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[Beginning of Front Cover] 

GAO: 

United States Government Accountability Office: 

Serving the Congress and the Nation: 

Performance and Accountability Highlights: 

Fiscal Year 2005: 

Accountability: 

Reliability: 

Integrity: 

[End of Front Cover] 

[See PDF for image] - graphic text: 

SERVING THE CONGRESS: 

GAO’S 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. 

SCOPE OF WORK: 

GAO performs a range of oversight-, insight-, and foresight-related 
engagements, a vast majority of which are conducted in response to 
congressional mandates or requests. GAO’s engagements include 
evaluations of federal programs; performance, financial and management 
audits; policy analyses; legal opinions; bid protest adjudications; and 
investigations. 

CORE VALUES: ACCOUNTABILITY: 

We help the Congress oversee federal programs and operations to ensure 
accountability to the American people. GAO’s analysts, auditors, 
lawyers, economists, information technology specialists, investigators, 
and other multidisciplinary professionals seek to enhance the economy, 
efficiency, effectiveness, and credibility of the federal government 
both in fact and in the eyes of the American people. 

CORE VALUES: INTEGRITY: 

We set high standards for ourselves in the conduct of GAO's work. Our 
agency takes a professional, objective, fact-based, nonpartisan, 
nonideological, fair, and balanced approach to all activities. 
Integrity is the foundation of reputation, and GAO's people and 
approach to its work, are designed to ensure both. 

CORE VALUES: RELIABILITY: 

We at GAO want our work to be viewed by the Congress and the American 
public as reliable. We produce high quality reports, testimony, 
briefings, legal opinions, and other products and services that are 
timely, accurate, useful, clear, and candid. 

Source: GAO. 

[End of Serving the Congress] 

From the Comptroller General of the United States: 

January 2006: 

By nearly every measure, GAO has once again produced excellent results 
in serving the Congress and the American people, and this summary 
performance and accountability report highlights our results for fiscal 
year 2005. Our business involves helping to improve performance and 
ensure accountability in connection with a broad range of federal 
programs, policies, and activities. Simply put, we try to help improve 
the way the federal government works for the benefit of all of our 
nation's citizens both now and in the future. To determine our success, 
we set performance targets and follow financial management and quality 
control practices that help ensure that we are making the best use of 
the federal funds invested in us. I am very pleased to report that in 
addition to strong financial and nonfinancial external performance 
results, GAO received clean opinions from external, independent 
auditors on our financial statements and on our performance audit and 
financial audit quality assurance systems. We also identified a broad 
range of issues that could seriously affect the stability and 
prosperity of the nation in the years to come. The following paragraphs 
highlight our performance in each of these areas. 

With respect to our performance measures, I am especially pleased to 
report that we met or exceeded targets for 10 of our 14 performance 
measures, while setting or matching all-time records for 3 measures. We 
documented $39.6 billion in financial benefits--a return of $83 for 
every dollar we spent--and over 1,400 nonfinancial benefits--a record 
for us. The work we did to produce these benefits helped to shape 
important legislation, such as the Intelligence Reform and Terrorism 
Prevention Act of 2004 (Pub. L. No. 108-458), and increase the 
efficiency of various federal programs, thus improving the lives of 
millions of Americans. In addition, the rate at which our 
recommendations were implemented by the Congress or federal agencies 
rose to 85 percent in fiscal year 2005, and the percentage of our 
fiscal year 2005 products containing recommendations increased to 63 
percent--exceeding the targets we set for both of these measures this 
year. Our performance in these two areas set an all-time record for 
recommendations implemented and matched the record we set in fiscal 
year 2004 for the percentage of new products with recommendations. We 
delivered 179 testimonies, slightly missing our target of 185. We also 
missed by just 1 percent our target of providing 98 percent of our 
products to the Congress when promised. In addition, in the first year 
that we are reporting our progress on our 8 new measures related to our 
people, we met or exceeded the targets for 6 of them related to 
retention and employee satisfaction. We came close to, but did not 
achieve, the targeted performance related to our new hire rate--the 
ratio of the number of people hired to the number of people we planned 
to hire--and the percentage of people that accepted our employment 
offers. 

As in past years, during fiscal year 2005, our work covered a number of 
major topics of concern to the nation and, in some cases, the world. 
For example, we reported on the nation's long-term fiscal challenges, 
the financial condition of the airline industry, spending and 
reconstruction activities related to Iraq and Afghanistan, and 
strengthening the visa process as an antiterrorism tool. We also 
examined the Department of Defense's transformation challenges, base 
realignment and closure issues, increasing the strategic focus of 
federal acquisitions, protecting against identity theft, oversight of 
electricity markets, zero down payment mortgages, and immigration 
enforcement. We testified many times before the Congress, contributing 
to the public debate on a variety of topics that included issues 
relating to Social Security, national security, homeland security, 
health care, tax policy and administration, and government 
transformation efforts. A list of topics on which we testified appears 
later in this summary report. 

The American people benefited this year as federal agencies took a wide 
range of actions based on our analyses and recommendations, while our 
efforts also heightened the visibility of issues needing attention. We 
feel fortunate and honored that in a significant majority of cases, our 
clients and federal agencies listen to what GAO has to say and act on 
our recommendations. Furthermore, virtually all of our reports are 
published and available on our Web site ([Hyperlink, 
http://www.gao.gov]), keeping us accountable to the American people. 

Once again we have received a clean audit opinion on our financial 
statements, and toward the end of this summary report we have included 
the independent auditor's condensed report stating that we presented 
our financial statements fairly and maintained effective internal 
control processes. The auditors also reported no instances of 
noncompliance with applicable laws and regulations. Additionally, I am 
most pleased to report the results of the first-ever review of our 
quality assurance system used to conduct our performance audits, which 
involves work performed in virtually all parts of GAO. This review--
which was performed by an international team of auditors from seven 
countries led by the Office of the Auditor General of Canada--assessed 
whether our quality assurance policies and procedures were suitably 
designed and operating effectively; the review resulted in a clean 
opinion. Their April 2005 audit report also cited a number of exemplary 
practices at GAO, such as our strategic planning process, proactive 
working relationship with the Congress, quality assurance framework, 
audit risk assessment process, and high-risk list. The international 
team also offered us some suggestions for improvement, including 
streamlining certain requirements for low-risk assignments, a 
suggestion that we are already working to implement. Similarly, as we 
have in the past, we received a clean opinion resulting from a separate 
audit of our quality assurance system for our financial audits. The 
auditors concluded that our system of quality control for the 
accounting and auditing practice was designed to meet applicable 
quality control standards and was complied with for the period 
reviewed, providing us reasonable assurance of conforming to applicable 
professional standards. 

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

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

In today's world, we should partner for progress with other key 
players. We believe strongly in doing so in order to maximize our value 
and mitigate risk within current and expected resource levels. Fiscal 
year 2005 included several major milestones in our outreach efforts. 
Most notably, we led the adoption of the first-ever strategic plans for 
the International Organizational of Supreme Audit Institutions and the 
National Intergovernmental Audit Forum. 

In short, fiscal year 2005 was a very successful year for us. Our 
complete performance and accountability report, which is available on 
our Web site at [Hyperlink, http://www.gao.gov], describes our many 
contributions toward improving the government. I am confident that the 
performance data and financial information in that report and this 
summary are complete and reliable. I believe that GAO remained true to 
its core values of accountability, integrity, and reliability 
throughout the year and that those who read this report will agree that 
the taxpayers received an excellent return on their investment in GAO. 

Signed by: 

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

[End of From the Comptroller General of the United States] 

GAO’s History: 

The Budget and Accounting Act of 1921 required the President to issue 
an annual federal budget and established GAO as an independent agency 
to investigate how federal dollars are spent. In the early years, we 
mainly audited vouchers, but after World War II we started to perform 
more comprehensive financial audits that examined the economy and 
efficiency of government operations. By the 1960s, GAO had begun to 
perform the type of work we are noted for today—program 
evaluation—which examines whether government programs are meeting their 
objectives. 

[End of GAO's History] 

About GAO: 

The U.S. Government Accountability Office (GAO) is an independent, 
nonpartisan, professional services agency in the legislative branch of 
the federal government. Commonly known as the “audit and investigative 
arm of the Congress” or the “congressional watchdog,” we examine how 
taxpayer dollars are spent and advise lawmakers and agency heads on 
ways to make government work better. 

Our mission is 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. We accomplish our mission by providing reliable 
information and informed analysis to the Congress, to federal agencies, 
and to the public; and we recommend improvements, when appropriate, on 
a wide variety of issues. Three core values—accountability, integrity, 
and reliability—form the basis for all of our work, regardless of its 
origin. These are described on the inside front cover of this summary. 

The majority of our work is undertaken in response to congressional 
mandates or requests. However, as authorized by our enabling 
legislation, we also independently allocate a limited portion of our 
resources for work performed under the Comptroller General’s authority. 
To perform both types of efforts, we maintain a workforce of highly 
trained professionals with degrees in many academic disciplines, 
including accounting, law, engineering, public and business 
administration, economics, and the social and physical sciences. About 
three-quarters of our approximately 3,200 employees are based at our 
headquarters in Washington, D.C; the rest are deployed in 11 field 
offices across the country. Almost all of our staff are organized into 
13 teams that support our three external strategic goals. Our other 
staff support our fourth strategic goal (an internal goal) and work in 
various staff offices, including General Counsel and Congressional 
Relations. 

To ensure that we are well positioned to meet the Congress’s current 
and future needs, we update our 6-year strategic plan every 3 years, 
consulting extensively during the update with our clients on Capitol 
Hill and with other experts (see our complete strategic plan on the Web 
at http://www.gao.gov/sp/d04534sp.pdf). Our strategic plan is based on 
a hierarchy of four elements—strategic goals, strategic objectives, 
performance goals, and key efforts. We use the strategic plan as a 
blueprint to lay out the areas in which we expect to conduct research, 
audits, analyses, and evaluations to meet our clients’ needs. This then 
allows us to allocate the resources we receive from the Congress 
accordingly. Our strategic plan framework is explained in the following 
section of this summary. 

Our work is primarily aligned under the first three strategic goals, 
which span issues that are both domestic and international, affect the 
lives of all Americans, and influence the extent to which the federal 
government serves the nation’s current and future interests. The fourth 
goal is our only internal one and is aimed at maximizing our 
productivity through such efforts as investing steadily in information 
technology to support our work; ensuring the safety and security of our 
people, information, and assets; pursuing human capital transformation; 
and leveraging our knowledge and experience. On page 10, we list by 
strategic goal some examples of the work we performed during fiscal 
year 2005. 

Each year, we hold ourselves accountable to the Congress and to the 
American people for our performance. As a legislative branch agency, we 
differ in some ways from executive branch agencies. We are, for 
instance, exempt from many laws applicable to the executive branch. 
However, we hold ourselves to the spirit of many of these laws, 
including 31 U.S.C. 3512 (commonly referred to as the Federal Managers’ 
Financial Integrity Act), the Government Performance and Results Act of 
1993, and the Federal Financial Management Improvement Act of 1996. 

The pages that follow offer highlights of our performance and 
accountability report for fiscal year 2005. We also present condensed 
financial statements and the independent auditor’s opinion on them. If 
you would like additional information, please see the full-length 
version of our performance and accountability report and other 
performance-related documents at http://www.gao.gov/sp.html. 

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: 

* Long-Term Fiscal Imbalance; 

* National Security; 

* Global Interdependence; 

* Changing Economy; 

* Demographics; 

* Science and Technology; 

* Quality of Life; 

* Governance; 

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'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 2004-2009. 

Source: GAO. 

[End of GAO's Strategic Plan Framework] 

Examples of How GAO Assisted the Nation: 

GAO strategic 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; 
In fiscal year 2005, GAO provided information that helped to...
* Improve the transition from active duty to civilian status for 
veterans with serious war-related injuries; 
* Address long-term health care financing pressures on state and local 
government budgets; 
* Identify challenges with transferring the Medicare appeals process 
from the Social Security Administration (SSA) and the Department of 
Health and Human Services (HHS); 
* Improve patient safety at Department of Veterans Affairs hospitals; 
* Improve the security of Social Security numbers; 
* Address the challenges of pension reform; 
* Strengthen the security screening process for passengers and checked 
baggage at the nation's airports; 
* Improve the oversight of Federal Housing Administration single-family 
and multifamily lenders; 
* Improve the oversight of electricity markets by the Federal Energy 
Regulatory Commission; 
* Identify challenges associated with the Department of Energy's (DOE) 
nuclear facility designs; 
* Monitor the growth in the digital television market; 
* Analyze issues contributing to the declining financial condition of 
the airline industry. 

GAO strategic 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; 
In fiscal year 2005, GAO provided information that helped to...
* Improve the management of funds for the Global War on Terrorism; 
* Increase the security of cargo containers to prevent terrorist 
activity; 
* Alert the Congress to issues affecting the Department of Defense's 
(DOD) major weapon systems; 
* Analyze funding options for a new federal foreign assistance program--
the Millennium Challenge Account; 
* Promote government efforts to address threats to the security of the 
nation's information systems; 
* Strengthen the visa process as an antiterrorism tool; 
* Improve management of the U.S. Coast Guard's Deepwater program; 
* Shape the debate on improving military pay and benefits; 
* Strengthen the U.S. strategic export control system; 
* Identify improvements needed to secure the telecommunications and 
information systems used by U.S. financial markets. 

GAO strategic goal 3; 
Description: Help transform the federal government's role and how it 
does business to meet 21st century challenges; 
In fiscal year 2005, GAO provided information that helped to...
* Increase the public's understanding of the federal government's long-
term fiscal challenges; 
* Implement governmentwide civil service reforms; 
* Oversee federal tax policy; 
* Increase debts collected from criminals; 
* Decrease improper payments made by the U.S. Department of 
Agriculture's (USDA) Food Stamp Program and other federal agencies; 
* Manage multibillion-dollar IT modernizations and investments at the 
Department of Homeland Security (DHS) and Office of Personnel 
Management; 
* Improve agencies' strategic purchasing practices; 
* Examine changes in key areas of federal activity that could affect 
the federal government's fiscal future; 
* Enhance the knowledge base on comprehensive national indicators. 

GAO strategic goal 4; 
Description: Maximize the value of GAO by being a model federal agency 
and a world-class professional services organization; 
In fiscal year 2005, GAO provided information that helped to...
* Foster among other federal agencies GAO's innovative human capital 
practices, such as broad pay bands; performance-based compensation; and 
workforce planning and staffing strategies, policies, and processes; 
* Share GAO's model business and management processes and other 
transformation-related information with counterpart organizations in 
the United States and abroad. 

Source: GAO. 

[End of How GAO Assisted the Nation] 

[End of About GAO] 

GAO's Performance: 

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

In addition, we helped to focus the attention of the Congress and the 
public on issues affecting the fiscal security and economic stability 
of the nation in the long term. In the second quarter of fiscal year 
2005, we issued two products that will assist the Congress as it 
addresses future challenges. Our report entitled 21st Century 
Challenges: Reexamining the Base of the Federal Government provides a 
series of illustrative questions related to 12 areas of federal 
activity as well as our perspective on various strategies and 
approaches that should be considered as possible means to address the 
issues and questions raised in the report. Drawing on our institutional 
knowledge and extensive program evaluation and performance assessment 
work for the Congress, we presented over 200 specific 21st century 
questions illustrating the types of hard choices our nation needs to 
face as it reexamines what the federal government does and how it does 
it. 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 areas and programs discussed in these two 
products may take years to address, and these products will serve as a 
useful guide for the Congress's future programmatic deliberations and 
oversight activities. (See sections below for more information about 
our 21st century challenges and high-risk reports, respectively.) We 
performed all this work and more in accordance with our strategic plan, 
guided by our core values, and consistent with our professional 
standards. 

As we assisted the Congress in fiscal year 2005, we monitored our 
performance using 14 annual performance measures that capture the 
results of our work; the assistance we provided to our client--the 
Congress; and our ability to attract, retain, develop, and lead a 
highly professional workforce (see table 1). These measures indicate 
that we had an impressive year--we met or exceeded our performance 
targets for 10 of our 14 measures. Two of our results measures--
financial benefits and other benefits--illustrate the outcomes of our 
work and our value to the nation because they track federal dollars 
saved or better used and programmatic improvements implemented as a 
result of our work. Two additional results measures track 
recommendations implemented and new products with recommendations that 
help us to achieve financial and other benefits. Our client measures--
testimonies and timeliness--indicate how well we, as an information 
provider, serve the Congress, and our people measures reflect how well 
we manage our staff to achieve the results that we do. 

In fiscal year 2005, we accomplished real results for the nation, 
surpassing our financial benefits target for the year and exceeding our 
annual target and all-time record for other (nonfinancial) benefits. 
Our financial benefits of $39.6 billion represent an $83 return on 
every dollar invested in us, and the more than 1,400 other benefits 
resulting from our work helped to improve the efficiency and 
effectiveness of government programs that serve the public. In 
addition, we exceeded our targets for the percentages of past 
recommendations implemented and new products with recommendations by 5 
percentage points and 8 percentage points, respectively. 

We did not achieve the targets we set for testimonies and timeliness. 
Several testimonies we had scheduled were postponed or canceled so that 
the Congress could turn its attention to the Supreme Court nominations 
and, during the last months of the fiscal year, to Hurricane Katrina 
and its aftermath. However, we believe we served the Congress very well 
during fiscal year 2005. Based on feedback through an electronic survey 
completed by a sample of our congressional clients who requested our 
testimonies and significant products, 96 percent of the responses 
concerning their overall satisfaction with our products were favorable. 

Table 1: Agencywide Summary of Annual Measures and Targets: 

Performance Measures: 

Results: Financial benefits; 
2001 Actual: $26.4 billion; 
2002 actual: $37.7 billion; 
2003 actual: $35.4 billion; 
2004 actual: $44.0 billion; 
2005 target: $37.5 billion; 
2005 actual: $39.6 billion; 
Met/not met: Met; 
2006 target: $39.0 billion. 

Results: Other benefits; 
2001 Actual: 799; 
2002 actual: 906; 
2003 actual: 1,043; 
2004 actual: 1,197; 
2005 target: 1,000; 
2005 actual: 1,409; 
Met/not met: Met; 
2006 target: 1,050. 

Results: Past recommendations implemented; 
2001 Actual: 79%; 
2002 actual: 79%; 
2003 actual: 82%; 
2004 actual: 83%; 
2005 target: 80%; 
2005 actual: 85%; 
Met/not met: Met; 
2006 target: 80%. 

Results: New products with recommendations; 
2001 Actual: 44%; 
2002 actual: 53%; 
2003 actual: 55%; 
2004 actual: 63%; 
2005 target: 55%; 
2005 actual: 63%; 
Met/not met: Met; 
2006 target: 60%. 

Performance measure: Client: 

Client: Testimonies; 
2001 actual: 151; 
2002 actual: 216; 
2003 actual: 189; 
2004 actual: 217; 
2005 target: 185; 
2005 actual: 179; 
Met/not met: Not met; 
2006 target: 210 

Client: Timeliness; 
2001 actual: 95%; 
2002 actual: 96%; 
2003 actual: 97%; 
2004 actual: 97%; 
2005 target: 98%; 
2005 actual: 97%; 
Met/not met: Not met; 
2006 target: 98%. 

Performance measure: People: 

People: New hire rate; 
2001 Actual: N/A; 
2002 actual: 96%; 
2003 actual: 98%; 
2004 actual: 98%; 
2005 target: 97%; 
2005 actual: 94%; 
Met/not met: Not met; 
2006 target: 97%. 

People: Acceptance rate; 
2001 Actual: N/A; 
2002 actual: 81%; 
2003 actual: 72%; 
2004 actual: 72%; 
2005 target: 75%; 
2005 actual: 71%; 
Met/not met: Not met; 
2006 target: 75%. 

People: Retention rate with retirements; 
2001 Actual: 91%; 
2002 actual: 91%; 
2003 actual: 92%; 
2004 actual: 90%; 
2005 target: 90%; 
2005 actual: 90%; 
Met/not met: Met; 
2006 target: 90%. 

People: Retention rate without retirements; 
2001 Actual: 
95%; 
2002 actual: 97%; 
2003 actual: 96%; 
2004 actual: 95%; 
2005 target: 94%; 
2005 actual: 94%; 
Met/not met: Met; 
2006 target: 94%. 

People: Staff development; 
2001 Actual: N/A; 
2002 actual: 71%; 
2003 actual: 67%; 
2004 actual: 70%; 
2005 target: 72%; 
2005 actual: 72%; 
Met/not met: Met; 
2006 target: 74%. 

People: Staff utilization; 
2001 Actual: N/A; 
2002 actual: 67%; 
2003 actual: 71%; 
2004 actual: 72%; 
2005 target: 74%; 
2005 actual: 75%; 
Met/not met: Met; 
2006 target: 75%. 

People: Leadership; 
2001 actual: N/A; 
2002 actual: 75%; 
2003 actual: 78%; 
2004 actual: 79%; 
2005 target: 80%; 
2005 actual: 80%; 
Met/not met: Met; 
2006 target: 80%. 

People: Organizational climate; 
2001 Actual: N/A; 
2002 actual: 67%; 
2003 actual: 71%; 
2004 actual: 74%; 
2005 target: 75%; 
2005 actual: 76%; 
Met/not met: Met; 
2006 target: 75%. 

Source: GAO. 

Notes: N/A indicates the information is not available or the target is 
not applicable. Our fiscal year 2006 target for the percentage of 
products with recommendations differs from the target we reported for 
this measure in our fiscal year 2006 performance plan posted on our Web 
page in June 2005. On the basis of our performance in fiscal year 2005, 
we increased this target by 5 percentage points. 

[End of table] 

Concerning our eight people measures, for which we began to hold 
managers accountable in fiscal year 2005, we are happy to report that 
we met or exceeded our annual targets for all but two of them--new hire 
rate and acceptance rate. Our performance in this area indicates that 
we did a very good job developing, productively using, and managing our 
staff, but need to improve our recruiting and hiring processes, which 
we have taken steps to do. 

Results Measures: 

Focusing on outcomes and the efficiency of the processes needed to 
achieve them is fundamental to accomplishing our mission. The following 
measures indicate that we have fulfilled our mission and delivered 
results that benefit the nation. 

Financial and Other Benefits: 

We describe many of the benefits produced by our work as either 
financial or other (nonfinancial) benefits. Both types of benefits 
result from our efforts to provide information to the Congress that 
helped to (1) change laws and regulations, (2) improve services to the 
public, and (3) promote sound agency and governmentwide management. In 
many cases, the benefits we claimed in fiscal year 2005 are based on 
work we did in past years because it often takes the Congress and 
agencies time to implement our recommendations or to act on our 
findings. To claim either type of benefit, our staff must document the 
connection between the benefits reported and the work that we 
performed. 

Financial Benefits: 

Our findings and recommendations produce measurable financial benefits 
for the federal government when the Congress or agencies act on them 
and the funds are made available to reduce government expenditures or 
are reallocated to other areas. The monetary effect realized can be the 
result of changes in: 

* business operations and activities; 

* the structure of federal programs; or: 

* entitlements, taxes, or user fees. 

For example, financial benefits could result if the Congress were to 
reduce the annual cost of operating a federal program or lessen the 
cost of a multiyear program or entitlement. Financial benefits could 
also result from increases in federal revenues--due to changes in laws, 
user fees, or asset sales--that our work helped to produce. In fiscal 
year 2005, our work generated $39.6 billion in financial benefits. Of 
this amount, $19 billion (or approximately 48 percent) resulted from 
changes in laws or regulations. 

Financial benefits included in our performance measures are net 
benefits--that is, estimates of financial benefits that have been 
reduced by the costs associated with taking the action that we 
recommended. We convert all estimates involving past and future years 
to their net present value and use actual dollars to represent 
estimates involving only the current year. Financial benefit amounts 
vary depending on the nature of the benefit, and we can claim financial 
benefits over multiple years based on a single agency or congressional 
action. To ensure conservative estimates of net financial benefits, 
reductions in operating cost are typically limited to 2 years of 
accrued reductions. Multiyear reductions in long-term projects, changes 
in tax laws, program terminations, or sales of government assets are 
limited to 5 years. Estimates come from non-GAO sources and are reduced 
by any identifiable offsetting costs. These non-GAO sources are 
typically the agency that acted on our work, a congressional committee, 
or the Congressional Budget Office. 

To document financial benefits, our staff complete reports documenting 
accomplishments that are linked to specific products or actions. All 
accomplishment reports for financial benefits are documented and 
reviewed by (1) another GAO staff member not involved in the work and 
(2) a senior executive in charge of the work. Also, a separate unit 
reviews all financial benefits and approves benefits of $100 million or 
more, which amounted to 94 percent of the total dollar value of 
benefits recorded in fiscal year 2005. Additionally, our Inspector 
General (IG) performs an independent review of all accomplishment 
reports claiming benefits of $500 million or more, which represented 
about 78 percent in fiscal year 2005. 

Figure 1 lists several of our major financial benefits reported in 
fiscal year 2005 and briefly describes some of our work contributing to 
financial benefits. 

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

Description: Reduced funding for a missile defense system. In an April 
2003 report, we stated that to successfully develop an effective and 
suitable missile defense system, the Missile Defense Agency must be 
willing to adopt knowledge-based acquisition practices that have made 
other developers successful. Our report acknowledged that the agency's 
development strategy for the Kinetic Energy Interceptor program 
included knowledge-based practices, but concluded that the agency had 
not implemented two important practices: (1) using well-developed 
technologies during system integration and (2) fully testing a system 
before fielding it. In response, the Missile Defense Agency is scaling 
back development of the Kinetic Energy Interceptor program until 
technologies are mature. Over a 5-year period--from fiscal year 2005 
through fiscal year 2009--program funding will be reduced by about $5.2 
billion, which has a net present value of about $4.7 billion. (Goal 2); 
Amount: $4.7 billion. 

Description: Avoided higher costs associated with a nuclear waste 
disposal process. In a June 2003 report, we recommended that DOE pursue 
legislative clarification from the Congress because of a legal 
challenge that threatened DOE's ability to proceed with its less costly 
strategy for treating and disposing of radioactive tank wastes with 
lower concentrations of radioactivity. DOE estimated that pursuing a 
more expensive treatment and disposal strategy suitable for wastes with 
higher concentrations of radioactivity would increase waste treatment 
disposal costs by $55 billion to $60 billion at its Savannah River 
Site. The Fiscal Year 2005 National Defense Authorization Act contained 
a provision that clarified DOE's authority to follow its planned 
treatment and disposal strategy thus avoiding a more costly process. We 
calculated that the net present value of the cost avoidance for fiscal 
years 2005 through 2009 was about $4.5 billion. (Goal 1); 
Amount: $4.5 billion. 

Description: Improved the Army's force structure. In a report examining 
the Army's force structure, we recommended that the Army establish 
mission criteria to provide a firmer basis for its Strategic Reserve, 
Domestic Support, and Homeland Defense force requirements. Such 
criteria would help to ensure that the Army had the right number and 
types of soldiers available for these purposes. Rather than request 
additional end strength, the Army reconfigured its existing force's 
structure. In April 2003, DOD reported that the Army had included force 
structure changes in its fiscal year 2004 budget, which supported 
increased units for military police; military intelligence; special 
forces; and chemical, civil affairs, and psychological operations. 
Based on this action, the Army has been able to rebalance its force 
structure to create needed units with minimal increases in authorized 
end strength. The amount shown represents the net present value of the 
force structure changes over a 5-year period (fiscal years 2004 through 
2008). (Goal 2); 
Amount: $3.4 billion. 

Description: Reduced the cost of federally subsidized housing projects. 
We determined that the Department of Housing and Urban Development 
(HUD) had not developed the systems it needed to track the status of 
unexpended balances in its project-based Section 8 housing program and 
therefore could not use this information to help manage the program and 
formulate budget requests for it. As a result of our work, the Congress 
required HUD to better enforce the legislative provisions requiring the 
recapture of capital funds not being utilized by public housing 
authorities. In fiscal year 2005, we documented--using HUD data--that a 
financial benefit of about $2.7 billion in current dollars resulted 
from HUD's recapture of about $2.5 billion of fiscal year 2003 dollars. 
(Goal 1); 
Amount: $2.7 billion. 

Description: Avoided costs associated with higher payment rates at 
skilled nursing homes. In 2002, we assessed the impact of a 16.6 
percent increase in Medicare's daily rate for skilled nursing 
facilities on nurse staffing ratios. Our analysis showed that nurse 
staffing ratios changed little from April 1, 2001, through September 
30, 2002--the period during which the rate increase was in effect. In 
fiscal year 2003, the cost to the federal government of reinstating the 
payment rate increase was approximately $1 billion per year. Since we 
issued our report, the Congress has considered reinstating the rate 
increase, but it has chosen not to, largely on the basis of our 
analysis. The net present value of the annual cost avoidance for fiscal 
years 2004 and 2005 is $2 billion. (Goal 1); 
Amount: $2.0 billion. 

Description: Increased tax revenues. We reported that the Internal 
Revenue Service (IRS) did not have systems or procedures in place to 
allow it to identify and actively pursue unpaid tax cases that may have 
some collection potential. Based on our work, IRS has taken action to 
better assess the potential for collecting unpaid tax assessment cases 
and has used that information to better target its collection efforts. 
Specifically, in 2004 IRS began implementing a sophisticated modeling 
technology to identify productive and less productive cases to ensure 
that its resources are devoted to cases with a higher likelihood of 
collection and to help prevent premature suspension of collection 
efforts. IRS's analysis of the yield on collection cases after 
employing this modeling in fiscal year 2004 shows that this yield 
increased by about $1.8 billion (in current year dollars), or 8.4 
percent from the previous year (fiscal year 2003), without significant 
staffing level increases. (Goal 3); 
Amount: $1.8 billion. 

Description: Ensured continued investment in the General Services 
Administration's (GSA) online purchasing system. As of 2003, GSA had 
spent $84 million to develop, implement, and maintain Advantage, a 
system for ordering products and services online. However, 5 years 
after the system was launched, only 35 percent of all government-
contracted vendors participated in the program, and agencies were 
largely using the system to compare pricing. To ensure GSA's level of 
investment matched customer needs, we recommended that the agency 
develop a business case for a system such as Advantage, and in January 
2005, GSA selected a new business strategy that would significantly 
enhance the system's capabilities to serve as a broker between buyers 
and suppliers and provide agencies with an automated tool for 
formulating acquisition requirements and developing requests for 
quotes. GSA projects over $1.5 billion in financial benefits to result 
from electronic transactions, spend analysis (analysis of expenditures 
that shows how money is spent on goods and services), a searchable 
procurement data repository, and competitive pricing. This financial 
benefit has a net present value of just over $1.3 billion. (Goal 3); 
Amount: $1.3 billion. 

Description: Reduced Navy and Air Force appropriations. DOD policy 
requires the Defense Working Capital Fund to maintain cash levels to 
cover 7 to 10 days of operational cash and 6 months of capital asset 
disbursements. Our analysis showed that the January 2004 reported 
actual cash balance for the Air Force Working Capital Fund exceeded the 
10-day cash requirement by about $1.5 billion, and the Navy's Working 
Capital Fund reported actual cash balance exceeded the budgeted cash 
balance by $659 million and $408 million at the end of fiscal years 
2002 and 2003, respectively. The Congress reduced the Navy and Air 
Force fiscal year 2005 Operation and Maintenance appropriations by just 
under $1.3 billion due to excessive cash amounts. (Goal 3); 
Amount: $1.3 billion. 

Description: Eliminated the National Aeronautics and Space 
Administration's (NASA) Prometheus 1 project. We issued a report 
questioning whether NASA had established the initial justification for 
its investment in the Prometheus 1 project and how the agency planned 
to ensure that critical nuclear power and propulsion system 
technologies were sufficiently developed to support deep space probes 
like the Jupiter Icy Moons Orbiter. We also reported that the approved 
Prometheus 1 funding profile was inadequate to support the planned 
mission--a launch to Jupiter's Icy Moons in 2015. NASA has subsequently 
deferred the Jupiter Icy Moons Orbiter mission indefinitely, reducing 
the agency's funding needs by about $1.22 billion through fiscal year 
2009; the net present value of this reduction is over $1.1 billion. 
(Goal 3); 
Amount: $1.1 billion. 

Description: Reduced the budget request for a new foreign assistance 
program. In March and June 2004, we provided the Congress with 
information to help it assess the President's $2.5 billion fiscal year 
2005 budget request for the Millennium Challenge Account--a new foreign 
assistance program intended to provide economic assistance to countries 
that demonstrate a commitment to ruling justly, investing in people, 
and encouraging economic freedom. Our work provided the Congress with a 
framework for identifying relationships and tradeoffs between funding 
levels, compact length, and number of compacts (i.e., agreements). Our 
analysis indicated that by reducing assistance target levels, the 
length of compacts or both with participating countries, the program 
could operate at a lower funding level. We also estimated the effect of 
funding compacts partly from future appropriations. Our work 
facilitated the Congress's decision to reduce the appropriation for the 
Millennium Challenge Account in fiscal year 2005 to $1.5 billion. (Goal 
2); 
Amount: $1.0 billion. 

Source: GAO. 

[End of figure] 

Other Benefits: 

Many of the benefits that result from our work cannot be measured in 
dollar terms. During fiscal year 2005, we recorded a total of 1,409 
other benefits. We documented 75 instances where the information we 
provided to the Congress resulted in statutory or regulatory changes, 
595 instances where federal agencies used our information to improve 
services to the public, and 739 instances where agencies improved core 
business processes or governmentwide reforms as a result of our work. 
These actions spanned the full spectrum of issues, from identifying 
that some soldiers had not been reimbursed for military-related travel 
costs they personally incurred to highlighting weaknesses in the Social 
Security Administration's policies for verifying birth certificates 
when issuing replacement Social Security cards. In figure 2 we provide 
examples of some of the other benefits we claimed as accomplishments in 
fiscal year 2005. The laws that we cite in the first section of this 
figure were passed in fiscal year 2005. 

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

Other benefits that helped to change laws: 

Intelligence Reform and Terrorism Prevention Act of 2004 (Pub. L. No. 
108-458): 

In our May 2004 testimony on the use of biometrics for aviation 
security, we reported on the need to identify how biometrics will be 
used to improve aviation security prior to making a decision to design, 
develop, and implement biometrics. Using information from our 
statement, the House introduced a bill on July 22, 2004, directing the 
Transportation Security Administration (TSA) to establish system 
requirements and performance standards for using biometrics, and to 
establish processes to (1) prevent individuals from using assumed 
identities to enroll in a biometric system and (2) resolve errors. 
These provisions were later included in an overall aviation security 
bill and were eventually included in the Intelligence Reform and 
Terrorism Prevention Act of 2004, enacted in December 2004. (Goal 2) 

We also conducted a body of work assessing the physical screening of 
airport passengers and their checked baggage. We found that the 
installation of systems that are in line with airport baggage conveyor 
systems may result in financial benefits according to TSA estimates for 
nine airports. We also found that the effectiveness of the advance 
passenger screening under the process known as Secure Flight was not 
certain. TSA agreed to take corrective actions in these areas, and the 
Congress required TSA in the Intelligence Reform and Terrorism 
Protection Act to prepare a plan and guidelines for installing in-line 
baggage screening systems, and enacted measures to promote Secure 
Flight's development and implementation. (Goal 1) 

Real ID Act of 2005 (Pub. L. No. 109-13): 

We reported on the verification of identity documents for drivers' 
licenses, noting that visual inspection of key documents lent itself to 
possible identity fraud. To demonstrate this, our investigators were 
able to obtain licenses in two states using counterfeit documents and 
the Social Security numbers of deceased persons. The Congress 
established federal identification standards for state drivers' 
licenses and other such documents and mandated third-party verification 
of identity documents presented to apply for a driver's license. (Goal 
1) 

Ronald W. Reagan National Defense Authorization Act for Fiscal Year 
2005 (Pub. L. No. 108-375): 

We assisted the Congress in crafting major improvements to a program 
intended to compensate individuals who worked in DOE facilities and 
developed illnesses related to radiation and hazardous materials 
exposure. In a 2004 report, we identified features of the originally 
enacted program that would likely lead to inconsistent benefit outcomes 
for claimants, in part because the program depended on the varying 
state workers compensation systems to provide some benefits. We also 
presented several options for improving the consistency of benefit 
outcomes and a framework for assessing these options. When the Congress 
enacted the Ronald W. Reagan National Defense Authorization Act for 
Fiscal Year 2005, it revamped this energy employees benefit program. 
Among other changes, this law federalized the payment of worker 
compensation benefits for eligible energy contractor employees and 
provided a schedule of uniform benefit payments. (Goal 1) 

Federal Lands Recreation Enhancement Act (Pub. L. No. 108-447): 

Our work over the past several years has helped the Congress to 
establish and assess the impacts of the recreational fee demonstration 
program. Under this trial program, the Congress authorized the National 
Park Service, the Fish and Wildlife Service, the Bureau of Land 
Management, and the Forest Service to charge fees to visitors to, among 
other things, reduce the maintenance backlog at federal parks and 
historic places and protect these lands from visitor impacts. Since the 
program's inception in 1996, we have identified issues that needed to 
be addressed to improve the program's effectiveness that included 
providing (1) a more permanent source of funds to enhance stability, 
since the current program had to be reauthorized every 2 years; (2) the 
participating agencies with greater flexibility in how and where they 
apply fee revenues; and (3) improvements in interagency coordination in 
the collection and use of revenue fees to better serve visitors by 
making the payment of fees more convenient and equitable and reducing 
visitor confusion about similar or multiple fees being charged at 
nearby or adjacent federal recreational sites. As a result of this body 
of work, the Congress addressed these issues by passing the Federal 
Lands Recreation Enhancement Act in December 2004. This act permits 
federal land management agencies to continue charging fees at 
campgrounds, rental cabins, high-impact recreation areas, and day-use 
sites that have certain facilities. The act also provides for a 
nationally consistent interagency program, more on-the-ground 
improvements at recreation sites across the nation, enhanced visitor 
services, a new national pass for use across interagency federal 
recreation sites and services, and public involvement in the program. 
(Goal 1) 

Consolidated Appropriations Act, 2005 (Pub. L. No. 108-447): 

At the time of our August 2003 report, the original 1999 expiration 
date for the franchise fund pilots operating at six federal agencies 
had been extended three times. These franchise funds, authorized by the 
Government Management Reform Act of 1994, are part of a group of 34 
intragovernmental revolving funds that were created to provide common 
administrative support services required by many federal agencies, 
including, for example, information technology (IT) infrastructure 
support services. We concluded that increasing the period of 
authorization would help ease concerns of current and potential clients 
about franchise fund stability and might allow franchise funds to add 
new business lines, and we suggested that the authorizations be 
extended for longer periods. The Congress provided permanent authority 
to the Treasury franchise fund in the Consolidated Appropriations Act, 
2005, passed on December 8, 2004. (Goal 3) 

Also in 2003, we reported that most agencies could not retain the 
proceeds from the sale of unneeded property and this acted as a 
disincentive to disposing of unneeded property. We stated in our high-
risk report on federal real property that it may make sense to permit 
agencies to retain proceeds for reinvestment in real property where a 
need exists. Subsequently, in the Consolidated Appropriations Act, 
2005, the Congress authorized the Administrator of GSA to retain the 
net proceeds from the conveyance of real and related personal property. 
These proceeds are to be deposited into the Federal Buildings Fund and 
are to be used as authorized for GSA's real property capital needs. 
(Goal 1) 

In December 2003, we reported that 184 out of 213 Alaska Native 
villages are affected, to some extent, by flooding and erosion. 
However, these villages often have difficulty qualifying for federal 
assistance to combat their flooding and erosion problems. In our 
report, we recommended that the Denali Commission adopt a policy to 
guide investment decisions and project designs in villages affected by 
flooding and erosion. In this legislation, the Congress provided the 
Secretary of the Army authority to carry out “structural and non-
structural projects for storm damage prevention and reduction, coastal 
erosion, and ice and glacial damage in Alaska, including relocation of 
affected communities and construction of replacement facilities.” (Goal 
1) 

To improve the federal government's ability to collect billions of 
dollars of outstanding criminal debt, we recommended in a 2001 report, 
that the Department of Justice work with other agencies involved in 
criminal debt collection to develop a strategic plan that would improve 
interagency processes and coordination with regard to criminal debt 
collection activities. The conference report that accompanied the 
Consolidated Appropriations Act, 2005, directed the Attorney General to 
assemble an interagency task force for the purpose of better managing, 
accounting for, reporting, and collecting criminal debt. (Goal 3) 

Other benefits that helped to improve services to the public: 

Encouraged improvements in the process for ensuring states' compliance 
with education laws for the disabled: 

Our report found that the Department of Education's (Education) system 
for resolving noncompliance with the Individuals with Disabilities in 
Education Act is protracted. We found that resolution of noncompliance 
cases often takes several years, in part because Education took a year 
on average from the time it identified noncompliance to issue a report 
citing the noncompliance. We therefore recommended that Education 
improve its system of resolving noncompliance by shortening the amount 
of time it takes to issue a report of noncompliance and by tracking 
changes in response times under the new monitoring process. In response 
to our recommendation, Education has instituted an improved process for 
managing and tracking the various phases of the monitoring process, 
which includes the creation of a database to facilitate this tracking. 
This new tracking system will enable Education to better monitor the 
status of existing noncompliance, and thus enable the department to 
take appropriate action when states fail to come into compliance in a 
timely manner. (Goal 1) 

Identified a weakness in Medicare's telephone assistance service: 

In 2004, we found that the 24-hour 1-800-MEDICARE help line, operated 
by the Centers for Medicare & Medicaid Services (CMS), did not answer 
10 percent of the calls we placed to test its accuracy, often because 
it automatically transferred some calls to claims administration 
contractors that were not open for business at the time of the call. 
This call transfer process prohibited callers from accessing 
information during nonbusiness hours, even though 1-800-MEDICARE 
operates 24-hours a day. As a result, we recommended that CMS revise 
the routing procedures of 1-800-MEDICARE to ensure that calls are not 
transferred or referred to claims administration contractors' help 
lines during nonbusiness hours. In response, CMS finished converting 
its call routing procedures. As a result, calls placed after normal 
business hours will be routed to the main 1-800-MEDICARE help line for 
assistance. (Goal 1) 

Highlighted the need for increased security at a federal disease 
research facility: 

U.S. Department of Agriculture (USDA) scientists at the Plum Island 
Animal Disease Center research contagious animal diseases that have 
been found in other countries. The mission of the facility, now 
administered by the Department of Homeland Security (DHS), is to 
develop strategies for protecting the nation's animal industries and 
exports from these foreign animal diseases. In our September 2003 
report, Combating Bioterrorism: Actions Needed to Improve Security at 
Plum Island Animal Disease Center, we made several recommendations to 
improve security at the facility and reduce vulnerability to terrorist 
attacks. Among other things, we recommended that the Secretary of 
Homeland Security, in consultation with the Secretary of Agriculture, 
enhance incident response capability by increasing the size of the 
guard force. DHS has informed us that this has been completed. 
According to the Director of Plum Island, DHS has more than doubled the 
number of guards assigned on each shift on Plum Island. (Goal 1) 

Other benefits that helped to promote sound agency and governmentwide 
management: 

Recommended a process to increase the efficiency of DOD procurements: 

DOD spending on service contracts approaches $100 billion annually, but 
DOD's management of services procurement is inefficient and ineffective 
and the dollars are not always well spent. Many private companies have 
changed management practices based on analyzing spending patterns and 
coordinating procurement efforts in order to achieve major savings. We 
recommended that DOD adopt the effective spend analysis processes used 
by these leading companies and use technology to automate spend 
analysis to make it repeatable. In response, DOD is developing new 
technology to do that. According to DOD and contractor project 
managers, one phase of the project was completed in December 2004. In 
March 2005, DOD approved a business case analysis to seek follow-on 
funding for developing a DOD-wide spend analysis system. (Goal 2) 

Improved the Air Force's oversight of purchase card transactions: 

As part of our audit of Air Force purchase card controls, we identified 
transactions that Air Force officials acknowledged to be fraudulent as 
well as potentially fraudulent transactions that the Air Force had not 
identified. To improve Air Force oversight of purchase card activity 
and facilitate the identification of systemic weaknesses and 
deficiencies in existing internal control and the development of 
additional control activities, we recommended that the Air Force 
establish an agencywide database of known purchase card fraud cases. In 
lieu of establishing a separate agencywide database, during fiscal year 
2003, the Air Force Office of Special Investigations initiated 
quarterly reporting on its purchase card investigations to the DOD IG 
for macro-level analysis of systemic weaknesses in the program. Our 
ongoing collaboration with the DOD IG on DOD's purchase card program 
confirmed that the Air Force's Office of Special Investigations is 
working effectively with DOD's IG on data- mining techniques for 
detection of potentially improper and fraudulent purchase card 
transactions. As a result of our work, the Air Force has taken action 
to reduce the financial risk associated with undetected fraud and abuse 
in its purchase card program. (Goal 3) 

Encouraged the Census Bureau to produce training materials in other 
languages: 

For the 2000 Census, the United States Census Bureau (Bureau) printed 
material used to train census workers only in English, except in Puerto 
Rico where training materials were available in Spanish. However, to 
better prepare census workers--some of whom speak Spanish as their 
first language--to locate migrant farm workers and other hard-to-count 
groups, we recommended that the Bureau consider providing training 
materials in languages other than English to targeted areas. In 
response to our recommendation, the Bureau is researching foreign- 
language data collection methods as part of its preparations for the 
2006 Census test and, more generally, plans to identify areas and 
operations that will require in-language training materials for areas 
with very large, new migrant populations where it will not be possible 
to hire bilinguals. Moreover, the Bureau's June 2005 request for 
proposals for a Field Data Collection Automation System includes a 
requirement for the contractor to provide training applications and 
materials in English and Spanish for the handheld computers that 
enumerators are to use to count nonrespondents. (Goal 3) 

Source: GAO. 

[End of figure] 

In addition to the financial and other benefits claimed in fiscal year 
2005 from our work, we also achieved the following results. 

Past Recommendations Implemented: 

One way we measure our effect on improving the government's 
accountability, operations, and services is by tracking the percentage 
of recommendations that we made 4 years ago that have since been 
implemented. At the end of fiscal year 2005, 85 percent of the 
recommendations we made in fiscal year 2001 had been implemented, 
primarily by executive branch agencies. Putting these recommendations 
into practice will generate tangible benefits for the nation in the 
years ahead. The 85 percent implementation rate for fiscal year 2005 
exceeded our target for the year by 5 percentage points as well as our 
actual performance for the last 4 years. Because agencies need time to 
act on recommendations, we assess recommendations implemented after 4 
years, the point at which experience has shown that if a recommendation 
has not been implemented, it is not likely to be. 

New Products Containing Recommendations: 

This year, about 63 percent of the 637 written products we issued 
(excluding testimonies) contained recommendations. We track the 
percentage of new products with recommendations because we want to 
encourage staff to develop recommendations that when implemented by the 
Congress and agencies, produce financial and other benefits for the 
nation. However, by setting our target at 55 percent, we recognize that 
our products do not always include recommendations and that the 
Congress and agencies often find such informational reports just as 
useful as those that contain recommendations. Our informational reports 
have the same analytical rigor and meet the same quality standards as 
those with recommendations and, similarly, can help to bring about 
significant financial and other benefits. Hence, this measure allows us 
ample leeway to respond to requests that result in reports without 
recommendations. 

Client Measures: 

To fulfill the Congress's information needs, we strive to deliver the 
results of our work orally as well as in writing at a time agreed upon 
with our clients. 

Testimonies: 

Our clients often invite us to testify on our current and past work 
when it addresses issues that congressional committees are examining 
through the hearing process. During fiscal year 2005, experts from our 
staff testified at 179 congressional hearings covering a wide range of 
complex issues. For example, our senior executives testified on 
improving the security of nuclear material, federal oversight of mutual 
funds, and the management and control of DOD's excess property. A 
summary of issues we testified on by strategic goal in fiscal year 2005 
appears below. Over 70 of our testimonies were related to high-risk 
areas and programs, which are discussed in the High-Risk section below. 

However, in spite of our willingness to testify for our clients, we did 
not meet our fiscal year 2005 target of 185 testimonies, primarily 
because congressional committees either canceled or postponed several 
hearings at which our senior executives were scheduled to testify to 
focus instead on key events such as Hurricane Katrina. 

Timeliness: 

We track the percentage of our products that are delivered on or before 
the day we agreed to with our clients because it is critical that our 
work be done on time for it to be used by policymakers. In fiscal year 
2005 we missed our target of providing 98 percent of them by the 
promised date. 

As part of its periodic review of our performance measures, the IG 
independently examined our process for calculating product timeliness 
and found evidence that some staff may be inconsistently applying the 
policy for changing a committed issue date, which ultimately affects 
the reliability of this measure. The IG also noted that the internal 
reporting approach may not adequately represent the most complete 
assessment of the requesters' satisfaction with our ability to deliver 
products when our clients need them. The IG recommended that GAO 
management strengthen the guidance for determining timeliness and 
consider developing an alternative, more independent measure to gauge 
performance in this area. Therefore, beginning in fiscal year 2006, we 
will use the results of our client feedback survey as a barometer for 
how well we are getting our products to the Congress when it needs 
them. We will use this survey as the primary data source for our 
external timeliness measure because the responses come directly from 
our clients and are free from significant input by our staff. However, 
we will continue to use our current process as a supplemental check for 
determining timeliness. For further information about this measure, see 
[Hyperlink, http://www.gao.gov/new.items/d061sp.pdf] page 87 in our 
full performance and accountability report. 

People Measures: 

We could not have performed as well as we did in fiscal year 2005 
without the support and commitment of our highly professional, 
multidisciplinary staff. Our ability to hire, develop, retain, and lead 
staff is critical to fulfilling our mission of serving the Congress and 
the American people. Since 2002, we have refined our processes for 
measuring how well we manage our human capital and have benchmarked our 
performance in this area. Fiscal year 2005 was the first year we held 
our managers accountable for our eight people measures, and we met six 
of them--slightly missing our targets for new hire rate and acceptance 
rate by only a few percentage points. These measures are directly 
linked to our goal 4 strategic objective of becoming a professional 
services employer of choice. 

On the pages that follow our selected list of testimonies, we highlight 
our performance under each of our strategic goals; discuss our 21st 
century challenges report and high-risk update; and describe strategies 
for achieving those strategic goals, our management challenges, the 
external factors we face, and the resources we used to achieve our 
performance results. 

Selected Testimony Issues: Fiscal Year 2005: 

Goal 1: 

Address Challenges to the Well-Being and Financial Security of the 
American People: 

* Head Start grants management; 
* Preparing for an influenza pandemic; 
* Overseeing the U.S. food supply; 
* Retirement options for seniors; 
* Long-term health care costs and government budgets; 
* Energy demand in the 21st century; 
* Postal service reform legislation; 
* Veterans' disability claims; 
* Social Security reform; 
* Wildland fire management; 
* Medicaid financing issues; 
* Meeting the future demand for energy in the United States; 
* National air traffic system; 
* Amtrak's Acela train; 
* Protecting nuclear material handled at science and environmental 
sites; 
* Providing services to seriously injured veterans; 
* Rural housing service; 
* Federal real property; 
* Endangered Species Act; 
* Federal oversight of the E-rate program. 

Goal 2: 

Respond to Changing Security Threats and the Challenges of 
Globalization: 

* Army's modular forces; 
* U.S. passport fraud; 
* Cargo security strategies; 
* Acquisition challenges facing the Navy's DD(X) destroyer program; 
* Tactical aircraft modernization; 
* DOD security clearances; 
* Oil for Food program; 
* Unmanned aerial vehicles; 
* Condition of Coast Guard aircraft and ships used in deep waters; 
* Managing violations of restricted air space; 
* Federal oversight of mutual funds to ensure investor security; 
* Port security; 
* Protecting U.S. officials overseas from terrorist attacks; 
* DOD's business transformation; 
* Transportation security issues; 
* Implementing laws that protect the security of information; 
* DOD's national security personnel system; 
* Acquisition challenges facing the Army's future combat systems 

Goal 3: 

Help Transform the Federal Government's Role and How It Does Business: 

* Long-term fiscal issues affecting the federal government; 
* Gaps in military pay and benefits; 
* 21st century challenges for the federal government; 
* Air Force procurement protests; 
* Human capital transformation at DHS; 
* Preparing for emergencies at federal agencies; 
* Space shuttle workforce issues; 
* Reducing the tax gap; 
* U.S. government financial statements; 
* Management and control of DOD's excess property; 
* Pricing federal multiple award contracts; 
* Performance budgeting; 
* High-risk federal programs; 
* Army National Guard travel reimbursement issues; 
* Space acquisitions and investment planning; 
* Improper Payments Information Act; 
* Agencies' continuity of operations plans; 
* DHS's Student and Exchange Visitor Information System. 

Source: GAO. 

[End of Selected Testimony Issues] 

Goal 1 Results: 

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: 

Financial Benefits: $15.6 Billion (Target: $19.6 Billion): 

* Reducing nuclear waste cleanup costs: Financial benefits valued at 
$4.5 billion arose from costs avoided after the implementation of our 
recommendation that DOE seek legislation to allow more economical 
treatment and disposal of high-level nuclear wastes. 

* Improving air traffic control systems: The Federal Aviation 
Administration (FAA) reviewed its Facilities and Equipment account and 
reduced its initial budget request by $393 million for several air 
traffic systems that had experienced chronic delays and cost overruns, 
largely by targeting vulnerabilities that we had identified in our 
analyses and by using management processes we recommended based our 
past work. 

* Identifying funds to address hazardous waste sites: Our work has been 
instrumental in the Environmental Protection Agency's efforts to 
identify, deobligate, and reuse $189.3 million in unspent funds from 
expired projects in the Superfund program, which has offset the need 
for additional appropriations. 

* Identifying a potentially duplicative structure for job training 
funding: We suggested that the Department of Labor's (DOL) proposal for 
a new $250 million program for community-based job training grants 
would create a new administrative structure for allocating training 
funds to community colleges and may duplicate the system currently in 
place. Based on our work, the Congress appropriated $125 million 
instead of DOLS initial request. 

Other Benefits: 277 (Target: 240 Other Benefits): 

* Paying properly for power wheelchairs for Medicare beneficiaries: On 
the basis of our finding that the information provided to Medicare 
contractors that process wheelchair claims-one of the program's most 
expensive items-provided insufficient detail, new requirements were 
established to make more information available. 

* Monitoring states' inventories of childhood vaccines: The Centers for 
Disease Control and Prevention implemented our recommendation to 
develop a strategic plan that includes steps to monitor childhood 
vaccine supplies in state depots, which should help ensure that the 
adequate inventories are available. 

* Estimating tobacco retailer violation rates: Our work led the 
Department of Health and Human Services (HHS) to increase oversight of 
states' monitoring of tobacco retailers; for example, HHS now visits 
states to help assess the accuracy and completeness of tobacco outlet 
lists and works with states to improve standardization of inspection 
protocols. 

Goal 1's Net Cost: 

[See PDF for image] -- graphic text: 

$197.7 million, 38.7% of GAO's total. 

Source: GAO. 

[End of figure] 

[End of Goal 1 Results] 

Goal 2 Results: 

Provide Timely, Quality Service to the Congress and the Federal 
Government to Respond to Changing Security Threats and the Challenges 
of Global Interdependence: 

Financial Benefits: $13.0 Billion (Target: $9.4 Billion): 

* Improving DOD's missile defense system acquisitions: A financial 
benefit of about $4.7 billion stemmed from our findings that the 
Missile Defense Agency could scale back its system development efforts 
until required technologies are more mature. 

* Improving management of funds for officers' housing: In May 2004, we 
reported that 13 renovation projects for general and flag officer 
quarters-6 Navy and 7 Marine Corps-exceeded the services' cost 
estimates and that about 45 percent of the increased costs were related 
to customer-driven changes. The Congress subsequently reduced the 
services' (Army, Navy, Air Force, and Marines) family housing 
operations and maintenance budget requests by about $10.8 million in 
total citing our work on this subject. 

Other Benefits: 365 (Target: 300 Other Benefits): 

* Improving controls covering technology exports: We found that a gap 
in control regulations covering exports with both military and civilian 
applications could enable individuals in most countries to legally 
obtain these items without any U.S. government review and that these 
items could be used to help make a cruise missile or unmanned aerial 
vehicle. The Department of Commerce subsequently proposed modifications 
to its regulations to help close the regulatory gap. 

* Strengthening the visa process as an antiterrorism tool: Using our 
work as a primary guide, the Department of State strengthened the visa 
process as an antiterrorism tool by, among other things, issuing 
guidance emphasizing national security as the department's first 
priority in the visa process; developing over 80 standard operating 
procedures to ensure that consular officers properly review visa 
applications and effectively fulfill their national security 
responsibilities; and developing and enhancing training on analytic 
interviewing techniques, fraud prevention, counterterrorism, and use of 
a name check system for passports and visa applications. 

* Ensuring decisions to transfer U.S. weapons and technologies to 
foreign governments are adequately informed: We found that the National 
Disclosure Policy Committee-which approves or denies requests for 
exceptions to the criteria used to determine if classified weapons or 
technologies can be released to the requesting country-was operating 
with outdated Central Intelligence Agency risk assessments. Acting on 
our recommendations, the committee's Executive Secretariat requested 
that the Central Intelligence Agency provide updated risk assessments 
for 23 countries, and those assessments are under way. 

Goal 2's Net Cost: 

[See PDF for image] -- graphic text: 

$144.2 million, 28.2% of GAO's total. 

Source: GAO. 

[End of figure] 

[End of Goal 2 Results] 

Goal 3 Results: 

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

Financial Benefits: $11.0 Billion (Target: $8.5 Billion): 

* Improving IRS's methodology for pursuing delinquent taxes: A 
financial benefit of about $1.8 billion stemmed from our findings that 
led IRS to increase revenue collections by improving its capacity to 
assess the collectibility of delinquent taxes and to decide on which 
debts to focus collection efforts. 

* Avoiding costs associated with the Small Business Administration's 
(SBA) loan monitoring system: We recommended that SBA perform benefit- 
cost analyses for systems alternatives to better ensure that the agency 
would meet its needs for a new loan monitoring system at the lowest 
cost. As a result, SBA stopped its in-house system development work and 
contracted with a firm to perform its loan monitoring services. 
Consequently, we were able to document cost avoidances that led to $5.6 
million in financial benefits this fiscal year. 

Other Benefits: 767 (Target: 460 Other Benefits): 

* Adding rigor to the Coast Guard's oversight of Deepwater program 
contractors: We found that (1) the Coast Guard's evaluation of a 
contractor responsible for developing and delivering assets for the 
Deepwater program-established to modernize the Coast Guard's aging 
fleet of ships and aircraft-lacked the necessary rigor to be effective 
and (2) two subcontractors were solely responsible for deciding whether 
to compete assets or make the assets themselves. Based on our 
recommendations, the Coast Guard improved the criteria for assessing 
the system integrator's performance and required the subcontractors to 
provide notification of decisions to make assets valued at $10 million 
or more. 

* Preventing improper sales of sensitive clothing and textile items: On 
the basis of our findings that it improperly sold over the Internet 
excess clothing with reflectant properties that prevent detection with 
infrared technologies, DOD issued a more stringent policy, which 
determined that these items are of a sufficiently critical and 
sensitive nature to require total destruction-an action that should 
help prevent this sensitive technology from falling into the wrong 
hands. 

* Improving accountability at DOL: We recommended that the Office of 
Management and Budget (OMB) revise its audit guidance related to 
testing to be able to positively state whether agency financial 
management systems comply with requirements (positive assurance). DOLS 
IG advised us that it had followed our advice and became the first 
federal agency to provide positive assurance. 

* Improving NASA's cost-estimating processes: Acting on our 
recommendations, NASA has removed barriers to cost estimation-such as 
the lack of reliable financial and performance data and the lack of 
incentives to measure and monitor cost trends-and improved its cost- 
estimating practice. 

Goal 3's Net Cost: 

[See PDF for image] -- graphic text: 

$147.3 million, 28.8% of GAO's total. 

Source: GAO. 

[End of figure] 

[End of Goal 3 Results] 

Goal 4 Results: 

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

* Improving dissemination of GAO products: We continued our pilot to 
produce and disseminate GAO reports in an electronic format, and based 
on the positive client feedback we received on the approximately 25 
reports we provided in electronic format, we plan to make the use of 
electronic products routine. We also improved the process for creating 
and posting to our Web site the electronic supplements to our reports, 
enabling our staff to view all features of a supplement before it is 
posted on the Internet, easing navigation within the electronic 
supplement, and more readily identifying the product as a GAO product. 

* Enhancing our classification and compensation systems: We directly 
linked the process for determining compensation to an individual's 
performance, as reflected on the appraisal, and used a market-based 
compensation study that allows us to design a competitive, fair, and 
equitable compensation program that is aligned with competitive labor 
markets in which we compete for talent. In addition, our administrative 
and professional support staff completed their first year under a 
broadband pay system and a competency-based performance system. 

* Improving engagement support services: We revised the Audit 
Documentation Set to help ensure that our engagements are consistent 
with the generally accepted auditing standards and our Quality 
Assurance Framework and that our work and engagement-related decisions 
have been systematically documented. The streamlined and simplified 
document eliminates duplicate requirements and documentation of steps, 
thereby saving staff time. 

* Improving customer service through use of Web-based technology: We 
upgraded our Web-based time and attendance system and our automated 
competency-based performance system, developed and implemented a Web- 
based request system for scheduling GAO vans and drivers that transport 
our staff to official meetings, redesigned the Web-based phone book, 
and deployed a major enhancement to our Web-based employee locator 
system. 

* Ensuring our IT security: We installed personal firewall software, 
implemented changes to ensure desktop security and foil spyware, and 
implemented an integrated security approach for our Web-based systems. 

* Ensuring our physical security: We enhanced our physical security by 
completing perimeter security efforts, including installation of high- 
speed rollup doors, guard booths, undervehicle cameras, pop-up 
barriers, and a perimeter plinth wall. 

Goal 4's Net Cost: 

[See PDF for image] -- graphic text: 

$22.0 million, 4.3% of GAO's total. 

Source: GAO. 

[End of figure] 

[End of Goal 4 Results] 

[End of GAO's Performance] 

21st Century Challenges: 

We have long had a statutory responsibility for monitoring the 
condition of the nation's finances. Recently, in our role as the 
auditor of the U.S. government's consolidated financial statements, we 
included an emphasis paragraph in our audit report for the fiscal year 
ended September 30, 2005, expressing our concern that the nation's 
current fiscal path is unsustainable and that tough choices by the 
President and the Congress are necessary in order to address the 
nation's large and growing long-term fiscal imbalance. This conclusion 
is based on the results of our long-term budget model, which we have 
used since 1992. 

Over the long term, the nation's growing fiscal imbalance stems 
primarily from the aging of the population, rising health care costs, 
and lower federal revenues as a percentage of the economy. These trends 
are compounded by the presence of near-term deficits arising from new 
discretionary and mandatory spending as well as lower revenues as a 
share of the economy. Absent significant changes on the spending side, 
the revenue side, or both sides of the budget, these long-term deficits 
will encumber a growing share of federal resources and test the 
capacity of current and future generations to afford both today's and 
tomorrow's commitments. Continuing on this unsustainable path will 
gradually erode, if not suddenly damage, our economy, our standard of 
living, and ultimately our national security. 

Addressing the nation's long-term fiscal imbalances constitutes a major 
transformational challenge that may take a generation to resolve. Given 
the size of our projected deficit, we will not be able to grow our way 
out of this problem--tough choices will be required. In addition, 
traditional incremental approaches to budgeting will need to give way 
to more fundamental and periodic reexaminations of the base of 
government, ultimately covering discretionary and mandatory programs as 
well as the revenue side of the budget. The nature and magnitude of the 
fiscal, security, economic, and other adjustments that need to be 
considered are not amenable to "quick fixes;" rather they will likely 
require an iterative, thoughtful process of disciplined changes and 
reforms over many years. 

We produced the 21st century challenges report (see 21st Century 
Challenges: Reexamining the Base of the Federal Government, [Hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-325SP]) to help the Congress 
review and reconsider the base of federal spending and tax programs. It 
is intended as one input among many that the Congress will receive as 
it decides what its agenda will be for oversight and program review. We 
have framed the issues presented as illustrative questions for 
policymakers to consider as a supplement to their own efforts. The 
questions are drawn from our issued work, our strategic plan prepared 
in consultation with the Congress, input from several IGs, and the 
institutional knowledge of our staff. They cover discretionary 
spending; mandatory spending, including entitlements; and tax policies 
and programs. While answers to these questions may draw on our work and 
that of others, only elected officials can and should decide which 
questions to address as well as how and when to address them. 

Having identified the major fiscal challenge facing the nation, and 
given our role in supporting the Congress, we believe that we also have 
an obligation to provide policymakers with support in identifying 
issues and options that could help to address these fiscal pressures. 
In our 21st century challenges report, we built on our past and pending 
work--about 90 percent of which was requested by the Congress or 
required by law--to provide policymakers with a comprehensive 
compendium of those areas throughout government that could be ripe for 
reexamination and review. The report is consistent with our other 
products, such as our high-risk reports (discussed in the following 
section), in that it pulls together our insights and previous work for 
the Congress to help with its budget and programmatic deliberations and 
oversight activities. 

In developing the 21st century questions posed in the report, we 
reflected on the inventory of future forces working to reshape American 
society, our place in the world, and the various roles and 
responsibilities of the federal government that were presented in our 
strategic plan. The specific questions raised for each area were 
informed by a set of generic evaluation criteria that are useful in 
evaluating any government program, policy, function, or activity. The 
criteria are framed as questions and are designed to address the 
legislative basis for the program, its purpose and continued relevance, 
its effectiveness in achieving goals and outcomes, its efficiency and 
targeting, its affordability, its sustainability, and its management. 
We used these criteria to generate specific 21st century questions 
about those programs and priorities already identified. The 21st 
century questions illustrate the kinds of issues that a reexamination 
and review initiative needs to address. 

[End of 21st Century Challenges] 

GAO's High-Risk Program: 

Issued to coincide with the start of each new Congress, our high-risk 
update has helped sustain attention from members of the Congress who 
are responsible for oversight and from 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. Our latest report, released in January 2005, 
highlights 25 troubled areas across government. Of the 43 areas that 
have appeared on our high-risk list since 1990, 16 have improved enough 
to be removed from the list and 2 have been consolidated with other 
areas. 

Our high-risk program includes the following four high-risk areas added 
in fiscal year 2005: 

* establishing appropriate and effective information-sharing mechanisms 
to improve homeland security, 

* DOD approach to business transformation, 

* DOD personnel security clearance program, and: 

* management of interagency contracting. 

We also removed the high-risk designation from three areas: Education's 
student financial aid programs, FAA's financial management, and USDA's 
Forest Service financial management. 

In fiscal year 2005, excluding our high-risk update report and its 
companion testimony, we issued 183 reports and delivered 75 testimonies 
related to our high-risk areas and documented related financial 
benefits totaling about $26 billion. For example, we examined 
challenges in the implementation and transformation of DHS, such as 
strengthening internal controls and addressing weaknesses in financial 
systems, fully establishing and institutionalizing a departmentwide 
strategic framework for managing information, and addressing systematic 
problems in human capital and acquisition systems, resulting in 19 
reports and 11 testimonies. We also evaluated the Medicare program and 
found weaknesses in program management and oversight of patient safety 
and care, inefficient payment policies, and areas vulnerable to fraud 
and abuse. Our work in this area resulted in approximately $3.9 billion 
in financial benefits for fiscal year 2005. Our efforts continue to 
bring attention to areas in urgent need of improvement and to help the 
Congress and federal government institute reforms to address these high-
risk areas. 

To learn more about our work on the high-risk areas shown in table 2 or 
to download the high-risk update in full, go to [Hyperlink, 
http://www.gao.gov/docsearch/featured/highrisk.html]. 

Table 2: GAO's 2005 High-Risk List: 

Addressing challenges in broad-based transformations: 

2005 high-risk area: Strategic Human Capital Management[A]; 
Year designated high risk: 2001; 
GAO's strategic goal: 3. 

2005 high-risk area: U.S. Postal Service Transformation Efforts and 
Long-Term Outlook[A]; 
Year designated high risk: 2001; 
GAO's strategic goal: 1. 

2005 high-risk area: Managing Federal Real Property[A]; 
Year designated high risk: 2003; 
GAO's strategic goal: 1. 

2005 high-risk area: Protecting the Federal Government's Information 
Systems and the Nation's Critical Infrastructures; 
Year designated high risk: 1997; 
GAO's strategic goal: 3. 

2005 high-risk area: Implementing and Transforming the Department of 
Homeland Security; 
Year designated high risk: 2003; 
GAO's strategic goal: 2. 

2005 high-risk area: Establishing Appropriate and Effective Information-
Sharing Mechanisms to Improve Homeland Security; 
Year designated high risk: 2005; 
GAO's strategic goal: 3. 

2005 high-risk area: DOD Approach to Business Transformation[A]; 
Year designated high risk: 2005; 
GAO's strategic goal: 2. 

2005 high-risk area: DOD Business Systems Modernization; 
Year designated high risk: 1995; 
GAO's strategic goal: 3. 

2005 high-risk area: DOD Personnel Security Clearance Program; 
Year designated high risk: 2005; 
GAO's strategic goal: 2. 

2005 high-risk area: DOD Support Infrastructure Management; 
Year designated high risk: 1997; 
GAO's strategic goal: 2. 

2005 high-risk area: DOD Financial Management; 
Year designated high risk: 1995; 
GAO's strategic goal: 3. 

2005 high-risk area: DOD Supply Chain Management (formerly Inventory 
Management); 
Year designated high risk: 1990; 
GAO's strategic goal: 2. 

2005 high-risk area: DOD Weapon Systems Acquisition; 
Year designated high risk: 1990; 
GAO's strategic goal: 2. 

Managing federal contracting more effectively: 

2005 high-risk area: DOD Contract Management; 
Year designated high risk: 1992; 
GAO's strategic goal: 2. 

2005 high-risk area: DOE Contract Management; 
Year designated high risk: 1990; 
GAO's strategic goal: 1. 

2005 high-risk area: NASA Contract Management; 
Year designated high risk: 1990; 
GAO's strategic goal: 2. 

2005 high-risk area: Management of Interagency Contracting; 
Year designated high risk: 2005; 
GAO's strategic goal: 2. 

Assessing the efficiency and effectiveness of tax law administration: 

2005 high-risk area: Enforcement of Tax Laws[A, B]; 
Year designated high risk: 1990; 
GAO's strategic goal: 3. 

2005 high-risk area: IRS Business Systems Modernization[C]; 
Year designated high risk: 1995; 
GAO's strategic goal: 3. 

Modernizing and safeguarding insurance and benefit programs: 

2005 high-risk area: Modernizing Federal Disability Programs[A]; 
Year designated high risk: 2003; 
GAO's strategic goal: 1. 

2005 high-risk area: Pension Benefit Guaranty Corporation Single-
Employer Insurance Program[A]; 
Year designated high risk: 2003; 
GAO's strategic goal: 1. 

2005 high-risk area: Medicare Program[A]; 
Year designated high risk: 1990; 
GAO's strategic goal: 1. 

2005 high-risk area: Medicaid Program[A]; 
Year designated high risk: 2003; 
GAO's strategic goal: 1. 

2005 high-risk area: HUD Single-Family Mortgage Insurance and Rental 
Housing Assistance Programs; 
Year designated high risk: 1994; 
GAO's strategic goal: 1. 

Other: 

2005 high-risk area: Federal Aviation Administration (FAA) Air Traffic 
Control Modernization; 
Year designated high risk: 1995; 
GAO's strategic goal: 3. 

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. 

[B] Two high-risk areas--collection of unpaid taxes and earned income 
credit noncompliance--have been consolidated to make this area. 

[C] The IRS financial management high-risk area has been incorporated 
into this high-risk area. 

[End of table] 

[End of GAO's High-Risk Program] 

Strategies for Achieving Our Goals: 

The Government Performance and Results Act directs agencies to 
articulate not just goals, but also strategies for achieving those 
goals. As detailed in the following sections, our strategies primarily 
emphasize providing information from our work to the Congress and the 
public in a variety of forms and continuing and strengthening our 
internal operations. Our strategies also emphasize the importance of 
two overarching approaches: (1) working with other organizations on 
crosscutting issues and (2) effectively addressing the challenges to 
achieving our agency's goals and recognizing the internal and external 
factors that could impair our performance. Through these strategies, 
which have proven successful for us for a number of years, we plan to 
achieve the level of performance that is needed to meet our performance 
measures and our multiyear performance goals that in turn will allow us 
to achieve our strategic goals. 

In fiscal year 2005, we devoted 87 percent of our engagement resources 
to work requested or mandated by the Congress. We initiated the 
remaining 13 percent of the engagement work under the Comptroller 
General's authority. Much of this work was related to government 
programs and operations that we have identified as high risk for fraud, 
abuse, and mismanagement; reviews of agencies' budget requests; and 
various emerging challenges that are of broad-based interest to the 
Congress, such as the cost of the Global War on Terrorism and the 
status of the reconstruction efforts in Iraq.[Footnote 1] By making 
recommendations to improve the accountability, operations, and services 
of government agencies, we contribute to increasing the effectiveness 
of federal spending and enhancing the taxpayers' trust and confidence 
in their government. Collectively, our products always contain 
information and often conclusions and recommendations that allow us to 
achieve our external strategic goals. 

Another means of ensuring that we are achieving our goals is to examine 
the impact of our past work and use that information to shape our 
future work. We evaluate actions taken by federal agencies and the 
Congress in response to our past recommendations by monitoring the 
status of our open recommendations and reporting our findings annually 
to the Congress and the public ([Hyperlink, 
http://www.gao.gov/openrecs.html)]. Similarly, we will use our biennial 
high-risk report, most recently issued in January 2005, to provide a 
status report on major government operations that we consider high risk 
because they are vulnerable to waste, fraud, abuse, and mismanagement 
or are in need of broad-based transformation. And we will use our 
report on 21st century challenges, which was issued in February 2005, 
to alert the nation's leaders to current and emerging issues facing the 
nation, including the long-range budget challenge, the human capital 
crisis, postal reforms, and the federal government's financial 
management efforts. 

Achieving our strategic goals and objectives also requires strategies 
for coordinating with other organizations with similar or complementary 
missions; we use advisory panels and other bodies to inform our 
strategic and annual work planning. We also initiate and support 
collaborative national and international audit, technical assistance, 
and other knowledge-sharing efforts. 

Strategic and Annual Work Planning: 

Through a series of forums, advisory boards, and panels; periodic 
environmental scans; and our speakers' series, we gather information 
and perspectives for our strategic and annual planning efforts. In 
fiscal year 2005, the Comptroller General convened various experts from 
the public, private, and nonprofit sectors in a series of forums and 
panels intended to enhance our understanding of emerging issues and to 
identify opportunities for action. 

* In December 2004, we hosted a forum on long-term fiscal challenges 
and issued a report summarizing the discussion in February 2005. 

* In February 2005, we convened a forum on defined benefits pension 
plans, the results of which were reported in June 2005. 

* In March 2005, we convened a roundtable involving the accountability 
community on long-term fiscal challenges, the results of which were 
summarized and shared with the participants. 

* Throughout 2005, we held five sessions of our speakers' series, 
Conversations on 21st Century Challenges, wherein prominent leaders 
discuss emerging themes and their implications for public policy. In 
2005, we also initiated the Auditors General Speakers' Series that 
provides unique international perspectives in support of our work; 
speakers included the auditors general of China, Ireland, South Korea, 
and Saudi Arabia. 

Advisory boards and panels also support our strategic and annual work 
planning by alerting us to issues, trends, and lessons learned across 
the national and international audit communities that we should factor 
into our work. These groups include the Comptroller General's Advisory 
Board whose 40 members from the public and private sectors have broad 
expertise in areas related to our strategic objectives. Through the 
National Intergovernmental Audit Forum, chaired by the Comptroller 
General and 10 regional intergovernmental audit forums, we consult 
regularly with federal inspectors general and state and local auditors. 
In addition, through the Domestic Working Group, the Comptroller 
General and the heads of 18 federal, state, and local audit 
organizations exchange information and seek opportunities to 
collaborate. 

We also work with a number of issue-specific and technical panels to 
improve our strategic and annual work planning, including the 
following: 

* The Advisory Council on Government Auditing Standards provides us 
guidance on promulgating auditing standards. These standards articulate 
auditors' responsibilities when examining government organizations; 
programs; activities; functions; and government assistance received by 
contractors, nonprofits, and other nongovernmental organizations. The 
council's work ensured that the revised standards would be generally 
accepted and feasible. 

* The Accountability Advisory Council, made up of experts in the 
financial management community, advises us on audits of the U.S. 
government's consolidated financial statements and emerging issues 
involving financial management and accountability reporting. 

* The Executive Council on Information Management and Technology, whose 
19 members are experts from the public and private sectors and 
representatives of related professional organizations, helps us to 
identify high-risk and emerging issues in the IT arena. 

* The Comptroller General's Educators' Advisory Panel, composed of 
deans, professors, and other academics from prominent universities 
across the United States, advises us on recruiting, retaining, and 
developing staff and on strategic planning matters. 

Internationally, we serve on the board and have several leadership 
roles in the International Organization of Supreme Audit Institutions 
(INTOSAI)--the professional organization of the national audit offices 
of 186 countries. During the fall of 2004, the INTOSAI Congress 
unanimously adopted a 5-year strategic plan--the first in INTOSAI's 50- 
year history--that was developed by a 10-nation task force chaired by 
the Comptroller General. This plan has provided the foundation for the 
Governing Board to engage member institutions in advancing professional 
audit standards and promoting knowledge sharing. 

Collaborating with Others: 

By collaborating with others, we have strengthened professional 
standards, provided technical assistance, leveraged resources, and 
developed best practices. In our work with INTOSAI, we chair the 
accounting and reporting committee, and we are an active member of 
INTOSAI's auditing standards, internal control and accounting 
standards, and other technical committees. We publish INTOSAI's 
quarterly International Journal of Government Auditing in five 
languages to foster global understanding of standards, best practices, 
and technical issues. To help ensure that the public sector's 
perspectives are reflected in the International Federation of 
Accountants Standards Development project, we are working as a member 
of INTOSAI's Professional Standards Committee as it collaborates 
closely with the International Auditing Assurance Standards Board and 
the World Bank to develop international auditing standards. 

To build capacity in national audit offices around the world, we 
conduct an international audit fellows program for mid-to senior-level 
staff from other countries. In 2005, 20 audit fellows from Africa, 
Asia, Europe, Latin America, and the Middle East spent about 4 months 
at GAO learning how we are organized to do our work, how we plan our 
work, and what methodologies we use, particularly for performance 
audits. As part of our strategy to promote continuous learning and 
sustainability once the fellows return to their countries, we are 
working with major donors--such as the World Bank and the U.S. Agency 
for International Development--to identify or support relevant capacity-
building projects in fellows' institutions. Six current and seven 
former auditors general as well as several deputy auditors general, 
including the current chair of INTOSAI, are graduates of this program. 

Other collaborative activities undertaken by our staff during 2005 
included the following: 

* Conferring with the Partnership for Public Service (Partnership), a 
nonprofit, nonpartisan public service organization committed to making 
the government an employer of choice for talented, dedicated Americans 
through educational outreach, research, legislative advocacy, and hands-
on partnerships with agencies on workforce management issues. In late 
2004, the Partnership merged with the Private Sector Council, another 
external partner organization dedicated to helping the federal 
government improve its efficiency, management, and productivity through 
the cooperative sharing of knowledge. During 2005, the Partnership has 
collaborated with us on a human capital symposium focused on 
performance management best practices and assisted us on a number of 
engagements. 

* Actively participating in four Domestic Working Group collaborative 
efforts of federal, state, and local audit officials to address issues 
regarding access to records, grants management, long-term fiscal 
challenges, and governance. Collaborative efforts with the Domestic 
Working Group and the National Association of State Auditors, 
Comptrollers, and Treasurers facilitated our work involving the states 
by fostering a cooperative working relationship with the state auditors 
on over a dozen engagements. 

* Implementing the National Intergovernmental Audit Forum (Forum) 
strategic plan that was adopted in December 2004. This plan was 
developed by a task force composed of federal, state, and local 
auditors and an independent public accountant. The newly established 
committees have begun organizing to implement the plan, which seeks to 
maximize the Forum's effectiveness in promoting good government and 
accountability at all levels of government. In addition, 21 regional 
Forum meetings were held, which brought together auditors at all 
government levels. 

Using Our Internal Experts: 

We coordinated extensively within our own organization on our strategic 
and annual performance planning efforts, as well as on the preparation 
of our performance and accountability reports. Our efforts are 
completed under the overall direction of the Comptroller General and 
the Chief Operating Officer. We relied on our Chief Administrative 
Officer/Chief Financial Officer and her staff to provide key 
information, such as the financial information that is included on page 
51 of this report. Her staff also coordinated with others throughout 
the agency to provide the information on goal 4's results (which 
appears in condensed form on page 32 of this summary report), and 
provided input on other efforts dealing with issues that include 
financial management, budgetary resources, training, and security. We 
obtained input on all aspects of our strategic and annual performance 
planning and reporting efforts from each of our engagement teams and 
organizational units through their respective managing directors, as 
well as other staff responsible for planning or engagement activities 
in the teams. Staff from Quality and Continuous Improvement prepared 
the report, ensuring, among other things, that the report addressed 
comments and suggestions received from the Association of Government 
Accountants and other reviewers. In short, we involved virtually every 
part of GAO and used our internal expertise in our planning and 
reporting efforts. 

[End of Strategies for Achieving Our Goals] 

Addressing Management Challenges That Could Affect Our Performance: 

At GAO, management challenges are identified by the Comptroller 
General, the Executive Committee, and the agency's senior executives 
through the agency's strategic planning, management, and budgeting 
processes. Our progress in addressing the challenges is monitored 
through our annual performance and accountability process. Under 
strategic goal 4, we establish performance goals focused on each of our 
management challenges, track our progress in completing the key efforts 
for those performance goals quarterly, and report each year on our 
progress toward meeting the performance goals. Each year we ask our IG 
to examine management's assessment of the challenges and the agency's 
progress in addressing them. 

For fiscal year 2005, we continued to address three management 
challenges--human capital, information security, and physical security. 
We anticipate that we may need to continue to address these management 
challenges in future years because they are evolving and will require 
us to continuously identify ways to adapt and improve. We revisit the 
challenges each year and refine them when appropriate, and when we 
believe we have sufficiently addressed these challenges we will remove 
them from our list. We will report any changes as we monitor and report 
on our progress in addressing the challenges through our annual 
performance and accountability process. The following sections describe 
our recent and planned efforts to address these challenges. 

The Human Capital Challenge: 

Given our role as a key provider of professional and objective 
information and analyses to the Congress, maintaining the right mix of 
technical knowledge and expertise as well as general analytical skills 
is vital to achieving our mission. We spend about 80 percent of our 
resources on our people, but without excellent human capital policies 
and management practices, we could run the risk of being unable to lead 
by example and meet the expectations of the Congress and the American 
people. Our ability to meet the needs of the nation could also be 
impaired if we do not receive the funding that we need to adequately 
staff the agency, invest to support our people, and reward our top 
performers--a mitigating external factor that we discuss below and in 
the section that follows on Mitigating External Factors That Could 
Affect Our Performance. 

To recruit, reward, and retain a highly qualified, high-performing, and 
diverse workforce remains one of our most important challenges. We 
employed a number of strategies to improve our recruitment efforts and 
support our workforce plan, including increasing the use of short-term 
and time-limited appointments and direct-hire authorities and 
implementing a pilot program for undergraduate cooperative education 
program participants. We also developed our fiscal year 2006 
recruitment strategy to more directly support the agency's workforce 
plan. The strategy includes enhancements or expansions of existing 
programs, such as the capability to offer internships in the fall and 
spring as well as the summer and using special teams to employ targeted 
recruiting for special skill sets, hard-to-fill positions, and 
diversity recruiting. 

We continued to enhance our performance management and compensation 
systems through new and enhanced policies and processes. To improve our 
performance-based compensation system, with the help of a well-regarded 
consulting firm, we implemented a revised process for determining 
performance-based compensation that more directly links an individual's 
performance, as reflected by his or her appraisal, with his or her 
compensation. In June 2005, our administrative and professional support 
staff completed their first year under a broadband pay system and a 
competency-based performance system. To ensure that these staff 
understood the new process and to foster staff acceptance, we employed 
an aggressive communication strategy that included meetings with staff 
as well as Web-based guides and questions and answers. To design a 
competitive, fair, and equitable compensation program aligned with 
competitive labor markets in which we compete for talent, we worked 
with the same consulting firm to perform a market-based compensation 
study. Based on the results of the market-based compensation survey, we 
have invested significantly in restructuring our analyst and analyst- 
related specialist Band II pay band into two pay levels to better align 
individual staff with our institutional compensation policies. We 
expect many of these compensation system changes to be implemented in 
fiscal year 2006. 

Finally, we continued providing our staff with courses and 
opportunities to develop their knowledge and expertise, build their 
competency, and strengthen their leadership skills. We designed and 
delivered 13 new competency-building courses and implemented an adjunct 
faculty program to increase the number of our subject matter experts 
available to develop content for new courses, expand the range of 
courses available, and provide training throughout the year. Among 
other efforts, we also established a group of analysts-in-charge 
representing various teams supporting goals 1 through 3 to discuss best 
practices related to managing engagements. To deliver required core 
courses to Band I analyst staff in field offices, we redistributed and 
realigned course delivery among three learning hubs rather than 
centralizing course delivery in headquarters. We estimate that this 
decision will result in a cost avoidance of $500,000 in travel and per 
diem, as well as other benefits, such as networking among and across 
teams, a sustained focus on learning, larger classes that make more 
effective use of adjunct faculty time, and the opportunity to 
strengthen matrixed work relationships through shared learning 
experiences. 

While we have made progress in addressing the human capital challenge, 
more work remains to be done. Some of the largest efforts planned in 
this area for fiscal year 2006 include: 

* implementing the market-based compensation ranges for our analyst and 
analyst-related staff, 

* determining the market-based compensation ranges for our 
administrative professional and support staff, 

* implementing changes necessary to restructure our analyst Band II 
staff, 

* continuing to strengthen our recruiting processes to better meet the 
needs of the agency and support our strategic goals, 

* obtaining a better understanding of the retention factors affecting 
GAO, and: 

* identifying an appropriate methodology to successfully implement the 
Comptroller General's authority to determine the amount of annual pay 
adjustments. 

The Information Security Challenge: 

Information system security is a critical activity in ensuring our 
information system assets are safe and free from compromise. To address 
the increasing threats due to compromised information or information 
systems, we implemented a wide range of initiatives to strengthen and 
protect the security of our information systems and data. 

We enhanced the security of our users' workstations by installing 
personal firewall software to prevent download of viruses, anti-spyware 
to identify and eliminate malicious programs, and automatic activation 
of the screensaver. We also locked the GAO intranet home page as the 
default home page to prevent spyware from hijacking the default home 
page and downloading more spyware. 

In support of the requirements in the Federal Information Security 
Management Act, we completed remediation of several key weaknesses and 
vulnerabilities during fiscal year 2005. These included ensuring that 
risk assessments, system security plans, reviews performed under 
National Institute of Standards and Technology special publication 800- 
26, and letters for authorization to operate were in place and that 
system test and evaluation reviews and certifications and 
accreditations were developed and completed as necessary. 

Finally, we continued to implement initiatives and improvements to our 
Disaster Recovery Program. Our most significant accomplishment was the 
completion of our vision of the Disaster Recovery Program/Continuity of 
Operations, which was approved and signed by the Comptroller General 
and the Chief Administrative Officer on May 31, 2005. In support of the 
program we also developed emergency preparedness training video 
material for headquarters staff and installed an emergency voice and 
text notification system on the network. 

We anticipate that information security will continue to be one of our 
management challenges in the future. In fiscal year 2006, we will 
further address that challenge by completing implementation of 
centralized auditing of network servers and devices to better secure 
our computing assets within GAO, refining our network monitoring 
procedures to include the use of correlation products to automate the 
detection of potentially harmful threats to our network, implementing 
improvements to our disaster recovery operations, and improving our 
ability to respond and recover in the event of a disruption by 
implementing additional technologies to lessen our risks. 

The Physical Security Challenge: 

The challenge of providing a safe and secure work environment for 
employees remains a constant in light of domestic and international 
events that can have a profound impact on the way we conduct business 
in the United States and around the world. Protecting our people and 
our assets is paramount to agency operations. In fiscal year 2005, we 
initiated actions to enhance our communication with external agencies, 
improve our internal communications and operations, and strengthen the 
technical and physical aspects of our emergency preparedness efforts. 

Externally, we established or enhanced contacts and procedures with 
local agencies to enable us to receive detailed intelligence that would 
not necessarily be provided through normal communication channels and 
to ensure coordination with the legislative branch in case of 
emergency. For example, we established emergency notification 
procedures with the Federal Bureau of Investigation Joint Terrorism 
Task Force; enhanced relocation procedures and improved relations with 
the U.S. Capitol Police, the House Sergeant at Arms, and the Emergency 
Preparedness Office; and made arrangements with the District of 
Columbia government to receive up-to-date emergency notifications. We 
are also an active member of the Legislative Branch Continuity of 
Operations Plan Working Group, and we coordinated and participated in a 
legislative branch tabletop exercise involving a simulation of a crisis 
requiring the House of Representatives to vacate and relocate 
elsewhere. 

Internally, we took several steps to support our goal of providing a 
safe and secure work environment. To ensure that our staff know what to 
do in case of an emergency, we conducted our first shelter in place 
drill for headquarters, and distributed shelter in place plans for the 
majority of our field offices and an emergency preparedness brochure 
for all staff. To reduce the agency's security risk, we installed an 
electronic fingerprint system that improves the speed with which we can 
obtain screening through the Federal Bureau of Investigation, including 
immediate reports if prints are not acceptable. 

To help ensure continued operations, we have completed initiatives in 
the areas of technical and physical security. We increased our network 
access potential by installing and reactivating additional local area 
network ports. This will provide for efficient and effective use of 
space in the event that congressional staff need to relocate to our 
headquarters building in an emergency. 

We plan to continue to assess our security operations to ensure our 
ability to meet ever-changing challenges to our security posture. In 
fiscal year 2006 we will be completing work on the Integrated 
Electronic Security System, which includes installation of turnstiles 
at headquarters, implementation of smart card technology, and upgrading 
access control and intrusion detection systems for headquarters and the 
field offices. Other efforts to meet this continuing challenge include 
procurement of an emergency notification system, and designing and 
disseminating a more robust security education and awareness program 
for headquarters and the field offices. 

[End of Addressing Management Challenges] 

Mitigating External Factors That Could Affect Our Performance: 

Several external factors could affect the achievement of our 
performance goals, including the amount of resources we receive, shifts 
in the content and volume of our work, and various national and 
international developments. Limitations imposed on our work by other 
organizations or limitations on the ability of other federal agencies 
to make the improvements we recommend are additional factors that could 
affect the achievement of our goals. 

The external factors that could have the most significant adverse 
affect on us are the constrained budget environment in which we 
currently work and the uncertain budget future we face. We are 
experiencing heavy demand from the Congress for work in a number of 
subject areas, especially in disaster recovery and preparedness in the 
aftermath of Hurricanes Katrina and Rita and in health care. Given the 
across-the-board funding reductions that the Congress is considering 
for fiscal year 2006, large current federal budget deficits, and the 
nation's long-range fiscal imbalance, the Congress is likely to place 
an increasing emphasis on fiscal constraint. While it is unclear how we 
will ultimately be affected, it is reasonable to assume that any 
attempt to exercise additional budgetary discipline in the legislative 
branch will include our agency. As a result, while we believe that we 
submit reasonable and responsible budget requests and we know that the 
return on investment that we generate is unparalleled, we must plan and 
prepare for the possibility of significant and recurring constraints on 
the resources made available to us. In addition, because about 80 
percent of our budget is composed of people-related costs, any serious 
budget situation will have an adverse impact on our human capital 
policies and practices and related investment practices. This, in turn, 
will have an adverse impact on our ability to serve the Congress and 
meet our performance targets. While, as we noted above, the nature and 
extent of any such budget constraints cannot be determined at the 
present time, our executive team is prudently engaged in a range of 
related planning activities that will help us to manage small 
reductions in our funding levels and still perform the high-quality 
work for the Congress that we are known for. We sincerely strive to 
lead by example, and are hopeful that our modest budget requests 
supported by our sound business case and proven performance results 
will encourage the Congress to provide additional resources to us and 
other high-performing entities. If the Congress employs such an 
approach, we should be in a good position to continue to provide a high 
rate of return on the resources invested in the agency. However, 
employing an across-the-board cut or other nontargeted approaches would 
greatly impede our ability to do our work and may create perverse 
incentives for those agencies that are trying to model our priorities 
and practices. 

A growing area for us also involves our work on bid protests. As 
required by law, General Counsel prepares Comptroller General 
procurement law decisions that resolve protests filed by disappointed 
bidders. These bidders challenge the way individual federal 
procurements are being conducted or how the contracts were awarded. In 
recent years, we have experienced an increase in the number of bid 
protests that have been filed. There is a possibility of a further 
increase if the executive branch undertakes a significant number of 
public or private competitions under OMB Circular A-76, particularly if 
statutory changes allow representatives of employees to protest when 
the private sector wins these competitions. We will continue to monitor 
our workload in this area to ensure that we meet our statutory 
responsibilities with minimal negative impact on our other work. 

In addition to current and future budget constraints, another external 
factor is the extent to which we can obtain access to certain types of 
information. With concerns about operational security being unusually 
high at home and abroad, we may have more difficulty obtaining 
information in a timely manner and reporting on sensitive issues. 
Historically, our auditing and information gathering have been limited 
whenever the intelligence community is involved. In addition, we have 
not had the authority to access or inspect records or other materials 
held by other countries or, generally, by the multinational 
institutions that the United States works with to protect its 
interests. Consequently, our ability to fully assess the progress being 
made in addressing national and homeland security issues may be 
hampered. Also, we anticipate that more of our reports may be subject 
to classification reviews than in the past, which means that the public 
dissemination of these products may be limited. We plan to work with 
the Congress to identify both legislative and nonlegislative 
opportunities for strengthening our access authority as necessary and 
appropriate. 

As the Congress focuses on unpredictable events--such as natural 
disasters, possible public health pandemics, and the global threat 
posed by sophisticated terrorist networks--the mix of work we are asked 
to undertake may change, diverting our resources from some strategic 
objectives and performance goals. We can and do mitigate the impact of 
these events on the achievement of our goals in various ways. For 
example in fiscal year 2005, we: 

* stayed abreast of current events (such as the airline industry's 
financial crisis and gasoline prices) and communicated frequently with 
our congressional clients in order to be alert to possibilities that 
could shift the Congress's priorities or trigger new priorities; 

* quickly redirected our resources when appropriate (e.g., on the cost 
and recovery efforts related to Hurricane Katrina) so that we could 
deal with major changes as they occur; 

* maintained broad-based staff expertise (e.g., in our Social Security, 
health care financing, and homeland security areas) so that we could 
readily address emerging needs; and: 

* initiated research under the Comptroller General's authority on a 
limited number of selected topics, such as U.S. tsunami detection and 
preparedness efforts, the status of Iraq's reconstruction, and our 21st 
century challenges and high-risk work. 

Our ability to effectively manage the demands on our resources could 
have an impact on our ability to meet our performance targets. However, 
we will continue to manage the congressional requests we receive and 
the work we do under the Comptroller General's authority in order to 
minimize any negative impact it may have on our ability to meet the 
needs of the Congress and the American people. 

[End of Mitigating External Factors That Could Affect Our Performance] 

Managing Our Resources: 

Resources Used to Achieve Our Fiscal Year 2005 Performance Goals: 

Our financial statements for fiscal year 2005 received an unqualified 
opinion from an independent auditor. The auditor found our internal 
controls to be effective--which means that no material weaknesses were 
identified--and the auditor reported substantial compliance with the 
requirements for financial systems in the Federal Financial Management 
Improvement Act of 1996. The auditor also found no instances of 
noncompliance with the laws or regulations in the areas tested. 
Compared with the statements of large and complex agencies in the 
executive branch, our statements present a relatively simple picture of 
a small yet important agency in the legislative branch. We focus most 
of our financial activity on the execution of our congressionally 
approved budget with most of our resources devoted to the human capital 
needed for our mission of supporting the Congress with professional, 
objective, fact-based, nonpartisan, nonideological, fair, and balanced 
information and analysis. Table 3 summarizes key data from the 
financial statements. 

Table 3: GAO's Financial Highlights: Resource Information: 

Total budgetary resources[A]; 
Fiscal year 2005: $493.8 million; 
Fiscal year 2004: $487.5 million. 

Total outlays[A]; 
Fiscal year 2005: $478.7 million; 
Fiscal year 2004: $469.0 million. 

Net cost of operations: 

Goal 1: Well-being and financial security of the American people; 
Fiscal year 2005: $197.7 million; 
Fiscal year 2004: $194.7 million. 

Goal 2: Changing security threats and challenges of globalization; 
Fiscal year 2005: $144.2 million; 
Fiscal year 2004: $131.7 million. 

Goal 3: Transforming the federal government's role; 
Fiscal year 2005: $147.3 million; 
Fiscal year 2004: $145.8 million. 

Goal 4: Maximizing the value of GAO; 
Fiscal year 2005: $22.0 million; 
Fiscal year 2004: $23.4 million. 

Less reimbursable services not attributable to goals; 
Fiscal year 2005: ($5.4 million); 
Fiscal year 2004: ($5.5 million). 

Total net cost of operations[A]; 
Fiscal year 2005: $505.8 million; 
Fiscal year 2004: $490.1 million. 

Actual full-time equivalents; 
Fiscal year 2005: 3,189; 
Fiscal year 2004: 3,224. 

Source: GAO: 

[A] The net cost of operations figures include nonbudgetary items, such 
as imputed pension and depreciation costs, which are not included in 
the figures for total budgetary resources (which include current and 
prior year carryover authority) or total outlays. 

[End of table] 

Our budget consists of an annual appropriation covering salaries and 
expenses and revenue from reimbursable audit work and rental income. 
For fiscal year 2005, our total budgetary resources increased by $6.3 
million from fiscal year 2004. This increase consists of funds needed 
to cover mandatory and uncontrollable costs and a onetime transfer of 
budgetary authority from DHS for a review of TSA's calendar year 2000 
costs for screening passengers and property. 

Our total assets were $114.4 million, consisting mostly of property and 
equipment (including the headquarters building, land and improvements, 
and computer equipment and software) and funds with the U.S. Treasury. 
The largest dollar change in our assets was in the net value of 
property and equipment, which decreased in fiscal year 2005 as a result 
of normal depreciation amounts being greater than asset purchases. 
Total liabilities of $94.9 million were composed largely of employees' 
accrued annual leave, amounts owed to other government agencies, 
accounts payable, and employees' salaries and benefits. The greatest 
changes in the liabilities were increases in intragovernmental accounts 
payable and capital lease liabilities. The increase in 
intragovernmental accounts payable relates to amounts due to GSA 
accrued at the end of the year. The increase in capital lease liability 
during fiscal year 2005 is primarily the result of entering into new 
leases for the replacement of substantially all the notebook computers 
and copiers at GAO headquarters. 

The net cost of operating GAO during fiscal year 2005 and fiscal year 
2004 was approximately $506 million and $490 million, respectively. 
Expenses for salaries and related benefits accounted for 78 and 79 
percent of our net cost of operations in fiscal years 2005 and 2004, 
respectively. Figure 3 shows how our fiscal year 2005 costs break down 
by category. 

We report net cost of operations according to our four strategic goals, 
consistent with our strategic plan. Goal 2 accounted for the greatest 
dollar increase in our net cost of operations from fiscal year 2004 
through fiscal year 2005. The increase is due to the continued efforts 
in homeland security. Costs in goal 4 decreased in fiscal year 2005 as 
a result of several goal 4 key efforts being completed during fiscal 
year 2004, the first year of the 2-year strategic plan period. Examples 
include the implementation of the Travel Manager System completed in 
fiscal year 2004 as well as the development phase efforts for both the 
performance-based compensation system and the competency-based 
appraisal system. 

Figure 3: Use of Fiscal Year 2005 Funds by Category: 

[See PDF for image] - graphic text: 

Pie chart with five items. 

Percentage of Total Net Costs: 

Salaries and benefits: 78.3%; 
Building and hardware maintenance services: 10.8%; 
Rent (space and hardware): 3.9%; 
Depreciation: 2.7%; 
Other: 4.3%. 

Source: GAO. 

[End of figure] 

Figures 4 and 5 show our net costs by goal for fiscal year 2002 through 
fiscal year 2005. Figure 4 shows costs unadjusted for inflation, while 
figure 5 shows the same costs in 2005 dollars, that is, adjusted for 
inflation. 

Figure 4: Net Cost by Goal, Unadjusted for Inflation: 

[See PDF for image] - graphic text: 

Bar chart with 4 groups of 4 items each. 

Goal 1; 
2002: $178.3 million; 
2003: $186.4 million; 
2004: $194.7 million; 
2005: $197.7 million. 

Goal 2; 
2002: $110.5 million; 
2003: $122.0 million; 
2004: $131.7 million; 
2005: $144.2 million. 

Goal 3; 
2002: $141.0 million; 
2003: $144.9 million; 
2004: $145.8 million; 
2005: $147.3 million. 

Goal 4; 
2002: $25.3 million;
2003: $20.0 million;
2004: $23.4 million;
2005: $22.0 million. 

Source: GAO. 

[End of figure] 

Figure 5: Net Cost by Goal, Adjusted for Inflation: 

[See PDF for image] - graphic text: 

Bar chart with 4 groups of 4 items each. 

Goal 1; 
2002: $191.3 million; 
2003: $196.1 million; 
2004: $200.1 million; 
2005: $197.7 million. 

Goal 2; 
2002: $118.6 million; 
2003: $128.4 million; 
2004: $135.3 million; 
2005: $144.2 million. 

Goal 3; 
2002: $151.3 million; 
2003: $152.5 million; 
2004: $149.8 million; 
2005: $147.3 million. 

Goal 4; 
2002: $27.2 million;
2003: $21.0 million;
2004: $24.0 million;
2005: $22.0 million. 

Source: GAO. 

[End of figure] 

Audit Advisory Committee: 

Assisting the Comptroller General in overseeing the effectiveness of 
GAO's financial operations is a three-member external Audit Advisory 
Committee. The committee's report for fiscal year 2005 appears after 
our financial statements and accompanying notes. Current members of the 
committee are: 

* Sheldon S. Cohen (Chairman), CPA and practicing attorney in 
Washington, D.C., former Commissioner and Chief Counsel of the Internal 
Revenue Service, and Senior Fellow of the National Academy of Public 
Administration. 

* Edward J. Mazur, CPA, member of the Governmental Accounting Standards 
Board, former State Comptroller of Virginia, and former Controller of 
the Office of Federal Financial Management in OMB. 

* Charles O. Rossotti, Senior Advisor at The Carlyle Group; former 
Commissioner of Internal Revenue; and founder and former Chief 
Executive Officer and Chairman of American Management Systems, Inc., an 
international business and IT consulting firm. 

Planned Resources to Achieve Our Fiscal Year 2006 Performance Goals: 

GAO's resources include budget authority of $490 million for fiscal 
year 2006 to maintain current operations for serving the Congress as 
outlined in our strategic plan and allow us to continue to enhance our 
productivity, and maintain the progress we have made in technology and 
other transformation areas. This funding level supports 3,217 full-time 
equivalent personnel. Our resources include $483 million in direct 
appropriations and estimated revenue of $7 million from reimbursable 
audit work and rental income. Our fiscal year 2006 resources represent 
a modest 3 percent increase over fiscal year 2005 resources--primarily 
to fund mandatory pay and uncontrollable costs. Following the 
catastrophic events of Hurricanes Katrina and Rita, the Congress is 
considering governmentwide across-the-board funding reductions that 
might reduce fiscal year 2006 spending levels, and this could affect 
our resources. The nature and extent of any potential funding reduction 
is unknown. 

Our resources support three broad program areas: human capital, mission 
operations, and critical infrastructure. We will also continue to 
address our major management challenges, which are human capital, 
information security, and physical security. For example, on the human 
capital front, to ensure our ability to attract and retain a highly 
qualified, high-performing, and diverse workforce, our fiscal year 2006 
recruitment strategy enhances or expands existing programs for 
internships and professional development, and provides targeted 
recruiting for special skill sets and hard-to-fill positions, and to 
enhance the agency's diversity recruiting. 

In fiscal year 2006, we plan to implement recommendations resulting 
from an assessment of our compensation system being conducted by a well-
regarded consulting firm, to ensure that our compensation is fair and 
equitable and aligned with competitive labor markets. 

On the information security front, to address the increasing threats 
due to compromised information or information systems, we will complete 
an audit of network servers and refine monitoring techniques. To extend 
our ability to securely access and transmit classified data and 
information, we completed installation of security features in seven of 
our field offices and plan to continue installation at the remaining 
field offices in fiscal year 2006. 

On the physical security front, we are working to enhance our 
communication with external agencies, improve our internal 
communications and operations, and strengthen the technical and 
physical aspects of our emergency preparedness efforts. 

[End of Managing Our Resources] 

From the Chief Financial Officer: 

January 2006: 

I am pleased to report that in fiscal year 2005 the U.S. Government 
Accountability Office continued to set the standard for excellence in 
government financial management. For the 19th consecutive year, 
independent auditors gave our financial statements an unqualified 
opinion with no material weaknesses and no major compliance problems. 
The financial statements that follow were prepared, audited, and made 
publicly available as an integral part of this performance and 
accountability report 45 days after the end of the fiscal year. In 
addition, for the fourth year in a row, the Association of Government 
Accountants awarded us a certificate of excellence in accountability 
reporting for our fiscal year 2004 annual performance and 
accountability report. 

During fiscal year 2005 we continued to make strides toward our 
strategic goal of becoming a model federal agency and a world-class 
professional services organization. We are leading the way in 
performance management through new and enhanced policies and processes. 
With the help of a consultant, we analyzed and designed a competitive, 
fair, and equitable compensation program aligned with the labor markets 
in which GAO competes for talent. Further, we invested significantly in 
restructuring our analysts' and specialists' pay bands to better align 
compensation with responsibilities. In June, our administrative staff 
completed their first cycle under a similar competency-based system 
designed to establish a clear link between employee performance and 
GAO's mission, core values, and strategic goals and objectives. This 
system will enable fair, honest, and properly applied measures of 
performance based on standards that are reasonable, appropriate, and 
clear to employees. Having a consistent competency-based performance 
management system throughout the agency will help to ensure that the 
work of all our staff is aligned with our core values and strategic 
direction. 

We also performed an extensive review of agency operations during 
fiscal year 2005 for potential cost savings, outsourcing, streamlining, 
and other opportunities to increase operational efficiency and 
effectiveness, as the result of a mandate in House Report 108-577. We 
had previously decided to cease operations of our internal print plant 
as a result of a reduced demand for printed products. The closing of 
the print plant was completed in October 2004, and all our printing 
needs are now met through contracts. Another area affected by our 
streamlining efforts this fiscal year was our accounting branch within 
the Office of Financial Management. Aiming to focus our financial 
management staff on greater value-added input to GAO activities, we 
have begun to shift the efforts of our staff away from routine 
transaction processing and toward a greater role in strategic business 
decision analysis and support. This shift will occur through a 
combination of automation, reallocation of resources within GAO, and 
outsourcing some data entry functions. Last year's implementation of 
the Travel Manager system has enabled us to streamline the auditing of 
our travel vouchers and transfer the remaining efforts from financial 
management to field office staff, more efficiently using administrative 
resources available throughout the agency. We cross-serviced the 
accounts payable function to the Department of the Interior's National 
Business Center. This center performs invoice receipt, processing, and 
payment activities for a number of other agencies; by utilizing the 
center's services, we will realize savings through eliminating data 
entry positions and focusing the efforts of the remaining staff on 
higher end financial analysis and decision support. 

To improve our operations through the use of new technology, we have 
embarked on an extensive effort to replace our current financial 
management system. Although our current system has served us well over 
the years, upgrades are no longer offered and technical support has 
become increasingly difficult to find. We have adopted, and are 
following, best practice processes to select and implement our next 
generation financial management system. This is part of a larger 
enterprise architecture effort that will improve integration of all our 
systems that interact with our financial data. We also improved our 
internal communications by implementing a new system for electronic 
dissemination and storage of agencywide communications, a new 
administrative services Web site, and a searchable administrative 
services directory. 

Looking forward to fiscal year 2006, we realize that there are many 
challenges ahead. In addition to our work on the new financial system, 
we continue to voluntarily implement the additional requirements of 
OMB's revised Circular A-123, which requires management to specifically 
document, assess, and attest to the effectiveness of internal controls 
over financial reporting beginning in fiscal year 2006. In addition to 
these efforts, we will continue to investigate and implement new 
approaches to improve the efficiency and effectiveness of our 
preparation of quality products for our clients in the Congress and the 
American people. 

Signed by: 

Sallyanne Harper: 
Chief Financial Officer: 

[End of From the Chief Financial Officer] 

Financial Management Accountability: 

Our condensed financial statements begin in the Financial Statements 
section below. Our financial statements for the fiscal years ended 
September 30, 2005 and 2004, were audited by an independent auditor, 
Cotton & Co., LLP (see part III of our fiscal year 2005 performance and 
accountability report for our complete financial statements and the 
auditor's full report at [Hyperlink, http://www.gao.gov/sp.html]). 

Cotton & Co., LLP, rendered an unqualified opinion on our financial 
statements and an unqualified opinion on the effectiveness of our 
internal controls over financial reporting and compliance with laws and 
regulations. The auditor also reported that we have substantially 
complied with the applicable requirements of the Federal Financial 
Management Improvement Act (Improvement Act) of 1996 and found no 
reportable instances of noncompliance with selected provisions of laws 
and regulations. In the opinion of the independent auditor, the 
financial statements are presented fairly in all material respects and 
are in conformity with generally accepted accounting principles. 

Financial Systems and Internal Controls: 

We recognize the importance of strong financial systems and internal 
controls to ensure our accountability, integrity, and reliability. To 
achieve a high level of quality, management maintains a quality control 
program and seeks advice and evaluation from both internal and external 
sources. 

We are committed to fulfilling the internal control objectives of 31 
U.S.C. 3512, commonly referred to as the Federal Managers' Financial 
Integrity Act (Integrity Act). Although we are not subject to the act, 
we comply voluntarily with its requirements. Our internal controls are 
designed to provide reasonable assurance that obligations and costs are 
in compliance with applicable laws and regulations; funds, property, 
and other assets are safeguarded against loss from unauthorized 
acquisition, use, or disposition; and revenues and expenditures 
applicable to our operations are properly recorded and accounted for to 
enable our agency to prepare reliable financial reports and maintain 
accountability over our assets. 

Our management assesses compliance with these controls through a series 
of comprehensive internal reviews, applying the evaluation criteria in 
OMB's guidance for implementing the Integrity Act. The results of these 
reviews are discussed with our Audit Advisory Committee, and action is 
taken to correct deficiencies as they are identified. 

We assessed our internal controls as of September 30, 2005, based on 
the criteria mentioned above for effective internal controls in the 
federal government. On the basis of this assessment, we believe that as 
of September 30, 2005, we have effective internal controls in place. 
Additionally, our independent auditor found that we maintained 
effective internal controls over financial reporting and compliance 
with laws and regulations. Consistent with our evaluation, the auditor 
found no material internal control weaknesses. 

In addition, we are committed to fulfilling the objectives of the 
Improvement Act, which is also covered within 31 U.S.C. 3512. Although 
we are not subject to the act, we voluntarily comply with its 
requirements. We believe that we have implemented and maintained 
financial systems that comply substantially with federal financial 
management systems requirements, applicable federal accounting 
standards, and the United States Government Standard General Ledger at 
the transaction level as of September 30, 2005. We made this assessment 
based on criteria established under the Improvement Act and guidance 
issued by OMB. Also, our auditor reported that we had substantially 
complied with the applicable requirements of the Improvement Act as of 
September 30, 2005. 

GAO's IG also conducts audits and investigations that are internally 
focused, functions as an independent fact-gathering adviser to the 
Comptroller General, and reviews all accomplishment reports totaling 
$500 million or more. During fiscal year 2005, the IG examined 
compliance with our policy and procedures for conflict-of-interest 
determinations, recruiting and hiring, performance evaluations, career 
advancement, professional development, continuing professional 
education, GAO's information security program and practices, the 
performance-based compensation process for analysts and attorneys, and 
benefits for transit and parking. In addition, the IG independently 
tests our compliance with procedures related to our performance data on 
a rotating basis over a 3-year period. No material weaknesses were 
reported by the IG. During fiscal year 2005, we completed actions 
related to 12 IG recommendations, none of which affected the financial 
statements. There are no unresolved issues. 

Limitation on Financial Statements: 

Responsibility for the integrity and objectivity of the financial 
information presented in the financial statements in this report rests 
with our managers. The statements were prepared to report our financial 
position and results of operations, consistent with the requirements of 
the Chief Financial Officers Act, as amended (31 U.S.C. 3515). The 
statements were prepared from our financial records in accordance with 
the formats prescribed in OMB Circular A-136, Financial Reporting 
Requirements. These financial statements differ from the financial 
reports used to monitor and control our budgetary resources. However, 
both were prepared from the same financial records. Our financial 
statements should be read with the understanding that as an agency of a 
sovereign entity, the U.S. government, we cannot liquidate our 
liabilities (i.e., pay our bills) without legislation that provides 
resources to do so. Although future appropriations to fund these 
liabilities are likely and anticipated, they are not certain. 

Purpose of Each Financial Statement: 

The condensed financial statements present the following information: 

* A balance sheet presents the combined amounts we had available to use 
(assets) versus the amounts we owed (liabilities) and the residual 
amounts after liabilities were subtracted from assets (net position). 

* A statement of net cost presents the annual cost of our operations. 
The gross cost less any offsetting revenue earned from our activities 
is used to arrive at the net cost of work performed under our four 
strategic goals. 

* A statement of changes to net position presents the accounting items 
that caused the net position section of the balance sheet to change 
from the beginning to the end of the fiscal year. 

* A statement of budgetary resources presents how budgetary resources 
were made available to us during the fiscal year and the status of 
those resources at the end of the fiscal year. 

* A statement of financing reconciles the resources available to us 
with the net cost of operating the agency. 

[End of Financial Management Accountability] 

Independent Auditor's Report: 

Cotton & Company: 

Cotton & Company, LLP: 
635 Slaters Lane: 
4th Floor: 
Alexandria, VA 22314: 

P: 703.836.6701: 
F: 703.836.0941: 

www.cottoncpa.com: 

INDEPENDENT AUDITOR'S REPORT: 

Cotton & Company LLP audited GAO's Balance Sheets as of September 30, 
2005, and 2004, and the related Statements of Net Cost, Changes in Net 
Position, Budgetary Resources, and Financing for the years then ended. 
In our report dated November 1, 2005, we stated that we found: 

* The 2005 and 2004 financial statements referred to above are fairly 
presented, in all material respects, in conformity with U.S. generally 
accepted accounting principles, 

* GAO maintained effective internal control over financial reporting 
(including safeguarding of assets) and compliance with laws and 
regulations as of September 30, 2005, 

* GAO's financial management systems substantially complied with 
applicable requirements of the Federal Financial Management Improvement 
Act of 1996 (FFMIA), and: 

* No reportable noncompliance with laws and regulations tested. 

In our opinion, the information set forth in the accompanying condensed 
financial statements is fairly presented, in all material respects, in 
relation to the financial statements from which it has been derived. 

We performed our audit and examinations in accordance with Government 
Auditing Standards, U.S. generally accepted auditing standards, 
American Institute of Certified Public Accountants' attestation 
standards, and Office of Management and Budget (OMB) Bulletin No. 01- 
02, Audit Requirements for Federal Financial Statements. 

With respect to our opinion on internal control, misstatements, losses, 
or noncompliance may nevertheless occur and not be detected because of 
inherent limitations in internal control. Also, projections of any 
evaluation of internal control to future periods are subject to the 
risk that internal control may become inadequate as the result of 
changes in conditions, or that the degree of compliance with the 
policies or procedures may deteriorate. 

With respect to our opinion on GAO's financial management systems' 
compliance with FFMIA, our examination does not provide a legal 
determination of GAO's financial management systems compliance with 
specified requirements. 

We are responsible for testing compliance with selected provisions of 
laws and regulations that have a direct and material effect on the 
financial statements. We did not test compliance with all laws and 
regulations applicable to GAO. We limited our tests of compliance to 
those laws and regulations required by OMB audit guidance that we 
deemed applicable to the financial statements for the fiscal year ended 
September 30, 2005. We caution that noncompliance may occur and not be 
detected by these tests, and that such testing may not be sufficient 
for other purposes. Our conclusion on compliance with laws and 
regulations is intended solely for the information and use of the 
management of GAO, OMB, and Congress and is not intended to be, and 
should not be, used by anyone other than these specified parties. 
However, this report is a matter of public record and its distribution 
is not limited. 

COTTON & COMPANY LLP: 

Signed by: 

Charles Hayward, CPA: 

Alexandria, Virginia: 
November 1, 2005: 

[End of Independent Auditor's Report] 

Financial Statements: 

U.S. Government Accountability Office. 

Condensed Balance Sheets. 

As of September 30, 2005 and 2004. 

(Dollars in thousands). 

Assets: 

Intragovernmental assets including funds with the U.S. Treasury; 
2005: $66,755; 
2004: $68,670. 

Property and equipment, net; 
2005: $47,291; 
2004: $49,180. 

Other; 
2005: $310; 
2004: $382. 

Total Assets; 
2005: $114,356; 
2004: $118,232. 

Liabilities: 

Intragovernmental liabilities; 
2005: $16,188; 
2004: $11,248. 

Accounts payable and salaries and benefits; 
2005: $28,614; 
2004: $27,784. 

Accrued annual leave and other; 
2005: $30,093; 
2004: $29,958. 

Workers' compensation; 
2005: $10,357; 
2004: $9,819. 

Capital leases; 
2005: $9,657; 
2004: $5,934. 

Total Liabilities; 
2005: $94,909; 
2004: $84,743. 

Net Position: Unexpended appropriations; 
2005: $27,003; 
2004: $34,621. 

Net Position: Cumulative results of operations; 
2005: ($7,556); 
2004: ($1,132). 

Total Net Position; 
2005: $19,447; 
2004: $33,489. 

Total Liabilities and Net Position; 
2005: $114,356; 
2004: $118,232. 

[End of table] 

Financial Statements: 

U.S. Government Accountability Office. 

Condensed Statements of Net Cost. 

For Fiscal Years Ended September 30, 2005 and 2004. 

(Dollars in thousands). 

Net Costs by Goal: 

Goal 1: Well-being/financial security of American people; 
2005: $197,730; 
2004: $194,731. 

Goal 2: Changing security threats/challenges of global interdependence; 
2005: $144,200; 
2004: $131,660. 

Goal 3: Transforming the federal government's role; 
2005: $147,318; 
2004: $145,761. 

Goal 4: Maximize the value of GAO; 
2005: $22,034; 
2004: $23,410. 

Less: reimbursable services not attributable to goals; 
2005: (5,432); 
2004: ($5,493). 

Net Cost of Operations; 
2005: $505,850; 
2004: $490,069. 

[End of table] 

Financial Statements: 

U.S. Government Accountability Office. 

Condensed Statements of Changes in Net Position. 

For Fiscal Years Ended September 30, 2005 and 2004. 

(Dollars in thousands). 

Balances, Beginning of Fiscal Year; 
2005: Cumulative Results of Operations; ($1,132); 
2005: Unexpended Appropriations; $34,621; 
2004: Cumulative Results of Operations; $2,338; 
2004: Unexpended Appropriations; $40,327. 

Budgetary Financing Sources: Current year appropriations; 
2005: Cumulative Results of Operations; -; 
2005: Unexpended Appropriations; $467,205; 
2004: Cumulative Results of Operations; -; 
2004: Unexpended Appropriations; $457,606. 

Budgetary Financing Sources: Appropriations used; 
2005: Cumulative Results of Operations; $474,118; 
2005: Unexpended Appropriations; ($474,118); 
2004: Cumulative Results of Operations; $461,503; 
2004: Unexpended Appropriations; ($461,503). 

Budgetary Financing Sources: Other; 
2005: Cumulative Results of Operations; -; 
2005: Unexpended Appropriations; ($705); 
2004: Cumulative Results of Operations; -; 
2004: Unexpended Appropriations; ($1,809). 

Other Financing Sources: Employee benefit costs imputed to GAO; 
2005: Cumulative Results of Operations; $25,309; 
2005: Unexpended Appropriations; -; 
2004: Cumulative Results of Operations; $25,884; 
2004: Unexpended Appropriations; -. 

Other Financing Sources: Other; 
2005: Cumulative Results of Operations; ($1); 
2005: Unexpended Appropriations; -; 
2004: Cumulative Results of Operations; ($788); 
2004: Unexpended Appropriations; -. 

Total Financing Sources; 
2005: Cumulative Results of Operations; $499,426; 
2005: Unexpended Appropriations; (7,618); 
2004: Cumulative Results of Operations; $486,599; 
2004: Unexpended Appropriations; ($5,706). 

Net Cost of Operations; 
2005: Cumulative Results of Operations; ($505,850); 
2005: Unexpended Appropriations; -; 
2004: Cumulative Results of Operations; ($490,069); 
2004: Unexpended Appropriations; -. 

Balances, End of Fiscal Year; 
2005: Cumulative Results of Operations; ($7,556); 
2005: Unexpended Appropriations; $27,003; 
2004: Cumulative Results of Operations; ($1,132); 
2004: Unexpended Appropriations; $34,621. 

[End of table] 

Financial Statements: 

U.S. Government Accountability Office. 

Condensed Statements of Budgetary Resources. 

For Fiscal Years Ended September 30, 2005 and 2004. 

(Dollars in thousands). 

Budgetary Resources: 

Current year appropriations; 
2005: $467,205; 
2004: $457,606. 

Transfers of budget authority; 
2005: $1,644; 
2004: -. 

Unobligated appropriations, beginning of fiscal year; 
2005: $14,066; 
2004: $18,895. 

Reimbursements; 
2005: $10,892; 
2004: $11,021. 

Total Budgetary Resources; 
$493,807; 
$487,522. 

Status of Budgetary Resources: 

Obligations incurred; 
2005: $480,378; 
2004: $471,647. 

Unobligated appropriations, end of fiscal year; 
2005: $11,080; 
2004: $14,066. 

Lapsed budget authority; 
2005: $2,349; 
2004: $1,809. 

Total Status of Budgetary Resources; 
2005: $493,807; 
2004: $487,522. 

Relationship of Obligations to Outlays: 

Obligations incurred; 
2005: $480,378; 
2004: $471,647. 

Obligated balance, net - beginning of fiscal year; 
2005: $53,103; 
2004: $50,487. 

Less: Obligated balance, net - end of fiscal year; 
2005: ($54,798); 
2004: ($53,103). 

Total Outlays; 
2005: $478,683; 
2004: $469,031. 

Outlays: 

Disbursements; 
2005: $478,683; 
2004: $469,031. 

Collections; 
2005: ($10,892); 
2004: ($11,021). 

Net Outlays; 
2005: $467,791; 
2004: $458,010. 

[End of table] 

Financial Statements: 

U.S. Government Accountability Office. 

Condensed Statements of Financing. 

For Fiscal Years Ended September 30, 2005 and 2004. 

(Dollars in thousands). 

Resources Used to Finance Activities; 

Budgetary Resources Obligated; 

Obligations incurred; 
2005: $480,378; 
2004: $471,647. 

Less: Reimbursements; 
2005: ($10,892); 
2004: ($11,021). 

Net obligations; 
2005: $469,486; 
2004: $460,626. 

Other Resources; 

Employee benefit costs imputed to GAO; 
2005: $25,309; 
2004: $25,884. 

Other; 
2005: ($1); 
2004: ($788). 

Net other resources used to finance activities; 
2005: $25,308; 
2004: $25,096. 

Total resources used to finance activities; 
2005: $494,794; 
2004: $485,722. 

Resources Used to Finance Items Not Part of the Net Cost of Operations; 

Net decrease in unliquidated obligations; 
2005: $4,632; 
2004: $876. 

Costs capitalized on the balance sheet; 
2005: ($9,069); 
2004: ($11,703). 

Total resources used to finance items not part of the net cost of 
operations; 
2005: ($4,437); 
2004: ($10,827). 

Total resources used to finance the net cost of operations; 
2005: $490,357; 
2004: $474,895. 

Components That Require/Generate Resources in Future Periods; 

Increase/(decrease) in workers' compensation, accrued annual leave, and 
other liabilities; 
2005: $732; 
2004: ($1,630). 

Costs That Do Not Require Resources; 

Depreciation; 
2005: $14,761; 
2004: $16,804. 

Net Cost of Operations; 
2005: $505,850; 
2004: $490,069. 

[End of table] 

[End of Financial Statements] 

From the Inspector General: 

[See PDF for image] 

[End of figure] 

[End of From the Inspector General] 

Providing Comments on This Report: 

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U.S. Government Accountability Office 
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Washington, D.C. 20548: 

[End of Providing Comments on This Report] 

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FOOTNOTES 

[1] In fiscal years 2003 and 2004, the work performed under the 
Comptroller General's authority represented 8 percent and 10 percent, 
respectively, of our engagement efforts. 

[End of Footnotes] 

[End of Performance and Accountability Highlights: Fiscal Year 2005]