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United States Government Accountability Office: 
GAO: 

Strategic Plan: Serving the Congress and the Nation, 2010-2015: 

GAO-10-559SP: 

Serving the Congress and the Nation: 

GAO’s Strategic Plan Framework: 

Mission: 

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

Trends: 

* National Security Threats: 
* Fiscal Sustainability Challenges: 
* Economic Recovery and Growth: 
* Global Interdependence: 
* Science and Technology: 
* Networks and Virtualization: 
* Shifting Roles of Government: 
* Demographic and Societal Change: 

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;
* Lifelong learning;
* Benefits and protections for workers, families, and children;
* Financial security;
* Effective system of justice;
* Viable communities;
* Stable financial system and consumer protection; 
* Stewardship of natural resources and the environment; 
* Infrastructure. 

Provide Timely, Quality Service to the Congress and the Federal 
Government to Respond to Changing Security Threats and the Challenges 
of Global Interdependence involving:
* Homeland security;
* Military capabilities and readiness;
* U.S. foreign policy interests;
* Global market forces. 

Help Transform the Federal Government to Address National Challenges 
by assessing: 
* Government’s fiscal position and options for closing gap; 
* Fraud, waste, and abuse; 
* Major management challenges and program risks. 

Maximize the Value of GAO by Enabling Quality, Timely Service to the 
Congress and Being a Leading Practices Federal Agency in the areas of: 
* Efficiency, effectiveness, and quality; 
* Diverse and inclusive work environment; 
* Professional networks and collaboration; 
* Institutional stewardship and resource management. 

Core Values: 

* Accountability; 
* Integrity; 
* Reliability. 

Source: GAO. 

[End of GAO's Strategic Plan Framework] 

Table of Contents: 

Abbreviations: 

Letter from the Acting Comptroller General: 

Table of Contents 

Abbreviations 

Letter from the Acting Comptroller General: 

GAO at a Glance: 

Trends Shaping the United States and Its Place in the World: 
Threats Confronting U.S. National Security Interests: 
Fiscal Sustainability and Debt Challenges: 
Economic Recovery and Restored Job Growth: 
Changing Dynamics of Global Interdependence and Shifts in Power: 
Advances in Science, Technology, Engineering, and Mathematics (STEM): 
Increasing Impact of Networks and Virtualization: 
Shifting Roles in Government and Governance: 
Demographic and Societal Changes Confronting the Young and Old: 

Goal 1: Address Current and Emerging Challenges to the Well-being and 
Financial Security of the American People: 
Strategic Objective 1.1: Evaluate Financing of and Programs to Serve 
the Health Needs of an Aging and Diverse Population: 
Strategic Objective 1.2: Lifelong Learning to Enhance U.S. 
Competitiveness: 
Strategic Objective 1.3: Benefits and Protections for Workers, 
Families, and Children: 
Strategic Objective 1.4: Financial Security for an Aging Population: 
Strategic Objective 1.5: A Responsive, Fair, and Effective System of 
Justice: 
Strategic Objective 1.6: Viable Communities: 
Strategic Objective 1.7: A Stable Financial System and Consumer 
Protection: 
Strategic Objective 1.8: Responsible Stewardship of Natural Resources 
and the Environment: 
Strategic Objective 1.9: A Viable, Efficient, Safe, and Accessible 
National Infrastructure: 

Goal 2: Respond to Changing Security Threats and the Challenges of 
Global Interdependence: 
Strategic Objective 2.1: Protect and Secure the Homeland from Threats 
and Disasters: 
Strategic Objective 2.2: Ensure Military Capabilities and Readiness: 
Strategic Objective 2.3: Advance and Protect U.S. Foreign Policy 
Interests: 
Strategic Objective 2.4: Respond to the Impact of Global Market Forces 
on U.S. Economic and Security Interests: 

Goal 3: Help Transform the Federal Government to Address National 
Challenges: 
Strategic Objective 3.1: Analyze the Government’s Fiscal Position and 
Opportunities to Strengthen Approaches to Address the Current and 
Projected Fiscal: 
Strategic Objective 3.2: Identify Fraud, Waste, and Abuse: 
Strategic Objective 3.3: Support Congressional Oversight of Major 
Management Challenges and Program Risks: 

Goal 4: Maximize the Value of GAO by Enabling Quality, Timely Service 
to the Congress, and by Being a Leading Practices Federal Agency: 
Strategic Objective 4.1: Improve Efficiency and Effectiveness in 
Performing GAO’s Mission and Delivering Quality Products and Services 
to the Congress and the American People: 
Strategic Objective 4.2: Maintain and Enhance a Diverse Workforce and 
Inclusive Work Environment through Strengthened Recruiting, Retention, 
Development, and Reward Programs: 
Strategic Objective 4.3: Expand Networks, Collaborations, and 
Partnerships That Promote Professional Standards and Enhance GAO’s 
Knowledge, Agility, and Response Time: 
Strategic Objective 4.4: Be a Responsible Steward of GAO’s Human, 
Information, Fiscal, Technological, and Physical Resources: 

Appendix I: 

Image Sources: 

List of Figures: 

GAO’s Strategic Plan Framework: 

GAO’s Office Locations: 

Figure 1: Debt Held by the Public under Two Fiscal Policy Simulations: 

Figure 2: GAO’s Alternative Simulation Shows Interest, Social Security, 
Medicare, and Medicaid Costs Consume Nearly All Federal Revenue by 
2020: 

Figure 3: U.S. Nonfarm Employment Has Plummeted, Erasing All Gains 
since 1999: 

Figure 4: Unemployment Is Privately Projected to Be above Its Pre-
Crisis Rate through 2020: 

Figure 5: Private Investment Fell Sharply but Is Starting to Recover: 

Figure 6: Most U.S. Growth Is Projected to Come from Private or 
Foreign Demand: 

Figure 7: U.S. Agencies Are Exploring Nanotechnology’s Promise and 
Potential Risks: 

Figure 8: Surgical Area of a Robotic Trauma Pod, Which Can Be 
Controlled Remotely by Doctors Who “Teleoperate” on Patients: 

Figure 9: China Has Caught Up to the United States in Terms of the 
Number of Scientific Researchers in Selected Regions/Countries/
Economies: 1995 to 2007: 

Figure 10: U.S. Wireless Service Subscriptions Have Surged: 

Figure 11: Total Fixed High-Speed Connections Have Grown During 2005-
2008: 

Figure 12: Changes in DOD’s Product and Service Contract Obligations, 
Fiscal Years 2001–2009: 

Figure 13: World Population Is Projected to Grow by Nearly a Third by 
2050: 

Figure 14: Aging of the World’s Population Is Projected to Become 
More Acute as Percentages of Population over Age 65 Increase, by 
Country, 2010 and 2050: 

Figure 15: Growth in the U.S. Civilian Labor Force Is Projected to 
Slow: 

Figure 16: Change in the Ratio of Workers to Social Security 
Beneficiaries Indicates That Fewer Workers Will Support Each Retiree: 

Figure 17: Educational Attainment of Key U.S. Demographic Groups 
Differs, 2008: 

Figure 18: Official U.S. Poverty Has Been Rising: 

Figure 19: Children’s Family Living Arrangements in the United States, 
2008: 

Figure 20: Government Transfer Payments Partly Offset Private-Sector 
Wage Declines in 2009: 

Figure 21: The Growth of Federal Health Expenditures, Fiscal Years 
1990–2014: 

Figure 22: Duration of Unemployment, 2000–2009 (Annual Data), April 
2009-2010 (Monthly Data): 

Figure 23: Funding for Selected Benefit Programs, Fiscal Year 2009: 

Figure 24: Estimated Outlays for Selected Assistance Programs, Fiscal 
Years 2009–2015: 

Figure 25: Number of Defined Benefit and Defined Contribution Plans, 
1985-2007: 

Figure 26: Personal Saving Rate as a Percentage of Disposable Income, 
1960–2009: 

Figure 27: Growth of Federal Prison Population, Fiscal Years 2000–2013: 

Figure 28: National Default and Foreclosure Trends, 1979-2009: 

Figure 29: Key Developments and Resulting Challenges Hindering the 
Effectiveness of the Financial Regulatory System: 

Figure 30: Examples of Natural Resources and Environment Issues: 

Figure 31: Examples of U.S. Infrastructure: 

Figure 32: Universal Service Fund Disbursements, 1998-2009: 

Figure 33: Actual and Projected Total Mail Volume, Fiscal Years 1971–
2020: 

Figure 34: Example of High-Visibility Canine Sweep at a Mass Transit 
Station: 

Figure 35: U.S. Port of Entry at San Ysidro, California: 

Figure 36: Worksite Enforcement Operation: 

Figure 37: DOD’s Budget Authority for Fiscal Years 2001–2010 
(Excluding Contingency Operations): 

Figure 38: International Reserves, 1990–2009: 

Figure 39: U.S. Trade as a Percentage of U.S. GDP, 1990–2009: 

Figure 40: State and Local Model Operating Balance as a Percentage of 
GDP, 1980–2060: 

Figure 41: GAO Is Utilizing Technology to Expand the Audience for Its 
Products and Information: 

Figure 42: GAO’S Workforce Profile, Fiscal Years 2005–2009: 

Figure 43: Strength in Unity—GAO Is Committed to Fostering a Diverse, 
Inclusive Work Environment: 

Figure 44: GAO Works with Many Nations to Improve Audit Standards, 
Capacity, and Awareness: 

Figure 45: Enhanced Integrated Planning and Budgeting Enables 
Improvements in Core Business Processes and Support: 

Figure 46: GAO’s Strategic Planning Hierarchy: 

Figure 47: GAO’s Organizational Structure: 

Figure 48: Types of Financial and Nonfinancial Benefits Recorded in 
Fiscal Year 2009 from Our Work: 

List of Tables: 

Table 1: Challenges Affecting the Federal Budget in the Near Term: 

Table 2: GAO’s High-Risk List as of May 2010: 

Table 3: Four-Year Rolling Averages for Selected GAO Measures, Fiscal 
Years 2005 to 2009: 

Abbreviations: 

BOP: Bureau of Prisons (federal): 

CBO: Congressional Budget Office: 

CDC: Centers for Disease Control and Prevention: 

Census: U.S. Census Bureau: 

CHIP: Children’s Health Insurance Program: 

CMS: Centers for Medicare & Medicaid Services: 

Commerce: Department of Commerce: 

CPSC: Consumer Product Safety Commission: 

CPSIA: Consumer Product Safety Improvement Act: 

DHS: Department of Homeland Security: 

DOD: Department of Defense: 

DOE: Department of Energy: 

DOJ: Department of Justice: 

EPA: Environmental Protection Agency: 

ESEA: Elementary and Secondary Education Act: 

FBI: Federal Bureau of Investigation: 

FDA: Food and Drug Administration: 

FDIC: Federal Deposit Insurance Corporation: 

FEMA: Federal Emergency Management Agency: 
FHFA: Federal Housing Finance Agency: 

FHA: Federal Housing Administration: 

GDP: gross domestic product: 

GED: General Equivalency Diploma: 

Ginnie Mae: Government National Mortgage Association: 

GPRA: Government Performance and Results Act of 1993: 

GSE: government-sponsored enterprise: 

HI: Medicare’s Hospital Insurance: 

HUD: Department of Housing and Urban Development: 

HHS: Department of Health and Human Services: 

HSPD-12: Homeland Security Presidential Directive-12: 

IFPTE: International Federation of Professional and Technical 
Engineers: 

IMF: International Monetary Fund: 

INTOSAI: International Organization of Supreme Audit Institutions: 

IRS: Internal Revenue Service: 

IT: information technology: 

K-12: kindergarten through 12th grade: 

Labor: Department of Labor: 

NASA: National Aeronautics and Space Administration: 

NATO: North Atlantic Treaty Organization: 

NNSA: National Nuclear Security Administration: 

OECD: Organisation for Economic Co-operation and Development: 

OJJDP: Office of Juvenile Justice and Delinquency Prevention: 

Recovery Act: American Recovery and Reinvestment Act of 2009: 

PBGC: Pension Benefit Guaranty Corporation: 

pre-K: pre-Kindergarten: 

Pub. L.: Public Law: 

R&D: research and development: 

SBA: Small Business Administration: 

SNAP: Supplemental Nutrition Assistance Program (formerly called the 
Food Stamp Program): 

SSN: Social Security number: 

State: Department of State: 

STEM: Science, Technology, Engineering, and Mathematics: 

TARP: Troubled Asset Relief Program: 

Treasury: Department of the Treasury: 

TSA: Transportation Security Administration: 

UN: United Nations: 

USAID: U.S. Agency for International Development: 

USDA: U.S. Department of Agriculture: 

USPS: U.S. Postal Service: 

VA: Department of Veterans Affairs: 

WIA: Workforce Investment Act: 

[End of section] 

Letter from the Acting Comptroller General: 

June 2010: 

I am pleased to present GAO’s strategic plan for serving the Congress 
for fiscal years 2010 through 2015. In keeping with our commitment to 
update our plan every 3 years, it describes our proposed goals and 
strategies for supporting the Congress and the nation as the United 
States undergoes a period of change, daunting challenges, and 
opportunities. 

We have identified eight trends that provide context for our plan: 

* evolving security threats; 

* urgent fiscal sustainability and debt challenges; 

* economic recovery and restored job growth; 

* changing dynamics of global interdependence and shifts in power; 

* advances in science, technology, engineering, and mathematics; 

* increasing impact of networks and virtualization; 

* shifting roles in government and governance; and; 

* demographic and societal changes confronting the young and old. 

Since we issued our last plan, significant changes have affected our 
nation’s commitments and fiscal outlook. Our nation has multiple 
wartime-related commitments as it winds down one war in Iraq, 
increases its presence in another in Afghanistan, and re-examines 
commitments in Pakistan. The global financial crisis emerged as a new 
national security threat as it destabilized economies around the 
world. Our nation faced the deepest recession since the Great 
Depression, with unemployment exceeding 9 percent and economists 
forecasting that recovery could be both slow and fragile. 

To meet the economic challenges over the next 6 years, the federal 
government must also address the nation’s long-term fiscal outlook—
which shows escalating debt, even after economic recovery. Our most 
recent long-term simulations for all federal government programs show 
that by 2020, absent policy changes, debt held by the public as a 
percentage of gross domestic product could exceed the historical high 
of 109 percent reached in the aftermath of World War II. The long-term 
fiscal outlook is unsustainable, given existing federal commitments 
and the challenges of caring for an aging population and increasing 
health care costs. Absent a change in policy, our simulations show 
that the interest costs on the growing debt plus spending on major 
entitlement programs could absorb 93 cents of every dollar of federal 
revenue in 2020. New federal commitments, to stabilize the financial 
system and to avert a prolonged recession through a massive fiscal 
stimulus, have added to the annual federal deficit, which totaled $1.4 
trillion for fiscal year 2009. Finding ways to reduce spending and 
generate revenues will be necessary and will involve difficult choices 
related to social, economic, and generational equity. Our economic 
security will rest on our ability to acquire financing in a global 
market where other countries have also issued an unprecedented amount 
of government debt and are also seeking additional financing. Any 
added costs the federal government has in issuing and financing its 
debt will pose additional constraints on spending and the federal 
government’s capacity to deliver programs and services. Although state 
and local governments have been helped by funds from the American 
Recovery and Reinvestment Act of 2009, the fiscal challenges of many 
governments will linger, in part due to health care costs, an eroded 
revenue base, pension commitments, and an aging population. 

Many of our nation’s safety and security, economic, social, and 
environmental challenges will require working with other countries to 
develop effective and sustainable solutions. Achieving global 
consensus on issues even where there is broad agreement is difficult. 
Our economic recovery will depend on building a stronger, more energy-
independent economic base and increasing U.S. competitiveness. 
However, as the global population grows, we face issues such as the 
sustainability of our planet’s natural resources to meet demands and 
keen competition for resources in global markets. This is especially 
true given the growth and urbanization of India and particularly China—
which is projected to soon replace Japan as the world’s second-largest 
economy. Together, China and India account for nearly 37 percent of 
the world’s population. As national borders blur, U.S. tax policies 
and regulatory efforts—ranging from modernizing the outdated financial 
regulatory structure to protecting consumers and food and drug safety—
may have potentially unintended consequences if they do not adequately 
consider global connections and implications. Monitoring and 
evaluating the U.S. position, relative to other nations, in areas such 
as health care, education, and infrastructure are important, as 
multinational corporations have a growing influence in the global 
economy and seek locations and talent that will maximize their profits 
and best position them to gain access to emerging markets. 

Scientific and technological advances will continue to offer 
revolutionary possibilities for improving our nation’s quality of 
life, including the potential for renewable and sustainable resources, 
improved national security, and productivity gains and economic 
growth. Yet these opportunities come with challenges, such as ensuring 
cybersecurity and citizens’ privacy, providing a proper ethical 
framework for our use of biotech and biomedical advances, and ensuring 
that materials made by new technologies are safe. Aided by 
technological advances in computing, digital communications, and 
virtualization, the world is linked in new and rapidly evolving ways. 
These advances are transforming industries and organizations and are 
radically changing how we work, learn, communicate, and collaborate. 
Organizations must be able to do more with less, deliver programs and 
services in radically different ways, and reach out to target groups 
and larger audiences at minimal cost. 

Citizens expect government to be more responsive, timely, coordinated, 
transparent, and accountable. The nature of governance is changing as 
lines between the public, private, and nonprofit sectors shift. The 
U.S. government now holds ownership stakes in banks, financial firms, 
the insurance firm AIG, and automobile manufacturers. The federal 
government relies on the states and nongovernmental organizations to 
deliver programs and services. Similarly, the lines between military 
and civilian entities are shifting as the military is being called 
upon to assist in emergency response domestically and nation building 
abroad. Increased outsourcing to contractors and grants to states and 
localities for program and service delivery have given rise to concern 
about outsourcing important governmental functions and diminishing the 
government’s ability to effectively oversee program and service 
delivery and to prevent fraud, waste, and abuse. Facing constraints on 
capacity and budgets, the federal government will need to identify 
innovative ways to partner with the private sector and other 
governmental and nongovernmental organizations. 

Over the period of this strategic plan, GAO seeks not only to help 
position the government to better manage risks that could compromise 
the nation’s security, health, and solvency, but also to identify 
opportunities for managing resources wisely for a more sustainable 
future. The world still looks to the United States for leadership, 
security, economic growth, and innovation. The window to avert a major 
fiscal crisis is still open, and it will be critical that serious and 
sustained attention is focused on doing so. Although our nation’s 
workforce is aging—as is the workforce in other developed countries—
the number of workers available to support retirees is projected to be 
greater than other developed countries, in part because of a 
combination of higher U.S. fertility rates and net immigration. The 
U.S. economy, fortunately, is dynamic and remains able to adapt 
rapidly to changing conditions and new opportunities. Our nation’s 
increasingly diverse population can help us compete in a globally 
interdependent world. 

GAO stands ready to serve the Congress and the American people at this 
historically critical juncture. GAO is uniquely positioned to help 
address our nation’s challenges and identify opportunities. Pressures 
to reduce the federal deficit following an economic recovery will mean 
a greater need for analyses of programs and their effectiveness, as 
well as a reduction in improper federal payments and closing the gap 
between taxes owed and paid. Further, legislation was recently enacted 
that requires GAO to annually report on its assessment of overlap and 
duplication among government programs and activities, both within and 
across federal agencies, as well as opportunities to reduce or 
eliminate redundancies in order to improve government operations. Our 
long-standing focus on high-risk programs and activities identifies 
for policymakers the agencies and programs that require priority 
attention. Our dedicated and multidisciplinary staff has substantive 
agency and program expertise, as well as expertise in conducting 
financial and performance audits, program evaluations, policy 
analyses, and technology assessments. The greater audit and 
accountability community looks to us for leadership, and our networks 
with the domestic and international community are more valuable than 
ever. 

To make sure this plan accurately reflects the needs of the Congress 
and the nation as a whole, we invited comments on a draft from Members 
of Congress and their staff; our Comptroller General’s Advisory Board 
as well as other GAO advisory entities, which include representatives 
from the federal Inspector General, state and local government audit 
communities, and academia; and GAO’s sister agencies, the 
Congressional Budget Office and the Congressional Research Service. We 
incorporated comments in the plan as appropriate. 

The detailed plan that follows provides more information about the 
specific areas of GAO’s work we anticipate—including a description of 
our strategic goals and objectives, related performance goals, and key 
efforts. While the vast majority of our engagements are the result of 
congressional mandates or requests, this planning effort helps ensure 
GAO is in tune with the Congress’ priorities and is able to respond 
appropriately. See the appendix for other GAO-related information 
called for in the Government Performance and Results Act of 1993. 
Visit the strategic plan portion of our Web site at [hyperlink, 
http://www.gao.gov/sp.html] to find our annual performance plans and 
performance and accountability reports. Respectively, these documents 
tie our strategic plan to our resources and actual results. 

If you have any questions about our strategic plan, please contact me 
at (202) 512-5500 or dodarog@gao.gov or contact Helen Hsing, Managing 
Director for Strategic Planning and External Liaison, at (202) 512-
2639 or hsingh@gao.gov. 

Sincerely yours, 

Signed by: 

Gene L. Dodaro: 
Acting Comptroller General of the United States: 

[End of section] 

GAO at a Glance: 

About GAO: 

GAO is an independent, nonpartisan professional services agency in the 
legislative branch of the federal government. Commonly known as the 
audit and investigative arm of the Congress or the “congressional 
watchdog,” we examine how taxpayer dollars are spent and advise 
lawmakers and agency heads on ways to make government work better. 

About this Plan: 

As a legislative branch agency, we are exempt from many laws that 
apply to the executive branch agencies. However, we generally hold 
ourselves to the spirit of many of these laws, including the 
Government Performance and Results Act of 1993 (GPRA). This strategic 
plan provides what we consider to be information equivalent to that 
supplied by executive branch agencies in their GPRA-required strategic 
plans. 

GAO History: 

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

Agency Head: 

Gene L. Dodaro, Acting Comptroller General of the United States. 

Core Values: 

Our core values of accountability, integrity, and reliability are 
reflected in all of the work we do. 

Accountability describes the nature of GAO’s work. GAO helps oversee 
federal programs and operations to enhance the economy, efficiency, 
effectiveness, and credibility of the federal government. 

Integrity describes the high standards GAO sets for conducting its 
work. The agency takes a professional, objective, fact-based, 
nonpartisan, nonideological, fair, and balanced approach to all of its 
activities. 

Reliability describes GAO’s goal for how its work is viewed. The 
agency produces high-quality reports, testimony, legal opinions, and 
other services that are timely, accurate, useful, clear, and candid. 

Employees: 

About 3,300, with academic degrees in accounting, law, engineering, 
public and business administration, economics, and the social and 
physical sciences, among other fields. 

Products Issued: 

Over 1,000 products annually, in addition to about 300 to 400 legal 
decisions and opinions. 

Financial Benefits: 

In fiscal year 2009, GAO documented about $43 billion in financial 
benefits—a return of $80 for every dollar we spent. Over the last 4 
fiscal years, our return on the Congress’ investment in GAO has 
ranged from $83 in fiscal year 2005 to $114 in fiscal year 2008, a 
record for us. 

Nonfinancial Benefits: 

In fiscal year 2009, GAO documented over 1,300 nonfinancial benefits 
resulting from our recommendations, and 620 of these nonfinancial 
benefits helped to promote sound agency and governmentwide management. 

Offices: 

Washington, D.C. (headquarters), plus 11 field offices. 

Figure: GAO’s Office Locations: 

[Refer to PDF for image: U.S. map] 

The following locations of GAO Offices are indicated on the map: 

Atlanta, Georgia; 
Boston, Massachusetts; 
Chicago, Illinois; 
Dallas, Texas; 
Dayton, Ohio; 
Denver, Colorado; 
Huntsville, Alabama; 
Los Angeles, California; 
Norfolk, Virginia; 
San Francisco, California; 
Seattle, Washington; 
Washington, D.C. 

Source: Map Resources. 

[End of figure] 

[End of section] 

Trends Shaping the United States and Its Place in the World: 

Trends Shaping the United States and Its Place in the World
For nearly 90 years, GAO has stood at the vanguard of the U.S. 
government’s efforts to ensure government effectiveness and prepare 
for the future with foresight. This agency continues to pursue and 
address the nation’s most pressing challenges. In November 2008, GAO 
launched a Web site to facilitate the transition of the federal 
government to both a new Congress and a new President. This site drew 
from the agency’s past work on a full range of federal programs to 
single out time-critical issues, major cost-saving opportunities, 
management challenges across government, and agency-by-agency issues. 
This in-depth, one-stop resource now has evolved into a permanent 
service that is regularly refreshed, named High Risk and Other Major 
Government Challenges portal (http://www.gao.gov/highrisk/). Earlier, 
GAO had also undertaken an effort to identify 21st century challenges, 
an exercise to revisit and rethink the base of government programs in 
light of today’s needs.[Footnote 1] 
 
Accordingly, in framing GAO’s own work over the next several years, 
GAO’s strategic plan takes into account trends that are likely to 
shape American society, as well as determine the United States’ place 
in the world and the business of the federal government. More broadly, 
each trend will affect the well-being and security of the American 
people. 

Based on a review of external literature, discussions with outside 
advisors and selected experts, and input from our mission teams, GAO 
has identified eight key trends to watch: 

National security: Threats are evolving, presenting both challenges 
and opportunities for the federal government to balance and integrate 
the elements of national power: military, diplomatic, intelligence, 
development assistance, economic, and law enforcement support. Such 
balance also necessitates a more strategic approach across a wide 
range of actors. 

Fiscal sustainability: The nation remains on an unsustainable long-
term debt and deficit path. While the drivers of the long-term fiscal 
outlook have not changed, the sense of urgency has increased.
Economic recovery and restored growth: As the nation seeks to sustain 
a recovery from its worst downturn since the Great Depression, high 
joblessness and weak real estate markets pose risks. 

Global interdependence: Financial and commodity markets are more 
interconnected, leaving the United States vulnerable to shocks and 
competition from fast-growing powers such as China. 

Scientific and technological advances: Scientific breakthroughs in 
areas such as nanotechnology, biology, and information technology show 
considerable promise, but managing them well requires impartial 
scrutiny. 

Virtualization: The growing capacity to connect people and information 
at any time, anywhere, has taken networking to a new level. The change 
presents government with some challenges but also with opportunities 
to break down barriers to collaboration. 

Governance: Demands on government are growing and lines of 
responsibility within the federal government—and across state and 
private partners—are blurring, highlighting the need for effective 
coordination. 

Demography: Rising poverty and pressing issues among children and 
young adults join aging and increasing diversity as key societal 
trends affecting demand for government services. 

With each trend, we discuss what we know, as well as what is less 
certain but will be important to watch. Our strategic goals and 
objectives reflect how we plan to respond to shifting realities. 
Further, given the uncertainties associated with these trends, the 
overall 2010–2015 strategic plan is based on the premise that GAO will 
need to be more agile to meet demands arising from the inevitable 
changes that lie ahead. All of these efforts should better enable us 
to tackle the complex and interconnected challenges our nation faces—
today and tomorrow. 

Threats Confronting U.S. National Security Interests: 

The United States faces a complex domestic and international security 
environment. In addition to the wars in Afghanistan and Iraq and 
persistent threats against the homeland, the United States will be 
required to address pressing security concerns that will necessitate a 
delicate balancing of military power, international relationships, and 
foreign policy. Long-standing threats like those posed by extremism; 
terrorist attacks against U.S. interests at home and abroad; 
cybersecurity; and the proliferation of chemical, biological, and 
nuclear weapons will continue to jeopardize the safety of the American 
people and national interests. These security challenges stand against 
a backdrop of economic uncertainties exacerbated by the global 
financial crisis and economic downturn. Further, issues such as energy 
security and climate change will affect existing national security 
concerns. 

“The inability of many states to police themselves effectively or to 
work with their neighbors to ensure regional security represents a 
challenge to the international system. … If left unchecked, such 
instability can spread and threaten regions of interest to the United 
States, our allies, and friends. Insurgent groups and other non-state 
actors frequently exploit local geographical, political, or social 
conditions to establish safe havens from which they can operate with 
impunity.” From: National Defense Strategy, Department of Defense, 
June 2008[Footnote 2] 

Instability in Various Regions Compromises U.S. National Security 
Interests: 

Instability and lack of security in areas of the Middle East, Central 
Asia, and Africa provide a fertile environment for terrorists to 
establish safe havens, leaving U.S. national security interests 
vulnerable to attack. Although overall incidences of violence in Iraq 
remain at their lowest levels since 2003, the intelligence community 
has warned that Iraq’s progress will depend on: 

* How Arab-Kurd tensions are managed. 

* How Sunni Arabs are integrated into the political process. 

* How much ability Iraqi Security Forces develop to combat threats 
against the state. 

Other states in the Middle East continue to face challenges, including 
the activity of Yemen-based al Qaeda in the Arabian Peninsula, which 
could be a source of regional instability: 

* In Afghanistan, the security situation has become more dangerous and 
unstable as the Taliban-dominated insurgency has expanded its scope of 
operations and power. Lack of security, along with minimal government 
involvement, has hindered efforts to improve governance and broaden 
development in several areas of Afghanistan. 

* Compounding the fragile situation in Afghanistan is Pakistan’s 
inability to counter safe havens where al Qaeda, Afghan Taliban, and 
Pakistani militant groups are known to plan operations, direct 
propaganda, recruit and train terrorists, and raise funds with 
relative impunity. 

* Africa’s political and economic conditions continue to erode, and, 
in some countries, democracy has stalled. In East Africa, the 
intelligence community has assessed that U.S. and local interests will 
continue to be threatened by al Qaeda and affiliated extremist groups. 

“...it would not be surprising to see a range of states react to their 
straitened conditions by reducing their military budgets, withdrawing 
from some of their overseas commitments, and scaling back their 
investments of time and energy in multilateral diplomacy. Overcoming 
this new reticence and the resentment against the United States 
engendered by the crisis will be critical...” From: Global Strategic 
Assessment 2009: America’s Security Role in a Changing World, 
Institute for National Strategic Studies, September 2009[Footnote 3] 

Security Issues Stemming from the Global Recession: 

The global recession and the potentially protracted length of time for 
full worldwide economic recovery raise the probability of serious 
damage to U.S. strategic interests. According to the February 2010 
U.S. Intelligence Community Annual Threat Assessment, although 
unprecedented policy responses to the global recession by governments 
and central banks laid the foundation for global recovery, any 
missteps in stimulus-withdrawal strategies could hinder recovery 
efforts. In areas such as Europe, recovery efforts have already shown 
signs of weakening. Although the International Monetary Fund (IMF) and 
others see signs of stabilization and growth, the World Bank reports 
many people worldwide still face a difficult future. In Africa, for 
example, the slowed economic growth resulting from the global 
recession and the daunting array of challenges facing many nations in 
the region will cause new political, economic, and humanitarian 
crises, further adding to demands for U.S. response in the area. The 
World Bank and the IMF jointly reported in April 2010 that 53 million 
more people will remain in extreme poverty in 2015 than otherwise as a 
result of the global economic crisis. Due to it and the 2008 food 
price crisis, they said, hunger has been exacerbated in the developing 
world, leaving a billion people worldwide still struggling to meet 
basic needs.[Footnote 4] 

The recent Global Strategic Assessment by the Institute for National 
Strategic Studies observed that the downturn in global growth has 
seriously undermined U.S. prestige and influence, a development that 
could complicate diplomacy and security relationships in the coming 
years. In addition, the financial crisis increased budget deficits not 
only for the United States, but also for other industrialized 
countries, such as Japan, deficits that will likely constrain spending 
on foreign commitments—like supporting stabilization efforts in 
Afghanistan or attending to humanitarian disasters—to concentrate on 
reducing deficits. The near- and long-term U.S. fiscal outlook will 
put added pressure on the Department of Defense (DOD), which faces 
growing demands such as: 

* the substantial amounts of resources required for continuing 
operations, 

* the toll on readiness and the rebuilding of forces while extending 
military operations, 

* the increasing costs associated with personnel and health care, and, 

* the growing costs attributed to weapon systems programs. 

Security Implications of Climate Change and Energy Security
Concerns about the reliability of energy supplies, price volatility, 
and the effects of energy use on the environment and climate are, 
collectively, among the pressing emerging concerns in national 
security. 

“Climate change and energy will play significant roles in shaping the 
future security environment.” From: Quadrennial Defense Review Report, 
Department of Defense, February 2010[Footnote 5] 

Recent trends suggest that the world is on an unsustainable and 
undesirable course with regard to energy. Because the population of 
the world is estimated to grow to more than 9 billion people over the 
next 40 years, society will require greater amounts of energy to 
sustain development. In addition, global energy demand is expected to 
increase approximately 55 percent by 2030, with nearly 74 percent of 
growth coming from developing countries. If energy demand growth leads 
to greater scarcity of energy, competition for these scarce resources 
and rising energy prices could enter more prominently into regional or 
national conflicts. In addition, perceptions of energy scarcity will 
compel states to secure their future access to energy supplies, which 
could lead to interstate conflicts over access to energy resources. 
Already, energy security concerns are prompting countries such as 
India and China to purchase equity stakes in the energy sector. 

Climate change could produce secondary effects that have wide-ranging 
implications for U.S. national security interests. Although the 
intelligence community estimates that climate change is unlikely to 
cause any state to fail through 2030, it has asserted that the effects 
from climate change will worsen existing problems such as poverty, 
social tensions, environmental degradation, and weak political 
institutions in states pivotal to regional stability. The Food and 
Agriculture Organization of the United Nations emphasizes that one of 
the greatest challenges to be faced in this century is world food 
security in light of the impact of climate change. In areas already 
prone to climate-related disasters, climate change could threaten 
agricultural production—through rising temperatures, variations in 
rainfall patterns, and increases of droughts and floods—with the 
potential to adversely affect some of the poorest regions already 
exhibiting the highest levels of chronic hunger. Areas in Africa and 
other parts of the world are projected to encounter higher levels of 
instability, including clashes over land ownership as a result of food 
shortages and affordability. 

Long-standing Security Issues Confronting the United States
Established security issues will continue to pose a threat to U.S. 
national security interests. Efforts by states to develop or acquire 
dangerous weapons and delivery systems represent a significant threat 
to the United States and its allies. The nuclear ambitions and 
proliferation behavior of Iran and North Korea threaten to cause 
destabilization in areas of the Middle East and Asia. In addition, 
assessments by the intelligence community state that countries and 
nonstate actors will continue to obtain materials and technologies 
that could contribute to biological and chemical weapons programs or 
attacks against the homeland or U.S. interests abroad. Further, the 
United States will continue to face persistent and evolving homeland 
security threats from terrorist groups like al Qaeda that may try to 
smuggle or use radioactive, chemical, or biological agents to carry 
out an attack inside the country. 

Terrorist groups and other state and nonstate actors are also 
increasingly targeting the U.S. information technology infrastructure 
for attack, including telecommunications networks and computer 
systems. This infrastructure, which is largely owned and operated by 
the private sector, is part of the global digital communications and 
networks infrastructure that includes the Internet and is commonly 
called cyberspace. Currently, criminals, state, and nonstate actors 
are compromising, disrupting, and destroying systems and networks to 
illegally acquire valuable information, such as proprietary corporate 
information, intellectual property, and military secrets. Securing 
cyberspace, an essential component of U.S. economic and national 
security, poses serious and growing challenges for the federal 
government and private industry. 

Infectious diseases and other health issues, such as the emergence of 
a pandemic, would have serious implications for U.S. homeland 
security. A pandemic, for example, would threaten the operation of the 
nation’s critical systems by potentially removing for weeks or months 
essential personnel needed to operate them from the workplace. 

Notwithstanding the seriousness of those challenges, they also provide 
a compelling opportunity for the federal government to re-examine 
national security agencies, missions, programs, and approaches to 
develop more effective, integrated, and strategic solutions for the 
nation. For example, DOD and the Department of State have developed an 
integrated civilian-military campaign plan for Afghanistan, and these 
and other agencies are now in the process of implementing the plan. 

Implications of Today’s Security Environment for the Federal 
Government and GAO: 

Today’s complex and rapidly evolving security environment will require 
the federal government to continue to concentrate on enduring 
challenges and identifying strategic opportunities, while adapting to 
emerging threats. Coordination and cooperation on many fronts (within 
the federal, private, and international sectors) will be required to: 

* rebuild the global economy; 

* impede broader geopolitical tensions; 

* prepare for the stresses and strategic environment that climate 
change and dwindling energy resources may trigger; 

* counter terrorist threats against U.S. homeland security and 
national security interests abroad; 

* adapt the military to effectively combat irregular warfare; and; 

* continue sustained pressure against the proliferation of nuclear, 
biological, and chemical technologies, weapons, or materials. 

“Sustaining existing alliances and creating new partnerships are 
central elements of U.S. security strategy. The United States cannot 
sustain a stable international system alone. In an increasingly 
interdependent world, challenges to common interests are best 
addressed in concert with likeminded allies and partners who share 
responsibility for fostering peace and security.” From: Quadrennial 
Defense Review Report, Department of Defense, February 2010[Footnote 6] 

The United States will have to call on long-standing alliances, such 
as that with the North Atlantic Treaty Organization, and perhaps 
identify opportunities for new alliances to successfully address the 
range of security challenges on the horizon. Greater cross-
coordination will be needed among the U.S. government agencies—
including the Departments of Defense, Justice, Homeland Security, 
State, and the Treasury, as well as the intelligence community—that 
are tasked with securing the country from a wide range of national 
security threats. At the same time, an increasingly constrained fiscal 
outlook may require a greater emphasis on taking a risk-based approach 
to allocating resources. Specifically, the nation cannot afford to 
protect everything against all possible threats, and must take the 
opportunity to look across threats, vulnerabilities, and resources to 
prioritize homeland security investments and leverage the resources 
and expertise of federal, state, local, private, and international 
partners with homeland security responsibilities. 

GAO will be called upon to conduct oversight work and evaluations of 
how the U.S. government responds to both new and established security 
trends. Through the High-Risk List, GAO will continue to highlight 
areas of weakness within the government’s national security framework 
that could have serious consequences for the United States at home and 
abroad if left unchecked. As the government works to foster 
comprehensive partnerships and explores effective and integrated 
strategies to manage more complex geopolitical environments and 
potential global security threats, GAO may be asked to provide insight 
into the negotiation, implementation, and verification of partnerships 
and agreements related to security issues. Varying and sophisticated 
security trends will require government agencies to foster better 
coordination and integration of efforts to create a more effective 
national security framework—these trends will also call for GAO to 
evaluate government processes and systems in a more integrated and 
crosscutting manner. To adequately manage the rising demands caused by 
emerging and established security threats in the coming years, the 
government will need to develop new capabilities while pressure to 
reduce most federal agencies’ budgets is intense. GAO can play a 
useful role in evaluating long-term costs and trade-offs for 
restructuring U.S. capabilities by identifying ways to reduce 
duplication and overlap among DOD’s, State’s, and other federal 
agencies’ programs. 

Specifically, as elaborated under Goal 2, GAO plans related work to: 

* Review U.S. efforts to secure, stabilize, and develop Afghanistan, 
Pakistan, Iraq, and other regions in conflict. 

* Review U.S. efforts to combat terrorism at home and abroad. 

* Review the government’s efforts to identify and act on credible 
threats to the homeland, border, and transportation security, as well 
as those involving biological, chemical, radiological, and nuclear 
dimensions. 

* Analyze the funding and costs of military operations and investment 
in future capabilities, given the fiscal pressures facing the nation. 

* Evaluate efforts to ensure the reliability, security, and 
affordability of energy, as well as the implications of climate change 
for the federal government. 

Fiscal Sustainability and Debt Challenges: 

For more than a decade, each of GAO’s long-term fiscal simulations has 
shown the federal government to be on an unsustainable deficit and 
debt path due to spending pressures caused by growth in health care 
costs and an aging population. Since the recession and financial 
crisis began in late 2007, policymakers have been understandably 
focused on addressing problems with financial markets and responding 
to the economic downturn. However, this is the same window of time 
when attention has been needed to address the long-term fiscal 
outlook. While the drivers of the long-term fiscal outlook have not 
changed, the sense of urgency has. GAO’s simulations show that, absent 
policy changes, the federal government faces an unsustainable growth 
in debt; under our Alternative simulation[Footnote 7]-—which is based 
on historical trends and policy preferences—debt held by the public as 
a share of national income or gross domestic product (GDP) could 
exceed the historical high reached in the aftermath of World War II by 
2020 (see figure 1)-—10 years sooner than our simulation showed just 2 
years ago. 

Figure 1: Debt Held by the Public under Two Fiscal Policy Simulations: 

[Refer to PDF for image: line graph] 

Percentage of GDP: 

Historical high: 109% in 1946. 

Year: 2000; 
Baseline extended: 35.1%; 
Alternative: 35.1%. 

Year: 2001; 
Baseline extended: 33.0%;
Alternative: 33.0%. 

Year: 2002; 
Baseline extended: 34.11%; 
Alternative: 34.11%. 

Year: 2003; 
Baseline extended: 36.2%; 	
Alternative: 36.2%. 

Year: 2004; 
Baseline extended: 37.3%; 	
Alternative: 37.3%. 

Year: 2005; 
Baseline extended: 37.5%; 	
Alternative: 37.5%. 

Year: 2006; 
Baseline extended: 36.5%; 	
Alternative: 36.5%. 

Year: 2007; 
Baseline extended: 36.2%; 
Alternative: 36.2%. 

Year: 2008; 
Baseline extended: 40.2%; 
Alternative: 40.2%. 

Year: 2009; 
Baseline extended: 53.8%; 
Alternative: 53.8%. 

Year: 2010; 
Baseline extended: 61.4%; 
Alternative: 61.6%. 

Year: 2011; 
Baseline extended: 65.2%; 
Alternative: 67.6%. 

Year: 2012; 
Baseline extended: 65.9%; 
Alternative: 71.6%. 

Year: 2013; 
Baseline extended: 65.5v; 
Alternative: 74.8%. 

Year: 2014; 
Baseline extended: 66.0v; 
Alternative: 79.4%. 

Year: 2015; 
Baseline extended: 66.5%; 
Alternative: 84%. 

Year: 2016; 
Baseline extended: 67%; 
Alternative: 89%. 

Year: 2017; 
Baseline extended: 67.5%; 
Alternative: 94%. 

Year: 2018; 
Baseline extended: 67.0%; 
Alternative: 98.4%. 

Year: 2019; 
Baseline extended: 67.8%; 
Alternative: 104.3%. 

Year: 2020; 
Baseline extended: 68.9%; 
Alternative: 110.4%. 

Year: 2021; 
Baseline extended: 70.1%; 
Alternative: 116.3%. 

Year: 2022; 
Baseline extended: 71.6%; 
Alternative: 122.4%. 

Year: 2023; 
Baseline extended: 73.4%; 
Alternative: 128.8%. 

Year: 2024; 
Baseline extended: 75.6%; 
Alternative: 135.3%. 

Year: 2025; 
Baseline extended: 78.1%; 
Alternative: 142.1%. 

Year: 2026; 
Baseline extended: 81%; 
Alternative: 149.3%. 

Year: 2027; 
Baseline extended: 84.2%; 
Alternative: 156.9%. 

Year: 2028; 
Baseline extended: 87.8%; 
Alternative: 164.9v. 

Year: 2029; 
Baseline extended: 91.7%. 
Alternative: 173.4%. 

Year: 2030; 
Baseline extended: 95.9%; 
Alternative: 182.3%. 

Year: 2031; 
Baseline extended: 100.6%; 
Alternative: 191.6. 

Year: 2032; 
Baseline extended: 105.5; 
Alternative: 201.4%. 

Year: 2033; 
Baseline extended: 110.8%; 
Alternative: 211.5%. 

Year: 2034; 
Baseline extended: 116.3%; 
Alternative: 222.0%. 

Year: 2035; 
Baseline extended: 122.2%; 
Alternative: 232.9%. 

Year: 2036; 
Baseline extended: 128.5%; 
Alternative: 244.2%. 

Year: 2037; 
Baseline extended: 134.8%; 
Alternative: 255.9%. 

Year: 2038; 
Baseline extended: 141.5%; 
Alternative: 268.0%. 

Year: 2039; 
Baseline extended: 148.5%; 
Alternative: 280.4%. 

Year: 2040; 
Baseline extended: 155.8%; 
Alternative: 293.2%. 

Year: 2041; 
Baseline extended: 163.4%; 
Alternative: 306.4%. 

Year: 2042; 
Baseline extended: 171.2%; 
Alternative: 319.9%. 

Year: 2043; 
Baseline extended: 179.2%; 
Alternative: 333.7%. 

Year: 2044; 
Baseline extended: 187.5%; 
Alternative: 347.9%. 

Year: 2045; 
Baseline extended: 196.1%; 
Alternative: 362.5%. 

Year: 2046; 
Baseline extended: 204.9%; 
Alternative: 377.4%. 

Year: 2047; 
Baseline extended: 213.9%; 
Alternative: 392.6%. 

Year: 2048; 
Baseline extended: 223.4%; 
Alternative: 408.4%. 

Year: 2049; 
Baseline extended: 233.1%; 
Alternative: 424.7%. 

Year: 2050; 
Baseline extended: 243.1%; 
Alternative: 441.3%. 

Source: GAO analysis of Social Security and Medicare Trustees’ 2009 
data. 

Notes: Data are from GAO’s January 2010 analysis based on the Trustees’
assumptions for Social Security and Medicare. 

Some of the increase in debt has been used to purchase financial 
assets as part of programs to stabilize financial markets and 
stimulate the economy. The value of these financial assets has not 
been subtracted from the total debt held by the public in our 
simulations. 

[End of figure] 

Although the economy is still fragile, there is wide agreement on the 
need to begin to change the long-term fiscal path as soon as possible 
without slowing the recovery because the magnitude of the changes 
needed grows with time. The longer action to deal with the nation’s 
long-term fiscal outlook is delayed, the greater the risk that the 
eventual changes will be disruptive and destabilizing. 

Health care cost growth and demographic trends—once thought of as long-
term challenges—have already begun to affect the federal budget—in 
some cases sooner than previously estimated (see table 1). The oldest 
members of the baby-boom generation are now eligible for Social 
Security retirement benefits and will be eligible for Medicare 
benefits in 2011. Medicare’s Hospital Insurance Trust Fund began 
running cash deficits in 2008. Social Security cash surpluses in the 
past have served to reduce the unified budget deficit; however, the 
Congressional Budget Office (CBO) recently estimated that current 
economic conditions will result in the program’s running small 
temporary cash deficits for the next 4 years and then running 
persistent cash deficits beginning in 2016. This will put additional 
pressure on the rest of the federal budget. The Patient Protection and 
Affordable Care Act (Pub. L. No. 111-148) includes some provisions 
designed to address health care cost increases, as well as those 
designed to expand health insurance coverage. However, the federal 
government will need to do much more in the coming years to slow the 
increase in health care costs in Medicare and Medicaid. 

Table 1: Challenges Affecting the Federal Budget in the Near Term: 

2008: Oldest members of the baby-boom generation became eligible for 
early Social Security retirement benefits. 

2008: Medicare’s Hospital Insurance (HI) Trust Fund outlays exceeded 
cash income. 

2010: Social Security runs first cash deficit since 1984.[A] 

2011: Oldest members of the baby-boom generation become eligible for 
Medicare. 

2014: 45 percent of Medicare outlays funded by general revenue.[B] 

2016: Social Security begins running consistent annual cash deficits. 

2017: Medicare’s HI Trust Fund exhausted. Income sufficient to pay 
about 81 percent of benefits.[B] 

2020: Debt held by the public under GAO’s Alternative simulation 
exceeds the historical high reached in the aftermath of World War II. 

Source: GAO. 

[A] Based on Congressional Budget Office’s January 2010 baseline 
projections. 

[B] Based on 2009 Annual Report of the Boards of Trustees of the 
Federal Hospital Insurance and Federal Supplementary Medical Insurance 
Trust Funds (May 12, 2009). Projections showing the percentage of 
funding from general revenue reaching 45 percent by law trigger a 
“Medicare funding warning,” requiring a proposal from the President in 
response. 

[End of table] 

Without programmatic changes, spending on Social Security, Medicare, 
Medicaid, and interest on the federal debt will account for an ever-
growing share of the economy. Under our Alternative simulation, as 
figure 2 shows, absent policy changes, the interest costs on the 
growing debt plus spending on Social Security, Medicare, and Medicaid 
could absorb 93 cents of every dollar of federal revenue in 2020, 
leaving little room for “all other spending”-—or what many think of as 
“government,” including national defense, homeland security, highways 
and mass transit, alternative energy sources, and smaller entitlement 
programs. Having total federal government expenditures exceed federal 
revenues every year results in persistent annual deficits. As the 
deficits grow, in general, so does the need for more borrowing from 
the public. By 2030, net interest payments on the federal government’s 
accumulating federal debt would exceed 8 percent of GDP—making 
interest payments the largest single expenditure in the federal budget. 

Figure 2: GAO’s Alternative Simulation Shows Interest, Social 
Security, Medicare, and Medicaid Costs Consume Nearly All Federal 
Revenue by 2020: 

[Refer to PDF for image: combined line and stacked vertical bar graph] 

Fiscal year: 2010; 
Net interest: 1.4%; 
Social Security: 4.8%; 
Medicare and Medicaid: 5.1%; 
All other spending: 12.9%; 
Revenue: 15%. 

Fiscal year: 2020; 
Net interest: 5%; 
Social Security: 5.2%; 
Medicare and Medicaid: 6.1%; 
All other spending: 11.2%; 
Revenue: 18%. 

Fiscal year: 2030; 
Net interest: 8.4%; 
Social Security: 6%; 
Medicare and Medicaid: 8%; 
All other spending: 10.9%; 
Revenue: 18%. 

Fiscal year: 2040; 
Net interest: 13.4%; 
Social Security: 6.1%; 
Medicare and Medicaid: 9.8%; 
All other spending: 10.9%; 
Revenue: 18%. 

Source: GAO. 

Note: Data are from GAO’s January 2010 analysis based on the Trustees’ 
assumptions for Social Security and Medicare. 

[End of figure] 

Although relatively low interest rates have reduced Treasury’s 
borrowing costs to date, the amount of debt that must be rolled over 
in the short-term presents challenges. Between the onset of the 
economic recession in December 2007 and June 2009, the largest 
increase in outstanding marketable Treasury securities was in short-
term debt. Market experts believe that the large amount of the debt 
that must be rolled over in the next few years is cause for concern 
and agree with Treasury that it needs to increase the average maturity 
of its debt portfolio and diversify its funding sources. 

Weaknesses in the U.S. economy and financial markets—and the 
government’s response to them—continue to shape the near-term budget 
and debt outlook. The budget deficit in fiscal year 2009 hit an all-
time high in absolute terms and is the largest as a share of GDP in 
nearly 65 years. As of September 30, 2009, debt held by the public 
increased to 53 percent of GDP. These increases are primarily the 
result of the effects of the recession and the costs of the federal 
government’s actions to stabilize the financial markets and to promote 
economic recovery. Federal tax revenues automatically decline when GDP 
and incomes fall, and, at the same time, spending on unemployment 
benefits and other income-support programs automatically increases. 
CBO has estimated that the American Recovery and Reinvestment Act of 
2009’s (the Recovery Act) combined spending and tax provisions will 
cost $862 billion over 10 years, of which more than $600 billion will 
be in additional federal spending, and the Department of the Treasury 
(Treasury) has disbursed more than $360 billion to support 
participating institutions under the Troubled Asset Relief Program 
(TARP). 

“Under current law, federal health care costs are likely to keep 
growing faster than GDP—as they have for the past 40 years. In 
addition, the share of the population age 65 or older will continue to 
expand rapidly. As a consequence, the growth of spending for Medicare, 
Medicaid, and Social Security will speed up from its already rapid 
rate. To keep annual deficits and total federal debt from reaching 
levels that would substantially harm the economy, lawmakers would have 
to increase revenues significantly as a percentage of GDP, decrease 
projected spending sharply, or enact some combination of the two.” 
From: The Budget and Economic Outlook: Fiscal Years 2010 to 2020, 
Congressional Budget Office. 

Beyond their effects on the budget deficit, the economic downturn and 
financial crisis—-and the government’s response to them—-could result 
in greater long-term fiscal exposure for the federal government. This 
stems from, among other things, federal support for Fannie Mae and 
Freddie Mac and expansion of federal housing, insurance, and guarantee 
programs—such as the Department of Housing and Urban Development’s 
(HUD) Federal Housing Administration (FHA), the Federal Deposit 
Insurance Corporation (FDIC), and the Pension Benefit Guarantee 
Corporation (PBGC). The possibility of substantial increases in fiscal 
exposure associated with these programs and others will make oversight 
critical in the coming years to ensure that the government effectively 
understands and manages its risks. Recent trends illustrate how these 
programs have grown or have the potential to grow in magnitude: 

* Treasury provided more than $100 billion in equity injections to 
Fannie Mae and Freddie Mac since September 2008, when the Federal 
Housing Finance Agency (FHFA) placed into conservatorship these two 
government-sponsored enterprises, which together own or guarantee 
nearly half of the $11.9 trillion in U.S. residential mortgage debt. 
Recently, Treasury lifted its combined $400 billion cap on government 
assistance to Fannie Mae and Freddie Mac to allow its funding 
commitment to increase as necessary to cover their net-worth losses 
through 2012. 

* In fiscal year 2009, FHA had $757.2 billion of mortgage insurance in 
force, 42.4 percent more than the previous fiscal year. Most of the 
mortgages FHA insures are packaged into mortgage-backed securities 
guaranteed by the Government National Mortgage Association (Ginnie 
Mae); hence, the federal government is ultimately responsible for 
paying investors that own Ginnie Mae bonds if FHA-backed mortgages 
become troubled. At the end of fiscal year 2009, the total amount of 
mortgage securities guaranteed by Ginnie Mae jumped 43 percent to $826 
billion, with some observers saying it could soon top $1 trillion. 

* In 2008, FDIC’s ratio of reserves to insured deposits fell well 
below the minimum statutory level, and, in 2009, 140 FDIC-insured 
institutions failed, more than five times the 25 failures in the 
previous year. At the end of 2009, FDIC reported a negative ratio of 
reserves to insured deposits. FDIC has implemented a restoration plan 
to replenish its Deposit Insurance Fund reserves to the statutory 
minimum. However, further losses could occur if potentially vulnerable 
insured institutions ultimately fail, guarantees result in greater 
than anticipated losses, or economic and market conditions further 
deteriorate. 

* The PBGC continues to face the ongoing threat of losses from the 
termination of underfunded pension plans. It reported that its single- 
and multi-employer programs had a $22 billion deficit as of September 
30, 2009, nearly double its $11.2 billion deficit reported a year 
earlier. Further, pension plans of financially weak firms are 
estimated to be underfunded by about $161 billion—a figure that may 
worsen if economic recovery is slow or if financial markets weaken. 

Strains on the budget are not being felt solely at the federal level. 
State and local governments also face near-term challenges in funding 
current programs, as well as long-term challenges driven by health-
related costs. Medicaid will continue to be a key component of the 
sector’s health-related costs. State and local budgets are also under 
stress because of decreased tax revenue. The reliance of state and 
local budgets on income, sales, and property tax receipts means that 
if unemployment remains high, consumer spending is sluggish, or 
property values are slow to recover, state and local budgets will 
likely experience prolonged strain. Recent declines in pension asset 
values could also affect the sector’s long-term fiscal position. In 
addition to declines in pension asset values and the challenge of 
fully funding pension benefits, state and local governments also face 
challenges funding their liabilities for other public employee 
benefits (which are primarily retiree health benefits). State and 
federal policymakers will need to work closely in the coming years to 
close state budget gaps in a sustainable way. 

Implications for Government and GAO: 

In the coming years, the audit and accountability demands for 
government in such a strained fiscal environment are likely to be 
significant. Concerns about debt levels—as well as revenue that cannot 
keep pace with increased spending obligations—could seriously affect 
agency budgets and operations. Many government agencies will need to 
be prepared to confront the capacity issues that may arise if there 
are continuing demands for more government services alongside smaller 
budgets and more limited operational resources. Agencies will have to 
become more efficient and effective at delivering services, achieving 
productivity gains, and taking a risk-based approach to managing and 
allocating scarce resources. 

Helping the Congress and the federal government better understand and 
manage these challenges will require that GAO take a crosscutting 
approach in its work that incorporates the full and complex array of 
economic and social factors involved. GAO stands ready to continue 
assisting the Congress by identifying opportunities to reduce spending 
and narrow the gap between taxes owed and taxes collected. Ultimately, 
addressing the fiscal challenges of the future will require looking at 
the entire range of federal activities. All types of federal spending—
that is, for both discretionary and entitlement programs—and tax 
expenditures will need to be re-examined. In the future, the federal 
government will need to make tough choices in setting priorities and 
linking resources to results. 

Specifically, the Goal 3 narrative details GAO plans to: 

* Identify elements to help address the nation’s fiscal challenges, 
including Social Security; tax reform; retirement, health, and 
disability programs; opportunities to reduce spending; and reducing 
the gap between taxes owed and collected. This is done in part by 
analyzing the effectiveness of programs (spending, credit, and tax 
expenditures). 

* Perform financial statement audits, including of the Internal 
Revenue Service, FDIC, the Securities and Exchange Commission, and FHA. 

* Conduct long-term fiscal simulations and analyses of federal 
deficits, federal debt levels, and the state and local sectors. 

* Recommend solutions to reduce the risk of waste, fraud, and abuse 
and improper payments. 

* Assess overlap and duplication among federal programs and agencies. 

Economic Recovery and Restored Job Growth: 

Since GAO issued its last strategic plan, the U.S. economy has 
suffered from shocks that collectively precipitated a global downturn 
some feared would lead to a second Great Depression. Sharply rising 
food and energy prices, a bursting of the housing bubble, and a full-
scale financial crisis of worldwide proportions have resulted in the 
United States’ most severe economic recession since World War II. From 
the fourth quarter of 2007 to the third quarter of 2009, real GDP fell 
by about 2.8 percent. U.S. joblessness has doubled and just dropped 
below 10 percent, surpassing levels not seen since 1983. Figure 3 
illustrates the loss of 8.8 million jobs from the peak of the last 
business cycle in December 2007 until December 2009; this is second 
only to the nearly 9 million jobs lost from 1929-1930 and is the 
largest on record in the postwar period. 

Figure 3: U.S. Nonfarm Employment Has Plummeted, Erasing All Gains 
since 1999: 

[Refer to PDF for image: line graph] 

Year: 1999; 
Employees (in thousands): 127,480. 

Year: 2000; 
Employees (in thousands): 130,781. 

Year: 2001 (period of recession); 
Employees (in thousands): 132,469. 

Year: 2002; 
Employees (in thousands): 130,591. 

Year: 2003; 
Employees (in thousands): 130,266. 

Year: 2004; 
Employees (in thousands): 130,420. 

Year: 2005; 
Employees (in thousands): 132,453. 

Year: 2006; 
Employees (in thousands): 135,075. 

Year: 2007; 
Employees (in thousands): 137,067. 

Year: 2008 (period of recession); 
Employees (in thousands): 137,941. 

Year: 2009 (period of recession); 
Employees (in thousands): 133,549. 

Year: 2010; 
Employees (in thousands): 129,527. 

Source: U.S. Department of Labor. 

[End of figure] 

Recession’s Toll and Signs of Recovery: 

U.S. household wealth is down $11.9 trillion, or 18 percent, from its 
2007 peak. Bank failures continue, near-record levels of bankruptcies 
and home foreclosures persist, and problems in commercial property 
markets loom. A decade’s worth of job growth has all but vanished, and 
middle-class families arguably entered 2010 worse off in real terms 
than they were at the start of the 21st century. Notably, U.S. 
household net worth is below its 1999 level, as are median household 
incomes. The overall rate of real U.S. economic growth registered in 
the first decade of the new millennium was the lowest of any decade 
since the 1930s. 

The deep recession that began in December 2007, nonetheless, appears 
to have given way to signs of an economic stabilization and recovery. 
CBO and the International Monetary Fund (IMF) are among those, such as 
the World Bank and the Organization for Economic Cooperation and 
Development (OECD), expecting economic progress to continue. In April 
2010, for example, the IMF’s World Economic Outlook stated that “the 
global economic recovery is proceeding at a better-than-expected rate” 
and, as this recovery has gained traction, certain risks have eased. 
Yet, the IMF report said the outlook remains “unusually uncertain” 
with new downside risks—notably, worries over sovereign debt in Greece 
and elsewhere in Europe—coming to the fore. A key uncertainty is 
whether the recovery will be strong enough to be self-sustaining, as 
well as how many years it will take to return to historical growth 
rates and reverse the loss in U.S. employment and output. CBO’s 
January 2010 budget and economic outlook projects little progress in 
2010–2011 because of weak economic growth; however, it projects that 
higher growth in 2012–2014 will close the gap between actual and 
potential U.S. output by 2014. A full recovery of the labor market is 
not expected until 2 years later: CBO says unemployment likely will 
not drop to 5 percent, its “natural rate,” until 2016. U.S. 
policymakers must oversee this evolving economic environment with 
skill and sufficient information, as well as draw the right lessons 
about what went wrong to better manage it in the future. GAO’s planned 
work will complement and support that effort. 

Causes and Responses: 

GAO staff have joined with their colleagues at other national audit 
institutions around the world to examine the causes of the crisis and 
devise means to protect taxpayers and ensure program integrity in the 
future. In addition, the Congress appointed a special commission in 
2009 to investigate the causes of the crisis. A vigorous debate among 
economists and others continues, but there seems to be some agreement 
that a confluence of structural, cyclical, and speculative forces 
contributed to the debilitating U.S. economic situation. 

The past decade’s consumption and debt-driven, asset-leveraged growth 
proved unsustainable and largely illusory. In general, market 
participants—encouraged by a period of economic stability, cheap and 
available credit, and strong financial market performance—became 
complacent about risk-taking and leverage, pushing asset prices in a 
wide range of markets—most notably, real estate—to unjustifiably high 
levels. When housing prices began declining, a number of poor 
decisions were exposed. Falling home prices nationwide destabilized a 
real estate market that was supported by complex and risky financial 
instruments. These risks were unchecked due to failures in risk 
management at private financial institutions, lack of government 
oversight of risk management and housing, lapses in the regulatory and 
oversight apparatus, and a breakdown in market discipline. The 
subprime mortgage market provided the first shock to the fragile 
economic system, but similar excesses existed across a variety of 
markets, such as commercial real estate, leveraged loans, and credit 
cards. GAO has concluded that various weaknesses in the structure of 
the U.S. financial regulatory system were also important contributors 
to the recent crisis. Notably, this system failed to keep pace with 
major developments in financial markets.[Footnote 8] 

Yet an even more severe economic downturn was averted through 
concerted government action in the United States and elsewhere. 
[Footnote 9] Confronted with unprecedented weakness in the financial 
sector and the overall economy, the U.S. government, including the 
Federal Reserve, acted to moderate the downturn and restore economic 
growth. Among other things, the Congress agreed to the President’s 
request for some $700 billion under the TARP[Footnote 10] to stabilize 
teetering financial and credit markets and a currently estimated $862 
billion in fiscal stimulus provided through the Recovery Act.[Footnote 
11] The Recovery Act involves higher federal spending and lower taxes, 
as well as transfers to states and local governments to fund certain 
activities, such as Medicaid assistance. The stimulus represents 
approximately 2 percent of U.S. national income in each of the next 2 
years, divided roughly equally among tax cuts, direct government 
spending, and aid to states and people hurt by the recession—notably, 
the unemployed. The Federal Reserve’s monetary moves injected 
trillions of dollars into the banking system; the Federal Reserve and 
Treasury continue to take steps to stabilize and restart financial 
markets that had nearly seized up in September 2008. GAO’s oversight 
of certain aspects of these programs, which is slated to continue, has 
helped improve transparency and accountability. 

Prospects: 
The way forward over the next 5 years is uncertain. Three scenarios 
are most often predicted: 

* the most hopeful scenario, a rapid and robust recovery that quickly 
becomes self-sustaining due to a revival of consumer and business 
demand and innovation at home and growing foreign demand for U.S. 
exports that enables gradual restoration of structural balance among 
nations; 

* a middle, yet optimistic, scenario of weak but continued recovery 
that nevertheless features ongoing high rates of joblessness in this 
period;[Footnote 12] and; 

* the last scenario predicts a stalling of the nascent recovery and a 
resumed recession. 

Which path the economy takes will have profound implications for U.S. 
government programs, fiscal deficits, and the focus of GAO’s work. 
Yet, the macroeconomic effects of federal policy choices, in terms of 
overall spending, monetary stimulus, and long-term national savings, 
will drive outcomes. 

CBO currently predicts a continuation of the modest recovery that 
began in mid-2009 but doubts that U.S. growth will be sufficiently 
robust to reduce unemployment appreciably, to below 8 percent, before 
2012.[Footnote 13] In particular, CBO notes that past financial crises 
have been especially difficult to recover from, and that it took a 
year or more for U.S. job growth to start after the two most recent 
recessions ended. The Chairman of the Board of Governors of the 
Federal Reserve System concurs that continued growth is likely but 
warns that strong headwinds, such as a weak job market and the poor 
fiscal condition of many state and local governments, will constrain 
prospects. CBO projects U.S. growth to average 2.1 percent from 2010 
to 2014, well below its average in the past 60 years. 

In January 2010, CBO downgraded its labor market outlook. 
Specifically, CBO said that the unemployment rate will be higher from 
2010 to 2014 than it estimated in August 2009, in part because of the 
forecast for slower growth of real GDP but also because “the 
dislocations in labor markets caused by the recession now appear to be 
more pervasive than previously estimated.” CBO also revised upward its 
estimate of the natural rate of unemployment for 2015–2020, from 4.8 
percent to 5 percent. This revision was based on both econometric 
evidence and analysis of the recent trends in labor markets, 
especially the increase in the number of displaced workers and the 
rise in the number of workers unemployed for more than 27 weeks. 
Because CBO’s projection methods basically assume a return to natural 
rates of resource use in 2015, a private forecast for unemployment 
that goes through year-end 2020. (and GAO’s strategic plan period) is 
presented in figure 4. The picture it paints shows unemployment will 
remain above its pre-recesssion levels for a full decade, but seems 
consistent with the CBO Director’s statement, 

“More of the pain of unemployment from this downturn lies ahead of us 
than behind us.” From: Douglas W. Elmendorf, Director, Congressional 
Budget Office, February 2010[Footnote 14] 
 
Nevertheless recent reports by the Federal Reserve, the IMF, World 
Bank, and OECD see the U.S. and global recovery broadening as of late 
April 2010. Some have raised economic growth projections or raised 
their evaluation of the probability of recovery versus recession, for 
the United States and the world overall. Yet unevenness across 
countries and a high degree of uncertainty remains. 

Figure 4: Unemployment Is Privately Projected to Be above Its Pre-
Crisis Rate through 2020: 

[Refer to PDF for image: line graph] 

Historical data from 2001 through 2010; 
Forecasted data from 2011 through 2020. 

Year: 2001; 
Unemployment: 4.2%. 

Year: 2002; 
Unemployment: 5.7%. 

Year: 2003; 
Unemployment: 5.9%. 

Year: 2004; 
Unemployment: 5.7%. 

Year: 2005; 
Unemployment: 5.3%. 

Year: 2006; 
Unemployment: 4.7%. 

Year: 2007; 
Unemployment: 5%. 

Year: 2008; 
Unemployment: 5%. 

Year: 2009; 
Unemployment: 10%; 

Year: 2010; 
Unemployment: 9.7%. 

Year: 2011; 
Unemployment: 9.4%. 

Year: 2012; 
Unemployment: 8.7%. 

Year: 2013; 
Unemployment: 7.8%. 

Year: 2014; 
Unemployment: 7.4%. 

Year: 2015; 
Unemployment: 7%. 

Year: 2016; 
Unemployment: 6.5%. 

Year: 2017; 
Unemployment: 6.1%. 

Year: 2018; 
Unemployment: 5.8%; 

Year: 2019; 
Unemployment: 5.6%. 

Year: 2020; 
Unemployment: 5.3%. 

Source: IHS Global Insight, June 2010. 

[End of figure] 

As a result, the federal government must monitor several economic 
conditions and effects: 

* Lost jobs may be hard to replace. Unemployment typically lags in the 
initial stages of recovery: Job losses continued through February 
2010. Job gains were recorded in March and April 2010 but the 
unemployment rate rose slightly as discouraged workers resumed active 
pursuit of jobs. Many of the job cuts were permanent jobs, CBO notes. 
More workers will suffer long-term unemployment or separation from the 
workforce. This makes re-entry into the workforce more challenging. 
Some older workers appear to be forgoing retirement and working 
longer. Some of those who lose jobs are claiming Social Security and 
fully retiring. Younger workers are among those who have been hit 
especially hard. Young adults shut out of jobs now may suffer long-
term losses in lifetime earnings and employment opportunities. CBO 
says gains in employment in this recession will rely more than usual 
on the creation of new jobs, possibly by new firms. Workers may need 
to relocate or retrain to qualify for these jobs. 

* Hiring may be slow to resume, particularly if, as the Federal 
Reserve expects, businesses choose to convert existing workers from 
part time to full time or to increase their hours. Small businesses 
have historically accounted for a large share of employment gains in 
past recoveries but are facing tighter credit conditions that could 
constrain their job-creating potential. Bank lending to consumers and 
businesses continued to fall through mid-April 2010. Many of the jobs 
lost are in the construction, manufacturing, and finance industries. 
Should these losses be structural (meaning that they are permanently 
gone), rather than cyclical, some assert that a “jobless recovery” is 
a possibility.[Footnote 15] It appears that states and regions 
contributing most to the downturn are in the Southeast and Far West, 
which benefited from the housing boom.[Footnote 16] 

* Because consumers play a key role in the U.S. economy, whether and 
how they change their behavior in response to tighter economic 
circumstances is pivotal. Indeed, as the initial boost to U.S. growth 
from federal spending and business inventory restocking wanes, growth 
in private demand by consumers and businesses will be key to further 
U.S. economic expansion, the Fed Chairman notes.[Footnote 17] Though 
consumer spending has shown signs of life and consumer confidence is 
improving, consumer sentiment remains subdued. CBO forecasts moderate 
improvements in real income, household wealth, and the cost of 
consumer credit that will fuel a modest rise in consumer spending. 

* Yet, recent signs also suggest that a fundamental change away from 
borrowing and spending and toward savings may be occurring, reversing 
a decades-long decline. The U.S. personal savings rate has climbed 
fitfully from its 2007 low, reaching 5.4 percent by the second quarter 
of 2009, before dropping back to 3.9 percent in third and fourth 
quarters and 3.1 percent in the first quarter of 2010. Consumer credit 
outstanding—particularly revolving credit—continued to shrink through 
February 2010, falling at an annual rate of 5.5 percent. While higher 
savings are associated with higher rates of long-term growth, some 
worry that a higher personal saving rate could dampen U.S. economic 
growth in the near term; others say that a 5 percent savings rate is 
consistent with 3 percent to 4 percent GDP growth.[Footnote 18] 
 
* Moreover, the IMF says reversing the fundamental imbalances among 
nations that fueled the crisis is desirable. But it will require the 
United States and other countries whose consumption has outstripped 
their savings to save and export more, while countries such as China 
that have relied on foreign markets must build up their own domestic 
demand. 

* Other sources of growth, such as ..business investment, government 
spending, and net exports could make up the slack. However, it is 
unclear whether the federal government has the wherewithal to sustain 
a U.S. recovery. 

As partially illustrated in figure 5, business capital spending has 
fallen more steeply than at any time since World War II, dropping by 
24 percent in 2009 alone. In the second quarter of 2009, net private 
investment fell to its lowest percentage of GDP since World War II. 
Capacity utilization remains lower than its 1972–2009 average, but has 
risen somewhat as inventories have been depleted. Nonresidential fixed 
investment and industrial production have been growing and outlays for 
equipment and software are increasing at a solid pace. Profits are up, 
productivity has risen, and many companies’ capacity to use in-house 
or external funds to finance investment has improved. 

Figure 5: Private Investment Fell Sharply but Is Starting to Recover: 

[Refer to PDF for image: line graph, indicating 10 period of recession] 

Private investment in constant 2005 dollars in billions: 

Year: 1950; 
Private investment: $215.6 billion. 

Year: 1955; 
Private investment: $268.6 billion. 

Year: 1960; 
Private investment: $331.7 billion. 

Year: 1965; 
Private investment: $429.1 billion. 

Year: 1970; 
Private investment: $476.9 billion. 

Year: 1975; 
Private investment: $493.2 billion. 

Year: 1980; 
Private investment: $781.1 billion. 

Year: 1985; 
Private investment: $927.3 billion. 

Year: 1990; 
Private investment: $1,021.1 billion. 

Year: 1995; 
Private investment: $1,282.1 billion. 

Year: 2000; 
Private investment: $1,887.8 billion. 

Year: 2005; 
Private investment: $2,170.3 billion. 

Year: 2010; 
Private investment: $1601.8 billion. 

Source: U.S. Department of Commerce. 

[End of figure] 

* In August 2009, CBO said it expects investment to begin rebounding 
soon and to provide a large share of real growth from 2010 to 2013, 
though its January 2010 Budget and Economic Outlook takes a more 
cautious tone. CBO’s public projections do not break out GDP 
components in detail, but IHS Global Insight’s June 2010 forecast 
(partially shown here) appears consistent with CBO’s assessment and 
shows private demand, including business investment, as an important 
source of U.S. growth going forward (see figure 6). 

Figure 6: Most U.S. Growth Is Projected to Come from Private or 
Foreign Demand: 

[Refer to PDF for image: multiple line graph] 

Constant 2005 dollars (in billions): 
Historical data indicated for 2001 through 2009. 
Forecasted data indicated for 2010 through 2021. 

Year: 2001; 
Net exports: -$466.8; 
Investment: $1.882.7; 
Personal consumption: $7.744.3. 

Year: 2002; 
Net exports: -$510.6; 
Investment: $1.789.3; 
Personal consumption: $7.957.3. 

Year: 2003; 
Net exports: -$585.3; 
Investment: $1.813.1; 
Personal consumption: $8,122.3. 

Year: 2004; 
Net exports: -$632.5; 
Investment: $1,970; 
Personal consumption: $8,437.6. 

Year: 2005; 
Net exports: -$714.8; 
Investment: $2,170.3; 
Personal consumption: $8,719. 

Year: 2006; 
Net exports: -$732.5; 
Investment: $2,264.7; 
Personal consumption: $8,986.6. 

Year: 2007; 
Net exports: -$704.9; 
Investment: $2,132.6; 
Personal consumption: $9,265.1. 

Year: 2008; 
Net exports: -$550.9; 
Investment: $2,082.9; 
Personal consumption: $9,349.6. 

Year: 2009; 
Net exports: -$386.5; 
Investment: $1,558.5; 
Personal consumption: $9,209.2. 

Year: 2010; 
Net exports: -$368.3; 
Investment: $1,677.7; 
Personal consumption: $9,368.7. 

Year: 2011; 
Net exports: -$450.2; 
Investment: $1,863.5; 
Personal consumption: $9,671. 

Year: 2012; 
Net exports: -$474.7; 
Investment: $2,095.6; 
Personal consumption: $9,917.7. 

Year: 2013; 
Net exports: -$439.1; 
Investment: $2,327.4; 
Personal consumption: $10,102.8. 

Year: 2014; 
Net exports: -$355.1; 
Investment: $2,466.3; 
Personal consumption: $10,280.7. 

Year: 2015; 
Net exports: -$301.2; 
Investment: $2,538.9; 
Personal consumption: $10,569.7. 

Year: 2016; 
Net exports: -$263.3; 
Investment: $2,633.1; 
Personal consumption: $10,859.9. 

Year: 2017; 
Net exports: -$200.9; 
Investment: $2,719.9; 
Personal consumption: $11,115.4. 

Year: 2018; 
Net exports: -$120.6; 
Investment: $2,792.7; 
Personal consumption: $11,353.7. 

Year: 2019; 
Net exports: -$44.39; 
Investment: $2,872.9; 
Personal consumption: $11,607.8. 

Year: 2020; 
Net exports: $13.0; 
Investment: $2,963.2; 
Personal consumption: $11,883.5. 

Year: late 2020; 
Net exports: $46.6; 
Investment: $3,020.19; 
Personal consumption: $12,112.4. 

Source: IHS Global Insight, June 2010. 

[End of figure] 

* Exports: With foreign markets showing more promise, enabling exports 
and avoiding protectionist policies that risk trade wars are also 
crucial. World trade and investment registered sharp declines in 2009 
but have begun to rebound, in part due to strong growth in Asia and 
developing country markets. The World Bank recently projected world 
trade volume will rise by 4.3 percent and 6.2 percent in 2010 and 
2011, respectively, driven by relatively robust recovery in developing 
country growth. CBO predicts net U.S. exports will rise beginning in 
2011. Europe’s recovery and currency stability will remain important 
to this growth, since that region accounts for nearly a fourth of U.S. 
exports. 

* Housing remains fragile, and signs suggest more foreclosures are 
looming. As of the fourth quarter of 2009, about one in seven mortgage 
loans was 30 or more days delinquent or in the foreclosure process 
already.[Footnote 19] Almost a quarter (24 percent) of mortgaged 
residential properties—some 11.3 million—were estimated to be “
underwater” or to involve borrowers owing more than the value of the 
properties.[Footnote 20] The number of vacant housing units was near 
historic highs, putting downward pressure on prices. As a result, 
forecasters predict that millions more will lose their homes to 
foreclosure over the next few years. 

* Commercial real estate markets-—with about $3.5 trillion in 
outstanding debt—-are also under greater strain, with commercial real 
estate prices having peaked in October 2007 and falling since early 
2008. Delinquencies in commercial mortgage-backed securities have 
increased sharply—-to 8 percent in 2009, or double the rate recorded 
in 2008. The Federal Reserve noted that demand for commercial property 
has dropped as the economy has weakened, leading to significant 
declines in property values, increased vacancy rates, and falling 
rents. By January 2010, prices had dropped approximately 41 percent 
since the peak. Because of these poor fundamentals, the credit quality 
of commercial real estate loans on banks’ books and of the loans that 
back commercial mortgage-backed securities has deteriorated sharply. 
As a result, obtaining financing for new mortgages is difficult and 
refinancing the $500 billion in such securities maturing in 2010 and 
2011 may prove problematic. Banks and thrifts hold about half, or $1.7 
trillion, of the commercial real estate debt outstanding. Smaller 
regional and community banks, which entered the crisis with high 
concentrations of commercial real estate loans, may be particularly 
vulnerable. 

* In terms of government support, sizable fiscal stimulus is in the 
pipeline. Yet, much of the planned fiscal stimulus was expected to be 
withdrawn (spent) by 2012, and the employment creating or supporting 
effects of the Recovery Act were expected to all but disappear by 
2013.[Footnote 21] CBO recently said that the Recovery Act will have 
larger effects in the 2011–2019 period and raised its estimate of 
Recovery Act-related outlays by $75 billion. The President and some in 
the Congress are calling for further job creation and public 
investment efforts but face calls to reign in spending and tackle the 
ballooning U.S. budget deficit.[Footnote 22] 

* Managing the significant monetary support in the pipeline also 
matters. The Federal Reserve has largely wound down the extraordinary 
liquidity programs it created to assist U.S. financial institutions 
and markets during the financial crisis. The only remaining program is 
scheduled to close on June 30, 2010. However, the U.S. central bank 
continues to provide substantial liquidity to the markets as a result 
of holding over $1 trillion in mortgage-backed securities and in other 
debt instruments on its balance sheet. As growth resumes, the Fed’s 
success in absorbing excess liquidity is imperative to avoid 
inflation, keep interest costs affordable, and maintain orderly 
exchange rates for the dollar and other major currencies. This is 
especially important because price increases for food, commodities 
such as oil, and imports are predicted by CBO. OECD recently reported 
that inflation expectations in the United States are trending upwards. 
[Footnote 23] At the same time, a premature withdrawal of stimulus 
could abort the nascent recovery.[Footnote 24] Adopting a more 
integrated and robust approach to financial market regulation is also 
critical. 

* Tighter laws, oversight, and regulation of financial markets by such 
regulators as the Securities and Exchange Commission are being 
considered. The Federal Reserve says it has already strengthened some 
requirements and will take a more systemic approach to risk that 
relies on a range of experts to evaluate developments. At the same 
time, the Fed and other regulators are taking steps to ensure bank 
supervision is not impeding sound lending and thus slowing the 
recovery. In jointly issued guidance, the federal regulators noted 
that they are working with industry and supervisory staff to ensure 
policies and actions do not inadvertently curtail credit to sound 
small business borrowers. Looking ahead, the federal government will 
need to determine the most expeditious manner in which to bring 
closure to its financial stabilization initiatives while optimizing 
its investment returns. This will be a formidable challenge, as 
unequivocal financial stabilization and sustained economic recovery 
will likely be difficult to ascertain with any degree of certainty in 
the near future. 

The Bottom Line: 

The American economy has periodically been proclaimed dead in the past 
but has always proved resilient, thanks to, for example, scientific 
and technical advances that have spurred U.S. growth by generating 
innovation or boosting productivity. A recovery is becoming more 
firmly established but remains fragile. Given the economic shock the 
United States has suffered, a shift toward a different path—one with 
less robust growth—has likely begun. 

Implications for Government and GAO: 

The severe economic deterioration has major implications for the 
federal government’s finances and programs. Certainly, concerted and 
capable federal efforts to manage the macroeconomy through wise 
monetary and fiscal policy stances will be crucial. 

GAO’s efforts are essential complements to such efforts by the Fed, 
the Congress, and the executive branch. GAO has statutory 
responsibilities for TARP under the Emergency Economic Stability Act 
and the Recovery Act that include bimonthly reports. GAO also plans 
work on: 

* financial market oversight and reform; 

* efforts to ensure the stability of the overall banking, housing, and 
financial markets; 

* federal programs to promote home ownership; 

* the functioning of the mortgage market and ultimate disposition of 
Fannie Mae and Freddie Mac; 

* monitoring services to assist job seekers and low-income families 
via social safety net programs, such as Medicaid, child health and 
nutrition support, unemployment insurance, trade adjustment 
assistance, worker retraining, and homeless assistance; 

* plans to boost the economy, including investments in energy-
efficiency and infrastructure and job expansion; 

* the world financial system and trade promotion; and; 

* state fiscal conditions. 

For example, GAO will seek to look at social safety nets in a more 
holistic manner, taking the perspective of how they work together to 
affect households, as well as their incentives and behavior. 

Changing Dynamics of Global Interdependence and Shifts in Power: 

The recent financial crisis, above all, illustrated the extent to 
which economies, trade, and information flows have become linked. How 
countries respond to restoring their economies—whether they adopt 
protectionist measures or continue on the path of open markets—could 
determine the extent to which economies and markets remain 
interdependent. Associated with U.S. future economic security is the 
shift of economic influence to other parts of the world, especially 
Asia; this shift has implications on our nation’s ability to restore 
the economy and promote job growth. Interdependence also means the 
United States will compete with a growing global population for food 
and natural resources, such as water, energy, and critical minerals, 
and face issues relating to the safety and reliability of supplies at 
affordable prices. In addition, U.S. security is threatened by failed 
nation states that are unable to meet the basic needs of their people. 
Budget constraints may affect how and the extent to which the United 
States responds to international peacekeeping and humanitarian 
assistance efforts. Over the next 5 years, all of these trends and 
issues will likely affect our nation’s future and the well-being of 
the American people. 

Effects of the Financial Crisis and Recovery: 

To stabilize financial markets and institutions and stimulate 
economies—the United States and other countries collectively injected 
trillions of dollars into the world’s financial systems. As a case in 
point, the aggressive fiscal policy response of China—which is 
projected to overtake Japan in 2010 as the world’s second-largest 
economy—helped China’s economy rebound strongly and has helped boost 
the recovery of other countries, especially in Asia. However, there is 
concern that the global effort to stimulate economies through 
government activities may have increased the risk of inflation. In 
turn, any significant increase in inflation and other potential 
financial repercussions—such as speculative investments in real estate 
and commodities—could weaken the fragile recovery that so far has 
taken hold in the United States and around the world. 

In the aftermath of the financial crisis, certain indicators of global 
interdependence became more muted: 

* Global growth for 2009 dropped to negative 0.8 percent after 
achieving a growth of 3 percent in 2008. 

* Growth in developing countries skidded from 6 percent in 2008 to 2.1 
percent in 2009. 

* Trade volumes plummeted more than 12 percent in 2009 after an 
increase of almost 3 percent in 2008. (Some of this decrease was due 
to the decline in economic output in both developed and developing 
nations, and some was due to the collapse in commodity prices that 
make up a large share of some nations’ trade.) 

* Given a sharp decrease in imports into the United States, the U.S. 
current account deficit dropped from nearly 5 percent of GDP in 2008 
to 2.6 percent in 2009, meaning that the United States required less 
borrowing relative to income to cover the deficit. Similarly, oil 
exporting nations that were running large current account surpluses 
saw their numbers drop sharply. Saudi Arabia’s current account 
surplus, for example, shifted from a surplus of 28.6 percent of GDP in 
2008 to 4.1 percent of GDP in 2009. 

The good news is that thus far in 2010 many of these losses are being 
reversed. 

Shifts in economic power and interdependence: The phenomenal economic 
growth of China, India, and other emerging countries over the last 
decade, along with the blossoming of international trade and the broad 
movement of goods and services, has intensified the interdependence of 
the world’s economies. As U.S. dollars flowed to overseas producers of 
goods and services, other countries—especially China and Japan—used 
their reserves to purchase vast amounts of U.S. government debt; they 
thereby became major stakeholders in the U.S. economy. Given its 
substantial borrowing needs, the United States is now more 
economically dependent on others because it requires financing in a 
global market where other developed countries have also issued an 
unprecedented amount of debt and are seeking additional financing. Any 
reluctance to purchase U.S. debt—whether for political, economic, or 
other reasons—could drive up the interest costs the U.S. government 
will need to pay on its securities and compromise the government’s 
ability to fund other priorities. 

Just as the United States will look globally to fund its debt, 
American companies will continue to look for opportunities to grow 
their business. China and India, for example, together account for 
about 37 percent of the world’s population, and their middle class is 
estimated to exceed the entire U.S. population—demographics that 
appeal to virtually every company in the world. Indonesia and Brazil 
also boast emerging economies, bolstered by populations that are the 
fourth and fifth largest in the world, respectively. 

Competition for Resources: 

The United Nations (UN) projects global population to grow by more 
than 2 billion to about 9 billion from 2010 to 2050, and with that 
growth will come major shifts in the movement of people looking for 
economic opportunity, as well as keen competition for the resources 
upon which they depend. Following are snapshots of several key aspects 
of this trend to watch. 

Urbanization: According to the UN, a majority of the global population 
will live in cities by 2030. Most noteworthy is China’s urbanization 
strategy and the size and speed with which it is being implemented. 
Within a mere two decades, 60 percent of China’s estimated 1.5 billion 
people are expected to be living in urban centers. The population of 
India, which has 43 cities with a population of more than 1 million, 
is also becoming increasingly urban. In the next 20 years, India’s 
urban population is expected to grow from its current 28 percent of 
the population to 41 percent. This rise in urbanization has 
implications not only for the world but also for the United States 
because it will be competing with other countries for such 
construction-related commodities as cement, steel, aluminum, coal, and 
timber. 

Global energy supply and demand: Global energy demand is expected to 
increase approximately 55 percent by 2030, with nearly 74 percent of 
that growth coming from the developing world—including China and 
India. That potentially presents a challenge for the United States, 
which has long depended on plentiful, inexpensive natural resources—
primarily from fossil fuels—to maintain its global competitiveness and 
way of life. However, our reliance on oil—particularly foreign oil—
will continue to expose us to volatile prices. As a result, the United 
States is generally pursuing a policy of greater energy independence 
and seeking to develop multiple and nontraditional sources of energy, 
such as natural gas, biofuels, solar, and liquefied natural gas and 
coal. 

Food security and safety: In recent years, consumers in the United 
States and other countries experienced dramatic increases in the 
prices of grains. In some countries, the increases not only caused 
food shortages and destabilized governments, but also led to bans on 
grain exports to protect domestic supplies. U.S. biofuel policies that 
encouraged the use of corn for ethanol faced criticism for potentially 
contributing to global food price increases. Although U.S. consumers 
were not as profoundly affected as consumers in poorer nations that 
heavily rely on food imports, no country is immune to these types of 
shocks, as higher prices for grains translate into higher food prices 
and a higher cost of living. Further, with a substantial portion of 
the U.S. food supply imported (15 percent of the total U.S. supply, 60 
percent of our fresh fruit, and 80 percent of our seafood), the safety 
of the supply is an issue GAO has designated as high risk. GAO will 
continue to monitor this issue in the coming years. 

Freshwater: Over the next 20 years, global demand for freshwater is 
expected to increase by 30 percent. Moreover, the world might be close 
to hitting a peak in terms of freshwater supplies. Conflicts over 
water could become especially acute in Asia and Africa—regions with 
large populations and diminishing supplies. In the United States, the 
Environmental Protection Agency has identified potential freshwater 
supply problems in various regions, including California—a major 
agricultural producer. 

Critical minerals: According to a 2008 report commissioned by the 
National Research Council of the National Academies, the advent of the 
Information Age has demanded an ever-wider range of metallic and 
nonmetallic minerals to perform essential functions for such 
technologies as computers, cellular telephones, and transportation 
equipment. As with many other commodities, the nonfuel minerals market 
has become increasingly globalized, with the extraction and production 
of many minerals shifting away from the United States. Further, 
mineral commodity prices have been at a relative high recently, driven 
primarily by demand from China, India, and other countries. The 
concern, according to the 2008 report, is the reliability of nonfuel 
mineral supplies and whether the necessary resources would be 
available in time, and at an acceptable cost, to meet the future needs 
of producers of emerging products and technologies. 

The World Bank’s January 2010 review and price forecast—Global 
Commodity Markets—notes that most commodity prices reached historical 
highs in mid-2008. While it concludes demand-side pressures eased with 
the September 2008 onset of the global financial crisis and subsequent 
downturn, the World Bank predicts energy prices will firm to a steady 
range of between two and three times their 2000 levels in the 2010–
2020 period. Metals and minerals prices will fall, and food prices 
will be flat over the 2010–2020 period, the World Bank predicts. 
[Footnote 25] 

Failed Nation States and Other Global Challenges: 

The world community has been unable to effectively address the 
failures of governance and the need for sustainable development in the 
poorest countries of the world. Indeed, the Fund for Peace in 2009 
published an index of failed nation states that includes 38 states in 
the “Alert” category—indicating the presence of humanitarian 
emergencies, sharp economic decline, and violation of human rights, 
among other conditions. Failed states take an enormous toll on their 
own citizens and on neighboring countries because of, for example, 
mass migrations, civil unrest, and even genocide. Failed nation states 
also affect the world as a whole, as many are sources of piracy or 
operate as terrorist safe havens. 

Some failed states that have an abundance of natural resources—
particularly nations in Africa—have not been able to translate their 
resources into benefits for their people or economies. As a result, 
some of these nations fail to provide basic protections to their 
citizens, contribute to greater instability in world markets for 
natural resources, and ultimately place greater demands on other 
nations for assistance. 

This global challenge and many of our nation’s security, economic, 
social, and environmental challenges—such as international 
peacekeeping, disaster relief, drug interdiction, and pandemic 
preparedness and prevention—cannot be addressed by the United States 
alone. For example, the United States is heavily involved in helping 
stabilize conflicts and nations around the world and has provided over 
$1 trillion for efforts in Iraq, Afghanistan, and Pakistan since 2001. 
In addition, the United States participates with over 50 countries in 
UN peacekeeping operations to bring sustainable peace to locations 
such as Sudan and Darfur, the Democratic Republic of the Congo, 
Lebanon, and Sierra Leone. By participating in these operations, the 
United States leverages its resources and maintains important global 
ties to help achieve international security. Also, the United States 
and other countries participate in international disaster relief 
efforts in Haiti, Indonesia, and Sri Lanka. In the face of fiscal 
constraints, a key issue will be how the United States can and should 
contribute to international peacekeeping operations and disaster 
relief efforts and the extent to which they serve U.S. interests. 

Implications for Government and GAO: 

As national borders blur, policy initiatives, such as protecting the 
security of U.S. citizens; reforming our nation’s tax laws; 
modernizing the outdated U.S. financial regulatory system; and 
protecting public safety in the areas of medical products, food, and 
consumer goods, may have unintended consequences if these initiatives 
do not adequately consider global connections and implications. 
Protecting the United States from bioterrorism and public health 
threats requires integrated international strategies. Notably, federal 
agencies’ efforts to ensure the safety and efficacy of pharmaceuticals 
and medical devices, consumer products, food, and chemicals must be 
revamped and updated across regulatory jurisdictions to reflect 
increasingly global supply chains and production. 

GAO proposes to build on past work that allows it to flexibly respond 
to the issues and subject areas affected by these trends. For example, 
our work on reforming financial markets and institutions should help 
to inform the Congress and policymakers on the complexities of 
regulating these entities in a globally interconnected and competitive 
world, as well as to assist in congressional oversight of regulatory 
reform initiatives. Similarly, we plan cross-border work on regulating 
the safety of medical products, food, and consumer products to help 
the Congress monitor and oversee regulatory efforts in these areas. 
Building on our work on recent global health-related events and their 
implications for preparedness, we seek to provide additional lessons 
for federal, state, and local governments to enhance their 
preparedness for future global health-related events. Our planned work 
places new emphasis on monitoring the adequacy of supply and causes of 
price volatility of commodities, including energy and food. Further, 
our past and planned work in international peacekeeping, disaster 
assistance, and public diplomacy will prepare us to advise 
policymakers on what works and the challenges of tracking and ensuring 
accountability of funds that flow through governmental and 
nongovernmental organizations and across international borders. 

Specifically, GAO anticipates undertaking related work to: 

* understand the effects of a global U.S. supplier base on U.S. 
national security interests; 

* evaluate the effectiveness of programs to protect critical 
technologies, ensure a safe supply of food and medical products, and 
respond to public health emergencies; 

* assess programs to improve the U.S. image abroad and promote 
exports; and 

* analyze energy market regulation, competition, and information. 

Advances in Science, Technology, Engineering, and Mathematics (STEM): 

Science, technology, engineering, and mathematics (STEM) together 
offer revolutionary possibilities for improving the nation’s quality 
of life, national security, and economic growth. Yet, with these 
opportunities come numerous challenges for the U.S. government. In 
addition to the global challenges identified in Strategic Objective 
1.8, such as food, water, energy scarcity, and climate change, other 
key challenges include ensuring cybersecurity while preserving 
privacy, providing a proper ethical framework for the use of 
biomedical devices, and ensuring that newly developed materials are 
safe for people and the environment. 

For the federal government, keeping pace with technology developments 
and advances in scientific disciplines will require investments in 
research and development (R&D), higher education (i.e., STEM human-
capital), and other STEM-related infrastructure (e.g., laboratories 
and facilities). To assist the Congress over the next 5 years, GAO 
will continue to build its capacity to delve more deeply into emerging 
areas that will affect everything from climate change to renewable 
energy, from natural resources to transportation, and from space 
exploration to national and homeland security. 

Among the STEM fields likely to affect the federal government 
substantially are the “three Os”: nano, bio, and info—-also known as 
nanotechnology, biomedical technology, and information technology. 

Nanotechnology: 

Today, the properties and behaviors of materials are being discovered 
at nanoscale-—units equal to 1 billionth of a meter. The growth of the 
nanotechnology sector, however, is anything but small. Some $12 
billion was invested in nanotechnology research from 2001 to 2010, and 
the National Science Foundation estimates that U.S. expenditures on 
nanotechnology-related goods and services will rise to more than $1 
trillion by 2015. The societal impacts of nanotechnology are expected 
to be prodigious since they will have an effect on almost all 
materials. (See figure 7.) 

Figure 7: U.S. Agencies Are Exploring Nanotechnology’s Promise and 
Potential Risks: 

[Refer to PDF for image: photograph] 

Source: National Institute of Standards and Technology. 

Note: A research team at the National Institute of Standards and 
Technology has quantified the interaction of gold nanoparticles with 
important proteins (like insulin, pictured here) found in human blood. 
Such research could provide insights that are useful to the 
development of nanoparticle-based medical therapies and to 
understanding the reasons why certain nanoparticles are toxic. 

[End of figure] 

The federal government, through the National Nanotechnology 
Initiative, has supported the science with investments into an array 
of current and future technologies. The funding supports basic 
research, infrastructure development, and technology transfer, with 
the aim of helping make important contributions to national 
priorities. Current and expected applications of government-funded 
research cut across industries, including aeronautics, agriculture, 
biotechnology, electronics, energy, health care, homeland security, 
information technology, and transportation. 

Over time, nanotechnology is expected not only to reshape some 
economic sectors but also to give birth to new industries that, in 
turn, will create jobs in science and manufacturing. Nanotechnology is 
found today in things as mundane as toothpaste and woven fiber, as 
well as in cutting-edge computational or biomedical sensing systems. 
Still expected to come are: 

* “never-wash” nanofiber clothes that do not get wet and can help 
prevent the spread of disease, 

* ultralight and super-strong composite body armor and airframes, and; 

* nanoengineered gels able to regrow lost or damaged spinal cord and 
brain cells. 

Among the challenges for the government inherent in the technology is 
that nanoparticles have health and safety risks—the particles are so 
small they may simply pass through the natural skin barrier or can be 
easily inhaled. 

Biomedical Technology: 

Two areas of biotechnology in particular bear watching: gene and stem 
cell research. In 2003, the Human Genome Project successfully mapped 
some 25,000 genes found in the human genome. The result is a vast 
repository of human genetic information available to the biomedical 
community for researching solutions to a broad array of diseases. 
Because stem cells have the potential to develop into almost all types 
of human cells—including heart, muscle, nerve, and blood cells—they 
could dramatically improve patient outcomes from diseases or injuries, 
such as cancer, heart disease, Parkinson’s, birth defects, burns, and 
diabetes. 

In the larger medical sector, telepresence technology is poised to 
become a standard practice in conducting globalized medical treatment 
(see figure 8). For example, one day, a doctor in Boston may be able 
to monitor surgery on a heart patient in a hospital in Milan. 
Moreover, when the Defense Advanced Research Projects Agency’s trauma 
pod project is fully completed, U.S. Army staff could pull a wounded 
soldier from the battlefield into an unmanned surgical suite, where 
injuries would be diagnosed and life-saving surgery performed 
robotically. In addition to military applications, the trauma pod 
could help save lives during natural disasters, which often demand 
urgent medical care for people with life-threatening injuries in 
remote locations. 

Figure 8: Surgical Area of a Robotic Trauma Pod, Which Can Be 
Controlled Remotely by Doctors Who “Teleoperate” on Patients: 

[Refer to PDF for image: photograph] 

Sources: SRI International and Dr. Jacob Rosen. 

[End of figure] 

Although the biomedical frontier holds tremendous promise, it also 
will generate discussions about the ethics of using the technologies, 
the role and extent of government regulation in the field, and the 
management and ownership of genetic information. 

Information Technology (IT): 

The speed of change in this field makes it one of the most dynamic of 
all. Following are just four snapshots of numerous key developments in 
IT: 

* Quantum computing— in which bits of digital data are manipulated by 
using the behavior of individual atoms or molecules—has the potential 
to carry out extremely complicated calculations at speeds far beyond 
those of today’s best supercomputers. No quantum computer yet exists 
in commercial production, and there are still fundamental technical 
barriers to overcome. Nevertheless, small-scale experimental systems 
have been built and demonstrated. The implications of quantum 
computing are profound. It is extremely difficult to break certain 
types of encryption by using today’s computers, but it could 
theoretically take just minutes to do so on a fully developed quantum 
computer. Current systems of encryption, including those used for bank 
transactions, secure military communications, and electronic commerce, 
would potentially be highly vulnerable to a quantum computer. Yet, 
quantum computing holds promise in fields such as digital 
communications, pharmaceuticals, and materials science. 

* Cloud computing— an arrangement in which an organization pays a 
service provider to deliver IT applications, computing power, and 
storage via the Internet—enables organizations or individuals to 
access and share computer resources and potentially gain significant 
cost savings. Users with heavy demands for computing power, such as 
banks, could achieve tens of trillions of computations per second by 
processing data across large groups of servers. Questions remain, 
however, as to how to manage security policies and protect sensitive 
data in such an environment. Users of data and applications “in the 
cloud” might face a new layer of complexity for data management. 

* Virtualization technology— which essentially is software that 
replicates a physical computer and its operating system—has the 
potential to enable more efficient use of computing resources, save 
time and labor, and trim hardware costs. But to realize such benefits, 
organizations may need to make investments in software, hardware, and 
expertise. 

* Health IT— the use of information technology to electronically 
collect, store, retrieve, and transfer health information—has great 
potential to help improve the quality and efficiency of health care. 
The successful implementation of health IT offers promise for 
improving patient safety and reducing inefficiencies and has been 
shown to support cost-savings and other benefits. In April 2004, an 
executive order called for widespread adoption of interoperable 
electronic health records by 2014, and the Department of Health and 
Human Services (HHS), in turn, initiated activities to advance the 
nationwide implementation of interoperable health IT. In addition, for 
the past decade, DOD and the Department of Veterans Affairs (VA) have 
been pursuing initiatives to share data between their health 
information systems. 

The Recovery Act provided direct funding and incentives to support the 
development of health IT infrastructure and also called for 
recommendations on standards to promote the safe and secure exchange 
of health care information. The Recovery Act established a Health IT 
Policy Committee to act as an advisory panel and directed GAO’s 
Comptroller General to appoint 13 members to the committee. The 
committee will make recommendations on creating a policy framework for 
the development and adoption of a nationwide health IT infrastructure, 
including standards for the exchange of patient medical information. 
Further, HHS is currently working to accelerate the adoption of health 
IT standards. 

Achieving the transition to a nationwide health IT capability will be 
complex and will require consideration of many important issues. These 
include mechanisms to establish clearly defined health IT standards 
that are agreed upon by all important stakeholders, comprehensive 
planning grounded in results-oriented milestones and measures, and an 
approach to privacy protection that encourages the acceptance and 
adoption of electronic health records. 

STEM Investment in Education and Economic Competitiveness: 

In a world without technological boundaries, many governments are 
recognizing that if they are to keep pace with advancing economies 
elsewhere, they need to increase their R&D investments in high-
technology industries. Significant R&D now takes place outside of the 
United States, which means that the United States will increasingly 
need to engage globally to acquire STEM knowledge and services in 
order to maintain economic competitiveness. Within the United States, 
the National Science Board has observed, with concern, a decline in 
support for some areas of R&D, especially basic research. Similarly, 
federal government support for academic R&D began falling in 2005 for 
the first time in a quarter century, while federal and industry 
support for their own basic research has stagnated over the last 
several years. 

While the United States has maintained its leadership in most broad 
aspects of STEM activities, the National Science Board recently 
reported via its Science and Engineering Indicators 2010 that this 
position is being eroded not only by a rapid increase in STEM 
capabilities in Asia but also by a rise in the European Union’s 
competitiveness in R&D, innovation, and high technology. China, for 
example, and several other Asian economies have all been actively 
seeking to develop their own world-class R&D infrastructures. (See 
figure 9.) U.S. competitiveness would likely be enhanced by shifting 
from single-discipline, investigator-driven R&D projects in favor of 
multidisciplinary R&D activities such as synthetic biology and 
biomaterials, bioinformatics, and bioenergy—-all expected to be major 
sources of innovation. Regardless of the type of emerging technology, 
these innovations will need to be more efficiently and effectively 
commercialized in order to enable additional economic growth. 

Additional competition is coming from many less-developed nations, 
which have begun to incorporate STEM considerations into their 
government policies. Such nations are, more than ever: 

* investing long term in expanding higher education, 

* developing infrastructure to support R&D, 

* attracting foreign investors and technologically advanced 
multinational firms, and, 

* developing their own high-technology capabilities. 

Pointing to the role of science and technology in economic growth, job 
creation, and national security, the President has planned to double 
funding over 10 years for federal agency STEM programs. The President’
s budget plans also increase support for exploratory and high-risk 
research related to: 

* the understanding of climate through geoengineering and, 
 
* new technologies intended to help transform the nation’s 
transportation systems. 

Figure 9: China Has Caught Up to the United States in Terms of the 
Number of Scientific Researchers in Selected Regions/Countries/ 
Economies: 1995 to 2007: 

[Refer to PDF for image: multiple line graph] 

Full-time equivalents (in thousands): 

Year: 1995; 
United States: 1,036; 
European Union: 964.4; 
Japan: 673.4; 
Singapore: 100.5; 
China: 522; 
Russia: 7.7; 
South Korea: 610.4. 

Year: 1996; 
United States: 1,098; 
European Union: 960.4; 
Japan: 617.4; 
Singapore: 99.4; 
China: 548; 
Russia: 9.1; 
Taiwan: 45.8; 
South Korea: 562.1. 

Year: 1997; 
United States: 1,159.9; 
European Union: 956.4; 
Japan: 625.4; 
Singapore: 102.7; 
China: 588.7; 
Russia: 9.7; 
Taiwan: 47.6; 
South Korea: 532.5. 

Year: 1998; 
United States: 1,210.4; 
European Union: 994; 
Japan: 652.8; 
Singapore: 92.5; 
China: 485.5; 
Russia: 11.4; 
Taiwan: 53.5; 
South Korea: 492.5. 

Year: 1999; 
United States: 1,260.9; 
European Union: 1,036.1; 
Japan: 658.9; 
Singapore: 100.2; 
China: 531.1; 
Russia: 12.6; 
Taiwan: 54.8; 
South Korea: 497. 

Year: 2000; 
United States: 1,289.3; 
European Union: 1,078.7; 
Japan: 647.6; 
Singapore: 108.4; 
China: 695.1; 
Russia: 16.6; 
Taiwan: 55.5; 
South Korea: 506.4. 

Year: 2001; 
United States: 1,320.1; 
European Union: 1,116; 
Japan: 675.9; 
Singapore: 136.3; 
China: 742.7; 
Russia: 16.7; 
Taiwan: 59.7; 
South Korea: 505.8. 

Year: 2002; 
United States: 1,342.5; 
European Union: 1,174.2; 
Japan: 646.5; 
Singapore: 141.9; 
China: 810.5; 
Russia: 18.1; 
Taiwan: 69.9; 
South Korea: 491.9. 

Year: 2003; 
United States: 1,430.6; 
European Union: 1,205.6; 
Japan: 675.3; 
Singapore: 151.3; 
China: 862.1; 
Russia: 20; 
Taiwan: 75.1; 
South Korea: 487.5. 

Year: 2004; 
United States: 1,393.5; 
European Union: 1,239.4; 
Japan: 677.2; 
Singapore: 156.2; 
China: 926.3; 
Russia: 21.4; 
Taiwan: 81.2; 
South Korea: 477.6. 

Year: 2005; 
United States: 1,387.9; 
European Union: 1,292.3; 
Japan: 704.9; 
Singapore: 179.8; 
China: 1,118.7; 
Russia: 23.8; 
Taiwan: 88.9; 
South Korea: 464.6. 

Year: 2006; 
United States: 1,425.6; 
European Union: 1,342.1; 
Japan: 709.7; 
Singapore: 200; 
China: 1,223.8; 
Russia: 25; 
Taiwan: 95.2; 
South Korea: 464.4. 

Year: 2007; 
United States: 1,441.8; 
European Union: 1,360.3; 
Japan: 710; 
Singapore: 221.9; 
China: 1,423.4; 
Russia: 27.3; 
Taiwan: 103.5; 
South Korea: 469.1. 

Source: National Science Board. 

Note: 2007 data for the United States are estimated based on annual 
growth rate between 1995 and 2006. 

[End of figure] 

Implications for Government and GAO: 

GAO has found that the United States has historically promoted 
advances in STEM through public- and private-sector investments of 
about $284 billion annually. With all of STEM’s potential, the federal 
government and the nation’s other key centers of research will need to 
work together to ensure that the STEM workforce is sufficiently 
skilled, that there are enough well-equipped R&D facilities, and that 
STEM-related information can be appropriately transferred while 
protecting intellectual property rights. Education is a crucial 
enabler for each of these points. Economists from across the spectrum 
have noted that in this digital age, a highly educated and skilled 
workforce is critical not only to individual opportunity, but also to 
the overall success of the nation’s economy. 

To assist the Congress, GAO intends to expand its knowledge of and 
expertise in STEM trends, including the complex and controversial 
issues that will inevitably arise. To support the increasing number 
and sophistication of congressional requests with STEM dimensions, GAO 
has grown its science, engineering, and mathematical staff and has 
created a Center for Science, Technology, and Engineering. In 
addition, GAO will need to: 

* strengthen its networks in the scientific community; 

* support and participate in advisory boards, Comptroller General 
forums, and the National Academies; and; 

* collaborate with other national and international institutions 
dedicated to science and technology development. 

For 2010 through 2015, GAO’s portfolio of assessments in the science 
and technology field will encompass a wide range of topics, including: 

* nanomaterials, 

* climate remediation technologies (such as carbon capture and 
sequestration), 

* biotechnology, 

* counterterrorism technologies (such as advanced radiation detection 
systems), 

* next-generation space systems, 

* virtualization of information, 

* technology-related social and behavioral norms, and, 

* advances in computational processing and information transmission 
and storage. 

As developments in STEM continue to provide new opportunities and 
challenges to the nation and the Congress, GAO will continuously adapt 
its capabilities to help meet those challenges.
Among the specific work GAO envisages are: 

* conducting specialized studies and technology assessments of a wide 
range of science and technology issues, such as climate change, the 
challenges of developing sophisticated space and defense systems, and 
green energy; 

* reviewing the effectiveness of computer and network security at 
federal agencies to better ensure the protection of government and 
personal information; 

* assessing the government’s planning, implementation, and use of 
information technology; 

* assessing the management and results of the federal investment in 
science and technology and the effectiveness of efforts to protect 
intellectual property; and; 

* reviewing federal efforts to turn around low-performing schools, 
enhance oversight of charter schools, and establish effective teacher 
evaluation and compensation programs. 

“The U.S. may be uniquely able to adapt its higher education and 
research system to rising global demand and position itself as a world 
education hub for the growing number of students that will enter the 
education market out to 2025. Although further opening of U.S. 
classrooms and laboratories could mean greater competition for U.S. 
students, the U.S. economy would likely benefit because companies tend 
to base their operations near available human-capital.” From: Global 
Trends 2025: A Transformed World, National Intelligence Council. 

Increasing Impact of Networks and Virtualization: 

Society, business, and government are rapidly entering a technological 
age where traditional processes and systems are giving way to ones 
that are more collaborative, dynamic, networked, and virtual. Numerous 
trends—including the increasing use of wireless devices, decreasing 
costs of and more powerful computers, and growing penetration and 
affordability of high-speed Internet access—have converged to create 
more numerous and more sophisticated systems of networks across 
different areas of society. Silos are breaking down, and information 
is moving outside of traditional stovepipes. In the trend of “
virtualization,” we see that physical presence is no longer required: 
virtual classrooms, virtual work spaces, virtual worlds, virtual media 
content, and virtual software are increasingly commonplace in schools, 
homes, and the workplace. As digital systems add ever more 
capabilities and as wireless systems become more ubiquitous, the 
ability of governments, the private sector, and individuals to form 
networks that increase their efficiency and effectiveness will only 
grow. 

Technology Is Increasingly Less Expensive: 

Advances in technology continue to radically change the economics of 
information sharing and networking. According to data in Deloitte’s 
2009 Shift Index: 

* The cost of one gigabyte of storage has been decreasing at an 
exponential rate; in 1992, one gigabyte of storage cost $569. In 2008, 
it cost 13 cents. 

* The cost of transferring 1,000 megabits of data per second dropped 
nearly 10 times, from $1,197 in 1999 to $130 in 2008. 

* Wireless activity continues to grow rapidly (see figure 10). 
Wireless subscriptions grew from 340,000 in 1985 to approximately 270 
million by the end of 2008. 

* Text messaging has shown similar growth. In the last 5 years, cell 
phone users on average increased their rate of sending text messages 
from about 1 message per month to 25 per month. 

Figure 10: U.S. Wireless Service Subscriptions Have Surged: 

[Refer to PDF for image: line graph] 

Year: 1989; 
Subscribers (in millions): 3.5. 

Year: 1990; 
Subscribers (in millions): 5.3. 

Year: 1991; 
Subscribers (in millions): 7.6. 

Year: 1992; 
Subscribers (in millions): 11.0. 

Year: 1993; 
Subscribers (in millions): 16.0. 

Year: 1994; 
Subscribers (in millions): 24.1. 

Year: 1995; 
Subscribers (in millions): 33.8. 

Year: 1996; 
Subscribers (in millions): 44.0. 

Year: 1997; 
Subscribers (in millions): 55.3. 

Year: 1998; 
Subscribers (in millions): 69.2. 

Year: 1999; 
Subscribers (in millions): 86.1. 

Year: 2000; 
Subscribers (in millions): 109.5. 

Year: 2001; 
Subscribers (in millions): 128.4. 

Year: 2002; 
Subscribers (in millions): 140.8. 

Year: 2003; 
Subscribers (in millions): 158.7. 

Year: 2004; 
Subscribers (in millions): 182.1. 

Year: 2005; 
Subscribers (in millions): 207.9. 

Year: 2006; 
Subscribers (in millions): 233.0. 

Year: 2007; 
Subscribers (in millions): 255.4. 

Year: 2008; 
Subscribers (in millions): 270.3. 

Source: CTIA–The Wireless Association, data are used by permission. 

Note: Industry data count a subscriber as any person using a wireless 
phone under a paid subscription. Because an individual could have more 
than one wireless phone, such as separate phones for personal and 
professional use, the number of wireless phone service users is 
smaller than the number of subscribers. 

[End of figure] 

Networks and Virtualization: 
The falling costs, increasing performance, and wider availability of 
computers and bandwidth, combined with increasing availability of 
wireless networks and more powerful portable devices, have enabled 
users to work together and communicate with one another more than ever 
before. According to filings with the Federal Communications 
Commission, fixed high-speed Internet connections have been steadily 
increasing in recent years (see figure 11). Further, wireless and 
remote-access tools are significantly increasing the number of 
networked connections in schools, offices, homes, and beyond—on the 
road, in the air, or at sea. Moreover, the accelerating use of social 
media platforms provides faster and more numerous ways to share 
information and build relationships that support learning, 
collaboration, and knowledge transfer, regardless of location. At the 
same time, if such advances are unevenly distributed, it could result 
in a widening gap between countries and groups that have access to 
these technologies and those that do not, including some of the most 
vulnerable populations. 

Figure 11: Total Fixed High-Speed Connections Have Grown During 2005-
2008: 

[Refer to PDF for image: line graph] 

Total fixed high-speed connections 2005-2008 (connections over 200 
kbps in at least one direction, in thousands): 

Year: June 2005; 
Total fixed high-speed connections: 42,138. 

Year: December 2005; 
Total fixed high-speed connections: 47,803. 

Year: June 2006; 
Total fixed high-speed connections: 53,975. 

Year: December 2006; 
Total fixed high-speed connections: 60,238. 

Year: June 2007; 
Total fixed high-speed connections: 65,681. 

Year: December 2007; 
Total fixed high-speed connections: 70,206. 

Year: June 2008; 
Total fixed high-speed connections: 73,123. 

Year: December 2008; 
Total fixed high-speed connections: 76,926. 

Source: U.S. Federal Communications Commission. 

[End of figure] 

Changing Nature of Information: 

As networks grow and virtualization increases, the way information is 
created and shared is rapidly changing. Less than a generation ago, 
the main sources of information available to the public were largely 
limited to libraries, a local newspaper, and a handful of radio and 
television stations. Now it is possible—and increasingly common—for 
individuals to receive information in “real time” from a growing array 
of global sources, at any time, in almost any location, and in any 
format—including video and audio. The traditional broadcast model of 
distributing information is giving way to “on demand” consumption of 
content, from news and entertainment to educational material. 
Moreover, individuals and entities that in the past were simply 
consumers of information are now able not only to create their own 
content, but also to distribute that content across the world. Even 
the way in which data and media are stored is rapidly changing. 
Individuals—and institutions—are no longer limited to storing their 
own permanent copies of software, databases, books, music, or video 
programming; instead, these media are increasingly available through 
“cloud computing” solutions, whereby information resides in servers 
accessible through the Internet and is downloaded temporarily onto 
various hardware devices, such as desktop and notebook computers, 
entertainment centers, and handheld telephones. 

Implications for Government and GAO: 

The growth in technology has the potential to affect not only how 
people work and learn, but also how they think and what they expect 
from their government. Understanding and managing the implications of 
this rapidly changing landscape will be crucial for government in the 
coming years as it works to adapt to interconnected global financial 
systems, improve public access to government data, evaluate and deploy 
cloud computing, solicit public participation in problem solving, 
offer telecommuting to its employees, or deploy “matrixed” 
(interdisciplinary) and decentralized work teams. Trends in networks 
and virtualization will require that government respond to a host of 
new opportunities and challenges, including the following: 

* Government will face increasingly complex, international, and 
multidisciplinary challenges stemming from decentralized and 
technology-enabled networks and groups. This will be especially 
relevant when dealing with key national security threats arising from, 
for example, nonstate actors or electronic warfare. 

* As the federal workforce becomes more mobile, geographically 
distributed, and time- and location-independent, it may need to 
acquire technologies to enable work groups to better collaborate 
within and across agencies. Whether as part of virtual meetings, 
virtual classrooms, or virtual teams spread across the country or the 
world, employees will require and expect technologies to support these 
virtual applications to help them work more efficiently and 
effectively. 

The government, therefore, will need to focus on more systemwide 
perspectives and solutions. The performance and accountability of the 
federal government will require viewing government processes and 
systems in a more holistic way that fully accounts for trends related 
to networks and virtualization. As the services that government 
provides—and the technologies that support them—become more complex 
and cut across traditional boundaries, approaches to accountability 
will have to move beyond the traditional “stovepipes” and silo-like 
entities that these trends are rupturing. 

Related GAO work includes: 

* assessing federal efforts to promote affordable access to telephone 
and broadband Internet services; 

* reviewing the management of government telecommunications and 
interconnected systems and federal agencies’ effectiveness in 
providing secure, reliable, and fast Internet and Web connections; 

* assessing the Department of Homeland Security’s efforts to enhance 
the resiliency of critical national assets, networks, and systems; and; 

* analyzing and supporting efforts to improve the federal workforce 
infrastructure. 

Shifting Roles in Government and Governance: 

As government agencies increasingly rely on collaboration with—and, in 
permissible circumstances, delegation of duties and responsibilities 
to—private and nongovernmental entities, the line between the 
governmental and the nongovernmental sectors continues to blur. 
Private firms continue to play ever-larger roles in providing support 
services in areas some regard as more central or core governmental 
functions. At the same time, government has taken on additional roles, 
responsibilities, and even financial stakes in the private sector. 
These changing circumstances and trends potentially have implications 
for governance, transparency, and access to data that can affect the 
accountability of, although not ultimate responsibility for, program 
effectiveness and government spending. Further, as the problems facing 
government become more complex and interconnected, roles and 
responsibilities are also shifting within the federal government and 
among different levels of government. 

Evolving Roles for the Federal Government: 

The military, for example, is playing larger roles in international 
and domestic disaster response, international development, and public 
diplomacy. At the same time, many civilian federal programs and 
agencies increasingly have missions that are integral to national 
security. Debate continues about the proper balance of different 
levels of government in areas such as regulation related to financial 
services, insurance, and the environment. 

Contractors’ Role in Government: 

The federal government relies increasingly on contractors to carry out 
its missions, as the following examples illustrate: 

* Governmentwide spending on contractor services has more than doubled 
in the last 10 years. In fiscal year 2009, procurement spending 
totaled more than $500 billion per year, of which more than $350 
billion was spent by DOD—the federal government’s largest purchaser of 
contractor-provided services. The government is increasingly reliant 
on contractors to perform tasks such as procurement and contracting 
support, intelligence analysis, security services, program management, 
and engineering and technical support for program offices. 

* DOD’s product and service contract obligations have been steadily 
increasing over recent years (see figure 12). DOD purchases services 
that include professional and management support, IT support, weapon 
system and base operations support, and intelligence support. 

* The U.S. military has long used contractors to provide supplies and 
services to deployed forces, but the scale of contractor support DOD 
relies on in deployed locations today has increased considerably. 
Contractors in Iraq and Afghanistan, the majority of whom are third-
country or local nationals, have outnumbered troops; however, as we 
have previously reported,[Footnote 26] it is difficult to obtain an 
exact count of contractors due to limitations and incompleteness of 
contractor data maintained by DOD, the Department of State, and United 
States Agency for International Development. 

Figure 12: Changes in DOD’s Product and Service Contract Obligations, 
Fiscal Years 2001–2009: 

[Refer to PDF for image: stacked vertical bar graph] 

Constant fiscal year 2009 dollars (in billions): 

Fiscal year: 2001; 
Products: $81.2; 
Services: $94.1. 

Fiscal year: 2002; 
Products: $92.8; 
Services: $110.3. 

Fiscal year: 2003; 
Products: $105.3; 
Services: $137.8. 

Fiscal year: 2004; 
Products: $116.8; 
Services: $144.4. 

Fiscal year: 2005; 
Products: $134.4; 
Services: $156.2. 

Fiscal year: 2006; 
Products: $147; 
Services: $162. 

Fiscal year: 2007; 
Products: $162.8; 
Services: $177. 

Fiscal year: 2008; 
Products: $189.5; 
Services: $189.8. 

Fiscal year: 2009; 
Products: $165.3; 
Services: $207. 

Source: GAO analysis of the Federal Procurement Data System-Next 
Generation data. 

[End of figure] 

While contractors have an important role to play—and, in some cases, 
the use of contractors can result in improved efficiency and 
effectiveness—this trend raises concerns about what the proper balance 
is between public and private employees in performing federal agency 
missions. 

The use of contractors potentially can place greater distance between 
contractors that assist in conducting the business of government and 
the oversight of contractors that is crucial to the transparent and 
effective operation of government-—in particular, in areas such as 
ethics rules, legal jurisdiction, conflicts of interest, privacy and 
data security, and records retention and management. If the use of 
contractors causes financial, human-capital, performance, or other 
program data to be scattered across multiple contracting entities, 
then oversight of government spending and performance can—in practice, 
if not in law—become more time-consuming or difficult.[Footnote 27] 
More broadly, agencies that use contractors extensively, particularly 
over the long term, face the risk of losing or failing to develop in-
house expertise in their core capabilities or functions because they 
have relied too heavily on contractors to perform those core functions. 

Government’s Role in the Private Sector: 

The U.S. government’s spending today accounts for a bigger share of 
the nation’s economy—nearly 25 percent—than at any time since 1946. 
The government is becoming more directly active in the private sector, 
as well. The financial crisis and economic downturn have resulted in a 
wide-ranging federal response that included infusing capital into 
financial institutions and major corporations and guaranteeing their 
assets. The 2008 legislation that created the Troubled Asset Relief 
Program—the primary vehicle for these actions—resulted in the federal 
government’s becoming a significant shareholder in many different 
companies and financial institutions. The federal government is also 
involved in mortgage finance through its conservatorship and financial 
support of Fannie Mae and Freddie Mac. In 2009, the U.S. government 
helped finance or guarantee approximately 90 percent of all newly made 
home loans and owned stock in private-sector firms, including 
Citigroup, Chrysler, and GMAC; 60 percent of General Motors; and more 
than 75 percent of AIG. The structures and oversight of such 
arrangements will be important to avoid conflicts of interest and to 
ensure accountability for the government’s investment. This area will 
require close attention for many years to come to ensure 
accountability when creating, managing, regulating, or unwinding such 
arrangements. 

State and Local Government and Other Entities: 

As the problems facing government become more complex and 
interconnected, federal actions and nongovernmental entities are 
having an impact on state and local governments. For example, through 
Title I of the Elementary and Secondary Education Act (ESEA) and the 
Recovery Act, the federal government has encouraged states to increase 
school accountability and implement other education reform policies. 
Specifically, through ESEA, the federal government required that each 
state have an accountability system that measures whether schools are 
helping students meet goals for academic achievement. Through the 
Recovery Act, the federal government has urged states and districts to 
take steps to increase teacher effectiveness, establish data systems 
to track progress and foster continuous improvement, implement 
rigorous standards and high-quality assessments, and help improve 
struggling schools. The rise of charter schools—public schools that 
are sometimes run by for-profit or non-profit entities—is an example 
of how governmental and nongovernmental sectors are working together, 
especially at the local level. 

Further, because of the strained fiscal condition of many state and 
local governments, the federal government is increasingly in the 
position to partner or intervene at the state and local level to 
provide relief. For example, with the Recovery Act, the federal 
government is helping to reduce state budget gaps with funding for 
education, road construction, and Medicaid. In other areas, the 
converse holds true, such as proposals by the current administration 
to allow states to set state greenhouse gas standards that are 
stricter than federal standards. 

Federal policymakers are increasingly faced with the challenge of 
addressing complex socioeconomic problems that cut across multiple 
geographic jurisdictions within a metropolitan area or a region. 
Rethinking the delivery of public services by states and localities 
offers some hopes of generating program efficiencies and benefits to 
communities. For example, the Department of Housing and Urban 
Development has promoted efforts to create sustainable communities 
that span large metropolitan areas or regions by connecting housing to 
jobs through housing and transportation investments. Such efforts 
include encouraging local governments to integrate their regional 
housing, transportation, and land use planning and offer many 
potential benefits to communities. A particular challenge is the need 
to better integrate transportation decisions, which are made at the 
state and regional level, with land use decisions, which are made at 
the local level. Federal law has required urban areas to carry out, 
through their metropolitan planning organizations, comprehensive 
regional planning as a condition of receiving federal transportation 
funds since 1973, but these planning organizations differ considerably 
in terms of capacity, responsibilities, and range of activities. 

Implications for Government and GAO: 

The scope and nature of the federal government’s work will continue to 
evolve. The government has made changes in major policy areas such as 
financial regulation and health care. Further, the public sector’s 
reliance on assistance from nonprofit organizations and the private 
sector to help achieve policy objectives may need to be addressed if 
nonprofit and private-sector organizations falter due to financial 
constraints. As the line between the public, private, and nonprofit 
sectors continues to blur and as those sectors become more 
interdependent, partnerships and collaborations among various federal 
organizations and sectors will be paramount to ensure accountability 
and transparency. 

These trends on the shifting roles of government are already having an 
impact on the types of audits GAO does and the access that GAO has 
when conducting those audits. Entities that receive funds from or 
perform work on behalf of the government may not have the same record-
keeping policies that their contracting or granting federal agencies 
do. Unusual or unique circumstances surrounding the way data are 
maintained or stored can also present challenges. For example, 
government agency data can be more difficult to process as the number 
of software applications and variety of electronic storage methods 
proliferate. Finally, complex ownership and investment structures that 
involve private-sector companies and multiple federal entities—for 
example, the Department of the Treasury and the Federal Reserve—will 
create new challenges for auditing in the aftermath of the financial 
crisis in the coming years. As the budgets, functions, and points of 
service of many government programs devolve to state and local 
governments, private entities and nonprofit organizations, and other 
third parties, tailored approaches may be required to ensure effective 
oversight and accountability. 

Related GAO work under Goal 3 includes: 

* focusing on major areas that are at high risk, including the U.S. 
Postal Service’s financial condition, oversight of food and drug 
safety, and cybersecurity efforts; 

* assessing the government’s strategy for managing its reliance on 
contractors to ensure that agencies determine the right mix of, as 
well as proper roles and responsibilities for, government and 
contractor employees; 

* identifying ways to improve the acquisition of goods and services by 
federal agencies; and; 

* identifying opportunities to improve the coordination, 
collaboration, and governance of networks of governmental and 
nongovernmental organizations to address complex national issues. 

Demographic and Societal Changes Confronting the Young and Old: 

Recent decades have witnessed tremendous global demographic changes 
that are influencing national economies and societies around the 
world. In its own way, the United States is also experiencing many of 
these profound demographic changes; the United States has an aging 
population, a rising life expectancy, and a slower growing and more 
diverse workforce. The next 5 years will see a large number of 
retirements and a growing proportion of the baby-boom generation 
exiting the workforce. These trends will also have important 
implications for our nation’s future economic performance and the 
basic fabric of American society and will pose challenges to a range 
of federal government programs, such as Social Security, and public 
policies in areas such as health care, education, and income support. 
In addition, these demographic trends will have a major impact on the 
federal budget. 

Global Demographic Trends: 

The world continues to experience demographic changes that will pose 
challenges to ensuring continued economic growth and rising living 
standards, as well as societal harmony. 

* Population growth and migration: According to the UN, the world’s 
population is projected to grow by over a third (33.8 percent) over 
the next 40 years, reaching about 9 billion in 2050. Meanwhile, people 
will become more mobile, as populations move in search of work and 
economic opportunity, political sanctuary, and societal stability. 
According to the 2009 United Nations Development Programme’s Human 
Development Report, nearly 1 billion—or one of seven—people worldwide 
are currently migrants. While most do not cross borders, some 215 
million were projected to do so in 2010 alone. Migrants have been a 
major source of remittance flows (repatriated funds) to developing 
countries. According to the World Bank, these flows have been more 
resilient during the global recession than other forms of external 
financing, such as private equity and foreign direct investment. 
[Footnote 28] 

* Aging: Meanwhile, the average age in many parts of the world has 
been rising dramatically and is projected to continue to rise between 
now and 2050. The 2009 UN population projection notes that the number 
of people in the main working ages “…is at an all time high: 603 
million [in developed countries] and 2.4 billion [in developing 
countries].” Restoring and creating jobs across the globe remains 
imperative for this and other reasons. 

Population Growth and Migration: 

World population is projected to continue to grow significantly in the 
years ahead (see figure 13). According to the UN, world population is 
projected to grow from about 6.9 billion in 2009 to more than 9.1 
billion by 2050. Developing countries will add most of the 2.2 billion 
people. Developed regions as a whole, in contrast, only grow as a 
result of net international migration from developing countries. 

The United States is an exception among developed countries and is 
expected to experience continued population growth. This is in part 
because of its higher-than-average fertility rate and because it is 
expected to be the largest net receiver of international migrants, 
attracting 1.1 million or more annually. Indeed, at 308 million, the 
United States is the third most populous country (behind China and 
India, with 1.3 and 1.2 billion people, respectively) and is projected 
to remain third in the coming decades. The United States is also 
projected to be one of the nine most populous countries that together 
will account for half of the world’s population growth between 2010 
and 2050. The remaining nine countries (in order of the size of their 
contribution to global population growth) are all developing countries—
India, Pakistan, Nigeria, Ethiopia, the Democratic Republic of the 
Congo, Tanzania, China, and Bangladesh. The population growth in the 
developing world will increase the global labor force significantly. 
But, as figure 13 shows, the share of persons age 65 or over will 
double between 2010 and 2050. 

Figure 13: World Population Is Projected to Grow by Nearly a Third by 
2050: 

[Refer to PDF for image: 3 pie-charts] 

Year: 1965; 
Age 0-14: 38%; 
Age 15–64: 57%; 
Age 65+: 5%; 
Total: 3.3 billion. 

Year: 2010; 
Age 0-14: 27%; 
Age 15–64: 65%; 
Age 65+: 8%; 
Total: 6.9 billion. 

Year: 2050; 
Age 0-14: 20%; 
Age 15–64: 64%; 
Age 65+: 16%; 
Total: 9.1 billion. 

Source: GAO presentation of United Nations data. 

[End of figure] 

Aging: 

Indeed, as figure 14 illustrates, aging is a global phenomenon. Rising 
living standards, life expectancy, and declining fertility have led to 
a sustained increase in the average age of the population in much of 
the advanced industrialized world and nations like China and South 
Korea. 

Figure 14: Aging of the World’s Population Is Projected to Become More 
Acute as Percentages of Population over Age 65 Increase, by Country, 
2010 and 2050: 

[Refer to PDF for image: 2 world maps] 

The maps are shaded to indicate the amount of population over age 65 
as follows: 

less than 7.5%; 
7.5%–14.9%; 
15% or greater. 

Source: GAO presentation of United Nations data. 

[End of figure] 

U.S. Demographic Trends: 

Aging: While the U.S. population’s aging is not new, the urgency of 
understanding its impacts is upon us. The baby boomers—born between 
1946 and 1964, inclusive—began to retire in 2008, signaling a profound 
change for American society. Over the last several decades, the United 
States was fortunate to have a baby-boom generation of some 75 million 
swelling the U.S. working-age population and fueling labor force and 
economic growth. America’s population nearly tripled in the generation 
now reaching retirement. But in 2008, the oldest members of the baby-
boom generation hit age 62, causing a reversal in this young/old 
dynamic. Meanwhile, rising living standards over the last 60 years 
have led to a considerable increase in longevity, from about age 73 
for men and age 79 for women in 1950 to nearly age 82 for men and age 
86 for women in 2010. Social Security both project that U.S. life 
expectancy will continue to increase—by about 2 years from 2010 to 
2030 and by another year from 2030 to 2050. The U.S. fertility rate, 
in contrast, is expected to remain flat, though above replacement 
levels. As a result, Census says, one in five U.S. residents will be 
age 65 or older by 2030. 

Although the aging of the American population will doubtless create 
many challenges, compared with other developed nations such as Western 
Europe and Japan, the economic effects of our aging population may be 
less severe. Our country is expected to have more youth in the 
population than these other countries do and, therefore, potentially 
more workers to support those not in the labor force. And many workers 
born during the baby-boom years are expected to remain at work. The 
Bureau of Labor Statistics expects that 95 percent of the growth of 
the U.S. labor force over the coming decade will be by those age 55 or 
older. 

Population and economic growth: Census projects that the overall U.S. 
population will increase by 42 percent by 2050, to 439 million, 
whereas there will be a doubling of people age 65 or older. As the 
retirement of baby boomers accelerates, the slightly more than 1 
percent growth in the civilian labor force experienced lately is 
expected to fall to around 0.5 percent. (See figure 15.) By 2030, the 
share of the working-age population in the total U.S. population will 
drop to 55 percent (from 60 percent in 2010). Meanwhile, the 
dependency ratio—the ratio of those age 20 or younger and age 65 or 
older to those of working age—will reach 83 percent, versus 67 percent 
today. 

In general, a rising labor force is a key contributor to economic 
growth, and improved labor productivity is correlated with increased 
income. To compensate for a slower growing labor force, the 
productivity of U.S. workers will need to increase. However, to the 
extent that older workers remain in the labor force, they will 
contribute to economic growth and increase federal revenues, helping 
to defray some of the anticipated costs associated with increased 
claims on Social Security and Medicare. 

Figure 15: Growth in the U.S. Civilian Labor Force Is Projected to 
Slow: 

[Refer to PDF for image: line graph] 

Year: 1960; 
Labor force growth (percentage): 2.2%. 

Year: 1961; 
Labor force growth (percentage): 1.4%. 

Year: 1962; 
Labor force growth (percentage): 1%. 

Year: 1963; 
Labor force growth (percentage): 1.6%. 

Year: 1964; 
Labor force growth (percentage): 1.6%. 

Year: 1965; 
Labor force growth (percentage): 2.2%. 

Year: 1966; 
Labor force growth (percentage): 3.1%. 

Year: 1967; 
Labor force growth (percentage): 3.1%. 

Year: 1968; 
Labor force growth (percentage): 3.4%. 

Year: 1969; 
Labor force growth (percentage): 3.6%. 

Year: 1970; 
Labor force growth (percentage): 2.9%. 

Year: 1971; 
Labor force growth (percentage): 2%. 

Year: 1972; 
Labor force growth (percentage): 2.1%. 

Year: 1973; 
Labor force growth (percentage): 2.2%. 

Year: 1974; 
Labor force growth (percentage): 1.9%. 

Year: 1975; 
Labor force growth (percentage): 1.5%. 

Year: 1976; 
Labor force growth (percentage): 2%. 

Year: 1977; 
Labor force growth (percentage): 2%. 

Year: 1978; 
Labor force growth (percentage): 1.9%. 

Year: 1979; 
Labor force growth (percentage): 2.1%. 

Year: 1980; 
Labor force growth (percentage): 2.4%. 

Year: 1981; 
Labor force growth (percentage): 1.9%. 

Year: 1982; 
Labor force growth (percentage): 1%. 

Year: 1983; 
Labor force growth (percentage): 0.5%. 

Year: 1984; 
Labor force growth (percentage): 0.8%. 

Year: 1985; 
Labor force growth (percentage): 1.3%. 

Year: 1986; 
Labor force growth (percentage): 1.7%. 

Year: 1987; 
Labor force growth (percentage): 2.5%. 

Year: 1988; 
Labor force growth (percentage): 2.9%. 

Year: 1989; 
Labor force growth (percentage): 2.5%. 

Year: 1990; 
Labor force growth (percentage): 2%. 

Year: 1991; 
Labor force growth (percentage): 1.5%. 

Year: 1992; 
Labor force growth (percentage): 1.2%. 

Year: 1993; 
Labor force growth (percentage): 0.9%. 

Year: 1994; 
Labor force growth (percentage): 1%. 

Year: 1995; 
Labor force growth (percentage): 1.1%. 

Year: 1996; 
Labor force growth (percentage): 1.6%. 

Year: 1997; 
Labor force growth (percentage): 1.8%. 

Year: 1998; 
Labor force growth (percentage): 1.9%. 

Year: 1999; 
Labor force growth (percentage): 1.8%. 

Year: 2000; 
Labor force growth (percentage): 1.9%. 

Year: 2001; 
Labor force growth (percentage): 1.6%. 

Year: 2002; 
Labor force growth (percentage): 1.1%. 

Year: 2003; 
Labor force growth (percentage): 0.7%. 

Year: 2004; 
Labor force growth (percentage): 0.6%. 

Year: 2005; 
Labor force growth (percentage): 0.5%. 

Year: 2006; 
Labor force growth (percentage): 0.8%. 

Year: 2007; 
Labor force growth (percentage): 1.1%. 

Year: 2008; 
Labor force growth (percentage): 1%. 

Year: 2009; 
Labor force growth (percentage): 0.5%. 

Year: 2010; 
Labor force growth (percentage): 0.2%. 

Year: 2011; 
Labor force growth (percentage): 0.2%. 

Year: 2012; 
Labor force growth (percentage): 0.3%. 

Year: 2013; 
Labor force growth (percentage): 0.7%. 

Year: 2014; 
Labor force growth (percentage): 1.2%. 

Year: 2015; 
Labor force growth (percentage): 1.3%. 

Year: 2016; 
Labor force growth (percentage): 1.1%. 

Year: 2017; 
Labor force growth (percentage): 0.9%. 

Year: 2018; 
Labor force growth (percentage): 0.7%. 

Year: 2019; 
Labor force growth (percentage): 0.6%. 

Year: 2020; 
Labor force growth (percentage): 0.5%. 

Year: 2021; 
Labor force growth (percentage): 0.5%. 

Year: 2022; 
Labor force growth (percentage): 0.4%. 

Year: 2023; 
Labor force growth (percentage): 0.4%. 

Year: 2024; 
Labor force growth (percentage): 0.4%. 

Year: 2025; 
Labor force growth (percentage): 0.4%. 

Year: 2026; 
Labor force growth (percentage): 0.4%. 

Year: 2027; 
Labor force growth (percentage): 0.4%. 

Year: 2028; 
Labor force growth (percentage): 0.4%. 

Year: 2029; 
Labor force growth (percentage): 0.4%. 

Year: 2030; 
Labor force growth (percentage): 0.4%. 

Year: 2031; 
Labor force growth (percentage): 0.4%. 

Year: 2032; 
Labor force growth (percentage): 0.4%. 

Year: 2033; 
Labor force growth (percentage): 0.5%. 

Year: 2034; 
Labor force growth (percentage): 0.5%. 

Year: 2035; 
Labor force growth (percentage): 0.5%. 

Year: 2036; 
Labor force growth (percentage): 0.5%. 

Year: 2037; 
Labor force growth (percentage): 0.5%. 

Year: 2038; 
Labor force growth (percentage): 0.5%. 

Year: 2039; 
Labor force growth (percentage): 0.5%. 

Year: 2040; 
Labor force growth (percentage): 0.5%. 

Year: 2041; 
Labor force growth (percentage): 0.5%. 

Year: 2042; 
Labor force growth (percentage): 0.5%. 

Year: 2043; 
Labor force growth (percentage): 0.5%. 

Year: 2044; 
Labor force growth (percentage): 0.5%. 

Year: 2045; 
Labor force growth (percentage): 0.5%. 

Year: 2046; 
Labor force growth (percentage): 0.5%. 

Year: 2047; 
Labor force growth (percentage): 0.5%. 

Year: 2048; 
Labor force growth (percentage): 0.5%. 

Year: 2049; 
Labor force growth (percentage): 0.5%. 

Year: 2050; 
Labor force growth (percentage): 0.5%. 

Year: 2051; 
Labor force growth (percentage): 0.5%. 

Year: 2052; 
Labor force growth (percentage): 0.5%. 

Year: 2053; 
Labor force growth (percentage): 0.5%. 

Year: 2054; 
Labor force growth (percentage): 0.5%. 

Year: 2055; 
Labor force growth (percentage): 0.5%. 

Year: 2056; 
Labor force growth (percentage): 0.5%. 

Year: 2057; 
Labor force growth (percentage): 0.5%. 

Year: 2058; 
Labor force growth (percentage): 0.5%. 

Year: 2059; 
Labor force growth (percentage): 0.5%. 

Year: 2060; 
Labor force growth (percentage): 0.5%. 

Year: 2061; 
Labor force growth (percentage): 0.5%. 

Year: 2062; 
Labor force growth (percentage): 0.5%. 

Year: 2063; 
Labor force growth (percentage): 0.5%. 

Year: 2064; 
Labor force growth (percentage): 0.5%. 

Year: 2065; 
Labor force growth (percentage): 0.5%. 

Year: 2066; 
Labor force growth (percentage): 0.5%. 

Year: 2067; 
Labor force growth (percentage): 0.5%. 

Year: 2068; 
Labor force growth (percentage): 0.5%. 

Year: 2069; 
Labor force growth (percentage): 0.5%. 

Year: 2070; 
Labor force growth (percentage): 0.5%. 

Year: 2071; 
Labor force growth (percentage): 0.4%. 

Year: 2072; 
Labor force growth (percentage): 0.4%. 

Year: 2073; 
Labor force growth (percentage): 0.4%. 

Year: 2074; 
Labor force growth (percentage): 0.4%. 

Year: 2075; 
Labor force growth (percentage): 0.4%. 

Year: 2076; 
Labor force growth (percentage): 0.4%. 

Year: 2077; 
Labor force growth (percentage): 0.4%. 

Year: 2078; 
Labor force growth (percentage): 0.4%. 

Year: 2079; 
Labor force growth (percentage): 0.4%. 

Year: 2080; 
Labor force growth (percentage): 0.4%. 

Year: 2081; 
Labor force growth (percentage): 0.4%. 

Year: 2082; 
Labor force growth (percentage): 0.4%. 

Year: 2083; 
Labor force growth (percentage): 0.4%. 

Year: 2084; 
Labor force growth (percentage): 0.4%. 

Year: 2085; 
Labor force growth (percentage): 0.4%. 

Sources: Social Security and Medicare Boards of Trustees. 

[End of figure] 

Diversity: America continues to become more diverse. According to 
Census’s latest population projections, present-day minorities, as a 
total group, will become the majority of the U.S. population by 2042. 
Census projects that the U.S. Hispanic population will nearly triple 
by midcentury and that the share of Hispanics in the overall U.S. 
population will double, to 30 percent. Census also projects that the 
U.S. working-age population will be about 55 percent minority in 2039-—
more than 30 percent Hispanic (up from 15 percent in 2008), 15 percent 
black (up from 13 percent in 2008), and 9.6 percent Asian (up from 5.3 
percent in 2008). Separately, Census reports that the proportion of 
the U.S. labor force that is foreign-born has also been rising 
steadily, doubling from 7.1 percent in 1980 to 15.6 percent in 2007-—a 
level not seen since 1930. 

Implications of Demographic Trends on Key Federal Programs: 
U.S. demographic developments will have important implications for 
economic growth and, in particular, our ability both to ensure the 
necessary income maintenance and care of the elderly while investing 
in the well-being, education, and training of our youths and prime-age 
workforce. 

Cost and capacity pressures on old-age programs: Declining labor force 
growth will leave fewer workers available to support the growing 
number of retirees. The change in the ratio of workers to Social 
Security beneficiaries—measuring the number of people available to 
support each retiree—will drop rapidly, from 3.2 in 2008 to 2.5 in 
2020 and to 2.2 by 2030. (See figure 16.) 

Programs that largely serve the older population, like Social Security 
and Medicare, will face increased fiscal challenges. Increased life 
spans and the impending retirement of the baby-boom generation have 
resulted in major long-term solvency challenges for the Social 
Security trust funds. If no action is taken, by 2037, Social Security 
will be unable to pay full benefits promised to retirees. Medicare 
faces even tougher challenges. Only Part A (hospital benefits) is 
funded through payroll taxes. Part B (which covers physician and other 
outpatient services) and Part D (which covers prescription drugs) are 
funded through a combination of general revenues and beneficiary 
premiums. However, Part B premiums are set by statute at just 25 
percent of projected per capita program costs. 

Capacity constraints at federal and local agencies may also worsen. In 
addition to Medicare and Social Security, the aging population will 
increasingly turn to other federal programs, such as Medicaid and the 
VA health care system, and long-term-care settings, such as nursing 
homes and home health care arrangements, which generally involve 
federal oversight to ensure quality of care. 

Figure 16: Change in the Ratio of Workers to Social Security 
Beneficiaries Indicates That Fewer Workers Will Support Each Retiree: 

[Refer to PDF for image: line graph] 

Year: 1960; 
Covered workers per OASDI beneficiary (percentage): 5.1%. 

Year: 1961; 
Covered workers per OASDI beneficiary (percentage): 4.6%. 

Year: 1962; 
Covered workers per OASDI beneficiary (percentage): 4.3%. 

Year: 1963; 
Covered workers per OASDI beneficiary (percentage): 4.1%. 

Year: 1964; 
Covered workers per OASDI beneficiary (percentage): 4%. 

Year: 1965; 
Covered workers per OASDI beneficiary (percentage): 4%. 

Year: 1966; 
Covered workers per OASDI beneficiary (percentage): 3.9%. 

Year: 1967; 
Covered workers per OASDI beneficiary (percentage): 3.8%. 

Year: 1968; 
Covered workers per OASDI beneficiary (percentage): 3.8%. 

Year: 1969; 
Covered workers per OASDI beneficiary (percentage): 3.8%. 

Year: 1970; 
Covered workers per OASDI beneficiary (percentage): 3.7%. 

Year: 1971; 
Covered workers per OASDI beneficiary (percentage): 3.6%. 

Year: 1972; 
Covered workers per OASDI beneficiary (percentage): 3.5%. 

Year: 1973; 
Covered workers per OASDI beneficiary (percentage): 3.5%. 

Year: 1974; 
Covered workers per OASDI beneficiary (percentage): 3.4%. 

Year: 1975; 
Covered workers per OASDI beneficiary (percentage): 3.2%. 

Year: 1976; 
Covered workers per OASDI beneficiary (percentage): 3.2%. 

Year: 1977; 
Covered workers per OASDI beneficiary (percentage): 3.2%. 

Year: 1978; 
Covered workers per OASDI beneficiary (percentage): 3.2%. 

Year: 1979; 
Covered workers per OASDI beneficiary (percentage): 3.2%. 

Year: 1980; 
Covered workers per OASDI beneficiary (percentage): 3.2%. 

Year: 1981; 
Covered workers per OASDI beneficiary (percentage): 3.2%. 

Year: 1982; 
Covered workers per OASDI beneficiary (percentage): 3.1%. 

Year: 1983; 
Covered workers per OASDI beneficiary (percentage): 3.1%. 

Year: 1984; 
Covered workers per OASDI beneficiary (percentage): 3.2%. 

Year: 1985; 
Covered workers per OASDI beneficiary (percentage): 3.3%. 

Year: 1986; 
Covered workers per OASDI beneficiary (percentage): 3.3%. 

Year: 1987; 
Covered workers per OASDI beneficiary (percentage): 3.3%. 

Year: 1988; 
Covered workers per OASDI beneficiary (percentage): 3.4%. 

Year: 1989; 
Covered workers per OASDI beneficiary (percentage): 3.4%. 

Year: 1990; 
Covered workers per OASDI beneficiary (percentage): 3.4%. 

Year: 1991; 
Covered workers per OASDI beneficiary (percentage): 3.3%. 

Year: 1992; 
Covered workers per OASDI beneficiary (percentage): 3.3%. 

Year: 1993; 
Covered workers per OASDI beneficiary (percentage): 3.2%. 

Year: 1994; 
Covered workers per OASDI beneficiary (percentage): 3.3%. 

Year: 1995; 
Covered workers per OASDI beneficiary (percentage): 3.3%. 

Year: 1996; 
Covered workers per OASDI beneficiary (percentage): 3.3%. 

Year: 1997; 
Covered workers per OASDI beneficiary (percentage): 3.3%. 

Year: 1998; 
Covered workers per OASDI beneficiary (percentage): 3.4%. 

Year: 1999; 
Covered workers per OASDI beneficiary (percentage): 3.4%. 

Year: 2000; 
Covered workers per OASDI beneficiary (percentage): 3.4%. 

Year: 2001; 
Covered workers per OASDI beneficiary (percentage): 3.4%. 

Year: 2002; 
Covered workers per OASDI beneficiary (percentage): 3.3%. 

Year: 2003; 
Covered workers per OASDI beneficiary (percentage): 3.3%. 

Year: 2004; 
Covered workers per OASDI beneficiary (percentage): 3.3%. 

Year: 2005; 
Covered workers per OASDI beneficiary (percentage): 3.3%. 

Year: 2006; 
Covered workers per OASDI beneficiary (percentage): 3.3%. 

Year: 2007; 
Covered workers per OASDI beneficiary (percentage): 3.3%. 

Year: 2008; 
Covered workers per OASDI beneficiary (percentage): 3.2%. 

Year: 2009; 
Covered workers per OASDI beneficiary (percentage): 3.1%. 

Year: 2010; 
Covered workers per OASDI beneficiary (percentage): 3%. 

Year: 2011; 
Covered workers per OASDI beneficiary (percentage): 3%. 

Year: 2012; 
Covered workers per OASDI beneficiary (percentage): 3%. 

Year: 2013; 
Covered workers per OASDI beneficiary (percentage): 2.9%. 

Year: 2014; 
Covered workers per OASDI beneficiary (percentage): 2.9%. 

Year: 2015; 
Covered workers per OASDI beneficiary (percentage): 2.8%. 

Year: 2016; 
Covered workers per OASDI beneficiary (percentage): 2.8%. 

Year: 2017; 
Covered workers per OASDI beneficiary (percentage): 2.7%. 

Year: 2018; 
Covered workers per OASDI beneficiary (percentage): 2.6%. 

Year: 2019; 
Covered workers per OASDI beneficiary (percentage): 2.6%. 

Year: 2020; 
Covered workers per OASDI beneficiary (percentage): 2.5%. 

Year: 2021; 
Covered workers per OASDI beneficiary (percentage): 2.5%. 

Year: 2022; 
Covered workers per OASDI beneficiary (percentage): 2.4%. 

Year: 2023; 
Covered workers per OASDI beneficiary (percentage): 2.4%. 

Year: 2024; 
Covered workers per OASDI beneficiary (percentage): 2.4%. 

Year: 2025; 
Covered workers per OASDI beneficiary (percentage): 2.3%. 

Year: 2026; 
Covered workers per OASDI beneficiary (percentage): 2.3%. 

Year: 2027; 
Covered workers per OASDI beneficiary (percentage): 2.2%. 

Year: 2028; 
Covered workers per OASDI beneficiary (percentage): 2.2%. 

Year: 2029; 
Covered workers per OASDI beneficiary (percentage): 2.2%. 

Year: 2030; 
Covered workers per OASDI beneficiary (percentage): 2.2%. 

Year: 2031; 
Covered workers per OASDI beneficiary (percentage): 2.2%. 

Year: 2032; 
Covered workers per OASDI beneficiary (percentage): 2.1%. 

Year: 2033; 
Covered workers per OASDI beneficiary (percentage): 2.1%. 

Year: 2034; 
Covered workers per OASDI beneficiary (percentage): 2.1%. 

Year: 2035; 
Covered workers per OASDI beneficiary (percentage): 2.1%. 

Year: 2036; 
Covered workers per OASDI beneficiary (percentage): 2.1%. 

Year: 2037; 
Covered workers per OASDI beneficiary (percentage): 2.1%. 

Year: 2038; 
Covered workers per OASDI beneficiary (percentage): 2.1%. 

Year: 2039; 
Covered workers per OASDI beneficiary (percentage): 2.1%. 

Year: 2040; 
Covered workers per OASDI beneficiary (percentage): 2.1%. 

Year: 2041; 
Covered workers per OASDI beneficiary (percentage): 2.1%. 

Year: 2042; 
Covered workers per OASDI beneficiary (percentage): 2.1%. 

Year: 2043; 
Covered workers per OASDI beneficiary (percentage): 2.1%. 

Year: 2044; 
Covered workers per OASDI beneficiary (percentage): 2.1%. 

Year: 2045; 
Covered workers per OASDI beneficiary (percentage): 2.1%. 

Year: 2046; 
Covered workers per OASDI beneficiary (percentage): 2.1%. 

Year: 2047; 
Covered workers per OASDI beneficiary (percentage): 2.1%. 

Year: 2048; 
Covered workers per OASDI beneficiary (percentage): 2.1%. 

Year: 2049; 
Covered workers per OASDI beneficiary (percentage): 2.1%. 

Year: 2050; 
Covered workers per OASDI beneficiary (percentage): 2.1%. 

Year: 2051; 
Covered workers per OASDI beneficiary (percentage): 2.1%. 

Year: 2052; 
Covered workers per OASDI beneficiary (percentage): 2.1%. 

Year: 2053; 
Covered workers per OASDI beneficiary (percentage): 2.1%. 

Year: 2054; 
Covered workers per OASDI beneficiary (percentage): 2.1%. 

Year: 2055; 
Covered workers per OASDI beneficiary (percentage): 2.1%. 

Year: 2056; 
Covered workers per OASDI beneficiary (percentage): 2.1%. 

Year: 2057; 
Covered workers per OASDI beneficiary (percentage): 2.1%. 

Year: 2058; 
Covered workers per OASDI beneficiary (percentage): 2.1%. 

Year: 2059; 
Covered workers per OASDI beneficiary (percentage): 2.1%. 

Year: 2060; 
Covered workers per OASDI beneficiary (percentage): 2.1%. 

Year: 2061; 
Covered workers per OASDI beneficiary (percentage): 2.1%. 

Year: 2062; 
Covered workers per OASDI beneficiary (percentage): 2.1%. 

Year: 2063; 
Covered workers per OASDI beneficiary (percentage): 2.1%. 

Year: 2064; 
Covered workers per OASDI beneficiary (percentage): 2.1%. 

Year: 2065; 
Covered workers per OASDI beneficiary (percentage): 2%. 

Year: 2066; 
Covered workers per OASDI beneficiary (percentage): 2%. 

Year: 2067; 
Covered workers per OASDI beneficiary (percentage): 2%. 

Year: 2068; 
Covered workers per OASDI beneficiary (percentage): 2%. 

Year: 2069; 
Covered workers per OASDI beneficiary (percentage): 2%. 

Year: 2070; 
Covered workers per OASDI beneficiary (percentage): 2v 

Year: 2071; 
Covered workers per OASDI beneficiary (percentage): 2%. 

Year: 2072; 
Covered workers per OASDI beneficiary (percentage): 2%. 

Year: 2073; 
Covered workers per OASDI beneficiary (percentage): 2%. 

Year: 2074; 
Covered workers per OASDI beneficiary (percentage): 2%. 

Year: 2075; 
Covered workers per OASDI beneficiary (percentage): 2%. 

Year: 2076; 
Covered workers per OASDI beneficiary (percentage): 2%. 

Year: 2077; 
Covered workers per OASDI beneficiary (percentage): 2%. 

Year: 2078; 
Covered workers per OASDI beneficiary (percentage): 2%. 

Year: 2079; 
Covered workers per OASDI beneficiary (percentage): 2%. 

Year: 2080; 
Covered workers per OASDI beneficiary (percentage): 2%. 

Year: 2081; 
Covered workers per OASDI beneficiary (percentage): 2%. 

Year: 2082; 
Covered workers per OASDI beneficiary (percentage): 2%. 

Year: 2083; 
Covered workers per OASDI beneficiary (percentage): 2%. 

Year: 2084; 
Covered workers per OASDI beneficiary (percentage): 1.9%. 

Year: 2085; 
Covered workers per OASDI beneficiary (percentage): 1.9%. 

Sources: Social Security and Medicare Boards of Trustees. 

[End of figure] 

Economic growth and education: A key strategy to increasing economic 
growth is to raise worker productivity by, for example, providing a 
quality education to the school-age population and ensuring workers 
have opportunities to maintain or enhance their skills. Yet 
educational performance and outcomes for the U.S. school-age 
population, including minorities and immigrants, have also been a long-
standing concern that remains to be addressed. Hispanic children—
particularly immigrants and first-generation Americans—and black 
children have tended to lag behind other major demographic groups in 
educational attainment through high school, as illustrated in figure 
17. Recent private analyses show Hispanic and black youths are also 
more likely to drop out of school, become teenage parents, or live in 
poverty than white and Asian youths. 

Figure 17: Educational Attainment of Key U.S. Demographic Groups 
Differs, 2008: 

[Refer to PDF for image: illustrated table] 

Percentage of total number of people ages 25 to 40 having attained a 
given level of education as of survey date: 

Asian/Pacific Islander: 
High school diploma[A]: 93%;
Some college: 81%; 
Bachelor's degree: 60%. 

White: 
High school diploma[A]: 93%; 
Some college: 69%; 
Bachelor's degree: 36%. 

African American: 
High school diploma[A]: 87%; 
Some college: 56%; 
Bachelor's degree: 20%. 

Hispanic: 
High school diploma[A]: 64%; 
Some college: 37%; 
Bachelor's degree: 13%. 

Source: GAO analysis of Census 2008 American Community Survey data. 

[End of figure] 

The 2008 National Assessment of Educational Progress Long-term Trend 
Report showed improved reading skills, critical to learning, for 9-, 
13-, and 17-year-olds overall. Furthermore, the average reading score 
for all 9-year-olds was higher in 2008 than in all previous assessment 
years. Blacks (all ages) and Hispanics (ages 9 and 17) showed greater 
improvement in reading scores in the 1971–2007 period than their white 
counterparts. Nevertheless, the achievement gap between white students 
and black and Hispanic students remains large and persistent.
Census expects more than half of all children to be minorities by 
2023. Such data and projections suggest that policymakers will want to 
focus on the quality and availability of education and employment 
opportunities for this large component of the next generation of 
workers. Otherwise, the problems resulting from a declining worker-to-
retiree ratio could be compounded by lower worker productivity and 
wages. 

The challenges to ensuring a well-skilled labor force are not only at 
the elementary and secondary school levels. For example, increases in 
costs for higher education have raised concerns about discouraging 
pursuit or completion of 4-year college degrees, particularly for 
minority and low-income students. This ability of the United States to 
ensure the numbers of skilled workers necessary for a high-
productivity economy could be adversely affected. 

Poverty and family well-being challenges: Rising poverty rates 
exacerbated by the current recession compound the challenges facing 
key federal programs. In September 2009, Census reported that the 
official U.S. poverty rate had risen in 2008 to 13.2 percent, the 
first statistically significant increase in the poverty rate since 
2004 and the highest rate of poverty since 1997. Children and working-
age people (18- to 64-year-olds) both had higher poverty rates, while 
the poverty rate for those age 65 or older remained steady. All told, 
39.8 million Americans lived in poverty, more than at any time since 
1960. (See figure 18.) Data for 2009 are not available, but in the 
past the poverty rate and the number of people in poverty have gone up 
during recessions and even up slightly after recessions. 

Figure 18: Official U.S. Poverty Has Been Rising: 

[Refer to PDF for image: multiple line graph] 

Eight recession periods are indicated on the graph. 

Year: 1959; 
Number of people below poverty level: 39.8 million; 
Poverty rate: 22.4%. 

Year: 1960; 
Number of people below poverty level: 37.3 million; 
Poverty rate: 22.2%. 

Year: 1965; 
Number of people below poverty level: 34.6 million; 
Poverty rate: 17.3%. 

Year: 1970; 
Number of people below poverty level: 35.6 million; 
Poverty rate: 12.5%. 

Year: 1975; 
Number of people below poverty level: 38.0 million; 
Poverty rate: 11.8%. 

Year: 1980; 
Number of people below poverty level: 32.2 million; 
Poverty rate: 14%. 

Year: 1985; 
Number of people below poverty level: 34.4 million; 
Poverty rate: 13.6%. 

Year: 1990; 
Number of people below poverty level: 24.7 million; 
Poverty rate: 14.2%. 

Year: 1995; 
Number of people below poverty level: 24.5 million; 
Poverty rate: 13.7%. 

Year: 2000; 
Number of people below poverty level: 27.8 million; 
Poverty rate: 11.7%. 

Year: 2001; 
Number of people below poverty level: 28.5 million; 
Poverty rate: 13.3%. 

Year: 2002; 
Number of people below poverty level: 33.2 million; 
Poverty rate: 12.1%. 

Year: 2003; 
Number of people below poverty level: 36.1 million; 
Poverty rate: 12.5%. 

Year: 2004; 
Number of people below poverty level: 36.4 million; 
Poverty rate: 12.7%. 

Year: 2005; 
Number of people below poverty level: 38.6 million; 
Poverty rate: 12.6%. 

Year: 2006; 
Number of people below poverty level: 39.6 million; 
Poverty rate: 12.3%. 

Year: 2007; 
Number of people below poverty level: 39.9 million; 
Poverty rate: 12.5%. 

Year: 2008; 
Number of people below poverty level: 39.8 million; 
Poverty rate: 13.2%. 

Source: U.S. Census Bureau. 

[End of figure] 

Economic research suggests that individuals living in poverty face an 
increased risk of adverse outcomes, such as poor health and criminal 
activity. When poverty affects a significant portion of the 
population, negative effects—notably, slower economic growth—can 
spread to society as a whole. The relationship between poverty and 
adverse outcomes for individuals is complex, in part because most 
variables, like health status, can be both a cause and a result of 
poverty. 

For example, the U.S. Department of Agriculture (USDA) recently 
reported that about 17 million households in the United States (or 
14.6 percent of all U.S. households) were “food insecure” in 2008—that 
is, household members were, at times, uncertain of having or unable to 
acquire enough food. Food insecurity was the highest recorded since 
1995, even though more than half (55 percent) of all food insecure 
households were participating in the largest federal food assistance 
programs. Undernourishment can lead to poor physical and psychological 
outcomes, such as low birth weights, chronic illnesses, and 
depression. At the same time, adverse health outcomes associated with 
poor nutrition and health can limit the development of an individual’s 
knowledge, skills, abilities, and habits necessary to fully 
participate in the labor force. 

Our nation’s youths face other challenges. A federal interagency 
effort to gauge the well-being of America’s children—America’s 
Children: Key National Indicators of Well-Being—shows a mixed picture. 
In 2009, progress was reported in several of the 40 statistical 
indicators, for example, the number of children who were vaccinated 
and covered by health insurance. Other indicators, such as those on 
teenage pregnancy and child poverty, regressed. The report notes that 
the structure of children’s families is associated with the economic, 
parental, and community resources available to children and their well-
being. For example, children of single parents (from divorced or never-
married parents) more frequently participate in government assistance 
programs than do children from two-parent families, and the report 
found 43 percent of children in female-household families lived in 
poverty, versus 9 percent of children in married families. (See figure 
19 for a breakdown of children’s family living arrangements.) 

Figure 19: Children’s Family Living Arrangements in the United States, 
2008: 

[Refer to PDF for image: pie-chart and 3 sub-charts] 

No parent: 4%: 
- 4% Other; 
- 8% Foster parent(s); 
- 9% Nonrelative; 
- 25% Other relative; 
- 54% Grandparent. 

One parent: 26%: 
- 2% Single father with cohabiting partner; 
- 9% Single mother with cohabiting partner; 
- 11% Single father; 
- 78% Single mother. 

Two parents: 70%: 
- 4% Two biological/adoptive cohabiting parents; 
- 8% One biological/adoptive parent and stepparent; 
- 88% Two biological/adoptive married parents. 

Source: U.S. Census Bureau. 

[End of figure] 

The Centers for Disease Control and Prevention (CDC) reports that 
nearly three-fourths (72 percent) of all deaths among 10- to 24-year-
olds result from motor vehicle crashes, other unintentional injuries, 
homicide, and suicide. CDC’s latest Youth Risk Behavior Survey found 
that despite a decrease in the prevalence of many health-risk 
behaviors since 1991, many high school students continue to engage in 
behaviors that increase their likelihood of death from these four 
causes. Young males have particularly high rates of drug dependence 
and alcohol abuse. They are also likely to have lower rates of school 
enrollment and employment. Young men, compared with young women, are 
less likely to have a college or advanced degree and, if they are ages 
20 to 24, are more likely to be incarcerated. 

Significantly, more Americans are turning to federal social safety net 
programs for assistance, and this trend of rising enrollments and 
outlays is expected to continue. In fact, the U.S. Department of 
Commerce (Commerce) recently reported that government social benefit 
transfers to people increased to $232 billion in 2009, while private-
sector wages in the United States fell $303 billion (see figure 20). 
Social security, VA benefits, unemployment insurance, and family 
assistance programs appear to have played a major “safety net” role. 
According to Commerce, personal income would have fallen by $421 
billion in real (inflation-adjusted) terms without these government 
transfers—or by $441 billion in nominal terms, according to GAO’s 
calculations. 

Figure 20: Government Transfer Payments Partly Offset Private-Sector 
Wage Declines in 2009: 

[Refer to PDF for image: multiple line graph] 

Fiscal year: 1995; 
Increases and decreases in total compensation of employees (wage and 
salary disbursements received in private industries): $67.7 billion; 
Government social benefits transfers: $47.1 billion. 

Fiscal year: 1996; 
Increases and decreases in total compensation of employees (wage and 
salary disbursements received in private industries): $179.3 billion; 
Government social benefits transfers: $41 billion. 

Fiscal year: 1997; 
Increases and decreases in total compensation of employees (wage and 
salary disbursements received in private industries): $236.5 billion; 
Government social benefits transfers: $28.6 billion. 

Fiscal year: 1998; 
Increases and decreases in total compensation of employees (wage and 
salary disbursements received in private industries): $275.6 billion; 
Government social benefits transfers: $22.1 billion. 

Fiscal year: 1999; 
Increases and decreases in total compensation of employees (wage and 
salary disbursements received in private industries): $245.9 billion; 
Government social benefits transfers: $35.7 billion. 

Fiscal year: 2000; 
Increases and decreases in total compensation of employees (wage and 
salary disbursements received in private industries): $321.7 billion; 
Government social benefits transfers: $53 billion. 

Fiscal year: 2001; 
Increases and decreases in total compensation of employees (wage and 
salary disbursements received in private industries): $82.3 billion; 
Government social benefits transfers: $100.7 billion. 

Fiscal year: 2002; 
Increases and decreases in total compensation of employees (wage and 
salary disbursements received in private industries): -$6.1 billion; 
Government social benefits transfers: $106.6 billion. 

Fiscal year: 2003; 
Increases and decreases in total compensation of employees (wage and 
salary disbursements received in private industries): $102.1 billion; 
Government social benefits transfers: $68.1 billion. 

Fiscal year: 2004; 
Increases and decreases in total compensation of employees (wage and 
salary disbursements received in private industries): $246.6 billion; 
Government social benefits transfers: $82.6 billion. 

Fiscal year: 2005; 
Increases and decreases in total compensation of employees (wage and 
salary disbursements received in private industries): $236.6 billion; 
Government social benefits transfers: $84.1 billion. 

Fiscal year: 2006; 
Increases and decreases in total compensation of employees (wage and 
salary disbursements received in private industries): $324.2 billion; 
Government social benefits transfers: $100.9 billion. 

Fiscal year: 2007; 
Increases and decreases in total compensation of employees (wage and 
salary disbursements received in private industries): $286.1 billion; 
Government social benefits transfers: $104.2 billion. 

Fiscal year: 2008; 
Increases and decreases in total compensation of employees (wage and 
salary disbursements received in private industries): $84.8 billion; 
Government social benefits transfers: $155.4 billion. 

Fiscal year: 2009; 
Increases and decreases in total compensation of employees (wage and 
salary disbursements received in private industries): -$302.6 billion; 
Government social benefits transfers: $232.9 billion. 

Source: U.S. Department of Commerce. 

[End of figure] 

Implications for GAO: 

These trends will have particular effects on our work in many areas, 
as well as budgetary and long-run fiscal implications. Given the 
important influences demographic developments have on a range of 
federal programs, from Medicare to nutrition assistance, our work 
under Goal 1 will: 

* Support health care financing and reform efforts through analyses of 
Medicare, Medicaid, and other health programs. 

* Assess policy and administrative challenges to the federal 
government in providing for Americans’ financial security in 
retirement, as well as options and strategies to help individuals 
ensure retirement security for themselves and their families. 

* Examine whether social, economic, and nutrition programs for low-
income workers, families, and children target resources appropriately, 
achieve their goals, and provide cost-effective service. 

* Assess financial and administrative challenges to providing employer-
sponsored pensions and retaining older Americans in the workforce. 

* Evaluate the federal government’s efforts to assist communities with 
combating crime and to safely and effectively manage a growing federal 
prison population. 

Policymakers will also need more timely and relevant information and 
analysis to react to changing trends. As the federal statistical 
system is a major contributor of such data and analyses, our work will 
help identify gaps in information from these sources and identify 
approaches that the agencies could use to enhance the value of their 
information products. At the same time, we will be addressing issues 
such as the growing cost and difficulty of collecting information from 
the public and the need to ensure its confidentiality. 

[End of section] 

Goal 1: 

Address Current and Emerging Challenges to the Well-being and 
Financial Security of the American People: 

In keeping with GAO’s mission to support the Congress in carrying out 
its constitutional responsibilities, GAO’s first strategic goal 
focuses on the need to, as the founding fathers put it, “promote the 
general welfare and secure the blessings of liberty” for U.S. 
citizens. Balancing these goals with their associated costs has always 
had major policy and budget implications for the federal government. 
Given that the federal government is on an unsustainable long-term 
fiscal path, it faces one of its biggest balancing acts of all in the 
coming years: 

How does the federal government reconcile Americans’ desire to improve 
the quality of life today with the need to address federal deficits 
and position the country for sustainable growth? 

In light of the circumstances, it is more essential than ever for the 
Congress and the federal government to accurately identify the nation’
s greatest needs and ensure that resources are targeted accordingly 
and are achieving their intended outcomes. This is particularly 
important as Americans increasingly turn to their government for help 
at a time when budgets are tightening. GAO’s work can help the 
Congress and the federal government address competing demands and 
challenges; ensure that federal programs are operating as effectively 
and efficiently as possible; and identify overlap, duplication, and 
opportunities for cost-savings. 

To address current and emerging challenges to the well-being and 
financial security of the American people, GAO has established nine 
strategic objectives: 

1.1: Evaluate Financing of and Programs to Serve the Health Needs of 
an Aging and Diverse Population; 

1.2: Lifelong Learning to Enhance U.S. Competitiveness; 

1.3: Benefits and Protections for Workers, Families, and Children; 

1.4: Financial Security for an Aging Population; 

1.5: A Responsive, Fair, and Effective System of Justice; 

1.6: Viable Communities; 

1.7: A Stable Financial System and Consumer Protection; 

1.8: Responsible Stewardship of Natural Resources and the Environment; 

1.9: A Viable, Efficient, Safe, and Accessible National Infrastructure. 

Strategic Objective 1.1: 

Evaluate Financing of and Programs to Serve the Health Needs of an 
Aging and Diverse Population: 

By 2018, total health care spending in the United States is expected 
to reach almost $4.4 trillion, almost six times what it was in 1990. 
As a result, the health care sector will continue to claim an 
increasing share of the national income—from about 12 percent of GDP 
in 1990 to an estimated 20 percent in 2018. Not surprisingly, health 
care comprised 25 percent of all federal spending in 2008, has grown 
three times faster than the rest of the federal budget over the last 
quarter century, and is estimated to continue to grow at a rapid pace. 
(See figure 21.) This spending growth creates tremendous challenges as 
the federal government grapples with efforts to institute health care 
reform and enable access to care for an aging and diverse population, 
while ensuring care quality and constraining costs. A weak economy and 
increased unemployment have created further pressure as the number of 
people who are uninsured or depending on government-sponsored health 
care coverage has risen. 

Figure 21: The Growth of Federal Health Expenditures, Fiscal Years 
1990–2014: 

[Refer to PDF for image: multiple line graph] 

Percentage change since fiscal year 1990: 

Fiscal year: 1990; 
Federal health outlays: 0; 
All other federal outlays: 0. 

Fiscal year: 2000; 
Federal health outlays: 115.6%; 
All other federal outlays: 30.5%. 

Fiscal year: 2010; 
Federal health outlays: 421%; 
All other federal outlays: 147.1%. 

Fiscal year: 2014; 
Federal health outlays: 548%; 
All other federal outlays: 165.4%. 

Source: GAO analysis of Office of Management and Budget data. 

Note: The percentages for 1990 through 2009 are based on actual dollar 
amounts. The percentages for 2010 through 2014 are projected. 

[End of figure] 

New federal efforts: The federal role in health care is becoming ever 
more critical. In the coming years, the federal government will likely 
take actions that have the potential to significantly improve the 
nation’s health through new efforts to regulate or reform the 
provision of health insurance, reform payments to health care 
providers, safeguard public health, and ensure and oversee the quality 
of care. Federal programs such as Medicare and Medicaid finance health 
care for some of the nation’s most vulnerable populations—low-income 
children, people with disabilities, and older adults—and some of these 
populations are growing. DOD provides health care to servicemembers 
and their families, and VA provides care to the veterans; the two 
agencies are jointly responsible for the transition of care for 
wounded veterans from DOD to VA. Other federal programs that protect 
and promote the public’s health, such as preparing for and responding 
to public health emergencies, have to respond to emerging issues and 
new demands. 

Access to health care: The continuing decline of private health 
insurance coverage has been coupled with a rise in the number of 
people who rely on government health insurance programs or who are 
uninsured. From 2000 to 2008, private coverage declined from 203 
million to 201 million, while people who report receiving public 
coverage rose from 69 million to 87 million. Individuals can be 
covered by more than one public program, such as receiving coverage 
from both Medicare and Medicaid. With the growth in the uninsured from 
38 million in 2000 to 46 million in 2008, the Congress passed the 
Patient Protection and Affordable Health Care Act (Pub. L. No. 111-
148) in 2010. This health care reform has provisions affecting private 
and public coverage—notably, those involving standards for private 
health insurance, entities to provide or help consumers access 
coverage, tax incentives, and enhancements to public programs. Such 
reforms may increase access to health insurance for some individuals 
but will need to be carefully monitored for their cost implications, 
effects on those already covered, and the need for effective 
regulatory oversight. Further, rising health care spending could lead 
the federal government to consider other changes in the coming years 
that could affect access. For example, the federal government is 
currently estimated to forgo over $1.4 trillion in tax revenue from 
2010 through 2014 as a result of the tax incentives given to employers 
that contribute to their employees’ medical care and medical 
insurance, but changing these incentives could discourage employers 
from providing these benefits. 

Medicare: Medicare’s projected growth in spending will continue 
pressures to improve its financing and management. Medicare now 
finances health care for an estimated 45 million Americans who are age 
65 or older or with disabilities, at a cost estimated to be $458 
billion in 2010. Medicare spending is expected to rise to $878 billion 
by 2019. As our population ages and medical costs escalate, Medicare 
is expected to more than double its share of the economy by 2035, 
crowding out other government spending and economic activity. 
Fundamental, structural changes are necessary to stem this rapid 
growth and ensure the program’s long-term sustainability. Medicare’s 
payment methods must be designed to improve care quality and 
efficiency while preserving equitable access to care. GAO has 
designated Medicare as a high-risk program, vulnerable to waste, 
fraud, abuse, and mismanagement. This makes improvements in management 
of the program, including preventing improper payments, a priority. 

Medicaid: Like Medicare, Medicaid’s growth in costs also calls for 
increased federal oversight to ensure its financial and operational 
integrity. The aging of the population and the national economic 
downturn have increased pressure on the program, for which federal 
expenditures are projected to rise from $290 billion in 2010 to $471 
billion in 2019. GAO recently redesignated Medicaid as high risk, in 
part because its decentralized state-administered structure makes 
federal oversight extremely challenging. This federal-state program 
covers acute health care and long-term-care services for an estimated 
50 million people per month—including about 8 million who also receive 
Medicare—through more than 50 distinct state-based programs. The 
Centers for Medicare & Medicaid Services (CMS) provides oversight at 
the federal level, but the states administer their respective programs’
day-to-day operations. Although CMS has taken steps to improve the 
fiscal and management oversight of Medicaid, CMS’s actions remain 
insufficient given the program’s size, growth, and diversity. 

Oversight: Federal oversight is needed to ensure that recipients of 
Medicaid and other programs providing coverage or care to vulnerable 
populations have access to quality long-term and acute-care services. 
As of 2007, Medicaid, Medicare, and other public programs contributed 
about three quarters of the over $200 billion spent in 2007 on nursing 
home, home health, and other long-term care. The aging of the baby 
boomers and longer life expectancies because of medical advances will 
increase the elderly population over the next three decades, 
particularly those 85 and older—and will increase the demands for long-
term care. The vulnerability of the population needing long-term care 
underscores the need for oversight to ensure that providers of 
institutional or community-based services comply with all federal and 
state requirements. Medicaid along with the states’ Children’s Health 
Insurance Program (CHIP) and other programs are particularly important 
for responding to the acute health care needs of millions of 
vulnerable, low-income Americans. However, enrollment has not 
guaranteed eligible individuals’ access to needed medical and dental 
services. Strengthened federal oversight is essential to ensure that 
these programs effectively and efficiently provide access to quality 
care. 

VA and DOD: VA and DOD face challenges to improve two of the largest 
health care systems in the world to better meet the needs of veterans, 
servicemembers, and their families. VA is expected to spend about $48 
billion in fiscal year 2010 to provide health care to about 6 million 
patients—about 5.4 million of whom are veterans—while DOD’s health 
care system is expected to spend over $50 billion in fiscal year 2010 
to provide health care to over 9 million eligible beneficiaries, 
including active duty personnel, retirees, and their dependents. Both 
systems face challenges to improve and adapt infrastructure and 
services in an era of growing demand for health care and increasing 
fiscal pressures. 

In addition, these departments must meet the needs of servicemembers 
returning from Iraq and Afghanistan who transition from DOD’s to VA’s 
health care systems. VA’s infrastructure is not effectively aligned 
with its new health care delivery model, which emphasizes outpatient 
care delivered closer to where veterans live. As a result of the 
influx of new veteran enrollees due to relaxed eligibility standards 
and the return of veterans from combat, VA faces difficult decisions 
about how best to allocate its resources. DOD faces pressures to adapt 
its health care structure because of expanded benefits and an evolving 
marketplace, characterized by rising costs and beneficiaries’ concerns 
about access. Because aspects of VA’s and DOD’s health care delivery 
systems are potentially complementary, integrating aspects of their 
operations could increase their overall efficiency and effectiveness. 

Quality of health care: The federal government plays a critical and 
growing role in promoting, protecting, and ensuring the quality of 
health care—from patient safety to encouraging the implementation of 
quality measures—but the effectiveness of the government’s efforts 
remains a concern. For example, such concern has led to the increasing 
public and congressional scrutiny of the Food and Drug Administration 
(FDA), which is currently under pressure to better oversee the drug 
and medical device industries and now must regulate tobacco products. 
FDA faces the challenge of increasing inspections of medical products 
manufactured abroad and conducting more intense review of products 
already on the market. Federal agencies are also involved in new 
efforts to improve health care quality, such as by facilitating 
voluntary reporting on patient safety issues, developing and applying 
quality measures and payment methods based on them, and expanding 
health information technology use. However, these can raise new 
issues, such as maintaining medical information privacy, as the use of 
health IT expands. 

Response to health threats: Recent public health threats—whether 
natural or manmade—have heightened concern about federal efforts to 
respond quickly and effectively. Emerging infectious diseases, like 
the influenza pandemic caused by the 2009 H1N1 virus, require timely 
and effective surveillance and prompt action by the CDC and effective 
coordination with other public health agencies at international, 
federal, state, and local levels. The use of anthrax as a weapon in 
2001 raised concerns about the nation’s preparedness for biological 
terrorism attacks, while disasters such as Hurricane Katrina 
highlighted the need to effectively plan for catastrophic events that 
can disable a regional health care system or exacerbate widespread 
acute or chronic physical and mental health problems. Although the 
federal government has taken a number of actions to improve 
preparedness, such as devising a national strategy and implementation 
plan to deal with influenza pandemics, and the Congress has 
appropriated funds to help states and localities improve preparedness, 
many issues still need to be addressed—such as agency roles in leading 
the response; the adequacy of surveillance; and gaps in health care 
capacity, guidance, and planning. 

The demands on the federal government to meet Americans’ health care 
needs are growing in volume and complexity, as federal challenges to 
oversee health programs escalate. GAO’s forthcoming work on health 
coverage options, federal health programs’ financing and management, 
and steps to ensure care access and quality and protect public health 
can help federal leaders make more informed and strategic decisions in 
reconciling these competing demands. To support efforts by the 
Congress and the federal government to address the nation’s health 
care needs in the 21st century, GAO has established the following 
performance goals and key efforts: 

Performance Goal 1.1.1: 

Assess trends and issues in public and private health insurance 
coverage and reforms: 

Key Efforts: 

* Analyze implementation of mandated and potential reforms, such as 
modifications to federal tax policies and new insurance-purchasing 
arrangements, for their estimated impact on the numbers of uninsured, 
costs of health care services, the health insurance industry, and 
implementation challenges for federal and state agencies. 

* Evaluate trends, and the distribution of health insurance coverage, 
including long-term-care insurance and employer sponsorship of private 
health insurance for employees and retirees. 

* Analyze the coverage and affordability of products available to 
consumers in the individual and small-group insurance markets. 

* Assess the impact of public and private agencies’ efforts to achieve 
compliance with federal and state health insurance standards. 

Performance Goal 1.1.2: 

Evaluate Medicare reform, financing, and operations: 

Key Efforts: 

* Evaluate CMS’s management of Medicare, including its implementation 
of legislative reforms and its service to providers and beneficiaries. 

* Evaluate Medicare payment methods for health care providers and 
plans and assess the effects of Medicare’s payment methods on access 
to and quality of health care services. 

* Examine CMS’s safeguards and program controls over provider and plan 
payments, beneficiaries’ access, and quality of health care services. 

* Analyze Medicare’s financial condition and the potential 
consequences of structural reforms. 

Performance Goal 1.1.3: 

Evaluate Medicaid financing, operations, and program integrity
Key Efforts: 

* Evaluate federal oversight of states’ implementation of Medicaid, 
including ensuring fiscal integrity and the appropriate use of 
authority to waive certain statutory provisions. 

* Evaluate CMS’s and states’ safeguards and program controls over 
provider and plan payments, beneficiaries’ access, and quality of 
health care services. 

Performance Goal 1.1.4: 

Evaluate federal and state program strategies for financing and 
overseeing long-term health care: 

Key Efforts: 

* Examine nursing homes’ compliance with federal and state quality 
standards, including the adequacy of federal and state oversight and 
resources. 

* Review federal requirements and standards and their use in ensuring 
quality care in community-based, long-term-care settings, such as home 
health arrangements, assisted-living facilities, and adult day care. 

* Analyze public and private payment sources and strategies that 
finance the continuum of long-term care, including integrated programs 
for elderly or disabled beneficiaries who are dually eligible for 
Medicare and Medicaid. 

Performance Goal 1.1.5: 

Assess state experiences and federal oversight in providing health 
coverage or health care for low-income and other vulnerable 
populations through Medicaid and other programs: 

Key Efforts: 

* Evaluate Medicaid and CHIP access and coverage for vulnerable 
populations, such as the chronically ill, and access to and use of 
services under different service-delivery systems, payment 
methodologies, and cost-sharing practices. 

* Assess other programs, such as Federally Qualified Health Centers, 
that provide or fund health care to vulnerable populations. 

Performance Goal 1.1.6: 

Assess actions and options for improving VA’s and DOD’s health care 
services: 

Key Efforts: 

* Evaluate proposals to restructure or consolidate VA’s health care 
system, including proposals on capital asset realignment and resource-
sharing. 

* Review implementation of VA resource allocation and revenue 
collection systems and budget formulation and execution practices. 

* Assess implications of changes to VA and DOD health benefits and 
health care delivery systems, including whether integrating aspects of 
their operations could increase their overall efficiency and 
effectiveness. 

* Assess vulnerability of VA’s system to fraud, waste, abuse, and 
mismanagement. 

* Examine access to and quality and cost of care for VA and DOD 
beneficiaries, including DOD’s efforts to contain and share the costs 
of expanded benefits for active duty, reserve, and retired 
beneficiaries, and VA’s and DOD’s efforts to provide care and seamless 
transitions for veterans returning from Iraq and Afghanistan. 

Performance Goal 1.1.7: 

Evaluate the effectiveness of federal programs to promote, protect, 
and ensure the quality of health care: 

Key Efforts: 

* Assess the regulatory structure for ensuring the safety and efficacy 
of medical devices, drugs, and other medical products and therapies 
and impediments and barriers to the development of new prescription 
drugs and vaccines. 

* Evaluate efficiency and effectiveness of public health agency 
programs and operations. 

* Evaluate federal efforts to ensure health care quality. 

* Examine the use of health IT and its effects on the costs and 
quality of care. 

* Evaluate the effectiveness of programs to provide prevention, 
treatment, and other services related to mental health conditions, 
including substance abuse. 

Performance Goal 1.1.8: 

Evaluate the effectiveness of federal programs to prevent, prepare 
for, and respond to public health emergencies: 

Key Efforts: 

* Assess the effectiveness of federal programs and evaluate the need 
for federally funded efforts to ensure state and local governments’ 
preparedness for a public health emergency, including activities such 
as surveillance, training, and developing communication systems and 
laboratory capacity. 

* Evaluate the development and acquisition of vaccines and other 
treatments for biodefense, including the use of risk assessment in 
acquisition decisions. 

* Evaluate the ability of federal public health agencies to detect and 
counter emerging threats to the nation’s health, including whether any 
duplication or overlap in responsibilities, activities, or efforts 
exists that could be better coordinated or consolidated to achieve 
greater efficiency. 

Strategic Objective 1.2: 

Lifelong Learning to Enhance U.S. Competitiveness: 

Ensuring lifelong learning opportunities that enable people to learn 
and attain skills throughout their lives—from early childhood through 
their adult years—is critical to our society’s well-being and long-
term ability to compete in a global marketplace. The education system 
is contending with rising student enrollments, ever higher costs, and 
tight budgets. The federal employment and training system has been 
stretched thin in its efforts to serve the increasing numbers of laid-
off workers who need assistance. The federal government invested $82 
billion in fiscal year 2008 on programs that foster the development, 
education, and skill attainment of children and adults of all ages. 
Although this funding is expected to increase to almost $96 billion in 
2010, these challenges highlight the need to effectively manage and 
target federal resources. 

Educating children: The federal government faces significant 
challenges in supporting the education of children, particularly 
during a period of significant fiscal constraint. Policymakers have 
advocated the need for a more integrated and seamless continuum of 
programs for children from birth through school age. The current 
administration is considering ways that would better align early care 
and development systems with kindergarten through 12th grade (K-12) 
education through upcoming reauthorization of the Elementary and 
Secondary Education Act (ESEA) and the Child Care and Development 
Block Grant. For example, options are being discussed to include 
inserting professional development and credentialing requirements in 
ESEA that would encompass both K-12 and pre-K teachers, as well as 
providing expanded flexibility to local education agencies to use ESEA 
funding for pre-kindergarten (pre-K) programs. Partly as a result of 
adverse long-term fiscal conditions, the imperative for a growing 
portion of the population to self-finance an adequate retirement 
income, and the increased financial complexity of many common consumer 
decisions, policymakers have also identified the need for schools to 
improve the financial literacy skills of their students. However, the 
lack of integrated data systems, the absence of coordinated standards 
for what students should learn, and protracted and worsening fiscal 
constraints limit the capacity of both federal and state governments 
to align, coordinate, and monitor programs and funding in ways that 
can accomplish these goals. 

Student performance: The administration and the Congress have also 
made improving low-performing schools a top priority, providing $3 
billion under the American Recovery and Reinvestment Act of 2009 (the 
Recovery Act) to help these schools. Title I of ESEA, also referred to 
as No Child Left Behind, is targeted to low-income school districts 
and schools. ESEA has focused national attention on increasing 
accountability for states and school districts to improve achievement 
for all students, while continuing the traditional focus of federal K-
12 programs that provide opportunities for children from disadvantaged 
families. One key factor for closing achievement gaps and improving 
student performance will be the effectiveness of the nation’s teaching 
workforce. GAO and others have identified obstacles to these goals, 
however, such as weak coordination among the many federal programs 
addressing teacher issues. It will be essential for the federal 
government to address these obstacles and leverage federal 
expenditures to improve the effectiveness of the teaching workforce in 
raising student achievement and ensure consistent access to high-
quality education. 

Higher education: America’s higher education system is also beset by a 
number of challenges: 

* Students and their families face escalating educational costs. 

* Postsecondary enrollments are projected to increase in the next 
decade. 

* Fiscal and budgetary pressures will constrain federal and state 
support to higher education. 

In fiscal year 2009, the federal government provided about $113 
billion in financial aid to almost 13 million students and their 
families, a substantial increase in funding over fiscal year 2008. 
Given the likelihood of increased demand for these funds to help cover 
the cost of college, it will be important to look for ways to control 
rising costs and maximize the federal investment in them, as well as 
in programs that promote access, affordability, and completion for 
disadvantaged students. Federal efforts must address these challenges 
and improve oversight to ensure that the federal investment in 
postsecondary education is adequately protected. 

Employment and training: High levels of unemployment and long-term 
joblessness, and the increasing number of dislocated workers highlight 
the need for job training and related services. For example, the 
percentage of the unemployed who remain jobless 27 weeks or more rose 
from 11 percent in 2000 to 46 percent in April 2010, while the 
percentage who are unemployed less than 5 weeks declined from 45 
percent in 2000 to 18 percent in April 2010 (see figure 22). While 
unemployment may decline somewhat as the economy recovers, the number 
of unemployment insurance beneficiaries is expected to remain higher 
through 2013 than it was in 2008. Moreover, even when the economy 
starts adding more jobs than it loses, there are concerns that many of 
the unemployed will find that the types of jobs they previously held 
are no longer available. The Department of Labor (Labor)anticipates a 
significant increase in the depth and breadth of training needed for 
dislocated workers and youths. Job search assistance, training, and re-
employment services—such as those offered through the Workforce 
Investment Act (WIA) and Trade Adjustment Assistance programs—can help 
develop the skills that employers require, while minimizing long-term 
unemployment. Key issues for policymakers will be how limited funding 
can best be leveraged and targeted to enhance the skills of the U.S. 
workforce, strengthen program accountability and oversight, and 
improve coordination among employment programs. 

Figure 22: Duration of Unemployment, 2000–2009 (Annual Data), April 
2009-2010 (Monthly Data): 

[Refer to PDF for image: multiple line graph] 

Percentage distribution of the unemployed (monthly data are seasonally 
adjusted): 

Year: 2000; 
Less than 5 weeks: 44.9%; 
27 weeks or more: 11.4%. 

Year: 2001; 
Less than 5 weeks: 42%; 
27 weeks or more: 11.8%. 

Year: 2002; 
Less than 5 weeks: 34.5%; 
27 weeks or more: 18.3%. 

Year: 2003; 
Less than 5 weeks: 31.7%; 
27 weeks or more: 22.1%. 

Year: 2004; 
Less than 5 weeks: 33.1%; 
27 weeks or more: 21.8%. 

Year: 2005; 
Less than 5 weeks: 35.1%; 
27 weeks or more: 19.6%. 

Year: 2006; 
Less than 5 weeks: 37.3%; 
27 weeks or more: 17.6%. 

Year: 2007; 
Less than 5 weeks: 35.9%; 
27 weeks or more: 17.6%. 

Year: 2008; 
Less than 5 weeks: 32.8%; 
27 weeks or more: 19.7%. 

Year: 2009; 
Less than 5 weeks: 22.2%; 
27 weeks or more: 31.5%. 

Begin reported monthly: 

Year: April, 2009; 
Less than 5 weeks: 24.3%; 
27 weeks or more: 27.5%. 

Year: May, 2009; 
Less than 5 weeks: 22.2%; 
27 weeks or more: 27.7%. 

Year: June, 2009; 
Less than 5 weeks: 21%; 
27 weeks or more: 29.6%. 

Year: July, 2009; 
Less than 5 weeks: 21.9%; 
27 weeks or more: 34.2%. 

Year: August, 2009; 
Less than 5 weeks: 20%; 
27 weeks or more: 33.6%. 

Year: September, 2009; 
Less than 5 weeks: 19.4%; 
27 weeks or more: 35.9%. 

Year: October, 2009; 
Less than 5 weeks: 20.1%; 
27 weeks or more: 36%. 

Year: November, 2009; 
Less than 5 weeks: 18.2%; 
27 weeks or more: 38.7%. 

Year: December, 2009; 
Less than 5 weeks: 19%; 
27 weeks or more: 39.8%. 

Year: January, 2010; 
Less than 5 weeks: 19.6%; 
27 weeks or more: 41.2%. 

Year: February, 2010; 
Less than 5 weeks: 18.3%; 
27 weeks or more: 40.9%. 

Year: March, 2010; 
Less than 5 weeks: 17.8%; 
27 weeks or more: 44.1%. 

Year: April 2010; 
Less than 5 weeks: 18.3%; 
27 weeks or more: 45.9%. 

Source: U.S. Department of Labor. 

[End of figure] 

As the Congress and federal government continue to refine the 
country’s education and employment programs, they will need reliable 
information on: 

* how efficiently and effectively federal funds are used to provide or 
augment educational and lifelong learning opportunities, particularly 
among those most in need of help; 

* how well federal programs are achieving their objectives and meeting 
the changing needs of workers; and; 

* how the management and oversight of these programs can be improved. 

The Congress and GAO will also be monitoring the impact under the 
Recovery Act of increased funding to education and employment programs—
such as Title I of ESEA, the Individuals with Disabilities Education 
Act (IDEA), and WIA—and tracking the expansion of early childhood 
programs, such as Head Start and Early Head Start. These efforts will 
require a large role for the federal government and the states as they 
oversee the distribution of additional funds. To support efforts by 
the Congress and the federal government to address these issues, we 
will use the following performance goals and key efforts: 

Performance Goal 1.2.1: 

Assess options for federal programs to effectively address the 
educational needs of children and youths and their educational 
settings: 

Key Efforts: 

* Evaluate the cost, coordination, potential overlap, and availability 
of child care and early childhood education. 

* Provide information on trends and changes in student performance 
outcomes in early childhood and K-12 education programs. 

* Assess the impact of efforts to close achievement gaps among 
disadvantaged populations in K-12 education programs. 

Evaluate federal oversight and management of education programs. 

* Evaluate support for state, local, and private-sector program 
service providers and efforts to coordinate service delivery. 

Performance Goal 1.2.2: 

Identify opportunities to improve programs that provide postsecondary 
education and federal student aid: 

Key Efforts: 

* Determine how well programs designed to promote access to and 
affordability of postsecondary education achieve their goals. 

* Assess efforts to assist disadvantaged populations to complete 
postsecondary education. 

* Evaluate oversight and management of postsecondary education and 
federal student aid programs. 

Performance Goal 1.2.3: 

Identify ways to improve programs that facilitate job opportunities 
for workers and enhance their employment skills: 

Key Efforts: 

* Determine how employment and training programs are responding to 
changing economic and budgetary conditions to better assist workers. 

* Evaluate federal oversight and management of employment and training 
programs and identify potential overlaps. 

* Evaluate oversight of employment and training providers and efforts 
to coordinate service delivery. 

Strategic Objective 1.3: 

Benefits and Protections for Workers, Families, and Children: 

Through a wide range of programs, the federal government, often 
through states, plays an essential role in promoting and supporting 
work among those able to work, aiding those unable to provide for 
themselves, and protecting vulnerable populations. In fiscal year 
2009, the federal government invested more than $453 billion in these 
programs (see figure 23), which together form the foundation for the 
nation’s social safety net. Yet the growing federal deficit, the 
economic downturn, and changing workforce demographics driven heavily 
by the aging of baby boomers are among the many factors increasing 
demand for supports and benefits and challenging customary federal 
approaches. It is thus imperative to explore and assess other 
approaches for providing benefits and protections in a cost-effective 
manner while promoting program integrity. 

Figure 23: Funding for Selected Benefit Programs, Fiscal Year 2009: 

[Refer to PDF for image: pie-chart] 

Disability programs: $204 billion; 
Unemployment assistance: $120 billion; 
Food and nutrition programs: $78 billion; 
Benefits for low-income workers, families, and children: $51 billion; 
Total: $453 billion. 

Source: GAO analysis of data from the Office of Management and Budget, 
Social Security Administration, and Department of Veterans Affairs. 

[End of figure] 

Assistance programs: Even during prosperous times, tens of millions of 
individuals and families face daunting challenges and turn to a 
patchwork of social programs. These programs provide needed benefits, 
such as financial or food assistance, or protection for vulnerable 
groups, such as children and the elderly: 

* The severe economic downturn exacerbated these challenges, and if 
historic experience repeats, low-income families will be slow to 
recover: Poverty will continue to rise for some time, even after 
recovery. Figure 24 shows rising estimated outlays for food and 
nutrition assistance, driven mainly by the Supplemental Nutrition 
Assistance Program (SNAP, formerly known as the Food Stamp Program), 
to 2015. 

* Further, many states are expected to face severe budget stresses 
over the next few years, raising questions about the capacity of state-
administered programs to address long-standing intractable problems, 
such as the estimated 900,000 children who are victims of child abuse 
or neglect each year. Although $67 billion in Recovery Act funds is 
estimated to be spent on many of these programs over the next few 
years, concerns have been raised about the capacity of service 
providers beyond the availability of this additional funding. 
Moreover, despite an increased focus on work following the nation’s 
overhaul of its welfare programs and the ensuing reductions in welfare 
caseloads, self-sufficiency continues to elude many, such as those 
with a limited education or disability. As states and localities use 
their federal funds to try different approaches to serving those in 
need, it is important to gain further insight into cost-effective 
approaches that support desired program outcomes and appropriately 
balance the need for accountability with state flexibility to design 
programs that reflect their needs and values. 

* Also, billions of dollars in benefits continue to be incorrectly 
paid through these social programs each year. For example, state-
administered federal programs, such as unemployment insurance and 
SNAP, have reported billion of dollars in improper payments. Further 
study of federal and state efforts will be required to reduce these 
improper payments, as well to disseminate promising practices. 

* Finally, the performance of some programs during the economic 
downturn—such as unemployment insurance and welfare—has raised 
questions about their ability to respond to varying economic 
conditions. In the coming years, GAO will examine federal and state 
efforts to deliver benefits to the target populations that 
appropriately balance program integrity with benefit access and that 
promote cost-effective approaches to achieving program goals. 

Figure 24: Estimated Outlays for Selected Assistance Programs, Fiscal 
Years 2009–2015: 

[Refer to PDF for image: multiple line graph] 

Fiscal year: 2009; 
Food and nutrition assistance: $77.24 billion; 
Unemployment insurance: $118.95 billion; 
Aid for low-income and vulnerable populations: $51.36 billion. 

Fiscal year: 2010; 
Food and nutrition assistance: $96.88 billion; 
Unemployment insurance: $157.71 billion; 
Aid for low-income and vulnerable populations: $59.93 billion. 

Fiscal year: 2011; 
Food and nutrition assistance: $100.76 billion; 
Unemployment insurance: $83.32 billion; 
Aid for low-income and vulnerable populations: $53.64 billion. 

Fiscal year: 2012; 
Food and nutrition assistance: $100.92 billion; 
Unemployment insurance: $76.57 billion; 
Aid for low-income and vulnerable populations: $49.97 billion. 

Fiscal year: 2013; 
Food and nutrition assistance: $99.32 billion; 
Unemployment insurance: $72.05 billion; 
Aid for low-income and vulnerable populations: $50.25 billion. 

Fiscal year: 2014; 
Food and nutrition assistance: $97.34 billion; 
Unemployment insurance: $68.12 billion; 
Aid for low-income and vulnerable populations: $50.8 billion. 

Fiscal year: 2015; 
Food and nutrition assistance: $95.21 billion; 
Unemployment insurance: $64.43 billion; 
Aid for low-income and vulnerable populations: $54.25 billion. 

Source: GAO analysis of Office of Management and Budget data. 

[End of figure] 

Worker protections: For those who are already working, the government 
is increasingly challenged to protect safety and health, wages, and 
equal employment opportunities, as well as the security of sensitive 
personal information, such as the Social Security number (SSN): 

* Regulations and activities by federal agencies, such as the 
Occupational Safety and Health Administration, need revision to 
reflect changes in the work arrangements and demographics of the 
nation’s workforce. Such changes include the increasing use of 
telework, temporary workers, and independent contractors (who do not 
now receive safety and health protections through their employers). 
Through enforcement and other strategies, such as voluntary compliance 
programs, federal and state efforts must balance the need to protect 
workers with employers’ needs to increase productivity in an 
increasingly competitive global environment. 

* The federal government also faces challenges in protecting workers’ 
sensitive personal information, such as the SSN. Despite its narrowly 
intended purpose, the SSN has in practice become the national 
identifier and is central to a range of vital transactions and 
services, such as obtaining a driver’s license, and receiving health 
care. For this reason, SSNs are key pieces of information in creating 
false identities. The terrorist events of September 11, 2001, 
underscore the importance both of issuing SSNs only to those eligible 
for them and protecting those SSNs already assigned to individuals. 
The flow of noncitizens into the United States and the accompanying 
number of SSNs issued to this group over the last several years add to 
the importance of having sound practices to avoid issuing SSNs to 
those who do not qualify for them and to ensure the identity of those 
who receive them. Millions of people become victims of identity theft 
each year—up to 4.6 percent of the U.S. adult population—translating 
into losses exceeding $50 billion. Recent security breaches of both 
federal and private data sources have highlighted the challenges to 
preventing identify theft. GAO will assess federal and state efforts 
to appropriately use and safeguard SSNs and prevent their improper use 
in securing other key documents, such as driver’s licenses, as well as 
ensure safety, health, and other protections for workers. 

Disability programs: Federal disability programs have grown during the 
economic downturn and are poised to grow further as more baby boomers 
reach their disability-prone years. For example, because of the 
increasing number of beneficiaries relative to the number of workers 
paying into Social Security, the Social Security Administration’s 
Disability Insurance program is projected to grow by more than 40 
percent between 2004 and 2030. Of the 54 million Americans with 
physical or mental impairments, millions apply for benefits each year 
through one or more of the nation’s disability programs. Almost 200 
federal programs administered by 21 federal agencies provide various 
types of support for individuals with disabilities, including monetary 
benefits, employment-related assistance, medical care, and 
information. Several of these 21 agencies provide similar services, 
potentially causing overlap and duplication. 

The Social Security Administration and VA oversee four of the largest 
programs, which collectively paid out more than $185 billion in cash 
benefits to more than 17 million beneficiaries in 2008. These programs 
have struggled to address increasing workloads; provide timely, 
accurate, and consistent eligibility decisions; and prevent 
overpayments. At the same time, the tens of thousands of service 
members wounded in recent military conflicts have strained the 
capacity of the DOD and the VA disability evaluation processes, 
including their ability to provide timely and accurate disability 
decisions. Moreover, other federal disability programs face challenges 
in providing additional support and services, including health care 
and return-to-work assistance, such as vocational rehabilitation. GAO 
added modernizing disability programs to its High-Risk List in 2003, 
noting that federal disability programs in general do not fully 
incorporate how advances in medicine and technology impact individuals’
ability to live with greater independence and function in work 
settings. 

Taken as a whole, efforts need to continue to be made to better 
position disability programs to provide meaningful and timely support 
for persons with disabilities. Effectively coordinating our nation’s 
myriad disability programs is essential to ensure efficient service 
delivery and improve supports. GAO will assess federal efforts to 
provide accurate, timely, and consistent disability decisions to 
program applicants; reduce fraud, waste, and overpayments; and 
modernize and increase coordination among federal disability programs, 
which could help minimize overlap and duplication. This would include 
assessing how federal programs can leverage new medical and 
technological advances to increase work participation for more 
individuals at the earliest viable point. 

To support government efforts to address these issues, we will use the 
following performance goals and key efforts: 

Performance Goal 1.3.1: 

Identify opportunities to improve programs that provide social 
services and economic and nutrition assistance to individuals, 
families, and children: 

Key Efforts: 

* Determine whether social, economic, and nutrition programs achieve 
their goals and appropriately target resources. 

* Assess federal and state oversight and management of social services 
and economic and nutrition assistance programs to ensure program 
integrity. 

* Analyze issues related to cost-effective service delivery, effects 
on special populations, and interactions among programs. 

Performance Goal 1.3.2: 

Assess the effectiveness of strategies and safeguards to protect 
workers as well as individuals’ identities: 

Key Efforts: 

* Assess federal and state efforts to ensure safety, health, and other 
protections for workers. 

* Evaluate federal and state efforts to promote workplace quality 
through direct intervention and cooperative approaches. 

* Assess efforts to appropriately use and safeguard SSNs. 

Performance Goal 1.3.3: 

Identify ways to improve federal policies and support for people with 
disabilities: 

Key Efforts: 

* Assess the operations and program integrity of federal disability 
programs and whether they follow best practices. 

* Assess DOD and VA efforts to provide services to wounded warriors 
and other servicemembers with disabilities. 

* Assess efforts to modernize and coordinate federal policies and 
programs that provide support and services to people with disabilities. 

Strategic Objective 1.4: 

Financial Security for an Aging Population: 

Providing retirement income security in the United States has 
traditionally been a shared responsibility of government, employers, 
and individual workers. However, the financing shortfall facing Social 
Security and Medicare, which could result in benefit reductions, and 
the declining security of employer-provided pension plans suggest a 
shift in responsibility and risk to individual workers for ensuring an 
adequate and secure retirement. These trends are the outgrowth of 
broader developments associated with population aging, global 
competition, and labor market trends and are unlikely to abate in the 
near future. With the baby-boom generation beginning to retire, the 
Congress (1) will need more information on the economic, financial, 
and social implications of these trends to ensure that government, 
employers, and workers share retirement risk equitably and efficiently 
and (2) will need to ensure that the Social Security Administration is 
efficiently managing the influx of new baby-boom retirees. Such 
information will also help workers make informed retirement planning 
decisions, including on when and how to retire and invest their 
savings. Moreover, these decisions may be driven in part by the 
interaction between federal programs, including any changes to 
retirement age, health insurance coverage, and disability benefits. 

Sustainability of retirement programs: Since 1960, life expectancy at 
age 65 has increased by over 3 years. By 2050, persons age 65 or over 
will account for over 20 percent of the total U.S. population, up from 
about 13 percent in 2000. If retirement ages do not adjust to these 
changes, people are expected to spend more time in retirement. This 
will adversely affect the sustainability of pay-as-you-go-financed 
federal retirement programs. Although the Social Security trust funds 
are not expected to be depleted until 2037, the strains on government 
finances will begin as early as 2016, when Social Security starts to 
pay out more than it takes in each year.[Footnote 29] Given current 
benefit and revenue streams, Social Security programs will face 
shortfalls over the long run, and the federal government is going to 
have to make hard choices regarding either benefits or revenues or 
both, to stabilize the programs. To the extent such choices reduce 
benefits, they will affect the level of financial resources workers 
can draw on during retirement. Furthermore, the expected increase in 
the average amount of individual health care expenses—from 17 percent 
of the average Social Security benefit in 2010 to 37 percent in 2080—
may further reduce these resources. 

Employer-provided pensions: Although many Americans will rely on 
employer-provided pensions for an important part of their retirement 
income, this source of income is also facing challenges: 

* Because providing pensions is voluntary, not all employers offer a 
pension and, among those that do, not all employees choose to 
participate. At any given time, only about half of the private-sector 
workforce has a pension. 

* The number of defined benefit pension plans (see figure 25) has 
declined dramatically as has the percentage of the private labor force 
covered by these plans. When a defined benefit pension plan is in 
financial distress, the Pension Benefit Guaranty Corporation (PBGC), 
which insures the defined benefit pensions of 44 million participants, 
protects a portion of the retirement income of workers by providing a 
guaranteed maximum benefit. GAO placed PBGC’s programs on its High-
Risk List because of concern about the program’s long-term net 
financial position. PBGC’s structural financial shortfall has worsened 
because of unfavorable economic conditions and the instability of 
pension plans PBGC insures, particularly those of major employers in 
the manufacturing and transportation sectors. At the end of fiscal 
year 2009, PBGC’s programs registered a negative net accumulated 
position of $21.9 billion, an increase in the deficit of $10.8 billion 
over the prior year. 

* Meanwhile, employers are increasingly moving away from traditional 
defined benefit plans to what has become the most dominant and fastest 
growing type of defined contribution plans, 401(k) plans; 401(k) plans 
allow workers to save for retirement by diverting a portion of their 
pretax income into an investment account that can grow tax-free until 
withdrawn in retirement. As participants accrue earnings on their 
investments, they also pay a number of fees, including expenses, 
commissions, or other charges associated with a 401(k) plan. Since 
workers now largely bear the risk of investment under 401(k) plans, 
any factor or decision that negatively affects participants’ 
retirement savings income, such as adverse fees or hardship 
withdrawals, can have potentially irreversible consequences for the 
participant’s retirement income and could result in workers having to 
extend their work life or rely more heavily on personal savings. 

Figure 25: Number of Defined Benefit and Defined Contribution Plans, 
1985-2007: 

[Refer to PDF for image: vertical bar graph] 

Year: 1985; 
Define benefit plans: 170,000; 
Defined contribution plans: 462,000. 

Year: 1987; 
Define benefit plans: 163,000; 
Defined contribution plans: 570,000. 

Year: 1989; 
Define benefit plans: 132,000; 
Defined contribution plans: 599,000. 

Year: 1991; 
Define benefit plans: 102,000; 
Defined contribution plans: 598,000. 

Year: 1993; 
Define benefit plans: 84,000; 
Defined contribution plans: 619,000. 

Year: 1995; 
Define benefit plans: 69,000; 
Defined contribution plans: 624,000. 

Year: 1997; 
Define benefit plans: 59,000; 
Defined contribution plans: 661,000. 

Year: 1999; 
Define benefit plans: 50,000; 
Defined contribution plans: 683,000. 

Year: 2001; 
Define benefit plans: 47,000; 
Defined contribution plans: 687,000. 

Year: 2003; 
Define benefit plans: 47,000; 
Defined contribution plans: 653,000. 

Year: 2005; 
Define benefit plans: 48,000; 
Defined contribution plans: 631,000. 

Year: 2007; 
Define benefit plans: 49,000; 
Defined contribution plans: 659,000. 

Source: U.S. Department of Labor. 

[End of figure] 

Personal savings: Despite the outlook for federal retirement programs 
and employer-sponsored pension plans, individuals have so far not 
filled in the gap with personal saving, and the economic downturn has 
depleted the savings of many individuals. In 2007, only 40 percent of 
families headed by someone ages 55 to 64 owned an Individual 
Retirement Account, and among families in this cohort in 2009, median 
account balances were $52,000.[Footnote 30] In recent years, personal 
saving as a percentage of disposable income has been very low. In 
2005, for example, personal saving averaged just 1.4 percent of 
disposable income. The economic downturn has caused people to decrease 
spending, which has likely increased saving: The personal saving rate 
rose to 4.3 percent by 2009. (See figure 26.) Whether this trend will 
continue remains to be seen. 

Figure 26: Personal Saving Rate as a Percentage of Disposable Income, 
1960–2009: 

[Refer to PDF for image: line graph] 

Percentage of disposable income: 

Year: 1960; 
Saving rate: 7.2%. 

Year: 1965; 
Saving rate: 8.6%. 

Year: 1970; 
Saving rate: 9.4%. 

Year: 1975; 
Saving rate: 10.6%. 

Year: 1980; 
Saving rate: 9.8%. 

Year: 1985; 
Saving rate: 8.1%. 

Year: 1990; 
Saving rate: 6.5%. 

Year: 1995; 
Saving rate: 5.2%. 

Year: 2000; 
Saving rate: 2.9%. 

Year: 2001; 
Saving rate: 2.7%. 

Year: 2002; 
Saving rate: 3.5%. 

Year: 2003; 
Saving rate: 3.5%. 

Year: 2004; 
Saving rate: 3.4%. 

Year: 2005; 
Saving rate: 1.4%. 

Year: 2006; 
Saving rate: 2.4%. 

Year: 2007; 
Saving rate: 1.7%. 

Year: 2008; 
Saving rate: 2.7%. 

Year: 2009; 
Saving rate: 4.3%. 

Source: U.S. Department of Commerce. 

[Ed of figure] 

Delaying retirement: In response to these challenges and changing 
economic conditions, many workers may need to stay in the labor market 
past today’s typical retirement age, which is about age 62 for both 
men and women. This trend may already be under way and may have 
strengthened during the economic downturn. For example, the highest 
participation rate increases between 2008 and 2018 are projected to be 
7.5 percent for workers ages 62 to 64, and 6.2 percent for workers 
ages 65 to 69. Many employers indicate a willingness to recruit or 
retain older workers, and some programmatic changes, such as the 
Social Security earnings test for those people above the normal 
retirement age, have been updated to eliminate penalties for continued 
work. But most employers have not made the types of changes—such as 
establishing alternative work and schedule arrangements or allowing 
phased retirement—that would accommodate the needs and preferences of 
older workers. The Congress and employers must address the labor 
market challenges posed by an aging population and encourage older 
workers to participate in the workforce. 

In the coming 3 to 5 years, GAO will examine policies aimed at 
ensuring financial security by stabilizing the Social Security program 
for the long run and enhancing retirement security through 
improvements to pension plan features. Improved financial literacy and 
greater awareness of retirement income needs can also help workers 
develop strategies to ensure income security in old age. To support 
these efforts, GAO has established the following performance goals and 
key efforts: 

Performance Goal 1.4.1: 

Assess the policy and administrative challenges to the federal 
government in providing for Americans’ financial security in 
retirement: 

Key Efforts: 

* Analyze policies to ensure Social Security’s financial stability and 
continued effectiveness as the foundation of retirement income. 

* Assess challenges facing the Social Security Administration in 
providing customer service and ensuring program integrity. 

Performance Goal 1.4.2: 

Assess the financial and administrative challenges to providing 
employer-sponsored pensions and retaining older Americans in the 
workforce, and their implications for national retirement security: 

Key Efforts: 

* Monitor the impact of changing economic conditions on PBGC, defined 
benefit pension plans, and regulations to protect benefits. 

* Monitor the impact of changing economic conditions on pension 
offerings, savings, and participation in defined contribution plans. 

* Identify strategies to enhance the role of private pensions and 
increased employment of older workers. 

Performance Goal 1.4.3: 

Assess options and strategies to help individuals ensure retirement 
security for themselves and their families: 

Key Efforts: 

* Examine challenges to workers posed by the rise in the risk and 
responsibility they bear for their retirement security. 

* Examine financial vehicles to foster greater retirement savings and 
how people adapt to changing economic conditions. 

* Examine the effectiveness of services and protections provided to 
individuals at older ages. 

Strategic Objective 1.5: 

A Responsive, Fair, and Effective System of Justice: 

As the U.S. population ages, the ongoing downward trend in violent 
crime, exhibited by the recent 10 percent decline in murder and 
manslaughter in 2009, is expected to continue. At the same time, 
increasingly sophisticated transnational criminal and drug 
organizations will present new and growing challenges for the 
Department of Justice (DOJ). In particular, the Federal Bureau of 
Investigation (FBI) estimates that the United States will continue to 
face terrorist threats, along with an increase in ethnic-related 
organized crime—including white-collar crime, racketeering, and human 
trafficking—that will increasingly affect local communities throughout 
the United States. DOJ and the federal judiciary also face challenges 
in effectively managing resources, while ensuring accountability to 
the taxpayer in the face of tight budgets, a continued focus on 
terrorism, new and evolving criminal threats, rising criminal 
immigration caseloads, and a growing population of offenders released 
from prison who require community supervision. Managing the breadth of 
DOJ’s mission and changing workload while operating in a constrained 
fiscal environment will likely present potentially significant policy 
trade-offs. GAO’s oversight of DOJ as it manages these trade-offs will 
be essential to help ensure accountability to the Congress and the 
American people. 

Domestic intelligence, revitalized counterterrorism, and emerging 
crimes: DOJ is faced with an evolving domestic intelligence and 
revitalized counterterrorism mission and the need to respond to new 
and emerging crimes, such as cyber and financial crimes. Garnering the 
resources and having the organizational dexterity to respond to this 
changing mission while protecting the safety and civil liberties of 
the American public will place a premium on DOJ’s ability to 
effectively manage its resources. DOJ’s 40 components execute its 
statutory responsibility for a wide-ranging mission that encompasses 
enforcing the law and defending the interests of the United States, 
ensuring public safety, providing federal leadership in crime 
prevention and control, seeking punishment for those guilty of 
unlawful behavior, enforcing the nation’s voting rights statutes, and 
ensuring the fair and impartial administration of justice for all 
Americans. The federal judiciary will also need to address a growing 
immigration caseload. Criminal immigration cases have risen steadily 
since 2000-—they increased 21 percent in 2009 alone, to 25,804—-
representing one-third of all criminal cases filed in U.S. district 
courts nationwide. Effective strategic planning and performance 
measurement will become increasingly important tools in helping DOJ 
and the federal judiciary achieve their missions. 

Federal Bureau of Investigation: Within DOJ, the FBI commands the 
largest portion of resources, has the broadest mission, and will face 
trade-offs as it continues to build its counterterrorism capabilities 
while managing its more traditional law enforcement missions. 
Protecting the United States from terrorist attacks remains the FBI’s 
top priority, but the FBI must also address a 60 percent increase in 
public corruption investigations and a doubling in high-yield-
investment fraud investigations. The FBI faces significant human-
capital challenges, such as realigning staff to face new and evolving 
law enforcement missions while recruiting and retaining employees with 
the specialized skills needed to address evolving counterterrorism 
priorities. Maintaining a steady stream of new talent will continue to 
be especially important for the FBI, since 20 percent of its current 
workforce will be eligible to retire in the next 2 years. The FBI will 
also need to build and improve its intelligence-gathering, analytic, 
and information-sharing capabilities—requiring ongoing transformation 
of its intelligence program and upgrading of its computer systems. In 
addition, growing gang violence will continue to pose safety threats 
to communities across the United States. DOJ estimates that there are 
about 20,000 gangs and 1 million gang members in the United States. 
These gangs, which engage in crimes such as homicide and drug-selling 
and trafficking, are increasingly migrating to suburban and rural 
communities. 

Federal inmate population: The United States also faces difficult 
decisions in managing a growing and increasingly costly federal inmate 
population that now accounts for nearly a quarter of the entire DOJ 
budget. DOJ’s Federal Bureau of Prisons (BOP) faces significant 
challenges in effectively managing this prison population within an 
already overcrowded and increasingly aging prison system. The federal 
prison population grew by 44 percent from 2000-2009, and additional 
growth is projected (see figure 27). In response to the increased 
inmate population, BOP’s annual budget also has grown by 68 percent 
during this same time period. However, according to BOP, its 
facilities were operating at 37 percent overcapacity at the end of 
2009 and overcrowding is expected to continue, straining BOP and 
community resources. Addressing overcrowding will require DOJ to 
carefully assess and balance several competing resource demands, 
including maintaining its aging facilities, meeting current inmate 
medical needs, and enhancing programs to reduce the rate at which 
former inmates return to prison (recidivism). The most recent Bureau 
of Justice Statistics study found that more than two-thirds of 
prisoners released were rearrested for a new offense. These trends 
strain limited federal and community resources and significantly 
complicate DOJ’s and the judiciary’s efforts to confine, rehabilitate, 
and prepare for and monitor the release of convicted offenders. 

Figure 27: Growth of Federal Prison Population, Fiscal Years 2000–2013: 

[Refer to PDF for image: line graph] 

Fiscal year: 2000; 
Inmate population: 145,125. 

Fiscal year: 2001; 
Inmate population: 156,572. 

Fiscal year: 2002; 
Inmate population: 163,436. 

Fiscal year: 2003; 
Inmate population: 172,499. 

Fiscal year: 2004; 
Inmate population: 179,895. 

Fiscal year: 2005; 
Inmate population: 187,394. 

Fiscal year: 2006; 
Inmate population: 192,584. 

Fiscal year: 2007; 
Inmate population: 200,020. 

Fiscal year: 2008; 
Inmate population: 201,668. 

Fiscal year: 2009; 
Inmate population: 209,027. 

Fiscal year: 2010; 
Inmate population: 213,527. 

Fiscal year: 2011; 
Inmate population: 218,027. 

Fiscal year: 2012; 
Inmate population: 222,527. 

Fiscal year: 2013; 
Inmate population: 227,027. 

Source: GAO analysis of U.S. Department of Justice data and 
projections. 

[End of figure] 

Federal probation officers: The federal judiciary will also need to 
address an increasing number of offenders on supervised release as a 
growing number of federal probation officers become eligible for 
retirement. In the 1980s and 1990s, thousands of offenders were 
sentenced to mandatory minimum prison terms of 10 or more years for 
drug offenses. The terms of many are coming to an end. In addition, in 
March 2008, 21,000 federal prison inmates sentenced for crack cocaine 
offenses became eligible for shorter prison sentences. As of January 
2009, 12,723 of these inmates had been granted an average sentence 
reduction of 24 months. Each of these inmates must serve a term of 
community supervision after release from prison, placing increasing 
demands on federal probation services. Monitoring how the judiciary 
responds to these and other workload demands is important, as this 
response affects other aspects of the federal justice system, such as 
prosecution, sentencing decisions, and prison capacity. 

Grant funding: At its most fundamental, the nation’s communities must 
deal with the consequences of crime. DOJ plays a critical role in 
equipping states and localities to address crime by providing federal 
grant dollars for prevention, intervention, and enforcement programs: 

* In 2009, DOJ managed over $3 billion in grant funding from its 
regular fiscal year appropriation, according to the DOJ Office of the 
Inspector General. DOJ has had problems effectively managing its grant 
funds and will need to increasingly focus on ensuring that states and 
localities are spending funds on crime prevention and reduction 
programs that have achieved long-standing results. 

* In an era when states and localities are increasingly concerned 
about their ability to fund and sustain programs to fight traditional 
crime, the effectiveness and efficiency of federal law enforcement 
grant programs will become increasingly important. With state 
governments projected to face a collective budget gap of $162 billion 
for fiscal year 2010, some state governments are re-evaluating 
sentencing, parole, and drug policies to scale back the expense of 
housing inmates. 

* In this light, DOJ will need to play an important role in 
researching, supporting, and evaluating new model programs, such as 
programs addressing gang violence and juvenile delinquency, to ensure 
that they have shown demonstrated results to help communities reduce 
or prevent crime. For example, from fiscal years 2007 through 2009, 
DOJ’s Office of Juvenile Justice and Delinquency Prevention (OJJDP) 
provided about $1.1 billion in grants to states, localities, and 
organizations to help reduce juvenile delinquency and victimization. 

* However, GAO’s prior work has shown that OJJDP could enhance its 
efforts to ensure the effectiveness of its grant programs by taking 
steps to ensure performance measurement data collected from grantees 
are verified, regularly soliciting and incorporating feedback from the 
juvenile justice field on information it disseminates about programs, 
and finalizing a plan for its research and evaluation efforts. 

GAO’s prior and future work on the federal system of justice can help 
federal decision makers address an increasingly complex strategic 
environment. To support efforts by the Congress and the federal 
government to ensure a responsive, fair, and effective system of 
justice, GAO has established the following performance goals and key 
efforts: 

Performance Goal 1.5.1: 

Assess the federal government’s ability to effectively administer and 
ensure accountability for the federal justice system: 

Key Efforts: 

* Assess DOJ’s efforts to protect individuals’ rights and civil 
liberties as the department executes its missions. 

* Evaluate whether DOJ and its components act as effective stewards of 
their resources, including through efforts to minimize potential 
overlap in programs and functions. 

* Evaluate the judiciary’s efforts to manage and resolve its growing 
and evolving workload, including through mediation and other trial 
alternatives. 

* Assess DOJ’s accountability mechanisms, including its strategic 
planning and performance management system. 

* Evaluate progress in addressing challenges facing the nation’s 
election system, including ensuring accurate voter registration lists 
and ballot access for all eligible voters. 

Performance Goal 1.5.2: 

Assess DOJ’s efforts to prevent and deter terrorism and traditional 
crimes through investigations and prosecutions: 

Key Efforts: 

* Assess DOJ’s efforts to address terrorism and traditional crime, as 
well as emerging crimes such as cyber crime. 

* Assess the effectiveness of federal efforts to control the supply 
and demand for illicit drugs. 

* Evaluate DOJ components’ coordination with state, local, tribal, and 
federal law enforcement agencies to ensure effective use of 
intergovernmental resources and minimize duplication of federal 
programs and services. 

Performance Goal 1.5.3: 

Review the federal government’s efforts to confine, rehabilitate, and 
monitor the release of convicted offenders: 

Key Efforts: 

* Assess DOJ’s efforts to safely and effectively manage a growing 
federal prison population. 

* Evaluate DOJ programs and activities to rehabilitate convicted 
offenders. 

* Review federal efforts to monitor convicted offenders after release. 

Performance Goal 1.5.4: 

Evaluate DOJ’s efforts to assist communities with combating crime 
through federal law enforcement grants: 

Key Efforts: 

* Evaluate the extent to which DOJ has sufficient controls in place to 
monitor grant recipients’ use of funds for law enforcement activities. 

* Assess DOJ’s efforts to provide training and technical assistance to 
grant recipients. 

* Review DOJ’s efforts to evaluate the impact of funded programs on 
crime prevention and the extent to which DOJ requires recipients to 
conduct independent evaluations. 

* Assess DOJ’s efforts to share the information it collects on 
effective programs within and among its components. 

Strategic Objective 1.6: 

Viable Communities: 

The economic and social well-being of communities is vital to the 
nation’s overall growth and prosperity. Adverse economic conditions-—
including declining home prices, high unemployment, and distressed 
residential and commercial lending markets-—will continue to threaten 
the long-term viability of communities nationwide. For example, 
communities with high levels of foreclosures face a growing number of 
vacant or abandoned properties, which will further depress property 
values in surrounding neighborhoods and destabilize neighborhood 
conditions. These conditions could further stress communities with 
historically higher levels of poverty, homelessness, and 
disinvestment. In and of itself, promoting economic stability and 
development in communities is complex, involving the combined efforts 
of federal, state, and local governments, as well as financial 
institutions, businesses, and nonprofit organizations. The impact of 
the recent economic crisis has made these efforts even more 
complicated. The federal government, in particular, will face 
significant challenges carrying out its role, including helping to 
reduce or limit the impact of foreclosures on communities. 

Homeownership: Housing, which represents over a third of the nation’s 
total fixed assets, contributes significantly to the health of 
communities and the overall economy. The federal government plays a 
role in furthering homeownership through various finance programs, 
incentives, and requirements administered by the Department of the 
Treasury (Treasury) and the Departments of Housing and Urban 
Development (HUD), Veterans Affairs (VA), and Agriculture (USDA). In 
addition, two government-sponsored enterprises (GSE), Fannie Mae and 
Freddie Mac, are major participants in the home mortgage market: 

* As evidenced by their placement under federal conservatorship in 
September 2008, the GSEs pose significant risks to taxpayers and 
investors. For example, the Congressional Budget Office (CBO) 
estimated that the total cost of Treasury’s financial assistance to 
the GSEs will be nearly $400 billion. 

* Declining home prices and rising mortgage foreclosures were 
important factors in the financial crisis that began in 2008 (see 
figure 28) and have placed severe stresses on federal single-family 
housing programs, current and prospective homeowners, and the 
neighborhoods in which they live. For example, the capital reserves of 
HUD’s Federal Housing Administration (FHA) fell below the statutory 
minimum in 2009, a year in which FHA’s business volume increased 
dramatically. 

* As a by-product of FHA’s expansion, the volume of guarantees by the 
Government National Mortgage Association (Ginnie Mae) has grown 
sharply, raising concerns about the financial risks of these 
commitments. 

* Furthermore, buying a home is a confusing process for many families, 
partly because of complex settlement procedures and disclosure 
requirements that have not kept up with changes in the mortgage 
industry. The recent foreclosure crisis highlights the risks of 
purchasing a home with mortgage products that borrowers do not fully 
understand. Enforcing federal laws and disclosure requirements is an 
important part of protecting prospective homeowners from abuse.
Over the long term, the federal government will face difficult 
decisions on how to balance the benefits and risks of promoting 
homeownership. 

Figure 28: National Default and Foreclosure Trends, 1979-2009: 

[Refer to PDF for image: multiple line graph] 

5 periods of recession are indicated on the graph. 

Q1 1979-Q4 2009: 

Year: 1979; 
Foreclosure starts: 0.17%; 
Foreclosure inventory: 0.31%; 
Defaults: 0.47%. 

Year: 1980; 
Foreclosure starts: 0.14%; 
Foreclosure inventory: 0.32%; 
Defaults: 0.54%. 

Year: 1985; 
Foreclosure starts: 0.25%; 
Foreclosure inventory: 0.79%; 
Defaults: 0.98%. 

Year: 1990; 
Foreclosure starts: 0.33%; 
Foreclosure inventory: 0.97%; 
Defaults: 0.7%. 

Year: 1995; 
Foreclosure starts: 0.32%; 
Foreclosure inventory: 0.86%; 
Defaults: 0.7%. 

Year: 2000; 
Foreclosure starts: 0.36%; 
Foreclosure inventory: 1.17%; 
Defaults: 0.55%. 

Year: 2001; 
Foreclosure starts: 0.4%; 
Foreclosure inventory: 1.24%; 
Defaults: 0.66%. 

Year: 2002; 
Foreclosure starts: 0.45%; 
Foreclosure inventory: 1.51%; 
Defaults: 0.8v 

Year: 2003; 
Foreclosure starts: 0.41%; 
Foreclosure inventory: 1.43%; 
Defaults: 0.83v 

Year: 2004; 
Foreclosure starts: 0.46%; 
Foreclosure inventory: 1.29%; 
Defaults: 0.85%. 

Year: 2005; 
Foreclosure starts: 0.42%; 
Foreclosure inventory: 1.08%; 
Defaults: 0.81%. 

Year: 2006; 
Foreclosure starts: 0.42%; 
Foreclosure inventory: 0.98%; 
Defaults: 0.95%. 

Year: 2007; 
Foreclosure starts: 0.59%; 
Foreclosure inventory: 1.28%; 
Defaults: 0.95%. 

Year: 2008; 
Foreclosure starts: 1.01%; 
Foreclosure inventory: 2.47%; 
Defaults: 1.56%. 

Year: 2009; 
Foreclosure starts: 1.37%; 
Foreclosure inventory: 3.85%; 
Defaults: 3.39v 

Q2 2005-Q4 2009: 

Year: Q2, 2005; 
Foreclosure starts: 0.38%; 
Foreclosure inventory: 1%; 
Defaults: 0.83%. 

Year: Q4, 2005; 
Foreclosure starts: 0.42%; 
Foreclosure inventory: 0.99%; 
Defaults: 1.09%. 

Year: Q2, 2006; 
Foreclosure starts: 0.4%; 
Foreclosure inventory: 0.99%; 
Defaults: 0.9%. 

Year: Q4, 2006; 
Foreclosure starts: 0.57%; 
Foreclosure inventory: 1.19%; 
Defaults: 1.02%. 

Year: Q2, 2007; 
Foreclosure starts: 0.59%; 
Foreclosure inventory: 1.4%; 
Defaults: 1.07%. 

Year: Q4, 2007; 
Foreclosure starts: 0.88%; 
Foreclosure inventory: 2.04 %; 
Defaults: 1.58%. 

Year: Q2, 2008; 
Foreclosure starts: 1.08%; 
Foreclosure inventory: 2.75%; 
Defaults: 1.75%. 

Year: Q4, 2008; 
Foreclosure starts: 1.08%; 
Foreclosure inventory: 3.3%; 
Defaults: 3%. 

Year: Q2, 2009; 
Foreclosure starts: 1.36%; 
Foreclosure inventory: 4.3%; 
Defaults: 3.67%. 

Year: Q4, 2009; 
Foreclosure starts: 1.2%; 
Foreclosure inventory: 4.58%; 
Defaults: 5.09%. 

Sources: GAO analysis of Mortgage Bankers Association data, National 
Bureau of Economic Research. 

[End of figure] 

Rental housing: The availability of decent, safe, and affordable 
rental housing can also affect community stability. HUD, USDA, and 
Treasury spend around $40 billion annually in outlays and tax 
expenditures on numerous programs to help rental households with lower 
incomes reside in decent, safe, and affordable housing. Over the 
years, HUD has made progress in addressing long-standing management 
weaknesses. However, in recent years, legislative and administrative 
actions have changed HUD’s biggest programs—Section 8 and public 
housing—in ways that may call for different oversight approaches. 
Also, the stock of housing assisted with federal funds and tax 
incentives is aging, and HUD and other agencies will need to consider 
strategies for ensuring that these properties remain in good physical 
and financial condition. Furthermore, some owners may decide to stop 
participating in these programs, raising concerns about the 
availability of housing that is affordable to low-income and special-
needs households. Over the coming years, the federal government faces 
challenges in ensuring that federally assisted properties are 
maintained in a physically and financially sound manner, are 
administered in a way that best serves the needs of low-income 
households, and remain available to lower-income tenants to the extent 
practicable. 

Homelessness: The nation’s communities are also affected by the long-
standing, complex, and multifaceted problem of homelessness. HUD’s 
2008 Annual Homeless Assessment Report to the Congress estimates that 
1.2 million to 2 million individuals stayed in homeless shelters or 
were on the street for at least one night in 2008. This problem may 
have been exacerbated by the financial crisis that started in 2008. It 
has been reported that increases in foreclosures and rising 
unemployment have contributed to higher rates of homelessness among 
some groups, but particularly among families facing increased 
financial strain. Multiple federal agencies—HUD, the Department of 
Health and Human Services, and VA—administer programs that provide 
housing and services to the homeless at a cost of around $2.5 billion 
annually: 

* Federal decision makers must find ways to improve the design and 
flexibility of these programs to help the homeless, while working with 
multiple players—state and local governments and nonprofit 
organizations—and limited data on the homeless population. 

* At the same time, federal agencies must provide enough oversight to 
ensure that programs meet their goals and comply with federal 
requirements. 

Distressed communities: For decades, federal, state, and local 
governments and the private and nonprofit sectors have sought ways to 
revitalize distressed communities. The federal government alone 
operates over 100 programs that offer communities various grants, 
loans, loan guarantees, and special tax incentives designed to assist 
distressed areas. For example, the Community Development Block Grant 
program provides assistance for a variety of infrastructure and 
capacity-building needs, and the Empowerment Zone and Renewal 
Community programs are intended to encourage investment in targeted 
areas: 

* Despite these efforts, no simple answer has been found to the 
question of how best to revitalize America’s distressed communities, 
in part because of the difficulty of measuring the factors that 
actually cause communities to improve. 

* Also, the issue of how best to deliver aid is complicated by the 
need to strike a balance between the goals of the federal government 
and those of state and local governments and nonprofit organizations, 
which administer a large share of federal dollars for community and 
economic development. 

Small business: Small businesses, which employ more than half the 
nation’s workforce, are crucial to economic growth in many 
communities. Small businesses are also vulnerable during economic 
downturns, particularly when these businesses may face challenges in 
accessing credit. The Small Business Administration (SBA)—the nation’s 
single, largest financial backer of small businesses—guarantees over 
$60 billion of business loans and provides management and technical 
assistance to over 1 million small business owners annually. SBA also 
has oversight responsibility for federal contracting goals for small 
and minority-owned businesses. In addition, many of SBA’s programs are 
intended to assist small businesses that are economically and socially 
disadvantaged. SBA has faced challenges in overseeing its numerous 
programs to fulfill its mission to aid, counsel, assist, and protect 
the interests of small businesses, including ensuring that only 
eligible businesses obtain assistance from programs that target 
specific populations. 

GAO’s work can help inform the Congress in reforming programs and 
policies that support homeownership, as well as strengthening the 
management and oversight of the programs that promote affordable 
rental housing, economic activities in distressed communities, and 
small and minority-owned businesses. To support efforts by the 
Congress and the federal government to address these issues, GAO has 
established the following performance goals and key efforts: 

Performance Goal 1.6.1: 

Assess how the federal government can balance promoting homeownership 
and financial risk while adapting to changing markets and policies: 

Key Efforts: 

* Evaluate the effectiveness of federal efforts to promote and sustain 
homeownership. 

* Evaluate how well federal housing finance programs are adapting to 
market changes and operating on a financially sound basis. 

* Assess the federal government’s oversight of secondary mortgage 
market participants, including the housing GSEs (Fannie Mae and 
Freddie Mac) and Ginnie Mae. 

* Evaluate efforts to reform and enforce federal laws and disclosure 
requirements intended to protect prospective homeowners from abuse. 

Performance Goal 1.6.2: 

Track how well federal programs that support affordable rental housing 
meet their objectives, including managing the condition of assisted 
properties and improving the well-being of special populations: 

Key Efforts: 

* Monitor federal agencies’ efforts to ensure that federally assisted 
rental housing is effectively managed and in good physical and 
financial condition and to encourage property owners to continue to 
participate in federal programs. 

* Evaluate federal performance in overseeing housing agencies, 
property owners, and contractors responsible for administering federal 
housing assistance. 

* Evaluate the effectiveness of federal housing programs in meeting 
the housing and supportive service needs of the elderly and other 
special populations. 

Performance Goal 1.6.3: 

Assess federal homeless assistance efforts and their impact on both 
homeless individuals and families: 

Key Efforts: 

* Evaluate the effectiveness of federal programs in meeting the 
housing and supportive service needs of the homeless. 

* Assess the extent to which the missions, goals, and activities of 
federal programs are duplicative and evaluate efforts to consolidate 
federal assistance to the homeless. 

* Evaluate the extent of program coordination among the various 
federal agencies that provide homeless assistance. 

* Assess efforts to ensure homeless programs meet goals and comply 
with requirements. 

Performance Goal 1.6.4: 

Monitor federal community and economic development assistance and its 
impact on communities: 

Key Efforts: 

* Evaluate the extent of federal program coordination in targeted 
communities. 

* Evaluate the extent to which the missions, goals, and activities of 
federal programs are duplicative and examine the potential costs and 
benefits of consolidating them. 

* Assess the impact of development initiatives on communities. 

* Evaluate federal agencies’ efforts to ensure that development 
programs meet their goals and comply with requirements. 

Performance Goal 1.6.5: 

Assess the effectiveness of federal initiatives to assist small and 
minority-owned businesses: 

Key Efforts: 

* Assess the impact of federal contracting policies and practices on 
small businesses and determine what oversight SBA provides to ensure 
that the programs serve eligible small businesses as intended. 

* Assess SBA’s actions to improve its internal control and fraud 
prevention measures, use of information technology, and management of 
human-capital. 

* Monitor SBA’s initiatives to make its programs more efficient, 
effective, and helpful to small businesses, especially to those 
businesses least able to access credit markets. 

* Assess the effectiveness of SBA’s programs to achieve the agency’s 
mission of meeting the needs of small businesses. 

Strategic Objective 1.7: 

A Stable Financial System and Consumer Protection: 

The nation’s financial services industry has helped provide capital 
for U.S. companies and returns for the savings of individual investors 
and savers. However, since 2008, the financial markets have been 
coping with the vast and far-reaching fallout from the crisis that has 
resulted in the failure, sale, or government control of some of the 
largest and most significant U.S. financial institutions. Moreover, 
unprecedented federal help had to be provided with the passage of the 
Emergency Economic Stabilization Act of 2008 and creation of the $700 
billion Troubled Asset Relief Program (TARP) in an attempt to 
stabilize the financial system and restore the functioning of credit 
markets. GAO is performing ongoing monitoring and evaluation to 
determine the extent to which actions by Treasury, the Federal 
Reserve, the Federal Deposit Insurance Corporation (FDIC), and others 
have achieved the intended goals of reducing foreclosures, restoring 
stability in the credit and financial markets, and protecting 
taxpayers. While achieving the intended goals is important, it will be 
vital for the government to have exit strategies from various 
assistance programs that will not further disrupt the stability of the 
financial markets. 

Regulatory system: The crisis also dramatized the ineffectiveness of 
the regulatory system in overseeing the increasing complexity of U.S. 
markets, institutions, and products that have rapidly evolved over the 
past 30 years and are expected to continue to do so. The outdated U.S. 
financial regulatory system was designated as a major problem in GAO’s 
2009 high-risk program. The four key developments and associated 
challenges for government—such as the emergence of large, complex 
globally active conglomerates and increasingly global financial 
markets—are summarized in figure 29. The regulatory system, developed 
piecemeal over the past 150 years, with some parts of the system 
created in response to previous financial crises, lacks the 
comprehensive framework needed to regulate today’s highly complex, 
ever-changing global marketplace. The result has been myriad proposals 
to create new regulatory bodies and new rules to govern financial 
services firms and activities. 

Figure 29: Key Developments and Resulting Challenges Hindering the 
Effectiveness of the Financial Regulatory System: 

[Refer to PDF for image: illustrated table] 

Developments in financial markets and products: Emergence of large, 
complex, globally active, interconnected financial conglomerates; 
Examples of how developments have challenged the regulatory system: 
* Regulators sometimes lack sufficient authority, tools, or 
capabilities to oversee and mitigate risks. 
* Identifying, preventing, mitigating, and resolving systemic crises 
has become more difficult. 

Developments in financial markets and products: Less-regulated 
entities have come to play increasingly critical roles in financial 
system; 
Examples of how developments have challenged the regulatory system: 
* Nonbank lenders and a new private-label securitization market played 
significant roles in the subprime mortgage crisis that led to broader 
market turmoil. 
* Activities of hedge funds have posed systemic risks. 
* Overreliance on credit ratings of mortgage-backed products 
contributed to the recent turmoil in financial markets. 
* Financial institutions’ use of off-balance sheet entities led to 
ineffective risk disclosure and exacerbated recent market instability. 

Developments in financial markets and products: New and complex 
products that pose challenges to financial stability and investor and 
consumer understanding of risks; 
Examples of how developments have challenged the regulatory system: 
* Complex structured finance products have made it difficult for 
institutions and their regulators to manage associated risks. 
* Growth in complex and less-regulated over-the-counter derivatives 
markets have created systemic risks and revealed market infrastructure 
weaknesses. 
* Investors have faced difficulty understanding complex investment 
products, either because they failed to seek out necessary information 
or were misled by improper sales practices. 
* Consumers have faced difficulty understanding mortgages and credit 
cards with new and increasingly complicated features, due in part to 
limitations in consumer disclosures and financial literacy efforts. 
* Accounting and auditing entities have faced challenges in trying to 
ensure that accounting and financial reporting requirements 
appropriately meet the needs of investors and other financial market 
participants. 

Developments in financial markets and products: Financial markets have 
become increasingly global in nature, and regulators have had to 
coordinate their efforts internationally; 
Examples of how developments have challenged the regulatory system: 
* Standard setters and regulators also face new challenges in dealing 
with global convergence of accounting and auditing standards. 
* Fragmented U.S. regulatory structure has complicated some efforts to 
coordinate internationally with other regulators, such as negotiations 
on Basel II and certain insurance matters. 

Sources: GAO (analysis); Art Explosion (images). 

[End of figure] 

Because the financial sector is vital to our economic well-being and 
billions of taxpayer dollars have been committed to address the 
financial crisis, the efforts being undertaken in the next few years 
to ensure that this sector is overseen by an effective and efficient 
regulatory system is a key challenge to our nation. In a January 2009 
report, we provided a framework for crafting and assessing proposals 
on modernizing the outdated U.S. financial regulatory system to assist 
the Congress with its financial regulatory reform effort. The 
framework consists of nine characteristics that should be reflected in 
any new regulatory system. Existing and newly created or combined 
regulators that may emerge as a result of these proposals will also 
face challenges in organizing themselves effectively. Meanwhile, it is 
equally important for existing regulators to be vigilant in overseeing 
troubled financial markets, such as the commercial real estate market, 
and corresponding risk management practices at financial institutions 
because growing defaults in commercial mortgages or commercial 
mortgage-backed securities could pose additional risk to the 
recovering financial system. 

Financial products and services: Dramatic transformations in the 
financial services sector have generated both benefits and costs for 
consumers. While consumers enjoy more choices in financial products 
and services and in some cases lower costs, they also face more 
complex products with risks that are difficult to understand. Numerous 
studies published in recent years have shown that most adults have not 
mastered basic economic concepts, such as the risks associated with 
investment choices. Poor financial literacy can reduce consumers’ 
economic well-being and security. Moreover, GAO and federal regulators 
have previously noted the lack of adequate disclosure requirements for 
financial services and products. For example, available disclosures 
for subprime and other risky mortgage products did not provide 
borrowers with easily comprehensible information on the risks 
associated with such mortgages. Ensuring that regulators adequately 
protect consumers from inadequate disclosures and predatory products 
will continue to be important and challenging. 

Consumer products: Similar to financial products, consumer products—
such as toys and household appliances—are also becoming more 
technically complex and sophisticated, and they increasingly are not 
“from” any one place but, rather, consist of parts and components from 
any number of countries: 

* From 1998 to 2007, the value of consumer products imported into the 
United States increased about 101 percent, with products from China 
(which includes Hong Kong) nearly quadrupling over that same period to 
constitute about 42 percent of all imported consumer goods. In 
addition to the growing value of imports, the number and variety of 
consumer products have been increasing. 

* The growing volume of consumer products imported into the United 
States has strained the resources of the Consumer Product Safety 
Commission (CPSC) and is challenging the agency to find new ways to 
ensure the safety of these products. In fiscal year 2007, CPSC 
announced 473 recalls, the most in 10 years. Some 389 of these recalls 
(or about 82 percent) involved imported products. The number of 
product recalls in fiscal year 2008 was even higher. These record 
numbers of recalls have raised the issue of whether CPSC can ensure 
the safety of products that are increasingly manufactured overseas. 
The Consumer Product Safety Improvement Act (CPSIA) was enacted on 
August 14, 2008.[Footnote 31] CPSIA mandated that GAO review CPSC’s 
authorities to protect consumers. 

GAO’s work in the next 3 to 5 years can help the Congress determine 
how to best update the financial regulatory structure to ensure that 
the financial system is safe and sound in the 21st century and that 
regulators provide effective consumer protections in financial and 
manufactured products. To support efforts by the Congress and the 
federal government to address these issues, GAO has established the 
following performance goals and key efforts: 

Performance Goal 1.7.1: 

Assess the ability of the financial services industry and its 
regulators to maintain a stable and efficient financial system in the 
face of significant market and regulatory shifts: 

Key Efforts: 

* Monitor and evaluate the appropriateness of the U.S. government’s 
efforts, including the use of billions of dollars of taxpayer funds, 
to help with recovery from the 2008 crisis. 

* Evaluate whether changes in the overall regulatory structure and the 
role of existing and any newly created financial regulatory agencies 
are addressing the gaps in oversight, changes in market practices, and 
financial institution ownership and organizational structures. 

* Assess how regulators are overseeing financial firms that are 
increasingly global and manage multiple business lines and types of 
risk across regulated and unregulated entities. 

* Assess how well regulators are responding to new products and market 
participants, emerging threats, and their impact on safety, soundness, 
and competition in the financial services industry. 

* Assess the effectiveness of regulatory programs and policies in 
deterring the use of financial institutions and products to commit 
financial crimes. 

* Assess how well new and existing regulators are managing their 
operations and making effective use of technology and human capital. 

Performance Goal 1.7.2: 

Assess federal oversight of consumer protection laws and regulations 
for financial services and products and manufactured items: 

Key Efforts: 

* Determine whether financial regulators and institutions are 
promoting the financial literacy of consumers and investors, including 
providing information on how to manage their finances, with an 
emphasis on preparing to meet their retirement and other goals, using 
credit responsibly, and assessing and understanding risks. 

* Assess whether current regulatory efforts, policies, and 
requirements are adequate to ensure that investors and consumers are 
sufficiently informed of the costs and risks of traditional and 
innovative financial products and services. 

* Assess federal financial regulators’ oversight and enforcement of 
consumer protection laws, such as the fair lending laws and securities 
investor disclosure requirements, and their efforts to detect and 
punish violators and deter other illegal activity. 

* Assess the development and implementation of potential new 
regulatory structures and organizations to monitor and enforce 
compliance with consumer protection laws. 

* Assess consumer protections related to manufactured products and CPSC’
s efforts to better ensure the safety of key imported and domestically 
produced manufactured items. 

Strategic Objective 1.8: 

Responsible Stewardship of Natural Resources and the Environment: 

Responsible stewardship of our natural resources and the environment 
encompasses some of the nation’s most challenging issues. (See figure 
30.) Balancing the demands of often--competing objectives—-economic 
growth for today versus protection of our natural resources and the 
environment for the future—will entail difficult decisions affecting 
fundamental human needs, such as air, food, and water. Moreover, many 
of these decisions are linked; for example, our choices about how we 
produce food and use energy affect our climate and are altering the 
land and water we depend on for survival. As a result of our choices, 
many of the nation’s natural resources and the systems associated with 
their use are under widespread and increasing stress. The increasing 
globalization of natural resource issues adds another layer of 
complexity, and addressing transboundary issues such as climate change 
will be increasingly important. GAO’s work on natural resources in the 
coming 3 to 5 years will include a focus on these key concerns. 

Figure 30: Examples of Natural Resources and Environment Issues: 

[Refer to PDF for image: 5 photographs] 

Sources: Los Alamos National Laboratory, Department of Agriculture, 
National Institutes of Health, Environmental Protection Agency, and 
Department of the Interior. 

[End of figure] 

Energy: Energy is a key force in our modern economy but raises 
difficult questions about how to resume and sustain economic growth 
when the engines of that growth—factories, automobiles, fertilizers, 
and electricity-generating plants—can adversely affect air and water 
quality, potentially changing the climate in catastrophic ways. For 
decades, businesses and consumers have been able to depend on 
plentiful, inexpensive energy to maintain our nation’s global 
competitiveness and way of life. Although the United States accounts 
for about 4.5 percent of the world’s population, it consumes about 20 
percent of the primary energy produced worldwide. Energy demand has 
nearly tripled in the past 50 years and is projected to continue to 
grow, resulting in a more precarious market balance. Concerns about 
volatile prices, overreliance on oil, and the impacts of energy use on 
climate and the environment have driven interest in reducing demand, 
promoting energy-efficiency, and shifting supplies toward renewable 
energy sources and modified use of traditional sources, such as clean 
coal and advanced nuclear technologies. Such a shift could have far-
reaching effects on land and water use, trade and transportation 
patterns, national security, and energy prices. Further, the energy 
sector is responsible for a large share of greenhouse gas emissions; 
as such, efforts to decrease greenhouse gas emissions face competing 
and complementary concerns about energy security and impacts on fuel 
prices. At the same time, the nation’s extensive energy 
infrastructure, which includes hundreds of thousands of miles of 
transmission lines and pipelines, is also showing signs of strain and 
may require new investment to update and secure. Finally, the Congress 
is concerned that growth in renewable energy initiatives—and the 
consequent growth in federal funding and agencies responsible for 
regulating this industry—could allow for regulatory gaps and wasteful 
duplication that hinder progress. 

Land and water resources: Management of the nation’s land and water 
resources is characterized by the struggle to accommodate competing—
sometimes incompatible—demands and the need to balance their use in 
the short term with their preservation over the long term. The 
resources owned and managed by the federal government are vast, 
including about 700 million acres of federal land, or almost 30 
percent of the nation’s land surface; rights to minerals underlying 
more than 700 million acres of both federal and nonfederal land; 
almost 1.8 billion acres of the Outer Continental Shelf; and fisheries 
as far as 200 miles offshore. The debates over oil development on 
federal lands illustrate the challenge of balancing demand for 
resources today with preservation for the future. These resources are 
also showing increasing signs of stress—more catastrophic wildfires, 
such as the one shown below; shrinking aquifers; destruction of 
wildlife habitat; and the collapse of many fisheries. At the same 
time, competition for water is growing among various interests, 
including agriculture, communities, and energy providers. Shortages 
could lead to severe economic, environmental, and social consequences. 
Finally, multiple federal agencies are engaged in resource management 
research, raising questions about the efficiency of these efforts. 

Environment: Protecting the environment and human health has become 
increasingly complex. For example, although nationwide air quality has 
improved steadily over the past few decades, the Environmental 
Protection Agency (EPA) reports that approximately 138 million people 
live in areas that do not meet health-related national air quality 
standards for ozone, particulate matter, or both. In addition, 
according to EPA, about 44 percent of the nation’s 3.5 million miles 
of rivers and streams are impaired. Further, climate change could 
threaten coastal areas, alter agricultural productivity, and increase 
the intensity and frequency of floods and tropical storms. Efforts to 
address these consequences domestically and internationally are 
increasingly important. Moreover, although scientific understanding of 
the effects of toxic chemicals has improved, information on the 
toxicity of many chemicals is insufficient, and EPA cannot make 
informed decisions on how best to protect the public. As a result, GAO 
added EPA’s processes for assessing and controlling toxic chemicals as 
a high-risk area in January 2009. 

Hazardous and radioactive waste sites: Significant challenges remain 
in cleaning up the country’s hazardous and radioactive waste sites—
including more than 1,200 Superfund sites nationwide. EPA estimates 
that one in four Americans live within 3 miles of a hazardous site, 
posing potential health and safety problems. Further, federal efforts 
to dispose of high-level radioactive waste and spent nuclear fuel are 
in flux, and inventories are increasing. The nation’s current 
inventory of about 70,000 metric tons of high-level radioactive waste, 
mostly generated by the nation’s nuclear power reactors, is likely to 
more than double to about 153,000 metric tons by 2055. Moreover, 
radioactive waste from weapons production still needs to be cleaned up 
at Department of Energy (DOE) sites in 13 states. While DOE has made 
improvements recently, environmental cleanup contracts and projects 
managed by DOE’s Office of Environmental Management remain on GAO’s 
High-Risk List. 

Food and agriculture: Challenges persist in the way the nation 
produces and protects its food supply. Fragmentation in U.S. food 
safety laws—with 15 agencies administering more than 30 laws—has 
caused inconsistent oversight, ineffective coordination, and 
inefficient use of resources, leading GAO to add the federal oversight 
of food safety to its High-Risk List in 2007. Addressing this problem 
is even more pressing because the volume of imported foods is 
increasing, and shifting demographics mean that more of the U.S. 
population is, and increasingly will be, susceptible to food-borne 
illnesses. Moreover, diseases that spread between livestock and 
humans, such as influenzas, have the potential to seriously compromise 
our daily lives, and given the potential for and the consequences of 
bioterrorism, food security continues to pose serious concerns. In 
addition, while U.S. Department of Agriculture (USDA) programs provide 
about $16 billion annually to subsidize crop production and farm 
conservation practices and to supply disaster assistance, the 
integrity and equity of these programs are in question. Further, 
pressures to minimize the environmental impact of the $200 billion 
agricultural sector are likely to intensify. Finally, USDA also faces 
major management challenges to provide fair and equitable services to 
all of its customers and to uphold the civil rights of its employees. 

GAO’s past and forthcoming work can help federal leaders reconcile 
competing demands for our natural resources and achieve a balance that 
will meet the country’s needs in the 21st century. To support efforts 
by the Congress and the federal government to address these issues, we 
will use the following performance goals: 

Performance Goal 1.8.1: 

Assess the nation’s ability to ensure reliable and environmentally 
sound energy for current and future generations: 

Key Efforts: 

* Evaluate efforts to ensure the reliability, physical security, and 
affordability of the energy supply infrastructure. 

* Analyze energy market regulation, competition, and information. 

* Evaluate federal efforts to promote energy-efficiency and 
conservation. 

* Assess energy-related research and development and science. 

* Analyze the relationship between energy use and the environment—
including health—and climate. 

* Assess federal energy management practices and efficiencies. 

Performance Goal 1.8.2: 

Assess federal strategies for sustainably managing our nation’s land 
and water resources: 

Key Efforts: 

* Evaluate federal use and protection of natural resources and 
protection of threatened and endangered species. 

* Assess federal natural resource agencies’ operational and 
maintenance needs. 

* Evaluate federal efforts to recover costs from the sale and use of 
public resources. 

* Evaluate federal programs for Native Americans and Alaska Natives. 

* Assess management practices and efficiencies at federal natural 
resource agencies. 

Performance Goal 1.8.3: 

Assess environmental protection strategies and programs: 

Key Efforts: 

* Evaluate federal efforts to assess and control toxic substances. 

* Evaluate federal efforts to improve the nation’s air quality. 

* Assess the implications of climate change. 

* Evaluate federal efforts to ensure safe drinking water and improve 
the quality of the nation’s waters. 

* Assess management practices and efficiencies at EPA. 

Performance Goal 1.8.4: 

Assess efforts to reduce the threats posed by hazardous and nuclear 
wastes: 

Key Efforts: 

* Assess efforts to address nuclear, ordnance, and other hazardous 
wastes resulting from federal activities. 

* Evaluate strategies for cleaning up Superfund and other private-
sector hazardous waste sites and responding to emergency contamination 
releases. 

* Analyze nuclear waste disposal sites and facilities. 

* Assess management practices and efficiencies at waste cleanup 
agencies. 

Performance Goal 1.8.5: 

Assess federal programs’ ability to ensure a plentiful and safe food 
supply, provide economic security for farmers, and minimize 
agricultural environmental damage: 

Key Efforts: 

* Evaluate federal efforts to ensure a safe food supply and guard 
against agroterrorism and infectious disease. 

* Evaluate agricultural production and federal support for it. 

Identify the potential environmental impacts of agricultural practices. 

* Assess management practices and efficiencies at USDA and other food 
safety agencies. 

Strategic Objective 1.9: 

A Viable, Efficient, Safe, and Accessible National Infrastructure: 

The infrastructure of the United States-—including transportation, 
telecommunications, the postal system, and federal facilities (see 
figure 31)-—provides a foundation for the nation’s economic vitality 
and quality of life. But challenges—such as capacity constraints, 
deterioration, and technological obsolescence-—hinder efforts to 
ensure that the infrastructure is viable, efficient, safe, and 
accessible. In addition, resource limitations constrain funding 
improvements and complicate the nation’s ability to respond to these 
challenges. 

Figure 30: Examples of Natural Resources and Environment Issues: 

[Refer to PDF for image: 5 photographs] 

Sources: Far left image (Creatas); other images (PhotoDisc). 

[End of figure] 

Funding: The nation’s aviation and surface transportation systems are 
undergoing strain, and the estimated cost of safely and reliably 
meeting future demands, including modernizing the air traffic control 
system, runs into the hundreds of billions of dollars. Calls for 
increased investment come at a time when traditional funding sources 
are under increasing stress. Revenues to both the Highway Trust Fund 
and the Airport and Airway Trust Fund have not kept pace with outlays, 
requiring additional appropriations from the Congress to prevent a 
shortfall in both funds. For example, Highway Trust Fund expenditures 
have exceeded revenues in recent years, requiring the Congress to 
appropriate about $35 billion from the General Fund of the Treasury 
over the last 3 fiscal years so that the Highway Trust Fund could 
remain solvent. We placed surface transportation funding on our High-
Risk List in part due to concerns about the solvency of the Highway 
Trust Fund. Moreover, increases in transportation spending in recent 
years have not translated into commensurate improvements in system 
performance, raising questions about the effectiveness of federal 
programs in addressing key challenges. In addition, no national 
strategy currently integrates the different modes of transportation 
into a system that is more than a sum of its parts. 

Transportation accidents: The nation’s transportation system acts as 
the backbone of the nation’s economy and affects the daily life of 
most Americans. Yet, despite considerable federal investment and 
oversight of transportation safety, accidents continue to kill and 
injure too many of our citizens: While fatalities and injuries have 
fallen in recent years, on average, about 44,000 people are killed and 
2.8 million more are injured each year. Traffic accidents claim most 
of these lives and result in most of these injuries. Some age groups 
are particularly vulnerable. For example, traffic crashes are the 
leading cause of death for 15- to 20-year-olds. Older drivers are more 
susceptible to injury or death in an accident than others, and the 
population age 65 or older is expected to nearly double by 2030. While 
most transportation-related deaths and injuries occur on our nation’s 
highways, about 860 fatalities occur annually in rail accidents and 
another 620 annually in commercial and general aviation accidents. 

The federal government faces seemingly intractable causes of 
accidents, such as impaired, distracted, or fatigued driving, and is 
seeking new tools and approaches to mitigate these safety threats. 
Changes in technology have improved safety both by helping people 
avoid accidents and by mitigating their impact, but technological 
change has also led to new causes of crashes, such as distraction by 
electronic devices. Until such challenges are addressed, many deaths 
and injuries will continue to plague our transportation systems. In 
addition, the federal government will face increasing challenges to 
ensure that transportation safety is not sacrificed due to economic 
recession. 

Congestion: Congestion continues to worsen and looming problems from 
the anticipated growth in travel demand are not being adequately 
addressed. The economic and environmental implications are 
significant, ranging from wasted fuel and lost time as cars idle in 
traffic to increased costs for businesses as the transportation system 
grows more unreliable. Also, as the nation’s economy recovers, freight 
movement will continue to expand, particularly containerized freight 
moving through the nation’s ports and onto already congested highway 
and rail networks. 

To address congestion in our transportation system, policymakers will 
be challenged to both identify ways to fund investments in new 
infrastructure and encourage more efficient use of the existing 
infrastructure. Transportation policy decisions are also inextricably 
linked with environmental and energy policy concerns. Long-standing 
federal policy requires that improvements to our transportation 
infrastructure be made in an environmentally responsible manner—
creating and maintaining conditions under which humans and nature can 
exist in harmony—but these requirements can lengthen planning and 
project lead times and perhaps conflict with the need to respond to 
congestion. Improving aviation congestion through modernization 
promises significant benefits, such as reduced emissions and mitigated 
delays, but is also a serious challenge as the cost of transforming 
the nation’s air traffic control system could exceed $40 billion in 
combined government and civilian investment, according to the Federal 
Aviation Administration’s Joint Planning and Development Office. 

Telecommunications industry: In 2007, the telecommunications and 
related industries contributed over $400 billion to the nation’s 
economy; these industries deploy infrastructure and provide services 
that every day affect how Americans communicate, conduct business, and 
educate themselves: 

* The federal government, led by the Federal Communications 
Commission, faces challenges in carrying out its responsibility to 
ensure that the largely private telecommunications industry operates 
in the public’s interest. Within the industry, universal access to the 
Internet via broadband technologies is commonly viewed as a vital part 
of infrastructure and a key driver of economic growth. Yet, the United 
States ranks 15th among the 30 democratic countries that comprise the 
Organization for Economic Cooperation and Development in broadband 
subscribers per 100 inhabitants. Consequently, federal policy 
regarding broadband deployment, use, and affordability is under debate 
and development. For example, in the National Broadband Plan, the 
Federal Communications Commission recommended changes to the existing 
Universal Service Fund to better create incentives for universal 
availability and adoption of broadband. However, the cost of the 
Universal Service has increased dramatically, from $2.3 billion in 
1998 to over $7.0 billion in 2009, imposing greater burdens on 
consumers. (See figure 32.) 

* As the telecommunications industry has evolved, concerns have arisen 
about whether the existing government policies, procedures, and 
organizational structures adequately address consumer and industry 
needs. For example, with increased reliance on wireless communications 
for a variety of commercial and government functions, questions about 
the current approach to allocating spectrum across these sectors are 
growing in importance. 

* Further, technology advances, such as enhanced 911 capabilities for 
wireless service that allow emergency responders to pinpoint a caller’
s location, offer opportunities to improve public safety that are 
tempered by challenges in expanding network coverage. Recent 
consolidation and certain industry practices, such as marketing 
handsets exclusive to individual wireless networks, have also raised 
concerns in the Congress and elsewhere about whether competition is 
sufficient to ensure that new technologies are introduced and that 
lower costs are passed on to consumers. 

Figure 32: Universal Service Fund Disbursements, 1998-2009: 

[Refer to PDF for image: line graph] 

Year: 1998; 
Disbursements: $2.3. 

Year: 1999; 
Disbursements: $3.6. 

Year: 2000; 
Disbursements: $4.4. 

Year: 2001; 
Disbursements: $4.7. 

Year: 2002; 
Disbursements: $5.4. 

Year: 2003; 
Disbursements: $5.6. 

Year: 2004; 
Disbursements: $5.3. 

Year: 2005; 
Disbursements: $6.5. 

Year: 2006; 
Disbursements: $6.6. 

Year: 2007; 
Disbursements: $6.9. 

Year: 2008; 
Disbursements: $7.1. 

Year: 2009; 
Disbursements: $7.3. 

Sources: Universal Service Administrative Company annual reports (1999-
2009). 

[End of figure] 

U.S. Postal Service: Mail use has been declining dramatically as a 
result of the economic downturn and changing use of the mail linked to 
the continuing shift to electronic communications and payments. Mail 
volume dropped by about 36 billion pieces (about 17 percent) from 
fiscal years 2007 through 2009. The U.S. Postal Service (USPS) 
projects further volume declines of about 15 percent by fiscal year 
2020 (see figure 33). When we added USPS’s financial condition to our 
High-Risk List in July 2009, we reported that USPS urgently needed to 
restructure to address its current and long-term financial viability: 

* The short-term challenge for USPS is cutting costs quickly enough to 
offset the unprecedented volume and revenue declines, so that it can 
cover its operating expenses. 

* In the long term, the Congress must engage USPS about potential 
changes to its mission, including restructuring postal operations, 
networks, and the workforce to improve efficiency, and assessing 
whether long-standing services, such as 6-day-per-week mail delivery, 
should be changed to reflect the emerging business environment and 
reduced use of the mail. 

Part of USPS’s challenge is to continue to improve the efficiency of 
its operations through modernization of its mail processing and retail 
networks, while ensuring the quality and availability of postal 
services during any restructuring. 

Figure 33: Actual and Projected Total Mail Volume, Fiscal Years 1971–
2020: 

[Refer to PDF for image: line graph] 

Fiscal year: 1971; 
Pieces: 87.0 billion. 

Fiscal year: 1980; 
Pieces: 106.3 billion. 

Fiscal year: 1985; 
Pieces: 140.1 billion. 

Fiscal year: 1990; 
Pieces: 166.3 billion. 

Fiscal year: 1995; 
Pieces: 180.7 billion. 

Fiscal year: 2000; 
Pieces: 207.9 billion. 

Fiscal year: 2005; 
Pieces: 211.7 billion. 

Fiscal year: 2010; 
Pieces: 166.1 billion. 

Fiscal year: 2015; 
Pieces: 158.6 billion. 

Fiscal year: 2020; 
Pieces: 148.9 billion. 

Projected fiscal year 2020 volume: about 150 billion pieces, the 
lowest level since fiscal year 1986. 

Source: U.S. Postal Service. 

Note: Mail volumes for fiscal years 2010 through 2020 are projected. 

[End of figure] 

Federal real property: The vast and diverse federal real property 
portfolio totals more than 3 billion square feet of space with an 
estimated gross value in the hundreds of billions of dollars. Long-
standing problems that we have highlighted in our High-Risk List 
series include: 

* excess and underutilized property, 
* deteriorating facilities, 
* repair and restoration backlogs in the tens of billion of dollars, 
* unreliable real property data, and, 
* overreliance on costly leasing. 

We have called for addressing these problems more directly through a 
reassessment of options; development of well-reasoned strategies; and, 
in some cases, changes in law. Protecting federal facilities from the 
threat of terrorism is an ongoing challenge, since in recent years, 
our work has shown that federal facilities continue to be vulnerable. 
Allocating resources according to risk, leveraging technology, and 
sharing information among agencies will provide a framework for 
guiding and overseeing agencies’ protection efforts and addressing 
security challenges. 

Last, the federal government is the nation’s largest energy consumer. 
Compliance with and the effectiveness of new laws and policies 
requiring improved environmental and energy performance of federal 
properties will require ongoing attention and oversight. 

Our past and forthcoming work on the nation’s infrastructure can help 
federal leaders face key strategic decisions about how the nation can 
best establish and maintain a viable, safe, secure, and accessible 
infrastructure to meet the country’s needs in the 21st century. To 
support efforts by the Congress and the federal government to address 
infrastructure issues in the areas of aviation and surface 
transportation, telecommunications, postal service, and federal 
facilities, GAO has established the following performance goals and 
key efforts: 

Performance Goal 1.9.1: 

Assess federal investments in and financing of transportation 
infrastructure: 

Key Efforts: 

* Review the effectiveness of federal investments in surface 
transportation and determine the effectiveness of federal investments 
in integrated intermodal solutions. 

* Review the effectiveness of federal investments in aviation. 

* Assess the sustainability and alternative methods for financing 
federal transportation investments. 

Performance Goal 1.9.2: 

Assess federal regulation of transportation safety and efforts to fund 
improvements in safety: 

Key Efforts: 

* Assess federal oversight of aviation safety. 
 
* Assess federal oversight of safety in highway, rail, pipeline, and 
other surface modes. 

* Review the use of federal grants and other strategies to improve 
safety outcomes. 

Performance Goal 1.9.3: 

Evaluate federal policies to improve the mobility of and increased 
access to transportation systems: 

Key Efforts: 

* Assess efforts to make transportation systems available to older 
Americans and other populations. 

* Assess federal programs for improving the efficiency of freight and 
passenger movement in all modes. 

* Assess efforts to mitigate environmental effects of transportation 
systems and balance environmental protection with improved mobility. 

Performance Goal 1.9.4: 

Assess federal efforts to support and oversee telecommunications in 
the public interest: 

Key Efforts: 

* Assess federal efforts to promote affordable access to telephone, 
digital television, and broadband Internet services. 

* Assess federal efforts to promote efficient spectrum management and 
emerging telecommunications technologies. 

* Evaluate federal efforts to enforce oversight in the public interest 
of media and telecommunications technologies. 

Performance Goal 1.9.5: 

Assess the U.S. Postal Service’s efforts to ensure its viability and 
accomplish its mission: 

Key Efforts: 

* Assess USPS’s business model and plans for restructuring to address 
its financial condition and outlook. 

* Evaluate USPS efforts to improve operational efficiency through 
modernization. 

* Monitor and evaluate the quality and availability of postal services. 

* Assess lessons learned from emerging international trends in 
providing postal services. 

Performance Goal 1.9.6: 

Assess federal efforts to manage and secure the government’s real 
property portfolio in an economically and environmentally viable way: 

Key Efforts: 

* Assess federal efforts to manage its real property portfolio to 
improve its efficiency and condition. 

* Review federal efforts to protect and secure federal facilities. 

* Determine the effectiveness of federal efforts related to managing 
energy use and improving environmental performance across the 
government’s real property portfolio. 

[End of Goal 1] 

Goal 2: 

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

GAO’s second strategic goal is to assist the Congress and the federal 
government respond to changing security threats and the challenges of 
global interdependence. Our specific objectives are to support 
congressional and federal efforts to: 

* protect and secure the homeland from threats and disasters, 

* ensure military capabilities and readiness, 

* advance and protect U.S. foreign policy interests, and, 

* respond to the impact of global market forces on U.S. economic and 
security interests. 

Over the next 5 years, such threats and challenges are expected to be 
pronounced. The United States is in a transitional moment, according 
the President’s 2010 National Security Strategy, and faces a broad 
array of challenges that require a renewal of American leadership. The 
complex and rapidly evolving national security environment facing the 
United States includes cyber attacks, terrorist activities fueled by 
extremist ideologies, and instability in Afghanistan and Pakistan, as 
well as global interdependence—as demonstrated by the recent global 
financial crisis and economic downturn. 

Further, the nation’s growing fiscal imbalances—ever-increasing trade 
deficits, the dependence on foreign capital inflows to finance U.S. 
spending, and the imbalance between government revenues and spending—
will affect the entire federal government as difficult decisions are 
made about the nation’s priorities. The nation’s security agencies—
most prominently, the Departments of Defense (DOD), Homeland Security 
(DHS), and State—will need to strike an affordable balance between 
spending on current missions and investing in new capabilities. Today, 
the three departments and other agencies are attempting to: 

* defeat the terrorist threat in Afghanistan and Pakistan, 

* stabilize Iraq, 

* protect the homeland, 

* curb transnational criminal organizations, 

* ensure the free and lawful flow of people and goods into and out of 
the homeland, 

* promote international security to reduce conflict, and, 

* foster economic growth through stable trade and investment flows. 

At the same time, federal agencies are attempting to develop new 
mission capabilities to address emerging threats and the challenges 
presented by global trends. These trends—population growth, limited 
natural resources and energy, the emerging economic power of countries 
such as India and China, transformational technologies, increasing 
movements of money and people, and climate change—create great 
uncertainty and could lead to rapid social, cultural, and geopolitical 
shifts that result in instability and potential conflict. GAO’s work 
under Goal 2 can assist the Congress and the federal government in 
determining the most effective and efficient balance between 
maintaining current capabilities for national security and developing 
new capabilities for emerging threats and challenges. 

DOD, DHS, State, and other national security agencies will also need 
to enhance basic management capabilities to meet these threats and 
challenges. For example, all three departments need to strengthen 
strategic and operational planning, better manage human-capital, 
improve acquisition and contract management, and focus on results-
oriented decision making. For these reasons, DHS is on our list of 
agencies most in need of broad reform, while several program and 
management areas at DOD and State are considered high risk due to 
their vulnerabilities to fraud, waste, abuse, and mismanagement. GAO 
will monitor these agencies’ progress in enhancing their management 
capabilities and make recommendations to improve the effectiveness and 
efficiency of their operations and services. 

Finally, federal agencies also need to improve their ability to 
collaborate on interrelated conventional and emerging threats that 
often go beyond the authority and scope of any one agency. As a 
result, overarching strategies and plans will be required to enhance 
agencies’ abilities to collaborate with each other, as well as with 
foreign, state, and local governments and nongovernmental partners. 
The Congress has recently taken steps to strengthen interagency 
collaboration for international issues, and a number of other 
commissions, research institutions, and congressionally mandated 
studies have proposed reforms to parts or all of the national security 
and foreign policy system to improve interagency collaboration, among 
other things. GAO’s future work in this area will identify barriers to 
interagency collaboration, inefficiencies in the use of resources, and 
duplication of effort, as well as identify tools for ensuring a united 
effort. 

To provide timely, quality service to the Congress and the federal 
government to respond to changing security threats and the challenges 
of global interdependence, GAO has established four strategic 
objectives: 

2.1: Protect and Secure the Homeland from Threats and Disasters. 

2.2: Ensure Military Capabilities and Readiness. 

2.3: Advance and Protect U.S. Foreign Policy Interests. 

2.4: Respond to the Impact of Global Market Forces on U.S. Economic 
and Security Interests. 

Strategic Objective 2.1: 

Protect and Secure the Homeland from Threats and Disasters: 

In the coming years, the United States will continue to face dynamic 
and increasingly complex threats to the nation’s security. These 
threats include: 

* terrorists’ potential use of radioactive, chemical, or biological 
agents to carry out an attack inside the country; 

* terrorists’ and other criminals’ exploitation of critical 
infrastructure vulnerabilities in sectors such as transportation, 
energy, and information technology; and; 

* the spread of infectious diseases, such as the H1N1 pandemic. 

Increasingly adaptive and interconnected terrorist and transnational 
criminal organizations are likely to leverage these vulnerabilities, 
and any failure to address them would have serious consequences for 
the physical and economic security of the country. At the same time, 
concerns are growing that climate change and other factors may 
increase the frequency and magnitude of natural disasters, whose 
occurrence and scale inherently remain unpredictable. 

Federal leadership: The federal government must enhance its ability to 
assess, respond to, and recover from a wide range of hazards and 
threats against the personal security of its citizens and its economic 
interests. Federal leadership is critical in addressing security needs 
while maintaining personal freedoms and the legitimate flow of 
commerce and people. As the unifying core of the vast national network 
of organizations and institutions involved in securing the nation, DHS 
will need to ensure that it can respond to and recover from natural 
disasters, as well as protect against terrorist threats on various 
fronts. These threats include vulnerabilities along the U.S. border, 
in the nation’s transportation systems, and in national critical 
infrastructure and key resources open to attack and exploitation. They 
also include challenges in the gathering, analyzing, and sharing of 
information to help prevent and respond to terrorist and other 
incidents. 

Constrained budgets: DHS faces significant challenges in addressing 
changing threats within the confines of annual appropriations that are 
likely to be increasingly constrained and may be limited in growth in 
real terms: 

* It will be critical for DHS to ensure that its resources are 
effectively directed toward the nation’s most pressing homeland 
security challenges. In particular, DHS must define an acceptable and 
achievable level of risk, to prioritize among its missions, and make 
risk-based decisions about investments and resources. 

* DHS will also need to continue its efforts to integrate and 
transform the functions, programs, and assets of its numerous 
component offices and agencies into a more holistic department. GAO 
has designated DHS’s implementation and transformation as high risk, 
in part because of the inherent difficulties of such a massive effort. 
Given the complexity and significance of its organization, missions, 
and functions, it is likely to take several more years for DHS to 
complete its transformation efforts. 

* While DHS has made progress, the department must continue to address 
its programmatic challenges and risks while identifying, refining, and 
implementing actions to improve its financial, information technology, 
human-capital, and acquisition management functions. 

Sharing intelligence information: On December 25, 2009, despite 
information indicating a possible terrorist threat, the country came 
close to experiencing another horrific event. A passenger attempted to 
detonate a bomb onboard an international flight into Detroit. In the 
aftermath, a number of fundamental questions were raised regarding the 
intelligence community’s sharing of information about the alleged 
terrorist; analysis of that information to determine the threat posed; 
and decisions on the individual’s placement on a government terrorist 
watch list. Federal agencies have begun sharing more information about 
terrorist threats with their partners in new ways—they have developed 
new organizational structures, as well as policies, databases, and 
information systems; intelligence reports and products; and standards, 
among other things. But gaps in that sharing—including policy, 
cultural, and other barriers—continue to pose serious security 
vulnerabilities and elevate the critical need to address them. Because 
of the security liability the government faces, GAO designated the 
sharing of terrorism-related information as high risk in 2005. Our 
work in recent years has found that while the Congress has mandated 
that the government create an information-sharing environment across 
agencies that defines what information needs to be shared, with whom, 
and how, the federal government still lacks a road map to clearly 
establish agency responsibilities and a system to hold agencies 
accountable to the Congress and the American public. GAO’s planned 
work will help better ensure progress in closing gaps for this high-
risk function. 

Protecting the nation’s transportation system: In addition to sharing 
information, DHS plays a vital role in protecting the nation’s 
transportation system. Roughly one-third of past terrorist attacks 
worldwide have targeted transportation systems, and intelligence and 
recent events demonstrate that the transportation network continues to 
be an attractive target for those wanting to harm U.S. citizens and 
interests. However, securing the U.S. transportation system—which 
includes more than 5,000 public-use airports, 3.9 million miles of 
roads, over 300 seaports, and over 500 train stations—will continue to 
be difficult because of its vastness and open access points: 

* Given the global interdependence of the nation’s transportation 
network, the United States will need to strengthen partnerships with 
foreign nations and harmonize security efforts to protect these 
systems. DHS has made progress in strengthening the security of 
commercial aviation and seaports through multiple layers of security 
programs, but the department must continue to adapt security measures 
to counter evolving threats, balance resources across missions, 
develop and deploy new security technologies, and increase its focus 
on securing nonaviation modes of transportation, particularly surface 
modes of transportation. (See figure 34.) 

* History has shown that terrorists have been effective at modifying 
their tactics to circumvent existing security measures, such as by 
using liquid explosives and evolving methods of concealment. Further, 
terrorist attacks on surface transportation systems around the world 
highlight the vulnerabilities of these systems and the need for an 
increased focus on securing them from terrorism. Maritime 
transportation components overseas have been attacked by terrorists 
and pirates, highlighting the potential vulnerabilities of our own 
ports, vessels, and sea-based supply chain for such critical items as 
oil and liquefied natural gas. Frequent criminal use of seagoing cargo 
containers—to smuggle drugs and traffic people—demonstrates the 
potential for terrorists to use such containers to get weapons of mass 
destruction and other contraband into the United States. 

* Although DHS components, such as the Transportation Security 
Administration, or TSA, Coast Guard, and U.S. Customs and Border 
Protection have primary responsibility for various aspects of 
transportation security, the responsibility for securing all of these 
transportation modes is shared among other federal, state, local, 
international, and private-sector partners, necessitating continual 
DHS coordination with these entities. In addition, because of the 
interconnectivity of the global and national transportation network, 
it is important that the department’s risk assessment consider 
systemwide and multimodal risks, as well as risks pertaining to 
intermodal facilities—where more than one mode of transportation 
connect—so that terrorists are not driven from one mode to another 
that they view as less secure. 

Figure 34: Example of High-Visibility Canine Sweep at a Mass Transit 
Station: 

[Refer to PDF for image: photograph] 

Source: Washington Metropolitan Area Transit Authority. 

[End of figure] 

Securing U.S. borders: The significant transnational flows of people 
and goods create challenges in securing U.S. borders. Hundreds of 
millions of people and millions of cargo containers enter the United 
States each year through more than 300 ports of entry. Estimates 
indicate that hundreds of thousands of people try to enter illegally 
across the more than 7,000 miles of land border with Canada and Mexico: 

* DHS will continue to face major challenges in identifying and 
apprehending those trying to enter the country illegally across the 
U.S. borders or at ports of entry through the use of false documents 
or documents belonging to others, and in interdicting suspect cargo—
including potential terrorists and weapons of mass destruction. DHS 
will have to balance these homeland security missions while not 
significantly impeding the flow of legitimate travelers and cargo. 
(See figure 35.) 

* DHS will also continue to face obstacles in reducing the conditions 
that encourage illegal employment, identifying and removing millions 
of undocumented aliens from the country, preventing and combating 
immigration fraud and identity theft, and providing timely immigration 
services to eligible individuals. (See figure 36.) As the economy 
improves, it is likely that attempts to immigrate illegally will 
increase as the prospects for work in the United States increase. 
While DHS has already spent billions of dollars to hire thousands of 
additional border enforcement personnel and to deploy advanced 
technology, our work shows that some of this technology has not worked 
as planned. DHS may also need to modify its investment plans to 
address evolving threats to the border, such as increased violence 
against U.S. law enforcement. 

* Strategies and resources will also be needed to prevent the illegal 
movement out of the country of cash and weapons that are fueling drug-
related violence along the Southwest border and threatening the 
security of the United States, as well as that of Mexico. 

* Future pandemics could also significantly challenge DHS’s efforts to 
secure the border because of the sheer volume of traffic and the 
difficulty in developing screening protocols to detect an influenza-
like illness. 

* Finally, comprehensive immigration reform legislation-—which could 
be taken up within the next several years-—would put significant 
pressure on DHS to meet its goals of transforming its immigration 
benefit application process in order to meet a potential surge of 
millions of additional applications, while simultaneously processing 
the approximately 5 million applications it already receives each year. 

Figure 35: U.S. Port of Entry at San Ysidro, California: 

[Refer to PDF for image: photograph] 

Source: GAO. 

[End of figure] 

Figure 36: Worksite Enforcement Operation: 

[Refer to PDF for image: photograph] 

Source: Department of Homeland Security. 

[End of figure] 

Disaster preparedness and response: As the threat of terrorist attacks 
and the severity and related financial costs of natural disasters 
increase in the next decade, so will the national preparedness, 
response, and recovery challenges for federal, state, and local 
emergency responders: 

* Scientific assessments indicate that climate change is expected to 
result in more volatile weather patterns, with potentially more 
frequent and severe natural hazard events, such as hurricanes, that 
result in increased economic losses and response and recovery costs. 

* Other factors-—such as changing demographics (e.g., the growing 
population of those age 65 or older), evolving infectious disease or 
biological threats, and aging infrastructure—-will affect disaster 
risks, the potential consequences of disaster, and, thus, the 
challenges of disaster preparedness. 

* It will become increasingly important for the nation to enhance its 
ability to assess those evolving risks and make the appropriate 
adjustments and investments to disaster preparedness and response 
plans and capabilities. Although DHS has developed key national 
response policies, operational plans that identify the organizations 
and resources required for preparedness and a systematic means of 
prioritizing resources are needed to ensure that federal funds are 
used most effectively and that needed federal, state, and local 
capabilities are appropriately developed. 

* Although billions of dollars have been spent to improve the nation’s 
ability to respond to the next catastrophic disaster, the federal 
government continues to face challenges in developing useful measures 
to assess preparedness and response capabilities. Most disasters are 
the result of a single, short-term event, such as a hurricane or 
flood, but an infectious disease pandemic presents unique challenges 
because it could persist for months as it spreads across the country 
in waves, affecting first responders and health care workers, as well 
as the general population. Early detection of the spread of a 
biological agent—whether naturally occurring or introduced 
deliberately—is a formidable challenge requiring the resources and 
coordinated efforts of many federal, state, and private entities, such 
as public health services and hospitals. Such events may require 
specialized response capabilities—such as those for a release of 
radiation from a nuclear power plant or a dirty bomb. 

Disaster recovery: Natural disasters in the United States have also 
highlighted challenges facing DHS and others in ensuring that 
homeowners and businesses have access to financial resources to 
recover from disasters. For example, the National Flood Insurance 
Program, which we have designated as high risk, still owes the 
Treasury $19 billion it borrowed to pay for losses from earlier 
hurricanes, and some state insurance programs are under increasing 
financial strain as a number of private market insurers have begun 
limiting the number of policies they write in hurricane-prone areas. 
It is unlikely that the Federal Emergency Management Agency can repay 
a debt of this size and also pay future claims in a program that 
generates premium income of about $2 billion a year. Legislation has 
been introduced that would limit National Flood Insurance Program 
subsidies, with the goal of improving the financial stability of the 
program. In addition, the Small Business Administration’s (SBA) 
Disaster Loan Program plays a crucial role by providing financial 
assistance to homeowners and business affected by disasters. Yet, 
SBA’s response to the 2005 Gulf Coast hurricanes (Katrina, Rita, and 
Wilma) exposed many deficiencies. Since then, SBA has taken several 
steps to reform the Disaster Loan Program so that the agency is better 
prepared to handle future large-scale disasters. However, as we 
reported in July 2009, SBA still has not fully addressed several 
requirements outlined in the Small Business Disaster Response and Loan 
Improvements Act of 2008. By continuing its efforts to implement all 
requirements in the act, SBA could improve its operations for future 
hurricane seasons, build on the lessons learned from the 2005 Gulf 
Coast hurricanes, and further signal its commitment to its mission of 
providing affordable and timely financial assistance to help 
businesses and homeowners recover from disasters. 

Protecting critical infrastructure: Terrorists, criminals, and others 
will continue to target the nation’s physical and cyber assets—
including vital information technology systems and networks—to disrupt 
national security, sap economic vitality, and endanger public health 
and safety. In addition, they will try to gain access to highly 
sensitive information and commit fraud and theft, including identity 
theft, and try to thwart programs and measures aimed at reducing the 
nation’s and individuals’ vulnerabilities to fraud and theft. In 
addition, natural disasters have and can result in widespread damage 
to physical infrastructure, including oil pipelines and refineries, 
transportation systems, electrical power lines, and cell-phone towers. 
Any man-made or natural disaster affecting the highly interconnected 
computer and telecommunications systems needed to operate those assets 
could be debilitating to the nation’s capacity to maintain essential 
national defense, economic activity, and quality of life. DHS, in 
partnership with other federal agencies; the private sector; and 
state, local, tribal, and territorial governments, will face ongoing 
challenges in meeting its responsibilities to protect critical 
infrastructure, especially since the effects of terrorist attacks and 
natural, man-made, or technological hazards can cascade far beyond the 
affected infrastructure and the geographic location of the incident. 
DHS and its partners also face challenges identifying threats, 
mitigating vulnerabilities, and minimizing the consequences of 
incidents, while managing the risk associated with interdependencies 
among diverse critical infrastructure so that assets, systems, and 
networks can be made more resilient. DHS and its partners are equally 
challenged in protecting federal information technology and the 
nation’s cyber systems, including highly sensitive government and 
personal information and the computer and telecommunications systems 
that are vital to the continued operation of other critical assets, 
systems, and networks. 

GAO’s planned work will help federal decision makers assess efforts to 
protect against and respond to threats and other disasters facing the 
nation, and to identify, prioritize, and allocate resources and 
investments for homeland security. To support efforts by the Congress 
and the federal government to address these issues, GAO has 
established the following performance goals and key efforts: 

Performance Goal 2.1.1: 

Assess federal homeland security management, resources, and 
stakeholder coordination: 

Key Efforts: 

* Assess DHS’s transformation efforts and its ability to appropriately 
measure performance. 

* Assess whether DHS is using a risk-based approach to allocate its 
resources and is being an effective steward of those resources. 

* Evaluate DHS’s and its components’ efforts to acquire, manage, and 
efficiently use their assets. 

* Assess federal efforts to develop and implement homeland security-
related strategies and plans and to coordinate with homeland security 
partners. 

* Evaluate DHS’s efforts to manage science and technology resources 
and assess homeland security technologies to prevent and respond to 
attacks and disasters. 

Performance Goal 2.1.2: 

Assess efforts to strengthen the sharing of terrorism-related 
information: 

Key Efforts: 

* Evaluate federal efforts to implement the information-sharing 
environment. 

* Assess whether agencies’ information-sharing roles and 
responsibilities have been clearly defined to help ensure 
effectiveness and minimize overlap or duplication. 

* Determine federal, state, local, and tribal agencies’ progress in 
sharing terrorism and law enforcement information, including 
technology innovations. 

* Assess how federal, state, local, and tribal agencies balance 
sharing terrorism information with protecting privacy and civil 
liberties. 

Performance Goal 2.1.3: 

Assess efforts to strengthen security in all transportation modes: 

Key Efforts: 

* Assess federal government efforts to secure the aviation, surface, 
and maritime transportation sectors while facilitating the legitimate 
flow of people and commerce. 

* Assess progress in allocating security resources across and within 
all transportation modes based on risk. 

* Assess the security of integrated transportation networks, across 
modes and among federal, state, local, and private-sector stakeholders. 

Performance Goal 2.1.4: 

Assess efforts to strengthen border security and address immigration 
enforcement and services issues: 

Key Efforts: 

* Evaluate DHS’s efforts to prevent the unlawful movement of people, 
money, and materials across U.S. borders. 

* Evaluate DHS’s use of customs and immigration authorities to respond 
to and address security threats and related vulnerabilities. 

* Assess DHS’s efforts to efficiently, effectively, and fairly process 
and adjudicate applications for immigration benefits. 

* Evaluate immigration reform initiatives and proposals. 

Performance Goals 2.1.5: 

Assess U.S. national emergency preparedness and response capabilities: 

Key Efforts: 

* Assess whether the federal government provides reasonable assistance 
to establish needed national preparedness capabilities. 

* Assess whether emergency management organizations have the 
capabilities needed to respond to all disasters. 

* Determine whether emergency management officials are effectively 
using federal grants to establish needed capabilities. 

* Assess the extent to which DHS is leading assessments of federal 
emergency preparedness capabilities. 

Performance Goal 2.1.6: 

Assess the cost, availability, and management of natural catastrophe 
insurance and disaster loan programs: 

Key Efforts: 

* Assess the Federal Emergency Management Agency management of the 
National Flood Insurance Program. 

* Assess the costs and benefits of implementing new or revising 
existing disaster-related insurance programs. 

* Assess efforts to increase private market provision of catastrophic 
insurance coverage. 

* Assess SBA’s disaster recovery efforts. 

Performance Goal 2.1.7: 

Assess efforts to strengthen the protection and resiliency of the 
nation’s critical physical and cyber infrastructure: 

Key Efforts: 

* Assess DHS’s efforts to enhance the resiliency of critical national 
assets, networks, and systems. 

* Review the effectiveness of computer and network security at federal 
agencies to better ensure the protection of government and personal 
information. 

* Assess efforts to manage and protect the computer information 
systems and networks that support the nation’s critical infrastructure. 

* Assess DHS’s efforts to identify and reconcile gaps and overlaps 
between its critical infrastructure protection strategy and the 
regulatory regimes affecting its public and private-sector partners. 

* Assess DHS’s efforts to identify, manage, and mitigate risks 
associated with interdependencies across the spectrum of critical 
assets, systems, and networks. 

Strategic Objective 2.2: 

Ensure Military Capabilities and Readiness: 

U.S. operations in Iraq and Afghanistan have seen increased 
deployments for military personnel, as well as put significant wear 
and tear on military equipment, and it is unclear when these demands 
will diminish. The decision to expand U.S. force levels in Afghanistan 
will place additional demands on DOD, including requirements for new 
types of equipment, additional facilities, and specialized training. 
Beyond these ongoing operations, DOD is confronted with a rapidly 
evolving national security environment exemplified by nonstate actors 
such as terrorists and pirates, as well as cyber attacks and other 
emerging threats. Also, global financial challenges and environmental 
changes could lead to greater instability and conflicts that could 
involve U.S. forces. To meet the continuing demands of current 
operations and adjust to evolving security needs, DOD is pursuing 
broad-based initiatives to grow, modernize, and transform its forces 
to address a more diverse range of threats. However, the nation’s 
fiscal challenges make it increasingly urgent that the department 
manage and prioritize its resources well. 

Budgetary pressures: DOD’s budget represents about half of the federal 
government’s discretionary spending, and the level of resources 
provided to it have increased significantly in recent years. For 
fiscal year 2010, Congress set aside about $661 billion for DOD, 
including about $534 billion for base needs and about $127 billion for 
contingency operations. (See figure 37.) As of December 2009, DOD had 
received about $1 trillion since 2001 to support contingency 
operations, including those in Iraq, Afghanistan, and elsewhere.
Despite the significant resources being devoted to defense, DOD will 
likely face mounting budgetary pressures over the coming 5 years due 
to the broader fiscal challenges the nation faces: 

* As the growth of defense budgets slows, DOD will likely be forced to 
manage trade-offs among operations, personnel, and the development and 
acquisition of major weapon systems. Contingency operations will 
likely continue to require a considerable share of future defense 
budgets; the magnitude of the costs will depend on factors such as the 
scope and duration of the operations and the related, but as yet 
unknown, cost to rebuild the force in the aftermath. 

* While it deals with the demands of continuing large-scale 
operations, DOD must prepare for a range of evolving threats. This 
preparation includes efforts to become more agile—such as with the 
Navy’s development of a multimission littoral combat ship—as well as 
expanding the use of unmanned systems. Personnel costs have risen 
dramatically, partly because the Army and Marines have become larger 
to meet operational demands, but costs have also been driven by 
increases in basic pay, housing allowances, recruitment and retention 
bonuses, and incentive pay and allowances. 

* Reflecting similar trends outside of the military, DOD’s health care 
costs are increasing rapidly and have grown from $17.5 billion in 
fiscal year 2000 ($21.95 billion adjusted for inflation) to $47.4 
billion in fiscal year 2010 budget authority. This cost growth, 
adjusted for inflation, is greater than 115 percent ($25 billion). The 
full human costs of ongoing conflicts are unknown but will likely be 
borne for many years to come; by 2009, more than 30,000 servicemembers 
had been wounded, a number that continues to climb with the ongoing 
operations. 

* Recapitalizing aging equipment will also compete for DOD resources. 
Since 2003, DOD’s portfolio of major defense acquisition programs has 
grown from 77 to 96 programs; and its investment in those programs has 
grown from $1.2 trillion to $1.5 trillion (in fiscal year 2009 
dollars). These programs include new weapons like the Joint Strike 
Fighter and Virginia-class submarine and upgrades to others, such as 
the Apache and Blackhawk helicopters. Improving acquisition outcomes 
will be crucial, as DOD has been unable to consistently achieve its 
goals to deliver weapon systems within the estimated time and costs. 
The consequences of this failure are significant: Hundreds of billions 
of dollars in cost growth for DOD’s portfolio of major defense 
acquisition programs, average delays in delivering capabilities of 
almost 2 years, and an erosion of the buying power of the defense 
dollar that results from fielding more expensive systems in fewer 
numbers. 

Figure 37: DOD’s Budget Authority for Fiscal Years 2001–2010 
(Excluding Contingency Operations): 

[Refer to PDF for image: combined vertical bar and line graph] 

Fiscal year: 2001; 
Nominal dollars: $289.9 billion; 
Constant FY 2010 dollars: $355.3 billion. 

Fiscal year: 2002; 
Nominal dollars: $331.1 billion; 
Constant FY 2010 dollars: $399.2 billion. 

Fiscal year: 2003; 
Nominal dollars: $368.5 billion; 
Constant FY 2010 dollars: $435.2 billion. 

Fiscal year: 2004; 
Nominal dollars: $376.6 billion; 
Constant FY 2010 dollars: $433.6 billion. 

Fiscal year: 2005; 
Nominal dollars: $400.9 billion; 
Constant FY 2010 dollars: $447.0 billion. 

Fiscal year: 2006; 
Nominal dollars: $418.5 billion; 
Constant FY 2010 dollars: $451.2 billion. 

Fiscal year: 2007; 
Nominal dollars: $431.9 billion; 
Constant FY 2010 dollars: $452.5 billion. 

Fiscal year: 2008; 
Nominal dollars: $450.5 billion; 
Constant FY 2010 dollars: $461.3 billion. 

Fiscal year: 2009; 
Nominal dollars: $513.3 billion; 
Constant FY 2010 dollars: $517.9 billion. 

Fiscal year: 2010; 
Nominal dollars: $534.0 billion; 
Constant FY 2010 dollars: $534 billion. 

Source: Department of Defense. 

[End of figure] 

Coordination and integration activities: A growing realization of the 
limits of traditional military power to combat increasingly 
unconventional threats like economic instability or pandemic disasters 
has highlighted the need for U.S. government agencies to improve the 
coordination and integration of national security activities. Federal 
agencies will need to create mechanisms that coordinate national 
security activities across the federal government, such as developing 
overarching strategies to guide the planning and execution of missions 
or sharing and integrating national security information across 
agencies. Even when DOD does not take a lead role in future 
operations, prudent investment will be needed in key capabilities—such 
as cyber operations; unmanned systems; intelligence, surveillance, and 
reconnaissance; and nonlethal weapons. GAO’s work will examine the 
federal government’s investments in these key capabilities. This work 
will also assess approaches for addressing duplication and overlap 
across national security programs and activities, such as integrating 
service delivery, consolidating programs, or setting up better 
coordination approaches to ensure that agencies’ strategic goals are 
mutually reinforcing. 

Nuclear weapons stockpile: The National Nuclear Security 
Administration (NNSA) is responsible for producing nuclear weapons and 
naval reactors, as well as preventing the proliferation of weapons of 
mass destruction. The legislatively mandated Nuclear Posture Review, 
completed in April 2010, recognizes that in the years ahead, new 
approaches will be vital to ensuring that the nation’s nuclear weapons 
stockpile continues to be safe and reliable without additional 
underground testing. Moreover, maintaining and refurbishing the 
stockpile as it ages will require a modern, efficient, and secure 
research and development and production infrastructure. Meeting these 
challenges will also require NNSA to have effective human-capital 
strategies to respond to an aging contractor and federal workforce. 
Our work in the coming years will help ensure that NNSA achieves 
effective results from the more than $6 billion per year spent on 
these efforts, with a particular focus on NNSA’s efforts to improve 
its project management and contract administration—an area we have 
identified as being at high risk for fraud, waste, and abuse. 

Business operations: Importantly, DOD has an opportunity over the next 
few years to take concrete steps to correct long-standing weaknesses 
in its business operations, as well as free up resources that can 
better position the department to respond to changing economic 
conditions and future threats. DOD is taking some positive steps to 
formally establish business leadership positions and institutions so 
that defense business operations not only deliver the outcomes 
expected under the terms of DOD’s overarching strategic plan, the 
Quadrennial Defense Review, but also respond and adapt to emerging 
needs and unexpected problems. In addition, the department will need 
to continue to take steps to meet the congressionally mandated 
organizational changes designed to increase DOD’s emphasis on 
acquisition improvements, such as cost estimating, program 
performance, systems engineering, and developmental testing. These 
changes, if implemented consistently, could improve the department’s 
return on investment in this area. Lasting reform in defense business 
operations will require DOD to follow through by setting priorities, 
strengthening management accountability, executing plans, implementing 
policy, gauging actual progress against goals, and making adjustments 
as needed. 

Major weapon systems acquisition: One area where DOD needs to make 
real progress is in improving its approach to acquiring major weapon 
systems. Total acquisition cost growth on DOD’s fiscal year 2008 
portfolio of major programs reached nearly $300 billion over initial 
estimates. DOD’s ability to successfully adapt to budgetary 
constraints will depend in great measure on its ability to better 
manage weapon systems acquisition. At the program level, programs are 
often begun and continued without enough knowledge about a system’s 
requirements, technology, and design. Lacking such knowledge, managers 
rely on assumptions that are consistently too optimistic, exposing 
programs to significant and unnecessary risk and, ultimately, cost 
growth and delays. Cost overruns lead to fewer resources for other 
priorities and reduced buying power for DOD, and schedule delays mean 
that the warfighter does not get critical capabilities when needed and 
therefore relies on legacy systems or goes without. The Congress and 
DOD have recently addressed many of these issues through acquisition 
reform legislation and changes to acquisition policy. However, many 
efforts at acquisition reform have been tried in the past without much 
success. Sustained leadership and consistent implementation of these 
recent reforms are necessary if DOD hopes to improve its weapon system 
program outcomes. 

Supply chain network and support infrastructure: Improving management 
of DOD’s vast and complex supply chain network and support 
infrastructure represents opportunities to increase efficiency, 
improve effectiveness, reduce waste, and free up resources for other 
priorities. For example, DOD officials have estimated that the level 
of investment in the department’s supply chains is more than $150 
billion a year, and the value of its spare part inventories has grown 
by tens of billions of dollars in recent years. Yet, the department 
continues to have substantial unneeded inventory. Furthermore, DOD 
faces challenges in managing its portfolio of facilities, halting 
facilities’ degradation, and reducing unneeded infrastructure to save 
money. DOD also faces challenges in relocating over 120,000 personnel 
to new bases, which will prompt significant new construction. As a 
result, DOD’s budget will be even further squeezed as it attempts to 
complete all required construction, maintain facilities to avoid 
degradation, and ensure adequate installation support for DOD’s 
mission and the quality of life for DOD personnel and their families. 

DOD contractor-supported missions: DOD’s ongoing reliance on 
contractor-provided services to support its missions makes effective 
management and oversight of these contracts critical. DOD obligated 
about $207 billion on contracts for services in fiscal year 2009. 
[Footnote 32] At installations within the United States, contractors 
provide base operations support (such as food and housing) and other 
administrative and logistical support. In Iraq and Afghanistan, where 
DOD reported that more than 217,000 contractors were supporting its 
efforts as of September 30, 2009, contractors provide not only 
traditional logistical support—such as base operations support and the 
maintenance of weapon systems—but also intelligence analysis and 
interpreters who accompany military patrols. This reliance on 
contractors will continue to present several challenges for DOD, such 
as: 

* determining which functions and activities should be contracted out 
and which should not to ensure institutional capacity; 

* developing a total workforce strategy to address the appropriate mix 
of contractor and government personnel; 

* identifying and distinguishing the roles and responsibilities of 
contractors and civilian and military personnel; and; 

* ensuring appropriate oversight, including addressing risks, ethics 
concerns, and surveillance needs. 

GAO’s recent and forthcoming work on these challenges will support 
congressional oversight and assist DOD in determining the appropriate 
role of contractors in supporting the military in carrying out its 
mission. 

Human-capital management: In addition to contractors, DOD needs 
effective management of its total workforce of over 3 million active 
duty, guard, reserve, and civilian personnel to maximize their value 
in achieving its mission. The cornerstones of human-capital management 
are leadership; strategic planning; acquiring, developing, and 
retaining talent; and creating results-oriented organizational 
cultures. However, DOD faces numerous challenges, including 
competition with the private sector, in making sure that it has the 
right number of people with the right skills. Also, social and 
behavior factors, such as incidents of sexual assault or domestic 
violence, can undermine core values and negatively affect readiness. 

Taken together, the national security challenges are immense, and our 
work can help the Congress and federal leaders as they seek to 
reconcile competing demands, strengthen interagency collaboration, and 
improve defense business operations to make the most of the nation’s 
investment in national security. Specifically, GAO has established the 
following performance goals and key efforts: 

Performance Goal 2.2.1: 

Assess DOD’s ability to meet operational demands while preparing for 
the future: 

Key Efforts: 

* Assess services’ readiness and training to accomplish missions. 

Evaluate plans for transforming active and reserve forces. 

* Analyze DOD plans for maintaining and modernizing strategic 
capabilities. 

* Review global posture and forward presence plans. 

Performance Goal 2.2.2: 

Assess DOD’s efforts to secure the homeland and respond to emerging 
threats and irregular warfare: 

Key Efforts: 

* Evaluate DOD’s role and collaboration in homeland security. 

* Evaluate DOD’s preparedness for emerging threats and irregular 
warfare, including chemical, biological, radiological, and nuclear 
attacks from nonstate actors. 

* Assess DOD’s protection of its forces, critical infrastructure, and 
assets worldwide. 

* Assess DOD’s efforts to improve and integrate command, control, 
communications, computers, intelligence, surveillance, and 
reconnaissance. 

Performance Goal 2.2.3: 

Assess DOD’s progress and challenges in improving interagency 
collaboration for national security: 

Key Efforts: 

* Assess DOD’s efforts to work with U.S. agencies and international 
partners to plan and execute operations overseas. 

* Evaluate DOD’s progress toward developing integrated joint and 
interagency capabilities in its regional commands and other 
organizations. 

* Assess DOD’s progress in developing a workforce skilled in an 
interagency environment. 

Performance Goal 2.2.4: 

Assess DOD’s human-capital management to ensure a high-quality total 
force: 

Key Efforts: 

* Assess DOD’s approach to determining requirements and managing its 
military, civilian, and contractor workforce. 

* Assess DOD’s efforts to improve management of its active-duty, 
reserve, and civilian personnel workforce. 

* Assess DOD’s management of its financial resources to compensate 
personnel. 

* Assess DOD’s policies and programs for addressing social and 
behavioral factors. 

Performance Goal 2.2.5: 

Assess the ability of weapon system acquisition programs and processes 
to achieve desired outcomes: 

Key Efforts: 

* Identify ways for DOD to prioritize its investments in weapon 
systems. 

* Assess the performance of and budget requests for weapon programs. 

* Analyze individual weapon programs to ensure that they are ready to 
start development or production. 

* Identify best practices to address problems that consistently affect 
weapon programs. 

* Assess DOD’s implementation of acquisition reforms. 

Performance Goal 2.2.6: 

Assess DOD’s progress in improving the economy, efficiency, and 
effectiveness of its logistics and support infrastructure: 

Key Efforts: 

* Assess efforts to provide timely support to the warfighter and 
address emerging requirements. 

* Evaluate the need and opportunities for improving logistics 
functions and systems. 

* Assess facilities maintenance and modernization. 

* Assess implementation of base realignment and closure efforts. 

Performance Goal 2.2.7: 

Assess the National Nuclear Security Administration’s efforts to 
maintain a safe and reliable nuclear weapons stockpile: 

Key Efforts: 

* Assess NNSA’s research, development, and production programs to 
support a safe and reliable stockpile. 

* Evaluate NNSA’s personnel, procurement, and planning systems. 

* Assess NNSA’s development of effective and efficient security 
programs to protect nuclear weapons, materials, and information. 

Performance Goal 2.2.8: 

Assess DOD’s efforts to adapt and leverage management processes to 
improve performance: 

Key Efforts: 

* Analyze funding and costs of military operations and programs. 

* Assess DOD’s efforts and identify alternative approaches to improve 
planning, programming, and budgeting. 

* Assess DOD’s efforts to provide leadership for the transformation of 
its business operations. 

Strategic Objective 2.3: 

Advance and Protect U.S. Foreign Policy Interests: 

In the second decade of the 21st century, the United States will 
continue to see growing challenges to its foreign policy interests, 
which include promoting global peace, prosperity, and stability. As 
boundaries become more fluid, more people, goods, money, culture, and 
information move across them more rapidly. As a result, the United 
States will be increasingly faced with international challenges, and 
Americans will more keenly feel the effects of these challenges, which 
include: 

* unstable and failed states; 
* ongoing terrorist and proliferation threats; 
* humanitarian, economic, and political crises; 
* breakdowns in multilateral consensus; and; 
* a tarnished U.S. image abroad. 

These complex challenges will call for flexible and multifaceted 
government responses that combine sustained international security 
interventions, including vigilant international counterterrorism and 
nonproliferation efforts, with effective U.S. foreign assistance, 
collaborative multilateral participation, and strong U.S. diplomatic 
presence. GAO identified advancing U.S. efforts in Iraq, Afghanistan, 
and Pakistan as a major government challenge in November 2009 (see 
[hyperlink, http://www.gao.gov/highrisk/]). Such activities cross 
organizational and programmatic boundaries and put a premium on 
strategic planning, interagency coordination, and international 
partnerships. These activities will also require substantial 
resources. For example, the U.S. government has already provided more 
than $100 billion to State, DOD, the U.S. Agency for International 
Development (USAID), and other agencies for stabilization and 
reconstruction, and for capacity-building efforts in Afghanistan, 
Iraq, and Pakistan. 

International security: Major U.S. security operations will continue 
in Iraq and Afghanistan and around the world to maintain peace among 
nations or stabilize states, either unilaterally or with the support 
of U.S. allies—including the North Atlantic Treaty Organization (NATO) 
and United Nations (UN) peacekeepers. In other conflict areas, the UN 
is working to build sustainable peace in 15 peacekeeping operations 
worldwide, including Darfur, Lebanon, and the Democratic Republic of 
the Congo; however, the lack of donor country resources hinders some 
operations from fully carrying out their mandates. 

The U.S. government, along with other member countries, is helping the 
UN address resource challenges, particularly with regard to 
specialized military units, police, and civilians. The United States 
will continue to provide bilateral security assistance and pursue 
programs that counter transnational threats in order to foster 
international security—including, for example, drug and arms 
trafficking, which not only destabilizes the U.S.–Mexico border, but 
also continues to affect regional stability in strategically important 
areas of Asia and Latin America. 

Nevertheless, achieving U.S. objectives to stabilize regional 
conflicts and address security challenges will require long-term 
efforts. Building and sustaining such efforts requires commitment, 
coordination, resources, and consensus—which can be difficult to 
obtain in the face of competing international priorities and strained 
resource bases. GAO’s work will help the Congress monitor these 
complex security challenges, including the implications of the planned 
drawdown of U.S. forces in Iraq and buildup of forces in Afghanistan. 

International counterterrorism: Since 2001, the United States has 
increased and realigned its resources, as well as developed strategies 
to achieve the critical national security goal of disrupting, 
dismantling, and defeating terrorist threats and closing terrorist 
safe havens, such as Pakistan’s Federally Administered Tribal Areas 
and border region with Afghanistan, that provide protection to those 
who seek to threaten U.S. interests and citizens at home and abroad: 

* In conjunction with international partners, the United States 
spearheads global efforts to identify and disrupt active international 
terrorist groups, such as al Qaeda, and reduce their flow of support 
(e.g., from terrorist financing and violent extremists). Various U.S. 
international agencies are engaged in activities to more effectively 
block the entry of terrorists and criminals; protect U.S. personnel 
overseas; and pursue military, intelligence, law enforcement, 
development, diplomatic, and economic efforts to erode terrorist 
networks and their sources of support. 

* To advance these efforts, U.S. agencies will continue a variety of 
counterterrorism-related assistance programs to provide partner 
nations with training and equipment and improve bilateral ties. For 
example, U.S. agencies will help train and equip foreign countries to 
prevent, combat, and respond to terrorism and will invest billions of 
dollars to replace or harden government facilities overseas. 

* The U.S. government has renewed its emphasis on key programs to 
protect U.S. borders and prevent the entry of those who are a danger 
to the United States or are likely to remain in the United States 
illegally. 

* Additionally, the United States is increasing the use of nonmilitary 
efforts, such as giving economic and development assistance, to 
address terrorist threats abroad. GAO will address continuing concerns 
about whether government agencies are effectively coordinating an 
international approach to combating terrorism. GAO will also assess 
whether agencies have efforts under way to mitigate program, resource, 
and security challenges that would otherwise adversely affect their 
missions. 

Nonproliferation: The proliferation of weapons of mass destruction 
continues to receive heightened attention because of concerns that 
terrorists or a rogue regime could threaten the United States with 
nuclear, chemical, radiological, or biological attack. The centerpiece 
of U.S. nonproliferation efforts is a multibillion-dollar array of 
efforts by DOD, the Department of Energy, and State to help former 
Soviet states control and reduce their vast, diverse holdings of Cold 
War-era nuclear, biological, and chemical weapons and their related 
delivery systems and infrastructure. 

However, U.S. programs have moved beyond past agreements with the 
former Soviet Union to focus on risks from other countries and 
terrorist networks seeking weapons of mass destruction. The United 
States is renewing nonproliferation efforts, as shown by the President’
s September 2009 address to the UN, in which he emphasized the need to 
curb Iranian and North Korean nuclear programs, reach new nuclear 
agreements with Russia, and provide high-level attention to arms 
control agreements, such as the Comprehensive Test Ban Treaty. The 
United States also seeks ways to strengthen and modernize multilateral 
export controls over sensitive technologies and weapon systems through 
its national export control system and multilateral arrangements with 
other nations that trade in these technologies. GAO’s work will help 
the Congress maintain attention on the serious threats posed by the 
international spread of these weapons and related technologies. 

Foreign assistance: Bilateral and multilateral foreign assistance is 
central to advancing U.S. international interests, and the U.S. 
government’s process for managing such assistance continues to evolve. 
Policymakers have pursued organizational and procedural changes 
intended to enhance the effective use of foreign assistance. 
Furthermore, increased momentum for additional foreign assistance 
reforms may result from a presidential directive examining development 
policy and the first Quadrennial Diplomacy and Development Review, 
announced in July 2009. 

These changes have sought to more fully align programs carried out by 
State, USAID, and the more than 25 other U.S. departments and agencies 
involved in delivering U.S. development, humanitarian, and economic 
assistance and carrying out activities fostering democracy and human 
rights. For example, the U.S. government will provide about $24.2 
billion for such assistance in 2010, including basic education, 
disaster relief, and aid to refugees in strategic regions such as 
Africa and Asia. For 2011, the President requested about $1.28 billion 
to provide developing countries with development assistance through 
the Millennium Challenge Corporation. 

The administration has committed to increasing foreign assistance—
seeking to double it by 2015—and is emphasizing development—building 
countries’ capacities for transformational change—as a key element of 
U.S. foreign policy. These efforts support the globally agreed 
Millennium Development Goals set through the UN a decade ago.
In addition to these bilateral efforts, the United States delivers 
some of this foreign assistance through international partners and a 
wide variety of multilateral organizations, including the UN and 
related agencies. In 2009, major donor countries agreed to a $22 
billion, 3-year commitment for agriculture and food security for 
developing countries. The U.S. share of this commitment—at least $3.5 
billion—includes $1.2 billion toward the administration’s Global 
Hunger and Food Security (or Feed the Future) initiative in fiscal 
year 2010, representing more than double the fiscal year 2009 budget 
request. Moreover, the President proposed $63 billion in funding for 
all global health programs through 2014, with more than 70 percent of 
this amount for AIDS relief. In signing the Copenhagen Accord at the 
2009 United Nations Climate Change Conference, the United States 
committed to join with other developed countries to provide new and 
additional resources approaching $30 billion from 2010 to 2012 and to 
jointly mobilize $100 billion by 2020 to support developing countries 
in combating climate change. Nevertheless, the January 2010 earthquake 
in Haiti is an example of an unforeseen major event that may place new 
demands on foreign assistance resources and require changes in agency 
plans. 

GAO’s work will focus on helping the Congress assess the efficiency 
and impact of U.S. foreign assistance. 

Membership in multilateral organizations: U.S. participation in a wide 
variety of multilateral organizations—including the UN and 11 related 
agencies (such as the International Atomic Energy Agency), the 
International Monetary Fund, the World Bank, and four regional 
development banks—was sometimes debated during the last 
administration. It remains to be seen whether the new administration 
will work more through multilateral forums to build international 
consensus for actions that further U.S. foreign policy goals. Although 
multilateral organizations facilitate international cooperation in 
many areas, questions continue to arise about these organizations’ 
effectiveness and their ability to advance U.S. interests. As a 
result, the United States will remain a strong advocate of action 
within multilateral organizations to (1) address today’s needs, 
threats, and opportunities; (2) become more efficient and effective; 
and (3) ensure financial and programmatic accountability for funds 
that member nations provide. For example, the United States has urged 
the UN to implement key management reforms and improve its internal 
controls and has supported efforts to combat corruption in 
international organizations’ programs. GAO’s key efforts will help the 
Congress monitor the success of these efforts and may provide further 
impetus for such improvements. 

U.S. diplomatic presence: The United States must safeguard and ensure 
the strategic use of U.S. government personnel and resources overseas 
as they are called on to operate in a growing number of dangerous 
locations. U.S. diplomats are working to adapt to today’s highly 
volatile global environment and to instantaneous worldwide 
communications. 

As a result, in November 2009, GAO identified “ensuring effective 
representation of U.S. diplomatic interests and image” as a major 
government challenge that it now tracks on GAO’s High Risk and Other 
Major Government Challenges Web site.[Footnote 33] Throughout the 
world, the public face of the United States generates strong opinions, 
both positive and negative. Negative perceptions of the United States 
persist in many locations, despite the investment of billions of 
dollars on communication designed to advance U.S. strategic interests 
abroad and promote U.S. national security objectives, such as 
countering ideological support for violent extremism. Enhancing the 
U.S. public image overseas and engaging foreign audiences directly 
through social networks and technologies (such as Facebook and 
Twitter) can help the U.S. government achieve its foreign policy and 
assistance objectives. 

In addition, U.S. diplomatic readiness is compromised by several 
issues, including human-capital and physical-infrastructure 
challenges, which have prompted reforms that continue to affect the 
overseas presence of about 23,000 U.S. staff from more than 30 
agencies who work in more than 260 diplomatic posts in about 180 
countries. For example, State must continue to address persistent 
staffing gaps at critical posts and shortfalls in foreign language 
capabilities, both of which compromise diplomatic readiness. State has 
undertaken several initiatives to address these problems, but has not 
done so in a comprehensive and strategic manner. 

More broadly, the potential is great for overlap and poorly 
coordinated roles and responsibilities with so many agencies involved 
in U.S. foreign affairs activities. GAO will help the Congress seek to 
ensure that: 

* critical programs achieve their intended results; 

* the U.S. government has a sound strategic plan for carrying out its 
foreign affairs functions and activities; and; 

* resources are aligned with needs, particularly to ensure that new 
secure embassy compounds—which can cost hundreds of millions of 
dollars—are designed for the right number of staff. 

GAO’s key efforts will help the Congress guide the evolution of U.S. 
diplomacy and presence overseas. 

GAO’s work on issues that advance and protect U.S. foreign policy 
interests will continue to look across programmatic, organizational, 
and geographic boundaries to bring objective perspective and 
thoughtful analysis to inform policymakers and the public. To support 
efforts by the Congress and the federal government to address these 
challenges in international security, counterterrorism, 
nonproliferation, foreign assistance, multilateral organizations, and 
U.S. diplomatic presence, GAO has established the following 
performance goals and key efforts: 

Performance Goal 2.3.1: 

Analyze the strategies, plans, roles, costs, and results of 
international security activities: 

Key Efforts: 

* Evaluate U.S. and multilateral activities to stabilize security in 
areas of conflict. 

* Assess multinational peacekeeping and U.S. military alliances with 
other nations or international organizations, such as NATO. 

* Assess the management of U.S. bilateral security assistance 
programs, such as foreign military financing and training. 

* Evaluate U.S. efforts to counter transnational threats, such as 
illegal trafficking in drugs and other illicit activities. 

Performance Goal 2.3.2: 

Evaluate the coordination and effectiveness of U.S. and international 
counterterrorism efforts: 

Key Efforts: 

* Evaluate U.S. programs to train and equip foreign countries to 
prevent, combat, and respond to terrorism. 

* Assess U.S. efforts to protect overseas personnel, facilities, and 
interests from terrorist attack. 

* Assess U.S. international programs focused on preventing and 
combating the growth of terrorism and violent extremist ideology. 

* Evaluate U.S. efforts to improve passport, visa, and other processes 
to prevent terrorists or criminals from entering the United States. 

Performance Goal 2.3.3: 

Assess the effectiveness of U.S. and international efforts to prevent 
proliferation of nuclear, biological, chemical, radiological, and 
conventional weapons and sensitive technologies: 

Key Efforts: 

* Evaluate U.S. programs and facilities’ safety to minimize 
proliferation of nuclear, biological, chemical, radiological, and 
conventional weapons. 

* Assess the impact of multilateral agreements to reduce arsenals of 
weapons of mass destruction. 

* Assess the management and effectiveness of U.S. and multilateral 
controls over exports of sensitive goods and technologies. 

Performance Goal 2.3.4: 

Analyze the implementation and management of U.S. bilateral and 
multilateral foreign assistance: 

Key Efforts: 

* Evaluate U.S. efforts to provide development assistance. 

* Examine U.S. efforts to provide humanitarian assistance. 

* Assess U.S. efforts to provide economic assistance. 

* Analyze U.S. activities to promote democracy and human rights. 

Performance Goal 2.3.5: 

Evaluate the extent to which U.S. membership in multilateral 
organizations serves U.S. interests: 

Key Efforts: 

* Assess the effectiveness of U.S. participation in multilateral 
organizations. 

* Review institutional management and reform. 

Performance Goal 2.3.6: 

Assess the strategies and practices for maximizing the U.S. diplomatic 
presence and general management of international activities: 

Key Efforts: 

* Evaluate the efficacy of U.S. public diplomacy and other key 
programs to enhance the U.S. image abroad. 

* Assess efforts to improve U.S. diplomatic readiness. 

* Assess efforts to achieve the optimal level of U.S. overseas 
presence. 

Review broader efforts to strategically align overall foreign affairs 
management. 

Strategic Objective 2.4: 

Respond to the Impact of Global Market Forces on U.S. Economic and 
Security Interests: 

While the steady opening of international markets helped fuel global 
development and the growth of U.S. trade and investment in the past, 
the global financial crisis and severe economic downturn that began in 
fall 2008 demonstrated that closer global integration can bring 
greater susceptibility to financial risk and loss. Further, the 
continuing emergence of several large and economically significant 
developing countries—such as Brazil, China, and India—has shifted 
traditional patterns of trade, production, and investment and poses 
questions concerning future U.S. economic and security strategies. 
Current account surpluses with the United States have contributed to 
the buildup of foreign currency reserves in some economies. Since 
1990, international reserves in advanced economies have grown nearly 
five-fold, and reserves in emerging and developing economies have 
increased more than twenty-five-fold. International reserves in 
emerging and developing economies overtook those of advanced economies 
in 2005. (See figure 38.) In addition, the same mechanisms that 
facilitate the free flow of goods and people also potentially increase 
U.S. vulnerability to national security threats. 

Figure 38: International Reserves, 1990–2009: 

[Refer to PDF for image: multiple line graph] 

Year: 1990; 
Emerging and developing economies: $0.20 trillion; 
Advanced economies: $0.62 trillion; 
World: $0.99 trillion. 

Year: 1991; 
Emerging and developing economies: $0.25 trillion; 
Advanced economies: $0.78 trillion; 
World: $1.04 trillion. 

Year: 1992; 
Emerging and developing economies: $0.26 trillion; 
Advanced economies: $0.76 trillion; 
World: $1.04 trillion. 

Year: 1993; 
Emerging and developing economies: $0.32 trillion; 
Advanced economies: $0.81 trillion; 
World: $1.15 trillion. 

Year: 1994; 
Emerging and developing economies: $0.38 trillion; 
Advanced economies: $0.91 trillion; 
World: $1.31 trillion.  

Year: 1995; 
Emerging and developing economies: $0.47 trillion; 
Advanced economies: $1.04 trillion; 
World: $1.53 trillion. 

Year: 1996; 
Emerging and developing economies: $0.56 trillion; 
Advanced economies: $1.1 trillion; 
World: $1.70 trillion. 

Year: 1997; 
Emerging and developing economies: $0.62 trillion; 
Advanced economies: $1.12 trillion; 
World: $1.75 trillion; 

Year: 1998; 
Emerging and developing economies: $0.64 trillion; 
Advanced economies: $1.16 trillion; 
World: $1.81 trillion. 

Year: 1999; 
Emerging and developing economies: $0.68 trillion; 
Advanced economies: $1.24 trillion; 
World: $1.93 trillion. 

Year: 2000; 
Emerging and developing economies: $0.74 trillion; 
Advanced economies: $1.32 trillion; 
World: $2.07 trillion. 

Year: 2001; 
Emerging and developing economies: $0.82 trillion; 
Advanced economies: $1.36 trillion; 
World: $2.19 trillion. 

Year: 2002; 
Emerging and developing economies: $0.99 trillion; 
Advanced economies: $1.57 trillion; 
World: $2.57 trillion. 

Year: 2003; 
Emerging and developing economies: $1.29 trillion; 
Advanced economies: $1.90 trillion; 
World: $3.20 trillion. 

Year: 2004; 
Emerging and developing economies: $1.71 trillion; 
Advanced economies: $2.20 trillion; 
World: $3.92 trillion. 

Year: 2005; 
Emerging and developing economies: $2.25 trillion; 
Advanced economies: $2.16 trillion; 
World: $4.42 trillion. 

Year: 2006; 
Emerging and developing economies: $3.00 trillion; 
Advanced economies: $2.32 trillion; 
World: $5.34 trillion. 

Year: 2007; 
Emerging and developing economies: $4.27 trillion; 
Advanced economies: $2.50 trillion; 
World: $6.78 trillion. 

Year: 2008; 
Emerging and developing economies: $4.85 trillion; 
Advanced economies: $2.57 trillion; 
World: $7.44 trillion. 

Year: 2009; 
Emerging and developing economies: $5.51 trillion; 
Advanced economies: $3.06 trillion; 
World: $8.57 trillion. 

Source: GAO analysis of International Monetary Fund data. 

Note: International reserves are assets available for financing 
international payments that are controlled by finance ministries and 
central banks. Such reserves can be used to cushion an export 
shortfall or defend the home currency in a financial crisis. 

[End of figure] 

World financial system: Restoring and maintaining global financial 
health and the maintenance of the world financial system are critical 
to long-term U.S. objectives and are cornerstones of U.S. foreign 
policy. International efforts in this area are primarily undertaken 
through international financial institutions, most notably the World 
Bank and the International Monetary Fund (IMF), and use various means 
to help countries deal with complex financial problems and development 
needs. These international financial institutions will be using new or 
revised mechanisms to anticipate, prevent, and resolve financial 
crises, but it remains to be seen if these mechanisms will safeguard 
the stability of the international financial system and enhance 
recovery. For example, with increased support in response to the 
global financial crisis and persistent poverty in many developing 
countries, these multilateral organizations will seek to keep finance 
available to support global recovery. These organizations will also 
work to address the increasing or heavy debt burdens of low-income 
countries, about 40 of which have been classified as heavily indebted. 
The United States is the IMF’s major contributor and relies heavily on 
it and the World Bank to promote global economic health. Given the 
significant role of these institutions in responding to the global 
financial crisis, their programs, operations, and transparency are 
likely to come under increased scrutiny. 

In addition, as foreign government-controlled sovereign wealth funds 
continue to grow, the United States will need to make new efforts to 
monitor their transparency and potential impacts. The Export-Import 
Bank of the United States will continue to play an important role in 
promoting U.S. exports, including in areas such as small and minority-
owned businesses, and financing for environmental exports. GAO stands 
ready to provide the Congress with independent assessments of these 
complex international financial challenges. 

International trade: As the world economy tries to recover from the 
recent recession, the United States will see increasing opportunities 
and challenges in international trade with regard to promoting 
economic growth and creating well-paying jobs. The United States has 
been the principal architect of the open world trading system, as 
embodied in the World Trade Organization and other trade agreements, 
and has benefited immensely from global trade and investment. Yet, 
ongoing multilateral trade negotiations have stalled, as has U.S. 
approval of some bilateral free trade agreements. Trade will remain a 
vital part of U.S. economic prosperity and growth, but large trade 
imbalances between the United States and the rest of the world will 
need to decline to lessen distortions and risks in the global economy. 
(See figure 39.) It is uncertain whether a new consensus in the 
Congress to seek more open trade and investment will emerge, at least 
in part because segments of the U.S. and world populations have not 
shared equally in the benefits and may not do so in the future. The 
effective monitoring and enforcing of trade agreements the United 
States has signed, which govern access to most of the world’s export 
markets, will be crucial to ensuring that they achieve their intended 
goals. 

Figure 39: U.S. Trade as a Percentage of U.S. GDP, 1990–2009: 

[Refer to PDF for image: combined vertical bar and line graph] 

Percentage of U.S. GDP: 

Year: 1990; 
Deficit: 1.33%; 
Imports: 10.85%; 
Exports: 9.51%. 

Year: 1991; 
Deficit: 0.44%; 
Imports: 10.40%; 
Exports: 9.95v 

Year: 1992; 
Deficit: 0.51%; 
Imports: 10.52%; 
Exports: 10.01%. 

Year: 1993; 
Deficit: 0.96%; 
Imports: 10.79%; 
Exports: 9.83%. 

Year: 1994; 
Deficit: 1.30%; 
Imports: 11.48%; 
Exports: 10.17%. 

Year: 1995; 
Deficit: 1.22%; 
Imports: 12.17%; 
Exports: 10.94%. 

Year: 1996; 
Deficit: 1.22%; 
Imports: 12.29%; 
Exports: 11.06%. 

Year: 1997; 
Deficit: 1.21%; 
Imports: 12.67%; 
Exports: 11.45%. 

Year: 1998; 
Deficit: 1.84%; 
Imports: 12.68%; 
Exports: 10.84%. 

Year: 1999; 
Deficit: 2.80%; 
Imports: 13.37%; 
Exports: 10.57v 

Year: 2000; 
Deficit: 3.83%; 
Imports: 14.82%; 
Exports: 10.98%. 

Year: 2001; 
Deficit: 3.60%; 
Imports: 13.5%; 
Exports: 9.99%. 

Year: 2002; 
Deficit: 4.01%; 
Imports: 13.43%; 
Exports: 9.42%. 

Year: 2003; 
Deficit: 4.52%; 
Imports: 13.86%; 
Exports: 9.34%. 

Year: 2004; 
Deficit: 5.21%; 
Imports: 15.15%; 
Exports: 9.94%. 

Year: 2005; 
Deficit: 5.71%; 
Imports: 16.04%; 
Exports: 10.32%. 

Year: 2006; 
Deficit: 5.74%; 
Imports: 16.72%; 
Exports: 10.97%. 

Year: 2007; 
Deficit: 5.07%; 
Imports: 16.83%; 
Exports: 11.76%. 

Year: 2008; 
Deficit: 4.90%; 
Imports: 17.58%; 
Exports: 12.67%. 

Year: 2009; 
Deficit: 2.75%; 
Imports: 13.72%; 
Exports: 10.97%. 

Source: GAO analysis of U.S. Department of Commerce data. 

[End of figure] 

In addition, despite the nation’s $1.6 trillion in exports in 2009, 
significant foreign trade barriers in fast-growing markets in 
developing countries remain, and fewer than 1 percent of U.S. firms 
are identified as exporters; this presents great potential for 
continued trade liberalization and federal export promotion 
activities. The rapid growth in Brazil, China, and India will increase 
international competition for natural resources, will compound global 
climate change and greenhouse gas emissions, and parallels the growing 
role of developing countries in international negotiations and the 
world trading system. 

Policymakers will be forced to respond to these challenges, and in 
doing so, to balance calls for protection from industries at risk from 
the “offshoring” of U.S. jobs against calls supporting resumed or 
increased trade that many consider vital to global economic health. 
Similarly, U.S. agencies will continue to face management challenges 
as they balance their varied functions, such as upholding free and 
fair trade, protecting intellectual property rights, preventing trade 
in illegal goods such as conflict diamonds, and collecting duties of 
close to $30 billion annually. GAO’s key efforts will help the 
Congress assess these competing international trade interests and the 
outcomes. 

Global supplier base: The globalization of the supplier base is 
changing the way the United States obtains technologies and 
capabilities to best serve its national security interests. Domestic 
firms that develop defense products, parts, and weapon systems and 
integrate and maintain those systems often rely on a supplier network 
of both domestic and foreign firms. At the same time, DOD has shown a 
willingness to acquire goods and services from foreign suppliers to 
achieve its goals. For example, the department has partnered with 
foreign allies to develop major weapon systems, such as the F-35 
aircraft program. Globalization presents opportunities to DOD, such as 
the potential to speed innovation and reduce costs, but it also 
carries potential threats to the technological superiority of the U.S. 
military and may require new approaches to protect national security 
interests. Because of weaknesses we identified in the programs to 
protect technologies critical to U.S. national security interests, GAO 
continues to include this area in its High-Risk List. GAO’s 
independent assessments of the effects of increased reliance on a 
globalized defense industrial base will provide information needed for 
DOD to better manage its critical technologies, as well as its 
interactions with the global supplier base. 

To support efforts by the Congress and the federal government to 
address issues that relate to the impact of global market forces on 
U.S. economic and security interests, GAO has established the 
following performance goals and key efforts: 

Performance Goal 2.4.1: 

Assess how the United States can influence improvements in the world 
financial system: 

Key Efforts: 

* Assess the operations of international financial institutions. 

* Provide insight about international debt issues. 

* Review international investment and exchange issues. 

* Evaluate U.S. government international financing and guarantees. 

Performance Goal 2.4.2: 

Analyze how international trade serves U.S. interests: 

Key Efforts: 

* Examine efforts to ensure and increase access to foreign markets and 
sources, including trade agreements and export promotion activities. 

* Assess the effectiveness of duty collections, trade remedies against 
injurious goods, and other import programs. 

* Analyze emerging trade policy issues and crosscutting trade 
management challenges. 

Performance Goal 2.4.3: 

Improve understanding and management of the effects of a global 
supplier base on U.S. national security interests: 

Key Efforts: 

* Evaluate the effectiveness of U.S. government programs designed to 
protect critical technologies. 

* Assess DOD’s management of its commercial and foreign supplier base. 

[End of Goal 2] 

Goal 3: 

Help Transform the Federal Government to Address National Challenges: 

Our national government faces serious short- and long-term challenges, 
including working through the aftermath of the most serious economic 
crisis since the Great Depression and continuing to improve efforts to 
prepare for, respond to, and recover from national emergencies, such 
as natural disasters, mass-casualty events, and pandemics. The nation’
s success in meeting these and other large-scale challenges depends on 
how the federal government works with its partners; manages its 
performance; maximizes its resources; and promotes efficiency, 
effectiveness, and accountability in all of its endeavors. The federal 
government must transform itself to: 

* work more effectively across silos and traditional boundaries, 
* form new relationships and strengthen existing ones, 
* modernize its systems and improve operations, and, 
* find new strategies for allocating limited resources. 

To meet the economic challenges over the next 5 years, the federal 
government must address the nation’s long-term fiscal outlook, which 
shows escalating deficits and debt even after economic recovery. 
Examining all aspects of fiscal policy is needed to help the 
government ensure that its fiscal position improves. Evaluating 
existing programs and operations, as well as tax administration for 
opportunities to reduce fraud, waste, abuse, and mismanagement, will 
also help create flexibility to meet the nation’s needs. 

Access to complete, reliable, and timely federal financial information 
will be critical. The nation’s leaders need a clear and realistic 
assessment of the federal government’s financial condition and cost of 
operations to address long-term challenges, including the direction of 
federal programs and policies. Yet, much work lies ahead to strengthen 
the current state of federal financial management and accountability. 

Because the public expects demonstrable results from the federal 
government, government leaders need to address management challenges 
and high-risk issues with better strategic planning, crosscutting 
approaches, and a focus on results. Helping create a capacity for and 
a culture that embraces risk management will be critical to navigating 
rapid change, uncertainty, and fiscal strain. Further, the changing 
role of government, along with increasing global interdependence, 
means that the federal government must work closely with state and 
local governments, nongovernmental organizations, and the private 
sector—domestically and internationally—to achieve results. 
Accordingly, GAO will focus on the government’s role in achieving 
national goals in an increasingly networked and globalized environment 
and on the government’s ability to report on, deliver, and account for 
high, cost-effective performance. 

To help transform the government and increase its ability to respond 
to major national challenges, GAO has established three strategic 
objectives: 

3.1: Analyze the Government’s Fiscal Position and Opportunities to 
Strengthen Approaches to Address the Current and Projected Fiscal Gap. 

3.2: Identify Fraud, Waste, and Abuse. 

3.3: Support Congressional Oversight of Major Management Challenges 
and Program Risks. 

Strategic Objective 3.1: 

Analyze the Government’s Fiscal Position and Opportunities to 
Strengthen Approaches to Address the Current and Projected Fiscal Gap: 

Weaknesses in the economy and financial markets—and the government’s 
responses to them—have contributed to near-term increases in federal 
deficits, which reached record levels in fiscal year 2009. Yet, the 
federal government faces even larger fiscal challenges that will 
persist long after the return of financial stability and economic 
growth. 

In the coming decades, the nation’s fiscal outlook will be shaped 
largely by demographics and health care costs. As the baby-boom 
generation retires, federal spending on retirement and health programs—
Social Security, Medicare, and Medicaid—will grow dramatically. A 
range of other federal fiscal commitments, some explicit and some 
representing implicit public expectations, also bind the nation’s 
fiscal future. Without changes in policy, a growing imbalance between 
expected federal spending and tax revenues will mean escalating and 
ultimately unsustainable federal deficits and debt. 

Long-term fiscal outlook: GAO’s simulations of the long-term fiscal 
outlook show debt escalating and illustrate that the nation’s long-
term fiscal outlook remains unsustainable. In barely 10 years, debt 
held by the public as a percentage of gross domestic product (GDP) 
could exceed the historical high reached in the aftermath of World War 
II and grow at a steady rate thereafter. The large public debt that 
must be refinanced over the coming 5 years also causes concern. The 
recent increase in federal debt takes place in the context of growing 
long-term fiscal pressures that will further squeeze the resources 
available to finance government activities. Like the federal 
government, state and local governments have faced and will continue 
to face fiscal challenges, which will be even more acute during 
periods of higher unemployment, constrained revenue, and increased 
demands for services (see figure 40). Moreover, as states and 
localities seek to foster economic growth and fiscal sustainability 
within their jurisdictions, they are increasingly competing with each 
other across a range of business, economic, and social dimensions to 
achieve policy goals. Public policy decisions would benefit from a 
greater understanding of the tools used to compete, as well as the 
advantages and disadvantages of such competition. 

Figure 40: State and Local Model Operating Balance as a Percentage of 
GDP, 1980–2060: 

[Refer to PDF for image: line graph and sub-graph] 

Year: 1980; 
Operating balance March 2010: 0.09%. 

Year: 1985; 
Operating balance March 2010: 0.55%. 

Year: 1990; 
Operating balance March 2010: -0.16%. 

Year: 1995; 
Operating balance March 2010: -0.1%. 

Year: 2000; 
Operating balance March 2010: 0.15%; 

Year: 2005; 
Operating balance March 2010: 0.09%. 

Insert magnifying near-term fiscal position: 

Year: 2008; 
Operating balance March 2010: -0.39
Operating balance January 2009 adjusted: -03.9 

Year: 2009; 
Operating balance March 2010: -0.2
Operating balance January 2009 adjusted: -0.35 

Year: 2010; 
Operating balance March 2010: -0.27
Operating balance January 2009 adjusted: -0.79 

Year: 2011; 
Operating balance March 2010: -0.82
Operating balance January 2009 adjusted: -0.85 

Year: 2012; 
Operating balance March 2010: -0.83
Operating balance January 2009 adjusted: -0.79 

Year: 2013; 
Operating balance March 2010: -0.7
Operating balance January 2009 adjusted: -0.67 

[End insert] 

Year: 2015; 
Operating balance March 2010: -0.72	
Operating balance January 2009 adjusted: -0.59 

Year: 2020; 
Operating balance March 2010: -0.98	
Operating balance January 2009 adjusted: -0.9 

Year: 2025; 
Operating balance March 2010: -1.24; 
Operating balance January 2009 adjusted: -1.24 

Year: 2030; 
Operating balance March 2010: -1.63
Operating balance January 2009 adjusted: -1.69 

Year: 2035; 
Operating balance March 2010: -21.3
Operating balance January 2009 adjusted: -21.9 

Year: 2040; 
Operating balance March 2010: -2.68
Operating balance January 2009 adjusted: -2.7 

Year: 2045; 
Operating balance March 2010: -3.26
Operating balance January 2009 adjusted: -3.21 

Year: 2050; 
Operating balance March 2010: -3.88
Operating balance January 2009 adjusted: -3.76 

Year: 2055; 
Operating balance March 2010: -4.55
Operating balance January 2009 adjusted: -4.33 

Year: 2060; 
Operating balance March 2010: -5.3
Operating balance January 2009 adjusted: -4.94 

Sources: GAO simulations, updated March 2010 and January 2009 adjusted. 

[End of figure] 

Financial reporting and debt management: The federal government’s 
economic stimulus and recovery efforts have created new and 
unprecedented federal financial reporting and debt management 
challenges. Accurate and timely financial information about government 
spending, including how the American Recovery and Reinvestment Act 
(the Recovery Act) and other federal funds are being used by states 
and localities, will help policymakers and the public assess and 
manage the country’s fiscal condition and economic progress in the 
coming years. GAO’s planned work reflects significant developments, 
such as: 

* The total cost of loans, credit guarantees, and other assistance 
that the Treasury, Federal Reserve, or other government entities have 
committed to date to address the financial crisis has been estimated 
in the trillions of dollars. In the near term, oversight is needed to 
ensure that the government’s responses achieve its goals efficiently 
and effectively. 

* The federal government is on an unsustainable long-term fiscal path 
driven primarily by rising health care costs and known demographic 
trends. The Statement of Social Insurance, for example, shows that the 
present value of projected scheduled benefits exceeds earmarked 
revenues for social insurance programs (such as Social Security and 
Medicare) by about $46 trillion over the next 75 years. 

* Other risks and uncertainties may affect the federal government’s 
reported financial condition. For example, the federal government is 
allowing its funding commitment to Fannie Mae and Freddie Mac to 
increase as necessary to accommodate any cumulative reduction in the 
net worth of the two entities over the next 3 years. Notably, Fannie 
Mae and Freddie Mac together own or guarantee roughly half of the 
$11.7 trillion in U.S. residential mortgage debt. 

* GAO will also monitor high-risk areas of government operations 
vulnerable to economic weakness, like the Pension Benefit Guaranty 
Corporation, whose government-insured insurance programs remain 
exposed to the threat of terminations of large underfunded pension 
plans sponsored by financially weak firms. Pension plans of 
financially weak firms are estimated to be underfunded by about $161 
billion—a figure that may worsen if the economic recovery slows or 
financial markets weaken. 

Annual financial statements: Of particular importance in the coming 5 
years will be GAO’s unique role in auditing the U.S. government’s 
annual consolidated financial statements, as well as those of the 
Federal Deposit Insurance Corporation’s Deposit Insurance Fund, the 
Securities and Exchange Commission, the Internal Revenue Service 
(IRS), the Bureau of Public Debt, the Federal Housing Finance Agency 
(with its responsibility for the supervision and oversight of Fannie 
Mae, Freddie Mac, and the 12 federal home loan banks), and Treasury’s 
Office of Financial Stability (responsible for the Troubled Asset 
Relief Program). For example, the financial crisis has expanded the 
federal government’s ownership of private-sector firms, its purchase 
and guaranteeing of financial assets, and its insurance against 
financial losses. As a result, auditing the government’s financial 
statements—and properly accounting for its assets and liabilities—will 
be complex. GAO will also continue to work with other key federal 
agencies and their auditors to improve internal controls over 
financial reporting, compliance with selected laws and regulations, 
and the usefulness and relevance of overall federal financial 
reporting. 

Performance and program outcomes: As the administration and the 
Congress work to address fiscal imbalances, the effective monitoring, 
measurement, and evaluation of performance and program outcomes will 
take on heightened importance, especially as strategic decisions will 
have to be made about allocating scarce resources during the federal 
budget process. Forward-looking information will be needed that helps 
assess the fiscal, economic, and social implications of possible 
changes to long-standing or entrenched government programs and 
policies. Against a backdrop of uncertainty and rapid changes in the 
economy and nation’s fiscal condition, GAO will work to recommend ways 
federal agencies can find opportunities and build a culture for 
effective risk management in critical program areas, including 
financial regulation, health care, defense, and homeland security. 

Revenue: Dealing with the longer-term fiscal challenge will also 
require examining the revenue side of the budget. Short-term revenue 
fluctuations are normal and may be a countercyclical force. For 
example, during periods of economic strain and higher unemployment, 
without changes in policy, tax revenue will likely be lower at the 
same time that public expenditures and demand for public services 
increase. However, in the longer term, both the amount of revenue to 
be raised to finance federal expenditures and how that revenue is 
raised will need to be carefully considered. 

Tax policy and the economy: In addition to affecting revenue, tax 
policy will profoundly affect the economy as a whole and the decisions 
that individuals and businesses make about working, saving, and 
investing in the coming years: 

* The federal tax system includes numerous tax provisions intended to 
influence taxpayers’ behavior throughout the economy, but still little 
is known about the effects of many of these provisions. 

* These tax expenditures—the special tax credits, deductions, 
deferrals, exclusions, and preferential tax rates provided under the 
tax code that either reduce the flow of federal income taxes from 
individuals and corporations or that require higher tax rates on other 
taxpayers to make up for lost revenue—need particular attention. The 
number of tax expenditures reported by the Treasury has more than 
doubled since 1974, and the sum of revenue-loss estimates for tax 
expenditures was nearly $981 billion in 2009. 

* Given the size and complexity of the federal tax code, tax reform 
will continue to be an area of particular interest for the Congress 
and the federal government. 

Taxpayer compliance: Federal revenues also are reduced to the extent 
that taxpayers do not fully comply with paying their tax liabilities. 
The most recent estimate of these net tax gaps is $290 billion. The 
IRS faces pressures to improve its taxpayer service to spur voluntary 
compliance, enforcement efforts to catch noncompliance, and 
collections of tax debts. Significant improvements to compliance also 
will depend on innovative solutions involving external parties, such 
as paid tax return preparers, and legislative changes, such as those 
to simplify the tax code or mandate electronic filing. Enforcing tax 
laws and modernizing IRS business systems continue to be included in 
GAO’s High-Risk List. GAO’s work will seek to ensure IRS improvement 
and inform other solutions to shrinking the tax gap. 

Financial information: With the federal government facing serious 
fiscal challenges, the need is greater than ever for timely and 
accurate financial information to measure and control costs, manage 
for results, and make fully informed program and resource allocation 
decisions: 

* Routinely generating timely and reliable financial information will 
require transforming federal financial management systems to focus on 
accounting for the full cost of programs and operations; integrating 
program, budget, and financial information; and accounting for 
performance against established metrics. 

* It is essential that federal financial information be presented in a 
form that is useful for deliberating on the nation’s budget, debt, and 
long-term fiscal challenges. 

* Financial information must be presented with a view toward better 
recognizing the unique elements of government operations, such as the 
extent of the federal government’s social insurance commitments. 

GAO plans to focus its efforts on near- and longer-term opportunities 
to improve the accuracy, timeliness, and usefulness of federal cost 
and other financial performance data; federal financial management 
operations; and accounting, auditing, and internal control standards. 
The worsening fiscal position and outlook calls for improvements in 
both congressional and agency information and processes to better 
illuminate the short- and long-term value and costs of decisions and 
provide the context to help decision makers consider difficult trade-
offs. 

To support efforts by the Congress and the federal government to 
address these issues, GAO has established the following performance 
goals and key efforts: 

Performance Goal 3.1.1: 

Analyze the implications of commitments, information, processes, and 
controls on the federal budget outlook and on agencies’ budget 
decisions and operations: 

Key Efforts: 

* Continue to perform long-term fiscal simulations and analyses of 
federal deficits and debt levels, and the state and local sector under 
varying policy assumptions. 

* Analyze transparency and the implications of current and emerging 
longer-term commitments on the federal budget and debt. 

* Explore the effects of congressional budget processes and controls—
including information, incentives, and exceptions—on decision making. 

* Assess implications of the information used in agencies’ budget 
processes on resource decisions, operations, and accountability. 

Performance Goal 3.1.2: 

Monitor and examine the federal government’s response to the states’ 
short- and long-term fiscal condition: 

Key Efforts: 

* Determine how federal policies and economic trends affect the short- 
and long-term fiscal capacities of states and localities to pursue 
national objectives. 

* Assess and review how states and localities are using federal funds, 
including Recovery Act funds. 

* Evaluate the efficacy of federal funding to help create economic 
growth or close fiscal gaps in states and localities, including 
Recovery Act fund recipients. 

Performance Goal 3.1.3: 

Assess the reliability of financial information on the government’s 
fiscal position and financing sources: 

Key Efforts: 

* Annually audit the U.S. government’s financial statements, related 
internal controls, and compliance with legal requirements. 

* Audit financial statements and related control and legal compliance 
of federal entities charged with economic recovery responsibilities. 

* Annually audit Treasury’s revenue collections and federal debt 
management. 

* Address opportunities to improve auditing and reporting on federal 
agency and consolidated U.S. government’s financial operations. 

Performance Goal 3.1.4: 

Monitor and assess the use of risk management, performance 
measurement, and program evaluation tools to help improve the 
efficiency, effectiveness, and accountability of government operations 
and to help inform the budget process: 

Key Efforts: 

* Assess the use of metrics and performance measures to help make 
government policy and programs more effective and efficient. 

* Assess the use of evaluation evidence, performance measures, and 
program evaluation tools in the federal budget decision-making process. 

* Identify opportunities and evaluate efforts to implement risk 
management tools and techniques in federal agencies to manage outcomes 
more effectively. 

* Provide forward-looking analysis and foresight to help policymakers 
make informed decisions about trade-offs and implications of changes 
to government policies and programs. 

Performance Goal 3.1.5: 

Contribute to congressional deliberations on tax policy: 

Key Efforts: 

* Evaluate the government’s oversight of tax expenditures as a whole 
and the effectiveness of individual tax expenditures and their 
aggregate impacts, such as those on tax revenue, taxpayers and the 
economy. 

* Analyze how the tax code affects business decisions, such as where 
to locate and how to structure operations. 

* Analyze how changes in the tax system affect objectives, such as 
equity, economic efficiency, simplicity, revenue, and 
administratability. 

Performance Goal 3.1.6: 

Identify specific opportunities to reduce the tax gap by improving 
taxpayer voluntary compliance and IRS’s ability to pursue 
noncompliance: 

Key Efforts: 

* Identify opportunities to improve IRS’s service to taxpayers 
through, for example, easier tax return filing; faster refund 
processing; and more informative, interactive communications 
(including telephone, Web site, and written communications). 

* Identify opportunities to improve IRS’s enforcement programs in 
light of a changing U.S. and international economy, evolving 
technology, and the tax gap. 

* Identify opportunities to better use third parties, such as paid 
preparers, tax preparation software companies, and information return 
reporters, to ensure tax returns are filed accurately and on time. 

* Evaluate IRS’s efforts to modernize its systems, particularly its 
expenditure plans. 

* Assess IRS’s crosscutting efforts to improve agencywide management, 
including re-engineering efforts, budget formulation, human-capital 
management, and use of research and data analyses to enhance service 
and enforcement programs. 

Performance Goal 3.1.7: 

* Identify ways to improve financial management infrastructure 
capacity to provide useful information for managing results and costs 
day to day: 

Key Efforts: 

* Assess whether efforts to improve federal financial management are 
effectively focused on providing useful cost and other financial data. 

* Analyze federal agencies’ progress in implementing legislation 
directed at improving federal financial management infrastructure. 

* Identify best practices in federal financial management 
organizations, operations, and governance structures. 

* Serve as a catalyst for improving the usefulness of federal 
accounting, auditing, and internal control standards. 

Strategic Objective 3.2: 

Identify Fraud, Waste, and Abuse: 

No one knows how much fraud, waste, and abuse cost the federal 
government each year, but evidence suggests the total is in the 
hundreds of billions of dollars annually. GAO’s work over the past 
several years has demonstrated that improper payments are a long-
standing and widespread problem. Federal agencies’ estimated improper 
payments in fiscal year 2009 totaled about $98 billion and involved 
over 70 programs, or 5 percent of the $1.9 trillion of reported 
outlays for those programs. On the revenue side, the IRS estimated 
that, in 2005, the net annual tax gap—or the difference between the 
amount of tax that taxpayers should pay and the amount they pay 
voluntarily and on time—was about $290 billion. GAO will continue to 
perform audit work, including cutting-edge forensic audits and special 
investigations, targeted at programs across the government that are 
duplicative or highly vulnerable to fraud, waste, and abuse, and 
improper payments. To identify and locate individuals and businesses 
involved in fraud and abuse of federal programs, GAO uses data mining, 
covert testing, and law enforcement research tools that include the 
Financial Crimes and Enforcement Network and the National Crime 
Information Center. 

GAO’s focus on preventive controls is integral to GAO’s efforts in 
other strategic areas as well. For example, as discussed under 
Performance Goal 3.3.2, GAO will seek to identify, and annually report 
on, programs, agencies, offices, and initiatives with duplicative 
goals and activities. Further, as discussed under Strategic Objective 
1.1, GAO will continue to examine vulnerabilities in the nation’s 
health care programs, including controls in place to prevent improper 
payments associated with programs such as Medicaid. Also, under our 
Goal 2, GAO will continue to focus on Departments of Defense and State 
programs and areas at high risk of fraud, waste, and abuse. Across all 
of these areas, GAO will recommend concrete steps that can be taken by 
agencies and the Congress to implement effective fraud prevention 
programs. 

Forensic audits and investigations: GAO’s ability to conduct forensic 
audits and investigations of programs across the government puts the 
agency in a unique position. For example, in recent years, GAO has 
used its forensic audits and special investigations to identify 
governmentwide fraud and abuse in areas such as: 

* first- and business-class travel by government employees, 

* the use of government purchase cards, 

* the transit benefit program, 
* small business procurement programs, and, 

* contractors and health care providers with billions of dollars of 
unpaid federal taxes. 

Consequences resulting from investigations: An important element of 
the federal government’s ability to deter fraud is to have 
consequences for those who fail to pay taxes or who commit fraud 
against the federal government. Forensic audits are designed to 
identify ineffective controls and vulnerabilities to expose areas of 
fraud, waste, and abuse and, in some cases, matters of security that 
clearly demonstrate the “real-world” effects of broken or inadequate 
controls. The audits get the attention of the Congress and the public 
and result in positive change. 

Through forensic audits, GAO has identified tens of thousands of cases 
of potential fraud and abuse and has referred these cases to the 
appropriate law enforcement agencies and others for criminal 
investigation and administrative action. For example, after Hurricanes 
Katrina and Rita, GAO identified over 23,000 cases of potential 
individual disaster assistance fraud and referred them to the Katrina 
Fraud Task Force and law enforcement agencies. Although most 
individuals who committed disaster-benefit fraud may never be 
prosecuted, over 70 of the cases that GAO referred to the task force 
resulted in prosecution, with convicted individuals receiving prison 
sentences as long as 6 years. These prosecutions and convictions 
vividly highlight the consequences of fraudulent activity and help 
deter future fraud against the government. 

GAO’s future efforts: GAO will continue to coordinate and, where 
appropriate, work closely with law enforcement agencies from federal, 
state, and local governments in conducting its investigations and 
developing cases of fraud and abuse. GAO will also continue to work 
with the Congress to identify programs across the government that are 
vulnerable to fraud, waste, and abuse, including those on GAO’s High-
Risk List, to maintain accountability over hundreds of billions of 
dollars in federal assets and program payments. The need for effective 
accountability controls over federal grants has increased with the 
dramatic growth of grant awards—in 2009 alone, federal grants 
increased by an estimated 50 percent. Medicare and Medicaid—which 
together provide health insurance for one in four Americans—were 
estimated to have made improper payments totaling about $54 billion 
for fiscal year 2009, which is about 55 percent of the total $98 
billion in reported improper payments for that fiscal year. GAO’s work 
across the government has shown that fraud prevention-—including 
controls that prevent the improper and fraudulent disbursement of 
federal dollars-—is the most efficient and effective means to minimize 
fraud, waste, and abuse. Once federal dollars are disbursed 
fraudulently or improperly, the government is likely to recover only a 
few pennies on the dollar. 

Thus, GAO will continue to focus its work on identifying 
vulnerabilities in agency preventive controls and providing 
recommendations to improve them. Key areas of focus for the next 5 
years include health care, the tax gap, procurement, entitlement 
programs, and the Recovery Act. To support this work, GAO will use 
tips it receives on its FraudNET hotline, an Internet-based operation 
that provides a secure means for individuals to confidentially 
communicate their concerns about possible fraud, waste, abuse, 
mismanagement, and criminal activities in federal programs. 

To support efforts by the Congress and the federal government to 
address these issues, GAO has established the following performance 
goals and key efforts: 

Performance Goal 3.2.1: 

Perform forensic audits to identify and address vulnerabilities to 
fraud, waste, and abuse: 

Key Efforts: 

* Evaluate and investigate Medicare, Medicaid, and other health care 
programs. 

* Evaluate and investigate Recovery Act outlays. 

* Evaluate and investigate the tax gap, entitlement programs, and 
federal procurement. 

* Evaluate and investigate fraud, as requested by the Congress and the 
Comptroller General. 

* Refer cases of fraud and abuse identified to the relevant federal, 
state, and local law enforcement agencies or other authorities. 

Performance Goal 3.2.2: 

Conduct special investigations and security and vulnerability 
assessments: 

Key Efforts: 

* Evaluate and investigate specific allegations of consumer fraud or 
other program mismanagement as requested by the Congress and the 
Comptroller General. 

* Perform overt and covert testing of security-related systems and 
controls. 

Performance Goal 3.2.3: 

Investigate allegations received through FraudNET 

Key Effort 

* Evaluate and investigate the 2,000-plus ..allegations made annually 
through FraudNET. 

Performance Goal 3.2.4: 

Identify ways to strengthen accountability for the federal 
government’s assets and operations: 

Key Efforts: 

* Assess federal agencies’ internal controls to identify opportunities 
to reduce risk of fraud, waste, and abuse, including improper payments. 

* Analyze federal agencies’ high-risk and other critical programs to 
identify opportunities to improve accountability for assets and 
operations. 

* Review audit oversight of federal programs, grants, and other funds. 

Strategic Objective 3.3: 

Support Congressional Oversight of Major Management Challenges and 
Program Risks: 

The U.S. government is one of the world’s largest and most complex 
entities, and its performance—especially given the nation’s long-term 
fiscal outlook—is central to effectively and responsibly addressing 
issues of major concern to the American public, including public 
safety and security, the creation of jobs, the oversight of financial 
markets, and the response to emergencies and disasters. Given the 
public’s demand for a more transparent and accountable federal 
government, federal agencies will need to improve their performance 
and focus on effective, efficient, and results-oriented management. 

Key issues to be addressed: As systems and programs become more 
complex, government managers and policymakers will have to address a 
variety of issues that no longer fit neatly within the boundaries of 
individual agencies, departments, or offices: 

* Individual programs or agencies can have significant effects in 
other parts of government. For example, the decennial census is not 
simply a count of the nation’s population; census data affect the 
funding formulas for billions of dollars in federal government 
assistance in areas as diverse as health, highways, education, and 
housing. 

* Emerging challenges will require a more strategic and crosscutting 
approach. Issues related to human-capital management, IT, 
cybersecurity, data management, and acquisition and contract 
management cut across government and must be managed holistically. 

* Innovations in science and technology also cut across government and 
can have rapid, far-reaching, and even disruptive effects on what 
government does and how it does it. 

* Numerous high-risk areas—such as the U.S. Postal Service, DOD 
program management, National Aeronautics and Space Administration 
(NASA) procurement, surface transportation funding, food safety, and 
oversight of toxic chemicals—will require agencies to address a host 
of crosscutting issues in order to ensure program or agency 
effectiveness. 

Transformation: The next 3 years will see the 20th anniversary of the 
Government Performance and Results Act of 1993 (GPRA). Although GAO’s 
work has shown significant growth in the percentage of managers 
reporting that they have GPRA results-oriented performance measures, a 
crucial challenge remains for agencies to build organizational 
cultures in which managers actually use performance information and 
evaluation in their decision making. Congressional leadership will 
continue to be vital in achieving a broad transformation of the 
government, especially at DOD and DHS, which are in the midst of major 
organizational transformations. GAO will work to help inform 
congressional oversight as agencies continue to build their 
fundamental management capabilities, resolve high-risk areas, and 
address major management challenges to effectively address the 
nation’s most pressing issues. 

The federal government relies increasingly on complex networks and 
partnerships—often including multiple federal agencies, state and 
local governments, domestic and international nongovernmental or quasi-
governmental organizations, and for-profit and not-for-profit 
contractors—to achieve national objectives. As state and local 
governments grapple with major budget gaps, the intergovernmental 
system will continue to be tested by a complex array of short- and 
long-term economic, fiscal, and social challenges. Effective 
coordination of and response to these challenges by all levels of 
government and their partners will be crucial as governments work to 
balance service delivery with increased pressure on budgets. 

Furthermore, the federal government has adapted over time to new needs 
and problems by creating new organizations and programs or adding new 
roles, responsibilities, and functions to existing agencies and 
programs. The result has been overlap and fragmentation of 
responsibilities and activities within and across agencies. Some of 
this overlap and fragmentation may be merited—for example, to have 
surge capacity to respond to a national emergency. However, overlap 
and fragmentation can also adversely affect the economy, efficiency, 
and effectiveness of the federal government. Recognizing this through 
recently enacted legislation, the Congress has directed GAO to 
identify programs, agencies, offices, and initiatives with duplicative 
goals and activities—-within agencies and governmentwide—-and to 
report annually on the effects and ways to reduce duplication. 

High-Risk List: GAO’s High-Risk List continues to be an important tool 
for the Congress and policymakers to call attention to the agencies 
and program areas that are vulnerable to fraud, waste, abuse, and 
mismanagement or are most in need of broad reform. Our High-Risk List 
currently identifies 31 high-risk areas, as shown in table 2, that 
focus on: 

* strengthening the foundations for efficient and effective government; 
* transforming DOD business operations; 
* ensuring public safety and security; 
* managing federal contracting; 
* assessing tax administration efficiency and effectiveness; and; 
* modernizing insurance and benefit programs, including Medicare, 
Medicaid, and the Pension Benefit Guaranty Corporation. 

Modernizing the U.S. financial regulatory system, also on the High-
Risk List, will be a critical step to ensuring that financial 
challenges can be met. Determining how to create and implement a 
regulatory system that reflects new market realities is key to 
reducing the likelihood that our nation will experience another 
financial crisis. 

Finding lasting solutions to issues in these high-risk areas could 
save billions of dollars, improve service to the American public, and 
strengthen public trust in the federal government. GAO will 
persistently monitor and report on progress in the High-Risk List 
areas and, as developments dictate, identify new high-risk areas 
warranting attention. 

Table 2: GAO’s High-Risk List as of May 2010: 

Strengthening the Foundation for Efficiency and Effectiveness: 

* Modernizing the Outdated U.S. Financial Regulatory System. 
* Restructuring the U.S. Postal Service to Achieve Sustainable 
Financial Viability. 
* Funding the Nation’s Surface Transportation System. 
* 2010 Census. 
* Strategic Human-Capital Management. 
* Managing Federal Real Property. 

Transforming DOD Program Management: 

* DOD Approach to Business Transformation. 
* Business Systems Modernization. 
* Personnel Security Clearance Program. 
* Support Infrastructure Management. 
* Financial Management. 
* Supply Chain Management. 
* Weapon Systems Acquisition. 

Ensuring Public Safety and Security: 
* Implementing and Transforming the Department of Homeland Security. 
* Establishing Effective Mechanisms for Sharing Terrorism-Related 
Information to Protect the Homeland. 
* Protecting the Federal Government’s Information Systems and the 
Nation’s Critical Infrastructures. 
* Ensuring the Effective Protection of Technologies Critical to U.S. 
National Security Interests. 
* Revamping Federal Oversight of Food Safety. 
* Protecting Public Health through Enhanced Oversight of Medical 
Products. 
* Transforming EPA’s Process for Assessing and Controlling Toxic 
Chemicals. 

Managing Federal Contracting More Effectively: 
* DOD Contract Management. 
* DOE’s Contract Management for the National Nuclear Security 
Administration and Office of Environmental Management. 
* NASA Acquisition Management. 
* Management of Interagency Contracting. 

Assessing the Efficiency and Effectiveness of Tax Law Administration: 
* Enforcement of Tax Laws. 
* IRS Business Systems Modernization. 

Modernizing and Safeguarding Insurance and Benefit Programs: 
* Improving and Modernizing Federal Disability Programs. 
* Pension Benefit Guaranty Corporation Insurance Programs. 
* Medicare Program. 
* Medicaid Program. 
* National Flood Insurance Program. 

Source: GAO. 

[End of table] 

Human-capital management: Because people are an organization’s most 
important asset, they must be the centerpiece of any serious effort to 
transform government agencies. However, many of today’s strategies—
designed for a workforce of an earlier era—are not suited to meet 21st 
century challenges. The federal workforce, like the nation’s, is 
aging, and increasingly large percentages are becoming eligible to 
retire. It remains unclear when the expected retirement wave will 
peak, but eventually baby boomers will leave the workforce, and when 
they do, they will leave behind gaps in leadership, skills, and 
knowledge due to the slower-growing pool of younger workers. Notably, 
by 2025, overall labor force growth is expected to be only one-fifth 
of what it is today. 

Faced with an aging federal workforce, agencies will need to 
strengthen their efforts and use of available flexibilities to 
acquire, develop, motivate, and retain talent. More focus will be 
needed in such areas as: 

* strategic planning, 
* knowledge transfer, 
* pay and reward systems, 
* recruitment and retention, and, 
* performance management. 

The Office of Personnel Management and federal agencies should be held 
accountable for the continued monitoring and refinement of approaches 
to strengthen their workforces. 

Information technology: Information technology (IT) systems are key to 
management reform and have the potential to help dramatically reshape 
government to improve performance, reduce cost, and enhance 
transparency. Today, the government spends over $70 billion annually 
on IT to support virtually all government operations and assets. With 
increased attention to budgets and the efficiencies that IT can 
provide, additional focus will be needed to ensure effective 
management of IT efforts. 

The rapid pace of technological change and innovation, including the 
prevalence of advanced Internet and Web 2.0 technologies, means 
government agencies will have unprecedented opportunities to use IT to 
enhance government service to citizens, improve performance, and 
reduce costs. These opportunities, however, create significant 
challenges, such as the need to apply a wide range of complex, new 
electronic technologies effectively; interconnect diverse networks and 
systems securely and reliably; and strengthen technical capacity of 
personnel.
Addressing these challenges will require strong and effective IT 
management leadership. At the same time, federal agencies will need to 
continue to reduce the risk of making poor IT investment decisions and 
costly mistakes that result in wasteful spending and lost 
opportunities for improving performance and delivery of services to 
the public. Further, without proper management and safeguards, 
computer systems are vulnerable to those with malicious intentions who 
can obtain and manipulate sensitive information, commit fraud, disrupt 
operations, or launch attacks against other computer systems and 
networks. 

Acquisition management: Effective acquisition management also plays a 
key role in creating and sustaining high-performing organizations. 
Because federal agencies depend increasingly on contractors to 
accomplish their missions—with procurement spending totaling more than 
$500 billion—the government urgently needs to improve its acquisition 
business processes and workforce. 

Achieving desired outcomes is a challenge GAO will continue to 
monitor, especially at agencies with high-risk designations for 
contracting or management transformation, including DOD and DHS. 
Poorly defined requirements, ill-suited business arrangements, or 
poorly structured incentives, as well as inadequate oversight of 
contractor performance, can place the government at risk of not 
getting what it contracted for and paying more than necessary. 

The government needs a fully capable acquisition workforce to ensure 
that it obtains the best value on all its contracts, but it still 
faces challenges in developing and maintaining a knowledgeable, 
skilled, and adequately sized workforce. Further, agencies continue to 
struggle with determining the right mix of, as well as proper roles 
and responsibilities for, government and contractor employees to avoid 
overreliance on contractors. Our authority to resolve government 
contract formation disputes by providing an objective, independent 
forum for resolving bid protests and by recommending actions to 
correct procurement law violations, further enhances government 
accountability. 

Science and technology: Science and technology investments are 
critically important in improving quality of life—especially in areas 
such as health care, telecommunications, clean energy, and the 
environment—and in providing the engine of future economic growth. 
Each year, the federal government spends over $90 billion on research 
and development and grants, issues about 300,000 patents and 
trademarks, and registers about 500,000 copyrights. The resulting 
intellectual property has helped fuel the U.S. economy. 

However, as the pace of innovation is quickening, global competition 
is accelerating, and other nations are increasingly able to 
commercialize technological advances, educate highly skilled 
workforces, and offer world-class research opportunities. 
Congressional oversight is critical to ensuring that the substantial 
federal investment in science and technology is allocated effectively 
and that intellectual property rights are protected here and abroad. 

Further, questions posed by the Congress about government programs 
increasingly require a capability to independently assess the veracity 
of the science claims of those programs. The increased development and 
use of new technologies presents challenges to the Congress in 
evaluating their potential and assessing the effects on security, 
safety, privacy, and economic growth. For example, as an ever-growing 
number of products that contain nanosized materials enters the 
marketplace, concerns arise that the federal government may not focus 
adequate resources on research to determine their environmental, 
health, and safety effects. GAO will conduct assessments of 
technologies to provide the Congress with information regarding the 
effects of scientific and technical developments on its legislative 
process. 

Information management: Proper management of vital government 
information is essential to improving the government’s performance. 
Information is a critical strategic asset, and agencies will confront 
unique and sometimes conflicting demands in collecting and providing 
it. The growing sophistication of electronic government techniques and 
advances in archival, search, and retrieval technologies are creating 
greater opportunities to provide citizens with improved public access 
to government records and information. However, agencies are being 
asked not only to make information more readily available to the 
public, but also to collect and share data far more extensively than 
they have in the past. These trends have the potential to overwhelm 
agencies and are raising concerns about agencies’ ability to manage 
information and knowledge in such an evolving environment. 

The growth in IT, networking, and electronic storage has made it ever 
easier to collect and maintain information about individuals. An 
accompanying growth in incidents of loss and unauthorized use of such 
information will likely lead to a continued focus on protecting the 
privacy of individuals’ personal information, whether on federal 
systems or from private-sector sources such as data resellers that 
specialize in amassing personal information from multiple sources. 

Census: The demographic statistics and information collected from the 
U.S. Census Bureau’s decennial census informs major decisions by the 
U.S. public and the private sector. Population data are used for 
congressional apportionment and redistricting; economic indicators are 
used by the Federal Reserve Board to set monetary policy; and 
population and other data are used to allocate federal aid to state 
and local governments. 

In the next 5 years, managing the 2010 Census and preparing for the 
2020 Census will be crucial. For example, each of the 10 largest 
federal assistance programs—totaling $478.3 billion in 2009 and 
representing about 84 percent of total federal assistance when 
including about $122.7 billion funded by the Recovery Act—relies at 
least in part on census or related data. 

Additional improvements to the decennial census, including a 
fundamental re-examination of the nation’s approach to conducting the 
enumeration, might be required because the current approach may no 
longer be financially sustainable—one reason why GAO has designated 
the 2010 Census as a high-risk area. If past rates of cost escalation 
continue into 2020, the nation could soon be looking at a $30 billion 
census. 

Further, with major reforms in such areas as health care and energy 
policy possible in the coming years, it is important that agencies 
begin to collect data to help determine whether new programs and 
instruments are working. GAO’s review of the data it uses from the 
U.S. statistical system, including the identification of gaps in data 
sources, will enhance an understanding of the value of such 
information and help provide insights toward improving it. 

To support efforts by the Congress and the federal government to 
address these issues, GAO has developed the following performance 
goals and key efforts: 

Performance Goal 3.3.1: 

Highlight high-risk federal programs and operations and monitor 
progress of executive branch management reforms: 

Key Efforts: 

* Update progress in addressing high-risk areas with every new 
Congress and identify areas to be newly designated high risk. 

* Assist congressional and presidential transitions by highlighting 
key challenges and recommendations to improve the performance and 
accountability of the federal government. 

* Monitor the progress and continuing challenges related to 
governmentwide management reform initiatives, including risk 
management. 

Performance Goal 3.3.2: 

Assess efforts to improve results-oriented management across the 
government: 

Key Efforts: 

* Conduct targeted reviews and assessments of transformation efforts, 
management, and leadership at selected agencies, and other 
organizations to improve effectiveness and identify efficiencies. 

* Annually assess overlap and duplication among government programs 
and activities within and across federal agencies, and identify 
opportunities to reduce or eliminate it so as to improve government 
operations. 

* Monitor and evaluate efforts by agencies and the Office of 
Management and Budget to develop and use information to improve 
performance. 

* Facilitate congressional use of performance information in decision 
making. 

* Identify and disseminate useful strategies and methodological tools 
for strategic planning, performance measurement, and program and 
policy evaluation. 

* Identify opportunities to improve the coordination, collaboration, 
and governance of networks of governmental and nongovernmental 
organizations addressing complex national issues. 

Performance Goal 3.3.3: 

Analyze and support efforts to improve the federal workforce 
infrastructure, key to successfully transforming the government: 

Key Efforts: 

* Assess the leadership, management, and delivery of human-capital 
products and services that agencies need to carry out their current 
and emerging missions effectively. 

* Evaluate the federal government’s effort to attract, develop, and 
retain a workforce that is flexible, resilient, and capable. 

Identify ways that policies, programs, and practices can enhance 
individual performance and contributions toward agency outcomes. 

* Assess policies that create an inclusive environment by leveraging 
diversity. 

Performance Goal 3.3.4: 

Identify ways to improve federal agencies’ acquisition of goods and 
services: 

Key Efforts: 

* Enhance agencies’ acquisition business processes and workforce. 

* Improve agencies’ knowledge of the supplier base and use of sound 
contract management. 

* Maximize quality acquisition outcomes and mitigate risk at major 
agencies, including DOD, DHS, and NASA. 

* Assess the government’s strategy for managing its reliance on 
contractors and ensuring contractor integrity. 

* Assess protested procurements. 

Performance Goal 3.3.5: 

Assess the management and results of the federal investment in science 
and technology and the effectiveness of efforts to protect 
intellectual property: 

Key Efforts: 

* Evaluate the impact of federal policies and funding on national 
competitiveness and technological advancement. 

* Conduct technology assessments to evaluate the status and 
implications of science and technology for public policy and 
congressional decision making. 

* Assess implementation and coordination among efforts of federal 
science agencies to advance the federal science and research agenda. 

Performance Goal 3.3.6: 

Assess the government’s planning, implementation, and use of IT to 
improve performance and modernize federal programs and operations: 

Key Efforts: 

* Assess and promote the application and use of IT investment 
management best practices across the government. 

* Promote adopting sound enterprise architectures and assess 
government enterprise architecture efforts to engineer business 
processes for implementing IT systems that optimize mission 
performance. 

* Review federal agencies’ management and effectiveness in carrying 
out systems acquisition, development, and integration efforts—-
including complex, multiyear modernizations. 

* Review the management of government telecommunications and 
interconnected systems and federal agencies’ effectiveness in 
providing secure, reliable, and fast Internet and Web connections. 

* Review government progress in developing effective IT human-capital.
Note: Key efforts related to computer security, cybersecurity, and 
protecting the nation’s critical infrastructure are included under 
Performance Goal 2.1.7. 

Performance Goal 3.3.7: 

Identify ways to improve the collection, dissemination, and quality of 
federal information: 

Key Efforts: 

* Assess the government’s ability to protect the privacy of individuals’
 personal information in an era of rapidly evolving technology. 

* Review the government’s progress in using electronic technology to 
store, preserve, and share public records. 

* Examine the use of electronic technologies to improve public access 
to federal records and enhance the collecting, using, and 
disseminating of government information. 

* Identify ways to improve the management and cost-effectiveness of 
the decennial census. 

Assess the quality and use of statistical and other U.S. data. 

[End of Goal 3] 

Goal 4: 

Maximize the Value of GAO by Enabling Quality, Timely Service to the 
Congress, and by Being a Leading Practices Federal Agency: 

With the growing and rapidly changing list of challenges facing the 
United States and the world, GAO’s work—and how GAO communicates the 
results of its work—has never been more important. To successfully 
carry out its responsibilities to the Congress for the benefit of the 
American people, GAO’s work must be professional, objective, fact-
based, nonpartisan, nonideological, fair, and balanced. To sustain 
high-quality and timely service, the agency must process its work 
efficiently and effectively while ensuring client and customer 
satisfaction. Key to achieving these goals is aggressively leveraging 
technology and enhancing quality assurance processes. Importantly, GAO 
must continually modernize how it delivers the results of its work, 
including refining its product line and presenting content more 
concisely and in real time. To ensure GAO continues to address the 
many issues facing the government, the agency will need to enhance how 
it manages its workload. Maintaining adequate resources for a broad 
range of work is particularly critical to GAO’s efforts to apprise the 
Congress of high-risk issues and challenges of national and 
international concern. 

The talent, creativity, and dedication of GAO’s staff are the bedrock 
of the agency’s ability to provide high-quality products and maintain 
its credibility. GAO’s workforce is composed of highly trained 
professionals with degrees in many academic disciplines, including 
accounting, law, engineering, public administration, economics, 
statistics, and information technology (IT), among others. To sustain 
the quality of its services, while remaining responsive to increased 
demands, GAO must be able to recruit, develop, retain, and reward its 
high-performing diverse workforce. The agency strives to strengthen 
its recruiting and hiring programs by, among other things, 
incorporating leading practices. GAO must also ensure that its 
performance and compensation systems are fair, provide equitable and 
targeted developmental support and opportunities, and enable staff to 
maximize their contributions to agency goals. Strengthening agency 
programs for staff development and providing clear career paths will 
not only help the agency meet its goals, but will also enable staff to 
have a line of sight for their individual goals and the support needed 
to achieve them. GAO also remains committed to embracing diversity and 
taking steps to ensure the agency develops and supports a fair and 
unbiased work environment that values opportunity and inclusiveness. 

In light of the increasingly complex, interdisciplinary, and global 
issues facing the government, GAO must expand its relationships with 
other entities to promote professional auditing standards and auditing 
capacity, as well as enhance its own knowledge, agility, and 
responsiveness. GAO’s leadership roles in the professional auditing 
and accounting community will help ensure that U.S. funds, in 
particular, are not subject to waste, fraud, and abuse. In addition, 
GAO seeks to enhance its information-sharing and collaborative efforts 
with other accountability organizations, agencies, and professional 
organizations to tap into their expertise. Partnerships also help GAO 
remain aware of changing governance and management practices, so that 
it can continue to improve internal operations and implement leading 
practices. 

As a reviewer of how other agencies manage federal resources, as well 
as a recipient of taxpayer dollars, GAO must responsibly manage its 
resources. Even though GAO is not subject to many of the laws applied 
to executive branch agencies for operations and management, it 
endeavors to maintain consistency with the requirements and spirit of 
those laws because the agency audits the executive branch’s compliance 
with these laws and implementing regulations. Thus, GAO will 
proactively address and expand on statutory and regulatory 
requirements for mission support functions to ensure that it is 
adhering to the highest standards as the agency audits others. 
Physical and information security remain high-priority areas, as do 
enhancing GAO’s privacy program, implementing environmental 
initiatives, and optimizing internal control reviews to ensure 
accountability. GAO will continue to leverage technology to improve 
its business processes, particularly as related to its financial, 
human-resource, and travel systems. It will also pursue integration of 
many of these systems to enable timely decision making. Also key to 
operational excellence is ensuring the appropriate management of 
administrative processes. Since people are GAO’s primary asset, 
establishing a human-capital governance structure that ensures the 
strategic use of staff is essential, as is continuing to work 
constructively with GAO employee organizations to address employee 
concerns. Other areas of focus include strengthening the agency’s 
strategic planning, facilitating collaboration across units, and 
ensuring consistent internal communications. 

For 2010 through 2015, GAO has reoriented its strategic objectives and 
performance goals to focus on discrete areas of product support and 
business and management operations. To accomplish GAO’s goal of 
enabling quality, timely service to the Congress and implementing 
leading practices, GAO has established four strategic objectives: 

4.1: Improve Efficiency and Effectiveness in Performing GAO’s Mission 
and Delivering Quality Products and Services to the Congress and the 
American People. 

4.2: Maintain and Enhance a Diverse Workforce and Inclusive Work 
Environment through Strengthened Recruiting, Retention, Development, 
and Reward Programs. 

4.3: Expand Networks, Collaborations, and Partnerships That Promote 
Professional Standards and Enhance GAO’s Knowledge, Agility, and 
Response Time. 

4.4: Be a Responsible Steward of GAO’s Human, Information, Fiscal, 
Technological, and Physical Resources. 

Strategic Objective 4.1: 

Improve Efficiency and Effectiveness in Performing GAO’s Mission and 
Delivering Quality Products and Services to the Congress and the 
American People: 

To continue to provide timely, high-quality products and services to 
the Congress, GAO must enhance its support for planning and managing 
engagements. While the processes GAO uses to support its core values 
of accountability, integrity, and reliability have been refined over 
the years, the basic way in which engagements are planned and managed 
remains unchanged. With the availability of advanced technology tools 
and the pressure to continually do more with less, GAO must undertake 
more than incremental improvements in its processes and support 
systems. GAO needs to better utilize integrated technology support and 
collaborative tools, and re-evaluate and refine processes in its 
quality assurance framework. 

Knowledge and expertise: To enhance audit quality, GAO must better 
identify and capitalize on its own knowledge and expertise in a range 
of agency operations and management areas. It must also bring together 
interdisciplinary teams more efficiently to evaluate the many 
crosscutting issues facing the nation. 

Agency relationships: Collaborative working relationships with audited 
agencies are essential to accomplishing GAO’s work efficiently and 
effectively. While GAO generally receives all of the data it needs 
from federal agencies, there are certain occasions when ready access 
to agency data is not always consistent across or even within 
agencies. Therefore, GAO needs to focus on improving relationships 
and, if necessary, re-evaluate and revise its protocols for working 
with audited agencies, and seek additional legislative authorities as 
necessary. 

Product delivery: Rapid technological innovations and trends during 
the last several years have substantially changed the way individuals 
receive information. As a service agency whose primary product is 
information, GAO must modernize and adjust how it delivers that 
information, both in terms of the physical construct, level of detail, 
and appearance of its products and in the venues through which it 
delivers them. GAO has recently expanded the audience for its products 
and information through selected social media outlets and must 
continue to explore other forums and formats for sharing information, 
especially as they expand knowledge and awareness of the critical 
issues facing the country. (See figure 41.) 

Figure 41: GAO Is Utilizing Technology to Expand the Audience for Its 
Products and Information: 

[Refer to PDF for image: illustration] 
 
Sources: GAO, Twitter, iTunes, YouTube, and PhotoDisc. 

[End of figure] 

Resources: In light of the increasing complexity of the challenges 
facing the government, GAO must ensure that it devotes its resources 
to the highest priority issues. Specifically, GAO must expand internal 
processes for assigning priorities to requested and mandated work and 
for identifying emerging issues to which resources should be devoted. 
Working closely with congressional clients will be essential to 
ensuring GAO continues to meet their needs. In addition, monitoring 
changing events and emerging issues is essential to inform updates to 
strategic, workforce, and budgeting plans, as well as to ensure the 
agency maintains the agility to quickly reprioritize work, shift 
resources across goals and teams, and hire staff with needed expertise. 

To improve GAO’s efficiency and effectiveness in performing the 
agency’s mission and delivering quality products and services to the 
Congress and the American people, GAO has established the following 
performance goals and key efforts: 

Performance Goal 4.1.1: 

Enhance support for planning and managing engagements while 
maintaining or enhancing quality and client and customer satisfaction: 

Key Efforts: 

* Leverage IT and business process re-engineering to streamline 
engagement services and eliminate rework. 

* Design and implement a modular approach for engagement management 
that consolidates and centralizes engagement functions. 

* Enhance GAO’s quality assurance framework to address internal and 
external peer review suggestions and to ensure the highest quality 
possible in the agency’s work. 

Performance Goal 4.1.2: 

Enhance support for conducting and reporting on GAO work while 
maintaining or enhancing quality and client and customer satisfaction: 

Key Efforts: 

* Enhance communication and outreach to audited agencies to promote 
effective and productive working relationships. 

* Seek additional legislative access authorities and remedies as 
warranted. 

* Facilitate collaboration across GAO’s mission and mission support 
units to more efficiently and effectively share relevant knowledge and 
expertise to increase the quality of engagement work. 

* Revise the agency’s product-line and communication-delivery 
strategies to make GAO’s message more concise and available in 
multiple, easy-to-access formats. 

* Review and revise methods for measuring client and customer 
satisfaction to ensure GAO obtains timely, meaningful feedback. 

Performance Goal 4.1.3: 

More efficiently prioritize and manage GAO’s workload and staff 
resources to ensure the agency responds most effectively to the 
highest priorities: 

Key Efforts: 

* Enhance GAO’s processes for managing its workload. 

* Enhance processes to monitor workload, shift resources across goals, 
and create matrixed teams to ensure efficient and effective responses 
to the highest-priority work. 

* Monitor factors impacting the federal government and demands for GAO 
work to ensure strategic and workforce plans reflect emerging issues 
and changing demands. 

Strategic Objective 4.2: 

Maintain and Enhance a Diverse Workforce and Inclusive Work 
Environment through Strengthened Recruiting, Retention, Development, 
and Reward Programs: 

As GAO’s most important asset, the workforce defines the agency’s 
character and capacity to perform. Thus, recruiting a high-performing, 
diverse workforce is critical to ensuring that GAO has the talent it 
needs now and in the future: 

* In fiscal year 2009, GAO began an assessment of its recruiting 
practices and determined that while it was successful in attracting 
highly qualified candidates, it needed additional structure and 
oversight to ensure the best return for its recruiting efforts. GAO 
has now set an overarching goal for its recruiting program and will 
continue to refine its strategy for recruiting a capable, diverse 
workforce. 

* GAO also needs to improve its hiring process to make it more 
efficient and transparent for applicants and to remain competitive 
with other employers. GAO will leverage technology to enhance 
communication, simplify the application process, and reduce the length 
of time needed to finalize a hiring decision once, a vacancy 
announcement has been posted. 

* While GAO’s attrition rate has historically been low, the agency is 
experiencing the impact of changing demographics and workplace 
expectations. Currently, more than 35 percent of GAO staff have fewer 
than 5 years of agency experience, while about 15 percent of all GAO 
staff are eligible to retire, including about 35 percent of its 
executive corps. (See figure 42.) Thus, improving staff-development 
and career-progression opportunities will be important to enhance 
institutional knowledge and succession planning. 

Figure 42: GAO’S Workforce Profile, Fiscal Years 2005–2009: 

Percentage of staff: 

Fiscal year: 2005; 
Other staff: 48%; 
Staff eligible to retire within 12 months: 15.6%; 
Staff with 5 years of service or less: 36.4%. 

Fiscal year: 2006; 
Other staff: 43%; 
Staff eligible to retire within 12 months: 15.4%; 
Staff with 5 years of service or less: 41.2%. 

Fiscal year: 2007; 
Other staff: 49%; 
Staff eligible to retire within 12 months: 15.9%; 
Staff with 5 years of service or less: 34.7%. 

Fiscal year: 2008; 
Other staff: 50%; 
Staff eligible to retire within 12 months: 15.6%; 
Staff with 5 years of service or less: 34.6%. 

Fiscal year: 2009; 
Other staff: 46%; 
Staff eligible to retire within 12 months: 16.7%; 
Staff with 5 years of service or less: 36.5%. 

Source: GAO. 

Note: A small number of employees are eligible to retire within 12 
months and have less than 5 years of service with GAO (typically less 
than 0.5 percent). 

[End of figure] 

Performance and compensation systems: To sustain a high-performing 
diverse workforce, GAO must ensure fairness and equity in its 
performance and compensation systems. Several internal and external 
studies have been done of GAO’s performance programs that identify 
areas for improvement. GAO will continue its own studies and will 
develop initiatives to address suggested areas of improvement: 

* GAO’s goal is to ensure that all staff are assessed fairly and that 
they are appropriately rewarded for their contributions. 

* GAO must also ensure that it is providing staff with meaningful and 
targeted developmental experiences, training, and coaching, so that 
staff can feel valued and the agency can maximize their contributions 
to GAO goals. 

* GAO will ensure that its managers and supervisors are equipped with 
the requisite skills, authorities, and incentives that are essential 
to developing staff effectively. 

* GAO will provide a range of workplace and work-life balance programs 
to enhance employee retention, and will continue to evaluate its 
programs in these areas and work with staff to identify improvements. 

Diversity: A constant influence that will guide decisions about GAO’s 
human-capital practices is the agency’s Workforce Diversity Plan. GAO 
will continue to make diversity and inclusiveness a priority and will 
hold all managers accountable for taking actions that support a fair 
and inclusive work environment. Having a diverse workforce at all 
levels is an organizational strength that contributes to the 
achievement of results by bringing a wider variety of perspectives and 
approaches to policy development and implementation, strategic 
planning, problem solving, and decision making. GAO is committed to 
cultivating and sustaining an inclusive organizational culture that 
embraces diversity in all of its forms and emphasizes both agency and 
individual integrity and accountability (see figure 43). 

Figure 43: Strength in Unity: GAO Is Committed to Fostering a Diverse, 
Inclusive Work Environment: 

[Refer to PDF for image: photograph] 

Source: PhotoDisc. 

[End of figure] 

GAO management will continue ongoing dialogue and engagement with GAO 
employee organizations, including the International Federation of 
Professional and Technical Engineers (IFPTE), Local 1921; the Employee 
Advisory Council—which is composed of headquarters and field 
Administrative, Professional, and Support Staff, as well as Assistant 
Directors in analyst and analyst-related positions, and attorneys; and 
the Diversity Advisory Council—composed of diversity representatives 
of IFPTE, Local 1921, and employee liaison groups for employees who 
are disabled, Asian-American, African-American, Hispanic, veterans of 
the armed forces, people over 40, and advocates for nondiscrimination 
based on sexual orientation or gender identity—to hear and consider 
employee needs, concerns, and suggestions as they arise. 

To achieve a more diverse workforce and inclusive work environment 
through enhanced recruitment, retention, development, and reward 
programs, GAO will implement the following performance goals and key 
efforts: 

Performance Goal 4.2.1: 

Strengthen recruiting and hiring initiatives to attract a diverse 
workforce: 

Key Efforts: 

* Incorporate leading practices into GAO’s recruiting program to 
attract a diverse workforce. 

* Develop a comprehensive institutional perspective for recruiting and 
hiring to ensure a strategic and consistent approach. 

* Improve the efficiency and effectiveness of GAO’s hiring process. 

Performance Goal 4.2.2: 

Improve performance management and compensation systems: 

Key Efforts: 

* Implement recommendations from the GAO performance appraisal study 
to ensure fairness and equity. 

* Strengthen performance management practices to ensure consistent 
application. 

* Support and promote implementation of designated performance managers’
 responsibilities to more effectively develop and coach staff. 

* Review and improve compensation systems to ensure fairness and 
equity. 

Performance Goal 4.2.3: 

Enhance efforts to engage and develop the workforce: 

Key Efforts: 

* Support formal and informal initiatives to promote continuous 
learning and development. 

* Develop career-progression opportunities and enhanced training for 
all pay plans and levels to build institutional capacity and enhance 
succession planning. 

* Enhance staffing practices across the agency to ensure staff are 
fully utilized and obtain meaningful developmental experiences. 

* Monitor employee satisfaction with human-capital policies and 
practices to inform decision making. 

Performance Goal 4.2.4: 

Promote an environment that is fair and unbiased and that values 
opportunity and inclusiveness: 

Key Efforts: 

* Expand training and initiatives to enhance awareness and promote an 
inclusive workplace culture that values and appreciates diversity. 

* Review human-capital practices and outcomes to ensure employees are 
fairly and equitably treated and receive the support and assistance 
they need to succeed. 

Strategic Objective 4.3: 

Expand Networks, Collaborations, and Partnerships That Promote 
Professional Standards and Enhance GAO’s Knowledge, Agility, and 
Response Time: 

In light of the grave fiscal challenges facing the nation and 
countries around the globe, continual refinement of professional 
accounting and auditing standards is more important than ever, and GAO 
will continue to embrace its leadership role in this area. (See figure 
44.) Using its domestic and international networks, the agency will 
facilitate dialogue about strengthening professional standards, as 
well as explore new technologies and efficient communication methods 
to expand its reach across the accountability profession. 

Figure 44: GAO Works with Many Nations to Improve Audit Standards, 
Capacity, and Awareness: 

[Refer to PDF for image: 3 photographs] 

Sources: Brand X Pictures and PhotoDisc. 

[End of figure] 

Capacity: It is also important for GAO to expand its efforts to 
enhance capacity across all levels of audit offices in the United 
States and abroad to help address the daunting challenges governments 
face. GAO supports various capacity-building programs and initiatives 
that help ensure the billions of taxpayer dollars being spent in 
domestic and international programs are not subject to waste, fraud, 
and abuse. GAO continually re-evaluates these programs to identify 
ways to expand the reach and depth of its capacity-building efforts. 
To enhance the efficiency and effectiveness of these efforts, 
leveraging technology and expanding partnerships will be key. 

Knowledge sharing: GAO must expand its knowledge-sharing 
collaborations with auditing, accountability, and other entities to 
minimize duplication of effort and to leverage resources in the shared 
task of conducting valuable research on a range of public policy 
issues. GAO should continue to expand and enhance important 
information--sharing efforts, training, and collaboration on key legal 
issues, such as procurement and appropriations law, for federal 
agencies and practitioners. Given the increasing complexity of fiscal 
and other challenges facing the nation, expanding GAO’s partnerships—
both within existing networks and with other entities in the nonprofit 
and private sectors (e.g., academia, auditing and consulting firms, 
and good government organizations)-—will help ensure the agency stays 
abreast of emerging issues and enhance the agency’s knowledge, 
agility, and responsiveness. 

Partnerships: Partnerships are also critical to help GAO track 
changing government practices and governance; effectively react to 
technology, governance, and societal shifts; and ensure the agency 
maintains excellence in operations. 

Achieving this will require GAO to outreach to organizations 
domestically and internationally, such as professional standards-
setting organizations, good government organizations, and research 
entities, and to identify opportunities that can leverage GAO’s 
resources and expand its knowledge base. By enhancing its 
partnerships, GAO will be better able to identify lessons learned, 
leading practices, and emerging trends that benefit government and 
agency management. To expand networks, collaborations, and 
partnerships that promote professional standards and enhance its 
knowledge, agility, and response time, GAO has established the 
following performance goals and key efforts: 

Performance Goal 4.3.1: 

Enhance professional accounting and auditing standards and communicate 
with the accountability community: 

Key Efforts: 

* Coordinate with domestic and international standards-setting 
organizations to strengthen public sector accounting and auditing 
standards. 

* Enhance GAO staff knowledge of professional accounting and auditing 
standards to improve audit quality. 

* Enhance the domestic and international accountability community’s 
knowledge of professional standards to improve audit quality. 

* Prepare the domestic audit and accountability community for 
international convergence of public sector accounting and auditing 
standards. 

* Leverage technology to help ensure a consistent knowledge base of 
updated professional and accounting standards. 

Performance Goal 4.3.2: 

Enhance the capacity of the domestic and international accountability 
community to do quality work in auditing programs involving U.S. funds: 

Key Efforts: 

* Help strengthen the strategic plans of the International 
Organization of Supreme Audit Institutions (INTOSAI) and the National 
Intergovernmental Audit Forum to facilitate effective use of resources. 

* Advance and support implementation of the INTOSAI Donors Funding 
Initiative and Capacity Building Goal to expand capacity building in 
the international accountability community. 

* Enhance GAO’s current business model for providing capacity building 
to the domestic audit and accountability community to improve 
efficiency and effectiveness. 

* Enhance GAO’s current business model for providing capacity building 
to the national audit offices in developing countries to improve 
efficiency and effectiveness. 

* Leverage technology to assist in capacity-building efforts in the 
domestic and international accountability community to improve 
efficiency and effectiveness. 

Performance Goal 4.3.3: 

Enhance information sharing and collaborate with accountability 
organizations, advisory groups, sister agencies, and professional 
organizations to promote expanded audit and legal knowledge, 
expertise, and partnerships: 

Key Efforts: 

* Participate in domestic and international forums, task forces, and 
work groups to expand knowledge of audit approaches, legal issues, and 
emerging issues. 

* Explore potential partnerships and collaborations with additional 
organizations in the public, private, and nonprofit sectors, including 
such entities as academic institutions, research centers, and 
foundations to leverage GAO’s knowledge base. 

* Enhance and strengthen networking activities of our senior 
executives to broaden their professional networks within their 
respective disciplines and to expand GAO’s reach. 

* Enhance communication and coordination with stakeholders, such as 
inspectors general, to minimize duplication of effort and ensure 
effective and efficient use of resources. 

* Promote dialogue and action through leadership on critical 
international accountability issues, such as the global financial 
crisis. 

* Expand use of Comptroller General Forums and Roundtables to inform 
GAO’s strategic planning process and promote a continuous learning 
environment. 

* Enhance education and outreach on procurement and appropriations law 
to promote a common understanding of and compliance with legal 
requirements. 

Performance Goal 4.3.4: 

Enhance information sharing and collaboration with sister agencies, 
professional organizations, and others to improve internal operations 
and implementation of leading practices: 

Key Efforts: 

* Expand collaboration with other legislative branch agencies to share 
information and expertise on operational issues and leading practices. 

* Enhance participation in government networks to share information 
and expertise on operational issues and leading practices. 

* Expand relationships with professional organizations and the private 
and nonprofit sectors to access information on nongovernmental leading 
practices. 

Strategic Objective 4.4: 

Be a Responsible Steward of GAO’s Human, Information, Fiscal, 
Technological, and Physical Resources: 

Proactively addressing operational and management requirements is 
essential to maintain excellence in internal operations: 

* GAO will continue to enhance its already strong internal control 
program by increasing its focus on risk and making the control program 
an integral part of planning, budgeting, management, accounting, and 
internal auditing activities. 

* GAO has embraced federal “greening” initiatives to contribute to 
federal efforts to increase energy-efficiency and prevent 
environmental degradation, among other things. 

* The safety and security of GAO’s employees and their environment is 
also of paramount importance, especially in light of domestic and 
international events and technological changes. Specifically, the 
agency will continue to take action to ensure the personal safety of 
staff, asset protection, and continuity of agency operations. 

* GAO will also step up efforts to conduct privacy impact assessments 
and other actions necessary to ensure that information on individuals 
in its systems, databases, and other records is adequately protected. 

Business operations: To continue to be a leading-practices agency, it 
is essential that GAO’s business operations are efficient and 
effective and that agency systems provide the data needed to inform 
timely decisions. (See figure 45.) To meet this goal, GAO is in the 
process of implementing a number of new core business systems: 

* The agency will take steps to fully use the capabilities of the 
shared service provider of its financial system to ensure integration 
across all business operations and to improve data integrity, 
efficiency of operations, and financial decision making. 

* Completing initial deployment of the agency’s new travel and human-
resource systems is also important to reduce administrative burdens on 
mission and support staff, improve processing times, increase 
transaction accuracy, and support timely decision making. 

* Leveraging technology to improve remaining manual processes will 
also help reduce workloads and increase program-efficiency when 
tracking international requests and correspondence and obtaining 
passports and visas. 

* In light of the many new responsibilities placed on the agency in 
fiscal year 2009 and the need to shift resources quickly, identifying 
requirements and technical solutions for an integrated workforce 
planning and budgeting system will also be a priority. 

Figure 45: Enhanced Integrated Planning and Budgeting Enables 
Improvements in Core Business Processes and Support: 

[Refer to PDF for image: illustration] 

Core: Budget. 

Surrounded by: 
* Financial Services; 
* Workforce Planning; 
* Administrative Programs; 
* Technology Management; 
* Human-Capital Programs. 

Surrounded by: Fiscal Accountability. 

Surrounded by: Continuous Improvement. 

Surrounded by: Strategic Planning. 

Source: GAO. 

[End of figure] 

Administrative functions: Consistent management of and cohesive 
policies and practices for key administrative functions are important 
for effective agency leadership and management: 

* To ensure it can meet its most pressing needs, GAO will develop a 
human-capital governance structure that requires senior managers to be 
involved in key decisions. 

* GAO will continue to enhance its budgeting and workforce-planning 
processes and capabilities to ensure maximum flexibility in responding 
to changing and emerging needs and requirements. 

Surrounded by: GAO will strengthen its strategic planning process so 
that it reinforces management’s long-term vision for the organization 
and provides a line of sight for all employees. 

* GAO will institutionalize processes for sharing the considerable 
knowledge and expertise of its analysts to improve internal operations 
and to “walk the talk,” ensuring that GAO practices are consistent 
with recommendations made to other agencies. 

* GAO will institutionalize practices for using various internal 
communication methods to ensure that a strategic and consistent 
approach is applied across the agency. 

* In addition, to ensure agency needs are effectively met, GAO will 
revisit how it uses its headquarters workspace in light of changing 
factors, such as new entrants into its workforce, greater use of 
matrixed work teams, expanded teleworking, and the agency’s rotational 
development program. 

Employee organizations: As a knowledge-based people organization, GAO 
embraces the full engagement of all employees. In 2007, GAO Band I and 
Band II analysts, auditors, specialists, and investigators, and staff 
in the Professional Development Program, elected to be represented by 
a union and established GAO Employees’ Organization, IFPTE, Local 
1921. In 2008, GAO and IFPTE, Local 1921, reached an interim 
collective bargaining agreement. GAO is committed to continuing to 
work constructively with IFPTE, Local 1921, to finalize and implement 
a master term collective bargaining agreement. In addition, GAO has a 
number of employee organizations that represent various minority 
groups and other populations at GAO. These various employee 
organizations—including IFPTE, Local 1921; the Employee Advisory 
Council; and the Diversity Advisory Council—are the primary mechanisms 
for fostering collaboration and open communication between GAO 
management and staff. GAO management works cooperatively with employee 
organizations to obtain employee comments, concerns, and potential 
solutions regarding GAO policies, procedures, and practices. 

To ensure GAO continues to be a responsible steward of the agency’s 
human, information, fiscal, technological, and physical resources, GAO 
has established the following performance goals and key efforts: 

Performance Goal 4.4.1: 

Proactively address and expand on statutory and regulatory 
requirements for security, facilities, financial management, and other 
mission support areas: 

Key Efforts: 

* Enhance physical security in headquarters and field offices to be 
consistent with relevant Homeland Security Presidential Directive-12 
(HSPD-12) guidelines and to ensure protection of people and assets. 

* Enhance emergency preparedness measures and monitor developments in 
pandemic flu and other possible threats in order to protect and inform 
staff. 

* Improve information security in headquarters and field offices to 
protect GAO information and systems by continuously monitoring for 
threats and implementing protective measures. 

* Implement and enhance GAO’s privacy program to protect important 
information on individuals. 

* Implement initiatives to support federal environmental 
sustainability goals to reduce costs and waste. 

Optimize GAO’s internal control reviews to make them more risk-driven, 
responsive, adaptable, and accountable. 

Performance Goal 4.4.2: 

Leverage technology to achieve business process improvement and 
efficiency gains and enable timely decision making: 

Key Efforts: 

* Leverage existing technology solutions in fiscal operations to fully 
integrate financial systems and incorporate human-capital data to 
improve business processes. 

* Implement an electronic travel management system that is integrated 
with the agency’s financial management system. 

* Identify and implement a workforce planning and budgeting system 
that interfaces with agency financial management and human-capital 
systems. 

* Leverage technology solutions in human-resources management to 
achieve business process improvements and efficiency gains. 

* Improve the processes for managing international correspondence and 
requests, and obtaining passports and visas for GAO staff. 

* Explore other opportunities to leverage technology to provide 
improved service and support. 

Performance Goal 4.4.3: 

Improve management and governance of key administrative processes: 

Key Efforts: 

* Establish a human-capital governance structure to ensure an 
integrated and strategic approach to human-capital management. 

* Maintain and enhance GAO’s budgeting and workforce planning 
processes and capabilities to ensure maximum flexibility and 
responsiveness to changing and emerging needs. 

* Strengthen GAO’s strategic planning process by enhancing the 
documentation of its 3-year planning cycle to ensure transparency and 
understanding. 

* Facilitate collaboration across mission and mission support units to 
more effectively share relevant knowledge and expertise to improve 
internal operations. 

* Optimize use of workspace based on unit needs and workforce planning 
goals to manage physical infrastructure as an asset and improve 
effectiveness in meeting needs. 

* Implement an internal communications plan to ensure collaboration 
across units on strategic communications. 

Performance Goal 4.4.4: 

Enhance information-sharing and collaboration with internal employee 
organizations to ensure management and operational outcomes are in the 
collective best interest of the agency and its employees: 

Key Efforts: 

* Work constructively with GAO Employees Organization, IFPTE, Local 
1921, to finalize a comprehensive collective bargaining agreement. 

* Work constructively with GAO Employees Organization, IFPTE, Local 
1921, to facilitate productive working relationships and carry out the 
collective bargaining agreement that sets forth the agreed-upon 
working conditions, processes, rights of the parties, and shared 
values. 

* Facilitate productive ongoing discussions with GAO’s Employee 
Advisory Council and Diversity Advisory Council to ensure employee 
needs, concerns, and suggestions are understood and taken into 
consideration during management decision making. 

[End of Goal 4] 

Appendix I: 

GAO’s Mission, Responsibilities, Strategies and Means, Organization, 
Performance Measures, and External and Internal Challenges: 

Mission: 

The United States Government Accountability Office 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. 

Statutory Responsibilities: 

With the Budget and Accounting Act of 1921, the Congress established 
GAO with the broad role of investigating “all matters relating to the 
receipt, disbursement, and application of public funds” and to “make 
recommendations looking to greater economy or efficiency in public 
expenditures.” Since World War II, the Congress has clarified and 
expanded the original charter in the following ways: 

* The Government Corporation Control Act of 1945 provided GAO with the 
authority to audit the financial transactions of government 
corporations. 

* The Budget and Accounting Procedures Act of 1950 assigned GAO 
responsibility for establishing accounting standards for the federal 
government and carrying out audits of internal controls and financial 
management. 

* The Legislative Reorganization Act of 1970 expressly authorized GAO 
to conduct program evaluations and analyses of a broad range of 
federal activities. 

* The General Accounting Office Act of 1980 reiterated GAO’s authority 
to obtain agency and other records needed for its investigations and 
evaluations and added the authority for GAO to enforce its access 
rights in court. 

* The Chief Financial Officers Act of 1990 and the Government 
Management Reform Act of 1994 authorized GAO to audit agencies’ 
financial statements and annually audit the consolidated financial 
statements of the United States. Numerous statutes authorize or 
require GAO to audit the annual financial statements of federal 
departments, agencies, and other entities. Several statutes also 
specifically authorize or require GAO to review a broad range of 
activities related to the financial management of federal departments, 
agencies, and other entities. 

* Numerous other laws complement GAO’s basic audit and evaluation 
authorities, including the Congressional Budget and Impoundment 
Control Act of 1974, which provided for GAO review of reported or 
unreported impoundments; the Inspector General Act of 1978, which 
provided for GAO-established standards for the audit of federal 
programs and activities; and the Competition in Contracting Act of 
1984, which provided for GAO review of protested federal contracting 
actions. 

* GAO received authority and responsibility for oversight and 
reporting under the Emergency Economic Stabilization Act of 2008 and 
the American Recovery and Reinvestment Act of 2009, which together 
authorized over $1 trillion to stabilize the financial system, support 
economic activity, and stem job loss during a sharp downturn in the 
U.S. economy. In addition, under the Patient Protection and Affordable 
Care Act, enacted in 2010, GAO is responsible for conducting 
evaluations and providing reports related to the administration of a 
number of federal health care programs, including Medicare and 
Medicaid. 

At GAO, we implement our statutory responsibilities by engaging in a 
range of oversight, insight, and foresight activities that span the 
full breadth and scope of federal activities and programs. We publish 
hundreds of reports and other documents annually and provide a number 
of other related services. By making recommendations to improve the 
practices and operations of government agencies, we contribute not 
only to the increased effectiveness of and accountability for federal 
spending, but also to the enhancement of the taxpayers’ trust and 
confidence in their federal government. We also look at national and 
international trends and challenges to anticipate their implications 
for public policy. 

Strategic Goals: 

To accomplish our mission and meet our statutory responsibilities, we 
use a strategic planning and management framework with four strategic 
goals: 

Goal 1:	Address Current and Emerging Challenges to the Well-being and 
Financial Security of the American People. 

Goal 2:	Respond to Changing Security Threats and the Challenges of 
Global Interdependence. 

Goal 3:	Help Transform the Federal Government to Address National 
Challenges. 

Goal 4:	Maximize the Value of GAO by Enabling Quality, Timely Service 
to the Congress and Being a Leading Practices Federal Agency. 

Each of our strategic goals is further defined by strategic 
objectives, performance goals, and key efforts. The strategic 
objectives and performance goals provide progressively more detailed 
descriptions of what we plan to achieve. Each key effort outlines a 
body of work that supports a performance goal. 

GAO’s audit, evaluation, analytic, and investigative work is primarily 
aligned under the first three strategic goals, which span domestic and 
international issues, affect the lives of all residents of the 
country, and influence the extent to which the federal government 
serves the nation’s current and future interests (see figure 46). 

The fourth goal is GAO’s only internal goal. It is aimed at maximizing 
productivity by investing steadily in information technology to 
support GAO’s work; ensuring the safety and security of GAO’s people, 
information, and assets; pursuing human-capital transformation; and 
leveraging GAO’s knowledge and experience. 

Figure 46: GAO’s Strategic Planning Hierarchy: 

[Refer to PDF for image: illustration] 

Strategic goals: 4; 
Strategic objectives: 20; 
Performance goals: 96; 
Key efforts: 300+. 

Source: GAO. 

[End of figure] 

Strategies and Means: 

To achieve our strategic goals, we develop and present information in 
a number of ways, including: 

* evaluations of federal programs, policies, operations, and 
performance; 

* audits to determine whether public funds are spent efficiently, 
effectively, and in accordance with the law; 

* investigations of potential illegal or improper activities; 

analyses of the financing for government activities; 

* engagements in which we work proactively with agencies to help guide 
their efforts toward achieving positive results; 

* legal decisions and opinions to determine whether agencies are in 
compliance with applicable laws and regulations; 

* policy analyses to assess needed and proposed actions; and; 

* additional assistance to the Congress in support of its oversight, 
appropriations, legislative, and other responsibilities. 

Most of our work is done at the request of congressional committees or 
is mandated by public laws. Congressional, agency, and international 
protocols [hyperlink, http://www.gao.gov/congress.html] establish the 
criteria GAO considers in accepting, prioritizing, staffing, and 
conducting its engagements. We also undertake research under the 
authority of the Comptroller General on government programs and 
operations we have identified as being at high risk for fraud, waste, 
abuse, or mismanagement, as well as on emerging trends such as the 
cost of fighting terrorism and the status of the reconstruction 
efforts in Iraq. 

In brief, we advise the Congress and the heads of executive agencies 
about ways to make government more efficient, effective, ethical, 
equitable, and responsive. Our work leads to laws and acts that 
improve government operations, thereby saving the government and 
taxpayers billions of dollars. 

GAO’s Organization: 

GAO, a relatively small agency, depends almost totally on one type of 
resource to achieve its strategic goals and objectives: its people. GAO’
s approximately 3,300 staff work within 14 research, audit, and 
evaluation teams, as well as in staff offices and mission support 
units (see figure 47). 

Because achieving GAO’s strategic goals and objectives also requires 
GAO to coordinate with other organizations with similar or 
complementary missions, GAO: 

* uses advisory panels and other bodies to inform our strategic and 
annual work planning and; 
 
* maintains strategic working relationships with other national and 
international government accountability and professional 
organizations, including the federal inspectors general, state and 
local audit organizations, and other national audit offices. 

These two types of strategic working relationships extend our 
institutional knowledge and experience, leverage our resources, and in 
turn improve our service to the Congress and the nation. Our Strategic 
Planning and External Liaison office leads our work with external 
partner organizations, while our research, audit, and evaluation teams 
lead with most of the issue-specific organizations. 

Figure 47: GAO’s Organizational Structure: 

[Refer to PDF for image: illustration] 

The following chart depicts GAO's organizational structure. It is 
organized in a "tree" structure. 

Level one (center): 

Comptroller General of the United States, Gene Dodaro (Acting), 
(Executive Committee): 

Level one (reporting to the Comptroller General): 

Public Affairs: 
Strategic Planning and External Liaison,: 
Congressional Relations: 
Opportunity and Inclusiveness: 

Level one (set apart from all GAO units to denote independence and 
statutory role): 

Inspector General: 

Level two (reporting to the Comptroller General): 

General Counsel: 
Chief Operating Officer: 
Chief Administrative Officer: 

Level three, reporting to General Counsel): 

Goal 1; 
Goal 2; 
Goal 3: 
* Provide Audit and Other Legal Support Services for All Goals and 
Staff Offices; 
* Manage GAO’s Bid Protest and Appropriations Law Work; 
Goal 4; 

Level three, reporting to Chief Operating Officer: Teams: 
Goal 1: 
Provide Timely, Quality Service to the Congress and the Federal 
Government to Address Current and Emerging Challenges to the Well-
being and Financial Security of the American People: 
* Education, Workforce, and Income Security; 
* Financial Markets and Community Investment; 
* Health Care; 
* Homeland Security and Justice; 
* Natural Resources and Environment; 
* Physical Infrastructure; 
Goal 2: 
Provide Timely, Quality Service to the Congress and the Federal 
Government to Respond to Changing Security Threats and the Challenges 
of Global Interdependence: 
* Acquisition and Sourcing Management; 
* Defense Capabilities and Management; 
* International Affairs and Trade; 
Goal 3: 
Help Transform the Federal Government to Address National Challenges: 
* Applied Research and Methods; 
* Financial Management and Assurance; 
* Forensic Audits and Special Investigations; 
* Information Technology; 
* Strategic Issues. 

Level three, reporting to Reporting to Chief Administrative 
Officer/CFO: 
Goal 4: 
Maximize the Value of GAO by Enabling Quality, Timely Service to the 
Congress and Being a Leading Practices Federal Agency: 
* Controller; 
* Human Capital Office; 
– Chief Human Capital Officer; 
* Information Systems and Technology Services; 
– Chief Information Officer; 
* Knowledge Services; 
– Chief Knowledge Services Officer; 
* Professional Development Program; 
* Field Operations. 

Source: GAO. 

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

[End of figure] 

Key Performance Measures: 

GAO uses a balanced scorecard of 15 agencywide measures to assess our 
performance and ensure we fulfill our mission and deliver results to 
benefit the nation. 

These measures focus on four key areas: 

Results: Focusing on results and the processes needed to achieve them 
is fundamental to accomplishing our mission. GAO uses four annual 
measures—financial benefits, nonfinancial benefits, past 
recommendations implemented, and new products containing 
recommendations—to evaluate the impact of our past work. 

Client: Used to judge how well we are serving our congressional 
clients, GAO’s client measures include the number of times GAO was 
invited to testify on its current and past work, addressing issues 
that congressional committees are examining through the hearing 
process. We also outreach to congressional clients to ensure GAO’s 
products are provided in the time period agreed to by GAO and our 
client for particular engagements. 

People: As our most important asset, our people define our character 
and capacity to perform. A variety of data sources, including an 
internal survey, provide information to help us measure how we are 
attracting and retaining high-quality staff and how well we are 
developing, supporting, using, and leading staff. 

Internal operations: GAO’s mission and people are supported by 
internal administrative services, including information management, 
building management, knowledge services, human-capital, and financial 
management services. An annual customer satisfaction survey is used to 
gather information about how well these internal operations help 
employees get their job done and improve employees’ quality of work 
life. 

Performance targets for all of the measures are set each year. They 
are based on what we have been able to do in the past—for example, we 
consider 4-year rolling averages for some measures, as well as 
discussions by the agency’s top executives with teams and offices 
about what must be accomplished. The most recent 4-year averages for 
selected measures are shown in table 3. 

Table 3: Four-Year Rolling Averages for Selected GAO Measures, Fiscal 
Years 2005 to 2009: 
 
Performance measure: Results: Financial benefits (billions): 
2005: $39.2; 
2006: $43.0; 
2007: $45.1; 
2008: $48.7; 
2009: $49.5. 
 
Performance measure: Results: Nonfinancial benefits: 
2005: 1,139; 
2006: 1,248; 
2007: 1,325; 
2008: 1,376; 
2009: 1,352. 
 
Performance measure: Results: New products with recommendations: 
2005: 58%; 
2006: 61%; 
2007: 64%; 
2008: 65%; 
2009: 66%; 
 
Performance measure: Client: Testimonies: 
2005: 200; 
2006: 206; 
2007: 228; 
2008: 248; 
2009: 254. 

Source: GAO. 

[End of table] 

Two of GAO’s results measures bear particular attention here: 

Financial benefits: As illustrated in figure 48, GAO’s recommendations 
can produce measurable financial benefits for the federal government 
after they are acted on by the Congress or agencies. Funds can then be 
reallocated to other areas or made available to reduce government 
expenditures. 

Nonfinancial benefits: Many benefits produced from implemented GAO 
recommendations cannot be measured in dollars. In fiscal year 2009, 
GAO documented 1,315 nonfinancial benefits that covered a wide variety 
of crucial issues, such as enforcing border security and immigration; 
strengthening the federal government’s preparedness for an influenza 
pandemic; and reforming how the government stores, shares, and tracks 
information on contractors’ performance. Some 620 of these 
nonfinancial benefits reflected improved core business practices at 
agencies or in government reforms. (See figure 48.) 

Figure 48: Types of Financial and Nonfinancial Benefits Recorded in 
Fiscal Year 2009 from Our Work: 

[Refer to PDF for image: 2 pie-charts] 

Financial Benefits: 
Total $43 billion: 
Agencies acted on GAO information to improve services to the public: 
$8.2 billion (19%); 
Information GAO provided to the Congress resulted in statutory or 
regulatory changes: $18.2 billion (42%); 
Core business processes improved at agencies and governmentwide 
management reforms advanced by GAO’s work: $16.6 billion (39%). 

Nonfinancial Benefits: 
Total 1,315: 
Agencies acted on GAO information to improve services to the public: 
626 (48%); 
Information GAO provided to the Congress resulted in statutory or 
regulatory changes: 69 (5%); 
Core business processes improved at agencies and governmentwide 
management reforms advanced by GAO’s work: 620 (47%). 

Source: GAO. 

[End of figure] 

We use GAO’s performance and accountability report, issued shortly 
after the end of each fiscal year, to publicly report on all of our 
performance measures. See [hyperlink, http://www.gao.gov/sp.html] for 
our latest report. 

Internal Management Challenges: 

Over the next 6 years, GAO anticipates focusing on three key internal 
management challenges—-physical security, information security, and 
human-capital. 

Physical security challenge: To strengthen our ability to protect our 
people and our assets, we will constantly assess our physical security 
profile and continuity of operations programs relative to the domestic 
and international climate. 

Information security challenge: The constantly evolving threats to 
information and information security assets will continue to be a 
challenge for us. We will strive to ensure that information protection 
requirements extend across the life cycle of documentation, from data 
collection, report production, data transmission, and storage to the 
eventual archiving and disposal of data. 

Human-capital challenge: We depend on a talented, high-performing, 
knowledge-based workforce to carry out our mission in support of the 
Congress. At the same time, the federal government faces new and 
complex challenges. GAO will continue to identify and implement 
improvements in human-capital management to promote a work environment 
that is fair, unbiased, and inclusive and that offers opportunities 
for all employees to realize their full potential. 

External Risks and Mitigating Factors: 

Several external factors could affect the achievement of our 
performance goals, including the amount of resources we receive, 
shifts in the content and volume of our work, and national and 
international developments. Limitations imposed on our work by other 
organizations or limitations on the ability of other federal agencies 
to make the improvements we recommend are additional factors that 
could affect the achievement of our goals. 

As the Congress focuses on known challenges facing the nation and 
responds to unforeseen events, the mix of work we are asked to 
undertake may change, necessitating that we modify the resources 
allocated for some strategic objectives and performance goals. 

Congressional demand for our analysis and advice is strong. In fiscal 
year 2009, we received over 900 requests and mandates. The number of 
new congressional mandates, our highest-priority work, increased from 
75 in fiscal year 2007 to 131 in fiscal year 2009. Moreover, in fiscal 
year 2009, we devoted almost one-third of our audit resources to 
mandates. 

Federal funding and budget constraints could also affect our ability 
to serve the Congress and meet our performance targets. Almost 80 
percent of our budget is composed of people-related costs, and any 
serious budget situation will have an impact on our staffing and human-
capital policies and practices. 

Another external factor that affects our ability to serve the Congress 
is the extent to which we can obtain access to agency information. 
This access to information plays an essential role in our ability to 
report in a timely manner on issues of importance to the Congress and 
the American people. While we generally receive very good cooperation 
in response to our requests for information, over time GAO has 
experienced some access issues at certain departments and agencies. We 
actively pursue access issues as they arise and are engaged in 
discussions and efforts across the executive branch to enhance our 
access to information. Legislation pending in the House—the Government 
Accountability Office Improvement Act of 2009, H.R. 2646—would confirm 
certain aspects of our access rights, refuting agency interpretations 
that restrict GAO’s access in particular circumstances. We appreciate 
the interest of the Congress in helping to ensure that we obtain 
access to information and the efforts by agencies to cooperate with 
our requests. (A more detailed discussion about this issue appears on 
pages 61 and 62 in our full performance and accountability report for 
fiscal year 2009.) 

[End of Appendix] 

Image Sources: 

This section contains credit and copyright information for images and 
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not listed adjacent to the image or graphic. 

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[End of section] 

Footnotes: 

[1] GAO, 21st Century Challenges: Reexamining the Base of the Federal 
Government, [hyperlink, http://www.gao.gov/products/GAO-05-325SP] 
(Washington, D.C.: February 2005). 

[2] Department of Defense, National Defense Strategy (Washington, 
D.C.: June 2008), 2–3, [hyperlink, 
http://www.defenselink.mil/news/2008NationalDefenseStrategy.pdf]. 

[3] Patrick M. Cronin, ed., Institute for National Strategic Studies, 
Global Strategic Assessment 2009: America’s Security Role in a 
Changing World (Washington, D.C.: National Defense University Press, 
September 2009), 13, [hyperlink, 
http://www.ndu.edu/inss/docUploaded/05-GSA2009_Chpt%201.pdf]. 

[4] World Bank and International Monetary Fund, Global Monitoring 
Report 2010: The Millennium Development Goals after the Crisis 
(Washington, D.C.: Apr. 23, 2010). 

[5] Department of Defense, Quadrennial Defense Review Report 
(Washington, D.C.: February 2010), XV, [hyperlink, 
http://www.defense.gov/qdr/]. 

[6] Department of Defense, Quadrennial Defense Review Report 
(Washington, D.C.: February 2010), 57, [hyperlink, 
http://www.defense.gov/qdr/]. 

[7] The “Alternative” simulation is based on historical trends and 
policy preferences. Discretionary spending grows with GDP rather than 
inflation during the first 10 years, Medicare physician payment rates 
are not reduced as in the Congressional Budget Office’s baseline, all 
tax provisions are extended to 2020, and the alternative minimum tax 
exemption amount is indexed to inflation through 2020; revenues are 
then brought back to their historical level. See GAO, The Federal 
Government’s Long-Term Fiscal Outlook: January 2010 Update, GAO-10-
468SP (Washington, D.C.: Mar. 2, 2010) for additional information 
about the long-term fiscal outlook. 

[8] See, for example, GAO, Financial Regulation: A Framework for 
Crafting and Assessing Proposals to Modernize the Outdated U.S. 
Financial Regulatory System, [hyperlink, 
http://www.gao.gov/products/GAO-09-216] (Washington, D.C.: Jan. 8, 
2009); Financial Markets Regulation: Financial Crisis Highlights Need 
to Improve Oversight of Leverage at Financial Institutions and Across 
System, [hyperlink, http://www.gao.gov/products/GAO-09-739] 
(Washington, D.C.: July 22, 2009); and Financial Regulation: Recent 
Crisis Reaffirms the Need to Overhaul the U.S. Regulatory System, 
[hyperlink, http://www.gao.gov/products/GAO-09-1049T] (Washington, 
D.C.: Sept. 29, 2009). 

[9] For example, extraordinary meetings of the finance ministers and 
leaders of the Group of 20 Leading Economic Nations resulted in joint 
commitments and domestic actions, such as taking strong stimulus 
measures, repairing the financial system to restore lending, 
strengthening financial regulation, funding and reforming 
international financial institutions, and promoting trade and 
sustainable recovery. 

[10] The TARP was authorized under the Emergency Economic 
Stabilization Act of 2008, Pub. L. No. 110-343, Div. A., 122 Stat. 
3765 (2008) (codified at 12 U.S.C. §§ 5201 et seq.). 

[11] Pub. L. No. 111-5, 123 Stat. 115 (Feb. 17, 2009). 

[12] CBO’s January 2010 projections show U.S. unemployment staying 
above 8 percent until 2012 and not reaching its pre-recession level of 
4.6 percent in 2007 until the 2014-2016 period; IHS Global Insight’s 
most likely scenario in its June 2010 U.S. forecast shows U.S. 
unemployment remaining well above its pre-recession level through 2020. 

[13] Specifically, CBO forecasts real GDP will grow 2.2 percent in 
2010 and 1.9 percent in 2011, and will average 4.4 percent annually in 
the 2012–2014 period, while unemployment will stay at 10.1 percent in 
2010, before dropping to 9.5 percent in 2011, 6.4 percent in 2012–
2014, and 5.0 percent in 2014–2020. 

[14] CBO Director Douglas W. Elmendorf’s Blog entry, titled CBO 
Testifies before the Joint Economic Committee on Policies for 
Increasing Economic Growth and Employment in the Short Term, 
accompanying prepared remarks before the Joint Economic Committee, 
U.S. Congress, February 23, 2010, [hyperlink, 
http://cboblog.cbo.gov/?p=475]. 

[15] See Riccardo DiCecio and Charles S. Gascon, “Vacancies and 
Unemployment,” in National Economic Trends, Federal Reserve Bank of 
St. Louis (Nov. 12, 2009). CBO’s August 2009 Budget and Economic 
Outlook says that many of the jobs lost in the construction, financial 
services, and auto-related manufacturing and distribution industries 
are “unlikely to return.” 

[16] See Richard G. Anderson, “The Financial Services Sector: Boom and 
Recession,” National Economic Trends, Federal Reserve Bank of St. 
Louis (Sept. 14, 2009). 

[17] See Statement by Ben S. Bernanke, Chairman, Board of Governors of 
the Federal Reserve System, before the Joint Economic Committee, U.S. 
Congress (Apr. 14, 2010), 1. 

[18] A recent, though somewhat rudimentary, effort by Federal Reserve 
economists to analyze the near-term effects of past savings finds that 
higher saving is correlated with faster (not slower) growth in the 
ensuing 2 years. See Daniel L. Thornton, “Personal Saving and Economic 
Growth,” National Economic Trends, Federal Reserve Bank of St. Louis 
(Dec. 17, 2009). 

[19] Mortgage Bankers Association National Delinquency Survey. 

[20] Core Logic Estimates of negative equity as of the third quarter 
of 2009. 

[21] See CBO Director Douglas W. Elmendorf’s Blog entry to accompany 
remarks before the American Association for Budget and Program 
Analysis, The Economic and Budget Outlook (Nov. 24, 2009) at 
[hyperlink, http://cboblog.cbo.gov]. 

[22] In January 2010, CBO issued an assessment of various options that 
concluded that “properly designed measures could help increase U.S. 
growth and employment in 2010 and 2011.” Nevertheless, CBO said the 
resulting worsening of the U.S. deficit, if unaddressed, could reduce 
longer-term U.S. growth. Options giving the greatest “bang for the buck”
included increasing aid to the unemployed, reducing payroll taxes for 
employers, and allowing full or partial expensing of investment costs. 
See CBO, Policies for Increasing Economic Growth and Employment in 
2010 and 2011 (January 2010) and CBO Director’s Blog, Jan. 14, 2010, 
[hyperlink, http://cboblog.cbo.gov/?p=454]. 

[23] Pier Carlo Padoan, OECD Chief Economist, What is the Economic 
Outlook for OECD Countries: An Interim Assessment (Paris, France: 
Organization for Economic Cooperation and Development, Apr. 7, 2010), 
19. 

[24] For example, Council of Economic Advisors Chairman Christina 
Romer has asserted that a tightening of fiscal and monetary policy in 
1936–1937 added 2 years to the Depression and caused unemployment to 
rise dramatically, to 19 percent, in 1938. See Christina Romer, 
Lessons from the Great Depression for Economic Recovery in 2009, 
prepared remarks for presentation at The Brookings Institution (Mar. 
9, 2009), 8. 

[25] World Bank, Global Commodity Markets, (Washington, D.C.: The 
World Bank Group, January 2010), 6-9. 

[26] GAO, Contingency Contracting: DOD, State, and USAID Continue to 
Face Challenges in Tracking Contractor Personnel and Contracts in Iraq 
and Afghanistan, [hyperlink, http://www.gao.gov/products/GAO-10-1] 
(Washington, D.C.: Oct. 1, 2009). 

[27] Agencies and GAO have legal access to significant federal 
contractor and grantee data. 

[28] World Bank Development Prospects Group, “Outlook for Remittance 
Flows 2010-11,” Migration and Development Brief, No. 12 (Apr. 23, 
2010). 

[29] In 2010 and 2011, the Social Security program is expected to pay 
out more in benefits then it collects in taxes. However, this is not 
expected to happen again until 2016 when, without changes, it will 
occur every year until the trust funds are depleted. 

[30] This amount is based on an adjusted 2007 median of $65,000, 
adjusted by market index returns and asset allocation of IRA and Keogh 
owners. 

[31] Pub. L. No. 110-314, 122 Stat. 3016 (Aug. 14, 2008). 

[32] According to the Federal Procurement Data System–Next Generation, 
DOD’s total obligations for services in fiscal year 2009 were about 
$193 billion. However, this figure reflects DOD’s approximately $13.9 
billion downward adjustment to correct an administrative error made in 
fiscal year 2008. As this adjustment significantly affected DOD’s 
reported obligations in fiscal year 2009, the $207 billion figure we 
report reflects what DOD’s total obligations for services would have 
been had the error not occurred. 

[33] See [hyperlink, http://www.gao.gov/highrisk/]. 

[End of section] 

[End of Strategic Plan]