This text file was formatted by the U.S. General Accounting Office (GAO) to be accessible to users with visual impairments, as part of a longer term project to improve GAO products' accessibility. Every attempt has been made to maintain the structural and data integrity of the original printed product. Accessibility features, such as alternative text descriptions for graphic images and reformatted tables, are provided but may not exactly duplicate the presentation or format of the printed version. The portable document format (PDF) file is an exact electronic replica of the printed version. We welcome your feedback. Please E-mail your comments regarding the contents or accessibility features of this document to Webmaster@gao.gov.

2001 Performance and Accountability Report. U.S. General Accounting Office, Serving the Congress and the Nation. Accountability Report 2001, Performance Report 2001, Performance Plan 2003.

Inside front cover figure: A diagram summarizing the key elements of GAO's strategic plan, which are: GAO's mission, the themes that drive GAO's work, strategic goals and objectives, and GAO's core values.

Serving the Congress: GAO's Strategic Plan Framework for Fiscal Years 2000 through 2005.

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

Themes: GAO works with an awareness of forces that are likely to shape American society, the United States' place in the world, and the role of the federal government. These forces are assessed through six themes discussed in GAO's strategic plan: demographics, globalization, quality of life, security, technology, and government performance and accountability.

Goals and objectives: Each of GAO's four strategic goals is supported by a specific set of strategic objectives.

GAO's first strategic goal is to 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. To achieve this goal, GAO will provide information and recommendations on the following eight strategic objectives: health care needs and financing, retirement income security, social safety net, education/workforce issues, effective system of justice, community investment, natural resources use and environmental protection, and physical infrastructure.

GAO's second strategic goal is to provide timely, quality service to the Congress and the federal government to respond to changing security threats and the challenges of global interdependence. To achieve this goal, GAO will provide information and recommendations on the following four strategic objectives: diffuse security threats, military capabilities and readiness, advancement of U.S. interests, and global market forces.

GAO's third strategic goal is to support the transition to a more results oriented and accountable federal government. To achieve this goal, GAO will provide information and recommendations on the following four strategic objectives: fiscal position of the federal government; government financing and accountability; governmentwide management reforms; and economy, efficiency, and effectiveness improvements in federal agencies.

GAO's fourth strategic goal is to maximize the value of GAO by being a model organization for the federal government. To achieve this goal, GAO will fulfill the following five strategic objectives: client relations, strategic and annual planning, human capital, core business and supporting processes, and information technology services.

Core values: The foundation for GAO's efforts to meet these strategic goals and objectives is the agency's three core values of accountability, integrity, and reliability.
End of figure.

From the Comptroller General.
(Photograph of David M. Walker, Comptroller General of the United States.)
February 27, 2002.
I am pleased to present GAO's performance and accountability report; it combines an assessment of our accomplishments in fiscal 2001 with our plans for continued progress through fiscal 2003. In keeping with the spirit of the Government Performance and Results Act (GPRA), we want to let the Congress and the American people know what we have achieved and how we expect to continue to work on their behalf. I am confident that the financial information and the data measuring GAO's performance contained in this report are complete and reliable.

The year 2001 was characterized by a series of unprecedented challenges for the federal government. After a lengthy waiting period to decide the results of the presidential election, the year began with a new administration and a new policy agenda. Within a short time, the leadership of the Senate changed as well. Although the year began with the nation at peace and with modest economic growth, by year's end, the nation was at war and the economy was in recession.

Against this backdrop, GAO served the Congress and the American people in a variety of ways. First, our 2001 Performance and Accountability Series and High Risk Update identified close to 100 major management challenges and program risks at 21 federal agencies and highlighted actions needed to address these serious problems. The series proved useful in carrying out our responsibility under the Presidential Transition Act to serve as a key source of information for the incoming administration and members of the 107th Congress. Among the issues we brought to their attention was the importance of addressing the strategic human capital needs of the federal government being triggered by the impending retirements of the baby boom generation, by inadequately planned downsizing in the 1990s, by the knowledge and skills imbalances created by a changing economy and new technology, and by the need to create a more performance and results oriented work culture. 

Citizens benefited directly from GAO's work as federal agencies took a wide range of actions based on our analyses and recommendations. The results ranged from improving services to low income children and disabled veterans, to protecting consumers from insurance fraud, to identifying billions of dollars in savings and resources that could be reallocated to meet other priorities. In total, GAO's efforts helped the Congress and government leaders to save $26.4 billion; a $69 return on every dollar invested in GAO.

Because of our past work and work in progress, we were able to provide timely, rapid assistance on the issues raised by the tragic events of September 11. In numerous congressional hearings, GAO's witnesses offered suggestions for strengthening the security of the nation's airports and air traffic control system, for protecting critical information technology infrastructure, and for enhancing government's ability to analyze and manage security risks, including bioterrorism. We were also able to highlight a number of safeguards that could be used in structuring financial assistance to the airlines, several of which were incorporated in the emergency $15 billion financial aid package that was enacted. 

Closer to home, 2001 was a significant year for GAO because it marked the 80th anniversary of our agency. It was also a year marked by changes designed to better position our agency for the future. As the seventh comptroller general of the United States, I am pleased and honored to be able to lead the more than 3,000 public servants who make up the GAO team. I also take great pride in the many years of service this agency has provided the nation. Building on this legacy, we at GAO look forward to continuing to help the Congress and the nation meet the challenges of the 21st century.

Signed by David M. Walker, Comptroller General of the United States.

The Comptroller General's FMFIA Assurance Statement for Fiscal 2001.
On the basis of GAO's comprehensive management control program, I am pleased to certify, with reasonable assurance, that:

Our financial reporting is reliable: Transactions are properly recorded, processed, and summarized to permit the preparation of financial statements in accordance with generally accepted accounting principles, and assets are safeguarded against loss from unauthorized acquisition, use, or disposition.

GAO is in compliance with all applicable laws and regulations: Transactions are executed in accordance with A. Laws governing the use of budget authority and other laws and regulations that could have a direct and material effect on the financial statements and B. Any other laws, regulations, and governmentwide policies applicable to GAO.

Our performance reporting is reliable: Transactions and other data that support reported performance measures are properly recorded, processed, and summarized to permit the preparation of performance information in accordance with the criteria stated by GAO's management.

I also believe these same systems of accounting and internal controls provide reasonable assurance that GAO is in compliance with the spirit of 31 U.S.C. 3512, formerly the Federal Managers' Financial Integrity Act (FMFIA). 

Signed by David M. Walker, Comptroller General of the United States.

Report Contents.
From the Comptroller General including The Comptroller General's FMFIA Assurance Statement for Fiscal 2001.
GAO at a Glance.
Performance at a Glance.
How to Use This Report.
Management's Discussion and Analysis including: Performance and Financial Information, Limitation on Financial Statements, Strategies and Challenges: Achieving Our Goals, Data Quality and Program Evaluation, and Resources Needed to Achieve Our Fiscal 2003 Performance Goals.
Financial Statements including: Overview of Financial Statements, Financial Systems and Internal Controls, Government Information Security Reform, Financial Statements, Notes to Financial Statements, Report of the Audit Advisory Committee, and Independent Auditor's Report.
Appendix One including Measures and Targets for Fiscal 1998 through 2003.
Appendix Two including Accomplishments and Other Contributions for Fiscal 2001.
Appendix Three including Performance on Qualitative Performance Goals for Fiscal 2000 and 2001.
Appendix Four including Qualitative Performance Goals for Fiscal 2002 and 2003.
Appendix Five including Report on the Implementation of the GAO Personnel Flexibility Act of 2000.
End of report contents.

List of Report Acronyms.
AICPA: American Institute of Certified Public Accountants.
AIDS: acquired immunodeficiency syndrome.
COE: Corps of Engineers (U.S. Army).
CPA: certified public accountant.
CPE: continuing professional education.
CSRS: Civil Service Retirement System.
DOD: Department of Defense.
DOE: Department of Energy.
DOL: Department of Labor.
EAC: Employee Advisory Council.
EAGLE: Electronic Assistance Guide for Leading Engagements.
FAA: Federal Aviation Administration.
FASAB: Federal Accounting Standards Advisory Board.
FBI: Federal Bureau of Investigation.
FECA: Federal Employees' Compensation Act.
FEGLIP: Federal Employees Group Life Insurance Program.
FEHPB: Federal Employees Health Benefit Program.
FEMA: Federal Emergency Management Agency.
FERS: Federal Employees Retirement System.
FFMIA: Federal Financial Management Improvement Act.
FHA: Federal Housing Administration.
FICA: Federal Insurance Contributions Act.
FMFIA: Federal Managers' Financial Integrity Act (now 31 U.S.C. 3512).
GAAP: generally accepted accounting principles.
GAO: General Accounting Office.
GISRA: Government Information Security Reform Act.
GSA: General Services Administration.
HHS: Department of Health and Human Services.
HIV: human immunodeficiency virus.
HUD: Department of Housing and Urban Development.
IG: inspector general.
INTOSAI: International Organization of Supreme Audit Institutions.
IRS: Internal Revenue Service.
IT: information technology.
JFMIP: Joint Financial Management Improvement Program.
K–12: kindergarten through 12th grade.
NATO: North Atlantic Treaty Organization.
NED: New Engagement Database.
OMB: Office of Budget and Management.
OPM: Office of Personnel Management.
PDA: personal data assistant.
P.L.: Public Law.
RIF: reduction in force.
SFFAS: Statement of Federal Financial Accounting Standards.
SSA: Social Security Administration.
USAID: United States Agency for International Development.
U.S.C.: United States Code.
USEC: U.S. Enrichment Corporation.
VA: Department of Veterans Affairs.
Y2K: Year 2000.
End of acronyms.

GAO at a Glance.
Mission: Support the Congress in meetings its constitutional responsibilities and help improve the performance and accountability of the federal government for the benefit of the American people.

The U.S. General Accounting Office is an independent, professional, nonpartisan agency in the legislative branch that is commonly called the investigative arm of the Congress or the Congress's "watchdog." Created in 1921 as a result of the Budget and Accounting Act, GAO has seen its role evolve over the decades as the Congress has expanded the agency's statutory authority and called on GAO with much greater frequency for oversight, insight, and foresight in addressing the growing complexity of government and society.

(Photograph of GAO's headquarters.) GAO's headquarters is in Washington, D.C. at 441 G Street, Northwest. Three quarters of GAO's approximately 3,200 employees are based at headquarters. The remainder of the staff is deployed in field offices from coast to coast.

Figure: A map of the United States of America showing GAO's field offices in Atlanta, Boston, Chicago, Dallas, Dayton, Denver, Huntsville, Los Angeles, Norfolk, San Francisco, and Seattle. End of figure. 

Today, we examine the full breadth and scope of federal activities and programs, publish thousands of reports and other documents annually, and provide a number of related services. We also look at national and international trends and challenges to anticipate their implications for public policy. By making recommendations to improve the practices and operations of government agencies, GAO contributes not only to the increased effectiveness of federal spending, but also to the enhancement of the tax payers' trust and confidence in their federal government.

We rely on a workforce of highly trained professionals who hold degrees in many academic disciplines, including accounting, law, engineering, public and business administration, economics, and the social and physical sciences. They are arrayed in 14 research, audit, and evaluation teams backed by staff offices and mission support units.

Figure: An organization chart showing GAO's basic structure.
The agency's top level of organization is the executive committee, which includes the comptroller general, the chief operating officer, the chief mission support officer, and the general counsel.

Twenty two units are shown as reporting directly to the comptroller general and the chief operating officer. The units include the following staff offices: Public Affairs, External Liaison, Congressional Relations, Opportunity and Inclusiveness, Inspector General, Field Operations, Quality and Risk Management, and Product and Process Improvement.

The units also include the following teams that conduct audits, evaluations, and research: Acquisition and Sourcing Management; Applied Research and Methods; Defense Capabilities and Management; Education, Workforce, and Income Security; Financial Management and Assurance; Financial Markets and Community Investment; Health Care; Information Technology; International Affairs and Trade; National Preparedness; Natural Resources and Environment; Physical Infrastructure; Strategic Issues; and Tax Administration and Justice.

In addition, the following units report to the comptroller general and chief operating officer through the chief mission support officer: Human Capital; Controller; Information Technology; and Knowledge Services. The Special Investigations unit reports to the comptroller general and chief operating officer through the general counsel.
End of figure.

The agency's chief executive officer is the comptroller general of the United States, who is appointed to a 15 year term. Under current law, the president proposes a nominee from a list of candidates submitted by a bipartisan commission of Senate and House leaders. The president's nominee is subject to confirmation by the Senate. The current comptroller general, David M. Walker, began his term in November 1998.

To ensure that GAO is well positioned to meet the Congress's needs in the future, we update our six year strategic plan every two years, consulting extensively with our clients on Capitol Hill and with other experts as we do so. Using the plan as a frame of reference, we respond to congressional requests for specific work throughout the year. These requests drive most of our work; 87 percent in fiscal 2001. The remainder is "R and D" work we undertake independently as authorized under our enabling legislation. Each year, we hold ourselves accountable to the Congress and the American people for our performance, primarily through this consolidated report you are reading.

As a legislative branch agency, GAO differs in some ways from executive branch agencies. We are, for instance, exempt from many laws designed to improve the performance and accountability of the executive branch. However, because one of our strategic goals is to maximize our value by serving as a model agency for the federal government, we hold ourselves to the spirit of many of these laws, including 31 U.S.C. 3512 (formerly the Federal Managers' Financial Integrity Act), the Federal Financial Management Improvement Act of 1996, the Government Performance and Results Act of 1993, and the Consolidated Reports Act of 2000. Accordingly, this consolidated report supplies what we consider to be equivalent information within the context of GAO's structure and mission and the statutes under which we operate.

On the pages that follow, we assess our performance for fiscal 2001 and outline our planned performance for fiscal 2003. Our current activities in fiscal 2002 are discussed as necessary to bridge our past performance and our future plans. This report, along with previously issued strategic plans, performance plans, and performance and accountability reports, is available at www.gao.gov/sp.html.

Performance at a Glance.
In fiscal 2001, we exceeded all but one of the targets for GAO's performance measures. As the charts displaying data for the past four years show, our results have steadily improved in nearly every instance. We have introduced an additional performance measure for fiscal 2002 on recommendations and have set targets for our performance through fiscal 2003. Here are the highlights:

Financial benefits: $26.4 billion.
We achieve financial benefits when our findings and recommendations are used to make government services more efficient, to improve the budgeting and spending of tax dollars, or to strengthen the management of federal resources. Our work on military base realignments and closures, restructuring the defense acquisition workforce, and recapturing unexpended balances in a major federal housing program, for instance, together yielded more than $12 billion of the year's financial benefits.

Figure: Financial Benefits.
Bar chart with 6 groups showing dollars in billions.
Group 1, 1998, Actual.
Item 1, 19.7. 
Group 2, 1999, Actual. 
Item 1, 20.1. 
Group 3, 2000, Actual. 
Item 1, 23.2. 
Group 4, 2001. 
Item 1, Actual, 26.4.
Item 2, Target, 23.
Group 5, 2002.
Item 1, Target, 30. 
Group 6, 2003.
Item 1, Target, 35.
End of figure.

Other benefits: 799 actions taken to improve government agencies' management or performance.
Not all actions on our findings and recommendations produce measurable financial benefits. We measure these other types of improvements by tabulating the number of cases in which our findings and recommendations have prompted federal agencies or the Congress to improve management or performance. The 799 actions reported for fiscal 2001 include actions to combat terrorism, to strengthen public safety and consumer protection, to improve computer security controls, and to establish more effective and efficient government operations.

Figure: Other Benefits.
Bar chart with 6 groups showing number of actions.
Group 1, 1998, Actual.
Item 1, 537.
Group 2, 1999, Actual. 
Item 1, 607.
Group 3, 2000, Actual. 
Item 1, 788.
Group 4, 2001. 
Item 1, Actual, 799. 
Item 2, Target, 700.
Group 5, 2002, Target. 
Item 1, 770. 
Group 6, 2003, Target.
Item 1, 785.
End of figure.

Recommendations implemented: 79 percent of the recommendations made four years ago.
One way we measure our impact in improving the government's accountability, operations, and services is by tracking the percentage of recommendations we made four years ago that have since been implemented. That is, by the end of fiscal 2001, 79 percent of the recommendations we made in fiscal 1997 had been implemented. These recommendations lead to the financial and other benefits, such as improvements in national security, health care programs, and controls over federal finances. We use a four year interval because our historical data show that agencies often need this time to complete action on our recommendations.

Figure: Recommendations Implemented.
Bar chart with 6 groups showing four year implementation rate.
Group 1, 1998, Actual.
Item 1, 69%. 
Group 2, 1999, Actual.
Item 1, 70%.
Group 3, 2000, Actual. 
Item 1, 78%. 
Group 4, 2001. 
Item 1, Actual, 79%. 
Item 2, Target, 75%. 
Group 5, 2002, Target.
Item 1, 75%. 
Group 6, 2003, Target. 
Item 1, 77%.
End of figure.

Recommendations made: 1,563 recommendations.
Because it takes time for agencies to implement our recommendations, we also tabulate, as an interim measure of performance, the number of recommendations we make each year. In fiscal 2001, our recommendations targeted improvements in the economy, efficiency, and effectiveness of federal operations that could yield significant financial and other benefits. Our work on information security and federal financial management is largely responsible for the high number of recommendations in fiscal 2001. We have found that in those two areas, highly specific (and therefore numerous) recommendations are the most helpful to the agencies in question as they work to improve their operations.

Figure: Recommendations Made.
Bar chart with 6 groups, showing number made.
Group 1, 1998, Actual.
Item 1, 987.
Group 2, 1999, Actual.
Item 1, 940. 
Group 3, 2000, Actual.
Item 1, 1,224. 
Group 4, 2001. 
Item 1, Actual, 1,563. 
Item 2, Target, 975.
Group 5, 2002, Target.
Item 1, 1,200.
Group 6, 2003, Target.
Item 1, 1,200.
End of figure.

Products containing recommendations: 44 percent; a new measure for fiscal 2002.
We are introducing this measure to track the percentage of our written products that contain recommendations to improve government operations and services because simply tracking the number of recommendations made each year does not tell the full story. A report with a single recommendation can produce far reaching improvements. To develop a fiscal 2002 target for this measure, we calculated previous years' percentages as benchmarks.

Figure: Products with Recommendations.
Bar chart with 6 groups.
Group 1, 1998, Actual.
Item 1, Actual, 33%.
Group 2, 1999, Actual. 
Item 1, 33%.
Group 3, 2000, Actual. 
Item 1, 39%. 
Group 4, 2001, Actual. 
Item 1, 44%.
Item 2, No Target.
Group 5, 2002, Target.
Item 1, 45%.
Group 6, 2003, Target.
Item 1, 50%.
End of figure.

Testimonies: 151 given before the Congress.
Because one of GAO's primary functions is to support the Congress in its decision making and oversight responsibilities, the number of times our witnesses testify each year is an indicator of our responsiveness and the value our clients place on our work. Our target and results for fiscal 2001 were lower than those for previous years because external factors, such as a new Congress and a new administration both beginning work, reduced the number of congressional hearings. Nonetheless, we testified on a broad range of subjects, including combating terrorism, energy prices, and federal budget issues.

Figure: Testimonies.
Bar chart with 6 groups showing number given.
Group 1, 1998, Actual.
Item 1, 256. 
Group 2, 1999, Actual. 
Item 1, 229.
Group 3, 2000, Actual. 
Item 1, 263.
Group 4, 2001. 
Item 1, Actual, 151. 
Item 2, Target, 150.
Group 5, 2002, Target.
Item 1, 200.
Group 6, 2003, Target. 
Item 1, 210.
End of figure.

Timeliness: 95 percent of our products delivered on time.
For our work to be useful, our clients must have it on a timely basis. We therefore compare actual product delivery dates with the dates agreed to with our clients. We set an idealistic target of 100 percent for fiscal 2001 to emphasize the importance of providing timely information and will continue to strive to deliver all of our products when they are expected. Occasionally, external factors beyond our control may delay a product. To reflect that reality, we have reduced our target for fiscal 2002 and 2003 to 98 percent, still a challenge for our staff, but not an unattainable one.

Figure: Timeliness.
Bar chart with 6 groups showing products on time.
Group 1, 1998, Actual.
Item 1, 93%.
Group 2, 1999, Actual. 
Item 1, 96%.
Group 3, 2000, Actual. 
Item 1, 96%. 
Group 4, 2001. 
Item 1, Actual, 95%.
Item 2, Target, 100%. 
Group 5, 2002, Target.
Item 1, 98%.
Group 6, 2003, Target.
Item 1, 98%.
End of figure.

Qualitative performance goals: 89 percent achieved.
Our qualitative performance goals lay out the work we plan to do to achieve financial and other benefits. Among the 94 performance goals assessed this year were "identify ways to administer our nation's immigration laws more efficiently and effectively" and "assess the effectiveness of federal food safety programs." For a goal to be met, we must have provided information or recommendations on the work planned under its key efforts, when viewed collectively. Our results, 89 percent of the goals met, were heavily influenced by our decision to synchronize our assessment and strategic planning cycles, which meant assessing our performance on these goals after two years instead of three years as originally planned. The work remaining under these goals has been carried forward in our updated strategic plan.

Figure: Qualitative Performance Goals.
Pie chart with 2 items covering 94 qualitative performance goals.
Item 1, Not Met, 11%. 
Item 2, Met, 89%.
End of figure.

How to Use This Report.
This report consolidates GAO's performance and accountability reports for fiscal 2001 with the agency's performance plan for fiscal 2003, as called for by the Reports Consolidation Act of 2000. When necessary to make the connections clear between our past performance and our future plans, we discuss our current activities in fiscal 2002.

In assessing our performance, we are comparing actual results against targets and goals set in a previous performance plan. That annual plan was developed under GAO's strategic plan for fiscal 2000 through 2005. The key components of the strategic plan are outlined in the diagram on the inside front cover of this report. Our full family of strategic planning and performance and accountability reports is available on our Web site at www.gao.gov/sp.html.

This report has three major sections:

1. Management's Discussion and Analysis.
Look here for a summary of GAO's performance and financial results for fiscal 2001, agencywide and by each of our strategic goals, along with our plans for fiscal 2003; the strategies we use and the challenges we face in achieving our goals, including our management challenges and the external factors that could affect our performance; and an explanation of our performance measures and how we verify and validate our performance data. At the end of this section, we discuss GAO's budget request for fiscal 2003.

2. Financial Statements and Independent Auditor's Report.
Look here for GAO's audited financial statements for fiscal 2001, the notes to our financial statements, the report of our Audit Advisory Committee of distinguished experts with government and private sector experience, and the report of our independent auditor, Cotton and Company, LLP.

3. Appendixes.
Look here for more detailed information on our performance results for fiscal 1998 through 2001 and targets for fiscal 2001 through 2003, our accomplishments and contributions for fiscal 2001, our assessments of whether we met or did not meet the qualitative performance goals for fiscal 2000 and 2001, our performance goals for fiscal 2002 and 2003, and our annual report on the GAO Personnel Flexibility Act of 2000 (P.L. 106-303).

Management's Discussion and Analysis.
All of GAO's efforts are guided by three 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. GAO accomplishes its mission through a variety of activities, including financial audits, program reviews, investigations, legal support, and policy analyses.

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 the GAO approach to work ensures both.

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.

In its 80th year as the Congress's "watchdog," the U.S. General Accounting Office recorded more than $26 billion in financial benefits for the American taxpayer along with nearly 800 other actions taken to improve government agencies' management or performance. Those numbers reflect not only the achievements of GAO's staff but also those of the Congress and of the many federal agencies that acted on our findings and recommendations to improve the government's services and operations.

To ensure that improvements continue, we made more than 1,500 new recommendations in fiscal 2001 and drafted a new set of qualitative performance goals to help guide our staff's work through the end of fiscal 2003. As always, our work will be largely driven by requests from our congressional clients. As the Congress confronts the shifting priori ties and new demands that flow from the heightened need for greater national preparedness, we are shifting our own priorities to provide the information and analyses the Congress will need.

In this section, we discuss GAO's performance and financial results for fiscal 2001. Past years' performance and future targets, first for the agency as a whole and then for each of the agency's four strategic goals, are described. Next, we discuss the strategies we will use and the challenges we expect to face in achieving our goals. We also explain how we verify and validate our performance data and how we evaluate our progress. Finally, we provide highlights of our budget request for fiscal 2003, thus tying the results we expect to achieve to the resources we need to achieve those results.

Performance and Financial Information.
Performance and Targets: Agencywide.
We track GAO's performance using six quantitative measures designed to show the extent to which our work is being used and whether our work is achieving the desired results. We are adding a seventh performance measure for fiscal 2002. The following table summarizes our results since fiscal 1998 and provides our targets for fiscal 2002 and 2003. A fully annotated version of the table, along with tables of results and targets for each of GAO's strategic goals, is in appendix one.

Table: Agencywide Results and Targets.
Performance measure: Financial benefits (billions); Actual 1998; $19.7; Actual 1999; $20.1; Actual 2000; $23.2; Target 2001; $23.0; Actual 2001; $26.4; Target 2002; $30.0; Target 2003; $35.0.

Performance measure: Other benefits; Actual 1998; 537; Actual 1999; 607; Actual 2000; 788; Target 2001; 700; Actual 2001; 799; Target 2002; 770; Target 2003; 785.

Performance measure: Recommendations implemented; Actual 1998; 69%; Actual 1999; 70%; Actual 2000; 78%; Target 2001; 75%; Actual 2001; 79%; Target 2002; 75%; Target 2003; 77%.

Performance measure: Recommendations made; Actual 1998; 987; Actual 1999; 940; Actual 2000; 1,224; Target 2001; 975; Actual 2001; 1,563; Target 2002; 1,200; Target 2003; 1,200.

Performance measure: Products with recommendations; Actual 1998; 33%; Actual 1999; 33%; Actual 2000; 39%; Target 2001; N/A; Actual 2001; 44%; Target 2002; 45%; Target 2003; 50%.

Performance measure: Testimonies; Actual 1998; 256; Actual 1999; 229; Actual 2000; 263; Target 2001; 150; Actual 2001; 151; Target 2002; 200; Target 2003; 210.

Performance measure: Timeliness; Actual 1998; 93%; Actual 1999; 96%; Actual 2000; 96%; Target 2001; 100%; Actual 2001; 95%; Target 2002; 98%; Target 2003; 98%.

Note: Please see appendix one for full explanations of the data in this table.
End of table.

In addition to our annual quantitative measures, we also set multiyear qualitative performance goals to help us assess whether we have done the work we planned to do for our congressional clients. In this report, we are assessing our performance on these multiyear goals for the first time. In light of our actual performance over the last four years, we expect to achieve our performance tar gets and qualitative goals for fiscal 2002 and 2003.

Financial Benefits.
In fiscal 2001, GAO recorded $26.4 billion in financial benefits from our agency's past work, exceeding our target for the year of $23 billion and also exceeding last year's results of $23.2 billion. This is a 34 percent increase over our 1998 results of $19.7 billion.

One reason for the overall increase here and for our other measures, we believe, is the simple fact that we have adopted them as important indicators of our performance. Our executives and managers are tasked by the comptroller general to, among other things, program work that has potential for producing financial benefits for the nation. Each of GAO's strategic goals and research, audit, and evaluation teams has a target for financial benefits and documents any accomplishments being claimed with the independent calculations of the affected agency, the Congressional Budget Office, or the Joint Committee on Taxation. Other factors are that as the size of the federal budget has increased, we have had opportunities to achieve larger financial benefits, and the implementation rate for our recommendations has increased. Examples of the work we did to achieve financial benefits are highlighted below. Additional examples are in appendix two.

Work examples: GAO at Work.
Contributing to the Military Base Closure and Realignment Process.
GAO has issued a number of reports since 1979 documenting excess infrastructure within the Department of Defense (DOD) and supporting the need for a base closure and realignment process. After the Congress's authorization of such a process, GAO was legislatively required to provide the Congress with a series of reports and testimonies validating DOD's implementation. GAO monitored and assessed all phases of the decision making process, including executive level sessions, for compliance with congressional requirements. In addition, GAO provided staff to each commission established to recommend base closures and realignments for rounds held in 1991, 1993, and 1995. The staff helped shape the commissions' decisions through analysis of issues associated with closing or realigning specific installations. GAO estimated $6 billion in net savings in fiscal 1999 and 2000 for the three base closure rounds.

Cutting the Cost of Defense's Acquisition Infrastructure.
In a series of reports and comments on legislation for the House National Security Committee beginning in the mid 1990s, GAO examined numerous facets of DOD's acquisition infrastructure, of which its acquisition workforce is a major component. GAO's primary messages were that acquisition infrastructure reductions had not kept pace with reductions in other areas of DOD's operations and that the acquisition workforce needed to be consistently defined to effect appropriate reductions. Consequently, DOD redefined the workforce and the Congress directed DOD to develop specific plans for reducing its acquisition workforce. These workforce reductions totaled $3.32 billion and freed the funds for other high priority items.

Recapturing Unexpended Balances in a Federal Housing and Urban Development Program.
GAO reviewed the unexpended balances in the Department of Housing and Urban Development's (HUD) Section 8 program, in which HUD contracts with property owners to provide housing for low income families. GAO recommended that HUD revise the procedures used to review unexpended balances and ensure that excess balances were recaptured from this program. Subsequently, HUD recaptured nearly $3 billion of unexpended balances from prior years' budgets. According to HUD officials, the savings directly resulted from their implementation of GAO's recommendation.
End of examples.

For fiscal 2002, we initially set a target of $24 billion after meeting with each of our teams and assessing likely actions on our recommendations. We have since revised the target to $30 billion to reflect changes in the way we tabulate certain financial benefits. In the past, we limited the period for which financial benefits from a particular action directly attributable to, or significantly influenced by, our work could be tabulated to two fiscal years. While we are retaining the two year limit for financial benefits from reductions in agencies' annual operating costs (achieved, for instance, through decreasing the number of staff assigned to a specific program in response to a GAO recommendation), beginning in fiscal 2002, we are extending the period to five years for financial benefits from reductions in the costs of multiyear projects and entitlements and from increases in revenues from asset sales or changes in tax laws or user fees. The longer period more accurately reflects the value realized by the taxpayers from changes brought about by our work and is a conservative measure because some of our efforts produce financial benefits that extend beyond five years. We continue to use a two year period when reporting benefits generated by changes made to federal agencies' operations because experience has shown that it is difficult for agencies to maintain the momentum on changes of this type over extended periods. Because this revision to our methodology will produce data that are not comparable to past financial benefits results, during fiscal 2002, we will tabulate financial benefits using both methodologies to produce comparable data. Also beginning with fiscal 2002, all financial benefits will be reported in net present value terms, a change that ensures our results will be fair and accurate regardless of inflation.

As always, the financial benefits GAO reports will continue to be based on the calculations of independent sources. Because agencies need time to implement GAO's recommendations and document savings, the financial benefits we report in a given year may be based on work we performed in the cur rent or previous years.

For fiscal 2003, our target is $35 billion, again reflecting the longer period instituted for tabulating some types of financial benefits. Without that reporting change, the target would have been $26 billion.

Other Benefits.
GAO's work results in other tangible benefits that are not financial in nature, as the examples below show.

Work examples: GAO at Work.
Improving DOD Antiterrorism Efforts.
At the request of the House Special Oversight Panel on Terrorism, GAO reviewed DOD’s antiterrorism efforts at domestic installations. GAO identified shortcomings that needed to be addressed to provide installation commanders with the necessary information to effectively manage the risk of a terrorist attack and develop an effective antiterrorism program. DOD agreed with GAO’s findings and has begun implementing all of the GAO recommended corrective actions. GAO also worked with DOD to update and improve antiterrorism standards and the secure communication capabilities between some Navy facilities. This work provided a foundation for developing a risk management approach that can be applied to other government operations. GAO presented information about this management approach to various congressional committees and other organizations.

Strengthening Nuclear Nonproliferation and Safety Efforts.
Preventing the spread of weapons of mass destruction and ensuring the safety of Soviet designed reactors are important national security concerns. GAO’s work in this area continues to have major impacts, including the implementation of GAO’s recommendations designed to strengthen the Department of Energy’s (DOE) program to secure nuclear materials in Russia and sustain the improvements. In addition, DOE has implemented GAO’s recommendations to fund only those safety projects that directly improve the operation of Soviet designed reactors and to focus its Nuclear Cities Initiative funding on only those projects designed to employ Russian weapons scientists. These changes will result in better targeting of limited resources by eliminating projects that did not meet mission goals.

Improving Food Safety.
Over the years public awareness of foodborne illness outbreaks has heightened concerns about the effectiveness of the federal system for ensuring the safety of the nation’s food supply. GAO has served as an honest broker of information on the shortcomings of the federal food safety system. In particular, GAO’s work has been used extensively in congressional deliberations and by federal program mangers to improve the food safety system. For example, GAO’s work on seafood safety identified several important weaknesses that compromised the overall effectiveness of the Food and Drug Administration’s newly implemented science based system for seafood. In response, the agency made improvements in 2001 to the science based system. GAO’s work identifying shortcomings in shellfish safety was instrumental in the 2001 adoption of the first national plan to reduce pathogenic bacteria in oysters.
End of examples.

In fiscal 2001, we documented 799 cases in which our work prompted actions to be taken that improved government agencies' management or performance. This total exceeded our target of 700 cases and also slightly exceeded our fiscal 2000 figure of 788 actions; almost a 49 percent increase over our 1998 results of 537 actions.

As with financial benefits, some of the increase recorded for this measure is attributable to our having adopted other benefits as a performance indicator. Our staff now makes a greater effort to follow up on GAO's recommendations to determine whether agencies have acted on them and to document any benefits achieved. Another reason for the increase stems from the fact that, through the establishment of other performance measures, we have encouraged our staff to focus on developing cost effective, implementable recommendations. As a growing percentage of these recommendations has been acted on over the years, the numbers of improvements in government operations and services counted here as other benefits have grown. Our work on information technology issues and on financial management and accountability issues, in particular, has generated a number of recommendations in the past that are now paying off for the American people in better information security and more effective financial controls, among other improvements. In light of agencies' current efforts to implement recommendations we have made, we believe targets of 770 actions in fiscal 2002 and 785 actions in fiscal 2003 are appropriate.

Recommendations Implemented.
By the end of fiscal 2001, 79 percent of the recommendations we made four years ago had been implemented, exceeding our target of 75 percent and roughly matching the fiscal 2000 implementation rate of 78 percent. The current results are up 10 percentage points from the implementation rate in fiscal 1998 of 69 percent.

Adopting the implementation rate for our recommendations as a key indicator has helped increase our staff's focus on writing recommendations that are action oriented and feasible. Another factor is that we have placed greater emphasis on identifying and promoting best practices of private and public sector organizations that can be applied to the federal government. Including better recommendations in our products and following up more diligently to learn what progress the agencies have made with them have raised the implementation rate ten percentage points in four years. We do not anticipate continued gains of that magnitude. Our fiscal 2002 target is 75 percent once again and our fiscal 2003 target is 77 percent.

Recommendations Made.
In the products we issued during fiscal 2001, we made 1,563 recommendations to improve the government's performance, dramatically exceeding our target of 975 and surpassing our fiscal 2000 results of 1,224 recommendations made. This is more than a 58 percent increase over our fiscal 1998 results of 987 recommendations.

As with our other key indicators, adopting recommendations made as a measure of GAO's performance has increased our staff's attention on designing engagements to yield workable solutions as well as good information and analysis. But that alone does not explain the great increase in the number of recommendations GAO made in fiscal 2001. In our work on information security and on the accountability of federal financial statements, two areas we placed great emphasis on in recent years, we have found that highly specific recommendations best serve the agencies in question. As a result, products dealing with those issues contain unusually high numbers of recommendations.

We have not wanted this indicator to emphasize quantity over quality, however. Accordingly, one step we are taking to avoid this unintended effect is to set our targets for fiscal 2002 and 2003 at roughly our level of performance in fiscal 2000: 1,200 recommendations made a year. We believe that target continues to be a challenge but is not such a high number that it could encourage staff to seek simply more rather than better recommendations. Another step we are taking to avoid overemphasizing more rather than better recommendations is to introduce a new measure, the percentage of written products containing recommendations, which is explained below.

Products with Recommendations.
The percentage of written products containing recommendations is a new measure of GAO's performance for fiscal 2002. To establish a baseline, we calculated our past performance on this measure and found that 44 percent of the written products we issued in fiscal 2001 contained recommendations, up from 39 percent in fiscal 2000 and an 11 percentage point increase over fiscal 1998.

We are introducing this measure because, although we want our staff to seek solutions and make recommendations, the number of recommendations made is not necessarily a predictor of impact. A product with a single recommendation can help bring about a far reaching improvement. Tracking what proportion of our written products offer recommendations as well as how many recommendations have been made provides a more complete picture of the extent to which we are providing decision makers with solutions that will help to improve government.

The baseline data we gathered for this new measure show that GAO has already been increasing the proportion of written products that contain recommendations, in part because of the existing measures of the number of recommendations made and the percentage of recommendations implemented four years after they were made. Those measures helped to increase our staff's focus on providing workable solutions to the problems they uncover and thus increased the percentage of reports that contain recommendations.

Our initial target for this measure is for 45 percent of our written products issued in fiscal 2002 to contain recommendations. For fiscal 2003, the target is 50 percent. The target may remain at that level. We recognize our congressional clients' needs for products that are purely descriptive or analytical in nature and do not want this measure to make our staff any less dedicated to serving these needs.

Testimonies.
In fiscal 2001, GAO's experts testified 151 times before the Congress, bearing out our forecast that we would have fewer than usual opportunities to testify. Our target, in fact, was 150 testimonies. We realized that as the year began, a combination of unusual external factors was likely to reduce the number of hearings the Congress would hold: Both a new Congress and a new administration were beginning work. The 2000 elections led to an extended transition for the new administration and for the 107th Congress as well. The change in majority party in the Senate and the many new committee chairs in the House were also likely to reduce the number of opportunities GAO witnesses had to present testimony.

Our target for fiscal 2002 of 200 testimonies again reflects external factors that may hold down the number of hearings below the levels in the late 1990s when we had opportunities to testify more often (256 times in fiscal 1998, for instance). The terrorist attacks on September 11 and the anthrax attacks in the months that followed changed the congressional agenda markedly and also disrupted the Congress's operations. That 2002 is also an election year for the House of Representatives and one third of the Senate is also likely to reduce the number of hearings held. Our target for fiscal 2003 calls for us to give at least 210 testimonies.

Timeliness.
Timeliness measures the percentage of our products that were delivered on or before the date we agreed to with our congressional clients or estimated internally for the R and D work we do apart from congressionally requested engagements. In fiscal 2001, 95 percent of our products were delivered on time, falling short of our target of 100 percent on time delivery and slightly below our fiscal 2000 rate of 96 percent. The results for this indicator have remained stable over the last four years.

Our commitment to delivering all of our products on time remains strong. We continue to work toward improving our timeliness by agreeing to delivery dates that are feasible and streamlining our processes to make issuing our work as efficient as possible. We have, however, set our fiscal 2002 and 2003 targets at 98 percent. The 100 percent target of previous years was idealistic in that it did not consider the external factors beyond GAO's control that some times cause delays in issuing products, such as problems gaining access to needed data, delays in receiving comments on our reports from the affected agencies, and unforeseeable events like the disruptions caused by the terrorist attacks on September 11 and the anthrax attacks that followed. We expect the 98 percent targets to be challenging to meet, but feasible.

Qualitative Performance Goals.
Our qualitative performance goals lay out the work we plan to do to achieve financial and other benefits. Tracking our progress in accomplishing these goals gives us an additional tool to use in holding our selves accountable for the resources the Congress provides. For examples of work we did under these goals, please see GAO at Work below, and for additional examples, see appendix two.

Work examples: GAO at Work.
Creating a Focal Point for Combating Terrorism.
GAO identified fragmentation among federal efforts to combat terrorism as several key interagency functions were spread across various agencies and sometimes overlapped. During summer 2001, GAO recommended that the President appoint a single focal point within the Executive Office of the President to oversee the collective efforts of the many agencies involved. Soon after the formal release of GAO's related report in September 2001, the President announced the creation of the Office of Homeland Security within the Executive Office of the President. The Executive Order establishing the office provided it with many of the functions and responsibilities that GAO had advocated for improving interagency coordination.

Addressing Election Policy Issues.
In a series of reports, GAO provided the Congress with extensive analysis related to voter access and election reform. A March 2001 report analyzed the constitutional authority under which the Congress may legislate regarding federal and state elections and described current federal statutes. In other work, GAO conducted a 50 state review of state statutes, regulations, and policies on disabled access requirements and alternative voting methods. GAO also examined the challenges faced by military and overseas citizens who vote absentee. In response to GAO's recommendations, the Departments of Defense and State have pledged action to improve their voting assistance programs. Furthermore, the House and Senate Armed Services Committees have incorporated provisions in the fiscal 2002 DOD authorization bills to address weaknesses we identified in our report. Finally, in early fiscal 2002, we issued a capping report that discusses 1. How the constitutional and operational division of federal and state authority to conduct elections has resulted in great variability in the ways elections are administered nationwide, 2. The main challenges election officials face in all major parts of the elections systems, and 3. Basic criteria for assessing a range of election reform proposals. Our work was instrumental in enabling the House and Senate to develop election reform proposals.

Modernizing Medicare's Contracting of Claims Administration.
GAO's congressionally requested work on the contracting of Medicare's claims administration identified challenges for contracting reform, resulted in the administering agency's improved contract management, and pointed out potential benefits to removing restrictions and introducing competition to improve contractor performance. On December 4, 2001, the House passed legislation that would require competition and contractor performance standards for accuracy of payments and communications with providers, beneficiaries, and suppliers. Contracting reform legislation is currently pending in the Senate.
End of examples.

In the strategic plan we published in 2000, we laid out multiyear performance goals to help us achieve our four overarching strategic goals. Initially, we expected to assess our performance after three years, that is, at the end of fiscal 2002. We subsequently opted to assess our performance at the end of fiscal 2001, so that we could bring the assessment cycle into alignment with our two year strategic planning cycle. We will assess our progress on our qualitative performance goals every two years henceforth.

As of the end of fiscal 2001, we had met 84 (or 89 percent) of our 94 qualitative performance goals and had not met 10 (or 11 percent). The expedited assessment cycle was the most frequent reason for a goal’s not having been met. In one case, a goal was not met because resources were reassigned to meet unanticipated priorities of congressional clients. The work under all of the unmet performance goals will be carried forward under performance goals for fiscal 2002 and 2003. See the Data Quality and Program Evaluation section for an explanation of how we assess our performance on our qualitative goals and appendix three for a goal by goal assessment of our performance.

For fiscal 2002 and 2003, we are establishing a new set of qualitative goals as part of our updated strategic plan, currently under review. In updating the plan for fiscal 2002, we increased the focus on national preparedness issues and made other changes to enhance the alignment between the plan and our organizational structure. The qualitative performance goals under review for fiscal 2002 and 2003 are listed in appendix four. As this report goes to press, we are consulting with our congressional clients and other outside experts on our proposed update to our strategic plan for fiscal 2002 through 2007.

Financial Information: Agencywide.
GAO’s financial statements for fiscal 2001 received an unqualified opinion from our independent auditor. No material weaknesses in internal control were identified, and the auditor reported substantial compliance with the requirements in the Federal Financial Management Improvement Act of 1996 (FFMIA) for financial systems. The auditor found no instances of noncompliance with the laws or regulations in the areas they tested. The statements and their accompanying notes, along with the auditor’s report, appear later in this report. The following table summarizes key data.

Table: GAO's Financial Highlights: Resource Information (dollars in thousands).
Appropriations; Fiscal 2001; $384,020; Fiscal 2000; $377,561.

Total available resources; Fiscal 2001; $392,943; Fiscal 2000; $390,653.

Total outlays; Fiscal 2001; $387,200; Fiscal 2000; $384,096.

Full time equivalent employees; Fiscal 2001; 3,110; Fiscal 2000; 3,192.

Net cost of operations; Goal 1: Well being/financial security of American people; Fiscal 2001; $161,112; Fiscal 2000; $153,448.

Net cost of operations; Goal 2: Changing security threats/challenges of global interdependence; Fiscal 2001; 93,440; Fiscal 2000; 96,993.

Net cost of operations; Goal 3: Results oriented and accountable federal government; Fiscal 2001; 139,459; Fiscal 2000; 134,637.

Net cost of operations; Goal 4: Maximize the value of GAO; Fiscal 2001; 20,695; Fiscal 2000; 19,760.

Net cost of operations; Less reimbursable services not attributable to goals; Fiscal 2001; (1,652); Fiscal 2000; (712).

Net cost of operations; Total; Fiscal 2001; $413,054; Fiscal 2000; $404,126.
End of table.

Compared with the statements of large and complex agencies in the executive branch, GAO’s statements present a relatively simple picture of a small agency in the legislative branch that has most of its financial activity focused on the execution of its congressionally approved budget and most of its resources devoted to the human capital needed for its mission of supporting the Congress with information and analysis.

GAO’s budget consists of an annual appropriation covering salaries and expenses and a building expenditure fund. For fiscal 2001, GAO’s budget authority increased 1.7 percent from fiscal 2000. GAO’s total assets were roughly $123.5 million, consisting mostly of property and equipment (including the headquarters building, land, and improvements and computer equipment and software) and funds with the Treasury. The major change in our assets was in property and equipment (net), which decreased $7.5 million as a result of annual depreciation. The total liabilities of roughly $86.9 million were largely accrued annual leave and employee salaries and benefits as well as amounts owed to other government agencies and accounts payable.

To align our net costs with our strategic plan, this year we are reporting net costs by strategic goal for the first time. As the figure below indicates, our first goal, under which we organize our work on challenges to the well being and financial security of the American people, accounted for the largest share of the costs. 

Figure: Net Cost of Operations, Fiscal Year 2001 Total $413.1 Million.
Pie chart with 4 items.
Item 1, Goal 1, 39%.
Item 2, Goal 2, 22%.
Item 3, Goal 3, 34%. 
Item 4, Goal 4, 5%.
Note: Total net costs include about $1.7 million in reimbursable services not attributable to the goals.
End of figure.

As a later section on our budget request for fiscal 2003 will show, we expect this goal to continue to represent the largest share of our costs.

Assisting the comptroller general in overseeing the effectiveness of GAO’s financial operations is a three member Audit Advisory Committee:

Sheldon S. Cohen (chairman) is a certified public accountant 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.

Alan B. Levenson is a practicing attorney in Washington, D.C., and a former senior official at the Securities and Exchange Commission.

Katherine D. Ortega is a certified public accountant, former treasurer of the United States, former commissioner of the Copyright Royalty Tribunal, and a former member of the President’s Advisory Committee on Small and Minority Business.

The committee’s report for fiscal 2001 appears after our financial statements and accompanying notes.

Limitation on Financial Statements.
Responsibility for the integrity and objectivity of the financial information presented in the financial statements in this report rests with GAO's managers. The statements were prepared to report GAO's 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 GAO's financial records in accordance with the formats prescribed in the Office of Management and Budget's (OMB) Bulletin 01-09, Form and Content of Agency Financial Statements. These financial statements differ from the financial reports used to monitor and control GAO's budgetary resources; however, both are prepared from the same financial records.

GAO's financial statements should be read with the understanding that, as an agency of a sovereign entity, the U.S. government, GAO cannot liquidate its liabilities (that is, pay its bills) without legislation that provides resources to do so. Although future appropriations to fund these liabilities are likely and anticipated, they are not certain.

Performance and Targets: Strategic Goal One.
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 by providing information and recommendations on the following eight strategic objectives: the health care needs of an aging and diverse population, a secure retirement for older Americans, the social safety net for Americans in need, an educated citizenry and a productive workforce, an effective system of justice, investment in community and economic development, responsible stewardship of natural resources and the environment, and a safe and efficient national physical infrastructure.

In keeping with our mission to support the Congress in carrying out its constitutional responsibilities, our first strategic goal focuses on several of the aspirations of the American people that were defined by the Founders:

to "establish justice, insure domestic tranquility, ...promote the general welfare, secure the blessings of liberty to ourselves and our posterity..."

Our aging and increasingly diverse population, rapid technological change, and Americans’ desire to improve the quality of life all have major policy and budgetary implications for the federal government. In particular, growing commitments to the elderly will challenge the capacity of a smaller generation of workers to finance the competing needs and wants brought to federal decision makers.

In fiscal year 2001, we exceeded three of our targets under our first strategic goal, as the following table shows, those for other benefits, recommendations made, and testimonies given. 

Table: Goal One Results and Targets.
Performance measure: Financial benefits (billions); Actual 1998; $10.8; Actual 1999; $13.8; Actual 2000; $14.1; Target 2001; $12.7; Actual 2001; $8.9; Target 2002; $17.0; Target 2003; $22.8.

Performance measure: Other benefits; Actual 1998; 177; Actual 1999; 140; Actual 2000; 182; Target 2001; 196; Actual 2001; 210; Target 2002; 218; Target 2003; 218.

Performance measure: Recommendations implemented; Actual 1998; 69%; Actual 1999; 72%; Actual 2000; 72%; Target 2001; 75%; Actual 2001; 71%; Target 2002; 75%; Target 2003; 77%.

Performance measure: Recommendations made; Actual 1998; 285; Actual 1999; 350; Actual 2000; 435; Target 2001; 349; Actual 2001; 396; Target 2002; 359; Target 2003; 359.

Performance measure: Testimonies; Actual 1998; 130; Actual 1999; 123; Actual 2000; 131; Target 2001; 71; Actual 2001; 73; Target 2002; 93; Target 2003; 93.

Note: Please see appendix one for full explanations of the data in this table and for four year averages.
End of table.

We did not reach the two other targets:
We achieved measurable financial benefits of about $8.9 billion, falling short of our $12.7 billion target for the year. The shortfall was caused by our decision to defer some sizable accomplishments as we reconsidered our methodology for tabulating financial benefits. As discussed previously, we instituted a new methodology effective October 1, 2001. The deferred accomplishments will be reported in next year’s results.

The implementation rate for the recommendations we made to improve government operations was 71 percent, falling short of our 75 percent target. We have identified the three teams that have implementation rates for their goal one work that are low enough to hold down the goal’s results, but we do not yet know all of the reasons for the low rates. To improve our performance, we are examining the nature of the recommendations being made under this goal and the process used to track their implementation. We expect to meet the 75 percent target in fiscal 2002.

Of the 42 qualitative goals, we met 37, meaning that we provided information or recommendations on those goals’ key efforts, when viewed collectively, during fiscal 2000 and 2001.

Figure: Qualitative Performance Goals.
Pie chart with 2 items covering 42 qualitative performance goals.
Item 1, Not Met, 12%. 
Item 2, Met, 88%.
End of figure.

The primary reason that four of the goals were not met was, as explained previously, our decision to assess our performance after two years instead of three. A fifth goal was not met because we redirected resources to meet unanticipated congressional priorities. The work remaining to be done under those goals has been carried forward under our new performance goals for fiscal 2002 and 2003. For a detailed assessment of our performance on our qualitative goals for fiscal 2000 and 2001, see appendix three; for the new goals, see appendix four.

For fiscal 2002, we have assigned 1,282 full time equivalent personnel to this strategic goal, which we anticipate will again account for the largest share of our net costs ($161 million, or 39 percent of the agency’s total in fiscal 2001) because of the wide scope of work carried out under it.

Figure: Net Cost of Operations, Fiscal Year 2001 Total $413.1 Million.
Pie chart with 2 items.
Item 1, Goal 1, $161 million.
Item 2, All other goals, $252.1 million.
End of figure.

For fiscal 2003, we are requesting 1,293 full time equivalent personnel for the strategic goal. Given these resources, we plan to meet the following targets in fiscal 2003:

$22.8 billion in financial benefits, although seemingly high when compared with fiscal 2001’s actual results, the target is appropriate given our new approach to reporting financial benefits;

218 actions taken on our findings and recommendations to improve government operations and services; and

A 77 percent implementation rate for the recommendations we made four years ago, feasible, we believe, because of our efforts to improve the performance on this measure of particular teams under the goal.

In addition, we set targets of delivering 93 testimonies and making 359 recommendations and are proposing qualitative performance goals for fiscal 2002 and 2003 that reflect a more intense focus on security and preparedness issues. Some of those goals (listed in appendix four) have been reorganized. Performance goals dealing with social safety net issues, for instance, have been placed within our strategic objectives on work opportunities, health care, and natural resources (under which our work on agricultural programs, including food aid, is done) rather than being isolated under a separate strategic objective. And, whereas our previous plan grouped performance goals dealing with education and employment under one strategic objective, we are proposing separate objectives for them in the new plan.

Work examples: GAO at Work.
In fiscal 2001, GAO contributed in many ways to the Congress’s and the federal government’s ability to address current and emerging challenges to the well being and financial security of the American people. Some of the topics we testified are: air pollution; airline competition and federal assistance; alternative motor fuels; Coast Guard investments; commercial fisheries; drug control; elections; energy prices and markets; FBI oversight; food stamps; health care; housing; infrastructure; intellectual property; intercity passenger rail; medicare; milk prices; nuclear safety; pediatric drug research; postal service transformation; prisoner releases; veterans’ employment, training, and health care; and welfare reform.

A few of the tangible improvements our work produced are:
Protecting Patients in Mental Health Facilities.
GAO pointed out the dangers to patients from the use of restraint and seclusion in mental health facilities; poor reporting of serious incidents; and the uneven protection afforded to patients in differing residential treatment settings. This work informed the Congress and set the stage for the passage of the Children’s Health Act of 2000 (P.L. 106-310). The act specifies the circumstances in which restraint and seclusion can be used, requires facilities to notify the appropriate agency of restraint or seclusion related deaths, and requires facilities to train staff in the use of restraints and alternatives to them. In addition, the Centers for Medicare and Medicaid Services cited GAO’s work in its regulations that established standards for the use of restraint or seclusion in psychiatric residential treatment facilities. The regulations require such facilities to inform state authorities of any deaths or serious injuries involving seclusion or restraint, as well as informing the Centers of any deaths.

Reducing Nuclear Waste Treatment Costs.
Starting in 1996, through a series of reports and testimonies, GAO questioned the reasonableness of the Department of Energy’s (DOE) "privatized" approach to treating liquid high level radioactive wastes at its Hanford, Washington, site. Under this approach, financing and constructing treatment facilities would have cost at least $8 billion. In June 2000, GAO reported that DOE’s privatized approach had not been successful for other complex cleanup projects and suggested that DOE reassess the cost effectiveness of this approach at Hanford, including analyzing different contracting and financing alternatives. Subsequently, DOE terminated its privatized contract because of dramatic cost growth and contractor performance problems. Consistent with GAO’s suggestions, DOE assessed alternative contracting and financing strategies and awarded a new contract in December 2000. It expects to save about $1.3 billion in fiscal 2001 and 2002 and expects additional savings in future years.

Controlling Pollution.
GAO’s work on pollution control issues has resulted in both tangible program impacts as well as significant budgetary savings. For example, in a series of reports and testimonies, GAO documented serious deficiencies in states’ water quality monitoring programs and recommended that the Environmental Protection Agency (EPA) improve the information collected on water quality conditions across the country. EPA and the Congress have since responded with steps designed to improve the quality and consistency of state monitoring programs. Taken together, these actions are expected to improve the prospects that the right waters will be targeted for cleanup, saving millions of dollars and ensuring that scarce resources are applied where they are most needed. In another example, GAO recommended reduced appropriations across an array of environmental programs, including EPA’s Climate Technology Initiative, Clean Air Partnership Fund, and the Great Lakes Cleanup Grants. As a result, over $400 million in savings was achieved without compromising important environmental objectives.
End of examples.

Performance and Targets: Strategic Goal Two.
Provide timely, quality service to the Congress and the federal government to respond to changing security threats and the challenges of global interdependence by providing information and recommendations on responding to diffuse threats to national and global security, ensuring military capabilities and readiness, advancing and protecting U.S. international interests, and responding to the impact of global market forces and U.S. economic and security interests.

As the world grows increasingly interconnected through more open markets and rapidly developing technology, the United States is facing threats to its security and economy from sources that range from terrorism to regional conflicts to instability sparked by adverse economic conditions, corruption, ethnic hatreds, nationalism, and disease. At the same time, the end of the cold war and the globalization of markets have created new opportunities for the nation as a whole and for American producers and consumers.

While seeking to anticipate and address diffuse threats to the nation’s security and economy, the federal government also tries to promote foreign policy goals, sound trade policies, and other strategies to advance the interests of the United States and those of U.S. trading partners and allies in every corner of the world. In light of the globalization, technology, and security trends identified in our strategic plan, the second goal is to help the Congress and the federal government respond to changing security threats and the challenges of global interdependence.

In fiscal 2001, we exceeded four of our targets under our second strategic goal, sometimes dramatically, and narrowly missed a fifth, as the following table shows.

Table: Goal Two Results and Targets.
Performance measure: Financial benefits (billions); Actual 1998; $5.8; Actual 1999; $3.0; Actual 2000; $5.5; Target 2001; $5.1; Actual 2001; $10.5; Target 2002; $7.8; Target 2003; $7.6.

Performance measure: Other benefits; Actual 1998; 73; Actual 1999; 80; Actual 2000; 129; Target 2001; 162; Actual 2001; 188; Target 2002; 178; Target 2003; 192.

Performance measure: Recommendations implemented; Actual 1998; 76%; Actual 1999; 65%; Actual 2000; 84%; Target 2001; 75%; Actual 2001; 81%; Target 2002; 75%; Target 2003; 77%.

Performance measure: Recommendations made; Actual 1998; 242; Actual 1999; 255; Actual 2000; 376; Target 2001; 283; Actual 2001; 618; Target 2002; 460; Target 2003; 485.

Performance measure: Testimonies; Actual 1998; 45; Actual 1999; 37; Actual 2000; 56; Target 2001; 36; Actual 2001; 34; Target 2002; 49; Target 2003; 55.

Note: Please see appendix one for full explanations of the data in this table and for four year averages.
End of table.

Financial benefits were nearly double the targeted amount because of the $6 billion in benefits achieved by decision makers who used our analyses of options for military base realignments and closures in their efforts to reduce the costs to DOD from maintaining facilities and functions primarily geared to the cold war era. The implementation rate for the recommendations we made to improve government operations was 81 percent, well above the target primarily because our staff followed up and reported on defense recommendations more diligently than in the past. We recorded more than twice as many new recommendations as called for by the target because the reports we issued on information security contained many specific recommendations to particular agencies.

The one target that was not met was that for testimonies. We testified 34 times before the Congress rather than 36 times. The performance target was set at an approximate level, and the deviation from that level was slight. There was no effect on GAO’s overall performance.

Of the 20 qualitative performance goals, we met 19, meaning that we provided information or recommendations on those goals’ key efforts, when viewed collectively, during fiscal 2000 and 2001.

Figure: Qualitative Performance Goals.
Pie chart with 2 items covering 20 qualitative performance goals.
Item 1, Met, 95%. 
Item 2, Not Met, 5%.
End of figure.

The reason that one of the goals was not met was, as previously explained, our decision to assess our performance after two years instead of three. The work remaining to be done under that goal has been carried forward under our new performance goals for fiscal 2002 and 2003. For a detailed assessment of our performance on our qualitative goals for fiscal 2000 and 2001, see appendix three; for the new goals, see appendix four.

For fiscal 2002, we have assigned 878 full time equivalent personnel to this strategic goal, which we anticipate will again account for roughly a quarter of our net costs ($93.4 million, or 22 percent of the agency’s total in fiscal 2001).

Figure: Net Cost of Operations, Fiscal Year 2001 Total $413.1 Million.
Pie chart with 2 items.
Item 1, Goal 2, $93.4 million. 
Item 2, All other goals, $319.7 million.
End of figure.

For fiscal 2003, we are requesting 884 full time equivalent personnel for the strategic goal. Given these resources, we plan to meet targets in fiscal 2003 that call for, among other things, $7.6 billion in financial benefits and 192 actions taken on our findings and recommendations to improve government operations and services. We are proposing qualitative performance goals for fiscal 2002 and 2003 that reflect a more intense focus on security and preparedness issues (see appendix four).

Work examples: GAO at Work.
In fiscal 2001, GAO contributed in many ways to the Congress’s and the federal government’s ability to respond to changing security threats and the challenges of global interdependence. Some of the topics we testified on are: A-76 competitive sourcing program; anthrax vaccine; aviation security; cannibalizing military aircraft; combating terrorism; computer security; debt relief; defense infrastructure; defense maintenance; democracy programs; export controls; F-22 fighter aircraft production; Free Trade Area of the Americas; homeland security; international disaster assistance; military base closures; nuclear nonproliferation; and peacekeeping operations.

A few of the tangible improvements our work produced are:
Informing the Debate Over Aviation Security.
Improving the screening of airline passengers and their baggage moved to the top of the national agenda following the September 11 terrorist attacks. Building upon a considerable body of work on aviation security completed in recent years, GAO delivered four testimonies and two statements for the record during the two weeks following the attacks. These efforts, as well as discussions with the Congress since the hearings, helped bring into focus the root problems with our nation’s aviation security system and, in particular, the screening process. Subsequently, the Congress passed legislation that addressed the screening concerns GAO identified. In earlier work, GAO had recommended that FAA consider pursuing procedures common in other countries, such as limiting access to ticketed passengers, placing armed police at checkpoints, and placing armed militia throughout airports. FAA has begun adopting some of these security screening strategies and procedures.

Improving Accountability Over Defense Inventory.
In response to various congressional requests, GAO issued several reports on DOD’s inventory management practices that resulted in significant management improvements, financial savings, and enhanced congressional oversight. GAO identified key factors causing parts shortages for military weapon systems and the adverse impact these shortages were having on mission performance, morale of military personnel, and actions DOD is taking to address these problems. The work also resulted in recommendations to improve quality deficiency reporting for parts purchased or repaired. Related work further showed that DOD was not effectively tracking the use of funds earmarked for reducing spare part shortages and recommended actions for improving oversight of such funds. GAO also recommended actions to improve the accountability over DOD inventory that was being shipped from contractor or DOD facilities. GAO’s work showed that these items, which were cumulatively valued at billions of dollars, were often vulnerable to theft and undetected loss. This work resulted in savings of about $1.8 billion. Further recommendations were made to improve the accountability over items containing sensitive military technology that were being disposed. Lastly, GAO made recommendations to improve the practices for determining when to retain or dispose of DOD’s multibillion dollar inventory of spare parts.

Strengthening Federal Information Security.
Numerous federal agencies implemented improvements based on GAO recommendations to better protect the integrity, confidentiality, and availability of their critical computer supported operations. Improvements stemming from prior years’ and recent follow up work included actions by DOD, the Treasury, VA, and EPA. Also, audits issued during fiscal 2001 prompted newly initiated actions at the Departments of Interior, Commerce, and Education. Improvements included strengthening access controls, developing and testing service continuity plans, and implementing management processes for ensuring that security controls appropriately address current threats and operate as intended. In addition, GAO reports and testimonies facilitated congressional oversight by highlighting significant vulnerabilities in critical federal systems and providing detailed information on new viruses and other cyber related events.
End of examples.

Performance and Targets: Strategic Goal Three.
Support the transition to a more results oriented and accountable federal government by analyzing the federal government's long term and near term fiscal position, outlook, and options; strengthening approaches for financing the government and determining accountability for the use of taxpayer dollars; facilitating governmentwide management and institutional reforms needed to build and sustain high performing organizations and more effective government; and recommending economy, efficiency, and effectiveness improvements in federal agency programs.

As the 21st century begins, Americans are increasingly demanding improved government services and better stewardship of public resources. The federal government is adopting the principles of performance based management in an effort to address these demands. This approach to managing government integrates thinking about organizational structure; strategies for delivering programs and services; and the use of technology, reliable financial information, and effective human capital strategies into decisions about the results the government intends to achieve.

Many initiatives under way across government to improve operations and strengthen accountability are being driven by management reforms statutorily established by the Congress in the 1990s. Yet the reforms did not encompass all areas of government management, in particular, strategic planning for and management of human capital at a governmentwide level.

The reforms that have been adopted have profound implications for the way government delivers products and services, for the way it is organized, and for the way it performs. As a result, government decision makers and managers are adopting new ways of thinking, considering different ways of achieving goals, and using new information to guide decisions. At the same time, with the federal budget sliding from surplus to deficit, the U.S. government faces a new set of challenges, in both the long and near terms, in making spending decisions. Consequently, we established a strategic goal of supporting the transition to a more results oriented and accountable government in the new environment.

In fiscal 2001, we exceeded four of the performance targets under our third strategic goal as the following table shows, and narrowly missed a fifth. 

Table: Goal Three Results and Targets.
Performance measure: Financial benefits (billions); Actual 1998; $4.6; Actual 1999; $4.5; Actual 2000; $5.1; Target 2001; $5.3; Actual 2001; $7.0; Target 2002; $5.3; Target 2003; $4.6.

Performance measure: Other benefits; Actual 1998; 311; Actual 1999; 414; Actual 2000; 503; Target 2001; 342; Actual 2001; 401; Target 2002; 374; Target 2003; 375.

Performance measure: Recommendations implemented; Actual 1998; 65%; Actual 1999; 78%; Actual 2000; 77%; Target 2001; 75%; Actual 2001; 85%; Target 2002; 75%; Target 2003; 77%.

Performance measure: Recommendations made; Actual 1998; 460; Actual 1999; 335; Actual 2000; 413; Target 2001; 343; Actual 2001; 549; Target 2002; 381; Target 2003; 356.

Performance measure: Testimonies; Actual 1998; 96; Actual 1999; 100; Actual 2000; 105; Target 2001; 43; Actual 2001; Actual 2001; 42; Target 2002; 58; Target 2003; 62.

Note: Please see appendix one for full explanations of the data in this table and for four year averages.
End of table.

The results under other benefits, recommendations implemented, and recommendations made were particularly high because of the large number of very specific recommendations in reports on information technology and financial management issues. We missed the target for testimonies by one. The target was set at an approximate level, and the deviation from that level was slight. There was no effect on GAO’s overall performance.

We met all 15 of the qualitative performance goals, meaning that we provided information or recommendations on those goals’ key efforts, when viewed collectively, during fiscal 2000 and 2001. For a detailed assessment of our performance on these goals, see appendix three.

Figure: Qualitative Performance Goals.
Pie chart with 1 item covering 15 qualitative performance goals.
Item 1, Met, 100%.
End of figure.

For fiscal 2002, we have assigned 941 full time equivalent personnel to this strategic goal, which we anticipate will again account for the second largest share of our net costs ($139.5 million, or 34 percent of the agency’s total in fiscal 2001).

Figure: Net Cost of Operations, Fiscal Year 2001 Total $413.1 Million.
Pie chart with 2 items.
Item 1, Goal 3, $139.5 million. 
Item 2, All other goals, $273.6 million.
End of figure.

For fiscal 2003, we are requesting 948 full time equivalent personnel for the strategic goal. Given these resources, we plan to meet the performance targets in fiscal 2003 that call for, among other things, $4.6 billion in financial benefits and 375 actions taken on our findings and recommendations to improve government operations and services. We are proposing qualitative performance goals for fiscal 2002 and 2003 that reflect a more intense focus on security and preparedness and on the role of the government and how it does business in the 21st century; see appendix four for the goals.

Work examples: GAO at Work.
In fiscal 2001, GAO contributed in many ways to the federal government's transition to being more results oriented and more accountable. Some of the topics we testified on are: alternative minimum tax, contracting for services, controls over federal payments, District of Columbia reforms, electronic government, federal budget issues, federal rulemaking requirements, federal telecommunications services, financial statement reliability, human capital, implementation of the Government Performance and Results Act, information security, information technology workforce, intergovernmental fiscal issues, IRS modernization, presidential transition, reusable launch vehicles, and tax filing season. 

A few of the tangible improvements our work produced are:
Improving Collection of Nontax Debt.
GAO has continued to report on the government’s serious collection problems with nontax debt, debt, other than taxes, that is owed to the federal government. GAO promoted centralizing the offset of delinquent debt against federal payments prior to the enactment of the Debt Collection Improvement Act of 1996. GAO was also instrumental in the successful merging of the tax refund and administrative offset programs, now better known as the Treasury Offset Program. Since the program’s inception in January 1999 and through July 2001, collections of federal nontax debt from tax refund offsets have increased by $931 million, including $677 million during fiscal 1999 and 2000.

Focusing Attention on Major Management Challenges and High Risk Issues.
In its 2001 "Performance and Accountability Series and High Risk Update," GAO identified almost 100 major management challenges and program risks at 21 federal agencies and 22 high risk areas. GAO also high lighted the actions needed to address these serious problems. Since 1990, GAO’s high risk list continues to identify and help resolve serious weaknesses in areas that involve substantial resources and provide critical service to the public. New to the high risk list were the Postal Service’s transformational efforts and long term outlook and strategic human capital management, a pervasive challenge across the federal government. The 2001 series also explored the longer term fiscal implications of current programs and policies and a range of existing and emerging major management challenges and program risks confronting the federal government. The added focus on program and management issues coming out of this report series has clearly resonated across the federal spectrum and yielded valuable benefits. Congressional leaders, who have historically referred extensively to the series in framing oversight hearing agendas, have now also strongly urged the administration and individual agencies to develop specific performance goals to address these pervasive problems. In addition, the president’s recently issued management agenda for reforming the federal government mirrors many of the issues that GAO has focused and reported on in this series, including a governmentwide initiative to focus on strategic management of human capital.

Identifying Strategies for a More Cost Effective Census.
In a series of congressionally requested reports over the last year, GAO examined the lessons learned from the 2000 Census. GAO identified financial savings and best practices that could help improve the planning and conduct of the next national account in 2010. For example, GAO’s recommendations for improving the methods the Bureau of the Census used for calculating the productivity of census enumerators provided the Congress and the bureau with better data for future planning and budgeting decisions. Likewise, GAO’s work on the bureau’s program for partnering with local governments and nonprofits prompted the bureau to implement improvements to make this key promotion and outreach effort more accountable and performance oriented. In addition, GAO’s review of certain assumptions behind the bureau’s fiscal 2000 budget alerted the Congress to the availability of unobligated funds. Subsequent action taken by the bureau and House and Senate Appropriations Committees led to financial savings of $360 million.
End of examples.

Performance and Targets: Strategic Goal Four.
Maximize the value of GAO by being a model organization for the federal government through cultivating and fostering effective congressional and agency relations, implementing a model strategic and annual planning and reporting process, aligning human capital policies and practices to support GAO's mission, developing efficient and responsive business processes, and building an integrated and reliable information technology infrastructure. 

To carry out our responsibilities to the Congress and the American people successfully, GAO must be perceived as credible and must lead by example. Our fourth strategic goal provides the framework for enhancing and sustaining our organization’s credibility. The areas in which GAO is addressing management challenges all fall under this goal: human capital, information technology, and security. Please see the special section on management challenges later in this report for additional details.

The quantitative measures used to assess our performance on our external strategic goals (goals one through three) are not applicable to this internal strategic goal, but qualitative performance goals do apply. Of the 17 internal qualitative performance goals, we met 13 during fiscal 2000 and 2001. 

Figure: Qualitative Performance Goals.
Pie chart with 2 items covering 17 qualitative performance goals.
Item 1, Met, 76%. 
Item 2, Not Met, 24%.
End of figure.

The primary reason that four of the goals were not met was the decision to assess our performance after two years instead of three. The work remaining to be done under those goals has been carried forward under our new performance goals for fiscal 2002 and 2003. For a detailed assessment of our performance on our qualitative goals for fiscal 2000 and 2001, see appendix three; for the new goals, see appendix four.

For fiscal 2002, we have assigned 168 full time equivalent personnel to this strategic goal, which we anticipate will again account for the smallest share of our net costs ($20.7 million, or five percent of the agency’s total in fiscal 2001). For fiscal 2003, we are requesting 144 full time equivalent personnel for the strategic goal.

Figure: Net Cost of Operations, Fiscal Year 2001 Total $413.1 Million.
Pie chart with 2 items.
Item 1, Goal 4, $20.7 million. 
Item 2, All other goals, $392.4 million.
End of figure.

Work examples: GAO at Work.
In fiscal 2001, GAO’s efforts to maximize the value of the agency by being a model organization for the federal government produced tangible results as these examples illustrate.

Strengthening Relationships with GAO’s Clients and Stakeholders.
In fiscal 2001, GAO implemented a set of congressional protocols, policies and procedures to guide interactions with the Congress and to ensure GAO’s accountability to the Congress. Responding to client requests, GAO and the Congressional Budget Office developed materials on legislative branch services for new members of the Congress and their staff. GAO also expanded and improved access to information for our congressional clients through a Web accessible active assignments list. To assist in the congressional and presidential transitions, GAO worked with OMB and Cabinet level officials to provide new legislators and officials with information about the challenges facing them; much of the information about GAO’s work was made available on a transition Web site. GAO continued our efforts to work across boundaries and encourage knowledge sharing by networking through various boards and panels, including the Comptroller General’s Advisory Board, the Educators’ Advisory Board, the Accountability Advisory Board, and the global and domestic working groups of accountability organizations.

Aligning GAO’s Resources with Our Strategic Goals.
To enhance our ability to achieve the goals and objectives of our strategic plan, GAO completed a major organizational realignment in fiscal year 2001. The realignment provides for a clearer and more transparent delineation of responsibilities for achieving strategic goals and in meeting the needs of the Congress. In addition, the realignment centralized certain administrative support services to more efficiently provide human capital, report production and publishing, budget and financial management, information systems desk side support, security and safety, property management, copying and reproduction services, supplies, and mail to agency staff. The centralization will allow GAO to effectively devote more resources to our mission work and obtain economies of scale by providing central and shared services.

Aligning Human Capital Policies and Practices to Support GAO’s Mission.
We have made significant progress toward reshaping GAO’s human capital profile to better support the agency’s mission. In fiscal 2001, under new personnel management authorities provided by human capital legislation enacted in 2000, GAO offered qualified staff opportunities for early retirement and hired several senior level specialists. GAO also instituted new recruiting strategies to bring in diverse, high caliber staff with the skills needed to meet GAO’s strategic goals, particularly as senior GAO staff begin to retire in increasing numbers. As part of GAO’s overall workforce planning, we also developed an inventory of staff knowledge and skills that was used in conjunction with an employee preference survey to realign staff to better meet our strategic goals. Finally, GAO completed the development of a new performance appraisal system, to be implemented in 2002, based on the strategic plan and needed competencies; new training and professional development programs are being developed to support these competencies.
End of examples.

Strategies and Challenges: Achieving Our Goals.
The Government Performance and Results Act directs agencies to articulate not just goals, but also strategies for achieving those goals. As discussed in this section, our strategies emphasize the importance of working with other organizations on cross cutting issues and to mitigate challenges to achieving our agency's goals, that is, the internal and external factors that could impair performance.

Strategies for Achieving Our Goals and Coordinating with Others.
For GAO, achieving our goals and objectives rests, for the most part, on providing professional, objective, fact based, nonpartisan, nonideological, fair, and balanced information. We develop and present this information in a number of ways to support the Congress, including the following:

Evaluations of federal policies and the performance of agencies;

Oversight of government operations through financial and other management audits to determine whether public funds are spent efficiently, effectively, and in accordance with applicable laws;

Investigations to assess whether illegal or improper activities are occurring;

Analyses of the financing for government activities;

Constructive engagements in which we work proactively with agencies, when appropriate, to help guide their efforts toward positive results;

Legal opinions to determine whether agencies are in compliance with applicable laws and regulations;

Policy analyses to assess needed actions and the implications of proposed actions; and

Additional assistance to the Congress in support of its oversight and decision making responsibilities.

The qualitative performance goals listed in appendix four lay out the work we plan to do in fiscal 2002 and 2003.

GAO builds strategic working relationships with other national and international government accountability and professional organizations to broaden and leverage our institutional knowledge and experience, and in turn, to improve our service to the Congress and the American public. The relationships focus on 1. using advisory panels and other bodies to inform GAO's strategic and annual work planning and 2. initiating and supporting collaborative national and international audit, technical assistance, and other knowledge sharing efforts. GAO's External Liaison office provides the leadership, strategic focus, and administrative support for working with crosscutting organizations while GAO's audit teams provide the leadership for working with most issue specific organizations.

Planning with Others.
A number of advisory boards and panels support GAO's strategic and annual performance planning. For example, GAO works actively with the Comptroller General's Advisory Board, which includes more than 40 members from the public and private sectors whose areas of expertise mirror GAO's strategic objectives. GAO meets with the board once a year and works with individual members throughout the year on our strategic objectives and initiatives, including, for example, future work GAO should conduct on counterterrorism issues. In addition, GAO uses the National Intergovernmental Audit Forum chaired by the comptroller general, 10 regional intergovernmental audit forums, and other means to consult regularly with federal inspectors general and state and local auditors on GAO's strategic and annual work plans. For example, the comptroller general plans to consult with the domestic working group, which includes about 18 federal, state, and local auditors, on ways that the intergovernmental audit community might best address counterterrorism issues.

We also work with a number of issue specific and technical panels to improve our strategic and annual planning. For example, we meet periodically with our Accountability Advisory Council to obtain advice on vital and emerging issues pertaining to financial management and accountability reporting, with our Executive Council on Information Management and Technology to obtain advice on critical information management issues, with our K-12 Advisory Panel to obtain advice on elementary and secondary education issues, with our Advisory Council on Government Auditing Standards to obtain advice and guidance on promulgating auditing standards, and with our Educators' Advisory Panel to identify the best practices for recruiting and developing GAO's staff.

In the international area, GAO participates actively in the International Organization of Supreme Audit Institutions (INTOSAI), the professional organization of about 180 national audit offices from around the world. At the 17th International Congress of Supreme Audit Institutions in Seoul, Korea, in October 2001, the comptroller general chaired an overall theme on ways to strengthen the role of supreme audit institutions in administrative and government reform efforts and agreed to chair a 10 country task force charged with developing a strategic planning framework for INTOSAI. The comptroller general is a member of the INTOSAI Governing Board and also participates each year in an informal global working group, in which the heads of GAO's counterparts from the G-7 and other selected countries meet to discuss strategic plans and issues of mutual concern.

Collaborating with Others.
GAO collaborates on crosscutting issues with numerous organizations to strengthen professional standards, provide technical assistance, leverage resources, and develop best practices. For example, in response to a statutory mandate, the comptroller general convened the Commercial Activities Panel to review the government's policies and procedures for deciding whether commercially available services should be performed by federal employees or by the private sector. The panel, which includes senior leaders from government agencies, federal labor unions, contractor groups, and academia, will develop a set of principles to guide agencies' sourcing decisions and make related recommendations.

GAO has long collaborated with others in carrying out its leadership role in the area of financial management. GAO works closely with OMB, Treasury, the inspector general community, and others in developing federal accounting standards and pre paring and auditing the U.S. government's financial statements, including the development and issuance of guidance on the form and content of the financial statements and the methodologies for conducting the audits. In July 2001, GAO and the President's Council on Integrity and Efficiency jointly issued a Financial Audit Manual for performing financial statement audits of federal entities. The manual provides common methodologies and ground rules for conducting these audits and will improve consistency among agencies' audits. Furthermore, GAO sets the internal control standards and the auditing standards for government and provides technical advice, training, and other outreach to the governmental community to ensure that the standards are under stood and accepted.

As chair of the Joint Financial Management Improvement Program (JFMIP), the comptroller general initiated a series of sessions at which the JFMIP principals (the comptroller general, the secretary of the Treasury, the director of the Office of Management and Budget, and the director of the Office of Personnel Management) discussed pressing governmentwide financial management issues. These summits were the first time the JFMIP principals had gathered in 10 years. Their deliberations and agreements focused on key issues such as restructuring the Federal Accounting Standards Advisory Board to allow more input from the public, establishing audit committees for the major federal agencies, defining success measures for financial management that go beyond an unqualified audit opinion on financial statements, addressing the impediments to an audit opinion on the U.S. government's consolidated financial statements, accelerating financial statement reporting, reporting social insurance financial information, and promoting improved financial management systems and human capital practices. Through this initiative, the JFMIP principals have reinvigorated efforts to improve financial management across government. They will continue to review and monitor strategies critical to the full and successful implementation of existing statutes on federal financial management reform.

Other examples of GAO's collaborative activities include the following:
Several GAO teams are working collaboratively with the Private Sector Council. For example, GAO's Financial Management and Assurance team worked with the council to develop an executive guide on strategies to manage improper payments, and GAO's Education, Workforce, and Income Security team is working with the council to identify effective practices for safeguarding social security numbers.

GAO's Information Technology team is working with state auditors on several joint information security initiatives, including the joint development and issuance of a management planning guide for information systems security auditing.

GAO's Education, Workforce, and Income Security team is working with the Department of Education's inspector general, the state auditors of Pennsylvania and Texas, and the auditor of the city of Philadelphia on improving basic programs operated by local education agencies.

GAO's Physical Infrastructure team is working with the Department of Transportation's inspector general and Louisiana's state auditor on issues pertaining to highway construction oversight and transportation security.

GAO's Health Care team helped to strengthen program evaluation in the military by contributing to a senior management training program at the Department of the Air Force.

GAO's Applied Research and Methods team continuously assists other agencies in improving their analytical capabilities by reviewing their information development activities and helping them develop methodologies. The team also fosters knowledge transfer in the professional and federal evaluation communities.

GAO's Strategic Issues team worked with the National Conference of State Legislatures on spending issues pertaining to settlements with tobacco companies and programs for low income families under welfare reform.

GAO's Office of Special Investigations is working with the Pennsylvania Department of State on potential telemarketing fraud in multistate charities.

GAO's Financial Markets and Community Investment team worked with Tennessee's state auditor to identify weaknesses in regulatory oversight and supervision of insurance companies, reducing systemic risk and the possibility that the federal government would be called on to assist states in the event of insurer insolvencies.

GAO's International Affairs and Trade team assisted the International Monetary Fund in setting up an independent evaluation office.

GAO's External Liaison office developed a best practices section on GAO's public Web site (www.gao.gov/bestpractices/) for other organizations to use in performing their accountability work.

As mentioned previously, we use our work with INTOSAI to better inform our strategic and annual planning processes, but we also collaborate with INTOSAI on crosscutting issues. The comptroller general is a member of INTOSAI's board of governors and, along with senior GAO staff, a member of a number of INTOSAI committees. GAO publishes the quarterly international journal for INTOSAI and administers an international fellowship program. We have agreed to participate in an INTOSAI initiative on preventing and detecting international money laundering and have completed work on a set of protocols to help guide our international work.

GAO also participates in a number of specific joint ventures with the audit offices of other nations. For example, our International Affairs and Trade team plans to work with GAO's Russian counterpart on a cooperative review of U.S. assistance to Russia for eliminating chemical weapons. And our Natural Resources and Environment team is, in coordination with Canada's auditor general, reviewing efforts to prevent and control the harmful effects, such as crop destruction and ship damage, that can result from the introduction of invasive species. This work will specifically highlight problems in the Great Lakes and other U.S. Canada boundary waters.

Addressing Management Challenges That Could Affect Our Performance.
Two of the management challenges that may affect GAO's performance in fiscal 2003,human capital and information technology issues, were identified in our previous performance and accountability report. We have made progress in addressing these issues but continue to view them as significant challenges. In light of the far reaching effects of the September 11 terrorist attacks, we are adding a third management challenge: ensuring the security and safety of our people, information, facilities, and other key assets. If GAO is to gain widespread recognition as a world class professional services organization, each of these areas: human capital, information technology, and security and safety, is critical.

After a decade of downsizing and curtailed investments in human capital, it became increasingly clear that GAO needed new human capital strategies if the agency is to meet the current and emerging needs of the Congress and the nation's citizens. We have made good progress with our human capital challenges but have more work to do during fiscal 2002 and 2003 in the areas of recruiting, hiring, training, and performance appraisal.

We have begun implementing some of the new personnel management authorities provided to GAO under the human capital legislation enacted in October 2000. After developing policies for the new voluntary early retirement authority, we gave qualifying staff an opportunity in late fiscal 2001 to apply for early retirement. In addition, we established the senior level positions authorized by the legislation and hired several individuals. Other provisions and policies for reductions in force and voluntary separation incentive payments remain to be addressed. The required annual report to the Congress on our implementation of the legislation is in appendix five.

We have revised our recruiting and hiring strategy and were very successful in hiring diverse, high caliber staff with the skills and abilities GAO needs to achieve our strategic goals and objectives. The hiring of these new staff has contributed to addressing the succession planning, structural, and skill imbalance issues facing the agency. We plan to refine our recruitment and hiring programs to target staffing gaps identified through our workforce planning efforts, including the significant percentage of our workforce becoming eligible for retirement. Also, to enhance our recruitment and retention incentives, we will be offering a student loan repayment program and mass transit subsidies and plan to explore other means to attract and retain high caliber and skilled staff.

We have expanded training opportunities for our senior executives and are planning to revitalize training and professional development programs for all our staff, particularly at the entry level. In addition, we plan to develop a core curriculum for our managers and staff, focusing on understanding the congressional environment and achieving excellence in performance.

We have developed, and in January 2002 began implementing, a new competency based performance appraisal system for our analyst and specialist staff. The system links performance standards to our strategic plan, core values, and skill competencies to achieve results. We plan to develop a similar performance system for our attorneys and mission support employees.

We have constructed and analyzed a detailed workforce profile and developed a workforce planning model to ensure that GAO hires, retains, or contracts for the appropriate number of staff with the competencies needed to achieve our mission. We also plan to continue developing a human capital strategic plan to support our strategic goals and to ensure that diversity, skills, leadership, and retention issues are addressed.

As with human capital, information technology (IT) investments at GAO were significantly reduced during the mid to late 1990s as a result of mandated spending reductions. Consequently, information technology became a management challenge as we entered the 21st century. As at other organizations, the role of IT has become an increasingly vital one in our efforts to meet our goals and objectives for client service, strategic planning, human capital, and business processes. When used well, IT makes new services and product lines possible, significantly reduces process time and costs, enhances the quality and responsiveness of services and products, and makes information and services more accessible. Identifying and implementing new technologies are essential to GAO's continued efforts to provide efficient and effective services. We have made progress in building an integrated and reliable IT infrastructure that supports the achievement of our goals and objectives, but we must sustain these efforts and begin others to ensure that GAO can continue to provide quality, timely, efficient, and effective services to the Congress and the public.

We have upgraded our network operating system and are in the process of upgrading, agencywide, our desktop operating system and applications as well as our workstations, which have reached the end of their useful life.

We have completed a comprehensive review of our IT and have assessed the adaptability of our current architecture to changes in GAO's organization and business processes. We have also made progress with developing an enterprise information architecture, including a concept of operations, that provides an integrated view of GAO's business processes; we will continue refining and updating this architecture. In addition, a committee has been formed to guide the direction of GAO's IT investment policies, processes, and portfolio and to link our investment decisions to the agency's strategic direction. We also prepared an IT plan for fiscal 2001 through 2004 to provide a foundation for initiatives and investments and to ensure a secure IT environment; we will refine this plan and keep it up to date.

We have expanded and improved congressional and public access to our reports and other information resources. For example, we have provided our congressional clients with a Web based active assignments list to keep them abreast of GAO's ongoing work and have enhanced our public Web site to make it easier to find and access our products electronically. We plan to conduct a usability study to help us enhance our public Web site and to develop training initiatives for our staff to improve their use of Web based knowledge services.

We have expanded and accelerated our efforts to protect the agency's information assets. We have installed intrusion detection software to monitor and thwart attempts to hack into GAO's network, implemented an awareness program to promote security policies and practices, and developed a disaster recovery strategy and draft plan to ensure the continued operation of GAO's essential computer systems should a disaster occur. We also intend to establish backup IT capability at a remote facility.

We have also upgraded our remote access capability, improving the speed and reliability of dial up connections to GAO's facilities; completed communications upgrades to the field to provide high speed, reliable connections to GAO's network; replaced our aging videoconferencing equipment with equipment that provides enhanced capabilities and is more user friendly; and begun planning for future communications upgrades to support evolving video capabilities. We plan to continue these efforts and to deploy new technologies agencywide.

We have initiated efforts to replace our aging management information systems and our administrative systems with Web based systems using a common database. We have begun collecting requirements and mapping business processes in our effort to redesign our system for managing and tracking GAO's work. We have efforts under way to implement an automated travel manager system and to procure a new online recruitment system and a Web based time and attendance system. These systems will eliminate largely paper based processes and reduce the administrative burden on staff. We are also completing requirements work and entering the development phase of a management information system that will support GAO's new competency based performance management program. The recruitment, time and attendance, and performance management systems are components of what, over time, will become a new human capital management system.

The safety and security of GAO's people, information, and assets are necessarily a top priority for GAO. In the aftermath of the September 11 terrorist attacks and the subsequent anthrax incidents, we designated safety and security a management challenge for our agency. We are conducting threat assessments and a comprehensive evaluation of security that we plan to complete in early 2002. Guided by these assessments, we will develop an implementation plan to strengthen security and safety within GAO. We also plan to review and update our emergency preparedness and response plan and develop a continuity of operations plan so that we are prepared for, can respond to, and will recover from any major threat or crisis.

At GAO, management challenges are identified by the comptroller general 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. We seek the resources to meet these challenges in our budget request to our appropriations committees.

Mitigating External Factors That Could Affect Our Performance.
Several external factors could affect the achievement of our performance goals, including national and international upheavals, the resources we receive, and limitations imposed on our work by other organizations or limitations on the ability of other federal agencies to make the improvements we recommend. For example, as the Congress focuses on unpredictable events, such as the global threat posed by sophisticated terrorist networks, international financial crises, or natural disasters, the mix of work we are asked to undertake may change, diverting our resources from some of our strategic objectives and performance goals. We can and do mitigate the impact of these events on the achievement of our goals in various ways:

Being alert to possibilities that could shift the Congress's, and therefore our, priorities;

Continuing to identify in our products and meetings with the Congress conditions that could trigger new priorities; and

Quickly redirecting our resources, as appropriate, so that we can deal with major changes that do occur.

At the same time, with concerns about operational security unusually high at home and abroad, it may be more difficult for us to obtain information and report on certain issues. Historically, GAO's auditing and information gathering has been limited where the intelligence community is concerned. Nor have we had the authority to access or inspect records or other materials held by other countries or by multinational institutions that the United States works with to protect its interests. These limitations may hamper our ability to fully assess what progress is being made in addressing homeland security issues, and because some of our reports may be subjected to greater classification reviews than in the past, their public dissemination may be limited.

Data Quality and Program Evaluation.

Completeness and Reliability.
Our performance data are complete because actual data are reported for every performance measure and the data are actual results for full fiscal years rather than projections from partial year data. Our data are reliable because we followed the verification and validation procedures described in this section to ensure their quality. Since most of the data limitations explained here are underestimates of our actual performance, we are confident that they do not affect the quality of the data being presented.

Procedures to Ensure Data Quality.
In verifying and validating our own performance data, we benefit from lessons learned from our assessments of other agencies' performance information. We adhere to the same professional standards and internal policies and procedures applied to GAO's audit, evaluation, and analysis work.

Management's use of our performance information on a routine basis further helps to ensure its quality and validity. Data are provided to managers for decision making, and their feedback on these data helps to ensure that the data are properly recorded.

The specific sources of our performance data and procedures for verifying and validating the performance data for each of our performance measures are shown in the following table.

Table: Performance Data Sources and Verification and Validation Procedures.
Performance measure: Financial benefits.
Background and context:
Our findings and recommendations directly or indirectly contribute to congressional decision making and executive branch actions that result in significant financial benefits to taxpayers. These benefits include reductions in annual operating costs and the costs of multiyear projects and entitlements as well as increases in revenues from asset sales and changes in tax laws or user fees that are documented as either directly attributable to, or significantly influenced by, our work. The funds made available in response to our findings and recommendations may be used to reduce government expenditures or may be reallocated to other areas.

Data limitations:
Not every financial benefit from our work can be readily estimated or directly attributed to GAO. Estimates are based on both objective and subjective data, and as a result, judgment is required. We use data provided by an agency or an independent third party, such as the Congressional Budget Office or a congressional committee, to make our estimates. Therefore, we believe that the total of the estimated benefits from our findings and recommendations understates our overall contribution to congressional decision making and executive branch actions.

Verification and validation:
Policies and procedures guide the estimation of financial benefits and their attribution to GAO. We require estimates to be based on independent sources and reduced by any identifiable offsetting costs. Benefits are estimated in internal written reports that are formally reviewed to ensure they meet the same documentation and quality standards as any external GAO product. In addition, our Quality and Risk Management office reviews benefit claims in excess of $100 million, and our Office of the Inspector General reviews claims in excess of $1 billion. Benefits are revised if new information significantly affects the estimated values.

Data sources:
Internal listing of accomplishment reports.

Performance measure: Other benefits.

Background and context:
Our findings and recommendations also contribute to congressional decision making and executive branch actions that result in significant improvements to agency management or performance, for example, by strengthening internal control processes, but do not have directly measurable financial benefits. This measure is the number of actions that the Congress or agencies have taken in response to our findings and recommendations.

Data limitations:
Other benefits vary in significance. Also, because not all benefits can be directly attributed to our findings and recommendations or documented, this measure understates our overall contribution toward improving government.

Verification and validation:
Policies and procedures require internally written reports to record the other benefits of our findings and recommendations. These reports are formally reviewed within GAO to ensure the appropriateness of the claimed accomplishment, including attribution to GAO’s work. These reports must meet the same documentation and quality standards as any GAO product.

Data sources:
Internal listing of accomplishment reports.

Performance measure: Recommendations implemented.

Background and context:
As part of our audit responsibilities under generally accepted government auditing standards, we follow up and report yearly to the Congress on the status of actions taken by the Congress and agencies in response to our recommendations. This measure is the percentage rate of implementation of recommendations made four years prior to a given fiscal year. For example, the fiscal 2001 implementation rate is the percentage of recommendations made in fiscal 1997 that were implemented by the end of fiscal 2001. Prior experience has shown that if a recommendation has not been implemented within four years, it is not likely to be implemented.

Data limitations:
Because the measure is based on the implementation of recommendations made four years prior to any given fiscal year, the measured value for any given year will not reflect the results of GAO’s activities undertaken within that year. In addition, this measure may not include all actions proposed or initiated by agencies. Specifically, agencies may report actions in response to our recommendations, but we may determine that these actions are insufficient or do not adequately implement our recommendations. In these cases, recommendations will be recorded as not implemented even though the agency has proposed or taken some actions.

Verification and validation:
GAO policies and procedures specify that staff must verify with sufficient supporting documentation that an agency’s reported actions are adequately being implemented. Our staff may interview agency officials, obtain agency documents, access agency databases, or obtain information from the agency’s Office of the Inspector General. Internal review procedures are intended to ensure that claims regarding the implementation of our recommendations are consistent and meet our quality requirements. Information on recommendations implemented is maintained in a database managed by an external contractor that routinely conducts software based checks of data consistency and completeness and annually performs more exhaustive checks for data integrity.

Data sources:
The percentage of recommendations implemented is derived from GAO’s document database. Information entered into the database is collected through our recommendation follow up system.

Performance measures: Recommendations made and percentage of products containing recommendations.

Background and context:
Recommendations in our products help to ensure that benefits will result from our work. These recommendations reflect specific actions that can be taken to improve federal programs. Where appropriate, we strive for recommendations that are directed at resolving the cause of identified problems; that are addressed to parties who have the authority to act; and that are specific, feasible, and cost effective to the extent practical. We continue to track the number of recommendations made but have supplemented that indicator with one that measures the percentage of our written products that contain recommendations. The latter indicator recognizes that, while more recommendations are generally desirable, the number of recommendations alone is not necessarily a predictor of impact. For example, a product with a single recommendation can help bring about significant financial or other benefits to the government. We believe that, together, these two measures give a more complete picture of the extent to which we are providing decision makers with information that will help improve government.

Data limitations:
We provide a variety of products and services that meet the needs of our congressional clients but may not lead to recommendations. For example, the Congress may require descriptive information on federal programs or analyses of the potential consequences of alternative program design options. This information is intended to assist the Congress in its oversight of federal agencies or in its formulation of policy and legislation but does not