Reports News from the GAO http://www.gao.gov/docsearch/repandtest.html 2009-11-20T13:39:49+01:00 FeedCreator 1.7.2-ppt 2009-11-20T00:00:00+01:00 2009-11-20T00:00:00+01:00 http://www.gao.gov/pdfs/GAO-10-11?source=ra

In Process

2009-11-20T00:00:00+01:00 2009-11-20T00:00:00+01:00 http://www.gao.gov/pdfs/GAO-10-39?source=ra

In Process

2009-11-19T00:00:00+01:00 2009-11-19T00:00:00+01:00 http://www.gao.gov/pdfs/GAO-10-260T?source=ra

Recent cases of corporate fraud and mismanagement heighten the Department of Justice's (DOJ) need to appropriately punish and deter corporate crime. Recently, DOJ has made more use of deferred prosecution and non-prosecution agreements (DPAs and NPAs), in which prosecutors may require company reform, among other things, in exchange for deferring prosecution, and may also require companies to hire an independent monitor to oversee compliance. This testimony addresses (1) the extent to which prosecutors adhered to DOJ's monitor selection guidelines, (2) the prior work experience of monitors and companies' opinions of this experience, and (3) the extent to which companies raised concerns about their monitors, and whether DOJ had defined its role in resolving these concerns. Among other steps, GAO reviewed DOJ guidance and examined the 152 agreements negotiated from 1993 (when the first 2 were signed) through September 2009. GAO also interviewed DOJ officials, obtained information on the prior work experience of monitors who had been selected, and interviewed representatives from 13 companies with agreements that required monitors. These results, while not generalizable, provide insights into monitor selection and oversight. Prosecutors adhered to DOJ guidance issued in March 2008 in selecting monitors required under agreements entered into since that time. Monitor selections in two cases have not yet been made due to challenges in identifying candidates with proper experience and resources and without potential conflicts of interests with the companies. DOJ issued guidance in March 2008 to help ensure that the monitor selection process is collaborative and based on merit; this guidance also requires prosecutors to obtain Deputy Attorney General approval for the monitor selection. For DPAs and NPAs requiring independent monitors, companies hired a total of 42 different individuals to oversee the agreements; 23 of the 42 monitors had previous experience working for DOJ--which some companies valued in a monitor choice--and those without prior DOJ experience had worked in other federal, state, or local government agencies, the private sector, or academia. The length of time between the monitor's leaving DOJ and selection as a monitor ranged from 1 year to over 30 years, with an average of 13 years. While most of the companies we interviewed did not express concerns about monitors having prior DOJ experience, some companies raised general concerns about potential impediments to independence or impartiality if the monitor had previously worked for DOJ or had associations with DOJ officials. Representatives for more than half of the 13 companies with whom GAO spoke raised concerns about the monitor's cost, scope, and amount of work completed--including the completion of compliance reports required in the DPA or NPA--and were unclear as to the extent DOJ could be involved in resolving such disputes, but DOJ has not clearly communicated to companies its role in resolving such concerns. Companies and DOJ have different perceptions about the extent to which DOJ can help to resolve monitor disputes. DOJ officials GAO interviewed said that companies should take responsibility for negotiating the monitor's contract and ensuring the monitor is performing its duties, but that DOJ is willing to become involved in monitor disputes. However, some company officials were unaware that they could raise monitor concerns to DOJ or were reluctant to do so. Internal control standards state that agency management should ensure there are adequate means of communicating with, and obtaining information from, external stakeholders that may have a significant impact on the agency achieving its goals. While one of the DOJ litigating divisions and one U.S. Attorney's Office have made efforts to articulate in the DPAs and NPAs what role they could play in resolving monitor issues, other DOJ litigation divisions and U.S. Attorney's Offices have not done so. Clearly communicating to companies the role DOJ will play in addressing companies' disputes with monitors would help increase awareness among companies and better position DOJ to be notified of potential issues related to monitor performance.

2009-11-19T00:00:00+01:00 2009-11-19T00:00:00+01:00 http://www.gao.gov/pdfs/GAO-10-45?source=ra

When a consumer uses a credit card to make a purchase, the merchant does not receive the full purchase amount because a certain portion of the sale is deducted to compensate the merchant's bank, the bank that issued the card, and the card network that processes the transaction. The level and growth of these rates have become increasingly controversial. The 2009 Credit Card Accountability, Responsibility, and Disclosure Act directed GAO to review (1) how the fees merchants pay have changed over time and the factors affecting the competitiveness of the credit card market, (2) how credit card competition has affected consumers, (3) the benefits and costs to merchants of accepting cards and their ability to negotiate those costs, and (4) the potential impact of various options intended to lower merchant costs. To address these objectives, GAO reviewed and analyzed relevant studies, literature, and data on the card payment market and interviewed industry participants, including large and small card issuers (including community banks and credit unions), card processors, card networks, large merchants representing a significant proportion of retail sales, and small merchants from a variety of industries, and academic experts. GAO provided a draft of this report to the Department of Justice, the Federal Trade Commission, and federal banking regulators, and we incorporated their technical comments where appropriate. According to Federal Reserve analysis, total costs of accepting credit cards for merchants have risen over time as consumers use cards more. Part of these increased costs also may be the result of how Visa and MasterCard competed to attract and retain issuers to offer cards by increasing the number of interchange fee categories and the level of these rates. Concerns remain over whether the level of these rates reflects market power--the ability of some card networks to raise prices without suffering competitive effects--or whether these fees reflect the costs that issuers incur to maintain credit card programs. Issuers, particularly smaller issuers such as community banks and credit unions, report relying on interchange fees as a significant source of revenue for their credit card operations, and analyses by banking regulators indicate such operations traditionally have been among the most profitable types of activities for large banks. Some consumers have benefited from competition in the credit card market, as cards often have no annual fees, lower interest rates than they did years ago, and greater rewards. However, consumers who do not use credit cards may be paying higher prices for goods and services, as merchants pass on their increasing card acceptance costs to all of their customers. For merchants, the benefits of accepting credit cards include increased sales and reduced labor costs. However, representatives from some of the large merchants with whom we spoke said their increased payment costs outstripped any increased sales. These merchants also reported that their inability to refuse popular cards and network rules (which prevent charging more for credit card than for cash payments or rejecting higher-cost cards) limited their ability to negotiate payment costs. Interchange fees are not federally regulated in the United States, but concerns about card costs have prompted federal investigations and private lawsuits, and authorities in more than 30 countries have taken or are considering taking actions to address such fees and other card network practices. Proposals for reducing interchange fees in the United States or other countries have included (1) setting or limiting interchange fees, (2) requiring their disclosure to consumers, (3) prohibiting card networks from imposing rules on merchants that limit their ability to steer customers away from higher-cost cards, and (4) granting antitrust waivers to allow merchants and issuers to voluntarily negotiate rates. If these measures were adopted here, merchants would benefit from lower interchange fees. Consumers would also benefit if merchants reduced prices for goods and services, but identifying such savings would be difficult. Consumers also might face higher card use costs if issuers raised other fees or interest rates to compensate for lost interchange fee income. Each of these options also presents challenges for implementation, such as determining at which rate to set, providing more information to consumers, or addressing the interests of both large and small issuers and merchants in bargaining efforts.

2009-11-19T00:00:00+01:00 2009-11-19T00:00:00+01:00 http://www.gao.gov/pdfs/GAO-10-56?source=ra

The Department of Defense (DOD) implemented the post-deployment health reassessment (PDHRA), which is required to be administered to servicemembers 90 to 180 days after their return from deployment. DOD established the PDHRA program to identify and address servicemembers' health concerns that emerge over time following deployments. This report is the second in response to a Senate Armed Services Committee report directing the Government Accountability Office (GAO) to review DOD's administration of the PDHRA, and to additional congressional requests. In this report, GAO examined (1) the extent to which DOD's central repository contains PDHRA questionnaires for active and Reserve component servicemembers who returned from deployment to Iraq or Afghanistan and (2) how DOD monitors the administration of the PDHRA to Reserve component servicemembers. To conduct this review, GAO performed a quantitative analysis using DOD deployment and PDHRA data, reviewed relevant PDHRA policies, and interviewed DOD officials. DOD policy requires that the military services electronically submit PDHRA questionnaires to DOD's central repository. Based on two separate queries to this repository in 2009, GAO did not find PDHRA questionnaires for a substantial percentage of the 319,000 active and Reserve component servicemembers who returned from deployment to Iraq or Afghanistan between January 1, 2007, and May 31, 2008. GAO's first query on April 15, 2009, showed that only 77 percent of this population of interest had questionnaires in the central repository, leaving approximately 74,000 servicemembers without questionnaires in the repository. On September 4, 2009, GAO queried DOD's central repository again to update its April 2009 data and found that DOD's central repository was still missing PDHRA questionnaires for about 72,000 servicemembers, or 23 percent of the servicemembers in GAO's original population of interest. When PDHRA questionnaires are not in DOD's central repository, DOD does not have reasonable assurance that servicemembers to whom the PDHRA requirement applies were given the opportunity to fill out the questionnaire and identify and address health concerns that could emerge over time following deployment. DOD uses four methods to monitor the contractor, Logistics Health, Inc. (LHI), that administers the PDHRA to Reserve component servicemembers. The four monitoring methods are: (1) reviews of periodic reports from LHI; (2) inspections of LHI's administration of the PDHRA; (3) feedback on LHI's administration of the PDHRA from military service officials; and (4) weekly telephone discussions with LHI staff. These methods are used to help ensure that the objective of the PDHRA program is being met for Reserve component servicemembers. Through these methods, DOD identified a number of potential problems that may pose risks to the PDHRA program objective and to the welfare and safety of Reserve component servicemembers. However, GAO found that when monitoring the administration of the PDHRA to Reserve component servicemembers, DOD does not maintain clear documentation that is consistent with federal internal control standards. GAO found that the documentation generated by DOD generally did not clearly describe the potential problems, the actions taken to address the problems, and whether these actions had resolved the problems. Overall, this lack of clear documentation does not allow DOD to have reasonable assurance that potential problems related to the administration of the PDHRA to Reserve component servicemembers have been addressed and resolved.

2009-11-19T00:00:00+01:00 2009-11-19T00:00:00+01:00 http://www.gao.gov/pdfs/GAO-10-57?source=ra

The Department of Education (Education) awards about $45 billion in grants each year to school districts, states, and other entities. In addition, the American Recovery and Reinvestment Act of 2009 provided an additional $97 billion in grant funding. In a series of reports from 2002 to 2009, Education's Inspector General cited a number of grantees for failing to comply with financial and programmatic requirements of their grant agreements. GAO was asked to determine: (1) what progress Education has made in implementing a risk-based approach to grant monitoring, (2) to what extent Education's program offices have the expertise necessary to monitor grantees' compliance with grant program requirements, and (3) to what extent information is shared and used within Education to ensure the effectiveness of grant monitoring. To do this, GAO reviewed agency documentation related to Education's internal controls and interviewed senior Education officials and staff in 12 of the 34 offices that monitor grants. In October 2006, Education began to look at ways to improve the efficiency and effectiveness of the department's grant management processes; in particular, it sought ways to more effectively monitor its grants after they were made. In 2007, Education created the Risk Management Service (RMS) to work with all components of the department to ensure that each office has an effective risk management strategy in place. Effective monitoring protocols and tools based on accepted control standards are key to ensuring that waste, fraud, and abuse are not overlooked and program funds are being spent appropriately. Such tools include identifying the nature and extent of grantee risks and managing those risks, having skilled staff to oversee grantees to ensure they are using sound financial practices and meeting program objectives and requirements, and using and sharing information about grantees throughout the organization. Our review of Education's current grant monitoring processes and controls found that it: (1)Has made uneven progress in implementing a department-wide, risk-based approach to grant monitoring. Education has not disseminated department-wide guidance on grantee risk assessment, but it has planned some new efforts in this area. In the absence of guidance on a department-wide risk assessment strategy, individual program offices have developed their own strategies for assessing and managing risk that vary in rigor. (2) Has limited financial expertise and training, hindering effective monitoring of grantees' compliance with financial requirements. Education has monitoring tools that aid in reviewing basic financial compliance, but the lack of staff expertise limits the ability to probe more deeply into grantees' use of funds. (3) Lacks a systematic means of sharing information on grantees and promising practices in grant monitoring throughout the department. These shortcomings can lead to weaknesses in program implementation that ultimately result in failure to effectively serve the students, parents, teachers, and administrators those programs were designed to help.

2009-11-19T00:00:00+01:00 2009-11-19T00:00:00+01:00 http://www.gao.gov/pdfs/GAO-10-13?source=ra

The Department of Homeland Security's (DHS) U.S. Visitor and Immigrant Status Indicator Technology (US-VISIT) program stores and processes biometric and biographic information to, among other things, control and monitor the entry and exit of foreign visitors. Currently, an entry capability is operating at almost 300 U.S. ports of entry, but an exit capability is not. The Government Accountability Office (GAO) has previously reported on limitations in DHS's efforts to plan and execute its efforts to deliver US-VISIT exit, and made recommendations to improve these areas. GAO was asked to determine (1) the status of DHS's efforts to deliver a comprehensive exit solution and (2) to what extent DHS is applying an integrated approach to managing its comprehensive exit solution. To accomplish this, GAO assessed US-VISIT exit project plans, schedules, and other management documentation against relevant criteria, and it observed exit pilots. DHS has established a Comprehensive Exit project within its US-VISIT program that consists of six components that are at varying stages of completion. To DHS's credit, the US-VISIT program office has established integrated project management plans for, and has adopted an integrated approach to, interacting with and involving stakeholders in its Comprehensive Exit project. However, it has not adopted an integrated approach to scheduling, executing, and tracking the work that needs to be accomplished to deliver a comprehensive exit solution. Rather, it is relying on several separate and distinct schedules to manage individual components and the US-VISIT prime contractor's work that supports these components. Moreover, neither of the two component schedules that GAO reviewed are reliable because they have not been derived in accordance with relevant guidance. Specifically, both the Air Exit Pilots schedule and the Temporary Worker Visa Exit Pilot schedule only fully meet one of nine key schedule estimating practices, and either partially, minimally, or do not meet the remaining eight. In contrast, the prime contractor's schedule is largely reliable, as it fully or substantially meets all nine practices. Without a master schedule for the Comprehensive Exit project that is integrated and derived in accordance with relevant guidance, DHS cannot reliably commit to when and how the work will be accomplished to deliver a comprehensive exit solution to its almost 300 ports of entry, and it cannot adequately monitor and manage its progress toward this end.

2009-11-19T00:00:00+01:00 2009-11-19T00:00:00+01:00 http://www.gao.gov/pdfs/GAO-10-223?source=ra

The American Recovery and Reinvestment Act of 2009 (Recovery Act) requires recipients of funding from federal agencies to report quarterly on jobs created or retained with Recovery Act funding. The first recipient reports filed in October 2009 cover activity from February through September 30, 2009. GAO is required to comment on the jobs created or retained as reported by recipients. This report addresses (1) the extent to which recipients were able to fulfill their reporting requirements and the processes in place to help ensure data quality and (2) how macroeconomic data and methods, and the recipient reports, can be used to assess the employment effects of the Recovery Act. GAO performed an initial set of basic analyses on the final recipient report data that first became available at www.recovery.gov on October 30, 2009; reviewed documents; interviewed relevant state and federal officials; and conducted fieldwork in selected states, focusing on a sample of highway and education projects. On October 30, www.recovery.gov (the federal Web site on Recovery Act spending) reported that more than 100,000 recipients reported hundreds of thousands of jobs created or retained. Given the national scale of the recipient reporting exercise and the limited time frames in which it was implemented, the ability of the reporting mechanism to handle the volume of data from a wide variety of recipients represents a solid first step in moving toward more transparency and accountability for federal funds. Because this effort will be an ongoing process of cumulative reporting, GAO's first review represents a snapshot in time. While recipients GAO contacted appear to have made good faith efforts to ensure complete and accurate reporting, GAO's fieldwork and initial review and analysis of recipient data from www.recovery.gov, indicate that there are a range of significant reporting and quality issues that need to be addressed For example, GAO's review of prime recipient reports identified the following: Erroneous or questionable data entries that merit further review: (1) 3,978 reports that showed no dollar amount received or expended but included more than 50,000 jobs created or retained; (2) 9,247 reports that showed no jobs but included expended amounts approaching $1 billion, and (3) Instances of other reporting anomalies such as discrepancies between award amounts and the amounts reported as received which, although relatively small in number, indicate problematic issues in the reporting. Coverage: While OMB estimates that more than 90 percent of recipients reported, questions remain about the other 10 percent. Quality review: While less than 1 percent were marked as having undergone review by the prime recipient, over three quarters of the prime reports were marked as having undergone review by a federal agency. Full-time equivalent (FTE) calculations: Full-time equivalent (FTE) calculations: Under OMB guidance, jobs created or retained were to be expressed as FTEs. GAO found that data were reported inconsistently even though significant guidance and training was provided by OMB and federal agencies. While FTEs should allow for the aggregation of different types of jobs--part time, full time or temporary--differing interpretations of the FTE guidance compromise the ability to aggregate the data. Although there were problems of inconsistent interpretation of the guidance, the reporting process went relatively well for highway projects. Transportation had an established procedure for reporting prior to enactment of the Recovery Act. In the cases of Education and Housing, which do not have this prior reporting experience, GAO found more problems. Some of these have been reported in the press. State and federal officials are examining these problems and have stated their intention to deal with them.

2009-11-19T00:00:00+01:00 2009-11-19T00:00:00+01:00 http://www.gao.gov/pdfs/GAO-10-224T?source=ra

This testimony discusses the report being issued today on the first set of recipient reports made available in October 2009 in response to the American Recovery and Reinvestment Act's section 1512 requirement. On October 30, Recovery.gov (the federal Web site on Recovery Act spending) reported that more than 100,000 recipients had reported hundreds of thousands of jobs created or retained. GAO is required to comment quarterly on the estimates of jobs created or retained as reported by direct recipients of Recovery Act funding from federal agencies. In the first quarterly GAO report, being released today, we address the following issues: (1) the extent to which recipients were able to fulfill their reporting requirements and the processes in place to help ensure recipient reporting data quality and (2) how macroeconomic data and methods, and the recipient reports, can be used to help gauge the employment effects of the Recovery Act. Because the recipient reporting effort will be an ongoing process of cumulative reporting, our review represents a snapshot in time. At this juncture, given the national scale of the recipient reporting exercise and the limited time frames in which it was implemented, the ability of the reporting mechanism to handle the volume of data from a wide variety of recipients represents a solid first step in moving toward more transparency and accountability for federal funds; however, there is a range of significant reporting and quality issues that need to be addressed. Consequently, our report contains several recommendations to improve data quality that Office of Management and Budget (OMB) staff generally agreed to implement. We will continue to review the processes that federal agencies and recipients have in place to ensure the future completeness and accuracy of data reported. Finally, our report notes that because the recipient reports cover about one-third of Recovery Act funds, both the data in those reports and other macroeconomic data and methods together can offer a more complete view of the overall employment impact of the Recovery Act. As detailed in our report, our analysis and fieldwork indicate there are significant issues to be addressed in reporting, data quality, and consistent application of OMB guidance in several areas. Many entries merit further attention due to an unexpected or atypical data value or relationship between data. As part of our review, we examined the relationship between recipient reports showing the presence or absence of any full-time equivalent (FTE) counts with the presence or absence of funding amounts shown in either or both data fields for "amount of Recovery Act funds received" and "amount of Recovery Act funds expended." Forty-four percent of the prime recipient reports showed an FTE value. However,we identified 3,978 prime recipient reports where FTEs were reported but no dollar amount was reported in the data fields for amount of Recovery Act funds received and amount of Recovery Act funds expended. These records account for 58,386 of the total 640,329 FTEs reported. While OMB estimates that more than 90 percent of recipients reported, questions remain about the other 10 percent. Less than 1 percent of the records were marked as having undergone review by the prime recipient. The small percentage reviewed by the prime recipients themselves during the OMB review time frame warrants further examination. While it may be the case that the recipients' data quality review efforts prior to initial submission of their reports were seen as not needing further revision during the review timeframe, it may also be indicative of problems with the process of noting and recording when and how the prime recipient reviews occur and the setting of the review flag. In addition, the report record data included a flag as to whether a correction was initiated. Overall, slightly more than a quarter of the reports were marked as having undergone a correction during the period of review. In its guidance to recipients for estimating employment effects, OMB instructed recipients to report solely the direct employment effects as "jobs created or retained" as a single number. Problems with the interpretation of this guidance or the calculation of FTEs were one of the most significant problems we found. Jobs created or retained expressed in FTEs raised questions and concerns for some recipients. One source of inconsistency was variation in the period of performance used to calculate FTEs, which occurred in both the highway and education programs we examined. While there were problems of inconsistent interpretation of the guidance, the reporting process went relatively well for highway projects. DOT had an established procedure for reporting prior to enactment of the Recovery Act. As our report shows, in the cases of Education and the Department of Housing and Urban Development, which do not have this prior reporting experience, we found more problems. State and federal officials are examining identified issues and have stated their intention to deal with them.

2009-11-19T00:00:00+01:00 2009-11-19T00:00:00+01:00 http://www.gao.gov/pdfs/GAO-10-255T?source=ra

The Small Business Administration (SBA), which, along with federal procuring activities, administers the Service-Disabled Veteran-Owned Small Business (SDVOSB) program, reported in fiscal year 2008 that $6.5 billion in federal contracts were awarded to firms who self-certified themselves as SDVOSBs. Government contracts to SDVOSBs accounted for only 1.5 percent of all government contract dollars paid in fiscal year 2008. Since the SDVOSB program began, the government has not met its annual mandated goal of 3 percent. In addition to SBA's statutory authority over administration of the SDVOSB program, several other government agencies have separate authority over issues related to the SDVOSB program. The Veterans Benefits, Health Care, and Information Technology Act requires the Department of Veterans Affairs (VA) to maintain a database of SDVOSBs and Veteran-Owned Small Businesses (VOSB) so contractor eligibility can be verified on VA SDVOSB and VOSB contracts. In addition, The Office of Federal Procurement Policy (OFPP), within the Office of Management and Budget, provides overall direction for governmentwide procurement policies, regulations, and procedures and to promote economy, efficiency, and effectiveness in the acquisition processes. The Office's primary focus is on the Federal Acquisition Regulation (FAR), the governmentwide regulation governing agency acquisitions of goods and services, including SDVOSB set-aside and sole-source contract actions. Fraud and abuse in the SDVOSB program allowed ineligible firms to improperly receive millions of dollars in set-aside and sole-source SDVOSB contracts, potentially denying legitimate service-disabled veterans and their firms the benefits of this program. We identified 10 case-study examples of firms that did not meet SDVOSB program eligibility requirements, which received approximately $100 million in SDVOSB contracts, and over $300 million in additional 8(a), HUBZone, and non-SDVOSB federal government contracts. SBA found four of the firms ineligible for the SDVOSB program through the agency's bid protest process. Nevertheless, because there are no requirements to terminate contracts when firms are found ineligible, several contracting agencies allowed the ineligible firms to continue their work. For example, bid-protest decisions do not always result in the termination of contracts with ineligible firms, even when termination costs would be minimal in cases where contract work had not begun. As some of our case studies show, even when firms are found ineligible to receive a contract, they can still retain it because current regulations do not require that the contracting agency terminate the contract.In addition, we identified six other case-study firms that were not eligible for the SDVOSB program. The misrepresentations case-study firms made included a firm whose owner was not a service-disabled veteran, a serviced-disabled veteran who did not control the firm's day-to-day operations, a service-disabled veteran who was a full-time contract federal employee at MacDill Air Force Base, and firms that served as a "pass-through" for large and sometimes foreign-based corporations. In the case of a pass-through, a firm or joint venture lists a service-disabled veteran as the majority owner, but contrary to program requirements, all work is performed and managed by a non-service-disabled person or a separate firm. Federal regulations set requirements for a small business to qualify as an SDVOSB. Specifically, SDVOSB eligibility regulations mandate that a firm must be a small business and at least 51 percent-owned by one or more service-disabled veterans who control the management and daily business operations of the firm. The lack of effective fraud-prevention controls by SBA and agencies awarding contracts allowed these ineligible firms to receive approximately $100 million of sole-source or set-aside SDVOSB contracts over the last several years. The SDVOSB program is essentially an eligibility-based program. However, neither the SBA, except when responding to a protest, nor contracting officials are currently verifying the eligibility of firms claiming to be SDVOSBs. For example, currently the SBA and contracting agencies do not have a process in place to access the VA service-disabled veteran's database listing individuals that are valid service-disabled veterans. In addition, contracting officers are not required to validate that a firm's owner is a service-disabled veteran prior to award. Unlike other small business contracting programs, such as the HUBZone and 8(a) programs, there also are no documentation submissions to substantiate eligibility for the program or application process associated with the SDVOSB program. This lack of controls substantially increases the risk for fraud and abuse in the SDVOSB program. The only process in place to detect fraud in the SDVOSB program involves a formal bid protest process at the SBA, whereby interested parties to a contract award can protest if they feel a firm misrepresented its small business size or SDVOSB eligibility in its bid submission. However, as shown by our case studies, this self-policing process does not prevent ineligible firms from receiving SDVOSB contracts.

2009-11-19T00:00:00+01:00 2009-11-19T00:00:00+01:00 http://www.gao.gov/pdfs/GAO-10-108?source=ra

The Service-Disabled Veteran-Owned Small Business (SDVOSB) program is intended to provide federal contracting opportunities to qualified firms. In fiscal year 2007, the Small Business Administration (SBA) reported $4 billion in governmentwide sole source and set aside SDVOSB contract awards. Given the amount of federal contract dollars being awarded to SDVOSB firms, GAO was asked to determine (1) whether cases of fraud and abuse exist within the SDVOSB program, and (2) whether the program has effective fraud-prevention controls in place. To identify whether cases exist, GAO reviewed SDVOSB contract awards and protests since 2003, and complaints sent to our fraud hotline. GAO defined a case as one or more affiliated firms who were awarded one or more SDVOSB contracts. To assess fraud-prevention controls, GAO reviewed laws and regulations and conducted interviews with SBA and Department of Veterans Affairs (VA) officials. GAO did not attempt to project the extent of fraud and abuse in the program. GAO found that the SDVOSB program is vulnerable to fraud and abuse, which could result in legitimate service-disabled veterans' firms losing contracts to ineligible firms. The 10 case-study firms identified in this report received approximately $100 million from SDVOSB contracts through fraud or abuse of the program, or both. For example, contracts for Hurricane Katrina trailer maintenance were awarded to a firm whose owner was not a service-disabled veteran. GAO also found SDVOSB companies used as a pass-through for large, sometimes multinational corporations. In another case a full-time federal contract employee at MacDill Air Force Base set up a SDVOSB company that passed a $900,000 furniture contract on to a company where his wife worked, which passed the work to a furniture manufacturer that actually delivered and installed the furniture. GAO found that the government does not have effective fraud-prevention controls in place for the SDVOSB program. Specifically, SBA and agencies awarding SDVOSB contracts do not have processes in place to validate a firm's eligibility for the program prior to bid submission. SBA and contracting agencies also currently do not have a database of individuals that are service-disabled veterans, a key eligibility requirement for the program. According to VA, it is developing a database, called VetBiz, of validated SDVOSBs, but currently it is only used for contracting by the VA. SBA's bid-protest process is the only governmentwide control over the SDVOSB program. However, although ineligible firms have been identified through bid protests, firms found ineligible do not face real consequences, can be allowed to complete the contracts received, and are not suspended or debarred.

2009-11-19T00:00:00+01:00 2009-11-19T00:00:00+01:00 http://www.gao.gov/pdfs/GAO-10-77?source=ra

When sponsors terminate underfunded plans during bankruptcy, it can deplete resources of the Pension Benefit Guaranty Corporation (PBGC), which protects the pensions of almost 44 million American workers and retirees who participate in over 29,000 defined benefit pension plans. In 2009, PBGC reported an estimated deficit of over $30 billion. GAO was asked to determine what pay and other compensation executives received in the years preceding their company's termination of an underfunded defined benefit pension plan. To identify case study examples GAO analyzed a listing of the 1,246 underfunded plans that were terminated from 1999 to 2008 and selected public companies with large unfunded liabilities, large unfunded liabilities per participant, and a large number of plan participants. GAO reviewed documents provided by companies and executives, and interviewed PBGC and company officials. GAO also reviewed Securities and Exchange Commission (SEC) filings and PBGC documents disclosing plan underfunding at the time of termination and missed contributions. Executive compensation figures may be understated because some company executives could not be located, did not respond to document requests, declined interviews, and did not give GAO access to their tax records. GAO found that 40 executives for 10 companies received approximately $350 million in pay and other compensation in the years leading up to the termination of their companies' underfunded pension plans. GAO identified salaries, bonuses, and benefits provided to small groups of high-ranking executives at these companies during the 5 years leading up to the termination of their pension plans. For example, beyond the tens of millions in base salaries received, GAO found that executives also received millions of dollars in stock awards, income tax reimbursements, retention bonuses, severance packages, and supplemental executive-only retirement plans. In some cases, plan participants had their benefits reduced due to the underfunding of the plan when it was terminated. For example, a retired pilot saw his monthly pension payment reduced by two-thirds. The reduction in benefits occurred because federal law caps the benefits PBGC can guarantee when it takes over an underfunded pension plan. In addition, PBGC has no oversight power with regard to executive compensation prior to a company's bankruptcy. During bankruptcy, executive compensation must be approved by the bankruptcy court, and after this approval PBGC has extremely limited ability to recover those payments to executives. GAO did not find any illegal activity with respect to executive compensation on the part of either the 10 companies or the 40 executives under review.

2009-11-18T00:00:00+01:00 2009-11-18T00:00:00+01:00 http://www.gao.gov/pdfs/GAO-10-236T?source=ra

The Federal Protective Service (FPS) within the Department of Homeland Security (DHS) is responsible for providing law enforcement and related security services for nearly 9,000 federal facilities under the control and custody of the General Services Administration (GSA). In 2004 GAO identified a set of key protection practices from the collective practices of federal agencies and the private sector, which included allocation of resources using risk management, strategic management of human capital, leveraging of technology, information sharing and coordination, and performance measurement and testing. This testimony is based on past reports and testimonies and discusses (1) limitations FPS faces in protecting GSA buildings and resulting vulnerabilities; and (2) actions FPS is taking. To perform this work, GAO used its key practices as criteria, visited a number of GSA buildings, surveyed tenant agencies, analyzed pertinent laws and DHS and GSA documents, conducted covert testing at 10 judgmentally selected high-security buildings in four cities, and interviewed officials from DHS, GSA, and tenant agencies, and contractors and guards. FPS's approach to securing GSA buildings reflects some aspects of key protection practices; however, GAO found limitations in each area and identified vulnerabilities. More specifically: (1) FPS faces obstacles in allocating resources using risk management. FPS uses an outdated risk assessment tool and a subjective, time-consuming process to assess risk. In addition, resource allocation decisions are the responsibility of GSA and tenant agencies. This leads to uncertainty about whether risks are being mitigated. Also, FPS continues to struggle with funding challenges that impede its ability to allocate resources effectively. (2) FPS does not have a strategic human capital management plan to guide its current and future workforce planning efforts, making it difficult to discern how effective its transition to an inspector-based workforce will be. Furthermore, because contract guards were not properly trained and did not comply with post orders, GAO investigators concealing components for an improvised explosive device passed undetected by FPS guards at 10 of 10 high-security facilities in four major cities. (3) FPS lacks a systematic approach for leveraging technology, and inspectors do not provide tenant agencies with an analysis of alternative technologies, their cost, and the associated reduction in risk. As a result, there is limited assurance that the recommendations inspectors make are the best available alternatives, and tenant agencies must make resource allocation decisions without key information. (4) FPS has developed information sharing and coordination mechanisms with GSA and tenant agencies, but there is inconsistency in the type of information shared and the frequency of coordination. (5) FPS lacks a reliable data management system for accurately tracking performance measurement and testing. Without such a system, it is difficult for FPS to evaluate and improve the effectiveness of its efforts, allocate resources, or make informed risk management decisions. FPS is taking actions to better protect GSA buildings, in part as a result of GAO's recommendations. For example, FPS is developing a new risk assessment program and has recently focused on improving oversight of its contract guard program. Additionally, GAO has recommended that FPS implement specific actions to make greater use of key practices and otherwise improve security. However, FPS has not completed many related corrective actions and FPS faces implementation challenges as well. Nonetheless, adhering to key practices and implementing GAO's recommendations in specific areas would enhance FPS's chances for future success, and could position FPS to become a leader and benchmark agency for facility protection in the federal government.

2009-11-18T00:00:00+01:00 2009-11-18T00:00:00+01:00 http://www.gao.gov/pdfs/GAO-10-142?source=ra

There is ongoing concern about the security of federal buildings and their occupants. The Federal Protective Service (FPS) within the Department of Homeland Security (DHS) is responsible for providing law enforcement and related security services for nearly 9,000 federal buildings under the control and custody of the General Services Administration (GSA). In 2004, GAO identified a set of key protection practices from the collective practices of federal agencies and the private sector that included: allocating resources using risk management, leveraging technology, and information sharing and coordination. As requested, GAO determined whether FPS's security efforts for GSA buildings reflected key practices. To meet this objective, GAO used its key practices as criteria, visited five sites to gain firsthand knowledge, analyzed pertinent DHS and GSA documents, and interviewed DHS, GSA, and tenant agency officials. FPS's approach to securing GSA buildings reflects some aspects of key protection practices, and FPS has several improvements underway such as a new risk assessment program and a countermeasure acquisition program. While FPS's protection activities exhibit some aspects of the key practices, GAO found limitations in each of the areas. FPS assesses risk and recommends countermeasures to GSA and tenant agencies; however, FPS's ability to influence the allocation of resources using risk management is limited because resource allocation decisions are the responsibility of GSA and tenant agencies, which may be unwilling to fund FPS's countermeasure recommendations. Moreover, FPS uses an outdated risk assessment tool and a subjective, time-consuming process. As a result, GSA and tenant agencies are uncertain whether risks are being mitigated. Concerned with the quality and timeliness of FPS's risk assessment services, GSA and tenant agencies are pursuing some of these activities on their own. Although FPS is developing a new risk management program, full implementation is not planned until the end of fiscal year 2011 and has already experienced delays. With regard to leveraging technology, FPS inspectors have considerable latitude for selecting technologies and countermeasures that tenant agencies fund, but FPS provides inspectors with little training and guidance for making cost-effective choices. Additionally, FPS does not provide tenant agencies with an analysis of alternative technologies, their cost, and associated reduction in risk. As a result, there is limited assurance that the recommendations inspectors make are the best available alternatives and tenant agencies must make resource allocation decisions without key information. Although FPS is developing a program to standardize security equipment and contracting, the program has run behind schedule and lacks an evaluative component for assessing the cost-effectiveness of competing technologies and countermeasures. FPS has developed information sharing and coordination mechanisms with GSA and tenant agencies, but there is inconsistency in the type of information shared and the frequency of coordination. Lack of coordination through regular contact can lead to communication breakdowns. For example, during a construction project at one location, the surveillance equipment that FPS was responsible for maintaining was removed from the site during 2007. FPS and tenant agency representatives disagree over whether FPS was notified of this action. Furthermore, FPS and GSA disagree over what building risk assessment information can be shared. FPS maintains that the sensitive information contained in the assessments is not needed for GSA to carry out its mission. However, GSA maintains that restricted access to the risk assessments constrains its ability to protect buildings and occupants.

2009-11-17T00:00:00+01:00 2009-11-17T00:00:00+01:00 http://www.gao.gov/pdfs/GAO-10-252T?source=ra

The Department of Homeland Security's (DHS) Domestic Nuclear Detection Office (DNDO) is responsible for addressing the threat of nuclear smuggling. Radiation detection portal monitors are key elements in the nation's defenses against such threats. DHS has sponsored testing to develop new monitors, known as advanced spectroscopic portal (ASP) monitors, to replace radiation detection equipment being used at ports of entry. DNDO expects that ASPs may offer improvements over current-generation portal monitors, particularly the potential to identify as well as detect radioactive material and thereby to reduce both the risk of missed threats and the rate of innocent alarms, which DNDO considers to be key limitations of radiation detection equipment currently used by Customs and Border Protection (CBP) at U.S. ports of entry. However, ASPs cost significantly more than current generation portal monitors. Due to concerns about ASPs' cost and performance, Congress has required that the Secretary of Homeland Security certify that ASPs provide a significant increase in operational effectiveness before obligating funds for full-scale ASP procurement. In May 2009, GAO issued a report (GAO-09-655) on the status of the ongoing ASP testing round. This testimony (1) discusses the principal findings and recommendations from GAO's May report on ASP testing and (2) updates those findings based on information from DNDO and CBP officials on the results of testing conducted since the report's issuance. DHS, DNDO, and CBP's oral comments on GAO's new findings were included as appropriate. GAO's May 2009 report on ASP testing found that DHS increased the rigor in comparison with previous tests and thereby added credibility to the test results. However, GAO's report also questioned whether the benefits of the ASPs justify its high cost. In particular, the DHS criteria for a significant increase in operational effectiveness require only a marginal improvement in the detection of certain weapons-usable nuclear materials, which DNDO considers a key limitation of current-generation portal monitors. The marginal improvement required of ASPs is particularly notable given that DNDO has not completed efforts to fine-tune current-generation equipment to provide greater sensitivity. Moreover, the test results showed that ASPs performed better than current-generation portal monitors in detection of such materials concealed by light shielding approximating the threat guidance for setting detection thresholds, but that differences in sensitivity were less notable when shielding was slightly below or above that level. Finally, DNDO had not yet updated its cost-benefit analysis to take into account the results of ASP testing and did not plan to complete computer simulations that could provide additional insight into ASP capabilities and limitations prior to certification even though test delays have allowed more time to conduct the simulations. DNDO officials believed the other tests were sufficient for ASPs to demonstrate a significant increase in operational effectiveness. GAO recommended that DHS assess ASPs against the full potential of current-generation equipment and revise the program schedule to allow time to conduct computer simulations and to uncover and resolve problems with ASPs before full-scale deployment. DHS agreed to a phased deployment that should allow time to uncover ASP problems but disagreed with the other recommendations, which GAO believes remain valid. The results of DNDO's most recent round of field testing raise continuing issues. In July 2009, DNDO resumed the field testing of ASPs that it initiated in January 2009 but suspended because of serious performance problems. However, the July tests also revealed critical performance deficiencies. For example, the ASP had a high number of false positive alarms for the detection of certain nuclear materials. According to CBP, these false alarms are very disruptive in a port environment because any alarm for this type of nuclear material causes CBP to take enhanced security precautions. To address these false alarms, DNDO plans to modify the ASP to make these monitors less sensitive to these nuclear materials and thereby diminishing the ASPs' capability. As GAO reported earlier this year, previous testing results demonstrated that the ASPs represented a marginal improvement in detecting these materials. By reducing the sensitivity to nuclear materials even further, it is uncertain exactly what improvement in detecting these materials the ASPs are providing or whether DNDO might be able to achieve a similar level of performance as the modified ASPs by improving the current-generation portal monitors that are already in place. In addition, the July 2009 testing also identified a critical equipment failure, including an alert malfunction, which DNDO is taking steps to resolve for future testing.

2009-11-17T00:00:00+01:00 2009-11-17T00:00:00+01:00 http://www.gao.gov/pdfs/GAO-10-230T?source=ra

Pervasive and sustained cyber attacks continue to pose a potentially devastating threat to the systems and operations of the federal government. In recent months, federal officials have cited the continued efforts of foreign nations and criminals to target government and private sector networks; terrorist groups have expressed a desire to use cyber attacks to target the United States; and press accounts have reported attacks on the Web sites of government agencies. The ever-increasing dependence of federal agencies on computerized systems to carry out essential, everyday operations can make them vulnerable to an array of cyber-based risks. Thus it is increasingly important for the federal government to have effective information security controls in place to safeguard its systems and the information they contain. GAO was asked to provide a statement describing (1) cyber threats to federal information systems and cyber-based critical infrastructures, (2) control deficiencies at federal agencies that make these systems and infrastructures vulnerable to cyber threats, and (3) opportunities that exist for improving federal cybersecurity. In preparing this statement, GAO relied on its previously published work in this area. Cyber-based threats to federal systems and critical infrastructure are evolving and growing. These threats can be unintentional or intentional, targeted or non-targeted, and can come from a variety of sources, including criminals, terrorists, and adversarial foreign nations, as well as hackers and disgruntled employees. These potential attackers have a variety of techniques at their disposal, which can vastly enhance the reach and impact of their actions. For example, cyber attackers do not need to be physically close to their targets, their attacks can easily cross state and national borders, and cyber attackers can more easily preserve their anonymity. Further, the growing interconnectivity between information systems, the Internet, and other infrastructure presents increasing opportunities for such attacks. In addition, reports of security incidents from federal agencies are on the rise, increasing by over 200 percent from fiscal year 2006 to fiscal year 2008. Compounding the growing number and kinds of threats, GAO--along with agencies and their inspectors general--has identified significant weaknesses in the security controls on federal information systems, resulting in pervasive vulnerabilities. These include deficiencies in the security of financial systems and information and vulnerabilities in other critical federal information systems. GAO has identified weaknesses in all major categories of information security controls at federal agencies. For example, in fiscal year 2008, weaknesses were reported in such controls at 23 of 24 major agencies. Specifically, agencies did not consistently authenticate users to prevent unauthorized access to systems; apply encryption to protect sensitive data; and log, audit, and monitor security-relevant events, among other actions. An underlying cause of these weaknesses is agencies' failure to fully or effectively implement information security programs, which entails assessing and managing risk, developing and implementing security policies and procedures, promoting security awareness and training, monitoring the adequacy of security controls, and implementing appropriate remedial actions. Multiple opportunities exist to enhance cybersecurity. In light of weaknesses in agencies' information security controls, GAO and inspectors general have made hundreds of recommendations to improve security, many of which agencies are implementing. In addition, the White House and the Office of Management and Budget, collaborating with other agencies, have launched several initiatives aimed at improving aspects of federal cybersecurity. The Department of Homeland Security, which plays a key role in coordinating cybersecurity activities, also needs to fulfill its responsibilities, such as developing capabilities for protecting cyber-reliant critical infrastructures and implementing lessons learned from a major cyber simulation exercise. Finally, a panel of experts convened by GAO made several recommendations for improving the nation's cybersecurity strategy. Realizing these opportunities for improvement can help ensure that the federal government's systems, information, and critical cyber-reliant infrastructure are effectively protected.

2009-11-17T00:00:00+01:00 2009-11-17T00:00:00+01:00 http://www.gao.gov/pdfs/GAO-10-259T?source=ra

The U.S. Department of the Interior's Bureau of Land Management (BLM), Fish and Wildlife Service, and National Park Service, and the U.S. Department of Agriculture's Forest Service manage about 628 million acres of public land, mostly in 11 western states and Alaska. Under the Federal Land Transaction Facilitation Act (FLTFA) of 2000, revenue raised from selling BLM lands is available to the agencies, primarily to acquire nonfederal land within the boundaries of land they already own--known as inholdings. These inholdings can create significant land management problems. To acquire land, the agencies can nominate parcels under state-level interagency agreements or the Secretaries can use their discretion to initiate acquisitions. FLTFA expires in July 2010. This testimony discusses GAO's 2008 report: Federal Land Management: Federal Land Transaction Facilitation Act Restrictions and Management Weaknesses Limit Future Sales and Acquisitions (GAO-08-196). Specifically, the testimony discusses (1) FLTFA revenue generated, (2) challenges to future sales, (3) FLTFA expenditures, (4) challenges to future acquisitions, and (5) agencies' implementation of GAO's recommendations. Among other things, GAO examined the act, agency guidance, and FLTFA sale and acquisition data, interviewed agency officials, and obtained some updated information. (1) BLM raised most FLTFA revenue from land sales in Nevada. As of August 2009, BLM reported raising a total of $113.4 million from sale of about 29,400 acres. Since FLTFA was enacted in 2000 through August 2009, about 78 percent of the revenue raised, or about $88 million, has come from land transactions in Nevada. (2) BLM faces challenges to future sales under FLTFA. In particular, BLM state and field officials most frequently cited the limited availability of knowledgeable realty staff to conduct sales. We identified two additional issues hampering land sales activity under FLTFA. First, while BLM had identified land for sale in its land use plans, it had not made these sales a priority during the first 7 years of the FLTFA program. Furthermore, BLM had not set goals for sales or developed a sales implementation strategy. Second, some of the additional land BLM had identified for sale since the act would not generate revenue for acquisitions because the act only allows the deposit of revenue from the sale of lands identified for disposal on or before the date of the act. (3) Agencies had purchased few parcels with FLTFA revenue. In 2008, we reported that between August 2007--7 years after FLTFA was enacted--and January 2008, the four land management agencies had spent $13.3 million of the $95.7 million in revenue raised under FLTFA: $10.1 million using the Secretaries' discretion to acquire nine parcels of land and $3.2 million for administrative expenses to prepare land for FLTFA sales. More recently, as of November 2009, BLM reported spending a total of $43.8 million to acquire 28 parcels, including $24.6 million for 12 parcels through the state-level interagency process. (4) Agencies face challenges to completing additional acquisitions. BLM state and field officials GAO interviewed most commonly cited the time, cost, and complexity of the land acquisition process as a challenge to completing land acquisitions. Furthermore, the act's requirement to spend the majority of funds in the state in which revenue was generated has had the effect of making little revenue available for acquisitions outside of Nevada. The agencies also had not established procedures to track the implementation of the act's requirement that at least 80 percent of FLTFA revenue raised in each state be used to acquire inholdings in that state or to track the extent to which BLM is complying with agreed-upon fund allocations among the four participating agencies. (5) BLM has taken steps to implement GAO's recommendations. Specifically, BLM established FLTFA sale goals for fiscal years 2009 and 2010 and established a sales incentive program providing seed funds to state and field offices to identify and pre-screen properties for possible sale under FLTFA. As of November 2009, six states have agreed to participate in the program.

2009-11-17T00:00:00+01:00 2009-11-17T00:00:00+01:00 http://www.gao.gov/pdfs/GAO-10-86R?source=ra

Over the past few decades, the cost of tuition, room, and board for undergraduate students has increased, making it more difficult for some students and families to afford the cost of college. While students have historically relied on federal loans and grants and family contributions to pay for college, a growing number have turned to private education loans to help them cover the cost. In 2007-08, private loan volume, including private sector and state sponsored loans, totaled $19 billion, up from $3 billion in 1997-98, according to the 2008 College Board report on student aid. Unlike federal loans, private education loans are not guaranteed by the federal government and are typically more costly for students than loans offered through federal programs. Despite their generally higher cost, about 26 percent of students who obtained private education loans in 2007-08 did not obtain Federal Stafford loans, and more than one-half of these students did not apply for Federal financial aid, according to the Institute for College Access and Success. In 2007-08, 14 percent of undergraduate students obtained private education loans, according to the Institute for College Access and Success, and the average private loan amount was $6,533. This letter discusses GAO's work under the mandated study in section 1122 of the Higher Education Opportunity Act of 2008 (HEOA) directs the Government Accountability Office (GAO) to assess the impact of private lenders' use of nonindividual factors--factors other than the borrower's own credit worthiness, such as the cohort default rate or graduation rate of the school the student attends-- in making loan decisions. To address the issues raised in the mandate, GAO framed its study around three key questions: (1) What are the key characteristics of private education loan borrowers and the types of schools they attend?; (2) How do lenders use nonindividual factors--including cohort default rate, graduation rate, and accreditation--in making lending decisions for private education loans?; and (3) What is the impact of using these factors on loan products and rates students pay and their access to loans, by gender, race, income, and institution type? Specifically, according to NPSAS, nearly one-third of the students at the highest cost institutions ($25,000 or more per year) took out private loans. In addition, while students attending proprietary schools accounted for approximately 10 percent of the undergraduate population, over 40 percent of them borrowed private loans. Moreover, a slightly higher percentage of dependent undergraduate students borrowed private education loans (15 percent) compared to independent students (13 percent), and a higher percentage of dependent students from middle and high income families (17 percent and 15 percent, respectively) borrowed private loans compared to dependent students from low income families (about 12 percent).9 In addition, a slightly higher proportion of female students borrowed private education loans (about 15 percent for females and 13 percent for males). While there were varying differences in the percentages of undergraduate students borrowing private education loans by race/ethnicity, Black or African American students were the highest percentage of borrowers. Students who attended certain types of schools were more likely to take out private loans; and in addition, there were small differences that were statistically significant for private loan borrowers with respect to dependent and independent students, family income, gender, and greater differences between some race and ethnicity groups. Private lenders may use nonindividual factors to select the institutions at which they will lend to students and to establish loan terms and conditions, including interest rates, according to lenders and industry experts. Lenders generally view longer programs of study, high graduation rate, and low cohort default rate as more favorable conditions when making lending decisions, according to experts and lenders we interviewed. Lenders, researchers, and industry experts confirmed that lenders have historically used nonindividual factors to help them make lending decisions, especially because students often lack sufficient credit history upon which to base decisions. The student loan lending landscape has changed significantly since the HEOA, which mandated GAO's study, was passed. Many of the lenders offering private loans have exited the market in response to limited access to capital resulting from the credit crisis, according to researchers, lenders, and experts we interviewed. In 2008-09, the private loan volume totaled about $12 billion, according to the 2009 College Board report on student aid. Lenders who have continued their private student loans programs reportedly tightened their lending practices, which have limited some students' access to these loans, according to some researchers we interviewed.

2009-11-17T00:00:00+01:00 2009-11-17T00:00:00+01:00 http://www.gao.gov/pdfs/GAO-10-262T?source=ra

U.S. trade preference programs promote economic development in poorer nations by providing duty-free export opportunities in the United States. The Generalized System of Preferences, Caribbean Basin Initiative, Andean Trade Preference Act, and African Growth and Opportunity Act unilaterally reduce U.S. tariffs for many products from over 130 countries. However, two of these programs expire partially or in full this year, and Congress is exploring options as it considers renewal. This testimony describes the growth in preference program imports, identifies policy trade-offs, and summarizes the Government Accountability Office (GAO) recommendations and options suggested by a panel of experts on the African Growth and Opportunity Act (AGOA). The testimony is based on studies issued in September 2007, March 2008, and August 2009. For those studies, GAO analyzed trade data, reviewed trade literature and program documents, interviewed U.S. officials, did fieldwork in nine countries, and convened a panel of experts. Total U.S. preference imports grew from $20 billion in 1992 to $110 billion in 2008, with most of this growth taking place since 2000. The increases from preference program countries primarily reflect the addition of new eligible products, increased petroleum imports from some African countries, and the rapid growth of exports from countries such as India, Thailand, and Brazil. Preference programs give rise to three critical policy trade-offs. First, opportunities for beneficiary countries to export products duty free must be balanced against U.S. industry interests. Some products of importance to developing countries, notably agriculture and apparel, are ineligible by statute as a result. Second, some developing countries, such as Bangladesh and Cambodia, are not included in U.S. regional preference programs; however, there is concern that they are already competitive in marketing apparel to the United States and that giving them greater duty-free access could harm the apparel industry in Africa and elsewhere. Third, Congress faces a trade-off between longer preference program renewals, which may encourage investment, and shorter renewals, which may provide leverage to encourage countries to act in accordance with U.S. interests such as trade liberalization. GAO reported in March 2008 that preference programs have proliferated and become increasingly complex, which has contributed to a lack of systematic review. Moreover, we found that there was little to no reporting on the impact of these programs. In addition, GAO solicited options from a panel of experts in June 2009 for improving the competitiveness of the textile and apparel sector in AGOA countries. Options they suggested included aligning trade capacity building with trade preference programs, modifying rules of origin to facilitate joint production among trade preference program beneficiaries and free trade partners, and creating non-punitive and voluntary incentives to encourage the use of inputs from the United States or its trade preference partners to stimulate investment in beneficiary countries.

2009-11-16T00:00:00+01:00 2009-11-16T00:00:00+01:00 http://www.gao.gov/pdfs/GAO-10-65?source=ra

In fiscal year 2008, the Department of Veterans Affairs (VA) identified three material internal control weaknesses over financial reporting--financial management system functionality, IT security controls, and financial management oversight. VA is developing a new financial system--FLITE--but full implementation is not expected until 2014. Therefore, the Subcommittee asked us to determine whether VA corrective action plans and oversight are appropriately focused on near-term actions to provide improved financial information. This report addresses (1) the nature of the internal control weaknesses identified in the VA fiscal year 2008 financial audit report and how long they have been outstanding, (2) whether VA had plans appropriately focused on near-term corrective actions, and (3) whether VA had appropriate oversight mechanisms in place to help assure that near-term corrective action plans are implemented on schedule. GAO reviewed corrective action plans for significant deficiencies underlying 2 of the 3 material weaknesses and performed additional analysis for two underlying significant deficiencies. VA's fiscal year 2008 material weaknesses in financial management system functionality and financial management oversight have been reported since fiscal years 2000 and 2005, respectively. These two material weaknesses are comprised of 16 underlying significant financial reporting control deficiencies. Although VA had eliminated some significant deficiencies in prior years, other deficiencies have emerged. As a result, continuing serious deficiencies in financial reporting leave VA at risk of processing errors and misstatements in its financial statements. Although VA had corrective action plans in place intended to result in near-term remediation of the 16 fiscal year 2008 significant control deficiencies, many of these plans did not contain the detail needed to provide VA officials with assurance that the plans could be effectively implemented on schedule. VA lacked documented policies and procedures needed to assure the consistent and comprehensive design of these corrective action plans, and 8 of 13 of VA's plans for correcting its financial reporting deficiencies lacked key information regarding milestones for action steps and validation activities.As of August 2009, VA had missed milestones in 5 of the 13 corrective action plans. For example, our analysis of plans for remediating deficiencies regarding the capitalization of property, plant, and equipment and inadequate benefit payment reconciliations showed that slipping milestones could jeopardize VA's timely completion of these plans, and consequently may impair VA's ability to obtain improved data reliability within the time frames originally envisioned. VA lacked documented policies and procedures for overseeing implementation of the corrective action plans, but recently took steps intended to better coordinate its oversight activities.

2009-11-16T00:00:00+01:00 2009-11-16T00:00:00+01:00 http://www.gao.gov/pdfs/GAO-10-218?source=ra

The Housing and Economic Recovery Act of 2008 (HERA) created the Federal Housing Finance Agency (FHFA) and gave it responsibility for, among other things, the supervision and oversight of Fannie Mae, Freddie Mac, and the 12 federal home loan banks. Specifically, FHFA was assigned responsibility for ensuring that each of the regulated entities operates in a fiscally safe and sound manner, including maintenance of adequate capital and internal controls, and carries out its housing and community development finance mission. HERA also requires FHFA to annually prepare financial statements, and further requires the Government Accountability Office (GAO) to audit these statements. Pursuant to HERA's requirement, GAO audited FHFA's fiscal year 2009 financial statements to determine whether (1) the financial statements were fairly stated and (2) FHFA management maintained effective internal control over financial reporting. GAO also tested FHFA's compliance with selected laws and regulations. GAO is not making any recommendations in this report. In commenting on a draft of this report, FHFA noted the challenges it faced in establishing the new agency while working to stabilize the housing market. It noted that it would continue to work to enhance its internal controls and ensure the reliability of its financial reporting, its operational soundness, and public confidence in its mission. In GAO's opinion, FHFA's fiscal year 2009 financial statements are fairly presented in all material respects. GAO also concluded that FHFA had effective internal control over financial reporting as of September 30, 2009. GAO found no reportable instances of noncompliance with the laws and regulations it tested. HERA established FHFA as an independent agency on July 30, 2008, and abolished, effective within 1 year of enactment, the Office of Federal Housing Enterprise Oversight (OFHEO) and the Federal Housing Finance Board (FHFB) - which, together with a mission group within the Department of Housing and Urban Development (HUD), had previous supervisory and oversight responsibilities for Fannie Mae, Freddie Mac, and the 12 federal home loan banks. During fiscal year 2009, OFHEO's and FHFB's personnel, property, and program activities, and certain employees and activities of HUD, were transferred to FHFA, and the assets, liabilities, and financial transactions of OFHEO and FHFB were consolidated into FHFA. While FHFA was in existence prior to the start of fiscal year 2009, this was its first full year of operations and the first year for which it prepared financial statements. Consequently, FHFA's financial statements do not present comparative information for the prior year. In early September 2008, Fannie Mae and Freddie Mac were placed into conservatorship by the Director of FHFA, with the stated intent to stabilize these entities. The assets, liabilities, and activities of the two entities, Fannie Mae and Freddie Mac, are not reflected in FHFA's fiscal year 2009 financial statements, based on determinations by the Office of Management and Budget (OMB) and the Department of the Treasury (Treasury) that they did not meet the criteria for inclusion in the financial statements of the U.S. government or the Treasury under federal accounting concepts. Specifically, OMB and Treasury concluded this because the entities are not currently reflected in the federal government's budget and because the conservatorship arrangement is considered to be temporary. FHFA management concurred with this conclusion. Should circumstances change, this decision would need to be revisited. Over the longer term, Congress and the executive branch face difficult decisions on how to restructure the entities and promote housing opportunities while limiting the risks to taxpayers and the financial markets. GAO issued a report containing a framework for evaluating various options available. GAO noted other less significant matters involving FHFA's internal controls and will be reporting separately to FHFA management on these matters.

2009-11-16T00:00:00+01:00 2009-11-16T00:00:00+01:00 http://www.gao.gov/pdfs/GAO-10-250?source=ra

Established in 1934 to enforce the securities laws and protect investors, the United States Securities and Exchange Commission (SEC) plays an important role in maintaining the integrity of the U.S. securities markets. Pursuant to the Accountability of Tax Dollars Act of 2002, SEC is required to prepare and submit to Congress and the Office of Management and Budget audited financial statements. GAO agreed, under its audit authority, to perform the audit of SEC's financial statements to determine whether (1) the financial statements are fairly stated, and (2) SEC management maintained effective internal control. GAO also tested SEC's compliance with selected provisions of significant laws and regulations. In GAO's opinion, SEC's fiscal years 2009 and 2008 financial statements are fairly presented in all material respects. However, in GAO's opinion, SEC did not have effective internal control over financial reporting as of September 30, 2009. Recommendations for corrective action will be included in a separate report. During this year's audit, we identified six significant deficiencies that collectively represent a material weakness in SEC's internal control over financial reporting. The significant deficiencies involve SEC's internal control over (1) information security, (2) financial reporting process, (3) fund balance with Treasury, (4) registrant deposits, (5) budgetary resources, and (6) risk assessment and monitoring processes. These internal control weaknesses give rise to significant management challenges that have reduced assurance that data processed by SEC's information systems are reliable and appropriately protected; impaired management's ability to prepare its financial statements without extensive compensating manual procedures; and resulted in unsupported entries and errors in the general ledger. As we reported last year, SEC's ability to sustain effective internal control over financial reporting was at risk due to its continued reliance on processes and systems that were not designed to provide the accurate, complete, and timely transaction-level financial information that management needs to make well-informed decisions, or to accumulate and report reliable financial information without extensive manual workarounds and compensating controls. During this year's audit, the nature of the errors and related internal control deficiencies we found indicate that SEC was unable to sustain the level of effort and resources needed to compensate for these deficient processes and systems to achieve effective internal control over financial reporting. These deficiencies are likely to continue to exist until SEC's general ledger system is either significantly enhanced or replaced, key accounting activity is fully integrated with the general ledger at the transaction level, information security controls are strengthened, and appropriate resources are dedicated to maintaining effective internal controls. In the interim, SEC will need to place greater emphasis on monitoring the current risks and vulnerabilities, along with the related compensating procedures, to determine whether these risks are being adequately mitigated on an ongoing basis. Successfully addressing these issues is critical to maintaining SEC's credibility given its important role in the financial reporting process of registrants, and is vital to achieving SEC's stated vision to be the standard against which federal agencies are measured.

2009-11-16T00:00:00+01:00 2009-11-16T00:00:00+01:00 http://www.gao.gov/pdfs/GAO-10-80?source=ra

Access to broadband service is seen as vital to economic, social, and educational development, yet many areas of the country lack access to, or their residents do not use, broadband. To expand broadband deployment and adoption, the American Recovery and Reinvestment Act (Recovery Act) provided $7.2 billion to the Department of Commerce's National Telecommunications and Information Administration (NTIA) and the Department of Agriculture's Rural Utilities Service (RUS) for grants or loans to a variety of program applicants. The agencies must award all funds by September 30, 2010. This report addresses the challenges NTIA and RUS face; steps taken to address challenges; and remaining risks in (1) evaluating applications and awarding funds and (2) overseeing funded projects. The Government Accountability Office (GAO) reviewed relevant laws and program documents and interviewed agency officials and industry stakeholders. NTIA and RUS face scheduling, staffing, and data challenges in evaluating applications and awarding funds. NTIA, through its new Broadband Technology Opportunities Program, and RUS, through its new Broadband Initiatives Program, must review more applications and award far more funds than the agencies formerly handled through their legacy telecommunications grant or loan programs, including NTIA's largest legacy grant program, Public Safety Interoperable Communications. NTIA and RUS initially proposed distributing these funds in three rounds, but recently adopted two rounds. To meet these challenges, the agencies have established a two-step application evaluation process that uses contractors or unpaid, independent experts for application reviews and plan to publish information on applicants' proposed service areas to help ensure the eligibility of proposed projects. While these steps address some challenges, the upcoming deadline for awarding funds may pose risks to the thoroughness of the application evaluation process. In particular, the agencies may lack time to apply lessons learned from the first funding round and to thoroughly evaluate applications for the remaining rounds. NTIA and RUS will oversee a significant number of projects, including projects with large budgets and diverse purposes and locations. In doing so, the agencies face the challenge of monitoring these projects with far fewer staff per project than were available for their legacy grant and loan programs. To address this challenge, NTIA and RUS have hired contractors to assist with oversight activities and plan to require funding recipients to complete quarterly reports and, in some cases, obtain annual audits. Despite these steps, several risks remain, including a lack of funding for oversight beyond fiscal year 2010 and a lack of updated performance goals to ensure accountability for NTIA and RUS. In addition, NTIA has yet to define annual audit requirements for commercial entities funded under the Broadband Technology Opportunities Program.

2009-11-16T00:00:00+01:00 2009-11-16T00:00:00+01:00 http://www.gao.gov/pdfs/GAO-10-18?source=ra

The federal government has invested billions of dollars to improve student academic performance, and many schools, teachers, and researchers are trying to determine the most effective instructional practices with which to accomplish this. The Conference Report for the Consolidated Appropriations Act for Fiscal Year 2008 directed GAO to study strategies used to prepare students to meet state academic achievement standards. To do this, GAO answered: (1) What types of instructional practices are schools and teachers most frequently using to help students achieve state academic standards, and do those instructional practices differ by school characteristics? (2) What is known about how standards-based accountability systems have affected instructional practices? (3) What is known about instructional practices that are effective in improving student achievement? GAO analyzed data from a 2006-2007 national survey of principals and 2005-2006 survey of teachers in three states, conducted a literature review of the impact of standards-based accountability systems on instructional practices and of practices that are effective in improving student achievement, and interviewed experts. Nationwide, most principals focused on multiple strategies to help students meet academic standards, such as using student data to inform instruction and increasing professional development for teachers, according to our analysis of data from a U.S. Department of Education survey. Many of these strategies were used more often at high-poverty schools--those where 75 percent or more of the students were eligible for the free and reduced-price lunch program--and high-minority schools--those where 75 percent or more of students were identified as part of a minority population, than at lower poverty and minority schools. Likewise, math teachers in California, Georgia, and Pennsylvania increased their use of certain instructional practices in response to their state tests, such as focusing more on topics emphasized on assessments and searching for more effective teaching methods, and teachers at high-poverty and high-minority schools were more likely than teachers at lower-poverty schools and lower-minority schools to have made these changes, according to GAO's analysis of survey data collected by the RAND Corporation. Some researchers suggested that differences exist in the use of these practices because schools with lower poverty or lower minority student populations might generally be meeting accountability requirements and therefore would need to try these strategies less frequently. Research shows that standards-based accountability systems can influence instructional practices in both positive and negative ways. For example, some research notes that using a standards-based curriculum that is aligned with corresponding instructional guidelines can facilitate the development of higher order thinking skills in students. But, in some cases, teacher practices did not always reflect the principles of standards-based instruction, and the difficulties in aligning practice with standards were attributed, in part, to current accountability requirements. Other research noted that assessments can be powerful tools for improving the learning process and evaluating student achievement, but assessments can also have some unintended negative consequences on instruction, including narrowing the curriculum to only material that is tested. Many experts stated that methodological issues constrain knowing more definitively the specific instructional practices that improve student learning and achievement. Nevertheless, some studies and experts pointed to instructional practices that are considered to be effective in raising student achievement, such as differentiated instruction. Professional development for teachers was also highlighted as important for giving teachers the skills and knowledge necessary to implement effective teaching practices.