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Strategic Objective: Assess the Government's Human Capital and Other
Capacity for Serving the Public.

Issue: The federal government requires a mixture of critical 
resources; such as human capital, information technology, and financial 
systems; to fulfill its roles and achieve intended results. 
Unfortunately, over the last decade, the federal government has missed 
opportunities to make needed investments in these resources 
effectively. For example, agencies have only recently started the 
analysis necessary to link their human capital policies and practices 
to their missions and goals. This situation puts the government at risk 
because an increasing number of federal employees will become eligible 
to retire over the next several years (see fig. 3.1).

Figure 3.1: Employees Eligible to Retire at 24 Major Agencies, Fiscal 
Years 1999 through 2012.

Line graph with 1 line and 14 points showing number of employees.
Point 1, 1999 is 37,602.
Point 2, 2000 is 41,445.
Point 3, 2001 is 47,482.
Point 4, 2002 is 58,605.
Point 5, 2003 is 63,736.
Point 6, 2004 is 66,708.
Point 7, 2005 is 65,826.
Point 8, 2006 is 67,131.
Point 9, 2007 is 74,912.
Point 10, 2008 is 74,587.
Point 11, 2009 is 73,574.
Point 12, 2010 is 70,940.
Point 13, 2011 is 67,170.
Point 14, 2012 is 62,876.

Notes: Estimates do not reflect likely attrition before becoming 
eligible to retire. "Employees" are career federal employees at 
agencies that fall under the Chief Financial Officers (CFO) Act, which 
account for about 98 percent of the executive branch's employees. The 
CFO Act agencies include the cabinet agencies and major independent 
agencies, such as the Environmental Protection Agency and the Social 
Security Administration, but exclude the U.S. Postal Service, the 
Federal Reserve, the Tennessee Valley Authority, and the intelligence 
agencies.

Source: GAO's analysis of data from the Office of Personnel 
Management's Central Personnel Data File as of Sept. 30, 1998.
[End of Figure]

Accordingly, GAO and the President have identified human capital as a 
critically needed management reform. In January 2001, GAO designated 
strategic human capital management as a governmentwide high-risk area. 
GAO's high-risk report outlined four pervasive human capital challenges 
facing the federal government:

* strategic human capital planning and organizational alignment;

* leadership continuity and succession planning;

* acquiring and developing staffs whose size, skills, and deployment meet 
agency needs; and

* creating results-oriented performance cultures.

Moreover, the President's Management Agenda for Fiscal Year 2002 also 
identifies human capital as the first of five governmentwide areas for 
management reform (see fig. 3.2). It calls for workforce planning and 
restructuring in terms of each agency's mission, goals, and objectives. 
Both the administration and the Congress have proposed legislation 
intended to address human capital issues at the federal level.

Figure 3.2: The President's Management Agenda for Fiscal Year 2002: 
Governmentwide Initiatives.

1. Strategic Management of Human Capital.
2. Competitive Sourcing.
3. Improved Financial Performance.
4. Expanded Electronic Government.
5. Budget and Performance Integration.
[End of Figure]

In addition, numerous poorly managed information technology systems 
have produced multimillion-dollar cost overruns, schedule slippages, 
and poor results, and now the government's information technology and 
management infrastructure faces security threats. Similarly, the 
federal government's financial management has suffered from neglect and 
financial systems with serious shortcomings. One result of this 
condition is that many agencies prepare statutorily required annual 
financial statements, and receive unqualified audit opinions, only by 
using inefficient, time-consuming, and costly processes to remedy 
inaccurate and untimely information produced by their financial 
systems. This approach does not result in significantly improved 
financial management and requires resources that could otherwise be 
used to address underlying financial management systems and control 
problems. Moreover, financial management success goes beyond an 
unqualified financial statement audit opinion; the federal government 
also must recognize the importance of success measures such as having 
financial information that is timely, reliable, and useful for managing 
operations day to day; financial systems that meet requirements; no 
material internal control weaknesses; and cost reporting that captures 
the full cost of programs and projects.

Agencies also are considering other approaches for achieving greater 
efficiency and effectiveness in their operations, including appropriate 
use of contracts with the private sector. In response to a 
congressional mandate, GAO convened the Commercial Activities Panel, 
chaired by the Comptroller General, to review the process and 
procedures agencies use to decide whether to have needed services 
performed by government employees or through contracts with the private 
sector. The panel issued its report to the Congress on April 30, 2002. 
The panel developed a set of principles to be used in addressing 
sourcing decisions and recommended that competitions between the public 
and private sectors to perform commercial functions be conducted using 
the established framework of the Federal Acquisition Regulation (FAR). 
GAO will be following developments in this area closely in the coming 
years.

While it is important to enhance the government's use of new 
technologies to improve the collection and dissemination of government 
information, it is also important that this information; especially 
that collected for statistical purposes; meets the current needs of 
federal programs and policymakers. In areas where the U.S. economic and 
social structure is undergoing major change, statistical agencies need 
to respond to these changes with relevant data on a timely basis.

Finally, despite recent reforms to transform the federal acquisition 
process, the government still does not have a world-class purchasing 
system. All too often, many of the products and services the government 
buys cost more than expected, are delivered late, or fail to perform as 
expected. No commercial business would remain viable for very long with 
results like these. Significant improvements; including the skills of 
the acquisition workforce; are needed to produce better outcomes that 
mirror the practices of the nation's best commercial companies.

Performance Goals: To assess the government's capacity to better 
deliver public services, GAO will:

* identify and facilitate the implementation of human capital practices 
that will improve federal economy, efficiency, and effectiveness;

* identify ways to improve the financial management infrastructure 
capacity to provide useful information to manage for results and costs 
day to day;

* assess the government's capacity to manage information technology to 
improve performance;

* assess efforts to manage the collection, use, and dissemination of 
government information in an era of rapidly changing technology;

* assess the effectiveness of the Federal Statistical System in providing 
relevant, reliable, and timely information that meets federal program 
needs; and

* identify more businesslike approaches that can be used by federal 
agencies in acquiring goods and services.

Human Capital and Other Capacity:
Identify and Facilitate the Implementation of Human Capital Practices 
that Will Improve Federal Economy, Efficiency, and Effectiveness.

Key Efforts:

* Assess agencies' progress in integrating strategic human capital 
management into program and mission decision making,

* Identify best practices in leadership, organizational continuity, and 
succession planning,

* Identify options for improving the federal government's ability to 
attract, retain, train, and develop staff with skills that meet current 
and emerging needs,

* Develop approaches for better instilling a "performance culture" in 
agencies that aligns management, decision making, and accountability 
with results.

Significance:

One of the most important assets of federal agencies is the workforce. 
For agencies, building and maintaining an effective workforce; their 
human capital; are critical in both the accomplishment of their 
missions and in the use of taxpayers' funds. No consensus has emerged, 
however, on the fundamental structural or policy changes that may be 
needed to address agencies' management of their human capital. At its 
core, sound human capital management requires a well-grounded analysis 
that continually links an agency's human capital policies and practices 
to its mission and strategies. Yet, strategic workforce planning has 
often been neglected in federal agencies. For example, despite an 
explicit requirement that agencies take human capital into account in 
developing their performance plans under the Government Performance and 
Results Act (GPRA), most of the plans show little evidence that this 
has been done. Inadequate strategic human capital management is eroding 
the capacity of some agencies; and threatening to erode the capacity of 
others; to efficiently, effectively, and economically provide services 
and deliver results for the benefit of the American people.

Potential Outcomes that Could Result when GAO's Work Is Used:

Improved human capital planning at agencies, as evidenced in their GPRA 
plans,

Informed decision makers who are knowledgeable about best practices 
alternatives for human capital activities such as attracting, 
retaining, training, developing, managing, and rewarding talented 
employees,

Greater congressional awareness of the major human capital issues 
facing key federal agencies,

Consensus on fundamental structural or policy reforms for federal human 
capital management.

Human Capital and Other Capacity:
Identify Ways to Improve the Financial Management Infrastructure 
Capacity to Provide Useful Information to Manage for Results and Costs 
Day to Day.

Key Efforts:

* Work with the Office of Management and Budget (OMB) and the Department 
of the Treasury to define conceptually how to measure financial 
management success and develop key performance indicators,

* Monitor the management of projects to modernize financial management 
systems and assess whether they provide meaningful, useful information,

* Analyze and report on agencies' progress in implementing federal 
accounting standards and other Federal Financial Management Improvement 
Act requirements,

* Identify financial management best practices and suggest ways to 
improve financial management operations, organizations, and human 
capital practices,

* Fulfill accounting, auditing, and internal control standards setting 
responsibilities.

Significance:

Today, the government does not have timely, accurate, and useful 
financial information to measure and control costs, manage for results, 
and make timely and fully informed decisions. Routinely generating good 
financial information will require modern financial management systems 
that 1. ensure consistent agency and governmentwide reporting; 2. 
account for the full cost of programs and projects; 3. integrate 
program, budget, and financial information; 4. report performance 
measures; and 5. implement appropriate accounting standards. The 
government has not yet met this challenge nor addressed the persistent 
financial management human capital issues and the high-risk financial 
management operations GAO identified at several major agencies.

Potential Outcomes that Could Result when GAO's Work Is Used:

Agreement on financial management success measures that go beyond 
attaining an unqualified audit opinion on annual financial statements,

Reliable, useful, and timely financial and budget information routinely 
available to manage daily operations and properly implement a results-
oriented government,

Enhanced congressional oversight of agencies' progress in implementing 
federal accounting standards, improving financial systems, and 
resolving high-risk financial management operations,

Accounting, auditing, and internal control standards that are tailored 
to government's unique characteristics and special needs and are 
generally accepted,

Effective governmentwide financial management reform initiatives.

Human Capital and Other Capacity:
Assess the Government's Capacity to Manage Information Technology to 
Improve Performance.

Key Efforts:

* Continue to build on efforts to review the integrity of key systems;  
including operational systems and new systems development and 
acquisition efforts; and processes,

* Assess federal efforts to develop and implement governmentwide 
improvements to computer security and to implement critical 
infrastructure protection initiatives,

* Continue to develop best practice evaluations of specific elements of 
IT management and make available guidance and methodologies based on 
these studies,

* Apply these guidelines and methodologies to determine institutional and 
system specific management capability and, thereby, to improve 
government performance and accountability,

* Assess agencies' progress in completing complex multiyear modernization 
efforts needed to serve government and the public.

Significance:

As the United States continues to exploit the opportunities inherent in 
the greater use of technology, it is important that the government act 
to ensure the safety and security of the automated systems and 
electronic data that support virtually all important operations and 
assets. It is also important to ensure that the federal government's 
information technology (IT) budget of more than $50 billion is better 
managed to help achieve greater program effectiveness and service 
delivery, as well as improved economy and efficiency in government 
operations.

Potential Outcomes that Could Result when GAO's Work Is Used:

Enhanced agency capability to detect, protect against, and respond to 
computer intrusions,

More effective evaluation of the risk and vulnerability of 
interconnected systems,

Improved agency management and engineering capability to develop and 
acquire IT systems that support mission and performance objectives,

More informed congressional appropriations and oversight decisions on 
major planned and ongoing IT investments,

Improved service delivery and greater economy and efficiency of 
critical government operations,

Increased return on the federal government's IT investments,

Expanded and consistent governmentwide application and implementation 
of IT best practices.

Human Capital and Other Capacity:
Assess Efforts to Manage the Collection, Use, and Dissemination of 
Government Information in an Era of Rapidly Changing Technology.

Key Efforts:

* Examine issues related to the oversight of the Paperwork Reduction Act 
and reauthorization of the Office of Management and Budget's Office of 
Information and Regulatory Affairs,

* Assess agencies' strategies and plans to guide the government's 
transition to conducting business electronically,

* Review the results and lessons learned from the 2000 census and monitor 
the Bureau of the Census's planning efforts for the 2010 census,

* Assess the government's progress using technology to store and preserve 
public records,

* Review the government's ability to efficiently and effectively 
disseminate government information using traditional methods and new 
electronic technologies,

* Examine the government's efforts to provide the public with efficient 
and responsive access to publicly funded research and government 
records,

* Assess the government's ability to protect the privacy of individuals' 
information.

Significance:

Information has very rapidly become a critical strategic asset. 
Therefore, it is important that federal agencies manage this valuable 
resource to fulfill mission goals and achieve organizational efficiency 
and effectiveness. Agencies, however, face unique challenges because of 
statutory requirements to reduce information collection burdens on the 
public, protect the privacy of personal records, provide access to 
public records, disseminate information, secure information from harm 
or misuse, and preserve information of historical value. Meanwhile, 
technological advances, including the growth of the Internet, have 
created the promise of an increasingly electronic government that will 
make government services and information more accessible to the public. 
At the same time, these trends have raised concerns about the adequacy 
of the current governmentwide organizational and policy framework and 
about agencies' ability to manage information and more importantly, 
knowledge, in this evolving environment.

Potential Outcomes that Could Result when GAO's Work Is Used:

An updated set of national policies on privacy, access, burden, data 
sharing, and storage in an electronic environment,

Expanded and improved citizen access to public services and information 
through electronic means,

A more accurate and less costly census in 2010,

Improved records management programs,

A managed transition as the government moves away from printing as the 
primary means for disseminating information to the public,

Less costly and more responsive ways to provide the public access to 
government records,

Improved compliance with existing privacy requirements and a better 
understanding of the challenges the government faces in ensuring 
personal privacy in an increasingly electronic environment.

Human Capital and Other Capacity:
Assess the Effectiveness of the Federal Statistical System in Providing 
Relevant, Reliable, and Timely Information that Meets Federal Program 
Needs.

Key Efforts:

* Assess the effectiveness of a fully implemented American Community 
Survey to provide reliable and timely information to meet the needs of 
federal programs and to replace existing statistical programs,

* Assess the need to change existing measures or to provide additional 
measures of economic performance to better reflect a knowledge-based 
economy,

* Identify major coverage and timing gaps in data related to retirement 
incomes and health insurance.

Significance:

The output of the federal government's statistical system, which spends 
more than $4 billion a year, provides critical information for many 
federal programs. This information includes population data that are 
used for apportionment and redistricting; indicators of the nation's 
economic performance that are used by the Federal Reserve Board to 
monitor current economic conditions and set monetary policy; 
productivity, investment, income and saving data that are used by the 
Congressional Budget Office to project federal receipts and 
expenditures; and regional data that are used to allocate nearly $200 
billion in federal funds to state and local governments. In addition, 
GAO uses the output of statistical programs as the basis of many of its 
most important reports relating to the changing economy, demographics, 
and the quality of life. Emerging changes in the economic and social 
structure of the U.S. economy will place new demands on federal 
programs and on federal statistics in the 21ST century, and the Federal 
Statistical System (FSS) will need to make changes to continue to 
produce relevant, reliable, and timely information that meet these 
needs.

Potential Outcomes that Could Result when GAO's Work Is Used:

Measures of output, investment, and productivity that more accurately 
reflect new technologies and knowledge-based services,

Improved regional data that more closely meet the needs of formulas for 
the allocation of federal funds,

Improved data for decision making on social security reform and health 
insurance.

Human Capital and Other Capacity:
Identify More Businesslike Approaches that Can Be Used by Federal 
Agencies in Acquiring Goods and Services.

Key Efforts:

* Evaluate change to the policies and procedures governing the transfer 
of commercial activities between the public and private sectors,

* Assess the capabilities of the acquisition workforce to plan, manage, 
and control the purchases of goods and services,

* Determine how the policies and practices that govern agencies' 
relationships with industry can be made more cost-effective, 
incorporate commercial practices, and maximize efficiencies offered by 
technology,

* Determine whether innovative contracting initiatives used to acquire 
services are achieving their intended objectives.

Significance:

The federal government spends more than $220 billion a year contracting 
for goods and services; a figure that is expected to grow. Over the 
last few years, significant changes were made to the federal 
contracting processes to improve the way the government relates to 
contractors and the rules governing these relationships. These changes 
are by no means complete, and contract management reform, with its 
emphasis on widespread reengineering of fundamental processes, 
continues to receive attention at the highest levels in the executive 
branch. The federal government needs to 1. improve the economy and 
efficiency of its commercial-type activities, 2. achieve and maintain 
the capacity for a high-quality acquisition workforce, 3. improve its 
oversight and accountability in acquiring services as well as products, 
and 4. eliminate the difficulties in administering federal contracts.

Potential Outcomes that Could Result when GAO's Work Is Used:

Improved governmentwide policy governing decisions to use the private 
sector for commercially available goods and services,

Adequate emphasis on career development, training, and orderly 
succession planning for the acquisition workforce,

Greater reliance on commercial practices when appropriate,

Better and more economical delivery of products and services,

Outcome-oriented contract management policies and practices,

More efficient and economical service acquisition by the federal 
government.