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From the Comptroller General:

January 31, 2003:

It is indeed a pleasure to present GAO’s performance and accountability 

report for fiscal 2002. In the spirit of the Government Performance and 

Results Act (GPRA), this annual report informs the Congress and the 

American people about what we have achieved on their behalf. 

Importantly, we received a clean opinion from independent auditors on 

our financial statements for the 16th consecutive year. I am confident 

that the financial information and the data measuring GAO’s performance 

contained in this report are complete and reliable.

The year 2002 was marked by certain new and unprecedented challenges 

for the federal government. In the aftermath of the September 11, 2001, 

terrorist attacks and the delivery of anthrax spores through the mail, 

securing the safety of Americans at home and abroad became the foremost 

national priority. It was also a year of economic challenges: not just 

falling stock prices, but diminished public confidence in certain 

corporate institutions and in the ability of government to effectively 

oversee financial markets. The troubles experienced at Enron and other 

corporations and the related conduct of auditors and various other 

parties had far reaching effects.

The threat of terrorism and the damage done to Americans’ economic 

well-being in 2002 were but two challenges among many--some of them 

long-standing challenges with which the Congress continues to grapple. 

The nation’s changing demographics, the educational needs of its 

children, the long-term viability of Social Security and Medicare, the 

rising cost of health care and the millions of Americans who are 

uninsured, the vulnerability of the government’s computer systems to 

sabotage, the requirements of the armed forces in the face of new 

threats to national security--these and other challenges continued to 

engage the attention of the Congress and therefore helped define the 

year’s priorities at GAO.

As a key source of objective information and analysis, GAO played a 

crucial role in supporting congressional decision making. For example, 

GAO’s work informed the debate over national preparedness strategy, 

helping the Congress answer questions about the associated costs and 

program trade-offs and providing perspectives on how best to organize 

and manage the new Transportation Security Administration and the new 

Department of Homeland Security. GAO’s input was a major factor in 

helping to shape the Sarbanes-Oxley Act, which created the Public 

Company Accounting Oversight Board as well as new rules to strengthen 

corporate governance and ensure auditor independence. Further, GAO’s 

work helped the Congress develop and enact election reform legislation 

in the form of the Help America Vote Act of 2002.

The Congress and the executive agencies took a wide range of actions 

based on GAO analyses and recommendations. These included reducing 

improper payments under the Medicare program, reducing the risks 

associated with agriculture loan programs, and improving the oversight 

of contingency appropriations for defense. In total, GAO’s efforts 

helped the Congress and government leaders achieve $37.7 billion in 

financial benefits--an $88 return on every dollar invested in GAO.

That return on the public’s investment in GAO extends beyond dollar 

savings to improvements in how the government serves its citizens. 

Whether by spurring efforts to coordinate emergency preparedness by 

federal, state, and local agencies; by informing the Congress and the 

public about the risks involved in private pension plans; or by helping 

federal agencies improve their oversight of the nation’s food safety 

system, GAO is contributing directly to bettering Americans’ daily 

lives. Another way we do this is by raising congressional and public 

awareness of emerging national problems. For example, we underscored 

for the Congress the prevalence of security weaknesses at American 

seaports, the nature and growing cost of identity theft, weaknesses in 

export controls over sophisticated weapons technologies, inadequacies 

in nursing home care, and shortages of children’s vaccines. The more 

the nation’s leaders in the public, nonprofit, and private sectors know 

about these growing challenges, the sooner they will be able to craft 

effective responses.

Access to the information the Congress wishes to have became a special 

issue for GAO during the year when, for the first time in our history, 

we used our statutory authority to file suit in order to obtain certain 

government records from an executive branch official. The action came 

about after we received congressional requests from four Senate 

Committee Chairs and Subcommittee Chairs and two House Members for 

information on meetings between private-sector individuals and a White 

House energy task force chaired by the Vice President on the 

development of the President’s proposed National Energy Policy. 

Starting in May 2001, we sought limited factual information from the 

Vice President in his capacity as chairman of the National Energy 

Policy Development Group. He refused to disclose a range of 

information, such as the dates, locations, subjects, and attendees 

involved in the group’s meetings with external parties. We repeatedly 

explained our explicit statutory audit and access authority, 

streamlined our requests, and offered the White House flexibility in 

how the information might be provided. Furthermore, the administration 

did not take advantage of the statutory provision that could have 

prevented a suit and did not claim executive privilege. We reluctantly 

filed suit in federal district court in February 2002 under the 

provisions of GAO’s statutory authorities, asking the court to direct 

that the requested records be produced.

In December 2002, the district court dismissed our suit for lack of 

standing. In doing so, the court did not address the merits of the 

case--including GAO’s fundamental audit or access rights--but instead 

ruled that as Comptroller General, I lacked standing to enforce this 

agency’s access rights in court. In his ruling, the judge stated that 

the issues involved and the nature of the congressional interest in the 

records were not sufficient to have the court decide the dispute. We 

strongly disagree with the court’s ruling, but as this report goes to 

press, we are reviewing the court’s decision and analyzing its basis 

and potential implications. Once this review is completed and we have 

consulted with the Congress’s leadership on a bipartisan basis, I will 

decide whether to appeal the decision to the circuit court.

The value of information in serving our clients is driven home to us 

every day at GAO. It is not just a matter of obtaining facts from the 

executive branch but also of observing best practices in and out of 

government and how they are or can be applied. For instance, how well 

the government delivers on its promises frequently depends on how well 

it applies fundamental modern management principles. Strategic 

planning, organizational alignment, performance management, financial 

management, information technology, human capital strategy, knowledge 

management, and change management are key elements in maximizing 

performance and ensuring accountability. We have significantly 

increased the amount of our work focused on these areas to enhance the 

implementation of these principles throughout the federal government.

We don’t just preach modern management principles at GAO. We practice 

what we preach, and we aim to lead by example. We continued this year 

to make significant progress in improving our human capital programs, 

our information technology capabilities, and our change management 

practices. All of these are key areas in which we seek to be a model 

for other federal agencies.

Visitors to GAO headquarters may have felt, as I do, that the building 

itself somehow conveys a sense of solidity and purpose. There is a new 

plaque in the lobby of GAO headquarters that commemorates another 

quality of the organization and its people: a readiness to contribute 

in whatever way may be needed to support our country, the Congress, and 

the continuity of representative government. On October 23, 2001, with 

only 3 days’ notice, we opened our doors to the 435 members of the 

House of Representatives and selected members of their staffs. As they 

set up quarters at GAO, their Capitol Hill offices were checked for 

traces of anthrax. It was the first time since the War of 1812, when 

the Capitol and the White House were burned, that the House of 

Representatives sought alternative housing.

Working with congressional and contractor staff, we were able to 

provide the telecommunications, computer, and other services needed to 

conduct the business of the House as 1,200 members of our staff shifted 

to alternative locations. Through it all, our work went on, and we 

continued to issue reports and to testify on issues important to the 

Congress and the public. I am very proud of how, in a time of 

uncertainty, the people of GAO responded with a positive attitude in 

doing whatever their country required and an unwavering resolve to 

continue their work. Knowing this organization as I do, I was not 


In summary, fiscal 2002 was truly an exceptional year. I believe that 

those who read this report will agree with me that taxpayers receive an 

excellent return on their investment in GAO.

David M. Walker:

Comptroller General of the United States:

[Signed by David M. Walker]

In fiscal 2002, GAO served the Congress and the American people by 

helping to--

* Create a national preparedness strategy at the federal, state, and 

local levels that will make Americans safer from terrorism:

* Devise election reforms to restore voter confidence:

* Protect investors through better oversight of the securities industry 

and the accounting profession:

* Ensure a safer national food supply:

* Expose the inadequacy of nursing home care:

* Make income tax collection fair, effective, and less painful to 


* Strengthen public schools’ accountability for educating children:

* Keep sensitive American technologies out of the wrong hands:

* Protect American armed forces confronting chemical or biological 


* Identify the risks to employees in private pension programs:

* Identify factors causing the shortage of children’s vaccines:

* Assist the postal system in addressing anthrax and various management 


* Identify security risks at ports, airports, and transit systems:

* Save billions by bringing sound business practices to the Department 

of Defense:

* Foster human capital strategic management to create a capable, 

effective, well-managed federal workforce:

* Ensure that the armed forces are trained and equipped to meet the 

nation’s defense commitments:

* Enhance the safety of Americans and foreign nationals at U.S. 

installations worldwide:

* Assess ways of improving border security through biometric 

technologies and other means:

* Reduce the international debt problems faced by poor countries:

* Reform the way federal agencies manage their finances:

* Protect government computer systems from security threats:

* Enhance the transition to e-government--the new “electronic 

connection” between government and the public:


The U.S. General Accounting Office is an independent, nonpartisan, 

professional services agency in the legislative branch that is commonly 

regarded as the audit, evaluation, and investigative arm of the 

Congress. Created in 1921 as a result of the Budget and Accounting Act, 

GAO’s “watchdog” role has evolved over the decades as the Congress 

expanded our statutory authority and called on us with increasing 

frequency for support in carrying out its legislative and oversight 


Today, we examine the full breadth and scope of federal activities and 

programs, publish thousands of reports and other documents annually, 

and provide a number of related services intended to aid decision 

makers and the general public alike. We also study national and global 

trends to anticipate their implications for public policy. By making 

recommendations to improve the accountability, operations, and services 

of government agencies, GAO contributes not only to the increased 

effectiveness of federal spending, but also to the enhancement of the 

taxpayers’ trust and confidence in their government.

To accomplish our mission, we rely on a workforce of highly trained 

professionals who hold degrees in many academic disciplines, including 

accounting, law, engineering, public and business administration, 

economics, computer science, and the social and physical sciences. They 

are arrayed in 13 research, audit, and evaluation teams and one 

temporary or “virtual” team on national preparedness. These teams are 

backed by staff offices and mission support units. 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.

On the pages that follow, we summarize our performance for fiscal 2002. 

We also present condensed financial statements and the independent 

auditor’s opinion on them. If you would like additional information, 

please see the full-length version of our performance and 

accountability report at Our performance plan for 

fiscal 2004 will be available through that same page as soon as the 

budget process permits.

GAO’s Performance:

Fiscal 2002 was a year of challenges, not just for GAO but also for the 

Congress and the nation GAO serves. The nation’s vulnerabilities were 

exposed in a series of crises--America’s vulnerability to sophisticated 

terrorist networks, America’s vulnerability to bioterrorism waged 

through mechanisms as mundane as the daily mail, and America’s 

vulnerability to corporate misconduct capable of wiping out jobs, 

pensions, and investments virtually overnight.

As the Congress’s priorities evolved to meet these crises, GAO’s 

challenge was to respond quickly and effectively to our congressional 

clients’ changing needs. Under our original strategic plan, published 

in spring 2000, we had already streamlined and realigned GAO’s 

structure and resources to better serve the Congress in its 

legislative, oversight, and investigative roles. The new human capital 

initiatives we had begun, including recruiting, hiring, and 

professional development, equipped us to operate in a constantly 

changing knowledge environment. The steps that we took to enhance our 

information technology capabilities served to increase our 

productivity, consistency, and responsiveness. And with work already 

under way across a spectrum of critical policy and performance issues, 

we had a head start toward meeting the Congress’s needs in a year of 

unexpected and often tumultuous events.

We were, for instance, asked to assist with the deliberations over the 

Department of Homeland Security’s formation by looking into questions 

involving flexibilities for managing human capital, information 

sharing, management, acquisition, budget and program transfer 

authorities; and lessons available from other reorganizations in the 

public and private sectors. Teams with different specialties from 

across GAO collaborated on that effort and also pursued specific 

aspects of national preparedness. For example, building on an extensive 

body of completed work, we provided important information to the 

Congress as it drafted the Aviation and Transportation Security Act, 

while providing continuing assistance with information on aviation, 

port, and transit security.

Building on our previous work on the outbreak of West Nile virus and 

our examination of state and local efforts to meet the challenges all 

epidemics pose--those of detection and treatment--we aided the 

Congress’s decision making about how to equip and organize the 

Department of Homeland Security to prepare for and respond to 


We were also deeply involved in congressional efforts to address 

terrorism insurance issues--raising alternative strategies and 

suggesting guiding principles based on past efforts to assist 

industries and firms in times of crisis, such as the savings and loan 

industry and, more recently, the aviation industry.

As we gathered information and conducted analyses for the Congress, 

developed recommendations for improvements, and detailed the potential 

ramifications of policies to address the national problems the Congress 

was confronting, we continued work on the issues that the Congress had 

faced before homeland security gripped the nation’s attention. Among 

these was a wide range of issues that also directly affect the lives of 


* We, for instance, helped policymakers probe the issues behind the 

shortages in the supplies of vaccines for childhood illnesses, such as 

measles, mumps, rubella, and tetanus, clarifying the variety of 

contributing factors and exploring the key questions, such as how more 

manufacturing and competition can be encouraged, how adequate oversight 

can be provided, and how stockpiles can be amassed.

* Our work also helped policymakers--and the public--understand private 

pension issues in the wake of the Enron bankruptcy and other corporate 

failures, including the questions they raised for workers nationwide. 

For instance, in early 2002, the Comptroller General convened a forum 

on corporate governance, transparency, and accountability that 

highlighted a number of systemic issues, including concerns related to 

employee pension and savings plans. And we alerted the Congress to 

weaknesses that may exist in the legal protections for employee 

pensions. We highlighted the ways in which employers’ stock investment 

decisions can increase the risks to which employees’ pension plans are 

exposed and recommended improvements to the information employees must 

receive. We also issued a guide for Members of Congress, their staffs, 

and the public called Answers to Key Questions about Private Pension 

Plans (, which explains 

in easy-to-understand terms the concepts and rules that last year 

became sharply relevant to the future economic security of millions of 


Selected Public Laws to Which GAO Contributed During Fiscal 2002 

Included --:

Prescription Drug User Fee Amendments of 2002, P.L. 107-188:

Best Pharmaceuticals for Children Act, P.L. 107-1092:

No Child Left Behind Act of 2001, P.L. 107-110:

Food Stamp Reauthorization Act of 2002, P.L. 107-171:

Help America Vote Act of 2002, P.L. 107-252:

Homeland Security Act of 2002, P.L. 107-296:

Public Health Security and Bioterrorism Preparedness and Response Act 

of 2002, P.L. 107-188:

Aviation and Transportation Security Act, P.L. 107-71:

Department of Defense Appropriation Act, 2003, P.L. 107-248:

Department of Defense and Emergency Supplemental Appropriations for 

Recovery From and Response to Terrorist Attacks on the United States 

Act, 2002, P.L. 107-117:

Bob Stump National Defense Authorization Act for Fiscal Year 2003, P.L. 


Foreign Relations Authorization Act, Fiscal Year 2003, P.L. 107-228:

Small Business Paperwork Relief Act of 2002, P.L. 107-198:

Federal Information Security Management Act of 2002, P.L. 107-347:

Sarbanes-Oxley Act of 2002, P.L. 107-204:

National Defense Authorization Act for Fiscal Year 2002, P.L. 107-107:

Legislative Branch Appropriations, Fiscal Year 2002, P.L. 107-68:

Improper Payments Information Act of 2002, P.L. 107-300:

Trade Act of 2002, P.L. 107-210:

Terrorism Risk Insurance Act of 2002, P.L. 107-297:

E-Government Act of 2002, P.L. 107-347:

* Our work on the elections process contributed to reform legislation 

drafted in response to the voting problems that came to national 

prominence in the November 2000 presidential election. A series of our 

reports disclosed major challenges involving the people, processes, and 

technology used at each stage of the election process--registering 

voters, absentee and early voting, preparing for and conducting 

election day activities, and tabulating votes in the 10,000 local 

election jurisdictions nationwide. The legislation passed by the 

Congress addresses federal subsidies for voting machinery, standards 

for the equipment, improved voter registration rolls, and improved 

access for voters with disabilities.

By year’s end, we had testified 216 times before the Congress, 

sometimes on as little as 24 hours’ notice, on a range of issues, 

including those listed on the next page. We had filled hundreds of 

urgent requests for information. We had developed 1,950 recommendations 

for improving the government’s operations, including, for example, 

those we made to the Secretary of State calling for the development of 

a governmentwide plan to help other countries combat nuclear smuggling 

and those we made to the Chairman of the Federal Energy Regulatory 

Commission calling for his agency to develop an action plan for 

overseeing competitive energy markets. We also had continued to track 

the recommendations we had made in past years, checking to see that 

they had been implemented and, if not, whether we needed to do follow-

up work on problem areas. We found, in fact, that 79 percent of the 

recommendations we had made in fiscal 1998 had been implemented, a 

significant step when the work we have done for the Congress becomes a 

catalyst for creating tangible benefits for the American people.

Figure: Issues On which GAO Testified During Fiscal 2002:

[See PDF for image] --graphic text:

Goal 1: Well-Being and Financial Security of the American People:

* Aviation security: 

* Bioterrorism: 

* Blood supplies: 

* Child welfare: 

* Childhood vaccines: 

* Coast Guard’s security missions: 

* Customs’ cargo inspections: 

* Disability programs: 

* EPA cabinet status: 

* FBI reorganization: 

* Federal property management reform: 

* Food safety: 

* Highway trust fund: 

* Housing: 

* HUD management reform: 

* Identity theft: 

* Immigration enforcement: 

* Indian tribal recognition: 

* Intercity passenger rail: 

* Long-term care: 

* Medicare payments: 

* Nuclear waste storage: 

* Nursing homes: 

* Postal Service challenges: 

* Public health aspects of homeland security: 

* Retiree health insurance: 

* SBA’s human capital challenges: 

* Social Security reform: 

* Transit safety and security: 

* VA health care: 

* Welfare reform: 

* Wildfire threats: 

* Workforce development: 

Goal 2: Changing Security Threats and Challenges of Globalization:

* A-76 competitive sourcing: 

* Anthrax vaccine: 

* Ballistic missile defense: 

* Chemical and biological preparedness: 

* Combating terrorism: 

* Compact with Micronesia: 

* Conflict diamonds: 

* Debt relief for poor countries: 

* Encroachment on training ranges: 

* Export controls: 

* Food aid: 

* Foreign language needs: 

* Gulf War illnesses: 

* Information security aspects of homeland security: 

* International trade: 

* Nuclear smuggling: 

* Organizational aspects of homeland security: 

* SEC’s human capital challenges: 

* Strategic seaport protection: 

* Terrorism insurance: 

* U.S. overseas presence: 

* Weapons of mass destruction: 

Goal 3: Transforming the Federal Government’s Role:

* Contract management: 

* Contracting for services: 

* Corporate governance and accountability: 

* Debt collection: 

* DOD financial management: 

* Electronic Government Act of 2002: 

* Electronic-government security: 

* Enterprise architecture: 

* Federal budget issues: 

* Federal building security: 

* Federal financial management reform: 

* Federal rulemaking requirements: 

* Freedom to Manage Act: 

* Human capital strategy: 

* Illegal tax schemes and scams: 

* Intergovernmental aspects of homeland security: 

* IRS modernization: 

* Medicaid financial management: 

* NASA’s management challenges: 

* President’s Management Agenda: 

* Purchase card controls: 

* Securing America’s borders: 

* U.S. government’s financial statements: 

Source: GAO:

[End of figure]

In fiscal 2002, we recorded 906 instances in which our work led to 

improvements in government operations or programs. For example, by 

acting on GAO’s findings or recommendations, the federal government has 

taken important steps toward enhancing aviation safety, improving 

pediatric drug labeling based on research, better targeting of funds to 

high-poverty school districts, greater accountability in the federal 

acquisition process, and more effective delivery of disaster recovery 

assistance to other nations, among other achievements.

Figure: Financial Benefits: 

[See PDF for image] - graphic text: 

Bar chart with 5 items.

Dollars in Billions:

Item 1, 1999 Actual; 20.1.

Item 2, 2000 Actual; 23.2.

Item 3, 2001 Actual; 26.4.

Item 4, 2002 Target; 30.

Item 5, 2002 Actual; 37.7.

Source: GAO:

Note: Changes GAO made to its methodology for tabulating financial 

benefits caused the fiscal 2002 results to increase about 11 percent. 

See the full-length version of this report at for 


[End of figure] - graphic text:

Figure: Other Benefits:

[See PDF for image] - graphic text:

Bar chart with 5 items.

Number of actions:

Item 1, 1999 Actual; 607.

Item 2, 2000 Actual; 788.

Item 3, 2001 Actual; 799.

Item 4, 2002 Target; 770.

Item 5, 2002 Actual; 906.

Source: GAO:

[End of figure] 

In another 115 instances, federal action on GAO’s findings or 

recommendations produced financial benefits for the American people: a 

total of $37.7 billion was achieved by making government services more 

efficient, improving the budgeting and spending of tax dollars, and 

strengthening the management of federal resources. Increased funding 

for improved safeguards against fraud and abuse helped the Medicare 

program to better control improper payments of $8.1 billion over 2 

years, for instance, and better policies and controls reduced losses 

from farm loan programs by about $4.8 billion across 5 years. 

Altogether, GAO’s fiscal 2002 financial benefits translate into a 

financial return on investment of $88 for every dollar budgeted for 


Of our seven agencywide annual performance targets (see the table), 

only one was not met: timeliness. While we provided 96 percent of our 

products to their congressional requesters by the date promised, we did 

not hit this measure’s target of 98 percent on-time delivery. The 

year’s turbulent events played a part in our missing the target, 

causing us to delay work in progress when higher-priority requests came 

in from the Congress. We know we will continue to face factors beyond 

our control as we strive to improve our performance in this area. But 

we believe the agency protocols we are piloting will help clarify 

aspects of our interactions with the agencies we evaluate and audit 

and, thus, expedite our work in ways that could improve the timeliness 

of our final products. We also believe that our continuing investments 

in human capital and information technology will improve our timeliness 

while allowing us to maintain our high level of productivity and 

performance overall.

Table: Annual Measures and Targets.

Performance measure; Financial benefits (billions); 

1999 Actual: $20.1; 2000 Actual: $23.2; 2001 Actual: $26.4; 2002 

$30.0; 2002 Actual: $37.7[A]; 4-year avg. Actual: $26.9; 2003 Target: 


Performance measure; Other benefits; 1999 Actual: 607; 2000 

Actual: 788; 2001 Actual: 799; 2002 Target: 770; 2002 Actual: 906;

4-year avg. Actual: 775; 2003 Target: 800[B].

Performance measure; Past recommendations implemented; 1999 Actual: 

70%; 2000 Actual: 78%; 2001 Actual: 79%; 2002 Target: 75%; 2002 Actual: 

79%; 4-year avg. Actual: N/A; 2003 Target: 77%.

Performance measure; New recommendations made; 1999 Actual: 940; 2000 

Actual: 1,224; 2001 Actual: 1,563; 2002 Target: 1,200; 2002 

Actual: 1,950; 4-year avg. Actual: 1,419; 2003 Target: 1,250[B].

Performance measure; New products with recommendations; 

1999 Actual: 33%; 2000 Actual: 39%; 2001 Actual: 44%; 2002 Target: 45%; 

2002 Actual: 53%; 4-year avg. Actual: 42%; 2003 Target: 50%.

Performance measure; Testimonies; 1999 Actual: 229; 2000 Actual: 263; 

2001 Actual: 151; 2002 Target: 200; 2002 Actual: 216; 4-year avg. 

215; 2003 Target: 180[B].

Performance measure; Timeliness; 1999 Actual: 96%; 2000 Actual: 96%; 

2001 Actual: 95%; 2002 Target: 98%; 2002 Actual: 96%; 4-year avg. 

96%; 2003 Target: 98%.

[A] Changes GAO made to its 

methodology for tabulating financial benefits caused the fiscal 2002 

results to increase about 11 percent. See text under Financial Benefits 

on page 47 for details.; 

[B] Four targets published in GAO’s 

performance plan for fiscal 2003 were subsequently revised based on 

more current information. Two were raised; two were lowered. The 

original targets were financial benefits, $35 billion; other benefits, 

785; recommendations made, 1,200; and testimonies, 210.; 

N/A = not applicable.

[End of table]

At the beginning of fiscal 2002, as we prepared an updated draft of our 

strategic plan for congressional comment--extending the plan to fiscal 

2007 and factoring in developments that had occurred since we first 

issued it in fiscal 2000--it was clear that the world had changed 

considerably. When the original plan was issued, the nation had been 

enjoying a period of peace and prosperity, with large budget surpluses 

projected into the future. When the updated plan went onto the Web in 

2002, the nation was at war against terrorism, both within and outside 

its borders. The economic outlook had become difficult to predict. And 

the federal government faced the return of serious, long-range budget 

deficits and the burden they impose on the nation’s future prosperity.

The updated plan carried forward the four strategic goals we had 

already established as the organizing principles for a body of work 

that is as wide-ranging as the interests and concerns of the Congress 

itself. While these strategic goals, shown on page 18 with their 

strategic objectives, help us plan our work and assess our progress in 

fulfilling our mission to serve the Congress and the nation, they are 

not separate endeavors. We developed them with the intention of moving 

away from “siloed”--or compartmentalized--approaches to doing business 

on a matrixed basis. As the challenges facing policymakers grow more 

complex and interdependent, the only way a knowledge-based, 

multidisciplinary professional services organization such as GAO can be 

effective is to be flexible and capable of responding quickly to 

change. As a result, we have sought more cooperative, partnerial 

approaches that maximize the skills and expertise of people working 

together toward the same ends.

In later sections of this booklet, we highlight our performance under 

each of our strategic goals and the strategies and challenges involved 

in achieving those goals--including the management challenges and 

external factors we face. We also summarize how we used our resources 

in fiscal 2002, including our costs by strategic goal.

Helping the Government Improve Performance and Accountability:

Every 2 years, with the start of each new Congress, GAO issues an 

update of the high-risk series, which identifies and reports on federal 

programs and operations that have greater vulnerabilities to waste, 

fraud, abuse, and mismanagement or that have major challenges 

associated with their economy, efficiency, or effectiveness.

Lasting solutions to high-risk problems offer the potential to save 

billions of dollars, dramatically improve service to the American 

public, strengthen public confidence and trust in the performance and 

accountability of the national government, and ensure the ability of 

government to deliver on its promises.

Since 1990, the Congress’s and federal agencies’ commitment to 

resolving serious, long-standing high-risk problems has paid off--the 

root causes of half the 14 high-risk areas on our original list have 

been addressed. This sustained commitment continues to produce results. 

In 2001, GAO identified 23 high-risk areas. Since then, demonstrable 

progress has been made in virtually all of them. :

GAO has increasingly used the high-risk designation to draw attention 

to the challenges faced by government programs and operations in need 

of broad-based transformation. Three of the new high-risk areas on the 

2003 list fall into that category, while a fourth new area involves 

fraud, waste, abuse, and mismanagement, the type of problem GAO 

continues to identify.

To learn more about these new high-risk areas, to review the full list 

of high-risk areas, or to download the update in full, go to

Figure: Serving the Congress: GAO’s Strategic Plan Framework:

[See PDF for image] --graphic text:


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.


* Security and Preparedness: 

* Globalization: 

* Changing Economy: 

* Demographics: 

* Science and Technology: 

* Quality of Life: 

* Governance: 

Goals and Objectives:

Provide Timely, Quality Service to the Congress and the Federal 

Government to...:

Address Current and Emerging Challenges to the Well-

Being and Financial Security of the American People related to...:

* Health care needs and financing: 

* Education and protection of children: 

* Work opportunities and worker protection: 

* Retirement income security: 

* Effective system of justice: 

* Viable communities: 

* Natural resources use and environmental protection: 

* Physical infrastructure: 

Respond to Changing Security Threats and the Challenges of 

Global Interdependence involving...:

* Diffuse security threats: 

* Military capabilities and readiness: 

* Advancement of U.S. interests: 

* Global market forces: 

Help Transform the Federal Government’s Role and How It Does 

Business to Meet 21st Century Challenges by assessing...:

* Roles in achieving federal objectives: 

* Human capital and other capacity for serving the public: 

* Progress toward results-oriented, accountable, and relevant 


* Fiscal position and financing of the government: 

Maximize the Value of GAO by Being a Model Federal Agency and a 

World-Class Professional Services Organization in the areas of...:

* Client and customer service: 

* Leadership and management focus: 

* Institutional knowledge and experience: 

* Process improvement: 

* Employer of choice: 

Core Values: 




Source: GAO:

[End of figure]

Figure: Goal 1: Well-Being and Financial Security of American People:

[See PDF for image] --graphic text:

An image of a dollar bill divided proportionally shows how large a 

of GAO’s costs were attributable to goal 1, which deals with the well-

and financial security of the American people.

Goal 1’s cost was $178.3 million or 39% of GAO’s total.


$24.1 billion in financial benefits:

* Safeguarding Medicare from fraud and abuse, $8.1 billion: 

* Improving HUD’s budget practices, $4.9 billion: 

* Reducing losses from farm loans, $4.8 billion: 

* Reducing costs of hazardous waste cleanup at Hanford, $1.5 billion: 

* Additional financial benefits, $4.8 billion: 


226 other benefits:

* Improving pediatric drug research and labeling: 

* Simplifying requirements for food stamp eligibility and benefits: 

* Better targeting education funds to high-poverty school districts: 

* Protecting taxpayers from faulty analyses of major public works 


* 222 additional benefits: 


524 new recommendations made:

* Develop strategy for expanding stockpiles of childhood vaccines: 

* Develop an action plan for overseeing competitive energy markets: 

* 522 additional improvements recommended: 

111 testimonies:

* Aviation security: 

* Bioterrorism: 

* Food safety: 

* Nursing homes: 

* 107 additional hearings on topics of national importance: 

Source: GAO

[End of figure]

Figure: Goal 2: Changing security threats and challenges of 

[See PDF for image] --graphic text: 

An image of a dollar bill divided proportionally shows how large a 

slice of GAO’s costs were attributable to goal 2, which deals with 

changing security threats and the challenges of globalization.

Goal 2’s cost was $110.5 million or 24% of GAO’s total.


$8.4 billion in financial benefits:

* Reducing DOD’s foreign currency exchange funding, $1.5 billion: 

* Consolidating and modernizing DOD’s computer center activities, 

$859 million: 

* Reducing funding for the V-22 development program, $763.8 million: 

* Better management of DOD’s satellite capacity, $702 million: 


* Additional financial benefits, $4.6 billion: 

218 other benefits:

* First steps toward unifying homeland security efforts: 

* Stronger measures to prevent unapproved export of missile parts: 

* More effective delivery of disaster recovery assistance to other 


* Improving Peace Corps’ safety and security practices: 

* 214 additional benefits: 

618 new recommendations made:

* Develop governmentwide plan to help other countries combat nuclear 


* Make engineering and manufacturing investments in technologies proven 

to be mature: 

* Develop overall investment plan for the National Security Space 


* 615 additional improvements recommended: 

38 testimonies:

* Combating terrorism: 

* Chemical and biological preparedness: 

* Conflict diamonds: 

* Foreign language needs: 

* 34 additional hearings on topics of national importance: 

Source: GAO

[End of figure]

Figure: Goal 3: Transforming the federal government’s role: 

[See PDF for image] --graphic text: 

An image of a dollar bill divided proportionally shows how large a 

slice of GAO’s costs were attributable to goal 3, which deals with 

transforming the federal government’s role.

Goal 3’s cost was $141 million or 31% of GAO’s total.


$5.2 billion in financial benefits:

* Improving Defense Department’s computer centers’ operations, 

$859 million: 

* Improving collection of nontax debts owed to the U.S. government, 

$300 million: 

* Additional financial benefits, $4 billion: 


462 other benefits:

* Greater accountability in the federal acquisition process: 

* Improved implementation of Paperwork Reduction Act: 

* Data stewardship strategies to protect individuals’ privacy: 

* Audit testing approach for forensic audits to identify fraud, waste, 

and abuse: 

* Improved government debt management: 

* 457 additional benefits: 


808 new recommendations made:

* Better protect government credit cards from misuse: 

* Audit agencies’ compliance with cost accounting standards: 

* Reassess the requirements for recertifying eligibility for the 

Earned Income Tax Credit: 

* 805 additional improvements recommended: 


65 testimonies:

* Intergovernmental aspects of homeland security: 

* Contract management: 

* Corporate governance and accountability: 

* Human capital: 

* Illegal tax schemes and scams: 

* U.S. government’s financial statements: 

* 59 additional hearings on topics of national importance: 

Source: GAO

[End of figure]

Figure: Goal 4: Maximize the value of GAO:

[See PDF for image] --graphic text: 

An image of a dollar bill divided proportionally shows how large a 

slice of GAO’s costs were attributable to goal 4, which deals with 

maximizing the value of GAO.

Goal 4’s cost was $25.3 million or 6% of GAO’s total.


Sharpen focus on clients’ and customers’ requirements:

* Piloted Web-based feedback system for congressional clients: 

* Provided emergency relocation support: 

* Developing agency and international protocols: 


Enhance leadership and promote management excellence:

* Increased security of GAO’s facilities and information systems: 

* Maintained integrity in financial management: 

* Continued to provide leadership in human capital strategy and 


Leverage institutional knowledge and experience:

* Improved management of agency records: 

* Piloted knowledge-sharing among GAO units: 

* Increased capacity through knowledge-sharing and collaboration: 


Continuously improve business and management processes:

* Improved guidance and tracking for GAO engagements: 

* Developed “highlights” page to encapsulate information from a GAO 

on a single page: 

* Donated excess computer equipment to schools: 


Become professional services employer of choice:

* Implemented competency-based performance system for analysts, 

and attorneys: 

* Developed new training process and expanded executive training 


* Continued recruitment focus on diversity: 

Source: GAO

[End of figure]

Strategies and Challenges:

As the audit, evaluation, and investigative arm of the Congress, GAO 

has a unique role to play. Within the legislative branch, we are the 

only agency with staff in the field, conducting performance analyses 

and financial accounting among other congressionally requested 

activities, and reporting our findings not only to our congressional 

clients but also to the American public. While we work with the 

Inspectors General at every federal agency, our engagements differ from 

theirs in that ours are often more strategic and longer-range in 

nature, governmentwide in scope, and initiated by requests from the 


Achieving our goals and objectives rests, for the most part, on 

providing professional, fact-based, balanced, nonpartisan information. 

We develop and present this information in a number of ways to support 

the Congress in carrying out its constitutional responsibilities, 

including the following:

* evaluating federal policies and the performance of agencies;

* overseeing government operations through financial and other 

management audits to determine whether public funds are spent 

efficiently, effectively, and in accordance with applicable laws;

* investigating whether illegal or improper activities are occurring;

* analyzing the financing for government activities;

* conducting constructive engagements in which we work proactively with 

agencies, when appropriate, to provide advice that may assist their 

efforts toward positive results;

* providing legal opinions that determine whether agencies are in 

compliance with applicable laws and regulations;

* conducting policy analyses to assess needed actions and the 

implications of proposed actions; and:

* providing additional assistance to the Congress in support of its 

oversight and decision-making responsibilities.

Because achieving our strategic goals and objectives also requires 

strategies for coordinating with other organizations with similar or 

complementary missions, we:

* use advisory panels and other bodies to inform GAO’s strategic and 

annual work planning, and:

* initiate and support collaborative national and international audit, 

technical assistance, and other knowledge-sharing efforts.

Those two types of strategic working relationships allow us to extend 

our institutional knowledge and experience and, in turn, to improve our 

service to the Congress and the American people. Our External Liaison 

office takes the lead and provides strategic focus for the work with 

crosscutting organizations, while our research, audit, and evaluation 

teams lead the work with most of the issue-specific organizations.

Among these efforts is our work with the International Organization of 

Supreme Audit Institutions (INTOSAI)--the professional organization of 

the national audit offices of 184 countries. During fiscal 2002, GAO 

led a 10-nation task force in developing a strategic planning framework 

for the organization that was approved in October 2002. In fiscal 2003, 

the task force will expand the framework into a comprehensive strategic 

plan. The Comptroller General also leads the Global Working Group, in 

which the heads of GAO’s counterparts from 15 countries discuss mutual 

challenges, share experiences, and identify opportunities for 

collaboration with one another. GAO also chairs INTOSAI’s accounting 

standards committee and is an active member of the auditing standards, 

internal control standards, and public debt committees.

Domestically, the Comptroller General chairs the National 

Intergovernmental Audit Forum, and through 10 regional 

intergovernmental audit forums, GAO consults regularly with federal 

inspectors general and state and local auditors. In addition, through 

the Domestic Working Group, the Comptroller General and the heads of 18 

federal, state, and local audit organizations exchange information and 

seek opportunities to collaborate. The Comptroller General is also one 

of the four principals of the Joint Financial Management Improvement 

Program, who are actively fostering financial management reform 


Addressing Management Challenges That Could Affect Our Performance:

GAO has three management challenges that may affect our performance. 

Two of the challenges--human capital and physical security--were 

identified in our previous performance and accountability report. We 

have made progress in addressing each of these challenges, but we still 

have work to do. The third challenge, information security, will 

replace our previous challenge of information technology. With the 

establishment of a stable and reliable computer network and 

institutionalized standard routine updates of network and desktop 

operating systems and equipment, we will have completed our work on the 

original management challenge. However, independent reviews of our 

information security program indicate a need for further improvement.

Given GAO’s role as a key provider of information and analyses to the 

Congress, maintaining the right mix of technical knowledge and 

expertise as well as general analytical skills is vital to achieving 

our mission. We spend about 80 percent of our resources on our people, 

but without excellent human capital management, we could still run the 

risk of being unable to deliver what the Congress and the nation expect 

from us. In 1999, after an extended hiring freeze, GAO’s workforce was 

sparse at the entry level, and we faced succession planning issues as a 

large number of our senior managers and analysts became eligible to 

retire. The development and training of our senior executives had been 

curtailed for funding reasons. And at the same time, more of our staff 

needed enhanced technical skills if they were to assist the Congress 

effectively. In all those respects, GAO was little different from the 

government as a whole. In the years since, we have addressed these 

issues in a variety of ways and are continuing to do so. For example, 

we developed a recruitment program that allowed us to hire 430 

permanent staff during fiscal 2002, revamped and modernized the 

performance appraisal system for analysts and attorneys, and 

implemented a succession-planning program.

Over the next several years, we need to continue to address skill gaps, 

maximize staff productivity and effectiveness, and reengineer our human 

capital processes to make them more user-friendly. We plan to address 

skill gaps by further refining our recruitment and hiring strategies to 

target gaps identified through our workforce planning efforts, while 

taking into account the significant percentage of our workforce 

eligible for retirement. We will reengineer our human capital systems 

and practices to increase their efficiency and to take full advantage 

of technology. We will also ensure that our staff have the needed 

skills and training to function in this reengineered environment. In 

addition, we are developing a competency-based performance system for 

our mission support employees.

During the 108th Congress, we will work with our appropriations and 

oversight committees to achieve enactment of legislation to support our 

continuing efforts to be a leader in federal human capital management 

and a world-class organization. To build on the human capital 

flexibilities provided by the Congress in 2000, we will identify 

opportunities for additional flexibilities that would, among other 

things, facilitate GAO’s continuing efforts to develop a more 

performance-based compensation system, realign our workforce, and 

provide greater opportunities for staff to phase into retirement.

In the aftermath of the September 11 terrorist attacks and subsequent 

anthrax incidents, our ability to provide a safe and secure workplace 

emerged as a challenge for our agency. Protecting our people and our 

assets is critical to our ability to carry out our mission. We devoted 

additional resources to this area and implemented measures such as 

reinforcing vehicle and pedestrian entry points, installing an 

additional x-ray machine, adding more security guards, reinforcing 

windows, and relocating air sources. We are in the process of 

researching and designing other projects to better control building 

access and security around the building. We plan to implement these 

projects over the next several years.

Ensuring information systems security and disaster recovery systems 

that allow for continuity of operations is a critical requirement for 

the agency, particularly in light of the events of September 11 and the 

anthrax incidents. The risk is that our information could be 

compromised and that we would be unable to respond to the needs of the 

Congress in an emergency. In light of this risk, and in keeping with 

our goal of being a model federal agency, we are implementing an 

information security program consistent with the requirements in the 

Government Information Security Reform provisions (commonly referred to 

as “GISRA”) enacted in the Floyd D. Spence National Defense 

Authorization Act for Fiscal Year 2001. We have made progress through 

our efforts to, among other things, implement a risk-based, agencywide 

security program; provide security training and awareness; and develop 

and implement an enterprise disaster recovery solution.

However, we need to complete certain key actions to be better able to 

detect intruders in our systems, identify our users, and recover in the 

event of a disaster. Among our current efforts and plans for these 

areas are completing the installation of software that helps us detect 

intruders on all our internal servers, completing the implementation of 

a secure user authentication process, and refining the disaster 

recovery plan we developed last year.

At GAO, management challenges are identified by the Comptroller General 

and the agency’s senior executives through the agency’s strategic 

planning, management, and budgeting processes. Our progress in 

addressing the challenges is monitored through our annual performance 

and accountability process. Under strategic goal 4, we establish 

performance goals focused on each of our management challenges and 

track our progress in completing the key efforts for those performance 

goals quarterly. The performance goals are assessed and updated each 


GAO’s Inspector General reviews management’s assessment of the 

challenges and the agency’s progress in addressing them. The memorandum 

on the Inspector General’s findings is reprinted at the end of this 


Mitigating External Factors That Could Affect Our Performance:

Several external factors could affect the achievement of our 

performance goals, including national and international developments 

and the resources we receive. Limitations imposed on our work by other 

organizations or limitations on the ability of other federal agencies 

to make the improvements we recommend are other factors that could 

affect the achievement of our goals.

As the Congress focuses on unpredictable events--such as the global 

threat posed by sophisticated terrorist networks, international 

financial crises, or natural disasters--the mix of work we are asked to 

undertake may change, diverting our resources from some of our 

strategic objectives and performance goals. We can and do mitigate the 

impact of these events on the achievement of our goals in various ways:

* We are alert to possibilities that could shift the Congress’s and, 

therefore, our priorities.

* We continue to identify in our products and meetings with the 

Congress conditions that could trigger new priorities.

* We quickly redirect our resources, when appropriate, so that we can 

deal with major changes that do occur.

* We maintain broad-based staff expertise so that we can readily 

address emerging needs.

As this report goes to press, the uncertainty about our fiscal 2003 

funding levels was affecting when we will complete--and, in some cases, 

begin--initiatives to address our management challenges and other 

issues. Meeting the fiscal 2003 performance targets in this report and 

completing the work under way to meet our 2-year performance goals are 

contingent on receiving the resources we are requesting from the 

Congress. Once actual funding is known, we may adjust our targets and 

performance goals to ensure that key congressional priorities are met.

A final external factor is the extent to which GAO can obtain access to 

certain types of information. Most notably, recent developments have 

raised concerns about whether records access challenges are likely to 

increase in the future. First, in December 2002, a district court 

dismissed a lawsuit GAO filed to obtain information about meetings held 

with private-sector individuals by the Vice President, in his capacity 

as chairman of the National Energy Policy Development Group, and the 

group’s members and staff. The court did not address the merits of the 

case, but rather stated that the Comptroller General lacked standing in 

the matter. Second, the current administration has shown a tendency to 

not readily share certain information with GAO and the Congress that 

both have received in the past.

In addition, with concerns about operational security being unusually 

high at home and abroad, GAO may have more difficulty obtaining 

information and reporting on sensitive issues. Historically, our 

auditing and information gathering has been limited whenever the 

intelligence community is involved. Nor have we had the authority to 

access or inspect records or other materials held by other countries 

or, generally, by the multinational institutions that the United States 

works with to protect its interests. Consequently, our ability to fully 

assess the progress being made in addressing homeland security issues 

may be hampered, and because some of our reports may be subjected to 

greater classification reviews than in the past, their public 

dissemination may be limited. We will work with the Congress to 

identify both legislative and nonlegislative opportunities for 

strengthening GAO’s access authority as necessary and appropriate.

Managing Our Resources:

GAO’s financial statements for fiscal 2002 received an unqualified 

opinion from an independent auditor. No material weaknesses in internal 

control were identified, and the auditor reported substantial 

compliance with the requirements in the Federal Financial Management 

Improvement Act of 1996 (the Improvement Act) for financial systems. 

The auditor found no instances of noncompliance with the laws or 

regulations in the areas they tested. The statements and their 

accompanying notes, along with the auditor’s report, appear later in 

this report. The table below summarizes key data.

Compared with the statements of large and complex agencies in the 

executive branch, GAO’s statements present a relatively simple picture 

of a small agency in the legislative branch that has most of its 

financial activity focused on the execution of its congressionally 

approved budget and most of its resources devoted to the human capital 

needed for its mission of supporting the Congress with information and 


Table: GAO’s Financial Highlights: Resource Information; 

Dollars in millions.

Total budgetary resources; Fiscal 2001; $392.9; Fiscal 2002: $442.6.

Total outlays; Fiscal 2001; $387.2; Fiscal 2002: $427.8.

Net cost of operations; 

Goal 1: Well-being and financial security of the American people; 

Fiscal 2001; $161.1; Fiscal 2002: $178.3.

Goal 2: Changing security threats and challenges of globalization; 

Fiscal 2001; 93.4; Fiscal 2002: 110.5.

Goal 3: Transforming the federal government’s role; Fiscal 2001; 139.5; 

Fiscal 2002: 141.0.

Goal 4: Maximizing the value of GAO; Fiscal 2001; 20.7; 

Fiscal 2002: 25.3.

Less reimbursable services not attributable to goals; Fiscal 2001; 

Fiscal 2002: (2.1).

Total net cost of operations; Fiscal 2001; $413.1; Fiscal 2002: $453.0.

Actual full-time equivalents; Fiscal 2001; 3,110; Fiscal 2002: 3,210.

Note: The net cost of operations figures include nonbudgetary items, 

such as imputed pension and depreciation costs, which are not included 

in the figures for total budgetary resources or total outlays.

[End of table]

GAO’s budget consists of an annual appropriation covering salaries and 

expenses and revenue from reimbursable audit work and rental income. 

For fiscal 2002, GAO’s total budgetary resources increased by $49.7 

million from fiscal 2001. This increase consists primarily of 

additional current year appropriations to meet continuing program 

requirements and $7.6 million in transfers of budget authority to 

conduct safety and security efforts to respond to the events of 

September 11. GAO’s total assets were $126.8 million, consisting mostly 

of property and equipment (including the headquarters building, land, 

and improvements and computer equipment and software) and funds with 

the Treasury. Our total liabilities of roughly $91.7 million were 

composed largely of employees’ accrued annual leave, amounts owed to 

other government agencies, accounts payable, and workers’ compensation 


GAO reports net costs by strategic goal to align our net costs with our 

strategic plan. As the figure indicates, our first goal, under which we 

organize our work on challenges to the well-being and financial 

security of the American people, accounted for the largest share of the 

costs. We expect this goal to continue to represent the largest share 

of our costs.

Figure: Net Cost of Operations: 

[See PDF for image] - graphic text:

Pie chart with 4 items.

FY 2002 total; 453 million dollars:

Item 1, Goal 4; 6 percent:

Item 2, Goal 2; 24 percent: 

Item 3, Goal 3; 31 percent. 

Item 4, Goal 1; 39 percent. 

Source: GAO:

[End of figure] 

For fiscal 2003, GAO has requested a budget of $457.8 million to 

maintain current operations to support the Congress as outlined in our 

strategic plan. This funding level--which is 6 percent above our 2002 

funding level--would allow us to support our authorized level of 3,269 

full-time-equivalent personnel and includes $4 million to meet 

nonrecurring requirements to enhance the safety and security of GAO’s 


The following table provides an overview of how our budgetary and human 

capital resources will be allocated among GAO’s four strategic goals.

Table: GAO’s Revised Fiscal 2003 Budget.

Dollars in millions; 

Strategic goal; Goal 1: Well-being and financial security of the 

American people; $177.6; Full-time equivalent staff: 1,275.

Strategic goal; Goal 2: Changing security threats and the challenges of 

globalization; 119.5; Full-time equivalent staff: 


Strategic goal; Goal 3: Transforming the federal government’s role; 

141.0; Full-time equivalent staff: 985.

Strategic Goal 4: Maximizing the value of GAO; 19.7; Full-time 

equivalent staff: 155.

Strategic goal; Total; $457.8; Full-time equivalent 

staff: 3,269.

[End of table]

Almost 80 percent of GAO’s fiscal 2003 budget will provide for employee 

compensation and benefits. The next largest portion of our budget--

about $55 million--is for contract services supporting both GAO’s 

mission work and administrative operations, including information 

technology, training, security, and building maintenance and operations 

services. During fiscal 2003, we plan to increase our investments in 

human capital, information technology and security, and the safety and 

security of GAO’s people, facilities, and other assets.

Overview of Financial Statements:

GAO recognizes the importance of strong financial systems and internal 

controls to ensure our accountability, integrity, and reliability. To 

achieve a high level of quality, management maintains a quality control 

program and seeks advice and evaluation from both internal and external 


GAO is committed to fulfilling the internal control objectives of 31 

U.S.C. 3512, formerly the Federal Managers’ Financial Integrity Act 

(the Integrity Act) and the Federal Financial Management Improvement 

Act of 1996 (the Improvement Act). Although GAO is not subject to the 

acts, we comply voluntarily with the acts’ requirements. GAO’s 

management assesses compliance with these controls through a series of 

comprehensive internal reviews, applying the evaluation criteria in the 

Office of Management and Budget’s guidance for implementing the 

Integrity Act. The results of these reviews are discussed with GAO’s 

Audit Advisory Committee, and action is taken to correct deficiencies 

as they are identified.

GAO has assessed our internal controls as of September 30, 2002, based 

on the criteria mentioned above for effective internal controls in the 

federal government. On the basis of this assessment, we believe that we 

have effective internal controls in place, as of September 30, 2002. 

Additionally, an independent auditor found that GAO maintained 

effective internal controls over financial reporting and compliance 

with laws and regulations. Consistent with GAO’s evaluation, the 

auditor found no material internal control weaknesses.

GAO’s Audit Advisory Committee assists the Comptroller General in 

overseeing the effectiveness of our financial reporting and audit 

processes, internal controls over financial operations, and processes 

to ensure compliance with laws and regulations relevant to GAO’s 

financial operations. As of September 30, 2002, the committee consisted 


* Sheldon S. Cohen (Chairman), a certified public accountant and 

practicing attorney in Washington, D.C., former Commissioner and Chief 

Counsel of the Internal Revenue Service, and Senior Fellow of the 

National Academy of Public Administration;

* Alan B. Levenson, a practicing attorney in Washington, D.C., and a 

former senior official at the Securities and Exchange Commission; and:

* Katherine D. Ortega, a certified public accountant, former Treasurer 

of the United States, former Commissioner of the Copyright Royalty 

Tribunal, and a former member of the President’s Advisory Committee on 

Small and Minority Business.

Condensed financial statements for GAO follow. Our detailed statements 

with their accompanying notes appear in the full-length version of this 

report. Our financial statements for the fiscal year ended September 

30, 2002, were audited by an independent auditor, Cotton & Co., LLP, 

which rendered unqualified opinions on our statements and on the 

effectiveness of our internal controls over financial reporting and 

compliance with laws and regulations. The auditor also reported that we 

had substantially complied with the applicable requirements of the 

Improvement Act and found no reportable instances of noncompliance with 

selected provisions of laws and regulations. In the opinion of the 

auditor, the financial statements are presented fairly in all material 

respects and are in conformity with generally accepted accounting 


U.S. General Accounting Office Condensed Balance Sheet:

As of September 30, 2002 and 2001;

(Dollars in thousands)

Assets: Intragovernmental assets including funds with the U.S. 

2002: $62,442; 2001; $56,736.

Assets: Property and equipment, net; 2002: 63,888; 2001; 66,318.

Assets: Other; 2002: 486; 2001; 401.

Total Assets; 2002: $126,816; 2001; $123,455.

Liabilities: Intragovernmental liabilities; 2002: $16,845; 2001; 

Liabilities: Accounts payable and salaries and benefits; 2002: 23,227; 

2001; 28,636.

Liabilities: Accrued annual leave and other; 2002: 29,357; 2001; 

Liabilities: Workers’ compensation; 2002: 12,331; 2001; 7,954.

Liabilities: Capital leases; 2002: 9,968; 2001; 5,360.

Total Liabilities; $91,728; 2001; $86,848.

Net Position: Unexpended appropriations; 2002: $29,925; 2001; $21,258.

Net Position: Cumulative results of operations; 2002: 5,163; 2001; 


Total net position; 2002: 35,088; 2001; 36,607.

Total Liabilities and Net Position; 2002: $126,816; 2001; $123,455.

[End of table]

U.S. General Accounting Office Condensed Statement Cost; 

For Fiscal Years Ended September 30, 2002 and 2001;

(Dollars in thousands)

Net Costs by Goal:

Goal 1: Well-being/financial security of American people; 2002; 

$178,381; 2001; $161,112.

Goal 2: Changing security threats/challenges of global Interdependence; 

2002; 110,537; 2001; 93,440.

Goal 3: Transforming the federal government’s role; 2002; 140,967; 


Goal 4: Maximize the value of GAO; 2002; 25,278; 2001; 20,695.

Less: reimbursable services not attributable to goals; 2002; (2,128); 

2001; (1,652).

Net Cost of Operations; 2002; $453,035; 2001; $413,054.

[End of table]

U.S. General Accounting Office; 

Condensed Statement of Changes in Net Position;

For Fiscal Years Ended September 30, 2002 and 2001; 

(Dollars in thousands); 

Balances, Beginning of Fiscal Year: 2002 Cumulative Results of 

Operations: $15,349; 

2002 Unexpended Appropriations: $21,258; 

2001 Cumulative Results of Operations: $18,761; 

2001 Unexpended Appropriations: $23,515.

Budgetary Financing Sources: Current Year Appropriations: 

2002 Cumulative Results of Operations: [Empty]; 

2002 Unexpended Appropriations: $421,844; 

2001 Cumulative Results of Operations: [Empty]; 

2001 Unexpended Appropriations: $384,020.

Budgetary Financing Sources: Appropriations Used:

2002 Cumulative Results of Operations: $419,046; 

2002 Unexpended Appropriations: ($419,046); 

2001 Cumulative Results of Operations: $387,148; 

2001 Unexpended Appropriations: ($387,148).

Budgetary Financing Sources: Other:

2002 Cumulative Results of Operations: [Empty]; 

2002 Unexpended Appropriations: $5,869; 

2001 Cumulative Results of Operations: [Empty]; 

2001 Unexpended Appropriations: $871.

Other Financing Sources: Employee Benefit Costs Imputed to GAO:

2002 Cumulative Results of Operations: $21,007; 

2002 Unexpended Appropriations: [Empty]; 

2001 Cumulative Results of Operations: $19,681; 

2001 Unexpended Appropriations: [Empty].

Other Financing Sources: Other:

2002 Cumulative Results of Operations: $2,796; 

2002 Unexpended Appropriations: [Empty]; 

2001 Cumulative Results of Operations: $2,813; 

2001 Unexpended Appropriations: [Empty].

Total Financing Sources:

2002 Cumulative Results of Operations: $442,849; 

2002 Unexpended Appropriations: $8,667; 

2001 Cumulative Results of Operations: $409,642; 

2001 Unexpended Appropriations: ($2,257).

Net Cost of Operations:

2002 Cumulative Results of Operations: ($453,035); 

2002 Unexpended Appropriations: [Empty]; 

2001 Cumulative Results of Operations: ($413,054); 

2001 Unexpended Appropriations: [Empty].

Balances, End of Fiscal Year:

2002 Cumulative Results of Operations: $5,163; 

2002 Unexpended Appropriations: $29,995; 

2001 Cumulative Results of Operations: $15,349; 

2001 Unexpended Appropriations: $21,258.

[End of table]

U.S. General Accounting Office.

Condensed Statement of Budgetary Resources.

For Fiscal Years Ended September 30, 2002 and 2001.

(Dollars in thousands).

Budgetary Resources: Current year appropriations; 2002: $421,844; 

2001: $384,020.

Budgetary Resources: Transfers of budget authority; 2002: 7,600; 2001: 


Budgetary Resources: Unobligated appropriations, 

beginning of fiscal year; 2002: 7,512; 2001: 4,264.

Budgetary Resources: Reimbursements; 

2002: 5,687; 2001: 3,676.

Total Budgetary Resources; 2002: $442,643; 2001: $392,943.

Status of Budgetary Resources: Obligations incurred; 

2002: $426,714; 2001: $385,319.

Status of Budgetary Resources: Unobligated appropriations, 

end of fiscal year; 2002: 14,198; 2001: 7,512.

Status of Budgetary Resources: Lapsed budget authority; 2002: 1,731; 

2001: 112.

Total Status of Budgetary Resources; 2002: $442,643; 2001: $392,943.

Relationship of Obligations to Outlays: Obligations incurred; 2002: 

$426,714; 2001: $385,319.

Relationship of Obligations to Outlays: Obligated balance, net - 

beginning of fiscal year; 2002: 48,970; 2001: 50,851.

Relationship of Obligations to Outlays: Less: Obligated balance, net - 

end of fiscal year; 2002: (47,856); 2001: (48,970).

Total Outlays; 2002: $427,828; 2001: $387,200.

Outlays: Disbursements; 2002: $427,828; 2001: $387,200

Outlays: Collections; 2002: (5,687); 2001: (3,676)

Net Outlays; 2002: $422,141; 2001: $383,524

[End of table]

U.S. General Accounting Office: Condensed Statement of Financing:

For Fiscal Years Ended September 30, 2002 and 2001: 

(Dollars in thousands)

Resources Used to Finance Activities: Budgetary Resources Obligated: 

Obligations incurred; 2002: $426,714; 2001: $385,319.

Resources Used to Finance Activities: Budgetary Resources Obligated: 

Less: Reimbursements; 2002: (5,687); 2001: (3,676).

Resources Used to Finance Activities: Budgetary Resources Obligated: 

Net Obligations; 2002: 421,027; 2001: 381,643.

Resources Used to Finance Activities: Other Resources: 

Employee benefit costs imputed to GAO; 2002: 21,007; 2001: 19,681.

Resources Used to Finance Activities: Other Resources: 

Other: 2002: 2,796; 2001: 2,813

Resources Used to Finance Activities: Other Resources: 

Net other resources used to finance activities; 2002: 23,803; 

2001: 22,494.

Resources Used to Finance Activities: Other Resources: 

Total resources used to finance activities; 2002: 444,830; 404,137.

Resources Used to Finance Items Not Part of the Net Cost of Operations:  

Net (increase) decrease in unliquidated obligations; 

2002: (1,980); 2001: 5,505.

Resources Used to Finance Items Not Part of the Net Cost of Operations:  

Costs capitalized on the balance sheet; 2002: (13,180); 

2001: (13,983).

Resources Used to Finance Items Not Part of the Net Cost of Operations:  

Total resources used to finance items not part of the 

net cost of operations; 2002: (15,160); 2001: (8,478).

Resources Used to Finance Items Not Part of the Net Cost of Operations: 

Total resources used to finance the net cost of 

operations; 2002: 429,670; 2001: 395,659.

Costs That Require Resources in Future Periods: 

Expenses to be funded by future appropriations; 2002: 6,213; 298.

Costs That Do Not Require Resources: Depreciation; 

2002: 17,152; 2001: 17,097.

Net Cost of Operations; 2002: $453,035; 2001: $413,054.

[End of table]

Independent Auditor’s Report:

Independent Auditor’s Report:

Cotton and Company LLP: 

333 North Fairfax Street Suite 401 Alexandria, Virginia 22314:


auditors * advisors:






We audited the General Accounting Office’s (GAO) Balance Sheets as of 

September 30, 2002, and 2001, and the related Statements of Net Cost, 

Changes in Net Position, Budgetary Resources, and Financing for the 

then ended. In our report dated December 11, 2002, we stated that we 

* The 2002 and 2001 financial statements referred to above are fairly 

presented, in all material respects, in conformity with U.S. generally 

accepted accounting principles,

* GAO maintained effective internal control over financial reporting 

(including safeguarding of assets) and compliance with laws and 

as of September 30, 2002,

* GAO’s financial management systems substantially complied with the 

applicable requirements of the Federal Financial Management Improvement 

Act of 1996 (FFMIA), and

* No reportable noncompliance with laws and regulations tested.

In our opinion, the information set forth in the accompanying condensed 

financial statements is fairly presented, in all material respects, in 

relation to the financial statements from which it has been derived. 

We performed our audit and examinations in accordance with Government 

Auditing Standards, U.S. generally accepted auditing standards, the 

American Institute of Certified Public Accountants’ attestation 

and Office of Management and Budget (OMB) Bulletin No. 01-02, Audit 

Requirements for Federal Financial Statements. With respect to our 

on internal control, misstatements, losses, or noncompliance may 

nevertheless occur and not be detected because of inherent limitations 

internal control. Also, projections of any evaluation of internal 

to future periods are subject to the risk that internal control may 

inadequate as the result of changes in conditions, or that the degree 

compliance with the policies or procedures may deteriorate. 

With respect to our opinion on GAO’s financial management systems’ 

compliance with FFMIA, our examination does not provide a legal 

determination of GAO’s financial management systems compliance with 

specified requirements. 

We are responsible for testing compliance with selected provisions of 

laws and regulations that have a direct and material effect on the 

financial statements. We did not test compliance with all laws and 

regulations applicable to GAO. We limited our tests of compliance to 

those laws and regulations required by OMB audit guidance that we 

applicable to the financial statements for the fiscal year ended 

30, 2002. We caution that noncompliance may occur and not be detected 

these tests and that such testing may not be sufficient for other 

Our conclusion on compliance with laws and regulations is intended 

for the information and use of the management of GAO, OMB, and Congress 

is not intended to be, and should not be, used by anyone other than 

specified parties. However, this report is a matter of public record 

its distribution is not limited.


Charles Hayward, CPA

Signed by Charles Hayward

Alexandria, Virginia

December 11, 2002

[End of section]

GAO: Memorandum:

Date: November 27, 2002

To: Comptroller General

From: Inspector General – Frances Garcia

Subject: Management Challenges

We have reviewed management’s assessment of the management challenges. 

Based on our work and institutional knowledge, we agree that human 

capital, physical security, and information security are the management 

challenges that may affect our performance. We are in agreement with 

management’s assessment of progress made in addressing these 

In addition, we reviewed all fiscal 2002 accomplishment reports 

financial benefits of $1 billion or more and found that GAO has a 

reasonable basis for claiming these benefits. We plan to review the 

internal controls for several key performance measures in fiscal 2003.

[End of section]

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