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GAO: 

United States Government Accountability Office: 

Performance and Accountability Report: 

Fiscal Year 2006: 

Serving the Congress and the Nation: 

Accountability * Integrity * Reliability: 

[See PDF for Image]- graphic text: 

Serving The Congress: 

GAO’s Mission: 

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

Core Values: Accountability: 

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

Core Values: Integrity: 

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

Core Values: Reliability: 

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

Scope Of Work: 

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

Source: See Image Sources. 

[End of figure] 

[Table of Contents] 

Contents: 

Abbreviations: 

How to Use This Report: 

Introduction: 

From the Comptroller General: 

Financial Reporting Assurance Statements: 

About GAO: 

Mission: 

Strategic Planning and Management Process: 

Organizational Structure: 

How We Measure Our Performance: 

Part I: Management's Discussion and Analysis: 

Helping the Federal Government Work Better and Be Accountable to the 
American People: 

Focusing on Results: 

Focusing on Our Client: 

Focusing on Our People: 

Focusing on Our Internal Operations: 

Continuing the Dialogue on 21st Century Challenges: 

GAO's High-Risk Program: 

Building and Sustaining Partnerships: 

Managing Our Resources: 

Strategies for Achieving Our Goals: 

Addressing Management Challenges That Could Affect Our Performance: 

Mitigating External Factors That Could Affect Our Performance: 

Part II: Performance Information: 

Performance Information by Strategic Goal: 

Goal 1 Overview: 

Financial Benefits: 

Nonfinancial Benefits: 

Testimonies: 

Goal 2 Overview: 

Financial Benefits: 

Nonfinancial Benefits: 

Testimonies: 

Goal 3 Overview: 

Financial Benefits: 

Nonfinancial Benefits: 

Testimonies: 

Goal 4 Overview: 

Data Quality and Program Evaluation: 

Verifying and Validating Performance Data: 

Program Evaluation: 

Part III: Financial Information: 

From the Chief Financial Officer: 

Overview of Financial Statements: 

Financial Systems and Internal Controls: 

Audit Advisory Committee's Report: 

Independent Auditor's Report: 

Purpose of Each Financial Statement: 

Balance Sheets: 

Statements of Net Cost: 

Statements of Changes in Net Position: 

Statements of Budgetary Resources: 

Statements of Financing: 

Notes to Financial Statements: 

Part IV: From the Inspector General: 

Part V: Appendixes: 

1. Accomplishments and Other Contributions: 

2. GAO's Report on Personnel Flexibilities: 

3. GAO's FISMA Efforts: 

Image Sources: 

Providing Comments on This Report: 

Obtaining Copies of GAO Documents: 

[End of table of Contents] 

Abbreviations: 

CAPPS: Computer-Assisted Passenger Prescreening System: 

CMS: Centers for Medicare & Medicaid Services: 

CSRS: Civil Service Retirement System: 

DD(X): destroyer: 

DHS: Department of Homeland Security: 

DOD: Department of Defense: 

DOE: Department of Energy: 

DOT: Department of Transportation: 

DTV: digital television: 

EEO: Equal Employment Opportunity: 

EEOC: Equal Employment Opportunity Commission: 

EPA: Environmental Protection Agency: 

FAA: Federal Aviation Administration: 

FCC: Federal Communications Commission: 

FDA: Food and Drug Administration: 

FECA: Federal Employees' Compensation Act: 

FEGLIP: Federal Employees Group Life Insurance Program: 

FEHBP: Federal Employees Health Benefit Program: 

FEMA: Federal Emergency Management Agency: 

FERS: Federal Employees Retirement System: 

FFELP: Federal Family Education Loan Program: 

FICA: Federal Insurance Contributions Act: 

FISMA: Federal Information Security Management Act: 

FSI: Forensic Audits and Special Investigations: 

FTE: full-time equivalent: 

GAGAS: generally accepted government auditing standards: 

GAO: Government Accountability Office: 

HHS: Department of Health and Human Services: 

HUD: Department of Housing and Urban Development: 

IG: Office of Inspector General: 

INTOSAI: International Organization of Supreme Audit Institutions: 

IRS: Internal Revenue Service: 

IT: information technology: 

LHA(R): amphibious assault ship replacement: 

MCA: managerial cost accounting: 

MCC: Millennium Challenge Corporation: 

NFC: National Finance Center: 

NIST: National Institute of Standards and Technology: 

OMB: Office of Management and Budget: 

OOI: Office of Opportunity and Inclusiveness: 

OPM: Office of Personnel Management: 

QCI: Quality and Continuous Improvement: 

SSA: Social Security Administration: 

SSI: Supplemental Security Income: 

SSN: Social Security number: 

TANF: Temporary Assistance for Needy Families: 

TSA: Transportation Security Administration: 

TVA: Tennessee Valley Authority: 

UN: United Nations: 

USACE: U.S. Army Corps of Engineers: 

USAID: U.S. Agency for International Development: 

USPS: U.S. Postal Service: 

US-VISIT: United States Visitor and Immigrant Status Indicator 
Technology: 

VA: Department of Veterans Affairs: 

[End of Abbreviations] 

How to Use This Report: 

This report describes the U.S. Government Accountability Office's (GAO) 
performance measures, results, and accountability processes for fiscal 
year 2006. In assessing our performance, we compared actual results 
against targets and goals that were set in our annual performance plan 
and performance budget and were developed to help carry out our 
strategic plan. Our complete set of strategic planning and performance 
and accountability reports is available on our Web site at [Hyperlink, 
http://www.gao.gov/sp.html]. 

This report has an introduction, four major parts, and supplementary 
appendixes as follows: 

Introduction: 

This section includes the letter from the Comptroller General and a 
statement attesting to the reliability of our performance and financial 
data in this report and the effectiveness of our internal control over 
our financial reporting. This section also includes a summary 
discussion of our mission, strategic planning process, organizational 
structure, and process for assessing our performance. 

Management's Discussion and Analysis: 

This section discusses our agencywide performance results and use of 
resources in fiscal year 2006. It also includes information on the 
strategies we use to achieve our goals and the management challenges 
and external factors that affect our performance. 

Performance Information: 

This section includes details on our performance results by strategic 
goal in fiscal year 2006 and the targets we are aiming for in fiscal 
year 2007. It also includes an explanation of how we ensure the 
completeness and reliability of the performance data used in this 
report. 

Financial Information: 

This section includes details on our finances in fiscal year 2006, 
including a letter from our Chief Financial Officer, audited financial 
statements and notes, and the reports from our external auditor and 
audit advisory committee. This section also includes information on our 
internal controls and an explanation of the kind of information each of 
our financial statements conveys. 

From the Inspector General: 

This section includes our Inspector General's assessment of our 
agency's management challenges: 

Appendixes: 

These sections include detailed write-ups about our most significant 
accomplishments and contributions recorded in fiscal year 2006, and 
information on certain human capital management flexibilities and on 
information security management efforts. 

[End of How to use this report] 

Introduction: From the Comptroller General: 

[See PDF for picture of David M. Walker, Comptroller General of the 
United States] 

Source: GAO. 

[End of Figure] 

November 15, 2006: 

I am now more than halfway through my 15-year tenure as Comptroller 
General of the United States. As time has passed, I have become more 
impressed with the breadth and quality of GAO's work, the ability and 
commitment of our staff, and the positive impact GAO's products and 
activities have on the economy, efficiency, effectiveness, and equity 
of federal programs supporting Americans everywhere. We strive each 
year to provide our client--the Congress--with the objective, fact- 
based, and reliable information it needs to improve the accountability 
of the federal government, and on the basis of our performance outcomes 
and the feedback we received from the Congress, we definitely 
accomplished this goal again in fiscal year 2006. 

We generally exceeded the targets we set for all of our performance 
measures that indicate our ability to produce results for the nation. I 
am extremely proud to say that we helped the federal government achieve 
a total of $51 billion in financial benefits--a record high for us that 
represents a $105 return on every dollar the Congress invested in us. 
As a result of our work we also documented 1,342 nonfinancial benefits 
that like our financial benefits, helped to improve services to the 
public, change laws, and transform government operations. Our client- 
focused performance measures indicate that the Congress valued our work 
and was very pleased with it overall. For example, senior GAO 
executives and I delivered testimonies at 240 hearings covering a range 
of topics, including the tax gap and tax reform, U.S. border security, 
Iraq and Hurricane Katrina activities, and issues affecting the health 
and pay of military servicemembers. Our testimonies significantly 
surpassed the fiscal year 2006 target we set as well as our actual 
performance over the last 4 years, and 92 percent of the congressional 
staff responding to our client feedback survey either strongly or 
generally agreed that our testimonies and written products were 
delivered on time to them. Though we were 6 percentage points shy of 
our timeliness target, we will continue our quest to improve the 
timeliness of our products. In addition, we also met or exceeded four 
of our eight performance measures that gauge how well we developed, 
challenged, and managed our workforce. 

I am also proud that we received a clean opinion from an external, 
independent auditor on our financial statements. I am confident that 
the performance information and the financial data included in this 
performance and accountability report are complete and reliable. 

Reflecting on fiscal year 2006, I am reminded how often our work has 
focused on the major issues affecting this nation, such as the federal 
government's efforts to relieve the suffering and recover from the 
devastation of hurricanes Katrina and Rita and improve disaster 
preparedness and coordination for the future. In fiscal year 2006 we 
issued over 30 reports and testimonies related to disaster 
preparedness, response, and reconstruction. In numerous reports and 
testimonies, we also examined how the federal government funded and 
fought the global war on terrorism and the war in Iraq; managed the 
cost of prescription drugs for Medicare enrollees; and safeguarded 
sensitive information systems to protect U.S. citizens from the 
unauthorized use of their Social Security numbers, passports, and other 
personal information. In these and other areas of our work--some of 
which are highlighted later in this report--millions of average 
Americans benefited from our recommendations that were subsequently 
implemented by various federal agencies and the Congress. 

We worked hard in fiscal year 2006 to help members of the Congress and 
the public better understand the trends and challenges facing the 
United States and its position in the world and to grasp the long-term 
and collateral implications of current policy paths. Through a number 
of reports, testimonies, presentations, and partnerships, we built on 
our groundbreaking report called 21st Century Challenges: Reexamining 
the Base of the Federal Government. This unprecedented effort 
highlights several demographic, economic, and other trends--such as 
longer life spans, slowing workforce growth, and a large national 
deficit--that will have a significant adverse impact on our nation's 
fiscal future. The report also asks a series of questions about, among 
other things, mandatory and discretionary spending and tax policy. I, 
along with representatives from a broad range of concerned groups, 
discussed the serious fiscal imbalances facing the United States at 
town hall meetings in 10 different cities across the country. This 
"Fiscal Wake-up Tour," sponsored by the Concord Coalition, has helped 
to increase awareness about the nation's worsening financial situation 
and encourage discussion about possible solutions. I carried this 
message to congressional decision makers through various testimonies 
and information sessions with various congressional caucuses and many 
congressional members. In addition, we continued to examine federal 
areas and programs at risk of fraud, waste, abuse, and mismanagement 
and those in need of broad-based transformations, and added another 
troubled program to our high-risk list--the National Flood Insurance 
Program. 

Change is not only essential for progress and innovation in the federal 
government as a whole, it is essential for the agencies and 
organizations that support the government, too--and GAO is no 
exception. During fiscal year 2006 we implemented a number of changes 
internally to move us toward our goal of becoming a world-class 
professional services organization. For example, we restructured our 
midlevel, policy analyst staff into two separate pay ranges in response 
to market data collected last year during the development of our 
competency-based performance appraisal system for analysts. These data 
showed that our prior Band II pay range encompassed two distinct levels 
of responsibility, and we made changes to ensure that we achieve the 
goal of equal pay for work of equal value over time. We also 
established market-based pay ranges for our professional and 
administrative support staff as we had done previously for our analyst 
staff. In addition, we began a comprehensive review of how we recruit 
both mission and mission support staff. The review team focused on five 
broad areas: college recruitment, candidate assessment, annual hiring, 
negotiating and processing job offers, and recruiting issues affecting 
administrative and support staff. We also began an outreach program to 
recruit candidates for our new executive exchange program that will 
give private sector employees at various companies, including 
accounting firms and think tanks, a direct hands-on experience in the 
public sector. 

It is vital for all organizations to understand the big picture, learn 
from the past, and be prepared for the future; we attempted to do these 
things in fiscal year 2006 by taking steps to position our workforce 
for the coming years. These actions helped to address some issues 
associated with our various human capital management challenges. We 
also took actions to address our other management challenges focused on 
securing the information we collect and produce and our physical 
environment. However, a significant challenge for us in fiscal year 
2006 was, and will remain in the near term, the federal budget. We and 
other federal agencies took steps to deal with constrained budgets. We 
are currently operating under a continuing resolution at our fiscal 
year 2006 funding level. During the past fiscal year, we tried to 
absorb this funding reduction without seriously disrupting our 
operations by modifying the timing of our hiring decisions and offering 
eligible staff the opportunity to retire early on a targeted, expedited 
basis. We will continue to actively manage these challenges in the 
future. 

During the rest of my tenure I intend to place additional attention on 
helping the Congress examine and address the nation's long-term fiscal 
outlook, health care reform, and the need to transform the Department 
of Defense. We will also work to enhance collaboration with our sister 
agencies in the legislative branch and continue to build partnerships 
with various accountability and other good government organizations. 
When it comes to improving government performance, strengthening 
accountability, and enhancing public trust, I take seriously my 
responsibility as Comptroller General and pledge to continue to guide 
GAO in its efforts to help the government work better for the benefit 
of the American people. 

Signed by: 

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

[End of From the Comptroller General] 

Financial Reporting Assurance Statements: 

November 15, 2006: 

We, as GAO's executive committee, are responsible for preparing and 
presenting the financial statements and other information included in 
this performance and accountability report. The financial statements 
included herein are presented in conformity with U.S. generally 
accepted accounting principles; incorporate management's reasonable 
estimates and judgments, where applicable; and contain appropriate and 
adequate disclosures. Based on our knowledge, the financial statements 
are presented fairly in all material respects, and other financial 
information included in this report is consistent with the financial 
statements. 

We are also responsible for establishing and maintaining adequate 
internal control over financial reporting. GAO conducted its assessment 
of the effectiveness of GAO's internal control over financial reporting 
consistent with Appendix A, OMB Circular A-123, Management's 
Responsibility for Internal Control. Based on the results of this 
assessment, GAO has reasonable assurance that internal control over 
financial reporting as of September 30, 2006, was operating effectively 
and that no material weaknesses exist in the design or operation of the 
internal controls over financial reporting. 

On the basis of GAO's comprehensive management control program, we are 
pleased to certify, with reasonable assurance, the following: 

* Our financial reporting is reliable--transactions are properly 
recorded, processed, and summarized to permit the preparation of 
financial statements in accordance with U.S. 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 laws governing the use of 
budget authority and other laws and regulations that could have a 
direct and material effect on the financial statements. 

* 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. 

We 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 (commonly referred to as the Federal Managers' 
Financial Integrity Act). This is an objective that we set for 
ourselves even though as part of the legislative branch of the federal 
government, we are not legally required to do so. 

Signed by: 

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

Signed by: 

Gene L. Dodaro: 
Chief Operating Officer: 

Signed by: 

Sallyanne Harper: 
Chief Financial Officer: 

Signed by: 

Gary L. Kepplinger: 
General Counsel: 

[End of Financial Assurance Statements] 

About GAO: 

We exist 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. 

GAO is an independent, nonpartisan, professional services agency in the 
legislative branch of the federal government. Commonly known as the 
"audit and investigative arm of the Congress" or the "congressional 
watchdog," we examine how taxpayer dollars are spent and advise 
lawmakers and agency heads on ways to make government work better. As a 
legislative branch agency, we are exempt from many laws that apply to 
the executive branch agencies. However, we generally hold ourselves to 
the spirit of many of the laws, including 31 U.S.C. 3512 (commonly 
referred to as the Federal Managers' Financial Integrity Act), the 
Government Performance and Results Act of 1993, and the Federal 
Financial Management Improvement Act of 1996.[Footnote 1] Accordingly, 
this performance and accountability report for fiscal year 2006 
supplies what we consider to be information that is at least equivalent 
to that supplied by executive branch agencies in their annual 
performance and accountability reports. 

Mission: 

Our mission is to support the Congress in meeting its constitutional 
responsibilities and to help improve the performance and ensure the 
accountability of the federal government for the benefit of the 
American people. The strategies and means that we use to accomplish 
this mission are described in the following pages. In short, we 
accomplish our mission by providing reliable information and informed 
analysis to the Congress, to federal agencies, and to the public; and 
we recommend improvements, when appropriate, on a wide variety of 
issues. Three core values--accountability, integrity, and reliability-
-form the basis for all of our work, regardless of its origin. These 
are described on the inside front cover of this report. 

GAO's History: 

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

Strategic Planning and Management Process: 

To accomplish our mission, we use a strategic planning and management 
process that is based on a hierarchy of four elements (see fig. 1), 
beginning at the highest level with the following four strategic goals: 

* Strategic Goal 1: 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: 

* Strategic Goal 2: Provide Timely, Quality Service to the Congress and 
the Federal Government to Respond to Changing Security Threats and the 
Challenges of Global Interdependence: 

* Strategic Goal 3: Help Transform the Federal Government's Role and 
How It Does Business to Meet 21st Century Challenges: 

* Strategic Goal 4: Maximize the Value of GAO by Being a Model Federal 
Agency and a World-Class Professional Services Organization: 

Figure 1: GAO's Strategic Planning Hierarchy: 

[See PDF for Image] - graphic text. 

A four step pyramid that shows GAO's strategic planning hierarchy. 

Step 1: Strategic Goals (4); 
Step 2: Strategic Objectives (21); 
Step 3: Performance Goals (99); 
Step 4: Key Efforts (300+); 

Source: GAO. 

[End of Figure] 

Our work is primarily aligned under the first three strategic goals, 
which span issues that are both domestic and international, affect the 
lives of all Americans, and influence the extent to which the federal 
government serves the nation's current and future interests (see fig. 
2). 

Figure 2: Examples of How GAO Assisted the Nation: 

A Table listing GAO's strategic goals and what it accomplished to reach 
those goals. 

Strategic Goal 1: 
Description: Provide Timely, quality service to the Congress and the 
federal government to address current and emerging challenges to the 
well-being and financial security of the American people; In Fiscal 
year 2006, GAO provided information that helped to: 
* protect Social Security numbers from abuse; 
* ensure the effectiveness of federal investments in science, 
technology, engineering, and mathematics education programs; 
* identify actions needed to improve Federal Emergency Management 
Agency (FEMA) and REd Cross coordination for the 2006 hurricane season; 
* highlight weaknesses in the Department of Health and Human Services' 
communications with beneficiaries about the new Medicare prescription 
drug benefit; 
* identify funding formula and drug pricing disparities in the federal 
AIDS/HIV program; 
* strengthen the oversight of clinical laboratories; 
* identify challenges the Department of Homeland Security (DHS) faces 
in controlling illegal immigration into the United States; 
* assess the thoroughness of the federal fair housing complaint and 
investigation process; 
* improve the management of federal oil and natural gad royalty 
revenue; 
* develop a strategy for managing wildfires; 
* focus on the short- and long-term challenge of financing the nation's 
transportation infrastructure; 
* identify outdated mail delivery performance standards used by the 
U.S. Postal Service (USPS). 

Strategic Goal: 2; 
Description: Provide timely, quality service to the Congress and the 
federal government to respond to changing security threats and the 
challenges of global interdependence; In Fiscal year 2006, GAO provided 
information that helped to: 
* identify current and future funding and cost issues related to 
Department of Defense (DOD) operations in Iraq and Afghanistan; 
* highlight inefficiencies that could hinder DOD's efforts to reform 
its business operations; 
* improve controls over the issuance of passports and visas and 
increase fraud prevention; 
* improve catastrophic disaster preparedness, response, and recovery; 
* improve the ability of federal agencies to cost effectively acquire 
goods and services; 
* improve the management of payments to U.S. producers injured 
financially by unfairly traded imports; 
* alert the Congress to companies that are marketing costly mutual fund 
products with low returns to military servicemembers; 
* identify steps needed to overhaul investment and management processes 
supporting major DOD acquisitions; 
* improve security at nuclear power plants; 
* improve DHS's ability to detect nuclear smuggling at U.S. ports; 
* promote government efforts to secure sensitive systems and 
information; 
* highlight the cost concerns of small public companies that must 
comply with internal control and auditing provisions of the Sarbannes- 
Oxley Act. 

Strategic Goal: 3; 
Description: Help transform the federal government's role and how it 
does business to meet the 21st century challenges; In Fiscal year 2006, 
GAO provided information that helped to: 
* improve congressional oversight of the process for reviewing foreign 
direct investment; 
* strengthen DOD's information systems modernization efforts; 
* highlight serious technical and cost challenges affecting the 
purchase of a critical weather satellite; 
* highlight key practices federal agencies should adopt to prevent data 
breaches and better protect the personal information of U.S. citizens; 
* monitor the development of the 2010 decennial census; 
* identify strategies to reduce the gap between the taxes citizens pay 
and the taxes actually owed; 
* focus attention on the revenue consequences of tax expenditures; 
* identify fraud, waste, and abuse in a component of FEMA's disaster 
assistance program; 
* emphasize the importance of reliable cost information for improving 
governmentwide cost efficiency; 
* expose government contractors who used for personal gain federal 
payroll taxes withheld from their employees. 

Strategic Goal: 4; 
Description: Maximize the value of GAO being a model federal agency and 
a world-class professional services organization; In Fiscal year 2006, 
GAO provided information that helped to: 
* foster among other federal agencies GAO's innovative human capital 
practices, such as broad pay bands; performance-based compensation; and 
workforce planning and staffing strategies, policies, and processes; 
* share GAO's model business and management processes with counterpart 
organizations in the United States and abroad. 

Source: GAO. 

[End of Figure] 

The fourth goal is our only internal one and is aimed at maximizing our 
productivity through such efforts as investing steadily in information 
technology (IT) to support our work; ensuring the safety and security 
of our people, information, and assets; pursuing human capital 
transformation; and leveraging our knowledge and experience. We revisit 
the focus and appropriateness of these four strategic goals each time 
that we update our strategic plan. We are scheduled to issue our next 
strategic plan in early 2007. 

The four strategic goals are supported by strategic objectives that are 
in turn supported by and achieved through numerous performance goals 
and key efforts. Our strategic planning framework for serving the 
Congress, which lists the strategic objectives under each goal, is 
described below. 

[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; 

Provide Timely, Quality Service to the Congress and the Federal 
Government to. 

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

* Emerging threats; 

* Military capabilities and readiness; 

* Advancement of U.S. interests; 

* Global market forces; 

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

* Roles in achieving federal objectives; 

* Government transformation; 

* Key management challenges and program risks; 

* Fiscal position and financing of the government: 

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

* Client and customer satisfaction; 

* Strategic leadership; 

* Institutional knowledge and experience; 

* Process improvement; 

* Employer of choice: 

Core Values: 

* Accountability; 

* Integrity; 

* Reliability; 

Fiscal Years 2004-2009. 

Source: GAO. 

[End of GAO's Strategic Plan Framework] 

An Example of Our Strategic Planning Elements: 

Strategic Goal 1: 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: 

Strategic Objective: An Effective System of Justice: 

Performance Goal: Assess Federal Efforts to Enforce Immigration and 
Customs Laws: 

Key Efforts: 

* Evaluate DHS's border enforcement efforts: 

* Assess implementation of DHS systems for tracking people and cargo 
entering the United States: 

* Assess DHS efforts to process aliens' applications for benefits more 
efficiently: 

* Assess DHS efforts to enforce immigration laws inside U.S. borders: 

Complete descriptions of the steps in our strategic planning and 
management process are included in our strategic plan for fiscal years 
2004 through 2009, which is available on our Web site at [Hyperlink, 
http://www.gao.gov]. This site also provides access to our annual 
performance plans since fiscal year 1999 and our performance and 
accountability reports since fiscal year 2001. 

To ensure that we are well positioned to meet the Congress's current 
and future needs, we update our 6-year strategic plan every 3 years, 
consulting extensively during the update with our clients on Capitol 
Hill and with other experts (see our complete strategic plan at 
[Hyperlink, http://www.gao.gov/sp/d04534sp.pdf]). Using the plan as a 
blueprint, we lay out the areas in which we expect to conduct research, 
audits, analyses, and evaluations to meet our clients' needs, and we 
allocate the resources we receive from the Congress accordingly. Given 
the increasingly fast pace with which crucial issues emerge and evolve, 
we design a certain amount of flexibility into our plans and staffing 
structure so that we can respond readily to the Congress's changing 
priorities. When we revise our plans or our allocation of resources, we 
disclose those changes in annual performance plans, which are posted-- 
like our strategic plan--on the Web for public inspection ([Hyperlink, 
http://www.gao.gov/sp.html]). 

Each year, we hold ourselves accountable to the Congress and to the 
American people for our performance, primarily through the annual 
performance and accountability report. We have included some 
information about our future plans in this report to provide as 
cohesive a view as possible of what we have done, what we are doing, 
and what we expect to do to support the Congress and to serve the 
nation. Last year, the Association of Government Accountants awarded us 
for the fifth consecutive year its Certificate of Excellence in 
Accountability Reporting for our fiscal year 2005 performance and 
accountability report. According to the association, this certificate 
means that we produced an interesting and informative report that 
achieved the goal of complete and fair reporting. We also received an 
award from Graphic Design USA for our fiscal year 2005 report. (See the 
description below.) 

Figure: 

[See PDF for Images] - graphic text. 

Scanned copes of: 

1. "AGA Certificate of Excellence in Accountability Reporting presented 
to the Government Accountability Office. 

In recognition of your outstanding efforts preparing GAO's Performance 
and Accountability Report for the fiscal year ended September 30, 2005. 

A Certificate of Excellence in Accountability is presented by AGA to 
federal government agencies whose annual Performance and Accountability 
Reports achieve the highest standards demonstrating accountability and 
communicating results. 

Signed by: 

John H Hammel: 
Chair, Certificate of Excellence in Accountability Reporting Director: 

Signed by: 

Relmond R. Van Daniker, Executive Director, AGA 

2. 2006 Graphic Design USA presents an American Inhouse Design Award to 
United States Government Accountability Office for Performance and 
Accountability Report 2005: 

3. Cover of the Government Accountability Office's Performance and 
Accountability Report for Fiscal Year 2005. 

Source: GAO. 

[End of Figure] 

Organizational Structure: 

As the Comptroller General of the United States, David M. Walker is the 
head of GAO and is serving a 15-year term that began in November 1998. 
Three other executives join Comptroller General Walker to form GAO's 
Executive Committee; these executives are Chief Operating Officer Gene 
L. Dodaro, Chief Administrative Officer/Chief Financial Officer 
Sallyanne Harper, and General Counsel Gary Kepplinger. 

To achieve our strategic goals, our staff is organized as shown in 
figure 3. For the most part, our 13 research, audit, and evaluation 
teams perform the work that supports strategic goals 1, 2, and 3--our 
three external strategic goals--with several of the teams working in 
support of more than one strategic goal. Senior executives in charge of 
the teams manage a mix of engagements to ensure that we meet the 
Congress's need for information on quickly emerging issues as we also 
continue longer term work efforts that flow from our strategic plan. To 
serve the Congress effectively with a finite set of resources, senior 
managers consult with our congressional clients and determine the 
timing and priority of engagements for which they are responsible. In 
fiscal year 2005, we formed a new unit--Forensic Audits and Special 
Investigations (FSI)--within our Financial Management and Assurance 
team. FSI was designed to provide the Congress with high-quality 
forensic audits; investigations of fraud, waste, and abuse; and 
evaluations of security vulnerabilities and other appropriate 
investigative services as part of its own assignments or in support of 
other teams. FSI follows up on engagements and referrals from our other 
teams when its special services are required to help determine whether 
legislative or administrative actions are necessary. FSI is composed of 
investigators and staff from our former Office of Special 
Investigations; auditors from the Financial Management and Assurance 
team who have experience with forensic audits; and staff in General 
Counsel who worked with FraudNet--our online system designed to 
facilitate the reporting of allegations of fraud, waste, abuse, or 
mismanagement of federal funds. 

As described below, General Counsel supports the work of all of our 
teams. In addition, the Applied Research and Methods team assists the 
other teams on matters requiring expertise in areas such as economics, 
research design, and statistical analysis. And staff in many offices 
such as Strategic Planning and External Liaison, Congressional 
Relations, Opportunity and Inclusiveness, Quality and Continuous 
Improvement, Public Affairs, and the Chief Administrative Office 
support the efforts of the teams. This collaborative process, which we 
refer to as matrixing, increases our effectiveness, flexibility, and 
efficiency in using our expertise and resources to meet congressional 
needs on complex issues. 

General Counsel is structured organizationally along subject matter 
lines to facilitate the delivery of legal services. This structure 
allows General Counsel to (1) provide legal support to GAO and its 
audit teams concerning all matters related to their work and (2) 
produce legal decisions and opinions for the Comptroller General. 
Specifically, the goal 1, goal 2, and goal 3 groups in General Counsel 
are organized to provide each of the audit teams with a corresponding 
team of attorneys dedicated to supporting each team's needs for legal 
services. In addition, these groups prepare advisory opinions to 
committees and members of the Congress on agency adherence to laws 
applicable to their programs and activities. General Counsel's Legal 
Services group provides in-house support to GAO's management on a wide 
array of human capital matters and initiatives and on information 
management and acquisition matters and defends the agency in 
administrative and judicial forums. Finally, attorneys in the 
Procurement Law and the Budget and Appropriations Law groups prepare 
administrative decisions and opinions adjudicating protests to the 
award of government contracts or opining on the availability and use of 
appropriated funds. 

For strategic goal 4--our fourth and only internal strategic goal-- 
staff in our Chief Administrative Office take the lead. They are 
assisted on specific key efforts by the Applied Research and Methods 
team and by staff offices such as Strategic Planning and External 
Liaison, Congressional Relations, Opportunity and Inclusiveness, 
Quality and Continuous Improvement, and Public Affairs. In addition, 
attorneys in General Counsel, primarily in the Legal Services group, 
provide legal support for goal 4 efforts. 

Throughout GAO, we maintain a workforce of highly trained professionals 
with degrees in many academic disciplines, including accounting, law, 
engineering, public and business administration, economics, and the 
social and physical sciences. About three-quarters of our approximately 
3,200 employees are based at our headquarters in Washington, D.C; the 
rest are deployed in 11 field offices across the country. GAO Field 
Locations include Atlanta, Boston, Chicago, Dallas, Dayton, Denver, 
Huntsville, Los Angeles, Norfolk, San Francisco, and Seattle. Staff in 
these field offices are aligned with our research, audit, and 
evaluation teams and perform work in tandem with our headquarters staff 
in support of our external strategic goals. 

Figure 3: Organizational Structure: 

[See PDF for image] - graphic text: 

An organization chart showing GAO’s basic structure. The agency’s top 
level of organization was the Executive Committee, which includes the 
Comptroller General, the Chief Operating Officer, the Chief 
Administrative Officer/Chief Financial Officer, and the General 
Counsel. Twenty-three units report directly to the Comptroller General 
and the Chief Operating Officer. The units included the following staff 
offices: Public Affairs, Strategic Planning and External Liaison, 
Congressional Relations, Opportunity and Inclusiveness, and Inspector 
General, which report to the Comptroller General; and Quality and 
Continuous Improvement, which reports to the Chief Operating Officer. 

Other units that report to the Chief Operating Officer include teams 
and field operations that conduct audits, evaluations, and research. 
These teams perform work primarily supporting one of our three external 
strategic goals but several teams perform work in support of multiple 
strategic goals. Generally the teams fall under the following goals: 

Goal 1: 

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. 

* Education, Workforce, and Income Security; 
* Financial Markets and Community Investment; 
* Health Care; 
* Homeland Security and Justice; 
* Natural Resources and Environment; 
* Physical Infrastructure; 

Goal 2: 

Provide timely, quality service to the Congress and the federal 
government to respond to the changing security threats and the 
challenges of global interdependence. 

* Acquisition and Sourcing Management; 
* Defense Capabilities and Management; 
* International Affairs and Trade; 

Goal 3: 

Help transform the federal government’s role and how it does business 
to meet 21st century challenges. 

* Applied Research and Methods; 
* Financial Management and Assurance; 
-Forensic Audits and Special Investigations; 
* Information Technology; 
* Strategic Issues; 
-Federal Budget and Intragovernmental Relations; 

Goal 4: 

Five units that report to the Chief Administrative Officer support our 
fourth goal; which is to maximize the value of GAO by being a model 
federal agency and a world-class professional services organization. 
These are: 

* Controller; 

* Human Capital Office: 
- Chief Human Capital Officer; 

* Information Systems and Technology Services: 
- Chief Information Officer; 

* Knowledge Services: 
- Chief Knowledge Services Officer; 

* Professional Development Program. 

General Counsel's structure largely mirrors the agency's goal 
structure, and attorneys assigned to a goal work with teams on specific 
engagements. General Counsel has support or advisory relationship with 
the goals and teams rather than a direct reporting relationship. 
General Counsel provides audit and other legal support services for all 
goals and staff offices and manages GAO’s procurement law and bid 
protest work. 

Source: GAO. 

Note: General Counsel's structure largely mirrors the agency's goal 
structure, and attorneys who are assigned to goals work with the teams 
on specific engagements. Thus, the dotted lines in this figure indicate 
General Counsel's support of or advisory relationship with the goals 
and teams rather than a direct reporting relationship. 

[End of Figure] 

[End of Organizational Structure] 

How We Measure Our Performance: 

We measure our performance using annual quantitative measures. 
Together, these indicators help us to determine how well we are meeting 
the needs of the Congress and maximizing our value as a world-class 
organization. 

For several years, we assessed our performance annually using 
quantitative performance measures that are related to our work results 
and the usefulness of those results to our primary client--the 
Congress. Recently, we expanded our focus to include a more balanced 
set of performance measures that focus on four key areas--results, 
clients, people, and internal operations.[Footnote 2] These categories 
of measures are briefly described below. 

* Results. Focusing on results and the effectiveness of the processes 
needed to achieve them is fundamental to accomplishing our mission. To 
assess our results, we measure financial benefits, nonfinancial 
benefits, recommendations implemented, and percentage of new products 
with recommendations. Financial benefits and nonfinancial benefits 
provide quantitative and qualitative information, respectively, on the 
outcomes or results that have been achieved from our work. They often 
represent outcomes that occurred or are expected to occur over a period 
of several years. The remaining measures are intermediate outcomes in 
that they often lead to achieving outcomes that are ultimately captured 
in our financial and nonfinancial benefits. 

For financial benefits and nonfinancial benefits, we first set targets 
for the agency as a whole and then we set targets for each of the 
external goals--that is, goals 1, 2, and 3--so that the sum of the 
targets for the goals equals the agencywide targets. For past 
recommendations implemented and percentage of products with 
recommendations, we set targets and report performance for the agency 
as a whole because we want our performance on these measures to be 
consistent across goals. We track our performance by strategic goal in 
order to understand why we meet or do not meet the agencywide target. 
We also use this information to provide feedback to our teams on the 
extent to which they are contributing to the overall target and to help 
them identify areas in which they need to improve. 

* Clients. To judge how well we are serving our clients, we count the 
number of congressional hearings where we are asked to present expert 
testimony as well as our timeliness in delivering products to the 
Congress. Our strategy in this area also draws upon a variety of data 
sources (e.g., our client feedback survey and in-person discussions 
with congressional staff) to obtain information on the services we are 
providing to our congressional clients. 

We set a target at the agencywide level for the number of testimonies 
and then assign a portion of the testimonies as a target for each of 
the external goals--that is, goals 1, 2, and 3--based on their expected 
contribution to the agencywide total. As in measuring the results of 
our work, we track our progress on this measure at the goal level in 
order to understand why we met or did not meet the agencywide target. 
We set agencywide targets for timeliness because we want our 
performance on these measures to be consistent across goals. 

* People. As our most important asset, our people define our character 
and capacity to perform. A variety of data sources, including an 
internal survey, provide information to help us measure how well we are 
attracting and retaining high-quality staff and how well we are 
developing, supporting, using, and leading staff. We set targets for 
these measures at the agencywide level. 

* Internal operations. Our mission and people are supported by our 
internal administrative services, including information management, 
building management, knowledge services, human capital, and financial 
management services. Through an internal customer satisfaction survey, 
we gather information on how well our internal operations help 
employees get their jobs done or improve employees' quality of work 
life. Examples of surveyed services include providing secure Internet 
access and voice communication systems, performance management, and 
benefits information and assistance. Fiscal year 2006 was the first 
year that we reported how well we performed against the targets we set 
for our internal operations measures. We set targets for these measures 
at the agencywide level. 

To establish targets for all of these measures, we examine what we have 
been able to achieve in the past (for example, by looking at our past 
performance (see Table 1) our 4-year rolling averages for our 
testimonies measure and most of our results measures (see Table 2) and 
the external factors that influence our work (see the discussion of 
Mitigating External Factors That Could Affect Our Performance). The 
teams and offices that are directly engaged in the work discuss their 
views of what must be accomplished in the upcoming fiscal year with our 
top executives, who then establish targets for the performance 
measures. 

Once approved by the Comptroller General, the targets become final and 
are presented in our annual performance plan and budget.[Footnote 3] We 
may adjust these targets after they are initially published when our 
expected future work or level of funding provided warrant doing so. If 
we make changes, we include the changed targets in later documents, 
such as this performance and accountability report, and annotate that 
we have changed them. In part II, we include detailed information on 
data sources that we use to assess each of these measures, as well as 
the steps we take to verify and validate the data (see Table 16). 

In the remainder of this report, we assess our performance for fiscal 
year 2006 against our previously established performance targets. We 
also present our financial statements, the independent auditor's 
report, and a statement from GAO's Inspector General. 

[End of About GAO] 

[End of Introduction] 

Part I: Management's Discussion and Analysis: 

Helping the Federal Government Work Better and Be Accountable to the 
American People: 

In fiscal year 2006 major events like the nation's recovery from 
natural disasters, ongoing military conflicts abroad, terrorist 
threats, and potential pandemics focused the public lens again and 
again on the federal government's ability to operate effectively and 
efficiently and provide services to Americans when needed. Our work 
during the year helped the Congress and the public judge how well the 
federal government performed its functions and consider alternative 
approaches for improving operations and laws when performance was less 
than adequate. For example, teams supporting all three of our external 
strategic goals did work related to every facet of the hurricane 
Katrina and Rita disasters--preparedness, response, recovery, long- 
term recovery, and mitigation. We developed a coordinated and 
integrated approach to ensure that the Congress's need for factual 
information about disaster preparedness, response, recovery, and 
reconstruction activities along the Gulf Coast were met. We examined 
how federal funds were used during and after the disaster and 
identified the disaster rescue, relief, and rebuilding processes that 
worked well and not so well throughout the effort. To do this, staff 
drawn from across the agency spent time in the hardest hit areas of 
Louisiana, Mississippi, Alabama, and Texas collecting information from 
government officials at the federal, state, and local levels as well as 
from private organizations assisting with this emergency management 
effort. We briefed congressional staff on our preliminary observations 
early in the fiscal year and subsequently issued over 30 reports and 
testimonies on hurricanes Katrina and Rita by fiscal year end focusing 
on, among other issues, minimizing fraud, waste, and abuse in disaster 
assistance and rebuilding the New Orleans hospital care system. 

In addition to our disaster-related work in the United States and 
abroad, we provided the Congress and the American people with critical 
information related to the oversight of Iraq through over 30 reports, 
briefings, and testimonies during fiscal year 2006. Our work, 
supplemented by staff's firsthand observations in the war zone, 
highlighted issues such as the cost of our nation's war efforts in 
Iraq, the steadily deteriorating security situation in the region, 
long- term logistical challenges to Iraqi forces, and the lack of a 
comprehensive strategy to achieve U.S. goals. We also completed a 
number of reviews examining a wide variety of health care issues in the 
United States and overseas, including how grant funds for people with 
AIDS are distributed in the United States and the impact of certain 
program requirements on the use of funds to fight AIDS globally. 

Through our reports, testimonies, and presentations, we also continued 
our efforts to heighten the awareness of policymakers and the public 
about the nation's worsening financial condition and growing long-term 
fiscal imbalance and the potential impact on programs and policies in 
almost every area of the federal government. We did work in fiscal year 
2006 that continued to encourage debate about many of the long-term 
21st century challenges that we identified last year in our report as 
well as produced reports and testimonies focused on federal programs we 
consider at high risk of fraud, waste, abuse, or mismanagement. We 
performed all of this work and more in accordance with our strategic 
plan, guided by our core values, and consistent with professional 
standards. 

The work we did in fiscal year 2006 as well as some of our past work 
contributed greatly to our impressive performance on our results and 
client measures shown in table 1. We significantly surpassed our 
financial benefits target by $12 billion this fiscal year and exceeded 
our annual target for nonfinancial benefits by about 28 percent. Our 
financial benefits of $51 billion represent a $105 return on every 
dollar invested in us, and the more than 1,300 nonfinancial benefits 
resulting from our work helped to improve the efficiency and 
effectiveness of government programs that serve the public. In 
addition, we exceeded our targets for past recommendations implemented 
and new products with recommendations by 2 percentage points and 5 
percentage points, respectively. 

Table 1: Agencywide Summary of Annual Measures and Targets: 

Performance Measure: Results: Financial benefits (dollars in billions); 
2002 Actual: $37.7 billion; 
2003 Actual: $35.4 billion; 
2004 Actual: $44.0 billion; 
2005 Actual: $39.6 billion; 
2006: Target: $39.0 billion; 
2006: Actual: $51.0 billion; 
Met/Not Met: Met; 
2007 Target: $40.0 billion. 

Performance Measure: Results: Nonfinancial benefits; 2002 Actual: 906; 
2003 Actual: 1,043; 
2004 Actual: 1,197; 
2005 Actual: 1,409; 
2006: Target: 1,050; 
2006: Actual: 1,342; 
Met/Not Met: Met; 
2007 Target: 1,100. 

Performance Measure: Results: Past recommendations implemented; 2002 
Actual: 79%; 
2003 Actual: 82%; 
2004 Actual: 83%; 
2005 Actual: 85%; 
2006: Target: 80%; 
2006: Actual: 82%; 
Met/Not Met: Met; 
2007 Target: 80%. 

Performance Measure: Results: New products with recommendations; 2002 
Actual: 53%; 
2003 Actual: 55%; 
2004 Actual: 63%; 
2005 Actual: 63%; 
2006: Target: 60%; 
2006: Actual: 65%; 
Met/Not Met: Met; 
2007 Target: 60%. 

Performance Measure: Client: Testimonies; 2002 Actual: 216; 
2003 Actual: 189; 
2004 Actual: 217; 
2005 Actual: 179; 
2006: Target: 210; 
2006: Actual: 240; 
Met/Not Met: Met; 
2007 Target: 185. 

Performance Measure: Client: Timeliness[A]; 2002 Actual: N/A[B]; 
2003 Actual: N/A; 
2004 Actual: 89%; 
2005 Actual: 90%; 
2006: Target: 98%; 
2006: Actual: 92%; 
Met/Not Met: Not met; 
2007 Target: 95%[C]. 

Performance Measure: People: New hire rate; 2002 Actual: 96%; 
2003 Actual: 98%; 
2004 Actual: 98%; 
2005 Actual: 94%; 
2006: Target: 97%; 
2006: Actual: 94%; 
Met/Not Met: Not met; 
2007 Target: 95%[D]. 

Performance Measure: People: Acceptance rate; 2002 Actual: 81%; 
2003 Actual: 72%; 
2004 Actual: 72%; 
2005 Actual: 71%; 
2006: Target: 75%; 
2006: Actual: 70%; 
Met/Not Met: Not met; 
2007 Target: 72%[D]. 

Performance Measure: People: Retention rate: with retirements; 2002 
Actual: 91%; 
2003 Actual: 92%; 
2004 Actual: 90%; 
2005 Actual: 90%; 
2006: Target: 90%; 
2006: Actual: 90%; 
Met/Not Met: Met; 
2007 Target: 90%[D]. 

Performance Measure: People: Retention rate: Without retirements; 2002 
Actual: 97%; 
2003 Actual: 96%; 
2004 Actual: 95%; 
2005 Actual: 94%; 
2006: Target: 94%; 
2006: Actual: 94%; 
Met/Not Met: Met; 
2007 Target: 94%[D]. 

Performance Measure: People: Staff development; 2002 Actual: 71%; 
2003 Actual: 67%; 
2004 Actual: 70%; 
2005 Actual: 72%; 
2006: Target: 74%; 
2006: Actual: 76%; 
Met/Not Met: Met; 
2007 Target: 75%. 

Performance Measure: People: Staff utilization; 2002 Actual: 67%; 
2003 Actual: 71%; 
2004 Actual: 72%; 
2005 Actual: 75%; 
2006: Target: 75%; 
2006: Actual: 75%; 
Met/Not Met: Met; 
2007 Target: 78%. 

Performance Measure: People: Leadership; 2002 Actual: 75%; 
2003 Actual: 78%; 
2004 Actual: 79%; 
2005 Actual: 80%; 
2006: Target: 80%; 
2006: Actual: 79%; 
Met/Not Met: Not met; 
2007 Target: 80%. 

Performance Measure: People: Organizational climate; 2002 Actual: 67%; 
2003 Actual: 71%; 
2004 Actual: 74%; 
2005 Actual: 76%; 
2006: Target: 75%; 
2006: Actual: 73%; 
Met/Not Met: Not met; 
2007 Target: 76%. 

Performance Measure: Internal operations[E]: Help get job done; 2002 
Actual: N/A; 
2003 Actual: 3.98; 
2004 Actual: 4.01; 
2005 Actual: 4.10; 
2006: Target: 4.00; 
2006: Actual: N/A; 
Met/Not Met: N/A; 
2007 Target: 4.00. 

Performance Measure: Internal operations[E]: Quality of work life; 2002 
Actual: N/A; 
2003 Actual: 3.86; 
2004 Actual: 3.96; 
2005 Actual: 3.98; 
2006: Target: 4.00; 
2006: Actual: N/A; 
Met/Not Met: N/A; 
2007 Target: 4.00. 

Source: GAO. 

Note: Information explaining all of the measures included in this table 
appears in the Data Quality and Program Evaluations section in part II 
of this report. 

[A] Since fiscal year 2004 we have collected data from our client 
feedback survey on the quality and timeliness of our products, and in 
fiscal year 2006 we began to use the independent feedback from this 
survey as a basis for determining our timeliness. 

[B] N/A indicates that the data are not available yet or are not 
applicable because we did not collect the data during this period. 

[C] Our fiscal year 2007 target for timeliness shown above differs from 
the target we reported for this measure in our fiscal year 2007 
performance budget in January 2006. Specifically, we decreased our 
timeliness target by 3 percentage points to create a challenging target 
given our new method for calculating this measure. 

[D] Our fiscal year 2007 targets for the first four people measures 
shown above differ from the targets we reported for these measures in 
our fiscal year 2007 performance budget in January 2006. Specifically, 
we lowered the new hire rate target by 2 percentage points and the 
acceptance rate target by 3 percentage points and decreased by 1 
percentage point each of the targets associated with retention rate. We 
made these adjustments on the basis of our past performance and future 
budget projections. 

[E] For our internal operations measures, we will report actual data 
for fiscal year 2006 once data from our November 2006 internal customer 
satisfaction survey have been analyzed. 

[End of table] 

We believe we served the Congress very well during fiscal year 2006. 
Our senior executives delivered testimony at 240 hearings, exceeding 
our target of 210 by 14 percent. Many of these testimonies focused on 
fraudulent activity and mismanagement associated with the Hurricane 
Katrina relief effort, the global war on terrorism, and information 
security weaknesses (see the list of selected testimony issues later in 
this report). Though we missed our timeliness target of 98 percent by 6 
percentage points, our performance indicates that 92 percent of 
congressional staff responding to our client feedback survey either 
strongly or generally agreed that our written products were delivered 
on time. We now use our client feedback survey as a basis for our 
timeliness performance measure. It is an electronic survey completed by 
a sample of our congressional clients who requested our testimonies and 
significant products. We discuss the client feedback survey in detail 
part II of this report. 

Concerning our eight people measures, we met or exceeded our targets 
for four of them--retention rate with retirements, retention rate 
without retirements, staff development, and staff utilization--but did 
not meet the remaining four measures--new hire rate, acceptance rate, 
leadership, and organizational climate. We missed our target of 97 
percent for new hire rate by 3 percentage points because we were unable 
to fill the number of positions we had planned for. Similarly, fewer 
prospective employees accepted our job offers than we anticipated, 
which prevented us from meeting our acceptance rate target by 5 
percentage points. We missed our leadership and organizational goals by 
1 percentage point and 2 percentage points, respectively. 

In fiscal year 2006, we used two new performance measures to assess our 
performance related to how well our internal administrative services 
help employees get their jobs done or improve employees' quality of 
work life. These measures are directly related to our goal 4 strategic 
objectives of continuously enhancing our business and management 
processes and becoming a professional services employer of choice. We 
use information from our annual customer satisfaction survey to set 
targets and assess our performance for both of these measures. We will 
report actual data for fiscal year 2006 once data from our November 
2006 internal operations survey have been analyzed. There will always 
be a lag in reporting on this measure because our customer feedback 
survey is distributed after we issue the performance and accountability 
report. 

To help us examine trends over time we also look at 4-year averages of 
our actual performance for our results and client measures except the 
percentage of past recommendations implemented--because it is a 
composite that is drawn from a number of years rather than an annual 
percentage--and timeliness--because we have no trend data for our 
current timeliness measure. Calculating 4-year rolling averages for the 
other measures minimizes the effect of an atypical result in any given 
year. We consider this calculation, along with other factors, when we 
set our performance targets. Table 2 shows that from fiscal year 2002 
through fiscal year 2006 financial and nonfinancial benefits increased 
steadily along with the percentage of new products with 
recommendations. The average number of testimonies, on the other hand, 
declined from fiscal year 2003 through fiscal year 2004, but has 
increased in fiscal years 2005 and 2006. When we set our fiscal year 
2007 target for financial benefits, we considered the rolling averages 
for this measure and the fact that federal agencies are facing serious 
budget constraints that could affect their ability to implement 
recommendations we made for improving their programs. We therefore set 
our fiscal year 2007 target between our fiscal year 2006 and 2007 
rolling averages. For our nonfinancial benefits measure, we tried to 
set a target for fiscal year 2007 that is challenging but that does not 
encourage staff to develop recommendations simply to meet a higher 
agencywide target each year. 

Table 2: Four-Year Rolling Averages for Selected GAO Measures: 

Performance measure: Results: Financial benefits(billions); 2002: $26.9 
billion; 
2003: $30.7 billion; 
2004: $35.9 billion; 
2005: $39.2 billion; 
2006: $43.0 billion. 

Performance measure: Results: Nonfinancial benefits; 2002: 775; 
2003: 884; 
2004: 986; 
2005: 1,139; 
2006: 1,248. 

Performance measure: Results: New products with recommendations; 2002: 
42%; 
2003: 48%; 
2004: 54%; 
2005: 58%; 
2006: 61%. 

Performance measure: Client: Testimonies; 2002: 215; 
2003: 205; 
2004: 193; 
2005: 200; 
2006: 206. 

Source: GAO. 

[End of table] 

Though we consider our 4-year rolling averages and our past performance 
when setting our target for the number of hearings at which our senior 
executives testify, we base our testimonies target largely on the 
cyclical nature of the congressional calendar. Our experience has shown 
that during the fiscal year in which an election occurs, generally the 
Congress holds fewer hearings which provide fewer opportunities for us 
to be invited to testify. We believe this decrease in the number of 
hearings occurs because the congressional members are reorganizing 
during the months after the election. We therefore set our fiscal year 
2007 target lower than our past and average performance in anticipation 
of fewer opportunities to testify at congressional hearings. 

Focusing on Results: 

Focusing on outcomes and the efficiency of the processes needed to 
achieve them is fundamental to accomplishing our mission. The following 
four annual measures--financial benefits, nonfinancial benefits, past 
recommendations implemented, and new products containing 
recommendations--indicate that we have fulfilled our mission and 
delivered results that benefit the nation. 

Financial Benefits and Nonfinancial Benefits: 

We describe many of the results produced by our work as either 
financial or nonfinancial benefits. Both types of benefits result from 
our efforts to provide information to the Congress that helped to (1) 
change laws and regulations, (2) improve services to the public, and 
(3) promote sound agency and governmentwide management. In many cases, 
the benefits we claimed in fiscal year 2006 are based on work we did in 
past years because it often takes the Congress and agencies time to 
implement our recommendations or to act on our findings. 

To claim either type of benefit, our staff must document the connection 
between the benefits reported and the work that we performed. 

Financial Benefits: 

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

* business operations and activities; 

* the structure of federal programs; or: 

* entitlements, taxes, or user fees. 

For example, financial benefits could result if the Congress were to 
reduce the annual cost of operating a federal program or lessen the 
cost of a multiyear program or entitlement. Financial benefits could 
also result from increases in federal revenues--because of changes in 
laws, user fees, or asset sales--that our work helped to produce. 

In fiscal year 2006, our work generated about $51 billion in financial 
benefits (see fig. 4), exceeding our target by about 31 percent. Of the 
total amount documented, about $27 billion (or approximately 53 
percent) resulted from changes in laws or regulations (see fig. 5). 

Figure 4: Financial Benefits GAO Recorded in Fiscal Year 2006: 

[See PDF for Image] - graphic text. 

Bar graph with six items: 

2002 Actual: $37.7 billion; 
2003 Actual: $35.4 billion; 
2004 Actual: $44.0 billion; 
2005 Actual: $39.6 billion; 
2006 Target: $39.0 billion; 
2006 Actual: $51.0 billion. 

Source: GAO. 

[End of Figure] 

Figure 5: Types of Financial Benefits Recorded in Fiscal Year 2006 from 
Our Work: 

[See PDF for Image] - graphic text: 

Pie chart with three slices, representing a total of $51 billion in 
financial benefits. 

Information GAO provided to the Congress resulted in statutory or 
regulatory changes: $27.0 billion (53.0%); 

Agencies acted on GAO information to improve services to the public: 
$10.0 billion (19.5%); 

Core business processes improved at agencies and governmentwide 
management reforms advanced by GAO's work: $14.0 billion (27.5%). 

Source: GAO. 

[End of Figure] 

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

To document financial benefits, our staff complete reports documenting 
accomplishments that are linked to specific products or actions. All 
accomplishment reports for financial benefits are documented and 
reviewed by (1) another GAO staff member not involved in the work and 
(2) a senior executive in charge of the work. Also, a separate unit, 
our Quality and Continuous Improvement (QCI) office, reviews all 
financial benefits and approves benefits of $100 million or more, which 
amounted to 96 percent of the total dollar value of benefits recorded 
in fiscal year 2006. Our Office of Inspector General (IG) also 
performed an independent review of accomplishment reports claiming 
benefits of $100 million or more in fiscal year 2006. 

Figure 6 lists several of our major financial benefits for fiscal year 
2006 and briefly describes some of our work contributing to financial 
benefits. 

Figure 6: GAO's Selected Major Financial Benefits Reported in Fiscal 
Year 2006: 

Description: Ensured continued monetary benefits from federal spectrum 
auctions. In 1993 the Congress provided the Federal Communications 
Commission (FCC) authority to use auctions to assign certain spectrum 
licenses, and since then the FCC has conducted 59 auctions that have 
generated over $14.5 billion for the U.S. Treasury. However, critics of 
these auctions asserted, among other things, that auctions raised 
consumer prices, slowed infrastructure deployment, and distorted 
competition. The FCC's auction authority was scheduled to expire on 
September 30, 2007. We reported that auctions had little to no negative 
impact on the wireless industry and are more effective than previous 
assignment mechanisms. We therefore recommended that the Congress 
consider extending the FCC's auction authority beyond the scheduled 
expiration date, which it acted on in 2006. Additionally, the Congress 
established December 31, 2006, as the target date for the completion of 
the digital television (DTV) transition and eventual auction of a 
substantial portion of this spectrum --however, this date could be 
extended if an insufficient number of households adopt DTV 
technologies. We reported in 2002 that the DTV transition would be 
unlikely to occur in 2006 and at the request of the Congress, we 
examined the cost of a subsidy program for DTV technologies to speed 
the DTV transition. In 2005, we testified and provided information on 
(1) the potential cost of a DTV technologies program under various 
scenarios and (2) issues and complexities in the administration of a 
subsidy program. Using much of our work during its deliberations on 
these issues, the Congress subsequently passed legislation that among 
other things, (1) sanctioned a DTV subsidy program and (2) extended the 
FCC's auction authority until 2011. The Congressional Budget Office 
projects a net savings of $7.2 billion from 2006 through 2010, which 
has a net present value of about $6.1 billion. (Goal 1); Amount: $6.1 
billion. 

Description: Encouraged DOD to identify and reduce unobligated funds in 
the military services' operations and maintenance budget. DOD estimates 
that in past years the Congress has reduced its operations and 
maintenance accounts by an average of almost $200 million a year on the 
basis of our unobligated balance analyses. Therefore, to address the 
persistent problem of unobligated balances and to protect DOD 
resources, DOD reduced by about $4.3 billion the military services' 
operations and maintenance baseline program at the appropriation level 
for fiscal years 2007 through 2011 using a methodology similar to the 
one we used to identify unobligated balances. DOD officials stated that 
they took this action because they would rather make the adjustments 
themselves than have the Congress make reductions based on our annual 
analyses. The net present value of the $4.3 billion reduction by DOD is 
about $3.9 billion. (Goal 2); 
Amount: $3.9 billion. 

Description: Recommended payment methods that cut Medicare costs for 
durable medical equipment, orthotics, and prosthetics. Medicare's 
supplementary medical insurance program (Medicare Part B) spent almost 
$7.8 billion for durable medical equipment, prosthetics, orthotics, and 
supplies in 2002 on behalf of its beneficiaries. For most of these 
items, Medicare payments are primarily based on historical charges from 
the mid-1980s, adjusted for inflation in some years, rather than market 
prices. We have repeatedly reported that Medicare payments for some 
medical equipment and supplies are out of line with actual market 
prices. This can occur when providers' costs for equipment and supplies 
have declined over time as competition and efficiencies have increased. 
We suggested several options to the Congress to better align Medicare 
fees with market prices, such as giving the Centers for Medicare & 
Medicaid Services (CMS) authority to conduct competitive bidding for 
these items. The Medicare Prescription Drug, Improvement, and 
Modernization Act of 2003 requires CMS to implement competitive 
acquisition of durable medical equipment, off-the-shelf orthotics, and 
supplies in 10 of the largest metropolitan statistical areas in 2007, 
80 of the largest areas in 2009, and in other areas thereafter. CMS can 
use information on the amounts paid in competitive acquisition areas to 
adjust Medicare payments in other localities. The Congressional Budget 
Office estimated that competitive bidding and the other changes to 
payment methods for durable medical equipment, orthotics, prosthetics, 
and supplies would result in a net reduction in Medicare spending of 
$6.8 billion from fiscal years 2005 through 2013. The Congressional 
Budget Office's estimate would result in a present value financial 
benefit to the Supplementary Medical Insurance Trust Fund of $2.972 
billion for fiscal year 2005 through fiscal year 2009. After 
subtracting estimated costs, the net present value of the total 
financial benefit is $2.905 billion. (Goal 1); 
Amount: $2.9 billion. 

Description: Helped to ensure that certain USPS retirement-related 
benefits would be funded. The Office of Personnel Management (OPM) 
analyzed the funding of USPS's retirement plans and reported in 2002 
that the current level of pension fund contributions would result in a 
surplus of funds and that this surplus would adequately cover future 
pension benefit obligations. At the request of the Congress, we 
reviewed this analysis and a proposal by the administration to change 
the funding formula. We emphasized to the Congress that even though 
USPS had projected a funds surplus, at the time we conducted our review 
USPS had not yet funded $40 billion to $50 billion in postretirement 
health benefits. In response, the Congress passed Pub. L. No. 108-018, 
the Postal Civil Service Retirement System Funding Reform Act of 2003, 
which, among other things, required that any reduction in USPS's annual 
pension fund after 2005 resulting from changes to the funding formula 
be held in an escrow account. The Congress wanted the funds made 
available from any pension payment reductions to be used to address 
USPS's unfunded postretirement health obligations. In 2005, USPS 
determined that it would not generate enough revenue in 2006 to fully 
fund the $3.1 billion escrow requirement for that fiscal year. USPS 
responded by raising postal rates effective January 2006 solely to fund 
the escrow requirement. This action by USPS avoided substantial costs 
to the federal government in the form of appropriations that would have 
been used to cover the escrow shortfall. Raising rates to fund the 
escrow account is projected to result in additional revenue during 
fiscal year 2006 that has a net present value of about $2.2 billion. 
(Goal 3); 
Amount: $2.2 billion. 

Description: Identified recoverable costs for the Tennessee Valley 
Authority (TVA). In past years, we reported that TVA--an independent 
federal government corporation that among other things, provides the 
public with electricity produced by several dams constructed in the 
Tennessee Valley area--had far greater financing and deferred asset 
costs than its competitors. TVA's financial condition gives it little 
flexibility to meet potential future competitive challenges, threatens 
its long- term viability, and places the federal government at 
financial risk. We also reported that the costs associated with TVA's 
three mothballed nuclear units (referred to in our work as deferred 
assets) did not represent viable construction projects and concluded 
that generally accepted accounting principles required TVA to begin 
immediately writing off and recovering the cost of these assets. We 
identified several options for improving TVA's financial condition, 
including raising its electricity rates and using the additional cash 
generated from the rate increase to reduce borrowing or pay down debt. 
In July 2005, TVA announced a rate increase of 7.5 percent effective 
October 1, 2005. This action by TVA will avoid substantial costs to the 
federal government in the form of appropriations that would have to be 
used to address TVA's fiscal challenges. TVA projects that the 7.5 
percent rate increase will provide about $524 million in additional 
annual revenue beginning in fiscal year 2006 and will enable it to 
reduce its debt and amortize the $3.9 billion deferred asset balance 
from one of its mothballed nuclear plants. This financial benefit 
pertains to the first 5 years of the rate increase. The net present 
value of the associated increase in federal revenues is about $1.8 
billion over 5 years. (Goal 3); 
Amount: $1.8 billion. 

Description: Helped to increase collections of civil debt. In July 
2001, we reported that the Department of Justice's (Justice) financial 
litigation units, which are responsible for both criminal and civil 
debt collection, did not have adequate procedures for enforcing 
collections. We made a number of recommendations to the Attorney 
General to help the units improve criminal debt collections and stem 
the growth in reported uncollected criminal debt. One such 
recommendation was to reinforce policies and procedures for entering 
cases into debt tracking systems; filing liens; issuing demand letters, 
delinquent notices, and default notices; performing asset discovery 
work; and using other enforcement techniques. These policies and 
procedures are applicable to the units' civil as well as criminal debt 
collection efforts. In January 2002, Justice completed actions to 
address this recommendation. In conjunction with implementing our 
recommendation, Justice has also provided training materials to unit 
staff involved in debt collection. These actions helped it to increase 
collections of civil debt by about $683.8 million in fiscal year 2002, 
and $719.4 million in fiscal year 2003. The net financial benefit has a 
present value of about $1.58 billion. (Goal 3); 
Amount: $1.6 billion. 

Description: Encouraged the Department of Housing and Urban Development 
(HUD) to take actions to reduce improper payments. For many years HUD 
had done very little to oversee third-party entities (such as local 
public housing agencies and property owners) that are responsible for 
administering its rental assistance programs, including determining 
subsidy amounts and household eligibility. HUD responded to the high- 
risk designation by establishing the Rental Housing Integrity 
Improvement Project in the spring of 2001. As part of the Rental 
Housing Integrity Improvement Project initiative, HUD developed annual 
goals for reducing improper payments from the baseline fiscal year 2000 
level: 15 percent by fiscal year 2003 and 30 percent by fiscal year 
2004. HUD implemented on-site reviews of program administrators--a key 
component of the Rental Housing Integrity Improvement Project 
initiative--starting in June 2002. Other significant actions initiated 
under the Rental Housing Integrity Improvement Project included 
automating the process used to verify tenant-reported income, offering 
additional training to program administrators, and improving program 
guidance. HUD has met its goals for reducing improper payments and 
attributed this reduction to the aggressive steps it has taken under 
the Rental Housing Integrity Improvement Program initiative. The amount 
of financial benefit is the reduction in the estimated improper 
payments in fiscal years 2003 and 2004 relative to those in fiscal year 
2000. The computed reductions were $658 million in fiscal year 2003 and 
$660 million in fiscal year 2004--a total of $1.318 billion with a net 
present value of $1.43 billion. (Goal 1); 
Amount: $1.4 billion. 

Description: Supported the Department of Energy's (DOE) efforts to 
reduce its carryover funds. Beginning in its 2001 annual report on 
carryover balances, DOE formally acknowledged our role in helping the 
agency identify, monitor, and reduce its uncosted obligations--funds 
that have been allocated to specific projects, but have not yet been 
spent and are not needed to meet near-term commitments. These uncosted 
obligations are essentially carryover balances that could be used to 
reduce future budget requests. In 1992, we identified (1) uncosted 
obligations as a growing DOE problem and (2) the need for an effective 
system to monitor these funds. Over the years, DOE has developed an 
analytical approach to better identify the portion of its uncosted 
obligations that could be used to offset annual appropriations 
requests, and we have monitored its efforts through our annual review 
of the DOE budget. In 2001, the Congress began working with DOE on how 
to use the carryover balances to offset programmatic costs and reduce 
potential budget requests, and DOE has continued to analyze and provide 
information to the Congress on its reprogramming of carryover balances. 
The appropriation reductions resulting from the congressional actions 
taken in concert with DOE--in response to our work--for fiscal years 
2001 through 2005 are about $1 billion. The implementation costs are 
considered negligible. The net present value is about $1.2 billion. 
(Goal 1); 
Amount: $1.2 billion. 

Source: GAO. 

[End of table] 

Nonfinancial Benefits: 

Many of the benefits that result from our work cannot be measured in 
dollar terms. During fiscal year 2006, we recorded a total of 1,342 
nonfinancial benefits (see fig. 7). 

Figure 7: Nonfinancial Benefits GAO Recorded in Fiscal Year 2006: 

[See PDF for Image]- graphic text: 

Bar graph with six items. 

2002 Actual: 906; 
2003 Actual: 1,043; 
2004 Actual: 1,197; 
2005 Actual: 1,409; 
2006 Targeted: 1,050; 
2006 Actual: 1,342. 

Source: GAO. 

[End of Figure] 

We documented 667 instances where federal agencies used our information 
to improve services to the public, 61 instances where the information 
we provided to the Congress resulted in statutory or regulatory 
changes, and 614 instances where agencies improved core business 
processes or governmentwide reforms as a result of our work. (See fig. 
8.) These actions spanned the full spectrum of issues, from identifying 
the adverse tax impact of combat pay and certain tax credits on low- 
income military families to improving the Department of State's process 
for developing staffing projections for new embassies. In figure 9, we 
provide examples of some of the nonfinancial benefits we claimed as 
accomplishments in fiscal year 2006. The laws that we cite in the first 
section of this figure were passed in fiscal year 2006. 

Figure 8: Types of Nonfinancial Benefits Recorded in Fiscal Year 2006 
from Our Work: 

[See PDF for Image]- graphic text: 

Pie chart with three slices, representing a total of 1,342 nonfinancial 
benefits. 

Core business processes improved at agencies and governmentwide 
management reforms advanced by GAO's work: 614 (46.0%); 

Agencies acted on GAO information to improve services to the public: 
667 (50.0%); 

Information GAO provided to the Congress resulted in statutory or 
regulatory changes: 61 (5.0%). 

Source: GAO. 

Note: Percentages do not add due to rounding. 

[End of Figure] 

Figure 9: GAO's Selected Nonfinancial Benefits Reported in Fiscal Year 
2006: 

Nonfinancial benefits that helped to change laws: 

Deficit Reduction Act of 2005, Pub. L. No. 109-171: 

Our work is reflected in this law in different ways: 

* Strengthening Medicaid program integrity. Our 2005 work was 
considered in writing the provisions of this act that provided for the 
creation of the Medicaid Integrity Program--which seeks to combat 
fraud, waste, and abuse in the Medicaid program--and specified 
appropriations to fund the program. Consistent with our findings, the 
act also required CMS to devote more staff to combating Medicaid 
provider fraud and abuse; to develop a comprehensive plan for the 
Medicaid Integrity Program every 5 fiscal years; and to report annually 
to the Congress on the use, and the effectiveness of activities 
supporting the use, of the appropriated funds. (Goal 1). 

* Improving oversight of the states' performance under the Temporary 
Assistance for Needy Families (TANF) program. We determined that 
differences in how states define the categories of work that count 
toward meeting the federal work requirements under TANF led to 
inconsistent measurement across states and to work participation data 
that could not be used to compare the performance of states. We also 
found that some states lacked internal controls to help ensure the work 
data were reliable. Congressional staff relied heavily on our report in 
writing provisions of this act that require HHS to provide additional 
direction and oversight regarding how to count and verify TANF work 
participation. (Goal 1). 

* Addressing domestic violence. In 2005, we reported that specifically 
addressing domestic violence is important to ensuring that marriage and 
responsible fatherhood programs address its dangers. We concluded that 
while most of these programs did not address the issues of domestic 
violence explicitly, evidence suggested that these issues should be 
explicitly addressed. Our findings influenced lawmakers to require 
through this act that all entities seeking grants to fund marriage 
promotion and responsible fatherhood programs describe how they will 
address domestic violence. (Goal 1). 

* Improving oversight of schools that are lenders. Congressional 
members cited our report on Federal Family Education Loan Program 
lenders as a catalyst for helping them to enact changes addressing the 
lending, contracting, and compliance practices on which we had 
reported. As a result, critical program measures are now in place to 
cover all school lenders, allowing the Department of Education 
(Education) to assess the adequacy of loan procedures, the financial 
resources of lenders, and the accreditation status of all school 
lenders. (Goal 1). 

Safe and Timely Interstate Placement of Foster Children Act of 2006, 
Pub. L. No. 109-239: 

Our work found that data to assess the timeliness of interstate 
placements of foster children were lacking, and that HHS was not able 
to identify states that may need improvements in their processes or may 
be burdened by other states' requests for assistance with placements. 
Congressional staff stated that our findings played a critical role in 
deliberations on the bill that became this act. Consistent with our 
findings, the act requires a state receiving a request to place a child 
for adoption or foster care to complete a home study within 60 days and 
requires the state making the request to respond within 14 days of 
receiving the home study. In addition, the act authorizes funding for 
an incentive program of $1,500 for every home study completed within 30 
days and requires that state plans for child welfare services include 
reference to state efforts to facilitate orderly and timely intrastate 
and interstate placements. (Goal 1). 

Nonfinancial benefits that helped to improve services to the public: 

Strengthening passport and visa issuance processes: 

Our work led the Department of State (State), in coordination with 
other agencies, to improve passport and visa controls. Thousands of 
names have been added to data systems to prevent persons with 
outstanding federal felony warrants from obtaining passports to leave 
the United States, passport information sharing among law enforcement 
agencies has increased, and staff received additional fraud prevention 
training. Also, State directed overseas posts to strengthen visa 
oversight and improve compliance with internal control requirements to 
ensure the integrity of the visa function; increase information 
sharing, especially regarding visa applicants who may pose security 
risks; and improve visa officers' ability to detect fraudulent visa 
applicants. (Goal 2). 

Identified vulnerabilities in the process to verify personal 
information about new drivers: 

To help make states less vulnerable to identity fraud, we recommended 
that the Social Security Administration (SSA) match drivers license 
verification requests submitted by states with SSA's records of 
deceased Social Security number (SSN) owners. At the time of our 
review, SSA was already matching requests with the names, birth dates, 
and SSNs of living SSN owners. By March 2006, SSA had implemented the 
software needed to modify its batch verification process and had begun 
notifying state agencies when the SSNs they were checking on belonged 
to deceased individuals. (Goal 1). 

Contributed to the increased visibility of a transportation information 
sharing program for seniors: 

We recommended that the Administration on Aging take the lead in 
developing a plan--in consultation with the Coordinating Council--for 
publicizing the Eldercare Locator Service as a central forum for 
sharing information on senior transportation and for reaching out to 
seniors and providers who do not use the Internet. In response, 
Administration on Aging officials developed a multifaceted marketing 
campaign to broaden awareness of the service, especially among special 
target groups such as low-income seniors. In addition, the 
Administration on Aging is working to increase public awareness of the 
service through its partnerships with various community and faith- 
based organizations, businesses, and special interest groups. (Goal 1). 

Identified a problem with untimely pay allowances to deployed soldiers: 

In an April 2005 report, we concluded that deployed military 
servicemembers and their families may face more financial problems 
related to pay than their nondeployed counterparts. We found that 
almost 6,000 servicemembers had experienced delays in obtaining their 
family separation allowance each month during their deployment. As a 
result of our recommendation, DOD's military pay operations 
organizations notified their field staff that the family separation 
allowance process should start immediately once they are notified that 
such a transaction is necessary so that the allowance begins within 30 
days of a servicemember's deployment if it is certain the servicemember 
will be on temporary duty for more than 30 days. (Goal 2). 

Helped to protect the public from exposure to pesticides in tobacco 
products: 

The Department of Agriculture implemented our recommendation to 
periodically review and update the pesticides used on tobacco for which 
the department sets residue limits and conducts test. At the time of 
our review in 2003, the department tested tobacco for 20 pesticides 
using 15 residue limits. The department currently tests domestic and 
imported tobacco for 36 pesticides using 44 residue limits and will 
continue to review and update the list of pesticides it tests for and 
establish residue limits. (Goal 1). 

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

Improved the quality of federal voluntary voting system standards: 

Our work on federal voluntary voting equipment standards, and the 
processes for managing them, identified weaknesses that could impede 
effective management of voting systems throughout their life cycles and 
resulted in recommendations for adding usability and quality assurance 
requirements to the standards. The federal Voluntary Voting System 
Guidelines, issued by the U.S. Election Assistance Commission in 
December 2005, satisfied our recommendations by adding requirements for 
usability (such as voter verification of ballots) and accessibility 
(for persons with visual, hearing, mobility, or other limitations), as 
well as quality assurance provisions for voting system vendors. In 
addition, our work recognized that no federal entity held statutory 
authority for updating the standards and asked the Congress to consider 
explicitly assigning this responsibility. The approval of the 2005 
federal guidelines demonstrated the first time federal voting system 
standards were updated by the commission, under authority granted by 
the Help America Vote Act of 2002. The updated standards will help 
increase citizens' confidence and ease in voting, while the execution 
of federal responsibility for maintaining voting standards increases 
the likelihood that they will be current, complete, relevant, and 
utilized by the states. (Goal 3). 

Highlighted weaknesses in the Federal Aviation Administration's (FAA) 
control over computers and other assets: 

During our audit of FAA we found that the agency lacked adequate 
controls over purchases to ensure that physical assets were recorded 
and accounted for in its property management system. We also observed 
instances where computers were not stored in separate and secured 
storage rooms, which gave employees unlimited access to these assets. 
In the fall of 2003, FAA reemphasized that responsible staff should 
record all newly acquired assets in the agency's property management 
system within 30 days of receipt and subsequently revised its guidance 
to require staff to document their entries in the system within 30 
days. FAA also revised its guidance outlining storage requirements for 
high-risk assets, such as computers and computer-related equipment, and 
established procedures to ensure that only authorized personnel have 
access to secured areas where such items are stored. (Goal 3). 

Strengthened oversight of federal personnel actions: 

In our February 2002 report on conversions of political appointees in 
the federal government from noncareer to career positions, we referred 
17 conversions to OPM for its review and action because the 
circumstances surrounding each case could have given the appearance of 
favoritism or political preference even if proper procedures were 
followed. OPM took a number of actions in 2005 in response to our work, 
such as giving four of the six candidates who were bypassed for 
positions priority consideration for equivalent vacancies. OPM also 
took disciplinary action on two of its employees who handled the 
conversions. (Goal 3). 

Encouraged federal agencies to seek savings on purchase cards: 

We recommended that the Director of the Office of Management and Budget 
(OMB) focus governmentwide management attention on the need to take 
advantage of opportunities to achieve savings on purchase card buys for 
goods and services that support official federal activities. In 2005, 
OMB issued a new appendix to its Circular A-123 to consolidate and 
update governmentwide charge card requirements. It also established 
minimum standards and best practices for management of the government 
charge card program. In related guidance, OMB also directs purchase 
card managers to be aware of any agencywide or multi-agencywide 
contracts that will yield better pricing for their organizations. (Goal 
3). 

Identified improper payments in DOD's travel accounts: 

As part of our audit of internal controls over DOD's centrally billed 
travel accounts, we found that DOD had made potentially improper 
reimbursements on about 27,000 travel claims. These payments were 
improper because the airline tickets that the travelers claimed as 
reimbursable expenses were actually purchased by DOD for the travelers. 
We recommended that DOD periodically issue guidance to its officials 
who approve travel vouchers instructing them on how to determine 
reimbursable airline ticket expenses. (Goal 3). 

Source: GAO. 

[End of table] 

In addition to the nonfinancial benefits claimed in fiscal year 2006 
from our audit work, the Congress and the public also benefited from 
some of our other activities in the following ways: 

* On the basis of our work, we referred a number of issues to agency 
inspectors general and the Internal Revenue Service (IRS) for further 
investigation and follow up. Specifically, we referred to FEMA's 
Inspector General 7,000 cases of possible criminal fraud that occurred 
in the agency's Individuals and Households Program for disaster 
assistance during the aftermath of Hurricane Katrina. We also referred 
to IRS 25 cases involving federal contractors who did not forward 
payroll taxes withheld from their employees and other taxes to IRS and 
15 charities that also engaged in abusive and potentially criminal 
activity related to the federal tax system and the Combined Federal 
Campaign--an annual charity drive that gives federal employees the 
opportunity to contribute to more than 22,000 charities. 

* We issued appropriations law decisions and opinions on, among other 
things, the purposes for which appropriated funds may be used, the 
proper disposition of funds received by the government, and potential 
Antideficiency Act violations. 

* We established a repository of Antideficiency Act reports and 
developed a Web site to make selected information from those reports 
publicly available. The Web site allows congressional members and 
staff, heads of agencies, auditors, inspectors general, other federal 
officers, and the public to monitor federal agency performance and 
compliance with the Antideficiency Act. The Congress amended the 
Antideficiency Act in December 2004, authorizing the Comptroller 
General to establish this repository. The repository will include, for 
example, the Antideficiency Act report filed by Education in fiscal 
year 2006 for improperly using appropriations for the purpose of covert 
propaganda. Its report was in response to our September 2005 opinions 
that Education had engaged in covert propaganda when it produced and 
distributed a prepackaged news story on its No Child Left Behind 
program without identifying Education as the source of the 
communication and when it hired a political commentator to endorse the 
program without identifying that the department had paid for the 
endorsement. In the 2005 opinions, we recommended that Education report 
Antideficiency Act violations because it had no appropriation available 
for purposes of covert propaganda. 

* We handled more than 1,000 protests filed by bidders who challenged 
the way individual federal procurements were conducted or how federal 
contracts were awarded, and we issued merit decisions on more than 400 
protests addressing a wide range of issues involving compliance with, 
and the interpretation of, procurement statutes and regulations. In 
fiscal year 2006, we addressed a number of significant protests 
addressing government contracts associated with the aftermath of 
Hurricane Katrina and the war in Iraq. 

* Several of our attorneys served on the Contract Appeals Board to 
resolve appeals on claims by contractors under contract with the 
Architect of the Capitol involving the Capitol Visitor Center, the West 
Refrigeration Plant Expansion, and the Longworth House Office Building. 

* We issued the third edition of volume II of The Principles of Federal 
Appropriations Law, commonly known as the Red Book. The Red Book is 
considered the primary resource in the federal financial community. 
Topics covered in volume II include the availability of appropriations 
(amount); obligation of appropriations; continuing resolutions; 
liability; and relief of accountable officers, grants and cooperative 
agreements, and guaranteed and insured loans. 

Past Recommendations Implemented: 

One way we measure our effect on improving the government's 
accountability, operations, and services is by tracking the percentage 
of recommendations that we made 4 years ago that have since been 
implemented. At the end of fiscal year 2006, 82 percent of the 
recommendations we made in fiscal year 2002 had been implemented (see 
fig. 10), primarily by executive branch agencies. Putting these 
recommendations into practice will generate tangible benefits for the 
nation in the years ahead. 

Figure 10: Percentage of Past Recommendations Implemented in Fiscal 
Year 2006: 

[See PDF for Image]- graphic text: 

Bar graph with six items. 

Four-year implementation rate: 

2002 Actual: 79%; 
2003 Actual: 82%; 
2004 Actual: 83%; 
2005 Actual: 85%; 
2006 Target: 80%; 
2006 Actual: 82%. 

Source: GAO. 

[End of figure] 

The 82 percent implementation rate for fiscal year 2006 exceeded our 
target for the year by 2 percentage points, exceeding and matching our 
performance in fiscal years 2002 and 2003, respectively. As figure 11 
indicates, agencies need time to act on recommendations. Therefore, we 
assess recommendations implemented after 4 years, the point at which 
experience has shown that if a recommendation has not been implemented, 
it is not likely to be. 

Figure 11: Cumulative Implementation Rate for Recommendations Made in 
Fiscal Year 2002: 

[See PDF for Image]- graphic text: 

Bar graph with four items. 

After 1 year: 14%; 
After 2 years: 31%; 
After 3 years: 46%; 
After 4 years: 82%. 

Source: GAO. 

[End of figure] 

New Products Containing Recommendations: 

This year, about 65 percent of the 672 written products we issued 
(excluding testimonies) contained recommendations. (See fig. 12.) We 
track the percentage of new products with recommendations because we 
want to encourage staff to develop recommendations that when 
implemented by the Congress and agencies, produce financial and 
nonfinancial benefits for the nation. However, by setting our target at 
60 percent, we recognize that our products do not always include 
recommendations and that the Congress and agencies often find such 
informational reports just as useful as those that contain 
recommendations. Our informational reports have the same analytical 
rigor and meet the same quality standards as those with recommendations 
and, similarly, can help to bring about significant financial and 
nonfinancial benefits. Hence, this measure allows us ample leeway to 
respond to requests that result in reports without recommendations. 

Figure 12: Percentage of New Products with Recommendations in Fiscal 
Year 2006: 

[See PDF for Image]- graphic text: 

Bar graph with six items. 

2002 Actual: 53%; 
2003 Actual: 55%; 
2004 Actual: 63%; 
2005 Actual: 63%; 
2006 Target: 60%; 
2006 Actual: 65%. 

Source: GAO. 

[End of figure] 

Focusing on Our Client: 

To fulfill the Congress's information needs, we strive to deliver the 
results of our work orally as well as in writing at a time agreed upon 
with our client. Our performance this year indicates that we assisted 
our client--the Congress--well, by significantly exceeding our target 
on the number of hearings we participated in and delivering many of our 
products on time based on the feedback from our client. 

Testimonies: 

Our clients often invite us to testify on our current and past work 
when it addresses issues that congressional committees are examining 
through the hearing process. During fiscal year 2006, experts from our 
staff testified at 240 congressional hearings covering a wide range of 
complex issues (see fig. 13). For example, our senior executives 
testified on a variety of issues, including freight rail rates, AIDS 
assistance programs, and federal contracting. (A summary of issues we 
testified on by strategic goal in fiscal year 2006 is described after 
figure 13 below.) Over 100 of the hearings where we testified were 
related to high-risk areas and programs, which are discussed later in 
this report. 

In fiscal year 2006, we significantly exceeded our target of 
testimonies at 210 hearings by 14 percent and surpassed our performance 
on this measure over the last 4 years. The Congress asked our 
executives to testify about 30 times this fiscal year on Hurricane 
Katrina issues and about 30 times on issues related to terrorism and 
the Iraq conflict, which helped us to perform exceptionally well in 
this area. 

Figure 13: Testimonies: 

[See PDF for Image]- graphic text: 

Bar graph with six items. 

Hearings at which GAO testified: 

2002 Actual: 216; 
2003 Actual: 189; 
2004 Actual: 217; 
2005 Actual: 179; 
2006 Target: 210; 
2006 Actual: 240. 

Source: GAO. 

[End of figure] 

Selected Testimony Issues: Fiscal Year 2006: 

Goal 1: 
Address Challenges to the Well-Being and Financial Security of the 
American people: 

* Health savings accounts; 
* Guardianships that protect incapacitated seniors; 
* Lake Pontchartrain hurricane protection project; 
* Funds to first responders for 9/11 health problems; 
* Immigration enforcement at worksites; 
* Future air transportation system; 
* Nursing home care for veterans; 
* Passenger rail security issues; 
* Freight railroad rates; 
* AIDS drug assistance programs; 
* Federal Housing Administration reforms; 
* Improving intermodal transportation; 
* Hanford nuclear waste treatment plant; 
* Evaluations of supplemental educational services; 
* Factors affecting gasoline prices; 
* Telecommunication spectrum reform; 
* H-1B visa program; 
* Federal crop insurance program. 

Goal 2: 
Respond to Changing Security Threats and the Challenges of 
Globalization: 

* A comprehensive strategy to rebuild Iraq; 
* Deploying radiation detection equipment in other countries; 
* Protecting military personnel from unscrupulous financial products; 
* Sensitive information at DOD and DOE; 
* Hurricane Katrina preparedness, response, and recovery; 
* Alternative mortgage products; 
* Global War on terrorism costs; 
* Transportation Security Administration (TSA) Secure Flight Program; 
* DOD's business systems modernization; 
* U.S. tactical aircraft; 
* National Capital Region Homeland Security Strategic Plan; 
* Polar-orbiting operational environmental satellites; 
* Worldwide AIDS relief plan; 
* Financial stability and management of the National Flood Insurance 
Program; 
* Information security laws; 
* Procurement controls at the United Nations. 

Goal 3: 
Help Transform the Federal Government's Role and How It Does Business: 

* Contract management challenges rebuilding Iraq; 
* DOD's financial and business management transformation; 
* Business tax reform; 
* Astronaut exploration vehicle risks; 
* Improving federal financial management governmentwide; 
* Long-term fiscal challenges; 
* Federal contracting during disasters; 
* Improving tax compliance to reduce tax gap; 
* Protecting the privacy of personal information; 
* DOD acquisition incentives; 
* Decennial census costs; 
* Information security weaknesses at the Department of Veterans' 
Affairs; 
* Improper federal payments for Hurricane Katrina relief; 
* Strengthening OPM's ability to lead human capital reform; 
* Public/Private recovery plan for the Internet; 
* Tax system abuses by General Services Administration contractors; 
* Compensation for federal executives and judges. 

Timeliness: 

To be useful to the Congress, our products must be available when our 
client needs them. In fiscal year 2006, we used the results of our 
client feedback survey as a barometer for how well we are getting our 
products to our congressional clients when they need the information. 
We used this survey as the primary data source for our external 
timeliness measure because the responses come directly from our 
clients. As shown in figure 14, in fiscal year 2006 we missed our 
timeliness target by 6 percentage points. We pilot tested this survey 
in 2002 and 2003 and began collecting actual data in 2004. 

We tally responses from the survey we send to key staff working for the 
requesters of our testimony statements and our more significant written 
products (e.g., engagements assigned an interest level of "high" by our 
senior management[Footnote 4] and those requiring an investment of 500 
staff days or more). Each survey asks the client whether the product 
was delivered on time. Because our products often have multiple 
requesters, we often survey more than one congressional staff person 
per product. In fiscal year 2006, we sought feedback on more than 50 
percent of the written products (including all testimonies) we issued 
that year and had a 28 percent response rate from the congressional 
staff surveyed. We received comments from one or more people for 53 
percent of the products for which we sent surveys. Overall, 92 percent 
of those responding to the survey either strongly or generally agreed 
that our products were delivered on time. 

Figure 14: Timeliness: 

[See PDF for Image]- graphic text: 

Bar graph with six items. 

Percentage of products on time. 

2002 Actual: N/A; 
2003 Actual: N/A; 
2004 Actual: 89%; 
2005 Actual: 90%; 
2006 Target: 98%; 
2006 Actual: 92%. 

Source: GAO. 

Note: We pilot tested our client feedback survey beginning in March 
2002 and collected actual data on our client's satisfaction with the 
timeliness of our products in fiscal year 2004. 

[End of Figure] 

Focusing on Our People: 

We could not have performed as well as we did in fiscal year 2006 
without the support and commitment of our highly professional, 
multidisciplinary staff. Our ability to hire, develop, retain, and lead 
staff is critical to fulfilling our mission of serving the Congress and 
the American people. 

Since 2002, we have refined our processes for measuring how well we 
manage our human capital and have benchmarked our performance in this 
area. In fiscal year 2006, we met four of our eight measures--only 
slightly missing our target for leadership and organizational climate 
by 1 and 2 percentage points, respectively. All eight measures are 
directly linked to our goal 4 strategic objective of becoming a 
professional services employer of choice. For more information about 
our people measures, see Verifying and Validating Performance Data in 
part II of this report. 

New Hire Rate and Acceptance Rate: 

Our new hire rate is the ratio of the number of people hired to the 
number we planned to hire. Annually, we develop a workforce plan that 
takes into account projected workload changes, as well as other changes 
such as retirements, other attrition, promotions, and skill gaps. The 
workforce plan for the upcoming year specifies the number of planned 
hires and, for each new hire, specifies the pay plan, skill type, and 
level. The plan is conveyed to each of our units to guide hiring 
throughout the year. Progress toward achieving the workforce plan is 
monitored monthly by the Chief Operating Officer and the Chief 
Administrative Officer. Adjustments to the workforce plan are made 
throughout the year, if necessary, to reflect changing needs and 
conditions. In fiscal year 2006, our adjusted plan was to hire 450 
staff. However, we were only able to bring on board 392 staff by year- 
end. Of the 450 staff positions, 33 positions were carried over to 
fiscal year 2007 because the applicants could not start until the new 
fiscal year. 

Our acceptance rate measure is a proxy for GAO's attractiveness as an 
employer and an indicator of our competitiveness in bringing in new 
talent. It is the ratio of the number of applicants accepting offers to 
the number of offers made. Table 3 shows that we missed the targets we 
set for new hire rate and acceptance rate by 3 percentage points and 5 
percentage points, respectively. Our calculations for each of these 
measures do not include offers extended to applicants for fiscal year 
2006 vacancies who accepted but will not report for duty until the 
first quarter of fiscal year 2007. In addition, we made a conscious 
decision during the summer to adjust our hiring targets for fiscal year 
2007. This was done because our future budget forecast indications were 
that we may not be able to support hiring at levels we requested in our 
fiscal year 2007 budget request. We therefore reduced the number of new 
hires in the summer to put us in a better position at the end of fiscal 
year 2006 for managing full-time equivalents (FTE) into the next fiscal 
year until the Congress appropriates funds for our fiscal year 2007 
budget. (For more about our recruitment strategy and performance in 
fiscal year 2006, see app. 1.) 

Table 3: Actual Performance and Targets Related to Our New Hire Rate 
and Acceptance Rate Measures: 

Performance measures: New hire rate; 
2002 Actual: 96%; 
2003 Actual: 98%; 
2004 Actual: 98%; 
2005 Actual: 94%; 
2006 Target: 97%; 
2006 Actual: 94%. 

Performance measures: Acceptance rate; 2002 Actual: 81%; 
2003 Actual: 72%; 
2004 Actual: 72%; 
2005 Actual: 71%; 
2006 Target: 75%; 
2006 Actual: 70%. 

Source: GAO. 

Notes: The fiscal year 2006 percentage for our new hire rate (actual) 
does not include offers extended to applicants for fiscal year 2006 
vacancies who accepted but will not report for duty until the first 
quarter of fiscal year 2007. In addition, we made a conscious decision 
during the summer to adjust our hiring targets. This was done because 
our future budget forecast indications were that we may not be able to 
support hiring at levels we requested in our fiscal year 2007 requests. 
We reduced hires in the summer to put us in a better position at the 
end of the fiscal year for managing FTEs into fiscal year 2007 until 
our budget situation was better known. For our fiscal year 2006 
acceptance rate (actual), the number of offers excludes 24 offers made 
for staff reporting in fiscal year 2007. 

[End of table] 

Retention Rate: 

We continuously strive to make GAO a place where people want to work. 
Once we have made an investment in hiring and training people, we would 
like them to stay with us. This measure is one indicator of whether we 
are attaining this objective. We calculate this measure by taking 100 
percent of the on-board strength minus the attrition rate, where 
attrition rate is defined as the number of separations divided by the 
average on-board strength. We calculate this measure with and without 
retirements. Table 4 shows that we met each of our retention rate 
targets in fiscal year 2006. Our actual retention rate including 
retirements has been relatively flat over the last 5 years, and our 
actual retention rate excluding retirements has generally declined by 1 
percentage point each year during this period. 

Staff Development and Utilization, Leadership, and Organizational 
Climate: 

One way that we measure how well we are supporting our staff and 
providing an environment for professional growth and improvement is 
through our annual employee feedback survey. This Web-based survey, 
which is conducted by an outside contractor to ensure the 
confidentiality of every respondent, is administered to all of our 
employees once a year. Through the survey, we encourage our staff to 
indicate what they think about GAO's overall operations, work 
environment, and organizational culture and how they rate our managers-
-from their immediate supervisors to the Executive Committee--on key 
aspects of their leadership styles. The survey consists of over 100 
questions. 

In fiscal year 2006, 80 percent of our employees completed the survey, 
and we met our target for two of the four measures and slightly missed 
the remaining two targets. We first conducted this survey in fiscal 
year 2002, and since then favorable responses to our staff utilization 
question increased steadily and leveled off in fiscal year 2006. 
Favorable responses to our leadership question also increased from 
fiscal years 2002 through 2005, dropping only slightly in fiscal year 
2006 (see table 5). In fiscal year 2006, we also revised some of the 
demographic questions to match the categories used by the Partnership 
for Public Service to determine our standing in the annual Best Places 
to Work in the Federal Government rankings. We were cited as one of 
seven federal agencies included in an article entitled "Great Places to 
Work" published in the November 2005 issue of Washingtonian magazine. 

Table 4: Actual Performance and Targets Related to Our Retention Rate 
Including and Excluding Retirements: 

Performance measures: Retention rate: With retirements; 2002 Actual: 
91%; 
2003 Actual: 92%; 
2004 Actual: 90%; 
2005 Actual: 90%; 
2006 Target: 90%; 
2006 Actual: 90%. 

Performance measures: Retention rate: Without retirements; 2002 Actual: 
97%; 
2003 Actual: 96%; 
2004 Actual: 95%; 
2005 Actual: 94%; 
2006 Target: 94%; 
2006 Actual: 94%. 

Source: GAO. 

[End of table] 

Table 5: Actual Performance and Targets Related to Our Measures of 
Employee Satisfaction with Staff Development, Staff Utilization, 
Leadership, and Organizational Climate: 

Performance Measures: Staff development; 2002 Actual: 71%; 
2003 Actual: 67%; 
2004 Actual: 70%; 
2005 Actual: 72%; 
2006 Target: 74%; 
2006 Actual: 76%. 

Performance Measures: Staff utilization; 2002 Actual: 67%; 
2003 Actual: 71%; 
2004 Actual: 72%; 
2005 Actual: 75%; 
2006 Target: 75%; 
2006 Actual: 75%. 

Performance Measures: Leadership; 
2002 Actual: 75%; 
2003 Actual: 78%; 
2004 Actual: 79%; 
2005 Actual: 80%; 
2006 Target: 80%; 
2006 Actual: 79%. 

Performance Measures: Organizational Climate; 2002 Actual: 67%; 
2003 Actual: 71%; 
2004 Actual: 74%; 
2005 Actual: 76%; 
2006 Target: 75%; 
2006 Actual: 73%. 

Source: GAO. 

[End of table] 

Focusing on Our Internal Operations: 

Our mission and people are supported by our internal administrative 
services, including information management, building management, 
knowledge services, human capital, financial management, and other 
services. In fiscal year 2006, we used two new performance measures to 
assess our performance related to how well our internal administrative 
services help employees get their jobs done or improve employees' 
quality of work life. These measures are directly related to our goal 4 
strategic objectives of continuously enhancing GAO's business and 
management processes and becoming a professional services employer of 
choice. We use information from our annual customer satisfaction survey 
to set targets and assess our performance for both of these measures, 
which are shown in table 6 along with baseline data that we recorded 
for them in fiscal year 2003 and fiscal year 2004. The first measure 
encompasses 21 services that help employees get their jobs done, such 
as Internet access, desktop computer equipment, voice and video 
communication systems, shared service centers for copying and courier 
assistance, travel services, and report production. The second measure 
encompasses another 10 services that affect quality of work life, such 
as assistance related to pay and benefits, building security and 
maintenance, and workplace safety and health. Using survey responses, 
we calculate a composite score for each service category that reflects 
employee ratings for (1) satisfaction with the service and (2) 
importance of the service. (For a more in-depth explanation of this 
measure see table 16 in Part II of this report.) 

Table 6: Actual Performance and Targets Related to Our Internal 
Operations Measures: 

Performance measures: Help get job done; 2002 Actual: N/A; 
2003 Actual: 3.98; 
2004 Actual: 4.01; 
2005 Actual: 4.1; 
2006 Target: 4.0; 
2006 Actual: N/A. 

Performance measures: Quality of work life; 2002 Actual: N/A; 
2003 Actual: 3.86; 
2004 Actual: 3.96; 
2005 Actual: 3.98; 
2006 Target: 4.0; 
2006 Actual: N/A. 

Source: GAO. 

Notes: We will report actual data for fiscal year 2006 once the data 
from our November 2006 internal operations survey have been analyzed. 
N/A indicates that the data are not available yet or are not applicable 
because we did not collect the data during this period. 

[End of Table] 

Continuing the Dialogue on 21st Century Challenges: 

Last fiscal year, we published an unprecedented report called 21st 
Century Challenges: Reexamining the Base of the Federal Government that 
asks a series of probing, sometimes provocative, questions about 
current government policies, programs, and operational practices in 12 
broad areas. The report highlights how much the U.S. government 
reflects organizational models, labor markets, life expectancies, 
transportation systems, security strategies, and other conditions that 
are rooted in the past and uses our analysis of the nation's worsening 
long-term fiscal outlook as the context for raising these questions 
now. Because many of the issues raised in our report cannot be resolved 
quickly in the near term, policymakers will need to develop a strategic 
approach for addressing them over time. Thus, our report was intended 
as one input among many that the Congress will consider as it decides 
(1) its agenda for oversight and program review in the years to come 
and (2) which federal programs and policies should remain priorities, 
which should be overhauled, and which have simply outlived their 
usefulness. 

Through our work and professional partnerships in fiscal year 2006, we 
attempted to provide the information necessary to keep policymakers and 
public and private stakeholders focused on the adverse affects of these 
very serious challenges and thinking about ways to address them. Below 
are a few examples of how our work advanced the discussion of many of 
the issues presented in our 21st Century Challenges report and how we 
contributed to the dialogue. 

* What opportunities exist to streamline and simplify the current tax 
system and thereby make it more transparent, reduce opportunities for 
tax evasion, and decrease taxpayer compliance burden? Fiscal year 2006 
saw a growing debate about the fundamental design of the tax system. 
Concerns about complexity, efficiency, and equity have motivated calls 
for a substantial restructuring of the individual income tax. The 
debate is partly about whether to reform the current income tax so that 
it has a broader base and lower rates or switch in whole or part to 
some form of a consumption tax. But it is also about other fundamental 
design issues, such as whether to maintain different tax treatment for 
corporate and noncorporate business. We testified at three hearings 
examining the current system of taxation for corporations, individuals, 
and businesses and providing principles to guide tax reform as well as 
common dimensions for comparing alternative reform proposals (see Tax 
Compliance: Challenges to Corporate Tax Enforcement and Options to 
Improve Securities Basis Reporting, GAO-06-851T, June 13, 2006; 
Individual Income Tax Policy: Streamlining, Simplification, and 
Additional Reforms Are Desirable, GAO-06-1028T, Aug. 3, 2006; and 
Business Tax Reform: Simplification and Increased Uniformity of 
Taxation Would Yield Benefits, GAO-06-1113T, Sept. 20, 2006). The 
Comptroller General also participated in an October 2005 tax reform 
roundtable and highlighted the need for tax reform during his fiscal 
wake-up tour. 

* Has the government's approach to competitive sourcing--using the 
private sector to do more of the government's business--proven 
successful? Should it be modified to improve results and reduce costs 
in a timely, fair, and equitable manner? Our work this fiscal year has 
continued to highlight problematic aspects associated with the 
government's continually increasing dependence on contractors to carry 
out critical functions, from management and oversight of vital 
government operations and high-dollar investments, to protection of 
government and military facilities, to emergency and large-scale 
logistics operations such as hurricane response and recovery and the 
war in Iraq. In testimonies, we have commented on broader trends that 
have added risks to the contracting function and the government's 
ability to ensure that it is hiring the right contractors at the right 
price. These include the increasing complexity and scope of large 
investments, skill gaps in the acquisition workforce, and long-standing 
weaknesses in oversight. At this time, we are working with the Congress 
to identify work needed to further illuminate problems in contractor 
selection and oversight. Moreover, this year, the Comptroller General 
convened a panel of government management and acquisition experts from 
the private and public sectors and academia, among other things, to 
share insights on the challenges associated with the government's 
growing reliance on contractors and the need to keep inherent 
government functions in the hands of the government. 

* How can we make our current Medicare and Medicaid programs 
sustainable? We met with representatives of the Medicare Payment 
Advisory Commission during fiscal year 2006 to discuss issues related 
to Medicare inpatient hospital payments. At $119.4 billion, spending 
for hospital inpatient services accounted for over a third of total 
Medicare spending in fiscal year 2005. Our discussions with the 
commission centered around (1) its recommendation to CMS to establish a 
new cost methodology for calculating Medicare hospital payments and (2) 
the preliminary results of GAO's research in this area. We also 
continued discussions with the commission once CMS pub