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United States Government Accountability Office:

GAO:

Testimony before the Subcommittee on Oversight and Investigations, 
Committee on Veterans' Affairs, House of Representatives:

For release on delivery 
expected at 9:30 a.m. EDT Wednesday, October 6, 2004:

ELECTRONIC GOVERNMENT:

Smart Card Usage is Advancing Among Federal Agencies, Including the 
Department of Veterans Affairs:

Statement of Linda D. Koontz:

Director, Information Management Issues:

GAO-05-84T:

GAO Highlights:

Highlights of GAO-05-84T, a testimony to the Subcommittee on Oversight 
and Investigations, House Committee on Veterans' Affairs

Why GAO Did This Study:

The federal government is interested in the use of smart cards—credit 
card-like devices that use integrated circuit chips to store and 
process data—for improving the security of its many physical and 
information assets. Besides providing better authentication of the 
identities of people accessing buildings and computer systems, smart 
cards offer a number of other potential benefits and uses, such as 
creating electronic passenger lists for deploying military personnel 
and tracking immunization and other medical records.

Over the past 2 years, GAO has studied and reported on the uses of 
smart cards across the federal government. The Subcommittee requested 
that GAO testify on federal agencies’ efforts in adopting smart card 
technology—based on the results of this prior work—and on the specific 
actions that the Department of Veterans Affairs is taking to implement 
smart card technology. 


What GAO Found:

As the unique properties and capabilities of smart cards have become 
more apparent, federal agencies, including the Office of Management 
and Budget, the National Institute of Standards and Technology, and 
the General Services Administration, have acted to advance the 
governmentwide adoption of smart card technology. In turn, numerous 
smart card projects that offer a variety of uses and benefits have been 
launched. As of June 2004, 15 federal agencies reported 34 ongoing 
smart card projects. Further, agencies’ actions toward the adoption of 
smart cards continue to evolve as understanding of the technology 
grows. Agencies are moving away from the small-scale, limited-duration 
demonstration projects of past years (involving as few as 100 
cardholders and aiming mostly to show the value of using smart cards 
for identification) to larger, more integrated, agencywide initiatives 
involving many thousands (or even millions) of users and that are 
focused on physical access to facilities and logical (information 
systems) access to computer systems and networks. 

In pursuing smart card projects, federal agencies have had to contend 
with numerous management and technical challenges. However, these 
challenges may be less imposing in the future because of increased 
management concerns about securing federal facilities and because 
technical advances have improved the capabilities and cost 
effectiveness of smart card systems.

The Department of Veterans Affairs (VA) is one of 9 federal agencies 
currently pursuing large-scale, agencywide smart card initiatives. 
VA’s project, currently in limited deployment, involves using, among 
other technologies, the One-VA Identification smart card to provide an 
agencywide capability to authenticate users with certainty and grant 
them access to information systems essential to accomplishing the 
agency’s business functions. VA estimates that this project will cost
about $162 million between 2004 and 2009, and enable it to issue 
500,000 smart cards to its employees and contractors. 

A Typical Smart Card (not to scale) 

[See PDF for image]

Source: GSA

[End of figure]

www.gao.gov/cgi-bin/getrpt?GAO-05-84T.

To view the full product, including the scope and methodology, click on 
the link above. For more information, contact Linda D. Koontz at (202) 
512-6240 or koontzl@gao.gov.

[End of section]

Mr. Chairman and Members of the Subcommittee:

Thank you for this opportunity to participate in the Subcommittee's 
hearing regarding the adoption and use of smart card technology. Smart 
cards are plastic devices--about the size of a credit card--that 
generally use integrated circuit chips to store and process data, much 
like a computer. This processing capability distinguishes these cards 
from traditional magnetic stripe cards, which cannot process 
information interactively with automated information systems.

Our prior work has found that smart cards offer a variety of benefits 
to the federal government, such as better authentication of 
cardholders' identities, increased security over buildings, more 
effective safeguards of computer systems and data, and more accurate 
and efficient financial and nonfinancial transactions.[Footnote 1] The 
General Services Administration (GSA) has promoted the adoption of 
smart card technology across government based on a goal of equipping 
all federal employees with a standardized smart card for a wide range 
of services. Nonetheless, the successful adoption of smart cards 
throughout the federal government has been a challenging task, and 
federal agencies' adoption of this technology continues to evolve.

At your request, my remarks today will summarize the federal 
government's efforts toward adopting smart card technology and the 
challenges that have been encountered. Also included in my discussion 
is an overview of the actions that the Department of Veterans Affairs 
(VA) is taking to implement smart cards. In addressing these objectives 
and developing this testimony, we relied primarily on previously 
reported information describing federal agencies' accomplishments and 
planned activities to promote smart cards and the challenges to smart 
card adoption identified across the federal government. We also 
assessed available documentation and interviewed VA officials regarding 
their specific actions to implement smart cards; however, we did not 
verify the information that VA provided in support of its initiatives. 
We performed our work in accordance with generally accepted government 
auditing standards during September and October 2004.

Results In Brief:

The unique properties and capabilities of smart cards--plastic devices 
that use integrated circuit chips to store and process data--offer the 
potential to significantly improve the security of federal buildings, 
systems, data, and transactions. With the potential uses and associated 
benefits in mind, federal agencies, including the Office of Management 
and Budget (OMB), the National Institute of Standards and Technology 
(NIST), and GSA have taken actions to advance the adoption of smart 
card technology governmentwide. In turn, numerous projects have been 
launched that offer many capabilities and tangible and intangible 
benefits. As of June 2004, 15 federal agencies had reported 34 ongoing 
smart card projects. Further, as understanding of smart card technology 
has increased, agencies have begun pursuing larger, integrated 
agencywide smart card systems aimed at better securing both physical 
access to facilities and logical access to computer systems and 
networks. Nonetheless, agency managers have faced considerable 
management and technical challenges in their efforts. These challenges 
have become less formidable, however, as management concerns about 
securing federal facilities and information systems have increased and 
as technical advances have improved the capabilities and reduced the 
cost of smart card systems.

The Department of Veterans Affairs is among a number of federal 
agencies currently pursuing large-scale, agencywide smart card 
initiatives. VA's Authentication and Authorization Infrastructure 
Project, begun in December 2002 and currently in a limited deployment 
phase, is planned to employ a combination of smart card and other 
technologies to achieve the capability to authenticate users with 
certainty and grant them access to information systems necessary to 
perform business functions. VA estimates that this project will cost 
about $162 million between 2004 and 2009, and enable it to issue 
500,000 smart cards to its employees and contractors.

Background:

As you are aware, technology plays an important role in helping the 
federal government ensure the security of its many physical and 
information assets. Today, federal employees are issued a wide variety 
of identification (ID) cards that are used to access federal buildings 
and facilities, sometimes solely on the basis of visual inspection by 
security personnel. These cards often cannot be used for other 
important identification purposes--such as gaining access to an 
agency's computer systems--and many can be easily forged or stolen and 
altered to permit access by unauthorized individuals. In general, the 
ease with which traditional ID cards--including credit cards--can be 
forged has contributed to an increase in identity theft and related 
security and financial problems for both individuals and 
organizations.[Footnote 2]

The unique advantage of smart cards--as opposed to cards with simpler 
technology, such as magnetic stripes or bar codes--is that smart cards 
can exchange data with other systems and process information rather 
than simply serving as static data repositories. Smart cards can 
readily be tailored to meet the varying needs of federal agencies or to 
accommodate previously installed systems. For example, other media, 
such as magnetic stripes, bar codes, and optical memory (laser-
readable) stripes can be added to smart cards to support interactions 
with existing systems and services or to provide additional storage 
capacity. An agency that has been using magnetic stripe cards for 
access to certain facilities could migrate to smart cards that would 
work with both its existing magnetic stripe readers as well as new 
smart card readers. Of course, the functions provided by the card's 
magnetic stripe, which cannot process transactions, would be much more 
limited than those supported by the card's integrated circuit chip. 
Optical memory stripes (which are similar to the technology used in 
commercial compact discs) can be used to equip a card with a large 
memory capacity for storing more extensive data--such as color photos, 
multiple fingerprint images, or other digitized images--and for making 
that card and its stored data very difficult to counterfeit.[Footnote 
3] A typical example of a smart card is shown in figure 1.

Figure 1: A Typical Smart Card:

[See PDF for image]

[End of figure]

Smart cards can be used to significantly enhance the security of an 
organization's computer systems by tightening controls over user 
access. A user wishing to log on to a computer system or network with 
controlled access must "prove" his or her identity to the system--a 
process called authentication. Many systems authenticate users by 
requiring them to enter secret passwords, which provide only modest 
security because the passwords can be easily compromised. Substantially 
better user authentication can be achieved by supplementing passwords 
with smart cards.[Footnote 4]

Even stronger authentication can be achieved when smart cards are used 
in conjunction with biometrics.[Footnote 5] Smart cards are one type of 
media that can be configured to store biometric information--such as 
fingerprints or iris scans--in electronic records that can be retrieved 
and compared with an individual's live biometric scan to verify that 
person's identity in a way that is difficult to circumvent. A system 
requiring users to present a smart card, enter a password, and verify a 
biometric scan provides what security experts call "three-factor" 
authentication, with the three factors being (1) something you possess 
(the smart card), (2) something you know (the password), and (3) 
something you are (the biometric). Systems with three-factor 
authentication are considered to provide a relatively high level of 
security.

Additionally, smart cards can be used in conjunction with public key 
infrastructure (PKI) technology to better secure electronic messages 
and transactions. A PKI is a system of hardware, software, policies, 
and people that, when fully and properly implemented, can provide a 
suite of information security assurances that are important in 
protecting sensitive communications and transactions.[Footnote 6] A 
properly implemented and maintained PKI can offer several important 
security services, including assurance that (1) the parties to an 
electronic transaction are really who they claim to be, (2) the 
information has not been altered or shared with any unauthorized 
entity, and (3) the parties will not be able to deny taking part in the 
transaction. Security experts generally agree that PKI technology is 
most effective when deployed in conjunction with smart cards.

Smart cards are grouped into two major classes: contact cards and 
"contactless" cards. Contact cards have gold-plated contacts that 
connect directly with the read/write heads of a smart card reader when 
the card is inserted into the device. Contactless cards contain an 
embedded antenna and work when the card is waved within the magnetic 
field of a card reader or terminal. Contactless cards are better suited 
for environments where quick interaction between the card and reader is 
required, such as high-volume physical access. For example, the 
Washington Metropolitan Area Transit Authority has deployed an 
automated fare collection system using contactless smart cards as a way 
of speeding patrons' access to the Washington, D.C. subway system. 
Smart cards can be configured to include both contact and contactless 
capabilities; however, two separate interfaces are needed because 
standards for the technologies are very different.

Federal Agencies' Pursuit of Smart Card Technology Is Evolving and 
Involves Challenges:

Since the 1990s, the federal government has considered the use of smart 
card technology as one option for electronically improving security 
over buildings and computer systems. In 1996, OMB tasked GSA with 
taking the lead in facilitating a coordinated interagency management 
approach for the adoption of multi-application smart cards across 
government. In this regard, GSA has taken important steps to promote 
federal smart card use. For example, since 1998, it has worked with 
several other federal agencies to promote broad adoption of smart cards 
for authentication throughout the federal government. Specifically, GSA 
worked with the Department of the Navy to establish a technology 
demonstration center to showcase smart card technology and applications 
and it established a smart card project managers' group and Government 
Smart Card Interagency Advisory Board.[Footnote 7]

For many federal agencies, GSA's chief contribution toward promoting 
smart card adoption was its effort in 2000 to develop a standard 
contracting vehicle for use by federal agencies in procuring commercial 
smart card products from vendors. Under the terms of the Smart Access 
Common ID Card contract, GSA, NIST, and the contract's awardees worked 
together to develop smart card interoperability guidelines--including 
an architectural model, interface definitions, and standard data 
elements--that were intended to guarantee that all the products made 
available through the contract would be capable of working together.

Further, OMB has begun taking action to develop a framework of policy 
guidance for governmentwide smart card adoption. Specifically, on July 
3, 2003, OMB's Administrator for E-Government and Information 
Technology issued a memorandum detailing specific actions the 
administration was taking to streamline authentication and identity 
management in the federal government.[Footnote 8] This included 
establishing the Federal Identity and Credentialing Committee to 
collect agency input on policy and requirements and coordinate the 
development of a comprehensive policy for credentialing federal 
employees.

Since 1998, multiple smart card projects have been launched in the 
federal government addressing an array of capabilities and providing 
many tangible and intangible benefits, including enhancing security 
over buildings and other facilities, safeguarding computer systems and 
data, and conducting financial and nonfinancial transactions more 
accurately and efficiently. As of June 2004, 15 federal agencies 
reported 34 ongoing smart card projects.

Initially, many of the smart card initiatives that were undertaken were 
small-scale demonstration projects that involved as few as 100 
cardholders and intended to show the value of using smart cards for 
identification or to store cash value or other personal information. 
However, federal efforts toward the adoption of smart cards have 
continued to evolve as agencies have gained an increased understanding 
of the technology and its potential uses and benefits. Our most recent 
study of federal agencies' investments in smart card technology, which 
we reported on last month,[Footnote 9] noted that agencies are 
increasingly moving away from many of their earlier efforts--which 
frequently involved small-scale, limited-duration pilot projects--
toward much larger, integrated, agencywide initiatives aimed at 
providing smart cards as identity credentials that agency employees can 
use to gain both physical access to facilities, such as buildings, and 
logical access to computer systems and networks.[Footnote 10] In some 
cases, additional functions, such as asset management and stored value, 
are also being included.

To date, the largest smart card program to be implemented in the 
federal government is the Common Access Card program of the Department 
of Defense (DOD), which is intended to be used for identification by 
about 3.5 million military and civilian personnel. Results from this 
project have indicated that smart cards can offer many useful benefits, 
such as significantly reducing the processing time required for 
deploying military personnel, tracking immunization records of 
dependent children, and verifying the identity of individuals accessing 
buildings and computer systems.

Another large agencywide initiative is the Department of Homeland 
Security's (DHS) Identification and Credentialing project, an effort in 
which the agency plans to issue 250,000 cards to employees and 
contractors using PKI technology for logical access and proximity chips 
for physical access. Authentication is to rely on biometrics with a 
personal identification number as a backup. Further, GSA's Nationwide 
Identification is a recently initiated agencywide smart card project in 
which the agency plans to issue a single standard credential card for 
identification, building access, property management, and other 
applications to 61,000 federal employees, contractors, and tenant 
agencies.

While smart card technology offers benefits, launching smart card 
projects--whether large or small--has proved challenging to federal 
agencies and efforts to sustain successful adoption of the technology 
across government. Our prior work noted a number of management and 
technical challenges that agency managers have faced. These challenges 
include:

* Sustaining executive-level commitment. Maintaining executive-level 
commitment is essential to implementing smart card technology 
effectively. Without this support and clear direction, large-scale 
smart card initiatives may encounter organizational resistance and cost 
concerns that lead to delays and cancellations. DOD officials stated 
that having a formal mandate from the Deputy Secretary of Defense to 
implement a uniform, common access identification card across the 
department was essential to getting a project as large as the Common 
Access Card initiative launched and funded.[Footnote 11]

* Recognizing resource requirements. Smart card implementation costs 
can be high, particularly if significant infrastructure modifications 
are required, or other technologies, such as biometrics and PKI, are 
being implemented in tandem with the cards. Key implementation 
activities that can be costly include managing contractors and card 
suppliers, developing systems and interfaces with existing personnel or 
credentialing systems, installing equipment and systems to distribute 
the cards, and training personnel to issue and use smart cards. As a 
result, agency officials have found that obtaining adequate resources 
is critical to implementing a major government smart card system.

* Integrating physical and logical security practices across 
organizations. The ability of smart card systems to address both 
physical and logical (information systems) security means that 
unprecedented levels of cooperation may be required among internal 
organizations that often had not previously collaborated, particularly 
physical security organizations and information technology 
organizations. In addition to the gap between physical and logical 
security organizations, the sheer number of separate and incompatible 
existing systems also adds to the challenge of establishing an 
integrated agencywide smart card system.

* Achieving interoperability among smart card systems. Interoperability 
is a key consideration in smart card deployment.[Footnote 12] The value 
of a smart card is greatly enhanced if it can be used with multiple 
systems at different agencies, and GSA has reported that virtually all 
agencies agree that interoperability at some level is critical to 
widespread adoption of smart cards across the government. However, 
achieving interoperability has been difficult because smart card 
products and systems developed in the past have generally been 
incompatible in all but very rudimentary ways. With varying products 
available from many vendors, there has been no obvious choice for an 
interoperability standard. GSA considered the achievement of 
interoperability across card systems to be one of its main priorities 
in developing its Smart Access Common ID Card contract that I discussed 
earlier.

* Maintaining security of smart card systems and privacy of personal 
information. Although concerns about security are a key driver for the 
adoption of smart card technology in the federal government, the 
security of smart card systems themselves is not foolproof and must be 
addressed when agencies plan the implementation of a smart card system. 
Although smart card systems are generally much more difficult to attack 
than traditional ID cards and password-protected systems, they are not 
invulnerable. In order to obtain the improved security services that 
smart cards offer, care must be taken to ensure that the cards and 
their supporting systems do not pose unacceptable security risks. In 
addition, protecting the privacy of personal information is a growing 
concern and must be addressed with regard to the personal information 
contained on the smart cards. Once in place, smart card-based systems 
designed simply to control access to facilities and systems could also 
be used to track the day-to-day activities of individuals, thus 
potentially compromising the individual's privacy. Further, smart card-
based systems could be used to aggregate sensitive information about 
individuals for purposes other than those prompting the initial 
collection of the information, which could compromise privacy. The 
Privacy Act of 1974[Footnote 13] requires the federal government to 
restrict the disclosure of personally identifiable records maintained 
by federal agencies while permitting individuals access to their own 
records and the right to seek amendment of agency records that are 
inaccurate, irrelevant, untimely, or incomplete. Further, the E-
Government Act of 2002[Footnote 14] requires agencies to conduct 
privacy impact assessments before developing or procuring information 
technology that collects, maintains, or disseminates personally 
identifiable information. Accordingly, agency officials need to assess 
and plan for appropriate privacy measures when implementing smart card-
based systems and ensure that privacy impact assessments are conducted 
when required.

In considering these challenges, it is important to note that, while 
they served to slow the adoption of smart card technology in past 
years, they may be less difficult in the future because of increased 
management concerns about securing federal facilities and information 
systems and because technical advances have improved the capabilities 
and reduced the cost of smart card systems. Nonetheless, sustained 
diligence in responding to such challenges is essential in light of the 
growing emphasis on the use of smart card technology.

Recognizing the critical role that GSA, OMB, and NIST play in 
furthering the successful adoption of smart card technology, we made 
recommendations in January 2003 to these agencies that were aimed at 
advancing the adoption of smart card technology governmentwide. 
Specifically, we recommended that:

* the Director, OMB, issue governmentwide policy guidance regarding 
adoption of smart cards for secure access to physical and logical 
assets;

* the Director, NIST, continue to improve and update the government 
smart card interoperability specification by addressing governmentwide 
standards for additional technologies--such as contactless cards, 
biometrics, and optical stripe media--as well as integration with PKI; 
and:

* the Administrator, GSA, improve the effectiveness of GSA's promotion 
of smart card technologies within the federal government by (1) 
developing an internal implementation strategy with specific goals and 
milestones to ensure that GSA's internal organizations support and 
implement smart card systems consistently; (2) updating its 
governmentwide implementation strategy and administrative guidance on 
implementing smart card systems to address current security priorities; 
(3) establishing guidelines for federal building security that address 
the role of smart card technology; and (4) developing a process for 
conducting ongoing evaluations of the implementation of smart card-
based systems by federal agencies to ensure that lessons learned and 
best practices are shared across government.

As of last month, all three agencies had taken actions to address the 
recommendations made to them. Specifically, in response to our 
recommendations, OMB issued its July 3, 2003, memorandum to major 
departments and agencies directing them to coordinate and consolidate 
investments related to authentication and identity management, 
including the implementation of smart card technology.[Footnote 15] 
NIST responded by improving and updating the government smart card 
interoperability specification to address additional technologies, 
including contactless cards and biometrics.[Footnote 16] GSA responded 
to our recommendations by updating its "Smart Card Policy and 
Administrative Guidance" to better address security priorities, 
including minimum-security standards for federal facilities, computer 
systems, and data across the government.

However, three of our four recommendations to GSA remained outstanding. 
GSA officials stated that they were working to address the 
recommendations to develop an internal GSA smart card implementation 
strategy, develop a process for conducting evaluations of smart card 
implementations, and share lessons learned and best practices across 
government. The responsibility for one recommendation--establishing 
guidelines for federal building security that address the role of smart 
card technology--was transferred to DHS.

Recent federal direction contained in Homeland Security Presidential 
Directive 12[Footnote 17] could further facilitate smart card adoption 
across the federal government. This directive, signed in late August, 
seeks to establish a common identification standard for federal 
employees and contractors to protect against a litany of threats, 
including terrorism and identity theft. The directive instructs the 
Departments of Commerce, State, Defense, Justice, and Homeland Security 
to work with OMB and the Office of Science and Technology Policy to 
institute the new standards and policies. With federal agencies' 
increasing pursuit of smart cards, directives from central management 
such as this one could be an important vehicle for ensuring that more 
comprehensive guidance is available to support and sustain the broader 
implementation of agencywide smart card initiatives.

VA Is Pursuing Agencywide Use of Smart Cards:

Mr. Chairman, beyond the governmentwide assessment presented, you 
requested that we specifically address actions of the Department of 
Veterans Affairs in adopting smart card technology. Our report last 
month discussing agencies' investments in smart card technology 
identified VA as being among 9 federal agencies that currently have 
large-scale, agencywide smart card projects underway.[Footnote 18]

VA's effort--the Authentication and Authorization Infrastructure 
Project (AAIP)--was begun in December 2002 as an attempt to provide 
agencywide capability to authenticate users with certainty and grant 
them access to information systems necessary to perform business 
functions. The initiative, currently in a limited deployment phase, 
involves three core components: (1) a One-VA ID smart card; (2) an 
enterprise PKI solution;[Footnote 19] and (3) an identity and access 
management infrastructure that addresses internal and external access 
requirements for VA users. VA currently estimates that, between fiscal 
years 2004 and 2009, this initiative will cost about $162 million.

The project is currently focusing on development of the One-VA ID card, 
which is to employ a combination of smart card and PKI technologies to 
store a user's credentials digitally.[Footnote 20] According to project 
documentation, the One-VA ID card is intended to replace the several 
hundred methods for issuing identification cards that are currently in 
place across the department,[Footnote 21] and improve physical and 
information security by strengthening the ability to authenticate users 
and grant access to information systems that employees and contractors 
rely on to perform VA's business functions.[Footnote 22] As an official 
source of government identification credentialing, the card is expected 
to be compliant with Homeland Security Presidential Directive 12.

VA is using a phased approach to develop and implement the One-VA ID 
card. This approach involves prototype testing followed by limited 
production testing at the department's facilities in the United States, 
and by 2006, the issuance of 500,000 cards with PKI credentials to its 
personnel. VA reported that it has already begun an initial limited 
deployment of the cards to about 15,000 to 25,000 users. The AAIP 
project manager anticipated that the results from this limited 
deployment would provide lessons learned for ensuring successful 
implementation, support, and training once full deployment of the One-
VA ID card begins in early 2005. Further, the department has indicated 
that it plans to use information gathered from the limited deployment 
to create agency-wide policies and procedures for the full deployment 
of smart cards across all VA business units. As of late September, VA 
reported that fiscal year 2004 spending on the One-VA ID card totaled 
approximately $27 million for activities such as the acquisition of 
smart cards, card readers, and hardware support.

We have not yet had an opportunity to fully assess the outcomes of the 
department's One-VA ID card initiative or its actions to develop the 
enterprise PKI solution and identity and access management 
infrastructure that are also key components of this initiative. 
However, VA officials believe that the department is sufficiently 
positioned to successfully implement the smart card technology on an 
agencywide level. The AAIP project manager noted the chief information 
officer's involvement, as chair of the department's Enterprise 
Information Board, in monitoring progress of the project.

Further, as a participant in a number of governmentwide initiatives 
supporting the adoption of smart card technology, VA should be 
effectively positioned to carry out such an undertaking. Among its 
collaborations, VA is one of five agencies[Footnote 23] using GSA's 
Smart Card Access Common ID contracting vehicle and plans to purchase 
smart cards for AAIP through the GSA contract. It is also a member of 
the Federal Identity Credentialing Committee, which provides guidance 
to federal agencies on the use of smart card technology that supports 
interoperable identity and authentication to enable an individual's 
identity to be verified within an agency and across the federal 
enterprise for both physical and logical networks. Collectively, the 
department's experiences and collaborations should lend strength to its 
own and overall federal efforts toward making smart cards a key means 
of securing critical information and assets.

In summary, the federal government is continuing to make progress in 
promoting and implementing smart card technology, which offers clear 
benefits for enhancing security over access to buildings and other 
facilities, as well as computer systems and networks. The adoption of 
such technology is continuing to evolve, with a number of large-scale, 
agencywide projects having been undertaken by federal agencies over the 
past several years. As agencies have sought greater use of smart cards, 
they have had to contend with a number of significant management and 
technical challenges, including sustaining executive-level commitment, 
recognizing resource requirements, integrating physical and logical 
security practices, achieving interoperability, and maintaining system 
security and privacy of personal information. These challenges become 
less difficult to address, however, as managers place greater emphasis 
on enhancing the security of federal facilities and information systems 
and technical advances improve the capabilities and reduce the costs of 
smart card systems. The challenges are also tempered as increased 
federal guidance brings direction to agencies' handlings of their smart 
card initiatives.

VA is among a number of agencies currently undertaking large-scale, 
agencywide projects to implement smart cards. While its project is 
still under development, VA has gained experience as a participant on 
governmentwide initiatives to further smart card adoption that should 
facilitate the increasing movement toward the use of smart cards as an 
essential means of securing critical information and assets.

Mr. Chairman, this concludes my statement. I would be pleased to 
respond to any questions that you or other members of the subcommittee 
may have.

Contacts and Acknowledgements:

If you should have any questions about this testimony, please contact 
me at (202) 512-6240 or via e-mail at koontzl@gao.gov. Other major 
contributors to this testimony included Michael A. Alexander, John de 
Ferrari, Nancy Glover, Steven Law, Valerie C. Melvin, J. Michael 
Resser, and Eric L. Trout.

FOOTNOTES

[1] GAO, Electronic Government: Progress in Promoting Adoption of Smart 
Card Technology, GAO-03-144 (Washington, D.C.: Jan. 3, 2003); 
Electronic Government: Challenges to the Adoption of Smart Card 
Technology, GAO-03-1108T (Washington, D.C.: Sept. 9, 2003); and 
Electronic Government: Federal Agencies Continue to Invest in Smart 
Card Technology, GAO-04-948 (Washington, D.C.: Sept. 8, 2004).

[2] See GAO, Identity Theft: Available Data Indicate Growth in 
Prevalence and Cost, GAO-02-424T (Washington, D.C.: Feb. 14, 2002).

[3] Cards with an optical memory stripe are known as laser cards or 
optical memory cards. For more information, see GAO, Technology 
Assessment: Using Biometrics for Border Security, GAO-03-174, 
(Washington, D.C.: Nov. 15, 2002).

[4] To gain access under this scenario, a user is prompted to insert a 
smart card into a reader to provide identifying information to the 
computer as well as type in a password. This authentication process is 
significantly more difficult to circumvent because an intruder would 
need to not only guess a user's password, but also to possess the same 
user's smart card.

[5] For more information about biometrics, see GAO, Information 
Security: Challenges in Using Biometrics, GAO-03-1137T (Washington, 
D.C.: Sept. 9, 2003) and Technology Assessment: Using Biometrics for 
Border Security, GAO-03-174 (Washington, D.C.: Nov. 15, 2002). 

[6] For more information about PKI technology, see GAO, Information 
Security: Advances and Remaining Challenges to Adoption of Public Key 
Infrastructure Technology, GAO-01-277 (Washington, D.C.: Feb. 26, 
2001). 

[7] In 2000, GSA established the Government Smart Card Interagency 
Advisory Board to address government smart card issues, standards, and 
practices, as well as to help resolve interoperability problems among 
agencies.

[8] Office of Management and Budget, Memorandum for Chief Information 
Officers of Departments and Agencies on Streamlining Authentication and 
Identity Management within the Federal Government (Washington, D.C.: 
July 3, 2003). 

[9] GAO-04-948. 

[10] As of June 2004, agencies reported that more than half of the 
smart card projects previously identified as ongoing (28 of 52) had 
been discontinued because they were absorbed into other smart card 
projects or were deemed no longer feasible.

[11] Deputy Secretary of Defense, Memorandum on Smart Card Adoption and 
Implementation (Washington, D.C.: Nov. 10, 1999).

[12] Interoperability is the ability of two or more systems or 
components to exchange information and to use the information 
exchanged. 

[13] 5 U.S.C. section 552a.

[14] E-Government Act of 2002, P.L. 107-347, sec. 208 (Dec. 17, 2002).

[15] OMB, Memorandum for the Chief Information Officers of Departments 
and Agencies, July 3, 2003. 

[16] NIST, Government Smart Card Interoperability Specification, 
version 2.1, Interagency Report 6887 (July 2003).

[17] Homeland Security Presidential Directive 12/Hspd-12, August 27, 
2004. 

[18] GAO-04-948. 

[19] VA plans to contract out a key component of the PKI known as a 
certification authority. For more information on contracting out 
certification authorities, see GAO-04-1023R. 

[20] A PKI is a system of computers, software, and data that relies on 
certain cryptographic techniques for some aspects of security. A 
properly implemented and maintained PKI can offer several important 
security services, including assurance that (1) the parties to an 
electronic transaction are really who they claim to be, (2) the 
information has not been altered or shared with any unauthorized 
entity, and (3) neither party will be able to wrongfully deny taking 
part in the transaction. For more information, see GAO, Information 
Security: Advances and Remaining Challenges to Adoption of Public Key 
Infrastructure Technology, GAO-01-277 (Washington, D.C.: Feb. 26, 
2001). 

[21] VA's facilities include 57 regional offices, 158 hospitals, 133 
nursing homes, 7 centralized mail out pharmacies, and 9 regional loan 
centers. 

[22] The One-VA ID card will not be issued to veterans or other VA 
beneficiaries.

[23] The other agencies are the National Aeronautics and Space 
Administration and the departments of Defense, Homeland Security, and 
Interior.