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United States Government Accountability Office: 

Transforming to Meet 21st Century Challenges: 

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

3rd Annual Business Performance Management Summit: 
Old Greenwich, CT: 

November 14, 2005: 

The Case for Change: 

Government is on a "burning platform," and the status quo way of doing 
business is unacceptable for a variety of reasons, including: 

* Past fiscal trends and significant long-range challenges; 

* Rising public expectations for demonstrable results and enhanced 
responsiveness; 

* Selected trends and challenges having no boundaries; 

* Additional resource demands due to recent terrorism events in the 
United States; 

* Government performance/accountability and high risk challenges, 
including the lack of effective human capital strategies. 

GAO's High-Risk List: 2005 

Addressing Challenges in Broad-based Transformations: 

High-Risk Areas: Protecting the Federal Government's Information 
Systems and the Nation's Critical Infrastructures; 
Year Designated High Risk: 1997. 

High-Risk Areas: Strategic Human Capital Management[A]; 
Year Designated High Risk: 2001. 

High-Risk Areas: U.S. Postal Service Transformation Efforts and Long-
Term Outlook[A]; 
Year Designated High Risk: 2001. 

High-Risk Areas: Managing Federal Real Property[A]; 
Year Designated High Risk: 2003. 

High-Risk Areas: Implementing and Transforming the Department of 
Homeland Security; 
Year Designated High Risk: 2003. 

High-Risk Areas: Establishing Appropriate and Effective Information-
Sharing Mechanisms to Improve Homeland Security; 
Year Designated High Risk: 2005. 

High-Risk Areas: DOD Approach to Business Transformation[A]; 
Year Designated High Risk: 2005. 

High-Risk Areas: DOD Approach to Business Transformation[A]: DOD Supply 
Chain Management (formerly Inventory Management); 
Year Designated High Risk: 1990. 

High-Risk Areas: DOD Approach to Business Transformation[A]: DOD Weapon 
Systems Acquisition; 
Year Designated High Risk: 1990. 

High-Risk Areas: DOD Approach to Business Transformation[A]: DOD 
Business Systems Modernization; 
Year Designated High Risk: 1995. 

High-Risk Areas: DOD Approach to Business Transformation[A]: DOD 
Financial Management; 
Year Designated High Risk: 1995. 

High-Risk Areas: DOD Approach to Business Transformation[A]: DOD 
Support Infrastructure Management; 
Year Designated High Risk: 1997. 

High-Risk Areas: DOD Approach to Business Transformation[A]: DOD 
Personnel Security Clearance Program; 
Year Designated High Risk: 2005. 

Managing Federal Contracting More Effectively: 

High-Risk Areas: DOE Contract Management; 
Year Designated High Risk: 1990. 

High-Risk Areas: NASA Contract Management; 
Year Designated High Risk: 1990. 

High-Risk Areas: DOD Contract Management; 
Year Designated High Risk: 1992. 

Management of Interagency Contracting; 
Year Designated High Risk: 2005. 

Assessing the Efficiency and Effectiveness of Tax Law Administration: 

High-Risk Areas: Enforcement of Tax Laws[A, B]; 
Year Designated High Risk: 1990. 

High-Risk Areas: IRS Business Systems Modernization[C]; 
Year Designated High Risk: 1995. 

Modernizing and Safeguarding Insurance and Benefit Programs: 

High-Risk Areas: Medicare Program[A]; 
Year Designated High Risk: 1990. 

High-Risk Areas: HUD Single-Family Mortgage Insurance and Rental 
Housing Assistance Programs; 
Year Designated High Risk: 1994. 

High-Risk Areas: Medicaid Program[A]; 
Year Designated High Risk: 2003. 

High-Risk Areas: Modernizing Federal Disability Programs[A]; 
Year Designated High Risk: 2003. 

High-Risk Areas: Pension Benefit Guaranty Corporation Single-Employer 
Insurance Program[A]; 
Year Designated High Risk: 2003. 

Other: 

High-Risk Areas: FAA Air Traffic Control Modernization; 
Year Designated High Risk: 1995. 

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

[B] Two high-risk areas-Collection of Unpaid Taxes and Earned Income 
Credit Noncompliance-have been consolidated to make this area. 

[C] The IRS Financial Management high-risk area has been incorporated 
into this high-risk area. 

[End of table] 

Composition of Federal Spending: 

[See PDF for image] - graphic text 

3 pie charts with 5 items each. 

1964: 
Defense: 46.0%; 
Social Security: 14.0%; 
Medicare & Medicaid: 0%; 
Net interest: 7.0%; 
All other spending: 33.0%. 

1984: 
Defense: 27.0%; 
Social Security: 21.0%; 
Medicare & Medicaid: 9.0%; 
Net interest: 13.0%; 
All other spending: 30.0%. 

2004: 
Defense: 20.0%; 
Social Security: 22.0%; 
Medicare & Medicaid: 19.0%; 
Net interest: 7.0%; 
All other spending: 32.0%. 

Source: Office of Management and Budget. 

[End of figure] 

Federal Spending for Mandatory and Discretionary Programs: 

[See PDF for image] - graphic text 

3 pie charts with 3 items each. 

1964: 
Discretionary: 67%; 
Mandatory: 26%; 
Net Interest: 7%. 

1984: 
Discretionary: 45%; 
Mandatory: 42%; 
Net Interest: 13%. 

2004: 
Discretionary: 39%; 
Mandatory: 54%; 
Net Interest: 7%. 

Source: Office of Management and Budget. 

[End of figure] 

Fiscal Year 2004 and 2005 Deficits: 

On-Budget Deficit; 
Fiscal Year 2004: -$567 billion; 
Fiscal Year 2004: -4.9% of GDP; 
Fiscal Year 2005: -$494 billion; 
Fiscal Year 2005: -4% of GDP. 

Off-Budget Surplus*; 
Fiscal Year 2004: $155 billion; 
Fiscal Year 2004: 1.3% of GDP; 
Fiscal Year 2005: $175 billion; 
Fiscal Year 2005: 1.4% of GDP. 

Unified Deficit; 
Fiscal Year 2004: -$412 billion; 
Fiscal Year 2004: -3.6% of GDP; 
Fiscal Year 2005: -$319 billion; 
Fiscal Year 2005: -2.6% of GDP. 

* Includes $151 billion in fiscal year 2004 and $173 billion in fiscal 
year 2005 in Social Security surpluses and $4 billion in fiscal year 
2004 and $2 billion in fiscal year 2005 in Postal Service surpluses. 

[End of table] 

Surplus or Deficit as a Share of GDP: Fiscal Years 1962-2005: 

[See PDF for image] - graphic text: 

Line/Stacked Bar combo chart with 1 line (Unified) and 44 bars. 

Fiscal year: 1962; 
On-budget: -1%; 
Off-budget: -0.2%; 
Unified: -1.3%. 

Fiscal year: 1963; 
On-budget: -0.7%; 
Off-budget: -0.1%; 
Unified: -0.8%. 

Fiscal year: 1964; 
On-budget: -1%; 
Off-budget: 0.1%; 
Unified: -0.9%. 

Fiscal year: 1965; 
On-budget: -0.2%; 
Off-budget: No data; 
Unified: -0.2%. 

Fiscal year: 1966; 
On-budget: -0.4%; 
Off-budget: -0.1%; 
Unified: -0.5%. 

Fiscal year: 1967; 
On-budget: -1.6%; 
Off-budget: 0.5%; 
Unified: -1.1%. 

Fiscal year: 1968; 
On-budget: -3.2%; 
Off-budget: 0.3%; 
Unified: -2.9%. 

Fiscal year: 1969; 
On-budget: -0.1%; 
Off-budget: 0.4%; 
Unified: 0.3%. 

Fiscal year: 1970; 
On-budget: -0.9%; 
Off-budget: 0.6%; 
Unified: -0.3%. 

Fiscal year: 1971; 
On-budget: -2.4%; 
Off-budget: 0.3%; 
Unified: -2.1%. 

Fiscal year: 1972; 
On-budget: -2.2%; 
Off-budget: 0.3%; 
Unified: -2%. 

Fiscal year: 1973; 
On-budget: -1.2%; 
Off-budget: No data; 
Unified: -1.1%. 

Fiscal year: 1974; 
On-budget: -0.6%; 
Off-budget: 0.1%; 
Unified: -0.4%. 

Fiscal year: 1975; 
On-budget: -3.5%; 
Off-budget: 0.1%; 
Unified: -3.4%. 

Fiscal year: 1976; 
On-budget: -4.1%; 
Off-budget: -0.2%; 
Unified: -4.2%. 

Fiscal year: 1977; 
On-budget: -2.5%; 
Off-budget: -0.2%; 
Unified: -2.7%. 

Fiscal year: 1978; 
On-budget: -2.5%; 
Off-budget: -0.2%; 
Unified: -2.7%. 

Fiscal year: 1979; 
On-budget: -1.5%; 
Off-budget: -0.1%; 
Unified: -1.6%. 

Fiscal year: 1980; 
On-budget: -2.7%; 
Off-budget: No data; 
Unified: -2.7%. 

Fiscal year: 1981; 
On-budget: -2.4%; 
Off-budget: -0.2%; 
Unified: -2.6%. 

Fiscal year: 1982; 
On-budget: -3.7%; 
Off-budget: -0.2%; 
Unified: -4%. 

Fiscal year: 1983; 
On-budget: -6%; 
Off-budget: No data; 
Unified: -6%. 

Fiscal year: 1984; 
On-budget: -4.8%; 
Off-budget: No data; 
Unified: -4.8%. 

Fiscal year: 1985; 
On-budget: -5.3%; 
Off-budget: 0.2%; 
Unified: -5.1%. 

Fiscal year: 1986; 
On-budget: -5.4%; 
Off-budget: 0.4%; 
Unified: -5%. 

Fiscal year: 1987; 
On-budget: -3.6%; 
Off-budget: 0.4%; 
Unified: -3.2%. 

Fiscal year: 1988; 
On-budget: -3.9%; 
Off-budget: 0.8%; 
Unified: -3.1%. 

Fiscal year: 1989; 
On-budget: -3.8%; 
Off-budget: 1%; 
Unified: -2.8%. 

Fiscal year: 1990; 
On-budget: -4.8%; 
Off-budget: 1%; 
Unified: -3.9%. 

Fiscal year: 1991; 
On-budget: -5.4%; 
Off-budget: 0.9%; 
Unified: -4.5%. 

Fiscal year: 1992; 
On-budget: -5.5%; 
Off-budget: 0.8%; 
Unified: -4.7%. 

Fiscal year: 1993; 
On-budget: -4.6%; 
Off-budget: 0.7%; 
Unified: -3.9%. 

Fiscal year: 1994; 
On-budget: -3.7%; 
Off-budget: 0.8%; 
Unified: -2.9%. 

Fiscal year: 1995; 
On-budget: -3.1%; 
Off-budget: 0.9%; 
Unified: -2.2%. 

Fiscal year: 1996; 
On-budget: -2.3%; 
Off-budget: 0.9%; 
Unified: -1.4%. 

Fiscal year: 1997; 
On-budget: -1.3%; 
Off-budget: 1%; 
Unified: -0.3%. 

Fiscal year: 1998; 
On-budget: -0.3%; 
Off-budget: 1.1%; 
Unified: 0.8%. 

Fiscal year: 1999; 
On-budget: No data; 
Off-budget: 1.4%; 
Unified: 1.4%. 

Fiscal year: 2000; 
On-budget: 0.9%; 
Off-budget: 1.5%; 
Unified: 2.4%. 

Fiscal year: 2001; 
On-budget: -0.3%; 
Off-budget: 1.6%; 
Unified: 1.3%. 

Fiscal year: 2002; 
On-budget: -3.1%; 
Off-budget: 1.5%; 
Unified: -1.5%. 

Fiscal year: 2003; 
On-budget: -4.9%; 
Off-budget: 1.5%; 
Unified: -3.5%. 

Fiscal year: 2004; 
On-budget: -4.9%; 
Off-budget: 1.3%; 
Unified: -3.6%. 

Fiscal year: 2005; 
On-budget: -4%; 
Off-budget: 1.3%; 
Unified: -2.6%. 

Source: Office of Management and Budget and Congressional Budget 
Office. 

[End of figure] 

Estimated Fiscal Exposures (in $ trillions): 

Explicit liabilities (Publicly held debt, military & civilian pensions 
& retiree health, other); 
2000: $6.9; 
2002: $7.8; 
2004: $9.1. 

Commitments & Contingencies: e.g., PBGC, undelivered orders; 
2000: $0.5; 
2002: $0.8; 
2004: $0.9. 

Implicit exposures; 
2000: $13.0; 
2002: $17.8; 
2004: $33.3. 

Implicit exposures: Future Social Security benefits; 
2000: $3.8; 
2002: $4.6; 
2004: $5.2. 

Implicit exposures: Future Medicare Part A benefits; 
2000: $2.7; 
2002: $5.1; 
2004: $8.5. 

Implicit exposures: Medicare Part B benefits; 
2000: $6.5; 
2002: $8.1; 
2004: $11.4. 

Implicit exposures: Medicare Part D benefits; 
2004: $8.1. 

Total; 
2000: $20.4; 
2002: $26.4; 
2004: $43.3. 

Sources: Consolidated Financial Statements. 

Note: Estimates for Social Security and Medicare are PV as of January 1 
of each year as reported in the Consolidated Financial Statements and 
all other data are as of September 30. The 2005 Trustees Reports issued 
in March of this year show that the Social Security and Medicare 
exposures have increased as follows: Social Security increased to $5.7 
trillion, Medicare Part A increased to $8.8 trillion, Medicare Part B 
increased to $12.4 trillion and Part D increased to $8.7 trillion. 
Totals may not add due to rounding. 

[End of table] 

How Big is Our Growing Fiscal Burden? 

Our total fiscal burden can be translated and compared as follows: 

Total fiscal exposures: $43.3 trillion; 
Total household net worth: $48.5 trillion: 
* Burden/Net worth ratio: 89 percent. 

Burden: 
Per person: $147,000; 
Per full-time worker: $350,000; 
Per household: $383,000. 

Income: 
Median household income: $44,389; 
Disposable personal income per capita: $29,475. 

Note: Net worth and income data are calendar year 2004 levels. 

Sources: Federal Reserve Board for household net worth; Census Bureau 
for median household income; and the Bureau of Economic Analysis for 
disposable personal income per capita. 

[End of table] 

Composition of Spending as a Share of GDP Under Baseline Extended: 

[See PDF for image] - graphic text: 

Line/Stacked Bar combo chart with 4 groups, 1 line (Revenue) and 4 bars 
per group. 

2004; 
Net interest: 1.4%; 
Social Security: 4.4%; 
Medicare & Medicaid: 3.8%; 
All other spending: 10.4%; 
Revenue: 16.3%. 

2015; 
Net interest: 1.8%; 
Social Security: 4.7%; 
Medicare & Medicaid: 5.3%; 
All other spending: 8.1%; 
Revenue: 19.5%. 

2030; 
Net interest: 2.8%; 
Social Security: 6.4%; 
Medicare & Medicaid: 8%; 
All other spending: 8.1%; 
Revenue: 19.5%. 

2040; 
Net interest: 5.7%; 
Social Security: 6.9%; 
Medicare & Medicaid: 9.7%; 
All other spending: 8.1%; 
Revenue: 19.5%. 

Notes: In addition to the expiration of tax cuts, revenue as a share of 
GDP increases through 2015 due to (1) real bracket creep, (2) more 
taxpayers becoming subject to the AMT, and (3) increased revenue from 
tax-deferred retirement accounts. After 2015, revenue as a share of GDP 
is held constant. 

Source: GAO’s August 2005 analysis. 

[End of figure] 

Composition of Spending as a Share of GDP Assuming Discretionary 
Spending Grows with GDP after 2005 and All Expiring Tax Provisions are 
Extended: 

[See PDF for image] - graphic text: 

Line/Stacked Bar combo chart with 4 groups, 1 line (Revenue) and 4 bars 
per group. 

2004; 
Net interest: 1.4%; 
Social Security: 4.4%; 
Medicare & Medicaid: 3.8%; 
All other spending: 10.4%; 
Revenue: 16.3%. 

2015; 
Net interest: 2.8%; 
Social Security: 4.7%; 
Medicare & Medicaid: 5.3%; 
All other spending: 9.9%; 
Revenue: 17.4. 

2030; 
Net interest: 8%; 
Social Security: 6.7%; 
Medicare & Medicaid: 8%; 
All other spending: 9.9%; 
Revenue: 17.4%. 

2040; 
Net interest: 15.8%; 
Social Security: 7.7%; 
Medicare & Medicaid: 9.7%; 
All other spending: 9.9%; 
Revenue: 17.4%. 

Notes: Although expiring tax provisions are extended, revenue as a 
share of GDP increases through 2015 due to (1) real bracket creep, (2) 
more taxpayers becoming subject to the AMT, and (3) increased revenue 
from tax-deferred retirement accounts. After 2015, revenue as a share 
of GDP is held constant. 

Source: GAO's August 2005 analysis. 

[End of figure] 

Current Fiscal Policy Is Unsustainable: 

The “Status Quo” is Not an Option: 

* We face large and growing structural deficits largely due to known 
demographic trends and rising health care costs. 

* GAO’s simulations show that balancing the budget in 2040 could 
require actions as large as: 

- Cutting total federal spending by about 60 percent or
- Raising taxes to about 2.5 times today's level. 

Faster Economic Growth Can Help, but It Cannot Solve the Problem: 

* Closing the current long-term fiscal gap based on responsible 
assumptions would require real average annual economic growth in the 
double digit range every year for the next 75 years. 

* During the 1990s, the economy grew at an average 3.2 percent per 
year. 

* As a result, we cannot simply grow our way out of this problem. Tough 
choices will be required. 

The Way Forward: Three Pronged Approach: 

Impose Budget Controls and Enhance Legislative Process: 

* Discretionary spending caps; 
* PAYGO rules on both sides of the ledger; 
* Mandatory spending triggers; 
* Automatic present value disclosures for legislative debate on major 
tax and spending bills; 
* Provide enhanced and integrated summaries of every key bill to 
Members before they vote on it. 

Improve Accounting and Reporting and Metrics: 

* Enhanced financial statement presentation (e.g. trust fund activity, 
intergenerational burdens); 
* Develop key national (outcome-based) indicators. 

Re-examine Policies and Programs: 

* Restructure existing entitlement programs; 
* Reexamine the base of discretionary and other spending; 
* Review and revise existing tax policy, including tax preferences and 
enforcement programs. 
* Expand scrutiny of proposed new programs, policies, or activities. 

21st Century Challenges Report: 

Provides background, framework, and questions to assist in reexamining 
the base. 

Covers entitlements & other mandatory spending, discretionary spending, 
and tax policies and programs. 

Based on GAO's work for the Congress. 

Issued February 16, 2005. 

Twelve Reexamination Areas: 

Mission Areas: 

* Defense; 
* Education & Employment; 
* Financial Regulation & Housing; 
* Health Care; 
* Homeland Security; 
* International Affairs; 
* Natural Resources, Energy & Environment; 
* Retirement & Disability; 
* Science & Technology; 
* Transportation. 

Crosscutting Areas: 

* Improving Governance; 
* Reexamining the Tax System. 

Key National Indicators: 

* WHAT: A portfolio of economic, social, and environmental outcome-
based measures that could be used to help assess the nation's and other 
governmental jurisdictions' position and progress. 

* WHO: Many countries and several states, regions, and localities have 
already undertaken related initiatives (e.g., Australia, New Zealand, 
Canada, United Kingdom, Oregon, Silicon Valley (California) and 
Boston). 

* WHY: Development of such a portfolio of indicators could have a 
number of possible benefits, including: 

- Serving as a framework for related strategic planning efforts; 
- Enhancing performance and accountability reporting; 
- Informing public policy decisions, including much needed baseline 
reviews of existing government policies, programs, functions, and 
activities; 
- Facilitating public education and debate as well as an informed 
electorate. 

* WAY FORWARD: Consortium of key players housed by the National 
Academies domestically and related efforts by the OECD and others 
internationally. 

Transformation: 

Webster's definition: 

An act, process, or instance of change in structure appearance, or 
character. 

A conversion, revolution, makeover, alteration, or renovation. 

The Objective of Transformation: 

To create a more positive future by maximizing value and mitigating 
risk within current and expected resource levels. 

Transformation: A New Model for Government Organizations: 

Government organizations will need to: 

* Become less hierarchical, process-oriented, stovepiped, and inwardly 
focused. 

* Become more partnership-based, results-oriented, integrated, and 
externally focused. 

* Achieve a better balance between results, customer, and employee 
focus. 

* Work better with other governmental organizations, non-governmental 
organizations, and the private sector, both domestically and 
internationally, to achieve results. 

* Focus on maximizing value, managing risk and enhancing responsiveness 
within current and expected resource levels. 

Keys to Making Change Happen: 

* Commitment and sustained leadership; 
* Demonstrated need for change (i.e., burning platform) Start at the 
top and with the new people (transformation takes 7+ years); 
* Process matters (e.g., employee involvement) -- Don't fight a two-
front war; 
* 15-percent rule; 
* Identifiable and measurable progress over time; 
* Communication, communication, communication; 
* Figure out what's right versus what's popular; 
* Patience, persistence, perseverance to pain before you prevail. 

Keys to Making Change Happen: 

Several other actions needed: 

* Strategic Plan; 
* Core values; 
* Organizational alignment; 
* Recruiting, development, and succession planning strategies; 
* Modernizing and integrating institutional, unit and individualized 
performance measurement and reward systems; 
* Employee empowerment and effective communications. 

GAO: Leading by Example (Change, Performance, and Human Capital 
Management): 

* Mission and vision clarification; 
* Core values: accountability, integrity, reliability; 
* Strategic planning; 
* Organizational realignment; 
* Definitions of success; 
* Multi-tasking and matrix management; 
* Procurement, contracting, and acquisition; 
* Human capital; 
* Information technology; 
* Knowledge management; 
* Financial management; 
* Client service/external agency relations and protocols; 
* Enhanced products and services; 
* Constructive engagement with agencies; 
* Partnering with other accountability and “good government” 
organizations. 

GAO's Strategic Plan: 

[See PDF for image] - graphic text: 

Serving the Congress and the Nation: 

GAO's Strategic Plan Framework: 

Mission: 

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

Themes: 

* Long-term Fiscal Imbalance; 

* National Security; 

* Global interdependence; 

* Changing Economy; 

* Demographics; 

* Science and Technology; 

* Quality of Life; 

* Governance; 

Goals and Objectives: 

Provide Timely, Quality Service to the Congress and the Federal 
Government to Address Current and Emerging Challenges to the Well-Being 
and Financial Security of the American People related to: 

* Health care needs and financing; 

* Education and protection of children; 

* Work opportunities and worker protection; 

* Retirement income security; 

* Effective system of justice; 

* Viable communities; 

* Natural resources use and environmental protection; 

* Physical infrastructure; 

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

* Emerging threats; 

* Military capabilities and readiness; 

* Advancement of U.S. interests; 

* Global market forces; 

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

* Roles in achieving federal objectives; 

* Government transformation; 

* Key management challenges and program risks; 

* Fiscal position and financing of the government; 

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

* Client and customer service; 

* Strategic leadership; 

* Institutional knowledge and experience; 

* Process improvement; 

* Employer of choice; 

Core Values: 

* Accountability; 

* Integrity; 

* Reliability; 

Source: GAO. 

GAO Strategic Plan 2004-2009. 

[End of strategic plan framework] 

GAO's Strategic Plan: 

[See PDF for image] - graphic text: 

Serving the Congress and the Nation: 

GAO's Strategic Plan Framework: 

Mission: 

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

Themes: 

* Long-term Fiscal Imbalance; 

* National Security; 

* Global interdependence; 

* Changing Economy; 

* Demographics; 

* Science and Technology; 

* Quality of Life; 

* Governance; 

Goals and Objectives: 

Provide Timely, Quality Service to the Congress and the Federal 
Government to Address Current and Emerging Challenges to the Well-Being 
and Financial Security of the American People related to: 

* Health care needs and financing; 

* Education and protection of children; 

* Work opportunities and worker protection; 

* Retirement income security; 

* Effective system of justice; 

* Viable communities; 

* Natural resources use and environmental protection; 

* Physical infrastructure; 

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

* Emerging threats; 

* Military capabilities and readiness; 

* Advancement of U.S. interests; 

* Global market forces; 

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

* Roles in achieving federal objectives; 

* Government transformation; 

* Key management challenges and program risks; 

* Fiscal position and financing of the government; 

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

* Client and customer service; 

* Strategic leadership; 

* Institutional knowledge and experience; 

* Process improvement; 

* Employer of choice; 

Core Values: 

* Accountability; 

* Integrity; 

* Reliability; 

Source: GAO. 

GAO Strategic Plan 2004-2009. 

[End of strategic plan framework] 

Annual Performance Measures: (1998 and 2005): 

Performance measure: Financial benefits (billions); 
FY 1998: $19.7; 
FY 2005: $39.6. 

Performance measure: Other benefits; 
FY 1998: 537; 
FY 2005: 1409. 

Performance measure: Past recommendations implemented; 
FY 1998: 69%; 
FY 2005: 85%. 

Performance measure: Return on investment (ROI); 
FY 1998: 58:1; 
FY 2005: 83:1. 

Performance measure: Financial benefits per employee (millions); 
FY 1998: $6.1; 
FY 2005: $12.4. 

Performance measure: Timeliness; 
FY 1998: 93%; 
FY 2005: 97%. 

[End of table] 

Client Feedback Fiscal Years 2002-05: 

FY 2002; 
Percent favorable: 92%; 
Response rate: 46%. 

FY 2003; 
Percent favorable: 96%; 
Response rate: 31%. 

FY 2004; 
Percent favorable: 97%; 
Response rate: 34%. 

FY 2005; 
Percent favorable: 96%; 
Response rate: 30%. 

[End of figure] 

GAO Benchmarking Results for 2005: 

GAO exceeded the latest private sector and Office of Personnel 
Management (OPM) benchmark measures in the following four questions, as 
shown below. 

Personal Experiences: 

I am given a real opportunity to improve my skills in my organization; 
Benchmarking Results: 
* Private Industry 2004: 62%; 
* OPM 2004: 63%; 
* GAO 2005: 72%. 

My job makes good use of my skills and abilities; 
Benchmarking Results: 
* Private Industry 2004: 74%; 
* OPM 2004: 67%; 
* GAO 2005: 75%. 

My work gives me a feeling of personal accomplishment; 
Benchmarking Results: 
* Private Industry 2004: 75%; 
* OPM 2004: 71%; 
* GAO 2005: 80%. 
 
Considering everything, how satisfied are you with your job? 
Benchmarking Results: 
* Private Industry 2004: 71%; 
* OPM 2004: 68%; 
* GAO 2005: 76%. 

Source: Federal Human Capital Survey 2004 analysis, and corresponding 
2005 GAO figures. 

[End of table] 

Key GAO Partnerships: 

INTOSAI; 
National Audit Forum; 
Good Government Organizations; 
Professional Associations; 
GAO Advisory Groups; 
Others; 

[End of figure] 

Key Transformation Elements: 

* Planning; 
* People; 
* Process; 
* Partnerships; 
* Technology; 
* Environment. 

The most important of the five is PEOPLE -- an agency's human capital. 

How GAO Has Addressed Its Human Capital Challenges: 

Administrative: 

* HQ realignment & field office restructuring; 
* Self-assessment checklist; 
* Human capital profile; 
* Workforce & succession planning; 
* Employee feedback survey & suggestion program; 
* Employee Advisory Council; 
* Enhanced employee communications & participation; 
* Skills & knowledge inventory; 
* Employee preference survey; 
* Frequent flyer miles; 
* Student loan repayment; 
* Recruitment & college relations; 
* Phased retirement initiative; 
* Training/development; 
* Recognition & rewards; 
* Business casual dress & business cards; 
* Enabling technologies; 
* Opportunity/inclusiveness; 
* Mentor/buddy programs; 
* Commuting subsidy; 
* Competency-based employee appraisal system; 
* Human Capital Officer; 
* Office of Opportunity & Inclusiveness; 
* Flextime and telework; 
* Total compensation communications; 
* Classification and compensation review; 
* Human Capital Strategic Plan; 

Legislation Addressing GAO's Human Capital Challenges: 

Past: 

* Broad-banding system for mission staff; 
* Expedited hiring authority (e.g., internship program) Special pay 
rates; 
* Senior level for technical staff; 
* Targeted early out and buyout authority (3 years); 
* Revised RIF rules. 

Recent: 

* Targeted early out and buyout authority (permanent); 
* Annual pay adjustment rates; 
* Pay retention provisions; 
* Relocation benefits; 
* Increased annual leave for upper level employees; 
* Executive exchange program. 
* Re-designation of "General Accounting Office" to "Government 
Accountability Office." 

GAO Elements of Reform: 

Modern, Effective, Credible, and Validated Performance Management 
System: 

* Focuses on core competencies; 
* Helps to communicate employee performance expectations; 
* Creates a "line of sight" linking institutional team/unit and 
individual performance; 
* Makes meaningful distinctions in employee performance; 
* Provides for competency-based results automatically and relative peer 
group standing on request. 

Modern Classification and Compensation System: 

* Uses pay bands; 
* Is market-based; 
* Is performance-oriented. 

Safeguards, transparency, and accountability built in: 

* Provisions for employee participation; 
* Pre-and post-implementation consultation and communications strategy 
incorporated; 
* Internal pre-decisional revenues and reasonable post-decisional 
transparency; 
* Avenues for adverse action appeals, both internally and externally. 

Competency-Based Performance Appraisal: 

Objective of new system are to provide a: 

* Clear link to our strategic plan, professional standards, protocols 
and core values; 
* Fair, honest, accurate and non-discriminatory assessment of 
performance based on standards that are valid, properly applied, and 
transparent to employees; 
* A sound basis for enhancing the performance capacity of all staff, 
rewarding high-performing staff, and dealing with "below expected" 
performers. 

Competency Model: 

Achieving Results; 
Maintaining Client and Customer Focus; 
Developing People; 
Thinking Critically; 
Collaborating with Others; 
Presenting Information Orally; 
Presenting Information in Writing; 
Leading Others. 

Relevant Areas: 

Succession Planning; 
Promotions; 
Recruitment; 
Work Assignments; 
Performance Management; 
Pay Decisions; 
Career Planning; 
Training. 

[End of figure] 

Analyst/Specialist Appraisal Scores (1984-2004): 

Year: 1984; 
Ratings = 4.7 and above: 7; 
Ratings = 5.0: 2; 
Average Rating (5-point scale): 3.84. 

Year: 1985; 
Ratings = 4.7 and above: 7; 
Ratings = 5.0: 1; 
Average Rating (5-point scale): 3.90. 

Year: 1986; 
Ratings = 4.7 and above: 9; 
Ratings = 5.0: 1; 
Average Rating (5-point scale): 3.98. 

Year: 1987; 
Ratings = 4.7 and above: 10; 
Ratings = 5.0: 1; 
Average Rating (5-point scale): 4.02. 

Year: 1988; 
Ratings = 4.7 and above: 11; 
Ratings = 5.0: 2; 
Average Rating (5-point scale): 4.07. 

Year: 1989; 
Ratings = 4.7 and above: 19; 
Ratings = 5.0: 3; 
Average Rating (5-point scale): 4.14. 

Year: 1990; 
Ratings = 4.7 and above: 19; 
Ratings = 5.0: 3; 
Average Rating (5-point scale): 4.26. 

Year: 1991; 
Ratings = 4.7 and above: 24; 
Ratings = 5.0: 4; 
Average Rating (5-point scale): 4.33. 

Year: 1992; 
Ratings = 4.7 and above: 31; 
Ratings = 5.0: 6; 
Average Rating (5-point scale): 4.39. 

Year: 1993; 
Ratings = 4.7 and above: 36; 
Ratings = 5.0: 7; 
Average Rating (5-point scale): 4.46. 

Year: 1994; 
Ratings = 4.7 and above: 41; 
Ratings = 5.0: 10; 
Average Rating (5-point scale): 4.54. 

Year: 1995; 
Ratings = 4.7 and above: 43; 
Ratings = 5.0: 12; 
Average Rating (5-point scale): 4.59. 

Year: 1996; 
Ratings = 4.7 and above: 50; 
Ratings = 5.0: 16; 
Average Rating (5-point scale): 4.61. 

Year: 1997; 
Ratings = 4.7 and above: 51; 
Ratings = 5.0: 16; 
Average Rating (5-point scale): 4.63. 

Year: 1998; 
Ratings = 4.7 and above: 50; 
Ratings = 5.0: 18; 
Average Rating (5-point scale): 4.62. 

Year: 1999; 
Ratings = 4.7 and above: 11; 
Ratings = 5.0: 2; 
Average Rating (5-point scale): 4.16. 

Year: 2000; 
Ratings = 4.7 and above: 12; 
Ratings = 5.0: 2; 
Average Rating (5-point scale): 4.18. 

Year: 2001; 
Ratings = 4.7 and above: 17; 
Ratings = 5.0: 2; 
Average Rating (5-point scale): 4.26. 

Year: 2002; 
Average Rating (5-point scale): 2.19. 

Year: 2003; 
Average Rating (5-point scale): 2.30. 

Year: 2004; 
Average Rating (5-point scale): 2.34. 

Note: GAO's new competency-based performance management system was 
implemented in January 2002. There were no individual appraisal 
averages as high as 4.7 in FY02, FY03, or FY04. 

[End of figure] 

Classification and Compensation System: Key Guiding Principles: 

* Enable GAO to attract and retain top talent; 

* Result in equal pay for work of equal value over time; 

* Be reflective of the roles and responsibilities that we expect GAO 
staff to perform; 

* Be reasonable; competitive; performance-oriented; and based on 
skills, knowledge, and role; 

* Be affordable and sustainable based on current and expected resources 
levels; 

* Be in conformity with applicable statutory limits; 

* Try to assure a reasonable consistency in ratings and related 
compensation results within and between teams. 

Pay Philosophy: Performance-Oriented and Market-Based: 

Historically: 

* Pay ranges followed the GS schedule; 

* Everyone could advance to the pay cap irrespective of their 
performance not a matter of if, but when. 

New Approach: 

* Pay ranges set to be competitive with the labor markets in which GAO 
competes for talent; 

* Everyone can advance to the pay cap but they must have performance in 
excess of a certain level to advance beyond a certain point of the pay 
range (e.g., 75th percentile); 

* Pay ranges may overlap in upper part of band pay range to adequately 
reward expertise, leadership, and performance. 

Three Key Ingredients Needed for These Challenging and Changing Times: 

* Courage; 
* Integrity; 
* Innovation. 

[End of slide presentation]