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After an internal assessment initiated in January 2010, the Secretary of Homeland Security announced in January 2011 that she had directed CBP to end the SBInet program as originally conceived. According to DHS, the Secretary's decision was informed by an independent analysis of cost- effectiveness, a series of operational tests and evaluations, and Border Patrol input. The prime contractor is to continue limited performance under the SBInet contract using a 1-year option for SBInet operations and maintenance services in Arizona beginning on April 1, 2011, with a possible 6-month extension. Further, according to CBP and the contractor, following a March 2010 decision by the Secretary halting further deployment of SBInet beyond the Tucson and Ajo Border Patrol stations, no additional SBInet deployments are expected. In addition, the Secretary's decision to end the SBInet program limited Block 1 deployments to the Tucson and Ajo stations in the Tucson Sector, but did not affect the current SBInet Block 1 capability, which was developed based on updated requirements from the Border Patrol. The Block 1 capability consists of 15 sensor towers (with day/night cameras and radar) and 10 communication towers, which transmit surveillance signals to the Common Operating Pictures (COP) at station command centers. This capability remains deployed and operational in Arizona, as part of the Border Patrol Tucson Sector's overall technology portfolio. According to contractor and Border Patrol officials, there were several original SBInet concepts that were not included in the Block 1 capability due to early design/cost trade-offs and Border Patrol agent feedback that they did not need them to perform their mission. Also, certain elements proved technically difficult and costly to include in the Block 1 capability. For example, the concepts to integrate transmissions from RVSS and MSS units into the COP, transmitting COP images into agents' laptops in their vehicles and tracking Border Patrol agent deployments on the geographic display were not included. OTIA and Border Patrol officials told us that the SBInet program's Block 1 capability has been useful since being deployed in February 2010 at the Tucson station and August 2010 at the Ajo station. For example, a shift commander at the Tucson station described the capability as considerably better than the technology that was available at the sector prior to the SBInet deployment. Further, according to COP operators in Tucson, the current SBInet sensor package is responsive to key mission requirements by giving them the capability to achieve persistent wide-area surveillance and situational awareness. Officials at Border Patrol headquarters stated that the Block 1 capability gave them a capability they did not have before. These officials also stated that, most importantly, the Block 1 capability helped them achieve persistent surveillance and situational awareness to enable an appropriate response to border intrusions and choose the location of interdiction, which they described as a tactical advantage. They also noted that the height of the towers allows for additional surveillance into terrain and brush thereby allowing the Border Patrol to shift personnel to gap areas where surveillance does not exist. Other examples of system usefulness offered by Border Patrol officials included a centralized point of data integration (through the COP), increased probability of arrest upon detection (by controlling the point of interdiction by means of camera and radar), improved agent safety when responding to potential threats, verification of whether a ground-sensor indicated a threat or not, efficiency and effectiveness in directing agent responses, and a tiered deployment of technology. For example, at the Ajo Station, a Border Patrol official explained that tiered deployment included mobile technology units that are positioned at the border line, and Block 1 sensor towers that are deployed off the line where they can monitor intruders who might have eluded interdiction at the border. The Secretary's January 2011 announcement also stated that the SBInet capability had generated some advances in technology that had improved Border Patrol agents' ability to detect, identify, track, deter, and respond to threats along the border. It further stated that the new border technology deployment plan would also include, where deemed appropriate by the Border Patrol, elements of the now-ended SBInet program that have proven successful. On the basis of limited data, the operational availability of deployed SBInet components has been consistent with the relevant requirement that expects SBInet to be operationally available 85 percent of the time. According to prime contractor operations and maintenance statistics for a 1-week period in January 2011, SBInet in the Tucson and Ajo Stations was operational over 96 percent of the time. According to the contractor's logistics manager who oversees the operation and maintenance of SBInet, since the deployment is relatively recent, a full year's worth of data would be needed to make conclusive determinations about long-term operational reliability and identify areas of persistent problems. The times that SBInet was not available were due primarily to camera malfunctions and power failures. According to Border Patrol and prime contractor officials, the SBInet Block 1 capability is receiving new features from the contractor in response to ongoing user input and feedback. These features include adding an "eye-safe" laser target illuminator (the eye-safe feature minimizes the potential for injury to a person exposed to the laser), adding a "standby" mode to the radar (wherein scanning is suspended until needed), and integrating the next-generation unattended ground sensors into the COP. However, this applies only to new sensors intended for Block 1--the Border Patrol has not selected a vendor for next-generation sensors for elsewhere along the border and outside of SBInet. The usefulness of SBInet's Block 1 capability notwithstanding, OTIA and Border Patrol officials told us that it has certain shortcomings. These shortcomings include not having the mobility to respond to shifts in risk, facing terrain coverage (line-of-sight) gaps, some of which are mitigated through other technologies, and performing poorly in adverse weather. Further, according to OTIA, the SBInet capability as configured by the prime contractor is a proprietary and not an open architecture. Thus, it is unable to incorporate, for example, next-generation radar and cameras without significant integration work and cost. In addition, the SBInet capability has been costly to deploy and maintain. Specifically, the total task-order cost for the Block 1 deployment in Arizona was about $164 million. The operations and maintenance costs for the deployment are estimated to be up to about $1.5 million per month, or about $18 million per year. DHS is implementing a new approach for acquiring and deploying border security technology called "Alternative (Southwest) Border Technology" to replace the SBInet program. As part of this approach DHS is to deploy a mix of technologies, including RVSS, MSS, and hand-held equipment for use by Border Patrol agents. It also is to include a new Integrated Fixed Tower system that is slated for deployment along the border where the Border Patrol deems it appropriate, beginning with five high-risk areas in Arizona at an estimated cost of $570 million. While other elements of the plan may be deployed sooner, the deployment schedule for the Integrated Fixed Towers envisioned by OTIA and the Border Patrol is planned to begin in 2013, depending on funding availability. This plan suggests that OTIA and the Border Patrol have determined that the Integrated Fixed Tower system is a cost-effective solution in certain locations. However, due to the questions we have about how the Analysis of Alternatives (AOA) analyses and conclusions were factored into planning and budget decisions, the basis for DHS's technology deployment plan is not yet clear. Further, the results of independent analyses were not complete at the time of the Secretary's decision to end the SBInet program, thus any results on SBInet's operational effectiveness could not inform the decisions to proceed with a possibly similar Integrated Fixed Tower system. According to the Border Patrol, its operational assessment for Arizona calls for deploying Integrated Fixed Tower systems to five high-threat areas in the state, beginning with the Nogales, Douglas, and Casa Grande Stations as part of this approach. These deployments will include 52 sensor towers, which is less than the 91 sensor towers envisioned under the original SBInet deployment plan. Border Patrol officials explained that they reviewed the contractor's original analysis of where to put the towers and determined that other solutions, such as RVSSs and MSSs, were more appropriate due to terrain and other factors such as population density. According to OTIA and Border Patrol officials, depending on the availability of funding, the deployments of the Integrated Fixed Tower system component of the Arizona technology plan are expected to begin around March 2013 and be completed by the end of 2015 (or possibly early 2016), with other sector deployments sequentially following the Arizona sector. OTIA estimates that the entire Integrated Fixed Tower system acquisition for Arizona would cost about $570 million, including funding for design and development, equipment procurement, production and deployment, systems engineering and program management, and a national operations center. In this regard, the President's fiscal year 2012 DHS budget request for BSFIT calls for $242 million to fund the first three Integrated Fixed Tower system deployments for Arizona, which include 36 sensor towers. Border Patrol officials told us that the existing SBInet capability and the requested Integrated Fixed Tower systems are intended to form the "baseline or backbone" of its evolving technology portfolio, where appropriate in high-risk areas in Arizona, with some exceptions. For example, in the urban areas of the Douglas and Naco Stations, RVSS units would likely be considered the backbone because they are better suited for populated areas where SBInet's radar capability is not as effective. A Border Patrol official said that Integrated Fixed Tower systems could be an important technology component in additional areas along the southwest border, but that the agency had not yet made those determinations, pending the outcome of forthcoming operational assessments. In one of its first actions following the Secretary of Homeland Security's announcement to end SBInet, DHS issued a Request for Information (RFI) in January 2011 to industry regarding the commercial availability of surveillance systems based on the Integrated Fixed Tower system concept, consistent with its stated intent to acquire future border technologies in its new plan through full and open competitions. OTIA and Border Patrol officials explained that the RFI would engender competition and better options for the government, in terms of finding out about state-of-the-art industry capabilities and obtaining feedback on requirements to help refine them. However, they expect similar benefits in terms of capability, performance, and cost that such competition would yield, as compared to the SBInet Block 1 capability. For example, OTIA and Border Patrol officials acknowledged that the surveillance system sought by the RFI is essentially the same as the one deployed in Block 1 in terms of expected capability and performance in meeting operational and effectiveness requirements. In February 2011, DHS conducted an "Industry Day" to provide potential vendors with a better understanding of Border Patrol's technology needs on the southwest border and collect information about potential capabilities. During the session, DHS provided information on potential procurements for Integrated Fixed Tower systems and a range of other surveillance technology, such as RVSS and unattended ground sensors. Following its information-collection activities, should DHS decide to move forward with requests for proposal for various types of technology, including the Integrated Fixed Tower system, these actions should be timed in such a way as to make maximum use of the results from the cost- effectiveness analyses discussed below. While the initial deployment actions will be in Arizona, it is envisioned that the contracts could be used to deploy technology anywhere on the southwest border. However, to accomplish this, DHS will need to ensure that the requirements specified in the request for proposal are sufficient for deployment not just in Arizona but throughout the border. According to OTIA and Border Patrol officials, the Secretary's decision on the future of SBInet and the Integrated Fixed Tower system was informed by an AOA that analyzed the cost-effectiveness of four options--mobile (e.g., MSS), fixed (Integrated Fixed Towers), agent (e.g., hand-held equipment), and aviation (Unmanned Aerial Vehicles). On the basis of our review of available information about the AOA to date, there are several areas that raise questions about how the AOA results were used to inform Border Patrol judgments about moving forward with technology deployments, including the Integrated Fixed Tower system. As we continue our work for the committee, we plan to examine each of the following areas in detail to obtain additional insights into DHS's decision making regarding the cost-effectiveness of a range of border technology options. Specifically, It is not clear how DHS used the AOA results to determine the appropriate technology plans for Arizona. For instance, the AOA identified uncertainties in costs and effectiveness of the four technology alternatives in each of the four geographic analysis areas, meaning that there was no clear-cut cost-effective technology alternative for any of the analysis areas. Yet, the AOA observed that a fixed tower alternative may represent the most effective choice only in certain circumstances. Because of the need to complete the first phase of the AOA in 6 weeks, the AOA was limited in its scope. For instance, the AOA did not consider the combination of technology approaches in the same geographic area and did not consider technology solutions, such as RVSS units. Urban areas were outside the scope of the AOA. Hence, it is unclear how DHS made decisions for proposed technology deployments in such areas. Further, the first AOA did not examine as an alternative the use of only existing Border Patrol equipment and agents without the addition of any new technology approaches. The AOA should have assessed the technology approaches based on the incremental effectiveness provided above the baseline technology assets in the geographic areas evaluated. According to study officials, the omission of a baseline alternative was corrected in the second AOA and did not change the conclusions of the first AOA. A more robust AOA could result in conclusions that differ not just in the Border Patrol sectors yet to be evaluated in future AOAs, but also in the Tucson and Yuma sectors considered in the first AOA. While the primary purpose of the second phase of the AOA was to expand the analysis to three additional Border Patrol sectors (San Diego, El Paso, and Rio Grande Valley), being able to conduct the analysis over several months allowed the study team more time to consider additional measures of effectiveness and technology options. DHS plans to conduct another AOA that would cover the remainder of the southwest border. According to study officials, while the potential for different results existed, the results from the second AOA did not significantly affect the findings from the first AOA. Further, we have questions about how the AOA analyses and conclusions were factored into planning and budget decisions regarding the optimal mix of technology deployments in Arizona. Specifically, according to OTIA and Border Patrol officials, the AOA was used to develop the Arizona technology deployment plan and related procurement plans and to provide cost data to be used for the Border Patrol's operational assessment and the fiscal year 2012 budget request for Integrated Fixed Tower systems. However, because AOA results were somewhat inconclusive, it is not yet clear to us the basis for including three of the four alternatives in the manner prescribed in the budget request (the Unmanned Aerial Vehicle alternative was not). For a program of this importance and cost, the process used to assess and select technology needs to be transparent. The uncertainties noted above raise questions about the decisions that informed the budget formulation process. We have not yet examined the Border Patrol's operational assessment to determine how the results of the AOA were considered in developing technology deployment planning in Arizona and, in turn, the fiscal year 2012 budget request. The Army Test and Evaluation Command (ATEC) was to independently test SBInet's Block 1 capability and evaluate the results to determine its operational effectiveness and suitability (i.e., the extent to which the system fits it its operational environment and is useful to Border Patrol to meet the agency's mission). Because the Integrated Fixed Tower system could be similar to the sensor towers and COP used in SBInet Block 1, the ATEC could inform DHS's decision about moving forward with technology deployments. However, the testing and evaluation was not complete at the time DHS reached its decision regarding the future of SBInet or requested fiscal year 2012 funding to deploy the new Integrated Fixed Tower systems, as discussed earlier. An initial briefing on the emerging results from the testing was provided to DHS on March 2, 2011, with a final report due sometime in April 2011. As our work proceeds, we will further address the questions raised about the AOA process, the test and evaluation results, and CBP's proposed new acquisition strategy. We will also continue to assess the status of the SBInet program in light of the Secretary's decision and the actions emanating from this decision. Chairwoman Miller, Ranking Member Cuellar, and members of the Subcommittee, this completes my prepared statement. I would be happy to respond to any questions you may have. For questions about this statement, please contact Richard M. Stana at (202) 512-8777 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. Individuals making key contributions to this statement included Seto J. Bagdoyan, Charles W. Bausell, Jr., Courtney Catanzarite, Justin Dunleavy, Christine Hanson, Michael Harmond, Richard Hung, Robert Rivas, and Ronald Salo. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.
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Securing the nation's borders from illegal entry of aliens, contraband, terrorists and weapons of mass destruction, is a long-term challenge. In November 2005, the Department of Homeland Security (DHS) launched the Secure Border Initiative network (SBInet)--a program which was to provide the Border Patrol, within DHS's U.S. Customs and Border Protection (CBP), with the tools to detect breaches and make agent deployment decisions by installing surveillance systems along the border. Alternative (Southwest) Border Technology is DHS's new plan to deploy a mix of technology to protect the border. This testimony is based on GAO's ongoing work conducted for the House Committee on Homeland Security and provides preliminary observations on (1) the status of SBInet and user views on its usefulness, and (2) the Alternative (Southwest) Border Technology plan and associated costs. GAO reviewed planning, budget, and system documents, observed operations along the southwest border, and interviewed DHS officials. In January 2011, the Secretary of Homeland Security directed CBP to end the SBInet program as originally conceived because it did not meet cost-effectiveness and viability standards, and to instead focus on developing terrain- and population-based solutions utilizing existing, proven technology, such as camera-based surveillance systems, for each border region. According to DHS, the Secretary's decision on SBInet was informed by (1) an independent analysis of alternatives (AOA) to determine the program's cost-effectiveness; (2) a series of operational tests and evaluations by the U.S. Army's Test and Evaluation Command (ATEC) to determine its operational effectiveness and suitability; and (3) an operational assessment by the Border Patrol to provide user input. The Secretary also stated that while the Alternative (Southwest) Border Technology plan should include elements of the former SBInet program where appropriate, she did not intend for DHS to use the current contract to procure any technology systems under the new plan, but rather would solicit competitive bids. SBInet's current surveillance capability continues to be used in Arizona. Specifically, there are 15 sensor towers (with cameras and radar) and 10 communication towers (which transmit the sensor signals to computer consoles for monitoring), currently deployed in the Border Patrol's Tucson Sector. In addition, on the basis of user feedback, the Border Patrol considers the current SBInet capability to be useful, including providing continuous surveillance in border areas where none existed before and enhancing agent safety when responding to potential threats. There are certain shortcomings including coverage gaps and radar performance limitations in adverse weather. The Alternative (Southwest) Border Technology plan is to incorporate a mix of technology, including an Integrated Fixed Tower surveillance system similar to that used in the current SBInet capability, beginning with high-risk areas in Arizona. But, due to a number of reasons, the cost-effectiveness and operational effectiveness and suitability of the Integrated Fixed Tower system is not yet clear. First, the AOA cited a range of uncertainties, and it is not clear how the AOA analyses and conclusions were factored into planning and budget decisions regarding the optimal mix of technology deployments in Arizona. Second, the ATEC independent analyses were not complete at the time of the Secretary's decision, thus any results on SBInet's operational effectiveness and suitability could not inform the decisions to proceed with the Integrated Fixed Tower system. The President's fiscal year 2012 budget request calls for $242 million to fund three of five future deployments of the Integrated Fixed Tower systems in Arizona, although, depending on funding, the earliest DHS expects the deployments to begin is March 2013 with completion anticipated by 2015 or later. Consistent with its intent to solicit competitive bids, CBP has initiated a new acquisition cycle, asking industry for information about the commercial availability of the Integrated Fixed Tower system. GAO will continue to assess this issue and report the final results later this year. GAO is not making any new recommendations in this statement but has made prior recommendations to strengthen SBInet. While DHS generally agreed most information in this statement, it did not agree with GAO's observations on the AOA and the potential usefulness of ATEC's analyses. GAO continues to believe its observations are valid. DHS also provided technical comments which were incorporated, as appropriate.
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The United States, along with its coalition partners and various international organizations and donors, has embarked on a significant effort to rebuild Iraq following multiple wars and years of neglect. In April 2003, Congress passed the Emergency Wartime Supplemental Appropriations Act, which created the Iraq Relief and Reconstruction Fund and appropriated approximately $2.48 billion for reconstruction activities. These funds--referred to as IRRF I--were to be used by USAID, State, DOD, Treasury, and Health and Human Services for a broad range of humanitarian and reconstruction efforts. In November 2003, Congress enacted an additional emergency supplemental appropriations act, which provided approximately $18.4 billion for reconstruction activities in Iraq. This appropriation--referred to as IRRF II--focused on security and infrastructure, and the funding was allocated across multiple sectors. Additionally, the November 2003 act required that full and open competition be used to enter into contracts using IRRF funds unless the use of an authorized statutory exception was properly documented and approved, and the specified congressional committees notified. As of August 29, 2006, about 94 percent, or approximately $20 billion, of all IRRF funds had been obligated by all agencies. The Competition in Contracting Act of 1984 (CICA) generally requires that federal contracts be awarded on the basis of full and open competition. This process is intended to permit the government to rely on competitive market forces to obtain needed goods and services at fair and reasonable prices. However, the law and implementing regulations recognize that there may be circumstances under which full and open competition would be impracticable, such as when contracts need to be awarded quickly to respond to urgent needs or when there is only one source for the required product or service. In such cases, agencies are given authority by law to award contracts without providing for full and open competition (e.g., using limited competition or on a sole-source basis), provided that the proposed approach is appropriately justified, approved, and documented. Additionally, regarding task orders issued under an existing contract, the competition law does not require competition beyond that obtained for the initial contract award, provided the task order does not increase the scope of the work, period of performance, or maximum value of the contract under which the order is issued. While no single, comprehensive system currently tracks governmentwide Iraq reconstruction contract data, we obtained competition information on $10 billion of the total $11.6 billion in obligations for Iraq reconstruction contracts collectively awarded by DOD, USAID, and State from October 1, 2003, through March 31, 2006, and found that about $9.1 billion, or 91 percent, of the obligations was for competitive awards. We obtained information on approximately $7 billion of the $8.55 billion DOD obligated and found that competition occurred for nearly all of the obligations. Both USAID and State provided information on all of their IRRF obligations made during the period of our review. However, where USAID information showed that almost all of its Iraq reconstruction contract obligations were for competitive awards, State information showed that few of its contract action obligations were for competitive awards. Figure 1 shows a breakdown of the three agencies' competed and noncompeted contract actions based on available data. Based on available data, we found that the majority of DOD's IRRF contract obligations incurred during the period we reviewed were for competitive awards. Competition information was available for approximately 82 percent of DOD's total $8.55 billion in Iraq reconstruction contract obligations. Of this, we found that DOD competitively awarded about $6.83 billion, and noncompetitively awarded about $189 million. Most of the DOD offices we spoke with reported that, when possible, contract actions were competed. JCC-I/A--the office performing the majority of Iraq contracting for the DOD offices we reviewed--and its predecessor organizations, including the Project and Contracting Office and Program Management Office, obligated $3.82 billion, of which $3.81 billion was obligated for competitive awards. Additionally, the other DOD offices we reviewed, including the Army Corps of Engineers' Gulf Region Division and Transatlantic Programs Center; the Army's TACOM Life Cycle Management Command; and the Air Force Center for Environmental Excellence obligated approximately $2.25 billion, and of these obligations, approximately $2.08 billion were for competitive awards and $177 million for noncompetitive awards. Furthermore, the Army Corps of Engineers' Southwestern Division competitively awarded two contracts to rebuild Iraqi oil infrastructure with obligations totaling $941 million. Complete information on DOD's contract actions and competition type for the period of our review was not available, in part because not all offices consistently tracked or reported this information. Currently, DOD is transitioning its contract-writing systems to interface with the Federal Procurement Data System-Next Generation (FPDS-NG). Until this transition is completed, the majority of DOD components are expected to use DD Form 350s to report contract actions. However, we found that while the DD 350 system tracks competition information by contract, not all offices report their contracts to the system. For example, the JCC-I/A and its predecessor organizations did not fully input detailed, individual contract action information into DOD-wide systems including DD 350, which would provide information on competition. Furthermore, according to JCC-I/A officials, JCC-I/A did not track competition information until after May 2005. Consequently, we relied on multiple sources in order to obtain competition information for the DOD components within our review. USAID provided competition information for 100 percent of the $2.27 billion in IRRF contract obligations that the agency reported incurring between October 1, 2003, and March 31, 2006. These data indicated that USAID competitively awarded contract actions for about $2.25 billion, or 99 percent, of the approximately $2.27 billion it obligated; approximately $20.4 million, or about 1 percent, of these obligations were noncompetitively awarded. Agency contracting staff reported that USAID has pursued competition with very few exceptions when awarding contracts and issuing task orders for Iraq reconstruction. During our contract file review, we identified three instances in which the competition information provided by USAID was inaccurate. In two cases, USAID reported contracts as being awarded competitively when they were actually awarded under limited competition. In the third case, USAID reported a contract as "not competed," when it was actually awarded competitively. In each of these instances, we used corrected competition information for our analysis. State obligated the smallest portion of IRRF funding among the three agencies, however, it incurred most if its obligations for noncompetitive awards. State provided competition information for 100 percent of the $762 million in IRRF contract obligations that the agency reported incurring between October 1, 2003, and March 31, 2006. These data indicated that State incurred obligations of approximately $73 million in competitive awards, or approximately 10 percent, of the approximate $762 million it obligated for IRRF contract actions; approximately $688 million, or about 90 percent, of these obligations were incurred under noncompetitive awards. In several of these cases, State cited urgency as the reason for awarding the contract actions noncompetitively. Specifically, justifications in two of the contract files we reviewed cited FAR SS 6.302-2, unusual and compelling urgency, as the basis for using other than full and open competitive procedures. Additionally, one task order we reviewed was an unauthorized commitment that had to be ratified by State. The ratification amounted to the issuance of a noncompetitive task order to the contractor. During our contract file review, we identified three instances in which the competition information provided by State was inaccurate. In two of these cases, we found that contracts that were reported as awarded competitively were actually awarded noncompetitively. In the third case, State misclassified the competition type reported for a contract that was awarded competitively. In each of these instances, we used corrected competition information for our analysis. We reviewed 51 contract actions totaling $1.55 billion--35 at DOD, 11 at USAID, and 5 at State. We found that the agencies generally followed the FAR and the applicable agency supplements regarding documentation requirements for contract actions but did not always comply with congressional notification requirements. Of the 51 contract actions that we reviewed, 22 were awarded noncompetitively, while 29 were awarded competitively. Only 1 of the 22 noncompetitive contract action files did not contain justifications or other documentation as required in the FAR or agency supplements. Of the 29 competed contract actions, DOD was unable to provide documentation that competition had occurred, such as evidence of bidders or price negotiation memos, in 4 cases. Additionally, of the 22 noncompeted contract actions, State should have notified Congress of 2 actions it awarded using other than full and open competition in accordance with the notification requirements. While State failed to provide the required notifications, State officials told us that they have taken steps to address the problem for future awards. Within our sample, we did not find any additional instances where DOD, USAID, and State should have notified Congress of a noncompeted award but did not. Of the 35 DOD IRRF contract actions we reviewed, 15 were indicated as noncompeted and 20 indicated as competed. The files for the 15 noncompeted contract actions contained documentation required by the FAR, Defense Federal Acquisition Regulation Supplement and the Army Federal Acquisition Regulation Supplement. Of the 15 noncompeted actions, 4 were sole source contract awards; 4 were awarded using limited competition; 3 were noncompeted task orders under a multiple award IDIQ contract; 3 were sole source awards under the 8(a) program; and 1 was an out of scope modification. Based on our review, all of the contract actions that were awarded non-competitively had justification and approval documentation citing the reason for either limiting competition or using a sole source award when required. For example, JCC-I/A partially terminated an IDIQ contract used to rebuild hospitals in Iraq. In order to complete the remaining work, JCC-I/A awarded a series of sole source contracts to the remaining Iraqi subcontractors to complete the work. In another example, the Project and Contracting Office awarded a series of contracts using limited competition to pave roads in 13 governorates in Iraq, citing unusual and compelling urgent circumstances due to security concerns and limited manpower to evaluate all submissions from Iraqi firms. For the 20 competed DOD contract actions, 16 files included documentation that competition occurred, such as evidence of bidders or price negotiation memos when required. However, DOD was unable to provide supporting evidence for the remaining 4 contract actions that were indicated as competed. Of the 11 USAID contract actions we reviewed, 3 were indicated as noncompeted and 8 indicated as competed. The files for all 3 noncompeted actions included the documentation required by the FAR and the Agency for International Development Acquisition Regulation (AIDAR) regarding competition. Two of these contracts were awarded under limited competition--one for catering services and one for armored vehicles--providing an opportunity for multiple vendors to submit bids. For both of these contracts, USAID used a blanket waiver authority provided by the USAID Administrator pursuant to section 706.302- 70(b)(3)(ii) of the AIDAR. This waiver was originally signed in January of 2003, later renewed in June 2004, and again in August 2005, and the agency is currently working on a 2006 version. The third noncompeted action was a modification extending the performance period and increasing the total award amount for a contract for facility security. The files for the 8 competed USAID contract actions included documentation that competition occurred, such as evidence of bidders or price negotiation memos. Finally, of the 5 State contract actions we reviewed, 4 were indicated as noncompeted and 1 indicated as competed. Of the 4 noncompeted actions, 2 were single-award contracts for protective services, and 2 were task orders for police and guard services off of 1 IDIQ contract. The files for the 2 single-award contracts and one of the task orders included all of the documentation required by the FAR and the Department of State Acquisition Regulation (DOSAR) regarding competition. However, the file for one of the task orders for construction of a police training facility did not include documentation regarding the basis for using an exception to the fair opportunity process, as required in FAR SS 16.505. The file for the 1 competed contract action included documentation that competition occurred, such as evidence of bidders or price negotiation memos. Of the 22 noncompeted contract actions in our review, State should have notified Congress of 2 actions it awarded using other than full and open competition in accordance with the congressional notification requirement in section 2202 of Public Law 108-106 but did not. State failed to notify Congress when awarding 2 letter contracts for personal protective services noncompetitively. State indicated that the department failed to comply with the notification requirement in these two cases because the Office of Acquisitions Management, which is responsible for awarding and administering contracts at State, was not notified that IRRF funds were applied to these contracts by the relevant program office. State officials told us they have coordinated with program office staff to ensure that they communicate funding types to contracting staff in the future. We did not identify any USAID or DOD contract actions within our sample that required congressional notification. We requested comments from DOD, USAID, and State on a draft of this report. DOD provided only one technical comment, which was incorporated into the report. USAID reviewed the report and found it to be factually correct. State acknowledged our findings and provided additional information regarding steps taken to address the section 2202 reporting requirement. Comments from State and USAID appear in appendixes IV and V. We are sending copies of this report to the Secretaries of Defense and State; the Administrator, U.S. Agency for International Development; and the Commanding General and Chief of Engineers, U.S. Army Corps of Engineers. We will make copies available to others on request. In addition, this report will be available at no charge on GAO's Web site at http://www.gao.gov. The major contributors to this report are listed in appendix VI. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. If you have any questions about this report, please contact me at (202)-512-4841. The fiscal year 2006 National Defense Authorization Act conference report required that GAO update its 2004 report on the extent of competition for Iraq reconstruction contracts. In response, we focused our review on reconstruction contract actions funded solely with the Iraq Relief and Reconstruction Fund (IRRF). IRRF represents the largest amount of U.S. appropriated funds for reconstruction purposes. Other sources of U.S. funding for Iraq military, reconstruction, and stabilization efforts that are not included in our review are the Iraq Security Forces Fund, the Commander's Emergency Response Program, and the Commander's Humanitarian Relief and Reconstruction Program. Additionally, the congressional notification requirement in section 2202 of Public Law 108- 106 that was included in our review applies only to contract awards funded with IRRF. We included the Departments of Defense (DOD) and State (State) and the U.S. Agency for International Development (USAID), as these agencies are responsible for 98 percent of the total obligations made with IRRF through June 2006. Additionally, within DOD, we used the Corps of Engineers Financial Management System (CEFMS) data to select individual components to include in our review that were responsible for the majority of IRRF II contracting during the time period of our review. The components we selected included the Joint Contracting Command- Iraq/Afghanistan, Army Corps of Engineers' Gulf Region Division and Transatlantic Programs Center, Army's TACOM Life Cycle Management Command, and the Air Force Center for Environmental Excellence. To determine the approximate number of reconstruction contract actions, the types of actions, the funding sources, and the competition type of such actions, we found that no single source of information contained suitable amounts of both contracting actions issued using IRRF monies and competition information. Therefore, to obtain DOD data, CEFMS was selected as the basis for DOD's IRRF contract universe due to the fact that it is the payment system for most of the major offices performing DOD contracting and presented the most complete contract action list. Using CEFMS, we identified DOD components based on the Department of Defense Activity Address Code, and selected offices to include in our review based on total obligations under IRRF II. Since CEFMS does not capture competition information, however, we attempted to cross- reference contracts found in CEFMS with DOD's DD Form 350 Individual Contracting Action Report database. However, at the time of our review, we found that DD 350 did not include fiscal year 2006 data and not all DOD components fully reported contract actions to DD 350. As a result, we contacted the individual DOD components selected for inclusion in our review and requested competition information for the offices' contracting actions funded with IRRF monies. To obtain IRRF-funded contract actions from USAID and State, we relied on agency-provided data, since the Federal Procurement Data System- Next Generation (FPDS-NG) did not contain any of USAID's contracting actions at the time we began our review. Although State's contracting actions were contained within FPDS-NG, the system did not indicate which actions were funded using IRRF money and other criteria needed for our review. We judgmentally selected 51 contract actions for further review to determine compliance with documentation requirements as prescribed in statutes, regulations, and other guidance, such as justification and approval documentation for noncompeted actions, and synopses of proposed contract actions, price negotiation memos, and evidence of bidder's lists for competed actions. To determine the applicable documentation requirements and policies governing competition when awarding contract actions, we reviewed the requirements of the Competition in Contracting Act of 1984 and the Federal Acquisition Regulation, and additional agency regulations including the Defense Federal Acquisition Regulation Supplement, Army Federal Acquisitions Regulation Supplement, Agency for International Development Acquisition Regulation, Department of State Acquisition Regulation, and other guidance. The contract actions were selected based on the following criteria: reconstruction contract actions funded with IRRF monies; actions awarded from October 1, 2003, through March 31, 2006; current obligations of $1 million or more; represented both competed and noncompeted actions; selected more actions from DOD than USAID and State based on volume of contract actions obtained; included a variety of contracts, task orders, and modifications; and included a variety of goods and services provided. Our findings regarding documentation are specific to these selected contract actions and are not projectable to the agencies' total contract action universe. Of the 51 contract actions selected, 22 were indicated as awarded noncompetitively and 29 were indicated as awarded competitively. We included competitively awarded actions in our review to verify the accuracy of reported actions and confirm evidence of competition. In the few cases noted where actions were incorrectly reported as competed or noncompeted by USAID and State, we corrected the errors as appropriate for use in our analysis. Given that our actions to corroborate the data contained within agency systems or provided by the agencies identified only a few errors, which we corrected, we believe the data to be sufficiently reliable for our purposes. To determine whether agencies complied with the congressional notification requirement contained in section 2202 of Public Law 108-106, we reviewed agency contract data within our selected contract actions to identify instances where the reporting requirement would apply and followed up with officials where appropriate. In order to review and understand the contract files selected, we interviewed DOD, USAID, and State contracting officers and other procurement officials in Washington, D.C.; Virginia; and Iraq. Where possible, we obtained electronic documentation from agency officials. Appendix II lists the Iraq reconstruction contract actions we reviewed. We conducted our work between April 2006 and August 2006 in accordance with generally accepted government auditing standards. Names of Iraqi firms not listed. To ensure that task orders issued to rebuild Iraq comply with applicable requirements, and to maximize incentives for the contractors to ensure effective cost control, the Secretary of the Army should review the out-of-scope task orders for Iraqi media and subject matter experts issued by the Defense Contracting Command-Washington (DCC-W) and take any necessary remedial actions. DCC-W agreed with the GAO findings concerning out-of-scope work for the orders awarded to SAIC for the Iraqi Media Network and the subject matter experts. Contracting officers ordering the out-of-scope work have been made aware that their actions were improper. DCC- W has instituted agencywide training in a number of topics, including the need to carefully review the scope of work of a contract to determine what may be legitimately ordered from that contract. This training will be periodically repeated. In addition, its postaward reviews will include an assessment of whether requiring work is within the scope of the basic contract. GAO and DOD consider this recommendation closed. To ensure that task orders issued to rebuild Iraq comply with applicable requirements, and to maximize incentives for the contractors to ensure effective cost control, the Secretary of the Army should ensure that any future task orders under the Logistics Civil Augmentation Program (LOGCAP) contract for Iraq reconstruction activities are within the scope of that contract. According to DOD, the Procuring Contracting Officer for the LOGCAP contract reviews each proposed scope of work that will result in a task order and makes a determination whether the action is within the scope of the contract and obtains appropriate legal advice as necessary. GAO and DOD consider this recommendation closed. To ensure that task orders issued to rebuild Iraq comply with applicable requirements, and to maximize incentives for the contractors to ensure effective cost control, the Secretary of the Army should address and resolve all outstanding issues in connection with the pending Justifications and Approvals for the contracts and related task orders used by the Army Corps of Engineers to restore Iraq's electricity infrastructure. As of June 2006, the justifications and approvals were being processed for Assistant Secretary of the Army for Acquisition, Logistics and Technology, approval. GAO considers this recommendation open, though Defense Procurement and Acquisition Policy has indicated that this recommendation will be closed in the near term. To ensure that task orders issued to rebuild Iraq comply with applicable requirements, and to maximize incentives for the contractors to ensure effective cost control, the Secretary of the Army should direct the Commanding General, Army Field Support Command, and the Commanding General and Chief of Engineers, U.S. Army Corps of Engineers, to definitize outstanding contracts and task orders as soon as possible. DOD has definitized, or reached agreement on key terms and conditions for, all of the six contract actions identified in our June 2004 report. We noted in our March 2005 report entitled, High-Level DOD Coordination is Needed to Further Improve the Management of the Army's LOGCAP Contract (GAO-05-328), that the Army had made improvements in definitizing task orders issued under the LOGCAP contract. GAO and DOD consider this recommendation closed. To improve the delivery of acquisition support in future operations, the Secretary of Defense, in consultation with the Administrator, U.S. Agency for International Development, should evaluate the lessons learned in Iraq and develop a strategy for ensuring that adequate acquisition staff and other resources can be made available in a timely manner. In November 2005, DOD issued directive 3000.05, Military Support for Stability, Security, Transition, and Reconstruction Operations, which, in part, required that DOD ensure proper oversight of contracts in stability operations and ensure U.S. commanders deployed in foreign countries are able to secure contract support rapidly. DOD is also working on developing joint contingency contracting policy and doctrine and assessing DOD's contract administration services capability for theater support contracts. The estimated completion data of the ongoing actions is fall 2006. GAO considers this recommendation open. Major contributors to this report were John Neumann, Daniel Chen, Kate France, Julia Kennon, John Krump, Art James, Shannon Simpson, Karen Sloan, Adam Vodraska, and Aaron Young.
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Since 2003, Congress has appropriated more than $20 billion through the Iraq Relief and Reconstruction Fund (IRRF) to support Iraq rebuilding efforts. The majority of these efforts are being carried out through contracts awarded by the Departments of Defense (DOD) and State and the U.S. Agency for International Development (USAID). When awarding IRRF-funded contracts for $5 million or more noncompetitively, agencies are required by statute to provide notification and justification to Congress. In June 2004, GAO found that agencies generally complied with laws and regulations governing competition to award new contracts, but did not always comply with competition requirements when issuing task orders under existing contracts. As mandated by Congress, this report (1) describes the extent of competition in Iraq reconstruction contracts awarded by DOD, USAID, and State since October 1, 2003, based on available data, and (2) assesses whether these agencies followed applicable documentation and congressional notification requirements regarding competition for 51 judgmentally selected Iraq reconstruction contract actions. In written comments, State and USAID concurred with the report findings. DOD provided a technical comment. While no single, comprehensive system currently tracks governmentwide Iraq reconstruction contract data, available data showed that from October 1, 2003, through March 31, 2006, DOD, USAID, and State collectively awarded the majority of Iraq reconstruction contracts competitively. Based on competition information we obtained on $10 billion of the total $11.6 billion in IRRF obligations by these agencies during the period of our review, we found that about $9.1 billion--or 91 percent--was for competitively awarded contracts. While our ability to obtain complete competition data for all DOD Iraq reconstruction contract actions was limited because not all DOD components consistently tracked or fully reported this information, we obtained information on approximately $7 billion, or 82 percent, of DOD's total Iraq reconstruction contract obligations, and of this, we found that competition occurred for nearly all of the obligations. Additionally, based on complete data for the period of our review we found that USAID competitively awarded contract actions for 99 percent of its obligations, while State awarded contract actions competitively for only 10 percent of its obligations. GAO reviewed the files for 51 contract actions totaling $1.55 billion--22 of which were awarded noncompetitively and 29 of which were awarded competitively--almost all of which contained proper documentation. One contract file--for a noncompetitively awarded task order issued by State--did not contain justifications or other required documentation. DOD was also unable to provide documentation for 4 of the competitively awarded contract actions. Of the 22 noncompeted contract actions in GAO's review, State should have notified Congress of 2 actions awarded using other than full and open competition in accordance with notification requirements but did not. State officials told GAO that they have taken steps to address the problem. GAO did not identify any DOD or USAID contract actions within the sample that required notification.
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Fallon NAS was constructed in the 1940s on land that previously had been farmed using water provided by the Bureau of Reclamation's Newlands Reclamation Project. Prior to the project, which was authorized in 1903, early settlers irrigated about 20,000 acres using simple diversions from the Truckee and Carson rivers. The Newlands project nearly quadrupled the amount of irrigated land to 78,000 acres, and the land surrounding the airfield has been irrigated farmland since. In the 1950s, the Navy obtained, as a buffer against encroachment, land surrounding the airfield that had been irrigated farmland. It has since leased the bulk of that land to farmers. Fallon NAS officials believe that continued use of the land for agriculture is of value to the local community as well as to the air station. They point out that the City of Fallon and Churchill County are concerned that any reduction in Fallon NAS' irrigation could have a negative impact on the recharging of the underlying aquifer, cause the manifestation of noxious weeds in fields, and have an impact on the economics of neighboring ranches and farms. The Navy currently holds water rights under the Newlands project for approximately 2,900 acres of the land at Fallon NAS. Of this acreage, the Navy has active water rights to about 1,900 acres of land. Water rights are attached to specific parcels of land, and Fallon NAS is entitled to 3.5 acre- feet of water per acre of water-righted land from the Newlands project. An acre-foot is the volume of water sufficient to cover an acre of land to the depth of 1 foot, which is about 325,900 gallons. The water rights for the remaining 1,000 acres are inactive. The active water rights, which would equal about 2.2 billion gallons, are used to obtain irrigation water to support the Navy's 3,595-acre greenbelt surrounding Fallon NAS' airstrip areas. The greenbelt has consumed an average of 1.6 billion gallons of this irrigation water each year since 1990. This figure includes drought years in which less water than the normal allocation was available and other years in which water over and above the acreage's entitlement was made available. As can be seen in figure 1, about a third of the greenbelt acreage lies inside the runway protection zone. Under Public Law 101-618, enacted in 1990, officials at Fallon NAS were required to develop an alternative land management plan that would control dust, provide for fire abatement and safety, and control damage to aircraft from foreign objects, while at the same time reducing the use of irrigation water. The law also required Fallon NAS to select and implement land management plans without impairing the safety of air operations. Under this act, the Navy has discretion to determine what constitutes operational air safety for Fallon NAS. In addition, the Secretary of the Navy was required to consult with the Secretary of Agriculture and other interested parties to fund and implement a demonstration project and test site at Fallon NAS for the cultivation and development of grasses, shrubs, and other native plant species. The project's goal was to help with the restoration of previously irrigated farmland in the Newlands project area to a stable and ecologically appropriate dryland condition. In responding to the act's requirements, the Navy studied various land management strategies, consulted with the Secretary of Agriculture and interested parties, and selected a strategy for the greenbelt that combines conventional farming with water conservation practices. Fallon NAS officials have started to implement this strategy for the runway protection zone. When fully implemented, the strategy would use approximately 1.4 billion gallons of water per year, somewhat of a decrease from the average of 1.6 billion gallons used annually in recent years. Fallon NAS is governed by aviation safety and operational standards established by DOD for runway protection zones. DOD's standards for military facilities and the Federal Aviation Administration's (FAA) standards for commercial airports require runway protection zones to protect lives and property. Under these standards, airports can obtain sufficient authority to restrict the use of the land for the runway protection zones in three primary ways. First, an airport can purchase the approach areas outright. Second, an airport can seek zoning requirements to control the way land owned by others is used. Third, an airport can purchase easements proscribing the incompatible use of land owned by others. Outright ownership is preferable because it gives an airport maximum control. It is DOD's and FAA's policy to oppose incompatible land uses that are proposed for property within the runway protection zones. Incompatible land uses include residences and places of public assembly such as churches, schools, hospitals, office buildings, and shopping centers. Compatible land uses within the runway protection zones are generally uses such as agriculture or golf courses that do not involve concentrations of people or the construction of buildings or other structures. DOD and FAA also allow other land uses that do not attract wildlife and that do not interfere with navigational aids. Neither policy requires the establishment of a greenbelt. In arriving at the land management strategy for Fallon NAS, the Navy considered three alternatives in detail. Each involved continued irrigation of land in Fallon NAS' greenbelt. As many as 11 different land management strategies were identified by Fallon NAS officials at the outset. Three strategies were eliminated from consideration before the initial screening was conducted. These three included covering the greenbelt with asphalt, cement, or rocks, or allowing the irrigated fields to go fallow. These strategies were eliminated because the officials believed that they would be environmentally or economically unacceptable or would cause unacceptable operational or safety impairments. They also felt that the strategies would be expensive to maintain and would not provide a "soft" landing for any aircraft accident. The remaining eight land management strategies were subjected to an initial screening on the basis of how they would contribute to the Navy's policy of zero accidental aircraft mishaps and at the same time fulfill the requirements of P.L. 101-618. Four evaluation criteria were used to assess the viability of the strategies: controlling dust and damage from foreign objects, including bird strikes; minimizing fire hazards; establishing a high probability of achieving safety objectives and contributing to zero-mishap management; and reducing the direct surface deliveries of irrigation water. Of the eight land management strategies, five were eliminated because Fallon NAS officials believed those strategies did not meet the evaluation criteria. These five strategies ranged from changing the plants allowed to be grown in the area to using drainwater for irrigation. The remaining three land use strategies were then subjected to detailed consideration. Table 1 presents a comparison of the features of the three strategies Fallon NAS officials considered in detail. The first and second strategies considered in detail included water conservation practices. The methods considered for saving water included lining canals, leveling fields for proper drainage, establishing windbreaks, and improving irrigation scheduling. The third strategy would not have required any changes to the way Fallon NAS officials had been managing the greenbelt land but would have reduced the use of water by irrigating fewer acres. Fallon NAS officials believed that, over time, this strategy would result in land degradation and that there was a low probability that it would control safety hazards such as dust, fire, and damage to aircraft from foreign objects and bird strikes. In considering these strategies, Fallon NAS officials made no distinction between the greenbelt areas that lie within the runway protection zone and the areas that lie outside the zone. Approximately 1,145 acres of the greenbelt lie within the runway protection zone, while 2,450 acres are outside of it. We found no analysis that had determined whether the 2,450 acres of the greenbelt outside the runway protection zone required the same level of prevention of foreign objects, bird strikes, or dust as the 1,145 acres within the zone. Fallon NAS officials confirmed that no such distinction had been made in conducting their analyses. Fallon NAS officials selected the first strategy: conventional farming with water conservation practices. At the time, these officials believed that the advantages of this strategy were the very high probability that it would satisfy the safety goals for the greenbelt for the long term and provide moderate water savings. They believed that the disadvantage would be the substantial capital, operations, and maintenance costs of the water conservation methods. When fully implemented, the chosen strategy would encompass 1,914 water-righted acres of land, using approximately 1.4 billion gallons of water per year. Navy officials believed that the plan would be costly to implement because it included lining irrigation canals with concrete, leveling fields for proper drainage, and other measures. According to Navy officials, the total cost to implement all these measures could be as much as $3.5 million. Since selecting the strategy of conventional farming with water conservation practices in 1995, Fallon NAS officials have undertaken efforts to implement it. As of May 1999, Fallon NAS had lined 16,419 linear feet of irrigation ditches and leveled 347 acres of fields at a cost of about $655,000. This cost was in addition to an estimated $817,000 spent on studies and pilot projects. According to the officials, the implementation of this strategy has stalled because of excessive costs and a shortage of funds. In 1998, Fallon NAS advertised a contract to line another 45,000 linear feet of ditches with concrete and level another 800 acres of fields. Fallon NAS originally estimated the cost of the additional work to be $1.4 million, but the lowest bid it received for the work was $1.9 million. According to Fallon NAS officials, because of the excessive costs, a shortage of funds, and concern that the work would save what they believed would be a relatively small amount of water, this contract was not awarded. Hence, Fallon NAS' chosen land management strategy is not currently being fully implemented. After the completion of our field work, Fallon NAS officials took action to comply with the Fiscal Year 2000 National Defense Authorization Act, which was enacted on October 5, 1999. The act included a provision concerning water usage at Fallon NAS. To comply with their understanding of the law, Fallon NAS officials informed us that they have decided to reduce the irrigated land by about 700 acres. They will cease irrigation in areas farthest from the airfield and the runway protection zone. Fallon NAS officials expressed misgivings about this action but said that it would allow them to comply with the new law. While they pointed out that the affected land is not "technically within the runway protection zones," they were concerned that "improper management could impair operational safety and create negative environmental impacts" and that Fallon NAS may incur added costs "to properly manage the land for , fire, weed and dust control." They also expressed concern about possible "long- term degradation of the land." On balance, however, they said that the strategy meets the requirement of the new law, and they also pointed out that the action will serve as "an excellent pilot study" of what happens when irrigation ceases. The land management strategies varied at the seven other military facilities and commercial airports we visited. All were located in environments similar to Fallon NAS'. Two military facilities used greenbelts, while the other five did not. Officials at all seven facilities said their current land use strategies provided a safe environment for their aircraft operations. The strategies varied because of differences in land formation, history, access to established irrigation facilities, and ownership. For example, at the two Navy and one Marine Corps facilities we visited, the government owned outright the areas surrounding the airfields as it does at Fallon NAS. According to Navy officials, it has been the Navy's practice to purchase land surrounding airfields to reduce possible encroachment and, where possible, to lease this land for agricultural purposes- an activity compatible with aircraft operations. One of the two Navy facilities and the one Marine Corps facility we visited had greenbelts that were being farmed. Like Fallon NAS, Lemoore NAS in Lemoore, California, and Yuma Marine Corps Air Station in Yuma, Arizona, were constructed on land that was originally used for irrigated farming. These three facilities maintain agricultural outlease programs through which the Navy or Marine Corps leases the land adjacent to the airfields to farmers. The farmers maintain the land and grow the irrigated crops specified by the leases. The third naval location we visited, China Lake Naval Weapons Station in Ridgecrest, California, does not have a greenbelt and does not plan to have one. The station was constructed in a desert area where crops are not grown and where the vast, sparsely populated area is considered to be an ideal location for testing weapons and conducting research and development. Neither of the two Air Force bases nor the two commercial airports we visited had an agricultural program like the Navy and Marine Corps facilities', nor did they try to maintain green areas around their runways and taxiways. None has returned substantial acreage of well-established agricultural land to native conditions. Officials from these facilities told us that their research had not uncovered any reports equating the safety of air operations with vegetation at the end of runways. In addition, they said that the cost to maintain and water green areas in the absence of available irrigation facilities would be substantial. At present, their water usage for the runway protection zones was minimal. Officials at the facilities we visited expressed a strong desire to hold down their water costs and believed that maintaining green areas around runways was inconsistent with this objective. For example, Sky Harbor International Airport in Phoenix, Arizona, used rock to landscape areas surrounding the airport that were once irrigated. Additionally, Sky Harbor officials have converted a significant amount of the airport's surrounding area to desert landscaping and have adopted other water conservation measures such as using a computerized irrigation system. According to the officials, these efforts helped the airport save about 70 million gallons of water during 1997. Similarly, at Nellis Air Force Base in Las Vegas, Nevada, the terrain around the runways is mostly disturbed desert (regrown native plants, thistle, or weeds). Because of the base's increased emphasis on desert landscaping, water consumption has dropped by almost half, from about 1.4 billion gallons of water in fiscal year 1996 to about 760 million gallons of water in fiscal year 1999. The facilities we visited without green areas around their runways used several techniques to maintain their land for safety purposes. These techniques include (1) mowing their fields to maintain them as open space, (2) covering specific areas within and surrounding the airstrip with asphalt or cement, and (3) allowing their fields to go fallow and applying a soil cement sealant in strategic locations to control dust and damage to aircraft from foreign objects. Fallon NAS officials said that, while they are aware of these other land management strategies, to date they have not studied them in detail. More detailed information on the land use practices of the five military facilities and two commercial airports we visited are included in appendix I. The Navy chose a land management strategy for the runway protection zone at Fallon NAS that is water intensive in an area where water is a scarce resource. Other strategies used in similar environments use less water while at the same time providing safety for air operations. Navy officials at Fallon NAS are aware of many of these other land management strategies but, to date, have not studied them in detail. Nor have they considered adopting different strategies for specific areas within and beyond the runway protection zone. In light of the congressional concern over water consumption in this desert area as expressed in statute and in light of the techniques used at other desert air fields that are less water intensive, we recommend that the Navy consider these techniques for Fallon NAS. Specifically, the Navy should consider its earlier identified strategies and adopt specific actions that would achieve safety and operational requirements while reducing water use at the air station. It should consider adopting different strategies that recognize the distinction between areas within the runway protection zone and those beyond the zone. The results of the Navy's decision to stop irrigating 700 acres of previously irrigated land should be closely monitored to determine whether this strategy can be successfully applied to additional land at Fallon NAS. We provided the Department of Defense with a draft of this report for its review and comment. DOD's written comments are in appendix II. DOD generally concurred with the draft report's recommendation. However, DOD expressed concern that the report did not accurately provide detailed information on the water usage conditions at Fallon NAS as compared with other civilian and military installations and that the report did not fully convey the specific actions taken by the Navy to comply with the requirements of congressional direction. DOD also stated that the report did not mention the value of the Navy's use of irrigation water to the local community for agriculture and to enhancement of the safety of the Navy's operations. We have provided additional information in the report to address DOD's concerns. DOD also provided technical changes, which were made as appropriate. We performed our review from May through December 1999 in accordance with generally accepted government auditing standards. Our scope and methodology are discussed in appendix III. We will provide copies of this report to the Honorable William Cohen, Secretary of Defense; the Honorable Richard Danzig, Secretary of the Navy; and to representatives of McCarran International Airport, Sky Harbor International Airport, and the U.S. Department of Transportation. We will also make copies available to others on request. If you or your staff have any questions, please contact me at (202) 512-3841 or Brad Hathaway at (202) 512-4329. Key contributors to this report are listed in appendix IV. The decision to construct Lemoore Naval Air Station (NAS) was made in October 1954 when it became clear that Moffett Field NAS near San Francisco could not be expanded because of urban encroachment. Lemoore was chosen because of its central location, good weather for flying, relatively inexpensive land, and nearby accommodations. At the time of this decision, the land chosen for the air station and the surrounding area was agricultural, as it remains today. Lemoore still has room to expand beyond its two parallel runways, and Navy officials told us that, if necessary, they could add another runway and an additional 265 F/A-18 aircraft to the 252 now stationed there. Reeves Field at Lemoore NAS has two parallel 13,500-foot runways that are 4,600 feet apart. (See fig. 2.) According to Navy officials, the runways are offset, with hangars, fueling, fire stations, towers, and parking located between them. The shoulders of the runways are paved. Outside of the paved areas is a 10-foot-wide strip that is periodically sprayed with herbicide to control vegetation. At the end of each of the two runways is a 1,000-foot paved overrun and an additional 1,000-by-3,000-foot mowed grass overrun. The remainder of the areas around the airfield are described as grassland that is kept mowed. Beyond the overruns and to either side of the runways are cultivated fields. Approximately 11,000 acres of privately owned farmland to the west of the station are under airspace easement. The terrain throughout Lemoore NAS is best typified as flat or level. Lemoore NAS has one of the largest agricultural outlease programs in the Department of Defense (DOD). It currently leases nearly 14,000 acres of agricultural land, which brings in between $1.5 million and $2.0 million annually. These funds support conservation and natural resource activities at Lemoore NAS and other Navy locations. The water for Lemoore's domestic and agricultural uses is supplied by the Westlands Water District via the California Aqueduct, which brings water from Shasta Lake behind Shasta Dam in northern California. This water supply is generally adequate in quantity and quality. Freshwater can also be obtained from a well system on the base. In 1928, the federal government leased land for a base from Yuma County, Arizona. When the United States entered World War II, an air base was erected. At the end of the war, all flight activity at Yuma ceased, and the area was partially reclaimed by the desert. During the period of inactivity, the base was controlled successively by the War Assets Administration, the U.S. Corps of Engineers, and the Department of the Interior's Bureau of Land Reclamation, which used it as a headquarters for its irrigation projects. In 1951, the Air Force reactivated the base. The facility was signed over to the Navy in 1959 and was designated a Marine Corps Auxiliary Air Station. In 1962, the designation was changed to Marine Corps Air Station. At the Yuma Marine Corps Air Station, the Corps owns the land, which encompasses four runways, and has granted permission to the City of Yuma to operate a civilian international airport in conjunction with the air activities of the military. (See fig. 3.) Land use documents for 1994 (the latest available) indicate that military air operations were nearly two-thirds (about 95,000) of the total of 149,485 takeoffs and landings at the facility. The areas just adjacent and between the runways are maintained using different methods. The land just adjacent to the runway is mowed. In addition, there is some use of herbicide to destroy weeds. The land between the two original 1943 runways is covered with a very light coat of asphalt. The land between the newer runways built in 1962 is maintained mainly by mowing and using herbicides. The air station is located on the southern side of Yuma and is surrounded mainly by agricultural fields, with smaller sections of open space (disturbed and undisturbed desert) and business areas containing commercial and industrial facilities. Marine Corps and city officials have agreed to use the surrounding land for agricultural production or light industry because of the compatibility of those uses with the operations of the air station. The Marine Corps leases about 90 acres of this land to local farmers. Leases for this land provide between $18,000 and $60,000 in revenues annually. The city and the air station receive their water from the neighboring Colorado River. In 1943, adequate facilities were needed for the testing and evaluation of rockets being developed for the Navy by the California Institute of Technology. The Navy also needed a new proving ground for all aviation ordnance. The Naval Ordnance Test Station (NOTS) was established in response to those needs in November 1943, forming the foundations of China Lake Naval Air Weapons Station near Ridgecrest, California. An auxiliary field was established near Inyokern, and the first facilities for China Lake were established there while the main field was being constructed. Weapons testing began at China Lake less than a month after the station's formal establishment, and by mid-1945, NOTS' aviation assets had been transferred to the new airfield, Armitage Field, located at China Lake. The vast, sparsely populated desert around China Lake and Inyokern, with near-perfect flying weather year-round and practically unlimited visibility, was considered to be an ideal location for testing weapons and for research and development purposes. The China Lake Naval Air Weapons Station operates its airstrips in desert terrain. At the end of each of China Lake's three runways is a 1,000-foot clear zone. (See fig. 4.) The runways are approximately 9,100 feet long. The land between the runways is paved. The clear zones are not paved but are plowed. Beyond the clear zones and along the sides of the runways, the land is disturbed desert (regrown native desert plants) with undisturbed native desert beyond. The land surrounding China Lake's airfield has always been desert and is not watered. Navy officials at China Lake are satisfied with the type of terrain that exists at the end of the runways and in the zones under the flight paths. One of the advantages of this land is that the natural desert vegetation controls dust and does not attract birds. Navy officials believe the desert terrain allows personnel to respond more quickly to a crash site than if the area had vegetation. All water used at China Lake comes from wells. The base's golf course is watered with treated effluent. Nellis Air Force Base is located in the Great Basin area of southern Nevada, about 10 miles northwest of Lake Mead and 8 miles northeast of Las Vegas. In 1941, the property was signed over by the City of Las Vegas to the U.S. Army Quartermaster Corps for the development of a gunnery school for the Army Air Corps. Locating the school there had many advantages. Flying weather was practically ideal year-round; more than 90 percent of the area to the north was wasteland in the public domain and available at $1 per acre; the strategic inland location was excellent; rocky hills approximately 6 miles from the base afforded a natural backdrop for cannon and machine gun firing; and dry lake beds were available for emergency landings. In 1948, the base became Las Vegas Air Force Base and hosted a pilot training wing. In 1950, the base was renamed Nellis Air Force Base. Nellis Air Force Base has two parallel runways and 2.2 million square yards of airfield pavement. (See fig. 5.) The land surrounding the base consists mostly of disturbed and undisturbed native desert. The disturbed areas have regrown native plants, thistle, and weeds. The undisturbed areas consist of sagebrush. Some areas contain eroded natural flood channels. Within the areas at the end of the runways are roads and parts of a golf course. Soil cement is applied at aircraft turning points as a method of controlling dust and damage to aircraft from foreign objects. Foreign objects and dust on the runways and taxiways are controlled using flightline vacuum sweepers and having personnel walk through the area to find and pick up any lose objects. Vegetation is being removed from between the runways, and soil cement will be applied in these areas. The base has no plans for clearing vegetation from the runway protection zones. Water is provided by the Southern Nevada Water Authority, the City of North Las Vegas, and potable water wells on the base. Because of an increased emphasis on using a desert environment rather than watered- plant landscaping, water consumption dropped by almost half from about 1.4 billion gallons of water in fiscal year 1996 to about 760 million gallons in fiscal year 1999. In 1940, the U.S. Army choose a site in Arizona for an Army Air Corps field for advanced training in conventional aircraft. The City of Phoenix bought 1,440 acres of land and leased it to the government for $1 a year, and in March 1941, construction began for what was then known as Litchfield Park Air Base. The first class of 45 students arrived in June 1941 to begin advanced flight training. During World War II, the field was the largest fighter training base in the Air Corps. By 1946, the number of pilots being trained had dropped significantly, and the base was deactivated. However, after combat developed in Korea, the field was reactivated on February 1, 1951, as Luke Air Force Base. Luke Air Force Base has two runways. Both runways are 150 feet wide; the primary runway is 10,000 feet long, while the secondary runway is 9, 910 feet long. (See fig. 6.) Luke owns 2,200 acres outright and has another 2,000 acres in easement. The base is within the city of Glendale and in the jurisdiction of Maricopa County. According to the base's land use documents, there is little land available for expansion or development. The land west of Luke is primarily agricultural, as is some of the land to the east and southeast. Residential, industrial, and commercial areas are located north, south, and east of the base. Approximately 190 F-16 aircraft are housed at Luke. The runways are surrounded by the base's infrastructure on the east and part of the south and by roads, fences, golf courses (both civilian and military), and agricultural land where flowers and vegetables are grown on the north, west, and the remainder of the south. The vegetation growing immediately around the runways is mostly weeds. The area between the runways is a combination of old asphalt and disturbed desert. The unused portions of the airfield have gone untreated, and as a result, weeds are growing in the cracks. Air Force officials at Luke have a program to mow the vegetation so that it does not exceed 14 inches in height. Sections of the airstrip have been sprayed with a soil sealant that helps control dust and foreign objects. The irrigation of the green areas maintained on the base for aesthetic purposes, such as recreation areas and at base housing, uses treated effluent from the base's wastewater treatment plant piped to automatic sprinkler systems. A new golf course will be irrigated using a similar system. Potable water for the base is supplied by seven groundwater wells on the base. McCarran International Airport in Las Vegas, Nevada, is 51 years old. In 1948, Clark County purchased an existing airfield on Las Vegas Boulevard and established the Clark County Public Airport. All commercial activities were moved from an existing field to this new site, which was renamed McCarran Field. Initially, the airport served four airlines- Bonanza, Western, United, and TWA- and averaged 12 flights a day. Clark County, through its Department of Aviation, now owns and operates five airports, including McCarran. McCarran has four runways; the surrounding area is desert habitat. On average, the runways are 14,500 feet long and about 150 feet wide. (See fig. 7.) McCarran has both disturbed and undisturbed desert areas. Most of the airport's terrain has been disturbed by grading, rolling, and watering. Airport officials have attempted to control weed growth by spraying herbicides. The undisturbed areas are native sage and cactus terrain. The area between the runways is paved. The runway protection zones are graded dirt. The surrounding land encompasses a golf driving range, a golf course, a cemetery, vacant land, and industrial property. McCarran officials have studied a number of methods of controlling airport dust, including soil cement. A study on dust control, conducted by a contractor for McCarran, highlighted measures that McCarran should consider, among them mulches, rock, and native vegetation for non-traffic areas and salts, coatings, and pavement for traffic areas. Watering in both the non-traffic and traffic areas was also suggested for consideration. McCarran receives its water through the City of Las Vegas from Lake Mead. In 1935, the City of Phoenix purchased what became Sky Harbor International Airport. At that time, Sky Harbor was 258 acres of isolated and rural land. Today, the airport consists of 2,232 acres of land. The City of Phoenix operates Phoenix Sky Harbor International Airport through its Aviation Department. Sky Harbor International Airport has two runways, one 11,000 feet long and the other 10,300 feet long. (See fig. 8.) Both runways are 150 feet wide. A third runway being completed is to be about 7,800 feet long. Land use surrounding the airport varies. On the west end of the airport is an industrial park. Weeds are growing on some of the vacant lots near the airport, and these weeds are mowed when needed. However, workers first water and roll the area to keep down the dust. Workers also apply small amounts of herbicide on these areas to kill weeds. To conserve water, Sky Harbor used rocks to landscape areas surrounding the airport that were once irrigated. Additionally, Sky Harbor officials have converted a significant amount of the airport's surrounding area to desert landscaping and have adopted other water conservation measures, such as using a computerized irrigation system. According to airport officials, these efforts helped save the airport about 70 million gallons of water during 1997. Terminals and concrete can be found between the runways. To meet Federal Aviation Administration and Environmental Protection Agency regulations, Sky Harbor implemented a plan to control dust and to reduce damage to aircraft from foreign objects. The substance that proved to be the most environmentally safe and the most durable was a product called "Soil Sement," an acrylic polymer type of liquid sealer. This sealer was applied using two separate methods- topical and soil stabilization. The topical application process consisted of applying the sealer to the undisturbed soil, while the stabilization application, which is more concentrated, was plowed into the top 6 inches of the surface of the soil. Sky Harbor receives its water from the City of Phoenix Water Service Department. After receiving a letter from Senator Harry Reid of Nevada, we visited Fallon NAS for background briefings and information on the air station's actions in response to Public Law 101-618. After follow-up discussions with Navy officials and with Senator Reid's office, we undertook this review to provide information on (1) the aviation safety and operational requirements for the runway protection zone at Fallon NAS, (2) the alternative land use strategies Fallon NAS identified in response to congressional direction and how it evaluated them, and (3) the current land use strategies at five military facilities and two commercial airports that operate in similar environments. To determine aviation safety and operational requirements, we obtained the regulations on runway protection zones issued by the Federal Aviation Administration, the Department of Defense, and the military services. We also obtained other regulations on airport safety and land requirements at military and commercial airports. We obtained extracts of Fallon NAS' air installation compatible use plans on runway protection zones. We interviewed commercial airport, Air Force, Navy, and Marine Corps officials. To determine the land use strategies Fallon NAS identified and how it evaluated them in selecting the greenbelt approach, we obtained Fallon NAS' Natural Resources Management Plan, its Environmental Assessment for Management of the Greenbelt Area, and a study by the U.S. Department of Agriculture's Natural Resources Conservation Service, "Plant Materials Trials on Revegetation of Abandoned Farmland." We interviewed Fallon NAS and Conservation Service officials on the results of these studies. We analyzed the efforts of Fallon NAS officials in evaluating the land use strategies. To determine the current land use practices at military and commercial airports that operate in desert-like environments and the impacts these practices have on water usage, we visited seven airports- five military (Navy, Air Force, and Marine Corps) and two commercial facilities: Lemoore Naval Air Station, California; Yuma Marine Corps Air Station, Arizona; China Lake Naval Air Weapons Station, California; Nellis Air Force Base, Nevada; Luke Air Force Base, Arizona; McCarran International Airport, Nevada; and Sky Harbor International Airport, Arizona. We obtained land use documents at the seven locations and their documents on water use and consumption. We also interviewed safety and operations officials at the seven locations. In addition, Rudolfo G. Payan, Uldis Adamsons, Richard W. Meeks, Doreen S. Feldman, and Kathleen A. Gilhooly made key contributions to this report. The first copy of each GAO report and testimony is free. Additional copies are $2 each. Orders should be sent to the following address, accompanied by a check or money order made out to the Superintendent of Documents, when necessary, VISA and MasterCard credit cards are accepted, also. Orders for 100 or more copies to be mailed to a single address are discounted 25 percent. U.S. General Accounting Office P.O. Box 37050 Washington, DC 20013 Room 1100 700 4th St. NW (corner of 4th and G Sts. NW) U.S. General Accounting Office Washington, DC Orders may also be placed by calling (202) 512-6000 or by using fax number (202) 512-6061, or TDD (202) 512-2537. Each day, GAO issues a list of newly available reports and testimony. To receive facsimile copies of the daily list or any list from the past 30 days, please call (202) 512-6000 using a touchtone phone. A recorded menu will provide information on how to obtain these lists.
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Pursuant to a congressional request, GAO provided information on alternative land uses that could save water at Fallon Naval Air Station, Nevada, focusing on: (1) the aviation safety and operational requirements for the runway protection zone at Fallon Naval Air Station (NAS); (2) the alternative land use strategies Fallon NAS identified in response to congressional direction and how it evaluated them; and (3) the land use strategies at five military facilities and two commercial airports that operate in similar environments. GAO noted that: (1) Fallon NAS must comply with the Department of Defense's (DOD) aviation safety and operational requirements for runway protection zones; (2) these requirements specify the maximum safe heights for buildings, towers, poles, and other possible obstructions to air navigation; (3) under these requirements, where possible, areas immediately beyond the ends of runways and along primary flight paths should be developed sparsely, if at all, to limit the risk from a possible aircraft accident; (4) at Fallon NAS, the agricultural and other low-density land uses are compatible with air operations; (5) the land surrounding the airfield is owned by the Navy and leased to farmers for agricultural use, which is permitted by DOD; (6) Fallon NAS gave detailed consideration to three land management strategies in developing its approach to managing land in the runway protection zone in the early 1990s; (7) each of these strategies involved irrigating the greenbelt; (8) as many as 11 different land management strategies were identified at the outset, but three of them were eliminated before an initial screening because Fallon NAS officials believed they would be environmentally or economically unacceptable or would cause unacceptable operational or safety impairments; (9) Fallon NAS officials eliminated five of the remaining eight strategies prior to a detailed analysis because they believed the strategies did not meet the Navy's evaluation criteria, which were based on provisions of the law; (10) the criteria Fallon NAS used in evaluating these land management strategies were based on the officials' assessment of whether the strategies would minimize dust, bird strikes, fire and other hazards, would enhance air safety, and, to a lesser extent, would reduce the amount of irrigation water used; (11) after a detailed analysis and the application of these criteria, Fallon NAS officials selected the strategy that involves conventional farming combined with water conservation practices because they believed it would have a very high probability of satisfying the safety goals while providing moderate water savings compared with the air station's historical usage; (12) at the seven other military facilities and commercial airports GAO visited, the land management strategies varied--two used strategies involving greenbelts, while five did not; and (13) the military facilities and commercial airports operating in desert-like conditions similar to Fallon NAS' have employed land management strategies that have resulted in water savings.
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Enacted in 1982, JTPA is the largest federal employment training program, with titles II-A and II-C intended to prepare economically disadvantaged adults and youths, respectively, for entry into the labor force. JTPA emphasizes state and local government responsibility for administering federally funded job training programs. In fiscal year 1995, JTPA title II-A and II-C programs received approximately $1.6 billion in funding. JTPA training programs annually provide employment training for specific occupations and services, such as job search assistance and remedial education, to roughly one million economically disadvantaged individuals. Training is provided in local service delivery areas (SDA) through service providers, such as vocational-technical high schools, community colleges, proprietary schools, and community-based organizations. The program objectives are to increase earnings and employment and to reduce welfare dependence for participants of all ages. During the NJS, participation in JTPA involved roughly 3 to 4 months of training at an average cost of about $2,400 per participant. In 1986, Labor commissioned the NJS to evaluate the impact of JTPA on adults and youths because previous findings on the effects of job training programs had been hampered by poor data and statistical problems. The NJS randomly assigned persons who sought JTPA services, and were eligible for them, to a treatment group or a control group. The treatment group was offered JTPA training, and the control group was not. The study was intended to ensure that the two groups would not differ systematically in any way except access to the program, so any subsequent differences in outcomes could be attributed solely to JTPA. The study included over 20,000 eligible participants who applied for JTPA services between November 1987 and September 1989 in 16 local SDAs. The study followed up on a sample of people in the treatment and control groups 18 months after assignment and then again at 30 months. The NJS showed mixed results on the impact of JTPA programs. Adult women assigned to JTPA training had significantly higher earnings than the control group of adult women after 18 and 30 months, but the treatment group of adult men, as well as of both male and female youths, did not have significantly higher earnings than its respective control groups. Participants assigned to receive JTPA training did not have significantly greater earnings than control group members 5 years after their assignment. For some of the four targeted worker categories--adult men, adult women, male youths, and female youths--treatment group earnings exceeded those of the control group in some of the intervening years, but any statistically significant effects disappeared by the fifth year. Annual earnings of adult men increased in each year following assignment for both the treatment and control groups. As shown in figure 1, in the first year after assignment, the average annual earnings of adult men in the treatment group grew from about $4,400 to about $6,900. This group's earnings continued to rise in the subsequent years, reaching approximately $8,700 in the fifth year after assignment to receive JTPA training. The earnings of adult men in the control group, which did not receive JTPA training, also rose following assignment, but this group's earnings were less than those of the treatment group for each of the 5 years. After 5 years, the difference between earnings of the treatment and control groups was not statistically significant. Five years after assignment, the treatment group's earnings had exceeded those of the control group by approximately $300 to $500 annually, but only in the first 3 years were these differences statistically significant. Earnings of adult women showed a pattern similar to those of adult men, increasing in each year after assignment. Figure 2 shows that the annual earnings of adult women assigned to the treatment group increased from approximately $2,800 in the year of assignment to approximately $4,700 in the first year following assignment. This group's earnings continued to climb, reaching approximately $6,600 in the fifth year. Earnings of adult women in the control group followed a similar pattern, but this group's earnings were lower than those of the treatment group in each year, reaching approximately $6,200 during the fifth year. As with the earnings of adult men, 5 years after assignment the difference between the treatment and control groups' annual earnings was not statistically significant. However, during the first 4 years after assignment, the differences between the treatment and the control groups' earnings were statistically significant in each year, with treatment group earnings approximately $300 to $600 higher than control group earnings annually. The earnings of male youths in the control group, like those of adult men and adult women, increased in each year following assignment. Figure 3 shows that the earnings of male youths in the treatment group increased from approximately $2,900 in the year of assignment to approximately $4,600 in the first year after assignment. This group's earnings continued to grow during the 5-year period, reaching a high of approximately $7,600 in the fifth year. The earnings of male youths in the control group also rose during the 5-year period following assignment, climbing from approximately $4,800 in the first year to approximately $6,800 in the fifth year. We found no significant difference between the treatment and control groups' annual earnings 5 years after assignment. Although the control group's earnings were higher than the treatment group's during the first 3 years following assignment, the differences, which ranged from approximately $200 to $400 each year, were not statistically significant. During the fourth and fifth years, the treatment group had higher earnings than the control group, but these differences too were not statistically significant. Earnings of female youths showed a pattern similar to that of male youths, growing in each year following assignment. Earnings of female youths in the treatment group rose from approximately $2,000 during the year of assignment to approximately $3,300 in the first year following assignment (see fig. 4). This group's earnings continued to climb, reaching approximately $5,400 in the fifth year following assignment. The earnings of female youths in the control group also rose during the 5-year period, climbing from approximately $3,400 in the first year to a high of approximately $5,200 in the fifth year. We found no significant differences between the treatment and control groups' annual earnings 5 years after receiving their assignments. During the first 2 years following assignment, the control group's earnings were higher than the treatment group's, but the differences of less than $100 annually were not statistically significant. In the fourth and fifth years following assignment, the treatment group had earnings of approximately $100 to $300 higher than the control group, but these differences also were not statistically significant. As with earnings, employment rates of those assigned to receive JTPA training were not significantly greater than employment rates of control group members 5 years after assignment. For some of the four targeted worker categories, treatment group employment rates were higher than those of the control group in some years, but any statistically significant effects disappeared by the fifth year. The employment rates of both treatment and control group adult men peaked during the calendar year of assignment and then declined in subsequent years, eventually reaching levels lower than those of the men before entering the study (see fig. 5). For example, the employment rate for adult men in the treatment group was 87 percent in the year of assignment. The percent employed declined in the following years, reaching 72 percent by the fifth year following assignment, which was lower than the group's employment rate of 79 percent in the year before entering the study. The adult men in the control group showed a similar pattern--their employment rate was 87 percent in the year of assignment but dropped to 71 percent in the fifth year after assignment. After 5 years, the difference between the treatment and control groups' employment rates was not statistically significant. The treatment group's employment rates were higher than the control group's in each year following assignment, although the differences in the employment rates were statistically significant only in the fourth year following assignment. The pattern of employment rates of adult women was somewhat similar to that of adult men. The employment rates of adult women were highest during the calendar year following assignment, with 80 percent of the treatment group and 77 percent of the control group employed (see fig. 6). After the first year, however, the employment rates for both the treatment and control groups fell, reaching 69 percent and 67 percent, respectively, in the fifth year following assignment. These rates in the fifth year were also lower than each group's employment rate in the year before assignment. We found no significant differences between the treatment and control groups' employment rates 5 years after assignment. The treatment group's employment rates exceeded the control group's in all 5 years following assignment, usually by about 2 to 3 percent, but only in the first 3 years were these differences statistically significant. The pattern of employment rates of male youths was somewhat similar to that of adult men and women: the male youths' employment rates peaked during the calendar year following assignment--reaching nearly 91 percent for the treatment group and over 92 percent for the control group--but then declined (see fig. 7). However, in contrast to the employment rates of adults, those of male youths were slightly higher 5 years after assignment than before assignment, reaching 81 percent for the treatment group in the fifth year, compared with 80 percent in the year before assignment. We found no significant differences between the treatment and control groups' employment rates 5 years after assignment. While the employment rates for the control group actually exceeded those for the treatment group in the year of assignment and the first and third years following assignment, none of the differences were statistically significant. The employment rates of female youths in both the treatment and control groups peaked during the calendar year of assignment, declined somewhat over the next 4 years, and then slightly increased in the fifth year (see fig. 8). As with those of male youths, the employment rates of female youths were slightly higher 5 years after assignment than before assignment. The employment rates of female youths were 74 percent for the treatment group and 73 percent for the control group in the fifth year following assignment, compared with 71 and 73 percent, respectively, in the year before assignment. We found no significant differences between the treatment and control groups' employment rates 5 years after assignment. Employment rates for the treatment group exceeded those for the control group in 4 of the 5 years following assignment, but none of the differences in employment rates were statistically significant. Though both long-term earnings and employment rates for NJS treatment groups surpassed those for their respective control groups, the differences did not meet our test for statistical significance. Five years after expressing an interest in JTPA-sponsored job training, individuals assigned to participate in the program did not have earnings or employment rates significantly higher than individuals not assigned to participate. In commenting on a draft of this report, Labor expressed several concerns. It took exception to what it characterized as unwarranted negative conclusions that are not consistent with the report findings. Labor also took issue with the importance the report places on tests of statistical significance applied to earnings of an individual group in a given year, preferring to emphasize other evidence of the positive effect of JTPA on participant earnings over the 5-year period. Labor also expressed concerns that the report findings have limited relevance to current job training programs. We believe that our conclusions are well supported by our findings. On several occasions where appropriate, we have noted comparisons favorable to the JTPA treatment groups, including in the "Results in Brief" and "Conclusions" sections. Although other evidence covering the 5-year period might be found to better highlight the positive effects of JTPA training, our research focused on the earnings and employment rates of each target group in the fifth year after applying for JTPA training. Also, we do not believe that current or proposed job training programs sufficiently differ from JTPA training at the time of the NJS to limit the relevance of our report findings. In its response, Labor enclosed an attachment with specific comments on the report and additional information. This attachment and our evaluation of the comments appear in appendix III. Labor also provided us with technical comments, which we have incorporated in the report where appropriate. As agreed with your office, unless you publicly announce its contents earlier, we plan no further distribution of this report until 30 days from the date of this letter. At that time, we will send copies to interested parties and make copies available to others upon request. This report was prepared under the direction of Wayne B. Upshaw, Assistant Director, who may be reached on (202) 512-7006 if you or your staff have any questions. Gene Kuehneman, Senior Economist, (202) 512-4091, Jill Schamberger, Senior Evaluator, and Thomas L. Hungerford, Senior Economist, were major contributors to this report. To select our sample of individuals assigned to receive training under JTPA and our control group, we used participation information from the National JTPA Study (NJS). We then obtained long-term earnings and employment information for these individuals from SSA. Our analysis compared earnings and employment levels of individuals in the treatment and control groups to determine whether differences between these groups were statistically discernable. The original NJS data set contained demographic and program information on 20,601 people who applied for JTPA services between November 1987 and September 1989 in 16 local service delivery areas. Program applicants were recruited, screened to determine their eligibility, assessed to determine their service needs and wants, and recommended for services. NJS participants were then randomly assigned to either the treatment group, which was allowed to participate in JTPA title II-A programs, or the control group, which was not allowed to participate in these programs for 18 months. Approximately two-thirds of the applicants were assigned to the treatment group and one-third to the control group. The control and treatment groups were closely matched in demographic variables such as age, race, and education, which typically allows a meaningful comparison of average outcomes between the two groups. However, two factors intervened to make such a comparison problematic. First, not all members of the treatment group participated in JTPA programs. For example, about two-thirds of the adult treatment group members enrolled in JTPA, but the other one-third either found jobs on their own or decided not to participate in the program. Second, a substantial minority of the control group members chose to participate in some alternative, non-JTPA training programs. These complications preclude attributing earnings differences between the two groups solely to JTPA training. Therefore, our findings refer to differences between the treatment and control groups rather than between individuals who did or did not receive JTPA training. Furthermore, we do not know which of the control and treatment group members chose to receive training later than 18 months after assignment. The NJS was not designed to track treatment or control group members beyond 30 months. Therefore, to calculate and compare longer term earnings and employment outcomes for these groups, we needed information from another source. We obtained annual earnings records from SSA for the individuals in the NJS treatment and control groups. SSA maintains information on annual earnings of individuals contributing to either Social Security or Medicare. We assumed that an individual was employed if his or her SSA records showed positive earnings for a given year. We adjusted data for what we assumed were data entry or processing errors, and we also rounded reported negative earnings to zero. We analyzed the NJS and SSA earnings records of 13,699 NJS participants to determine their annual earnings and employment outcomes for the 3 years before assignment to the treatment or control group, the year of assignment, and 5 years following assignment. The 3 years of prior earnings and employment data served to demonstrate the prior comparability of treatment and control groups. The 5 years of postassignment data effectively doubled the 30-month follow-up period for the NJS. The treatment group had 9,275 individuals, and the control group had 4,424 individuals. We used individual earnings data and calculated means and variances for each of the four target groups--adult men, adult women, male youths, and female youths--to compare the treatment groups' earnings and employment outcomes with those of the control groups. We tested for differences in earnings and employment outcomes at the 5-percent significance level. We calculated annual earnings amounts using SSA information on Social Security-covered earnings for nonfederal workers and on earnings covered by Medicare for federal workers. We calculated employment rates as the percentage of each group with positive covered earnings in a calendar year. Individuals with unreported earnings may have had their earnings and employment understated in our analysis. Individuals whose earnings exceeded the Social Security withholding ceiling may also have had their earnings understated in our analysis. These limitations applied to both the treatment and control groups, and we do not believe they affected the two groups differently. Statistically significant difference at 5% level? Statistically significant difference at 5% level? no Statistically significant difference at 5% level? Employment rates (percent employed) Statistically significant difference at 5% level? (percent employed) Statistically significant difference at 5% level? no (percent employed) Statistically significant difference at 5% level? (percent employed) The following are GAO's comments on the Department of Labor's letter dated November 30, 1995. 1. Labor comments that our report understates the gross returns to JTPA training. Furthermore, Labor implies that these gross returns calculations compare favorably with the returns to college education. Our objective, as clearly stated in the report, was not to evaluate the cost-effectiveness of JTPA training, but rather to determine and compare the long-term effects of JTPA training. In fact, because we did not calculate the gross return to JTPA participants the report cannot have understated or overstated the values. Such calculations were not within the scope of this report. While it may be true that these returns are favorable, we have no basis to judge the favorability of the gross returns to training. 2. Labor states that the report does not acknowledge favorable aspects of this study. Specifically, Labor cited that (1) all four target groups had higher earnings in the fifth year after assignment; (2) both adult treatment groups had higher earnings than their respective control groups in each of the 5 years following assignment; and (3) for male youths, a positive trend exists, and the fifth-year earnings exceed those of the control group by over 10 percent. Contrary to Labor's comment, we did note many of these favorable program outcomes in our report. We stated that adult male treatment group members had higher earnings than adult male control group members and presented similar findings for the other three target groups. We further stated that adult male treatment group earnings exceeded control group earnings in each of the 5 years and reported similar information for adult women. Also, we noted the positive trend for earnings of male youths. We did not note the percentage difference for male youths in the fifth year because we did not report percentage comparisons for any of the target groups. 3. Labor states that if the training impacts are accumulated over time during the 5-year follow-up period, the net benefits outweigh the costs. As we stated in comment 1, our objective was not to evaluate the cost-effectiveness of JTPA training, but rather to determine and compare the long-term effects of JTPA training. While it may be true that the net benefits outweigh the costs, we have no basis to judge this because such calculations were beyond the scope of this report. 4. Labor states that the increase in standard errors is primarily responsible for the decline in statistical significance of the estimated impacts. While Labor is correct in stating that the standard errors were greater in the fifth year, it is not accurate to attribute a decline in statistical significance to either the estimated training effects or to the standard errors. The test statistics used for our significance tests are determined by the ratio of the estimates to their standard error, and attributing the lack of significance solely to either component of these ratios is inappropriate. 5. Labor states that our conclusion requires assessing the total impact of JTPA and the overall cost and benefits. The Department states that we overemphasize the importance of year-by-year significance tests in questioning the program's usefulness in improving participants' long-term earnings prospects by stressing the insignificant effect of JTPA in the fifth year. We agree with Labor that year-by-year significance tests have limited value in assessing the total impact of JTPA and the overall cost and benefits. Furthermore, our year-by-year significance tests provide statistical evidence that adult treatment group members achieved higher earnings for several years following assignment to JTPA training. While other evidence covering the 5-year period might be found to better highlight the positive effects of JTPA training, we chose to address the question of whether the fifth-year earnings of those assigned to participate in JTPA differed significantly from the fifth-year earnings of those not assigned to participate in JTPA. 6. While acknowledging that the observed earnings differences between the four target groups were not statistically significant in the fifth year, Labor asserts that the odds that all four differences would be positive purely by chance is 6.25 percent. This implies that an accumulation of not statistically significant observations provides more compelling empirical evidence than the actual significance test for any one group. While the probability (not odds) that all four not significant fifth-year earnings differences would be positive purely by chance might be low, our research question is whether a significant earnings difference occurred for each target group. 7. Labor comments that the report does not report the standard errors. Labor states that the report should include confidence intervals for the estimates, sample sizes, and standard errors and specify significance levels for the estimates. We have made several additions to tables in appendix II in response to this comment. We have added the sample size, the size of the treatment and control groups, the standard errors, and a reminder that the significance level chosen is 5 percent for the tables in this appendix. Since we have not presented point estimates of the earnings effects, we did not calculate confidence intervals for these estimates. Technical readers of our report can construct such estimates and the associated intervals from the information in the appendix II tables. 8. Labor claims that the report treats figures that are not significant as zero. We do not report any training effect as zero. The magnitude of the earnings differences, whether significant or not, is discussed in the report and is easily calculated from the tables in appendix II. 9. Labor states that statistical significance is not a knife edge of yes or no but a continuum. The level used for tests of statistical significance may be chosen from a broad range (or continuum) of values. Although different researchers may choose to use different values for the significance level, choosing a significance level before analyzing any data is common practice. Once this level has been chosen, statistical hypothesis testing very much involves a yes or no decision. Either the data reject the null hypothesis of no training effect at the set significance level or not. We follow these commonly accepted procedures for hypothesis testing, and our convention is to set the significance level for such tests at 5 percent. 10. Labor also states that the report should discuss the results, the probability values, and changes in the significance levels. Our report does discuss the results as well as whether the earnings and employment effects were significant and whether this significance changed over time. Although we do not present the probability values, technical readers of our report can calculate them using the information in the appendix II tables. 11. Labor takes issue with our statement that complications (not all treatment group members received training and some control group members did receive training) precluded our attributing earnings differences solely to JTPA training. It claims that these complications led us to understate the effect of training, implying that the earnings differences observed, along with perhaps some further overlooked earnings effects, can be attributed to JTPA. We clearly state that these complications preclude solely attributing the earnings effects to JTPA training. However, we have no evidence that these factors led to an understatement of the effect of JTPA training. In the first place, a short delay can occur before an assignee can begin a training program. In some of these cases, individuals find and accept employment instead of reporting for training. To the extent that these individuals are more fully employed and may earn more than they might have if they had attended JTPA training, our estimate may actually overstate the effect of training. Second and more importantly, if those who attend training are in some way more motivated than those who do not attend, it would be difficult to separate any increase in earnings due to training from the increase in earnings due to this motivation. At a minimum, we would need to identify which control group members were motivated to attend training to draw such inferences. 12. Labor recommends adjusting the comparison by effectively removing treatment group members who did not enroll in training. We chose to compare only those assigned to JTPA training with those not assigned to training to take full advantage of the original random assignment design. As we stated in comment 11, we would have needed to identify which control group members were motivated to attend training to justify removing the treatment group members who did not attend training. Since we could not take all the necessary steps to fully implement Labor's suggestion, we chose not to make that or any other adjustments. 13. Labor comments that we will be providing the Department's contractor with access to Social Security data for additional analysis, including examining the results for subgroups. We would like to clarify the details of this arrangement in light of the sensitive nature and confidentiality of individual earnings records. When we began our work, Labor was also planning to evaluate the long-term impact of JTPA training on earnings. Both our and Labor's evaluation (contracted out to Westat, Inc.) planned to use Social Security earnings records to supplement the information collected through the NJS. In the spirit of cooperation, Labor requested and we agreed to provide aggregated earnings data to the Department, which will submit computer programs to us; we will in turn run the programs and provide the output to Labor. Only aggregated information, such as means and standards deviations, will be reported. No data will be released that could be traced to individuals, nor will we provide Labor or its contractor with individual earnings records. 14. Labor suggests that we include earnings and employment information for the third of the sample for whom only 4 years of follow-up data were available. We did not include this group in our analysis since we could not report on their earnings or employment 5 years after training. As such, any additional information provided would not address the question of whether JTPA had a long-term effect on the earnings or employment outcomes of the treatment group. 15. Labor states that we should explain that our employment measure is not the definition that is generally reported in government statistics and is not comparable to figures reported in Current Population Survey (CPS) and Bureau of Labor Statistics (BLS) reports. Our employment rate differs from measures reported in CPS and BLS reports but is appropriate for our purposes. Our employment rate is the number employed divided by all who were in the treatment or control group, which includes those workers who may have dropped out of the labor force. Since these workers presumably applied for training because they intended to keep working, we believe that all workers should be included in the denominator of the measure. Our measure also counts as employed everyone who worked during the year, even if they might have been unemployed for some portion of the year. As such, our measure may overstate the instantaneous employment outcomes of both the treatment and control groups relative to figures reported in CPS and BLS reports. 16. Labor states that Social Security data are subject to considerable revisions in the first year of availability. It believes this calls into doubt fifth-year estimates for adult men, adult women, and male youths. While data are often subject to revision, we have no reason to suspect that the data for those assigned to training in 1988 are materially less reliable than for those assigned to training in 1987. The fifth year (1993) of earnings data for those assigned to training in 1988 was extracted from SSA records in March 1995. An SSA official responsible for updates and revisions to SSA earnings data said that we could expect the accuracy and completeness of our extract to exceed 99 percent. 17. Labor states that we fail to recognize the limited relevance of our findings to current job programs. While we agree that our evaluation has limitations, we disagree that it has little relevance to current job programs. We make it quite clear that our analysis is not nationally representative of JTPA training. Additionally, we cite many flaws associated with the design and implementation of the original NJS that limit our analysis. However, no evidence exists to suggest that job training funded by JTPA and administered at the state and local level has changed so dramatically since 1989 that our findings are not relevant to the current program. The first copy of each GAO report and testimony is free. Additional copies are $2 each. Orders should be sent to the following address, accompanied by a check or money order made out to the Superintendent of Documents, when necessary. VISA and MasterCard credit cards are accepted, also. Orders for 100 or more copies to be mailed to a single address are discounted 25 percent. U.S. General Accounting Office P.O. Box 6015 Gaithersburg, MD 20884-6015 Room 1100 700 4th St. NW (corner of 4th and G Sts. NW) U.S. General Accounting Office Washington, DC Orders may also be placed by calling (202) 512-6000 or by using fax number (301) 258-4066, or TDD (301) 413-0006. Each day, GAO issues a list of newly available reports and testimony. To receive facsimile copies of the daily list or any list from the past 30 days, please call (202) 512-6000 using a touchtone phone. A recorded menu will provide information on how to obtain these lists.
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Pursuant to a congressional request, GAO compared the long-term earnings and employment rates for Job Training Partnership Act (JTPA) participants with those for non-participants. GAO found that: (1) JTPA participants receiving training had significantly higher earnings and employment rates than non-participants during the early stages of the program; and (2) annual earnings and employment rates for adult and youth JTPA participants increased after 5 years of participation, but the differences were not statistically significant.
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During the late 1960s and early 1970s, the government directed that all passengers and their carry-on baggage be screened for dangerous items before boarding a flight. As the volume of passengers requiring screening increased and an awareness of terrorists' threats against the United States developed, a computerized system was implemented in 1998 to help identify passengers posing the greatest risk to a flight so that they could receive additional security attention. This system, known as CAPPS, is operated by air carriers in conjunction with their reservation systems. CAPPS enables air carriers to separate passengers into two categories: those who require additional security screening--termed "selectees"--and those who do not. Certain information contained in the passenger's reservation is used by the system to perform an analysis against established rules and a government supplied "watch list" that contains the names of known or suspected terrorists. If the person is deemed to be a "selectee," the boarding pass is encoded to indicate that additional security measures are required at the screening checkpoint. This system is currently used by most U.S. air carriers to prescreen passengers and prescreens an estimated 99 percent of passengers on domestic flights. For those passengers not prescreened by the system, certain air carriers manually prescreen their passengers using CAPPS criteria and the watch list. Following the events of September 11, 2001, Congress passed the Aviation and Transportation Security Act requiring that a computer-assisted passenger prescreening system be used to evaluate all passengers, TSA's Office of National Risk Assessment has undertaken the development of a second-generation computer-assisted passenger prescreening system, known as CAPPS II. Unlike the current system that is operated by the air carriers, the government will operate CAPPS II. Further, it will perform different analyses and access more diverse data, including data from commercial and government databases, to classify passengers according to their level of risk. TSA program officials expect that CAPPS II will provide significant improvements over the existing system. First, they believe a centralized CAPPS II that will be owned and operated by the federal government will allow for more effective and efficient use of up-to-date intelligence information and make CAPPS II more capable of being modified in response to changing threats. Second, they also believe that CAPPS II will improve identity authentication and reduce the number of passengers who are falsely identified as needing additional security screening. Third, CAPPS II is expected to prescreen all passengers on flights either originating in or destined for the United States. Last, an additional expected benefit of the system is its ability to aggregate risk scores to identify higher-risk flights, airports, or geographic regions that may warrant additional aviation security measures. Key activities in the development of CAPPS II have been delayed, and TSA has not yet completed key system planning activities. TSA plans to develop CAPPS II in nine increments, with each increment providing increased functionality. (See app. I for a description of these increments.) As each increment is completed, TSA plans to conduct tests that would ensure the system meets the objectives of that increment before proceeding to the next increment. The development of CAPPS II began in March 2003 with increments 1 and 2 being completed in August and October 2003, respectively. However, TSA has not completely tested these initial two increments because it was unable to obtain the necessary passenger data for testing from air carriers. Air carriers have been reluctant to provide passenger data due to privacy concerns. Instead, the agency deferred completing these tests until increment 3. TSA is currently developing increment 3. However, due to the unavailability of passenger data needed for testing, TSA has delayed the completion of this increment from October 2003 until at least the latter part of this month and reduced the functionality that this increment is expected to achieve. Increment 3 was originally intended to provide a functioning system that could handle live passenger data from one air carrier in a test environment to demonstrate that the system can satisfy operational and functional requirements. However, TSA officials reported that they recently modified increment 3 to instead provide a functional application of the system in a simulated test environment that is not actively connected to an airline reservation system. Officials also said that they were uncertain when the testing that was deferred from increments 1 and 2 to increment 3 will be completed. TSA recognizes that system testing is a high-risk area and plans to further delay the implementation of the system to ensure that sufficient testing is completed. As a result, all succeeding increments of CAPPS II have been delayed, moving CAPPS II initial operating capability--the point at which the system will be ready to operate with one airline--from November 2003 to a date unknown. (See app. II for a timeline showing the original and revised schedule for CAPPS II increments.) Further, we found that TSA has not yet developed critical elements associated with sound project planning, including a plan for what specific functionality will be delivered, by when, and at what cost throughout the development of the system. Our work on similar systems and other best practice research have shown that the application of rigorous practices to the acquisition and development of information systems improves the likelihood of the systems' success. In other words, the quality of information technology systems and services is governed largely by the quality of the processes involved in developing and acquiring the system. We have reported that the lack of such practices has contributed to cost, schedule, and performance problems for major system acquisition efforts. TSA established plans for the initial increments of the system, including requirements for increments 1 and 2 and costs and schedules for increments 1 through 4. However, officials lack a comprehensive plan identifying the specific functions that will be delivered during the remaining increments; for example, which government and commercial databases will be incorporated, the date when these functions will be delivered, and an estimated cost of the functions. In addition, TSA officials recently reported that the expected functionality to be achieved during early increments has been reduced, and officials are uncertain when CAPPS II will achieve initial operating capability. Project officials also said that because of testing delays, they are unable to plan for future increments with any certainty. By not completing these key system development planning activities, TSA runs the risk that CAPPS II will not provide the full functionality promised. Further, without a clear link between deliverables, cost, and schedule, it will be difficult to know what will be delivered and when in order to track development progress. Until project officials develop a plan that includes scheduled milestones and cost estimates for key deliverables, CAPPS II is at increased risk of not providing the promised functionality, not being fielded when planned, and being fielded at an increased cost. In reviewing CAPPS II, we found that TSA has not fully addressed seven of the eight issues identified by the Congress as key areas of interest related to the development and implementation of CAPPS II. Public Law 108-90 identified eight key issues that TSA must fully address before the system is deployed or implemented. These eight issues are establishing an internal oversight board, assessing the accuracy of databases, testing the system load capacity (stress testing) and demonstrating its efficacy and accuracy, installing operational safeguards to protect the system from abuse, installing security measures to protect the system from unauthorized access, establishing effective oversight of the system's use and operations, addressing all privacy concerns, and creating a redress process for passengers to correct erroneous information. While TSA is in various stages of progress to address each of these issues, only the establishment of an internal oversight board to review the development of CAPPS II has been fully addressed. For the remaining issues, TSA program officials contend that their ongoing efforts will ultimately address each issue. However, due to system development delays, uncertainties regarding when passenger data will be obtained to test the system, and the need to finalize key policy decisions, officials were unable to identify a time frame for when all remaining issues will be fully addressed. The following briefly summarizes the status of TSA's efforts to address each of the eight issues. Establishment of a CAPPS II oversight board has occurred. DHS created an oversight board--the Investment Review Board--to review the department's largest capital asset programs. The Board reviewed CAPPS II in October 2003. Based on this review, the Board authorized TSA to proceed with the system's development. However, DHA noted some areas that the program needed to address. These areas included addressing privacy and policy issues, coordinating with other stakeholders, and identifying program staffing requirements and costs, among others, and directed that these issues be addressed before the system proceeds to the next increment. Although DHS has the Board in place to provide internal oversight and monitoring for CAPPS II and other large capital investments, we recently reported that concerns exist regarding the timeliness of its future reviews. DHS officials acknowledged that the Board is having difficulty reviewing all of the critical departmental programs in a timely manner. As of January 2004, DHS had identified about 50 of the largest capital assets that would be subject to the Board's review. As CAPPS II's development proceeds, it will be important for the Board to oversee the program on a regular and thorough basis to provide needed oversight. In addition, on February 12, 2004, DHS announced its intentions to establish an external review board specifically for CAPPS II. This review board will be responsible for ensuring that (1) the privacy notice is being followed, (2) the appeal process is working effectively, and (3) the passenger information used by CAPPS II is adequately protected. However, in announcing the establishment of this review board, DHS did not set a date as to when the board will be activated or who would serve on the board. The accuracy of CAPPS II databases has not yet been determined. TSA has not yet determined the accuracy--or conversely, the error rate-- of commercial and government databases that will be used by CAPPS II. Since consistent and compatible information on database accuracy is not available, TSA officials said that they will be developing and conducting their own tests to assess the overall accuracy of information contained in commercial and government databases. These tests are not intended to identify all errors existing within a database, but rather assess the overall accuracy of a database before determining whether it is acceptable to be used by CAPPS II. In addition to testing the accuracy of commercial databases, TSA plans to better ensure the accuracy of information derived from commercial databases by using multiple databases in a layered approach to authenticating a passenger's identity. If available information is insufficient to validate the passenger's identification in the first database accessed, then CAPPS II will access another commercial database to provide a second layer of data, and if necessary, still other commercial databases. However, how to better ensure the accuracy of government databases will be more challenging. TSA does not know exactly what type of information the government databases contain, such as whether a database will contain a person's name and full address, a partial address, or no address at all. A senior program official said that using data without assessing accuracy and mitigating data errors could result in erroneous passenger assessments; consequently government database accuracy and mitigation measures will have to be developed and completed before the system is placed in operation. In mitigating errors in commercial and government databases, TSA plans to use multiple databases and a process to identify misspellings to correct errors in commercial databases. TSA is also developing a redress process whereby passengers can attempt to get erroneous data corrected. However, it is unclear what access passengers will have to information found in either government or commercial databases, or who is ultimately responsible for making corrections. Additionally, if errors are identified during the redress process, TSA does not have the authority to correct erroneous data in commercial or government databases. TSA officials said they plan to address this issue by establishing protocols with commercial data providers and other federal agencies to assist in the process of getting erroneous data corrected. Stress testing and demonstration of the system's efficacy and accuracy have been delayed. TSA has not yet stress tested CAPPS II increments developed to date or conducted other system-related testing to fully demonstrate the effectiveness and accuracy of the system's search capabilities, or search tools, to correctly assess passenger risk levels. TSA initially planned to conduct stress testing on an early increment of the system by August 2003. However, stress testing was delayed several times due to TSA's inability to obtain the 1.5 million Passenger Name Records it estimates are needed to test the system. TSA attempted to obtain the data needed for testing from three different sources but encountered problems due to privacy concerns associated with its access to the data. For example, one air carrier initially agreed to provide passenger data for testing purposes, but adverse publicity resulted in its withdrawal from participation Further, as the system is more fully developed, TSA will need to conduct stress testing. For example, there is a stringent performance requirement for the system to process 3.5 million risk assessment transactions per day with a peak load of 300 transactions per second that cannot be fully tested until the system is further along in development. Program officials acknowledge that achieving this performance requirement is a high-risk area and have initiated discussions to define how this requirement will be achieved. However, TSA has not yet developed a complete mitigation strategy to address this risk. Without a strategy for mitigating the risk of not meeting peak load requirements, the likelihood that the system may not be able to meet performance requirements increases. Other system-related testing to fully demonstrate the effectiveness and accuracy of the system's search tools in assessing passenger risk levels also has not been conducted. This testing was also planned for completion by August 2003, but similar to the delays in stress testing, TSA's lack of access to passenger data prevented the agency from conducting these tests. In fact, TSA has only used 32 simulated passenger records--created by TSA from the itineraries of its employees and contractor staff who volunteered to provide the data--to conduct this testing. TSA officials said that the limited testing--conducted during increment 2--has demonstrated the effectiveness of the system's various search tools. However, tests using these limited records do not replicate the wide variety of situations they expect to encounter with actual passenger data when full-scale testing is actually undertaken. As a result, the full effectiveness and accuracy of the tools have not been demonstrated. TSA's attempts to obtain test data are still ongoing, and privacy issues remain a stumbling block. TSA officials believe they will continue to have difficulty in obtaining data for both stress and other testing until TSA issues a Notice of Proposed Rulemaking to require airlines to provide passenger data to TSA. This action is currently under consideration within TSA and DHS. In addition, TSA officials said that before the system is implemented, a final Privacy Act notice will be published. According to DHS's Chief Privacy Officer, the agency anticipated that the Privacy Act notice would be finalized in March 2004. However, this official told us that the agency will not publish the final Privacy Act notice until all 15,000 comments received in response to the August 2003 Privacy Act notice are reviewed and testing results are available. DHS could not provide us a date as to when this will be accomplished. Further, due to the lack of test data, TSA delayed the stress and system testing planned for increments 1 and 2 to increment 3, scheduled to be completed by March 31, 2004. However, since we issued our report last month, a TSA official said that they no longer expect to conduct this testing during increment 3 and do not have an estimated date for when these tests will be conducted. Uncertainties surrounding when stress and system testing will be conducted could impact TSA's ability to allow sufficient time for testing, resolving defects, and retesting before CAPPS II can achieve initial operating capability and may further delay system deployment. Security plans that include operational and security safeguards are not complete. Due to schedule delays and the early stage of CAPPS II development, TSA has not implemented critical elements of an information system security program to reduce opportunities for abuse and protect against unauthorized access by hackers. These elements--a security policy, a system security plan, a security risk assessment, and the certification and accreditation of the security of the system--together provide a strong security framework for protecting information technology data and assets. While TSA has begun to implement critical elements of an information security management program for CAPPS II, these elements have not been completed. Until a specific security policy for CAPPS II is completed, TSA officials reported that they are using relevant portions of the agency's information security policy and other government security directives as the basis for its security policy. As for the system security plan, it is currently in draft. TSA expects to complete this plan by the time initial operating capability is achieved. Regarding the security risk assessment, TSA has postponed conducting this assessment because of development delays and it has not been rescheduled. The completion date remains uncertain because TSA does not have a date for achieving initial operating capability as a result of other CAPPS II development delays. As for final certification and accreditation, TSA is unable to schedule the final certification and accreditation of CAPPS II because of the uncertainty regarding the system's development schedule. The establishment of a security policy and the completion of the system security plan, security risk assessment, and certification and accreditation process are critical to ensuring the security of CAPPS II. Until these efforts are completed, there is decreased assurance that TSA will be able to adequately protect CAPPS II information and an increased risk of operational abuse and access by unauthorized users. Policies for effective oversight of the use and operation of CAPPS II are not developed. TSA has not yet fully established controls to oversee the effective use and operation of CAPPS II. However, TSA plans to provide oversight of CAPPS II through two methods: (1) establishing goals and measures to assess the program's strengths, weaknesses, and performance and (2) establishing mechanisms to monitor and evaluate the use and operation of the system. TSA has established preliminary goals and measures to assess the CAPPS II program's performance in meeting its objectives as required by the Government Performance and Results Act. Specifically, the agency has established five strategic objectives with preliminary performance goals and measures for CAPPS II. While this is a good first step, these measures may not be sufficient to provide the objective data needed to conduct appropriate oversight. TSA officials said that they are working with five universities to assess system effectiveness and management and will develop metrics to be used to measure the effectiveness of CAPPS II. With this information, officials expect to review and, as necessary, revise their goals and objectives to provide management and the Congress with objective information to provide system oversight. In addition, TSA has not fully established or documented additional oversight controls to ensure that operations are effectively monitored and evaluated. Although TSA has built capabilities into CAPPS II to monitor and evaluate the system's operation and plans to conduct audits of the system to determine whether it is functioning as intended, TSA has not written all of the rules that will govern how the system will operate. Consequently, officials do not yet know how these capabilities will function, how they will be applied to monitor the system to provide oversight, and what positions and offices will be responsible for maintaining the oversight. Until these policies and procedures for CAPPS II are developed, there is no assurance that proper controls are in place to monitor and oversee the system. TSA's plans address privacy protection, but issues remain unresolved. TSA's plans for CAPPS II reflect an effort to protect individual privacy rights, but certain issues remain unresolved. Specifically, TSA plans address many of the requirements of the Privacy Act, the primary legislation that regulates the government's use of personal information. For example, in January 2003, TSA issued a notice in the Federal Register that generally describes the Privacy Act system of records that will reside in CAPPS II and asked the public to comment. While TSA has taken these initial steps, it has not yet finalized its plans for complying with the act. For example, the act and related Office of Management and Budget guidance state that an agency proposing to exempt a system of records from a Privacy Act provision must explain the reasons for the exemption in a published rule. In January 2003, TSA published a proposed rule to exempt the system from seven Privacy Act provisions but has not yet provided the reasons for these exemptions, stating that this information will be provided in a final rule to be published before the system becomes operational. As a result, TSA's justification for these exemptions remains unclear. Until TSA finalizes its privacy plans for CAPPS II and addresses such concerns, the public lacks assurance that the system will fully comply with the Privacy Act. When viewed in the larger context of Fair Information Practices-- internationally recognized privacy principles that also underlie the Privacy Act--TSA plans reflect some actions to address each of these practices. For example, TSA's plan to not collect passengers' social security numbers from commercial data providers and to destroy most passenger information shortly after they have completed their travel itinerary appears consistent with the collection limitation practice, which states that collections of personal information should be limited. However, to meet its evolving mission goals, TSA plans also appear to limit the application of certain of these practices. For example, TSA plans to exempt CAPPS II from the Privacy Act's requirements to maintain only that information about an individual that is relevant and necessary to accomplish a proper agency purpose. These plans reflect the subordination of the use limitation practice and data quality practice (personal information should be relevant to the purpose for which it is collected) to other goals and raises concerns that TSA may collect and maintain more information than is needed for the purpose of CAPPS II, and perhaps use this information for new purposes in the future. Such actions to limit the application of the Fair Information Practices do not violate federal requirements. Rather, they reflect TSA's efforts to balance privacy with other public policy interests such as national security, law enforcement, and administrative efficiency. As the program evolves, it will ultimately be up to policymakers to determine if TSA has struck an appropriate balance among these competing interests. Redress process is being developed, but significant challenges remain. TSA intends to establish a process by which passengers who are subject to additional screening or denied boarding will be provided the opportunity to seek redress by filing a complaint; however, TSA has not yet finalized this process. According to TSA officials, the redress process will make use of TSA's existing complaint process--currently used for complaints from passengers denied boarding passes--to document complaints and provide these to TSA's Ombudsman. Complaints relating to CAPPS II will be routed through the Ombudsman to a Passenger Advocate--a position to be established within TSA for assisting individuals with CAPPS II-related concerns--who will help identify errors that may have caused a person to be identified as a false positive. If the passengers are not satisfied with the response received from the Passenger Advocate regarding the complaint, they will have the opportunity to appeal their case to the DHS Privacy Office. A number of key policy issues associated with the redress process, however, still need to be resolved. These issues involve data retention, access, and correction. Current plans for data retention indicate that data on U.S. travelers and lawful permanent residents will be deleted from the system at a specified time following the completion of the passengers' itinerary. Although TSA's decision to limit the retention of data was made for privacy considerations, the short retention period might make it impossible for passengers to seek redress if they do not register complaints quickly. TSA has also not yet determined the extent of data access that will be permitted for those passengers who file a complaint. TSA officials said that passengers will not have access to any government data used to generate a passenger risk score due to national security concerns. TSA officials have also not determined to what extent, if any, passengers will be allowed to view information used by commercial data providers. Furthermore, TSA has not yet determined how the process of correcting erroneous information will work in practice. TSA documents and program officials said that it may be difficult for the Passenger Advocate to identify errors, and that it could be the passenger's responsibility to correct errors in commercial databases at their source. To address these concerns, TSA is exploring ways to assist passengers who are consistently determined to be false positives. For example, TSA has discussed incorporating an "alert list" that would consist of passengers who coincidentally share a name with a person on a government watch list and are, therefore, continually flagged for additional screening. Although the process has not been finalized, current plans indicate that a passenger would be required to submit to an extensive background check in order to be placed on the alert list. TSA said that available remedies for all persons seeking redress will be more fully detailed in CAPPS II's privacy policy, which will be published before the system achieves initial operating capability. In addition to facing developmental and operational challenges related to key areas of interest to the Congress, CAPPS II faces a number of additional challenges that may impede its success. We identified three issues that, if not adequately resolved, pose major risks to the successful development, implementation, and operation of CAPPS II. These issues are developing the international cooperation needed to obtain passenger data, managing the expansion of the program's mission beyond its original purpose, and ensuring that identity theft--in which an individual poses as and uses information of another individual--cannot be used to negate the security benefits of the system. For CAPPS II to operate fully and effectively, it needs data not only on U.S. citizens who are passengers on flights of domestic origin, but also on foreign nationals on domestic flights and on flights to the United States originating in other countries. However, obtaining international cooperation for access to these data remains a substantial challenge. The European Union, in particular, has objected to its citizens' data being used by CAPPS II, whether a citizen of a European Union country flies on a U.S. carrier or an air carrier under another country's flag. The European Union has asserted that using such data is not in compliance with its privacy directive and violates the civil liberties and privacy rights of its citizens. DHS and European Union officials are in the process of finalizing an understanding regarding the transfer of passenger data for use by the Bureau of Customs and Border Protection. However, this understanding does not permit the passenger data to be used by TSA in the operation of CAPPS II but does allow for the data to be used for testing purposes. According to a December 16, 2003, report from the Commission of European Communities, the European Union will not be in a position to agree to the use of its citizens' passenger data for CAPPS II until internal U.S. processes have been completed and it is clear that the U.S. Congress's privacy concerns have been resolved. The Commission said that it would discuss the use of European Union citizen passenger data in a second, later round of discussions. Our review found that CAPPS II may be expanded beyond its original purpose and that this expansion may affect program objectives and public acceptance of the system. The primary objective of CAPPS II was to protect the commercial aviation system from the risk of foreign terrorism by screening for high-risk or potentially high-risk passengers. However, in the August 2003 interim final Privacy Act notice for CAPPS II, TSA stated that the system would seek to identify both domestic and foreign terrorists and not just foreign terrorists as previously proposed. The August notice also stated that the system could be expanded to identify persons who are subject to outstanding federal or state arrest warrants for violent crimes and that CAPPS II could ultimately be expanded to include identifying individuals who are in the United States illegally or who have overstayed their visas. DHS officials have said that such changes are not an expansion of the system's mission because they believe it will improve aviation security and is consistent with CAPPS II's mission. However, program officials and advocacy groups expressed concern that focusing on persons with outstanding warrants, and possibly immigration violators, could put TSA at risk of diverting attention from the program's fundamental purpose. Expanding CAPPS II's mission could also lead to an erosion of public confidence in the system, which program officials agreed is essential to the effective operation of CAPPS II. This expansion could also increase the costs of passenger screening, as well as the number of passengers erroneously identified as needing additional security attention because some of the databases that could be used to identify wanted felons have reliability concerns. Another challenge facing the successful operation of CAPPS II is the system's ability to effectively identify passengers who assume the identity of another individual, known as identity theft. TSA officials said that while they believe CAPPS II will be able to detect some instances of identity theft, they recognized that the system will not detect all instances of identity theft without implementing some type of biometric indicator, such as fingerprinting or retinal scans. TSA officials said that while CAPPS II cannot address all cases of identity theft, CAPPS II should detect situations in which a passenger submits fictitious information such as a false address. These instances would likely be detected since the data being provided would either not be validated or would be inconsistent with information in the databases used by CAPPS II. Additionally, officials said that data on identity theft may be available through credit bureaus and that in the future they expect to work with the credit bureaus to obtain such data. However, the officials acknowledge that some identity theft is difficult to spot, particularly if the identity theft is unreported or if collusion, where someone permits his or her identity to be assumed by another person, is involved. TSA officials said that there should not be an expectation that CAPPS II will be 100 percent accurate in identifying all cases of identity theft. Further, the officials said that CAPPS II is just one layer in the system of systems that TSA has in place to improve aviation security, and that passengers who were able to thwart CAPPS II by committing identity theft would still need to go through normal checkpoint screening and other standard security procedures. TSA officials believe that, although not fool- proof, CAPPS II represents an improvement in identity authentication over the current system. The events of September 11, 2001, and the ongoing threat of commercial aircraft hijackings as a means of terrorist attack against the United States continue to highlight the importance of a proactive approach to effectively prescreening airline passengers. An effective prescreening system would not only expedite the screening of passengers, but would also accurately identify those passengers warranting additional security attention, including those passengers determined to have an unacceptable level of risk who would be immediately assessed by law enforcement personnel. CAPPS II, while holding the promise of providing increased benefits over the current system, faces significant challenges to its successful implementation. Uncertainties surrounding the system's future functionality and schedule alone result in the potential that the system may not meet expected requirements, may experience delayed deployment, and may incur increased costs throughout the system's development. Of the eight issues identified by the Congress related to CAPPS II, only one has been fully addressed. Additionally, concerns about mission expansion and identify theft add to the public's uncertainty about the success of CAPPS II. Our recent report on CAPPS II made seven specific recommendations that we believe will help address these concerns and challenges. The development of plans identifying the specific functionality that will be delivered during each increment of CAPPS II and its associated milestones for completion and the expected costs for each increment would provide TSA with critical guidelines for maintaining the project's focus and achieving intended system results and milestones within budget. Furthermore, a schedule for critical security activities, a strategy for mitigating the high risk associated with system and database testing, and appropriate oversight mechanisms would enhance assurance that the system and its data will be adequately protected from misuse. In addition to these steps, development of results-oriented performance goals and measures would help ensure that the system is operating as intended. Last, given the concerns regarding the protection of passenger data, the system cannot be fully accepted if it lacks a redress process for those who believe they are erroneously identified as an unknown or unacceptable risk. Our recently published report highlighted each of these concerns and challenges and contained several recommendations to address them. DHS generally concurred with our findings and has agreed to address the related recommendations. By adequately addressing these recommendations, we believe DHS increases the likelihood of successfully implementing this program. In the interim, it is crucial that the Congress maintain vigilant oversight of DHS to see that these concerns and challenges are addressed. Mr. Chairman, this concludes my statement. I would be please to answer any questions that you or other members of the Subcommittee may have at this time. For further information on this testimony, please contact Norman J. Rabkin at (202) 512-8777 or David A. Powner on (202) 512-9286. Individuals making key contributions to this testimony include J. Michael Bollinger, Adam Hoffman, and John R. Schulze. The following describes general areas of functionality to be completed during each of the currently planned nine developmental increments of the Computer -Assisted Passenger Prescreening System (CAPPS II). Increment 1. System functionality established at the central processing center. By completion of increment 1, the system will be functional at the central processing center and can process passenger data and support intelligence validation using in-house data (no use of airline data). Additionally, at this increment, validation will be completed for privacy and policy enforcement tools; the exchange of, and processing with, data from multiple commercial data sources; and processing of government databases to support multiple watch-lists. Increment 2. System functionality established to support processing airline data. At the completion of increment 2, the system is functionally and operationally able to process airline data. Additionally, the system can perform functions such as prioritizing data requests, reacting to threat level changes, and manually triggering a "rescore" for individual passengers in response to reservation changes or adjustments to the threat level. Increment 3. This increment will provide for a functional system that will use a test simulator that will not be connected to an airline's reservation system. System hardware that includes the establishment of test and production environments will be in place and a facility capable of performing risk assessment will be established. Design and development work for system failure with a back up system and help desk infrastructure will be put in place. Increment 4. By the completion of this increment, a back up location will be functionally and operationally able to support airlines processing application, similar to the main location. A help desk will be installed to provide assistance to airlines, authenticator, and other user personnel. Increment 5. Enhanced intelligence interface. At the conclusion of this increment, the system will be able to receive from DHS the current threat level automatically and be able to adjust the system in response to changes in threat levels. The system will also be able to semi-automatically rescore and reclassify passengers that have already been authenticated. Increment 6. Enhanced passenger authentication. This increment will allow the system to perform passenger authentication using multiple commercial data sources in the instance that little information on a passenger is available from original commercial data source. Increment 7. Integration of other system users. By the completion of this increment, TSA Aviation Operations and law enforcement organizations will be integrated into CAPPS II, allowing multiple agencies and organizations to do manpower planning and resource allocations based on the risk level of the nation, region, airport, or specific flight. Increment 8. Enhanced risk assessments. This increment provides for the installation of capabilities and data sources to enhance risk assessments, which will lower the number of passengers falsely identified for additional screening. This increment also provides for a direct link to the checkpoint for passenger classification, rather than having the passenger's score encoded on their boarding pass. Increment 9. Completion of system. Increment 9 marks the completion of the system as it moves into full operation and maintenance, which will include around-the-clock support and administration of the system, database, and network, among other things. System functionality to be achieved at revised schedule dates will be less than originally planned. This is a work of the U.S. government and is not subject to copyright protection in the United States. It may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.
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The security of U.S. commercial aviation is a long-standing concern, and substantial efforts have been undertaken to strengthen it. One such effort is the development of a new Computer-Assisted Passenger Prescreening System (CAPPS II) to identify passengers requiring additional security attention. The development of CAPPS II has raised a number of issues, including whether individuals may be inappropriately targeted for additional screening and whether data accessed by the system may compromise passengers' privacy. GAO was asked to summarize the results of its previous report that looked at (1) the development status and plans for CAPPS II; (2) the status of CAPPS II in addressing key developmental, operational, and public acceptance issues; and (3) additional challenges that could impede the successful implementation of the system. Key activities in the development of CAPPS II have been delayed, and the Transportation Security Administration (TSA) has not yet completed important system planning activities. TSA is currently behind schedule in testing and developing initial increments of CAPPS II, due in large part to delays in obtaining needed passenger data for testing from air carriers because of privacy concerns. TSA also has not established a complete plan identifying specific system functionality that will be delivered, the schedule for delivery, and estimated costs. The establishment of such plans is critical to maintaining project focus and achieving intended results within budget. Without such plans, TSA is at an increased risk of CAPPS II not providing the promised functionality, of its deployment being delayed, and of incurring increased costs throughout the system's development. TSA also has not completely addressed seven of the eight issues identified by the Congress as key areas of interest related to the development, operation, and public acceptance of CAPPS II. Although TSA is in various stages of progress on addressing each of these eight issues, as of January 1, 2004, only one--the establishment of an internal oversight board to review the development of CAPPS II--has been completely addressed. However, concerns exist regarding the timeliness of the board's future reviews. Other issues, including ensuring the accuracy of data used by CAPPS II, stress testing, preventing unauthorized access to the system, and resolving privacy concerns have not been completely addressed, due in part to the early stage of the system's development. GAO identified three additional challenges TSA faces that may impede the success of CAPPS II. These challenges are developing the international cooperation needed to obtain passenger data, managing the possible expansion of the program's mission beyond its original purpose, and ensuring that identity theft--in which an individual poses as and uses information of another individual--cannot be used to negate the security benefits of the system. GAO believes that these issues, if not resolved, pose major risks to the successful deployment and implementation of CAPPS II.
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The increased threat of terrorism is an urgent national issue. The President directed the establishment of a commission on July 25, 1996, headed by Vice President Gore, whose charter included reviewing aviation security. The commission was charged with reporting to the President within 45 days its initial findings on aviation security, including plans to (1) deploy technology capable of detecting the most sophisticated explosive devices and (2) pay for that technology. In a classified report, we made recommendations to the Vice President, in his capacity as chairman of the commission, that would enhance the effectiveness of the commission's work. Detection technologies are also important in the effort to stem the flow of drugs into the United States. Detection technologies are typically developed for specific applications--some for aviation security, some for drug interdiction, and some for both. The major applications for the aviation security efforts of the Federal Aviation Administration (FAA) include the screening of checked baggage, passengers, cargo, mail, and carry-on items such as electronics, luggage, and bottles. FAA's need for detection technology comes from its security responsibilities involving more than 470 domestic airports and 150 U.S. airlines, annually boarding over 500 million passengers with their checked baggage and carry-on luggage, and transporting mail and cargo. Some advanced detection technologies are commercially available to serve aviation security applications. However, only one technology is currently deployed in the United States. That technology is being operationally tested at two U.S. airports. Major applications for the drug interdiction efforts of the U.S. Customs Service include screening of cargo and containers, pedestrians, and vehicles and their occupants. Customs' need for detection technology emanates from its responsibilities to control 301 ports of entry. Currently, over 400 million people, almost 120 million cars, and 10 million containers and trucks pass through these points each year. Currently, Customs' screening is done manually by inspectors with relatively little equipment beyond hand-held devices for detecting false compartments in containers. The challenges in detecting explosives are significantly different than the challenges in detecting narcotics, as are the consequences in not detecting them. Customs and other drug enforcement agencies are concerned with much larger quantities than are aviation security personnel. Consequently, greater technical challenges are posed in attempting to detect explosives that might be used to bring down a commercial aircraft. Two general groups of technologies, with modifications, can be used to detect both explosives and narcotics. The first group uses X-rays, nuclear techniques involving neutron or gamma ray bombardment, or electromagnetic waves, such as radio frequency waves. These technologies show anomalies in a targeted object that might indicate concealed explosives and narcotics or detect actual explosives and narcotics. The second group, referred to as trace detection technologies, uses chemical analyses to identify particles or vapors characteristic of narcotics or explosives and deposited on, or surrounding, objects, such as carry-on electronics or surfaces of vehicles. In addition to technologies, dogs are considered a unique type of trace detector because they can be trained to respond in specific ways to smells of narcotics or explosives. Since 1978, the federal government has spent about $246 million for research and development (R&D) on explosives detection technologies, including over $7 million for ongoing demonstration testing at the Atlanta, San Francisco, and Manila airports. During the same period, the government has spent about $100 million for R&D on narcotics technologies and a little more than $20 million procuring a variety of equipment to assist Customs inspectors, such as hand-held devices for detecting false compartments. The majority of the spending has occurred since 1990. As shown in table 1, annual R&D spending on explosives detection technologies fluctuated from $23 million to $28 million during the first part of this decade, before increasing to $39 million for fiscal year 1996. The $14 million, or over 50 percent, increase from fiscal year 1995 is due principally to FAA's funding of demonstration testing of a technology for screening checked baggage and to the funding of a counterterrorism application by the Technical Support Working Group (TSWG). Annual spending on narcotics detection technology increased during the first part of the decade from $14 million to a peak of $20 million in fiscal year 1994 and then dropped $3 million from that peak, or 15 percent. The reason for this decline is reduced spending by the Department of Defense (DOD) as it shifted emphasis from one type of narcotics detection technology to other, less costly types of technologies to satisfy Customs' needs. The spending on detection technologies that has occurred since 1990 has been due in large part to congressional direction. The Aviation Security Improvement Act of 1990 (Public Law 101-604) directed FAA to increase the pace of its R&D. The act also set a goal of deploying explosives detection technologies by November 1993. However, it prohibited FAA from mandating deployment of a particular technology until that technology had first been certified as capable of detecting various types and quantities of explosives using testing protocols developed in conjunction with the scientific community. FAA initially concentrated its efforts on developing protocols and technologies for screening checked baggage to address one of the security vulnerabilities that contributed to the bombing of Pan Am flight 103 in December 1988. However, the goal of deploying such technology has still not been met. FAA has certified one system, and it is being operationally tested at two domestic airports and one airport overseas. Congress tasked DOD in 1990 to develop narcotics detection technologies for Customs and other drug enforcement organizations. DOD has focused on developing "non-intrusive inspection" technologies to screen containers without the need for opening them. Customs is deploying a DOD-developed technology for trucks and empty containers, but it rejected another DOD-developed technology for fully loaded containers (see p. 8). Customs has identified containerized cargo at commercial seaports as its greatest unsolved narcotics detection requirement. According to Customs, it may be necessary to explore new methods of financing the systems that are technologically feasible for seaports, but high in cost. Both aviation security and drug interdiction depend on a complex mix of intelligence, procedures, and technologies, which can partially substitute for each other in terms of characteristics, strengths, and limitations. For example, FAA evaluates information from the intelligence community in determining a level of threat and mandating security procedures appropriate to a specific time and place. These security procedures include bag matching and passenger profiling. FAA estimates that incorporating bag matching in everyday security could cost up to $2 billion, while profiling could reduce to 20 percent the number of passengers requiring additional screening. The Customs' drug interdiction task has an analogous set of procedures and technologies and trade-offs. Relevant trade-offs in selecting detection technologies for a given application involve their characteristics and costs, including issues of their effectiveness in detecting explosives or narcotics, safety risks to users of the technology, and impacts on the flow of commerce. For example, some highly effective technologies could be deployed now, but they are expensive, raise safety concerns, or slow the flow of commerce. These trade-offs are required for each of the major detection technology applications for FAA and Customs. While areas of overlap exist, FAA's aviation security applications generally relate to checked baggage, passengers, and carry-on items, and Customs' drug interdiction applications generally relate to screening of cargo, containers, vehicles, and baggage. In addition to detection technologies, teams of dogs and their handlers are used for both aviation security and drug interdiction applications. A system is available today for screening checked baggage that has been certified by FAA as capable of detecting various types and quantities of explosives likely to be used to cause catastrophic damage to a commercial aircraft, as is required by the Aviation Security Improvement Act of 1990. However, the certified system is costly and has operational limitations, including a designed throughput of about 500 bags an hour with actual throughput much less than that number. Other less costly and faster systems are available, but they cannot detect all the amounts, configurations, and types of explosive material likely to be used to cause catastrophic damage to commercial aircraft. FAA's plans for developing detection technologies for checked baggage include efforts to improve the certified system, develop new technologies, and evaluate a mix of technologies. FAA believes that an appropriate mix of systems that individually do not meet certification requirements might eventually work together to detect the amounts, configurations, and types of explosive material that are required by the act. Appendix I provides additional information about the various types of technologies available and under development for screening checked baggage, including the characteristics and limitations of those technologies, their status, the estimated range of prices for the technologies, and federal government funding for the technologies. The National Research Council recently reported that X-ray and electromagnetic technologies produce images of sufficient quality to make them effective for screening passengers for concealed explosives. Future development efforts by FAA and TSWG are generally focusing on devices that detect explosives on boarding documents passengers have handled and portals that passengers would walk through. One type of portal uses trace detection technologies that collect and analyze traces from the passengers' clothing or vapors surrounding them. The other type uses electromagnetic waves to screen passengers for items hidden under clothing. The National Research Council also recently observed that successful deployment of these technologies is likely to depend on the public's perception about the seriousness of the threat and the effectiveness of devices in countering the threat, which might also be considered intrusive or thought to be a health risk. (See App. II for more information about the various types of technologies available and under development for passenger screening.) Technologies available today for screening carry-ons for hidden explosives include conventional X-ray machines, an electromagnetic system, and trace detection devices. FAA has recently developed trace detection standards for inspecting carry-on electronics for explosives. In addition, FAA has "assessed as effective," but not certified, three trace detection systems to be used during periods of heightened security. FAA expects to soon "assess as effective" three more trace detection systems. The more expensive trace technologies used for carry-on baggage are capable of detecting smaller amounts of explosives and narcotics. FAA's future efforts are expected to include developing an enhanced X-ray device and screeners for bottles. (See app. III for more detailed information about technologies for screening carry-on items.) Tests have shown that fully loaded containers can be effectively screened for narcotics with available high energy X-ray technologies (about 8 million electron volts or the equivalent of 50 to 70 times the energy of a typical airport-passenger X-ray). However, Customs rejected a DOD-developed high energy technology because it cost $12 million to $15 million per location, required a large amount of land for shielding, and raised safety concerns. Available low-energy technologies (the equivalent of 3 to 4 times the energy of a passenger X-ray) are less costly and safer but cannot penetrate full containers, so their use is limited to screening for hidden compartments in empty containers and objects concealed in trucks and trailers. About 4 to 25 containers per hour can be processed through low- and high-energy X-ray technologies depending on their configurations. According to DOD and Customs officials, future efforts in container screening will include developing less expensive X-ray systems with higher energy levels, mobile X-ray systems, and more capable hand-held trace detection systems. Those efforts will also include evaluating nuclear-based techniques for inspecting empty tankers at truck and rail ports. (See app. IV for additional information about technologies for screening cargo and containers.) Dogs can be trained to alert their handlers upon detecting explosives and narcotics. FAA-certified dogs are trained to detect various types of explosive substances that might be concealed in aircraft, airport vehicles, baggage, cargo, and terminals. Customs' dogs are trained to detect narcotics and in 1994 almost 6,000 drug seizures were attributable to dog teams. Currently funded projects include efforts to develop methods of bringing air samples to the dogs, or swabs from objects they are to inspect. Despite the limitations of currently available detection technologies, other countries have deployed some of these technologies to detect explosives and narcotics because of differences in their perception of the threat and their approaches to counter the threat. These countries' experiences provide opportunities to learn lessons about operational measures taken to deploy detection technologies, such as the amount of airport modifications needed to incorporate new technologies and the types of training provided to the operators of the new equipment, as well as the actual effectiveness of the technologies. While Customs has deployed equipment such as hand-held devices, it is also deploying up to 12 low-energy X-ray systems to screen empty containers and trucks for narcotics along the Southwest border. On the other hand, some countries are using high-energy systems to screen fully loaded containers. The high-energy systems installed at ports of entry in the United Kingdom, France, Germany, and China would have similar uses at seaports here, but Customs officials told us that the systems are too new for reliable operational data. They also told us that tests have not been conducted against Customs' requirements and the technologies would also be too expensive in the quantities needed for nationwide deployment. A high-energy nuclear system is being considered for deployment at the Euro Tunnel between France and the United Kingdom. The system would be used to screen for explosives concealed in trucks and their cargo being transported under the English Channel. This system could also be used to detect narcotics. In the United Kingdom, Germany, the Netherlands, and Belgium, we observed governments working closely with airport authorities to deploy explosives detection technologies. In two countries, airport authorities have generally embraced an approach that entails successive levels of review of checked baggage to resolve uncertainty about checked baggage. This approach can require complex systems for tracking throughout the entire baggage handling system. Instead of using only the FAA-certified system for checked baggage, these countries are using a mix of technologies. Their approach has been to implement technology that is an improvement on existing technology or procedures, rather than waiting for perfected technology. Officials in the two other countries are waiting for the next generation of explosives detection technologies. They believe that X-ray technologies have generally reached their limits in detecting explosives. All of the countries have also deployed trace detection technology for screening checked baggage or carry-on items, especially electronics. FAA officials told us they cannot mandate the types of approaches used by other countries, although airlines could voluntarily adopt them, because of the statutory prohibition against mandating technology that is not certified. With a combination of the best available technologies and procedures, including the use of the certified system for screening checked baggage, FAA estimates the incremental cost of the most effective security system for U.S. air travellers to be $6 billion over the next 10 years. On a per-passenger basis, FAA estimates the equivalent cost to be about $1.30 per one-way ticket. Customs and FAA have deployed dog teams widely. Customs has deployed about 450 dog teams to airports, seaports, and land border ports. The cost to train a Customs' dog and handler is about $6,000. FAA's canine explosives detection program includes 29 U.S. airports with a total of 72 FAA-trained and certified dog teams. Of the 19 largest U.S. airports, 14 have FAA-trained and certified dogs. The five airports without certified dogs are Washington-National, Washington-Dulles, Baltimore-Washington International, New York-John F. Kennedy, and Honolulu. According to an FAA official, these airports do not have FAA-certified dog teams because airport officials are concerned about cost. The cost to train an FAA dog and handler is about $17,000 and the annual operating cost of a team, including the handler's salary, is about $60,000. Five agencies--FAA, DOD, Customs, TSWG, and ONDCP--provided comments on the technical accuracy of information contained in a draft of this report. We have incorporated their comments in this final report where appropriate. To determine the amount of federal government spending for R&D on explosives and narcotics detection technologies, we obtained funding information from Customs, FAA, DOD, ONDCP, and TSWG covering periods as far back as the information was available. Although we identified the historical and current levels of funding, we generally focused on the period 1990 to the present because most technologies were developed and deployed during this period. To obtain information on the characteristics and limitations of available and planned technologies for containers, checked baggage, passengers, and carry-on items, we requested project information from the same five agencies for each detection technology project they had undertaken since 1990. Additionally, we received briefings from developers of technology and manufacturers of equipment currently available on the market. We analyzed major categories of technologies to identify a few characteristics common to each that can be used in making comparisons. We did not attempt to evaluate the effectiveness of the technologies, nor did we assess whether the current funding level is adequate to develop reliable detection technologies. We interviewed officials and gathered data primarily from the FAA, DOD, Customs, ONDCP, and TSWG to develop information on available and planned detection technologies. We also interviewed officials and visited ports of entry in Miami, Florida; San Juan, Puerto Rico; and Otay Mesa, California; and airports in Belgium, Germany, the Netherlands, United Kingdom, and the United States. We are sending copies of this report to the Vice President of the United States; Chairmen and Ranking Minority Members of appropriate congressional committees; the Secretaries of Treasury, State, Defense, and Transportation; the Attorney General, Department of Justice; the Administrators, FAA and Drug Enforcement Administration; the Commissioner, U.S. Customs Service; and the Directors, ONDCP, Central Intelligence, and Federal Bureau of Investigation. If you or your staff have any questions concerning explosives detection technology, please contact Gerald L. Dillingham at (202) 512-2834. If you have any questions regarding narcotics detection technologies, please call David E. Cooper on (202) 512-4841. Major contributors to this report are listed in appendix V. Funding (FYs 78-96) X-ray source rotates around a bag obtaining a large number of cross-sectional images that are integrated by a computer, which displays densities of objects in the bag. $850,000 to $1 million $22.2 million (FAA) Automatically alarms when objects with high densities, characteristic of explosives, are detected. Relatively slow throughput; certified system requires two units to meet throughput requirement. Commercially available. Achieved Federal Aviation Administration (FAA) certification in December 1994. FAA currently funding operational testing at three airports and also funding projects to improve throughput rate, reduce unit cost, and improve overall capabilities. Department of Defense (DOD) recently tested technology for detecting drugs in small packages. Two different X-ray energies determine the densities and average atomic numbers of the target material. Commercially available. FAA is developing an enhanced version that may meet certification standards. The U.S. Customs Service (Customs) plans to test this technology for drug detection. $2.1 million (FAA) Currently none of the X-rays in this group meets certification standards for checked bags because they do not detect the quantities and configurations of the full range of explosives specified in the standards. (continued) Funding (FYs 78-96) Backscatter detects reflected X-ray energy, providing an additional image to highlight organic materials such as explosives and drugs near the edge of a bag. Commercially available. FAA has several projects aimed at assisting this group of X-ray devices meet certification standards. $100,000 to $140,000 $100,000 (Customs) $2.2 million (FAA) This group of X-ray devices generally does not automatically alarm and therefore requires an operator to interpret the image. Technology is based on the detection of scatter patterns as X-rays interact with crystal lattice structures of materials. FAA and Customs terminated projects due to significant technical problems. A foreign government and contractor are supporting development of this technology. $4.5 million (FAA) $270,000 (Customs) Accelerator produces gamma rays that penetrate bags to detect presence of chlorine compounds in narcotics. DOD is building a prototype to demonstrate proof-of-principle for airport baggage carousel application. Demonstration is expected in December 1996. $8.6 million (DOD) Eventual system expected to be very expensive. Six machines built and tested since 1989. FAA discontinued checked baggage portion of project in 1994, but it is now investigating carry-on application. DOD contractor now using FAA machines to test drug detection. radioactive source probe bags for presence of nitrogen or chlorine compounds. $6.6 million (FAA) $280,000 (DOD) $27,000 (Customs) Automatically alarms on explosives or narcotics. Cost, size, and false alarm rate were of concern to airline industry, President's Commission on Terrorism and Aviation Security, and Customs. (continued) Funding (FYs 78-96) Radio frequency pulses probe bags to elicit unique responses from explosives and drugs. Nonimaging technology that provides chemically specific detection and automatically alarms on explosives or drugs. Commercially available. FAA has a prototype capable of detecting two types of explosives. Customs has a prototype capable of detecting cocaine base. $1 million (DOD) $350,000 Office of National Drug Control Policy (ONDCP) $0.7 million (FAA) $1.6 million Technical Support Working Group (TSWG) Currently does not meet FAA certification standards. Detection of certain cocaine compounds needs improvement. The Funding column indicates whether a specific technology was developed or is being developed for explosives detection, narcotics detection, or both. Generally, FAA and TSWG funding has supported explosives detection, while funding by DOD, Customs, and ONDCP has supported narcotics detection. Where a technology funding cell shows FAA or TSWG in combination with DOD, Customs, or ONDCP, that technology is generally capable of detecting both narcotics and explosives. Funding (FYs 78-96) System is nonimaging, but will automatically alarm if drug is detected in the digestive tract of a swallower. Requires about 30 seconds to screen a suspect. Prototype developed and tested at an airport. Project was terminated because system emitted radio frequencies that interfered with airport operations and Customs decided against spending additional $165,000 on needed shielding. System is now sitting idle at a Customs' storage facility. $1.3 million (ONDCP) $123,000 (Customs) System will scan 360 degrees around a passenger and automatically pinpoint the location of all undeclared objects on the surface of the body. Under development by FAA. Factory and airport testing to occur in 1997. $110,000 to $200,000 $1.6 million (FAA) System will be capable of processing 500 passengers per hour. System provides 360- degree imaging of the human body in order to detect weapons, explosives, and drugs concealed underneath clothing. Under development by FAA. Fieldable prototype to be completed mid-1997 with airport testing to follow. $100,000 to $200,000 $5.3 million (FAA) System does not provide automatic detection, but relies on an operator to spot the contraband. System expected to process 360- 600 passengers per hour. (continued) Funding (FYs 78-96) Under development by FAA. Fieldable prototype completed in 1995. Factory and airport testing will begin in late 1996. $4.0 million (FAA) clothing collect vapor and particles while passengers are walking through the portal. System will automatically alarm if explosive is detected. Throughput is estimated to be 360 per hour. Air flow dislodges vapor or particles from passengers walking through portals to test for explosives. Two prototypes are being developed by FAA. $300,000 to $500,000 $2.5 million (FAA) Systems automatically alarm if explosive is detected. Throughput goal is 360 per hour. Trace samples collected from passengers' hands either through a token or document. Under development by FAA. Field prototype to be available sometime in 1996. $65,000 to $85,000 $125,000 (FAA) System will automatically alarm if explosive is detected. Throughput is estimated to be 425 per hour. IMS Document Screeners Collects trace samples $65,000 to $85,000 $430,000 (TSWG) from passengers' documents. Under development by TSWG. Project started in April 1996 and to be completed in 1998. System will automatically alarm if explosive is detected. Throughput is estimated to be 450 per hour. (Table notes on next page) The Funding column indicates whether a specific technology was developed or is being developed for explosives detection, narcotics detection, or both. Generally, FAA and TSWG funding has supported explosives detection, while funding by DOD, Customs, and ONDCP has supported narcotics detection. Where a technology funding cell shows FAA or TSWG in combination with DOD, Customs, or ONDCP, that technology is generally capable of detecting both narcotics and explosives. Funding (FYs 78-96) Measures mobility of various chemicals through a gas in an electrical field. Commercially available. For example, 125 units of a particular IMS system have been deployed overseas. $45,000 to $152,000 $2.3 million (FAA) Fast, portable, and inexpensive. Lower chemical specificity than mass spectrometry. $100,000 to $170,000 chromatography and mass spectrometry or chemiluminescence that separates mixtures using an absorbent material. Commercially available. For example, 154 units of a chemiluminescence system have been deployed overseas. $2 million (FAA) $230,000 (TSWG) High sensitivity and chemical specificity. Produces evidence acceptable in court. Expensive, slow, and bulky. Do not automatically alarm, so dependent on operator interpretation of enhanced images. Under development. $325,000 (FAA) $250,000 (TSWG) Limited penetration of target objects. (continued) Funding (FYs 78-96) Radio frequency pulses probe hags to elicit unique responses from explosives and drugs. Commercially available. A field prototype capable of handling small size packages was tested in Atlanta during the Olympics by airlines to screen electronics. This is a product derived from funding the same technology listed in appendix I. Nonimaging technology that provides chemically specific detection and automatically alarms on explosives or drugs. Detection of certain cocaine compounds needs improvement. System uses microwave technology to penetrate bottles and will discover when bottles do not contain the liquid that is expected. It is basically a discovery rather than detection system. This is an FAA in-house project working with a commercially available device. FAA is currently testing field prototypes. $19,000 to $25,000 $77,000 (FAA) System does not identify the liquid in the bottle. System throughput is expected to be 720 bottles per hour. However, system is unable to penetrate certain types of bottles. Automatically alarms if explosives detected. Prototypes are available. $75,000 to $125,000 $974,000 (FAA) Analysis time varies between 20 and 70 seconds per target. Manufacturer is working to shorten analysis time. The Funding column indicates whether a specific technology was developed or is being developed for explosives detection, narcotics detection, or both. Generally, FAA and TSWG funding has supported explosives detection, while funding by DOD, Customs, and ONDCP has supported narcotics detection. Where a technology funding cell shows FAA or TSWG in combination with DOD, Customs, or ONDCP, that technology is generally capable of detecting both narcotics and explosives. Funding (FYs 78-96) An accelerator generates gamma rays to penetrate the object to be screened. The gamma rays are preferentially absorbed by nitrogen nuclei. A significant decrease in the number of detected gamma rays indicates the possible presence of explosives. Project was originally intended for checked bags and has been inactive since 1993. FAA may reactivate project for screening air cargo containers. $12.1 million (FAA) System requires less shielding than other nuclear technologies. An accelerator generates neutrons for bombarding target; induced gamma rays are measured to detect presence of narcotics or explosives. System automatically alarms based on 3 dimensional images of elemental ratios of hydrogen, oxygen, nitrogen, and carbon. DOD completed the project, but the system was not transitioned to Customs due to Customs' concern with cost, size, operational, and safety issues. FAA conducted limited testing for checked baggage application in 1993 and it is now considering a new project for screening air cargo. TSWG is funding a counterterrorism application. $8 to $10 million $19 million (DOD) $ 5.3 million (FAA) $6.2 million (TSWG) System takes 20 minutes per analysis and would typically be combined with an X-ray system to speed throughput. Requires a large amount of space and shielding, a radiation permit, and an FDA permit for use on food. Also uses an accelerator to generate fast neutrons to probe bags; measurement of the transmitted neutron spectrum is used to detect explosives. FAA has two ongoing projects and now believes technology might be more suitable for screening air cargo or containerized checked baggage than individual bags. $3.5 million (FAA) (continued) Funding (FYs 78-96) System is designed for propane and other gas or liquid tanker trucks but is adaptable to scan railcars. Prototype being evaluated by DOD and Customs. $382,000 (ONDCP) While open and unsheltered, system requires a radiation permit to operate. Systems are designed to scan loaded trucks/containers and have throughput of 12-25 per hour depending on configurations. Commercially available. DOD completed the project in Tacoma, Washington, but system was not transitioned to Customs due to Customs' concerns with cost, safety, and operational issues. $12 to $15 million $15 million (DOD) $224,000 (Customs) Required extensive shielding, radiation permit, and FDA permit if used on food. System relies on operator's interpretation of the X-ray images. System is designed to scan empty trucks or containers. Throughput is about six trucks per hour. Commercially available. Customs has deployed one machine at Otay Mesa, California, and plans to deploy up to 11 more along the Southwest border. $3.7 million (DOD) Relies on operator's interpretation of the X-Ray images. Systems are designed to scan empty or loaded trucks and containers depending on the energy level and to complement the fixed-site X-ray systems. DOD is testing 450 KeV system and still developing machines at other energy levels. $1.75 to $6 million $10.8 million (DOD) A 1 MeV system is designed for aircraft size cargo containers. May also be useful for scanning passenger vehicles. (continued) Funding (FYs 78-96) Radio frequency wave probes objects, except that a magnet aligns hydrogen atoms prevalent in liquids. Abandoned machine is in storage at major Southeastern seaport. $130,000 (Customs) Abandoned FAA prototype for checked baggage was modified for Customs to scan frozen shrimp packages. Machine short-circuited during storm and Customs decided against spending for machine repair. Systems are based on gas chromatography, chemiluminescence, mass spectroscopy, surface acoustic wave, ion mobility spectroscopy, and biosensor technologies. Many commercially available. DOD is developing some prototypes for use by Customs. $2,500 to $170,000 $240,000 (Customs) $2.4 million (TSWG) $4.7 million (DOD) Sample collection steps are highly critical for the effectiveness of systems. Most existing systems use vacuum or wiping with a swab. Most existing systems are not currently capable of detecting the extremely low vapor pressures of cocaine and heroin. (continued) Funding (FYs 78-96) System differs from other vapor detectors in that it draws air sample from a barometric chamber into which the object to be inspected has been shaken and subjected to heat cycles. Under development by FAA. A fieldable prototype is expected to be tested by October 1996. $1.8 million (TSWG) System automatically alarms if explosive is detected. System may not work on a tightly sealed object. System concentrates 400 litres of air to .5 cc of liquid. Under development by FAA. $35,000 to $42,000 $1.3 million (FAA) Biosensor specifically identifies the explosives detected. System is suitable for use in cargo holds and interiors of aircraft, etc. The Funding column indicates whether a specific technology was developed or is being developed for explosives detection, narcotics detection, or both. Genrally, FAA and TSWG funding has supported explosives detection, while funding by DOD, Customs, and ONDCP has supported narcotics detection. Where a technology funding cell shows FAA or TSWG in combination with DOD, Customs, or ONDCP, that technology is generally capable of detecting both narcotics and explosives. Thomas F. Noone Matthew E. Hampton Marnie S. Shaul Gerald L. Dillingham The first copy of each GAO report and testimony is free. Additional copies are $2 each. Orders should be sent to the following address, accompanied by a check or money order made out to the Superintendent of Documents, when necessary. VISA and MasterCard credit cards are accepted, also. Orders for 100 or more copies to be mailed to a single address are discounted 25 percent. 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Pursuant to a congressional request, GAO provided information on explosives and narcotics detection technologies that are available or under development, focusing on: (1) funding for those technologies; (2) characteristics and limitations of available and planned technologies; and (3) deployment of these technologies by the United States and foreign countries. GAO found that: (1) aviation security and drug interdiction depend on a complex and costly mix of intelligence, procedures, and technologies; (2) since 1978, federal agencies have spent about $246 million for research and development on explosives detection technologies and almost $100 million on narcotics detection technologies; (3) most of this spending has occurred since 1990, in response to congressional direction, and has been for technologies to screen checked baggage, trucks, and containers; (4) difficult trade-offs must be made when considering whether to use detection technologies for a given application; (5) chief among those trade-offs are the extent to which intelligence-gathering and procedures can substitute for technology or reduce the need for expensive technology; (6) decisionmakers also need to evaluate technologies in terms of their characteristics and limitations; (7) some technologies are very effective and could be deployed now, but they are expensive, slow the flow of commerce, and raise issues of worker safety; (8) other technologies could be more widely used, but they are less reliable; (9) still others may not be available for several years at the current pace of development; (10) despite the limitations of the currently available technology, some countries have already deployed advanced explosives and narcotics detection equipment because of differences in their perception of the threat and their approaches to counter the threat; (11) should the United States start deploying the currently available technologies, lessons can be learned from these countries regarding their approaches, as well as capabilities of technology in operating environments; and (12) the Federal Aviation Administration estimates that use of the best available procedures and technology for enhancing aviation security could cost as much as $6 billion over the next 10 years or alternatively about $1.30 per one-way ticket, if the costs were paid through a surcharge.
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The livestock and poultry industry is vital to our nation's economy, supplying meat, milk, eggs, and other animal products. However, the past several decades have seen substantial changes in America's animal production industries. As a result of domestic and export market forces, technological changes, and industry adaptations, food animal production that was integrated with crop production has given way to fewer, larger farms that raise animals in confined situations. These large-scale animal production facilities are generally referred to as animal feeding operations. CAFOs are a subset of animal feeding operations and generally operate on a much larger scale. Most agricultural activities are considered to be nonpoint sources of pollution because the pollution that occurs is in conjunction with soil erosion caused by water and surface runoff of rain or snowmelt from diffuse areas such as farms or rangeland. However, the Clean Water Act specifically designates point sources of pollution to include CAFOs, which means that under the act, CAFOs that discharge into federally regulated waters are required to obtain a National Pollutant Discharge Elimination System (NPDES) permit. These permits generally allow a point source to discharge specified pollutants into federally regulated waters under specific limits and conditions. EPA, or the states that EPA has authorized to administer the Clean Water Act, are responsible for issuing these permits. In accordance with the Clean Water Act's designation of CAFOs as point sources, EPA defined which poultry and livestock facilities constituted a CAFO and established permitting requirements for CAFOs. According to EPA regulations, first issued in 1976, to be considered a CAFO a facility must first be considered an animal feeding operation. Animal feeding operations are agricultural operations where the following conditions are met: animals are fed or maintained in a confined situation for a total of 45 days or more in any 12-month period, and crops, vegetation, forage growth, or post harvest residues are not sustained during normal growing seasons over any portion of the lot. If an animal feeding operation met EPA's criteria and met or exceed minimum size thresholds based on the type of animal being raised, EPA considered the operation to be a CAFO. For example, an animal feeding operation would be considered a CAFO if it raised 1,000 or more beef cattle, 2,500 pigs weighing more than 55 pounds, or 125,000 chickens. In addition, EPA can designate an animal feeding operation of any size as a CAFO if it meets certain criteria, such as being a significant contributor of pollutants to federally regulated waters. In January 2003, we reported that although EPA believed that many animal feeding operations degrade water quality, it had placed little emphasis on its permit program and that exemptions in its regulations allowed as many as 60 percent of the largest operations to avoid obtaining permits. In its response to our 2003 report, EPA acknowledged that the CAFO program was hampered by outdated regulations. The agency subsequently revised its permitting regulations for CAFOs to eliminate the exemptions that allowed most animal feeding operations to avoid regulation. The revisions, issued in February 2003, also known as the 2003 CAFO rule, resulted, in part, from the settlement of a 1989 lawsuit by the Natural Resources Defense Council and Public Citizen. These groups alleged that EPA had failed to comply with the Clean Water Act. EPA's 2003 CAFO Rule included the following key provisions: Duty to apply. All CAFOs were required to apply for a permit under the Clean Water Act unless the permitting authority determined that the CAFO had no potential to discharge to federally regulated waters. Expanded CAFO definitions. All types of poultry operations, as well as all stand-alone operations raising immature animals, were included in the 2003 CAFO Rule. More stringent design standard for new facilities in the swine, poultry, and veal categories. The 2003 rule established a no-discharge standard for new facilities that could be met if they were designed, constructed, and operated to contain the runoff from a 100-year, 24-hour storm event. Best management practices. Operations were required to implement best management practices for applying manure to cropland and for animal production areas. Nutrient management plans. CAFO operations were required to develop a plan for managing the nutrient content of animal manure as well as the wastewater resulting from CAFO operations, such as water used to flush manure from barns. Compliance schedule. The 2003 rule required newly defined CAFOs to apply for permits by April 2006 and existing CAFOs to develop and implement nutrient management plans by December 31, 2006. According to EPA officials, the 2003 rule was expected to ultimately lead to better water quality because the revised regulations would extend coverage to more animal feeding operations that could potentially discharge and contaminate water bodies and subject these operations to periodic inspections. Three laws provide EPA with certain authorities related to air emissions from animal feeding operations, but, unlike the Clean Water Act, they do not specifically cite CAFOs as regulated entities. The Clean Air Act regulates any animal feeding operation, regardless of size, that exceeds established air emission thresholds for certain pollutants. For example, in certain specific situations, hydrogen sulfide, ammonia, or particulate matter may be regulated. In addition, Section 103 of CERCLA and Section 304 of EPCRA require owners or operators of a facility to report to federal, state, or local authorities when a "reportable quantity" of certain hazardous substances, such as hydrogen sulfide or ammonia, is released into the environment. Together, CERCLA's and EPCRA's reporting requirements provide government authorities, emergency management agencies, and citizens the ability to know about the source and magnitude of hazardous releases. EPA also works with USDA to address the impacts of animal feeding operations on air and water quality and human health. In 1998, EPA entered into a memorandum of understanding with USDA that calls for the agencies to coordinate on air quality issues related to agriculture and share information. In addition, in 1999, the two agencies issued a unified national strategy aimed at having the owners and operators of animal feeding operations take actions to minimize water pollution from confinement facilities and land application of manure. To help minimize water pollution from animal feeding operations and meet EPA's regulatory requirements, USDA, through its Natural Resources Conservation Service, provides financial and technical service to CAFO operators in developing and implementing nutrient management plans. Because no federal agency collects accurate and consistent data on the number, size, and location of CAFOs, it is difficult to determine precise trends in CAFOs. According to USDA officials, the data USDA collects for large farms raising animals can be used as a proxy for estimating trends in CAFOs nationwide. Using these data, we determined the following: Between 1982 and 2002, the number of large farms raising animals increased from about 3,600 to almost 12,000, or by about 234 percent. Growth rates varied dramatically by animal type. For instance, broiler chickens farms showed the largest increase, almost 1,200 percent, followed by hogs at more than 500 percent. In comparison, beef cattle farms grew by only 2 percent and layer chicken farms actually declined by 2 percent. The size of these farms also increased between 1982 and 2002. The layer and hog sectors had the largest increases in the median number of animals raised per farm, both growing by 37 percent between 1982 and 2002. In contrast, large farms that raised either broilers or turkeys only increased slightly in size, by 3 and 1 percent, respectively, from 1982 to 2002. The number of animals raised on large farms increased from over 257 million in 1982 to over 890 million in 2002--an increase of 246 percent. Moreover, most of the beef cattle, hogs, and layers raised in the United States in 2002 were raised on large farms. Specifically, 77 percent of beef cattle and 72 percent of both hogs and layers were raised on large farms. We also found that EPA does not systematically collect nationwide data to determine the number, size, and location of CAFOs that have been issued permits nationwide. Instead, since 2003, the agency has compiled quarterly estimates obtained from its regional offices or the states on the number and types of CAFOs that have been issued permits. However, these data are inconsistent and inaccurate and therefore do not provide EPA with the reliable data that it needs to identify permitted CAFOs nationwide. Without a systematic and coordinated process for collecting and maintaining accurate and complete information on the number, size, and location of CAFOs nationwide, EPA does not have the information it needs to effectively monitor and regulate these operations. In our report, we recommended that EPA develop a national inventory of permitted CAFOs and incorporate appropriate internal controls to ensure the quality of the data it collects. In response to our recommendation, EPA stated that it is currently working with its regional offices and states to develop and implement a new national data system to collect and record facility- specific information on permitted CAFOs. The amount of manure a large farm that raises animals can generate primarily depends on the types and numbers of animals raised on that farm, but can range from over 2,800 tons to more than 1.6 million tons a year. To further put this in perspective, the amount of manure produced by large farms that raise animals can exceed the amount of sanitary waste produced by some large U.S. cities. For example: A dairy farm meeting EPA's large CAFO threshold of 700 dairy cows can create about 17,800 tons of manure annually, which is more than the about 16,000 tons of sanitary waste generated per year by the almost 24,000 residents of Lake Tahoe, California. A large farm with 800,000 hogs could produce over 1.6 million tons of manure per year, which is one and a half times more than the annual sanitary waste produced by the city of Philadelphia, Pennsylvania--about 1 million tons--with a population of almost 1.5 million. Although manure is considered a valuable commodity, especially in states with large amounts of farmland, like Iowa, where it is used as fertilizer for field crops, in some parts of the country, large farms that raise animals can be clustered in a few contiguous counties. Because this collocation can result in the separation of animal from crop production, there is less cropland on which manure can be applied as a fertilizer. A USDA report first identified this concern as early as 2000, when it found that between 1982 and 1997, as livestock production became more spatially concentrated, when manure was applied to cropland, crops were not fully using the nutrients in manure, and this could result in ground and surface water pollution from the excess nutrients. According to the report, the number of counties where farms produced more manure nutrients, primarily nitrogen and phosphorus, than could be applied to the land without accumulating nutrients in the soil increased. As a result, the potential for runoff and leaching of these nutrients from the soil was high, and water quality could be impaired. Agricultural experts and government officials who we spoke to during our review echoed the findings of USDA's report and provided several examples of more recent clustering trends that have resulted in degraded water quality. For example, according to North Carolina agricultural experts, excessive manure production from CAFOs in five contiguous counties has contributed to the contamination of some of the surface and well water in these counties and the surrounding areas. USDA officials acknowledge that regional clustering of large animal feeding operations has occurred, but they told us that they believe producers' implementation of nutrient management plans and use of new technologies, such as calibrated manure spreaders and improved animal feeds, have resulted in animal feeding operations more effectively using the manure being generated and reducing the likelihood that pollutants from manure are entering ground and surface water. However, USDA could not provide us with information on the extent to which these techniques are being used or their effectiveness in reducing water pollution from animal waste. Since 2002, at least 68 government-sponsored or peer-reviewed studies have been completed on air and water pollutants from animal feeding operations. Of these 68 studies, 15 directly linked pollutants from animal waste generated by animal feeding operations to specific health or environmental impacts. Eight of these 15 studies were water quality studies and 7 were air emissions studies. Academic experts and industry and EPA officials told us that only a few studies directly link CAFOs with health or environmental impacts because the same pollutants that CAFOs discharge also often come from other sources, including smaller livestock operations; row crops using commercial fertilizers; and wastes from humans, municipalities, or wildlife, making it difficult to distinguish the actual source of the pollution. 7 found no impacts on human health or the environment from pollutants emitted by CAFOs. Four of these 7 studies were water quality studies and 3 were air emissions studies. According to EPA and academic experts we spoke with, the concentrations of air and water pollutants discharged by animal feeding operations can vary for numerous reasons, including the type of animal being raised, feed being used and the manure management system being employed, as well as the climate and time of day when the emissions occur. 12 made indirect linkages between air and water pollutants and health and environmental impacts. While these studies found that animal feeding operations were the likely cause of human health or environmental impacts occurring in areas near the operations, they could not conclusively link waste from animal feeding operations to the impacts, often because other sources of pollutants could also be contributing. 34 of the studies focused on measuring the amounts of water or air pollutants discharged by animal feeding operations that are known to cause human health or environmental impacts at certain concentrations. Of the 34 studies, 19 focused on water pollutants and another 15 focused on measuring air emissions from animal feeding operations. While EPA recognizes the potential impacts that water and air pollutants from animal feeding operations can have on human health and the environment, it lacks the data necessary to assess how widespread the impacts are and has limited plans to collect the data that it needs. For example, with regard to water quality, EPA officials acknowledged that the potential human health and environmental impacts of some CAFO water pollutants, such as nitrogen, phosphorus, and pathogens, are well known. However, they also stated that EPA does not have data on the number and location of CAFOs nationwide and the amount of discharges from these operations. Without this information and data on how pollutant concentrations vary by type of operation, it is difficult to estimate the actual discharges occurring and to assess the extent to which CAFOs may be contributing to water pollution. Although EPA has recently taken some steps that may help provide some of these data, agency officials told us that EPA currently has no plans to conduct a national study to collect information on CAFO water pollutant discharges because of a lack of resources. Similarly, with regard to air quality, more recently, EPA has recognized concerns about the possible health and environmental impacts from air emissions produced by animal feeding operations. In this regard, prompted in part by public concern, EPA and USDA commissioned a 2003 study by the National Academy of Sciences (NAS) to evaluate the scientific information needed to support the regulation of air emissions from animal feeding operations. The NAS report identified several air pollutants from animal feeding operations, such as ammonia and hydrogen sulfide, that can impair human health. The NAS report also concluded that in order to determine the human health and environmental effects of air emissions from animal feeding operations, EPA and USDA would first need to obtain accurate estimates of emissions and their concentrations from animal feeding operations with varying characteristics, such as animal type, animal feed, manure management techniques, and climate. In 2007, the 2-year National Air Emissions Monitoring Study was initiated to collect data on air emissions from animal feeding operations as part of a series of consent agreements that EPA entered into with individual CAFOs. This study, funded by industry and approved by EPA, is intended to help the agency determine how to measure and quantify air emissions from animal feeding operations. The data collected will in turn be used to estimate air emissions from animal feeding operations with varying characteristics. According to agency officials, until EPA can determine the actual level of air pollutants being emitted by CAFOs, it will be unable to assess the extent to which these emissions are affecting human health and the environment. The National Air Emissions Monitoring Study is intended to provide a scientific basis for estimating air emissions from animal feeding operations and to help EPA develop protocols that will allow it to determine which operations do not comply with applicable federal laws. According to EPA, although it has the authority to require animal feeding operations to monitor their emissions and come into compliance with the Clean Air Act on a case-by-case basis, this approach has proven to be time and labor intensive. As an alternative to the case-by-case approach, in January 2005, EPA offered animal feeding operations an opportunity to sign a voluntary consent agreement and final order, known as the Air Compliance Agreement. Almost 13,900 animal feeding operations were approved for participation in the agreement, representing the egg, broiler chicken, dairy, and swine industries. Some turkey operations volunteered but were not approved because there were too few operations to fund a monitoring site, and the beef cattle industry chose not to participate. In return for participating in this agreement and meeting certain requirements, EPA agreed not to sue participating animal feeding operations for certain past violations or violations occurring during the National Air Emissions Monitoring Study. Although EPA told us that the National Air Emissions Monitoring Study is the first step in developing comprehensive protocols for quantifying air emissions from animal feeding operations, we found that the study may not provide EPA with the data that it needs for the following three reasons. The monitoring study may not be representative of the vast majority of participating animal feeding operations and will not account for differences in climatic conditions, manure-handling methods, and density of operations because it does not include the 16 combinations of animal types and geographic regional pairings recommended by EPA's expert panel. EPA approved only 12 of the 16 recommended combinations, excluding southeastern broiler, eastern layer, midwestern turkey, and southern dairy operations. Selection of monitoring sites has been a concern since the selection plan was announced in 2005. At that time, many agricultural experts, environmental groups, and industry and state officials disagreed with the site selection methodology. They stated that the study did not include a sufficient number of monitoring sites to establish a statistically valid sample. Without such a sample, we believe that EPA will not be able to accurately estimate emissions for all types of operations. More recently, in June 2008, the state of Utah reached an agreement with EPA to separately study animal feeding operations in the state because of the state's continuing concerns that the National Air Emissions Monitoring Study will not collect information on emissions from operations in Rocky Mountain states and therefore may not be meaningful for those operations that raise animals in arid areas. Agricultural experts also have raised concerns that the National Air Emissions Monitoring Study does not include other sources that can contribute significantly to emissions from animal feeding operations. For example, the monitoring study will not capture data on ammonia emissions from feedlots and manure applied to fields. According to these experts, feedlots and manure on fields, as well as other excluded sources account for approximately half of the total ammonia emissions emitted by animal feeding operations. Furthermore, USDA's Agriculture Air Quality Task Force has recently raised concerns about the quantity and quality of the data being collected during the early phases of the study and how EPA will eventually use the information. In particular, the task force expressed concern that the technologies used to collect emissions data were not functioning reliably. At its May 2008 task force meeting, the members requested that the Secretary of Agriculture ask EPA to review the first 6 months of the study's data to determine if the study needs to be revised in order to yield more useful information. EPA acknowledged that emissions data should be collected for every type of animal feeding operation and practice, but EPA officials stated that such an extensive study is impractical. Furthermore, they stated that the selected sites provide a reasonable representation of the various animal sectors. EPA has also indicated that it plans to use other relevant information to supplement the study data and has identified some potential additional data sources. However, according to agricultural experts, until EPA identifies all the supplemental data that it plans to use, it is not clear if these data, together with the emissions study data, will enable EPA to develop comprehensive air emissions protocols. EPA has also indicated that completing the National Air Emissions Monitoring Study is only the first part of a multiyear effort to develop a process-based model for predicting overall emissions from animal feeding operations. A process-based model would capture emissions data from all sources and use these data to assess the interaction of all sources and the impact that different manure management techniques have on air emissions for the entire operation. For example, technologies are available to decrease emissions from manure lagoons by, among other things, covering the lagoon to capture the ammonia. However, if an operation spreads the lagoon liquid as fertilizer for crops, ammonia emissions could increase on the field. According to NAS, a process-based model is needed to provide scientifically sound estimates of air emissions from animal feeding operations that can be used to develop management and regulatory programs. Although EPA plans to develop a process-based model after 2011, it has not yet established a timetable for completing this model and, therefore, it is uncertain when EPA will have more sophisticated approaches that will more accurately estimate emissions from animal feeding operations. Moreover, two recent EPA decisions suggest that the agency has not yet determined how it intends to regulate air emissions from animal feeding operations. Specifically: In December 2007, EPA proposed exempting releases to the air of hazardous substances from manure at farms that meet or exceed the reportable quantities from both CERCLA and EPCRA notification requirements. According to EPA, this decision was in part a response to language in congressional committee reports related to EPA's appropriations legislation for 2005 and 2006 that directed the agency to promptly and expeditiously provide clarification on the application of these laws to poultry, livestock, and dairy operations. In addition, the agency received a petition from the several poultry industry organizations seeking an exemption from the CERCLA and EPCRA reporting requirements for ammonia emissions from poultry operations on the grounds that ammonia emissions from poultry operations pose little or no risk to public health, and emergency response is inappropriate. In proposing the exemption, EPA noted that the agency would not respond to releases from animal wastes under CERCLA or EPCRA nor would it expect state and local governments to respond to such releases because the source and nature of these releases are such that emergency response is unnecessary, impractical, and unlikely. It also noted that it had received 26 comment letters from state and local emergency response agencies supporting the exemption for ammonia from poultry operations. However, during the public comment period ending on March 27, 2008, a national association representing state and local emergency responders with EPCRA responsibilities questioned whether EPA had the authority to exempt these operations until it had data from its monitoring study to demonstrate actual levels of emissions from animal feeding operations. This national association further commented that EPA should withdraw the proposal because it denied responders and the public the information necessary to protect themselves from dangerous releases. Furthermore, the proposal also seems to be a departure from EPA's past regulatory enforcement actions that have included charges of failing to comply with the release reporting requirements when bringing claims against producers for violating several environmental laws and is also contrary to one of the stated goals of the Air Compliance Agreement. We believe that the timing of this proposed exemption, before the National Air Emissions Monitoring Study has been completed, calls into question the basis for EPA's decision. EPA has also recently stated that it will not make key regulatory decisions on how certain federal air regulations apply to animal feeding operations until after 2011, when the National Air Emissions Monitoring Study is completed. For example, according to EPA, the agency will not issue guidance for several more years defining the scope of the term "source" as it relates to animal agriculture and farm activities. According to EPA, it has not yet decided if it will aggregate the emissions occurring on an animal feeding operation as one source or if the emissions from the barns, lagoons, feed storage, and fields will each be considered as a separate source when determining if an operation has exceeded air emissions' reportable quantities. Depending on the approach EPA takes, how emissions are calculated could differ significantly. For example, according to preliminary data EPA has received from an egg-laying operation in Indiana, individual chicken barns may exceed the CERCLA reportable quantities for ammonia. Moreover, if emissions from all of the barns on the operation are aggregated, they might be more than 500 times the CERCLA reportable quantities. To address the various concerns that we identified with the ongoing air emission monitoring study, we recommended that EPA (1) reassess the study to ensure that it will provide valid data which the agency can use to develop air emissions protocols and (2) provide stakeholders with information on the additional data that it plans to use to supplement the study. In addition, we recommended that EPA establish a strategy and timetable for developing a process-based model that will provide more sophisticated air emissions estimating methodologies for animal feeding operations. EPA responded that it has developed a quality assurance plan for the study but did not address other issues that we identified in our report, such as the validity of the study's sample and the omission of other sources that can contribute significantly to the air emission from animal feeding operations. Furthermore, although EPA concurred with the need to identify supplemental data and establish a strategy and timetable for developing a process-based model and described actions that it has underway, the agency provided no indication of when it will complete its plans to either identify the data it will use to augment the monitoring study or develop a process-based model. Two federal court decisions--Waterkeeper Alliance Inc. v. EPA and Rapanos v. United States--have affected EPA and some states' abilities to regulate CAFOs for water pollutants. In its 2005 Waterkeeper decision, the U.S. Court of Appeals for the Second Circuit set aside a key provision of EPA's 2003 CAFO rule requiring every CAFO to apply for a permit. Under the 2003 rule, large numbers of previously unregulated CAFOs were required to apply for permits and would have been subject to monitoring and reporting requirements imposed by the permit as well as periodic inspections. According to EPA, the 2003 rule would have expanded the number of regulated CAFOs from an estimated 12,500 to an estimated 15,300, an increase of about 22 percent, and would have provided EPA with more comprehensive information on the number and location of CAFOs, enabling the agency to more effectively locate and inspect these operations nationwide. However, in 2003, both environmental and agricultural groups challenged EPA's 2003 rule. The court agreed with the environmental groups' arguments that, among other things, EPA's 2003 rule did not adequately provide for public review and comment on a CAFO's nutrient management plan and instructed EPA to revise the rule accordingly. The court also agreed with the agricultural groups' arguments that EPA had exceeded its authority under the Clean Water Act by requiring CAFOs that were not discharging pollutants into federally regulated water to apply for permits or demonstrate that they had no potential to discharge and therefore set aside the rule's permitting requirements for those CAFOs that did not discharge. The Waterkeeper decision, in effect, returned EPA's permitting program to one in which CAFO operators are not required to apply for a NPDES permit unless they discharge, or propose discharging, into federally regulated waters. As a result, EPA must identify and prove that an operation has discharged or is discharging pollutants in order to require the operator to apply for a permit. To help identify unpermitted discharges from CAFOs, EPA officials told us that they have to rely on other methods that are not necessarily all-inclusive, such as citizens' complaints, drive-by observations, aerial flyovers, and state water quality assessments that identify water bodies impaired by pollutants associated with CAFOs. According to EPA officials, these methods have helped the agency identify some CAFOs that may be discharging as well as targeting inspections to such CAFOs. As a result of the Waterkeeper decision, EPA proposed a new rule in June 2006 requiring that (1) only CAFO operators that discharge, or propose to discharge, apply for a permit, (2) permitting authorities review CAFO nutrient management plans and incorporate the terms of these plans into the permits, and (3) permitting authorities provide the public with an opportunity to review and comment on the nutrient management plans. According to EPA officials, the final rule is currently being reviewed by the Office of Management and Budget, but at the time we issued our report, these officials were uncertain when this review would be completed and the final rule issued. State water pollution control officials have expressed some concerns that EPA's new 2006 rule will place a greater administrative burden on states than the 2003 rule would have. In an August 2006 letter to EPA, the Association of State and Interstate Water Pollution Control Administrators noted that the "reactive" enforcement that EPA will now follow will require permitting authorities to significantly increase their enforcement efforts to achieve the level of environmental benefit that would have been provided by the 2003 rule. These officials believe that requiring EPA and the states to identify CAFOs that actually discharge pollutants into federally regulated water bodies will consume more resources than requiring all CAFOs to apply for a permit. Moreover, although the Waterkeeper decision has affected EPA's ability to regulate CAFOs' water pollutant discharges, state officials we contacted indicated that this decision has not had the same impact on their ability to regulate these operations. As table 1 shows, the impacts of the Waterkeeper decision have ranged from having little impact on state regulation to impairing state CAFO programs. Although the Rapanos case arose in the context of a different permit program, the scope of EPA's pollutant discharge program originates in the same Clean Water Act definition that was at issue in the case. As a result, the decision has complicated the agency's enforcement of CAFO regulations. According to EPA enforcement officials, the agency will now be less likely to seek enforcement against a CAFO that it believes is discharging pollutants into a water body because it may be more difficult to prove that the water body is federally regulated. According to EPA officials, as a result of the Rapanos decision, EPA must spend more resources developing an enforcement case because the agency must gather proof that the CAFO has not only illegally discharged pollutants, but that those pollutants have entered federally regulated waters. The difficulties EPA has experienced were highlighted in a March 4, 2008, memorandum in which EPA's Assistant Administrator for Enforcement and Compliance Assurance stated that the Rapanos decision and national guidance issued by EPA to ensure "nationwide consistency, reliability, and predictability in their administration of the statute" in light of the Supreme Court's decision has resulted in significant adverse impacts to the clean water enforcement program. According to the memorandum, the Rapanos decision and guidance negatively affected approximately 500 enforcement cases, including as many as 187 cases involving NPDES permits. In conclusion, Mr. Chairman, EPA has regulated CAFOs under the Clean Water Act for more than 30 years, and during this time it has amassed a significant body of knowledge about the pollutants discharged by animal feeding operations and the potential impacts of these pollutants on human health and the environment. Nevertheless, EPA still lacks comprehensive and reliable data on the number, location, and size of the operations that have been issued permits and the amounts of discharges they release. As a result, EPA has neither the information it needs to assess the extent to which CAFOs may be contributing to water pollution, nor the information it needs to ensure compliance with the Clean Water Act. More recently, EPA has also begun to address concerns about air pollutants that are emitted by animal feeding operations. The nationwide air emissions monitoring study, along with EPA's plans to develop air emissions estimating protocols, are important steps in providing much needed information on the amount of air pollutants emitted from animal feeding operations. However, questions about the sufficiency of the sites selected for the air emissions study and the quantity and quality of the data being collected could undermine EPA's efforts to develop air emissions protocols by 2011 as planned. A process-based model that more accurately predicts the total air emissions from an animal feeding operation is still needed. While EPA has indicated it intends to develop such a model, it has not yet established a strategy and timeline for this activity. Mr. Chairman, this concludes my prepared testimony. I would be happy to respond to questions that you or Members of the Subcommittee may have. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this testimony. For further information about this testimony, please contact Anu Mittal, Director, Natural Resources and Environment (202) 512-3841 or [email protected]. Key contributors to this testimony were Sherry McDonald, Assistant Director; Kevin Bray, Paul Hobart; Holly Sasso; Carol Herrnstadt Shulman; James Turkett; and Greg Wilmoth. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.
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Concentrated animal feeding operations (CAFO) are large livestock and poultry operations that raise animals in a confined situation. CAFOs may improve the efficiency of animal production, but the large amounts of manure they produce can, if improperly managed, degrade air and water quality. The Environmental Protection Agency (EPA) regulates CAFOs and requires CAFOs that discharge certain pollutants to obtain a permit. This testimony summarizes the findings of a September 4, 2008 GAO report (GAO-08-944) on (1) trends in CAFOs, (2) amounts of waste they generate, (3) findings of key research on CAFOs' health and environmental impacts, (4) progress made in developing CAFO air emissions protocols, and (5) the effect of recent court decisions on EPA's regulation of CAFO water pollutants. GAO analyzed U.S. Department of Agriculture's (USDA) data from 1982 through 2002 for large farms as a proxy for CAFOs; reviewed studies, EPA documents, laws, and regulations, and obtained the views of federal and state officials. Because no federal agency collects accurate and consistent data on the number, size, and location of CAFOs, GAO could not determine the exact trends for these operations. However, using USDA data for large farms that raise animals as a proxy for CAFOs, it appears that the number of these operations increased by about 230 percent, from about 3,600 in 1982 to almost 12,000 in 2002. The number of animals raised on large farms also increased during this 20-year period, but the rate of increase varied by animal type. Moreover, EPA does not have comprehensive, accurate data on the number of permitted CAFOs nationwide. As a result, the agency does not have the information that it needs to effectively regulate these CAFOs. EPA is currently working with the states to establish a new national data base. The amount of manure generated by large farms that raise animals depends on the type and number of animals raised, but these operations can produce from 2,800 tons to 1.6 million tons of manure a year. Some large farms that raise animals can generate more manure annually than the sanitary waste produced by some U.S. cities. Manure can be used beneficially to fertilize crops; but according to some agricultural experts, when animal feeding operations are clustered in certain geographic areas, the manure they produce may not be effectively used as fertilizer on adjacent cropland and could increase the potential of pollutants reaching nearby waters and degrading water quality. Since 2002, at least 68 government-sponsored or peer-reviewed studies have been completed that examined air and water quality issues associated with animal feeding operations and 15 have directly linked air and water pollutants from animal waste to specific health or environmental impacts. EPA has not yet assessed the extent to which pollutants from animal feeding operations may be impairing human health and the environment because it lacks key data on the amount of pollutants being discharged by these operations. Considered a first step in developing air emission protocols for animal feeding operations, a 2-year nationwide air emission monitoring study, largely funded by the industry, was initiated in 2007. However, the study, as currently structured, may not provide the scientific and statistically valid data it was intended to provide and that EPA needs to develop these protocols. In addition, EPA has not yet established a strategy or timetable for developing a more sophisticated process-based model that considers the interaction and implications of all emission sources at an animal feeding operation. Two recent federal court decisions have affected EPA's ability to regulate water pollutants discharged by CAFOs. The 2005 Waterkeeper decision required EPA to abandon the approach that it had proposed for regulating CAFOs in 2003. Similarly, the Rapanos decision has complicated EPA's enforcement of CAFO discharges because EPA believes that it must now gather more evidence to establish which waters are subject to the Clean Water Act's permitting requirements.
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Over the past decade, the number of acres burned annually by wildland fires in the United States has substantially increased. Federal appropriations to prepare for and respond to wildland fires, including appropriations for fuel treatments, have almost tripled. Increases in the size and severity of wildland fires, and in the cost of preparing for and responding to them, have led federal agencies to fundamentally reexamine their approach to wildland fire management. For decades, federal agencies aggressively suppressed wildland fires and were generally successful in decreasing the number of acres burned. In some parts of the country, however, rather than eliminating severe wildland fires, decades of suppression contributed to the disruption of ecological cycles and began to change the structure and composition of forests and rangelands, thereby making lands more susceptible to fire. Increasingly, federal agencies have recognized the role that fire plays in many ecosystems and the role that it could play in the agencies' management of forests and watersheds. The agencies worked together to develop a federal wildland fire management policy in 1995, which for the first time formally recognized the essential role of fire in sustaining natural systems; this policy was subsequently reaffirmed and updated in 2001. The agencies, in conjunction with Congress, also began developing the National Fire Plan in 2000. To align their policies and to ensure a consistent and coordinated effort to implement the federal wildland fire policy and National Fire Plan, Agriculture and Interior established the Wildland Fire Leadership Council in 2002. In addition to noting the negative effects of past successes in suppressing wildland fires, the policy and plan also recognized that continued development in the wildland- urban interface has placed more structures at risk from wildland fire at the same time that it has increased the complexity and cost of wildland fire suppression. Forest Service and university researchers estimated in 2005 that about 44 million homes in the lower 48 states are located in the wildland-urban interface. To help address these trends, current federal policy directs agencies to consider land management objectives--identified in land and fire management plans developed by each local unit, such as a national forest or a Bureau of Land Management district--and the structures and resources at risk when determining whether or how to suppress a wildland fire. When a fire starts, the land manager at the affected local unit is responsible for determining the strategy that will be used to respond to the fire. A wide spectrum of strategies is available, some of which can be significantly more costly than others. For example, the agencies may fight fires ignited close to communities or other high-value areas more aggressively than fires on remote lands or at sites where fire may provide ecological or fuel-reduction benefits. In some cases, the agencies may simply monitor a fire, or take only limited suppression actions, to ensure that the fire continues to pose little threat to important resources, a practice known as "wildland fire use." Federal firefighting agencies need a cohesive strategy for reducing fuels and addressing wildland fire issues. Such a strategy should identify the available long-term options and associated funding for reducing excess vegetation and responding to wildland fires if the agencies and the Congress are to make informed decisions about an effective and affordable long-term approach for addressing problems that have been decades in the making. We first recommended in 1999 such a strategy be developed to address the problem of excess fuels and their potential to increase the severity of wildland fires and cost of suppression efforts. By 2005, the agencies had yet to develop such a strategy, and we reiterated the need for a cohesive strategy and broadened our recommendation's focus to better address the interrelated nature of fuel reduction efforts and wildland fire response. The agencies said they would be unable to develop a cohesive strategy until they have completed certain key tasks. We therefore recommended that the agencies develop a tactical plan outlining these tasks and the time frames needed for completing each task and a cohesive strategy. These tasks include (1) finishing data systems that are needed to identify the extent, severity, and location of wildland fire threats in our national forests and rangelands; (2) updating local fire management plans to better specify the actions needed to effectively address these threats; and (3) assessing the cost-effectiveness and affordability of options for reducing fuels and responding to wildland fire problems. First, federal firefighting agencies have made progress in developing a system to help them better identify and set priorities for lands needing treatment to reduce accumulated fuels. Many past studies have identified fuel reduction as important for containing wildland fire costs because accumulated fuels can contribute to more-severe and more costly fires. The agencies are developing a geospatial data and modeling system, called LANDFIRE, intended to produce consistent and comprehensive maps and data describing vegetation, wildland fuels, and fire regimes across the United States. The agencies will be able to use this information to help identify fuel accumulations and fire hazards across the nation, help set nationwide priorities for fuel-reduction projects, and assist in determining an appropriate response when wildland fires do occur. LANDFIRE data are nearly complete for most of the western United States, with data for the remainder of the country scheduled to be completed in 2009. The agencies, however, have not yet finalized their plan for ensuring that collected data are routinely updated to reflect changes to fuels, including those from landscape-altering events, such as hurricanes, disease, or wildland fires themselves. The agencies expect to submit a plan to the Wildland Fire Leadership Council for approval later this month. Second, we reported in 2006 that 95 percent of the agencies' individual land management units had completed fire management plans in accordance with agency direction issued in 2001. As of January 2007, however, the agencies did not require regular updates to ensure that new data (from LANDFIRE, for example) were incorporated into the plans. In addition, in the wake of two court decisions--each holding that the Forest Service was required to prepare an environmental assessment or environmental impact statement under the National Environmental Policy Act (NEPA) to accompany the relevant fire management plan--the Forest Service decided to withdraw the two plans instead of completing them. It is unclear whether the agency would withdraw other fire management plans successfully challenged under NEPA; nor is it clear whether or to what extent such agency decisions could undermine the interagency policy directing that every burnable acre have a fire management plan. Without such plans, however, current agency policy does not allow use of the entire range of wildland fire response strategies, including less aggressive, and potentially less costly, strategies. Moreover, in examining 17 fire management plans, a May 2007 review of large wildland fires managed by the Forest Service in 2006 identified several shortcomings, including that most of the plans examined did not contain current information on fuel conditions, many did not provide sufficient guidance on selecting firefighting strategies, and only 1 discussed issues related to suppression costs. Third, over the past several years, the agencies have been developing a Fire Program Analysis (FPA) system, which was proposed and funded to help the agencies determine national budget needs by analyzing budget alternatives at the local level--using a common, interagency process for fire management planning and budgeting--and aggregating the results; determine the relative costs and benefits for the full scope of fire management activities, including potential trade-offs among investments in fuel reduction, fire preparedness, and fire suppression activities; and identify, for a given budget level, the most cost-effective mix of personnel and equipment to carry out these activities. We have said for several years--and the agencies have concurred--that FPA is critical to helping the agencies contain wildland fire costs and plan and budget effectively. Recent design modifications to the system, however, raise questions about the agencies' ability to fully achieve key FPA goals. A midcourse review of the developing system resulted in the Wildland Fire Leadership Council's approving in December 2006 modifications to the system's design. FPA and senior Forest Service and Interior officials told us they believed the modifications would allow the agencies to meet the key goals. The officials said they expected to have a prototype developed for the council's review in June 2007 and to substantially complete the system by June 2008. We have yet to systematically review the modifications, but after reviewing agency reports on the modifications and interviewing knowledgeable officials, we have concerns that the modifications may not allow the agencies to meet FPA's key goals. For example, under the redesigned system, local land managers will use a different method to analyze and select various budget alternatives, and it is unclear whether this method will identify the most cost-effective allocation of resources. In addition, it is unclear how the budget alternatives for local units will be meaningfully aggregated on a nationwide basis, a key FPA goal. Although the agencies have made progress on these three primary tasks, as of April 2007, they had yet to complete a joint tactical plan outlining the critical steps, together with related time frames, that the agencies would take to complete a cohesive strategy, as we recommended in our 2005 report. We continue to believe that, until a cohesive strategy can be developed, it is essential that the agencies create a tactical plan for developing this strategy, so Congress understands the steps and time frames involved in completing the strategy. As we testified before the Senate Committee on Energy and Natural Resources in January 2007, the steps the Forest Service and Interior agencies have taken to date to contain wildland fire costs lack several key elements fundamental to sound program management, such as clearly defining cost-containment goals, developing a strategy for achieving those goals, and measuring progress toward achieving them. First, the agencies have not clearly articulated the goals of their cost-containment efforts. For cost-containment efforts to be effective, the agencies need to integrate cost-containment goals with the other goals of the wildland fire program-- such as protecting life, property, and resources. For example, the agencies have established the goal of suppressing wildland fires at minimum cost, considering firefighter and public safety and values being protected, but they have not defined criteria by which these often-competing objectives are to be weighed. Second, although the agencies are undertaking a variety of steps designed to help contain wildland fire costs, the agencies have not developed a clear plan for how these efforts fit together or the extent to which they will assist in containing costs. Finally, the agencies are developing a statistical model of fire suppression costs that they plan to use to identify when the cost for an individual fire may have been excessive. The model compares a fire's cost to the costs of suppressing previous fires with similar characteristics. However, such comparisons with previous fires' costs may not fully consider the potential for managers to select less aggressive--and potentially less costly--suppression strategies. In addition, the model is still under development and may take a number of years to fully refine. Without clear program goals and objectives, and corresponding performance measures to evaluate progress, the agencies lack the tools to be able to determine the effectiveness of their cost-containment efforts. Our forthcoming report on federal agencies' efforts to contain wildland fire costs includes more- detailed findings and recommendations to the agencies to improve the management of their cost-containment efforts; this report is expected to be released at a hearing before the Senate Committee on Energy and Natural Resources scheduled for June 26, 2007. Complex conditions have contributed to increasing wildland fire severity. These conditions have been decades in the making, and will take decades to resolve. The agencies must develop an effective and affordable strategy for addressing these conditions in light of the large federal deficit and the long-term fiscal challenges facing our nation. To make informed decisions about an effective and affordable long-term approach to addressing wildland fire problems, the agencies need to develop a cohesive strategy that identifies the available long-term options and associated funding for reducing excess vegetation and responding to wildland fires. Because the agencies cannot develop such a strategy until they complete certain key tasks, we continue to believe that in the interim the agencies must create a tactical plan for developing this strategy so that Congress can monitor the agencies' progress. While the agencies continue to work toward developing a cohesive strategy, they have initiated a number of efforts intended to contain wildland fire costs, but the agencies cannot demonstrate the effectiveness of these cost containment efforts, in part because the agencies have no clearly defined cost-containment goals and objectives. Without clear goals, the agencies cannot develop consistent standards by which to measure their performance. Further, without these goals and objectives, federal land and fire managers in the field are more likely to select strategies and tactics that favor suppressing fires quickly over those that seek to balance the benefits of protecting the resources at risk and the costs of protecting them. Perhaps most important, without a clear vision of what they are trying to achieve and a systematic approach for achieving it, the agencies--and Congress and the American people-- have little assurance that their cost-containment efforts will lead to substantial improvement. Moreover, because cost-containment goals should be considered in relation to other wildland fire program goals-- such as protecting life, resources, and property--the agencies must integrate cost-containment goals within the overall cohesive strategy for responding to wildland fires that we have consistently recommended. Mr. Chairman, this concludes my prepared statement. I would be pleased to answer any questions that you or other Members of the Subcommittee may have at this time. For further information about this testimony, please contact me at (202) 512-3841 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. David P. Bixler, Assistant Director; Ellen W. Chu; Jonathan Dent; Janet Frisch; Chester Joy; and Richard Johnson made key contributions to this statement. This is a work of the U.S. government and is not subject to copyright protection in the United States. It may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.
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Increasing wildland fire threats to communities and ecosystems, combined with rising costs of addressing those threats--trends that GAO and others have reported on for many years--have not abated. On average, the acreage burned annually by wildland fires from 2000 to 2005 was 70 percent greater than the acreage burned annually during the 1990s. Annual appropriations to prepare for and respond to wildland fires have also increased substantially over the past decade, totaling about $3 billion in recent years. The Forest Service within the Department of Agriculture and four agencies within the Department of the Interior (Interior) are responsible for responding to wildland fires on federal lands. This testimony summarizes several key actions that federal agencies need to complete or take to strengthen their management of the wildland fire program, including the need to (1) develop a long-term, cohesive strategy to reduce fuels and address wildland fire problems and (2) improve the management of their efforts to contain the costs of preparing for and responding to wildland fires. The testimony is based on several previous GAO reports and testimonies addressing wildland fire issues. The Forest Service and Interior agencies need to complete several actions to strengthen their overall management of the wildland fire program. First, because a substantial investment and decades of work will be required to address wildland fire problems that have been decades in the making, the agencies need a cohesive strategy that addresses the full range of wildland fire management activities. Such a strategy should identify the available long-term options and associated funding for reducing excess vegetation and responding to wildland fires if the agencies and the Congress are to make informed decisions about an effective and affordable long-term approach for addressing wildland fire problems. GAO first recommended in 1999 that such a strategy be developed to address the problem of excess fuels and their potential to increase the severity of wildland fires and cost of suppression efforts. By 2005, the agencies had yet to develop such a strategy, and GAO reiterated the need for a cohesive strategy and broadened the recommendation's focus to better address the interrelated nature of fuel reduction efforts and wildland fire response. Further, because the agencies said they would be unable to develop a cohesive strategy until they have completed certain key tasks, GAO recommended that the agencies develop a tactical plan outlining these tasks and the time frames needed for completing each task and a cohesive strategy. Although the agencies concurred with GAO's recommendations, as of April 2007, they had yet to develop a tactical plan. Second, as GAO testified before the Senate Committee on Energy and Natural Resources in January 2007, the steps the Forest Service and Interior agencies have taken to date to contain wildland fire costs lack several key elements fundamental to sound program management, such as clearly defining cost-containment goals, developing a strategy for achieving those goals, and measuring progress toward achieving them. For cost-containment efforts to be effective, the agencies need to integrate cost-containment goals with the other goals of the wildland fire program--such as protecting life, resources, and property--and to recognize that trade-offs will be needed to meet desired goals within the context of fiscal constraints. Further, because cost-containment goals need to be considered in relation to other wildland fire program goals, it is important that the agencies integrate cost-containment goals within an overall cohesive strategy. GAO's forthcoming report on federal agencies' efforts to contain wildland fire costs includes more-detailed findings and recommendations to the agencies to improve the management of their cost-containment efforts; this report is expected to be released at a Senate Committee on Energy and Natural Resources hearing scheduled for June 26, 2007.
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In October 1990, the Federal Accounting Standards Advisory Board (FASAB) was established by the Secretary of the Treasury, the Director of the Office of Management and Budget (OMB), and the Comptroller General of the United States to consider and recommend accounting standards to address the financial and budgetary information needs of the Congress, executive agencies, and other users of federal financial information. Using a due process and consensus building approach, the nine-member Board, which has since its formation included a member from DOD, recommends accounting standards for the federal government. Once FASAB recommends accounting standards, the Secretary of the Treasury, the Director of OMB, and the Comptroller General decide whether to adopt the recommended standards. If they are adopted, the standards are published as Statements of Federal Financial Accounting Standards (SFFAS) by OMB and by GAO. In addition, the Federal Financial Management Improvement Act of 1996, as well as the Federal Managers' Financial Integrity Act, require federal agencies to implement and maintain financial management systems that will permit the preparation of financial statements that substantially comply with applicable federal accounting standards. Issued in December 1995 and effective beginning with fiscal year 1997, SFFAS No. 5, Accounting for Liabilities of the Federal Government, requires the recognition of a liability for any probable and measurable future outflow of resources arising from past transactions. The statement defines probable as that which is likely to occur based on current facts and circumstances. It also states that a future outflow is measurable if it can be reasonably estimated. The statement recognizes that this estimate may not be precise and, in such cases, it provides for recording the lowest estimate and disclosing in the financial statements the full range of estimated outflows that are likely to occur. The liability disclosure requirements stated in SFFAS No. 5 apply to several types of assets, including property, plant, and equipment (PP&E) and operating materials and supplies. SFFAS No. 3, Accounting for Inventory and Related Property, defines operating materials and supplies as consisting of tangible personal property to be consumed in normal operations. SFFAS No. 6, Accounting for Property, Plant, and Equipment, which is effective beginning in fiscal year 1998, deals with various accounting issues pertaining to PP&E. This statement establishes several new accounting categories of PP&E, collectively called stewardship PP&E. Other PP&E is referred to as general PP&E. One of the new stewardship categories--federal mission PP&E--is defined as tangible items owned by a federal government entity, principally DOD, that have no expected nongovernmental use, are held for use in the event of emergency, war, or natural disaster, and have an unpredictable useful life. Federal mission PP&E, which includes ships, submarines, aircraft, and combat vehicles, is a major part of DOD's total PP&E. Recently, FASAB reviewed the asset category for ammunition and reiterated its position that ammunition should be classified as operating materials and supplies rather than federal mission PP&E. Although the asset categories for financial reporting may be different, the SFFAS No. 5 requirements for recording the disposal liability are the same for operating materials and supplies and mission assets. We undertook this review to assist DOD in its efforts to meet the new federal accounting standard, SFFAS No. 5, and because of our responsibility to audit the federal government's consolidated financial statements beginning with fiscal year 1997. Our objectives were to determine (1) the status of DOD's efforts to implement the new federal accounting standard for disclosure of liabilities, such as ammunition disposal costs, and (2) whether the ammunition disposal liability was probable and whether a reasonable estimate of the minimum disposal liability for ammunition could be made. To determine if the liability is probable, we reviewed financial accounting standards, environmental laws and regulations, and DOD manuals that address the handling and disposal of hazardous material. We also reviewed congressional committee reports that requested ammunition disposal cost information. We also interviewed DOD officials responsible for financial reporting and those at the service level responsible for program management, ammunition demilitarization, and disposal. To determine if a disposal liability was reasonably estimable, we obtained information on ammunition inventories, as of September 30, 1996, the most recent data available at the time of our review, and what it costs to demilitarize and dispose of ammunition. To determine the availability of ammunition inventory information, we interviewed service officials responsible for inventory management and obtained information on the services' ammunition inventory systems as well as their ammunition inventories as of September 30, 1996. To determine the availability of ammunition demilitarization and disposal cost information, we obtained information on the volume, nature, and cost of the Army Industrial Operation Command's (DOD's single manager for ammunition) disposal activities, as well as information on the Joint Ordnance Commanders Group's munitions demilitarization studies. We also obtained information on the Navy's ammunition disposal activities because the Navy disposes of certain Navy-specific items, such as underwater torpedoes and depth charges. In addition, we interviewed service officials responsible for the accounting and reporting of demilitarization and disposal costs. We analyzed the DOD Joint Ordnance Commanders Group, Munitions Demil/Disposal Subgroup's 1995 and 1996 reports on demilitarization and disposal cost information. The Subgroup's 1996 Munitions Demilitarization Study identified disposal costs for 23 munition categories, referred to as Munition Items Disposition Action System (MIDAS) families. We did not independently verify the inventory and cost data furnished to us. We conducted our review between November 1996 and November 1997 in accordance with generally accepted government auditing standards. Appendix I lists the primary locations where we performed our review. We provided a draft of this report to the Secretary of Defense for review and comment. We received oral comments which are discussed in the "Agency Comments and Our Evaluation" section. As we recently stated in our report on DOD's aircraft disposal liability, as of the end of the fiscal year on September 30, 1997, DOD had not established a policy to implement SFFAS No. 5. On September 30, 1997, the DOD Comptroller's office posted revisions to the electronic version of DOD's Financial Management Regulation (FMR) to include SFFAS No. 1 through 4, but SFFAS No. 5 was not included. In commenting on a draft of our aircraft disposal liability report, DOD agreed with our recommendation that SFFAS No. 5 be incorporated in the FMR. In addition, the DOD Comptroller, who is responsible for developing and issuing guidance on accounting standards, and the Under Secretary of Defense (Acquisition and Technology), who is responsible for the operational activities associated with ammunition disposal, have not provided implementation guidance to the services to assist them in estimating the disposal costs for ammunition. Service officials stated that they are reluctant to estimate a liability for their ammunition disposal until they receive DOD-wide guidance. Unless prompt action to implement this standard is taken, it is unlikely that DOD's or the military services' fiscal year 1997 financial statements will include an estimate of ammunition disposal costs as required. One of the key criteria cited in SFFAS No. 5 for a liability to be reported is that a future payment is probable--that is, the future outflow of resources is likely to occur. Although, in some cases, the likelihood of a future outflow may be difficult to determine and an entity may have difficulty deciding whether to record a liability for certain events, this is not the case for DOD. DOD continually disposes of ammunition and has an amount for disposal costs in its annual budget. According to the Industrial Operations Command's Associate Director for Demilitarization, during the last 5 years, DOD has spent over $370 million to dispose of ammunition. Thus, because it is known at the time of acquisition that costs will be incurred for ammunition disposal, the probability criterion for recording a liability is met. The Congress has also recognized that disposal will occur and has emphasized the importance of accumulating these costs and considering this information. In the past 3 years, congressional committees have specifically asked for information related to ammunition disposal costs. The Senate Committee on Appropriations, in its report on the fiscal year 1995 Defense Appropriations bill, directed DOD to develop a plan for the disposal of rocket motors, ammunition, and other explosives, including information on alternative ammunition disposal methods and related costs. The next year, the House Committee on Appropriations, in its report on the fiscal year 1996 Defense Appropriations bill, expressed concern about the Army's continuing practice of demilitarizing ammunition by open-air burning and detonation. The committee requested an analysis that included the costs and savings of recycle and reuse technologies, the revenue that could be derived from the sale of recycled and reusable products, and the ultimate clean-up costs for open-air burning and detonation sites. Most recently, the Fiscal Year 1997 National Defense Authorization Act required the establishment of a 5-year program for the development and demonstration of environmentally compliant technologies for the disposal of ammunition, explosives, and rockets. The Army Industrial Operations Command (IOC), DOD's single manager for ammunition, has an ongoing program to dispose of ammunition from all services. While each service maintains its own ammunition inventory management systems and technically owns the ammunition, IOC manages procurement and disposal of ammunition items for all services. IOC supplies or ships ammunition from production and storage sites to field installations and units; manages ammunition disposal programs; oversees efforts to upgrade ammunition already in service; and manages the Army's worldwide ammunition stockpile. IOC is responsible for the disposal of about 96 percent of all ammunition. The exceptions are generally service-unique ammunition items, like Navy torpedoes, or items that are more practical to dispose of at their current installation or depot or by a contractor. The reasons for disposal of ammunition are obsolescence, deterioration, and excess supply. Obsolescence occurs when the weapons systems that use the ammunition are phased out, thus eliminating the need for the ammunition. Ammunition becomes excess when the quantities on hand exceed what is needed due to factors such as downsizing of the military forces. Deterioration can result from age and long-term storage conditions that render the ammunition unusable. The two overall types of ammunition disposal methods are (1) destructive processes that either explode or incinerate the ammunition and (2) resource recovery and recycling processes that remove the explosive components through a variety of methods and allow their reuse. Ammunition under IOC's control is tracked by the Commodity Command Standard System. This system accounts for ammunition in depots, but does not include ammunition issued to military field units. Army field ammunition stocks are accounted for by the World-wide Ammunition Reporting System. Systems used by the other services are the Air Force's Combat Ammunition System, the Navy's Conventional Ammunition Information Management System, and the Marine Corps Ammunition and Accounting Reporting System. We requested a detailed listing of the year-end ammunition inventory from each of the services and obtained the inventory balance from the information they provided to us. The September 30, 1996, ammunition inventory balance is shown in table 1, which contains the most recent data available. The ammunition inventory serves as the basis for estimating the disposal liability because ammunition used in training and operations is generally replaced to maintain the inventory at certain levels. As a result, training and operational usage may not reduce the total liability for ammunition disposal. The second key criterion in SFFAS No. 5 for reporting of a liability is that an amount be reasonably estimable. In the past, DOD has reported its estimated ammunition disposal costs using several methodologies that range from a "rule of thumb" figure to more detailed cost analyses based on specific types of ammunition. Achieving a reasonable estimate is possible using the existing detailed analyses as a starting point. A number of key factors would have to be considered to ensure that the development of the ammunition disposal cost estimate is as accurate as possible. DOD has used $1,000 per ton as a "rule of thumb" for ammunition disposal costs. For example, in May 1995 congressional testimony, the Deputy for Ammunition, U.S. Army, stated that "rule of thumb is that it costs about $1,000 a ton, hopefully a little less, to get rid of unserviceable ammunition." According to officials in the Army's Office of the Deputy for Ammunition, the $1,000 estimate was calculated for the Army's Conventional Ammunition Demilitarization Master Plan issued in May 1993. They stated that the $1,000 estimate was an average cost based on actual disposals during the 2 years preceding the master plan's issuance. As part of its response to Senate and House requests for more detailed disposal cost information in 1995 and 1996, DOD compiled historical cost information that could be used as a starting point for developing a reasonable estimate of the ammunition disposal cost liability. In response to the fiscal year 1995 Senate Committee on Appropriations report requesting information on alternative disposal procedures and costs for ammunition and other explosives, the Joint Ordnance Commanders Group (JOCG), Munitions Demil/Disposal Subgroup, analyzed the ammunition stockpile in 1995 using "families" of items for disposal. The MIDAS families are based on the materials contained in the ammunition, methods of assembly/disassembly, preferred demilitarization methods, and any unique features. In its September 1995 report, JOCG provided an estimate of the tonnage requiring disposal for each MIDAS family of ammunition. In response to the 1996 House Committee on Appropriations report that requested additional information, the JOCG subgroup formed an ad hoc working group to study the comparative benefits and costs of different disposal methods using the MIDAS families as the basis for collecting and summarizing the cost per ton for the various alternative disposal procedures. The cost information was collected for both government installations and contractor facilities that had performed ammunition disposal during fiscal years 1994 to 1996. For the 1996 study, the JOCG working group collected historical cost information on the ammunition disposed of during fiscal years 1994 through 1996. It grouped the disposal actions by MIDAS family and calculated an average disposal cost per ton based on the facility type--government-owned and operated facilities, government-owned facilities operated by a contractor, and contractor-owned and contractor-operated facilities. For 14 of the MIDAS families for which costs were available, the demilitarization was performed by a single category of facility and thus yielded a single average cost. The other eight MIDAS families involved demilitarization at more than one type of facility, thus yielding a range of average costs. See appendix II for a listing of the MIDAS families and the average disposal costs that were developed based on the working group's report. Although a number of critical factors would have to be considered, including the reliability of the historical data as discussed in the following section, the cost estimates developed for the MIDAS families can be used as a starting point to estimate the ammunition disposal liability. The national stock numbers (NSNs) of ammunition items throughout DOD have been associated with the MIDAS families. For example, for the Army, the U.S. Army Defense Ammunition Center and School staff provided us with a data file that translated the specific Army ammunition NSN line items into their respective MIDAS families. Using Army's fiscal year 1996 inventory amount of 2,144,995 tons (which excludes 14,672 tons of ammunition for which MIDAS cost information was not available) and the average disposal cost data developed by the JOCG working group for the MIDAS families, we estimated that the Army's ammunition disposal liability could range from about $1.3 billion to $2.1 billion. Marine Corps, Navy, and Air Force officials verified that information was available to perform a similar analysis of their respective ammunition inventories using NSNs and the MIDAS cost families. In using the MIDAS analysis to estimate the disposal liability, several additional factors would have to be considered to refine the estimate. Although SFFAS No. 5 is clear that the disposal liability is to be a reasonable estimate and that the disclosure may be presented as a range, the accuracy and precision of the range will affect its usefulness to decisionmakers. Key estimation factors to be considered include the following. Data reliability - Although we did not verify the underlying data supporting the historical cost data developed for the MIDAS families, a limited review yielded a number of discrepancies. For example, one schedule indicated that a contractor had destroyed 1,512 tons of small caliber ammunition in fiscal year 1996 for $1,512, or $1 per ton. The same schedule showed that the same contractor had destroyed the same type of ammunition in fiscal year 1995 for $728 per ton. In addition, the schedule showed that two government-owned, government-operated facilities had destroyed small caliber ammunition with costs of $0.10 per ton at one facility and $3,327 per ton at the other facility. Such anomalies would have to be addressed before relying on these data as a basis for estimating the total disposal liability. In addition, the appropriateness of averaging the actual disposal costs by type of facility would have to be considered. For example, the study concluded that the disposal cost for white phosphorus was $1,231 per ton. The underlying data show that white phosphorus was destroyed by one government-owned, government-operated facility in six separate batches in fiscal years 1994 through 1996. The reported costs per ton for each batch ranged from $646 to $14,208 and were averaged to arrive at the $1,231 figure. If it is determined that averaging does not appropriately reflect the true range of these costs, alternatives may include calculating a disposal liability range for each MIDAS family based on factors such as type of facility or disposal method. Data completeness - As stated in appendix II, data were not available for six of the MIDAS families because (1) the types of ammunition were not disposed of during the period studied or (2) the ammunition was disposed of by a specific service and the cost data were not available to the working group. DOD would have to consider the significance of these costs and determine whether cost data were collected by individual services. In addition, the MIDAS costs did not include an amount for packaging, crating, handling, and transportation, nor do they reflect the value of any scrap recovered from the demilitarization process. JOCG determined that packaging, crating, handling, and transportation costs ranged from $66 per ton to $228 per ton. Also, although the working group's 1996 report indicated that storage costs were part of the disposal costs, the group did not develop any storage cost estimates. Updated information - Finally, estimates using the MIDAS costs would have to be updated periodically to take into account the use of different disposal methods and locations, current costs, and other factors that would affect costs. Such factors would have to be considered by DOD as it develops its policy for determining its ammunition disposal liability. DOD has pointed out that the total disposal liability estimate for ammunition will result in a significant liability--much of which would not require budget authority in the current year. Thus, one way to provide a proper context for this reported liability and make it more meaningful to decisionmakers would be to provide a breakdown of the liability in a footnote to the financial statements showing the liability based on the services' estimates of the ammunition scheduled to be taken out of service. Table 2 is a simplified illustration of how the ammunition disposal liability for ammunition managed by the single manager could be related to the time period in which it is taken out of service. For the purposes of this illustration, we used $1,000 per ton as the basis for estimating the disposal liability. As discussed previously, in actual practice, the services should refine this figure to reflect the expected cost experience within the time period. We applied the $1,000 per ton disposal liability to (1) tonnage estimates reported in the JOCG September 1995 study that projected the quantity of ammunition that would be turned over to the single manager for disposal in fiscal years 1995 through 2001 and (2) the remaining inventory after subtracting these quantities. Such information could provide important context for congressional and other budget decisionmakers on the total liability by showing the annual impact of potentially needed budget authority for ammunition expected to be transferred for disposal. Furthermore, using time periods to present data consistent with budget justification documents, such as DOD's Future Years Defense Program, provides a link between budgetary and accounting information, one of the key objectives of the CFO Act. Ammunition disposal costs are both probable and estimable and, therefore, meet the criteria stated in SFFAS No. 5 for reportable liabilities. In commenting on our recent report on the aircraft disposal liability, DOD agreed to implement SFFAS No. 5 and to record the disposal liability related to aircraft, which are categorized as federal mission assets. DOD also agreed that the DOD Comptroller and Under Secretary of Defense (Acquisition and Technology) should promptly issue implementing guidance to assist the services in estimating the aircraft disposal liability. Because the same requirements apply to ammunition, which is considered part of the operating material and supply asset category, similar action is necessary to ensure that the ammunition disposal liability is properly recorded. Development of a reasonable estimate of the ammunition disposal liability, which addresses the key factors identified in this report, will help ensure not only that the financial statement disclosure requirements are met, but will also provide important information to the Congress and other decisionmakers as they continue to assess ammunition disposal methods and related costs. We recommend that you ensure that the DOD Comptroller and the Under Secretary of Defense (Acquisition and Technology) promptly issue joint implementing guidance for the services on the SFFAS No. 5 requirements for recognition of a liability for ammunition disposal costs. This guidance should address the key liability estimation factors identified in this report, including data reliability, data completeness, and the need for updated information. the DOD and military service comptrollers include the estimated ammunition disposal liability in DOD's fiscal year 1997 financial statements. In commenting on a draft of this report, Department of Defense officials concurred with our recommendations that joint implementing guidance be issued promptly on the SFFAS No. 5 requirements for recognition of a liability for ammunition disposal costs. In addition, DOD officials stated that current disposal cost estimates can be reasonably determined for ammunition types that have been in the active inventory for some period of time. However, DOD officials stated that the development of disposal cost estimates for all types in the inventory and the development and coordination of standard application procedures and reporting guidance would take time to complete. For this reason, Defense officials stated that it will not be feasible to report the estimated ammunition disposal liability in the DOD's financial statements prior to fiscal year 1998. SFFAS No. 5 was issued almost 2 years ago to allow agencies ample time to develop implementing policies and procedures prior to its fiscal year 1997 effective date. As stated in this report, information is available on all types of ammunition disposal processes to develop a reasonable estimate of these costs. Such cost information can be applied to all types of ammunition, regardless of the length of time the ammunition has been in the active inventory. Such an estimate need not be precise--SFFAS No. 5 permits the reporting of a range. Accordingly, DOD, with a concentrated effort, can develop an estimate of ammunition disposal costs for its fiscal year 1997 financial statements. This report contains recommendations to you. The head of a federal agency is required by 31 U.S.C. 720 to submit a written statement on actions taken on these recommendations to the Senate Committee on Governmental Affairs and the House Committee on Government Reform and Oversight not later than 60 days after the date of this report. A written statement also must be sent to the House and Senate Committees on Appropriations with the agency's first request for appropriations made more than 60 days after the date of this report. We are sending copies of this report to the Chairmen and Ranking Minority Members of the Senate Committee on Armed Services, the House Committee on National Security, the Senate Committee on Governmental Affairs, the House Committee on Government Reform and Oversight, and the Subcommittee on Management, Information and Technology, and to the Director of the Office of Management and Budget. We are also sending copies to the Under Secretary of Defense (Comptroller), the Air Force Assistant Secretary for Financial Management and Comptroller, the Army Assistant Secretary for Financial Management and Comptroller, the Navy Assistant Secretary for Financial Management and Comptroller, the Under Secretary of Defense (Acquisition and Technology), the Deputy Under Secretary of Defense for Environmental Security, and the Acting Director, Defense Finance and Accounting Service. Copies will be made available to others upon request. Please contact me at (202) 512-9095 if you have any questions concerning this letter. Major contributors to this letter are listed in appendix III. We contacted personnel and conducted work at the following locations. DOD Headquarters, Pentagon, Washington, D.C. Air Force Combat Support Division, Air Force Headquarters, Pentagon, Washington, D.C. Type of ammunition (MIDAS family) High explosive "D" (ammunition that contains ammonium picrate) High explosives for improved ammunition/cluster bomb units (ICM/CBUs) and submunitions High explosive projectiles and warheads Bulk propellants and black powder Inert (training material) John R. Richter, Auditor-in-charge Stewart O. Seman, Evaluator Lynn M. Filla-Clark, Auditor Frederick P. Schmidt, Evaluator The first copy of each GAO report and testimony is free. Additional copies are $2 each. Orders should be sent to the following address, accompanied by a check or money order made out to the Superintendent of Documents, when necessary. VISA and MasterCard credit cards are accepted, also. Orders for 100 or more copies to be mailed to a single address are discounted 25 percent. U.S. General Accounting Office P.O. Box 37050 Washington, DC 20013 Room 1100 700 4th St. NW (corner of 4th and G Sts. NW) U.S. General Accounting Office Washington, DC Orders may also be placed by calling (202) 512-6000 or by using fax number (202) 512-6061, or TDD (202) 512-2537. Each day, GAO issues a list of newly available reports and testimony. To receive facsimile copies of the daily list or any list from the past 30 days, please call (202) 512-6000 using a touchtone phone. A recorded menu will provide information on how to obtain these lists.
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Pursuant to a legislative requirement, GAO reviewed the Department of Defense's (DOD) implementation of the requirement to disclose the liability associated with the disposal of various types of assets, specifically conventional ammunition. GAO noted that: (1) DOD has not yet implemented the federal accounting standard that requires recognizing and reporting liabilities such as those associated with ammunition disposal, nor has it provided guidance to the military services; (2) in commenting on GAO's recent report on the aircraft disposal liability, DOD agreed with GAO's recommendation to incorporate statements of federal financial accounting standard (SFFAS) No. 5 in its Financial Management Regulation; (3) ammunition disposal is an ongoing process that results from materials with a limited shelf-life or that otherwise will not be used in operations, and the cost can be reasonably estimated; (4) accordingly, these activities meet the criteria for a reportable liability; (5) the cost information that DOD developed in response to requests from congressional committees can be used as a starting point to estimate the ammunition disposal liability; and (6) a number of additional factors will have to be addressed, including data reliability, data completeness, and the need for periodic updates.
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The District of Columbia Family Court Act of 2001 (P.L. 107-114) was enacted on January 8, 2002. The act stated that, not later than 90 days after the date of the enactment, the chief judge of the Superior Court shall submit to the president and Congress a transition plan for the Family Court of the Superior Court, and shall include in the plan the following: The chief judge's determination of the role and function of the presiding judge of the Family Court. The chief judge's determination of the number of judges needed to serve on the Family Court. The chief judge's determination of the number of magistrates of the Family Court needed for appointment under Section 11-1732, District of Columbia Code. The chief judge's determination of the appropriate functions of such magistrates, together with the compensation of and other personnel matters pertaining to such magistrates. A plan for case flow, case management, and staffing needs (including the needs of both judicial and nonjudicial personnel) for the Family Court, including a description of how the Superior Court will handle the one family/one judge requirement pursuant to Section 11-1104(a) for all cases and proceedings assigned to the Family Court. A plan for space, equipment, and other physical needs and requirements during the transition, as determined in consultation with the administrator of General Services. An analysis of the number of magistrates needed under the expedited appointment procedures established under Section 6(d) in reducing the number of pending actions and proceedings within the jurisdiction of the Family Court. A proposal for the disposition or transfer to the Family Court of child abuse and neglect actions pending as of the date of enactment of the act (which were initiated in the Family Division but remain pending before judges serving in other divisions of the Superior Court as of such date) in a manner consistent with applicable federal and District of Columbia law and best practices, including best practices developed by the American Bar Association and the National Council of Juvenile and Family Court Judges. An estimate of the number of cases for which the deadline for disposition or transfer to the Family Court cannot be met and the reasons why such deadline cannot be met. The chief judge's determination of the number of individuals serving as judges of the Superior Court who meet the qualifications for judges of the Family Court and are willing and able to serve on the Family Court. If the chief judge determines that the number of individuals described in the act is less than 15, the plan is to include a request that the Judicial Nomination Commission recruit and the president nominate additional individuals to serve on the Superior Court who meet the qualifications for judges of the Family Court, as may be required to enable the chief judge to make the required number of assignments. The Family Court Act states that the number of judges serving on the Family Court of the Superior Court cannot exceed 15. These judges must meet certain qualifications, such as having training or expertise in family law, certifying to the chief judge of the Superior Court that he or she intends to serve the full term of service and that he or she will participate in the ongoing training programs conducted for judges of the Family Court. The act also allows the court to hire and use magistrates to hear family court cases. Magistrates must also meet certain qualifications, such as holding U.S. citizenship, being an active member of the D.C. Bar, and having not fewer than 3 years of training or experience in the practice of family law as a lawyer or judicial officer. The act further states that the chief judge shall appoint individuals to serve as magistrates not later than 60 days after the date of enactment of the act. The magistrates hired under this expedited appointment process are to assist in implementing the transition plan, and in particular, assist with the transition or disposal of child abuse and neglect proceedings not currently assigned to judges in the Family Court. The Superior Court submitted its transition plan on April 5, 2002. The plan consists of three volumes. Volume I contains information on how the court will address case management issues, including organizational and human capital requirements. Volume II contains information on the development of IJIS and its planned applications. Volume III addresses the physical space the court needs to house and operate the Family Court. Courts interact with various organizations and operate in the context of many different programmatic requirements. In the District of Columbia, the Family Court frequently interacts with the child welfare agency--the Child and Family Services Agency (CFSA)--a key organization responsible for helping children obtain permanent homes. CFSA must comply with federal laws and other requirements, including the Adoption and Safe Families Act (ASFA), which placed new responsibilities on child welfare agencies nationwide. ASFA introduced new time periods for moving children who have been removed from their homes to permanent home arrangements and penalties for noncompliance. For example, the act requires states to hold a permanency planning hearing not later than 12 months after the child is considered to have entered foster care. Permanent placements include the child's return home and the child's adoption. The Family Court transition plan provides information on most, but not all, of the elements required by the Family Court Act. For example, the plan describes the Family Court's method for transferring child abuse and neglect cases to the Family Court, its one family/one judge case management principle, and the number and roles of judges and magistrates. However, the plan does not (1) indicate if the 12 judges who volunteered for the Family Court meet all of the qualifications outlined in the act, (2) include a request for judicial nomination, and (3) state how the number of magistrates to hire under the expedited process was determined. In addition, the court could consider taking additional actions, such as using a full range of measures by which the court can evaluate its progress in ensuring better outcomes for children. The transition plan establishes criteria for transferring cases to the Family Court and states that the Family Court intends to have all child abuse and neglect cases pending before judges serving in other divisions of the Superior Court closed or transferred into the Family Court by June 2003. According to the plan, the court has asked each Superior Court judge to review his or her caseload to identify those cases that meet the criteria established by the court for transferring or not transferring cases. Cases identified for transfer include those in which (1) the child is 18 years of age and older, the case is being monitored primarily for the delivery of services, and no recent allegations of abuse or neglect exist; and (2) the child is committed to the child welfare agency and is placed with a relative in a kinship care program. Cases that the court believes may not be candidates for transfer by June 2002 include those with respect to which the judge believes transferring the case would delay permanency. The court expects that older cases will first be reviewed for possible closure and expects to transfer the entire abuse and neglect caseloads of several judges serving in other divisions of the Superior Court to the Family Court. Using the established criteria to review cases, the court estimates that 1,500 cases could be candidates for immediate transfer. The act also requires the court to estimate the number of cases that cannot be transferred into the Family Court in the timeframes specified. The plan provides no estimate because the court's proposed transfer process assumes all cases will be closed or transferred, based on the outlined criteria. However, the plan states that the full transfer of all cases is partially contingent on hiring three new judges. The transition plan identifies the way in which the Family Court will implement the one family/one judge approach and improve its case management practices; however, the evaluation measures developed to assess the court's progress in reforming its operations could include additional measures that reflect outcomes for children. The plan indicates that the Family Court will implement the one family/one judge approach by assigning all cases involving the same family to one judicial team-- comprised of a Family Court judge and a magistrate. This assignment will begin with the initial hearing by the magistrate on the team and continue throughout the life of the case. Juvenile and family court experts indicated that this team approach is realistic and a good model of judicial collaboration. One expert said that such an approach provides for continuity if either team member is absent. Another expert said that, given the volume of cases that must be heard, the team approach can ease the burden on judicial resources by permitting the magistrate to make recommendations and decisions, thereby allowing the Family Court judge time to schedule and hear trials and other proceedings more quickly. Court experts also praised the proposed staggered terms for judicial officials--newly-hired judges, magistrates, and judges who are already serving on the Superior Court will be appointed to the Family Court for varying numbers of years--which can provide continuity while recognizing the need to rotate among divisions in the Superior Court. In addition, the plan identifies actions the court plans to take to improve case management. First, the Family Court plans to centralize intake. According to the plan, a central office will encompass all the functions that various clerks' offices--such as juvenile, domestic relations, paternity and support, and mental health--in the Family Court currently carry out. As part of centralized intake, case coordinators will identify any related cases that may exist in the Family Court. To do this, the coordinator will ensure that a new "Intake/Cross Reference Form" will be completed by various parties to a case and also check the 18 current computer systems serving the Family Court. Second, the court plans to use alternative dispute resolution to resolve cases more quickly and expand initial hearings to address many of the issues that the court previously handled later in the life of the case. Last, the plan states that the Family Court will provide all affected parties speedy notice of court proceedings and implement strict policies for the handling of cases--such as those for granting continuances--although it does not indicate who is responsible for developing the policies or the status of their development. The plan states that the court will conduct evaluations to assess whether components of the Family Court were implemented as planned and whether modifications are necessary; the court could consider using additional measures to focus on outcomes for children. For example, evaluation measures listed in the plan are oriented more toward the court's processes, such as whether hearings are held on time, than on outcomes. According to a court expert, measures must also account for outcomes the court achieves for children. Measures could include the number of finalized adoptions that did not disrupt, reunifications that do not fail, children who remain safe and are not abused again while under court jurisdiction or in foster care, and the proportion of children who successfully achieve permanency. In addition, the court will need to determine how it will gather the data necessary to measure each team's progress in ensuring such outcomes or in meeting the requirements of ASFA, and the court has not yet established a baseline from which to judge its performance. The transition plan states that the court has determined that 15 judges are needed to carry out the duties of the court and that 12 judges have volunteered to serve on the court, but does not address recruitment and the nomination of the three additional judges. Court experts said that the court's analysis to identify the appropriate number of judges is based on best practices identified by highly credible national organizations and is, therefore, pragmatic and realistic. The plan, however, does not include a request that the Judicial Nomination Commission recruit and the president nominate the additional three individuals to serve on the Superior Court, as required by the Family Court Act. The Superior Court does not provide in the plan its determination of the number of nonjudicial staff needed. The court acknowledges that while it budgeted for a certain number of nonjudicial personnel based on current operating practices, determining the number of different types of personnel needed to operate the Family Court effectively is pending completion of a staffing study. Furthermore, the plan does not address the qualifications of the 12 judges who volunteered for the court. Although the plan states that these judges have agreed to serve full terms of service, according to the act, the chief judge of the Superior Court may not assign an individual to serve on the Family Court unless the individual also has training or expertise in family law and certifies that he or she will participate in the ongoing training programs conducted for judges of the Family Court. The transition plan describes the duties of judges assigned to the Family Court, as required by the act. Specifically, the plan describes the roles of the designated presiding judge, the deputy presiding judge, and the magistrates. The plan states that the presiding and deputy presiding judges will handle the administrative functions of the Family Court, ensure the implementation of the alternative dispute resolution projects, oversee grant-funded projects, and serve as back-up judges to all Family Court judges. These judges will also have a post-disposition abuse and neglect caseload of more than 80 cases and will continue to consult and coordinate with other organizations (such as the child welfare agency), primarily by serving on 19 committees. One court expert has observed that the list of committees to which the judges are assigned seems overwhelming and added that strong leadership by the judges could result in the consolidation of some of the committees' efforts. The plan also describes the duties of the magistrates, but does not provide all the information required by the act. Magistrates will be responsible for initial hearings in new child abuse and neglect cases, and the resolution of cases assigned to them by the Family Court judge to whose team they are assigned. They will also be assigned initial hearings in juvenile cases, noncomplex abuse and neglect trials, and the subsequent review and permanency hearings, as well as a variety of other matters related to domestic violence, paternity and support, mental competency, and other domestic relations cases. As noted previously, one court expert said that the proposed use of the magistrates would ease the burden on judicial resources by permitting these magistrates to make recommendations and decisions. However, although specifically required by the act, the transition plan does not state how the court determined the number of magistrates to be hired under the expedited process. In addition, while the act outlines the required qualifications of magistrates, it does not specifically require a discussion of qualifications of the newly hired magistrates in the transition plan. As a result, none was provided and whether these magistrates meet the qualifications outlined in the act is unknown. A discussion of how the court will provide initial and ongoing training for its judicial and nonjudicial staff is also not required by the act, although the court does include relevant information about training. For example, the plan states that the Family Court will develop and implement a quarterly training program for Family Court judges, magistrates, and staff covering a variety of topics and that it will promote and encourage participation in cross-training. In addition, the plan states new judges and magistrates will participate in a 2 to 3 week intensive training program, although it does not provide details on the content of such training for the five magistrates hired under the expedited process, even though they were scheduled to begin working at the court on April 8, 2002. One court expert said that a standard curriculum for all court-related staff and judicial officers should be developed and that judges should have manuals available outlining procedures for all categories of cases. In a September 2000 report on human capital, we said that an explicit link between the organization's training offerings and curricula and the competencies identified by the organization for mission accomplishment is essential.Likewise, organizations should make fact-based determinations of the impact of its training and development programs to provide feedback for continuous improvement and ensure that these programs improve performance and help achieve organizational results. Two factors are critical to fully transitioning to the Family Court in a timely and effective manner: obtaining and renovating appropriate space for all new Family Court personnel and the development and installation of a new automated information system, currently planned as part of the D.C. Courts IJIS system. The court acknowledges that its implementation plans may be slowed if appropriate space cannot be obtained in a timely manner. For example, the plan addresses how the abuse and neglect cases currently being heard by judges in other divisions of the Superior Court will be transferred to the Family Court, but states that the complete transfer of cases hinges on the court's ability to hire, train, and provide appropriate space for additional judges and magistrates. In addition, the Family Court's current reliance on nonintegrated automated information systems that do not fully support planned court operations, such as the one family/one judge approach to case management, constrains its transition to a Family Court. The transition plan states that the interim space plan carries a number of project risks. These include a very aggressive implementation schedule and a design that makes each part of the plan interdependent with other parts of the plan. The transition plan further states that the desired results cannot be reached if each plan increment does not take place in a timely fashion. For example, obtaining and renovating the almost 30,000 occupiable square feet of new court space needed requires a complex series of interrelated steps--from moving current tenants in some buildings to temporary space, to renovating the John Marshall level of the H. Carl Moultrie Courthouse by July 2003. The Family Court of the Superior Court is currently housed in the H. Carl Moultrie Courthouse, and interim plans call for expanding and renovating additional space in this courthouse to accommodate the additional judges, magistrates, and staff who will help implement the D.C. Family Court Act. The court estimates that accommodating these judges, magistrates, and staff requires an additional 29,700 occupiable square feet, plus an undetermined amount for security and other amenities. Obtaining this space will require nonrelated D.C. Courts entities to vacate space to allow renovations, as well as require tenants in other buildings to move to house the staff who have been displaced. The plan calls for renovations under tight deadlines and all required space may not be available, as currently planned, to support the additional judges the Family Court needs to perform its work in accordance with the act, making it uncertain as to when the court can fully complete its transition. For example, D.C. Courts recommends that a portion of the John Marshall level of the H. Carl Moultrie Courthouse, currently occupied by civil court functions, be vacated and redesigned for the new courtrooms and court-related support facilities. Although some space is available on the fourth floor of the courthouse for the four magistrates to be hired by December 2002, renovations to the John Marshall level are tentatively scheduled for completion in July 2003--2 months after the court anticipates having three additional Family Court judges on board. Another D.C. Courts building--Building B--would be partially vacated by non-court tenants and altered for use by displaced civil courts functions and other units temporarily displaced in future renovations. Renovations to Building B are scheduled to be complete by August 2002. Space for 30 additional Family Court-related staff, approximately 3,300 occupiable square feet, would be created in the H. Carl Moultrie Courthouse in an as yet undetermined location. The Family Court act calls for an integrated information technology system to support the goals it outlines, but a number of factors significantly increase the risks associated with this effort, as we reported in February 2002. For example, The D.C. Courts had not yet implemented the disciplined processes necessary to reduce the risks associated with acquiring and managing IJIS to acceptable levels. A disciplined software development and acquisition effort maximizes the likelihood of achieving the intended results (performance) on schedule using available resources (costs). The requirements contained in a draft Request for Proposal (RFP) lacked the necessary specificity to ensure that any defects in these requirements had been reduced to acceptable levels and that the system would meet its users' needs. Studies have shown that problems associated with requirements definition are key factors in software projects that do not meet their cost, schedule, and performance goals. The requirements contained in the D.C. Courts' draft RFP did not directly relate to industry standards. As a result, inadequate information was available for prospective vendors and others to readily map systems built upon these standards to the needs of the D.C. Courts. Prior to issuing our February 2002 report, we discussed our findings with D.C. Courts officials, who generally concurred with our findings and stated their commitment to only go forward with the project when the necessary actions had been taken to reduce the risks to acceptable levels. In that report, we made several recommendations designed to reduce the risks associated with this effort to acceptable levels. In April 2002, we met with D.C. Courts officials to discuss the actions taken on our recommendations and found that significant actions have been initiated that, if properly implemented, will help reduce the risks associated with this effort. For example, D.C. Courts is beginning the work to provide the needed specificity for its system requirements. This includes soliciting requirements from the users and ensuring that the requirements are properly sourced (e.g., traced back to their origin). According to D.C. Courts officials, this work has identified significant deficiencies in the original requirements that we discussed in our February 2002 report. issuing a Request for Information to obtain additional information on commercial products that should be considered by the D.C. Courts during its acquisition efforts. This helps the requirements management process by identifying requirements that are not supported by commercial products so that the courts can reevaluate whether it needs to (1) keep the requirement or revise it to be in greater conformance with industry practices or (2) undertake a development effort to achieve the needed capability. developing a systems engineering life-cycle process for managing the D.C. Courts information technology efforts. This will help define the processes and events that should be performed from the time that a system is conceived until the system is no longer needed. Examples of processes used include requirements development, testing, and implementation. developing policies and procedures that will help ensure that the courts' information technology investments are consistent with the requirements of the Clinger-Cohen Act of 1996 (P.L. 104-106); and developing the processes that will enable the D.C. Courts to achieve a level 2 rating--this means basic project management processes are established to track performance, cost, and schedule--on the Software Engineering Institute's Capability Maturity Model. In addition, D.C. Courts officials told us that they are developing a separate transition plan that will allow them to use the existing (legacy) systems should the IJIS project experience delays. We will review the plan once it is made available to us. Although they recognize that maintaining two systems concurrently is expensive and causes additional resource needs, such as additional staff and training for them, these officials believe that they are needed to mitigate the risk associated with any delays in system implementation. Although these are positive steps forward, D.C. Courts still faces many challenges in its efforts to develop an IJIS system that will meet its needs and fulfill the goals established by the act. Examples of these include: Ensuring that the systems interfacing with IJIS do not become the weak link: The act calls for effectively interfacing information technology systems operated by the District government with IJIS. According to D.C. Courts officials, at least 14 District systems will need to interface with IJIS. However, several of our reviews have noted problems in the District's ability to develop, acquire, and implement new systems. The District's difficulties in effectively managing its information technology investments could lead to adverse impacts on the IJIS system. For example, the interface systems may not be able to provide the quality of data necessary to fully utilize IJIS's capabilities or provide the necessary data to support IJIS's needs. The D.C. Courts will need to ensure that adequate controls and processes have been implemented to mitigate the potential impacts associated with these risks. Effectively implementing the disciplined processes necessary to reduce the risks associated with IJIS to acceptable levels: The key to having a disciplined effort is to have disciplined processes in multiple areas. This is a complex task and will require the D.C. Courts to maintain its management commitment to implementing the necessary processes. In our February 2002 report, we highlighted several processes, such as requirements management, risk management, and testing that appeared critical to the IJIS effort. Ensuring that the requirements used to acquire IJIS contain the necessary specificity to reduce requirement related defects to acceptable levels: Although D.C. Courts officials have said that they are adopting a requirements management process that will address the concerns expressed in our February 2002 report, maintaining such a process will require management commitment and discipline. Court experts report that effective technological support is critical to effective family court case management. One expert said that minimal system functionality should include the identification of parties and their relationships; the tracking of case processing events through on-line inquiry; the generation of orders, forms, summons, and notices; and statistical reports. The State Justice Institute's report on how courts are coordinating family cases states that automated information systems, programmed to inform a court system of a family's prior cases, are a vital ingredient of case coordination efforts. The National Council of Juvenile and Family Court Judges echoes these findings by stating that effective management systems (1) have standard procedures for collecting data; (2) collect data about individual cases, aggregate caseload by judge, and the systemwide caseload; (3) assign an individual the responsibility of monitoring case processing; and (4) are user-friendly. While anticipating technological enhancements through IJIS, Superior Court officials stated that the current information systems do not have the functionality required to implement the Family Court's one family/one judge case management principle. Ensuring that users receive adequate training: As with any new system, adequately training the users is critical to its success. As we reported in April 2001, one problem that hindered the implementation of the District's financial management system was its difficulty in adequately training the users. Avoiding a schedule-driven effort: According to D.C. Courts officials, the act establishes ambitious timeframes to convert to a family court. Although schedules are important, it is critical that the D.C. Courts follows an event-driven acquisition and development program rather than adopting a schedule-driven approach. Organizations that are schedule- driven tend to cut out or inadequately complete activities such as business process reengineering and requirements analysis. These tasks are frequently not considered "important" since many people view "getting the application in the hands of the user" as one of the more productive activities. However, the results of this approach are very predictable. Projects that do not perform planning and requirements functions well typically have to redo that work later. However, the costs associated with delaying the critical planning and requirements activities is anywhere from 10 to 100 times the cost of doing it correctly in the first place. On the whole, even though some important issues are not discussed, the Superior Court's transition plan represents a good effort at outlining the steps it will take to implement a family court. However, the court still faces key challenges in ensuring that its implementation will occur in a timely and efficient manner. The court recognizes that its plan for obtaining and renovating needed physical space warrants close attention to reduce the risk of project delays. In addition, the court has taken important steps that begin to address many of the shortcomings we identified in our February 2002 report on its proposed information system. The court's actions reflect their recognition that developing an automated information system for the Family Court will play a pivotal role in the court's ability to implement its improved case management framework. Our final report on the transition plan may discuss some additional actions the court might take to further enhance its ability to implement the Family Court Act as required. Madam Chairman, this concludes my prepared statement. I will be happy to respond to any questions that you or other members of the subcommittee may have. For further contacts regarding this testimony, please call Cornelia M. Ashby at (202) 512-8403. Individuals making key contributions to this testimony included Diana Pietrowiak, Mark Ward, Nila Garces-Osorio, Steven J. Berke, Patrick DiBattista, William Doherty, John C. Martin, Susan Ragland, and Norma Samuel.
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The District of Columbia Family Act of 2001 was enacted to (1) redesignate the Family Division of the Superior Court of the District of Columbia as the Family Court of the Superior Court, (2) recruit trained and experienced judges to serve in the Family Court, and (3) promote consistency and efficiency in the assignment of judges to the Family Court and in its consideration of actions and proceedings. GAO found the Superior Court made progress in planning the transition of its Family Division to a Family Court, but some challenges remain. The transition requires the timely completion of a series of interdependent plans to obtain and renovate physical space for the court and its functions. Adequate space may not be available to support the additional judges the Family Court needs. Furthermore, the development of the Integrated Justice Information System will be critical for the Family Court's operational effectiveness, its ability to evaluate its performance, and to meet the judicial goals mandated by the Family Court Act.
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The Goals 2000: Educate America Act, which became law in 1994 and was amended in 1996, is intended to promote coordinated improvements in the nation's education system at the state and local levels. All states and the District of Columbia, Puerto Rico, and the U.S. Territories are currently participating in the program. Goals 2000 funds aim to support state efforts to develop clear standards for and comprehensive planning of school efforts to improve student achievement. Funds are provided through title III of the act and are to be used at the state and local levels to initiate, support, and sustain coordinated school reform activities. (See app. II for a listing of allocations.) States can retain up to 10 percent of the funds received each year, and the remainder is to be distributed to districts through a subgrant program. States have up to 27 months to obligate funds; after this time, unobligated funds must be returned to the federal government. Goals 2000 requires states to award subgrants competitively. To comply with this component of the law, states' subgrant programs require districts to compete directly against one another for funding or compete against a standard set of criteria established by the state to determine levels of funding for individual applicants. Some states weigh districts' subgrant proposals against one another and against standard criteria. Prior to the 1996 amendments, Goals 2000 was criticized as being too directive and intrusive in state and local education activities. The act initially required that states submit their education reform plans to the Secretary of Education for review and approval before they could become eligible for grants. The Omnibus Consolidated Rescissions and Appropriations Act of 1996 amended the law by providing an alternative grant application process that did not include the Secretary of Education's approval of a state's education reform plan and eliminated some requirements for state reporting of information to the Department of Education. The amendment also allowed local districts in certain states to apply directly to the Department for Goals 2000 funds, even if their state did not participate at the state level. As a result of the 1996 changes, the Goals 2000 program is essentially a funding-stream grant program with fiscal objectives. These types of grants differ from performance-related grants, which have more immediate, concrete, and readily measurable objectives. Funding-stream grant programs often confine the federal role to providing funds and give broad discretion to the grantee. They are also the least likely of various grant types to have performance information. Goals 2000 does not have specific performance requirements and objectives, and the Department of Education has issued no regulations specifically related to performance by states and districts concerning their activities under Goals 2000. Rather, the Department of Education provides states the latitude to merge Goals 2000 funds with other funds from state and local sources to support state and local reform activities. However, the Department has identified objectives in its annual performance plan that it expects to achieve as a result of this program, along with other education programs. Goals 2000 funds, totaling about $1.25 billion for fiscal years 1994 through 1997, have supported a broad range of education reform activities at both the state and local levels. Of this amount, states reported that about $109 million (9 percent) was retained at the state level where it was used for management, development of statewide standards, and other related purposes. The remaining funding was provided in the form of subgrants to local districts, consortia of districts, individual schools, and teachers. State program officials reported that subgrants supported a broad array of district efforts to promote education reform activities and keep up with new state standards and assessments. These efforts included developing district and school reform plans, aligning local curricula with new assessments, and promoting professional development activities for teachers. Subgrants, with few exceptions, were not used to support health-related activities. (See app. IV for additional information on state subgrants.) As permitted by the act, most states retained a portion of their total Goals 2000 funds at the state level and used it primarily to manage the subgrant program and support state-level activities. (See app. III for state-retained funds by cateogry and fiscal year.) Many states retained less than the maximum amount permitted, and a few states retained almost no funds at all. In some instances, state-retained funds were combined with subgrants to support local initiatives. In the 4-year period that we reviewed, states were able to provide detail on how $62 million in state-retained funds have been used. Of this amount, states primarily used Goals 2000 funds for personnel and benefits and contract services and consultants. (See fig. 1.) Funds were also used for training and travel; printing and postage; equipment and supplies; and rent, telephone, overhead, and other costs not classified elsewhere. The largest category of state-retained funds where detail was available was for funds reported as used for personnel and benefit costs (44 percent). These expenditures typically involved salaries and benefits for state-level staff who managed the state's subgrant program and other state-sponsored education reform activities. Generally, these personnel were responsible for disseminating information on the Goals 2000 program, providing technical expertise to districts regarding grant requirements, assisting district personnel with proposal writing, reviewing districts' subgrant proposals, and managing the subgrant selection process. These staff also typically monitored subgrantees' expenditures and reviewed reports that subgrantees submitted regarding their projects. The remaining state-retained funds where detail was reported were used for contract services, training and travel, printing and postage, equipment and supplies, and other activities. Contract services and consultant fees constituted about 28 percent of state-retained funds. These expenditures were often associated with state efforts to create new standards and assessments, develop new curricula in alignment with the standards, and use outside experts to research and develop these measures. Travel, training, and conference costs, accounting for about 9 percent of total expenditures, typically supported state Goals 2000 panel activities and training for teachers and administrators. These funds were also used to support state conferences designed to educate district and school officials about Goals 2000 and allow them to share information and collaborate on projects. Printing and postage made up 7 percent of state-retained funds, and funds used for equipment and supplies, such as purchasing computer hardware and software, made up another 7 percent. Other expenses--such as rent, telephone costs, overhead, and other costs not classified elsewhere--accounted for the remaining 5 percent of the identified funds.The additional $47 million identified by states as having been retained at the state level had either not yet been spent or could not be identified in detail. Most state officials said that Goals 2000 funding has been an important resource in their states' development of new standards and assessments, but they were unable to estimate how much future Goals 2000 funding they would need to complete these activities. Generally, officials said they were unqualified to make this estimate because their involvement in the state's overall education reform efforts was limited or they viewed the development of standards and assessments as an iterative process that will never be fully complete. We identified 16,375 local subgrants totaling over $1 billion that were awarded with funding provided in fiscal years 1994 through 1997. As shown in table 1, the number of subgrants and total dollar amount of subgrant awards rose each year between fiscal years 1994 through 1996. (Amounts for fiscal year 1997 are incomplete because several states had not yet awarded their subgrants for that year at the time of our review.) Subgrants ranged from a $28 subgrant that funded a reading professional development activity in a single California school to a $6.1 million subgrant for fourth- to eighth-grade reading instruction awarded to the Los Angeles Unified school district. More than 34 percent of the 14,367 school districts nationwide that provide instructional services received at least one Goals 2000 subgrant during the 4-year period reviewed. Many districts received Goals 2000 funding for 2 or more of the years we reviewed. Over the 4-year period reviewed, Goals 2000 subgrants funded several general categories of activities: local education reform projects, professional development, computer equipment and training, preservice training, and standards and assessments. Local education reform projects and professional development, the two largest categories, together account for about two-thirds of the subgrant funding. Some activities fell into a "crosscutting and other" category that reflected activities that had been combined or were too infrequent to categorize separately. In cases where states could not identify a single primary activity for a grant, we classified the grants as having had a crosscutting purpose. (See fig. 2.) Standards and Assessments $50,871,015 Table 2 summarizes some of the activities undertaken with subgrant funds under each of the general categories. Local education reform activities, constituting about 39 percent of total subgrant funding, included activities such as the development of district improvement plans, alignment of local activities with new state education reform plans, and efforts to update curriculum frameworks. For example, Indiana awarded a subgrant to align curricula and instruction and to design and implement an improvement plan that allows secondary schools to build on foundations developed at the elementary schools. In Kentucky, state officials reviewed their comprehensive reform activity and concluded that their plan was missing a public engagement program for parents and community members that would sustain education reform. Thus, the state awarded subgrants to improve public information, boost parental understanding, increase families' understanding of technology, engage parents, and broaden the reach of the school into the community. Professional development activities, representing about 28 percent of Goals 2000 subgrant funding over the 4-year period reviewed, included activities such as updating teacher skills in new teaching approaches and providing enrichment courses for teachers. For example, Tennessee provided a grant for 11 teachers to complete a year-long Reading Recovery training program in strategies to teach the most at-risk first-graders to read. Teachers who participated in the training program subsequently used the strategies to help 63 of 89 at-risk first-graders progress to reading at a level comparable to the average of their class. In the Troy, New York, area, subgrants funded a series of professional development activities for staff providing inservice programs, a curriculum workshop, and training in the use of learning and telecommunications technologies as tools to support innovative instructional processes. Preservice training activities, which involved teachers-in-training and university programs conducting new teacher training, used about 6 percent of the subgrant funds. For example, subgrant projects funded mentor programs in Illinois, where up to 50 percent of new teachers leave the profession after 5 years. In Peoria, Goals 2000 funded a grant allowing education majors in local colleges to attend an educators' fair, observe classes, create projects for classroom use, and meet regularly with selected master teachers from the district. In Delaware, a subgrant funded technology and staff support for a preservice program that allowed second-year student teachers to teach during the day and attend courses by videoconference rather than driving long distances to the state's only university with a preservice training program. Subgrants for computer equipment and training--which are used to buy computer hardware and software, network schools to educational sites on the Internet, and train teachers and staff on the effective use of the new technology--amounted to about 10 percent of total funding. For example, a subgrant in Louisiana allowed a teacher to buy a graphing calculator, which could be used with an overhead projector to help low-performing math students better understand algebra. In some states, districts could purchase technology using Goals 2000 funds if the primary purpose of the subgrants involved meeting state education reform goals. Other states--including New Mexico, Kansas, and Wisconsin--permitted districts to purchase technology using Goals 2000 funds only if the equipment was closely tied to an education reform project. As one Wisconsin official stated, "Districts cannot purchase technology for technology's sake." A few states restricted technology purchases in 1 or more years. Oregon, for example, did not permit districts to purchase high-cost computer equipment using Goals 2000 subgrant funds. However, some states, such as Virginia and Alabama, required all subgrant projects to be associated with technology. Officials in these states told us that they had taken this approach because their states tied their education reform efforts to their state technology plans or because the approach was one of the least controversial purposes available for using Goals 2000 funds. Standards and assessments activities, accounting for about 5 percent of total subgrant funding, included funding for such activities as the development of standards, alignment of current curriculum standards with new state content standards, and the development of new or alternative assessment techniques. For example, state officials in New York said Goals 2000 funds are being used to clarify standards for the core curriculum and to prepare students for the state's regents examination for twelfth-graders--an examination all New York students must pass to graduate from high school. State staff were also developing new assessments using state-retained funds. With Goals 2000 funds, Texas funded the development and dissemination of its Texas Essential Knowledge and Skills (TEKS) program, which informs teachers about what students should know and be able to do. Goals 2000 paid for items such as a statewide public and committee review of TEKS and subsequent revisions; printing and distribution of TEKS following its adoption by the state board; and ongoing support, including statewide centers, resource materials and products, and training related to TEKS. In Louisiana, Goals 2000 project directors reported that teachers in a number of subgrant projects were able to experiment with alternative assessment techniques. Project directors reported that team planning and networking made possible by Goals 2000 grants encouraged more applied learning strategies and the use of alternative approaches to student evaluation, such as portfolios, applied problem solving (especially in math and science), the use of journals, checklists, and oral examinations. These subgrant activities associated with education reform, reflecting districts' crosscutting approaches to meeting education reform goals, accounted for the remaining 12 percent of subgrant funding. In many of these cases, state officials were unable to identify a single focus for subgrant activities because they reflected a combination of activities. Some subgrants, for example, combined development of a district improvement plan (a local education reform activity) with teacher education on the new curriculum (a professional development activity). In Pennsylvania, most of the $41 million in subgrants for the 4-year period had several different areas of focus, such as a district's $462,100 subgrant identified as being for the development and implementation of a local improvement plan, assessments, technology, and preservice teacher training and professional development. Less than two-tenths of 1 percent of Goals 2000 subgrant funding was identified as being used to support health-related education activities. In the 31 subgrants specifically identified as being related to health issues, most involved nutrition and hygiene education efforts that district officials believed were important to the preparedness of their students to learn. For example, a subgrant in New Mexico focused on making children healthier and used subgrant funds to implement a curriculum that taught children about health issues, such as dental care, nutrition, exercise, and problems associated with cigarette smoking and alcohol use. According to a state official, this proposal was in congruence with a comprehensive health component that state officials had originally included in the state's education reform plan because they believed that their reform effort should address barriers to learning. Subgrants to local education agencies supported state education reform efforts. Professional development, preservice training, standards and assessments, and technology subgrants generally were aligned with state standards or reform priorities. Almost all state and local officials said Goals 2000 funds provided valuable assistance to education reform efforts at both the state and local levels and that, without this funding, some reform efforts either would not have been accomplished or would not have been accomplished as quickly. Some officials said Goals 2000 had been a catalyst for some aspect of the state's reform movement, though in most cases the funding served as an added resource for reform efforts already under way. State-level officials voiced strong support for the program's existing funding design. Almost all of the state officials we interviewed told us that Goals 2000 funds furthered their state's and local districts' education reform efforts by providing additional funding that they could use to implement reform plans that they had already initiated. In many cases, state officials said that Goals 2000 state-retained funds or subgrant money allowed the state and districts to accomplish things that would not have been done--or would not have been done as quickly or as well--had it not been for the extra funding provided by Goals 2000. For example, one Oregon official said that Goals 2000 funding was the difference between "doing it and doing it right" and that, without Goals 2000 funds, the state would either not have been able to develop standards or would have had to settle for standards only half as good as the ones that were developed. For example, Goals 2000 funds allowed Oregon to bring in experts, partner with colleges, align standards, create institutes to help teachers with content standards, and articulate the curriculum to all teachers to prepare students for standardized testing. Local officials in Kentucky described how their Goals 2000 funded projects allowed them to make progress in meeting their new state standards and speed their reform efforts. In several cases, state officials reported that Goals 2000 had served as a catalyst for a certain aspect of their reform efforts, such as the development of standards and assessments. For example, in Nevada, a state official said that Goals 2000 was a catalyst for developing content and performance standards that identified what, at a minimum, students would need to master at certain grade levels. Before Goals 2000, the state did not even have the terminology for standards-based reform. Goals 2000 brought terminology and a consistency of ideas regarding standards-based reform, he said. Goals 2000 was also a catalyst for education reform communication in Missouri. One state official reported that Goals 2000 was the vehicle that got schools and universities talking for the first time about issues such as student-teacher preservice training. While the scope of our work did not specifically include ascertaining the view of state education officials on the format of the Goals 2000 funding, most of the officials we interviewed expressed support for continuing the funding in its present format. The Congress has been considering changing the present format of Goals 2000 funding as part of ongoing discussions on how to better assist states in their education reform efforts. Almost every state official told us that flexibility is key to Goals 2000's usefulness in promoting state education reform because states could direct these funds toward their state's chosen education reform priorities. The current level of flexibility, officials told us, allowed states to use their state-retained funding according to self-determined priorities as well as structure their subgrant programs to mesh with their states' education reform plans. As one Washington state official said, Goals 2000 is laid out in the law with broad functions rather than with specific programs, which has had an impact in bringing schools and districts together to increase standards and prioritize issues rather than developing program "stovepipes." A state official from Arizona said that the flexibility permitted in determining how funds will be used allows states that are at different points in the reform process to use the funds according to their own needs--an especially important feature given the wide variation among states with respect to education reform progress. In New York, local and state officials described the Goals 2000 funding as being valuable because it allowed the state to react quickly to problems and opportunities. As one official stated, "It allows you to change the tire while the car is moving." Further, several state officials told us that they did not want more program flexibility, such as placing the funding into block grants that could be used for many purposes in addition to education reform. Generally, these state officials wanted the funding criteria to remain as they are with funds dedicated to systemic education reform purposes at a broad level but permitting flexibility at the state and local levels to determine what would be funded within that broad purpose. For example, Louisiana state officials said that they feared the funding would be used in lieu of current state spending if it were not earmarked for education reform and that this would reduce the level of reform that would occur in the state. In Nevada, an official told us that he did not want Goals 2000 funds to be more flexible because he thought this would cause the state to lose the focus on the standards and improved learning that it has had under Goals 2000. Title III of Goals 2000 provided more than $1.25 billion from fiscal years 1994 through 1997 for broad-based efforts to promote systemic improvements in education. State and local officials believe that Goals 2000 funding has served a useful purpose by helping states to promote and sustain their individual education reform efforts over the past 4 years. While the state-retained portion of funding allowed states to employ staff to coordinate overall reform efforts, the bulk of the funding was distributed as subgrants to thousands of local districts where, according to state and local officials, it enhanced their ability to develop education reform projects, professional development activities, preservice training, and new standards and assessments. Goals 2000 funds have provided an additional resource to enhance education reform efforts and helped states promote and accomplish reforms at an accelerated pace--which state officials believed would not have occurred without this funding. By giving states the flexibility to target funds toward their own education reform goals, states were able to direct funds toward their greatest priorities within the broad constraints of the law. While a program such as this, which entails great latitude in the use of funds and requires little in the way of reporting requirements, reduces some of the states' accountability for process and results, Goals 2000 appears to be accomplishing what the Congress intended--providing an additional and flexible funding source to promote coordinated improvements to state and local education systems. The Department of Education provided written comments on a draft of this report. The Department said that our report represents the most comprehensive review to date of state and local activities supported under Goals 2000 and that it would find this information extremely informative in its consideration of reauthorization proposals. Staff from the Goals 2000 office provided technical comments that clarified certain information presented in the draft, which we incorporated as appropriate. The Department of Education's comments appear in appendix V. Copies of this report are being sent to the Secretary of Education and interested congressional committees. We will also make copies available to others upon request. If you have questions about this report, please call me or Harriet Ganson, Assistant Director, on (202) 512-7014. Other major contributors to this report are listed in appendix VI. We were asked to (1) review the purposes for which Goals 2000 state-retained funds have been used, (2) determine what local projects have been funded using Goals 2000 funds, (3) determine state officials' views about how Goals 2000 relates to state reform, (4) ascertain how much of Goals 2000 funds have been used for developing standards and assessments and what future support is needed for these purposes, and (5) find to what extent Goals 2000 funds have been used for health education activities. For reporting purposes, we combined these questions into two broader objectives: (1) how Goals 2000 funds have been spent at both the state and local levels, including the levels of funding for developing standards and assessments as well as health education, and (2) how state and local officials view Goals 2000 as a means to promote education reform efforts. To conduct our work, we visited 10 states and interviewed federal, state, and local officials in these states. We also reviewed documents from the Department of Education, state departments of education, and the Council of Chief State School Officers; surveyed Goals 2000 coordinators in all states; analyzed quantitative and qualitative data from federal and state Goals 2000 offices and from independent audits; and reviewed the statutory and regulatory requirements of the Goals 2000 program. To obtain information about each assignment objective, we conducted site visits to 10 states, which account for over 32 percent of the 4-year total Goals 2000 funding under review. The sites visited were California, Delaware, Illinois, Kentucky, Louisiana, Maryland, New York, Oregon, South Carolina, and the District of Columbia. The selection of these sites was made on the basis of the 10 states' funding allocations and geographic representation, the number of subgrants awarded, activities we became aware of during our review, and recommendations of the Department of Education and Council of Chief State School Officers. At each site visit location, we interviewed state, district, and school officials to obtain comprehensive and detailed information about how the program has been used to promote education reform. At the state level, we spoke with various officials including state superintendents, Goals 2000 coordinators and staff, and financial officials. At the district level, we spoke with representatives of 71 districts. These included district superintendents, finance or budget officials, district staff, teachers, and students. In addition to the site visits, we also conducted comprehensive telephone interviews with state Goals 2000 coordinators. Both the telephone interviews and the site visits were used to obtain information on how each state has used Goals 2000 funding to support education reform. These interviews also included queries on subgrant selection criteria and processes, financial and programmatic monitoring, and evaluation efforts. We surveyed each state, the District of Columbia, and Puerto Rico to obtain financial and programmatic documentation of their Goals 2000 program. (Although small amounts of Goals 2000 funds are provided to the U.S. Territories and the Bureau of Indian Affairs, we did not review their programs.) We collected this documentation, reviewed it, and cross-checked it with documents and funding reports from the Department of Education and the Council of Chief State School Officers. We also clarified any discrepancies found in the data during our interviews. Documentation provided to us included requests for proposals, state reform plans, progress reports, budget and expenditure reports, and applicable audits. We also gathered and analyzed subgrant summaries from each state containing the name of the recipient, category of the subgrant, and subgrant amounts for all subgrants supported by Goals 2000 funds from fiscal years 1994 through 1997. (See app. IV.) For various reasons, several states were unable to provide details on state-retained funds, subgrant data, or both for 1 or more years. We reviewed title III of the Goals 2000: Educate America Act and analyzed regulations pertinent to the program. This review provided the foundation from which we analyzed the information collected. In conducting the data collection, we relied primarily on the opinions of the officials we interviewed and the data and supporting documents they provided. Although we did not independently verify this information, we requested copies of all state audits pertaining to Goals 2000 and reviewed those we received for relevant findings. We also reviewed, for internal consistency, the data that officials provided us and sought clarification where needed. We did not attempt to determine the effectiveness of the various grant-funded activities or measure the outcomes achieved by the funded projects. We conducted our work in accordance with generally accepted government auditing standards between November 1997 and October 1998. From fiscal years 1994 through 1997, a total of $1,262,740,153 was allocated to the states and the District of Columbia and Puerto Rico. The smallest allocation was $370,124 to Wyoming in 1994; the largest was $54,659,343 to California in 1997. (See table II.1.) Table II.1: Goals 2000 Allocations by State, Fiscal Years 1994 Through 1997 (continued) Fiscal year 1995 and fiscal year 1996 funds were awarded directly to LEAs in Montana, New Hampshire, and Oklahoma on a competitive basis. Direct awards are also being made to LEAs in Montana and Oklahoma with respect to fiscal year 1997 and fiscal year 1998 funds. The Goals 2000: Educate America Act permits states to retain a portion of their total Goals 2000 funds at the state level--up to 40 percent in fiscal year 1994 and 10 percent thereafter--to develop state reform plans and engage in statewide activities. States primarily use this portion to manage the district subgrant program and support state-level activities. Many states retained less than the maximum amount permitted, and a few states retained almost no funds at all. As shown in table III.1 below, states primarily used Goals 2000 funds for personnel and benefits; contract services and consultants; and, to a lesser extent printing, travel, equipment, training, supplies, and conferences. Other expenses such as rent, telephone, and postage (along with indirect and other costs not elsewhere classified) accounted for the remainder. In cases where states could not provide specific categorizations for the state-retained funds they reported, these amounts were included in the "other" category. This appendix provides state-by-state information on subgrants made to local school districts and other organizations. Table IV.1 shows the number and amount of subgrants in total for each state, table IV.2 shows the number of subgrants by category for each state, and table IV.3 shows the dollar amounts of subgrants by category for each state. Total amount of subgrants reported (continued) Table IV.3: Total Dollar Amounts for Subgrants by Category, by State, Fiscal Years 1994 Through 1997 (continued) In addition to those named above, the following individuals made important contributions to this report: Dawn Hoff collected and analyzed state information and drafted major sections of the report, Sonya Harmeyer collected state information and had a lead role in analyzing and developing graphic presentations of the data, Richard Kelley gathered and assisted in the analysis of information from states and the Department of Education, Edward C. Shepherd and Jennifer Pearl assisted in data collection activities, Edward Tuchman provided assistance in analyzing and verifying data, Stanley Stenersen assisted in structuring and reviewing the draft report, and Jonathan Barker of the Office of the General Counsel provided legal assistance. The first copy of each GAO report and testimony is free. Additional copies are $2 each. Orders should be sent to the following address, accompanied by a check or money order made out to the Superintendent of Documents, when necessary. VISA and MasterCard credit cards are accepted, also. Orders for 100 or more copies to be mailed to a single address are discounted 25 percent. U.S. General Accounting Office P.O. Box 37050 Washington, DC 20013 Room 1100 700 4th St. NW (corner of 4th and G Sts. NW) U.S. General Accounting Office Washington, DC Orders may also be placed by calling (202) 512-6000 or by using fax number (202) 512-6061, or TDD (202) 512-2537. Each day, GAO issues a list of newly available reports and testimony. To receive facsimile copies of the daily list or any list from the past 30 days, please call (202) 512-6000 using a touchtone phone. A recorded menu will provide information on how to obtain these lists.
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Pursuant to a congressional request, GAO reviewed the Goals 2000 Program, focusing on determining how: (1) its funds have been spent at both the state and local levels, including the levels of funding for developing standards and assessments as well as health education; and (2) state and local officials view Goals 2000 as a means to promote education reform efforts. GAO noted that: (1) Goals 2000 funds are being used to support a broad range of education reform activities at the state and local levels; (2) grants to states in the 4 fiscal years (FY) that GAO reviewed ranged from $370,000 to Wyoming in FY 1994 to $54.7 million to California in FY 1997; (3) over the 4-year period reviewed, Goals 2000 funds have been broadly disseminated: more than one-third of the 14,367 school districts nationwide that provide instructional services have received at least one Goals 2000 subgrant funded with fiscal years 1994 through 1997 funds; (4) state-retained funds were spent primarily for personnel, contracting services, and consultants involved in fund related activities; (5) districts used Goals 2000 subgrant funds to pay for education reform initiatives centered around several major categories: local education reform; professional development; and technology acquisition and training; (6) other uses included preservice training for college students who plan on becoming teachers; the development of education standards and assessments; and crosscutting and other activities; (7) most states had begun their state education reform efforts prior to receiving Goals 2000 funds, thus Goals 2000 funds have generally served as an additional resource for ongoing state reform efforts; (8) the districts' Goals 2000 activities appear to be aligned with state education reform initiatives; (9) many state officials reported that Goals 2000 has been a significant factor in promoting their education reform efforts and, in several cases, was a catalyst for some aspect of the state's reform movement; (10) state and local officials said that Goals 2000 funding provided valuable assistance and that, without this funding, some reform efforts would not have been accomplished so quickly if at all; (11) state officials told GAO they supported the flexible funding design of the Goals 2000 state grants program as a way of helping them reach their own state's education reform goals, and the program was achieving its purpose of supporting systemic education reform in states and districts; (12) a number of state officials noted that Congress' discussions about combining Goals 2000 funding with other federal funding in block grant approach caused them concern, as they believe the increased flexibility of a block grant could increase the risk that the funds would not be spent on education reform; (13) however, Goals 2000 appears to be accomplishing what Congress intended; and (14) it is providing an additional and flexible funding source to promote coordinated improvements to state and local education systems.
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In the 1980s, FAA began considering how a satellite-based navigation system could eventually replace the ground-based system that had long provided navigation guidance to aviation. In August 1995, after years of study and research, FAA contracted with Wilcox Electric to develop WAAS. However, because of concerns about the contractor's performance, FAA terminated the contract in April 1996. In May 1996, the agency entered into an interim contract with Hughes Aircraft. The interim contract with Hughes was subsequently expanded and became final in October 1996. Under the terms of the WAAS development contract, Hughes will deliver an initial operational capability (Phase 1 WAAS) to FAA by April 1, 1999. The original date written into the Wilcox contract was December 1997. Phase 1 WAAS will be able to support the navigation of aircraft throughout the continental United States for all phases of flight through Category I precision approaches. However, the Phase 1 system will not have sufficient redundancy to continue operations in the event of equipment failures and will have to be backed up by FAA's current ground-based system. FAA expects to conclude the operational testing of Phase 1 WAAS in June 1999 and to commission the system by July 15, 1999. To make WAAS capable of serving as a "sole means" navigation system throughout the United States, FAA plans to expand the system in Phases 2 and 3 of the contract. The Phase 3, or full, WAAS is scheduled to be delivered by October 2001 and commissioned in early 2002. Our August 1997 report on WAAS to this Subcommittee and others provided details on the history of FAA's cost estimates for WAAS. We found that although FAA knew that the facilities and equipment costs for WAAS could exceed $900 million, the agency presented to the Congress a figure that was some $400 million lower. In September 1997, FAA estimated the total life cycle cost of the WAAS program to be $2.4 billion. Of this amount, about $900 million is for facilities and equipment and $1.5 billion is for operations and maintenance through the year 2016. Accuracy, integrity, and availability are the major performance requirements for GPS/WAAS. Accuracy is defined as the degree of conformance of an aircraft's position as calculated using GPS/WAAS to its true position. Integrity is the ability to provide timely warnings when the GPS/WAAS is providing erroneous information and thus should not be used for navigation. Availability is the probability that at any given time GPS/WAAS will meet the accuracy and integrity requirements for a specific phase of flight. WAAS is a system comprising a network of ground stations and geostationary (GEO) communications satellites. Reference stations (up to 54 sites) on the ground will serve as the primary data collection sites for WAAS. These stations receive data from GPS and GEO satellites. Master stations (up to 8 sites) on the ground will process data from the reference stations to determine and verify corrections for each GPS satellite. These stations also validate the transmitted corrections. Ground earth stations (up to 8 sites) will, among other things, receive WAAS message data from the master stations, and transmit and validate the message to the GEO satellites. GEO satellites will transmit wide-area accuracy corrections and integrity messages to aircraft and also serve as additional sources of signals similar to GPS signals. The ground communications system will transmit information among the reference stations, master stations, and ground stations. For pilots to use GPS/WAAS for navigation, their aircraft must be equipped with receivers that process the information carried by the GPS and GEO signals. The receivers will enable the pilots to determine the time and their aircrafts' three-dimensional position (latitude, longitude, and altitude). While system developers and outside experts have confidence that WAAS can achieve most key performance requirements within current cost and schedule estimates, four concerns are worth noting: (1) the ability of WAAS to provide the level of service for precision approaches provided by existing ground-based systems; (2) the ability of computers to process the large quantities of GPS/WAAS data within a few seconds; (3) the vulnerability of GPS/WAAS signals to interference; and (4) the need for additional satellites to achieve the availability requirement. Regarding the first concern, it is uncertain whether WAAS can meet the requirement that the GPS/WAAS signal be available for precision approaches all but about 11 hours per year. Under current definitions based on ground-based navigation technology, a Category I system provides a level of service that allows aircraft to descend to an altitude (height) of not less than 200 feet when visibility is at least 1,800 feet. If WAAS cannot meet this requirement, FAA may incur additional costs to install local area augmentation systems at more airports than expected. The agency may also change the procedures by which pilots can make precision approaches. One procedural option under consideration is that FAA would require pilots to visually recognize additional approach markings before completing a landing. A decision is expected on any needed procedural changes by late 1998. A second concern is the integrity requirement that calls for the system to sound an alarm within 5.2 seconds when it receives hazardously misleading information, such as a correction that is wrong and would result in an aircraft operator being placed in a dangerous situation. The large volume of data that must be processed within a few seconds to meet this requirement is beyond the capabilities of computer data processors that are commercially available. However, FAA is testing newly developed processors and is confident that they will meet the agency's needs. A third concern exists about the possibility that the GPS/WAAS signal could prove vulnerable to unintentional or intentional radiofrequency interference that could affect the signal's availability or accuracy and, ultimately, flight safety. These vulnerabilities are common to ground- and satellite-based navigation aids. Because GPS broadcasts its signal at a very low power level, its signal is somewhat more vulnerable to interference. FAA expects to complete a vulnerability assessment for WAAS in October 1997. Once the assessment is completed, countermeasures, if needed, would be identified. Because of the sensitivity of this issue, we cannot go into details in this public hearing. FAA has stated that it will offer a private briefing for the Subcommittee. A fourth concern is whether FAA may have to add more GEO satellites to meet the availability requirement. FAA requires that GPS/WAAS be available virtually 100 percent of the time--all but about 5 minutes a year--for the phases of flight leading up to precision approaches. Although FAA originally thought it could meet this requirement by using four geostationary communications satellites, the agency may need five or six. If so, FAA could continue using one or two of the GEO satellites currently in space or obtain others. FAA intends to decide on the need for additional satellites by late 2000. Even with the added satellites, there may be isolated areas of air space, such as the far northern and western areas of Alaska, where the requirements may not be met. In such areas, according to FAA officials, FAA intends to use ground-based systems or local area augmentation systems to provide a level of service that is at least equal to what is provided today. The addition of one or two GEO satellites would increase the program cost beyond the current estimate of $2.4 billion. FAA expects that adding one or two GEO satellites would cost between $71 million and $192 million over the WAAS life cycle (2001-2016). FAA faces a very tight time frame for putting the GEO satellites in space. FAA intends to work with the Defense Department to begin the acquisition process this month, but it typically takes 4 years to acquire, launch, and check out a GEO satellite. Given FAA's October 2001 milestone for the delivery of the full WAAS, any delays in putting the GEO satellites in space could cause the WAAS program's schedule to slip. To get the full cost savings from WAAS, FAA will need to decommission its ground-based network of navigation aids, which now costs the agency $166 million annually to maintain. FAA's plan presumes that both its current ground-based system and the new satellite-based system will be in place from the time that the full, Phase 3 WAAS is commissioned until the decommissioning of the ground-based network is completed in 2010. FAA's plan recognizes that a critical factor in the transition will be the widespread installation by commercial and general aviation operators of GPS/WAAS avionics aboard their aircraft. FAA believes that the safety and economic benefits of GPS/WAAS will motivate aircraft operators to install GPS/WAAS avionics in the 5- to 6-year period after the services become available in 2001. The safety improvements include the vertical guidance WAAS will give aircraft during approach and landing at airports where no precision approach capability currently exists. This guidance enables aircraft to follow a smooth glide path safely to the runway. Other benefits include the cost savings that aircraft operators could realize by using one type of navigation equipment in the cockpit for all phases of flight and by flying more direct, fuel-efficient routes. FAA also expects that when it begins decommissioning ground-based navigation aids, aircraft that are not equipped with GPS/WAAS avionics will have to fly less direct routes and will have limits on the precision approach options available to them. As a result, there will be added incentives for aircraft operators to switch to satellite technology. Nevertheless, FAA's plans could be impeded if the WAAS program's schedule slips or if safety and economic benefits are not sufficient to cause the aviation industry to switch quickly to satellite technology. As already discussed, the primary concern about whether the WAAS requirements can be achieved on time is the potential for delays in putting the communications satellites in space. Economic considerations, however, could cause commercial and general aviation aircraft operators to switch to GPS/WAAS avionics more slowly than FAA envisioned in its Transition Plan. According to the U.S. GPS Industry Council, the typical GPS receiver used by large commercial aircraft costs between $20,000 and $50,000, and the typical GPS receiver used by smaller general aviation aircraft capable of flying when visibility is limited costs between $5,000 and $15,000. Database changes needed to keep the receivers up to date now cost $70 to $100 a month. Expenses for installing the equipment and training the pilots to use it would be additional. "Airspace users must have a compelling reason to change from their current ground-based avionics to space-based avionics. Simply stating that the technology is better is not enough. There must be real operational benefits for changing or the equipment will have to mandated. Otherwise, avionics change will be extremely slow." The organization representing general aviation, the Aircraft Owners and Pilots Association, has argued that the present cost of GPS/WAAS avionics, including the cost of maintaining a current database, is not affordable for all segments of the general aviation community. Representatives of the Association told us that FAA's plan for decommissioning by 2010 would be realistic if (1) FAA provides routes that are more direct, (2) more inexpensive avionics are available, (3) FAA places a high priority on certifying approach procedures where none currently exist, (4) inexpensive database updates for GPS receivers can be obtained electronically from FAA, and (5) FAA does not require aircraft operators to incur the added expense of carrying redundant (dual) GPS/WAAS receivers. FAA is currently working with industry to resolve these concerns. Even if the Association's concerns are satisfied, however, FAA could still face a slower-than-expected conversion to GPS/WAAS avionics if individual aircraft operators do not conclude that the benefits of installing the new navigation equipment outweigh their costs. FAA would then have to make a difficult choice--either slow down its decommissioning of ground-based navigation aids or, in effect, require conversion by proceeding with decommissioning as planned. In making investment decisions, FAA conducts benefit-cost analyses to determine if the benefits to be derived from acquiring new equipment outweigh the costs. In the case of WAAS, the benefits to the government include the cost savings from reduced maintenance of the existing, ground-based network of navigation aids and the avoidance of capital expenditures for replacing those aids. The benefits to aircraft operators--the users of the system--include the reduction in accident-related costs (from death, injury, and property damage) because WAAS landing signals would be available at airports that currently lack precision landing capability. Operators could also realize "direct route" savings that result from the shorter flight times on restructured, more direct routes that aircraft can fly using GPS/WAAS. The costs include the life cycle costs for WAAS facilities and equipment as well as operations and maintenance. Despite differing assumptions used in calculating benefit-cost ratios, FAA's analyses dating back to 1994 have always found WAAS to be a cost-beneficial investment--that is, the benefits clearly exceeded the costs, resulting in benefit-cost ratios in excess of 1. The most recent 1997 analysis found (1) a 5.2 ratio of benefits to costs when passenger time savings were included in the direct route benefits and all aircraft would gain a savings of 1 minute per flight from shorter routes, and (2) a 2.2 ratio when passenger time savings were excluded and 30 percent of all aircraft would gain a savings of 1 minute per flight. When these two cases were evaluated in dollar terms, the net benefits of WAAS were $5.3 billion and $1.5 billion, respectively. (See app. II for details on FAA's benefit-cost analyses for the WAAS program in 1994, 1996, and 1997.) To understand the impact of the potential cost increases and decommissioning delays previously discussed, we requested that FAA's support contractor perform alternative runs of the benefit-cost analysis.FAA's 1997 analysis served as the base case for comparison purposes. One pessimistic scenario that we requested made the following alternative assumptions from the base case: (1) the development cost of the primary WAAS contract would increase by 15 percent, (2) the leasing costs for communications satellites would increase by 50 percent, and (3) the decommissioning of the ground-based navigation aids would be delayed by 5 years. Using these assumptions, the contractor's analysis found that the benefit-cost ratio would be 4.6 when passenger time savings were included and all aircraft gained savings from shorter flights and 1.7 when passenger time savings were excluded and 30 percent of all aircraft gained savings from shorter flights. In dollar terms, net benefits declined substantially--about $490 million--when going from the base case to the pessimistic scenario. When scenarios were run using the three assumptions in turn, the analysis showed that the decommissioning delay of 5 years caused about $370 million of the decline in net benefits. The cost increases for contract development and satellite leasing contributed the remainder. We also asked for a run with a more pessimistic scenario in which the contract development and satellite leasing costs would increase by the same amount but ground-based navigation aids would never be decommissioned. In this case, the decline in net benefits totaled about $700 million. Ultimately, even when pessimistic assumptions were used, the analysis found that the benefits of the WAAS program still clearly outweighed its costs. However, delays in decommissioning or the retention of ground-based navigation aids would cause substantial decreases in the net benefits of the WAAS program. We received comments on a draft of this testimony from officials of the Department of Transportation and FAA, including FAA's Deputy Program Manager of the GPS Integrated Product Team and the WAAS Program Manager. These officials expressed general agreement with the findings of the testimony, considered it well-balanced, and provided clarifying and technical suggestions, which we incorporated as appropriate. Mr. Chairman, this concludes our statement. I would be happy to answer any questions that you or other Members of the Subcommittee may have. Availability: Probability that the system will provide an accurate and continuous navigation signal for each phase of flight En route through nonprecision approach: 99.999% availability (i.e., unavailable less than 5 minutes a year) FAA may need to add one or two GEO satellites to the four it planned to procure. Also, FAA is investigating the optimal placement of GEO satellites in orbit. But in isolated areas such as the far northern and western areas of Alaska the requirement may not be met. Precision approach: 99.9% available (i.e., unavailable 11 hours a year) FAA may field up to 54 ground stations, and Canada and Mexico may field up to 21. Between late 1998 and mid-1999, FAA will determine how many ground stations are needed based on system test results. FAA may be required to make changes to approach procedures to meet this requirement. Accuracy: Percentage of time that an aircraft's GPS position is within a given distance of the aircraft's true position En route through nonprecision approach: Within 100 meters 95% of the time--During periods when this standard cannot be met (up to a cumulative 72 minutes a day), system safety will be guaranteed by a proposed 2-mile horizontal protection limit. Within 500 meters 99.999% of the time--During periods when this standard cannot be met (up to a cumulative 6 seconds a day), system safety will be guaranteed by a proposed 2-mile horizontal protection limit. No major concerns have been raised by system developers or outside parties about these requirements because the existing GPS already guarantees this level of performance. Feasibility testing at FAA's National Satellite Test Bed (NSTB) has validated that these requirements have been met. FAA will revalidate whether the WAAS software and hardware will achieve these requirements. Precision approach: Within 7.6 meters 95% of the time--During periods when this standard cannot be met (up to a cumulative 72 minutes a day), system safety will be guaranteed by a proposed 63-foot horizontal and vertical protection limit. No major concerns have been raised by system developers or outside parties about this requirement. FAA's NSTB has achieved this level of accuracy. During WAAS software and hardware testing, FAA will validate that this requirement can be met. (continued) Integrity: Ability of the system to provide users with timely warnings about erroneous information Probability that the system will not detect hazardously misleading information En route through nonprecision approach: 1 chance in 10 million during 1 hour of system operation Precision approach: 1 chance in 400 million per approach (an approach is the final 2-1/2 minutes of flight) No major concerns have been raised by system developers and outside parties about these requirements. FAA plans to acquire safety-certified equipment and software, and during hardware and software testing also plans to collect and analyze data to provide increased assurance that the requirements will be met. The feasibility of meeting the 5.2-second requirement (and, therefore, the 8-second requirement) has been demonstrated at FAA's NSTB. But as WAAS processes more data, its ability to meet the requirement may decline. FAA's present analysis shows that the requirement is being marginally satisfied. FAA is looking at faster processing equipment to accommodate the expected increase in data. FAA may need to add one or two GEO satellites to the four it planned to procure or it may have to relax the requirement. Experts believe relaxing the requirement may be possible, but FAA has to determine the impact on safety if, in the event of a catastrophic loss of both GPS and WAAS, air traffic controllers might have to rely on radar to separate and direct aircraft. No major concerns have been raised by system developers or outside parties because existing aircraft systems have demonstrated this ability. During testing, FAA will review contractor data to validate that the integrity requirement can be met. Precision approach: Per approach, 1 chance in 550,000 that the accuracy and integrity requirements will not be met (an approach is the final 2-1/2 minutes of flight) No major concerns have been raised by system developers or outside parties about this requirement on the basis of the preliminary analysis. But because of the volume of data needed to validate compliance with this requirement, FAA is gathering additional data and exploring alternative methods for validating that the requirement can be met. (continued) FAA may need to add one or two GEO satellites to the four it planned to procure. Also, FAA is investigating the optimal placement of GEO satellites in orbit. But in isolated areas such as eastern Canada and oceanic airspace the requirement may not be met. FAA may field up to 54 ground stations, and Canada and Mexico may field up to 21. Between late 1998 and mid-1999, FAA will determine how many ground stations are needed based on system test results. FAA may be required to make changes to approach procedures to meet this requirement. The results of FAA's benefit-cost analyses of the WAAS program in 1994, 1996, and 1997 are summarized in table II-1. On the benefit side, benefits to the government accrue from the reduced maintenance of the existing, ground-based network of navigation aids and the avoidance of capital expenditures for replacing these aids. Benefits to users--the aircraft operators--fall into five categories: Efficiency benefits derive from having precision landing capability at airports where it does not now exist. Avionics cost savings reflect how GPS/WAAS will enable users to reduce the proliferation of avionics equipment in their cockpits. Fuel savings reflect the use of less fuel to fly aircraft that carry less avionics equipment. Safety benefits stem from the reduction in accident-related costs (death, injury, and property damage) because of the availability of WAAS landing signals at airports that presently lack a precision landing capability. Direct route savings result from the shorter flight times associated with restructured, more direct routes that aircraft can fly. FAA's 1997 benefit-cost analysis took a more conservative approach than previous versions of the model in estimating the benefit-cost ratio. That is, compared with the previous analyses, the assumptions underlying the current study increased the expected costs of WAAS and simultaneously reduced the expected benefits, which resulted in a lower benefit-cost ratio than found in the previous versions of the study. The higher total costs in the 1997 version were largely due to the inclusion of the costs of decommissioning land-based navigation systems that were not included in any earlier versions of the study. On the benefit side, several changes in key assumptions led to reduced expected benefits including (1) a shorter life cycle for the project, (2) a reduction in the assumed "saved" costs from phasing out ground-based navigation systems, (3) a reduction in estimated safety benefits based on the use of the more recent accident data, and (4) a reduction in the expected flight time savings resulting from more direct routes. National Airspace System: Questions Concerning FAA's Wide Area Augmentation System (GAO/RCED-97-219R, Aug. 7, 1997). Air Traffic Control: Improved Cost Information Needed to Make Billion Dollar Modernization Investment Decisions (GAO/AIMD-97-20, Jan. 22, 1997). Global Positioning System Augmentations (GAO/RCED-96-74R, Feb. 6, 1996). National Airspace System: Assessment of FAA's Efforts to Augment the Global Positioning System (GAO/T-RCED-95-219, June 8, 1995). Air Traffic Control: Status of FAA's Modernization Program (GAO/RCED-95-175FS, May 26, 1995). Aviation Research: Perspectives on FAA's Efforts to Develop New Technology (GAO/T-RCED-95-193, May 16, 1995). National Airspace System: Comprehensive FAA Plan for Global Positioning System Is Needed (GAO/RCED-95-26, May 10, 1995). Global Positioning Technology: Opportunities for Greater Federal Agency Joint Development and Use (GAO/RCED-94-280, Sept. 28, 1994). Airspace System: Emerging Technologies May Offer Alternatives to the Instrument Landing System (GAO/RCED-93-33, Nov. 13, 1992). The first copy of each GAO report and testimony is free. Additional copies are $2 each. Orders should be sent to the following address, accompanied by a check or money order made out to the Superintendent of Documents, when necessary. VISA and MasterCard credit cards are accepted, also. Orders for 100 or more copies to be mailed to a single address are discounted 25 percent. U.S. General Accounting Office P.O. Box 37050 Washington, DC 20013 Room 1100 700 4th St. NW (corner of 4th and G Sts. NW) U.S. General Accounting Office Washington, DC Orders may also be placed by calling (202) 512-6000 or by using fax number (202) 512-6061, or TDD (202) 512-2537. Each day, GAO issues a list of newly available reports and testimony. To receive facsimile copies of the daily list or any list from the past 30 days, please call (202) 512-6000 using a touchtone phone. A recorded menu will provide information on how to obtain these lists.
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GAO discussed the Federal Aviation Administration's (FAA) Wide Area Augmentation System (WAAS) program, focusing on: (1) the likelihood of WAAS satisfying key performance requirements within current program cost and schedule estimates; (2) the importance of avoiding delays in FAA's timetable for shutting down (decommissioning) ground-based navigation aids; and (3) the potential impact of cost increases and decommissioning delays on the benefit-cost analysis for the WAAS program. GAO noted that: (1) while the developers of WAAS and outside experts are confident that WAAS is likely to satisfy most key performance requirements within current program cost and schedule estimates, some concerns are worth noting; (2) specifically, FAA may make some procedural changes for aircraft landings if WAAS is not able to deliver the level of service provided by existing ground-based landing systems; (3) also, FAA may add more space-based equipment to meet performance requirements; (4) FAA expects to make decisions on these matters by late 1998 and late 2000, respectively; (5) if the space-based equipment is added, program costs would grow between $71 million and $192 million above the current total program cost estimate of $2.4 billion; (6) the program's schedule can be expected to slip if arrangements are not made immediately to put this equipment in space; (7) to realize the full cost savings from WAAS, FAA will need to avoid delays in decommissioning its ground-based network of navigation aids; (8) FAA estimates that it incurs costs of $166 million annually to maintain this ground-based network; (9) FAA's plans--which envision complete decommissioning of the network by 2010--presume that the full WAAS will become operational (commissioned) in 2001 and that the aviation industry will install the necessary equipment in its aircraft during the remainder of that decade; (10) however, the planned decommissioning could be delayed if the WAAS program's schedule slips or if safety and economic benefits, such as an aircraft's ability to take advantage of more fuel-efficient routes, are not sufficient to cause the industry to switch to satellite-based navigation technology by the end of the next decade; (11) cost increases and decommissioning delays, if they occur, would reduce the net benefits of the WAAS program, but program benefits would still outweigh costs; (12) FAA's July 1997 benefit-cost analysis found that benefits were: (a) more than five times greater than costs when passenger time savings were included and all aircraft gained savings from shorter flights; and (b) more than two times greater than costs when passenger time savings were excluded and 30 percent of all aircraft gained savings from shorter flights; (13) additional analyses done at GAO's request, using pessimistic cost and decommissioning assumptions, found that the WAAS program's benefits are still significantly greater than the costs; and (14) however, if the ground-based navigation network is not decommissioned or must remain in place much longer than expected, the net benefits from WAAS would be substantially reduced.
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FMCSA's primary mission is to reduce the number and severity of crashes involving large commercial trucks and buses conducting interstate commerce. It carries out this mission in the following ways: issuing, administering, and enforcing federal motor carrier safety and hazardous materials regulations; and gathering and analyzing data on motor carriers, drivers, and vehicles, among other things. FMCSA also takes enforcement actions and funds and oversees enforcement activities at the state level through Motor Carrier Safety Assistance Program grants. For-hire motor carriers are required to register with FMCSA and obtain federal operating authority before operating in interstate commerce. Applicants for passenger carrier operating authority must submit certain information to FMCSA, including contact information and U.S. Department of Transportation (DOT) number, and must certify that they have in place mandated safety procedures. After publication of the applicant's information in the FMCSA Register, a 10-calendar-day period begins in which anyone can challenge the application. Within 90 days of the publication, the carrier's insurance company must file proof of the carrier's insurance with FMCSA. Applicants must also designate a process agent, a representative upon whom court orders may be served in any legal proceeding. After FMCSA has approved the application, insurance, and process agent filings, and the protest period has ended without any protests, applicants are issued operating authority. FMCSA ensures that carriers, including motor coach carriers, comply with safety regulations primarily through compliance reviews of carriers already in the industry and safety audits of carriers that have recently started operations. Compliance reviews and safety audits help FMCSA determine whether carriers are complying with its safety regulations and, if not, to take enforcement action against them, including placing carriers out of service. FMCSA makes its compliance determination based on performance in six areas: one area is the carrier's crash rate, and the other five areas involve the carrier's compliance with regulations, such as insurance coverage, driver qualifications, and vehicle maintenance and inspections. Carriers are assigned one of three Carrier Safety Ratings based on their compliance with the Federal Motor Carrier Safety Regulations (FMCSR). These ratings include "satisfactory," for a motor carrier that has in place and functioning adequate safety management controls to meet federal safety fitness standards; "conditional," for a motor carrier that does not have adequate safety management controls in place to ensure compliance with the safety fitness standard, that could result in a violation of federal safety regulations; or "unsatisfactory," for a motor carrier that does not have adequate safety management controls in place to ensure compliance with the safety fitness standard, which has resulted in a violation of federal safety regulations. Carriers receiving an unsatisfactory rating have either 45 days (for carriers transporting hazardous materials in quantities that require placarding or transporting passengers) or 60 days (for all other carriers) to address the safety concerns. If a carrier fails to demonstrate it has taken corrective action acceptable to FMCSA, FMCSA will revoke its new entrant registration and issue an out-of-service order, which prohibits the carrier from operating until the violations are corrected. Further fines are assessed if it is discovered that it is operating despite the out-of-service order. Federal law requires new carriers to undergo a new-entrant safety audit within 18 months of when the company begins to operate. Carriers are then monitored on an ongoing basis using various controls that include but are not limited to annual vehicle inspections and driver qualification regulations. However, FMCSA may suspend a company or vehicle's operation at any time by ordering it out of service if it determines that an imminent safety hazard exists. (An imminent hazard means any condition of vehicle, employee, or commercial motor vehicle operations which substantially increases the likelihood of serious injury or death if not discontinued immediately.) In addition, FMCSA orders carriers out of service for failure to pay civil penalties levied by FMCSA, failing to take required corrective actions related to prior compliance reviews, or failing to schedule a safety audit. Out-of-service carriers are supposed to cease operations and not resume operations until FMCSA determines that they have corrected the conditions that rendered them out of service. If a carrier fails to comply with or disregards an out-of-service order, FMCSA may assess a civil monetary penalty each time a vehicle is operated in violation of the order. FMCSA and state law enforcement agencies use several methods to ensure that carriers ordered out of service, including motor coach companies, do not continue to operate. For example, FMCSA and its state partners monitor data on roadside inspections, moving violations, and crashes to identify carriers that may be violating an out-of-service order. FMCSA will visit some suspect carriers that it identifies by monitoring crash and inspection data to determine whether those carriers violated their orders. Also, recently, the Commercial Vehicle Safety Alliance began to require checking for carriers operating under an out-of-service order during roadside inspections and to take enforcement action against any that are. However, given the large size of the industry, the nation's extensive road network, and the relatively small size of federal and state enforcement staffs, it is difficult to catch motor coach carriers that are violating out-of- service orders. In addition, some carriers change their identities by changing their names and obtaining new DOT numbers--these carriers are generally referred to as reincarnating carriers--to avoid being caught. Our analysis of FMCSA data for fiscal years 2007 and 2008 identified 20 motor coach companies that likely reincarnated from "out-of-service" carriers. This represents about 9 percent of the approximately 220 motor coach carriers that FMCSA ordered out of service for those fiscal years. The analysis was based on two or more exact matches of data for the new entrant with the data for the out-of-service carriers on the following categories: company name, owner/officer name, address, phone number, cell phone number, fax number, vehicle identification number, and driver names. These 20 motor coach companies registered with FMCSA before FMCSA developed processes specifically for detecting reincarnated bus companies that were established subsequent to the Sherman, Texas, crash (see next section). The number of potential reincarnated motor coach carriers is understated because (1) our analysis was based on exact matches, so it could not find links if abbreviations were used or typos occurred in the data, (2) FMCSA only provided us data on vehicles and drivers when an accident or inspection took place, and thus the provided FMCSA data does not include the entire population of vehicles or drivers for either new entrants or out-of-service carriers, and (3) our analysis could not identify owners who purposely provided FMCSA bogus or otherwise deceptive information on the application (e.g., ownership) to hide the reincarnation from the agency. Although the number of reincarnated motor coach carriers that we could identify was relatively small, the threat these operators pose to the public has proven deadly. According to FMCSA officials, registration and enforcement policies at the time of the Sherman, Texas, crash, reincarnation was relatively simple to do and hard to detect. As a result, motor coach carriers known to be safety risks were continuing to operate, such as the company that was involved in the bus crash in Sherman, Texas. Five of the reincarnated carriers we identified were still operating as of May 2009. Our investigation found one of them had not received a safety evaluation and two carriers had been given a conditional rating after the agency determined its safety management controls were inadequate. The remaining two motor coach carriers were deemed satisfactory in a FMCSA compliance review because FMCSA inspectors were likely not aware of the potential reincarnations. We referred all five companies to FMCSA for further investigation. Based on our review of FMCSA data, we found that the agency already identified six of the 20 reincarnated motor coach carriers and ordered them out of service. The agency discovered them while performing a crash investigation (as in the case of the bus accident in Sherman, Texas), compliance reviews, or other processes. In addition, new carriers are subject to a safety audit within 18 months. Several of the reincarnated carriers we identified were small businesses located in states neighboring Mexico and making trips across the border. Our investigation also determined that all of the reincarnated motor coach carriers we identified were directly related to companies that received fines for safety problems shortly before being ordered out of service. Based on our analysis of the FMCSA data, we believe they reincarnated to avoid paying these fines and continue their livelihood. For example, we found instances where carriers continued to operate despite being ordered out of service for failure to pay their fines. In fact, one carrier was operating for several months after being placed out of service. We believe that these carriers reincarnated into new companies to evade fines and avoid performing the necessary corrective actions. We attempted to contact the owners to ask why they reincarnated but were unable to reach many of them. For the six owners that we did interview none said that they had shut down their old companies and opened new ones to evade the out-of-service orders. Table 1 summarizes information on 10 of the 20 cases that we investigated. Appendix II provides details on 10 others we examined. Appendix III provides a summary of the key data elements that matched on the new entrants that were substantially related to out-of-service carriers. The following narratives provide detailed information on three of the more egregious cases we examined. Case 1: The owner of a Houston motor coach company registered a new carrier with the same phone number, fax number, and cell phone number as the old one. The new company started in March 2007, 8 months before FMCSA ordered the old company out of service. The two companies appear to have operated simultaneously for a period of time. Six days after the new company was formed, a motor coach carrying 16 passengers operated by the old company was stopped and inspected on the United States-Mexico border at Laredo, Texas. The old company was charged with five violations, including "Operating without required operating authority." The old company owes $2,000 in fines. Our investigators contacted one of the owner's daughters. She stated that her mother was arrested for possessing drugs when she crossed the border from Mexico into the United States, and that her mother subsequently opened another bus company using another daughter's name. The daughter said she was not involved with the bus company. In 2008, the new carrier's new entrant registration was revoked and the owner was convicted of cocaine possession. Case 2: The owner of a New York motor coach company located at a church registered a new carrier using the same fax number, driver, and vehicle as the old one. FMCSA conducted a compliance review for the old company on May 30, 2007. Five safety violations were identified, including one "Acute" violation for "Failure to implement an alcohol and/or controlled substances testing program." The old company, which was ordered out of service in October 2007 for failing to pay a fine, still has $2,000 in outstanding fines as of May 2009. On August 9, 2007, approximately 2 months prior to FMCSA ordering the old company out of service, a new carrier was established with the same company officer name and fax number as the old carrier. The location of the old carrier was a school, which was associated with (and located next door to) the church. The owner of the new company claimed that the old company belonged to his father, not him, and that it was a "completely different business from his own." FMCSA records clearly show that this is not the case. The new owner is listed as "Vice President" of the old company, and "President" of the new company. The owner of the new company is also cited as being present during the Compliance Review conducted on May 30, 2007. The new company registered with FMCSA in August 2007 and FMCSA has not conducted a new-entrant safety audit of the new carrier as of July 2009, exceeding FMCSA's internal goal of 9 months. Case 3: The owner of a Los Angeles motor coach company registered a new carrier using the same social security number, business name, phone number, fax number, and company officer as the old one. FMCSA conducted a compliance review on the old company in December 2006, resulting in an "Unsatisfactory" safety rating. The review cited 11 safety violations, including one "Acute" violation for "Failure to implement an alcohol and/or controlled substances testing program" and four "Critical" violations for failure to maintain driver and vehicle records. Since the old company did not take the necessary steps to fix the violations within 45 days, it was ordered out of service in February 2007. A month later a motor coach operated by the old company was inspected in Douglas, Arizona. The company was charged with operating a commercial motor vehicle after the effective date of an "unsatisfactory" rating and fined $5,620. The same owner started the new company in June 2008. FMCSA conducted a compliance review on the new carrier and gave it a "satisfactory" safety rating in October 2008. FMCSA officials stated that they were not aware of any affiliation with the previous company. Our investigators visited the place of business of the new carrier, which was being run out of a retail store. Although the old carrier was out of service, several brochures and business cards for the old carrier were displayed on the store's counter, showing the same phone number as the new company. We attempted to contact the owner, but the business representative stated that the owner was currently in Mexico as the driver on a bus tour and could not be contacted. A week after our interview, unrelated to our investigation, FMCSA revoked the new company's authority due to lack of insurance. Prior to the August 2008 crash in Sherman, Texas, FMCSA did not have a dedicated processe to identify and prevent motor coach carriers from reincarnating. At that time, an out-of-service carrier could easily apply online for a new DOT number and operating authority. In the application, the owner could include the same business name, address, phone number(s), and company officer(s) that already existed under the out-of- service DOT carrier. FMCSA did not have a process to identify these situations, and, thus, FMCSA would have granted the new entrant operating authority upon submission of the appropriate registration data. Subsequent to the Sherman crash, FMCSA established the Passenger Carrier Vetting Process (PCVP), which requires the review of each new application for the potential of being a reincarnation. Under this process, FMCSA executes a computer matching process to compare information contained in the motor coach carrier's application to data of poor- performing motor coach carriers dating back to 2003. Specifically, it performs an exact match on the application with fields in nine categories across various FMCSA databases. This produces a list of suspect carriers and the number of matches in each category, which serve as indicators for further investigation. FMCSA officials stated that they have begun to enhance the computer-matching portion of the PCVP process. Specifically, the system will also be able to match fields that are close, but not necessarily exact matches of each other. For instance, "John P. Smith Jr." would match "John Smith," and "Maple Ln." would match "Maple Lane." This enhancement should improve its ability to detect those carriers attempting to disguise their prior registration. In addition to the computer matching, FMCSA Headquarters personnel receive and review each new carrier application for completeness and accuracy. It reviews the application for any red flags or evidence the company is a potentially unsafe reincarnated motor coach carrier. For example, the FMCSA staff check secretaries of state databases for the articles of incorporation to identify undisclosed owners. If the computer- matching process or FMCSA Division Office review identifies any suspected motor coach carriers attempting to reincarnate, FMCSA sends a Verification Inquiry letter to the applicant requesting clarification. If the carrier does not respond to the Verification Inquiry Letter within 20 days, the application will be dismissed. If the response to the letter shows the applicant is attempting to reincarnate, FMCSA issues a Show Cause Order stating that the application for authority will be denied unless the carrier can present evidence to the contrary. If the application is not completed, FMCSA dismisses the application and thus no authority is given. After the carrier is approved to operate, FMCSA requires all new carriers, including motor coach carriers, to undergo a safety audit within 18 months of approval. During this review, FMCSA should identify whether the new motor coach company is a reincarnation of a prior carrier. Although we did not specifically evaluate the effectiveness of the new-entrant audit process, we found two cases where FMCSA did not identify new motor coach carriers as reincarnations of companies it had ordered out of service and after the PCVP went into effect. Because we did not evaluate the effectiveness of the new-entry safety audit and the PCVP, we do not know the extent to which reincarnated carriers are still able to avoid FMCSA detection when registering to operate with the agency. GAO recently reported that PRISM provides up-to-date information on the safety status of the carrier responsible for the safety of a commercial vehicle prior to issuing or renewing vehicle registrations. PRISM generates a daily list of vehicles registered in the state that are associated with carriers that have just been ordered out of service by FMCSA. It is a tool that can be used by state personnel. PRISM's innovation is that it is designed to associate vehicle identification numbers with out-of-service carriers to prevent the carrier from registering or reregistering its vehicles. Although PRISM is a potential deterrent to a carrier wishing to reincarnate, only 25 states have implemented the system to the extent that they can automatically identify out-of-service carriers and then deny, suspend, or revoke their vehicle registrations. Another limitation to PRISM's effectiveness is that it only includes vehicles that register under a protocol known as the International Registration Plan (IRP)--which pertains only to carriers involved in interstate commerce. Charter buses are exempt from IRP (interstate) registration and thus not subject to PRISM. Furthermore, vehicles are not checked at registration since companies are not required to supply this information on their application to FMCSA. FMCSA's duty and authority to deny operating authority registration to persons not meeting statutory requirements is provided by statute. A person applying for registration must demonstrate that he or she is willing and able to comply with the safety regulations, other applicable regulations of the Secretary, and the safety fitness requirements. Complexities regarding the application of State laws on corporate successorship may, in certain instances, affect the agency's ability to deny operating authority to or pursue enforcement against unsafe reincarnated motor carriers under these statutory provisions. The complexities include the legal standard that must be met to hold a newly formed corporation liable for civil penalties assessed against its corporate predecessor. The facts necessary to satisfy the legal standard--whether under federal or State law--require documentation outside the normal compliance review processes. FMCSA uses a detailed Field Worksheet which lists types of evidence that would be needed, including company contact information, documentation on management and administrative personnel, business assets, tax records, insurance, payroll, drivers, vehicles, customer lists, advertising and promotional materials, corporate charters, and information on the corporate acquisition or merger at issue. This labor intensive investigative process is not undertaken unless strong preliminary evidence indicates that the new company is a reincarnation of a former motor carrier against which enforcement was taken and that the reincarnation was for the purpose of evading enforcement action or violation history of the predecessor company. In order to make it easier for FMCSA to place a reincarnated carrier out of service, the Highways and Transit Subcommittee of the Committee on Transportation and Infrastructure of the House of Representatives approved legislation on June 24, 2009, that would impose a uniform federal standard and would authorize FMCSA to deny or revoke operating authority from a carrier who failed to disclose a relationship with a prior carrier. The legislation would also authorize FMCSA, in certain cases, to impose civil penalties against a reincarnated motor carrier that were originally imposed against a related motor carrier. We briefed U.S. Department of Transportation (DOT) officials on the results of our investigation. They agreed that reincarnation of motor coach carriers is an important concern but stated that there are legitimate reasons for motor coach carriers to transfer ownership or reincorporate, or both, such as divorce, death, relocation, or new business opportunities. DOT officials stated that they established the PCVP to identify and attempt to prevent reincarnated carriers from receiving approval for operating authority. DOT officials stated that the PCVP is also used for household goods carriers and that they hope to use the process for other types of carriers if they obtain the resources to support this process. However, DOT officials stated that even if DOT has identified a carrier as a reincarnation, DOT must still prove that the new carrier is the corporate successor to the old carrier in order to deny or revoke the operating authority of the new carrier. DOT officials stated that this standard differs between states and that certain states require a very high standard of proof. As such, this determination is labor-intensive and requires documentation outside the normal compliance review process. DOT officials also provided technical comments to the report, which we addressed, as appropriate. As agreed with your office, unless you announce the contents of this report earlier, we will not distribute it until 3 days after its issue date. At that time, we will send copies of this report to the Secretary of Transportation and other interested parties. In addition, the report will be available at no charge on GAO's Web site at http://www.gao.gov. If you or your staff have any questions regarding this report, please contact me at (202) 512-6722 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix IV. To identify new entrants that were substantially related to motor carriers ordered out of service, we obtained and analyzed information from the following DOT databases: the Motor Carrier Management Information System (MCMIS), the Licensing & Insurance (L&I) system, and the Enforcement Management Information System (EMIS) as of December 2008. We identified new motor coach operators as those that had a New Entrant Program entry date of October 1, 2006, or later. We identified out- of-service motor carriers as those with an active, nonrescinded out-of- service order in place and who had been ordered off the road for reasons other than failure to make contact with DOT while in the New Entrant Program. We matched the new entrant carriers with those that were ordered out of service on the following key fields: company name, owner/officer name, address, phone number, cell phone number, fax number, vehicle identification number, and driver names. For the motor coach carriers identified, we interviewed, if possible, the owners to validate whether the company had reincarnated and, if possible, determine the reason for the reincarnation. Our analysis understates the actual number of reincarnated carriers because the matching scheme used cannot detect even minor changes in spelling, addresses, or owner names. In addition, the number is understated because FMCSA only provided us data on vehicles and drivers when an accident or inspection took place, and thus the provided FMCSA data does not include the entire population of vehicles or drivers for either new entrants or out-of-service carriers. Our analysis also could not identify all reincarnated carriers where the owners purposely provided FMCSA bogus or deceptive information on the application (e.g., ownership) to hide the reincarnation from FMCSA. To determine the tools FMCSA uses to identify reincarnated carriers, we interviewed FMSCA officials on the process that the agency uses to attempt to identify potentially reincarnating carriers. We also obtained and examined policies and other FMCSA documentation to obtain an understanding of the design of its motor carrier enrollment process. We did not perform any tests of the controls and therefore cannot make conclusions on its effectiveness. To determine the reliability of DOT's databases, we reviewed the system documentation and performed testing on the validity of the data. We performed electronic testing of the data including verifying the completeness of the carrier data against numbers published by DOT. We discussed the sources of the different data types with DOT officials and discussed their ongoing quality-control initiatives. Based on our review of agency documents and our own testing, we concluded that the data elements used for this report were sufficiently reliable for our purposes. We conducted the work for this investigation from November 2008 through July 2009 in accordance with quality standards for investigations as set forth by the Council of the Inspectors General on Integrity and Efficiency. In the body of the report, we provide detailed information on 10 reincarnated carriers. Table 2 below provides detailed information on the other 10 motor coach carriers that we investigated and determined were potential reincarnations. The cases were primarily identified by two or more exact matches of FMCSA data for new entrants and for out-of- service carriers in the following categories: company name, owner/officer name, address, phone number, cell phone number, fax number, vehicle identification number, and driver names. As stated earlier, we identified 20 new entrants that were substantially related to motor carriers ordered out of service. We identified these new entrant carriers by matching them with those that were ordered out of service on the following key fields: company name, owner/officer name, address, phone number, cell phone number, fax number, vehicle identification number, and driver names. Table 3 below provides the fields that were matched between the new entrant and the carrier that was ordered out of service. GAO staff who made major contributions to this report include Matthew Valenta, Assistant Director; John Ahern; Donald Brown; John Cooney; Paul Desaulniers; Eric Eskew; Timothy Hurley; Steve Martin; Vicki McClure; Sandra Moore; Andrew O'Connell; Anthony Paras; Philip Reiff; and Ramon Rodriguez.
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In 2008, the Federal Motor Carrier Safety Administration (FMCSA) reports that there were about 300 fatalities from bus crashes in the United States. Although bus crashes are relatively rare, they are particularly deadly since many individuals may be involved. FMCSA tries to identify unsafe motor coach carriers and take them off the road. GAO was asked to determine (1) to the extent possible, the number of motor coach carriers registered with FMCSA as new entrants in fiscal years 2007 and 2008 that are substantially related to or in essence the same carriers the agency previously ordered out of service, and (2) what tools FMCSA uses to identify reincarnated carriers. To identify new entrants that were substantially related to carriers placed out of service, we analyzed FMCSA data to find matches on key fields (e.g., ownership, phone numbers, etc.). Our analysis understates the actual number of reincarnated carriers because, among other things, the matching scheme used cannot detect minor spelling changes or other deception efforts. We interviewed FMCSA officials on how the agency identifies reincarnated carriers. GAO is not making any recommendations. In July 2009, GAO briefed FMCSA on our findings and incorporated their comments, as appropriate. Our analysis of FMCSA data for fiscal years 2007 and 2008 identified twenty motor coach companies that likely reincarnated from "out of service" carriers. This represents about 9 percent of the approximately 220 motor coach carriers that FMCSA placed out of service during these two fiscal years. The number of likely reincarnated motor carriers is understated, in part, because our analysis was based on exact matches and also could not identify owners who purposely provided FMCSA deceptive information on the application (e.g., ownership) to hide the reincarnation from the agency. Although the number of reincarnated motor coach carriers that we could identify was small, these companies pose a safety threat to the motoring public. According to FMCSA officials, under registration and enforcement policies up to summer 2008, reincarnation was relatively simple to do and hard to detect. As a result, motor coach carriers known to be safety risks were continuing to operate. According to FMCSA data, five of the twenty bus companies were still in operation as of May 2009. We referred these cases to FMCSA for further investigation. The twenty cases that we identified as likely reincarnations were registered with FMCSA at the time that FMCSA did not have any dedicated controls in place to prevent motor coach carriers from reincarnating. In 2008, FMCSA instituted a process to identify violators by checking applicant information against those of poor-performing carriers. For example, if FMCSA finds a new entrant with a shared owner name or company address for an out-of-service company, the agency will make inquiries to determine if the new applicant is related to the out-of-service carrier. If such a determination is made, FMCSA still faces legal hurdles, such as proving corporate successorship, to deny the company operating authority.
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The federal government is in a period of profound transition and faces an array of challenges and opportunities to enhance performance, ensure accountability, and position the nation for the future. As you know, our country's transition into the 21st century is characterized by a number of key trends including: the national and global response to terrorism and other threats to personal and national security; the increasing interdependence of enterprises, economies, civil society, and national governments, referred to as globalization; the shift to market-oriented, knowledge-based economies; an aging and more diverse U.S. population; advances in science and technology and the opportunities and challenges created by these changes; challenges and opportunities to maintain and improve the quality of life for the nation, communities, families, and individuals; and the changing and increasingly diverse nature of governance structures and tools. As the nation and government policymakers grapple with the challenges presented by these evolving trends, they do so in the context of an overwhelming fact: The fiscal pressures created by the retirement of the baby boom generation and rising health care costs threaten to overwhelm the nation's fiscal future. Our latest long-term budget simulations reinforce the need for change in the major cost drivers--Social Security and health care programs. By midcentury, absent reform of these entitlement programs and/or other major tax or spending policy changes, projected federal revenues may be adequate to pay little beyond interest on the debt and Social Security benefits. Further, our recent shift from surpluses to deficits means that the nation is moving into the future in a weaker fiscal position. In response to the emerging trends and long-term fiscal challenges the government faces in the coming years, we have an opportunity to create highly effective, performance-based organizations that can strengthen the nation's ability to meet the challenges of the 21st century and reach beyond our current level of achievement. The federal government cannot accept the status quo as a "given"--we need to reexamine the base of government programs, policies, and operations. We must strive to maintain a government that is effective and relevant to a changing society--a government that is as free as possible of outmoded commitments and operations that can inappropriately encumber the future, reduce our fiscal flexibility, and prevent future generations from being able to make choices regarding what roles they think government should play. Many departments and agencies were created in a different time and in response to problems and priorities very different from today's challenges. Some have achieved their one-time missions and yet they are still in business. Many have accumulated responsibilities beyond their original purposes. Others have not been able to demonstrate how they are making a difference in real and concrete terms. Still others have overlapping or conflicting roles and responsibilities. Redundant, unfocused, and uncoordinated programs waste scarce funds, confuse and frustrate program customers, and limit overall program effectiveness. Our work has documented the widespread existence of fragmentation and overlap from both the broad perspective of federal missions and from the more specific viewpoint of individual federal programs. As new needs are identified, the common response has been a proliferation of responsibilities and roles to federal departments and agencies, perhaps targeted on a newly identified clientele, or involving a new program delivery approach, or, in the worse case scenario, merely layered onto existing systems in response to programs that have failed or performed poorly. Though our work also suggests that some issues may warrant involvement of multiple agencies or more than one approach, fragmentation and overlap adversely impacts the economy, efficiency and effectiveness and of the federal government. It is obviously important to periodically reexamine whether current programs and activities remain relevant, appropriate, and effective in delivering the government that Americans want, need, and can afford. This includes assessing the sustainability of the programs, as well as the effectiveness of the tools--such as direct spending, loan guarantees, tax incentives, regulation, and enforcement--that these programs embody. Many federal programs--their goals, organizations, processes, and infrastructures--were designed years ago to meet the needs and demands as determined at that time and within the technological capabilities of that earlier era. The recent report of the Volcker Commission similarly observed that "ifty years have passed since the last comprehensive reorganization of the government" and that "he relationship of the federal government to the citizens it services became vastly broader and deeper with each passing decade." The commission recommended that a fundamental reorganization of the federal government into a limited number of mission-related executive departments was needed to improve its capacity to design and implement public policy. We now have both an opportunity and an obligation to take a comprehensive look at what the government should be doing and how it should go about doing its work. Based on GAO's own recent experiences with restructuring, such a fundamental reexamination of government missions, functions, and activities could improve government effectiveness and efficiency and enhance accountability by reducing the number of entities managed, thereby broadening spans of control, increasing flexibility, and fully integrating rather than merely coordinating related government activities. Given the obvious case for reexamining the government's structure, the major issue for debate today is the question of whether and how to change the Congress' normal deliberative process for reviewing and shaping executive branch restructuring proposals. Such authority can serve to better enable presidential leadership to propose government designs that would be more efficient and effective in meeting existing and emerging challenges. Presidential leadership is critical to set goals and propose the means--the organizational design and policy tools--needed to achieve the goals. However, it is important to ensure a consensus on identified problems and needs, and to be sure that the solutions our government legislates and implements can effectively remedy the problems we face in a timely manner. Fixing the wrong problems, or even worse, fixing the right problems poorly, could cause more harm than good. Congressional deliberative processes serve the vital function of both gaining input from a variety of clientele and stakeholders affected by any changes and providing an important constitutional check and counterbalance to the executive branch. The statutory framework for management reform enacted during the 1990s demonstrates the Congress' capacity to deal with governmentwide management reform needs. The Congress sought to improve the fiscal, program, and management performance of federal agencies, programs, and activities. For example, the Government Performance and Results Act (GPRA) is a central component of the existing statutory management framework, which includes other major elements, such as the Chief Financial Officers (CFO) Act, and information resource management improvements, such as the Clinger- Cohen Act. These laws provide information that is pertinent to a broad range of management-related decisions to help promote a more results- oriented management and decision-making process, regardless of what organizational approach is employed. The normal legislative process, which by design takes time to encourage thorough debate, does help to ensure that any related actions are carefully considered and have broad support. The Congress has played a central role in management improvement efforts throughout the executive branch and has acted to address several high-risk areas through both legislative and oversight activities. Traditionally, congressional and executive branch considerations of policy trade-offs are needed to reach a reasonable degree of consensus on the appropriate federal response to any substantive national need. It is imperative that the Congress and the administration form an effective working relationship on restructuring initiatives. Any systemic changes to federal structures and functions must be approved by the Congress and implemented by the executive branch, so each has a stake in the outcome. Even more importantly, all segments of the public that must regularly deal with their government--individuals, private sector organizations, states, and local governments--must be confident that the changes that are put in place have been thoroughly considered and that the decisions made today will make sense tomorrow. Only the Congress can decide whether it wishes to limit its powers and role in government reorganizations. As part of the legislative branch, we at GAO obviously have some concerns regarding any serious diminution of congressional authority. In certain circumstances, the Congress may deem limitations appropriate; however, care should be taken regarding the nature, timing, and scope of any related changes. Lessons can be learned from prior approaches to granting reorganization authority to the President. Prior successful reorganization initiatives reinforce the importance of maintaining a balance between executive and legislative roles in undertaking significant organizational changes. Safeguards are needed to ensure congressional input and concurrence on the goals as well as overall restructuring proposals. In the final analysis, the Congress must agree with any restructuring proposals submitted for consideration by the President in order for them to become a reality. Periodically, between 1932 and 1984, the Congress provided the President one form or another of expedited reorganization authority. Most of the authority granted during this period shared three characteristics. First, most previous authorities established rules that allowed the President's plan to go into effect unless either house acted by passing a motion of disapproval within a fixed period. However, in accordance with the 1983 Chadha decision, which held the one-house legislative veto unconstitutional, the most recent expedited reorganization authority, granted to President Reagan in 1984, required passage of a joint affirmative resolution by both houses and signed by the President to approve any presidential reorganization plan. Hence, the need for both houses to positively approve a president's plan for it to take effect set a higher bar for success and in essence gave the Congress a stronger role than in the past. Second, between 1949 and 1984, the Congress increasingly limited the scope of what the President could propose in a reorganization plan, which also had the effect of enhancing congressional control. For example, whereas in 1949, there were few restrictions on what the President could propose, the Reorganization Act of 1977 prohibited plans that, among other things, established, abolished, transferred, or consolidated departments or independent regulatory agencies. Third, expedited reorganization authority during this period limited the period of time during which a President could propose any reorganization plans. Clearly, the extent to which the Congress was willing to cede its authority to oversee the President's reorganization plans has been an important variable in designing such provisions. Throughout the 20th century, efforts to structure the federal government to address the economic and political concerns of the time met with varying degrees of success. The first Hoover Commission, which lasted from 1947 to 1949, is considered by many to have been the most successful of government restructuring efforts. The membership was bipartisan, including members of the administration and both houses of the Congress. Half its members were from outside government. The commission had a clear vision, making reorganization proposals that promoted what they referred to as "greater rationality" in the organization and operation of government agencies and enhanced the president's role as the manager of the government--principles that were understood and accepted by both the White House and the Congress. Former President Hoover himself guided the creation of a citizens' committee to build public support for the commission's work. More than 70 percent of the first Hoover Commission's recommendations were implemented, including 26 out of 35 reorganization plans. According to the Congressional Research Service, "the ease with which most of the reorganization plans became effective reflected two factors: the existence of a consensus that the President ought to be given deference and assistance by Congress in meeting his managerial responsibilities and the fact that most of the reorganization plans were pretty straightforward proposals of an organizational character." By contrast, the second Hoover Commission, which lasted from 1953 to 1954, had a makeup very similar to that of the first, but it did not have the advance backing of the President and the Congress. Hoover II, as it was called, got into policy areas with the goal of cutting government programs. But it lacked the support of the President, who preferred to use his own advisory group in managing the government. It also lacked the support of the Congress and the public, neither of which cared to cut the government at a time when federally run programs were generally held in high esteem and considered efficient and beneficial. More than 60 percent of Hoover II's recommendations were implemented, but these were mostly drawn from the commission's technical recommendations rather than from its major ones (such as changing the government's policies on lending, subsidies, and water resources) that would have substantively cut federal programs. The lesson of the two Hoover Commissions is clear: If plans to reorganize government are to move from recommendation to reality, creating a consensus for them is essential to the task. In this regard, both the process employed and the players involved in making any specific reorganization proposals are of critical importance. The success of the first Hoover Commission can be tied to the involvement and commitment of both the Congress and the President. Both the legislative branch and executive branches agreed to the goals. With this agreement, a process was established that provided for wide spread involvement, including citizens, and transparency so that meaningful results could be achieved. That lesson shows up again in the experience of the Ash Council, which convened in 1969-70. Like the first Hoover Commission, the Ash Council aimed its recommendations at structural changes to enhance the effectiveness of the President as manager of the government. In addition to renaming the Bureau of the Budget the Office of Management and Budget, the Ash Council proposed organizing government around broad national purposes by integrating similar functions under major departments. It proposed that four super departments be created--economic affairs, community development, natural resources, and human services--with State, Defense, Treasury, and Justice remaining in place. But the Ash Council could not gain the support of the Congress. Its recommendations would have drastically altered jurisdictions within the Congress and the relationships between committees and the agencies for which they had oversight responsibilities. The Congress was not thoroughly clear on the implications of the four super departments, was not readily willing to change its own structure to parallel the structure proposed by the council, and was not eager to substantially strengthen the authority of the presidency. Once again, the lesson for today is that reorganizing government is an immensely complex and politically charged activity. Those who would reorganize government must make their rationale clear and must build a consensus for change before specific proposed reorganizations are submitted to Congress if they are to see their efforts bear fruit. It is important that all players, particularly the Congress and the President, reach agreement on restructuring goals and establish a process to achieve their objectives that provides needed transparency if anything substantive is to be achieved. The process may vary depending on the significance of the changes sought. However, the risk of failure is high without having the involvement of key players and a process to help reach consensus on specific reorganization proposals that are submitted to the Congress for its consideration. A final important lesson from these prior experiences is that a balance must be struck between the need for due deliberation and the need for action. A distinction also needs to be made between policy choices and operational choices. Relatively straightforward reorganization proposals that focus on operational issues appear to have met with greater success than those that addressed more complex policy issues. For example, proposals to eliminate programs, functions, or activities typically involve policy choices. On the other hand, a proposal to consolidate those same activities within a single organization is more focused on management effectiveness and efficiency, than on policy changes. Therefore, in contrast to the past "one-size-fits-all" approaches, in again granting expedited reorganization authority to the President, the Congress may wish to consider different tracks that allow for a longer period for review and debate of proposals that include significant policy elements as opposed to operational elements. Three years ago, I testified that the challenge for the federal government at the start of the 21st century is to continue to improve and to translate the management reforms enacted by the Congress in the 1990s into a day-to- day management reality across government. Restructuring can be an important tool in this effort. Restructuring efforts must, however, be focused on clear goals. Further, irrespective of the number and nature of federal entities, creating high-performing organizations will require a cultural transformation in government agencies. Hierarchical management approaches will need to yield to partnerial approaches. Process-oriented ways of doing business will need to yield to results-oriented ones. Siloed organizations--burdened with overlapping functions, inefficiencies and turf battles--will need to become more horizontal and integrated organizations if they expect to make the most of the knowledge, skills, and abilities of their people. Internally focused agencies will need to focus externally in order to meet the needs and expectations of their ultimate clients--the American people. In the coming month, I plan to convene a forum to discuss steps federal agencies can take to become high- performing organizations. GAO is leading by example. To create a world-class professional services organization, we have undertaken a comprehensive transformation effort over the past few years. Our strategic plan, which is developed in consultation with the Congress, is forward looking and built on several key themes that relate to the United States and our position in the world community. We restructured our organization in calendar year 2000 to align with our goals, resulting in significant consolidation--going from 35 to 13 teams, eliminating an extra organizational layer, and reducing the number of field offices from 16 to 11. We have become more strategic, results-oriented, partnerial, integrated, and externally focused. Our scope of activities includes a range of oversight-, insight-, and foresight-related engagements. We have expanded and revised our products to better meet client needs. In addition, we have re-defined success in results-oriented terms and linked our institutional and individual performance measures. We have strengthened our client relations and employed a "constructive engagement approach" to those we review. The impact on our results has been dramatic. Several of our key performance measures have almost doubled and our client feedback reports satisfaction has also improved. There are six important elements to consider for a successful reorganization--establishing clear goals, taking an integrated approach, developing a comprehensive human capital strategy, selecting appropriate service delivery mechanisms, managing the implementation, and providing effective oversight. Clear goals. The key to any reorganization plan is the creation of specific, identifiable goals. The process to define goals will force decision makers to reach a shared understanding of what really needs to be fixed in government, what the federal role really ought to be, how to balance differing objectives, and what steps need to be taken to create not just short-term advantages but long-term gains. The mission and strategic goals of an organization must become the focus of the transformation, define the culture, and serve as a vehicle to build employee and organizational identity and support. Mission clarity and a clear articulation of priorities are critical, and strategic goals must align with and support the mission and serve as continuing guideposts for decision making. New organizations must have a clear set of principles and priorities that serve as a framework for the organization, create a common culture, and establish organizational and individual expectations. The most recent restructuring, the formation of the Department of Homeland Security (DHS), illuminates this point. There was clear national consensus that a new national goal and priority was homeland security. With agreement on the mission and goals of this new department, the various activities and functions scattered throughout the government could be identified and moved into the new department. Building a framework of clearly articulated goals facilitates any restructuring effort. This is true for both the initial design and the implementation. The government today is faced with many challenges. In considering restructuring, it is important to focus on not just the present but the future trends and challenges. Identification of goals to address these trends and challenges provides a framework for achieving consensus and organizational design. In fact, the effects of any reorganization are felt more in the future than they are today. The world is not static. Therefore, it is vital to take the long view, positioning the government to meet the challenges of the 21st century. Regardless of the immediate objectives, any reorganization should have in mind certain overarching goals: a government that serves the public efficiently and economically, that is run in a sound, businesslike fashion with full accountability, and that is flexible enough to respond to change. Integrated approach. The importance of seeing the overall picture cannot be overestimated. Reorganization demands a coordinated approach, within and across agency lines, supported by solid consensus for change. One cannot underestimate the interconnectedness of government structure and activities. Make changes here, and you will certainly affect something over there. Our work has certainly illuminated the interconnectedness of federal programs, functions, and activities. DHS again provides lessons. Though many homeland security responsibilities, functions, and activities have been brought under the umbrella of DHS, many remain outside. DHS will have to form effective partnerships throughout the federal government--on intelligence functions, health issues, science activities. In addition, partnerships will be required outside the federal government--state and local governments, private sector organizations, and the international community, if DHS is to successfully accomplish its mission. We have previously reported that the Government Performance and Results Act (Results Act) could provide a tool to reexamine roles and structure at the governmentwide level. The Results Act requires the President to include in his annual budget submission a federal government performance plan. The Congress intended that this plan provide a "single cohesive picture of the annual performance goals for the fiscal year." The governmentwide performance plan could be a unique tool to help the Congress and the executive branch address critical federal performance and management issues. It also could provide a framework for any restructuring efforts. Unfortunately, this provision has not been fully implemented. Beyond an annual performance plan, a strategic plan for the federal government might be an even more useful tool to provide broad goals and facilitate integration of programs, functions, and activities, by providing a longer planning horizon. In the strategic planning process, it is critical to achieve mission clarity in the context of the environment in which we operate. With the profound changes in the world, a re-examination of the roles and missions of the federal government is certainly needed. From a clearly defined mission, goals can be defined and organizations aligned to carrying out the mission and goals. Integration and synergy can be achieved between components of the government and with external partners to provide more focused efforts on goal achievement. If fully developed, a governmentwide strategic plan can potentially provide a cohesive perspective on the long-term goals for a wide array of federal activities. Successful strategic planning requires the involvement of key stakeholders. Thus, it could serve as a mechanism for building consensus. The process of developing the plan could prompt a more integrated and focused discussion between the Congress and the administration about long-term priorities and how agencies interact in implementing those priorities. Further, it could provide a vehicle for the President to articulate long-term goals and a road map for achieving them. In the process, key national performance indicators associated with the long-term goals could be identified and measured. In addition, a strategic plan can provide a much needed framework for considering any organizational changes and making resource allocation decisions. Essentially, organizations and resources (e.g., human, financial, and technological) are the ways and means of achieving the goals articulated by the strategic plan. Organizations should be aligned to be consistent with the goals and objectives of the strategic plan. Clear linkages should exist between the missions and functions of an organization and the goals and objectives it is trying to achieve. In making the trade-offs in resource decisions, a strategic plan identifies clear priorities and forms a basis for allocating limited resources for maximum effect. The process of developing a strategic plan that is comprehensive, integrated, and reflects the challenges of our changing world will not be easy. However, the end result could be a government that serves the public efficiently and economically, that is run more efficiently and effectively with full accountability, and that is flexible enough to respond to our rapidly changing world. Human capital strategy. People are an organization's most important asset, and strategic human capital management should be the centerpiece of any transformation or organizational change initiative. An organization's people define its character, affect its capacity to perform, and represent the knowledge base of the organization. Since 2001, we have designated human capital management as a governmentwide high risk. The Congress and the executive branch have taken a number of steps to address the federal government's human capital shortfalls. However, serious human capital challenges continue to erode the ability of many agencies, and threaten the ability of others, to economically, efficiently, and effectively perform their missions. A consistent, strategic approach to maximize government performance and ensure its accountability is vital to the success of any reorganization efforts as well as to existing organizations. A high-performance organization focuses on human capital. Human capital approaches are aligned with mission and goal accomplishment. Strategies are designed, implemented, and assessed based on their ability to achieve results and contribute to the organization's mission. Leaders and managers stay alert to emerging mission demands and human capital challenges. They reevaluate their human capital approaches through the use of valid, reliable, and current data, including an inventory of employee skills and competencies. Recruiting, hiring, professional development, and retention strategies are focused on having the needed talent to meet organizational goals. Individual performance is clearly linked with organizational performance. Effective performance management systems provide a "line of sight" showing how unit, team, and individual performance can contribute to overall organizational goals. Human capital strategies need to be built into any restructuring efforts. The Congress has recognized the importance of human capital in recent restructuring efforts. For example, in the creation of DHS and the Transportation Security Agency (TSA), human capital issues were addressed directly with the granting of flexibilities to improve the effectiveness of their workforces. Thus, human capital issues need to be addressed in both the design and implementation of any organization. Service delivery mechanisms. Once goals are defined, attention must be paid not only to how the government organizes itself but also to the tools it uses to achieve national goals. The tools for implementing federal programs include, for example, direct spending, loans and loan guarantees, tax expenditures, and regulations. A hallmark of a responsive and effective government is the ability to mix public/private structures and tools in ways that are consistent with overriding goals and principles while providing the best match with the nature of the program or service. The choice of tools will affect the results the government can achieve. Therefore, organizations must be designed to effectively use the tools they will employ. In most federal mission areas--from low-income housing to food safety to higher education assistance--national goals are achieved through the use of a variety of tools and, increasingly, through the participation of many organizations that are beyond the direct control of the federal government. This environment provides unprecedented opportunities to change the way federal agencies are structured to do business internally and across boundaries with state and local governments, nongovernmental organizations, private businesses, and individual citizens. Implementation. No matter what plans are made to reorganize the government, fulfilling the promise of these plans will depend on their effective implementation. The creation of a new organization may vary in terms of size and complexity. However, building an effective organization requires consistent and sustained leadership from top management to ensure the needed transformation of disparate agencies, programs, functions, and activities into an integrated organization. To achieve success, the end result should not simply be a collection of component units, but the transformation to an integrated, high-performance organization. The implementation of a new organization is an extremely complex task that can take years to accomplish. It is instructive to note that the 1947 legislation creating the Department of Defense was further changed four times by the Congress in order to improve the effectiveness of the department. Despite these changes, DOD continues to face a range of major management challenges, with six agency-specific challenges on our 2003 list and three governmentwide challenges. Start-up problems under any reorganization are inevitable but can be mitigated by comprehensive planning and strong leadership. An implementation plan anchored by an organization's mission, goals and core values is critical to success. An implementation plan should address the complete transition period, not just the first day or the first year. It must go beyond simply the timetable for the organization's creation, consolidation, or elimination. Effective implementation planning requires identification of key activities and milestones to transform the organization into a fully integrated, high-performance organization and establish accountability for results. Careful planning and attention to management practices and key success factors, such as strategic planning, information technology, risk management, and human capital management, are important to overall results. A human capital strategic plan must be developed. It is vital to have key positions filled with people who possess the critical competencies needed by the organization. Further, systems and processes need to be tailored to and integrated within the organization. The experiences of TSA highlight the need for long-term planning. A year after being set up, although great progress has been made, TSA still faces numerous challenges--ensuring adequate funding; establishing adequate cost controls; forming effective partnerships to coordinate activities; ensuring adequate workforce competence and staffing levels; ensuring information systems security; and implementing national security standards. Top leadership must set priorities and focus on the most critical issues. While top leadership is essential and indispensable, it will be important to have a broad range of agency leaders and managers dedicated to the transformation process to ensure that changes are thoroughly implemented and sustained over time. Dedicated management leadership can free the head of the organization from day-to-day operational and administrative issues, allowing time to focus on mission priorities. One approach to providing the sustained management attention essential for addressing key infrastructure and stewardship issues while helping facilitate the transition and transformation process is the creation of a chief operating officer (COO) position within selected federal agencies. To be successful, a COO must have a proven track record in a related position and high profile--reporting directly to the agency head, and be vested with sufficient authority to achieve results. Since successful restructurings often take a considerable amount of time, 5 to 7 years being common, a term appointment of up to 7 years might be warranted. To further clarify accountability, the COO should be subject to a clearly defined, results- oriented performance contract with appropriate incentives, rewards, and accountability mechanisms. Oversight. Congressional involvement is needed not just in the initial design of the organization, but in what can turn out to be a lengthy period of implementation. The Congress has an important role to play--both in its legislative and oversight capacities--in establishing, monitoring, and maintaining progress to attain the goals envisioned by government transformation and reorganization efforts. Sustained oversight by the Congress is needed to ensure effective implementation. The understanding by the Congress of the various agencies will provide a measure of whether the reorganization is accomplishing its goals and whether it needs further refinement. Assessing progress is important to ensuring implementation is moving in the right direction. To ensure effective implementation, along with efficient and effective oversight, the Congress will also need to consider realigning its own structure. With changes in the executive branch, the Congress should adapt its own organization in order to improve its efficiency and effectiveness. Most recently, the Congress has undertaken a reexamination of its committee structure, with the implementation of DHS. In fact, the DHS legislation instructed both houses of Congress to review their committee structures in light of the reorganization of homeland security responsibilities within the executive branch. In summary, the key issue at hand is how to make changes and reforms and what the respective roles of the Congress and the executive branch should be in the process. Only the Congress can decide whether it wishes to limit its powers and role in government reorganizations. As part of the legislative branch, I obviously have some concerns about any serious diminution of your authority. In certain circumstances, the Congress may deem it appropriate. A distinction needs to be made between policy choices and operational choices, and a balance must be struck between the need for due deliberation and the need for action in these different cases. The Congress may wish to consider a longer period for review and debate of proposals that include significant policy elements versus operational elements. Further, the President and the Congress may wish to consider establishing a process (e.g., a commission), that provides for the involvement of the key players and a means to help reach consensus on any specific restructuring proposals that would be submitted for consideration by the Congress.
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GAO has sought to assist the Congress and the executive branch in considering the actions needed to support the transition to a more high performing, results-oriented, and accountable federal government. At the Committee's request, GAO provided perspective on the proposal to reinstate the authority for the President to submit government restructuring plans to the Congress for expedited review. In view of the overarching trends and the growing fiscal challenges facing our nation, there is a need to consider the proper role of the federal government, how the government should do business in the future, and in some instances, who should do the government's business in the 21st century. The fundamental issue raised by the proposal to grant reorganization authority to the President is not whether the government's organization can and should be restructured, but rather, whether and how the Congress wishes to change the nature of its normal deliberative process when addressing proposals to restructure the federal government. Given current trends and increasing fiscal challenges, a comprehensive review, reassessment, and reprioritization of what the government does and how it does it is clearly warranted. This is especially vital in view of changing priorities and the compelling need to examine the base of government programs, policies, and operations since, given GAO's long-term budget simulations, the status quo is unsustainable over time. While the intent of such a review is desirable and some expedited congressional consideration may well be appropriate for specific issues, the Congress also has an important role to play in government reform initiatives, especially from an authorization and oversight perspective. In contrast to the past "one-size-fits-all" approaches in developing new executive reorganization authority, the Congress may want to consider different tracks for proposals that propose significant policy changes versus those that focus more narrowly on government operations. Further, Congress may want to consider establishing appropriate processes to ensure the involvement of key players, particularly in the legislative and executive branches, to help facilitate reaching consensus on specific restructuring proposals that would be submitted for consideration, should the Congress enact a new executive reorganization authority. Modern management practices can provide a framework for developing successful restructuring proposals. Such practices include: establishing clear goals, following an integrated approach, developing an effective human capital strategy, considering alternative program delivery mechanisms, and planning for both initial and long-term implementation issues to achieve a successful transformation. Furthermore, successful implementation will depend in part on continuing congressional oversight. The Congress could significantly enhance its efficiency and effectiveness by adapting its own organization to mirror changes in the executive branch.
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Multiple executive-branch agencies are responsible for different phases in the federal government's personnel security clearance process. In 2008, the Director of National Intelligence, for example, was designated Security Executive Agent by Executive Order 13467 and, in this capacity, is responsible for developing uniform and consistent policies and procedures to ensure the effective, efficient, and timely completion of background investigations and adjudications relating to determinations of eligibility for access to classified information or eligibility to hold a sensitive position. In turn, requesting executive branch agencies determine which positions--military, civilian, or private-industry contractors--require access to classified information and, therefore, which people must apply for and undergo a security clearance investigation. Investigators--often contractors--from Federal Investigative Services within the Office of Personnel Management (OPM) conduct these investigations for most of the federal government using federal investigative standards and OPM internal guidance as criteria for collecting background information on applicants. Adjudicators from requesting agencies, such as DOD, use the information contained in the resulting OPM investigative reports and consider federal adjudicative guidelines to determine whether an applicant is eligible for a personnel security clearance. DOD is OPM's largest customer, and its Under Secretary of Defense for Intelligence (USD(I)) is responsible for developing, coordinating, and overseeing the implementation of DOD policy, programs, and guidance for personnel, physical, industrial, information, operations, chemical/biological, and DOD Special Access Program security. Additionally, the Defense Security Service, under the authority and direction and control of USD(I), manages and administers the DOD portion of the National Industrial Security Program for the DOD components and other federal services by agreement, as well as providing security education and training, among other things. Pub. L. No. 108-458 (2004) (relevant sections codified at 50 U.S.C. SS 435b). Council. Under the executive order, this council is accountable to the President for driving implementation of the reform effort, including ensuring the alignment of security and suitability processes, holding agencies accountable for implementation, and establishing goals and metrics for progress. The order also appointed the Deputy Director for Management at the Office of Management and Budget as the chair of the council and designated the Director of National Intelligence as the Security Executive Agent and the Director of OPM as the Suitability Executive Agent. We have previously reported that, to safeguard classified data and manage costs, agencies need an effective process to determine whether positions require a clearance and, if so, at what level. Last year we found, however, that the Director of National Intelligence, as Security Executive Agent, has not provided agencies clearly defined policies and procedures to consistently determine if a civilian position requires a security clearance.for, among other things, developing uniform and consistent policies and procedures to ensure the effective, efficient, and timely completion of background investigations and adjudications relating to determinations of eligibility for access to classified information or eligibility to hold a sensitive position, and gives the Director authority to issue guidance to agency heads to ensure uniformity in processes relating to those determinations. Further, the Director also has not established guidance to require agencies to review and revise or validate existing federal civilian Executive Order 13467 assigns the Director responsibility position designations. Executive Order 12968certain exceptions, eligibility for access to classified information shall only be requested and granted on the basis of a demonstrated, foreseeable need for access, and the number of employees that each agency determines is eligible for access to classified information shall be kept to the minimum required. The order also states that access to classified information shall be terminated when an employee no longer has a need for access, and prohibits requesting or approving eligibility for access in excess of the actual requirements. Without such requirements, executive branch agencies may be hiring and budgeting for initial and periodic security clearance investigations using position descriptions and security clearance requirements that no longer reflect national security needs. says that, subject to In our July 2012 report, we found that Department of Homeland Security and DOD components' officials were aware of the need to keep the number of security clearances to a minimum, but were not always required to conduct periodic reviews and validations of the security clearance needs of existing positions. Overdesignating positions results in significant cost implications, given that the fiscal year 2012 base price for a top secret clearance investigation conducted by OPM was $4,005, while the base price of a secret clearance was $260. Conversely, underdesignating positions could lead to security risks. In the absence of guidance to determine if a position requires a security clearance, agencies are using a tool that OPM designed to determine the sensitivity and risk levels of civilian positions which, in turn, inform the type of investigation needed. OPM audits, however, found inconsistency in these position designations, and some agencies described problems in implementing OPM's tool. In an April 2012 audit, OPM reviewed the sensitivity levels of 39 positions in an agency within DOD and reached different conclusions than the agency for 26 of them. Problems exist, in part, because OPM and the Office of the Director of National Intelligence did not collaborate on the development of the position designation tool, and because their roles for suitability--consideration of character and conduct for federal employment--and security clearance reform are still evolving. In our July 2012 report, we concluded that without guidance from the Director of National Intelligence, and without collaboration between the Office of the Director of National Intelligence and OPM in future revisions to the tool, executive branch agencies will continue to risk making security clearance determinations that are inconsistent or at improper levels. In July 2012, we recommended, among other things, that the Director of National Intelligence, in coordination with the Director of OPM and other executive branch agencies as appropriate, issue clearly defined policy and procedures for federal agencies to follow when determining if federal civilian positions require a security clearance. We also recommended that the Director of National Intelligence, in coordination with the Director of OPM and other executive branch agencies as appropriate, issue guidance to require executive branch agencies to periodically review and revise or validate the designation of all federal civilian positions. The Director of National Intelligence concurred with our recommendation and has taken steps to implement them. We have emphasized--since the late 1990s--a need to build quality and quality monitoring throughout the clearance process to promote oversight and positive outcomes, such as honoring reciprocity. Executive branch efforts have emphasized timeliness, but efforts to develop and implement metrics for measuring the quality of investigations have not included goals with related outcome focused measures to show progress or identify obstacles to progress and possible remedies. Furthermore, our recent reviews of OPM's investigations show reasons for continuing concern. For example, in May 2009 we reported that, with respect to initial top secret clearances adjudicated in July 2008, documentation was incomplete for most OPM investigative reports. We independently estimated that 87 percent of about 3,500 investigative reports that DOD adjudicators used to make clearance decision were missing required documentation. We recommended that the Director of OPM direct the Associate Director of OPM's Federal Investigative Services Division to measure the frequency with which its investigative reports meet federal investigative standards in order to improve the completeness--that is, quality--of future investigation documentation. As of March 2013, however, OPM had not implemented our recommendation to measure how frequently investigative reports meet federal investigative standards. Instead, OPM continues to assess the quality of investigations based on voluntary reporting from customer agencies. Specifically, OPM tracks investigations that are (1) returned for rework from the requesting agency, (2) identified as deficient using a web-based survey, and (3) identified as deficient through adjudicator calls to OPM's quality hotline. In our past work, we have noted that the number of investigations returned for rework is not by itself a valid indicator of the quality of investigative work because adjudication officials have been reluctant to return incomplete investigations in anticipation of delays that would impact timeliness. Further, relying on agencies to voluntarily provide information on investigation quality may not reflect the quality of OPM's total investigation workload. In February 2011, we noted that one of OPM's customer agencies, DOD, had developed and implemented a tool known as Rapid Assessment of Incomplete Security Evaluations to monitor the quality of investigations completed by OPM. In that report, we noted that leaders of the reform effort had provided congressional members and executive branch agencies with metrics assessing quality and other aspects of the clearance process. Although the Rapid Assessment of Incomplete Security Evaluations was one tool the reform team members planned to use for measuring quality, according to an OPM official, OPM chose not to use this tool. Instead, OPM opted to develop another tool but has not provided details on the tool including estimated timeframes for its development and implementation. Since 2008, we have highlighted the importance of the executive branch enhancing efficiency and managing costs related to security clearance reform efforts. Government-wide suitability and personnel security clearance reform efforts have not yet focused on identifying potential cost savings, even though the stated mission of these efforts includes improving cost savings. For example, in 2008, we noted that one of the key factors to consider in current and future reform efforts was the long- term funding requirements. Further, in 2009, we found that reform-related reports issued in 2008 did not detail which reform objectives require funding, how much they will cost, or where funding will come from.Finally, the reports did not estimate potential cost savings resulting from these reform efforts. While the Performance Accountability Council has a stated goal regarding cost savings, it has not provided the executive branch with guidance on opportunities for achieving efficiencies in managing personnel security clearances. For example, OPM's investigation process--which represents just a portion of the security clearance process and had significant costs--has not been studied for process efficiencies or cost savings. In February 2012, we reported that OPM received over $1 billion to conduct more than 2 million background investigations (suitability determinations and personnel security clearances) for government employees in fiscal year 2011. OPM officials explained that, to date, they have chosen to address investigation timeliness and investigation backlogs rather than the identification of process and workforce efficiencies. To its credit, OPM helped reduce the backlog of ongoing background investigations that it inherited from DOD at the time of the 2005 transfer. However, only recently has OPM started to look at its internal processes for efficiencies. Further, while OPM invested in an electronic case-management program, it continues to convert submitted electronic files to paper. In November 2010, the Deputy Director for Management of the Office of Management and Budget testified that OPM receives 98 percent of investigation applications electronically, yet we observed that it was continuing to use a paper-based investigation processing system and convert electronically submitted applications to paper. OPM officials stated that the paper- based process is required because a small portion of their customer agencies do not have electronic capabilities. As a result, OPM may be simultaneously investing in process streamlining technology while maintaining a less efficient and duplicative paper-based process. In 2012, we recommended that, to improve transparency of costs and the efficiency of suitability and personnel security clearance background investigation processes that could lead to cost savings, the Director of OPM direct the Associate Director of Federal Investigative Services to take actions to identify process efficiencies that could lead to cost savings within its background investigation process. OPM agreed with this recommendation and we are working with OPM to assess any progress it has made in this area. Further, agencies have made potentially duplicative investments in case- management and adjudication systems without considering opportunities for leveraging existing technologies. In February 2012, as part of our annual report on opportunities to reduce duplication, overlap and fragmentation, we reported that multiple agencies have invested in or are beginning to invest in potentially duplicative, electronic case management and adjudication systems despite government-wide reform effort goals that agencies leverage existing technologies to reduce duplication and enhance reciprocity. development of its Case Adjudication Tracking System in 2006 and, as of 2011, had invested a total of $32 million to deploy the system. The system helped DOD achieve efficiencies with case management and an electronic adjudication module for secret level cases that did not contain issues, given the volume and types of adjudications performed. According to DOD officials, after it observed that the Case Adjudication Tracking System could easily be deployed to other agencies at a low cost, the department intended to share the technology with interested entities across the federal government. However, at that time, five other agencies were also developing or seeking funds to develop individual systems with With multiple agencies developing capabilities similar to DOD's system. GAO, 2012 Annual Report: Opportunities to Reduce Duplication, Overlap and Fragmentation, Achieve Savings, and Enhance Revenue, GAO-12-342SP (Washington, D.C.: Feb. 28, 2012). individual case-management systems, these agencies may be at risk of duplicating efforts and may fail to realize cost savings. In 2012, we recommended that the Deputy Director for Management at OMB, in his capacity as the Chair of the Performance Accountability Council, expand and specify reform-related guidance to help ensure that reform stakeholders identify opportunities for efficiencies and cost savings, such as preventing duplication in the development of electronic case management. OMB concurred with our recommendation. As of March of this year, however, OMB has not expanded and specified reform-related guidance to help ensure that reform stakeholders identify opportunities for cost savings. According to OMB officials, they are exploring whether and how to develop and implement guidance on information technology spending that is minimally disruptive, will not compromise agencies' ability to adjudicate cases, and is implementable within budget constraints. While these specific efforts may be notable steps in clearance reform, they do not meet the intent of our recommendation for OMB to develop overarching guidance that reform stakeholders can use to identify opportunities for cost savings. In conclusion, while the executive branch has made strides in improving the timeliness of the personnel security clearance process, now is the time to focus on making the improvements GAO has recommended. Failing to do so increases the risk of damaging unauthorized disclosures of classified information. This concludes my prepared statement. I would be pleased to answer any questions that you may have at this time. For further information on this testimony, please contact Brenda S. Farrell, Director, Defense Capabilities and Management, who may be reached at (202) 512-3604 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. GAO staff who made key contributions to this testimony include David Moser (Assistant Director), Sara Cradic, Mae Jones, Erin Preston, Leigh Ann Sennette, and Michael Willems. Managing for Results: Agencies Should More Fully Develop Priority Goals under the GPRA Modernization Act. GAO-13-174. Washington, D.C.: April 19, 2013. Security Clearances: Agencies Need Clearly Defined Policy for Determining Civilian Position Requirements. GAO-12-800. Washington, D.C.: July 12, 2012. 2012 Annual Report: Opportunities to Reduce Duplication, Overlap and Fragmentation, Achieve Savings, and Enhance Revenue. GAO-12-342SP. Washington, D.C.: February 28, 2012. Background Investigations: Office of Personnel Management Needs to Improve Transparency of Its Pricing and Seek Cost Savings. GAO-12-197. Washington, D.C.: February 28, 2012. GAO's 2011 High-Risk Series: An Update. GAO-11-394T. Washington, D.C.: February 17, 2011. High-Risk Series: An Update. GAO-11-278. Washington, D.C.: February 16, 2011. Personnel Security Clearances: Overall Progress Has Been Made to Reform the Governmentwide Security Clearance Process. GAO-11-232T. Washington, D.C.: December 1, 2010. Personnel Security Clearances: Progress Has Been Made to Improve Timeliness but Continued Oversight Is Needed to Sustain Momentum. GAO-11-65. Washington, D.C.: November 19, 2010. DOD Personnel Clearances: Preliminary Observations on DOD's Progress on Addressing Timeliness and Quality Issues. GAO-11-185T. Washington, D.C.: November 16, 2010. Personnel Security Clearances: An Outcome-Focused Strategy and Comprehensive Reporting of Timeliness and Quality Would Provide Greater Visibility over the Clearance Process. GAO-10-117T. Washington, D.C.: October 1, 2009. Personnel Security Clearances: Progress Has Been Made to Reduce Delays but Further Actions Are Needed to Enhance Quality and Sustain Reform Efforts. GAO-09-684T. Washington, D.C.: September 15, 2009. Personnel Security Clearances: An Outcome-Focused Strategy Is Needed to Guide Implementation of the Reformed Clearance Process. GAO-09-488. Washington, D.C.: May 19, 2009. DOD Personnel Clearances: Comprehensive Timeliness Reporting, Complete Clearance Documentation, and Quality Measures Are Needed to Further Improve the Clearance Process. GAO-09-400. Washington, D.C.: May 19, 2009. High-Risk Series: An Update. GAO-09-271. Washington, D.C.: January 2009. Personnel Security Clearances: Preliminary Observations on Joint Reform Efforts to Improve the Governmentwide Clearance Eligibility Process. GAO-08-1050T. Washington, D.C.: July 30, 2008. Personnel Clearances: Key Factors for Reforming the Security Clearance Process. GAO-08-776T. Washington, D.C.: May 22, 2008. Employee Security: Implementation of Identification Cards and DOD's Personnel Security Clearance Program Need Improvement. GAO-08-551T. Washington, D.C.: April 9, 2008. Personnel Clearances: Key Factors to Consider in Efforts to Reform Security Clearance Processes. GAO-08-352T. Washington, D.C.: February 27, 2008. DOD Personnel Clearances: DOD Faces Multiple Challenges in Its Efforts to Improve Clearance Processes for Industry Personnel. GAO-08-470T. Washington, D.C.: February 13, 2008. DOD Personnel Clearances: Improved Annual Reporting Would Enable More Informed Congressional Oversight. GAO-08-350. Washington, D.C.: February 13, 2008. DOD Personnel Clearances: Delays and Inadequate Documentation Found for Industry Personnel. GAO-07-842T. Washington, D.C.: May 17, 2007. High-Risk Series: An Update. GAO-07-310. Washington, D.C.: January 2007. DOD Personnel Clearances: Additional OMB Actions Are Needed to Improve the Security Clearance Process. GAO-06-1070. Washington, D.C.: September 28, 2006. DOD Personnel Clearances: New Concerns Slow Processing of Clearances for Industry Personnel. GAO-06-748T. Washington, D.C.: May 17, 2006. DOD Personnel Clearances: Funding Challenges and Other Impediments Slow Clearances for Industry Personnel. GAO-06-747T. Washington, D.C.: May 17, 2006. DOD Personnel Clearances: Government Plan Addresses Some Long- standing Problems with DOD's Program, But Concerns Remain. GAO-06-233T. Washington, D.C.: November 9, 2005. DOD Personnel Clearances: Some Progress Has Been Made but Hurdles Remain to Overcome the Challenges That Led to GAO's High-Risk Designation. GAO-05-842T. Washington, D.C.: June 28, 2005. High-Risk Series: An Update. GAO-05-207. Washington, D.C.: January 2005. DOD Personnel Clearances: Preliminary Observations Related to Backlogs and Delays in Determining Security Clearance Eligibility for Industry Personnel. GAO-04-202T. Washington, D.C.: May 6, 2004. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.
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Personnel security clearances allow government and industry personnel to gain access to classified information that, through unauthorized disclosure, can in some cases cause exceptionally grave damage to U.S. national security. In 2012, the Director of National Intelligence reported that more than 4.9 million federal government and contractor employees held a security clearance. Multiple executive-branch agencies are responsible for different phases in the government-wide personnel security clearance process. The Director of National Intelligence, as Security Executive Agent, is to develop uniform and consistent policies and procedures. Executive branch agencies are to determine which positions require access to classified information. OPM's investigators from the Federal Investigative Service conduct the majority of security investigations on personnel holding those positions, and adjudicators from requesting agencies, such as DOD, make the final clearance eligibility determination. Reform efforts and reporting requirements since 2005 have focused on expediting the processing of clearances. This testimony is based on GAO reports and testimonies issued between 2008 and 2013 on DOD's personnel security clearance programs and security clearance reform efforts. This testimony addresses three areas for improvement to the government-wide personnel security clearance process: (1) a sound requirements determination process, (2) performance metrics to measure quality, and (3) guidance to enhance efficiencies. In July 2012, GAO reported that the Director of National Intelligence, as Security Executive Agent, had not provided agencies clearly defined policy and procedures to consistently determine whether a civilian position required a security clearance. Underdesignating positions can lead to security risks; overdesignating positions can result in significant cost implications. Also, GAO reported that the Department of Homeland Security and Department of Defense (DOD) components' officials were aware of the need to keep the number of security clearances to a minimum but were not always required to conduct periodic reviews and validations of the security clearance needs of existing positions. GAO recommended that, among other things, the Director of National Intelligence, in coordination with the Director of Office of Personnel Management (OPM) and other executive branch agencies as appropriate, issue clearly defined policies and procedures to follow when determining if federal civilian positions require a security clearance, and also guidance to require executive branch agencies to periodically review and revise or validate the designation of all federal civilian positions. The Director of National Intelligence concurred with GAO's recommendations and identified actions to implement them. Executive branch agency efforts to improve the personnel security process have emphasized timeliness but not quality. In May 2009, GAO reported that with respect to initial top secret clearances adjudicated in July 2008, documentation was incomplete for most of OPM investigative reports. GAO independently estimated that 87 percent of about 3,500 investigative reports that DOD adjudicators used to make clearance decisions were missing required documentation. In May 2009, GAO recommended that the Director of OPM direct the Associate Director of OPM's Federal Investigative Services to measure the frequency with which its investigative reports met federal investigative standards in order to improve the completeness--that is, quality--of future investigation documentation. As of March 2013, however, OPM had not implemented this recommendation. Government-wide personnel security reform efforts have not yet focused on potential cost savings, even though the stated mission of these efforts includes improving cost savings. For example, OPM's investigation process--which represents a portion of the security clearance process and has significant costs--has not been studied for process efficiencies or cost savings. In February 2012, GAO reported that OPM received over $1 billion to conduct more than 2 million background investigations in fiscal year 2011. GAO raised concerns that OPM may be simultaneously investing in process streamlining technology while maintaining a less efficient and duplicative paper-based process. In 2012, GAO recommended that, to improve the efficiency of suitability and personnel security clearance background investigation processes that could lead to cost savings, the Director of OPM direct the Associate Director of Federal Investigative Services to take actions to identify process efficiencies that could lead to cost savings within its background investigation process. OPM agreed with this recommendation and GAO is working with OPM to assess any progress it has made in this area.
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As the central human resources agency for the federal government, OPM is tasked with ensuring that the government has an effective civilian workforce. In carrying out its mission, the agency delivers human resources products and services, including policies and procedures for recruiting and hiring, provides health and training benefit programs; and administers the retirement program for federal employees. The agency reports that approximately 2.7 million active federal employees and nearly 2.5 million retired federal employees rely on its services. According to OPM, the retirement program serves current and former federal employees by providing tools and options for retirement planning and retirement compensation. Two defined-benefit retirement plans that provide retirement, disability, and survivor benefits to federal employees are administered by the agency: (1) the Civil Service Retirement System (CSRS), which provides retirement benefits for most federal employees hired before 1984 and (2) the Federal Employees Retirement System (FERS), which covers most employees hired in or after 1984 and provides benefits that include Social Security and a defined contribution system. Retirement processing includes functions such as determining retirement eligibility, inputting data into benefit calculators, and providing customer service. The agency uses over 500 different procedures, laws, and regulations, which are documented on the agency's internal website, to process retirement applications. For example, the site contains memorandums that outline new procedures for handling special retirement applications, such as those for disability or court orders. Further, OPM's retirement processing involves the use of over 80 information systems that have approximately 400 interfaces with other internal and external systems. Recognizing the need to improve the efficiency and effectiveness of its retirement claims processing, OPM has undertaken a number of initiatives since 1987 that were aimed at modernizing its paper-intensive processes and antiquated systems. Initial modernization visions called for developing an integrated system and automated processes to provide prompt and complete benefit payments. However, following attempts over more than two decades, the agency has not yet been successful in achieving the modernized retirement system that it envisioned. In early 1987, OPM began a program called the FERS Automated Processing System. However, after 8 years of planning, the agency decided to reevaluate the program, and the Office of Management and Budget requested an independent review of the program, which identified various management weaknesses. The independent review suggested areas for improvement and recommended terminating the program if immediate action was not taken. In mid-1996, OPM terminated the program. In 1997, OPM began planning a second modernization initiative, called the Retirement Systems Modernization (RSM) program. The agency originally intended to structure the program as an acquisition of commercially available hardware and software that would be modified in- house to meet its needs. From 1997 to 2001, OPM developed plans and analyses and began developing business and security requirements for the program. However, in June 2001, it decided to change the direction of the retirement modernization initiative. In late 2001, retaining the name RSM, the agency embarked upon its third initiative to modernize the retirement process and examined the possibility of privately sourced technologies and tools. Toward this end, the agency determined that contracting was a viable alternative and, in 2006, awarded three contracts for the automation of retirement processing, the conversion of paper records to electronic files, and consulting services to redesign its retirement operations. In February 2008, OPM renamed the program RetireEZ and deployed an automated retirement processing system. However, by May 2008 the agency determined that the system was not working as expected and suspended system operation. In October 2008, after 5 months of attempting to address quality issues, the agency terminated the contract for the system. In November 2008, OPM began restructuring the program and reported that its efforts to modernize retirement processing would continue. However, after several years of trying to revitalize the program, the agency terminated the retirement system modernization in February 2011. In mid-January 2012, OPM released a plan to undertake targeted, incremental improvements to retirement processing rather than a large- scale modernization, which described planned actions in four areas: hiring and training 56 new staff to adjudicate retirement claims and 20 additional staff to support the claims process; establishing higher production standards and identifying potential working with other agencies to improve the accuracy and completeness of the data they provide to OPM for use in retirement processing; and improving the department's IT by pursuing a long-term data flow strategy, exploring short-term strategies to leverage work performed by other agencies, and reviewing and upgrading systems used by retirement services. Through implementing these actions, OPM said that it aimed to eliminate the agency's retirement processing backlog and accurately process 90 percent of its cases within 60 days by July 31, 2013. While its Fiscal Year 2013 Summary of Performance and Financial Information indicated that the agency was on track to eliminate the backlog, the agency nonetheless reported that two factors beyond its control prevented achieving the goal.First, Voluntary Early Retirement Authority and a Voluntary Separation Incentive Program offered by the U.S. Postal Service increased OPM's retirement processing workload by over 20,000 cases. Second, funding reductions due to sequestration required the agency to curtail overtime work on retirement processing in April 2013. In March 2014, OPM again articulated a retirement claims processing improvement goal as part of its Fiscal Year 2014-2015 Agency Priority Goals strategy. Specifically, the agency reiterated the goal to process 90 percent of retirement cases within 60 days, but extended the date for doing so to July 2014. However, OPM did not achieve this goal, reporting that 77.9 percent of cases were processed within 60 days in July 2014. Further, in October 2014, the most recent month for which the agency has reported, 83.2 percent of cases were processed within 60 days. Our prior reports noted that OPM's efforts to modernize its retirement system were hindered by weaknesses in key IT management disciplines. For example, in reporting on RSM in February 2005, we noted weaknesses in project management, risk management, and organizational change management. Project management is the process for planning and managing all project-related activities, including defining how project components are interrelated. Effective project management allows the performance, cost, and schedule of the overall project to be measured and controlled in comparison to planned objectives. Although OPM had defined major retirement modernization project components, it had not defined the dependencies among them. Specifically, by not identifying critical dependencies among project components, OPM increased the risk that unforeseen delays in one activity could hinder progress in other activities. Risk management entails identifying potential problems before they occur. Risks should be identified as early as possible, analyzed, mitigated, and tracked to closure. OPM officials acknowledged that they did not have a process for identifying and tracking retirement modernization project risks and mitigation strategies on a regular basis but stated that the agency's project management consultant would assist it in implementing a risk management process. Lacking such a process, OPM did not have a mechanism to address potential problems that could adversely impact the cost, schedule, and quality of the retirement modernization project. Organizational change management includes preparing users for the changes to how their work will be performed as a result of a new system implementation. Effective organizational change management includes plans to prepare users for impacts the new system might have on their roles and responsibilities, and a process to manage those changes. However, OPM officials had not developed a detailed plan to help users transition to different job responsibilities. Without having and implementing such a plan, effective implementation of new systems could be hindered by confusion about user roles and responsibilities. We recommended that the Director of OPM ensure that the retirement modernization program office expeditiously establish processes for effective project management, risk management, and organizational change management. In response, the agency initiated steps toward establishing management processes for retirement modernization and demonstrated activities to address our recommendations. We reported again on OPM's retirement modernization in January 2008, as the agency was about to deploy a new automated retirement processing system.management capabilities, including system testing, cost estimating, and progress reporting. We noted weaknesses in additional key Effective testing is an essential activity of any project that includes system development. At the time of our review, test results showed that the new system had not performed as intended. Although the agency planned to perform additional tests to verify that the system would work as intended, the schedule for conducting these tests became compressed, with several tests to be performed concurrently rather than sequentially. The agency stated that a lack of testing resources and the need for further system development, contributed to the delay of planned tests and the need for concurrent testing. The high degree of concurrent testing that OPM planned to meet its February 2008 deployment schedule increased the risk that the agency would not have the resources or time to verify that the planned system worked as expected. Cost estimating is the identification of individual project cost elements, using established methods and valid data to estimate future costs. Establishing a reliable cost estimate is important for developing a project budget and having a sound basis for measuring performance, including comparing the actual and planned costs of project activities. Although OPM developed a retirement modernization cost estimate, it was not supported by the documentation that is fundamental to a reliable cost estimate. Without a reliable cost estimate, OPM lacked a sound basis for formulating retirement modernization budgets or for developing the cost baseline that is necessary for measuring and predicting project performance. Earned value management (EVM) is a tool for measuring program progress by comparing the value of work accomplished with the amount of work expected to be accomplished. Fundamental to reliable EVM is the development of a baseline against which variances are calculated. OPM used EVM to measure and report monthly performance of the retirement modernization system. The reported results indicated that the project was progressing almost exactly as planned. However, this view of project performance was not reliable because the baseline on which it was based did not reflect the full scope of the project, had not been validated, and was unstable (i.e., subject to frequent changes). This EVM approach in effect ensured that material variances from planned performance would not be identified and that the state of the project would not be reliably reported. We recommended that the Director of OPM conduct effective system tests prior to system deployment and improve program cost estimation and progress reporting. OPM stated that it concurred with our recommendations and would take steps to address the weakness we identified. Nevertheless, OPM deployed a limited initial version of the modernized retirement system in February 2008. After unsuccessful efforts to address system quality issues, the agency suspended system operation, terminated the system contract, and began restructuring the modernization effort. In April 2009, we again reported on OPM's retirement modernization, noting that the agency still remained far from achieving the modernized Specifically, we retirement processing capabilities that it had planned.noted that significant weaknesses continued to exist in the areas of cost estimating, progress reporting, and testing, while also noting two additional weaknesses related to planning and oversight. Although it concurred with our January 2008 recommendation to develop a revised cost estimate for the retirement modernization effort, OPM had not completed initial steps for developing the new estimate by the time we issued our report in April 2009. We reported that the agency had not yet fully defined the estimate's purpose, developed an estimating plan, or defined the project's characteristics. By not completing these steps, OPM increased the risk that it would produce an unreliable estimate and not have a sound basis for measuring project performance and formulating retirement modernization budgets. OPM also concurred with our January 2008 recommendation to establish a basis for effective EVM but had not completed key steps as of the time of our report. Specifically, despite planning to use EVM to report the retirement modernization project's progress, the agency had not developed a reliable cost estimate and a validated baseline. Engaging in EVM reporting without first taking these fundamental steps could have again rendered the agency's assessments unreliable. As previously discussed, effective testing is an essential component of any project that includes developing systems. To be effectively managed, testing should be planned and conducted in a structured and disciplined fashion. Beginning the test planning process in the early stages of a project life cycle can reduce rework later. Early test planning in coordination with requirements development can provide major benefits. However, at the time of our April 2009 report, the agency had not begun to plan test activities in coordination with developing its requirements for the system it was planning at that time. Consequently, OPM increased the risk that it would again deploy a system that did not satisfy user expectations and meet requirements. Project management principles and effective practices emphasize the importance of having a plan that, among other things, incorporates all the critical areas of system development and is to be used as a means of determining what needs to be done, by whom, and when. Although OPM had developed a variety of informal documents and briefing slides that described retirement modernization activities, the agency did not have a complete plan that described how the program would proceed in the wake of its decision to terminate the system contract. As a result, we concluded that until the agency completed such a plan and used it to guide its efforts, it would not be properly positioned to proceed with its restructured retirement modernization initiative. Office of Management and Budget and GAO guidanceagencies to ensure effective oversight of IT projects throughout all life- cycle phases. Critical to effective oversight are investment management boards made up of key executives who regularly track the progress of IT projects such as system acquisitions or modernizations. OPM's Investment Review Board was established to ensure that major investments are on track by reviewing their progress and identifying appropriate actions when investments encounter challenges. Despite meeting regularly and receiving information that indicated problems with the retirement modernization, the board did not ensure that retirement modernization investments were on track, nor did it determine appropriate actions for course correction when needed. For example, from January 2007 to August 2008, the board met and was presented with reports that described problems the program was facing, such as the lack of an integrated master schedule and earned value data that did not reflect the "reality or current status" of the program. However, meeting minutes indicated that no discussion or action was taken to address these problems. According to a member of the board, OPM had not established guidance regarding how the board was to communicate recommendations and needed corrective actions for investments it oversaw. Without a fully functioning oversight body, OPM lacked insight into the retirement modernization and the ability to make needed course corrections that effective boards are intended to provide. Our April 2009 report made new recommendations calling for OPM to address the weaknesses in the retirement modernization project that we identified. Although the agency began taking steps to address them, the recommendations were overtaken by the agency's decision in February 2011 to terminate the retirement modernization project. OPM's Strategic Plan for Fiscal Years 2014-2018 includes a strategic goal to "Ensure that Federal retirees receive timely, appropriate, transparent, seamless, and accurate retirement benefits." To achieve this goal, the agency has set forth a strategy to improve the retirement claims processing system by, among other things, investing in information technology solutions, such as the acquisition of a case management system. In addition, the agency's February 2014 Strategic Information Technology Plan articulated OPM's vision of "transitioning the retirement program to a paperless system that will truly honor a Federal employee's service by authorizing accurate retirement benefits on the day they are due, answering customers' questions in a timely manner, and promoting self-service account maintenance." The plan also reiterated the agency's intention to acquire a new case management system. According to OPM's chief information officer (CIO), as of late-November 2014, the case management initiative is the agency's primary focus. Toward this end, the strategic plan states that OPM intends to complete documentation of its needs, evaluate available commercial solutions against those needs, and create an acquisition plan for procuring licenses and services this month. The agency then intends to develop a plan to begin implementing the chosen solution in August 2015. OPM received a fiscal year 2014 appropriation of $2.6 million for the case management system and, according to an agency official, is expecting to receive additional funding for the system in fiscal year 2015. Beyond acquisition of the case management system, the strategic IT plan also describes other initiatives that are intended to incrementally improve retirement claims processing. These initiatives include expanding and testing a retirement data repository to include data from agency human resources and payroll systems, data submitted via the online retirement application, and scanned documents; building a capability for the retirement calculator to pull data from the retirement data repository; identifying functional requirements for deployment of a web-based retirement data viewer to additional agencies; and developing requirements for a web-based electronic retirement application. According to the plan, pursuit of these initiatives is dependent on OPM receiving additional funding. While we have not conducted a detailed examination of OPM's plans for acquiring new technology for retirement processing, it will be important for the agency to leverage all available opportunities to ensure that its investments are carried out in the most effective manner possible, and not repeat mistakes of the past. Our experience has shown that challenges, such as those that have plagued the agency's past efforts, can successfully be overcome through using a more disciplined approach to IT acquisition management. To help federal agencies, such as OPM, address the acquisition challenges that they face, in 2011, we reported on nine common factors critical to the success of IT acquisitions. Specifically, we reported that department officials from seven agencies had each identified a successful investment acquisition, in that they best achieved their respective cost, schedule, scope, and performance goals. Among these seven IT investments, the officials identified nine factors as critical to the success of three or more of the seven. The factors most commonly identified include active engagement of stakeholders, program staff with the necessary knowledge and skills, and senior department and agency executive support for the program. These nine critical success factors are consistent with leading industry practices for IT acquisitions. Table 1 shows how many of the investments reported the nine factors. Officials for all seven selected investments cited active engagement with program stakeholders--individuals or groups (including, in some cases, end users) with an interest in the success of the acquisition--as a critical factor to the success of those investments. Agency officials stated that stakeholders, among other things, reviewed contractor proposals during the procurement process, regularly attended program management office sponsored meetings, were working members of integrated project teams, and were notified of problems and concerns as soon as possible. In addition, officials from two investments noted that actively engaging with stakeholders created transparency and trust, and increased the support from the stakeholders. Additionally, officials for six of the seven selected investments indicated that the knowledge and skills of the program staff were critical to the success of the program. This included knowledge of acquisitions and procurement processes, monitoring of contracts, large-scale organizational transformation, Agile software development concepts, and areas of program management such as earned value management and technical monitoring. Finally, officials for five of the seven selected investments identified having the end users test and validate the system components prior to formal end user acceptance testing for deployment as critical to the success of their program. Similar to this factor, leading guidance recommends testing selected products and product components throughout the program life cycle.prior to acceptance demonstrates, earlier rather than later in the program life cycle, that the functionality will fulfill its intended use. If problems are found during this testing, programs are typically positioned to make changes that are less costly and disruptive than ones made later in the life cycle would be. Testing of functionality by end users Use of the critical success factors described above can serve as a model of best practices for all agencies as they plan and conduct their own IT acquisitions. With specific regard to OPM, application of these acquisition best practices presents opportunities for the agency to undertake a more disciplined and, thus effective, management approach, as well as increase the likelihood that its planned IT investments to improve retirement processing will meet their cost, schedule, scope, and performance goals. In summary, despite OPM's longstanding recognition of the need to improve the timeliness and accuracy of retirement processing, the agency has thus far been unsuccessful in several attempts to develop the capabilities it has long sought. For over two decades, the agency's retirement modernization efforts were plagued by weaknesses in management capabilities that are critical to the success of such endeavors. Applying the information technology best practices we have identified to OPM's acquisition of a new case management system could help the agency overcome its long history of unsuccessful retirement modernization efforts. Chairman Farenthold, Ranking Member Lynch, and Members of the Subcommittee, this concludes my prepared statement. I would be pleased to respond to any questions that you or other members of the Subcommittee may have. If you have any questions concerning this statement, please contact Valerie C. Melvin, Director, Information Management and Technology Resources Issues, at (202) 512-6304 or [email protected]. Other individuals who made key contributions include Mark T. Bird, Assistant Director; Glenn Spiegel; Pavitri K. Daitnarayan; and Nancy E. Glover. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.
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The use of IT is integral to OPM's ability to carry out its responsibilities in modernizing federal employee retirement claims processing. Since 1987, the agency has undertaken a number of initiatives that were aimed at modernizing its paper-intensive processes and antiquated systems, but that were unsuccessful. GAO was asked to summarize findings from its previous reports on the challenges that OPM has faced in modernizing its retirement claims processing systems. The testimony also summarizes the agency's current plans to acquire new technology to improve the retirement process and key IT acquisition best practices that could serve as critical factors in the agency's successful accomplishment of its latest modernization efforts. The information in this testimony is primarily based on GAO's previous work at OPM. GAO also reviewed the agency's plans and related information discussing current efforts to improve retirement processing systems. Additionally, the testimony highlights findings from GAO's previous report on critical success factors for major IT acquisitions. Work in support of this testimony was performed during November and December 2014. In a series of reviews, GAO found that the Office of Personnel Management's (OPM) efforts over two decades to modernize its processing of federal employee retirement applications were fraught with information technology (IT) management weaknesses. Specifically, in 2005, GAO made recommendations to address weaknesses in project, risk, and organizational change management. In 2008, as OPM was on the verge of deploying an automated retirement processing system, GAO reported deficiencies in, and made recommendations to address, additional weaknesses in system testing, cost estimating, and progress reporting. In 2009, GAO reported that OPM continued to have deficiencies in its cost estimating, progress reporting, and testing practices and made recommendations to address these and other weaknesses in the planning and oversight of the agency's modernization effort. OPM began to address these recommendations; however, in February 2011, it terminated the modernization effort. OPM's Strategic Plan for Fiscal Years 2014-2018 includes a goal to deliver retirement benefits to employees accurately, seamlessly, and on time. To achieve this goal, the agency has plans to acquire a new case management system and, ultimately, to transition to a paperless system that will authorize accurate retirement benefits on the day they are due. In addition, the agency plans other initiatives that are intended to incrementally improve retirement claims processing. GAO has previously reported that its experience at other agencies has demonstrated that successfully overcoming challenges, such as those that have plagued OPM's past efforts, can best be achieved when critical success factors are applied. Nine common factors critical to the success of IT acquisitions are Active engagement of senior officials with stakeholders. Qualified and experienced program staff. Support of senior department and agency executives. Involvement of end users and stakeholders in the development of requirements. Participation of end users in testing system functionality prior to formal end user acceptance testing. Consistency and stability of government and contractor staff. Prioritization of requirements by program staff. Regular communication maintained between program officials and the prime contractor. Sufficient funding. These critical success factors can serve as a model of best practices that OPM could apply to enhance the likelihood that the incremental IT investments the agency now plans, including the acquisition of a new case management system, will be successfully achieved. GAO is not making new recommendations at this time. GAO has previously made numerous recommendations to address IT management challenges that OPM has faced in carrying out its retirement modernization efforts. Fully addressing these challenges remains key to the success of OPM's efforts.
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The space shuttle is the world's first reusable space transportation system. It consists of a reusable orbiter with three main engines, two partially reusable solid rocket boosters, and an expendable external fuel tank. Since it is the nation's only launch system capable of carrying people to and from space, the shuttle's viability is important to NASA's other space programs, such as the International Space Station. NASA operates four orbiters in the shuttle fleet. Space systems are inherently risky because of the technology involved and the complexity of their activities. For example, thousands of people perform about 1.2 million separate procedures to prepare a shuttle for flight. NASA has emphasized that the top priority for the shuttle program is safety. The space shuttle's workforce shrank from about 3,000 to about 1,800 full- time equivalent employees from fiscal year 1995 through fiscal year 1999. A major element of this workforce reduction was the transfer of shuttle launch preparation and maintenance responsibilities from the government and multiple contractors to a single private contractor. NASA believed that consolidating shuttle operations under a single contract would allow it to reduce the number of engineers, technicians, and inspectors directly involved in the day-to-day oversight of shuttle processing. However, the agency later concluded that these reductions caused shortages of required personnel to perform in-house activities and maintain adequate oversight of the contractor. Since the shuttle's first flight in 1981, the space shuttle program has developed and incorporated many modifications to improve performance and safety. These include a super lightweight external tank, cockpit display enhancements, and main engine safety and reliability improvements. In 1994, NASA stopped approving additional upgrades, pending the potential replacement of the shuttle with another reusable launch vehicle. NASA now believes that it will have to maintain the current shuttle fleet until at least 2012, and possibly through 2020. Accordingly, it has established a development office to identify and prioritize upgrades to maintain and improve shuttle operational safety. Last year, we reported that several internal studies showed that the shuttle program's workforce had been negatively affected by downsizing. These studies concluded that the existing workforce was stretched thin to the point where many areas critical to shuttle safety--such as mechanical engineering, computer systems, and software assurance engineering-- were not sufficiently staffed by qualified workers. (Appendix I identifies all of the key areas that were facing staff shortages). Moreover, the workforce was showing signs of overwork and fatigue. For example, indicators on forfeited leave, absences from training courses, and stress- related employee assistance visits were all on the rise. Lastly, the program's demographic shape had changed dramatically. Throughout the Office of Space Flight, which includes the shuttle program, there were more than twice as many workers over 60 years old than under 30 years old. This condition clearly jeopardized the program's ability to hand off leadership roles to the next generation. According to NASA's Associate Administrator for the Office of Space Flight, the agency faced significant safety and mission success risks because of workforce issues. This was reinforced by NASA's Aerospace Safety Advisory Panel, which concluded that workforce problems could potentially affect flight safety as the shuttle launch rate increased. NASA subsequently recognized the need to revitalize its workforce and began taking actions toward this end. In October 1999, NASA's Administrator directed the agency's highest-level managers to consider ways to reduce workplace stress. The Administrator later announced the creation of a new office to increase the agency's emphasis on health and safety and included improved health monitoring as an objective in its fiscal year 2001 performance plan. Finally, in December 1999, NASA terminated its downsizing plans for the shuttle program and initiated efforts to begin hiring new staff. Following the termination of its downsizing plans, NASA and the Office of Management and Budget conducted an overall workforce review to examine personnel needs, barriers to achieving proper staffing levels and skill mixes, and potential reforms to help address the agency's long-term requirements. In performing this review, NASA used GAO's human capital self-assessment checklist. The self-assessment framework provides a systematic approach for identifying and addressing human capital issues and allows agency managers to (1) quickly determine whether their approach to human capital supports their vision of who they are and what they want to accomplish and (2) identify those policies that are in particular need of attention. The checklist follows a five-part framework that includes strategic planning, organizational alignment, leadership, talent, and performance culture. NASA has taken a number of actions this year to regenerate its shuttle program workforce. Significantly, NASA's current budget request projects an increase of more than 200 full-time equivalent staff for the shuttle program through fiscal year 2002--both new hires and staff transfers. According to NASA, from the beginning of fiscal year 2000 through July 2001, the agency had actually added 191 new hires and 33 transfers to the shuttle program. These new staff are being assigned to areas critical to shuttle safety--such as project engineering, aerospace vehicle design, avionics, and software--according to NASA. As noted earlier, appendix I provides a list of critical skills where NASA is addressing personnel shortages. NASA is also focusing more attention on human capital management in its annual performance plan. The Government Performance and Results Act requires a performance plan that describes how an agency's goals and objectives are to be achieved. These plans are to include a description of the (1) operational processes, skills, and technology and (2) human, capital and information resources required to meet those goals and objectives. On June 9, 2000, the President directed the heads of all federal executive branch agencies to fully integrate human resources management into agency planning, budget, and mission evaluation processes and to clearly state specific human resources management goals and objectives in their strategic and annual performance plans. In its Fiscal Year 2002 Performance Plan, NASA describes plans to attract and retain a skilled workforce. The specifics include the following: Developing an initiative to enhance NASA's recruitment capabilities, focusing on college graduates. Cultivating a continued pipeline of talent to meet future science, math, and technology needs. Investing in technical training and career development. Supplementing the workforce with nonpermanent civil servants, where it makes sense. Funding more university-level courses and providing training in other core functional areas. Establishing a mentoring network for project managers. We will provide a more detailed assessment of the agency's progress in achieving its human capital goals as part of our review of NASA's Fiscal Year 2002 Performance Plan requested by Senator Fred Thompson. Alongside these initiatives, NASA is in the process of responding to a May 2001 directive from the Office of Management and Budget on workforce planning and restructuring. The directive requires executive agencies to determine (1) what skills are vital to accomplishing their missions, (2) how changes expected in the agency's work will affect human resources, (3) how skill imbalances are being addressed, (4) what challenges impede the agency's ability to recruit and retain high-quality staff, and (5) what barriers there are to restructuring the workforce. NASA officials told us that they have already made these assessments. The next step is to develop plans specific to the space flight centers that focus on recruitment, retention, training, and succession and career development. If effectively implemented, the actions that NASA has been taking to strengthen the shuttle workforce should enable the agency to carry out its mission more safely. But there are considerable challenges ahead. For example, as noted by the Aerospace Safety Advisory Panel in its most recent annual report, NASA now has the difficult task of training new employees and integrating them into organizations that are highly pressured by the shuttle's expanded flight rates associated with the International Space Station. As we stressed in our previous testimony, training alone may take as long as 2 years, while workload demands are higher than ever. The panel also emphasized that (1) stress levels among some employees are still a matter of concern; (2) some critical areas, such as information technology and electrical/electronic engineering, are not yet fully staffed; and (3) NASA is still contending with the retirements of senior employees. Officials at Johnson Space Center also cited critical skill shortages as a continuing problem. Furthermore, NASA headquarters officials stated that the stress-related effects of the downsizing remain in the workforce. Addressing these particular challenges, according to the Aerospace Safety Advisory Panel, will require immediate actions, such as expanded training at the Centers, as well as a long-term workforce plan that will focus on retention, recruitment, training, and succession and career development needs. The workforce problems we identified during our review are not unique to NASA. As our January 2001 Performance and Accountability Series reports made clear, serious federal human capital shortfalls are now eroding the ability of many federal agencies--and threatening the ability of others--to economically, efficiently, and effectively perform their missions. As the Comptroller General recently stated in testimony, the problem lies not with federal employees themselves, but with the lack of effective leadership and management, along with the lack of a strategic approach to marshaling, managing, and maintaining the human capital needed for government to discharge its responsibilities and deliver on its promises.To highlight the urgency of this governmentwide challenge, in January 2001, we added strategic human capital management to our list of federal programs and operations identified as high risk. Our work has found human capital challenges across the federal government in several key areas. First, high-performing organizations establish a clear set of organizational intents--mission, vision, core values, goals and objectives, and strategies--and then integrate their human capital strategies to support these strategic and programmatic goals. However, under downsizing, budgetary, and other pressures, agencies have not consistently taken a strategic, results-oriented approach to human capital planning. Second, agencies do not have the sustained commitment from leaders and managers needed to implement reforms. Achieving this can be difficult to achieve in the face of cultural barriers to change and high levels of turnover among management ranks. Third, agencies have difficulties replacing the loss of skilled and experienced staff, and in some cases, filling certain mission-critical occupations because of increasing competition in the labor market. Fourth, agencies lack a crucial ingredient found in successful organizations: organizational cultures that promote high performance and accountability. At this time last year, NASA planned to develop and begin equipping the shuttle fleet with a variety of safety and supportability upgrades, at an estimated cost of $2.2 billion. These upgrades would affect every aspect of the shuttle system, including the orbiter, external tank, main engine, and solid rocket booster. Last year, we reported that NASA faced a number of programmatic and technical challenges in making these upgrades. First, several upgrade projects had not been fully approved, creating uncertainty within the program. Second, while NASA had begun to establish a dedicated shuttle safety upgrade workforce, it had not fully determined its needs in this area. Third, the shuttle program was subject to considerable scheduling pressure, which introduced the risk of unexpected cost increases, funding problems, and/or project delays. Specifically, the planned safety upgrade program could require developing and integrating at least nine major improvements in 5 years--possibly making it the most aggressive modification effort ever undertaken by the shuttle program. At the same time, technical requirements for the program were not yet fully defined, and upgrades were planned to coincide with the peak assembly period of the International Space Station. Since then, NASA has made some progress but has only partially addressed the challenges we identified last year. Specifically, NASA has started to define and develop some specific shuttle upgrades. For example, requirements for the cockpit avionics upgrade have been defined. Also, Phase I of the main engine advanced health monitoring system is in development, and Friction Stir Welding on the external tank is being implemented. In addition, according to Shuttle Development Office officials, staffing for the upgrade program is adequate. Since our last report, these officials told us that the Johnson Space Center has added about 70 people to the upgrade program, while the Marshall Space Flight Center has added another 50 to 60 people. We did not assess the quality or sufficiency of the added staff, but according to the development office officials, the workforce's skill level has improved to the point where the program has a "good" skill base. Nevertheless, NASA has not yet fully defined its planned upgrades. The studies on particular projects, such as developing a crew escape system, are not expected to be done for some time. Moreover, our previous concerns with the technical maturity and potential cost growth of particular projects have proven to be warranted. For example, the implementation of the electric auxiliary power unit has been delayed indefinitely because of technical uncertainties and cost growth. Also, the estimated cost of Phase II of the main engine advanced health monitoring system has almost doubled, and NASA has canceled the proposed development of a Block III main engine improvement because of technological, cost, and schedule uncertainties. Compounding the challenges that NASA is facing in making its upgrades is the uncertainty surrounding its shuttle program. NASA is attempting to develop alternatives to the space shuttle, but it is not yet clear what these alternatives will be. We recently testified before the Subcommittee on Space and Aeronautics, House Committee on Science on the agency's Space Launch Initiative. This is a risk reduction effort aimed at enabling NASA and industry to make a decision in the 2006 time frame on whether the full-scale development of a reusable launch vehicle can be undertaken. However, as illustrated by the difficulties NASA experienced with another reusable launch vehicle demonstrator--the Lockheed Martin X-33--an exact time frame for the space shuttle's replacement cannot be determined at this time. Consequently, shuttle workforce and upgrade issues will need to be considered without fully knowing how the program will evolve over the long run. In conclusion, NASA has made a start at addressing serious workforce problems that could undermine space shuttle safety. It has also begun undertaking the important task of making needed safety and supportability upgrades. Nevertheless, the challenges ahead are significant--particularly because NASA is operating in an environment of uncertainty and it is still contending with the effects of its downsizing effort. As such, it will be exceedingly important that NASA sustain its attention and commitment to making space shuttle operations as safe as possible. Mr. Chairman, this concludes my statement. I would be happy to answer any questions that you or Members of the Subcommittee may have. For further contact regarding this testimony, please contact Allen Li at (202) 512-4841. Individuals making key contributions to this testimony included Jerry Herley, John Gilchrist, James Beard, Fred Felder, Vijay Barnabas, and Cristina Chaplain.
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In August 2000, the National Aeronautics and Space Administration's (NASA) space shuttle program was at a critical juncture. Its workforce had declined significantly since 1995, its flight rate was to double to support the assembly of the International Space Station, and costly safety upgrades were planned to enhance the space shuttle's operation until at least 2012. Workforce reductions were jeopardizing NASA's ability to safely support the shuttle's planned flight rate. Recognizing the need to revitalize the shuttle's workforce, NASA ended its downsizing plans for the shuttle program and began to develop and equip the shuttle fleet with various safety and supportability upgrades. NASA is making progress in revitalizing the shuttle program's workforce. NASA's current budget request projects an increase of more than 200 full-time equivalent staff through fiscal year 2002. NASA has also focused more attention on human capital management in its annual performance plan. However, considerable challenges still lie ahead. Because many of the additional staff are new hires, they will need considerable training and will need to be integrated into the shuttle program. Also, NASA still needs to fully staff areas critical to shuttle safety; deal with critical losses due to retirements in the coming years; and, most of all, sustain management attention to human capital reforms. Although NASA is making strides in revitalizing its workforce, its ability to implement safety upgrades in a timely manner is uncertain.
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According to the International Organization for Migration, the February 2006 bombing of the Al-Askari Mosque in Samara triggered sectarian violence, which increased the number of displaced Iraqis. Although military operations, crime, and general insecurity remained factors, sectarian violence became the primary driver for population displacement. Many Iraqis fled their country and immigrated to neighboring countries, particularly to Syria and Jordan. According to United Nations High Commissioner for Refugees (UNHCR), the 1951 United Nations Convention Relating to the Status of Refugees and its 1967 Protocol provide the foundation for modern refugee protection. According to the Convention, a refugee is someone who, "owing to a well- founded fear of being persecuted for reasons of race, religion, nationality, membership of a particular social group, or political opinion, is outside the country of his nationality, and is unable or, owing to such fear, is unwilling to avail himself of the protection of that country...." UNHCR is mandated to find solutions to the plight of refugees. According to UNHCR, three solutions are available: First, voluntary repatriation is the preferred solution for the majority of refugees. Most refugees prefer to return home as soon as circumstances permit (generally when a conflict has ended and a degree of stability has been restored). UNHCR promotes, supports, and facilitates voluntary repatriation as the best solution for displaced people, provided it is safe and reintegration is viable. Second, UNHCR may help refugees integrate and settle in the "asylum," or host, country where they reside as refugees. Some refugees cannot or are unwilling to return because they would face persecution. According to UNHCR, relatively few host countries allow refugees to settle. Third, UNHCR may assist refugees in permanently resettling in third countries. According to UNHCR, only a small number of nations take part in UNHCR resettlement programs worldwide and accept annual quotas of refugees. According to State, historically, less than 1 percent of registered refugees are resettled in third countries. Of the Iraqis resettling in third countries in 2009, UNHCR referred 75 percent (about 62,000) for resettlement in the United States. This report focuses on the third solution--those Iraqis resettled in the United States. When Iraqi refugees and SIV holders arrive in the United States, they have access to federal- and state-funded assistance to help them reach self-sufficiency in their new communities. State has primary responsibility for funding and administering initial reception and placement benefits for refugees and SIV holders upon their arrival in the United States. State's PRM has cooperative agreements with 10 resettlement agencies that coordinate with local affiliates across the country to make referrals and to administer resettlement services and other assistance. HHS's ORR administers cash and medical assistance, and employment and other social services through the states and resettlement agencies that coordinate services for refugees across the country. Regarding federal government employment, individuals are generally employed in the competitive, excepted, or Senior Executive Service. When hiring for competitive service positions, agencies use a competitive examination process set forth in Title 5 of the U.S. Code. Some agencies have excepted service positions for which they are not required to follow OPM's competitive examination process; instead, the agencies have the authority to establish their own hiring procedures. When agencies hire for career senior executive positions--top-level policy, supervisory, and managerial positions--the individual's executive and managerial qualifications must be reviewed and approved by an OPM-administered Senior Executive Service Qualifications Review Board. According to OPM data, the majority of civil service employees in the United States are in the competitive service. Between fiscal years 2006 and 2009, the United States has admitted 34,470 Iraqi refugees under State's Refugee Admissions Program. Since fiscal year 2007, State has issued 4,634 SIVs to Iraqis. Resettlement agencies, working under cooperative agreements with State, have resettled Iraqis throughout the United States, but particularly in California and Michigan. These agencies have found that Iraqis arrive in the United States with high levels of trauma, injury, and illness, which contribute to the challenges they face in resettling in a new country. In addition, entry-level jobs normally available to refugees are scarce and more competitive in the current economic downturn. State's PRM manages the U.S. Refugee Admissions Program (USRAP)-- the U.S. government's program for accepting and processing refugee applications for resettlement in the United States. PRM's regional refugee coordinator accepts referrals from UNHCR, embassies, and certain nongovernmental organizations (NGO). Certain categories of Iraqis with U.S. affiliations do not need a referral and may apply directly for refugee consideration under a direct access program in Jordan, Egypt, and Iraq. Overseas processing entities (OPE), working under a cooperative agreement with State, prescreen the referrals and prepare application forms by collecting and verifying personal and family information, obtaining details of persecution or feared harm, and initiating security name checks. Once the OPE prescreens the case, it is provided to DHS's U.S. Citizenship and Immigration Services (USCIS), which makes periodic visits to the region to interview refugees and adjudicate their applications for resettlement in the United States. Once USCIS preliminarily approves cases, they are returned to the OPE, which continues processing medical screenings, sponsorship (i.e., the identification of the U.S.-based resettlement agency that will provide initial resettlement benefits), travel arrangements, and cultural orientation, among other things. The cultural orientation, which is a voluntary course for all refugees over the age of 15, addresses essential topics related to processing, travel, and resettlement, such as the role of the resettlement agency, housing, employment, health, and money management. While the OPE coordinates outprocessing, PRM secures a sponsoring resettlement agency in the United States. From fiscal years 2006 through 2009, the United States admitted 34,470 Iraqi refugees (see table 1). DHS and State's Bureau of Consular Affairs also have implemented two SIV programs, established by Congress, to further assist qualified Iraqis who worked for or on behalf of the U.S. government and who want to immigrate to the United States. Both programs cover the principal Iraqi applicants and their dependents. Iraqi SIV holders are admitted into the United States as lawful permanent residents. The first SIV program, established under section 1059 of the NDAA for fiscal year 2006, targets Iraqi and Afghan translators and their dependents. The second SIV program, established under section 1244 of the NDAA for fiscal year 2008, targets certain Iraqis who had been U.S. government employees, contractors, or subcontractors and their dependents. In January 2008, Congress authorized that up to 5,000 Iraqis per year for the next 5 fiscal years, who had worked for or on behalf of the U.S. government in Iraq and had experienced or were experiencing an ongoing serious threat as a consequence, can receive SIVs. Some Iraqi refugees may also qualify for the SIV programs. To apply for special immigrant status, eligible Iraqis may file a petition, including a favorable recommendation from their U.S. civilian or military supervisor documenting their service. USCIS sends approved petitions to State's National Visa Center, which contacts applicants to set up an in- person interview at an embassy or a consulate. Consular officials interview applicants, review the submitted documents and security and medical clearances, and issue an immigrant visa if candidates satisfy all criteria. At the end of fiscal year 2009, State had issued 2,389 SIVs to principal Iraqi applicants out of a maximum authorized 11,050 principal- applicant visas. Under the two programs, the United States issued 4,634 Iraqi SIVs from fiscal years 2007 through 2009 (see table 2). It is unclear how many Iraqis with SIVs have entered the United States. USCIS provided us with data on the number of Iraqi and Afghan SIV holders who were admitted into the United States as permanent residents (or green card holders) between fiscal years 2007 and 2009. Iraqi and Afghan SIVs are issued based on an applicant's nationality. USCIS provided us these data by applicants' country of birth, but could not provide the data by nationality. Therefore, we report only Iraqi SIV issuance data. Since fiscal year 2006, Iraqi refugees and SIV holders have resettled in communities across the United States. Placement decisions consider the location of an individual's family members, potential medical needs, and municipal and sponsoring agency capacity to accept and provide for refugees and SIV holders. The largest populations of recently resettled Iraqis are in California, Michigan, Texas, Arizona, Illinois, and Virginia (see fig. 1 and app. II for more information). According to NGOs and resettlement agencies, the U.S. refugee resettlement program has been strained by a growing number of Iraqi and Afghan refugees and the economic downturn in the United States. In June 2009, the International Rescue Committee reported that the high levels of trauma, injury, and illness among Iraqi refugees contribute to the precarious nature of their resettlement. Moreover, unemployment and homelessness threaten Iraqi refugees and other populations recently resettled in the United States, according to NGOs and resettlement agencies. In October 2009, the Georgetown Law School reported that a Michigan resettlement office received funding in 2008 for 300 refugees, but served more than 1,200. Caseworkers, dealing with an average of 120 cases at a time--up from 30 the year before--could not provide what they considered sufficient employment services. According to the International Rescue Committee report and resettlement agency officials we interviewed, some Iraqi refugees face eviction because they cannot pay their rent. The present economic downturn has made jobs normally available to refugees, such as entry-level jobs with limited English proficiency, scarce and more competitive. An ORR official stated that, before the current economic recession, refugees could regularly secure such jobs, but since the recession these positions are generally not available. Most of the resettlement agencies stated that it is taking longer than usual--often as long as 6 months, and in some cases, 9 to 10 months--for incoming refugees to find employment. U.S. officials and resettlement agencies stated that without jobs, some refugees are unable to get by on the levels of assistance afforded them by the U.S. refugee resettlement program. Iraqi refugees, in particular, have faced difficulties finding work despite their relatively high levels of education, according to PRM, ORR, and USCIS officials, and representatives from the resettlement agencies. According to an ORR official and resettlement agency officials, the U.S. resettlement program does not take into account refugees' prior work experience and education in job placements. Rather, the focus of the program is on securing early employment for refugees. PRM data indicate that many Iraqi refugees who were resettled in the United States in fiscal years 2007 through 2009 reported having some secondary education. PRM, ORR, and the resettlement agencies reported that educated Iraqis are struggling to find entry-level employment in the United States, much less employment in their professional field of work. For example, we interviewed three Iraqi refugees about their experience searching for employment in the United States. Two had worked for the U.S. government in Iraq, and one was unable to find an entry-level position requiring no formal education. This individual estimated that he had applied for more than 30 low-skill jobs, such as for a busboy and cleaner, before his former U.S. supervisor in Iraq helped him find a job. Iraqi refugees and SIV holders are eligible for PRM-funded basic needs support and services upon arrival in the United States. In addition, qualified Iraqi refugees and--as a result of December 2009 legislation-- qualified Iraqi SIV holders can receive certain assistance generally for up to 7 years through public benefits programs. Prior to December 19, 2009, Iraqi SIV holders' eligibility for public benefits generally ceased after 8 months. Both groups can receive up to 8 months of ORR-funded cash and medical assistance. According to PRM, its assistance typically lasts for 30 days; however, support may continue for up to 90 days if basic needs have not been met. All refugees automatically receive this assistance, which includes travel arrangements to their assigned resettlement location, basic housing, food allowances, school enrollments, and referrals for medical needs, through the resettlement agencies. As of January 1, 2010, PRM provides the resettlement agencies $1,800 per refugee to cover the direct and administrative costs of the assistance. Prior to January 1, 2010, PRM provided resettlement agencies $900 per refugee. Iraqi SIV holders do not automatically receive these benefits; they must sign up to receive them within 10 days of receiving their visas. SIV holders who do not accept PRM benefits make their own travel arrangements and may resettle anywhere in the United States. According to PRM data, 1,995 SIV holders (out of 4,634 total issued visas for these years) have participated in the PRM program since 2007, when Iraqi SIV holders were first authorized to access these benefits. Qualified Iraqi refugees and, as of December 19, 2009, qualified Iraqi SIV holders may be eligible for federal public benefit programs, including Temporary Assistance for Needy Families (TANF), Medicaid and State Children's Health Insurance Program (SCHIP), Supplemental Security Income (SSI), and Supplemental Nutrition Assistance Program (SNAP, formerly the Food Stamp Program), for generally up to 7 years, depending on the program and the state. Permanent residents (such as Iraqi SIV holders) are generally barred from receiving certain public benefits for their first 5 years in the United States. However, in 2007, Congress passed legislation establishing that Iraqi SIV holders could receive public benefits for up to 6 months. In 2008, Congress extended their allowance to 8 months. The DOD Appropriations Act for fiscal year 2010 included a provision which allows Iraqi SIV holders to be eligible for public benefits to the same extent, and for the same period of time, as refugees. Relevant agencies are in the process of issuing guidance to further define the application of this provision to Iraqi SIV holders. In addition, ORR funds social services, for which Iraqi refugees and SIV holders may be eligible, for up to 5 years. ORR social services, which include job preparation, English language classes, and assistance with job interviews, do not have income requirements and are designed to find refugees employment within 1 year of enrollment. Figure 2 provides information on the types of resettlement assistance available to qualified Iraqi refugees and SIV holders, and the impact of the December 19, 2009, legislation on the duration of time for which they may be eligible for this assistance. As figure 2 also shows, Iraqi refugees and SIV holders who are not eligible for TANF or Medicaid may be eligible for ORR-funded Refugee Cash Assistance (RCA) and Refugee Medical Assistance (RMA) for up to 8 months. According to ORR, most Iraqi refugees and SIV holders who do not qualify for TANF or Medicaid are eligible for RCA and RMA. Refugee resettlement assistance programs, such as cash assistance, ensure that refugees become self-sufficient as quickly as possible after they arrive in the United States. To participate in RCA, qualifying refugees and SIV holders must register for employment services and generally accept the first job offered, unless they can show good cause for not accepting the position. Current requirements make it difficult for qualified Iraqi refugees and SIV holders to obtain U.S. government employment. Specifically, most federal jobs in the United States require U.S. citizenship and background investigations, and Arabic language positions often require security clearances, which noncitizens cannot obtain. Over the course of our work, we identified two institutes at DOD and State that have some flexibility in hiring noncitizens for U.S. positions. Finally, DOD and State have not implemented a program intended to employ SIV holders under authority granted in 2009 legislation. U.S. government hiring requirements limit the extent to which noncitizens--including Iraqi refugees and SIV holders--can be employed in federal government positions in the United States. Iraqi refugees and SIV holders seeking federal government employment also face challenges posed by requirements for background investigations, and, for certain positions, security clearances. First, U.S. government agencies are restricted from employing noncitizens in competitive service positions. For example, USCIS reported that it may employ only U.S. citizens and nationals as Arabic language specialists because the positions are in the competitive service. Under a provision passed in the fiscal year 2010 Consolidated Appropriations Act, agencies can use appropriated funds to employ qualifying permanent residents and refugees seeking U.S. citizenship in the excepted service or the Senior Executive Service. Second, a particular agency may have specific legislation that prohibits that agency from employing noncitizens in certain positions. For example, State may employ only U.S. citizens in the Foreign Service, including its overseas positions that require Arabic. Similarly, DHS's Transportation Security Administration may only employ U.S. citizens as Transportation Security Officers. According to OPM officials, it is difficult to complete background investigations, which are required for all U.S. government employees, on Iraqi refugees and SIV holders. For example, it is difficult to obtain the information necessary to verify Iraqi refugees' or SIV holders' employment history and other information required for the investigation. In addition, OPM officials stated that the background checks used to hire Iraqis as part of the U.S. mission in Iraq are not sufficient to substitute for the background investigation required for civil service employment in the United States. In addition, some U.S. government positions may also require security clearances to ensure that national security information is entrusted only to those who have proven reliability and loyalty to the nation; however, noncitizens cannot obtain security clearances. Four of the five agencies we reviewed reported that security clearances are required for most or all of their positions that require or prefer knowledge of Arabic or Iraq; USAID requires security clearances for all direct-hire positions. For example, DOD, DHS, and DOJ have intelligence positions that may require Arabic, but all such positions require a security clearance. Similarly, USAID officials said that, while they have a preference for persons who speak Arabic or have knowledge of Iraq, all civil service and all Foreign Service positions at USAID require security clearances. In addition, officials in the Human Rights Violators and War Crimes Unit in DHS's Immigrations and Customs Enforcement reported that, as of September 2009, there were 20 open investigations that would benefit from Arabic language skills. However, all staff in the unit must have security clearances. Certain federal positions in the United States at DOD and State are open to noncitizens, including Iraqi refugees and SIV holders. Specifically, as of November 6, 2009, DOD's Defense Language Institute (DLI) reported having 501 Arabic positions--including 32 open positions; all were available to noncitizens. Similarly, all 21 Arabic positions at State's Foreign Service Institute (FSI) are available to noncitizens, according to FSI (see table 3). Both DLI and FSI reported that they had previously hired foreign nationals to fill these types of positions. DLI and FSI can hire noncitizens, including Iraqi refugees and SIV holders, because language instructor positions at DLI and FSI are in the excepted service. Neither DLI nor FSI require security clearances because Arabic instructors do not require access to classified information, according to personnel officials at each institute. However, the positions do require background investigations. The positions may also require degrees or other educational backgrounds. In fiscal year 2009, the NDAA authorized DOD and State to jointly establish a temporary program to employ Iraqi SIV holders who have resettled in the United States as translators, interpreters, and cultural awareness instructors, but the agencies have not done so. According to OPM officials, DOD and State are authorized to hire Iraqi SIV holders as (1) temporary employees in excepted service positions, or (2) as personal services contractors, in which case they are not federal employees. In the committee report for the fiscal year 2010 NDAA, the House Armed Services Committee noted that Iraqi SIV holders' fluency i Arabic and knowledge of Iraq could be useful to the U.S. government. The committee also noted that many of the SIV holders worked on behalf of the United States and coalition forces for years, often at great risk to themselves or their families. Although DOD and State have needs for Arabic speakers, such as language instructors at DLI and FSI, DOD policy officials and State human resource officials stated that the agencies do not plan to establish this program to employ qualified Iraqi SIV holders to fill any unmet needs. A senior DOD policy official stated that DOD's human resources divisions did not have a need for additional Arabic speakers. Moreover, DOD and State officials stated that the departments did not receive any funding for the program. DOD provided written comments on a draft of this report (see appendix III). State, DHS, and HHS provided technical comments, which we incorporated, as appropriate. We also sent a draft of this report to DOJ, USAID, and OPM, but they did not provide comments. DOD noted that it is meeting its need for translators, interpreters, and cultural awareness instructors with knowledge of Arabic or Iraq through existing hiring authorities. Therefore, as we state in our report, DOD has not identified a need to establish the temporary employment program for Iraqi SIV holders pursuant to the NDAA for fiscal year 2009. We are sending copies of this report to interested congressional committees and the Secretaries of State, Defense, Health and Human Services, and Homeland Security, as well as the Attorney General, the Administrator of USAID, and the Director of OPM. This report will also be available at no charge on the GAO Web site at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-8979 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this report are listed in appendix IV. In this report, we (1) provide information on the status of resettled Iraqis in the United States and the initial challenges they face, (2) review the benefits afforded to Iraqi refugees and special immigrant visa (SIV) holders, and (3) review the challenges faced by Iraqi refugees and SIV holders in obtaining employment with the federal government. To provide information on the number and location of resettled Iraqis and the initial challenges they face, we collected and analyzed documentation and interviewed officials from the Department of State's (State) Bureau of Population, Refugees, and Migration (PRM) and Consular Affairs; the Department of Health and Human Services' (HHS) Office of Refugee Resettlement (ORR); and the Department of Homeland Security's (DHS) U.S. Citizenship and Immigration Services (USCIS). In addition, we interviewed representatives from 10 resettlement agencies that work with PRM and ORR to provide benefits and services to Iraqi refugees and SIV holders: Church World Service; Episcopal Migration Ministries; Ethiopian Community Development Council; Hebrew Immigrant Aid Society; Iowa Department of Human Services, Bureau of Refugee Services; International Rescue Committee; Lutheran Immigration and Refugee Service; U.S. Committee for Refugees and Immigrants; U.S. Conference of Catholic Bishops; and World Relief. We also interviewed two nongovernmental organizations (NGO) that work with PRM and ORR to provide technical assistance to resettlement agencies on refugee employment and cultural adjustment issues. We reviewed reports issued by NGOs on the status of Iraqi refugees in the United States and the challenges they face in resettling in this country. We interviewed several Iraqi refugees about their resettlement experiences; their views or experiences may not be representative of other refugees or SIV holders. To determine the reliability of Consular Affairs data on Iraqi SIV issuances, we interviewed the Consular Affairs official who maintains this data. We determined that the data were sufficiently reliable to report on the number of Iraqi SIVs issued between fiscal years 2007 and 2009. USCIS provided us with data on the number of Iraqi and Afghan SIV holders who were admitted into the United States as permanent residents (or green card holders) between fiscal years 2007 and 2009. Iraqi and Afghan SIVs are issued based on an applicant's nationality. USCIS provided us these data by applicants' country of birth, but could not provide the data by nationality. As a result, we determined that these data were not sufficiently reliable to indicate how many Iraqi SIV holders were admitted into the United States during this time period. Therefore, we report only Iraqi SIV issuance data. To determine the reliability of PRM data on resettled Iraqi refugees and SIV holders, we interviewed the PRM officials who monitor and use these data. We determined that the data were sufficiently reliable to report on the number, locations, and reported general education levels of resettled Iraqis between fiscal years 2006 and 2009. To review the benefits afforded Iraqi refugees and SIV holders, we collected and analyzed relevant laws, regulations, and agency policies regarding federally and state-funded and administered refugee resettlement programs. We interviewed officials from PRM and ORR to determine the types of benefits available and their eligibility requirements. The majority of our audit work was completed prior to the December 2009 passage of the fiscal year 2010 Department of Defense (DOD) Appropriations Act, which changed Iraqi SIV holders' eligibility for public benefits. To review the challenges Iraqi refugees and SIV holders face in obtaining employment with the federal government, we analyzed relevant laws, regulations, executive orders, and agency policies on U.S. government employment and personnel security requirements. The majority of our audit work was completed prior to the December 2009 passage of the fiscal year 2010 Consolidated Appropriations Act, which made changes to a long standing restriction on the use of appropriated funds to employ noncitizens by the federal government in the United States. We interviewed officials from the Office of Personnel Management (OPM) regarding requirements for U.S. government employment. We also interviewed program, human resource, and security officials from five key agencies--DOD (specifically, the Army), State, DHS, the Department of Justice, and the U.S. Agency for International Development (USAID)-- regarding their employment and personnel security requirements positions in the United States. We chose these agencies because they have national security missions, ongoing programs in Iraq, and needs for personnel with Arabic language skills; we did not include the intelligence community. We focused on employment in the United States because generally Iraqi refugees and SIV holders who want to apply for U.S. citizenship must reside in the United States for a certain period of time. In addition, refugees' ability to apply for permanent resident status could be delayed if they travel overseas. We did not develop an inventory of the agencies' needs for Arabic language skills or Iraqi expertise. We also interviewed policy officials at DOD and State regarding the temporary program authorized by the fiscal year 2009 Duncan Hunter National Defense Authorization Act to employ Iraqi SIV holders who have resettled in the United States as translators, interpreters, and cultural awareness instructors at DOD and State. To assess the reliability of data on Arabic positions at DOD's Defense Language Institute (DLI) and State's Foreign Service Institute (FSI), we interviewed human resource officials at DLI, DOD's U.S. Army Training and Doctrine Command, and FSI. We determined that the data were sufficiently reliable to report on the number of Arabic positions at DLI and FSI. Table 4 provides data on the numbers of Iraqi refugees and special immigrant visa (SIV) holders who were resettled in the United States from fiscal years 2006 through 2009. The six states with the highest numbers in each category are noted with an asterisk. In addition to the contact named above, Tetsuo Miyabara, Assistant Director; Kathryn H. Bernet; Muriel Brown; Lynn Cothern; Martin de Alteriis; Etana Finkler; Corissa Kiyan; Mary Moutsos; Steven Putansu; and Lindsay Read made key contributions to this report.
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Since the February 2006 bombing of the Al-Askari Mosque in Samara that triggered the displacement of thousands of Iraqis, the United States has taken a lead role in resettling the displaced. The administration has indicated its intent to assist those Iraqis who supported the United States in Iraq. In addition, Congress authorized the Departments of Defense (DOD) and State (State) to jointly establish and operate a program to offer temporary employment to Iraqi special immigrant visa (SIV) holders in the United States. This report provides information on the (1) status of resettled Iraqis in the United States and the initial challenges they face, (2) benefits afforded Iraqi refugees and SIV holders, and (3) challenges they face obtaining employment with the federal government. GAO conducted this review under the Comptroller General's authority. GAO analyzed data on Iraqi refugees and SIV holders in the United States, and laws and regulations on the benefits afforded to them. GAO also analyzed U.S. government employment and personnel security requirements. GAO interviewed officials from five key agencies regarding these requirements. This report does not contain recommendations. DOD provided official comments. State and the Departments of Homeland Security and Health and Human Services (HHS) provided technical comments. GAO incorporated these comments, as appropriate. Between fiscal years 2006 and 2009, the United States admitted 34,470 Iraqi refugees under State's Refugee Admissions Program. In addition, State issued 4,634 SIVs to Iraqis pursuant to two programs, established by Congress to help Iraqis who previously worked for the U.S. government in Iraq. Resettlement agencies, working under cooperative agreements with State, have resettled Iraqis throughout the United States but particularly in California and Michigan. These agencies have found that Iraqis arrive in the United States with high levels of trauma, injury, and illness, which contribute to the challenges they face in resettling in a new country. In addition, entry-level jobs normally available to refugees are scarce and more competitive in the current economic downturn. Iraqi refugees generally have high levels of education, according to U.S. officials and representatives from the resettlement agencies. Nevertheless, Iraqis have struggled to find entry-level employment in the United States. Iraqi refugees and SIV holders are eligible for resettlement assistance and public benefits upon arrival in the United States. State provides resettlement agencies $1,800 per person to cover basic housing, food, and assistance for accessing services during their first 30 days in the United States; however, support may continue for up to 90 days if basic needs have not been met. Refugees automatically receive these benefits; Iraqi SIV holders must elect to receive them within 10 days of receiving their visas. In addition, qualified Iraqi refugees and, as a result of December 2009 legislation, qualified SIV holders can receive certain assistance for up to 7 years through public benefits programs. Prior to December 19, 2009, Iraqi SIV holders' eligibility for public benefits generally ceased after 8 months. Both groups can also receive up to 8 months of cash and medical assistance from HHS if they do not qualify for public benefits. In addition, HHS funds social services, including job preparation, English language classes, and assistance with job interviews, for which Iraqi refugees and SIV holders may be eligible for up to 5 years. Iraqi refugees and SIV holders, including those who acted as interpreters and linguists for civilian agencies and military commands in Iraq, have limited opportunities for federal employment. Most federal positions in the United States require U.S. citizenship and background investigations; certain positions, including most positions related to Arabic or Iraq, also require security clearances, which noncitizens cannot obtain. However, GAO did identify positions at DOD's Defense Language Institute and State's Foreign Service Institute open to qualified noncitizens. Finally, State and DOD have not established the temporary program intended to offer employment to Iraqi SIV holders under authority granted the agencies in fiscal year 2009 legislation. Although both agencies have positions requiring Arabic language skills, neither identified any unfilled needs that could be met by employing Iraqi SIV holders through this joint program.
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Reserve components participate in military conflicts and peacekeeping missions in areas such as Bosnia, Kosovo, and southwest Asia, and assist in homeland security. From fiscal year 1996 through fiscal year 2001, an average of about 11,000, or 1 percent, of the roughly 900,000 reservists were mobilized each year. The length of mobilizations can be as long as 2 years with the mean length of mobilizations for the 6-year period we reviewed being 117 days. As of April 2002, about 80,000, or 8 percent, of reservists had been mobilized for 1 year for operations related to September 11, 2001. At the same time, additional reserve personnel continued to be deployed throughout the world on various peacekeeping and humanitarian missions. The rights of mobilized personnel of the reserve components are protected under the Soldiers' and Sailors' Civil Relief Act of 1940 (SSCRA), as amended, and by the Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA), as amended. Included in these acts are protections related to health care coverage. For example, SSCRA provides protections for reservists who have individual health coverage. Specifically, for individually covered reservists returning from active duty, SSCRA requires private insurance companies to reinstate coverage at the premium rate they would have been paying had they never left. Under SSCRA, the insurance company cannot refuse to cover most preexisting conditions. During military service, USERRA protects reservists' employer-provided health benefits. Specifically, for absences of 30 days or less (training periods typically last 2 weeks or less), health benefits continue as if the employee had not been absent. For absences of 31 days or more, coverage stops unless (1) the employee elects to pay for the coverage, including the employer contributions, or (2) the employer voluntarily agrees to continue coverage. Under USERRA, employers must reinstate reservists' health coverage the day they apply to be reinstated in their civilian positions--even if the employers cannot put the employees back to work immediately. Reservists mobilized under federal authorities are covered by TRICARE, DOD's health care system. If they are ordered to active duty for 31 days or more, reservists are enrolled in Prime, TRICARE's managed care option, and--like other active duty personnel--are required to receive care through TRICARE, either through 1 of 580 MTFs worldwide, or through TRICARE's network of civilian providers. When reservists' mobilization orders are for 31 to 178 days, their dependents are eligible for the Standard and Extra options--TRICARE's fee-for-service and preferred provider options, respectively. Once eligible for TRICARE, reservists and their dependents also become eligible for prescription drug benefits. When reservists' orders are for 179 days or more, dependents are eligible for health care under Prime. Under TRICARE, active duty personnel, including mobilized reservists, do not pay premiums for their health care coverage; however, depending on the option chosen, they may be responsible for copayments, deductibles, and enrollment requirements for their dependents. (For an overview of these benefits, see table 1.) Mobilized reservists are eligible for dental care through the military health care system. However, like active duty dependents, mobilized reservists' dependents are only eligible for dental care if they participate in DOD's voluntary dental insurance program, which requires enrollment and has monthly premiums. Because mobilized reservists' dependents could be liable for two health coverage deductibles in 1 year--their civilian insurers' deductible prior to mobilization and the TRICARE Standard or Extra deductible once mobilized--DOD has used authorities included in the National Defense Authorization Acts for 2000 and 2001 to provide financial assistance through several demonstration programs. For example, the Reserves Component Family Member Demonstration Project--available for those currently mobilized under DOD's Operation Noble Eagle and Operation Enduring Freedom--eliminates the TRICARE deductible and the requirement that dependents obtain statements that inpatient care is not available in an MTF before obtaining nonemergency treatment from a civilian hospital. In addition, DOD may pay non-network physicians up to 15 percent more than the TRICARE rate for treating dependents of mobilized reservists--a cost that otherwise would be borne by dependents if physicians required this additional payment. Until recently, DOD had administered a transitional benefit program that provided demobilized reservists and their dependents 30 days of additional TRICARE coverage as they returned to their civilian health care. The 2002 NDAA extended the transitional period during which reservists may receive TRICARE coverage from 30 days to 60--120 days, depending on the length of active duty service. This change more closely reflects the 90 days that USERRA provides reservists to apply for civilian reemployment when they are mobilized for more than 181 days, and the change will provide health care coverage if they elect to delay return to their employment subsequent to demobilization. However, the 2002 NDAA did not provide any transitional benefit for dependents. Overall, the percentage of reservists with health care coverage when they are not mobilized is similar to that found in the general population--and, like the general population, most reservists have coverage through their employers. According to DOD's 2000 Survey of Reserve Component Personnel, nearly 80 percent of reservists reported having health care coverage. In the general population, 81 percent of 18 to 65 year olds have health care coverage. Officers and senior enlisted personnel were more likely than junior enlisted personnel to have coverage. Only 60 percent of junior enlisted personnel, about 90 percent of whom are under age 35, had coverage--lower than the similarly aged group in the general population. Of reservists with dependents, about 86 percent reported having coverage. Of reservists without dependents, about 63 percent reported having coverage. More than three-quarters of reservists were provided health care coverage by their civilian employers' health plans or their spouses' health plans. (See fig. 1.) Some reservists were covered by more than one health plan. Most reservists maintained their civilian coverage when mobilized. Reservists generally maintained this coverage to better ensure continuity of health benefits and care for their dependents, sometimes at an additional cost. However, some reservists who dropped their civilian insurance to use TRICARE reported that their dependents had problems finding providers, establishing eligibility, understanding TRICARE's benefits, and obtaining assistance when questions or problems arose. We found that such problems could be ameliorated through additional education and assistance targeted to reservists and their dependents. Because most reservists maintained their civilian coverage when mobilized, few dependents experienced disruptions in coverage. According to DOD's 2000 survey, about 87 percent of reservists who had been mobilized at least once reported having civilian insurance at the time they were mobilized. The remaining 13 percent did not have civilian coverage. Of those who had civilian coverage, about 90 percent maintained it while mobilized. According to DOD officials and reservists we interviewed, many reservists maintained their civilian coverage to avoid disruptions associated with a change to TRICARE and to ensure that their dependents could continue seeing their current providers--who may not accept TRICARE reimbursements, either as network providers or under the Standard option. Preserving provider relationships was especially important to reservists whose dependents with special needs had specialists familiar with their care or to dependents who had long-standing relationships with civilian providers. Reservists we contacted reported varying financial arrangements for covering the costs of their civilian premiums while they were mobilized. USERRA does not require employers to continue paying their share of health insurance premiums when mobilizations extend beyond 30 days. However, employers continued to pay at least their portion of health insurance premiums beyond this 30-day period for about 80 percent of the reservists we contacted who maintained their employer-sponsored coverage. Sometimes, these employers paid all costs, both their own and the employee portion, while in other instances reservists continued to pay the employee portion of the premium. The remaining reservists paid the total insurance premium while mobilized. In the general population in 2001, the average employer-sponsored premium for a family plan was $588 per month with the employee generally paying about 26 percent of this premium. Mobilized reservists who used TRICARE reported a variety of problems that they and their dependents experienced when they tried to access the system. However, when DOD provided information and assistance targeted toward the situations reservists and their dependents face, these types of problems were more likely to be averted. The most common problems that reservists reported were difficulties they and their dependents had moving into the system--finding TRICARE providers, establishing eligibility, understanding TRICARE's benefits, and obtaining assistance when questions or problems arose. While similar problems have been reported by other active duty personnel, reservists and their dependents are more likely to experience such problems because they often live in areas distant from MTFs, and their active duty service is brief and episodic. Of the 360 reservists with recent mobilization experience that we contacted, about 38 percent reported some kind of problem with TRICARE. One problem, constituting about a quarter of the reported problems, was finding a TRICARE provider. Mobilized reservists and their dependents can have more difficulty finding TRICARE providers because many do not live in areas where the network is robust. Compared to 5 percent of active duty personnel, about 70 percent of reservists live and work more than 50 miles (or an hour's drive) from an MTF--areas DOD has designated as remote. Because DOD's civilian contractors are generally not required to establish TRICARE civilian networks in these areas, a network of providers may not exist. Where networks do exist, provider choice may be limited. TRICARE Prime Remote (TPR) and TPR for Active Duty Family Members were established to help improve access to care in remote areas for active duty and mobilized reservists and their dependents. However, dependent eligibility is statutorily based on residing with a service member who both lives and works in a remote area. As a result, because mobilized reservists are most often assigned to work in a location near an MTF or deployed overseas, few dependents of reservists who are mobilized for 179 days or more are eligible for these programs. About 17 percent of reported problems involved documenting and establishing eligibility. For example, reservists had problems with DOD not providing identification cards acknowledging that they and their dependents were TRICARE beneficiaries. They also had difficulties with the accuracy of information in the Defense Enrollment Eligibility Reporting System (DEERS), DOD's database that maintains benefit eligibility status. In order to ensure TRICARE eligibility, any status changes must be reported to DEERS, and according to a DOD civilian contractor, the services do not always send these changes to DEERS promptly. Reservists reported a variety of situations in which DEERS inaccuracies created problems. DEERS did not reflect that some reservists were on active duty; therefore, they and their dependents appeared to be ineligible for services and were denied care or medications. Further, in instances in which DEERS failed to reflect Prime enrollment for a dependent, claims were paid under Extra, resulting in charges for copayments that should not have been required. Also, mobilized reservists married to active duty personnel reported problems ensuring that DEERS accurately reflected their mobilized status so that they were eligible for active duty, rather than dependent, benefits and access privileges. Active duty families also have problems with DEERS, but, according to a TRICARE adviser at one site we visited, DEERS problems are accentuated for reservists because they move in and out of the system. However, determining the extent of such DEERS problems was beyond the scope of our work. Finally, about 40 percent of the problems reservists reported related to understanding TRICARE's benefits and obtaining assistance when questions or problems arose. According to DOD officials, mobilized reservists have greater difficulty understanding and navigating TRICARE than other active duty personnel. First, reservists have less incentive to become familiar with TRICARE because mobilizations are for a limited period and because TRICARE only becomes important to them and their dependents if they are mobilized. Further, when first mobilized, reservists must accomplish many tasks in a compressed period. For example, they must prepare for an extended absence from home, make arrangements to be away from their civilian employment, obtain military physical examinations, and ensure that their families are registered in DEERS. DOD officials told us that learning about TRICARE may be a low priority for reservists when they are mobilizing. According to interviews with reservists and support personnel at sites we visited, problems with TRICARE could be reduced if education and administrative assistance were available and information was targeted to the needs of reservists. In addition, when beneficiaries, especially reservists' dependents, were provided assistance with using the TRICARE system--identifying contact points and understanding TRICARE benefits and how to use them--they generally were able to obtain appropriate, timely health care through TRICARE. At one site we visited, assistance had been lacking or inadequate, and reservists were experiencing numerous difficulties with TRICARE. Here, 1,100 personnel, who were mobilized beginning in late September 2001 under Operation Noble Eagle and Operation Enduring Freedom, initially had no on-base MTF or TRICARE assistance. As a result, when questions arose, these mobilized reservists and their dependents sometimes obtained and passed along inaccurate information. In other instances they contacted TRICARE's civilian contractor directly, sometimes waiting for over an hour on hold trying to obtain information. In November 2001, two administrative personnel were assigned, including a health benefits expert, and at the time of our visit in February 2002, progress was being made to resolve reservists' and their dependents' health care questions. However, because this assistance was initially delayed, two staff members were insufficient to address the volume of misinformation and problems that existed on site. Beneficiaries told us they were still confused about TRICARE regulations at the time we visited. Some mobilized reservists still did not understand that they had to select a TRICARE primary care manager and were continuing to use their non-network providers, even though regulations require active duty personnel to participate in Prime. Likewise, their dependents were continuing to have problems, such as determining whether they could continue to see their civilian providers under TRICARE. At another site we visited, which had an MTF and better on-base assistance, we observed that reservists and their dependents generally were not experiencing problems with TRICARE. In this location DOD had a mobilization team on site to help explain the benefits and had a staff on base to offer assistance when needed. To help ensure that reservists and dependents understood the various TRICARE options, the mobilization team presented general information on TRICARE and tailored benefits discussions to beneficiaries' specific circumstances. For example, the mobilization team tailored TRICARE information depending on whether reservists' dependents lived in areas with established networks or in areas where TRICARE networks were minimal or nonexistent. For the latter, the mobilization team discussed how TRICARE's Standard option could permit dependents to continue relationships with civilian physicians by paying copayments similar to those required by many civilian insurers. The mobilization team members also referred reservists to TRICARE offices, Internet Web links, and toll-free information lines, and provided backup telephone numbers, including their own, to handle additional questions. The 2002 NDAA directed us to evaluate several health coverage options through TRICARE, FEHBP, or civilian insurance as possible mechanisms for ensuring continuity in benefits for reservists and their dependents. Some of the options would provide coverage on a continuous basis during the entire enlistment period, regardless of reservists' mobilization status, while others would provide additional or alternative coverage only during or following periods of mobilization. Cost estimates for these options, which were provided by CBO, range from a low of about $89 million to a high of about $19.7 billion over a 5-year period. (See app. II for estimate assumptions.) For 2003 through 2007, the estimated cost to DOD for providing reservists and their dependents continuous health care coverage, regardless of reservists' mobilization status, would range from about $4 billion to $19.7 billion for the 5-year period, depending on how the benefit was provided. CBO estimates that providing the benefit through TRICARE with no premium for reservists would cost DOD about $10.4 billion. (See table 2.) DOD's cost would be reduced to about $7 billion if reservists paid a premium similar to that paid by active duty retirees under age 65 or to about $4 billion if reservists paid a premium share similar to that paid by federal employees for FEHBP. Providing insurance through FEHBP would be more expensive to DOD because CBO estimated the premium would be based on the existing FEHBP pool--an older population using more health care services. (See table 3.) While CBO estimates that the actual cost of providing health care for reservists and their dependents under FEHBP would be about $10.9 billion, similar to the cost of providing the TRICARE benefit, it estimates the DOD health insurance premium costs for FEHBP to be about $19.7 billion. If reservists paid the typical FEHBP employee portion of the premium, CBO estimates that DOD premium costs would be reduced to about $10.2 billion. The cost for options providing health care coverage only during mobilizations or for expanding the benefit after mobilizations would be from $89 million to $1.8 billion over the 5-year period, according to CBO estimates. (See table 4.) For example, in lieu of a TRICARE benefit, DOD might assume the costs of reservists' civilian coverage during mobilization. The value of this benefit would vary from reservist to reservist depending on (1) the cost of the reservist's portion of the premium, (2) the extent of employer coverage, and (3) whether the employer continued to pay the premium during the reservist's mobilization. CBO estimates that if each year 80,000 reservists, the approximate number mobilized in April 2002, were mobilized for a 1-year period, the cost to fully pay for civilian health coverage for the 5-year period would be about $1.8 billion. The cost of DOD allowing dependents with civilian insurance the choice of TRICARE or a monetary voucher equivalent to the estimated value of the TRICARE benefit would be about $1.1 billion over 5 years, according to CBO's estimate. Although the amount of this voucher would be based on the average cost of the TRICARE benefit for which the dependent is eligible, this option would increase DOD's costs because historically many dependents of mobilized reservists have relied on their civilian coverage and have not used their TRICARE benefit. Revising the transitional period that DOD has provided so that demobilized reservists retain their TRICARE benefits for an additional 30 days and their dependents retain benefits for a 90-day period would cost $89 million for the 5-year period, according to CBO's estimate. Because most reservists have civilian insurance and maintain it while mobilized, few of their dependents experience problems with disruptions to their health care, such as being forced to change providers, learn new health care plan requirements, and adjust to different benefit packages. However, when using TRICARE some dependents of mobilized reservists have experienced certain problems--in part, because they do not adequately understand how the plan works. Problems that reservists and their dependents face with health coverage during mobilizations could be mitigated if DOD improved the information and assistance provided them. Reservists are confronted with choices and circumstances that are more complex than those faced by active duty personnel. Their decisions about health care are affected by a variety of factors--length of orders, where they and their dependents live, whether they or their spouses have civilian health coverage, and the amount of support civilian employers would be willing to provide with health care premiums. In addition, reservists must determine whether their existing civilian providers would be willing to accept TRICARE while they are mobilized since their desire not to disrupt these relationships during a temporary mobilization may outweigh other considerations. We recommend that the Secretary of Defense direct the Assistant Secretary of Defense for Health Affairs to ensure that reservists, as part of their ongoing readiness training, receive information and training on health care coverage available to them and their dependents when mobilized and provide TRICARE assistance during mobilizations targeted to the needs of reservists and their dependents. DOD reviewed and commented on a draft of this report. It concurred with the report's recommendation and generally agreed with its findings. DOD stated that it recognized the importance of a well-informed TRICARE beneficiary population and to that end has already taken a number of steps to ensure that reservists understand their health care benefits. For example, the TRICARE Management Activity website and the Reserve Affairs portion of the Department of Defense website provide information about the health benefits available for reservists. Further, DOD stated it will continue to emphasize the importance of health care education and, as problem areas are identified, will immediately take steps to correct them. DOD's comments are reprinted in appendix III. DOD provided additional comments from the Department of the Army and technical comments from the TRICARE Management Activity and from the Office of the Assistant Secretary of Defense for Reserve Affairs. The Army took exception to some of the information presented in the report that was obtained from DOD's 2000 Survey of Reserve Component Personnel. The Army stated that the number of reservists who continued to retain their civilian health care coverage "seems exceptionally high" although they could provide no basis to support this claim. Nevertheless, because of their concern, we subsequently contacted DOD officials at the Defense Manpower Data Center, who were responsible for the survey, to reconfirm the information they provided. After we explained the Army's position to them, they reaffirmed that the data from the survey instrument were correct. They stated that for the period covered by this survey prior to the 2001 partial mobilization there was no reason to question the accuracy of the estimate. The Army also asked for other analyses, such as a cost- benefit analysis of various TRICARE demonstration programs that were beyond the scope of our work. Technical corrections and clarifications have been incorporated into the text as appropriate. We are sending copies of this report to the Secretary of Defense, appropriate congressional committees, and other interested parties. Copies will also be made available to others on request. In addition, the report is available at no charge on the GAO Web site at http://www.gao.gov. If you or your staffs have any questions about this report, please contact me at (202) 512-7101. Other contacts and major contributors are listed in appendix IV. To determine whether reservists had health coverage when not on active duty and the source of any civilian coverage, we obtained analyses from the Department of Defense's (DOD) 2000 Survey of Reserve Component Personnel. Although all survey questions had not been analyzed, we obtained information from DOD on selected questions for which survey processing had been completed. Because DOD had not yet completed processing for all questions, we were unable to obtain a more thorough DOD analysis or to obtain data for our own analyses. Using the analyses DOD provided, we were able to do limited checks for consistency of results, but, for the most part, we were not able to verify the accuracy of DOD's data. To learn about the type of civilian health care coverage reservists and their dependents have and the extent to which mobilizations caused disruptions in coverage, we obtained information from 286 mobilized, or recently mobilized, reservists from three judgmentally selected reserve units-- representing the Army, Navy, and Air Force. We selected these units with the help of DOD personnel using two criteria: (1) the unit consisted of at least 50 reservists and (2) at the time of our audit work, the unit was mobilized or had recently completed a mobilization and was drilling. We visited these sites and administered a questionnaire to identify the types and volume of problems that reservists and their dependents were experiencing with health care coverage. Sometimes we used the questionnaire as a structured interview guide and administered it to individuals; more frequently, reservists completed the questionnaires in a group and spoke with us individually afterwards if they had issues they wanted to discuss. During these visits, we also interviewed unit commanders, personnel responsible for mobilization activities, TRICARE personnel, and medical staff, when available. We also used our questionnaire as a guide in conducting a telephone survey of an additional 74 reservists or their family members. We obtained a randomized list of reservists who had been mobilized during the period July 2000 through December 2001, along with the sampled reservists' home addresses and telephone numbers, from DOD's Defense Manpower Data Center. We first excluded from the sample those reservists whose records lacked both addresses and telephone numbers; then proceeded in order from the first name on the list, either calling the telephone number provided or attempting to locate a telephone number using the name and address. When we were not able to obtain a telephone number or when the telephone number given to us had been disconnected or was determined to be inaccurate, we also excluded that reservist. Of 100 reservists whom we were able to contact or leave messages for, we ultimately completed an interview with 74 reservists or family members. The remaining 26 reservists either did not return our calls or refused to participate in our survey. Finally, we interviewed officials in the offices of the Assistant Secretary of Defense for Reserve Affairs and the Assistant Secretary of Defense for Health Affairs; the TRICARE Management Activity; the National Guard Bureau; the Department of Labor; representatives of the Army, Navy, and Air Force Reserve Components; and reservist advocacy groups, including the Enlisted Association of the National Guard of the United States, the National Guard Association of the United States, the National Military Family Association, the Ohio Air National Guard, the Reserve Officers Association, the Retired Officers Association, and the Retired Enlisted Association. We also reviewed our prior work on reservists and military health care. The Congressional Budget Office (CBO) calculated costs associated with options specified in the 2002 NDAA for providing coverage for reservists. We did not independently verify data used to calculate the cost estimates. See appendix II for CBO's assumptions. In calculating the cost estimates specified in the National Defense Authorized Act for FY 2002 for providing health care coverage to reservists, CBO used the following basic assumptions: The estimates were based on 865,000 reservists, unless otherwise indicated. The benefit would start on January 2003. The percentage of the reserve force with dependents is 50.42. Reservists with dependents each have about 2.17 dependents. Inflation would be 8.5 percent in 2003, 7.5 percent in 2004, and 6.5 percent in the remaining years. The 14 percent of reservists who were federal employees were excluded from the estimates because they presumably have health insurance coverage under Employees Health Benefits Program (FEHBP). The specific assumptions used to develop each benefit option are discussed below. TRICARE (no premium) Ninety percent of reservists would take advantage of this option. Reservists and their dependents would use TRICARE-approved civilian physicians with little use of military treatment facilities (MTF). TRICARE costs were weighted from FEHBP costs, assuming that reservists cost about 40 percent of the FEHBP premium and families cost about 60 percent. TRICARE costs were estimated at $1,513 for a single reservist and $5,173 for a family during 2003. Costs of TRICARE Prime and TRICARE Standard are the same. Some beneficiaries would use TRICARE as a second payer insurance. (The 14 percent of reservists who presumably were enrolled in FEHBP was used as a proxy for this purpose.) Second payer costs were 25 percent of the regular TRICARE costs. Reservists will enroll over 3-year phase-in period. TRICARE with premium similar to under 65 active duty retirees Premium consists of $230 per year for individuals and $460 per year for families. Seventy percent of reservists would enroll in TRICARE under these conditions. Reservists and their dependents would use TRICARE-approved civilian physicians with little use of MTFs. TRICARE costs were weighted from FEHBP costs, assuming that reservists would cost about 40 percent of the FEHBP premium and families would cost about 60 percent of the FEHBP premium. TRICARE costs were estimated at $1,513 for an individual and $5,173 for a family during 2003. Costs of TRICARE Prime and TRICARE Standard are the same. No second payer costs exist. Reservists will enroll over 3-year phase-in period. TRICARE with premium-share equal to that of FEHBP Reservists would pay 28 percent of premium costs, which is similar to the percentage of FEHBP premiums paid by civilian federal employees. Fifty percent of reservists would enroll in TRICARE under these conditions. Reservists and their dependents would use TRICARE-approved civilian physicians with little use of MTFs. TRICARE costs were weighted from FEHBP costs, assuming that reservists cost about 40 percent of the FEHBP premium and families cost about 60 percent. Cost for an individual would be $1,513 and cost for a family would be $5,173 during 2003. Costs of TRICARE Prime and TRICARE Standard are the same. No second-payer costs exist. Reservists will enroll over 3-year phase-in period. FEHBP (no premium) Ninety percent of reservists would enroll in this program. DOD would pay the employee's share of the premium for the 14 percent of reservists who presumably were enrolled in FEHBP. Blue Cross/Blue Shield and Kaiser Permanente premiums were used to calculate costs. The estimated average annual cost was $3,760 for individuals and $8,718 for families during 2003. Reservists will enroll over 3-year phase-in period. FEHBP (regular premium) Seventy percent of reservists would enroll in FEHBP if they had to pay the employee's share of the premium. No cost was included for the 14 percent of reservists who presumably are enrolled in FEHBP. Average premiums for individuals and families were based on data provided by FEHBP actuaries. During 2003, the estimated cost for an individual would be $3,670 with DOD paying about 71 percent, and cost for a family would be $8,635 with DOD paying about 73 percent. Reservists will enroll over 3-year phase-in period. Costs are based on 80,000 reservists--the approximate number mobilized in April 2002. No cost was included for the 14 percent of reservists who presumably are enrolled in FEHBP. Ninety percent of reservists would enroll in the program. Average cost of employee premium and employer's share were based on Kaiser Family Foundation data. During 2003, cost for an individual would be $2,877 with DOD paying 86 percent, and cost for a family would be $7,656 with DOD paying 74 percent. There is no phase-in period. Provide voucher for civilian insurance Costs are based on 80,000 reservists--the approximate number mobilized in April 2002. Voucher could be used to pay for any current health insurance coverage, including both employee's and employer's share. FEHBP enrollees would not receive vouchers. Ninety percent of reservists would use vouchers. Voucher costs were based on 2003 estimated TRICARE costs of $1,513 for individuals and $5,173 for families. (TRICARE costs were weighted from FEHBP costs, assuming reservists would cost about 40 percent of the FEHBP premium and families would cost about 60 percent.) Voucher may not be used to cover the cost of paying second payer insurance--only covers primary insurance. There is no phase-in period. Extend/Offer transition period following demobilization Costs are based on 80,000 reservists-- the approximate number mobilized in April 2002. Forty percent of demobilized reservists would use this option. No cost was included for the 14 percent of reservists who presumably were enrolled in FEHBP. Reservists would use TRICARE-approved civilian physicians with little use of MTFs. TRICARE costs were weighted from FEHBP costs (assuming reservists would cost about 40 percent of the FEHBP premium and families would cost about 60 percent of the FEHBP premium). All reservists were eligible regardless of existing insurance coverage. Benefit for reservist is only 30 days since the first 60 days are currently covered. Dependents would be covered for 90 days. There is no phase-in period. In addition to those named above, the following staff members made key contributions to this report: Aditi Archer, Richard Wade, Julianna Williams, Mary W. Reich, and Karen Sloan.
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To expand the capabilities of the nation's active duty forces, the Department of Defense (DOD) relies on the 1.2 million men and women of the Reserve and National Guard. Currently, reserve components constitute nearly half of the total armed forces. Although DOD requires reservists to use TRICARE DOD's health care system for their own health care, using TRICARE is an option for their dependents. Nearly 80 percent of reservists had health care coverage when they were not on active duty, according to a GAO survey. The most frequently cited sources of coverage were civilian employer health plans and spouses' employer health plans. Few dependents of mobilized reservists experience disruptions in their health coverage--primarily because most maintained civilian health coverage while reservists were mobilized. Ninety percent of the reservists with civilian health coverage maintained that coverage. The 5-year cost of the coverage options delineated in the 2002 National Defense Authorization Act range from $89 million, for expanding the transition benefit allowing mobilizations, to $19.7 billion, for continuous coverage under the Federal Employees Health Benefits Program, as estimated by the Congressional Budget Office.
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DOE has about 50 major sites around the country where the department carries out its missions, including developing, maintaining, and securing the nation's nuclear weapons capability; cleaning up the nuclear and hazardous wastes resulting from more than 50 years of weapons production; and conducting basic energy and scientific research, such as mapping the human genome. This mission work is carried out under the direction of NNSA and DOE's program offices. With a workforce of 16,000 federal employees and more than 100,000 contractor employees, DOE relies primarily on contractors to manage and operate its facilities and to accomplish its missions. In addition to accomplishing DOE's core mission work, managing and operating the sites involves a broad range of support activities, such as information technology, safety, security, and purchase of products and services. The Small Business Act, as amended by the Small Business Reauthorization Act of 1997, directed the President to establish the goal that not less than 23 percent of the federal government's prime contracting dollars would be directed to small businesses each fiscal year. SBA is charged with working with federal agencies to establish agency small business contracting goals that, in the aggregate, meet or exceed the 23 percent government-wide goal. SBA negotiates an annual goal with each agency based on the overall amount of contracting in the agency (contracting base) and the agency's past achievements. SBA guidelines for setting individual agency goals specify that certain types of federal spending should not be included in the contracting base. These exclusions include items such as grants, purchases from mandatory sources, or contracts for work done internationally for which U.S. small businesses would not be competing. For fiscal year 2003, excluding such items resulted in a DOE contracting base of about $21 billion subject to the small business prime contracting goal. As figure 1 shows, facility management contracts account for more than 80 percent of this amount. DOE's Small Business Office negotiates annual small business contracting goals with SBA, coordinates outreach efforts with the small business community, and works with NNSA and DOE's program offices to establish and monitor annual goals for small business contracting. DOE's Office of Procurement and Assistance Management and NNSA's Office of Acquisition and Supply Management establish policies and guidance for conducting procurements according to federal and departmental regulations, and maintain the information systems on the department's prime contracts, including annual dollars provided to each contract. NNSA and DOE's program offices, such as EM and Science, are responsible for identifying opportunities for small business contracting and providing program oversight and direction to the contractors. Since the 1999 federal policy change, DOE can no longer include subcontracts of its facility management contractors when calculating the department's small business prime contracting goals. As a result, to achieve even its near-term small business prime contracting goals, DOE will have to direct more prime contracting dollars to small businesses than it ever has in the past. Further, meeting a long-term goal of 23 percent small business prime contracting would represent an achievement far beyond what DOE has ever reached--about 6 times the $847 million that it directed to small businesses in fiscal year 2003. Now that DOE's facility management subcontracts can no longer be counted toward achieving its small business prime contracting goals, achieving its near-term goals for fiscal years 2004 and 2005, will require DOE to expand the amount of prime contracting dollars it provides directly to small businesses. The department has a goal of directing to small business prime contracts 5.06 percent of its contracting base in fiscal year 2004, and 5.50 percent of its contracting base in fiscal year 2005. These goals surpass any of DOE's small business prime contracting achievements prior to fiscal year 2004. As figure 2 shows, the percentage of prime contracting dollars DOE directed to small businesses in any year since 1996 ranges from 2.68 percent to 3.99 percent. During 1991 through 1999, when DOE could include in its achievements those dollars going to small business subcontractors of facility management contractors, as well as dollars going directly to small business prime contractors, DOE's reported percentages of prime contracting dollars awarded to small businesses ranged from 15.7 percent to 19.9 percent. However, most of the reported achievements during those years came from facility management subcontracting dollars going to small businesses. The remainder of the reported achievements came from prime contracts to small businesses for work not associated with facility management contracts. Meeting the small-business prime contracting goals in fiscal years 2004 and 2005 will require DOE to achieve a substantial increase over the $847 million in prime contracting dollars that DOE provided directly to small businesses in fiscal year 2003. To meet its fiscal year 2004 goal, DOE will need to direct an additional $226 million, or 26.7 percent, over the 2003 amount. Meeting the department's 2005 goal will require directing $319 million more than in 2003, an increase of 37.7 percent over 2003 levels. Although achieving DOE's near-term small business prime contracting goals for fiscal years 2004 and 2005 will not be easy, the long-term goal of 23 percent would require an achievement far beyond what DOE has accomplished in the past. SBA expects DOE to achieve a small business prime contracting goal at least on par with the federal goal of 23 percent. DOE's response has been to formulate a plan for gradual compliance. In 2002, DOE's Small Business Office submitted a plan to SBA to achieve the 23 percent goal in 20 years, by the year 2022. According to this 20-year plan, DOE would increase its level of small business prime contracting by about 1 percentage point per year to achieve the 23 percent goal by 2022. To achieve this goal, the department would need to increase its small business prime contracting to about $5 billion, or 6 times its 2003 achievement. Put in terms of DOE's current contracting base, the additional amount of contracting dollars necessary to achieve the 23 percent goal approximately equals the combined annual budgets of the facility management contracts for the two largest laboratories--Los Alamos and Sandia National Laboratories. Meeting the 23 percent goal under DOE's current contracting approach means that a substantial portion of dollars now included in facility management contracts would have to be redirected to small business prime contracts, resulting in more prime contracts for DOE to manage. Redirecting these dollars would be necessary because prime contracts not associated with facility management generally account for less than 20 percent of DOE's total prime contract dollars. Therefore, even if all the dollars not associated with facility management contracts were directed to small businesses, the total amount would be insufficient to meet the 23 percent small business prime contracting goal. Although DOE has an agreed upon organizational strategy to achieve its near-term small business prime contracting goals, a consistent view does not prevail within the department on whether or how to reach the eventual goal of directing 23 percent of prime contracting dollars to small businesses. To achieve the near-term goals of 5.06 of prime contracting dollars to small businesses in fiscal year 2004, and 5.50 percent in fiscal year 2005, DOE has focused primarily on improving outreach to the small business community, directing more of the dollars not associated with facility management contracts toward small businesses, and beginning to redirect selected facility management contract activities to small business prime contracts. It is less clear, however, how DOE intends to achieve the eventual long-term goal of 23 percent small business prime contracting. DOE's Small Business Office's 20-year plan calls for redirecting about 20 percent of facility management contract dollars to small business prime contracts but provides no details as to how NNSA and the program offices, such as EM and Science, would implement the plan. Officials in these offices have differing views as to how much of the work done by their facility management contractors can be redirected to small businesses without jeopardizing critical agency missions. DOE's plan for achieving its near-term small business prime contracting goals focuses primarily on directing more of the dollars not associated with facility management contracts to small businesses. To increase the percentage of such dollars going to small businesses, DOE has expanded its outreach to the small business community, notifying small businesses of contracting opportunities and preparing them to compete for these contracts. DOE's Small Business Office has developed a variety of outreach and capacity-building activities designed to assist small businesses in competing for DOE prime contracts. For example, DOE's Small Business Office fosters mentor-protege relationships between small businesses and DOE's large prime contractors to help the small businesses expand their expertise. In addition to these department-wide efforts, offices such as NNSA and EM have also developed outreach activities, generally related to specific prime contract opportunities (see table 1 for examples.) In addition to its outreach efforts, DOE has taken steps in two other major areas. First, it has established internal requirements that it believes will help make progress toward achieving its small business prime contracting goals. These internal requirements were part of a 14-item plan of action included in the 20-year plan. The plan of action includes reviews of upcoming contracts to identify work activities that could potentially be awarded to small businesses, and regular monitoring of DOE program level and agency-wide achievements toward DOE's annual goals. For example, each year DOE's Small Business Office requires each program office to develop a small business plan that reflects the program's goals for increasing prime contracts with small businesses. These program plans are used to develop DOE's overall small business contracting goals, and DOE's Small Business Office tracks progress toward these goals quarterly. Second, DOE has modified some of its procurement processes to eliminate certain barriers for small businesses, such as bonding requirements, and to help small businesses minimize the cost of developing proposals. For example, DOE has limited the amount of documentation that small businesses are required to submit in response to a request for proposals to 50 pages instead of volumes of supporting documentation. To achieve the near-term small business prime contracting goals in fiscal years 2004 and 2005, DOE is concentrating primarily on contracts not associated with facility management, because doing so does not involve significant changes in the way the department does business. For contracts not associated with facility management, as new work is identified or existing contracts come up for renewal, DOE sets them aside for small businesses and awards them as small business prime contracts whenever possible. For example, the information technology support contract for DOE headquarters came up for renewal in January 2002. DOE determined that this contract, which was held by a large business, could be carried out by a small business. The new contract, for a 5-year term with a total value of $409 million, was awarded in January 2003, to a team that included a consortium of 10 small businesses. NNSA and the program offices have also focused primarily on procurements not associated with their facility management contracts. NNSA, EM, and Science officials issued policy letters stressing the importance of directing contracts for activities not associated with facility management to small businesses to the maximum extent possible. For example, for any upcoming contract not associated with facility management, program office personnel must first conduct market research to determine if any small businesses are capable of performing all or parts of the work and have the necessary qualifications to do so. If the program office finds two small businesses capable of doing the work, the policy requires the contract or parts of the contract to be "set aside" from unrestricted competition and instead generally be made available for a more restricted competition among small businesses. Any exceptions to this policy must be approved by the head of the program office. Although in the near term DOE is concentrating primarily on contracts not associated with facility management, it has also begun to look at certain facility management contracts as they come up for renewal to identify potential work that could be made available to small businesses. DOE's Offices of EM and Fossil Energy have identified several specific activities that had been within a facility management contractor's scope of work and have set those activities aside for small business prime contracts. (See table 2 for examples.) Of the examples shown in table 2, the procurement at the Strategic Petroleum Reserve in Louisiana is the only one that DOE has completed so far. According to DOE officials with the Office of Fossil Energy, when the facility management contract was nearing the end of its term, DOE's Small Business Office asked the program office to look for opportunities for small business prime contracts. DOE officials at the Strategic Petroleum Reserve said they identified a number of construction projects that could be performed by small businesses, and awarded several prime contracts to small businesses for this work. DOE officials then decided to remove all the construction management work from the facility management contract for the site so that a new small business prime contractor for construction management could then award and manage subcontracts for individual construction projects. According to DOE's contracting officer at the Strategic Petroleum Reserve, having the new prime contractor responsible for awarding and managing the contracts will reduce the amount of additional work required by DOE procurement and program personnel. The prime contract was awarded in November 2003. While DOE's Small Business Office and the three largest offices have a consistent approach to their near-term goals--primarily focusing on increasing small business prime contracting by using dollars not associated with facility management contracts--a consistent view does not prevail in the department on whether or how to achieve the eventual goal of directing 23 percent of prime contracting dollars to small businesses. DOE's Small Business Office's plan to achieve the long-term small business prime contracting goals has two main components. The first is to continue increasing the small business share of contract dollars not associated with facility management contracts. For any new contracts not associated with facility management, DOE has a stated preference to set aside those contracts for small businesses where possible. The three largest offices have been consistent in their efforts to do so. However, even this portion of DOE's contracting base (about 20 percent of total contract dollars) is not immediately available for small business prime contracts. For example, many of the contracts not associated with facility management cover multiple years, so only a portion of these contracts are up for award or renewal in a given year. In addition, some contracts for work not associated with facility management may not be available for award to small businesses, for example, if market research determines that there are not at least two small businesses capable of performing all or parts of the work in an upcoming procurement. Because of the limited amount of contracting dollars for work not associated with facility management, the second component of DOE's Small Business Office's long-term plan is to redirect dollars now going to facility management contracts to small business prime contracts. DOE's 20-year plan calls for increasing dollars redirected from facility management contracts to small business prime contracts from less than 1 percent in 2003 to about 20 percent by 2022 (see figure 3). Nevertheless, DOE does not have a consistent strategy in place to accomplish its plan for redirecting dollars from its facility management contracts to small business prime contracts. Officials in NNSA, EM, and Science have considerably different views about the feasibility of redirecting significant amounts of funding from their facility management contracts to small businesses. For example: Both NNSA and Science officials are very concerned about the implications of setting aside for small businesses significant portions of the dollars now going to facility management contractors that operate the weapons and research laboratories. NNSA and Science officials' concerns stem from the large scale of laboratory operations, the integrated nature of the mission and mission support work, and the complexity and critical importance of the laboratory missions. These officials said that fragmenting mission activities among several contractors at the research laboratories, whether the contractors were large or small businesses, was inadvisable. Therefore, according to NNSA's Director of Acquisition and Supply Management and Science's Director of Grants and Contracts, NNSA and Science may never achieve a 23 percent small business prime contracting level because doing so would be inconsistent with accomplishing their missions safely, securely, and effectively. Despite the reluctance to fragment core mission activities, NNSA and Science officials said they would explore opportunities to contract separately with small businesses for mission support functions at the laboratories if those mission support functions were not closely integrated with the laboratories' core missions. For example, NNSA is analyzing its own purchases of goods and services, such as computer hardware, software, and staffing services, as well as similar purchases by its facility management contractors. NNSA is assessing the feasibility of purchasing these items in bulk under a prime contract, rather than multiple separate contracts. An NNSA official said that NNSA is not trying to increase its small business prime contracting numbers by becoming a purchasing agent for its facility management contractors, but rather combining similar requirements as a way to possibly increase NNSA's level of prime contracting to small business. On the basis of this analysis, NNSA is pursuing three potential opportunities, valued at about $80 million, involving technical services and services to provide temporary staff, and is exploring other opportunities. By contrast, EM officials were more optimistic about the potential role of small businesses in accomplishing its core missions. The Assistant Secretary for EM said that part of its initiative to accelerate the cleanup of DOE sites involves greater use of alternatives to traditional facility management contracts, including removing work from facility management contracts and setting that work aside for small businesses. The Assistant Secretary said that these small business procurements are part of EM's overall strategy to clean up sites more quickly and at a lower cost to the government, not just to increase the amount of small business prime contracting. EM is also developing a complex-wide contracting arrangement, called indefinite delivery/indefinite quantity, which will result in prime contracts with both large and small businesses for smaller-scale cleanup activities. According to EM's Director of Acquisition Management, the multiple contracts awarded under this initiative will allow EM sites nationwide to quickly purchase cleanup services from small and large businesses without having to conduct a separate procurement, which can take months to complete. Instead, either EM or the facility management contractor will be able to simply write a task order against these existing contracts. Finally, it is unclear to what extent EM can expand its use of small business prime contracts to accomplish its core missions. According to the Assistant Secretary, the main constraint is the ability of EM staff to effectively oversee those contracts, not the availability of qualified small businesses to perform the work. The Assistant Secretary said that EM is proceeding carefully to ensure that effective management and oversight will occur; that cost, schedule, and technical standards are met; and that safety and security issues are adequately addressed. Since DOE is in the early stages of implementing a long-term strategy to redirect facility management contracting dollars to small businesses, the implications of increased small business prime contracting are still relatively uncertain. However, the implications depend heavily on the extent to which DOE agrees, in its negotiations with SBA, to meet the 23 percent small business prime contracting goal. Given the differences we heard in the approaches of the three largest offices, it is not clear if DOE will commit to the incremental increases that would eventually lead to a 23 percent rate of prime contracting to small businesses, as detailed in the 20- year schedule prepared by DOE's Small Business Office. Absent more specific direction from Congress or the executive branch, DOE's eventual commitment to a particular small business prime contracting goal appears to rest heavily on whether the department will be willing to change its approach to contracting for activities at the science and weapons laboratories, its environmental cleanup work, or both. Regardless of the extent to which DOE directs more prime contracting dollars to small businesses, efforts to increase small business prime contracting involve potential benefits as well as potential risks. An overarching benefit of increasing small business prime contracting is that DOE would be helping to carry out the President's small business agenda and would be contributing to the federal government's overall goal of directing 23 percent of prime contracting dollars to small businesses. Beyond contributing to this overall effort, DOE's Small Business Office and procurement officials explained that the benefits included increased competition, greater innovation, and enhanced small business capacity. One example of increased competition can be seen in EM's program. DOE's efforts to increase small business contracting have resulted in new procurements with narrower scope. In the past, EM has been concerned about the limited pool of potential contractors for large cleanup projects, sometimes receiving only two proposals on multibillion dollar procurements. By structuring the cleanup work into smaller contracts and opening them to individual small businesses or small business teams, EM expects to attract more potential bidders. One of EM's current procurements is for cleanup work at the Fast Flux Test Facility at the Hanford site in Washington state. Currently included in a facility management contract, EM is in the process of redirecting this work as a small business set-aside. EM officials said that in the response to the request for proposals for this project, with an estimated contract amount of $46 million per year for up to 8 years, DOE received proposals from several small business teams. According to EM officials, increased competition from a larger pool of potential contractors could result in better prices for the government. However, since the contracts for the current small business procurements have not yet been awarded, it is too soon to tell whether better prices will be realized. In addition to increased competition, DOE procurement and program office officials believe that small businesses may bring new ideas and innovative approaches to the work. For example, as part of its accelerated cleanup strategy, EM has been looking for better and faster ways to accomplish cleanup at its sites and facilities. According to EM officials, expanding the pool of potential contractors for cleanup projects may increase the potential for new technology and ideas. Increasing small business prime contracting can also provide small businesses with the experience necessary to compete for other federal prime contracts. According to small business associations and advocacy groups that we contacted, a direct contracting relationship with DOE provides small businesses with more challenging work and better opportunities to grow and expand their businesses. The use of mentor- protege arrangements or teaming with other small or large businesses also provides opportunities for growth and economic development. For example, an owner of a small construction company in New Mexico told us that his business had successfully teamed with a large construction company for several projects and that his small company was now the senior member of that team and was competing for DOE prime contracts. DOE's long-term strategy for achieving a 23-percent small business prime contracting goal includes redirecting a substantial amount of facility management contract dollars to small business prime contracts. DOE procurement and program officials acknowledge that doing so would significantly increase the number of prime contracts DOE would have to manage. Increasing DOE's number of prime contracts, whether these are with small or large businesses, could create problems with integrating and coordinating the efforts of more contractors at a site, as well as create problems with contract management and oversight. In addition, DOE's efforts to increase small business prime contracting could inadvertently reduce the amount of small business subcontracting directed to local and regional small businesses. Increasing the number of prime contracts at a site raises concerns about integration, coordination, and accountability. If a facility management contractor has primary responsibility for accomplishing work at the site, that contractor is also accountable for integrating the efforts of multiple subcontractors to ensure that the mission work is accomplished. In addition, the facility management contractor has the responsibility for ensuring that all contractor and subcontractor employees at the site comply with DOE safety and security standards. If the work done by the facility management contractor becomes fragmented and spread among multiple prime contracts, DOE may need to carry out these integration functions, which places more oversight responsibilities on federal program and project management personnel. If the number of prime contractors at a site increases significantly, the challenges associated with integrating and coordinating the activities also increase. Both DOE and facility management contractor officials have expressed concerns about successfully integrating and coordinating the efforts of an increased number of prime contractors at a site. Ensuring that all work is performed in accordance with DOE safety and security standards is a significant concern, especially given the continuing challenges that the department faces in these two areas. To begin to address the constraint of having a limited number of federal employees to perform coordination and integration functions, DOE is considering awarding small business prime contracts but then having the facility management contractors at the sites manage and oversee the work. As some facility management contracts are extended or awarded, DOE includes a provision that specifically allows the department to identify and redirect work within the facility management contract to a small business prime contract. The provision also allows DOE to request the facility management contractor to manage and oversee the work. Since the work that DOE would redirect is generally already being done by a facility management subcontractor, the only actual change is the contractual relationship. In fiscal year 2003, NNSA started using this arrangement for facilities and infrastructure restoration projects at the Sandia National Laboratory in New Mexico. NNSA awarded prime contracts--$100,000 in fiscal year 2003 and an estimated $3 million in fiscal year 2004--to small businesses for some of these projects. Although it is too soon to fully assess the implications of this arrangement, facility management contractor officials at the Sandia laboratory have expressed concern that it could confuse the lines of authority and accountability at the site, because the contractual relationship is not consistent with the daily management and oversight of the activities being performed. In prior work, we have also expressed concerns about confusing the lines of authority, which can make it difficult to hold contractors accountable for performance. Regarding contract management and oversight, increasing the number of prime contracts with DOE could place further strain on DOE's procurement and program oversight personnel. DOE's reliance on contractors to operate its facilities and carry out its missions, coupled with the department's history of inadequate contractor management and oversight, led us in 1990 to designate DOE contract management as a high- risk area vulnerable to fraud, waste, abuse, and mismanagement. This high-risk designation is still in effect. GAO and others have stated that one of the contributing factors to DOE's inadequate oversight of its contractors has been a shortage of personnel with the right skills to perform these functions. Although DOE has over the past several years made progress in training and certifying its procurement and project management personnel, DOE procurement and program officials said that the overall number of available personnel has not grown, and has significantly decreased in NNSA. More prime contracts would create additional work for federal employees in two phases: managing the procurement process by requesting and evaluating proposals to award a contract, and overseeing the work of the contractor to ensure that performance is acceptable. DOE officials at headquarters and at the sites we visited expressed concerns that significantly increasing the number of prime contracts could reduce the ability to adequately oversee and evaluate contractor performance. While headquarters and site office officials in the EM program acknowledge the potential risks that additional prime contracts can create in both integrating work activities at a site and contract management and oversight, they are pursuing ways to mitigate those risks. To address concerns about sitewide integration of safety and security, DOE officials at Hanford plan to use contract language and incentives to encourage the site's new small business prime contractors and the facility management contractors to work together. To earn potential incentive fees under this proposed arrangement, for example, all prime contractors will have to cooperate in such areas as safety and security. But, since these are new approaches and the small business prime contracts have yet to be awarded, the extent to which these steps will mitigate the potential risks is unknown. To lessen the impact of additional prime contracts on procurement and program personnel, EM officials said they intend to use a contract for small business procurements that has a well-defined statement of work and that ties incentive fees to accomplishing the contract's stated final goal rather than to interim steps. According to EM's Director of Acquisition Management, administering such contracts generally may require less federal involvement, although EM will also have to train its staff on the most effective way to manage these contracts. In addition to the potential risks discussed above, DOE and contractor officials, as well as representatives of small business advocacy groups, raised concerns about DOE's efforts to increase small business prime contracting. One concern expressed was that such efforts could inadvertently result in less total contracting dollars directed to the small business community. Procurement regulations require that all facility management contractors have a small business subcontracting plan and facility management contractors must generally negotiate annual small business subcontracting goals with the department. However, if work is removed from a facility management contract, the facility management contractor may negotiate lower subcontracting goals with the department and then subcontract less of the remaining work to small businesses. Since the efforts to redirect facility management contract dollars to small businesses is in its early stages, no data are yet available to validate this concern. A related concern is that if DOE removes work from a facility management contract and sets that work aside for a small business procurement, there may be fewer contracting dollars available to local and regional small businesses. This could occur because DOE's facility management contractors generally are not required to follow federal regulations in their procurements, but instead comply with "best business practices." In doing so, a facility management contractor can restrict a competition for its subcontracts to the local small business community. In contrast, DOE must generally open up its procurements to nationwide competition, which may result in fewer contracts going to local and regional small businesses. Again, no data are yet available to validate this concern. Finally, representatives of some small business advocacy groups told us that some small businesses would rather have a subcontract with a facility management contractor than a prime contract with DOE. This is because facility management contractors generally have fewer administrative requirements and a less burdensome and faster procurement process. It is not clear to what extent these potential risks will affect DOE's ability to carry out its missions in a safe, secure, and effective manner. The impact on DOE's missions of increasing small business prime contracts will depend both on the total number of new prime contracts awarded and on how well the department manages the contractors and the work. The stakes are high as DOE attempts to contribute to the federal government's goal of increasing the prime contracting dollars directed to the small business community, while striving to accomplish its missions efficiently and effectively. This concludes my testimony. I would be pleased to respond to any questions that you may have. For further information on this testimony, please contact Ms. Robin Nazzaro at (202) 512-3841. Individuals making key contributions to this testimony included Carole Blackwell, Ellen W. Chu, Matt Coco, Doreen Feldman, Jeff Rueckhaus, Stan Stenersen, and Bill Swick. Small business subcontracts awarded by all other prime contractors Small and large business subcontracts awarded by prime contractors Small business prime and subcontracts (as a percent of contracting base) Small business subcontracts awarded by prime contractors Small business subcontracts awarded by all other prime contractors Small and large business subcontracts awarded by prime contractors Small business prime and subcontracts (as a percent of contracting base) DOE's contracting base includes dollars that can potentially be directed to U.S. small businesses, excluding, under Small Business Administration (SBA) guidelines, dollars that cannot go to small business prime contracts, such as grants and purchases from mandatory or foreign sources. We calculated the percentage of DOE's contract dollars going to small business prime contracts by dividing small business prime contract dollars (row 5) by the contracting base (row 1). For fiscal years 1991 through 1999, DOE's annual small business prime contracting achievements, as reported to SBA, included DOE subcontracts awarded to small businesses by its facility management contractors, as well as prime contracts awarded directly to small businesses. To calculate small business prime contracting achievements for these 9 years, we therefore added rows 5 and 7 and divided the sum by row 1. We did not do this calculation for fiscal years 1990 and 2000 through 2003 because small business subcontracts from facility management contractors did not "count" in those years toward small business achievement percentages. We calculated the overall percentage of DOE's contract dollars going to small businesses--via both prime contracts and subcontracts--by dividing DOE's contract dollars to small businesses (row 4) by the contracting base (row 1). We calculated the percentage of total subcontracting dollars going to small business by dividing small business subcontract dollars from prime contractors (row 6) by total subcontract dollars going to small and large businesses (row 9). This is a work of the U.S. government and is not subject to copyright protection in the United States. It may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.
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Under the Small Business Reauthorization Act of 1997, the federal government has a goal of awarding at least 23 percent of prime, or direct, contracting dollars to small businesses each fiscal year. The Department of Energy (DOE), like other federal agencies, shares in the responsibility for meeting this goal. In fiscal year 2003, DOE spent $21.6 billion on prime contracts. More than 80 percent of this amount was spent on facility management contracts to manage and operate DOE's sites. Before 1999, DOE included subcontracts awarded by its facility management contractors when calculating its small business prime contracting achievements. In 1999, however, the Office of Federal Procurement Policy determined that DOE could no longer do so. This testimony discusses (1) the effect of the 1999 policy change on the amount of prime contract dollars that DOE will be required to direct to small businesses, (2) the steps that DOE has taken or plans to take to achieve its small business contracting goals, and (3) the likely implications for DOE's programs resulting from these changes. To meet its share of federal goals, DOE would need to direct significantly more prime contracting dollars to small businesses. If it is to reach its near-term goals of 5.06 percent in fiscal year 2004, and 5.50 percent in fiscal year 2005, DOE must direct to small businesses an additional $226 million and $319 million, respectively, over the $847 million it directed to small businesses in fiscal year 2003. Achieving a long-term goal of directing 23 percent of prime contracting dollars to small businesses would require DOE to contract with small businesses at about 6 times its current rate. Such an increase is about equal to the combined annual budgets for Los Alamos and Sandia--the two largest national laboratories. To address its near-term small business prime contracting goals, DOE has improved its outreach efforts and has redirected to small businesses some contract dollars not associated with facility management contracts. DOE has also begun to review facility management contracts up for renewal to identify work that could be redirected to small business prime contracts. Achieving a long-term goal of 23 percent is much more problematic. Notably, DOE's three largest offices--the National Nuclear Security Administration (NNSA), Environmental Management (EM), and Science--have differing views as to what extent facility management contract work can be redirected to small businesses without having a negative impact on accomplishing their missions. EM is in favor of doing so if redirecting the work is consistent with its accelerated cleanup strategy. NNSA and Science officials express concern that redirecting work now done by facility management contractors could jeopardize critical research missions at the laboratories. DOE's efforts to increase small business prime contracting involve both potential benefits and risks, which depend on the eventual goal DOE attempts to achieve. The potential benefits to DOE of increased small business prime contracting include increasing the pool of potential contractors, which could result in better competition and better prices for the government; finding new and innovative approaches to the work developed by small businesses; and providing experiences to small businesses to allow them to better compete for other federal contracts. The potential risks include integrating and coordinating the work of a greater number of contractors at a site in a safe, secure, and effective manner, and having adequate federal resources for effective contract management and oversight--areas that already pose significant challenges for DOE. In addition, DOE's efforts to increase small business prime contracting may cause its facility management contractors to reduce the amount of subcontracting that they direct to local and regional small businesses. DOE largely agreed with the information in this testimony. However, it disagreed with GAO's characterization of DOE's long-term small business prime contracting goal and its strategy to achieve it. GAO believes that both the longterm goal and DOE's strategy have been accurately described.
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The F-35 program made progress in 2012 on several fronts. The program met or substantially met most of its key management and development testing objectives for the year. We also found that the program made progress in addressing key technical risks, as well as improving software management, manufacturing, and supply processes. The F-35 program met or substantially met most of its key management objectives established for calendar year 2012. The program office annually establishes major management objectives that it wants to achieve in the upcoming year. The F-35 program achieved 7 of its 10 primary objectives in 2012. Those included, among other things, the completion of development testing on early increments of software, the beginning of lab testing for both variations of the helmet mounted display, the beginning of pilot training for two aircraft variants, and the completion of negotiations on the restructured development contract. Although the program did not complete its software block 3 critical design review as planned in 2012, it did successfully complete its block 3 preliminary design review in November 2012 and the critical design review in late January 2013. The program did not meet its objectives to (1) deliver 40 production aircraft in 2012 and (2) receive approval from the Defense Contract Management Agency of the contractor's plan for correcting deficiencies in its system for tracking and reporting cost and schedule progress. The F-35 development flight test program also substantially met 2012 expectations with some revisions to original plans. The program exceeded its planned number of flights by 18 percent, although it fell short of its plan in terms of test points flown by about 3 percent, suggesting that the flights flown were not as productive as expected. Test officials had to make several adjustments to plans during the year due to operating and performance limitations with aircraft and late releases of software to test. As a result, none of the three variants completed all of their planned 2012 baseline points, but the test team was able to add and complete some test points that had been planned for future years. Testing accomplished on each of the aircraft variants in 2012 included: Conventional takeoff and landing variant (F-35A)--accomplished high angle of attack testing, initial weapons separation, engine air start, expansion of the airspeed and altitude envelopes, and evaluated flying qualities with internal and external weapons. Short takeoff and vertical landing variant (F-35B)--accomplished the first weapons release, engine air start tests, fuel dump operations, flight envelope expansion with weapons loaded, radar signature testing, and tested re-design air inlet doors for vertical lift operations. Carrier suitable variant (F-35C)--conducted speed and altitude range verification and flights with external weapons, prepared for simulated carrier landings, and conducted shore-based tests of a redesigned arresting hook. In 2012, the F-35 program also made considerable progress in addressing four areas of technical risk that if left unaddressed could substantially degrade the F-35's capabilities and mission effectiveness. However, additional work remains to fully address those risks. These risk areas and the actions taken in 2012 are discussed below: 1. Helmet mounted display (HMD)--DOD continued to address technical issues with the HMD system. The original helmet mounted display, integral to mission systems, encountered significant technical deficiencies and did not meet warfighter requirements. The program is pursuing a dual path by developing a second, less capable helmet while working to fix the first helmet design. In 2012, DOD began dedicated ground and flight testing to address these issues. Both variations of the helmet mounted display are being evaluated and program and contractor officials told us that they have increased confidence that the helmet deficiencies will be fixed. DOD may make a decision in 2013 as to which helmet to procure. 2. Autonomic Logistics Information System (ALIS)--ALIS is an important tool to predict and diagnose aircraft maintenance and supply issues. ALIS systems with limited capability are in use at training and testing locations. More capable versions of ALIS are being developed and program and contractor officials believe that the program is on track to fix previously identified shortcomings and field the fully capable system in 2015. Limited progress was made in 2012 on developing a smaller, transportable version needed to support unit level deployments to operating locations. 3. Arresting hook system--The carrier variant arresting hook system was redesigned after the original hook was found to be deficient, which prevented active carrier trials. The program accomplished risk reduction testing of a redesigned hook point to inform this new design. The preliminary design review was conducted in August 2012 and the critical design review in February 2013. Flight testing of the redesigned system is slated for late 2013. 4. Structural durability--Over time, testing has discovered bulkhead and rib cracks on the aircraft. Structural and durability testing to verify that all three variants can achieve their expected life and identify life- limited parts was completed in 2012. The program is testing some redesigned structures and planning other modifications. Officials plan to retrofit and test a production aircraft already built and make changes to the production line for subsequent aircraft. Current projections show the aircraft and modifications remain within weight targets. In 2012, the F-35 aircraft contractor and program office took steps to improve the program's software management and output. The program began the process of establishing a second system integration laboratory, adding substantial testing and development capacity. The program also began prioritizing and focusing its resources on incremental software development as opposed to the much riskier concurrent development approach. In addition, the program began implementing improvement initiatives recommended by an independent software review, and evaluated the possible deferral of some of the aircraft's capabilities to later blocks or moving them outside of the current F-35 program altogether. At the same time, program data regarding software output showed improvement. For example, program officials reported that the time it took to fix software defects decreased from180 days to 55 days, and the time it took to build and release software for testing decreased from 187 hours to 30 hours. Key manufacturing metrics and discussions with defense and contracting officials indicate that F-35 manufacturing and supply processes improved during 2012. While initial F-35 production overran target costs and delivered aircraft late, the latest data through the end of 2012 shows labor hours decreasing and deliveries accelerating. The aircraft contractor's work force has gained important experience and processes have matured as more aircraft are built. We found that the labor hours needed to complete aircraft at the prime contractor's plant decreased, labor efficiency since the first production aircraft improved, time to manufacture aircraft in the final assembly area declined, factory throughput increased, and the amount of traveled work declined. In addition, program data showed that the reliability and predictability of the manufacturing processes increased while at the same time aircraft delivery rates improved considerably. Figure 1 illustrates the improvement in production aircraft delivery time frames by comparing actual delivery dates against the dates specified in the contracts. Ensuring that the F-35 is affordable and can be bought in the quantities and time frames required by the warfighter will be of paramount concern to the Congress, U.S. military and international partners. As we recently reported, the acquisition funding requirements for the United States alone are currently expected to average $12.6 billion per year through 2037, and the projected costs of operating and sustaining the F-35 fleet, once fielded, have been deemed unaffordable by DOD officials. In addition, the program faces challenges with software development and continues to incur substantial costs for rework to fix deficiencies discovered during testing. As testing continues additional changes to design and manufacturing processes will likely be required, while production rates continue to increase. We recently concluded that while the March 2012 acquisition program baseline places the F-35 program on firmer footing, the aircraft are expected to cost more and deliveries to warfighters will take longer than previously projected. The new baseline projects the need for a total of $316 billion in development and procurement funding from 2013 through 2037, or an average of $12.6 billion annually over that period (see figure 2). Maintaining this level of sustained funding will be difficult in a period of declining or flat defense budgets and competition with other "big ticket items" such as the KC-46 tanker and a new bomber program. In addition, the funding projections assume the financial benefits of the international partners purchasing at least 697 aircraft. If fewer aircraft are procured in total or in smaller annual quantities--by the international partners or the United States--unit costs will likely rise according to analysis done by the Office of the Secretary of Defense (OSD) Cost Assessment and Program Evaluation (CAPE) office. In addition to the costs for acquiring aircraft, we found that significant concerns and questions persist regarding the cost to operate and sustain the F-35 fleet over the coming decades. The current sustainment cost projection by CAPE for all U.S. aircraft, based on an estimated 30-year service life, exceeds $1 trillion. Using current program assumptions of aircraft inventory and flight hours, CAPE recently estimated annual operating and support costs of $18.2 billion for all F-35 variants compared to $11.1 billion spent on legacy aircraft in 2010. DOD officials have declared that operating and support costs of this magnitude are unaffordable and the department is actively engaged in evaluating opportunities to reduce those costs, such as basing and infrastructure reductions, competitive sourcing, and reliability improvements. Because of F-35 delays and uncertainties, the military services have made investments to extend the service lives of legacy F-16 and F-18 aircraft at a cost of $5 billion (in 2013 dollars). The Navy is also buying new F/A-18E/F Super Hornets at a cost of $3.1 billion (in then-year dollars) to bridge the gap in F-35 deliveries and mitigate projected shortfalls in fighter aircraft force requirements. As a result, the services will incur additional future sustainment costs to support these new and extended-life aircraft, and will have a difficult time establishing and implementing retirement schedules for existing fleets. Our report found that over time, F-35 software requirements have grown in size and complexity and the contractor has taken more time and effort than expected to write computer code, integrate it on aircraft and subsystems, conduct lab and flight tests to verify it works, and to correct defects found in testing. Although recent management actions to refocus software development activities and implement improvement initiatives appeared to be yielding benefits, software continued to be a very challenging and high-risk undertaking, especially for mission systems. While most of the aircraft's software code has been developed, a substantial amount of integration and test work remain before the program can demonstrate full warfighting capability. About 12 percent of mission systems capabilities have now been validated, up from 4 percent about a year ago. However, progress on mission systems was limited in 2012 by contractor delays in software delivery, limited capability in the software when delivered, and the need to fix problems and retest multiple software versions. Further development and integration of the most complex elements--sensor fusion and helmet mounted display--lie ahead. F-35 software capabilities are being developed, tested and delivered in three major blocks and two increments--initial and final--within each block. The testing and delivery status of the three blocks is described below: Block 1.0, providing initial training capability, was largely completed in 2012, although some final development and testing will continue. Also, the capability delivered did not fully meet expected requirements relating to the helmet, ALIS, and instrument landing capabilities. Block 2.0, providing initial warfighting capabilities and limited weapons, fell behind due to integration challenges and the reallocation of resources to fix block 1.0 defects. The initial increment, block 2A, delivered late and was incomplete. Full release of the final increment, block 2B, has been delayed until November 2013 and will not be complete until late 2015. Block 3.0 providing full warfighting capability, to include sensor fusion and additional weapons, is the capability required by the Navy and Air Force for declaring their respective initial operational capability dates. Thus far, the program has made little progress on block 3.0 software. The program intends initial block 3.0 to enter flight test in 2013. This is rated as one of the program's highest risks because of its complexity. Although our recent review found that F-35 manufacturing, cost, and schedule metrics have shown improvement, the aircraft contractor continues to make major design and tooling changes and alter manufacturing processes while development testing continues. Engineering design changes from discoveries in manufacturing and testing are declining in number, but are still substantial and higher than expected from a program this far along in production. Further, the critical work to test and verify aircraft design and operational performance is far from complete. Cumulatively, since the start of developmental flight testing, the program has accomplished 34 percent of its planned flights and test points. For development testing as a whole, the program verified 11.3 percent of the development contract specifications through November 2012. As indicated in table 1, DOD continues to incur financial risk from its plan to procure 289 aircraft for $57.8 billion before completing development flight testing. This highly concurrent approach to procurement and testing increases the risk that the government will incur substantial costs to retrofit (rework) already produced aircraft to fix deficiencies discovered in testing. In fact, the F-35 program office projects rework costs of about $900 million to fix the aircraft procured on the first four annual procurement contracts. Substantial rework costs are also forecasted to continue through the 10th annual contract (fiscal year 2016 procurement), but at decreasing amounts annually and on each aircraft. The program office projects about $827 million more to rework aircraft procured under the next 6 annual contracts. We have reported on F-35 issues for over a decade and have found that the magnitude and persistence of the program's cost and schedule problems can be largely traced to (1) decisions at key junctures made without adequate product knowledge; and (2) a highly concurrent acquisition strategy that significantly overlapped development, testing, and manufacturing activities. Over that time, our reports included numerous recommendations aimed at reducing risk in these areas and improving the chances for successful outcomes. DOD has implemented our recommendations to varying degrees. For example, in 2001 we recommended that DOD delay the start of system development until the F-35's critical technologies were fully mature. DOD disagreed with that recommendation and chose to begin the program with limited knowledge about critical technologies. Several years later, we recommended that DOD delay the production decision until flight testing had shown that the F-35 would perform as expected, and although DOD partially concurred with our recommendation, it chose to initiate production before sufficient flight testing had been done. Citing concerns about the overlap--or concurrency--among development, testing, and production, we have recommended that DOD limit annual production quantities until F-35 flying qualities could be demonstrated. Although DOD disagreed with our recommendation at the time, it has since restructured the F-35 program and, among other things, deferred the production of hundreds of aircraft into the future, thus addressing the intent of our recommendation and reducing program risk. Appendix ll lists these and other key recommendations we have made over time, and identifies the actions DOD has taken in response. In conclusion, while the recent restructuring of the F-35 program placed it on a firmer footing, tremendous challenges still remain. The program must fully validate the F-35's design and operational performance against warfighter requirements, while at the same time make the system affordable so that the United States and partners can acquire new capabilities in the quantity needed and can then sustain the force over its life cycle. Ensuring overall affordability will be a challenge as more austere budgets are looming. Chairman Durbin, Ranking Member Cochran and members of the subcommittee, this completes my prepared statement. I would be pleased to respond to any questions you may have. For further information on this statement, please contact Michael Sullivan at (202) 512-4841 or [email protected]. Contact points for our Office of Congressional Relations and Public Affairs may be found on the last page of this statement. Individuals making key contributions to this statement are Bruce Fairbairn, Travis Masters, Marvin Bonner, W. Kendal Roberts, Megan Porter, Erin Stockdale, and Abby Volk. October 2001 (system development start) baseline) March 2007 (approved baseline) June 2010 (Nunn- McCurdy) March 2012 (approved baseline) Start of system development and demonstration approved. Primary GAO message Critical technologies needed for key aircraft performance elements not mature. Program should delay start of system development until critical technologies mature to acceptable levels. DOD response and actions DOD did not delay start of system development and demonstration stating technologies were at acceptable maturity levels and will manage risks in development. The program undergoes re- plan to address higher than expected design weight, which added $7 billion and 18 months to development schedule. We recommended that the program reduce risks and establish executable business case that is knowledge-based with an evolutionary acquisition strategy. DOD partially concurred but did not adjust strategy, believing that its approach is balanced between cost, schedule and technical risk. Program sets in motion plan to enter production in 2007 shortly after first flight of the non-production representative aircraft. The program planned to enter production with less than 1 percent of testing complete. We recommended program delay investing in production until flight testing shows that JSF performs as expected. DOD partially concurred but did not delay start of production because it believed the risk level was appropriate. Congress reduced funding for first two low-rate production buys thereby slowing the ramp up of production. Progress was being made but concerns remained about undue overlap in testing and production. We recommended limits to annual production quantities to 24 a year until flying quantities are demonstrated. DOD non-concurred and felt that the program had an acceptable level of concurrency and an appropriate acquisition strategy. DOD implemented a Mid- Course Risk Reduction Plan to replenish management reserves from about $400 million to about $1 billion by reducing test resources. We believed new plan increased risks and DOD should revise it to address testing, management reserves, and manufacturing concerns. We determined that the cost estimate was not reliable and that a new cost estimate and schedule risk assessment is needed. DOD did not revise risk plan or restore testing resources, stating that it will monitor the new plan and adjust it if necessary. Consistent with a report recommendation, a new cost estimate was eventually prepared, but DOD refused to do a risk and uncertainty analysis. The program increased the cost estimate and adds a year to development but accelerated the production ramp up. Independent DOD cost estimate (JET I) projects even higher costs and further delays. Primary GAO message Moving forward with an accelerated procurement plan and use of cost reimbursement contracts is very risky. We recommended the program report on the risks and mitigation strategy for this approach. DOD response and actions DOD agreed to report its contracting strategy and plans to Congress and conduct a schedule risk analysis. The program completed the first schedule risk assessment with plans to update semi-annually. The Department announced a major restructuring reducing procurement and moving to fixed-price contracts. The program was restructured to reflect findings of recent independent cost team (JET II) and independent manufacturing review team. As a result, development funds increased, test aircraft were added, the schedule was extended, and the early production rate decreased. Costs and schedule delays inhibit the program's ability to meet needs on time. We recommended the program complete a full comprehensive cost estimate and assess warfighter and IOC requirements. We suggest that Congress require DOD to tie annual procurement requests to demonstrated progress. DOD continued restructuring, increasing test resources and lowering the production rate. Independent review teams evaluated aircraft and engine manufacturing processes. Cost increases later resulted in a Nunn-McCurdy breach. Military services are currently reviewing capability requirements as we recommended. Restructuring continued with additional development cost increases; schedule growth; further reduction in near-term procurement quantities; and decreased the rate of increase for future production. The Secretary of Defense placed the STOVL variant on a 2 year probation; decoupled STOVL from the other variants; and reduced STOVL production plans for fiscal years 2011 to 2013. The restructuring actions are positive and if implemented properly, should lead to more achievable and predictable outcomes. Concurrency of development, test, and production is substantial and provides risk to the program. We recommended the program maintain funding levels as budgeted; establish criteria for STOVL probation; and conduct an independent review of software development, integration, and test processes. DOD concurred with all three of the recommendations. DOD lifted STOVL probation, citing improved performance. Subsequently, DOD further reduced procurement quantities, decreasing funding requirements through 2016. The initial independent software assessment began in and ongoing reviews are planned through 2012. The program established a new acquisition program baseline and approved the continuation of system development, increasing costs for development and procurements and extending the period of planned procurements by 2 years. Primary GAO message Extensive restructuring places the program on a more achievable course. Most of the program's instability continues to be concurrency of development, test, and production. We recommend the Cost Assessment Program Evaluation office conduct an analysis on the impact of lower annual funding levels; JSF program office conducts an assessment of the supply chain and transportation network. DOD response and actions DOD partially concurred with conducting an analysis on the impact of lower annual funding levels and concurred with assessing the supply chain and transportation network. . F-35 Joint Strike Fighter: Current Outlook Is Improved, but Long-Term Affordability Is a Major Concern. GAO-13-309. Washington, D.C.: March 11, 2013. Defense Acquisitions: Assessments of Selected Weapon Programs. GAO-13-294SP. Washington, D.C.: March 28, 2013. Joint Strike Fighter: DOD Actions Needed to Further Enhance Restructuring and Address Affordability Risks. GAO-12-437. Washington, D.C.: June 14, 2012. Joint Strike Fighter: Restructuring Added Resources and Reduced Risk, but Concurrency Is Still a Major Concern. GAO-12-525T. Washington, D.C.: March 20, 2012. Joint Strike Fighter: Implications of Program Restructuring and Other Recent Developments on Key Aspects of DOD's Prior Alternate Engine Analyses. GAO-11-903R. Washington, D.C.: September 14, 2011. Joint Strike Fighter: Restructuring Places Program on Firmer Footing, but Progress Still Lags. GAO-11-325. Washington, D.C.: April 7, 2011. Joint Strike Fighter: Additional Costs and Delays Risk Not Meeting Warfighter Requirements on Time. GAO-10-382. Washington, D.C.: March 19, 2010. Joint Strike Fighter: Accelerating Procurement before Completing Development Increases the Government's Financial Risk. GAO-09-303. Washington D.C.: March 12, 2009. Joint Strike Fighter: Recent Decisions by DOD Add to Program Risks. GAO-08-388. Washington, D.C.: March 11, 2008. Joint Strike Fighter: Progress Made and Challenges Remain. GAO-07-360. Washington, D.C.: March 15, 2007. Joint Strike Fighter: DOD Plans to Enter Production before Testing Demonstrates Acceptable Performance. GAO-06-356. Washington, D.C.: March 15, 2006. Tactical Aircraft: Opportunity to Reduce Risks in the Joint Strike Fighter Program with Different Acquisition Strategy. GAO-05-271. Washington, D.C.: March 15, 2005. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.
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The F-35 Lightning II, the Joint Strike Fighter, is DOD's most costly and ambitious aircraft acquisition. The program is developing and fielding three aircraft variants for the Air Force, Navy, Marine Corps, and eight international partners. The F-35 is critical to long-term recapitalization plans as it is intended to replace hundreds of existing aircraft. This will require a long-term sustained funding commitment. Total U.S. investment is nearing $400 billion to develop and procure 2,457 aircraft through 2037. Fifty-two aircraft have been delivered through 2012. The F-35 program has been extensively restructured over the last 3 years to address prior cost, schedule, and performance problems. DOD approved a new acquisition program baseline in March 2012. This testimony is largely based on GAO's recently released report, G AO-13-309. This testimony discusses (1) progress the F-35 program made in 2012, and (2) major risks that program faces going forward. GAO's work included analyses of a wide range of program documents and interviews with defense and contractor officials. The new F-35 acquisition baseline reflects positive restructuring actions taken by the Department of Defense (DOD) since 2010, including more time and funding for development and deferred procurement of more than 400 aircraft to future years. Overall, the program progressed on several fronts during 2012 to further improve the current outlook. The program achieved 7 of 10 key management objectives and made substantial progress on one other. Objectives on aircraft deliveries and a corrective management plan were not met. The F-35 development test program substantially met expectations with some revisions to flight test plans and made considerable progress addressing key technical risks. Software management practices and some output measures improved, although deliveries to test continued to lag behind plans. Manufacturing and supply processes also improved--indicators such as factory throughput, labor efficiency, and quality measures were positive. While initial F-35 production overran target costs and delivered aircraft late, the latest data shows labor hours decreasing and deliveries accelerating. Going forward, the F-35 program still faces considerable challenges and risks. Ensuring that the F-35 is affordable and can be bought in the quantities and time required by the warfighter will be a paramount concern to the Congress, DOD, and international partners. With more austere budgets looming, F-35 acquisition funding requirements average $12.6 billion annually through 2037 (see below). Once fielded, the projected costs of sustaining the F-35 fleet have been deemed unaffordable by DOD officials; efforts to reduce these costs are underway. Software integration and test will be challenging as many complex tasks remain to enable full warfighting capability. The program is also incurring substantial costs for rework-currently projected at $1.7 billion over 10 years of production-to fix problems discovered during testing. With about two-thirds of development testing still to go, additional changes to design and manufacturing are likely. As a result, the program continues to incur financial risk from its plan to procure 289 aircraft for $57.8 billion before completing development flight testing. GAO's prior reviews of the F-35 made numerous recommendations to help reduce risk and improve outcomes. DOD has implemented those recommendations to varying degrees.
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In our past work on GNDA, we made recommendations about the need for a strategic plan to guide the development of the GDNA. Among other things, in July 2008, we recommended that DHS develop an overall strategic plan for the GNDA that (1) clearly defines the objectives to be accomplished, (2) identifies the roles and responsibilities for meeting each objective, (3) identifies the funding necessary to achieve those objectives, and (4) employs monitoring mechanisms to determine programmatic progress and identify needed improvements. In January 2009, we also recommended that DHS develop strategies to guide the domestic aspects of the GNDA including establishing time frames and costs for addressing previously identified gaps in the GNDA--land border areas between ports of entry, international general aviation, and small maritime vessels. DHS concurred with our 2008 recommendation to develop an overall strategic plan and did not comment on our 2009 recommendation to develop a plan for the domestic portion of the GNDA, but noted that it aligned with DNDO's past, present, and future actions. In December 2010, DNDO issued a strategic plan for the GNDA. The strategic plan establishes a broad vision for the GNDA, identifies cross- cutting issues, defines several objectives, and assigns mission roles and responsibilities to the various federal entities that contribute to the GNDA. For example, the Department of Energy has the lead for several aspects of enhancing international capabilities for detecting nuclear materials abroad, DHS has the lead for detecting nuclear materials as they cross the border into the United States, and the Nuclear Regulatory Commission has the lead on reporting and sharing information on lost or stolen domestic radiological material. In addition, earlier this year, DNDO released the Global Nuclear Detection Architecture Joint Annual Interagency Review 2011. This review describes the current status of GNDA and includes information about the multiple federal programs that collectively seek to prevent nuclear terrorism in the United States. However, neither the strategic plan nor the 2011 interagency review identifies funding needed to achieve the strategic plan's objectives nor establishes monitoring mechanisms to determine programmatic progress and identify needed improvements--key elements of a strategic plan that we previously identified in our recommendations. Furthermore, while the plan and the 2011 interagency review discuss previously identified gaps in the domestic portion of the architecture, neither discusses strategies, priorities, timeframes, or costs for addressing these gaps. In our view, one of the key benefits of a strategic plan is that it is a comprehensive means of establishing priorities, and using these priorities to allocate resources so that the greatest needs are being addressed. In times of tight budgets, allocating resources to address the highest priorities becomes even more important. Accordingly, while DNDO's new strategic plan represents an important step forward in guiding the development of the GNDA, DNDO could do more to articulate strategies, priorities, timeframes and costs in addressing gaps and further deploying the GNDA in order to protect the homeland from the consequences of nuclear terrorism. In discussing these issues with DHS officials, they indicated that they will be producing a GNDA implementation plan later this year that will address several of these issues. As we reported in June 2010, DHS has made significant progress in deploying both radiation detection equipment and developing procedures to scan cargo and conveyances entering the United States through fixed land and sea ports of entry for nuclear and radiological materials, deploying nearly two-thirds of the radiation portal monitors identified in its deployment plan. According to DHS officials, the department scans nearly 100 percent of the cargo and conveyances entering the United States through land borders and major seaports. However, as we reported, DHS has made less progress scanning for radiation in (1) railcars entering the United States from Canada and Mexico; (2) international air cargo; and (3) international commercial aviation aircraft, passengers, or baggage. According to DHS officials, since November 2009, almost all non-rail land ports of entry have been equipped with one or more radiation detection portal monitors and 100 percent of all cargo, conveyances, drivers, and passengers driving into the United States through commercial lanes at land borders are scanned for radiation, as are more than 99 percent of all personally operated vehicles (non commercial passenger cars and light trucks), drivers, and passengers. Similarly, at major seaports, according to DHS officials, the department scans nearly all containerized cargo entering U.S. seaports for nuclear and radiological materials. DHS has deployed radiation portal monitors to major American seaports that account for the majority of cargo entering the United States. However, some smaller seaports that receive cargo may not be equipped with these portal monitors. DHS officials stated that current deployment plans have been in place to address all the remaining gaps in the deployment of portal monitors to seaports but that current and future budget realities require a re-planning of the deployment schedule. DHS has made much less progress scanning international rail. As we reported in June 2010, there is limited systematic radiation scanning of the roughly 4,800 loaded railcars entering the United States each day from Canada and Mexico. Much of the scanning for radioactive materials that takes place at these ports of entry is conducted with portable, hand- held radioactive isotope identification devices. According to DHS officials, international rail traffic represents one of the most difficult challenges for radiation detection systems due to the nature of trains and the need to develop close cooperation with officials in Mexico and Canada. In addition, DHS officials told us that rail companies resist doing things that might slow down rail traffic and typically own the land where DHS would need to establish stations for primary and secondary screening. DHS is in the early stages of developing procedures and technology to feasibly scan international rail traffic. As we reported in 2010, DHS is in the early stages of addressing the challenges of scanning for radioactive materials presented by air cargo and commercial aviation. DHS officials are also developing plans to increase their capacity to scan for radioactive materials in international air cargo conveyed on commercial airlines. DHS officials stated that their experience in scanning air cargo at a few major international airports in the United States has helped them develop scanning procedures and inform current and future deployment strategies for both fixed and mobile radiation detection equipment. These officials said that they believe that further operational experience and research is necessary before they can develop practical mobile scanning strategies and procedures. DHS is also developing plans to effectively scan commercial aviation aircraft, passengers, and baggage for radioactive materials. Since 2006, we have reported that DHS faces difficulties in developing new technologies to detect nuclear and radiological materials. Specifically, we have reported on longstanding problems with DNDO's efforts to deploy advanced spectroscopic portal (ASP) radiation detection monitors. The ASP is a more advanced and significantly more expensive type of radiation detection portal monitor to replace the polyvinyl toluene (PVT) portal monitors in many locations that the Customs and Border Protection (CBP), an agency within DHS, currently uses to screen cargo at ports of entry. We have issued numerous reports regarding problems with the cost and performance of the ASPs and the lack of rigor in testing this equipment. For example, we found that tests DNDO conducted in early 2007 used biased test methods that enhanced the apparent performance of ASPs and did not use critical CBP operating procedures that are fundamental to the performance of current radiation detectors. In addition, in 2008 we estimated the lifecycle cost of each standard cargo version of the ASP (including deployment costs) to be about $822,000, compared with about $308,000 for the PVT portal monitor, and the total program cost for DNDO's latest plan for deploying radiation portal monitors to be about $2 billion. Based in part on our work, DHS informed this Committee in February 2010, after spending over $280 million, that the department had scaled back its plans for the development and use of ASP technology. In September 2010, we also reported that DNDO was simultaneously engaged in the research and development phase while planning for the acquisition phase of its cargo advanced automated radiography system (CAARS) to detect certain nuclear materials in vehicles and containers at CBP ports of entry. DNDO pursued the deployment of CAARS without fully understanding that it would not fit within existing inspection lanes at ports of entry and would slow down the flow of commerce through these lanes, causing significant delays. DHS spent $113 million on the program since 2005 and cancelled the acquisition phase of the program in 2007. As we reported in September 2010, no CAARS machines had been deployed, and CAARS machines from various vendors were either disassembled or sitting idle without being tested in a port environment. DNDO's problems developing the ASP and CAARS technologies are examples of broader challenges DHS faces in developing and acquiring new technologies to meet homeland security needs. Earlier this month, we testified that DHS has experienced challenges managing its multibillion-dollar acquisition efforts, including implementing technologies that did not meet intended requirements and were not appropriately tested and evaluated, and has not consistently completed analysis of costs and benefits before technologies were implemented. In June 2011, DHS reported to us that it is taking steps to strengthen its investment and acquisition management processes across the department. For example, DHS plans to establish a new model for managing departmentwide investments, establish new councils and boards to help ensure that test and evaluation methods are appropriately considered, and is working to improve the quality and accuracy of program cost estimates. As we testified, we believe these are positive steps and, if implemented effectively, could help the department address many of its acquisition challenges. However, it is still too early to assess the impact of DHS's efforts to address these challenges. Going forward, we believe DHS will need to demonstrate measurable, sustained progress in effectively implementing these actions. Chairman Lungren, Ranking Member Clarke, and Members of the Subcommittee, this concludes my prepared statement. I would be pleased to respond to any questions that you may have at this time. For questions about this statement, please contact David C. Maurer at (202) 512-9627 or [email protected] or Gene Aloise at (202) 512-3841 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. Individuals making key contributions to this statement include Ned Woodward and Kevin Tarmann. Homeland Security: DHS Could Strengthen Acquisitions and Development of New Technologies, GAO-11-829T (Washington, D.C.: July 15, 2011). DHS Science and Technology: Additional Steps Needed to Ensure Test and Evaluation Requirements Are Met, GAO-11-596 (Washington, D.C.: June 15, 2011). Supply Chain Security: DHS Should Test and Evaluate Container Security Technologies Consistent with All Identified Operational Scenarios To Ensure the Technologies Will Function as Intended, GAO-10-887 (Washington D.C.: Sept. 29, 2010). Combating Nuclear Smuggling: Inadequate Communication and Oversight Hampered DHS Efforts to Develop an Advanced Radiography System to Detect Nuclear Materials, GAO-10-1041T (Washington D.C.: Sept. 15, 2010). Department of Homeland Security: Assessments of Selected Complex Acquisitions. GAO-10-588SP (Washington, D.C.: June 30, 2010). Combating Nuclear Smuggling: Lessons Learned from DHS Testing of Advanced Radiation Detection Portal Monitors, GAO-09-804T (Washington, D.C.: June 25, 2009). Combating Nuclear Smuggling: DHS Improved Testing of Advanced Radiation Detection Portal Monitors, but Preliminary Results Show Limits of the New Technology. GAO-09-655 (Washington, D.C.: May 21, 2009). Nuclear Detection: Domestic Nuclear Detection Office Should Improve Planning to Better Address Gaps and Vulnerabilities, GAO-09-257 (Washington D.C.: Jan. 29, 2009). Combating Nuclear Smuggling: DHS's Program to Procure and Deploy Advanced Radiation Detection Portal Monitors Is Likely to Exceed the Department's Previous Cost Estimates, GAO-08-1108R (Washington DC: Sept. 22, 2008). Nuclear Detection: Preliminary Observations on the Domestic Nuclear Detection Office's Efforts to Develop a Global Nuclear Detection Architecture, GAO-08-999T (Washington, D.C.: July 16, 2008). Combating Nuclear Smuggling: Additional Actions Needed to Ensure Adequate Testing of Next Generation Radiation Detection Equipment, GAO-07-1247T (Washington, D.C.: Sept. 18, 2007). Customs Service: Acquisition and Deployment of Radiation Detection Equipment, GAO-03-235T (Washington, D.C.: Oct. 17, 2002). This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.
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This testimony discusses our past work examining the Department of Homeland Security's (DHS) progress and efforts in planning, developing, and deploying its global nuclear detection architecture (GNDA). The overall mission of the GNDA is to use an integrated system of radiation detection equipment and interdiction activities to combat nuclear smuggling in foreign countries, at the U.S. border, and inside the United States. Terrorists smuggling nuclear or radiological material into the United States could use these materials to make an improvised nuclear device or a radiological dispersal device (also called a "dirty bomb"). The detonation of a nuclear device in an urban setting could cause hundreds of thousands of deaths and devastate buildings and physical infrastructure for miles. While not as damaging, a radiological dispersal device could nonetheless cause hundreds of millions of dollars in socioeconomic costs as a large part of a city would have to be evacuated--and possibly remain inaccessible--until an extensive radiological decontamination effort was completed. Accordingly, the GNDA remains our country's principal strategy in protecting the homeland from the consequences of nuclear terrorism. The GNDA is a multi-departmental effort coordinated by DHS's Domestic Nuclear Detection Office (DNDO). DNDO is also responsible for developing, acquiring, and deploying radiation detection equipment to support the efforts of DHS and other federal agencies. Federal efforts to combat nuclear smuggling have largely focused on established ports of entry, such as seaports and land border crossings. However, DNDO has also been examining nuclear detection strategies along other potential pathways and has identified several gaps in the GNDA, including (1) land border areas between ports of entry into the United States; (2) international general aviation; and (3) small maritime craft, such as recreational boats and commercial fishing vessels. Developing strategies, technologies, and resources to address these gaps remains one of the key challenges in deploying the GNDA. Some progress has been made, but DHS and other federal agencies have yet to fully address gaps in the global nuclear detection architecture. Specifically, this testimony discusses DHS's efforts to (1) address our prior recommendations to develop a strategic plan for the GNDA, including developing strategies to prevent smuggling of nuclear or radiological materials via the critical gaps DNDO identified, (2) complete the deployment of radiation detection equipment to scan all cargo and conveyances entering the United States at ports of entry, and (3) develop new technologies to detect nuclear or radioactive materials. This testimony is based on our prior work on U.S. government efforts to detect and prevent the smuggling of nuclear and radiological materials issued from October 2002 through September 2010. We updated this information in July 2011 to reflect DHS's efforts to address our prior recommendations by meeting with DNDO officials and reviewing recent DNDO documents, such as the 2010 GNDA Strategic Plan and the 2011 GNDA Joint Annual Interagency Review. In summary, since December 2010, DNDO has issued both a strategic plan to guide the development of the GNDA and an annual report on the current status of the GNDA. The new strategic plan addressed some key components of what we previously recommended be included in a strategic plan, such as identifying the roles and responsibilities for meeting strategic objectives. However, neither the plan nor the annual report identifies funding needed to achieve the strategic plan's objectives or employs monitoring mechanisms to determine programmatic progress and identify needed improvements. DHS officials informed us that they will address these missing elements in an implementation plan, which they plan to issue before the end of this year. As we reported in September 2010, DHS has made progress in deploying both radiation detection equipment and developing procedures to scan cargo entering the United States through land and sea ports of entry for nuclear and radiological materials. For example, according to DHS officials, the department scans nearly 100 percent of the cargo and conveyances entering the United States through land borders and major seaports. However, as we reported in July 2011, DHS has experienced challenges in developing new technologies to detect nuclear and radiological materials, such as developing and meeting key performance requirements. DHS has plans to enhance its development and acquisition of new technologies, although it is still too early to assess their impact on addressing the challenges we identified in our past work.
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Among its responsibilities for aviation safety, FAA issues certificates that approve the design and production of new aircraft and equipment before they are introduced into service; these certificates demonstrate that the aircraft and equipment meet FAA's airworthiness requirements. FAA also grants approvals for such things as changes to air operations and equipment. Certificates indicate that the aircraft, equipment, and new air operators are safe for use or flight in the NAS. While industry stakeholders have expressed concerns about variation in FAA's interpretation of standards for certification and approval decisions, stakeholders and experts that we interviewed for our 2010 report indicated that serious problems occur infrequently. In addition, in September 2011 we reported that FAA did a good job following its certification processes in assessing the composite fuselage and wings of Boeing's 787 against its airworthiness standards. The certification process also provides an example of how FAA is attempting to use a more proactive approach in finding solutions to a potential problem. In the case of flammability regulations that govern transport type aircraft, FAA has primarily developed its regulations on a reactive basis. That is, as accidents and incidents have occurred, their causes have been investigated, and the findings used to develop regulations designed to prevent the future occurrence of similar incidents or accidents. To supplement this oversight method, FAA has proposed a new, threat-based approach for flammability regulations that will base the flammability performance for different parts of the aircraft upon realistic threats that could occur in-flight or in a post-crash environment. FAA recognizes the value of certification as a safety tool, however the agency faces some significant challenges, including resources and maintaining up-to-date knowledge of industry changes. According to a report from the Aircraft Certification Process Review and Reform Aviation Rulemaking Committee, these certification challenges will become increasingly difficult to overcome, as industry activity is expected to continue growing and government spending for certification resources remains relatively flat. As one means of responding to its certification workload, FAA relies on designees, however, our prior work has shown that there are concerns that designee oversight is lacking, particularly with the new organizational designation authorities in which companies rather than individuals are granted designee status. There are also concerns that, when faced with certification of new aircraft or equipment, FAA staff have not been able to keep pace with industry changes and, thus, may struggle to understand the aircraft or equipment they are tasked with certificating. SMS implementation within FAA should reduce certification delays and increase available resources to facilitate the introduction of advanced technologies. In response to a provision in the 2012 FAA Reauthorization, FAA is assessing the certification process and identifying opportunities to streamline the process. As we stated above, FAA plans to continue using data reactively to understand the causes of accidents and incidents, and is implementing a proactive approach--called an SMS approach--in which it analyzes data to identify and mitigate risks before they result in accidents. FAA is also overseeing SMS implementation throughout the aviation industry. Safety management systems are intended to continually monitor all aspects of aviation operations and collect appropriate data to identify emerging safety problems before they result in death, injury, or significant property damage. Under SMS, which FAA began implementing in 2005, the agency will analyze the aviation safety data it collects to identify conditions that could lead to aviation accidents or incidents and to address such conditions through changes to FAA's organization, processes, management, and culture. As we reported in September 2012, according to FAA, the overarching goal of SMS is to improve safety by helping ensure that the outcomes of any management or system activity incorporate informed, risk-based decision making. FAA's business lines, such as the Air Traffic Organization and the Aviation Safety Organization, are currently at different stages of SMS implementation and it is likely that full SMS implementation will take many more years. SMS relies heavily on data analysis and, while FAA has put in place various data quality controls, it continues to experience data challenges including limitations with some of its analyses and limitations to or the absence of data in some areas. Data limitations and the lack of data may inhibit FAA's ability to manage safety risks. For example, we found that some FAA data used in risk assessments may not be complete, meaningful, or available to decision makers. We have also reported that the agency currently does not have comprehensive risk-based data, sophisticated databases to perform queries and model data, methods of reporting that capture all incidents, or a level of coordination that facilitates the comparison of incidents across data systems. Furthermore, technologies aimed at improving reporting have not been fully implemented. As a result, aviation officials managing risk using SMS have limited access to robust FAA incident data. Implementing systems and processes that capture accurate and complete data are critical for FAA to determine the magnitude of safety issues, assess their potential impacts, identify their root causes, and effectively address and mitigate them. Our recent work on aviation safety and FAA oversight issues has identified a number of specific areas where FAA's risk-based oversight could be improved through improved data collection and analysis, including: runway and ramp safety, airborne operational errors, general aviation, pilot training, unmanned aircraft systems, and commercial space. FAA has taken steps to address safety oversight issues in many of these areas, including making changes to or committing to make changes to its data collection practices in response to our recommendations in most of these areas. Nonetheless, sustained FAA attention will be necessary to ensure that the agency's ability to comprehensively and accurately assess and manage risk is not impaired. Runway and ramp safety. Takeoffs, landings, and movement around the surface areas of airports (the terminal area) are critical to the safe and efficient movement of air traffic. In a June 2011 incident at John F. Kennedy International Airport in New York, for example, a jumbo jet carrying 286 passengers and crew almost collided with another jumbo jet, which reportedly missed a turn and failed to stop where it should have to avoid the occupied runway. Safety in the terminal area could be improved by additional information about surface incidents, which is currently limited to certain types of incidents, notably runway incursions and certain airborne incidents, but does not include runway overruns or incidents in ramp areas. Without a process to track and assess these overruns or ramp area incidents, FAA cannot assess trends in those areas and the risks posed to aircraft or passengers in the terminal area. FAA is planning to develop a program to collect and analyze data on runway overruns, something we recommended in 2011, but it will be several years before FAA has obtained sufficient information about these incidents to be able to assess risks.still collects no comprehensive data on ramp area incidents and NTSB does not routinely collect data on ramp accidents unless they result in serious injury or substantial aircraft damage. In 2011, we recommended that FAA extend its oversight to ramp safety and FAA concurred. Airborne operational errors. Operational errors -also referred to as losses of separation--occur when two aircraft fly closer together than safety standards permit due to an air traffic controller error. We reported that FAA's risk-based process for assessing airborne losses of separation is too narrow to account for all potential risk and changes in how errors are reported affect FAA's ability to identify trends. For example, FAA's current process for analyzing losses of separation assesses only those incidents that occur between two or more radar-tracked aircraft. By excluding incidents such as those that occur between aircraft and terrain or aircraft and protected airspace, FAA is not considering the systemic risks that may be associated with many other airborne incidents. FAA has stated that it is planning to include these incidents in its risk assessment process before the end of 2013, something we recommended in 2011.changes to reporting policies affect its ability to accurately determine safety trends. For instance, we reported in October 2011 that the rate and number of reported airborne operational errors in the terminal In addition, FAA's area increased considerably since 2007.to reporting policies and processes in 2009 and 2010 make it difficult to know the extent to which the recent increases in reported operational errors are due to more accurate data, an actual increase in the occurrence of incidents, or both. General aviation. General aviation is characterized by a diverse fleet of aircraft flown for a variety of purposes. In 2010, FAA estimated that there were more than 220,000 aircraft in the active general aviation fleet, comprising more than 90 percent of the U.S. civil aircraft fleet. The number of nonfatal and fatal general aviation accidents decreased from 1999 through 2011; however, more than 200 fatal accidents occurred in each of those years. In October 2012, we reported that general aviation flight activity data limitations impede FAA's ability to assess general aviation safety and thereby target risk mitigation efforts. For example, FAA estimates of annual general aviation flight hours may not be reliable because of methodological and conceptual limitations with the survey upon which flight activity estimates are based. These limitations include survey response rates below 50 percent. Without more comprehensive reporting of general aviation flight activity, such as requiring the reporting of flight hours at certain intervals, FAA lacks assurance that it is basing its policy decisions on an accurate measure of general aviation trends, and NTSB lacks assurance that its calculations of accident and fatality rates accurately represent the state of general aviation safety. Lack of comprehensive flight hour data is an issue we have also identified in other segments of the aviation industry, including helicopter emergency medical services (HEMS) and air cargo transportation. We recommended in 2007 and 2009 respectively that FAA take action to collect comprehensive and accurate data for HEMS and general aviation operations. In 2011, we confirmed that FAA now annually surveys all helicopter operators and requests, among other things, information on the total flying hours and the percentage of hours that were flown in air ambulance operations. Our recommendations to FAA for air cargo and general aviation data remain unaddressed. See GAO, Initial Pilot Training: Better Management Controls Are Needed to Improve FAA Oversight, GAO-12-117 (Washington, D.C.: November 4, 2011). data found that, while FAA requires its inspectors to conduct on-site inspections of each of these schools and their pilot examiners at least once per year, the agency does not have a comprehensive system in place to adequately measure its performance in meeting its annual inspection requirements. Without complete data on active pilot schools and pilot examiners, it is difficult to ensure that regulatory compliance and safety standards are being met. In addition, it is unclear whether required inspections for pilot examiners were completed because FAA's data system lacks historical information. One potential implication is the quality of training that recreational pilot candidates receive, which could contribute to the many general aviation accidents in which pilot error is cited as a contributing factor. In 2011, we recommended that FAA develop a comprehensive system to measure performance of pilot school inspections and noted that this recommendation may require modifying or improving existing data systems. In responding to our recommendation, FAA officials said they agreed that improvements in oversight data were needed and indicated that they believe efforts already in existence or under way address our recommendations. Unmanned aircraft systems (UAS). FAA and the National Aeronautics and Space Administration (NASA) are taking steps to ensure the reliability of both small and large UAS by working on certification standards specific to UAS and undertaking research and development efforts to mitigate obstacles to the safe and routine integration of UAS into the national airspace. Some of these obstacles include vulnerabilities in UAS operation that will require technical solutions. However, we found that these research and development efforts related to overcoming these obstacles cannot be completed and validated without safety, reliability, and performance standards for UAS operations, which FAA has not developed due to data limitations. Standards for UAS operations are a key step in the process of safely integrating regular UAS operations into the national airspace. Once standards are developed, FAA has indicated that it will begin to use them in UAS regulations; until then, UAS will continue to operate as exceptions to the regulatory framework rather than being governed by it. Commercial space. FAA also oversees the safety of commercial space launches that can carry cargo and eventually humans into space. FAA is responsible for licensing and monitoring the safety of such launches and of spaceports (sites for launching spacecraft). However, FAA is prohibited by statute from regulating commercial space crew and passenger safety before 2015 except in response to a serious injury or fatality or an event that poses a high risk of causing a serious injury or fatality. FAA has interpreted this limited authority as allowing it to regulate crew safety in certain circumstances and has been proactive in issuing a regulation concerning emergency training for crews and passengers. However, FAA has not identified data that would allow it to monitor the safety of the developing space tourism sector and determine when to regulate human space flight. To allow the agency to be proactive about safety, rather than responding only after a fatality or serious incident occurs, we recommended in 2006 that FAA identify and continually monitor indicators of space tourism industry safety that might trigger the need to regulate crew and passenger safety before 2015 and use it to determine if the regulations should be revised.working with its industry advisory group, the Commercial Space Transportation Advisory Committee, to develop guidelines for human spaceflight. According to agency officials, FAA is Chairman Rockefeller, Ranking Member Thune, and Members of the Committee, this concludes my written statement. I would be pleased to answer any questions that you may have at this time. For further information on this statement, please contact Gerald L. Dillingham, Ph.D., at (202) 512-2834 or by email at [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. GAO staff who made key contributions to this testimony include Heather MacLeod, Assistant Director; Brooke Leary; Paul Aussendorf; Russell Burnett; Vashun Cole; Laura Erion; Brandon Haller; Dave Hooper; Dan Hoy; Delwen Jones; Maureen Luna-Long; Teresa Spisak; Pam Vines; and Jessica Wintfeld. Unmanned Aircraft Systems: Continued Coordination, Operational Data, and Performance Standards Needed to Guide Research and Development. GAO-13-346T. Washington, D.C.: February 15, 2013. General Aviation Safety: Additional FAA Efforts Could Help Identify and Mitigate Safety Risks GAO-13-36. Washington, D.C.: Oct 4, 2012. Unmanned Aircraft Systems: Measuring Progress and Addressing Potential Privacy Concerns Would Facilitate Integration into the National Airspace System. GAO-12-981. Washington, D.C.: September 14, 2012. Aviation Safety: Additional FAA Efforts Could Enhance Safety Risk Management.GAO-12-898. Washington, D.C.: Sep 12, 2012. Aviation Safety: FAA Is Taking Steps to Improve Data, but Challenges for Managing Safety Risks Remain.GAO-12-660T. Washington, D.C.: Apr 25, 2012. Aviation Safety: FAA Has An Opportunity to Enhance Safety and Improve Oversight of Initial Pilot Training. GAO-12-537T. Washington, D.C.: Mar 20, 2012. Initial Pilot Training: Better Management Controls Are Needed to Improve FAA Oversight. GAO-12-117. Washington, D.C.: November 4, 2011. Aviation Safety: Enhanced Oversight and Improved Availability of Risk- Based Data Could Further Improve Safety. GAO-12-24. Washington, D.C.: Oct 5, 2011. Aviation Safety: Status of FAA's Actions to Oversee the Safety of Composite Airplanes. GAO-11-849. Washington, D.C.: Sep 21, 2011. Aviation Safety: Certification and Approval Processes Are Generally Viewed as Working Well, but Better Evaluative Information Needed to Improve Efficiency. GAO-11-14. Washington, D.C.: October 7, 2010. Air Ambulance: Effects of Industry Changes on Services Are Unclear. GAO-10-907. Washington, D.C. September 30, 2010. Aviation Safety: Improved Data Quality and Analysis Capabilities Are Needed as FAA Plans a Risk-Based Approach to Safety Oversight. GAO-10-414. Washington, D.C.: May 6, 2010. Aviation Safety: Better Data and Targeted FAA Efforts Needed to Identify and Address Safety Issues of Small Air Cargo Carriers. GAO-09-614. Washington, D.C.: June 24, 2009. Aviation Safety: Potential Strategies to Address Air Ambulance Safety Concerns. GAO-09-627T. Washington, D.C.: April 22, 2009. Aviation Safety: Improved Data Collection Needed for Effective Oversight of Air Ambulance Industry. GAO-07-353. Washington, D.C.: February 21, 2007. Commercial Space Launches: FAA Needs Continued Planning and Monitoring to Oversee the Safety of the Emerging Space Tourism Industry. GAO-07-16. Washington, D.C.: October 2006. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.
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Even with nearly 80,000 flights each day within the national airspace system, there has not been a fatal commercial aviation accident in more than 4 years. The U.S. airspace system is arguably one of the safest in the world, with key aviation stakeholders--the FAA, airlines, airports, aircraft manufacturers, and the National Transportation Safety Board (NTSB)--working together to ensure these results. As the federal agency responsible for regulating the safety of civil aviation in the United States, FAA is responsible for, among other things: setting aircraft certification standards, collecting fleet and flight activity data, conducting safety oversight of pilot training and general aviation operations, and safely integrating aircraft into the national airspace. As the aviation industry evolves, FAA must remain diligent in its efforts to ensure the continued safety of aviation. In 2010, Congress passed the Airline Safety and Federal Aviation Administration Extension Act, which, in part, called for FAA to better manage safety risks. This testimony focuses on (1) FAA's aircraft certification process and (2) FAA's use of data to enhance safety and improve aviation oversight. The testimony is based on GAO's previous work and updated with industry reports and information provided by FAA officials. GAO has previously recommended that FAA address several data quality weaknesses. FAA concurred with most of these recommendations and has taken steps toward addressing some. The Federal Aviation Administration (FAA) is responsible for approving the design and airworthiness of new aircraft and equipment before they are introduced into service. FAA approves changes to aircraft and equipment based on evaluation of industry submissions against standards set forth in federal aviation regulations and related guidance documents. In September 2011, we reported that, overall, FAA did a good job following its certification processes in assessing the composite fuselage and wings of Boeing's 787 against its airworthiness standards. However, the approval process--referred to as certification--presents challenges for FAA in terms of resources and maintaining up-to-date knowledge of industry practices, two issues that may hinder FAA's efforts to conduct certifications in an efficient and timely manner. FAA is currently assessing its certification process and identifying opportunities to streamline it. FAA plans to continue analyzing data reactively to understand the causes of accidents and incidents, and to augment this approach through implementation of a safety management system (SMS). SMS is a proactive approach that includes continually monitoring all aspects of aviation operations and collecting and analyzing appropriate data to identify emerging safety problems before they result in death, injury, or significant property damage. FAA has put in place various quality controls for its data; however, GAO has identified a number of areas where FAA does not have comprehensive risk-based data or methods of reporting that capture all incidents. The following are among the key areas GAO identified as needing improved data collection and analysis. Runway and ramp safety . Additional information about surface incidents could help improve safety in the airport terminal area, as data collection is currently limited to certain types of incidents, notably runway incursions, which involve the incorrect presence of an aircraft, vehicle, or person on a runway and certain airborne incidents, and does not include runway overruns, which occur when an aircraft veers off a runway or incidents in ramp areas, which can involve aircraft and airport vehicles. Airborne operational errors . FAA's metric for airborne losses of separation--a type of operational error--is too narrow to account for all potential risk. General aviation . FAA estimates of annual flight hours for the general aviation sector, which includes all forms of aviation except commercial and military, may not be reliable. Pilot training . FAA does not have a comprehensive system in place to measure its performance in meeting its annual pilot school inspection requirements. FAA has taken steps to address safety oversight issues and data challenges in many of these areas. For example, FAA is planning to develop a program to collect and analyze data on runway overruns, but it will be several years before FAA has obtained enough information about these incidents to assess risks. Sustained attention to these data collection and analysis issues will be necessary to ensure that FAA can more comprehensively and accurately assess and manage risk.
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The IMF's first purpose is promoting international monetary cooperation. Its Articles of Agreement, as amended, provide that it may make its resources available to members experiencing balance-of-payments problems; this is to be done under "adequate safeguards." The IMF's approach to alleviating a country's balance-of-payments problems has two main components--financing and conditionality--that are intended to address both the immediate crisis as well as the underlying factors that contributed to the difficulties. Although financing is designed to help alleviate the short-term balance-of-payments crisis by providing a country with needed reserves, it may also support the longer term reform efforts by providing needed funding. The access to and disbursement of IMF financial assistance are conditioned upon the adoption and pursuit of economic and structural policy measures the IMF and recipient countries negotiate. This IMF "conditionality" aims to alleviate the underlying economic difficulty that led to the country's balance-of-payments problem and ensure repayment to the IMF. As the reasons for and magnitude of countries' balance-of- payments problems have expanded (due, in part, to the growing importance of external financing and changes in the international monetary system since the 1970s), conditionality has also expanded. According to the IMF, conditionality has moved beyond the traditional focus of reducing aggregate demand, which was appropriate for relieving temporary balance-of-payments difficulties, typically in industrial economies. Structural policies--such as reducing the role of government in the economy and opening the economy to outside competition--that take longer to implement and are aimed at increasing the capacity for economic growth--became an important part of conditionality. More recently, the financial crises in Mexico (1994-95) and in Asia and Russia (1997-99) have resulted in an increased focus on strengthening countries' financial sectors and the gradual opening of their economies to international capital flows. Over time, the IMF has developed a broad framework for establishing and monitoring financial assistance arrangements that is applied on a case-by- case basis considering each country's circumstances. This process, based on the IMF's analysis of country data and projections of future economic performance, gives the IMF wide latitude in establishing an actual or potential balance-of-payments need, the amount and timing of resource disbursements, and the conditions for disbursements; and in monitoring and, in some cases, modifying the arrangements. Under its Articles of Agreement, as amended, the IMF provides financial assistance only to those countries with a balance-of-payments need. Under these Articles, the IMF primarily considers actual or potential difficulties in either the country's balance of payments or its reserve position to be a basis for providing financial assistance. This framework has provided the IMF with wide latitude to consider countries' individual circumstances and changes in the international monetary system in its financial assistance decisions. The specific conditions that the IMF and the country authorities negotiate are intended to address the immediate and underlying problems that contributed to the country's balance-of-payments difficulty, while ensuring repayment to the IMF. These conditions are intended to be clear indicators of a country's progress toward the overall program goals, such as strengthening the country's balance of payments or reducing inflation. These conditions can include a variety of changes in a country's fiscal, monetary, or structural policies. Fiscal policy conditions may call for countries to reduce budget deficits; Brazil's program, for instance, called for limits on public sector debt. Monetary policy conditions seek to, among other things, rebuild international reserves to promote financial stability; Uganda's program set a minimum level for its net international reserves. Changes in structural policies may include revisions to financial market regulation or tax policies; Korea's program called for restructuring its financial supervisory system. Political constraints and economic uncertainty can make these negotiations sensitive and difficult. After a country fulfills any early IMF requirements, known as "prior actions," and the IMF Executive Board approves the financial arrangement, the program is to take effect and the country is eligible to receive its first disbursement of funds. Korea and Argentina exemplify the differences that can exist between countries' financial arrangements with the IMF. Korea's program provided substantial funding at the earliest stage of the program to counter an ongoing balance-of-payments crisis in late 1997 resulting from substantial losses in Korea's foreign currency reserves and the depreciation of the won, Korea's currency. The country faced balance-of-payments problems primarily due to significant capital outflows. Korean banks had a large amount of short-term external debt that needed frequent refinancing. As market confidence fell, the willingness of external creditors to "roll over" or refinance these loans declined rapidly. The government's attempt to support the exchange rate rapidly depleted official reserves of foreign currencies. The main goals for the program's monetary policy were to limit the depreciation of the won and contain inflation. In contrast, Argentina's 1998 program was designed as a precaution against a potential balance-of-payments problem that could result from external economic shocks. Although Argentina enjoyed good access to capital markets and had employed a strategy to lengthen the maturity of its debt and borrow when interest rates were low, it faced an uncertain future due to deteriorating conditions in the international financial environment and the effect this likely would have on its future access to capital markets. Argentina agreed to access IMF resources only if external conditions made access necessary. The program was principally concerned with maintaining fiscal discipline and enacting labor market and tax reforms that were intended to maintain investor confidence and strengthen the economy's competitiveness. The process of monitoring a country's progress toward overall program goals and compliance with program conditions involves both the borrower country and the IMF. The approach is designed to incorporate data on a country's economic performance as well as the judgment of the IMF Executive Board and staff. IMF staff reviews a member's economic performance and implementation of policy changes that were negotiated as conditions of the financial assistance. The staff then reports to the Executive Board at regularly scheduled intervals for each assistance program. In situations where conditions have not been met, the staff formally or informally advises the Executive Board. The staff may recommend that the Board grant a waiver for the nonobservance of the unmet conditions. Typically waivers can be recommended if the nonobservance is minor and program implementation is otherwise "on track." If there is no waiver, additional financial assistance is not to be made available to the country and the program is effectively suspended until there is an agreement between the IMF and the country that is approved by the IMF Executive Board. This agreement may mandate policy changes before any further assistance is granted and change the conditions for future assistance. In monitoring compliance, IMF missions to each country documented a country's progress in satisfying conditions. In some cases, the IMF determined the countries had made sufficient overall progress in meeting program conditions so that additional funds could be made available, even when the countries had not satisfied some key conditions. For example, in response to the Argentine government's request, the IMF staff recommended, and the Executive Board approved, a waiver on the basis of the IMF's judgment that there was sufficient overall progress in implementing the program and that the deviation from meeting the required condition was minor. In March 1999, the IMF Board approved a waiver when Argentina's fiscal deficit (1.1 percent of gross domestic product) slightly exceeded its target of 1 percent. Access to funding was not delayed. Similarly, in April 1998, the IMF Board approved a waiver when the Ugandan government experienced a temporary shortfall in its checking account balances, causing it to miss a required condition. According to the IMF staff, this shortfall happened because the government made payments sooner than expected. The staff viewed this as a minor, technical issue and recommended the waiver. The IMF and borrower countries may also negotiate changes in conditions to respond to unanticipated developments. For example: The IMF and Korea revised Korea's program several times during its first 2 months. The IMF acknowledged that the initial program was "overly optimistic" as economic conditions worsened; Korea continued to have access to financial assistance during these renegotiations. Brazil's program was modified due to adverse events. The maintenance of the exchange rate regime was an objective of Brazil's IMF program. Brazil turned to the IMF for assistance in September 1998, when its currency came under pressure as a result of the Russian crisis, and it experienced a significant loss of reserves. This reserve loss decelerated after the negotiations began; but, according to Brazilian officials, Brazil's currency came under additional pressure after its IMF program had started. The reasons for this included the defeat in Brazil's congress of two tax measures deemed crucial to the fiscal adjustment program and the reluctance of a number of Brazilian state governors to fulfill their financial obligations to the government. To try to stem the additional loss of reserves, the Brazilian government found it necessary to devalue and then float the currency. The IMF program was then revised to reflect the new economic situation and currency regime. In some cases, the IMF determined that the countries had not made sufficient overall progress in meeting program conditions. In these cases, no additional funds were made available until, in the IMF's judgment, satisfactory progress had been achieved. The IMF delayed disbursements to Indonesia at various points during its current program until the IMF determined that the country had made sufficient overall progress in meeting the program requirements. For example, the IMF delayed Indonesia's disbursements from mid-March 1998 to early in May 1998 due to the IMF staff's determination that Indonesia had made insufficient progress in carrying out its program. The first review was completed in May 1998. Indonesia met none of the required conditions addressing macroeconomic components of the program and one of the key conditions for structural economic changes. IMF staff recommended that the Board grant Indonesia's request for waivers of these conditions on the basis of actions taken by the government. (For example, the government had established a new comprehensive bank-restructuring program in January 1998 to be implemented by a new agency, the Indonesian Bank Restructuring Agency.) Following the Board's approval, Indonesia received its next disbursement. At this time, the IMF moved from quarterly to monthly reviews of Indonesia's program. Disbursements were also delayed in the process of completing several subsequent reviews. The IMF faced continued problems in Russia's implementation of its IMF program. Over time, the IMF delayed disbursements and program approval, reduced the amount of the disbursement, and ultimately suspended the program. According to the IMF, it delayed disbursements because of Russia's poor tax collections, reflecting a lack of government resolve to collect taxes. However, throughout Russia's program the IMF staff expressed the view that Russia's key senior authorities were committed to the program and should be supported; therefore, the IMF Board continued to approve disbursements. Events in 1998 particularly illustrate this. The delayed approval of the 1998 program, due to cabinet changes and difficulty in meeting the revenue package, meant that Russia received no funds between January and June 1998. The program was finally approved in June 1998, on the basis of implementation of prior actions. In July 1998, the IMF approved additional funds to Russia but reduced the amount of the disbursement from $5.6 billion to $4.8 billion due to delays in getting two measures passed in the Duma. The IMF was scheduled to release the next disbursement in September 1998, but Russia had deviated so far from the program that the IMF made no further disbursements. In March 1999, Russia requested that the program be terminated. In April 1999, the IMF and Russia announced they had reached agreement on a new arrangement. To date, the IMF Board has not approved the new arrangement. Although all borrowers restrict trade to some extent, only a few of the 98 current IMF borrowers are traders large enough to affect the U.S. economy. Trade policies were not the major focus of IMF conditions for structural reform in the four borrowers we studied that are important U.S. trade partners. The IMF did seek to promote trade liberalization in these countries, however, and Brazil, Indonesia, and Korea undertook some actions to liberalize their trade regimes. Also, although U.S. imports from some of these countries have grown in some sectors, the effect of trade policy changes on U.S. imports has probably been of lesser magnitude than the effect of the substantial macroeconomic changes that these countries experienced. In its programs with four important U.S. trade partners, the IMF focused primarily on macroeconomic and structural reforms other than trade reforms. As we noted earlier, the IMF seeks to address the immediate and underlying problems that contributed to a country's balance-of-payments problem; restrictive trade policies were not major factors contributing to the countries' needs for IMF assistance. Nevertheless, the IMF sought to promote trade liberalization in the countries, as it deemed appropriate. Part of the IMF's mission, as embodied in its Articles of Agreement, is to facilitate the expansion and balanced growth of world trade. As such, countries that have borrowed from the IMF sometimes have liberalized their trade systems within the context of their financial arrangements. Borrowers have eliminated or reduced tariffs or nontariff barriers to imports and have ended or altered export policies, such as subsidies and export restrictions. Brazil, Indonesia, and Korea have undertaken some trade liberalization within the context of their recent IMF financial arrangements. Nevertheless, their overall conditionality has focused primarily on macroeconomic and structural reforms other than trade reform because restrictive trade policies per se were not major causes of their balance-of- payments difficulties, according to the Treasury Department and the IMF. Reflecting this, only one of the trade liberalization measures taken was a required condition--the requirement that Indonesia reduce export taxes on logs and sawn timber. Further, although some of the import and export policies to be eliminated or modified under their IMF arrangements have been of concern to the United States and other countries, the stated purpose of these measures is not to benefit the three countries' trading partners. Rather, the purpose is to help resolve the countries' balance-of- payments problems and address the underlying causes of these problems by promoting greater efficiency in their economic systems. Korea has eliminated four export subsidies, reduced some import barriers, and made improvements to the transparency of its subsidy programs. Indonesia has made many changes to its trade policies in the context of its IMF financial arrangements, including reducing or eliminating some import tariffs and export restrictions. Indonesia has committed to phase out most remaining nontariff import barriers and export restrictions by the time its IMF program ends in the year 2000. Brazil has committed to limit the scope of its interest equalization export subsidy program to capital goods and has suspended for 1999 a tax rebate given to exporters. Further, according to the IMF, Brazil has kept its pledge not to impose any new trade restrictions that hinder regional integration, are inconsistent with the World Trade Organization, or that are for balance-of-payments purposes. The large macroeconomic changes in these four countries caused by their recent financial crises greatly complicate predicting and measuring the trade policies' impact on the United States. Our analysis of 1997-98 trade data reveals that overall U.S. imports from Brazil, Indonesia, Korea, and Thailand rose moderately in 1998. However, there have been substantial increases in U.S. imports from these countries in certain sectors. For example, imports of one category of flat-rolled steel from Korea rose by 36 percent to $355.8 million, and paper and paperboard imports from Indonesia were up by 284 percent to $40.8 million. Under U.S. law, there are procedures to investigate and remedy situations, such as steel import surges, where U.S. industry believes rising imports are attributable to foreign government policy and harm its economic interests. In some sectors, rising imports may be due to other factors besides government policies. For example, market factors, such as increasing U.S. coffee consumption and the need for more natural rubber for the larger tires being used in U.S. motor vehicles, may be the reason for some of the import surges. Also, chemical imports are causing price pressures on U.S. producers in the United States, but the import increases are partly due to depressed demand within Asia that has led to increased shipments to the United States. Mr. Chairman, this concludes our statement this morning. My colleagues and I would be pleased to answer any questions you or members of the subcommittee may have. The first copy of each GAO report and testimony is free. 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Pursuant to a congressional request, GAO discussed the International Monetary Fund (IMF), focusing on the: (1) conditions IMF negotiates with its borrower countries; and (2) trade policies of borrower countries. GAO noted that: (1) IMF has a process for establishing and monitoring financial arrangements with member countries and it generally followed the process for the six countries in GAO's study; (2) the process encompasses data collection and analysis as well as judgment by the IMF Executive Board and staff, and gives IMF wide latitude in assessing a country's initial request for assistance, negotiating terms and conditions for that assistance, and determining the country's continued access to IMF resources; (3) under its charter, IMF limits financial assistance to members with a balance-of-payments need; IMF has broadly interpreted this to encompass a wide range of financial difficulties; (4) IMF has continued to make disbursements to a country that had not met all conditions when it decided that the country was making satisfactory progress; this decision was based on IMF's analysis of data on the country's progress and IMF's judgment; (5) when IMF determined that the country's progress in meeting key conditions was insufficient, disbursements have been delayed, and have not resumed unless or until satisfactory progress was achieved, in IMF's judgment; (6) IMF financial arrangements in four borrower countries that are important trading partners of the United States focus primarily on macroeconomic and structural reforms rather than trade reform because restrictive trade policies were not major causes of the countries' financial problems leading to the request for IMF assistance, according to the Department of the Treasury and IMF; (7) nevertheless Brazil, Indonesia, and Korea have undertaken some trade liberalization within the context of their most recent IMF arrangements; (8) according to Treasury, Thailand's recent IMF financial arrangements have had no trade liberalization commitments because trade policies were not the root causes of its financial crisis, and also because Thailand's trade system was more open than the other three countries' systems; (9) the large macroeconomic changes in these four borrower countries caused by their recent financial crises have probably been a more important source of changes in their trade policies; (10) this greatly complicates the task of measuring the impact of the trade policies on the United States; and (11) the countries' trade policies can distort trade in specific sectors, however, which could contribute to import surges.
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DOD and VA offer health care benefits to active duty servicemembers and veterans, among others. Under DOD's health care system, eligible beneficiaries may receive care from military treatment facilities or from civilian providers. Military treatment facilities are individually managed by each of the military services--the Army, the Navy, and the Air Force. Under VA, eligible beneficiaries may obtain care through VA's integrated health care system of hospitals, ambulatory clinics, nursing homes, residential rehabilitation treatment programs, and readjustment counseling centers. VA has organized its health care facilities into a polytrauma system of care that helps address the medical needs of returning servicemembers and veterans, in particular those who have an injury to more than one part of the body or organ system that results in functional disability and physical, cognitive, psychosocial, or psychological impairment. Persons with polytraumatic injuries may have injuries or conditions such as TBI, amputations, fractures, and burns. Over the past 6 years, DOD has designated over 29,000 servicemembers involved in Operation Iraqi Freedom and Operation Enduring Freedom as wounded in action, and almost 70 percent of these servicemembers are from the Army active, reserve, and national guard components. Servicemembers injured in these conflicts are surviving injuries that would have been fatal in past conflicts, due, in part, to advanced protective equipment and medical treatment. The severity of their injuries can result in a lengthy transition from patient back to duty, or to veterans' status. Initially, most seriously injured servicemembers from these conflicts, including activated National Guard and Reserve members, are evacuated to Landstuhl Regional Medical Center in Germany for treatment. From there, they are usually transported to military treatment facilities in the United States, with most of the seriously injured admitted to Walter Reed Army Medical Center or the National Naval Medical Center. According to DOD officials, once they are stabilized and discharged from the hospital, servicemembers may relocate closer to their homes or military bases and are treated as outpatients by the closest military or VA facility. Returning injured servicemembers must potentially navigate two different disability evaluation systems that generally rely on the same criteria but for different purposes. DOD's system serves a personnel management purpose by identifying servicemembers who are no longer medically fit for duty. The military's process starts with identification of a medical condition that could render the servicemember unfit for duty, a process that could take months to complete. The servicemember goes through a medical evaluation board proceeding, where medical evidence is evaluated, and potentially unfit conditions are identified. The member then goes through a physical evaluation board process, where a determination of fitness or unfitness for duty is made and, if found unfit for duty, a combined percentage rating is assigned for all unfit conditions and the servicemember is discharged from duty. The injured servicemember then receives monthly disability retirement payments if he or she meets the minimum rating and years of duty thresholds or, if not, a lump-sum severance payment. VA provides veterans compensation for lost earning capacity due to service-connected disabilities. Although a servicemember may file a VA claim while still in the military, he or she can only obtain disability compensation from VA as a veteran. VA will evaluate all claimed conditions, whether they were evaluated by the military service or not. If the veteran is found to have one or more service-connected disabilities with a combined rating of at least 10 percent, VA will pay monthly compensation. The veteran can claim additional benefits, for example, if a service-connected disability worsens. While the Army took near-term actions to respond to reported deficiencies in care for its returning servicemembers, and the Senior Oversight Committee is undertaking efforts to address more systemic problems, challenges remain to overcome long-standing problems and ensure sustainable progress. In particular, efforts were made to respond to problems in four key areas: (1) case management, (2) disability evaluation systems, (3) TBI and PTSD, and (4) data sharing between DOD and VA. The three review groups identified several problems in these four areas including: a need to develop more comprehensive and coordinated care and services; a need to make the disability systems more efficient; more collaboration of research and establishment of practice guidelines for TBI and PTSD; and more data sharing between DOD and VA. While efforts have been made in all four areas, challenges have emerged including staffing for the case management initiatives and transforming the disability evaluation system. The three review groups reporting earlier this year identified numerous problems with DOD's and VA's case management of servicemembers, including a lack of comprehensive and well-coordinated care, treatment, and services. Case management--a process intended to assist returning servicemembers with management of their clinical and nonclinical care throughout recovery, rehabilitation, and community reintegration--is important because servicemembers often receive services from numerous therapists, providers, and specialists, resulting in differing treatment plans as well as receiving prescriptions for multiple medications. One of the review groups reported that the complexity of injuries in some patients requires a coordinated method of case management to keep the care of the returning servicemember focused and goal directed, and that this type of care was not evident at Walter Reed. The Dole-Shalala Commission recommended that recovery coordinators be appointed to craft and manage individualized recovery plans that would be used to guide the servicemembers' care. The Dole-Shalala Commission further recommended that these recovery coordinators come from outside DOD or VA, possibly from the Public Health Service, and be highly skilled and have considerable authority to be able to access resources necessary to implement the recovery plans. The Army and the Senior Oversight Committee's workgroup on case management have initiated efforts to develop case management approaches that are intended to improve the management of servicemembers' recovery process. See table 1 for selected efforts by the Army and Senior Oversight Committee to improve case management services. The Army's approach includes developing a new organizational structure for providing care to returning active duty and reserve servicemembers who are unable to perform their duties and are in need of health care--this structure is referred to as a Warrior Transition Unit. Within each unit, the servicemember is assigned to a team of three key staff and this team is responsible for overseeing the continuum of care for the servicemember. The Army refers to this team as a "triad," and it consists of a (1) primary care manager--usually a physician who provides primary oversight and continuity of health care and ensures the quality of the servicemember's care; (2) nurse case manager--usually a registered nurse who plans, implements, coordinates, monitors, and evaluates options and services to meet the servicemember's needs; and (3) squad leader--a noncommissioned officer who links the servicemember to the chain of command, builds a relationship with the servicemember, and works along side the other parts of the triad to ensure the needs of the servicemember and his or her family are met. As part of the Army's Medical Action Plan, the Army established 32 Warrior Transition Units, to provide a unit in every medical treatment facility that has 35 or more eligible servicemembers. The Army's goal is to fill the triad positions according to the following ratios: 1:200 for primary care managers; 1:18 for nurse case managers; and 1:12 for squad leaders. This approach is a marked departure for the Army. Prior to the creation of the Warrior Transition Units, the Army separated active and reserve component soldiers into different units. One review group reported that this approach contributed to discontent about which group received better treatment. Moreover, the Army did not have formalized staffing structures nor did it routinely track patient-care ratios, which the Independent Review Group reported contributed to the Army's inability to adequately oversee its program or identify gaps. As the Army has sought to fill its Warrior Transition Units, challenges to staffing key positions are emerging. For example, many locations have significant shortfalls in registered nurse case managers and non- commissioned officer squad leaders. As shown in figure 1, about half of the total required staffing needs of the Warrior Transition Units had been met across the Army by mid-September 2007. However, the Army had filled many of these slots thus far by temporarily borrowing staff from other positions. Permanently assigned (832) Temporarily borrowed (451) Unfilled (1,127) The Warrior Transition Unit staffing shortages are significant at many locations. As of mid-September, 17 of the 32 units had less than 50 percent of staff in place in one or more critical positions. (See table 2.) Consequently, 46 percent of the Army's returning servicemembers who were eligible to be assigned to a unit had not been assigned, due in part to these staffing shortages. As a result, these servicemembers' care was not being coordinated through the triad. Army officials reported that their goal is to have all Warrior Transition Units in place and fully staffed by January 2008. The Senior Oversight Committee's approach for providing a continuum of care includes establishment of recovery coordinators and recovery plans, as recommended by the Dole-Shalala Commission. This approach is intended to complement the military services' existing case management approaches and place the recovery coordinators at a level above case managers, with emphasis on ensuring a seamless transition between DOD and VA. The recovery coordinator is expected to be the patient's and family's single point of contact for making sure each servicemember receives the care outlined in the servicemember's recovery plan--a plan to guide and support the servicemember through the phases of medical care, rehabilitation, and disability evaluation to community reintegration. The Senior Oversight Committee has indicated that DOD and VA will establish a joint Recovery Coordinator Program no later than October 15, 2007. At the time of our review, the committee was determining the details of the program. For example, the Dole-Shalala Commission recommended this approach for every seriously injured servicemember, and the Senior Oversight Committee workgroup on case management was developing criteria for determining who is "seriously injured." The workgroup was also determining the role of the recovery coordinators--how they will be assigned to servicemembers and how many are needed, which will ultimately determine what the workload for each will be. The Senior Oversight Committee has, however, indicated that the positions will be filled with VA staff. A representative of the Senior Oversight Committee told us that the recovery coordinators would not be staffed from the U.S. Public Health Service Commissioned Corps, as recommended by the Dole- Shalala Commission. The official told us that it is appropriate for VA to staff these positions because VA ultimately provides the most care for servicemembers over their lifetime. Moreover, Senior Oversight Committee officials told us that depending on how many recovery coordinators are ultimately needed, VA may face significant human capital challenges in identifying and training individuals for these positions, which are anticipated to be complex and demanding. As we have previously reported, providing timely and consistent disability decisions is a challenge for both DOD and VA. In a March 2006 report about the military disability evaluation system, we found that the services were not meeting DOD timeliness goals for processing disability cases; used different policy, guidance and processes for aspects of the system; and that neither DOD nor the services systematically evaluated the consistency of disability decisions. On multiple occasions, we have also identified long-standing challenges for VA in reducing its backlog of claims and improving the accuracy and consistency of its decisions. The controversy over conditions at Walter Reed and the release of subsequent reports raised the visibility of problems in the military services' disability evaluation system. In a March 2007 report, the Army Inspector General identified numerous issues with the Army Physical Disability Evaluation System. These findings included a failure to meet timeliness standards for determinations, inadequate training of staff involved in the process, and servicemember confusion about the disability rating system. Similarly, in recently-issued reports, the Task Force on Returning Global War on Terror Heroes, the Independent Review Group, and the Dole-Shalala Commission found that DOD's disability evaluation system often generates long delays in disability determinations and creates confusion among servicemembers and their families. Also, they noted significant disparities in the implementation of the disability evaluation system among the services, and in the purpose and outcome of disability evaluations between DOD and VA. Two reports also noted the adversarial nature of DOD's disability evaluation system, as servicemembers endeavor to reach a rating threshold that entitles them to lifetime benefits. In addition to these findings about current processes, the Dole-Shalala Commission questioned DOD's basic role in making disability payments to veterans and recommended that VA assume sole responsibility for disability compensation for veterans. In response to the Army Inspector General's findings, the Army made near- term operational improvements. For example, the Army developed several initiatives to streamline its disability evaluation system and address bottlenecks. These initiatives include reducing the caseloads of evaluation board liaisons who help servicemembers navigate the disability evaluation system. In addition, the Army developed and conducted the first certification training for evaluation board liaisons. Furthermore, the Army increased outreach to servicemembers to address confusion about the process. For example, it initiated briefings conducted by evaluation board liaisons and soldiers' counsels to educate servicemembers about the process and their rights. The Army also initiated an online tool that enables servicemembers to check the status of their case during the evaluation process. We were not able to fully assess the implementation and effectiveness of these initiatives because some changes are still in process and complete data are not available. To address more systemic concerns about the timeliness and consistency of DOD's and VA's disability evaluation systems, DOD and VA are planning to pilot a joint disability evaluation system. DOD and VA are reviewing multiple options that incorporate variations of the following three elements: (1) a single, comprehensive medical examination to be used by both DOD and VA in their disability evaluations; (2) a single disability rating performed by VA; and (3) incorporating a DOD-level evaluation board for adjudicating servicemembers' fitness for duty. For example, in one option, the DOD-level evaluation board makes fitness for duty determinations for all of the military services; whereas in another option, the services make fitness for duty determinations, and the DOD-level board adjudicates appeals of these determinations. Another open question is whether DOD or VA would conduct the comprehensive medical examination. Table 3 summarizes four pilot options under consideration by DOD and VA. As recent pilot planning exercises verified, in addition to agreeing on which pilot option to implement, DOD and VA must address several key design issues before the pilot can begin. For example, it has not been decided how DOD will use VA's disability rating to determine military disability benefits for servicemembers in the pilot. In addition, DOD and VA have not finalized a set of performance metrics to assess the effect of the piloted changes. DOD and VA officials had hoped to begin the pilot on August 1, 2007, but the intended start date slipped as agency officials took steps to further consider alternatives and address other important questions related to recent and expected events that may add further complexity to the pilot development process. For example, the Senior Oversight Committee may either choose or be directed by the Congress to pilot the Dole-Shalala recommendation that only VA and not DOD provide disability payments to veterans. Implementing this recommendation would require a change to current law, and could affect whether or how the agencies implement key pilot elements under consideration. In addition, the Veterans' Disability Benefits Commission, which is scheduled to report in October 2007, may recommend changes that could also influence the pilot's structure. Further, the Congress is considering legislation that may require DOD and VA to conduct multiple, alternative disability evaluation pilots. DOD and VA face other critical challenges in creating a new disability evaluation system. For example, DOD is challenged to overcome servicemembers' distrust of a disability evaluation process perceived to be adversarial. Implementing a pilot without adequately considering alternatives or addressing critical policy and procedural details may feed that distrust because DOD and VA plan to pilot the new system with actual servicemembers. The agencies also face staffing and training challenges to conduct timely and consistent medical examinations and disability evaluations. Both the Independent Review Group and the Dole-Shalala Commission recommended that only VA establish disability ratings. However, as we noted above, VA is dealing with its own long-standing challenges in providing veterans with timely and consistent decisions. Similarly, if VA becomes responsible for servicemembers' comprehensive physical examinations, it would face additional staffing and training challenges, at a time when it is already addressing concerns about the timeliness and quality of its examinations. Further, while having a single disability evaluation could ensure more consistent disability ratings, VA's Schedule for Rating Disabilities is outdated because it does not adequately reflect changes in factors such as labor market conditions and assistive technologies on disabled veterans' ability to work. As we have reported, the nature of work has changed in recent decades as the national economy has moved away from manufacturing-based jobs to service- and knowledge-based employment. Yet VA's disability program remains mired in concepts from the past, particularly the concept that impairment equates to an inability to work. The three independent review groups examining the deficiencies found at Walter Reed identified a range of complex problems associated with DOD and VA's screening, diagnosis, and treatment of TBI and PTSD, signature injuries of recent conflicts. Both conditions are sometimes referred to as "invisible injuries" because outwardly the individual's appearance is just as it was before the injury or onset of symptoms. In terms of mild TBI, there may be no observable head injury and symptoms may overlap with those associated with PTSD. With respect to PTSD, there is no objective diagnostic test and its symptoms can sometimes be associated with other psychological conditions (e.g., depression). Recommendations from the review groups examining these areas included better coordination of DOD and VA research and practice guidelines and hiring and retaining qualified health professionals. However, according to Army officials and the Independent Review Group report, obtaining qualified health professionals, such as clinical psychologists, is a challenge, which is due to competition with private sector salaries and difficulty recruiting for certain geographical locations. The Dole-Shalala Commission noted that while VA is considered a leader in PTSD research and treatment, knowledge generated through research and clinical experience is not systematically disseminated to all DOD and VA providers of care. Both the Army and the Senior Oversight Committee are working to address this broad range of issues. (See table 4.) The Army, through its Medical Action Plan, has policies in place requiring all servicemembers sent overseas to a war zone to receive training on recognizing the symptoms of mild TBI and PTSD. The Army is also exploring ways to track events on the battlefield, such as blasts, that may result in TBI or PTSD. In addition, the Army recently developed policies to provide mild TBI and PTSD training to all social workers, nurse case managers, psychiatric nurses, and psychiatric nurse practitioners to better identify these conditions. As of September 13, 2007, 6 of the Army's 32 Warrior Transition Units had completed training for all of these staff. A Senior Oversight Committee workgroup on TBI and PTSD is working to ensure health care providers have education and training on screening, diagnosing, and treating both mild TBI and PTSD, mainly by developing a national Center of Excellence as recommended by the three review groups. This Center of Excellence is expected to combine experts and resources from all military services and VA to promote research, awareness, and best practices on mild TBI as well as PTSD and other psychological health issues. A representative of the Senior Oversight Committee workgroup on TBI and psychological health told us that the Center of Excellence would include the existing Defense and Veterans Brain Injury Center--a collaboration among DOD, VA, and two civilian partners that focuses on TBI treatment, research, and education. DOD and VA have been working for almost 10 years to facilitate the exchange of medical information. However, the three independent review groups identified the need for DOD and VA to further improve and accelerate efforts to share data across the departments. Specifically, the Dole-Shalala Commission indicated that DOD and VA must move quickly to get clinical and benefit data to users, including making patient data immediately viewable by any provider, allied health professional, or program administrator who needs the data. Furthermore, in July 2007, we reported that although DOD and VA have made progress in both their long- term and short-term initiatives to share health information, much work remains to achieve the goal of a seamless transition between the two departments. While pursuing their long-term initiative to develop a common health information system that would allow the two-way exchange of computable health data, the two departments have also been working to share data in their existing systems. See table 5 for selected efforts under way by the Army and Senior Oversight Committee to improve data sharing between DOD and VA. As part of the Army Medical Action Plan, the Army has taken steps to facilitate the exchange of data between its military treatment facilities and VA. For example, the Army Medical Department is developing a memorandum of understanding between the Army and VA that would allow VA access to data on severely injured servicemembers who are being transferred to a VA polytrauma center. The memorandum of understanding would also allow VA's Veterans Health Administration and Veterans Benefits Administration access to data in a servicemember's medical record that are related to a disability claim the servicemember has filed with VA. Army officials told us that the Army's medical records are part paper (hard copy) and part electronic, and this effort would provide the VA access to the paper data until the capability to share the data electronically is available at all sites. Given that DOD and VA already have a number of efforts under way to improve data sharing between the two departments, the Senior Oversight Committee, through its data sharing workgroup, has been looking for opportunities to accelerate the departments' sharing initiatives that are already planned or in process and to identify additional data sharing requirements that have not been clearly articulated. For example, the Senior Oversight Committee has approved several policy changes in response to the Dole-Shalala Commission, one of which requires DOD and VA to ensure that all essential health and administrative data are made available and viewable to both agencies, and that progress is reported by a scorecard, by October 31, 2008. A representative of the data sharing workgroup told us that the departments are achieving incremental increases to data sharing capabilities and plan to have all essential health data--such as outpatient pharmacy, allergy, laboratory results, radiology reports, and provider notes--viewable by all DOD and VA facilities by the end of December 2007. Although the agencies have recently experienced delays in efforts to exchange data, the representative said that the departments are on track to meet all the timelines established by the Senior Oversight Committee. A Senior Oversight Committee workgroup on data sharing has also been coordinating with other committee workgroups on their information technology needs. Although workgroup officials told us that they have met numerous times with the case management and disability evaluation systems workgroups to discuss their data sharing needs, they have not begun implementing necessary systems because they are dependent on the other workgroups to finalize their information technology needs. For example, the Senior Oversight Committee has required DOD and VA to establish a plan for information technology support of the recovery plan to be used by recovery coordinators, which integrates essential clinical (e.g., medical care) and nonclinical aspects (e.g., education, employment, disability benefits) of recovery, no later than November 1, 2007. However, this cannot be done until the case management workgroup has identified the components and information technology needs of these clinical and nonclinical aspects, and as of early September this had not been done. Data sharing workgroup representatives indicated that the departments' data sharing initiatives will be ongoing because medications, diagnoses, procedures, standards, business practices, and technology are constantly changing, but the departments expect to meet most of the data sharing needs of patients and providers by end of fiscal year 2008. Our preliminary observations are that fixing the long-standing and complex problems spotlighted in the wake of Walter Reed media accounts as expeditiously as possible is critical to ensuring high-quality care for our returning servicemembers, and success will ultimately depend on sustained attention, systematic oversight by DOD and VA, and sufficient resources. Efforts thus far have been on separate but related tracks, with the Army seeking to address service-specific issues while DOD and VA are working together to address systemic problems. Many challenges remain, and critical questions remain unanswered. Among the challenges is how the efforts of the Army--which has the bulk of the returning servicemembers needing medical care--will be coordinated with the broader efforts being undertaken by DOD and VA. The centerpiece of the Army's effort is its Medical Action Plan, and the success of the plan hinges on staffing the newly-created Warrior Transition Units. Permanently filling these slots may prove difficult, and borrowing personnel from other units has been a temporary fix but it is not a long- term solution. The Army can look to the private sector for some skills, but it must compete for personnel in a civilian market that is vying for medical professionals with similar skills and training. Perhaps one of the most complex efforts under way is that of redesigning DOD's disability evaluation system. Delayed decisions, confusing policies, and the perception that DOD and VA disability ratings result in inequitable outcomes have eroded the credibility of the system. Thus, it is imperative that DOD and VA take prompt steps to address fundamental system weaknesses. However, as we have noted, key program design and operational policy questions must be addressed to ensure that any proposed system redesign has the best chance for success and that servicemembers and veterans receive timely, accurate, and consistent decisions. This will require careful study of potential options, a comprehensive assessment of outcome data associated with the pilot, proper metrics to gauge success, and an evaluation mechanism to ensure needed adjustments are made to the process along the way. Failure to properly consider alternatives or address critical policy and procedural details could exacerbate delays and confusion for servicemembers, and potentially jeopardize the system's successful transformation. Mr. Chairman, this completes my prepared remarks. We would be happy to respond to any questions you or other members of the subcommittee may have at this time. For further information about this testimony, please contact John H. Pendleton at (202) 512-7114 or [email protected] or Daniel Bertoni at (202) 512-7215 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. GAO staff who made major contributions to this report are listed in appendix II. In the aftermath of deficiencies identified at Walter Reed Medical Center, three separate review groups--the President's Commission on Care for America's Returning Wounded Warriors, commonly referred to as the Dole-Shalala Commission; the Independent Review Group, established by the Secretary of Defense; and the President's Task Force on Returning Global War on Terror Heroes--investigated the factors that may have led to these problems. Selected findings of each report are summarized in table 6. In addition to the contact named above, Bonnie Anderson, Assistant Director; Michele Grgich, Assistant Director; Jennie Apter; Janina Austin; Joel Green; Christopher Langford; Chan My Sondhelm; Barbara Steel- Lowney; and Greg Whitney, made key contributions to this statement. DOD Civilian Personnel: Medical Policies for Deployed DOD Federal Civilians and Associated Compensation for Those Deployed. GAO-07-1235T. Washington, D.C.: September 18, 2007. Global War on Terrorism: Reported Obligations for the Department of Defense. GAO-07-1056R. Washington, D.C.: July 26, 2007. Information Technology: VA and DOD Are Making Progress in Sharing Medical Information, but Remain Far from Having Comprehensive Electronic Medical Records. GAO-07-1108T. Washington, D.C.: July 18, 2007. Defense Health Care: Comprehensive Oversight Framework Needed to Help Ensure Effective Implementation of a Deployment Health Quality Assurance Program. GAO-07-831. Washington, D.C.: June 22, 2007. DOD's 21st Century Health Care Spending Challenges, Presentation for the Task Force on the Future of Military Health Care. Statement delivered by David M. Walker, Comptroller General of the United States. GAO-07-766-CG. Washington, D.C.: April 18, 2007. Veterans' Disability Benefits: Long-Standing Claims Processing Challenges Persist. GAO-07-512T. Washington, D.C.: March 7, 2007. DOD and VA Health Care: Challenges Encountered by Injured Servicemembers during Their Recovery Process. GAO-07-589T. Washington, D.C.: March 5, 2007. VA Health Care: Spending for Mental Health Strategic Plan Initiatives Was Substantially Less Than Planned. GAO-07-66. Washington, D.C.: November 21, 2006. VA and DOD Health Care: Efforts to Provide Seamless Transition of Care for OEF and OIF Servicemembers and Veterans. GAO-06-794R. Washington, D.C.: June 30, 2006. Post-Traumatic Stress Disorder: DOD Needs to Identify the Factors Its Providers Use to Make Mental Health Evaluation Referrals for Servicemembers. GAO-06-397. Washington, D.C.: May 11, 2006. Military Disability System: Improved Oversight Needed to Ensure Consistent and Timely Outcomes for Reserve and Active Duty Service Members. GAO-06-362. Washington, D.C.: March 31, 2006. VA and DOD Health Care: Opportunities to Maximize Resource Sharing Remain. GAO-06-315. Washington, D.C.: March 20, 2006. VA and DOD Health Care: VA Has Policies and Outreach Efforts to Smooth Transition from DOD Health Care, but Sharing of Health Information Remains Limited. GAO-05-1052T. Washington, D.C.: September 28, 2005. Federal Disability Assistance: Wide Array of Programs Needs to be Examined in Light of 21st Century Challenges. GAO-05-626. Washington, D.C.: June 2, 2005. Veterans' Disability Benefits: Claims Processing Problems Persist and Major Performance Improvements May Be Difficult. GAO-05-749T. Washington, D.C.: May 26, 2005. DOD and VA: Systematic Data Sharing Would Help Expedite Servicemembers' Transition to VA Services. GAO-05-722T. Washington, D.C.: May 19, 2005. VA Health Care: VA Should Expedite the Implementation of Recommendations Needed to Improve Post-Traumatic Stress Disorder Services. GAO-05-287. Washington, D.C.: February 14, 2005. VA and Defense Health Care: More Information Needed to Determine If VA Can Meet an Increase in Demand for Post-Traumatic Stress Disorder Services. GAO-04-1069. Washington, D.C.: September 20, 2004. This is a work of the U.S. government and is not subject to copyright protection in the United States. It may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.
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In February 2007, a series of Washington Post articles disclosed troublesome deficiencies in the provision of outpatient services at Walter Reed Army Medical Center, raising concerns about the care for returning servicemembers. These deficiencies included a confusing disability evaluation system and servicemembers in outpatient status for months and sometimes years without a clear understanding about their plan of care. The reported problems at Walter Reed prompted broader questions about whether the Department of Defense (DOD) as well as the Department of Veterans Affairs (VA) are fully prepared to meet the needs of returning servicemembers. In response to the deficiencies reported at Walter Reed, the Army took a number of actions and DOD formed a joint DOD-VA Senior Oversight Committee. This statement provides information on the near-term actions being taken by the Army and the broader efforts of the Senior Oversight Committee to address longer-term systemic problems that impact health care and disability evaluations for returning servicemembers. Preliminary observations in this testimony are based largely on documents obtained from and interviews with Army officials, and DOD and VA representatives of the Senior Oversight Committee, as well as on GAO's extensive past work. We discussed the facts contained in this statement with DOD and VA. While efforts are under way to respond to both Army-specific and systemic problems, challenges are emerging such as staffing new initiatives. The Army and the Senior Oversight Committee have efforts under way to improve case management--a process intended to assist returning servicemembers with management of their care from initial injury through recovery. Case management is especially important for returning servicemembers who must often visit numerous therapists, providers, and specialists, resulting in differing treatment plans. The Army's approach for improving case management for its servicemembers includes developing a new organizational structure--a Warrior Transition Unit, in which each servicemember would be assigned to a team of three key staff--a physician care manager, a nurse case manager, and a squad leader. As the Army has sought to staff its Warrior Transition Units, challenges to staffing critical positions are emerging. For example, as of mid-September 2007, over half the U.S. Warrior Transition Units had significant shortfalls in one or more of these critical positions. The Senior Oversight Committee's plan to provide a continuum of care focuses on establishing recovery coordinators, which would be the main contact for a returning servicemember and his or her family. This approach is intended to complement the military services' existing case management approaches and place the recovery coordinators at a level above case managers, with emphasis on ensuring a seamless transition between DOD and VA. At the time of GAO's review, the committee was still determining how many recovery coordinators would be necessary and the population of seriously injured servicemembers they would serve. As GAO and others have previously reported, providing timely and consistent disability decisions is a challenge for both DOD and VA. To address identified concerns, the Army has taken steps to streamline its disability evaluation process and reduce bottlenecks. The Army has also developed and conducted the first certification training for evaluation board liaisons who help servicemembers navigate the system. To address more systemic concerns, the Senior Oversight Committee is planning to pilot a joint disability evaluation system. Pilot options may incorporate variations of three key elements: (1) a single, comprehensive medical examination; (2) a single disability rating done by VA; and (3) a DOD-level evaluation board for adjudicating servicemembers' fitness for duty. DOD and VA officials hoped to begin the pilot in August 2007, but postponed implementation in order to further review options and address open questions, including those related to proposed legislation. Fixing these long-standing and complex problems as expeditiously as possible is critical to ensuring high-quality care for returning servicemembers, and success will ultimately depend on sustained attention, systematic oversight by DOD and VA, and sufficient resources.
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The size and composition of the nuclear stockpile have evolved as a consequence of the global security environment and the national security needs of the United States. According to NNSA's Stockpile Stewardship and Management Plan for Fiscal Year 2016, the stockpile peaked at 31,255 weapons in 1967, and in September 2013, the stockpile consisted of 4,804 weapons--the smallest since the Eisenhower Administration. The New Strategic Arms Reduction Treaty between the United States and Russia, which entered into force on February 5, 2011, is to reduce the operationally deployed stockpile even further by 2018. Weapons that were originally produced on average 25 to 30 years ago are now well past their original design life of approximately 15 to 20 years. In addition, no new nuclear weapons have been developed since the closing days of the Cold War. Before the end of the U.S. underground nuclear testing program in 1992, developing and maintaining the nuclear stockpile were largely accomplished by a continual cycle of weapon design, weapon testing, and the incorporation of lessons learned in the next design. A critical step in this process was conducting underground nuclear explosive tests. Since 1992, the United States has observed a self-imposed moratorium on nuclear explosive testing and has, instead, relied on a program of nonnuclear testing and modeling to ensure the reliability, safety, and effectiveness of the stockpile. While the United States maintains the policy of no new nuclear testing or weapon designs, and the stockpile is reduced in absolute numbers, confidence in the existing stockpile and the effectiveness of the deterrent must remain high to meet U.S. national security needs. For this reason, the United States is continuing to modernize the existing stockpile through life-extension programs (LEP). LEPs are modifications that refurbish warheads or bombs by replacing aged components with the intent of extending the service life of weapons by 20 to 30 years, while increasing safety, improving security, and addressing defects. NNSA's Office of Defense Programs is responsible for the manufacture, maintenance, refurbishment, surveillance, and dismantlement of nuclear weapons. Most modern nuclear weapons consist of three sets of materials and components--a primary, a secondary, and a set of nonnuclear components. When detonated, the primary and secondary components, which together are referred to as the weapon's "nuclear explosive package," produce the weapon's explosive force, or "yield." Some nonnuclear components--collectively called "limited-life components"--have shorter service lives than the weapons themselves and, therefore, must be periodically replaced. There are two key efforts in the stockpile surveillance program--Core Surveillance and the Enhanced Surveillance Program. NNSA's Core Surveillance, in one form or the other, has been in place for nearly 60 years. In contrast, the Enhanced Surveillance Program was established in the mid-1990s to assist in surveillance and evaluation of the stockpile primarily by identifying aging signs, developing aging models to predict the impact of aging on the stockpile, and developing diagnostic tools. Since the late 1950s, Core Surveillance has focused on sampling and testing the nuclear stockpile to provide continuing confidence in its reliability. Core Surveillance conducts tests that provide current information--essentially a snapshot of the current condition of the stockpile--for the annual assessment of the stockpile. According to NNSA officials, Core Surveillance focuses mainly on identifying the "birth defects" of a system--the manufacturing defects in current components and materials. Under Core Surveillance, NNSA's national security laboratories and production plants are to evaluate the current state of weapons and weapon components for the attributes of function, condition, material properties, and chemical composition through the following activities: System-Level Laboratory Testing. For such tests, units from each type of stockpiled weapon are chosen annually, either randomly or specifically, and sent to the Pantex Plant in Texas for disassembly, inspection, reconfiguration, and testing by the national security laboratories. System-Level Flight Testing. These tests drop or launch a weapon with its nuclear material removed. NNSA coordinates flight testing with DOD, which is responsible for providing the military assets (e.g., aircraft and missiles) needed to drop or launch a weapon. Component and Material Testing. These tests are conducted on nuclear and nonnuclear components and materials by both the national security laboratories and the production plants that manufactured them. Organizationally, Core Surveillance is part of NNSA's Directed Stockpile Work Program. This program also conducts, among other things, maintenance of active weapons in the stockpile, LEPs, and dismantlement and disposition of retired weapons. Core Surveillance activities were funded at approximately $217 million in fiscal year 2016. According to NNSA documents, through scientific and engineering efforts, the Enhanced Surveillance Program enables the agency to better predict where defects might occur in the future to help determine useful lifetimes of weapons and certain key components, such as switches or detonators, and to help plan when replacement is needed. The creation of the Enhanced Surveillance Program in the mid-1990s came at a time when concerns were growing (1) with an aging stockpile and (2) that Core Surveillance tended to produce diminishing returns. More specifically, in a 2006 study, NNSA and the Sandia National Laboratories found that as more is known about manufacturing and current aging defects--the focus of Core Surveillance--fewer and fewer manufacturing-related defects are discovered. This 2006 study suggested a different approach to surveillance for aging weapons. According to NNSA officials, the Enhanced Surveillance Program conducts three key activities: Aging studies. Enhanced Surveillance Program aging studies support decisions on when and whether to reuse or replace weapons components and materials. As part of these studies the program identifies and develops new materials and components that can substitute for materials that are no longer available; identifies inadequately performing components; and assesses performance of existing components to assist in weapons life-extension decisions. For example, to assist in making decisions on the life extension of weapons, the Enhanced Surveillance Program assessed the feasibility of reusing certain components. Specifically, according to NNSA documents, in fiscal year 2014, the Enhanced Surveillance Program validated the reuse of a battery for one weapon through aging studies, resulting in eliminating the need and cost to redesign the part. In another example, according to NNSA officials, Enhanced Surveillance Program aging models made it possible to certify the potential reuse of a key part of the W80 warhead to allow life extension of that weapon. NNSA also uses information from these aging studies in LEPs to guide decisions on when future weapons modifications, alterations, and life extensions need to occur to reduce the risk of potential problems from future defects. Finally, NNSA uses information from the aging studies in the national security laboratory directors' annual assessment of the condition of the stockpile. Computational modeling. On the basis of its aging studies and other data, the Enhanced Surveillance Program develops computational models to predict the impacts of aging on weapons components and materials. According to the Enhanced Surveillance Program's federal program manager, computational predictive models primarily benefit weapons systems managers at the three nuclear security laboratories. The federal program manager noted that the models allow a projection of the future performance of the systems and anticipate failures with sufficient time to correct them. Diagnostic tool development. The Enhanced Surveillance Program develops diagnostic tools to support Core Surveillance and allow the evaluation of weapons without the need to dismantle and destroy them. This is important since new weapons are not being produced. One diagnostic tool developed by the program was the high-resolution computed tomography image analysis tool for a particular nuclear component, implemented in fiscal year 2009. NNSA officials said this diagnostic tool has enhanced the ability to identify potential defects or anomalies without the need to dismantle or destroy the component. Organizationally, the Enhanced Surveillance Program is a part of NNSA's Engineering Program, which is part of NNSA's broader research, development, test, and evaluation (RDT&E) program. The Engineering Program creates and develops tools and capabilities to support efforts to ensure weapons are safe and reliable. NNSA's total RDT&E budget allocation for fiscal year 2016 is $1.8 billion; the Enhanced Surveillance Program budget allocation for fiscal year 2016 is approximately $39 million. According to agency documents, because of long-standing concerns over the stockpile surveillance program, NNSA launched its 2007 initiative to, among other things, better integrate stockpile surveillance program activities. The concerns date back to the mid-1990s. For example, our July 1996 report on the surveillance program found the agency was behind in conducting surveillance tests and did not have written plans for addressing the backlog. A January 2001 internal NNSA review of the surveillance program made several recommendations to improve surveillance, including addressing the selection and testing approach for weapons and components, developing new tools to allow for nondestructive testing of the stockpile, improving aging and performance models, and achieving closer coordination and integration of Core Surveillance and the Enhanced Surveillance Program. Further, an April 2004 review of the Enhanced Surveillance Program by DOE's Office of Inspector General found that NNSA experienced delays in completing some Enhanced Surveillance Program milestones and was at risk of not meeting future milestones. The report noted that such delays could result in NNSA's being unprepared to identify age-related defects in weapons and impact the agency's ability to annually assess the condition of the stockpile. Finally, an October 2006 DOE Office of Inspector General report found that NNSA had not eliminated its surveillance testing backlog. Faced with this criticism, a growing backlog of Core Surveillance's traditional surveillance testing, budgetary pressures, and an aging stockpile, NNSA developed its 2007 initiative. According to its project plan, the 2007 initiative sought to establish clear requirements for determining stockpile surveillance needs and to integrate all surveillance activities--to include Core Surveillance and the Enhanced Surveillance Program--through a strengthened management structure. In addition, NNSA sought to create a more flexible, cost-effective, and efficient surveillance program by, among other things, dismantling fewer weapons and increasing the understanding of the impact of aging on weapons, components, and materials by being able to predict the effects of aging activities. According to an NNSA official who previously oversaw surveillance activities, because of the nature of its work, the Enhanced Surveillance Program was intended to be a key part of this transformation effort. More specifically, according to the 2007 initiative project plan, one proposal was to increase evaluations of aging effects on nonnuclear weapons components and materials. The 2007 initiative project plan noted that more than 100 such evaluations would be undertaken at the Sandia National Laboratories in fiscal year 2007, the first year of the initiative's implementation. In addition, the 2007 initiative project plan stated that the Enhanced Surveillance Program would continue to assess the viability of diagnostic tools in support of Core Surveillance. NNSA implemented some aspects of its 2007 initiative but did not fully implement its envisioned role for the Enhanced Surveillance Program and has not developed a long-term strategy for the program. NNSA has substantially reduced the program's funding since 2007 and recently refocused some of its RDT&E programs on multiple weapon life- extension efforts and supporting efforts. A February 2010 internal NNSA review noted that NNSA had implemented some important aspects of the 2007 initiative. For example, NNSA updated guidance laying out processes for identifying surveillance requirements. In addition, the agency had implemented a governance structure consisting of working committees to harmonize requirements between Core Surveillance and the Enhanced Surveillance Program. Furthermore, the agency had created a senior-level position to lead the overall surveillance effort and better integrate Core Surveillance and the Enhanced Surveillance Program. However, according to NNSA documents and officials, the agency did not fully implement its envisioned role for the Enhanced Surveillance Program. Instead of increasing the role of the program by conducting the range of aging studies as envisioned, NNSA budgeted less funding to it, delayed some planned work, and transferred work to other NNSA programs. The amount of funding the agency budgeted to the Enhanced Surveillance Program declined from $87 million in fiscal year 2007--the first year of the 2007 initiative's implementation--to $79 million in fiscal year 2008. NNSA has continued to budget less funding to the Enhanced Surveillance Program. Funding dropped to approximately $38 million in fiscal year 2015, a reduction of more than 50 percent from fiscal year 2007. While the Enhanced Surveillance Program has experienced reductions in funding and scope since the 2007 initiative, Core Surveillance funding has generally kept pace with required stockpile testing, according to an NNSA official. After an initial funding reduction from $195 million in fiscal year 2007 to $158 million in fiscal year 2009, NNSA increased the budgeted funding to Core Surveillance in 2010 and has stabilized its funding levels since then. Agency officials said they believe the Core Surveillance program is now generally stable. Figure 1 shows funding levels for the two programs for fiscal years 2007 through 2015. NNSA also delayed some key Enhanced Surveillance Program activities during this time. For example, NNSA did not complete the proposed evaluations of the effects of aging on nonnuclear components and materials that were to be largely carried out at the Sandia National Laboratories. These evaluations--which NNSA viewed as an important part of the Enhanced Surveillance Program when it was being managed as a campaign, according to an NNSA official--were initiated in fiscal year 2007 and originally estimated to be completed by 2012. However, a 2010 NNSA review concluded these evaluations had not occurred. According to a contract representative at the Sandia National Laboratories overseeing Enhanced Surveillance Program work, these evaluations no longer have an estimated time frame for completion and their systematic completion, as was once envisioned, is no longer a program goal. Furthermore, while the program has developed some diagnostic tools to aid Core Surveillance, such as high-resolution computed tomography image analysis, NNSA officials and the NNSA fiscal year 2016 budget request said that other efforts to develop diagnostic tools had been deferred because of lack of funding. In addition, NNSA transferred some Enhanced Surveillance Program work to other programs. For example, NNSA transferred experiments (and related funding) to measure aging effects and to provide lifetime assessments on the plutonium pits--a key nuclear weapons component--from the Enhanced Surveillance Program to NNSA's Science Campaign in fiscal year 2009. According to the Enhanced Surveillance Program's federal program manager, NNSA has budgeted reduced funding because of competing internal priorities. The federal program manager said that the Enhanced Surveillance Program has to compete for funding with other internal high- priority activities, such as LEPs and infrastructure projects in a climate of overall agency funding constraints caused by, among other things, internal agency pressures to achieve budgetary savings to enable modernization of the stockpile and other priorities. In addition, Core Surveillance's importance in detecting "birth defects" of weapons--the manufacturing defects or signs of aging in current components and materials--has increased, according to NNSA officials, as NNSA has undertaken and completed more LEPs. In fiscal year 2016, NNSA shifted the focus of some of its RDT&E efforts, including efforts in the Enhanced Surveillance Program, to meet the immediate needs of its ongoing and planned LEPs and related supporting efforts. According to NNSA officials, the funding and scope reductions in the Enhanced Surveillance Program reflect ongoing internal prioritization tensions within NNSA over meeting immediate needs--such as understanding current stockpile condition using traditional surveillance methods--and investing in the science, technology, and engineering activities needed to understand the impacts of aging on weapons and their components in the future. The Enhanced Surveillance Program federal program manager as well as other stakeholders, such as the JASON group of experts, noted funding changes may have a larger impact on the program than is immediately apparent. NNSA officials said that the program plays a considerably broader role in assessing the condition of the stockpile than its name suggests and supports a wide variety of efforts, including the statutorily required annual assessment process, weapons life extension and modernization programs, and ongoing efforts to maintain weapons systems. According to a 2014 NNSA analysis conducted by the Enhanced Surveillance Program's federal program manager, slightly less than 15 percent of the program's fiscal year 2014 budget allocation supported the development of diagnostic tools largely for Core Surveillance. About half of the program's fiscal year 2014 budget allocation went to conducting aging studies, predictive modeling, and component and material evaluation studies that may support Core Surveillance but also benefit weapons life extension and modernization programs and ongoing efforts to maintain weapons systems, according to agency officials. The analysis found that about one-third of the Enhanced Surveillance Program's fiscal year 2014 budget allocation went to activities supporting the annual assessment process and ongoing or planned LEPs. As of April 2016, NNSA was no longer pursuing the vision for the Enhanced Surveillance Program contained in the 2007 initiative and did not have a current long-term strategy for the program. Specifically, the fiscal year 2017 Stockpile Stewardship and Management Plan noted that NNSA refocused all of its RDT&E engineering activities--including the activities within the Enhanced Surveillance Program--on supporting more immediate stockpile needs and, according to the program's federal program manager, NNSA has not developed a corresponding long-term strategy for the program. Enhanced Surveillance Program officials continue to focus on year-to-year management of the program under reduced funding levels to maintain key stockpile assessment capabilities, such as supporting Core Surveillance activities, the annual assessment process, and LEPs. Our previous work has demonstrated that a long-term strategy is particularly important for technology-related efforts such as the Enhanced Surveillance Program. Specifically, our April 2013 report found that for technology-related efforts, without a long-term strategy that provides an overall picture of what an agency is investing in, it is difficult for Congress and other decision makers to understand up front what they are funding and what benefits they can expect. In 1993, GPRA established a system for agencies to set goals for program performance and to measure results. GPRAMA, which amended GPRA, requires, among other things, that federal agencies develop long- term strategic plans that include agencywide goals and strategies for achieving those goals. Our body of work has shown that these requirements also can serve as leading practices for strategic planning at lower levels within federal agencies, such as NNSA, to assist with planning for individual programs or initiatives that are particularly challenging. Taken together, the strategic planning elements established under these acts and associated Office of Management and Budget guidance, and practices we have identified, provide a framework of leading practices in federal strategic planning and characteristics of good performance measures. For programs or initiatives, these practices include defining strategic goals, defining strategies that address management challenges and identify resources needed to achieve these goals, and developing and using performance measures to track progress in achieving these goals and to inform management decision making. Our review of NNSA documents and interviews with NNSA officials found that NNSA does not have a current long-term strategy for the Enhanced Surveillance Program defining the program's strategic goals that includes these practices. Strategic goals explain the purpose of agency programs and the results--including outcomes--that they intend to achieve. The Enhanced Surveillance Program has general long-term goals, such as "developing tools and information useful to ensure the stockpile is healthy and reliable." However, the program's long-term goals do not provide outcomes that are measurable or that encompass the entirety of the program. NNSA officials told us they use annual goals, which help manage work on a yearly basis. For example, the program's goals for fiscal year 2015 included "develop, validate and deploy improved predictive capabilities and diagnostics to assess performance and lifetime for nuclear and non-nuclear materials." By managing work on an annual basis, longer-term work--such as technology development projects extended over several years--may receive a lower priority and thus, according to NNSA officials, may not be funded. In addition, NNSA funds the program's annual requirements as part of the agency's annual budget formulation process and funds the program in accordance with the agency's internal process for allocating its budget authority. For fiscal year 2016, the agency budgeted funding for the program at a slightly higher level to meet stockpile requirements, such as surveillance, and the annual assessment process. However, without a current long-term strategy for the program, NNSA cannot plan for any management challenges that threaten its ability to meet its long-term strategic goals or the resources needed to meet those goals. Moreover, NNSA program officials told us that the agency has not defined specific quantifiable performance measures that could be used to track the program's progress toward its long-term goals, as called for by leading practices. The need for NNSA to develop clear, measureable performance metrics for the Enhanced Surveillance Program has been highlighted in past reviews, namely by DOE's Inspector General and by the JASON group. For example, in a September 2012 report, the Inspector General noted that NNSA's performance measure for the program was based on the percentage of funding spent rather than on work accomplishments. Furthermore, a July 2013 memorandum from the director of the Office of Management and Budget to executive agency heads noted that, in accordance with OMB Circular A-11 and GPRAMA, agencies should describe the targeted outcomes of research and development programs using meaningful, measurable, quantitative metrics, where possible, and describe how they plan to evaluate the success of the programs. We found in past work that effective long-term planning is needed to guide decision making in programs, including laboratory research and development programs, so that congressional and other decision makers can better understand up front what they are funding and what benefits they can expect. As NNSA refocused its research and technology development efforts for the Enhanced Surveillance Program on LEPs and related activities and as NNSA officials said that they recognized the need for a new long-term strategy for the program, it is an opportune time to incorporate sound federal strategic planning practices. A new strategy for the program that incorporates outcome-oriented strategic goals, addresses management challenges and identifies resources needed to achieve these goals, and develops and uses performance measures to track progress in achieving goals would allow the agency to better inform long-term planning and management decision making for the program. By seeking to increase the nondestructive evaluations of nonnuclear components--work that was to be conducted under the Enhanced Surveillance Program--NNSA sought to reduce Core Surveillance's backlog of mandated system-level tests requiring the dismantling of these components. However, NNSA did not fully implement its vision for the Enhanced Surveillance Program in its 2007 initiative. For example, rather than expanding the program, NNSA budgeted reduced funding for it, and the program did not complete the proposed evaluations of the effects of aging on nonnuclear components and materials. More recently, NNSA directed its RDT&E programs to focus on LEPs and related activities. This includes the Enhanced Surveillance Program. Enhanced Surveillance Program personnel have focused on year-to-year management of a program that has seen a nearly 50-percent funding reduction over the past decade and have not yet sought to redefine a strategy for how the program can best complement NNSA's other efforts to assess the condition of the stockpile, including Core Surveillance. With funding appearing to have been stabilized and with NNSA's adopting a different approach for all of its RDT&E programs, it is an opportune time to develop an Enhanced Surveillance Program strategy. A new long-term strategy for the program that incorporates outcome-oriented strategic goals, addresses management challenges and identifies resources needed to achieve these goals, and develops and uses performance measures to track progress in achieving goals would allow the agency to better inform long-term planning and management decision making for the program. To help ensure that NNSA can better inform long-term planning and management decision making as well as to ensure that the Enhanced Surveillance Program complements NNSA's other efforts to assess the nuclear weapons stockpile, we recommend that the NNSA Administrator develop a long-term strategy for the Enhanced Surveillance Program that incorporates outcome-oriented strategic goals, addresses management challenges and identifies resources needed to achieve these goals, and develops and uses performance measures to track progress in achieving these goals. We provided a draft of this report to the NNSA Administrator for review and comment. In his written comments, the NNSA Administrator agreed with our recommendation that the agency develop a long-term strategy for the Enhanced Surveillance Program. The Administrator noted that the growth envisioned for the Enhanced Surveillance Program did not materialize as originally intended but that the agency remains committed to long-term success of the program. The Administrator noted that the agency estimated completing a long-term strategy for the program by June 2017. We are sending copies of this report to the appropriate congressional committees, the NNSA Administrator, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff members have any questions about this report, please contact me at (202) 512-3841 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff that made key contributions to this report are listed in appendix II. David C. Trimble, (202) 512-3841 or [email protected]. In addition to the individual named above, Jonathan M. Gill (Assistant Director), Greg Campbell, William Horton, Nancy Kintner-Meyer, Rebecca Shea, and Kiki Theodoropoulos made key contributions to this report.
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DOE participates in the annual process to assess the safety and reliability of the U.S. nuclear stockpile, which is now made up largely of weapons that are beyond their original design lifetimes. In 2007, faced with a mounting backlog of required tests, DOE's NNSA announced plans to use its Enhanced Surveillance Program for a more cost-effective surveillance approach under its 2007 Surveillance Transformation initiative. Under this initiative, predictive models were to assess the impact of aging on weapons in the stockpile without having to dismantle them as the agency has done in the past. The Senate Report accompanying the National Defense Authorization Act for Fiscal Year 2015 included a provision that GAO review the status of the Enhanced Surveillance Program. This report assesses the extent to which NNSA implemented the vision for the Enhanced Surveillance Program from its 2007 initiative and developed a long-term strategy for the program. GAO reviewed NNSA plans and budget and other documents; interviewed agency officials; and discussed surveillance issues with members of a group of nationally known scientists who advise the government and who reviewed the program in September 2013. The Department of Energy's (DOE) National Nuclear Security Administration (NNSA) did not fully implement the Enhanced Surveillance Program as envisioned in the agency's 2007 Surveillance Transformation Project (2007 initiative) and has not developed a long-term strategy for the program. Surveillance is the process of inspecting a weapon through various tests of the weapon as a whole, the weapon's components, and the weapon's materials to determine whether they are meeting performance expectations, through dismantling the weapon or through the use of diagnostic tools. As called for in its 2007 initiative, NNSA took steps to improve the management of the overall surveillance program, which primarily tests dismantled weapons and their components, but the agency did not increase the role of the Enhanced Surveillance Program, as envisioned. The program develops computational models to predict the impact of stockpile aging; identifies aging signs; and develops diagnostic tools. Under the 2007 initiative, NNSA was to conduct more Enhanced Surveillance Program evaluations using computer models to predict the impacts of aging on specific weapon components--especially nonnuclear components and materials--and to assess the validity of more diagnostic tools. Instead of expanding the program's role, NNSA reduced program funding by more than 50 percent from fiscal year 2007 to fiscal year 2015. NNSA also delayed some key activities and reduced the program's scope during this time. For example, NNSA did not complete its proposed evaluations of the impact of aging on nonnuclear components and materials. These evaluations, originally estimated to be completed by 2012, were dropped as program goals in fiscal year 2016, according to NNSA officials and contractor representatives. In fiscal year 2016, NNSA broadly refocused the Enhanced Surveillance Program on multiple nuclear weapon life-extension efforts and supporting activities but has not developed a corresponding long-term strategy for the program. Instead, program officials have focused on developing general long-term goals and managing the program on a year-to-year basis under reduced funding levels to maintain key stockpile assessment capabilities. These general goals, however, do not provide measureable outcomes or encompass the entirety of the program. In addition, as GAO's previous work has shown, managing longer term work, such as multiyear technology development projects, on an annual basis makes it difficult for Congress and other decision makers to understand up front what they are funding and what benefits they can expect. As a result, these projects may receive a lower priority and may not be consistently funded. GAO's body of work has identified a number of leading practices in federal strategic planning that include defining strategic goals, defining strategies and resources for achieving these goals, and developing and using performance measures to track progress in achieving these goals and to inform management decision making. A new strategy for the Enhanced Surveillance Program that incorporates outcome-oriented strategic goals, addresses management challenges and identifies resources needed to achieve these goals, and develops and uses performance measures to track progress in achieving goals would allow the agency to better inform long-term planning and management decision making for the program as well as help ensure that it complements NNSA's other efforts to assess the nuclear weapons stockpile. GAO recommends that the NNSA Administrator develop a long-term strategy for the Enhanced Surveillance Program that incorporates leading practices. NNSA concurred with GAO's recommendation and estimated completion of a long-term strategy by June 2017.
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Prior to the terrorist attacks of September 11, national security, including counterterrorism, was a top-tier priority for the FBI. However, this top tier combined national security responsibilities with other issues, and the FBI's focus and priorities were not entirely clear. According to a Congressional Research Service report, the events of September 11 made clear the need to develop a definitive list of priorities. In June 2002, the FBI's director announced 10 priorities. The top 3 priorities were to (1) protect the United States from terrorist attack (counterterrorism), (2) protect the United States against foreign intelligence operations and espionage (counterintelligence), and (3) protect the United States against cyber-based attacks and high-technology crimes (cyber crime). White- collar crime ranked seventh in the priority list, and violent crime ranked eighth. Drug crimes that were not part of transnational or national criminal organizations were not specifically among the FBI's top 10 priorities. In June 2003 and March 2004, we testified that a key element of the FBI's reorganization and successful transformation is the realignment of resources to better ensure focus on the highest priorities. Since September 11, the FBI has permanently realigned a substantial number of its field agents from traditional criminal investigative programs to work on counterterrorism and counterintelligence investigations. The FBI's staff reprogrammings carried out since September 11 have permanently shifted 674 field agent positions from the drug, white-collar, and violent crime program areas to counterterrorism and counterintelligence. About 550 of these positions (more than 80 percent of the permanently shifted positions) came from the FBI's drug program, with substantially smaller reductions from the white-collar and violent crime programs. In addition, the FBI established the cyber program. As figure 1 shows, about 25 percent of the FBI's field agent positions were allocated to counterterrorism, counterintelligence, and cyber crime programs prior to the FBI's change in priorities. As a result of the staff reprogrammings and funding for additional special agent positions received through various appropriations between 2002 and 2004, the FBI staffing levels allocated to the counterterrorism, counterintelligence, and cyber program areas have increased to about 36 percent and now represent the single largest concentration of FBI resources. Figure 1 also notes that the number of nonsupervisory FBI field agent positions has increased from 10,292 in fiscal year 2002 to 11,021 in fiscal year 2004, about 7 percent. Additionally, the FBI has had a continuing need to temporarily redirect special agent resources from other criminal investigative programs to address counterterrorism and other higher-priority needs. The FBI continues to redirect agents from drug, white-collar, and violent crime programs to address the counterterrorism-related workload demands. These moves are directly in line with the FBI's priorities and in keeping with its policy that no counterterrorism leads will go unaddressed. Figure 2 shows that the counterterrorism program continues to rely on resources that are temporarily redirected from other crime programs. Appendix II contains figures that show the reductions in FBI nonsupervisory field agent positions and work years charged to the drug program and, to a lesser extent, the white-collar and violent crime programs after September 11. As one might expect, the reallocation of resources to align with post- September 11 priorities resulted in a significant increase in newly opened FBI counterterrorism matters, while the number of newly opened FBI drug, white-collar, and violent crime matters declined between fiscal year 2001 and the third quarter of fiscal year 2004. As shown in figure 3, the FBI's newly opened counterterrorism matters increased by about 183 percent, from 1,006 matters in the fourth quarter of fiscal year 2001 to 2,850 matters in the fourth quarter of fiscal year 2003. In contrast, the number of newly opened FBI drug matters declined from 1,447 in fiscal year 2001 to 587 in fiscal year 2003--a decrease of about 60 percent. FBI newly opened white-collar and violent crime matters also remained below pre-September 11 levels, though the decreases have not been as dramatic as those in the drug crime program. The decreases from fiscal year 2001 to fiscal year 2003 were about 32 percent in the number of newly opened white-collar crime matters and about 40 percent in newly opened violent crime matters. See appendix III for figures showing the pre- and post-September 11 changes in the FBI's newly opened drug, white-collar, and violent crime matters. Also, as expected with the significant shift in resources to address national security priorities, the FBI's referrals of counterterrorism matters to U.S. Attorneys' Offices for prosecution have increased since September 11, while referrals of drug, white-collar, and violent crime matters have decreased. In fiscal year 2001, which ended just after September 11, 2001, the FBI referred 236 counterterrorism matters to U.S. Attorneys for prosecution. In fiscal year 2003, the FBI referred 1,821 of these matters to U.S. Attorneys, an increase of about 671 percent. At the same time, FBI referrals of drug, white-collar, and violent crime matters decreased about 39 percent, 23 percent, and 10 percent respectively. We could not conclusively identify an effect on federal drug enforcement resulting from the FBI's shift in resources after September 11, because results of our analyses were mixed and the data we used had limitations. While the number of FBI nonsupervisory field agents assigned to the drug program decreased by more than 40 percent after September 11, the decrease in the number of combined FBI and DEA field agents assigned to drug work was about 10 percent because the number of DEA field agent positions increased slightly. Further, DEA, the lead agency for federal drug enforcement, is continuing to increase its resources as positions appropriated by Congress in prior fiscal years are filled. The combined number of newly opened FBI and DEA drug matters has declined by about 10 percent since September 11. However, the combined number of referrals of drug matters to U.S. Attorneys from all federal sources decreased about 2 percent. Finally, law enforcement officials from the FBI, DEA, U.S. Attorneys' Offices, and local police departments that we interviewed had mixed views on whether the FBI's shift of resources had an impact on drug enforcement in their communities. The data we analyzed and interviews with law enforcement officials should be considered short-term indicators with some limitations in their ability to depict the complete impact of FBI priority changes. As figure 4 shows, the combined number of FBI and DEA nonsupervisory field agent positions has decreased about 10 percent since the terrorist attacks, from about 4,500 nonsupervisory field agents at the end of fiscal year 2001 to about 4,000 field agent positions in the second quarter of fiscal year 2004. The decrease has not been more pronounced because DEA, as the nation's single-mission drug enforcement agency, has devoted more resources to domestic drug enforcement than has the FBI in both pre- and post-September 11 periods. As the number of FBI nonsupervisory field special agents assigned to drug program investigations has decreased from about 1,400 in fiscal year 2001 to about 800 in fiscal year 2004, the number of DEA nonsupervisory field agents has increased slightly. These DEA positions increased from a little less than 3,100 positions in fiscal year 2001 to a little more than 3,200 positions in the second quarter of fiscal year 2004. DEA devoted about twice as many agent resources as the FBI did to domestic drug enforcement before the terrorist attacks, and the DEA share of the combined FBI and DEA domestic drug enforcement agent resources has continued to increase since then. A Department of Justice official noted that Justice has pursued the goal of increasing agent strength, and the DEA domestic drug operations chief said that he expects the number of DEA domestic drug agents to increase significantly over the next 2 fiscal years, when positions already appropriated by Congress are filled. According to the chief, DEA expects to fill 216 new special agent positions appropriated in fiscal year 2003 by the end of fiscal year 2004. The agency plans to fill 365 additional positions appropriated in fiscal year 2004 during fiscal year 2005. Thus, in fiscal year 2005, the combined number of FBI and DEA drug enforcement agent resources should exceed the pre-September 11 workforce strength, and in fiscal year 2006, the total should continue to increase. In fiscal year 2005, DEA is requesting 111 additional agent positions for domestic enforcement. The chief said that he has worked with FBI and Department of Justice officials to determine where to deploy new special agent positions allocated since September 11 and that DEA has put additional resources in high-threat areas where the FBI had shifted resources out of drug enforcement. The chief said that DEA is pacing the hiring of new agents in an effort to manage its growth so that as new special agents come on board, DEA has the necessary infrastructure, including office space, cars, equipment, and training resources, to support them. In contrast, the chief of the FBI's drug section said that FBI officials do not foresee a significant increase in the number of agents assigned to drug investigations. However, he was not aware of any plans to withdraw additional agent resources from the drug program. He also said he was hopeful that in future years, as the FBI gained experience and resources for its national security-related priorities, fewer temporary diversions of special agents from drug work to higher priorities would be necessary. In addition, a Justice Department official noted that in fiscal year 2004, FBI received additional agent positions funded under the Organized Crime Drug Enforcement Task Force (OCDETF) program, and that additional OCDETF field positions were requested for the FBI in the 2005 budget. Since FBI officials do not foresee a significant increase in the number of special agents deployed to its drug program, if the trends continue, DEA would have an even larger portion of the combined FBI and DEA domestic drug program agent resources in the future than it currently has. Although the number of the FBI's newly opened drug matters decreased about 60 percent after September 11, the combined decrease in the number of FBI and DEA newly opened matters is much smaller--about 10 percent--because DEA has a much larger drug caseload than the FBI. As shown in Figure 5, the FBI and DEA together opened 22,736 domestic drug matters in fiscal year 2001, compared with a combined total of 20,387 domestic drug matters in fiscal year 2003. Assuming that the FBI and DEA open new matters at about the same pace in the last two quarters of fiscal year 2004 as they did during the first two quarters, fiscal year 2004 levels of newly opened drug crime matters will be similar to those in fiscal year 2003. The DEA Chief of Domestic Drug Operations said that he thought the decrease in the number of newly opened matters was due in part to an increased Department of Justice emphasis on cases targeting major drug organizations in its Consolidated Priority Organization Targeting (CPOT) initiative rather than reduced federal resources for drug enforcement. He said that the policy has resulted in DEA opening fewer cases but that those cases have potential to dismantle or disrupt the operations of major drug cartels. In commenting on a draft of this report, a Department of Justice official more broadly stated that the decrease in newly opened drug matters was due to the Justice strategy, which directs resources on complex, nationwide investigation of entire drug trafficking networks. The networks involve major international sources of supply, including those on the Consolidated Priority Organization Target list. While the FBI's referrals of drug matters to U.S. Attorneys for prosecution have decreased about 40 percent, from 2,994 matters to 1,840 matters between fiscal year 2001 and fiscal year 2003, DEA referrals increased over the same period by about 7 percent, from 9,907 matters in fiscal year 2001 to 10,596 matters in fiscal year 2003. Almost half of the total number of drug matters that were referred to U.S. Attorneys' Offices came from federal agencies other than the FBI and DEA in fiscal year 2003. The number of referrals from all federal agencies and departments other than the FBI and DEA was almost unchanged over the period, with 9,793 referrals in fiscal year 2001 and 9,816 referrals in fiscal year 2003. As figure 6 shows, U.S. Attorneys' Offices received 22,694 drug offense referrals in fiscal year 2001 and 22,252 drug offense referrals in fiscal year 2003, a decrease of about 2 percent from all federal agencies. The FBI and DEA referred 12,901 drug matters to U.S. Attorneys in fiscal year 2001 and 12,436 drug matters in fiscal year 2003, a decrease of about 4 percent. Law enforcement practitioners we interviewed had mixed views about the impact of the FBI's shift in resources on drug enforcement efforts. While many interviewees representing each of the locations and criminal justice organizations we visited generally described the FBI as a valuable law enforcement partner, some of them said that they did not think the FBI's shift in resources had a significant impact on drug enforcement efforts in their communities. Other interviewees said that drug investigations have suffered as a result of the FBI's shift in resources to new priority areas. For example, officials from 9 of the 14 law enforcement agencies we visited said that the FBI did not bring any specialized drug program expertise that in most cases could not be supplied by other agencies. However, 7 of the 14 interviewees said that there was a significant impact on overall drug enforcement efforts in the locations we visited as a result of the FBI's shift in resources to new priorities. It is important to keep in mind that the interviewees, although working in locations that experienced some of the sharpest reductions in the FBI drug program resources, are not representative of all locations or even of all of those locations that experienced similar reductions in resources. The following are examples of some of the comments we received from law enforcement practitioners who did not think that the shift in the FBI's resources had an impact on drug crime enforcement efforts in their communities. On the other hand, some law enforcement officials said that drug investigations have suffered as a result of the FBI shift in resources to new priority areas. The following are several of the other comments from law enforcement practitioners we interviewed who thought that the FBI's shift in resources had affected efforts to combat crime. The FBI's shift out of drug enforcement is having an impact in this city. We are receiving fewer drug referrals from the FBI since September 11, 2001, and, consequently, we are receiving fewer drug referrals overall. The FBI is the best agency at understanding the relationship between drugs and violence. --U.S. Attorney's Office Criminal Division Chief Referrals have dropped off since the shift in priorities because there are fewer agents working in the FBI criminal divisions. The FBI is not working the long-term drug cases like they did in the past because the bureau cannot afford to keep cases open for a year or two. --First Assistant U.S. Attorney The FBI's shift out of drug work has layered more responsibilities on state and local police. The organizations are responding by juggling resources, requiring officers to work more hours, and attempting to work smarter by improving information systems, using technology, and communicating more effectively with one another. State and local police agencies are more efficient now than they have ever been. As a result, FBI involvement is perhaps not as critical as it may have been in the past. --International Association of Chiefs of Police representative. Our analyses provide perspectives in the short term (less than 3 years) and are not necessarily indicative of long-term trends. With respect to the short-term perspective, a U.S. Attorneys' Office Criminal Division chief noted that cases can take many years to develop, and the full impact of the FBI's shift in priorities may not be apparent for several years. He said that cases are being referred to his office for prosecution now that began long before the September 11 attacks. We also determined that it was too early to assess possible changes in drug price, purity, use, and availability, as well as any drug-related crime trends that have occurred since September 11. Key statistical studies that track the price and purity of illegal drugs and reports on hospital emergency department drug episodes and drug abuse violations were not current enough to provide more than a year of trend data after September 11. Data over several more years are needed to determine whether changes in drug use and availability have occurred, and even when data are available, it will be very difficult to determine whether changes are specifically attributable to the FBI's shift in priorities or to other factors (such as improved drug prevention programs or new methods of drug importation). There are also other limitations to the data we analyzed. It is important to note that while we looked at numbers of agent resources, matters opened, and matters referred for prosecution, we could not fully assess the less tangible factors of the quality of agent resources and investigations and the complexity of investigations. Neither could we determine what drug investigations the FBI might have pursued had it had additional drug program agent resources. We did ask interviewees their opinions on whether the quality of drug agent resources and the quality and complexity of drug investigations had changed since September 11. Some FBI officials said that experienced agents were lost to the drug program when they were assigned to work in higher-priority areas and that these agents were unlikely to return to drug investigations. A top DEA official said that drug investigations are more complex now than they were prior to September 11. He said that the reason for the increased complexity is unrelated to counterterrorism efforts; instead it is the result of a Department of Justice strategy to target major drug organizations. We did not conclusively identify an effect on federal white-collar and violent crime enforcement resulting from the FBI's shift in priorities after September 11. Our analysis was limited to only the number of these matters referred to U.S. Attorneys' Offices for prosecution from the FBI and all other federal agencies and impacts observed by law enforcement officials we interviewed. Overall, all federal agencies referred about 6 percent fewer white-collar crime matters to U.S. Attorneys---down from 12,792 matters in fiscal year 2001 to 12,057 matters in fiscal year 2003. However, violent crime referrals increased about 29 percent during this period--from 14,546 matters in fiscal year 2001 to 18,723 matters in fiscal year 2003. Headquarters and field law enforcement officials we interviewed had mixed views on whether the FBI's shift of resources had an effect on white-collar and violent crime enforcement in their communities. Caveats to the results we reported on impacts of the FBI's shift in priorities on drug enforcement apply to white-collar and violent crime enforcement, as well. The data we analyzed and interviews with law enforcement officials should be considered as short-term indicators with limitations in their ability to determine the impact of the FBI priority shifts. All federal agencies referred about 6 percent fewer white-collar crime matters to U.S. Attorneys, down from 12,792 matters in fiscal year 2001 to 12,057 matters in fiscal year 2003. However, violent crime referrals increased about 29 percent during this period, from 14,546 matters in fiscal year 2001 to 18,723 matters in fiscal year 2003. Figures 7 and 8 show changes in the number of referrals of white-collar and violent crime matters to U.S. Attorneys from all federal enforcement agencies since September 11, 2001. Of all the federal agencies and departments, the FBI refers the greatest number of white-collar crime matters to U.S. Attorneys. FBI referrals decreased about 23 percent, from 6,941 matters in fiscal year 2001 to 5,331 matters in fiscal year 2003. At the same time, referrals by all other agencies increased by about 15 percent, from 5,851 matters in fiscal year 2001 to 6,726 in fiscal year 2003. Other lead agencies and departments for referring white-collar crime cases included the Department of Health and Human Services and the Social Security Administration, with health care and federal program fraud and other white collar crime referrals; the U.S. Postal Service, with referrals of tax and bank fraud, and other white-collar crime matters; the U.S. Secret Service; and the Internal Revenue Service, with securities and other fraud referrals. FBI violent crime referrals decreased about 10 percent from 5,003 matters in fiscal year 2001 to 4,491 matters in fiscal year 2003. However, over the same period ATF's violent crime referrals increased from 6,919 to 10,789. Several other agencies and departments, including all of the military services and the Departments of the Interior and Housing and Urban Development, also referred violent crime matters to U.S. Attorneys for prosecution. The Chief of the FBI's Violent Crime Section noted that violent crime referrals by all federal agencies have increased because efforts are under way nationwide to prosecute gang violence. The Department of Justice is targeting cities nationwide where high murder and violence rates persist despite an overall reduction in violent crime rates to the lowest level in 30 years. Law enforcement officials we interviewed had mixed views on whether the FBI's shift of resources had a negative impact on white-collar and violent crime enforcement in their communities. For example, police and federal prosecutors in two locations noted that the FBI had continued to provide necessary resources for critical white-collar and violent crime concerns, while prosecutors in another location expressed concern that white-collar crime enforcement was suffering because of the reduced FBI involvement. The following are comments we received from the local police supervisors and officials of several U.S. Attorneys' Offices who did not think that the FBI's shift in resources had an impact on white-collar and violent crime enforcement efforts in their communities. The following are two of the other comments from U.S. Attorneys' Office and FBI managers and supervisors who thought that the FBI's shift in resources had affected efforts to combat white-collar and violent crime. Caveats to the results we reported on impacts of the FBI's shift in priorities on drug enforcement apply to indicators of possible impacts on white-collar and violent crime enforcement as well. The data we analyzed and interviews with law enforcement officials should be considered as short-term indicators with limitations in their ability to determine the full impact of the FBI priority shifts. The data provide perspectives in the short term of less than 3 years, and they do not consider important factors such as whether changes have occurred in the quality or complexity of white- collar and violent crime matters being referred from federal law enforcement agencies to U.S. Attorneys for prosecution. Also, our analysis does not consider the number and quality of cases that could have been referred for prosecution by the FBI had additional white-collar and violent crime program resources been available. We are providing copies of this report to the Department of Justice and interested congressional committees We will also make copies available to others on request. In addition, the report will be available at no charge on GAO's Web site at http://www.gao.gov. Major contributors to this report are listed in appendix IV. If you or your staffs have any questions about this report, please contact me on (202) 512-8777 or by email at [email protected], or Charles Michael Johnson, Assistant Director on (202) 512-7331 or [email protected]. Key contributors to this report are listed in Appendix IV. To examine the effect of the Federal Bureau of Investigation's (FBI) post- September 11 priority shifts on federal efforts to combat domestic drug crime, we analyzed (1) the impact of resource shifts on the combined FBI and Drug Enforcement Administration (DEA) nonsupervisory field special agent resources devoted to drug enforcement; (2) changes in the number of newly opened FBI and DEA drug crime matters; (3) changes in the number of drug crime matters referred from all federal agencies to U.S. Attorneys' Offices for prosecution; and (4) impacts, if any, observed by headquarters and field law enforcement officials we interviewed. Specifically, to determine changes in the combined level of FBI and DEA nonsupervisory field special agent resources devoted to domestic drug enforcement, we analyzed FBI time utilization data and DEA data on funded staff levels for fiscal year 2001, which ended September 30, 2001, through the second quarter of fiscal year 2004, ending on March 31, 2004. We also analyzed FBI and DEA budget and resource allocation information. We focused our analysis primarily on nonsupervisory field special agent positions because these positions are directly involved in investigations, while supervisors, managers, and headquarters agents often have noninvestigative responsibilities in addition to their investigative duties. To determine the number of newly opened FBI and DEA drug matters, we analyzed case management system data for the period from fiscal year 2001 through the second quarter of fiscal year 2004. We also reviewed the Department of Justice's Domestic Drug Enforcement Strategy and discussed resource allocation issues and concerns with FBI and DEA officials. We did not attempt to analyze data on drug enforcement resource allocations and drug matters opened for federal agencies and departments other than the FBI and DEA that are involved in investigating drug-related crimes. To determine the number of drug referrals from the FBI, DEA, and other federal agencies to U.S. Attorneys, we analyzed Executive Office for U.S. Attorneys (EOUSA) case management data on the number of referrals received by referring agency and type of referral for fiscal year 2001 through 2003. We did not have access to criminal case files and thus did not provide any assessment of changes in the quality or complexity of traditional criminal investigations in pre- and post-September 11 periods. To provide perspectives of law enforcement officials on impacts, if any, they observed on traditional FBI criminal enforcement areas as a result of the FBI's shift of resources to new priorities, we interviewed selected federal headquarters and field officials, police department supervisors, and representatives of the International Association of Chiefs of Police. At FBI headquarters we interviewed the chief of the drug section, and at DEA headquarters we interviewed the chief of the domestic drug program. The field locations we visited, as shown in table 1, had among the greatest shifts of FBI resources from traditional criminal programs into new priorities. Using a semistructured interview and a data collection instrument, at each location we asked FBI and DEA field office managers and U.S. Attorney's Office supervisory prosecutors and local police department supervisors responsible for drug enforcement about any impacts they had observed on their caseloads, workloads, and crime in their communities as a result of the FBI shift in priorities. The results of these interviews cannot be generalized to any broader community of law enforcement agencies or officials or to other geographic locations. To examine the effect of the FBI's post-September 11 priority shifts on federal efforts to combat white-collar and violent crime, we considered (1) the number of matters referred to U.S. Attorneys' Offices for prosecution from the FBI and all other federal agencies and (2) the effects, if any, observed by law enforcement officials we interviewed. To determine how the numbers of white-collar and violent crime matters referred to U.S. Attorneys' Offices for prosecution from the FBI and all other federal agencies have changed, we analyzed case-management system data from EOUSA. To provide perspectives from selected law enforcement officials on any changes in federal white-collar and violent crime enforcement activities as a result of the FBI's shift in priorities, we included in our structured interview questions about effects federal and local law enforcement officials we visited might have observed on white- collar and violent crime caseloads, workloads, and law enforcement activities in their communities. We did not attempt to collect information on the number of newly opened white-collar and violent crime matters from all federal sources because there is no agency comparable to DEA, with single-mission dedication to white-collar crime or violent crime investigations. Many different federal agencies and offices, including criminal investigative agencies and inspectors general, investigate these matters, but our time frames did not allow us to obtain resource allocation data from them. The data should be viewed as short-term indicators with limitations. The full impact of the FBI's shift in priorities may not be apparent for several years. While we looked at numbers of agent resources, matters opened, and matters referred for prosecution, we could not fully assess the less tangible factors of the quality of agent resources and investigations and the complexity of investigations. Neither could we determine what investigations the FBI might have pursued had it had additional agent resources. Because the reliability of FBI, DEA, and EOUSA information management systems data is significant to the findings of this review, we interviewed FBI, DEA, and U.S. Attorney personnel to determine what steps they take to assess the accuracy of data elements and what limitations, if any, they have identified with the data elements used for our review. As a result of our assessment, we determined that the required data elements are sufficiently reliable for the purposes of this review. We performed our work from December 2003 to July 2004 in accordance with generally accepted government auditing standards. FBI Nonsupervisory Field Special Agent Positions and Work Years Charged to the Drug, White-Collar, and Violent Crime Programs (fiscal year 2001 to second quarter, fiscal year 2004). Non-Organized Crime Drug Enforcement Task Force (OCDETF) David Alexander, Leo Barbour, William Bates, Geoffrey Hamilton, Benjamin Jordan, Deborah Knorr, Jessica Lundberg, Andrew O'Connell, and Kathryn Young made significant contributions to this report.
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As a result of the terrorist attacks of September 11, 2001, the Federal Bureau of Investigation (FBI) has committed to a transformation to increase its focus on national security. The FBI has shifted agent resources to its top priorities of counterterrorism, counterintelligence, and cyber crime. Some of these agent resources were shifted away from drug, white-collar, and violent crime enforcement programs. The FBI's drug program has sustained, by far, the largest reduction in FBI agent workforce--about 550 positions, or more than 80 percent of the nonsupervisory field agents who were permanently reprogrammed. In addition, the FBI has had a continuing need to temporarily redirect agents from drug, white-collar, and violent crime enforcement to address counterterrorism-related workload demands. While GAO and other organizations have focused considerable attention on the progress of the FBI's transformation, this report addresses questions about the extent to which the shift in resources has affected federal efforts to combat drug, white-collar, and violent crime and whether other agencies, including the Drug Enforcement Administration (DEA) in the drug enforcement area, are filling gaps created by FBI resource shifts. The data GAO examined are inconclusive about the effect of the shifts in the FBI's priorities after September 11 on federal efforts to combat drug, white-collar, and violent crime. Indicators are mixed on the effect of the FBI shift on federal drug, white-collar, and violent crime enforcement. Further, GAO's analyses should be cautiously viewed as short-term indicators that are not necessarily indicative of long-term trends. Data GAO examined on federal drug enforcement efforts did not show a conclusive effect of the FBI's shift in agent resources to priority areas. GAO found that combined FBI and DEA nonsupervisory field agent resources decreased by about 10 percent since September 11 but that DEA is expecting significant increases in positions over the next 2 fiscal years. The combined number of newly opened FBI and DEA drug matters has declined by about 10 percent since 2001, from 22,736 matters in fiscal year 2001, which ended just after September 11, to 20,387 matters in fiscal year 2003. This decline may be attributed, at least in part, to an increased emphasis on cases targeting major drug organizations rather than to fewer investigative resources. In addition, referrals of drug matters to U.S. Attorneys from all federal sources decreased about 2 percent. Similarly, data do not show a conclusive impact on federal efforts to combat white-collar and violent crime resulting from the FBI's shift in priorities. For example, while the number of white-collar crime referrals from federal agencies to U.S. Attorneys declined by about 6 percent, from 12,792 in fiscal year 2001 to 12,057 in fiscal year 2003, violent crime referrals from all federal sources have increased by about 29 percent, from 14,546 in fiscal year 2001 to 18,723 in fiscal year 2003. Views of law enforcement practitioners GAO interviewed were mixed on the effect of the FBI's shift in resources on drug, white-collar, and violent crime enforcement efforts. Although these views are not representative of all practitioners, some did not think the FBI's shift had a significant impact on these crime enforcement efforts in their communities, while others said that drug, white-collar and violent-crime investigations had suffered.
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On October 25, 1995, Americans were reminded of the dangers that drivers/passengers often face when they travel over railroad crossings in the United States. On that day, in Fox River Grove, Illinois, seven high school students were killed when a commuter train hit a school bus. The potential for tragedies like the one at Fox River Grove is significant--the United States has over 168,000 public highway-railroad intersections. The types of warning for motorists at these crossings range from no visible devices to active devices, such as lights and gates. About 60 percent of all public crossings in the United States have only passive warning devices--typically, highway signs known as crossbucks. In 1994, this exposure resulted in motor vehicle accidents at crossings that killed 501 people and injured 1,764 others. Many of these deaths should have been avoided, since nearly one-half occurred at crossings where flashing lights and descended gates had warned motorists of the approaching danger. In August 1995, we issued a comprehensive report on safety at railroad crossings. We reported that the federal investment in improving railroad crossing safety had noticeably reduced the number of deaths and injuries. Since the Rail-Highway Crossing Program--also known as the section 130 program--was established in 1974, the federal government has distributed about $5.5 billion (in 1996 constant dollars) to the states for railroad crossing improvements. This two-decade investment, combined with a reduction in the total number of crossings since 1974, has significantly lowered the accident and fatality rates--by 61 percent and 34 percent, respectively. However, most of this progress occurred during the first decade, and since 1985, the number of deaths has fluctuated between 466 and 682 each year (see app. 1). Since 1977, the federal funding for railroad crossing improvements has also declined in real terms. Consequently, the question for future railroad crossing safety initiatives will be how best to target available resources to the most cost-effective approaches. Our report discussed several strategies for targeting limited resources to address railroad crossing safety problems. The first strategy is to review DOT's current method of apportioning section 130 funds to the states. Our analysis of the 1995 section 130 apportionments found anomalies among the states in terms of how much funding they received in proportion to three key risk factors: accidents, fatalities, and total crossings. For example, California received 6.9 percent of the section 130 funds in 1995, but it had only 4.8 percent of the nation's railroad crossings, 5.3 percent of the fatalities, and 3.9 percent of the accidents. Senators Lugar and Coats have proposed legislation to change the formula for allocating section 130 funds by linking the amounts of funding directly to the numbers of railroad crossings, fatalities, and accidents. Currently, section 130 funds are apportioned to each state as a 10-percent set-aside of its Surface Transportation Program funds. The second means of targeting railroad crossing safety resources is to focus the available dollars on the strategies that have proved most effective in preventing accidents. These strategies include closing more crossings, using innovative technologies at dangerous crossings, and emphasizing education and enforcement. Clearly, the most effective way to improve railroad crossing safety is to close more crossings. The Secretary of Transportation has restated FRA's goal of closing 25 percent of the nation's railroad crossings, since many are unnecessary or redundant. For example, in 1994, the American Association of State Highway and Transportation Officials found that the nation had two railroad crossings for every mile of track and that in heavily congested areas, the average approached 10 crossings for every mile. However, local opposition and localities' unwillingness to provide a required 10-percent match in funds have made it difficult for the states to close as many crossings as they would like. When closing is not possible, the next alternative is to install traditional lights and gates. However, lights and gates provide only a warning, not positive protection at a crossing. Hence, new technologies such as four-quadrant gates with vehicle detectors, although costing about $1 million per crossing, may be justified when accidents persist at signalled crossings. The Congress has funded research to develop innovative technologies for improving railroad crossing safety. Although installing lights and gates can help to prevent accidents and fatalities, it will not preclude motorists from disregarding warning signals and driving around descended gates. Many states, particularly those with many railroad crossings, face a dilemma. While 35 percent of the railroad crossings in the United States have active warning devices, 50 percent of all crossing fatalities occurred at these locations. To modify drivers' behavior, DOT and the states are developing education and enforcement strategies. For example, Ohio--a state with an active education and enforcement program--cut the number of accidents at crossings with active warning devices from 377 in 1978 to 93 in 1993--a 75-percent reduction. Ohio has used mock train crashes as educational tools and has aggressively issued tickets to motorists going around descended crossing gates. In addition, DOT has inaugurated a safety campaign entitled "Always Expect a Train," while Operation Lifesaver, Inc., provides support and referral services for state safety programs. DOT's educational initiatives are part of a larger plan to improve railroad crossing safety. In June 1994, DOT issued a Grade Crossing Action Plan, and in October 1995, it established a Grade Crossing Safety Task Force. The action plan set a national goal of reducing the number of accidents and fatalities by 50 percent from 1994 to 2004. As we noted in our report, whether DOT attains the plan's goal will depend, in large part, on how well it coordinates the efforts of the states and railroads, whose contributions to implementing many of the proposals are critical. DOT does not have the authority to direct the states to implement many of the plan's proposals, regardless of how important they are to achieving DOT's goal. Therefore, DOT must rely on either persuading the states that implementation is in their best interests or providing them with incentives for implementation. In addition, the success of five of the plan's proposals depends on whether DOT can obtain the required congressional approval to use existing funds in ways that are not allowable under current law. The five proposals would (1) change the method used to apportion section 130 funds to the states, (2) use Surface Transportation Program funds to pay local governments a bonus to close crossings, (3) eliminate the requirement for localities to match a portion of the costs associated with closing crossings, (4) establish a $15 million program to encourage the states to improve rail corridors, and (5) use Surface Transportation Program funds to increase federal funding for Operation Lifesaver. Finally, the action plan's proposals will cost more money. Secretary Pena has announced a long-term goal of eliminating 2,250 crossings where the National Highway System intersects Principal Rail Lines. Both systems are vital to the nation's interstate commerce, and closing these crossings is generally not feasible. The alternative is to construct a grade separation--an overpass or underpass. This initiative alone could cost between $4.5 billion and $11.3 billion--a major infrastructure investment. DOT established the Grade Crossing Safety Task Force in the aftermath of the Fox River Grove accident, intending to conduct a comprehensive national review of highway-railroad crossing design and construction measures. On March 1, 1996, the task force reported to the Secretary that "improved highway-rail grade crossing safety depends upon better cooperation, communication, and education among responsible parties if accidents and fatalities are to be reduced significantly." The report provided 24 proposals for five problem areas it reviewed: (1) highway traffic signals that are supposed to be triggered by oncoming trains; (2) roadways where insufficient space is allotted for vehicles to stop between a road intersection and nearby railroad tracks; (3) junctions where railroad tracks are elevated above the surface of the roadway, exposing vehicles to the risk of getting hung on the tracks; (4) light rail transit crossings without standards for their design, warning devices, or traffic control measures; and (5) intersections where slowly moving vehicles, such as farm equipment, frequently cross the tracks. Under the Federal Railroad Safety Act of 1970, as amended, FRA is responsible for regulating all aspects of railroad safety. FRA's safety mission includes 1) establishing federal rail safety rules and standards; 2) inspecting railroads' track, signals, equipment, and operating practices; and 3) enforcing federal safety rules and standards. The railroads are primarily responsible for inspecting their own equipment and facilities to ensure compliance with federal safety regulations, while FRA monitors the railroads' actions. We have issued many reports identifying weaknesses in FRA's railroad safety inspection and enforcement programs. For example, in July 1990, we reported on FRA's progress in meeting the requirements, set forth in the Federal Railroad Safety Authorization Act of 1980, that FRA submit to the Congress a system safety plan to carry out railroad safety laws. The act directed FRA to (1) develop an inspection methodology that considered carriers' safety records, the location of population centers, and the volume and type of traffic using the track and (2) give priority to inspections of track and equipment used to transport passengers and hazardous materials. The House report accompanying the 1980 act stated that FRA should target safety inspections to high-risk track--track with a high incidence of accidents and injuries, located in populous urban areas, carrying passengers, or transporting hazardous materials. In our 1990 report, we found that the inspection plan that FRA had developed did not include data on passenger and hazardous materials routes--two important risk factors. In an earlier report, issued in April 1989, we noted problems with another risk factor--accidents and injuries. We found that the railroads had substantially underreported and inaccurately reported the number of accidents and injuries and their associated costs. As a result, FRA could not integrate inspection, accident, and injury data in its inspection plan to target high-risk locations. In our 1994 report on FRA's track safety inspection program, we found that FRA had improved its track inspection program and that its strategy for correcting the weaknesses we had previously identified was sound. However, we pointed out that FRA still faced challenges stemming from these weaknesses. First, it had not obtained and incorporated into its inspection plan site-specific data on two critical risk factors--the volume of passenger and hazardous materials traffic. Second, it had not improved the reliability of another critical risk factor--the rail carriers' reporting of accidents and injuries nationwide. FRA published a notice of proposed rulemaking in August 1994 on methods to improve rail carriers' reporting. In February 1996, FRA reported that it intended to issue a final rule in June 1996. To overcome these problems, we recommended that FRA focus on improving and gathering reliable data to establish rail safety goals. We specifically recommended that FRA establish a pilot program in one FRA region to gather data on the volume of passenger and hazardous materials traffic and correct the deficiencies in its accident/injury database. We recommended a pilot program in one FRA region, rather than a nationwide program, because FRA had expressed concern that a nationwide program would be too expensive. The House and Senate Appropriations Conference Committee echoed our concerns in its fiscal year 1995 report and directed the agency to report to the Committees by March 1995 on how it intended to implement our recommendations. In its August 1995 response to the Committees, FRA indicated that the pilot program was not necessary, but it was taking actions to correct the deficiencies in the railroad accident/injury database. For example, FRA had allowed the railroads to update the database using magnetic media and audited the reporting procedures of all the large railroads. We also identified in our 1994 report an emerging traffic safety problem--the industry's excessive labeling of track as exempt from federal safety standards. Since 1982, federal track safety standards have not applied to about 12,000 miles of track designated by the industry as "excepted;" travel on such track is limited to 10 miles per hour, no passenger service is allowed, and no train may carry more than five cars containing hazardous materials. We found in our 1994 report that the number of accidents on excepted track had increased from 22 in 1988 to 65 in 1992--a 195-percent increase. Similarly, the number of track defects cited in FRA inspections increased from 3,229 in 1988 to 6,057 in 1992. However, with few exceptions, FRA cannot compel railroads to correct these defects. According to FRA, the railroads have applied the excepted track provision far more extensively than envisioned. For example, railroads have transported hazardous materials through residential areas on excepted track or intentionally designated track as excepted to avoid having to comply with minimum safety regulations. In November 1992, FRA announced a review of the excepted track provision with the intent of making changes. FRA viewed the regulations as inadequate because its inspectors could not write violations for excepted track and railroads were not required to correct defects on excepted track. FRA stated that changes to the excepted track provision would occur as part of its rulemaking revising all track safety standards. In February 1996, FRA reported that the task of revising track safety regulations would be taken up by FRA's Railroad Safety Advisory Committee. FRA noted that this committee would begin its work in April 1996 but did not specify a date for completing the final rulemaking. The Congress had originally directed FRA to complete its rulemaking revising track safety standards by September 1994. In September 1993, we issued a report examining whether Amtrak had effective procedures for inspecting, repairing, and maintaining its passenger cars to ensure their safe operation and whether FRA had provided adequate oversight to ensure the safety of passenger cars. We found that Amtrak had not consistently implemented its inspection and preventive maintenance programs and did not have clear criteria for determining when a passenger car should be removed from service for safety reasons. In addition, we found that Amtrak had disregarded some standards when parts were not available or there was insufficient time for repairs. For example, we observed that cars were routinely released for service without emergency equipment, such as fire extinguishers. As we recommended, Amtrak established a safety standard that identified a minimum threshold below which a passenger car may not be operated, and it implemented procedures to ensure that a car will not be operated unless it meets this safety standard. In reviewing FRA's oversight of passenger car safety (for both Amtrak and commuter rail), we found that FRA had established few applicable regulations. As a result, its inspectors provided little oversight in this important safety area. For more than 20 years, the National Transportation Safety Board has recommended on numerous occasions that FRA expand its regulations for passenger cars, but FRA has not done so. As far back as 1984, FRA told the Congress that it planned to study the need for standards governing the condition of safety-critical passenger car components. Between 1990 and 1994, train accidents on passenger rail lines ranged between 127 and 179 accidents each year (see app. 2). In our 1993 report, we maintained that FRA's approach to overseeing passenger car safety was not adequate to ensure the safety of the over 330 million passengers who ride commuter railroads annually. We recommended that the Secretary of Transportation direct the FRA Administrator to study the need for establishing minimum criteria for the condition of safety-critical components on passenger cars. We noted that the Secretary should direct the FRA Administrator to establish any regulations for passenger car components that the study shows to be advisable, taking into account any internal safety standards developed by Amtrak or others that pertain to passenger car components. However, FRA officials told us at the time that the agency could not initiate the study because of limited resources. Subsequently, the Swift Rail Development Act of 1994 required FRA to issue initial passenger safety standards within 3 years of the act's enactment and complete standards within 5 years. In 1995, FRA referred the issue to its Passenger Equipment Safety Working Group consisting of representatives from passenger railroads, operating employee organizations, mechanical employee organizations, and rail passengers. The working group held its first meeting in June 1995. An advance notice of proposed rulemaking is expected in early 1996, and final regulations are to be issued in November 1999. Given the recent rail accidents, FRA could consider developing standards for such safety-critical components as emergency windows and doors and safety belts as well as the overall crashworthiness of passenger cars. In conclusion, safety at highway-railroad crossings, the adequacy of track safety inspections and enforcement, and the safety of passenger cars operated by commuter railroads and Amtrak will remain important issues for Congress, FRA, the states, and the industry to address as the nation continues its efforts to prevent rail-related accidents and fatalities. Note 1: Analysis includes data from Amtrak, Long Island Rail Road, Metra (Chicago), Metro-North (New York), Metrolink (Los Angeles), New Jersey Transit, Northern Indiana, Port Authority Trans-Hudson (New York), Southeastern Pennsylvania Transportation Authority and Tri-Rail (Florida). Note 2: Data for Amtrak include statistics from several commuter railroads, including Caltrain (California), Conn DOT, Maryland Area Rail Commuter (excluding those operated by CSX), Massachusetts Bay Transportation Authority, and Virginia Railway Express. Railroad Safety: FRA Needs to Correct Deficiencies in Reporting Injuries and Accidents (GAO/RCED-89-109, Apr.5,1989). Railroad Safety: DOT Should Better Manage Its Hazardous Materials Inspection Program (GAO/RCED-90-43, Nov.17, 1989). Railroad Safety: More FRA Oversight Needed to Ensure Rail Safety in Region 2 (GAO/RCED-90-140, Apr. 27, 1990). Railroad Safety: New Approach Needed for Effective FRA Safety Inspection Program (GAO/RCED-90-194, July 31, 1990). Financial Management: Internal Control Weaknesses in FRA's Civil Penalty Program (GAO/RCED-91-47, Dec.26, 1990). Railroad Safety: Weaknesses Exist in FRA's Enforcement Program (GAO/RCED-91-72, Mar.22, 1991). Railroad Safety: Weaknesses in FRA's Safety Program (GAO/T-RCED-91-32, Apr. 11, 1991). Hazardous Materials: Chemical Spill in the Sacramento River (GAO/T-RCED-91-87, July 31, 1991). Railroad Competitiveness: Federal Laws and Policies Affect Railroad Competitiveness (GAO/RCED-92-16, Nov. 5, 1991) Railroad Safety: Accident Trends and FRA Safety Programs (GAO/T-RCED-92-23, Jan.13, 1992). Railroad Safety: Engineer Work Shift Length and Schedule Variability (GAO/RCED-92-133, Apr. 20, 1992). Amtrak Training: Improvements Needed for Employees Who Inspect and Maintain Rail Equipment (GAO/RCED-93-68, Dec.8, 1992). Amtrak Safety: Amtrak Should Implement Minimum Safety Standards for Passenger Cars (GAO/RCED-93-196, Sep.22, 1993). Railroad Safety: Continued Emphasis Needed for an Effective Track Safety Inspection Program (GAO/RCED-94-56, Apr.22, 1994). Amtrak's Northeast Corridor: Information on the Status and Cost of Needed Improvements (GAO/RCED-95-151BR, Apr. 13, 1995). Railroad Safety: Status of Efforts to Improve Railroad Crossing Safety (GAO/RCED-95-191, Aug. 3, 1995). The first copy of each GAO report and testimony is free. Additional copies are $2 each. Orders should be sent to the following address, accompanied by a check or money order made out to the Superintendent of Documents, when necessary. VISA and MasterCard credit cards are accepted, also. Orders for 100 or more copies to be mailed to a single address are discounted 25 percent. U.S. General Accounting Office P.O. Box 6015 Gaithersburg, MD 20884-6015 Room 1100 700 4th St. NW (corner of 4th and G Sts. NW) U.S. General Accounting Office Washington, DC Orders may also be placed by calling (202) 512-6000 or by using fax number (301) 258-4066, or TDD (301) 413-0006. Each day, GAO issues a list of newly available reports and testimony. To receive facsimile copies of the daily list or any list from the past 30 days, please call (202) 512-6000 using a touchtone phone. A recorded menu will provide information on how to obtain these lists.
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GAO provided information on the safety of highway railroad crossings, commuter passenger rails and adequacy of track safety inspections. GAO found that: (1) the leading cause of death associated with the railroad industry involved railroad crossing accidents; (2) about half of rail-related deaths occur because of collisions between trains and vehicles at public railroad crossings; (3) in 1994, 501 people were killed and 1,764 injured in railroad crossing accidents; (4) to improve the safety of railroad crossings, the Department of Transportation (DOT) must better target funds to high-risk areas, close more railroad crossings, install new technologies, and develop educational programs to increase the public's awareness of railroad crossings; (5) DOT plans are costly and will require congressional approval; (6) the Federal Railroad Administration (FRA) is unable to adequately inspect and enforce truck safety standards or direct transportation officials to the routes with the highest accident potential because its database contains inaccurate information; and (7) Congress has directed FRA to establish sufficient passenger car safety standards by 1999.
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Despite some progress in addressing staffing shortfalls since 2006, State's diplomatic readiness remains at risk for two reasons: persistent staffing vacancies and experience gaps at key hardship posts that are often on the forefront of U.S. policy interests. First, as of September 2008, State had a 17 percent average vacancy rate at the posts of greatest hardship (which are posts where staff receive the highest possible hardship pay). Posts in this category include such places as Peshawar, Pakistan, and Shenyang, China. This 17 percent vacancy rate was nearly double the average vacancy rate of 9 percent at posts with no hardship differentials. Second, many key hardship posts face experience gaps due to a higher rate of staff filling positions above their own grades (see table 1). As of September 2008, about 34 percent of mid-level generalist positions at posts of greatest hardship were filled by officers in such above-grade assignments--15 percentage points higher than the rate for comparable positions at posts with no or low differentials. At posts we visited during our review, we observed numerous officers working in positions above their rank. For example, in Abuja, Nigeria, more than 4 in every 10 positions were staffed by officers in assignments above grade, including several employees working in positions two grades above their own. Further, to fill positions in Iraq and Afghanistan, State has frequently assigned officers to positions above their grade. As of September 2008, over 40 percent of officers in Iraq and Afghanistan were serving in above-grade assignments. Several factors contribute to gaps at hardship posts. First, State continues to have fewer officers than positions, a shortage compounded by the personnel demands of Iraq and Afghanistan, which have resulted in staff cutting their tours short to serve in these countries. As of April 2009, State had about 1,650 vacant Foreign Service positions in total. Second, State faces a persistent mid-level staffing deficit that is exacerbated by continued low bidding on hardship posts. Third, although State's assignment system has prioritized the staffing of hardship posts, it does not explicitly address the continuing experience gap at such posts, many of which are strategically important, yet are often staffed with less experienced officers. Staffing and experience gaps can diminish diplomatic readiness in several ways, according to State officials. For example, gaps can lead to decreased reporting coverage and loss of institutional knowledge. In addition, gaps can lead to increased supervisory requirements for senior staff, detracting from other critical diplomatic responsibilities. During the course of our review we found a number of examples of the effect of these staffing gaps on diplomatic readiness, including the following. The economic officer position in Lagos, whose responsibility is solely focused on energy, oil, and natural gas, was not filled in the 2009 cycle. The incumbent explained that, following his departure, his reporting responsibilities will be split up between officers in Abuja and Lagos. He said this division of responsibilities would diminish the position's focus on the oil industry and potentially lead to the loss of important contacts within both the government ministries and the oil industry. An official told us that a political/military officer position in Russia was vacant because of the departure of the incumbent for a tour in Afghanistan, and the position's portfolio of responsibilities was divided among other officers in the embassy. According to the official, this vacancy slowed negotiation of an agreement with Russia regarding military transit to Afghanistan. The consular chief in Shenyang, China, told us he spends too much time helping entry-level officers adjudicate visas and, therefore, less time managing the section. The ambassador to Nigeria told us spending time helping officers working above grade is a burden and interferes with policy planning and implementation. A 2008 OIG inspection of N'Djamena, Chad, reported that the entire front office was involved in mentoring entry-level officers, which was an unfair burden on the ambassador and deputy chief of mission, given the challenging nature of the post. State uses a range of incentives to staff hardship posts at a cost of millions of dollars a year, but their effectiveness remains unclear due to a lack of evaluation. Incentives to serve in hardship posts range from monetary benefits to changes in service and bidding requirements, such as reduced tour lengths at posts where dangerous conditions prevent some family members from accompanying officers. In a 2006 report on staffing gaps, GAO recommended that State evaluate the effectiveness of its incentive programs for hardship post assignments. In response, State added a question about hardship incentives to a recent employee survey. However, the survey does not fully meet GAO's recommendation for several reasons, including that State did not include several incentives in the survey and did not establish specific indicators of progress against which to measure the survey responses over time. State also did not comply with a 2005 legal requirement to assess and report to Congress on the effectiveness of increasing hardship and danger pay from 25 percent to 35 percent in filling "hard to fill" positions. The lack of an assessment of the effectiveness of the danger and hardship pay increases in filling positions at these posts, coupled with the continuing staffing challenges in these locations, make it difficult to determine whether these resources are properly targeted. Recent legislation increasing Foreign Service officers' basic pay will increase the cost of existing incentives, thereby heightening the importance that State evaluate its incentives for hardship post assignments to ensure resources are effectively targeted and not wasted. Although State plans to address staffing gaps by hiring more officers, the department acknowledges it will take years for these new employees to gain the experience they need to be effective mid-level officers. In the meantime, this experience gap will persist, since State's staffing system does not explicitly prioritize the assignment of at-grade officers to hardship posts. Moreover, despite State's continued difficulty attracting qualified staff to hardship posts, the department has not systematically evaluated the effectiveness of its incentives for hardship service. Without a full evaluation of State's hardship incentives, the department cannot obtain valuable insights that could help guide resource decisions to ensure it is most efficiently and effectively addressing gaps at these important posts. State continues to have notable gaps in its foreign language capabilities, which could hinder U.S. overseas operations. As of October 31, 2008, 31 percent of officers in all worldwide language-designated positions did not meet both the foreign language speaking and reading proficiency requirements for their positions, up slightly from 29 percent in 2005. In particular, State continues to face foreign language shortfalls in areas of strategic interest--such as the Near East and South and Central Asia, where about 40 percent of officers in language-designated positions did not meet requirements. Gaps were notably high in Afghanistan, where 33 of 45 officers in language-designated positions (73 percent) did not meet the requirement, and in Iraq, with 8 of 14 officers (57 percent) lacking sufficient language skills. State has defined its need for staff proficient in some languages as "supercritical" or "critical," based on criteria such as the difficulty of the language and the number of language-designated positions in that language, particularly at hard-to-staff posts. Shortfalls in supercritical needs languages, such as Arabic and Chinese, remain at 39 percent, despite efforts to recruit individuals with proficiency in these languages (see figure 1). In addition, more than half of the 739 Foreign Service specialists--staff who perform security, technical, and other support functions--in language-designated positions do not meet the requirements. For example, 53 percent of regional security officers do not speak and read at the level required by their positions. When a post fills a position with an officer who does not meet the requirements, it must request a language waiver for the position. In 2008, the department granted 282 such waivers, covering about 8 percent of all language- designated positions. Past reports by GAO, State's Office of the Inspector General, the Department of Defense, and various think tanks have concluded that foreign language shortfalls could be negatively affecting U.S. national security, diplomacy, law enforcement, and intelligence-gathering efforts. Foreign Service officers we spoke to provided a number of examples of the effects of not having the required language skills, including the following. Consular officers at a post we visited said that because of a lack of language skills, they make adjudication decisions based on what they "hope" they heard in visa interviews. A security officer in Cairo said that without language skills, officers do not have any "juice"--that is, the ability to influence people they are trying to elicit information from. According to another regional security officer, the lack of foreign language skills may hinder intelligence gathering because local informants are reluctant to speak through locally hired interpreters. One ambassador we spoke to said that without language proficiency-- which helps officers gain insight into a country--the officers are not invited to certain events and cannot reach out to broader, deeper audiences. A public affairs officer at another post said that the local media does not always translate embassy statements accurately, complicating efforts to communicate with audiences in the host country. For example, he said the local press translated a statement by the ambassador in a more pejorative sense than was intended, which damaged the ambassador's reputation and took several weeks to correct. State's current approach for meeting its foreign language proficiency requirements involves an annual review process to determine language- designated positions, training, recruitment, and incentives; however, the department faces several challenges to these efforts, particularly staffing shortages. State's annual language designation process results in a list of positions requiring language skills. However, the views expressed by the headquarters and overseas officials we met with suggest State's designated language proficiency requirements do not necessarily reflect the actual language needs of the posts. For example, because of budgetary and staffing issues, some overseas posts tend to request only the positions they think they will receive rather than the positions they actually need. Moreover, officers at the posts we visited questioned the validity of the relatively low proficiency level required for certain positions, citing the need for a higher proficiency level. For example, an economics officer at one of the posts we visited, who met the posts' required proficiency level, said her level of proficiency did not provide her with language skills needed to discuss technical issues, and the officers in the public affairs section of the same post said that proficiency level was not sufficient to effectively explain U.S. positions in the local media. State primarily uses language training to meet its foreign language requirements, and does so mostly at the Foreign Service Institute in Arlington, Virginia, but also at field schools and post language training overseas. In 2008, the department reported a training success rate of 86 percent. In addition, the department recruits personnel with foreign language skills through special incentives offered under its critical needs language program and pays bonuses to encourage staff to study and maintain a level of proficiency in certain languages. The department has hired 445 officers under this program since 2004. However, various challenges limit the effectiveness of these efforts. According to State, two main challenges are overall staffing shortages, which limit the number of staff available for language training, and the recent increase in language-designated positions. The staffing shortages are exacerbated by officers curtailing their tours at posts, such as to staff the missions in Iraq and Afghanistan, which has led to a decrease in the number of officers in the language training pipeline. For example, officials in the Bureau of East Asian and Pacific Affairs told us of an officer who received nearly a year of language training in Vietnamese, yet cancelled her tour in Vietnam to serve in Iraq. These departures often force their successors to arrive at post early without having completed language training. As part of its effort to address these staffing shortfalls, in fiscal year 2009, State requested and received funding for 300 new positions to build a training capacity, intended to reduce gaps at posts while staff are in language training. State officials said that if the department's fiscal year 2010 request for 200 additional positions is approved, the department's language gaps will begin to close in 2011; however, State has not indicated when its foreign language staffing requirements will be completely met. Another challenge is the widely held perception among Foreign Service officers that State's promotion system does not consider time spent in language training when evaluating officers for promotion, which may discourage officers from investing the time required to achieve proficiency in certain languages. Although State Human Resources officials dispute this perception, the department has not conducted a statistically significant assessment of the impact of language training on promotions. State's current approach to meeting its foreign language proficiency requirements has not closed the department's persistent language proficiency gaps and reflects, in part, a lack of a comprehensive strategic direction. Common elements of comprehensive workforce planning-- described by GAO as part of a large body of work on human capital management--include setting strategic direction that includes measurable performance goals and objectives and funding priorities, determining critical skills and competencies that will be needed in the future, developing an action plan to address gaps, and monitoring and evaluating the success of the department's progress toward meeting goals. In the past, State officials have asserted that because language is such an integral part of the department's operations, a separate planning effort for foreign language skills was not needed. More recently, State officials have said the department's plan for meeting its foreign language requirements is spread throughout a number of documents that address these requirements, including the department's Five-Year Workforce Plan. However, these documents are not linked to each other and do not contain measurable goals, objectives, resource requirements, and milestones for reducing the foreign language gaps. We believe that a more comprehensive strategic approach would help State to more effectively guide and assess progress in meeting its foreign language requirements. In our recently-issued reports we made several recommendations to help State address its staffing gaps and language proficiency shortfalls. To ensure that hardship posts are staffed commensurate with their stated level of strategic importance and resources are properly targeted, GAO recommends the Secretary of State (1) take steps to minimize the experience gap at hardship posts by making the assignment of experienced officers to such posts an explicit priority consideration, and (2) develop and implement a plan to evaluate incentives for hardship post assignments. To address State's long-standing foreign language proficiency shortfalls, we recommend that the Secretary of State develop a comprehensive strategic plan with measurable goals, objectives, milestones, and feedback mechanisms that links all of State's efforts to meet its foreign language requirements. State generally agreed with our findings, conclusions, and recommendations and described several initiatives that address elements of the recommendations. In addition, State recently convened an inter- bureau language working group, which will focus on and develop an action plan to address GAO's recommendations. Mr. Chairman, this concludes my prepared statement. I would be pleased to respond to any questions you or other Members of the Subcommittee may have at this time. For questions regarding this testimony, please contact Jess T. Ford at (202) 512-4268 or [email protected]. Individuals making key contributions to this statement include Godwin Agbara and Anthony Moran, Assistant Directors; Robert Ball; Joseph Carney; Aniruddha Dasgupta; Martin de Alteriis; Brian Hackney; Gloria Hernandez-Saunders; Richard Gifford Howland; Grace Lui; and La Verne Tharpes. Department of State: Comprehensive Plan Needed to Address Persistent Foreign Language Shortfalls. GAO-09-955. Washington, D.C.: September 17, 2009. Department of State: Additional Steps Needed to Address Continuing Staffing and Experience Gaps at Hardship Posts. GAO-09-874. Washington, D.C.: September 17, 2009. State Department: Staffing and Foreign Language Shortfalls Persist Despite Initiatives to Address Gaps. GAO-07-1154T. Washington, D.C.: August 1, 2007. U.S. Public Diplomacy: Strategic Planning Efforts Have Improved, but Agencies Face Significant Implementation Challenges. GAO-07-795T. Washington, D.C.: April 26, 2007. Department of State: Staffing and Foreign Language Shortfalls Persist Despite Initiatives to Address Gaps. GAO-06-894. Washington, D.C.: August 4, 2006. Overseas Staffing: Rightsizing Approaches Slowly Taking Hold but More Action Needed to Coordinate and Carry Out Efforts. GAO-06-737. Washington, D.C.: June 30, 2006. U.S. Public Diplomacy: State Department Efforts to Engage Muslim Audiences Lack Certain Communication Elements and Face Significant Challenges. GAO-06-535. Washington, D.C.: May 3, 2006. Border Security: Strengthened Visa Process Would Benefit from Improvements in Staffing and Information Sharing. GAO-05-859. Washington, D.C.: September 13, 2005. State Department: Targets for Hiring, Filling Vacancies Overseas Being Met, but Gaps Remain in Hard-to-Learn Languages. GAO-04-139. Washington, D.C.: November 19, 2003. Foreign Affairs: Effective Stewardship of Resources Essential to Efficient Operations at State Department, USAID. GAO-03-1009T. Washington, D.C.: September 4, 2003. State Department: Staffing Shortfalls and Ineffective Assignment System Compromise Diplomatic Readiness at Hardship Posts. GAO-02-626. Washington, D.C.: June 18, 2002. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately. The Government Accountability Office, the audit, evaluation, and investigative arm of Congress, exists to support Congress in meeting its constitutional responsibilities and to help improve the performance and accountability of the federal government for the American people. 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This testimony discusses U.S. diplomatic readiness, and in particular the staffing and foreign language challenges facing the Foreign Service. The Department of State (State) faces an ongoing challenge of ensuring it has the right people, with the right skills, in the right places overseas to carry out the department's priorities. In particular, State has long had difficulty staffing its hardship posts overseas, which are places like Beruit and Lagos, where conditions are difficult and sometimes dangerous due to harsh environmental and extreme living conditions that often entail pervasive crime or war, but are nonetheless integral to foreign policy priorities and need a full complement of qualified staff. State has also faced persistent shortages of staff with critical language skills, despite the importance of foreign language proficiency in advancing U.S. foreign policy and economic interests overseas. In recent years GAO has issued a number of reports on human capital issues that have hampered State's ability to carry out the President's foreign policy objectives. This testimony discusses (1) State's progress in addressing staffing gaps at hardship posts, and (2) State's efforts to meet its foreign language requirements. Despite a number of steps taken over a number of years, the State Department continues to face persistent staffing and experience gaps at hardship posts, as well as notable shortfalls in foreign language capabilities. A common element of these problems has been a longstanding staffing and experience deficit, which has both contributed to the gaps at hardship posts and fueled the language shortfall by limiting the number of staff available for language training. State has undertaken several initiatives to address these shortages, including multiple staffing increases intended to fill the gaps. However, the department has not undertaken these initiatives in a comprehensive and strategic manner. As a result, it is unclear when the staffing and skill gaps that put diplomatic readiness at risk will close.
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As I mentioned earlier, as has been the case for the previous 6 fiscal years, the federal government continues to have a significant number of material weaknesses related to financial systems, fundamental recordkeeping and financial reporting, and incomplete documentation. Several of these material weaknesses (referred to hereafter as material deficiencies) resulted in conditions that continued to prevent us from forming and expressing an opinion on the U.S. government's consolidated financial statements for the fiscal years ended September 30, 2003 and 2002. There may also be additional issues that could affect the consolidated financial statements that have not been identified. Major challenges include the federal government's inability to properly account for and report property, plant, and equipment and inventories and related property, primarily at the Department of Defense (DOD); reasonably estimate or adequately support amounts reported for certain liabilities, such as environmental and disposal liabilities and related costs at DOD, and ensure complete and proper reporting for commitments and contingencies; support major portions of the total net cost of government operations, most notably related to DOD, and ensure that all disbursements are properly recorded; fully account for and reconcile intragovernmental activity and balances; demonstrate how net outlay amounts reported in the consolidated financial statements were related to net outlay amounts reported in the underlying federal agencies' financial statements; and effectively prepare the federal government's financial statements, including ensuring that the consolidated financial statements are consistent with the underlying audited agency financial statements, balanced, and in conformity with GAAP. In addition to these material deficiencies, we identified four other material weaknesses in internal control related to loans receivable and loan guarantee liabilities, improper payments, information security, and tax collection activities. The material weaknesses identified by our work are discussed in more detail in appendix II, and their primary effects are described in appendix III. The ability to produce the data needed to efficiently and effectively manage the day-to-day operations of the federal government and provide accountability to taxpayers and the Congress has been a long-standing challenge at most federal agencies. The results of the fiscal year 2003 assessments performed by agency inspectors general or their contract auditors under FFMIA show that these problems continue to plague the financial management systems used by most of the CFO Act agencies. While the problems are much more severe at some agencies than at others, their nature and severity indicate that overall, management at most CFO Act agencies lacks the full range of information needed for accountability, performance reporting, and decision making. These problems include nonintegrated financial systems, lack of accurate and timely recording of data, inadequate reconciliation procedures, and noncompliance with accounting standards and the U.S. Government Standard General Ledger (SGL). Agencies' inability to meet the federal financial management systems requirements continues to be the major barrier to achieving compliance with FFMIA. Under FFMIA, CFO Act agency auditors are required to report, as part of the agencies' financial statement audits, whether agencies' financial management systems substantially comply with (1) federal financial management systems requirements, (2) applicable federal accounting standards, and (3) the SGL at the transaction level. As shown in figure 1, auditors most frequently reported instances of noncompliance with federal financial management systems requirements. These instances of noncompliance involved not only core financial systems, but also administrative and programmatic systems. For fiscal year 2003, auditors for 17 of the 23 CFO Act agencies reported that the agencies' financial management systems did not comply substantially with one or more of FFMIA's three requirements. For the remaining 6 CFO Act agencies, auditors provided negative assurance, meaning that nothing came to their attention indicating that the agencies' financial management systems did not substantially meet FFMIA requirements. The auditors for these 6 agencies did not definitively state whether the agencies' systems substantially complied with FFMIA requirements, as is required under the statute. DHS is not subject to the requirements of the CFO Act and, consequently, is not required to comply with FFMIA. Accordingly, DHS's auditors did not report on DHS's compliance with FFMIA. However, the auditors identified and reported deficiencies that related to the aforementioned three requirements of FFMIA. Federal agencies have recognized the seriousness of their financial systems weaknesses and have efforts under way to implement or upgrade their financial systems to alleviate long-standing problems, but some of these efforts face significant challenges. For example, as we testified in May 2004, we have identified several issues related to NASA's financial management systems modernization effort: (1) NASA did not involve key stakeholders in the design and implementation of the agency's new financial management system's core financial module; (2) NASA did not follow key best practices for acquiring and implementing this system; and (3) the new system lacks key external reporting capabilities for property and budgetary data. In addition, as I will discuss later in this testimony, DOD faces major challenges in its efforts to develop a business enterprise architecture. We recognize that it will take time, investment, and sustained emphasis to improve agencies' underlying financial management systems. As I mentioned earlier, for the past 7 fiscal years, the federal government has been required to prepare, and have audited, consolidated financial statements. Successfully meeting this requirement is tightly linked to the requirements for the CFO Act agencies to also have audited financial statements. This has stimulated extensive cooperative efforts and considerable attention by agency chief financial officers, inspectors general, Treasury and OMB officials, and GAO. With the benefit of the past 7 years' experience by the federal government in having the required financial statements subjected to audit, more intensified attention will be needed on the most serious obstacles to achieving an opinion on the U.S. government's consolidated financial statements. Three major impediments to an opinion on the consolidated financial statements are (1) serious financial management problems at DOD, (2) the federal government's inability to fully account for and reconcile transactions between federal government entities, and (3) the federal government's ineffective process for preparing the consolidated financial statements. Essential to achieving an opinion on the consolidated financial statements is resolution of the serious financial management problems at DOD, which we have designated as high risk since 1995. In accordance with section 1008 of the National Defense Authorization Act for Fiscal Year 2002, DOD reported that for fiscal year 2003, it was not able to provide adequate evidence supporting material amounts in its financial statements. DOD stated that it is unable to comply with applicable financial reporting requirements for (1) property, plant, and equipment (PP&E); (2) inventory and operating materials and supplies; (3) environmental liabilities; (4) intragovernmental eliminations and related accounting adjustments; (5) disbursement activity; and (6) cost accounting by responsibility segment. Although DOD represented that the military retirement health care liability data had improved for fiscal year 2003, the cost of direct health care provided by DOD-managed military treatment facilities was a significant amount of DOD's total recorded health care liability and was based on estimates for which adequate support was not available. DOD continues to confront pervasive decades-old financial management and business problems related to its systems, processes (including internal controls), and people (human capital). These problems preclude the department from producing accurate, reliable, and timely information to make sound decisions and to accurately report on its billions of dollars of assets. DOD's long-standing business management systems problems adversely affect the economy, effectiveness, and efficiency of its operations and have resulted in a lack of adequate accountability across all major business areas. To date, none of the military services or major DOD components has passed the test of an independent financial audit because of pervasive weaknesses in financial management systems, operations, and controls. Additionally, the department's stovepiped, duplicative, and nonintegrated systems contribute to its vulnerability to fraud, waste, and abuse. In this regard, we have recently testified on problems related to military pay and unused airline tickets. Vulnerability to fraud, waste, and abuse continues despite substantial systems investment. For fiscal year 2004, DOD requested approximately $19 billion to operate, maintain, and modernize its reported 2,274 business systems. The duplicative and stovepiped nature of DOD's systems environment is illustrated by the numerous systems it has in the same functional areas. For example, DOD reported that it has 565 systems to support logistics functions. These systems are not integrated and thus have multiple points of data entry, which can result in significant data integrity problems. Further, DOD continues to lack effective management oversight and control over business systems modernization investments. The actual funding continues to be distributed among the military services and defense agencies, thereby enabling the numerous DOD components to continue to develop stovepiped, parochial solutions to the department's long-standing financial management and business operation challenges. Lacking a departmentwide focus and effective management oversight and control of business systems investment, DOD continues to invest billions of dollars in systems that fail to provide integrated corporate solutions to its long-standing business operations problems. Over the past 14 years, DOD has initiated several broad-based reform efforts intended to fundamentally reform its business operations and improve the reliability of information used in the decision-making process. While these initiatives produced some incremental improvements, they did not result in the fundamental reform necessary to resolve the department's long-standing management challenges. Secretary Rumsfeld has made business transformation a priority. For example, through its Business Management Modernization Program, DOD is continuing its efforts to develop and implement a business enterprise architecture and establish effective management and control over its business system modernization investments. However, we recently reported that after about 3 years of effort and over $203 million in obligations, we have not seen significant change in the content of DOD's architecture or in DOD's approach to investing billions of dollars annually in existing and new systems. Few actions have been taken to address the recommendations we made in our previous reports, which were aimed at improving DOD's plans for developing the next version of the architecture and implementing the institutional means for selecting and controlling both planned and ongoing business systems investments. To date, DOD has not addressed 22 of our 24 recommendations. Currently, DOD has various initiatives under way to support its efforts to obtain an unqualified audit opinion on its fiscal year 2007 financial statements. Because there are not yet detailed plans guiding these activities, however, it is unclear whether and how they support each other and whether they support this goal. Therefore, the feasibility of meeting this goal is as yet unknown. The seriousness of DOD's business management weaknesses underscores the importance of no longer condoning "status quo" business operations at DOD. Cultural resistance to change, military service parochialism, and stovepiped operations have all contributed significantly to the failure of previous attempts to implement broad-based management reforms at DOD. The department has acknowledged that it confronts decades-old problems deeply grounded in the bureaucratic history and operating practices of a complex, multifaceted organization and that many of these practices were developed piecemeal and evolved to accommodate different organizations, each with its own policies and procedures. To improve the likelihood that the department's current business transformation efforts will be successful, we have previously suggested that a chief management official position be created. Previous failed attempts to improve DOD's business operations illustrate the need for sustained involvement of DOD leadership in helping to assure that DOD's financial and overall business process transformation efforts remain a priority. While the Secretary and other key DOD leaders have demonstrated their commitment to the current business transformation efforts, the long- term nature of these efforts requires the development of an executive position capable of providing strong and sustained executive leadership over a number of years and various administrations. This position would provide the sustained attention essential for addressing key stewardship responsibilities such as strategic planning, performance and financial management, and business systems modernization in an integrated manner. This position could be filled by an individual, appointed by the President and confirmed by the Senate, for a set term of 7 years with the potential for reappointment. Such an individual should have a proven track record as a business process change agent in large, complex, and diverse organizations--experience necessary to spearhead business process transformation across the department, and potentially administrations, and serve as an integrator for the needed business transformation efforts. Further, in a recent report we also suggest that to improve management oversight, accountability, and control of the department's business systems funding, Congress may wish to consider providing the funds to operate, maintain, and modernize DOD's business systems to the functional areas, known as domains, rather than the military services and the defense agencies. Currently, each military service and defense agency receives its own funding and is largely autonomous in deciding how to spend these funds, thereby hindering the development of broad-based, integrated corporate system solutions to common DOD-wide problems. We believe it is critical that funds for DOD business systems be appropriated to the domain owners in order to provide for accountability and the ability to prevent the continued parochial approach to systems investment that exists today. The domains would establish a hierarchy of investment review boards with DOD-wide representation, including the military services and defense agencies. These boards would be responsible for reviewing and approving investments to develop, operate, maintain, and modernize business systems for the domain portfolio, including ensuring that investments were consistent with DOD's business enterprise architecture. DOD still has a long way to go, and top leadership must continue to stress the importance of achieving lasting improvement that truly transforms the department's business systems and operations. Only through major transformation, which will take time and sustained leadership from top management, will DOD be able to meet the mandate of the CFO Act and achieve the President's Management Agenda goal of improved financial performance. OMB and Treasury require the CFOs of 35 executive departments and agencies, including the 23 CFO Act agencies, to reconcile selected intragovernmental activity and balances with their "trading partners" and to report to Treasury, the agency's inspector general, and GAO on the extent and results of intragovernmental activity and balances reconciliation efforts. A substantial number of the agencies continue to be unable to fully perform reconciliations of intragovernmental activity and balances with their trading partners, citing reasons such as (1) trading partners not providing needed data; (2) limitations and incompatibility of agency and trading partner information systems; and (3) lack of human resources. Amounts reported for federal agency trading partners for certain intragovernmental accounts were significantly out of balance in the aggregate for both fiscal years 2003 and 2002. We reported in previous years that the heart of the intragovernmental transactions issue was that the federal government lacked clearly articulated business rules for these transactions so that they would be handled consistently by agencies. In this regard, at the start of fiscal year 2003, OMB issued business rules to transform and standardize intragovernmental ordering and billing. To address long-standing problems with intragovernmental exchange transactions between federal agencies, Treasury provided federal agencies with quarterly detailed trading partner information during fiscal year 2003 to help them better perform their trading partner reconciliations. In addition, the federal government began a three-phase Intragovernmental Transactions e-gov project to define a governmentwide data architecture and provide a single source of detailed trading partner data. On April 20, 2004, however, OMB announced that it was appropriate to pause and evaluate the results of the project to date. OMB estimated that the evaluation will take 120 days and will be followed by a phased deployment. Resolving the intragovernmental transactions problem remains a difficult challenge and will require a commitment by the CFO Act agencies and continued strong leadership by OMB. The federal government did not have adequate systems, controls, and procedures to ensure that the consolidated financial statements are consistent with the underlying audited agency financial statements, balanced, and in conformity with GAAP. In this regard, Treasury is developing a new system and procedures to prepare the consolidated financial statements beginning with the statements for fiscal year 2004. Treasury officials have stated that these actions are intended to, among other things, directly link information from federal agencies' audited financial statements to amounts reported in the consolidated financial statements and resolve many of the issues we identified in the process for preparing the consolidated financial statements. As part of our fiscal year 2004 audit, we will evaluate the new system and procedures as they are fully developed and implemented and determine the extent of linkage accomplished for the fiscal year 2004 financial statements. Resolving issues surrounding preparing the consolidated financial statements has been a significant challenge and will require continued strong leadership by Treasury management. Our nation's large and growing long-term fiscal imbalance, which is driven largely by known demographic trends and rising health care costs--coupled with new homeland security and defense commitments--serves to sharpen the need to fundamentally review and re-examine basic federal entitlements, as well as other mandatory and discretionary spending, and tax policies. As we look ahead, our nation faces an unprecedented demographic challenge with significant implications, among them budgetary and economic. Between now and 2035, the number of people who are 65 years old or over will double, driving federal spending on the elderly to a larger and ultimately unsustainable share of the federal budget. As a result, tough choices will be required to address the resulting structural imbalance. GAO prepares long-term budget simulations that seek to illustrate the likely fiscal consequences of the coming demographics and rising health care costs. Our latest long-term budget simulations reinforce the need for change in the major cost drivers--Social Security and health care programs. As shown in figure 2, by 2040, absent reform of these entitlement programs, projected federal revenues may be adequate to pay little beyond interest on the debt. Current financial reporting does not clearly and transparently show the wide range of responsibilities, programs, and activities that may either obligate the federal government to future spending or create an expectation for such spending and provides an unrealistic and even misleading picture of the federal government's overall performance and financial condition. Few agencies adequately show the results they are getting with the taxpayer dollars they spend. In addition, too many significant federal government commitments and obligations, such as Social Security and Medicare, are not fully and consistently disclosed in the federal government's consolidated financial statements and budget, and current federal financial reporting standards do not require such disclosure. Figure 3 shows some selected fiscal exposures. The spectrum of these exposures ranges from covering only the explicit liabilities that are shown on the consolidated financial statements to implicit promises embedded in current policy or public expectations. These liabilities, commitments, and promises have created a fiscal imbalance that will put unprecedented strains on the nation's spending and tax policies. Although economic growth can help, the projected fiscal gap is now so large that the federal government will not be able to simply grow its way out of the problem. Tough choices are inevitable. Particularly troubling are the many big-ticket items that taxpayers will eventually have to deal with. The federal government has pledged its support to a long list of programs and activities, including pension and health care benefits for senior citizens, medical care for veterans, and contingencies associated with various government-sponsored entities, whose claims on future spending total trillions of dollars. Despite their serious implications for future budgets, tax burdens, and spending flexibilities, these unfunded commitments get short shrift in the federal government's current financial statements and in budgetary deliberations. The federal government's gross debt as of September 2003 was about $7 trillion, or about $24,000 for every man, woman, and child in this country today. But that number excludes many big-ticket items, including the gap between promised and funded Social Security and Medicare benefits, veterans' health care, and a range of other commitments and contingencies. If these items are factored in, the total burden in current dollars is at least $42 trillion. To put that number into perspective, $42 trillion is 18 times the current federal budget, or 3.5 times our current annual gross domestic product. One of the biggest contributors to this total bill will be the new Medicare prescription drug benefit, whose estimated current-dollar cost over the next 75 years is more than $8 trillion. Stated differently, the current total burden for every American is more than $140,000--and every day that burden is growing larger. GAO's long-term budget simulations show that by 2040, the federal government may have to cut federal spending by 60 percent or raise taxes to about 2.5 times today's level to pay for the mounting cost of the federal government's current unfunded commitments. Either would be devastating. Proper accounting and reporting practices are essential in the public sector. After all, the U.S. government is the largest, most diverse, most complex, and arguably the most important entity on earth today. Its services--homeland security, national defense, Social Security, mail delivery, and food inspection, to name a few--directly affect the well-being of almost every American. But sound decisions on the future direction of vital federal government programs and policies are made more difficult without timely, accurate, and useful financial and performance information. Fortunately, we are starting to see efforts to address the shortcomings in federal financial reporting. The President's Management Agenda, which closely reflects GAO's list of high-risk government programs, is bringing attention to troubled areas across the federal government and is taking steps to better assess the results that programs are getting with the resources they are given. The Federal Accounting Standards Advisory Board is also making progress on many key financial reporting issues. In addition to these efforts, we have published frameworks for analyzing various Social Security reform proposals and for analyzing health care reform proposals. We have also helped to create a consortium of "good government" organizations to stimulate the development of a set of key national indicators to assess the United States' overall position and progress over time and in comparison to those of other industrialized nations. Budget experts at the Congressional Budget Office (CBO) and GAO continue to encourage reforms to the federal budget process to better reflect the federal government's commitments and signal emerging problems. Among other things, we have recommended that the federal government issue an annual report on major fiscal exposures. The President's fiscal year 2005 budget also proposes that future President's budgets report on any enacted legislation in the past year that worsens the unfunded obligations of programs with long-term actuarial projections, with CBO to make a similar report. Such reporting could be a good starting point. Although these are positive initial steps, much more must be done given the magnitude of the federal government's fiscal challenge. A top-to-bottom review of government activities to ensure their relevance and fit for the 21st century and their relative priority is long overdue. As I have spoken about in the past, the federal government needs a three-pronged approach to (1) restructure existing entitlement programs, (2) reexamine the base of discretionary and other spending, and (3) review and revise the federal government's tax policy, including major tax preferences, and enforcement programs. New accounting and reporting approaches, budget control mechanisms, and metrics are needed for considering and measuring the impact of spending and tax policies and decisions over the long term. Our report on the U.S. government's consolidated financial statements for fiscal years 2003 and 2002 highlights the need to continue addressing the federal government's serious financial management weaknesses. With the significantly accelerated financial reporting time frame for fiscal year 2004 and beyond, it is essential that the federal government move away from the extraordinary efforts many federal agencies continue to make to prepare financial statements and toward giving prominence to strengthening the federal government's financial systems, reporting, and controls. This is the only way the federal government can meet the end goal of making timely, accurate, and useful financial and performance information routinely available to the Congress, other policymakers, and the American public. The requirement for timely, accurate, and useful financial and performance management information is greater than ever as our nation faces major long-term fiscal challenges that will require tough choices in setting priorities and linking resources to results. The Congress and the President face the challenge of sorting out the many claims on the federal budget without the budget enforcement mechanisms or fiscal benchmarks that guided the federal government through the previous years of deficit reduction into the brief period of surplus. While a number of steps will be necessary to address this challenge, truth and transparency in federal government reporting are essential elements of any attempt to address the nation's long-term fiscal challenges. The fiscal risks I mentioned earlier can be managed only if they are properly accounted for and publicly disclosed. A crucial first step will be to face facts and identify the significant commitments facing the federal government. If citizens and federal government officials come to understand various fiscal exposures and their potential claims on future budgets, they are more likely to insist on prudent policy choices today and sensible levels of fiscal risk in the future. In addition, new budget control mechanisms will be required, along with effective approaches to successfully engage in a fundamental review, reassessment, and reprioritization of the base of federal government programs and policies that I have recommended previously. Public officials will have more incentive to make difficult but necessary choices if the public has the facts and comes to support serious and sustained action to address the nation's fiscal challenges. Without meaningful public debate, however, real and lasting change is unlikely. Clearly, the sooner action is taken, the easier it will be to turn things around. I believe that nothing less than a national education campaign and outreach effort is needed to help the public understand the nature and magnitude of the long-term financial challenge facing this nation. An informed electorate is essential for a healthy democracy. Members of Generations X and Y especially need to become active in this discussion because they and their children will bear the heaviest burden if policymakers fail to act in a timely and responsible manner. We at GAO are committed to doing our part, but others also need to step up to the plate. By working together, I believe we can make a meaningful difference for our nation, fellow citizens, and future generations of Americans. In closing, Mr. Chairman, I want to reiterate the value of sustained congressional interest in these issues, as demonstrated by the Congress's annual hearings on the results of our audit of the consolidated financial statements and of audits of certain federal agencies' financial statements. It will also be key that the appropriations, budget, authorizing, and oversight committees hold agency top leadership accountable for resolving these problems and that they support improvement efforts. For further information regarding this testimony, please contact Jeffrey C. Steinhoff, Managing Director, or Gary T. Engel, Director, Financial Management and Assurance, at (202) 512-2600. R. Navarro & Associates, Inc. R. Navarro & Associates, Inc. The federal government did not maintain adequate systems or have sufficient, reliable evidence to support information reported in the consolidated financial statements of the U.S. government, as described below. These material deficiencies contributed to our disclaimer of opinion on the consolidated financial statements and also constitute material weaknesses in internal control. In addition to the material deficiencies noted above, we found four other material weaknesses in internal control as of September 30, 2003: (1) several federal agencies continue to have deficiencies in the processes and procedures used to estimate the costs of their lending programs and value their related loans receivable; (2) most federal agencies have not reported the magnitude of improper payments in their programs and activities; (3) federal agencies have not yet fully institutionalized comprehensive security management programs; and (4) material internal control weaknesses and systems deficiencies continue to affect the federal government's ability to effectively manage its tax collection activities. In general, federal agencies continue to make progress in reducing the number of material weaknesses and reportable conditions related to their lending activities. However, significant deficiencies in the processes and procedures used to estimate the costs of certain lending programs and value the related loans receivable still remain. These deficiencies continue to adversely affect the government's ability to support annual budget requests for these programs, make future budgetary decisions, manage program costs, and measure the performance of lending activities. The most notable deficiencies existed at the Small Business Administration (SBA), which, while improved from last year, continues to have a material weakness related to this area. For example, SBA did not adequately document its estimation methodologies, lacked the management controls necessary to ensure that appropriate estimates were prepared and reported based on complete and accurate data, and could not fully support the reasonableness of the costs of its lending programs and valuations of its loan portfolio. We are currently assessing SBA's actions to resolve certain of these deficiencies related to accounting for previous loan sales and cost estimates for disaster loans. Across the federal government, improper payments occur in a variety of programs and activities, including those related to health care, contract management, federal financial assistance, and tax refunds. While complete information on the magnitude of improper payments is not yet available, based on available data, OMB has estimated that improper payments exceed $35 billion annually. Many improper payments occur in federal programs that are administered by entities other than the federal government, such as states. Improper payments often result from a lack of or an inadequate system of internal controls. Although the President's Management Agenda includes an initiative to reduce improper payments, most federal agencies have not reported the magnitude of improper payments in their programs and activities. The Improper Payments Information Act of 2002 provides for federal agencies to estimate and report on their improper payments. It requires federal agencies to (1) annually review programs and activities that they administer to identify those that may be susceptible to significant improper payments, (2) estimate improper payments in susceptible programs and activities, and (3) provide reports to the Congress that discuss the causes of improper payments identified and the status of actions to reduce them. In accordance with the legislation, OMB issued guidance for federal agencies' use in implementing the act. Among other things, the guidance requires federal agencies to report on their improper payment-related activities in the Management Discussion and Analysis section of their annual Performance and Accountability Reports (PAR). While the act does not require such reporting by all federal agencies until fiscal year 2004, OMB required 44 programs and 14 CFO Act agencies to report improper payment information in their fiscal year 2003 PARs. Our preliminary review of the PARs found that 12 of the 14 agencies reported improper payment amounts for 27 of the 44 programs identified in the guidance. We also found that, for the programs where improper payments were identified, the reports often contained information on the causes of the payments but little information that addressed the other reporting requirements cited in the legislation. Although progress has been made, serious and widespread information security weaknesses continue to place federal assets at risk of inadvertent or deliberate misuse, financial information at risk of unauthorized modification or destruction, sensitive information at risk of inappropriate disclosure, and critical operations at risk of disruption. GAO has reported information security as a high-risk area across government since February 1997. Such information security weaknesses could result in compromising the reliability and availability of data that are recorded in or transmitted by federal financial management systems. A primary reason for these weaknesses is that federal agencies have not yet fully institutionalized comprehensive security management programs, which are critical to identifying information security weaknesses, resolving information security problems, and managing information security risks on an ongoing basis. The Congress has shown continuing interest in addressing these risks, as evidenced by recent hearings on information security and enactment of the Federal Information Security Management Act of 2002 and the Cyber Security Research and Development Act. In addition, the administration has taken important actions to improve information security, such as integrating information security into the Executive Branch Management Scorecard. Material internal control weaknesses and systems deficiencies continue to affect the federal government's ability to effectively manage its tax collection activities. Due to errors and delays in recording activity in taxpayer accounts, taxpayers were not always credited for payments made on their taxes owed, which could result in undue taxpayer burden. In addition, the federal government did not always follow up on potential unreported or underreported taxes and did not always pursue collection efforts against taxpayers owing taxes to the federal government. Primary Effects on the Fiscal Years 2003 and 2002 Consolidated Financial Statements and the Management of Government Operations Without accurate asset information, the federal government does not fully know the assets it owns and their location and condition and cannot effectively (1) safeguard assets from physical deterioration, theft, or loss, (2) account for acquisitions and disposals of such assets, (3) ensure the assets are available for use when needed, (4) prevent unnecessary storage and maintenance costs or purchase of assets already on hand, and (5) determine the full costs of programs that use these assets. Problems in accounting for liabilities affect the determination of the full cost of the federal government's current operations and the extent of its liabilities. Also, improperly stated environmental and disposal liabilities and weak internal control supporting the process for their estimation affect the federal government's ability to determine priorities for cleanup and disposal activities and to allow for appropriate consideration of future budgetary resources needed to carry out these activities. In addition, when disclosures of commitments and contingencies are incomplete or incorrect, reliable information is not available about the extent of the federal government's obligations. Inaccurate cost information affects the federal government's ability to control and reduce costs, assess performance, evaluate programs, and set fees to recover costs where required. Improperly recorded disbursements could result in misstatements in the financial statements and in certain data provided by federal agencies for inclusion in the President's budget concerning obligations and outlays. Problems in accounting for and reconciling intragovernmental activity and balances impair the government's ability to account for billions of dollars of transactions between governmental entities. Until the differences between the total net outlays reported in federal agencies' Statements of Budgetary Resources and the records used by the Department of the Treasury to prepare the Statement of Changes in Cash Balance from Unified Budget and Other Activities are reconciled, the effect that these differences may have on the U.S. government's consolidated financial statements will be unknown. Because the federal government did not have adequate systems, controls, and procedures to prepare its consolidated financial statements, the federal government's ability to ensure that the consolidated financial statements are consistent with the underlying audited agency financial statements, balanced, and in conformity with U.S. generally accepted accounting principles was impaired. Without a systematic measurement of the extent of improper payments, federal agency management cannot determine (1) if improper payment problems exist that require corrective action, (2) mitigation strategies and the appropriate amount of investments to reduce them, and (3) the success of efforts implemented to reduce improper payments. Weaknesses in the processes and procedures for estimating credit program costs affect the government's ability to support annual budget requests for these programs, make future budgetary decisions, manage program costs, and measure the performance of lending activities. Information security weaknesses Information security weaknesses over computerized operations are placing enormous amounts of federal assets at risk of inadvertent or deliberate misuse, financial information at risk of unauthorized modification or destruction, sensitive information at risk of inappropriate disclosure, and critical operations at risk of disruption. Primary Effects on the Fiscal Years 2003 and 2002 Consolidated Financial Statements and the Management of Government Operations Weaknesses in controls over tax collection activities continue to affect the federal government's ability to efficiently and effectively account for and collect revenue. Additionally, weaknesses in financial reporting affect the federal government's ability to make informed decisions about collection efforts. As a result, the federal government is vulnerable to loss of tax revenue and exposed to potentially billions of dollars in losses due to inappropriate refund disbursements. This is a work of the U.S. government and is not subject to copyright protection in the United States. It may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately. The General Accounting Office, the audit, evaluation and investigative arm of Congress, exists to support Congress in meeting its constitutional responsibilities and to help improve the performance and accountability of the federal government for the American people. GAO examines the use of public funds; evaluates federal programs and policies; and provides analyses, recommendations, and other assistance to help Congress make informed oversight, policy, and funding decisions. GAO's commitment to good government is reflected in its core values of accountability, integrity, and reliability. The fastest and easiest way to obtain copies of GAO documents at no cost is through GAO's Web site (www.gao.gov). Each weekday, GAO posts newly released reports, testimony, and correspondence on its Web site. To have GAO e-mail you a list of newly posted products every afternoon, go to www.gao.gov and select "Subscribe to Updates."
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GAO is required to annually audit the consolidated financial statements of the U.S. government. Proper accounting and reporting practices are essential in the public sector. The U.S. government is the largest, most diverse, most complex, and arguably the most important entity on earth today. Its services--homeland security, national defense, Social Security, mail delivery, and food inspection, to name a few--directly affect the well-being of almost every American. But sound decisions on the future direction of vital federal government programs and policies are made more difficult without timely, accurate, and useful financial and performance information. Until the problems discussed in GAO's audit report on the U.S. government's consolidated financial statements are adequately addressed, they will continue to (1) hamper the federal government's ability to accurately report a significant portion of its assets, liabilities, and costs; (2) affect the federal government's ability to accurately measure the full cost as well as the financial and nonfinancial performance of certain programs while effectively managing related operations; and (3) significantly impair the federal government's ability to adequately safeguard certain significant assets and properly record various transactions. As in the 6 previous fiscal years, certain material weaknesses in internal control and in selected accounting and reporting practices resulted in conditions that continued to prevent GAO from being able to provide the Congress and American citizens an opinion as to whether the consolidated financial statements of the U.S. government are fairly stated in conformity with U.S. generally accepted accounting principles. Three major impediments to an opinion on the consolidated financial statements continue to be (1) serious financial management problems at DOD, (2) the federal government's inability to fully account for and reconcile transactions between federal government entities, and (3) the federal government's ineffective process for preparing the consolidated financial statements. For fiscal year 2003, 20 of 23 Chief Financial Officers (CFO) Act agencies received unqualified opinions, the same number received by these agencies in fiscal year 2002, up from 6 for fiscal year 1996. However, only 3 of the CFO Act agencies had neither a material weakness in internal control, an issue involving compliance with applicable laws and regulations, nor an instance of lack of substantial compliance with Federal Financial Management Improvement Act requirements. The requirement for timely, accurate, and useful financial and performance management information is greater than ever as our nation faces major longterm fiscal challenges that will require tough choices in setting priorities and linking resources to results. Given the nation's large and growing long-term fiscal imbalance, which is driven largely by known demographic trends and health care costs, coupled with new homeland security and defense commitments, the status quo is unsustainable. Current financial reporting does not clearly and transparently show the wide range of responsibilities, programs, and activities that may either obligate the federal government to future spending or create an expectation for such spending and provides an unrealistic and even misleading picture of the federal government's overall performance and financial condition. In addition, too many significant federal government commitments and obligations, such as Social Security and Medicare, are not adequately addressed in the federal government's financial statements and budget process, and current federal financial reporting standards do not require such disclosure. A top-to-bottom review of government activities to ensure their relevance and fit for the 21st century and their relative priority is long overdue. The federal government needs a three-pronged approach to (1) restructure existing entitlement programs, (2) reexamine the base of discretionary and other spending, and (3) review and revise the federal government's tax policy and enforcement programs. New accounting and reporting approaches, budget control mechanisms, and metrics are needed for considering and measuring the impact of spending and tax policies and decisions over the long term.
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The 100 veterans included in our review received a full mental health evaluation in an average of 4 days of the date they preferred to be seen (known as the preferred date). The full mental health evaluation is the primary entry point to mental health care. At the five VAMCs we visited, the average time in which a veteran received this full evaluation ranged from 0 to 9 days from the preferred date. However, we identified conflicting VHA policies regarding how long it should take a new veteran to receive a full mental health evaluation: (1) a 14-day policy established by VHA's Uniform Handbook for Mental Health Services, and (2) a 30-day policy set by VHA in response to the Choice Act. To date, VHA has not provided guidance on which policy should be followed, which is inconsistent with federal internal control standards that call for management to clearly document, through management directives or administrative polices, significant events or activities, such as ensuring timely access to mental health care, to help ensure management directives are carried out properly. A number of VHA officials, including VISN and VAMC officials, told us they do not know which policy they are currently expected to meet, which makes it difficult for them to ensure timely access to care in light of increasing demand for mental health care. As a result, we recommended VHA issue clarifying guidance on the access standard for new veterans seeking mental health care. VA concurred with this recommendation, stating that it is in the process of revising the relevant policy in the Uniform Handbook to be consistent with the 30-day wait time goal established in response to the Choice Act. VHA stated that it is targeting issuance of the revised policy and clarifying guidance for March 2016. Further, although the average time between veterans' preferred dates and their full mental health evaluations in our review were generally within several days, that time did not always reflect how long veterans may have actually waited for mental health care. Because VHA uses a veteran's preferred date as the basis for its wait-time calculations, rather than the date that the veteran initially requests or is referred for mental health care, these calculations only reflect a portion of a veteran's overall wait time. While some of the delay in care may be attributed to a veteran not wanting to start care immediately, we also found that some delays were because a facility did not adequately handle a referral or request for mental health care. In our review of 100 veteran records, we found that significant delays can occur if the referral or request for an appointment is not processed correctly or in a timely manner. For example, one veteran in our review waited 174 days between the initial referral for mental health care and the veteran's preferred date due to a referral not being appropriately managed. The veteran's primary care provider was to have placed a referral to psychology in March 2014, but our review of the medical record found no evidence of the referral ever being placed. Nonetheless, the veteran's primary care provider alerted a VHA psychologist who reached out to the patient in March 2014, by phone, but did not leave a message. No VAMC mental health provider reached out again until September 2014, after the veteran's primary care provider made a referral (this time appropriately requested). The veteran was then able to schedule a full mental health evaluation approximately 1 week later. On average, our review of 100 new veteran medical records found that a veteran's preferred date was 26 days after his or her initial request or referral for mental health care, though this varied by VAMC. (See fig. 1.) In commenting on a draft of our report, VHA confirmed that they measure wait times from preferred date to when the appointment occurs. However, they disagreed with our calculations of the overall wait time for veterans to receive full mental health evaluations, noting that these calculations do not capture situations outside of their control, such as when a veteran wants to delay treatment. Our calculations illustrate that the use of the preferred date does not always reflect how long veterans are waiting for care or the variation that exists not only between, but within, VAMCs. During the period of time prior to establishing the preferred date, we found instances of veterans' requests or referrals for care being mismanaged or lost in the system, leading to delays in veterans' access to mental health care. Our current and previous work, along with the work of VA OIG, highlights the limitations of VHA's current scheduling practices, including wait time calculations. In December 2012, we recommended that VHA take actions to improve the reliability of wait-time measures by clarifying the scheduling policy or identifying clearer wait- time measures that are not subject to interpretation or prone to scheduler error. VHA has not yet implemented this recommendation, and we continue to believe that implementation of this recommendation would improve the reliability of wait time measures. VHA monitors access to mental health care, but the lack of clear policies may contribute to unreliable wait-time data and precludes effective oversight. Among other reasons contributing to the potential unreliability of VHA wait-time data, we found VHA's wait-time data may not be comparable over time or between VAMCs. Data may not be comparable over time. VHA has changed the definitions used to calculate various mental health wait-time measures, and a number of VHA officials we interviewed, including VAMC and VISN officials, told us they were not sure which definitions for new mental health patients were in effect for calculating wait-time measures or gave conflicting answers about which definitions were being used. VHA has not clearly communicated the definitions used or changes made to these definitions used in its wait-time calculations, which is contrary to federal internal controls standards that call for management to communicate reliable and relevant information in a timely manner. This limits the reliability and usefulness of these data in determining progress in meeting stated objectives for veterans' timely access to mental health care. As a result, we recommended that VHA issue guidance about the definitions used to calculate wait times, such as how a new patient is defined, and communicate any changes in wait-time data definitions within and outside VHA. VHA concurred with our recommendation and stated that it plans to publicly provide an updated data definition document in October 2015 and will issue an information letter in November 2015 that contains sources where both internal and external stakeholders can locate the definitions used to calculate wait times, including how a new patient is defined. Data may not be comparable between VAMCs. When VAMCs use open-access appointments, data may not be comparable across VAMCs. Open-access appointments are typically blocks of time for veterans to see providers without a scheduled appointment. In these cases, because appointments are not scheduled until veterans come to the medical center, the preferred and appointment dates are the same and wait times are calculated as 0 days, regardless of when veterans initially requested or were referred for mental health care. We found inconsistencies in the implementation of these appointments, including one VAMC that was referring veterans to these open-access appointments after an initial evaluation by phone rather than rather than being given specific appointments. Those veterans who were referred to the open-access appointments were tracked using a manually maintained list outside of VHA's scheduling system. We found that follow-up with these veterans was inconsistent, and nearly half never showed up to the open-access appointments. VHA does not have guidance that clarifies how to manage and track open-access appointments, which is inconsistent with federal internal controls that call for management to clearly document policies for significant activities to help ensure management's directives are carried out properly. As a result, officials at the VAMCs that used open-access appointments said they were unclear about how they could be used, how they should be entered into VHA's scheduling system, and whether local tracking mechanisms were compliant with VHA scheduling policies. Without guidance on how appointment scheduling for open-access clinics is to be managed, VAMCs can continue to implement these appointments inconsistently, and place veterans on lists outside of VHA's scheduling system, potentially posing serious risks to veterans needing mental health care. As a result, we recommended VHA issue clarifying guidance on how open-access appointments are to be managed. VHA concurred with our recommendation, stating that it conducted training during the summer of 2015 for schedulers based on existing VHA policy that included instructions on how to schedule same-day appointments, which VHA considers to include open-access appointments. VHA further stated its plans to aggressively monitor appointment management and identify areas of local inconsistency in scheduling procedures. However, VHA's description of same-day appointments does not capture the circumstances we observed during our review, in which veterans who would normally be given an appointment were instead referred to an open-access clinic. We reviewed the training that VHA said was provided to schedulers, but it did not address the circumstances we described. Given differences between types of same-day appointments (e.g., walk-in clinics where no prior evaluation may be required and open-access clinics that include an evaluation prior to referral), issuing specific guidance for open-access appointments would help to ensure veterans are getting their needs served and to improve data comparability across VAMCs. VHA hired about 5,300 new clinical and non-clinical mental health staff between June 2012 and December 2013 for both its inpatient and outpatient programs, meeting the goals of its hiring initiative. Officials at the five VAMCs we visited reported local improvements in access to mental health care due to the additional hiring. For example, officials at one VAMC reported being able to offer more evidence-based therapies. Officials at this VAMC, as well as officials from another VAMC and two CBOCs, cited the ability to provide mental health care at new locations where they were previously unable to do so. Although VHA considered their hiring initiative a success because it met its goals, the five VAMCs we visited still had mental health staff vacancy rates ranging from 9 to 28 percent, and 4 of the 5 VMACs were unable to meet overall demand for mental health services. Officials at the five VAMCs reported a number of challenges in hiring and placing mental health providers, including pay disparity with the private sector; competition among VAMCs filling positions at the same time; lengthy VHA hiring process; lack of space for newly hired mental health staff; lack of support staff to assist providers; and nationwide shortage of mental health professionals. Despite VHA's hiring initiative, additional staff likely will be needed to meet VHA's growing demand for mental health care. In an April 2015 report, VHA projected a roughly 12 percent increase in mental health staff would be needed to maintain the current veteran staffing ratios for fiscal years 2014-2017. To address some of the mental health hiring challenges, VAMCs reported using various recruitment and retention tools, including hiring and retention bonuses, student debt repayment, and using internships and academic affiliations to find potential recruits. In November 2014, VHA raised the annual salary ranges for all physicians system-wide, including psychiatrists, to enhance the agency's recruiting, development, and retention abilities. Officials at the five VAMCs we visited also described strategies they used to manage demand for mental health care in light of staffing challenges, including (1) increasing the use of telehealth and group therapy (rather than individual therapy); (2) addressing space and staffing constraints by sharing offices or altering provider schedules; and (3) referring veterans to other VA locations when a preferred CBOC was not available. In 2013, 10 VAMCs across VHA participated in a pilot that established partnerships with 23 community mental health clinics (CMHCs), as required by an August 2012 Executive Order in an effort to help VHA meet veterans' mental health needs; these CMHCs provided mental health care to a limited number of veterans. Veterans received approximately 2,400 mental health appointments through the CMHCs, which accounted for approximately 2 percent of the total mental health care provided across the 10 participating VAMCs. Nearly half of the care provided through the pilot program was through partnerships with the Atlanta VAMC. The most common service veterans received was individual therapy or counseling, but other commonly provided services included group therapy, medication management, and treatment for substance abuse. According to VHA's survey of veterans who received care through the CMHCs during the pilot, veterans were generally satisfied with the care they received. VHA and CMHC officials in our review described a number of successes and challenges related to the pilot program. Successes included improved capacity and communication. For example, officials at one VAMC said they would not have been able to maintain mental health care access at current levels without the capacity provided by the pilot sites. Additionally, officials at three VAMCs said their partnerships allowed them to expand access by providing additional and more convenient care to veterans living in rural areas. VAMC and CMHC officials also said that having a VAMC liaison on site or a dedicated point of contact improved communication, which helped facilitate veterans' access to care. Challenges with the community provider pilot included a number of administrative issues, including challenges with the timely receipt of medical documentation and payment for services, as well as technical challenges, particularly related to the transfer of medical files and the use of telemental health technology. Other challenges included confusion among some VAMC officials about the different non-VA programs available to veterans and concerns about the appropriateness of care, including whether there were a sufficient number of community providers with the necessary training and experience to provide culturally competent and high-quality care to veterans. Chairman Isakson, Ranking Member Blumenthal, and Members of the Committee, this concludes my prepared statement. I would be pleased to answer any questions that you may have at this time. If you or your staff members have any questions concerning this testimony, please contact Debra A. Draper at (202) 512-7114 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. Other individuals who made key contributions to this testimony include Lori Achman, Assistant Director; Jennie F. Apter; Jacquelyn Hamilton; Eagan Kemp; Vikki L. Porter; and Malissa G. Winograd. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.
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This testimony summarizes the information contained in GAO's October 2015 report, entitled VA Mental Health: Clearer Guidance on Access Policies and Wait-Time Data Needed ( GAO-16-24 ). The way in which the Department of Veterans Affairs' (VA) Veterans Health Administration (VHA) calculates veteran mental health wait times may not always reflect the overall amount of time a veteran waits for care. VHA uses a veteran's preferred date (determined when an appointment is scheduled) to calculate the wait time for that patient's full mental health evaluation, the primary entry point for mental health care. Of the 100 veterans whose records GAO reviewed, 86 received full mental health evaluations within 30 days of their preferred dates. On average, this was within 4 days. However, GAO also found veterans' preferred dates were, on average, 26 days after their initial requests or referrals for mental health care, and ranged from 0 to 279 days. Further, GAO found the average time in which veterans received their first treatment across the five VA medical centers (VAMC) in its review ranged from 1 to 57 days from the full mental health evaluation. conflicting access policies for allowable wait times for a full mental health evaluation--14 days (according to VHA's mental health handbook) versus 30 days (set in response to recent legislation) from the veteran's preferred date--created confusion among VAMC officials about which policy they are expected to follow. These conflicting policies are inconsistent with federal internal control standards and can hinder officials' ability to ensure veterans are receiving timely access to mental health care. VHA monitors access to mental health care, but the lack of clear policies on wait-time data precludes effective oversight. GAO found VHA's wait-time data may not be comparable over time and between VAMCs. Specifically data may not be comparable over time. VHA has not clearly communicated the definitions used, such as how a new patient is identified, or changes made to these definitions. This limits the reliability and usefulness of the data in determining progress in meeting stated objectives for veterans' timely access to mental health care. data may not be comparable between VAMCs. For example, when open-access appointments are used, data are not comparable between VAMCs. Open-access appointments are typically blocks of time for veterans to see providers without a scheduled appointment. GAO found inconsistencies in the implementation of these appointments, including one VAMC that manually maintained a list of veterans seeking mental health care outside of VHA's scheduling system. Without guidance stating how to manage and track open-access appointments, data comparisons between VAMCs may be misleading. Moreover, VAMCs may lose track of patients referred for mental health care, placing veterans at risk for negative outcomes.
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Vaccination is the primary method for preventing influenza and its more severe complications. Flu vaccine is produced and administered annually to provide protection against particular influenza strains expected to be prevalent that year. When the match between the vaccine and the circulating viruses is close, vaccination may prevent illness in about 70-90 percent of healthy people aged 64 or younger. It is somewhat less effective for the elderly and those with certain chronic diseases but, according to CDC, it can still prevent secondary complications and reduce the risk for influenza-related hospitalization and death. CDC estimates that during the average flu season, for every 1 million elderly persons that are vaccinated approximately 1,300 hospitalizations and 900 deaths are prevented. Information on which groups are at highest risk for medical complications associated with influenza and recommendations on who should receive a flu shot are issued by CDC's Advisory Committee on Immunization Practices (ACIP). Because the flu season generally peaks between December and early March, and because immunity takes about 2 weeks to establish, most medical providers administer vaccinations between October and mid- November. CDC's ACIP recommended this period as the best time to receive a flu shot. However, if flu activity peaks in February or March, as it has in 10 of the past 19 years, vaccination in January or later can still be beneficial. Producing the vaccine is a complex process that involves growing viruses in millions of fertilized chicken eggs. This process, which requires several steps, generally takes at least 6 to 8 months between January and August each year. Each year's vaccine is made up of three different strains of influenza viruses, and typically each year, one or two of the strains is changed to better protect against the strains that are likely to be circulating during the next flu season. FDA decides which strains to include and also licenses and regulates the manufacturers that produce the vaccine. Three manufacturers--two in the United States and one in the United Kingdom--produced the vaccine used during the 2000-01 flu season. Much like other pharmaceutical products, flu vaccine is sold to thousands of purchasers by manufacturers, numerous medical supply distributors, and other resellers such as pharmacies. Purchasers then administer flu shots in medical offices, public health clinics, nursing homes and pharmacies, as well as in less traditional settings such as grocery stores and other retail outlets, senior centers, and places of employment. For the 1999-2000 flu season, about 77 million doses of vaccine were distributed nationwide. CDC estimates that about half of the vaccine was administered to people with high-risk conditions and to health care workers, and the balance was administered to healthy people younger than 65 years. Overall, manufacturing problems led to vaccine production and distribution delays of about 6-8 weeks in 2000-01. Although the eventual supply was about the same as the previous year's, the delay limited the amount of vaccine available during October and early November, the period when most people normally receive their flu shot. While the effect of the delay and initial shortage in terms of the number of high-risk persons vaccinated will not be known for some time, other effects can be observed, particularly in terms of the price of the vaccine. Providers who decided to purchase vaccine from those distributors who had it available during the October and November period of limited supply and higher demand often found prices that were several times higher than expected. Many providers who decided to wait for their orders placed earlier eventually received them, and at the lower prices they had initially contracted for. By December, as vaccine supply increased and demand dropped, prices declined. For the 2000-01 flu season, manufacturers collectively took about 6-8 weeks longer than normally expected to produce and distribute all of the flu vaccine. This delay meant that the bulk of the vaccine was not ready for market during the period of October and early November that CDC recommended as the best time to receive flu shots. This is also the time when most practitioners are used to administering the vaccine and when most people are used to receiving it. In 1999, more than 70 million doses of vaccine were available by the end of October; in 2000, fewer than 28 million doses were available by that date. Two main factors contributed to the delay. The first was that two manufacturers had unanticipated problems growing one of the two new influenza strains introduced into the vaccine for 2000-01. Because manufacturers must produce a vaccine that includes all three strains selected for the year, delivery was delayed until sufficient quantities of this difficult strain could be produced. The second factor was that two of the four manufacturers that produced vaccine the previous season shut down part of their manufacturing facilities because of FDA concerns about compliance with good manufacturing practices. One manufacturer temporarily closed on its own initiative to make facility improvements and address quality control issues raised during an FDA inspection; the other was ordered by FDA to cease production until certain actions were taken to address a number of concerns, including issues related to safety and quality control. The former reopened its facilities but the other manufacturer, which had been expected to produce 12-14 million doses for the 2000-01 flu season, announced in September 2000 that it would cease production altogether and, as a result, supplied no vaccine for 2000-01. These problems did not affect every manufacturer to the same degree. In particular, the manufacturer that produced the smallest volume of vaccine did not experience production problems or delays in shipping its vaccine. By the end of October, this manufacturer had distributed nearly 85 percent of its vaccine, while the two other manufacturers had shipped only about 40 percent and less than 15 percent, respectively. Purchasers who ordered their vaccine from the manufacturer with no major production problems were far more likely to receive their vaccine on time. For example, the state of Alabama ordered vaccine directly from all three manufacturers before July 2000 at a similar price per dose. As table 1 shows, the state received its shipments at markedly different times, reflecting how soon each manufacturer was able to get its vaccine to market. Purchasers that contracted only with the late-shipping manufacturers were in particular difficulty. For example, health departments and other public entities in 36 states banded together under a group purchasing contract and ordered nearly 2.6 million doses from the manufacturer that ended up having the greatest delays from production difficulties. Some of these public entities, which ordered vaccine for high-risk people in nursing homes or clinics, did not receive most of their vaccine until December, according to state health officials. The 2000-01 experience illustrates the fragility of the vaccine supply. Because influenza virus strains take a certain period of time to grow, the process cannot be accelerated to make up for lost time. When manufacturers found that one strain for the vaccine was harder to produce than expected, they adjusted their procedures to achieve acceptable yields, but it still took months to produce. Because only three manufacturers remain, the difficulties associated with vaccine production, and the need to formulate a new vaccine involving one or more new strains each year, the future vaccine supply is uncertain. Problems at one or more manufacturers can significantly upset the traditional fall delivery of influenza vaccine. Because supply was limited during the usual vaccination period, distributors and others who had supplies of the vaccine had the ability-- and the economic incentive--to sell their supplies to the highest bidder during this time rather than filling lower-priced orders they had already received. According to distributors, and purchasers, a vaccine order's price, quantity, and delivery might not be guaranteed. When no guarantee or meaningful penalty applies, orders can be cancelled or cut and deliveries can be delayed when vaccine is in short supply. Because of the production delays, many purchasers found themselves with little or no vaccine when the peak time came for vaccinations. Many of these purchasers had ordered vaccine months earlier at agreed-upon prices, with delivery scheduled for early fall. While some orders were cancelled outright or cut substantially, many purchasers were told that the vaccine was still being produced and that their full order would be delayed but delivered as soon as possible. This left many purchasers with a choice: they could take a risk and wait for the vaccine they had ordered, or they could try to find vaccine immediately to better ensure that patients were vaccinated before the flu season struck. Most of the physician groups and state health departments that we contacted reported that they waited for delivery of their early orders. For example, of the 53 physician group practices we surveyed that ordered vaccine before the end of June 2000, 34 groups waited for delivery of these original orders. Those who purchased vaccine in the fall--because they did not want to wait for their early orders to be delivered later, had orders canceled or reduced, or just ordered later--found themselves paying much higher prices. The following examples illustrate the higher prices paid to make up for reduced orders or delayed delivery: The state of Hawaii initially ordered 12,000 doses of vaccine from one distributor in June at $2.80 per dose. When the distributor cut the order by one-third, the state purchased vaccine from another distributor in September at a price between $5.00 and $6.00 per dose. One physician practice ordered flu vaccine from a supplier in April 2000 at $2.87 per dose. When it received none of that vaccine by November 1, the practice placed three smaller orders in November with a different supplier at the escalating prices of $8.80, $10.80, and $12.80 per dose. By the first of December, the practice ordered more vaccine from a third supplier at $10.80 per dose. The four more expensive orders were delivered immediately, before any vaccine had been received from the original April order. The data we collected from 58 physician group practices around the country provide another indication of how prices spiked during the period of high demand in October and November. Overall, the price paid by these practices averaged $3.71 per dose. However, as table 2 shows, the average price paid for orders placed by these practices in October and November was about $7 per dose, compared with about $3 per dose for advance orders placed in June or before. While some vaccine was available to those willing to pay a higher price in October and November, some purchasers trying to buy vaccine reported that they were unable to find vaccine from any supplier at any price during that time. For example, one large health maintenance organization told us that when delivery of its early order was delayed, it could not find any source with the large number of doses it needed and ended up waiting until November and December for delivery of more than a million doses it had ordered in the spring. Vaccine prices came down as a large quantity of vaccine was delivered in December, after the prime period for flu vaccinations had passed. Vaccine became increasingly available in December and manufacturers and distributors delivered the orders or parts of orders that had been postponed. In addition, recognizing the potential shortfall in production, CDC contracted in September 2000 with one manufacturer to extend production into late December for 9 million additional doses. Providers buying vaccine in December could do so at prices similar to those in place during the spring and summer. Among the physician groups we contacted, none of which ordered under the CDC contract, the price for orders placed in December or later averaged about $3.50 per dose--somewhat above the average price paid through June, but about half of the average price of orders placed in October and November. Although vaccine was plentiful by December, fewer people were seeking flu shots at that time. According to manufacturers and several large distributors, demand for influenza vaccine typically drops by November and it is difficult to sell vaccine after Thanksgiving. Despite efforts by CDC and other public health officials to encourage people to obtain flu shots later in the 2000-01 season, providers and other purchasers still reported a drop in demand for flu shots in December 2000. A reason people did not continue to seek flu shots in December and later may have been that the 2000-01 flu season was unusually light. Data collected by CDC's surveillance system showed relatively low influenza activity and mortality. While mortality due to influenza and pneumonia-- one indicator of the severity of a flu season--had surpassed CDC's influenza epidemic thresholds every year since 1991, it had not done so by April of the 2000-01 season. Had a flu epidemic hit in the fall or early winter, the demand for influenza vaccine may have increased substantially. As a result of the waning demand, manufacturers and distributors reported having more vaccine than they could sell. Manufacturers reported shipping about 70 million doses, or about 9 percent less than the previous year. More than 7 million additional doses produced under the CDC contract were never shipped at all because of lack of demand. None of the physician practices that we contacted had ordered from the CDC contract, mainly because they were waiting for earlier orders to arrive or they had already received some or all of their vaccine. In addition, some physicians' offices, employee health clinics, and other organizations that administered flu shots reported having unused doses in December and later. For example, the state of Oklahoma reported having more than 75,000 unused doses of vaccine. While it is difficult to determine if any of these events will affect the price of vaccine in the future, prices for early orders for the upcoming 2001-02 flu season have increased substantially over prior years' prices. Physician practices, state public health departments, and other purchasers reported that their suppliers are quoting prices of $4 to $5 per dose, or about 50 to 100 percent higher than the early order prices for the 2000-01 season. Citing expenses associated with expanding the production capacity and the costs of maintaining a modern and compliant facility, one manufacturer notified customers of a significant price increase for 2001- 02. There is no mechanism currently in place to distribute flu vaccine to high- risk individuals before others. In a typical year, there is enough vaccine available in the fall to give a flu shot to anyone who wants one. When the supply was not sufficient in the fall of 2000, focusing distribution on high- risk individuals was difficult because all types of providers served at least some high-risk people. Lacking information to identify which orders should be filled first to serve the population most in need, manufacturers and distributors who did attempt to target higher-risk persons used a variety of approaches to distribute the limited vaccine. According to public health officials and providers, there was confusion in many communities as some providers were able to administer flu shots to anyone requesting one, while at the same time, other providers had no vaccine for even their highest-risk patients. Like other pharmaceutical products, influenza vaccine is distributed largely through multiple channels in the private sector that have evolved to meet the specific needs of different types of purchasers. Those selling and delivering vaccine include the manufacturers themselves, distributors of general medical supplies and pharmaceuticals, and other types of resellers such as pharmacies. According to data from the manufacturers, about half of all flu vaccine is purchased by providers directly from manufacturers and roughly half is purchased through distributors and resellers. As a general practice, manufacturers said they pre-sell almost all of their planned production volume by May or June of each year. Major distributors and other large volume purchasers, including state health departments, can obtain the most favorable prices by ordering directly from manufacturers during this early order period. The distributors and other resellers can then offer smaller purchasers such as physicians' offices the convenience and flexibility of buying flu vaccine along with their other medical supplies. Most experts we interviewed agreed that when the supply of vaccine is sufficient, reliance on these varied distribution channels allows for the successful delivery of a large volume of influenza vaccine in time for the annual fall vaccination period. Providers of flu vaccine also represent a diverse group. The annual influenza vaccine is widely available as a convenience item outside the usual medical settings of physicians' offices, clinics, and hospitals. Millions of individuals, including those who are not at high risk, receive flu shots where they work or in retail outlets such as drugstores and grocery stores. Some of these providers order their own flu vaccine from a manufacturer or distributor, others participate in different types of purchasing groups, and others contract with organizations such as visiting nurse agencies to come in and administer the vaccine. The widespread availability of flu shots at both traditional medical settings and at convenience locations where people shop, work, and play may contribute to increased immunization rates. HHS survey data show that between 1989 and 1999, influenza immunization rates more than doubled for individuals aged 65 and older (see table 3). During that same period, however, immunization rates increased more than five-fold for the 18-49 year age group, which includes individuals who are likely to be at lower risk and to receive flu shots in nonclinical settings. While access to flu shots in a wide range of settings is an established mass immunization strategy, some physicians and public health officials view it as less than ideal for targeting high-risk individuals. Because of the expected delay or possible shortage of vaccine for the 2000-01 season, CDC and ACIP recommended in July 2000 that mass immunization campaigns be delayed until early to mid-November. CDC issued updated guidelines in October 2000 which stated that vaccination efforts should be focused on persons aged 65 and older, pregnant women, those with chronic health conditions that place them at high risk, and health care workers who care for them. Regarding mass immunization campaigns, these updated guidelines stated that while efforts should be made to increase participation by high-risk persons and their household contacts, other persons should not be turned away. Although some vaccination campaigns open to both high-risk and lower- risk individuals were delayed as recommended by CDC, many private physicians and public health departments raised concerns that they did not have vaccine to serve their high-risk patients at the time these campaigns were underway. The following are a few examples of promotional campaigns held across the nation that created controversy: One radio station sponsored a promotional event where a flu shot and a beer were available at a local restaurant and bar for $10 to whoever wanted one. One grocery store chain offered a discounted flu shot for anyone bringing in three soup can labels. Flu shots were available for purchase at a professional football stadium to all fans attending the game. We interviewed several retail outlets and employers and the companies they contract with to conduct mass immunization clinics. While some reported that they disseminated information on who was at high risk and stressed the need for priority vaccination among high-risk groups, they generally did not screen flu shot recipients for risk. The perspective of these companies was that the burden lies with the individual to determine his or her own level of risk, not with the provider. Moreover, they said that the convenience locations provide an important option for high-risk individuals, because physicians' offices would have difficulty vaccinating all high-risk individuals during the optimal time period of October through mid-November. Other organizations held flu clinics open to lower-risk individuals in the early fall before realizing the extent of the vaccine supply problems. Because there generally has been enough vaccine to meet demand in recent years, there was little practical need for the fragmented distribution process to develop the capability to determine which purchasers might merit priority deliveries based on serving high-risk individuals. When the supply of vaccine was delayed in the fall of 2000, the manufacturers and distributors we interviewed reported that it was difficult to determine which of their purchasers should receive priority vaccine deliveries in response to the ACIP's July and October 2000 recommendations to vaccinate high-risk groups first. Although some types of providers are more likely than others to serve high-risk individuals, it is likely that all types of providers serve at least some high-risk individuals. CDC and ACIP did not provide guidance about how to implement priority deliveries, and manufacturers and some distributors reported that they often did not have enough information about their customer base to make such decisions. As a result, they reported using various approaches in distributing their vaccine. One manufacturer reported that it initially followed its usual policies of distributing vaccine on the basis of initial order date--that is, orders were filled on a first in, first out basis--and honoring contracts with specific delivery dates. According to the manufacturer, a few contracts in which purchasers paid a premium price for an early delivery date received priority in distribution. However, less than halfway through its season's distribution, this company notified customers at the end of October that it changed its policy in order to make partial shipments to all purchasers as a way of ensuring more equitable treatment for all. One manufacturer reported that it first shipped vaccine to nursing home customers (where such customers could be identified) and then made partial shipments to other customers. One manufacturer sold all of its vaccine in the United States through one distributor. That distributor, which also sold vaccine from the other manufacturers, told us that it attempted to give priority to orders from physicians and then orders from state and local governments. Other distributors we contacted also used varied approaches to distribute vaccine in 2000. For example, officials from one large medical supply distributor said that after a manufacturer cut its order substantially, the distributor gave priority to the medical practices that ordered early. The distributor reported that it cancelled all orders from resellers and pharmacies, cancelled all orders that came in after June 21, and reduced all orders from medical practices that came in before June 21 by an equal percentage. Another medical supply distributor said it did not sell vaccine to any providers that were not regular customers until it had filled the early orders of its regular customers. Officials from the Health Industry Distributors Association, a national trade association representing medical products distributors, said that distributors are limited in their ability to target certain types of people because they can only target distribution by type of provider, such as physicians' offices, nursing homes, or hospitals. All of the manufacturers and distributors we talked to said that once they distributed the vaccine it would be up to the purchasers and health care providers to target the available vaccine to high-risk groups. The success of these various approaches to reach high-risk groups was limited by the wide variety of paths the vaccine takes from the manufacturers to the providers who administer the flu shots. For example, although one manufacturer shipped available vaccine to the nursing homes it could identify in its customer base as first priority, this did not ensure that all nursing homes received vaccine for their high-risk patients on a priority basis. State health officials reported that nursing homes often purchase their flu vaccine from local pharmacies or rely on public health officials to provide the vaccine. In those cases, how quickly nursing homes received vaccine for their high-risk residents depended on the practices along the distribution chain--in some cases involving the practices of manufacturers, distributors, pharmacies, and public health providers. Physicians also reported that they did not receive priority, even though nearly two-thirds of the elderly who had flu shots in 1998-99 received them in medical offices. The American Medical Association and other physicians told us that in some communities vaccine was available at retail outlets and other sources before physicians' offices. The 58 physician group practices we surveyed, which received nearly 90,000 doses from manufacturers, distributors, and other resellers reported receiving their vaccine at about the same time or slightly later than when manufacturers shipped more than 70 million doses (see table 4). Thus as a group these physician practices appeared to experience no priority in vaccine distribution. While HHS has no direct control over how influenza vaccine is purchased and distributed by the private sector and local governments during the annual influenza season, it has several initiatives under way to help mitigate the adverse effects of any future shortages and delays. Success of these various efforts, however, relies on collaboration between the public and private sectors. Completion of HHS' national plan to respond to an influenza pandemic could help foster this type of collaboration and provide a foundation to deal with vaccine shortages or delays in non- pandemic years. In the meantime, increasing immunization rates against pneumococcal pneumonia, which can follow the flu, may help reduce influenza-related illness and death. In response to the production and distribution problems experienced with flu vaccine for the 2000-01 flu season, HHS has undertaken several initiatives. As shown in table 5, these initiatives include (1) conducting clinical trials on the feasibility of using smaller doses of vaccine for healthy 18- to 49-year-olds, (2) working with public and private sector entities involved in vaccine distribution to explore ways of better targeting vaccine to high-risk groups, (3) recommending state and local health department actions to prepare for a vaccine delay or shortage, and (4) revising guidelines to expand the recommended timing of influenza immunizations. Success of these initiatives relies to a great extent on the willingness of manufacturers, distributors, private physicians, other vaccine providers, and the public to cooperate. For example, if manufacturers requested and FDA approved the use of half-doses of vaccine for certain healthy adults while full-doses of vaccine were given to high-risk adults, implementation strategies may have to address provider concerns about any associated administrative burden. And if distribution guidelines are agreed upon and implemented, vaccine sellers may have to sacrifice the additional revenue of selling to those willing to pay higher prices regardless of relative need. The importance of collaboration between the public and private sector to develop and implement initiatives to address flu vaccine shortages at the state and local level was highlighted by state public health officials we interviewed. States where public- and private-sector entities collaborated early to deal with the delay in vaccine shipments reported some success in targeting high-risk people for vaccination. For example: Before the fall 2000 vaccination period, health officials in Utah had partnered with Medicare's local Peer Review Organization (PRO) and a private managed care organization and others to form an Adult Immunization Coalition. This coalition had already identified the number and location of high-risk people living in the state and worked to target vaccine first to these locations. New Mexico health officials participated in a consortium with public and private providers that purchased about 90 percent of vaccine in the state. After nursing home residents were vaccinated, this consortium implemented a three-tiered vaccination strategy. This strategy first targeted the elderly, people with chronic disease and health care workers. Next it targeted household members or close contacts of the first group. Finally, it targeted vaccine to everyone else. CDC officials acknowledge that outreach and educational efforts are needed to change the behavior of both providers and the public to recognize the benefit of flu shots administered after mid-November. For the 2000-01 flu season, CDC undertook several outreach and educational efforts, including issuing guidelines and notices in its Morbidity and Mortality Weekly Report, posting information on a CDC web site, and conducting a media campaign in selected cities. However, the relative effectiveness of these various efforts remains unknown. In addition, CDC has planned various projects to evaluate the impact of the delay of flu vaccine availability on immunization rates and the vaccination practices of providers for the 2000-01 season. For example, CDC is surveying providers about the risk level of the people they vaccinated, providers' responses to the delays in obtaining vaccine, and the methods they used to target vaccinations. HHS has been working since 1993 to develop a national response plan that would outline actions to be taken to address vaccine delays or shortages during an influenza pandemic. While such a plan is expected to be used only in cases of public health emergencies, advance preparation by manufacturers, distributors, physicians, and public health officials to respond to a pandemic could provide a foundation to deal with some of the problems experienced during the 2000-01 flu season. For example, while some manufacturers and distributors tried various methods to target vaccine first to people who were at high risk for complications, they were often unable to identify these populations. The development of a methodology to identify and target various population groups under the pandemic plan could be a useful tool in this regard. In addition, pandemic planning activities could build collaborative relationships among affected parties that could be useful in dealing with vaccine shortages in non- pandemic years. As we reported in October 2000, HHS has not completed a national pandemic response plan that would, among other things, address how to deal with shortages of vaccine. While HHS has set a completion date of June 2001 for the body of the plan, it has not set specific dates for completing the detailed appendixes needed to implement the plan should vaccine be delayed or in short supply. Another ongoing HHS effort that could mitigate the impact of an influenza vaccine shortage is to increase adult immunization rates against pneumococcal disease, which causes a type of pneumonia that frequently follows influenza. The population most at risk for pneumococcal pneumonia includes the elderly and those with chronic illnesses--the same groups at high-risk for complications or death following infection with influenza. Because pneumococcal vaccine provides immunity for at least 5 to 10 years, it can provide some protection against one of the serious complications associated with influenza if the annual influenza vaccine is unavailable. Although pneumococcal vaccine provides added protection against a major influenza-related illness, widespread use among the high-risk population remains relatively low. HHS has set its goal for 2010 to achieve 90 percent immunization against pneumococcal disease among the elderly and 60 percent among other high-risk adults. Available data show that only 54 percent of the elderly and 13 percent of younger high-risk adults have been vaccinated against pneumococcal disease. For the population 65 years and older, HCFA, which administers the Medicare program, has activities directed toward increasing both pneumococcal and influenza vaccination rates. For example, HCFA has contracted with its 53 PROs to work within communities to raise immunization rates. The extent that state immunization rates for pneumococcal vaccine and influenza vaccine improve over time is a factor that HCFA will consider in evaluating PRO performance. CDC also supports efforts to increase adult immunizations, such as influenza and pneumococcal immunizations, for people aged 65 and older and others with medical conditions placing them at high risk for influenza and pneumococcal pneumonia. In 2001, CDC awarded $159 million for Preventive Health Services Immunization grants to support state infrastructures for childhood and adult immunization. However, because CDC considers activities to support childhood immunization a priority for these grants, only 5 of the 64 grantees targeted more than 10 percent of grant funds to support adult immunization efforts. While HCFA and CDC have taken some steps to coordinate many of their adult immunization activities, including efforts to increase pneumococcal immunization, their performance goals may differ. For example, in their fiscal year 2001 performance plans, HCFA set a target of vaccinating 55 percent of those 65 years and older against pneumococcal disease, while CDC set a more ambitious target of 63 percent. The circumstances that led to the delay and early shortage of flu vaccine during the 2000-01 flu season could repeat themselves in the future. Ensuring an adequate and timely supply of vaccine, already a difficult task given the current manufacturing process, has become even more difficult as the number of manufacturers has decreased. Now, a production delay or shortfall experienced by even one of the three remaining manufacturers can significantly impact overall vaccine availability. The effects of production delays in 2000-01 were exacerbated by the expectation of providers and the public that flu shots should be received by Thanksgiving or not at all, even though a flu shot after this time would provide a reasonable level of protection in most years. In the event of a future delay or shortage, determining the most effective means of changing this traditional behavior will be beneficial. The purchase, distribution, and administration of flu vaccine are mainly private-sector responsibilities. Consequently, HHS' actions to help mitigate any adverse effects of vaccine delays or shortages need to rely to a great extent on collaboration with private-sector participants. By completing its own planning efforts for dealing with these issues during a pandemic, as we previously recommended, HHS would provide a foundation for building collaboration among suppliers and purchasers of flu vaccine that could help improve the vaccine distribution process. The March 2001 meeting with public health officials, vaccine manufacturers, distributors, physicians, and others is a potentially useful first step towards developing voluntary guidelines for distribution in the event of a future delay or shortage, but more work is needed before consensus is achieved. Success is contingent on consensus and continued commitment by all parties. In addition, to maximize results federal and state agencies need to fully coordinate their pneumococcal vaccination efforts to set and achieve common goals. While pneumococcal vaccination is not a substitute for the annual flu shot, it can provide protection against a major complication of influenza if the flu vaccine is not available. In the event that future shortages of influenza vaccine cannot be avoided, coordination among HCFA, CDC, and state programs designed to increase pneumococcal immunizations now may contribute to lowering future hospitalization and death rates due to influenza-related pneumonia. We recommend that the Secretary of HHS take the following actions: To prepare for potential delays or shortages in flu vaccine, instruct the Director of CDC to assess the relative success of its past outreach and education efforts and identify those means that are most effective in changing behavior to meet public health priorities. When appropriate, these means should be used as the primary method to educate flu vaccine providers and the general public well before the start of the traditional fall vaccination period. To improve response to future vaccine delays or shortages, instruct the Director of CDC to continue to take a leadership role in organizing and supporting efforts to bring together all stakeholders to formulate voluntary guidelines for vaccine distribution. Specifically, in formulating guidelines for getting vaccine to high-risk individuals first in times of need, work with stakeholders to pursue the feasibility of steps that showed promise in the 2000-01 flu season. To maximize use of federal resources, instruct the Director of CDC to work to complement HCFA's ongoing activities to improve pneumococcal immunization rates among the Medicare population and focus CDC's funded efforts on increasing pneumococcal immunization in the high-risk non-Medicare population. We provided a draft of this report to HHS for review. In its written comments (see app. II), HHS identified actions that it had initiated or planned to undertake related to two of our recommendations. For example, HHS stated that CDC had efforts underway to assess the relative success of the outreach and educational efforts for the 2000-01 flu season, and that it was working with stakeholders to try to develop contingency plans for vaccine distribution in the event of future supply problems. Regarding our third recommendation, HHS stated that pneumococcal immunization could be part of a broader plan for the government to reduce the overall impact of influenza in case of vaccine supply problems. HHS also commented that our draft report overstated HHS' authority to exercise greater control over vaccine purchase and distribution in the event of a public health emergency such as an influenza pandemic. We have revised the report language to better reflect our point, which was not about the extent of HHS' authority to respond to a pandemic, but rather about using pandemic planning activities to better prepare for vaccine shortages in non-pandemic years as well. HHS also provided technical comments, which we incorporated where appropriate. We are sending copies of this report to the Honorable Tommy G. Thompson, Secretary of HHS; the Honorable Jeffrey P. Koplan, Director of CDC; the Honorable Bernard A. Schwetz, Acting Principal Deputy Commissioner of FDA; Michael McMullan, Acting Deputy Administrator of HCFA; Martin G. Myers, Director of NVPO; and others who are interested. We will also make copies available to others on request. If you or your staffs have any questions, please contact me at (202) 512- 7119. An additional GAO contact and the names of other staff who made major contributions to this report are listed in appendix III. For the 2000-01 flu season, the CDC Advisory Committee on Immunization Practices (ACIP) issued guidance in April 2000 that strongly recommended influenza vaccination for those persons who--because of age or underlying medical condition--are at increased risk for complications of influenza. For the first time, the committee lowered the age for universal vaccination from 65 years to 50 years of age, adding an estimated 28 to 31 million persons to the target population. The reason for this expansion was to increase vaccination rates among persons aged 50-64 with high-risk conditions, since age-based strategies have been more successful than strategies based on medical condition. The committee also recommended that health-care workers and other individuals in close contact with persons in high-risk groups should be vaccinated to decrease the risk of transmitting influenza to persons at high risk. Because of expected delays or possible shortages of influenza vaccine for the 2000-01 flu season, the committee issued adjunct recommendations on July 14, 2000. In addition to recommending that mass immunization campaigns be delayed, these adjunct recommendations said that (1) vaccination of high-risk individuals should proceed with available vaccine, (2) provider-specific contingency plans should be developed for possible vaccine shortages, and (3) vaccine administered after mid-November can still provide substantial benefits. Updated recommendations were issued on October 6, 2000, stating that a shortage had been averted but distribution would be delayed. These updated recommendations placed highest priority on those persons aged 65 and older, pregnant women and those persons with chronic health conditions that placed them at high risk, and health care workers who care for them. Table 6 shows the target groups for influenza immunization from these updated recommendations. The update also recommended that mass vaccination campaigns should be scheduled later in the season and that these campaigns should try to enhance coverage among those at greatest risk for complications of influenza and their household contacts. However, the recommendations stated that other persons should not be turned away. The updated recommendations also emphasized that special efforts should be made in December and later to vaccinate persons aged 50-64 and that vaccination efforts for all groups should continue into December and later when vaccine was available. Other major contributors to this report were Lacinda Ayers, George Bogart, Ellen M. Smith, Stan Stenersen, and Kim Yamane.
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Until the 2000-2001 flu season, the production and the distribution of flu vaccine generally went smoothly. In the fall of 2000, however, stories began to circulate about delays in obtaining flu vaccines. GAO reviewed (1) the circumstances that contributed to the delay and the effects the delay had on prices paid for vaccine, (2) how effectively current distribution channels ensure that high-risk populations receive vaccine on a priority basis, and (3) what the federal government is doing to better prepare for possible disruptions of influenza vaccine supply. GAO found that manufacturing difficulties resulted in an overall delay of about 6-8 weeks in shipping vaccine to most customers and a temporary price spike. Manufacturers experienced unprecedented problems growing a new viral strain, while two of four manufacturers halted production--one permanently--to address safety and quality control concerns. There is currently no system to ensure that high-risk patients have priority when the supply of vaccine is short. Although the federal government has no direct control over how influenza vaccine is purchased and distributed by the private sector and state and local governments, the Department of Health and Human Services (HHS) has several efforts underway to help cope with future influenza vaccine shortages and delays. For example, the Centers for Disease Control and Prevention (CDC) revised guidelines to extend the recommended timeframe for receiving immunizations. CDC is also helping to bring together manufacturers, distributors, providers, and others in the private and public sectors to explore ways to improve distribution to high-risk individuals.
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The Army has taken a number of steps since June 2010 at different levels to provide for more effective management and oversight of contracts supporting Arlington, including improving visibility of contracts, establishing new support relationships, formalizing policies and procedures, and increasing the use of dedicated contracting staff to manage and improve acquisition processes. While significant progress has been made, we have recommended that the Army take further action in these areas to ensure continued improvement and institutionalize progress made to date. These recommendations and the agency's response are discussed later in this statement. Arlington does not have its own contracting authority and, as such, relies on other contracting offices to award and manage contracts on its behalf. ANCP receives contracting support in one of two main ways, either by (1) working directly with contracting offices to define requirements, ensure the appropriate contract vehicle, and provide contract oversight, or (2) partnering with another program office to leverage expertise and get help with defining requirements and providing contract oversight. Those program offices, in turn, use other contracting arrangements to obtain services and perform work for Arlington. Using data from multiple sources, we identified 56 contracts and task orders that were active during fiscal year 2010 and the first three quarters of fiscal year 2011 under which these contracting offices obligated roughly $35.2 million on Arlington's behalf. These contracts and task orders supported cemetery operations, such as landscaping, custodial, and guard services; construction and facility maintenance; and new efforts to enhance information technology systems for the automation of burial operations. Figure 1 identifies the contracting relationships, along with the number of contracts and dollars obligated by contracting office, for the contracts and task orders we reviewed. At the time of our review, we found that ANCP did not maintain complete data on contracts supporting its operations. We have previously reported that the effective acquisition of services requires reliable data to enable informed management decisions.leadership may be without sufficient information to identify, track, and ensure the effective management and oversight of its contracts. While we obtained information on Arlington contracts from various sources, limitations associated with each of these sources make identifying and tracking Arlington's contracts as a whole difficult. For example: Without complete data, ANCP Internal ANCP data. A contract specialist detailed to ANCP in September 2010 developed and maintained a spreadsheet to identify and track data for specific contracts covering daily cemetery operations and maintenance services. Likewise, ANCP resource management staff maintain a separate spreadsheet that tracks purchase requests and some associated contracts, as well as the amount of funding provided to other organizations through the use of military interdepartmental purchase requests. Neither of these spreadsheets identifies the specific contracts and obligations associated with Arlington's current information technology and construction requirements. Existing contract and financial systems. The Federal Procurement Data System-Next Generation (FPDS-NG) is the primary system used to track governmentwide contract data, including those for the Department of Defense (DOD) and the Army. The Arlington funding office identification number, a unique code that is intended to identify transactions specific to Arlington, is not consistently used in this system and, in fact, was used for only 34 of the 56 contracts in our review. In October 2010 and consistent with a broader Army initiative, ANCP implemented the General Fund Enterprise Business System (GFEBS) to enhance financial management and oversight and to improve its capability to track expenditures. We found that data in this system did not identify the specific information technology contracts supported by the Army Communications-Electronics Command, Army Geospatial Center, Naval Supply Systems Command Weapon Systems Support office, and others. Officials at ANCP and at the MICC-Fort Belvoir stated that they were exploring the use of additional data resources to assist in tracking Arlington contracts, including the Virtual Contracting Enterprise, an electronic tool intended to help enable visibility and analysis of elements of the contracting process. Contracting support organizations. We also found that Army contracting offices had difficulty in readily providing complete and accurate data to us on Arlington contracts. For example, the National Capital Region Contracting Center could not provide a complete list of active contracts supporting Arlington during fiscal years 2010 and 2011 and in some cases did not provide accurate dollar amounts associated with the contracts it identified. USACE also had difficulty providing a complete list of active Arlington contracts for this time frame. The MICC-Fort Belvoir contracting office was able to provide a complete list of the recently awarded contracts supporting Arlington with accurate dollar amounts for this time frame, and those data were supported by similar information from Arlington. The Army has also taken a number of steps to better align ANCP contract support with the expertise of its partners. However, some of the agreements governing these relationships do not yet fully define roles and responsibilities for contracting support. We have previously reported that a key factor in improving DOD's service acquisition outcomes--that is, obtaining the right service, at the right price, in the right manner--is having defined responsibilities and associated support structures. Going forward, sustained attention on the part of ANCP and its partners will be important to ensure that contracts of all types and risk levels are managed effectively. The following summarizes ongoing efforts in this area: ANCP established a new contracting support agreement with the Army Contracting Command in August 2010. The agreement states that the command will assign appropriate contracting offices to provide support, in coordination with ANCP, and will conduct joint periodic reviews of new and ongoing contract requirements. In April 2011, ANCP also signed a separate agreement with the MICC, part of the Army Contracting Command, which outlines additional responsibilities for providing contracting support to ANCP. While this agreement states that the MICC, through the Fort Belvoir contracting office, will provide the full range of contracting support, it does not specify the types of requirements that will be supported, nor does it specify that other offices within the command may also do so. ANCP signed an updated support agreement with USACE in December 2010, which states that these organizations will coordinate to assign appropriate offices to provide contracting support and that USACE will provide periodic joint reviews of ongoing and upcoming requirements. At the time of our review, USACE officials noted that they were in the process of finalizing an overarching program management plan with ANCP, which, if implemented, provides additional detail about the structure of and roles and responsibilities for support. USACE and ANCP have also established a Senior Executive Review Group, which updates the senior leadership at both organizations on the status of ongoing efforts. ANCP has also put agreements in place with the Army Information Technology Agency (ITA) and the Army Analytics Group, which provide program support for managing information technology infrastructure and enhance operational capabilities. Officials at ANCP decided to leverage this existing Army expertise, rather than attempting to develop such capabilities independently as was the case under the previous Arlington management. For example, the agreement in place with ITA identifies the services that will be provided to Arlington, performance metrics against which ITA will be measured, as well as Arlington's responsibilities. These organizations are also responsible for managing the use of contracts in support of their efforts; however, the agreement with ANCP does not specifically address roles and responsibilities associated with the use and management of these contracts supporting Arlington requirements. Although officials from these organizations told us that they currently understand their responsibilities, without being clearly defined in the existing agreements, roles and responsibilities may be less clear in the future when personnel change. ANCP has developed new internal policies and procedures and improved training for staff serving as contracting officer's representatives, and has dedicated additional staff resources to improve contract management. Many of these efforts were in process at the time of our review, including decisions on contracting staff needs, and their success will depend on continued management attention. The following summarizes our findings in this area: Arlington has taken several steps to more formally define its own internal policies and procedures for contract management. In July 2010, the Executive Director of ANCP issued guidance stating that the Army Contracting Command and USACE are the only authorized contracting centers for Arlington. Further, ANCP is continuing efforts to (1) develop standard operating procedures associated with purchase requests; (2) develop memorandums for all ANCP employees that outline principles of the procurement process, as well as training requirements for contracting officer's representatives; and (3) create a common location for reference materials and information associated with Arlington contracts. In May 2011, the Executive Director issued guidance requiring contracting officer's representative training for all personnel assigned to perform that role, and at the time of our review, all of the individuals serving as contracting officer's representatives had received training for that position. ANCP, in coordination with the MICC-Fort Belvoir contracting office is evaluating staffing requirements to determine the appropriate number, skill level, and location of contracting personnel. In July 2010, the Army completed a study that assessed Arlington's manpower requirements and identified the need for three full-time contract specialist positions. While these positions have not been filled to date, ANCP's needs have instead been met through the use of staff provided by the MICC. At the time of our review, the MICC-Fort Belvoir was providing a total of 10 contracting staff positions in support of Arlington, 5 of which are funded by ANCP, with the other 5 funded by the MICC-Fort Belvoir to help ensure adequate support for Arlington requirements. ANCP officials have identified the need for a more senior contracting specialist and stated that they intend to request an update to their staffing allowance for fiscal year 2013 to fill this new position. Prior reviews of Arlington have identified numerous issues with contracts in place prior to the new leadership at ANCP. While our review of similar contracts found common concerns, we also found that contracts and task orders awarded since June 2010 reflect improvements in acquisition practices. Our previous contracting-related work has identified the need to have well-defined requirements, sound business arrangements (i.e., contracts in place), and the right oversight mechanisms to ensure positive outcomes. We found examples of improved documentation, better definition and consolidation of existing requirements for services supporting daily cemetery operations, and more specific requirements for contractor performance. At the time of our review, many of these efforts were still under way, so while initial steps taken reflect improvement, their ultimate success is not yet certain. The Army has also taken positive steps and implemented improvements to address other management deficiencies and to provide information and assistance to families. It has implemented improvements across a broad range of areas at Arlington, including developing procedures for ensuring accountability over remains, taking actions to better provide information- assurance, and improving its capability to respond to the public and to families' inquiries. For example, Arlington officials have updated and documented the cemetery's chain-of-custody procedures for remains, to include multiple verification steps by staff members and the tracking of decedent information through a daily schedule, electronic databases, and tags affixed to urns and caskets entering Arlington. Nevertheless, we identified several areas where challenges remain: Managing information-technology investments. Since June 2010, ANCP has invested in information-technology improvements to correct existing problems at Arlington and has begun projects to further enhance the cemetery's information-technology capabilities. However, these investments and planned improvements are not yet guided by an enterprise architecture--or modernization blueprint. Our experience has shown that developing this type of architecture can help minimize risk of developing systems that are duplicative, poorly integrated, and unnecessarily costly to maintain. ANCP is working to develop an enterprise architecture, and officials told us in January that they expect the architecture will be finalized in September 2012. Until the architecture is in place and ANCP's ongoing and planned information technology investments are assessed against that architecture, ANCP lacks assurance that these investments will be aligned with its future operational environment, increasing the risk that modernization efforts will not adequately meet the organization's needs. Updating workforce plans. The Army took a number of positive steps to address deficiencies in its workforce plans, including completing an initial assessment of its organizational structure in July 2010 after the Army IG found that Arlington was significantly understaffed. However, ANCP's staffing requirements and business processes have continued to evolve, and these changes have made that initial workforce assessment outdated. Since the July 2010 assessment, officials have identified the need for a number of new positions, including positions in ANCP's public-affairs office and a new security and emergency-response group. Additionally, Arlington has revised a number of its business processes, which could result in a change in staffing needs. Although ANCP has adjusted its staffing levels to address emerging requirements, its staffing needs have not been formally reassessed. Our prior work has demonstrated that this kind of assessment can improve workforce planning, which can enable an organization to remain aware of and be prepared for its current and future needs as an organization. ANCP officials have periodically updated Arlington's organizational structure as they identify new requirements, and officials told us in January that they plan to completely reassess staffing within ANCP in the summer of 2012 to ensure that it has the staff needed to achieve its goals and objectives. Until this reassessment is completed and documented, ANCP lacks assurance that it has the correct number and types of staff needed to achieve its goals and objectives. Developing an organizational assessment program. Since 2009 ANCP has been the subject of a number of audits and assessments by external organizations that have reviewed many aspects of its management and operations, but it has not yet developed its own assessment program for evaluating and improving cemetery performance on a continuous basis. Both the Army IG and VA have noted the importance of assessment programs in identifying and enabling improvements of cemetery operations to ensure that cemetery standards are met. Further, the Army has emphasized the importance of maintaining an inspection program that includes a management tool to identify, prevent, or eliminate problem areas. At the time of our review, ANCP officials told us they were in the process of developing an assessment program and were adapting VA's program to meet the needs of the Army's national cemeteries. ANCP officials estimated in January that they will be ready to perform their first self-assessment in late 2012. Until ANCP institutes an assessment program that includes an ability to complete a self- assessment of operations and an external assessment by cemetery subject-matter experts, it is limited in its ability to evaluate and improve aspects of cemetery performance. Coordinating with key partners. While ANCP has improved its coordination with other Army organizations, we found that it has encountered challenges in coordinating with key operational partners, such as the Military District of Washington, the military service honor guards, and Joint Base Myer-Henderson Hall. Officials from these organizations told us that communication and collaboration with Arlington have improved, but they have encountered challenges and there are opportunities for continued improvement. For example, officials from the Military District of Washington and the military service honor guards indicated that at times they have experienced difficulties working with Arlington's Interment Scheduling Branch and provided records showing that from June 24, 2010, through December 15, 2010, there were at least 27 instances where scheduling conflicts took place. These challenges are due in part to a lack of written agreements that fully define how these operational partners will support and interact with Arlington. Our prior work has found that agencies can derive benefits from enhancing and sustaining their collaborative efforts by institutionalizing these efforts with agreements that define common outcomes, establish agreed-upon roles and responsibilities, identify mechanisms used to monitor and evaluate collaborative efforts, and enable the organizations to leverage their resources. ANCP has a written agreement in place with Joint Base Myer-Henderson Hall, but this agreement does not address the full scope of how these organizations work together. Additionally, ANCP has drafted, but has not yet signed, a memorandum of agreement with the Military District of Washington. ANCP has not drafted memorandums of agreement with the military service honor guards despite each military service honor guard having its own scheduling procedure that it implements directly with Arlington and each service working with Arlington to address operational challenges. ANCP, by developing memorandums of agreement with its key operational partners, will be better positioned to ensure effective collaboration with these organizations and help to minimize future communication and coordination challenges. Developing a strategic plan. Although ANCP officials have been taking steps to address challenges at Arlington, at the time of our review they had not adopted a strategic plan aimed at achieving the cemetery's longer-term goals. An effective strategic plan can help managers to prioritize goals; identify actions, milestones, and resource requirements for achieving those goals; and establish measures for assessing progress and outcomes. Our prior work has shown that leading organizations prepare strategic plans that define a clear mission statement, a set of outcome-related goals, and a description of how the organization intends to achieve those goals. Without a strategic plan, ANCP is not well positioned to ensure that cemetery improvements are in line with the organizational mission and achieve desired outcomes. ANCP officials told us during our review that they were at a point where the immediate crisis at the cemetery had subsided and they could focus their efforts on implementing their longer-term goals and priorities. In January, ANCP officials showed us a newly developed campaign plan. While we have not evaluated this plan, our preliminary review found that it contains elements of an effective strategic plan, including expected outcomes and objectives for the cemetery and related performance metrics and milestones. Developing written guidance for providing assistance to families. After the Army IG issued its findings in June 2010, numerous families called Arlington to verify the burial locations of their loved ones. ANCP developed a protocol for investigating these cases and responding to the families. Our review found that ANCP implemented this protocol, and we reviewed file documentation for a sample of these cases. In reviewing the assistance provided by ANCP when a burial error occurred, we found that ANCP's Executive Director or Chief of Staff contacted the affected families. ANCP's Executive Director--in consultation with cemetery officials and affected families-- made decisions on a case-by-case basis about the assistance that was provided to each family. For instance, some families who lived outside of the Washington, D.C., area were reimbursed for hotel and travel costs. However, the factors that were considered when making these decisions were not documented in a written policy. In its June 2010 report, the Army IG noted in general that the absence of written policies left Arlington at risk of developing knowledge gaps as employees leave the cemetery. By developing written guidance that addresses the cemetery's interactions with families affected by burial errors, ANCP could identify pertinent DOD and Army regulations and other guidance that should be considered when making such decisions. Also, with written guidance the program staff could identify the types of assistance that can be provided to families. In January, ANCP provided us with a revised protocol for both agency-identified and family member-initiated gravesite inquiries. The revised protocol provides guidance on the cemetery's interactions with the next of kin and emphasizes the importance of maintaining transparency and open communication with affected families. A transfer of jurisdiction for the Army's two national cemeteries to VA is feasible based on historical precedent for the national cemeteries and examples of other reorganization efforts in the federal government. However, we identified several factors that may affect the advisability of making such a change, including the potential costs and benefits, potential transition challenges, and the potential effect on Arlington's unique characteristics. In addition, given that the Army has taken steps to address deficiencies at Arlington and has improved its management, it may be premature to move forward with a change in jurisdiction, particularly if other options for improvement exist that entail less disruption. During our review, we identified opportunities for enhancing collaboration between the Army and VA that could leverage their strengths and potentially lead to improvements at all national cemeteries. Transferring cemetery jurisdiction could have both benefits and costs. Our prior work suggests that government reorganization can provide an opportunity for greater effectiveness in program management and result in improved efficiency over the long-term, and can also result in short- term operational costs.told us they were not aware of relevant studies that may provide insight into the potential benefits and costs of making a change in cemetery jurisdiction. However, our review identified areas where VA's and the Army's national cemeteries have similar, but not identical, needs and have developed independent capabilities to meet those needs. For example, each agency has its own staff, processes, and systems for determining burial eligibility and scheduling and managing burials. While consolidating these capabilities may result in long-term efficiencies, there could also be challenges and short-term costs. At the time of our review, Army and VA officials Potential transition challenges may arise in transferring cemetery jurisdiction. Army and VA cemeteries have similar operational requirements to provide burial services for service members, veterans, and veterans' family members; however, officials identified areas where the organizations differ and stated that there could be transition challenges if VA were to manage Arlington, including challenges pertaining to the regulatory framework, appropriations structure, and contracts. For example, Arlington has more restrictive eligibility criteria for in-ground burials, which has the result of limiting the number of individuals eligible for burial at the cemetery. If Arlington cemetery were to be subject to the same eligibility criteria as VA's cemeteries, the eligibility for in-ground burials at Arlington would be greatly expanded. Additionally, the Army's national cemeteries are funded through a different appropriations structure than VA's national cemeteries. If the Army's national cemeteries were transferred to VA, Congress would have to choose whether to alter the funding structure currently in place for Arlington. Burial eligibility at VA's national cemeteries is governed by 38 U.S.C. SS 2402 and 38 C.F.R. SS 38.620. Burial eligibility at Arlington is governed by 38 U.S.C. SS 2410 and 32 C.F.R. SS 553.15. Mission and vision statements. The Army and VA have developed their own mission and vision statements for their national cemeteries that differ in several ways. Specifically, VA seeks to be a model of excellence for burials and memorials, while Arlington seeks to be the nation's premier military cemetery. Military honors provided to veterans. The Army and VA have varying approaches to providing military funeral honors. VA is not responsible for providing honors to veterans, and VA cemeteries generally are not involved in helping families obtain military honors from DOD. In contrast, Arlington provides a range of burial honors depending on whether an individual is a service member killed in action, a veteran, or an officer. Ceremonies and special events. Arlington hosts a large number of ceremonies and special events in a given year, some of which may involve the President of the United States as well as visiting heads of state. From June 10, 2010, through October 1, 2011, Arlington hosted more than 3,200 wreath-laying ceremonies, over 70 memorial ceremonies, and 19 state visits, in addition to Veterans Day and Memorial Day ceremonies, and also special honors for Corporal Frank Buckles, the last American servicemember from World War I. VA officials told us that their cemeteries do not support a similar volume of ceremonies, and as a result they have less experience in this area than the Army. During our review, we found that there are opportunities to expand collaboration between the Army and VA that could improve the efficiency and effectiveness of these organizations' cemetery operations. Our prior work has shown that achieving results for the nation increasingly requires that federal agencies work together, and when considering the nation's long-range fiscal challenges, the federal government must identify ways to deliver results more efficiently and in a way that is consistent with its limited resources. Since the Army IG issued its findings in June 2010, the Army and VA have taken steps to partner more effectively. The Army's hiring of several senior VA employees to help manage Arlington has helped to foster collaboration, and the two agencies signed a memorandum of understanding that allows ANCP employees to attend classes at VA's National Training Center. However, the Army and VA may have opportunities to collaborate and avoid duplication in other areas that could benefit the operations of either or both cemetery organizations. For example, the Army and VA are upgrading or redesigning some of their core information technology systems supporting cemetery operations. By continuing to collaborate in this area, the agencies can better ensure that their information-technology systems are able to communicate, thereby helping to prevent operational challenges stemming from a lack of compatibility between these systems in the future. In addition, each agency may have specialized capabilities that it could share with the other. VA, for example, has staff dedicated to determining burial eligibility, and the Army has an agency that provides geographic-information-system and global-positioning-system capabilities--technologies that VA officials said that they are examining for use at VA's national cemeteries. While the Army and VA have taken steps to improve collaboration, at the time of our review the agencies had not established a formal mechanism to identify and analyze issues of shared interest, such as process improvements, lessons learned, areas for reducing duplication, and solutions to common problems. VA officials indicated that they planned to meet with ANCP officials in the second quarter of fiscal year 2012, with the aim of enhancing collaboration between the two agencies. Unless the Army and VA collaborate to identify areas where the agencies can assist each other, they could miss opportunities to take advantage of each other's strengths--thereby missing chances to improve the efficiency and effectiveness of cemetery operations--and are at risk of investing in duplicative capabilities. The success of the Army's efforts to improve contracting and management at Arlington will depend on continued focus in various areas. Accordingly, we made a number of recommendations in our December 2011 reports. In the area of contracting, we recommended that the Army implement a method to track complete and accurate contract data, ensure that support agreements clearly identify roles and responsibilities for contracting, and determine the number and skills necessary for contracting staff. In its written comments, DOD partially concurred with these recommendations, agreeing that there is a need to take actions to address the issues we raised, but indicating that our recommendations did not adequately capture Army efforts currently underway. We believe our report reflects the significant progress made by Arlington and that implementation of our recommendations will help to institutionalize the positive steps taken to date. With regard to our recommendation to identify and implement a method to track complete and accurate contact data, DOD noted that Arlington intends to implement, by April 2012, a methodology based on an electronic tool which is expected to collect and reconcile information from a number of existing data systems. Should this methodology consider the shortcomings within these data systems as identified in our report, we believe this would satisfy our recommendations. DOD noted planned actions, expected for completion by March 2012 that, if implemented, would satisfy the intent of our other two recommendations. With regard to other management challenges at Arlington, we recommended that the Army implement its enterprise architecture and reassess ongoing and planned information-technology investments; update its assessment of ANCP's workforce needs; develop and implement a program for assessing and improving cemetery operations; develop memorandums of understanding with Arlington's key operational partners; develop a strategic plan; and develop written guidance to help determine the types of assistance that will be provided to families affected by burial errors. DOD fully agreed with our recommendations that the Army update its assessment of ANCP's workforce needs and implement a program for assessing and improving cemetery operations. DOD partially agreed with our other recommendations. In January, ANCP officials provided us with updates on its plans to take corrective actions, as discussed in this statement. With regard to implementing an enterprise architecture, DOD stated that investments made to date in information technology have been modest and necessary to address critical deficiencies. We recognize that some vulnerabilities must be expeditiously addressed. Nevertheless, our prior work shows that organizations increase the risk that their information technology investments will not align with their future operational environment if these investments are not guided by an approved enterprise architecture. Regarding its work with key operational partners, DOD stated that it recognizes the value of establishing memorandums of agreement and noted the progress that the Army has made in developing memorandums of agreement with some of its operational partners. We believe that the Army should continue to pursue and finalize agreements with key operational partners that cover the full range of areas where these organizations must work effectively together. With regard to a strategic plan, DOD stated that is was in the process of developing such a plan. As discussed previously, ANCP officials in January showed us a newly developed campaign plan that, based on our preliminary review, contains elements of an effective strategic plan. Regarding written guidance on the factors that the Executive Director will consider when determining the types of assistance provided to families affected by burial errors, DOD stated that such guidance would limit the Executive Director's ability to exercise leadership and judgment to make an appropriate determination. We disagree with this view. Our recommendation does not limit the Executive Director's discretion, which we consider to be an essential part of ensuring that families receive the assistance they require in these difficult situations. Our recommendation, if implemented, would improve visibility into the factors that guide decision-making in these cases. Finally, we recommended that the Army and VA implement a joint working group or other such mechanism to enable ANCP and VA's National Cemetery Administration to collaborate more closely in the future. Both DOD and VA concurred with this recommendation. As noted, VA stated that a planning meeting to enhance collaboration is planned for the second quarter of 2012. Chairman McCaskill, Ranking Member Portman, and Members of the Subcommittee, this completes our prepared statement. We would be pleased to respond to any questions that you may have at this time. For questions about this statement, please contact Brian Lepore, Director, Defense Capabilities and Management, on (202) 512-4523 or [email protected] or Belva Martin, Director, Acquisition and Sourcing Management, on (202) 512-4841 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this testimony. Individuals who made key contributions to this testimony include Tom Gosling, Assistant Director; Brian Mullins, Assistant Director; Kyler Arnold; Russell Bryan; George M. Duncan, Kathryn Edelman; Julie Hadley; Kristine Hassinger; Lina Khan; and Alex Winograd. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.
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Arlington National Cemetery (Arlington) contains the remains of more than 330,000 military servicemembers, their family members, and others. In June 2010, the Army Inspector General identified problems at the cemetery, including deficiencies in contracting and management, burial errors, and a failure to notify next of kin of errors. In response, the Secretary of the Army issued guidance creating the position of the Executive Director of the Army National Cemeteries Program (ANCP) to manage Arlington and requiring changes to address the deficiencies and improve cemetery operations. In response to Public Law 111-339, GAO assessed several areas, including (1) actions taken to improve contract management and oversight, (2) the Army's efforts to address identified management deficiencies and provide information and assistance to families regarding efforts to detect and correct burial errors, and (3) factors affecting the feasibility and advisability of transferring jurisdiction for the Army's national cemeteries to the Department of Veterans Affairs (VA). The information in this testimony summarizes GAO's recent reports on Arlington contracting (GAO-12-99) and management (GAO-12-105). These reports are based on, among other things, analyzing guidance, policies, plans, contract files, and other documentation from the Army, Arlington, and other organizations and interviews with Army and VA officials. GAO identified 56 contracts and task orders that were active during fiscal year 2010 and the first three quarters of fiscal year 2011 under which contracting offices obligated roughly $35.2 million on Arlington's behalf. These contracts supported cemetery operations, construction and facility maintenance, and new efforts to enhance information technology systems for the automation of burial operations. The Army has taken a number of steps since June 2010 at different levels to provide for more effective management and oversight of contracts, establishing new support relationships, formalizing policies and procedures, and increasing the use of dedicated contracting staff to manage and improve its acquisition processes. However, GAO found that ANCP does not maintain complete data on its contracts, responsibilities for contracting support are not yet fully defined, and dedicated contract staffing arrangements still need to be determined. The success of Arlington's acquisition outcomes will depend on continued management focus from ANCP and its contracting partners to ensure sustained attention to contract management and institutionalize progress made to date. GAO made three recommendations to continue improvements in contract management. The Department of Defense (DOD) partially concurred and noted actions in progress to address these areas. The Army has taken positive steps and implemented improvements to address other management deficiencies and to provide information and assistance to families. It has implemented improvements across a broad range of areas at Arlington, including developing procedures for ensuring accountability over remains and improving its capability to respond to the public and to families' inquiries. Nevertheless, the Army has remaining management challenges in several areas--managing information technology investments, updating workforce plans, developing an organizational assessment program, coordinating with key partners, developing a strategic plan, and developing guidance for providing assistance to families. GAO made six recommendations to help address these areas. DOD concurred or partially concurred and has begun to take some corrective actions. A transfer of jurisdiction for the Army's two national cemeteries to VA is feasible based on historical precedent for the national cemeteries and examples of other reorganization efforts in the federal government. However, several factors may affect the advisability of making such a change, including the potential costs and benefits, potential transition challenges, and the potential effect on Arlington's unique characteristics. In addition, given that the Army has taken steps to address deficiencies at Arlington and has improved its management, it may be premature to move forward with a change in jurisdiction, particularly if other options for improvement exist that entail less disruption. GAO identified opportunities for enhancing collaboration between the Army and VA that could leverage their strengths and potentially lead to improvements at all national cemeteries. GAO recommended that the Army and VA develop a mechanism to formalize collaboration between these organizations. DOD and VA concurred with this recommendation. In the reports, GAO made several recommendations to help Arlington sustain progress made to date.
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Under the Medicaid program's federal-state partnership, CMS is responsible for overseeing the program, while state Medicaid agencies are responsible for the day-to-day administration of the program. Although subject to federal requirements, each state develops its own Medicaid administrative structure for carrying out the program, including its approach to program integrity. To monitor program integrity in Medicaid, CMS estimates the national improper payment rate on an annual basis through the Payment Error Rate Measurement (PERM) program. The PERM involves reviews of sampled fee for service claims, payments to managed care entities, and beneficiary eligibility determinations in the states; the national improper payment rate is a weighted average of states' rates in each of these components. State Medicaid programs do not work in isolation on program integrity; instead, there are a large number of federal agencies, other state entities, and contractors with which states must coordinate. (See fig. 1.) Recognizing the importance of federal state collaboration on program integrity issues, in November 2016, along with the Office of Management and Budget, we convened a meeting with state auditors, CMS, and other federal officials to discuss ways to strengthen collaboration between the federal government and the states. In recent years, Medicaid expenditures and enrollment grew under PPACA. Growth in enrollment is primarily due to more than half of the states choosing to expand their Medicaid programs by covering certain low-income adults not historically eligible for Medicaid coverage, as authorized under PPACA. In addition to expanding Medicaid eligibility, PPACA required the establishment of health insurance exchanges in all states, and provided for federal subsidies to assist qualifying low-income individuals in paying for exchange coverage. States may elect to establish and operate an exchange, known as a state-based exchange, or allow CMS--which is responsible for overseeing the exchanges--to do so within the state, known as a federally facilitated exchange (FFE). As of March 2015, CMS operated an FFE in 34 states, and 17 states were approved to operate state-based exchanges. CMS has taken steps to improve Medicaid program integrity and reduce improper payments; however, additional actions should be taken to help further prevent improper payments. Specifically, our work has identified four key program integrity issues for the Medicaid program--enrollment verification, managed care, provider screening, and coordination between Medicaid and the exchanges--along with CMS's progress in addressing them, and additional necessary actions. Since 2011, CMS has taken steps to make the Medicaid enrollment- verification process more data-driven to improve the accuracy of eligibility determinations. For example, in response to PPACA, CMS established a more rigorous approach to verifying financial and nonfinancial information needed to determine Medicaid beneficiary eligibility. CMS created a tool called the Data Services Hub that was implemented in fiscal year 2014 to help verify beneficiary applicant information used to determine eligibility for enrollment in qualified health plans and insurance-affordability programs, including Medicaid. The hub routes to and verifies application information in various external data sources, such as the Social Security Administration and the Department of Homeland Security. According to CMS, the hub can verify key application information, including household income and size, citizenship, state residency, incarceration status, and immigration status. Despite CMS's efforts, there continue to be gaps in the agency's efforts to ensure that only eligible individuals are enrolled into Medicaid. In particular, our work found that federal and selected state-based marketplaces approved health insurance coverage and subsidies for 9 of 12 fictitious applications made during the 2016 special enrollment period. In another study, we found that CMS also had gaps in ensuring that Medicaid expenditures for enrollees--including enrollees eligible as a result of the PPACA expansion--are matched appropriately by the federal government. Specifically, we found that CMS had excluded from review federal Medicaid eligibility determinations in the states that have delegated authority to the federal government to make Medicaid eligibility determinations through the federally facilitated exchange. To address this gap in oversight of eligibility determinations, we recommended that CMS conduct reviews of federal Medicaid eligibility determinations to ascertain the accuracy of these determinations and institute corrective action plans where necessary. In October 2016, HHS provided additional information indicating that the department is relying upon operational controls within federal marketplaces to ensure accurate eligibility determinations as well as new processes that would identify duplicate coverage. However, we continue to believe that without a systematic review of federal eligibility determinations, the agency lacks a mechanism to identify and correct errors and associated payments. Lastly, CMS requires all states to participate annually in the Eligibility Review Pilots to test different approaches to measuring the accuracy of eligibility determinations under the new beneficiary enrollment processes. Oversight of beneficiary eligibility is important to program integrity. Our prior work has identified thousands of Medicaid beneficiaries involved in potential improper or fraudulent payments. Some of the concerns that we identified included beneficiaries having payments made on their behalf concurrently by two or more states, and payments made for claims that were dated after a beneficiary's death. CMS has taken steps to provide states with additional guidance on their oversight of Medicaid managed care organizations. In October 2014, CMS made available on its website the managed care plan compliance toolkit to provide further guidance to states and managed care plans on identifying improper payments to providers. In May 2016, CMS issued a final rule on Medicaid managed care, which requires states to conduct periodic audits of financial data submitted by, or on behalf of each Medicaid managed care plan. The final rule takes additional steps to improve oversight of Medicaid managed care, with some provisions applying after 2018. CMS has also taken action in response to recommendations that we made with regard to increasing guidance for states, requiring states to audit managed care organizations, and providing states with additional audit support. Oversight of Medicaid managed care is increasing in importance as states' use of managed care plans to deliver services has been growing. More than half of all Medicaid beneficiaries are now enrolled in managed care plans, and nearly 40 percent of Medicaid expenditures are for health care services delivered through managed care. The estimated improper payment rate for managed care is currently less than one percent; however, this estimate is based on a review of the payments made to managed care organizations and does not review any underlying medical documentation. Additional actions on the part of CMS and the states are critical to improving program integrity in Medicaid. In particular, we and the HHS Office of Inspector General have identified incomplete and untimely managed care encounter data. Encounter data are data that managed care organizations are expected to report to state Medicaid programs, allowing states to track the services received by beneficiaries enrolled in managed care. Our work found that encounter data for 11 states were not available in a timely manner, and that 6 states had encounter data that we deemed were unreliable. PPACA included multiple provisions aimed at strengthening the screening of providers who enroll to participate in Medicaid. While the act requires that all providers and suppliers be subject to licensure checks, it gave CMS discretion to establish a risk-based application of other screening procedures. According to CMS's risk-based screening, moderate- and high-risk providers and suppliers additionally must undergo pre- enrollment and post-enrollment site visits, while high-risk providers and suppliers also will be subject to fingerprint-based criminal-background checks. This requirement may address some of the potentially fraudulent or improper payments. Additionally, CMS regulations now require that the state Medicaid agency enroll all Medicaid managed care providers, which has the potential to improve oversight of providers in managed care. Prior to PPACA, if one state terminated a provider from its Medicaid program, a provider could potentially enroll in or continue participation in another state's Medicaid program, leaving the latter state's program vulnerable to potential fraud, waste, and abuse. Our prior work has identified hundreds of Medicaid providers who were potentially improperly receiving Medicaid payments. Potential improper behavior included providers with suspended or revoked licenses, improper mailing addresses, or deceased providers. Actions to ensure appropriate oversight of Medicaid providers, however, continue to require additional action on the part of CMS and the states. Our work, which was based on 2 states and 16 health plans, found that these states and health plans used information that was fragmented across 22 databases managed by 15 different federal agencies to screen providers--and that these databases did not always have unique identifiers. Our work resulted in in a recommendation that CMS identify databases best suited for oversight of provider eligibility and coordinate with other agencies to explore the use of a unique identifier. CMS regulations now require that the state Medicaid agency enroll all Medicaid managed care providers, which has the potential to improve oversight of providers in managed care. However, CMS has not yet evaluated whether the additional database merit further action or considered ways to ensure that a unique identifier is available so that providers can be accurately identified. We also found that the 10 selected states that we reviewed used inconsistent practices to make data on ineligible providers publicly available, which could result in provider screening efforts that do not identify ineligible providers. CMS has taken action that is responsive to another recommendation on providing guidance to state Medicaid programs, establishing expectations and best practices on sharing provider screening data among states and Managed care plans. In addition, the recently enacted 21st Century Cures Act takes important steps to address this recommendation including requiring CMS to establish a provider termination notification database by July 2018 and requiring the agency to establish uniform terminology for reasons for provider terminations. Regarding coordination between Medicaid and the exchanges, CMS implemented policies and procedures to ensure that individuals do not have duplicate coverage (enrolled in Medicaid and in subsidized exchange coverage). Due to changes in income and other factors, it is likely that under PPACA many low-income individuals will transition between Medicaid and subsidized exchange coverage. Our prior work found that despite CMS policies and procedures designed to prevent duplicate coverage, it was occurring. In response, CMS has conducted three checks to identify individuals with duplicate coverage. CMS has also reported that the agency intends to complete these checks at least two times per coverage year, which has the potential to save federal--as well as beneficiary--dollars. While CMS has made progress by implementing checks for duplicate coverage, weaknesses remain. CMS has not developed a plan for assessing whether the checks and other procedures are sufficient to prevent and detect duplicate coverage. In March 2016, CMS reported that it was reviewing data on the number of people identified as having duplicate coverage through the first CMS check who subsequently disenrolled from subsidized exchange coverage. CMS reported reviewing these data as a means of assessing the effectiveness of the checks for duplicate coverage. We are continuing to monitor CMS's efforts in this area, particularly whether CMS develops a plan, including thresholds for the level of duplicate coverage it deems acceptable, to routinely monitor the effectiveness of the checks and other planned procedures to prevent and detect duplicate coverage. In closing, Medicaid represents significant expenditures for the federal government and states, and is the source of health care for tens of millions of Americans. Its long-term sustainability is critical, and will require, among other things, effective federal and state oversight. Chairman Murphy, Ranking Member DeGette, and Members of the Subcommittee, this concludes my prepared statement. I would be pleased to respond to any questions that you might have. If you or your staff have any questions about this testimony, please contact Carolyn L. Yocom, Director, Health Care at (202) 512-7114 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. GAO staff who made key contributions to this testimony are Ann Tynan (Assistant Director), Susan Barnidge, Leslie Gordon, Drew Long, Andrea E. Richardson, and Jennifer Whitworth. Patient Protection and Affordable Care Act: Results of Enrollment Testing for the 2016 Special Enrollment Period. GAO-17-78. Washington, D.C.: November 17, 2016. Medicaid Fee-For-Service: State Resources Vary for Helping Beneficiaries Find Providers. GAO-16-809. Washington, D.C.: August 29, 2016. Patient Protection and Affordable Care Act: CMS Should Act to Strengthen Enrollment Controls and Manage Fraud Risk. GAO-16-506T. Washington, D.C.: March 17, 2016. Medicaid Managed Care: Trends in Federal Spending and State Oversight of Costs and Enrollment. GAO-16-77. Washington, D.C.: December 17, 2015. Medicaid: Additional Efforts Needed to Ensure that State Spending is Appropriately Matched with Federal Funds. GAO-16-53. Washington, D.C.: October 16, 2015. Medicaid: CMS Could Take Additional Actions to Help Improve Provider and Beneficiary Fraud Controls. GAO-15-665T. Washington, D.C.: June 2, 2015. Medicaid: Service Utilization Patterns for Beneficiaries in Managed Care. GAO-15-481. Washington, D.C.: May 29, 2015. Medicaid: Additional Actions Needed to Help Improve Provider and Beneficiary Fraud Controls. GAO-15-313. Washington, D.C.: May 14, 2015. Medicaid Program Integrity: Increased Oversight Needed to Ensure Integrity of Growing Managed Care Expenditures. GAO-14-341. Washington, D.C.: May 19, 2014. The following table lists selected recommendations GAO has made to the Department of Health and Human Services regarding Medicaid program integrity. The agency has implemented 3 of these recommendations. The agency has either not taken or has not completed steps to implement the remaining 8 recommendations, as of January 2017.
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Medicaid, a joint federal-state health care program, is a significant component of federal and state budgets, with estimated outlays of $576 billion in fiscal year 2016. The program's size and diversity make it particularly vulnerable to improper payments. In fiscal year 2016, improper payments were an estimated 10.5 percent ($36 billion) of federal Medicaid expenditures, an increase from an estimated 9.8 percent ($29 billion) in fiscal year 2015. States, which are responsible for the day-to-day administration of the Medicaid program, are the first line of defense against improper payments. Specifically, states must implement federal requirements to ensure the qualifications of the providers who bill the program, detect improper payments, recover overpayments, and refer suspected cases of fraud and abuse to law enforcement authorities. At the federal level, CMS is responsible for supporting and overseeing states' Medicaid program integrity activities. This testimony highlights key program integrity issues in Medicaid, the progress CMS has made improving its oversight of program integrity, and the related challenges the agency and states continue to face. This testimony is based on 10 products and 11 recommendations. Of these 11 recommendations, 3 have been implemented based on agency action. GAO's prior work has identified four Medicaid program integrity issues--where the program is vulnerable to improper payments such as those made for services that were not covered, were not medically necessary, or were not provided--as well as actions taken by the Centers for Medicare & Medicaid Services (CMS) to address the issues and additional actions that should be taken. Enrollment Verification: In response to the Patient Protection and Affordable Care Act (PPACA), CMS established a more rigorous approach for verifying financial and nonfinancial information needed to determine Medicaid beneficiary eligibility. Despite CMS's efforts, however, there continue to be gaps in efforts to ensure that only eligible individuals are enrolled into Medicaid, and that Medicaid expenditures for enrollees--particularly those eligible as a result of the PPACA expansion--are matched appropriately by the federal government. Oversight of Medicaid Managed Care: CMS has provided states with additional guidance on their oversight of Medicaid managed care. Oversight of managed care is increasing in importance and improvements in measuring the improper payment rate are needed. For example, the estimated improper payment rate for managed care is based on a review of payments made to managed care organizations, and does not review any underlying medical documentation. GAO and the Department of Health and Human Services (HHS) Office of Inspector General have identified incomplete and untimely managed care encounter data--data that managed care organizations are expected to report to state Medicaid programs, allowing states to track the services received by beneficiaries enrolled in managed care. Provider Eligibility: PPACA included multiple provisions aimed at strengthening the screening of providers who enroll to participate in Medicaid. While the act requires that all providers and suppliers be subject to licensure checks, it gave CMS discretion to establish a risk-based application of other screening procedures, such as fingerprint-based criminal-background checks for high-risk providers. Also, CMS regulations now require that all Medicaid managed care providers enroll with the state Medicaid agency, which has the potential to improve oversight of providers in managed care. However, GAO's work based on 2 states and 16 health plans identified challenges screening providers for eligibility, partially due to fragmented information. Coordination between Medicaid and the Exchange: CMS implemented a number of policies and procedures to ensure that individuals do not have duplicate coverage (enrolled in both Medicaid and in subsidized coverage through an exchange, which is a marketplace where eligible individuals may compare and purchase private health insurance). CMS has conducted checks to identify individuals with duplicate coverage, and plans to complete these checks at least two times per coverage year, which has the potential to save federal--as well as beneficiary--dollars. However, CMS has not developed a plan for assessing whether the checks and other procedures--such as thresholds for the level of duplicate coverage deemed acceptable--are sufficient to prevent and detect duplicate coverage.
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The National Cemeteries Act of 1973 (P.L. 93-43) authorized NCS to bury eligible veterans and their family members in national cemeteries. Before 1973, all national cemeteries were operated under the authority of the Department of the Army. However, P.L. 93-43 shifted authority to VA for all national cemeteries except Arlington National Cemetery and the U.S. Soldiers' and Airmen's Home National Cemetery. NCS operates and maintains 115 national cemeteries located in 39 states and Puerto Rico. NCS offers veterans and their eligible family members the options of casket interment and interment of cremated remains in the ground (at most cemeteries) or in columbaria niches (at nine cemeteries). NCS determines the number and type of interment options available at each of its national cemeteries. The standard size of casket grave sites, the most common burial choice, is 5 feet by 10 feet, and the grave sites are prepared to accommodate two caskets stacked one on top of the other. A standard in-ground cremains site is 3 feet by 3 feet and can generally accommodate one or two urns. The standard columbarium niche used in national cemeteries is 10 inches wide, 15 inches high, and 20 inches deep. Niches are generally arrayed side by side, four units high, and can hold two or more urns, depending on urn size. In addition to burying eligible veterans and their families, NCS manages the State Cemetery Grants Program, which provides aid to states in establishing, expanding, or improving state veterans' cemeteries. State veterans' cemeteries supplement the burial service provided by NCS. The cemeteries are operated and permanently maintained by the states. A State Cemetery grant may not exceed 50 percent of the total value of the land and the cost of improvements. The remaining amount must be contributed by the state. The State Cemetery Grants Program funded the establishment of 28 veterans' cemeteries, including 3 cemeteries currently under development, located in 21 states, Saipan, and Guam. The program has also provided grants to state veterans' cemeteries for expansion and improvement efforts. As the veteran population ages, NCS projects the demand for burial benefits to increase. NCS has a strategic plan for addressing the demand for veterans' burials up to fiscal year 2003, but the plan does not address longer term burial needs--that is, the demand for benefits during the expected peak years of veteran deaths, when pressure on the system will be greatest. Beyond the year 2003, NCS officials said they will continue using the basic strategies contained in the current 5-year plan. According to its 5-year strategic plan (1998-2003), one of NCS' primary goals is to ensure that burial in an open national or state veterans' cemetery is an available option for all eligible veterans and their family members. The plan sets forth three specific strategies for achieving this goal. First, NCS plans to build, when feasible, new national cemeteries. NCS is in various stages of establishing four new national cemeteries and projects that all will be operational by the year 2000. A second strategy for addressing the demand for veteran burials is through expansion of existing cemeteries. NCS plans to complete construction in order to make additional grave sites or columbaria available for burials at 24 national cemeteries. NCS also plans to acquire land needed for cemeteries to continue to provide service at 10 cemeteries. Third, NCS plans to encourage states to provide additional grave sites for veterans through participation in the State Cemetery Grants Program. According to the plan, NCS plans to increase the number of veterans served by a state veterans' cemetery by 35,000 per year beginning in fiscal year 1998. Also, NCS is in the early stages of developing information designed to assist states in the establishment of a state veterans' cemetery. veterans who will have access to a veterans' cemetery stop at the year 2003. Although NCS has a 5-year strategic plan for addressing the demand for veterans' burials during fiscal years 1998 through 2003, plans to address the demand beyond 2003 are unclear. For example, NCS' strategic plan does not articulate how NCS will mitigate the effects of the increasing demand for burial services. According to NCS' Chief of Planning, although its strategic plan does not address long-term burial needs, NCS is always looking for opportunities to acquire land to extend the service period of national cemeteries. Also, to help address long-range issues, NCS compiles key information, such as mortality rates, number of projected interments and cemetery closures, locations most in need of veterans' cemeteries, and cemetery-specific burial layout plans. In addition, NCS officials pointed out that the Government Performance and Results Act of 1993 (the Results Act) requires a strategic plan to cover a 5-year period. However, the Results Act requires that an agency prepare a strategic plan that covers at least a 5-year period and allows an agency to articulate how it plans to address future goals. For example, the National Aeronautics and Space Administration's plan articulates a "strategic roadmap" that outlines agencywide goals. This roadmap lists separate goals for near-, mid-, and long-term time periods over the next 25 years and beyond. The Environmental Protection Agency's plan also articulates goals that are not bound by the 5-year time period. For example, it includes an objective to reduce toxic air emissions by 75 percent in 2010 from 1993 levels. Although NCS projects annual interments to increase about 42 percent from 73,000 in 1995 to 104,000 in 2010, peaking at 107,000 in 2008, its strategic plan does not indicate how the agency will begin to position itself to handle this increase in demand for burial benefits. We believe that, given the magnitude of the projected increase in demand for burial benefits, NCS' strategic plan should discuss how its current strategies will be adjusted to address the demand during the peak years of veterans' deaths. through the State Cemetery Grants Program. According to NCS' Chief of Planning, NCS will encourage states to locate cemeteries in areas where it does not plan to operate and maintain national cemeteries. Since the State Cemetery Grants Program's inception in 1978, fewer than half of the states have established veterans' cemeteries, primarily because, according to NCS officials, states must provide up to half of the funds needed to establish, expand, or improve a cemetery as well as pay for all equipment and annual operating costs. Furthermore, the Director of the State Cemetery Grants Program told us that few states, especially those with large veteran populations, have shown interest in legislation that VA proposed in its 1998 and 1999 budget submission in order to increase state participation. This proposed legislation would increase the federal share of construction costs from 50 to 100 percent and permit federal funding for up to 100 percent of initial equipment costs. In fact, according to the Director, state veterans' affairs officials said they would rather have funding for operating costs than for construction. NCS officials told us they will continue to evaluate locations for additional national cemeteries in the future, based on demographic needs. However, according to NCS officials, VA currently has no plans to request construction funds for more than the four new cemeteries, which will be completed by the year 2000. Officials said that even with the new cemeteries, interment in a national or state veterans' cemetery will not be "readily accessible" to all eligible veterans and their family members. According to NCS officials, the majority of areas not served will be major metropolitan areas with high concentrations of veterans, such as Atlanta, Georgia; Detroit, Michigan; and Miami, Florida. the average columbarium interment cost would be about $280, compared with about $345 for in-ground cremains burial and about $655 for casket burial. Our analysis also showed that the service delivery period would be extended the most using columbarium interment. For example, using columbarium interment in a total of 1 acre of land could extend the service delivery period by about 50 years, while in-ground cremains interment would extend the service period about 3 years and casket burials about half a year. While historical data imply that the majority of veterans and eligible dependents prefer a casket burial, NCS national data show that the demand for cremation at national cemeteries is increasing. For example, veterans choosing cremation increased about 50 percent between 1990 and 1996, and NCS officials expect demand for cremation to continue to increase in the future. The incidence of cremation also continues to increase in the general population. The Cremation Association of North America projects that cremation will account for about 40 percent of all burials by 2010. designed to increase state participation by increasing the share of federal funding. Therefore, NCS needs to rely more on extending the service periods of its existing cemeteries. Columbaria can more efficiently utilize available cemetery land at a lower average interment cost than the other interment options and can also extend the service period of existing national cemeteries. Using columbaria also adds to veterans' choice of services and recognizes current burial trends. While we recognize that cremation may not be the preferred interment option for many veterans, identifying veterans' burial preferences, as NCS plans to do, would enable it to better manage limited cemetery resources and more efficiently meet veterans' burial needs. Mr. Chairman, this concludes my prepared statement. I will be glad to answer any questions you or Members of the Subcommittee may have. The first copy of each GAO report and testimony is free. Additional copies are $2 each. 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GAO discussed the National Cemetery System's (NCS) plans to accommodate the increasing demand for burial benefits and what it can do to extend the service period of existing cemeteries. GAO noted that: (1) NCS has adopted a 5-year strategic plan for fiscal years 1998 through 2003 with the goal of ensuring that burial in a national or state veterans' cemetery is an available option for all veterans and their eligible family members; (2) strategies outlined in NCS' plan include: (a) building new national cemeteries; (b) expanding existing cemeteries; and (c) encouraging states to provide additional burial sites through participation in the State Cemetery Grants Program; (3) however, it is unclear how NCS will address the veterans' burial demand during the peak years, when pressure on it will be greatest, since NCS' strategic plan does not indicate how it will begin to position itself to handle the increasing demand for burial benefits; (4) NCS officials stated that beyond 2003, NCS will continue using the basic strategies contained in its current 5-year plan; (5) for example, NCS plans to encourage states to establish veterans' cemeteries in areas where it does not plan to operate national cemeteries; (6) however, since the grant program's inception in 1978, fewer than half of the states have established veterans' cemeteries; (7) states have also shown limited interest in a legislative proposal designed to increase state participation by increasing the share of federal funding; (8) given the magnitude of the projected increase in demand for burial benefits, GAO continues to believe that it is important for NCS to articulate to Congress and other stakeholders how it plans to address the increasing demand; (9) as annual interments increase, cemeteries reach their burial capacity, thus increasing the importance of making the most efficient use of available cemetery space; (10) to identify feasible approaches to extending the service period of existing cemeteries, GAO analyzed the impact of adding burial sites to an acre of land in an existing cemetery; (11) GAO's analysis of three interment options showed that columbaria offered the most efficient option because they would involve the lowest average interment cost and would significantly extend a cemetery's service period; and (12) morever, while the majority of veterans and eligible family members prefer a casket burial, cremation is an acceptable interment option for many, and the demand for cremation, which varies by region, continues to increase.
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CMS has indicated that the primary principle of program integrity is to pay claims correctly. MIP is designed to address fraud, waste, and abuse, including improper payments, by (1) preventing fraud through effective enrollment of providers and through education of providers and beneficiaries; (2) detecting potential improper billing early through, for example, medical review and data analysis of claims; (3) coordinating closely with partners, including contractors and law enforcement agencies; and (4) implementing fair and firm enforcement policies. HIPAA established mandatory funding for MIP that ensured a stable funding source for Medicare program integrity activities from the Federal Hospital Insurance trust fund not subject to annual appropriations. The amount specified in HIPAA rose for the first few years and then was capped at $720 million per year in fiscal year 2003 and future years. CMS received increased and additional mandatory funding for MIP from the Federal Hospital Insurance trust fund in fiscal year 2006 under the Deficit Reduction Act of 2005 (DRA) and, in addition, received discretionary funding beginning in fiscal year 2009. On March 23, 2010, the Patient Protection and Affordable Care Act (PPACA) was signed into law. It included provisions that will provide MIP with a portion of an additional $350 million, to be shared with the Department of Justice (DOJ) and HHS, for fiscal year 2011 through fiscal year 2020 for health care fraud and abuse control efforts. It also increases funding for MIP each year by the percentage increase in the consumer price index for all urban consumers. MIP currently has eight activities, and each of these has multiple subactivities. As we reported in 2006, CMS undertook five original MIP activities required by HIPAA: Benefit Integrity. Aims to deter and detect Medicare fraud by conducting proactive data analysis of claims to identify patterns of fraud and taking other steps to determine whether fraud could be occurring. Potential fraud cases are documented and referred to law enforcement agencies. Provider Audit. Includes desk reviews, audits, and final settlement of institutional provider cost reports, such as those submitted by hospitals and skilled nursing facilities, which are used to establish payment rates. Medicare Secondary Payer (MSP). Identifies when beneficiaries have primary sources of payment--such as employer-sponsored health insurance, automobile liability insurance, or workers' compensation insurance--that should pay claims that were mistakenly billed to Medicare. MSP also involves recovering improper payments associated with such claims. Medical Review. Includes both automated and manual prepayment and postpayment reviews of individual Medicare claims to determine whether the services are provided by legitimate providers to eligible beneficiaries and are covered, medically reasonable, and necessary. Provider Outreach and Education. Provides training for providers, such as hospitals and physicians that serve Medicare beneficiaries, on appropriate billing practices to comply with Medicare rules and regulations. Since 2006, CMS has begun three additional MIP activities: Medicare-Medicaid Data Match Project (Medi-Medi). Was added to MIP by DRA. DRA provided this activity with its own dedicated funding source through a separate appropriation. Medi-Medi is a joint effort between CMS and states that participate voluntarily to identify providers with aberrant Medicare and Medicaid billing patterns through analyses of claims for individuals with both Medicare and Medicaid coverage. Part C and D Oversight. Consists of subactivities to address improper payments in Medicare Parts C and D. CMS began this activity in fiscal year 2006. Other Medicare Fee-For-Service. Consists of a variety of subactivities related to Medicare fee-for-service not captured by the other activities, such as support for pilot programs and enhancements to CMS data systems that CMS officials told us will allow for better analysis. CMS began these subactivities in fiscal year 2009. CPI is the CMS component responsible for oversight of all of CMS's program integrity efforts, including MIP, and is led by a deputy administrator. Formed in April 2010, CPI was created to enable CMS to pursue a more strategic and coordinated program integrity approach and to also allow the agency to build on and strengthen existing program integrity efforts. CPI has targeted several program areas to help identify, evaluate, and focus resources and projects. These areas are prevention, detection, recovery, and transparency and accountability. MIP is led by the Director of the Medicare Program Integrity Group within CPI. However, the MIP activity managers and their staff members are not all located within CPI. There are MIP activity managers located in CPI, the Center for Medicare, and OFM. For example, while the Benefit Integrity activity is managed by CPI, the Medical Review activity is managed by CMS's Provider Compliance Group within OFM. See appendix I for an organizational chart that identifies the CMS components responsible for the oversight of MIP activities. CMS uses a variety of contractors to perform MIP activities, including a Comprehensive Error Rate Testing (CERT) contractor, an MSP contractor, Medicare administrative contractors (MAC), Medicare drug integrity contractors, the National Supplier Clearinghouse, program safeguard contractors, and zone program integrity contractors (ZPIC). For example, the MACs conduct provider audits, prepayment and postpayment review of Medicare claims, and some provider outreach and education. See appendix II for more information on these contractors and appendix III for the activities they perform. MIP's activity managers and Director participate in a process to recommend funding allocations for MIP's activities through the Budget Small Group. The MIP activity managers submit budget request documents to the MIP Budget Small Group to help guide the funding allocation process. The MIP Budget Small Group weighs each request and submits a draft MIP budget request to the CMS Chief Financial Officer and Chief Operating Officer. Following review by these officials, the MIP budget request goes to the CMS Administrator, who reviews the request and makes any desired changes. The MIP budget request is integrated into the agency's entire proposed budget, which is sent to the Secretary of Health and Human Services. A proposed budget for the entire department goes to OMB for consideration on the President's behalf. Adjustments may be made by OMB or the President before a final version is submitted to Congress, thus beginning the congressional appropriation process. One way that agencies examine the effectiveness of their programs is by measuring performance as mandated by the Government Performance and Results Act of 1993 (GPRA), as amended by the GPRA Modernization Act of 2010. GPRA is designed to improve the effectiveness of federal programs by establishing a system to set goals for program performance and to measure results. Specifically, GPRA requires federal agencies to prepare multiyear strategic plans, annual performance plans, and annual performance reports that provide information on progress achieved. To meet GPRA requirements for fiscal year 2011, CMS established the following: Five high-level strategic objectives, which included the objective of "accurate and predictable payments." Agencywide GPRA goals, which included three specific to MIP. An agency's goals should flow from its strategic objectives and be limited to the vital goals that reflect the highest priorities of an agency. Performance measures, which included three specific to MIP, such as reducing the percentage of improper payments made under the Medicare fee-for-service and Part C program. Performance measures are generally more numerous than the GPRA goals and are used to measure progress toward the goals and objectives. PPACA established additional reporting requirements for MIP. PPACA requires that MIP contractors provide the Secretary of Health and Human Services or the HHS Inspector General, upon request, performance statistics. These performance statistics may include the number and amount of overpayments recovered, the number of fraud referrals, and the ROI of activities the contractor undertakes. The act also requires the Secretary to evaluate MIP contractors at least once every 3 years and submit an annual report to Congress on the use of funds for MIP and the effectiveness of the use of those funds. CMS used increased funding it received in fiscal years 2006 through 2010 to expand MIP. From fiscal year 2006 through 2010, CMS received mandatory HIPAA funding along with new DRA funding, and additional discretionary funding in some years, to supplement its existing program integrity activities and support two new activities--Part C and D Oversight activities and Medi-Medi. Additionally, the agency was able to realize savings in some MIP activities, in part, because of the consolidation of claims administration contracts. CMS redistributed some of these savings to Part C and D Oversight and Benefit Integrity activities. CMS received additional MIP funding during fiscal years 2006 through 2010 that was used to support new activities or existing activities not previously supported by MIP. These activities included Part C and D Oversight, Medi-Medi, and Other Medicare Fee-For-Service activities. During fiscal year 2006 through fiscal year 2010, CMS received the maximum amount of mandatory funding stipulated under HIPAA, $720 million per year, as well as additional discretionary and DRA mandatory funding. (See fig. 1.) Prior to fiscal year 2006, CMS used mandatory HIPAA funding for the five original program activities--Benefit Integrity, Provider Audit, Provider Outreach and Education, Medical Review, and MSP. From fiscal year 2006 through fiscal year 2010, CMS continued to use mandatory HIPAA funding predominantly to support the five existing program integrity activities. In addition, beginning in fiscal year 2006, CMS received mandatory DRA funding, which it used to support two new MIP activities--Medi-Medi and Part C and D Oversight. DRA provided funding for Medi-Medi activities of $12 million in fiscal year 2006, which increased to nearly $60 million by fiscal year 2010. CMS officials told us that the Medi-Medi funding was used to support the ZPICs that work directly with the states on the Medi-Medi project. State participation is voluntary, and states do not directly receive MIP funding. Additional MIP funding also went toward Part C and D Oversight. DRA provided CMS with a onetime amount of $100 million in fiscal year 2006, part of which CMS used to perform new Part C and D Oversight. In fiscal years 2007 and 2008, CMS requested but did not receive discretionary funding to perform Part C and D Oversight. As a result, CMS officials told us that mandatory HIPAA funding for MIP was moved from other MIP activities in fiscal years 2007 and 2008 to the Part C and D Oversight activity. In fiscal years 2009 and 2010, CMS received $147 million and $220 million, respectively, in discretionary funding and used more than half of that funding for Part C and D Oversight. In fiscal year 2009, CMS used about $85 million of the discretionary funding (or 58 percent of the $147 million) to perform Part C and D Oversight that addressed CMS's priority to deter fraud in the Medicare Part C and D programs. For example, CMS contractors conducted reviews of health care plans entering the Part C and D programs, and program and financial audits of the health care plans participating in the Part C and D programs. In fiscal year 2010, CMS used about $142 million (about 65 percent of the $220 million) to continue performing Part C and D Oversight. CMS moved the remaining discretionary funding, about $62 million (42 percent of $147 million) in fiscal year 2009 and $45 million (20 percent of $220 million) in fiscal year 2010, to the Other Medicare Fee-For-Service activity. CMS used the funding in the Other Medicare Fee-For-Service activity, in part, to fund the system that collects and stores enrollment information for all Medicare providers and suppliers in a national database. CMS officials stated that contractor consolidations resulted in some workload efficiencies and cost savings, which enabled the agency to redistribute some mandatory MIP funding to the Part C and D Oversight and Benefit Integrity activities. The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 required CMS to transfer all Part A and B claims administration work previously conducted by 51 claims administration contractors to MACs. As a result, from fiscal year 2006 through May 2011, CMS awarded contracts to 15 MACs, which generally covered larger jurisdictions, and replaced most of the contracts with previous claims administration contractors. CMS designed the MAC jurisdictions to achieve operational efficiencies through consolidation. Further, in response to one of our previous recommendations, CMS also consolidated its postpayment recovery efforts into one MSP recovery contractor in October 2006, thereby increasing the efficiency of the MSP activity. CMS officials stated that the operational efficiencies and cost savings resulting from the contractor consolidations enabled the agency to decrease mandatory MIP funding to four of the five existing MIP activities and redistribute those funds to the Part C and D Oversight and Benefit Integrity activities. Specifically, from fiscal years 2006 through 2009, CMS redistributed MIP funding from the Provider Outreach and Education, Medical Review, MSP, and Provider Audit activities because these activities were less costly with fewer contractors performing the work. For example, CMS officials told us that the Provider Outreach and Education activity had less overhead and other administrative costs with fewer contractors, which resulted in reduced program expenditures. Provider Outreach and Education spending decreased from almost $65 million in fiscal year 2006 to about $42 million in fiscal year 2010--about 35 percent. Provider Outreach and Education had the largest percentage decrease in MIP funding. CMS officials stated that another factor in the decrease in Provider Outreach and Education spending was a realignment of some of its activities in fiscal year 2007. CMS officials also told us that under the consolidation into MAC jurisdictions, CMS required only one medical director for each MAC jurisdiction, instead of having one medical director for each state, which lowered the cost to perform the Medical Review activity. CMS officials stated that reduced costs allowed CMS to use some of the newly available MIP mandatory funding to address other priorities, such as funding Part C and D Oversight in fiscal years 2007 and 2008, when the agency received no discretionary funding. In addition, the MSP consolidation allowed CMS to reduce MIP funding for the MSP activity beginning in fiscal year 2007, and the agency used the savings to fund other MIP activities. Based on the funding information provided by CMS, we estimated that the agency saved about $86 million from fiscal year 2006 through fiscal year 2010 by consolidating contracted functions within the MSP activity. Benefit Integrity spending increased as a result of the redistribution among program activities. For fiscal years 2006 through 2010, Benefit Integrity had the largest percentage increase in mandatory HIPAA funding among the original five MIP activities, in part, because of cost efficiencies from contractor consolidation being redistributed to this activity. (See fig. 2.) For this period, CMS increased the amount of mandatory MIP HIPAA funds spent on the Benefit Integrity activity, from about $125 million in fiscal year 2006 to about $166 million in fiscal year 2010-- about 33 percent. Benefit Integrity funds, among other subactivities, the work of a CMS contractor responsible for reviewing enrollment applications from durable medical equipment suppliers and conducting site visits to confirm these suppliers' compliance with Medicare regulations. This followed a period when we and HHS's Office of Inspector General (OIG) had highlighted problems with fraud in the Medicare program, including problems with suppliers of durable medical equipment. It also occurred during a period, starting in 2009, when HHS and DOJ were increasing coordination on investigating and prosecuting health care fraud through the Health Care Fraud Prevention and Enforcement Action Team, an initiative that marshals resources across the government to prevent health care fraud, waste, and abuse; crack down on those who commit fraud; and enhance existing partnerships between HHS and DOJ. Although CMS measures MIP effectiveness by using the improper payment rates for the Medicare fee-for-service, Part C Medicare Advantage, and Part D prescription drug programs, CMS officials with direct responsibility for MIP generally do not connect the MIP activities and the CMS goals of reducing improper payments. CMS added two new GPRA performance goals for MIP for fiscal year 2012 and is also developing other performance metrics based on PPACA requirements. One way that CMS measures MIP effectiveness is ROI, but the data the agency currently uses to calculate this measure are flawed. Three of CMS's GPRA goals for MIP in fiscal year 2012 are to reduce the improper payment rates in each part of the Medicare program, which could contribute to the governmentwide effort to reduce improper payments. The GPRA goals, which were also goals in previous fiscal years, are to reduce the percentage of improper payments made in the Medicare fee-for-service, Part C Medicare Advantage, and Part D prescription drug programs. Each goal has a corresponding performance measure. These goals and related measures are particularly important because, as part of the Accountable Government Initiative, the President set goals for federal agencies to reduce overall improper payments by $50 billion and recapture at least $2 billion in improper contract payments and overpayments to health providers by the end of 2012. Because of its size, Medicare represented 38 percent of the governmentwide fiscal year 2010 improper payments. Therefore, CMS's actions to reduce payment errors in Medicare will affect the success or failure of the governmentwide effort. To respond to the President's goals, as stated in its performance plan, CMS adopted a target to reduce its improper fee-for-service error rate from 10.5 percent in fiscal year 2010 to 6.2 percent in fiscal year 2012 and the Part C error rate from 14.1 percent in fiscal year 2010 to 13.2 percent in fiscal year 2012. Although CMS has established these GPRA goals as an important way to measure the effectiveness of MIP, our interviews with CMS officials with direct responsibility for MIP activities indicate that these officials generally do not connect MIP activities with the CMS goals of reducing improper payments. Only one of the five MIP activity managers stated that CMS uses the improper payment rates to assess MIP's overall effectiveness. Some of the remaining four MIP activity managers told us that they were not aware of any overall CMS measures of MIP effectiveness. In addition, some MIP activity managers told us that the improper payment rates did not clearly assess the work done in their activities. MIP activity managers told us that they used a number of other performance measures to assess the effectiveness of the activities for which they had responsibility, including assessments of individual contractors, survey results measuring customer satisfaction, feedback from provider associations, savings from claims processing, funds recovered, and ROI. The statements by agency officials indicate that CMS has not clearly communicated to its staff the relationship between the daily work of conducting MIP activities and the agency's higher-level performance measures for improper payment reduction. Our prior work has established that responsibility for meeting performance measures should be linked directly to the offices that have responsibility for making programs work. A clearly communicated connection between performance measures and program offices helps to reinforce program managers' accountability and ensure that managers keep in mind the outcomes their organization is striving to achieve. Within MIP, however, activity managers generally did not connect the activity-specific performance measures they use to assess their activity's effectiveness and the agencywide GPRA performance goals for reducing improper payments. Our prior work found that leading organizations try to link the goals and performance measures for each organizational level to successive levels and ultimately to the organization's strategic goals. These leading organizations recognized that without clearly communicated, hierarchically linked performance measures, managers and staff throughout the organization will lack straightforward road maps showing how their daily activities can contribute to attaining organizationwide strategic goals. In its FY 2012 Online Performance Appendix, CMS added two new MIP performance goals to the goals related to the improper payment rate for Medicare fee-for-service, Part C, and Part D, but it is also not clear how they link with performance measures currently used by MIP activity managers. (See table 1.) The first new performance goal is related to increasing the number of law enforcement personnel with training and access to near real-time CMS data. The second new performance goal aims to strengthen CMS's provider enrollment actions to prevent fraudulent providers and suppliers from enrolling in Medicare and ensure that existing providers continue to meet enrollment requirements. The performance measure associated with this goal will be an increase in the percentage of Medicare enrollment site visits to "high-risk" providers and suppliers that result in administrative actions. It is not clear how the revised GPRA goals relate to the performance measures used by MIP activity managers to assess the effectiveness of their activities because CMS has not established such a linkage. Such linkage is helpful to effectively communicate how performance is measured within the agency. In addition to expanding the GPRA performance goals, CMS officials told us that they hired a contractor to develop agencywide performance metrics in response to PPACA requirements. The performance metrics being developed by the contractor include performance metrics for MIP. CMS officials did not provide a date when the new performance metrics will be completed. According to the Director of the Medicare Program Integrity Group, the PPACA performance metrics are broader than the GPRA goals but generally are consistent with the GPRA goals. In addition to the efforts at CMS to increase program integrity within the Medicare program, HHS officials told us that they are developing a departmentwide strategy to address program integrity in all HHS programs. An official noted that measuring the effectiveness of any program integrity effort is a challenge. She said it is difficult to quantify instances where fraud or abuse was avoided because of program integrity efforts. For instance, Provider Outreach and Education on proper billing practices is a MIP activity, but it would be difficult to quantify how much more improper billing would occur without this education. PPACA requires CMS to report annually on the use of funds for MIP and the effectiveness of the use of those funds. One way that CMS measures program effectiveness is through calculation of ROI. CMS already calculates ROI for each MIP activity, with the exception of Provider Outreach and Education. An overall ROI for MIP is reported to Congress annually in the agency's budget justification. ROI is calculated as program savings from the activity divided by program expenditures from the activity. The Director of the Medicare Program Integrity Group told us that the current methodology used by MIP for calculating ROI is likely the method the agency will use to meet the PPACA reporting requirements. The data CMS currently uses to calculate the ROI have two flaws. First, CMS calculates the ROI for each activity in January of each year for the prior fiscal year, but contractors can change expenditure data via the submission of additional invoices or corrections through the time they are audited, which can occur up to 2 years after the end of the fiscal year. The ROI figures calculated based on this information are not subsequently updated. When we compared the expenditure data used to calculate activity-level ROIs and final expenditure data provided by OFM, we found differences up to $9.7 million. Given that these dollar amounts are used as the denominator for the ROI, the ROI amounts would likely change if they were updated with final expenditure data. In the case of the $9.7 million difference, for example, the difference represented a 6.4 percent increase in the program expenditures. Second, ROIs for activities conducted by MACs are potentially inaccurate because MACs have discretion to direct MIP funding among the activities they perform, and CMS does not have reliable information to determine the exact amount spent by each MAC on individual MIP activities. CMS officials told us that they were aware of the issue and were making changes to the data collection system so that CMS could calculate actual spending data. As of May 2011, these officials were unable to estimate when the change to the data collection system would be implemented. Decisions about recommendations for how MIP funding should be allocated among the various activities and subactivities are based on a variety of factors. Based on the budget request documents we reviewed, the CMS MIP Budget Small Group may consider any or all of the following factors: prior year's approved funding levels and requested levels for the current and following fiscal year; rationale for the increase or decrease in requested funding; description and justification of the subactivity; agency performance goals, including the strategic objective and GPRA goal, that the subactivity is intended to meet; and consequence of not funding the subactivity. We reviewed 36 budget request documents for subactivities funded in fiscal year 2010 and found that 11 cited the reduction of the fee-for- service improper payment rate as the GPRA goal the subactivity was intended to meet. It is difficult to determine the factors CMS considers when allocating MIP funds beyond those listed in the budget request documents. There is no record of why submitted subactivities were funded or not funded. Also, CMS has no policies or procedures in place that outline how decisions about funding allocations should be made for MIP. CMS officials told us that a subactivity's effectiveness may be discussed orally at the meetings, though there is no documentation substantiating this. A budget official in CMS told us that when allocating MIP funds, the MIP Budget Small Group tries to focus on where the problems are in each area and then determines how to efficiently spend the money. For instance, he said that in the past the process for allocating MIP funding within the Part C and D Oversight activity had been difficult because the subactivities were new, and consequently, there were no baseline ROI data available. This same official said that he thought the allocation process for Part C and D Oversight would become more data driven as program savings data become available, which will allow the agency to calculate ROIs for the Part C and D Oversight subactivities. The administration has made reducing the governmentwide improper payment rate a priority. CMS must play a strong role in this effort because, even without Part D, Medicare's improper payments constitute more than a third of total federal government improper payments. As the CMS program with the goal to reduce Medicare's improper payments, MIP will be central to the agency's effort to reduce the Medicare improper payment rates. CMS will need a strong, concerted effort on the part of staff and contractors working on MIP activities to achieve the improper payment reduction goals the agency has set for itself, and MIP staff will need to understand how their work supports these goals and any additional goals developed in response to PPACA requirements. Further, a clear focus on reducing improper payments should be central to MIP budget allocations. Because at least some information is presented orally at the MIP Budget Small Group meetings, we cannot determine the extent to which the risk of improper payments and effectiveness of MIP activities in addressing that risk are discussed during the process. We continue to believe that consideration of how MIP activities will reduce the risk of improper payments and their effectiveness in doing so should be an important part of the funding process and encourage CMS to make that a priority. As we noted in our 2006 report, ROI is a useful method for assessing the effectiveness of MIP activities. However, such reporting is valuable only if the ROI figures reported are reliable. Currently, the data used to calculate the ROI are flawed because the ROI calculations are not updated beyond the end of a fiscal year to account for changes in MIP expenditure data, and CMS does not currently have a way to account for the exact amount of MIP funds MACs spend on individual MIP activities. CMS officials acknowledged the shortcomings of the MAC expenditure data and noted that they were implementing changes to the applicable data collection system to more accurately capture MAC expenditures. Expeditiously completing this task and ensuring that final expenditure data are used to update ROI calculations will be essential to ensuring reliability in ROI reporting. We are making three recommendations to CMS. To enhance accountability and sharpen the focus of the agency on reducing improper payments, we recommend that the Administrator of CMS clearly communicate to staff the linkage between GPRA and PPACA performance measures related to the reduction in improper payments and other measures used to determine the performance of MIP activities. To enhance the reliability of data used to calculate the MIP ROI, we recommend that the Administrator of CMS take the following two actions periodically update ROI calculations after contractor expenses have been audited to account for changes in expenditure data reported to CMS and publish a final ROI after data are complete and expeditiously complete the implementation of data system changes that will permit CMS to capture accurate MAC spending data, thereby helping to ensure an accurate ROI. We provided a draft of this report to HHS for review, and in its written comments, HHS concurred with our recommendations. (HHS's written comments are reprinted in app. IV.) HHS noted that CMS has expanded its efforts to ensure that GPRA goals become an integral part of its overall management culture, including management of MIP activities. In addition, HHS stated that with the introduction of PPACA, the department is developing performance metrics that are in addition to, and align with, GPRA goals. CMS concurred with our recommendation to clearly communicate to staff the linkage between GPRA and PPACA performance measures related to the reduction in improper payments and other measures used to determine the performance of MIP activities. CMS stated that the agency recently established the position of the Chief Performance Officer to provide leadership, technical direction, and guidance in the development, implementation, communication, and operation of a comprehensive, CMS-wide performance management program. CMS also summarized other agency activities under way to assess program effectiveness, such as developing a new online data tool to report on the progress of key performance indicators, including those related to program integrity. CMS concurred with our recommendation to periodically update ROI calculations after contractor expenses have been audited to account for changes in expenditure data reported to CMS and publish a final ROI after data are complete. According to CMS, the agency will update the ROI when there has been a material change in the data used in the calculation and, at a minimum, will revisit the ROI annually to account for revisions in contractor cost reports and updated savings information. CMS also highlighted the complexities of estimating cost data for the MACs for purposes of the ROI. CMS also concurred with our recommendation to complete the implementation of data systems changes that will permit CMS to capture accurate MAC spending data, thus helping to ensure the accuracy of the ROI. CMS stated that the agency will convene an internal work group consisting of staff from several components to explore more efficient ways to accumulate MAC cost data and calculate ROI performance statistics. CMS also noted that some changes to the cost reporting system for contractor cost submissions have already been completed, particularly in the area of medical review cost reporting. However, the agency plans to pursue a full assessment of the costs reported across all of the MIP functions performed by the MACs to ensure that any additional changes are identified and implemented. We are encouraged by CMS's plans to implement our recommendations and believe that doing so will lead to a better understanding by the agency and Congress of MIP's effectiveness. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies of this report to the Secretary of Health and Human Services, Administrator of CMS, appropriate congressional committees, and other interested parties. The report also will be available at no charge on the GAO Web site at http://www.gao.gov. If you or your staffs have any questions about this report, please contact me at (202) 512-7114 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix V. The Comprehensive Error Rate Testing (CERT) contractor establishes error rates and estimates of improper payments for Medicare, which the Centers for Medicare & Medicaid Services (CMS) uses to assess the performance of MIP. Medicare administrative contractors (MAC) perform medical review of claims, identification and recovery of improper payments, provider audits, provider education, and screening of beneficiary complaints related to alleged fraud. MACs use information generated by the CERT contractors to identify how to target their improper payment prevention activities. In addition to performing these program integrity activities, MACs process Medicare claims and conduct other claims-related activities, such as answering provider inquiries and recouping overpayments. Medicare drug integrity contractors (MEDIC) are tasked with identifying potential fraud and abuse in Part C and D of the Medicare program and referring cases to the Department of Health and Human Services' Office of Inspector General (OIG) or Department of Justice as necessary. MEDICs are also responsible for auditing the fraud, waste, and abuse compliance programs that are a requirement for participation as a Part D provider. The Medicare secondary payer (MSP) contractors are responsible for researching and conducting all MSP claim investigations. In addition to this role in MIP, the MSP contractor identifies all health insurance held by Medicare beneficiaries and coordinates the payment process. The National Supplier Clearinghouse is responsible for reviewing enrollment applications from durable medical equipment suppliers and conducting site visits to confirm these suppliers' compliance with Medicare regulations. Program safeguard contractors (PSC) perform benefit integrity subactivities for Parts A and B of Medicare to identify cases of suspected fraud and take action to ensure that Medicare funding is not inappropriately paid and that any mistaken payments are identified. Cases of potential fraud are referred to the Department of Health and Human Services' OIG. Zone program integrity contractors (ZPIC) will eventually be responsible for performing benefit integrity subactivities for claims under Parts A, B, C, and D of the Medicare program. CMS is currently in the process of replacing the PSCs with ZPICs. Benefit Integrity includes subactivities designed to deter and detect Medicare fraud by conducting data analysis of claims. Provider Audit includes desk reviews, audits, and final settlement of institutional provider cost reports. Medicare Secondary Payer includes subactivities designed to identify claims that were mistakenly billed to Medicare when beneficiaries have primary sources of payment that should have paid the claims. Medical Review includes both automated and manual prepayments and postpayment reviews of individual Medicare claims to determine whether legitimate services are covered, medically reasonable, and necessary. Provider Outreach and Education includes training for providers, such as hospitals and physicians that serve Medicare beneficiaries, on procedures to comply with Medicare rules and regulations. Medicare-Medicaid Data Match Project is a joint effort between CMS and states that participate voluntarily to analyze claims for individuals with both Medicare and Medicaid coverage to identify providers with aberrant Medicare and Medicaid billing patterns. Part C and D Oversight includes subactivities designed to address improper payments in the Medicare private health plan program (Part C) and outpatient prescription drug benefit (Part D). Other Medicare Fee-For-Service includes a variety of Medicare fee-for-service-related subactivities not captured by other activities. In addition to the contact named above, key contributors to this report were Kay L. Daly, Director; Sheila Avruch, Assistant Director; Phillip McIntyre, Assistant Director; Sabrina Springfield, Assistant Director; Lori Achman; Nicole Dow; Emily Loriso; Chelsea Lounsbury; Roseanne Price; Andrea Richardson; and Jennifer Whitworth.
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The Medicare program makes about $500 billion in payments per year and continues to have a significant amount of improper payments--almost $48 billion in fiscal year 2010. The Centers for Medicare & Medicaid Services' (CMS) Medicare Integrity Program (MIP) is designed to identify and address fraud, waste, and abuse, which are all causes of improper payments. MIP's authorizing legislation provided funding for its activities and subsequent legislation provided additional funding. GAO was asked to report on how effectively CMS is using MIP funding to address Medicare program integrity. GAO examined (1) how CMS used MIP funding to support the program's activities from fiscal years 2006 through 2010, (2) how CMS assesses the effectiveness of MIP, and (3) factors CMS considers when allocating MIP funding. GAO analyzed CMS budget and other documents, interviewed CMS officials, and examined the agency's method of calculating return on investment (ROI), a performance measure used by CMS to measure the effectiveness of MIP activities. CMS used the increase in total MIP funding received, from $832 million in fiscal year 2006 to $1 billion in fiscal year 2010, to expand MIP's activities. The additional funding supported oversight of Medicare Part C (Medicare benefits managed through private plans) and Part D (the outpatient prescription drug benefit) and agency efforts to examine the claims of Medicare beneficiaries who also participate in Medicaid--a joint federal-state health care program for certain low-income individuals. CMS officials also reported that CMS was able to move some funding from activities, such as provider audit, to other activities because of savings achieved from consolidating contractors. The largest percentage increase from this redistribution went to benefit integrity activities, which aim to deter and detect Medicare fraud through proactive data analysis and coordination with law enforcement. Although CMS has reported that the agency measures MIP's performance with goals related to reductions in the improper payment rates for Medicare fee-forservice, Part C, and Part D, CMS officials with direct responsibility for MIP generally do not connect measurements of effectiveness of MIP activities with the CMS goals of reducing improper payments. These goals to reduce improper payments, which were reported as goals previously and for fiscal year 2012, are particularly important in light of the President's Accountable Government Initiative, which aims to reduce overall improper payments by $50 billion by the end of 2012. In interviews with GAO, CMS officials with direct responsibility for implementing MIP activities generally did not connect the measurement of effectiveness of MIP activities with these CMS goals to reduce improper payments and instead cited other measures of effectiveness. This suggests that CMS has not clearly communicated to its staff the relationship between the daily work of conducting MIP activities and the agency's improper payment reduction performance goals. Because MIP will be central to CMS's efforts to reduce Medicare improper payments, MIP staff need to understand how their work supports these goals. In addition, the Patient Protection and Affordable Care Act requires CMS to report annually on the use of funds for MIP and the effectiveness of the use of those funds. One way that CMS already measures MIP effectiveness is ROI, which CMS calculates as savings from an activity in relation to expenditures. CMS calculates ROI for most of its MIP activities, but the data it uses have two flaws. First, ROI calculations are not updated when program expenditure data, a key component in the ROI calculation, are updated, which may lead to an incorrect ROI. Second, CMS does not have reliable information to determine the amount of MIP spending by activity for one type of contractor that received about 22 percent of total MIP funding in fiscal year 2010. It will be important for CMS to correct these flaws to ensure reliability in ROI reporting. CMS considers a variety of factors when allocating MIP funding. Based on a review of the documents submitted to justify funding of specific MIP activities, CMS may consider the prior year's funding level, the consequence of not funding, and the performance goal that the activity is intended to meet. GAO recommends that CMS communicate the linkage between MIP activities and the goals for reducing improper payments and that CMS expeditiously improve the reliability of data used to calculate ROI. The Department of Health and Human Services concurred with these recommendations.
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As part of its responsibilities for civil aviation security, TSA enforces law and regulations requiring that passengers be screened to ensure that potential weapons, explosives, and incendiaries are not carried into an airport sterile area or on board a passenger aircraft. To provide the general public with guidance on the types of property TSA policy prohibits from being brought into airport sterile areas and on board aircraft, TSA publishes, and on occasion has updated, an interpretive rule in the Federal Register--known as the PIL--that, among other things, lists items prohibited from being carried on a passenger's person or in the passenger's accessible property into airport sterile areas and into the cabins of passenger aircraft. TSA also maintains a current list of prohibited items on its public website. The list is not intended to be exhaustive, and TSOs may exercise discretion, informed by the categories and examples included in the PIL and their standard operating procedures, to prohibit an individual from carrying an item through the checkpoint if in the screener's determination the item could pose a threat to transportation (i.e., whether it is or could be a weapon, explosive, or incendiary) regardless of whether it is or is not on the PIL. TSA has divided prohibited items into nine categories. Table 1 provides a description of the items included in the nine categories. Individuals are prohibited from carrying these items into an airport sterile area or on board an aircraft either in their carry-on bags or on their person. At passenger screening checkpoints, TSOs inspect individuals and property as part of the passenger screening process to deter and prevent the carriage of any unauthorized explosive, incendiary, weapon, or other items included on the PIL into the sterile area or on board an aircraft.shown in figure 1, TSOs use the following methods, among others, to screen passengers: X-ray screening of property, Advanced imaging technology scanners (often referred to by the public as body scanners) or walk-through metal detector screening of individuals, pat-down screening of individuals, physical search of property, trace detection for explosives, and behavioral observation. TSA has developed checkpoint screening standard operating procedures that establish the process and standards by which TSOs are to screen passengers and their carry-on items at the screening checkpoint. According to TSA standard operating procedures, passengers may be screened through the use of a walk-through metal detector, advanced imaging technology scanner, or a pat-down. Passengers are also generally required to divest their property, including the removal of shoes and outer garments, and empty their pockets. During this screening process, TSOs look for any prohibited or dangerous items on a passenger or among the passenger's property. Ordinarily, passenger screening at the checkpoint begins when the individual divests and places his or her accessible property on the X-ray conveyor belt or hands such property to a TSO. A TSO then reviews images of the property running through the X-ray machine and looks for signs of prohibited items. The passengers themselves are typically screened via a walk-through metal detector or an advanced imaging technology scanner, and passengers have the option to request screening by a pat-down if they do not wish to be screened via the advanced imaging technology scanner. TSA uses additional screening techniques on a random basis to provide an additional layer of security. These additional screening techniques, referred to as an Unpredictable Screening Process, are prompted automatically by the walk-through metal detector, which picks out a certain percentage of passengers at random to be selected for additional screening. For example, TSA uses explosives trace detection (ETD) to swab the hands or property of passengers on a random basis to screen for explosives. According to TSA officials, because of statutory and other considerations, TSA has revised the PIL six times since its inception in February 2003 (see table 2). In general, TSA modifies the PIL as necessary when circumstances prompt the agency to revise the items listed as prohibited from being carried into an airport sterile area or on board an aircraft. For example, in 2005, TSA modified the PIL in response to a statutory requirement to prohibit passengers from carrying any type of lighter on their person or in their accessible property on board aircraft. Later that year, TSA also modified the PIL to allow passengers with ostomates to carry small ostomy scissors with them onto aircraft because the agency had heard from persons with ostomies that they avoid flying, in part, because they are not allowed to carry the scissors they need onto the aircraft. In 2006, TSA further modified its policy with respect to permitted and prohibited items in response to a specific terrorist threat by initially prohibiting the carriage of liquids, gels, and aerosols on board an aircraft, and subsequently permitting passengers to carry limited amounts of liquids, gels, and aerosols on board an aircraft in a manner prescribed by the agency. See TSA Security Directive 1544-14-02 (Feb. 6, 2014) and TSA Emergency Amendment 1546-14-01 (Feb. 6, 2014) (imposing additional security requirements on U.S. and foreign air carrier operations, respectively, to and from the Russian Federation). The security directive and emergency amendment did permit the carriage of medication in liquid, gel, or aerosol form. such measures are carried out, TSA generally accomplishes this by issuing security directives and emergency amendments and, as circumstances permit, in coordination and consultation with host governments, the International Civil Aviation Organization (ICAO), and other affected parties. TSA officials told us that when evaluating whether or not to change the PIL, they generally consider the following four factors: (1) the security risks posed by each item on the current PIL or potential item to be added, (2) opportunities a potential change may have to improving checkpoint screening and passenger experience, (3) harmonization with international aviation security standards and recommended practices published by ICAO, and (4) stakeholder perspectives on the change. For example, as part of a broader set of potential changes related to adopting a risk-based security approach to passenger screening, TSA formed a working group in 2011 to conduct a risk-based review of the PIL; assessed the individual risk posed by each PIL item; and then considered how removing a particular item, or set of items would present opportunities, constraints, and challenges for TSA security operations at the checkpoint. TSA officials stated they then considered how any changes would affect TSA personnel costs and passenger experience such as likely screening throughput time if TSA personnel no longer had to screen for particular items. TSA then evaluated how interested parties such as Congress, airlines, and flight attendants would respond to permitting particular items on board an aircraft. TSA also considered ICAO guidance on prohibited items and took into account whether any changes it made to the PIL would further align TSA's guidelines for prohibiting items with ICAO standards and recommended practices. TSA officials told us that TSA does not have policies that require a specific process to be followed or a specific set of criteria to be used when evaluating potential modifications to the PIL, since the circumstances for each potential PIL change are unique. Officials stated the steps they take when considering a modification often vary depending on the nature of the proposed revision. In its 2011 review of the PIL, TSA's working group addressed these factors as follows: Impacts on security risk: The working group evaluated the risk to transportation security presented by each prohibited item by assessing the likelihood of an adversary successfully using the item to achieve different terrorist objectives. TSA assigned risk ratings of high, medium, low, or none to each item on the PIL for each terrorist objective. TSA assessed the levels of risk posed by small knives for each terrorist objective. Impacts on screening operations: The working group also considered how the removal of small knives would affect checkpoint screening operations. For example, TSA estimated, using historical data prior to 2009, that approximately half of all nonfirearm, nonincendiary voluntarily abandoned property (VAP) left behind at the checkpoint consisted of small knives with blades shorter than 2.36 inches. TSA concluded that TSOs spent a disproportionate amount of their time searching for these items. TSA reasoned that removing small knives from the PIL would have a positive impact on screening operations since TSOs would no longer have to detect and deal with small knives at the checkpoint, reducing direct and indirect personnel costs, increasing passenger throughput, and reducing distractions to TSOs. TSA also concluded that not requiring TSOs to screen for small knives would in turn improve their ability to screen for higher-threat items, such as IEDs, and thus reduce risk overall. For example, the TSA risk assessment cited a research study focused on how success rates for screening items vary based on what screeners look for. TSA cited the study in support of its assertion that TSOs would be more successful identifying IEDs if they did not have to screen for small knives. Harmonization with international standards and guidance: TSA also considered the harmonization of the PIL with ICAO standards and recommended practices. TSA concluded that making certain changes to the PIL, such as removing small knives, could better harmonize its policies with ICAO guidance. Specifically, ICAO guidance provides that member states should consider prohibiting knives with blades of more than 6 centimeters (approximately 2.36 inches) from being carried on board aircraft. TSA concluded that there would be operational and policy benefits from harmonizing the PIL with ICAO guidance because greater harmony among the various countries promotes greater cooperation on all security issues. Further, TSA asserted that inconsistencies between the PIL and the ICAO guidance could create confusion for passengers when items were allowed onto aircraft in one country, but prohibited in another. Stakeholder perspectives: The TSA working group also noted the need to coordinate with stakeholders on some of the options for modifying the PIL, as these options were likely to cause concern among some of these groups, if implemented. For example, for the working group's proposed recommendation to remove small knives from the PIL, TSA officials noted past concerns from stakeholders over the prospect of allowing small knives or other items on board aircraft and stated that coordination and collaboration with key stakeholders would be a critical success factor for implementation. They also noted that stakeholder support would be greatly enhanced by a unified approach to communicating to stakeholder groups that TSA planned to shift its resource focus from finding small knives to other efforts that would result in better security. Although TSA recognized that allowing small knives on planes would raise the potential risk of other terrorist aircraft scenarios, TSA concluded the change would not raise the overall risk of catastrophic aircraft destruction. However, rather than make an immediate decision about changing the PIL, TSA elected to suspend working group activities and delay making any decisions while it focused greater attention and TSA resources on other emerging risk-based security initiatives, such as the Known Crewmember and expedited passenger screening programs. TSA resumed working group evaluations of the PIL in July 2012. As previously discussed, TSA used its risk assessment to conclude that overall risk to aviation security would be lowered by allowing small knives onto aircraft because security screeners would be able to better focus on identifying higher-risk items, such as IEDs. However, TSA did not conduct sufficient analysis to show that removing small knives would ultimately reduce risk and improve checkpoint screening. TSA's reasoning for its decision to remove small knives from the PIL was to further align the PIL with ICAO guidance on prohibited items, decrease time spent rescreening or searching bags for these items, and better enable its TSOs to focus more attention on higher-threat items, such as IEDs, thereby potentially increasing security. DHS guidance for managing and assessing risk states that risk assessments should evaluate all the In its risk assessment, risk scenarios considered by the assessment.TSA assessed the risk posed by small knives for each terrorist objective; however, it did not complete data collection or an evaluation to determine whether TSOs would actually be better able to identify high-risk items, such as IEDs, if they were not looking for small knives. Furthermore, the research cited by TSA did not evaluate a situation where screeners had to differentiate between knives with blades greater or less than 2.36 inches in length, as proposed by TSA. Without conducting a more valid evaluation of the actual proposed change, TSA could not sufficiently evaluate whether the added risk of allowing small knives onto aircraft would be offset by a reduction in risk achieved through improved screening for IEDs. Such an analysis would have allowed TSA to actually measure whether airport screeners would be better able to identify explosives if they no longer had to screen for small knives, and better determine whether the added risk of allowing small knives onto aircraft would be offset by potential efficiencies in screening for explosives. Moreover, 25 of 35 TSOs (including supervisory TSOs) and 8 of the 10 Transportation Security Managers we interviewed during visits to six airports did not agree that allowing small knives on planes would have helped them better screen for IEDs, as TSA concluded in its risk assessment. Four TSOs and 1 supervisory TSO we interviewed noted that the exact size of a knife is difficult to ascertain on an X-ray. Therefore, these 4 TSOs and the supervisor believed they would have to open bags in many instances and physically measure the knife to make sure it conformed to TSA's definition of a permissible knife, which, according to TSA's definition, was a nonfixed blade less than 2.36 inches and not exceeding a 0.5 inch in width with no locking mechanism, and no molded grip or nonslip handle. TSA officials told us that the training provided to TSOs specified that each TSO was expected to use his or her judgment in determining, based on the X-ray image, whether a knife was permissible or not. We previously recommended in 2007 that TSA strengthen its evaluation of proposed modifications to the PIL and other checkpoint screening procedures to better justify its decisions. Specifically, in April 2007, we found that TSA did not conduct the necessary analysis to support its 2005 decision to remove small scissors (4 inches or less) and certain tools (7 inches or less) from the PIL. As with TSA's more recent rationale for removing small knives from the PIL, TSA stated that the reason for its decision to remove small scissors and tools was to shift TSO focus from items considered by TSA to pose a low threat to items considered to pose a high threat, such as IEDs, as well as to better allocate TSA resources to implement other security measures that target IEDs. However, we found that TSA did not conduct the necessary analysis to determine the extent to which removing small scissors and tools from the PIL could improve TSO performance in detecting higher-threat items, nor did TSA analyze other relevant factors such as the amount of time taken to search for small scissors and tools and the number of TSOs conducting these searches. As a result, we recommended that TSA, when operationally testing proposed modifications to its checkpoint screening procedures, such as the PIL, develop sound evaluation methods to assist it in determining whether proposed procedures would achieve their intended result, such as enhancing the agency's ability to better detect prohibited items, and free up existing TSO resources. TSA conducted one evaluation on proposed X-ray screening procedures and one test on a proposed ETD procedure. Regarding the X-ray procedure change, TSA collected and analyzed the necessary data to determine whether the X-ray screening procedures would improve passenger throughput. However, in its evaluation of ETD devices, TSA was not able to provide documentation that explained the intended purpose of the proposed ETD procedure, the type of data TSA planned to collect, or how the data would be used. changes to standard operating procedures, as we recommended in April 2007. Without sound evaluation methods, TSA will be limited in its ability to determine whether proposed modifications to standard operating procedures--such as the PIL--will result in the intended risk reduction, for example, by enhancing the agency's ability to better detect IEDs and other high-risk items. TSA consulted both internal and external stakeholders during development of its decision to remove small knives from the PIL, but it did not adequately consult with several external aviation stakeholder groups. Some of these groups later raised strong objections after TSA publicly announced the change. GAO's Standards for Internal Control in the Federal Government states that an organization's management should ensure there are adequate means of communicating with, and obtaining information from, external stakeholders that may have a significant impact on the agency's operations and its achievement of organizational goals. These internal control standards further state that management is responsible for developing detailed policies, procedures, and practices to fit its agency's operations and to ensure that they are built into, and an integral part of, operations. Moreover, TSA's risk assessment and other planning documents leading up to its proposal to remove small knives from the PIL called for full coordination and collaboration with key external stakeholders who might have reservations about the change before moving forward with any revisions to the PIL. In coordinating with stakeholders, TSA primarily consulted with internal groups who, according to TSA, were generally supportive overall of the proposed revision. Specifically, TSA's efforts to coordinate with internal groups included the following: The TSA "Idea Factory": Provides for online comments from TSA personnel with "likes" and "dislikes" similar to those on Facebook. According to TSA, results received from April 2011 through December 2012 indicated that some TSA personnel, including screeners, thought that removing small knives would be a good idea and would improve their ability to screen for IEDs. TSA National Advisory Council: An internal employee advisory committee representing TSA employees at various levels, including management, supervisors, and TSOs. An ad hoc subcommittee of this council reviewed the PIL in July 2012 and recommended removing small knives. Administrator Pistole's informal discussions with TSOs: According to TSA, Administrator Pistole visited several airports, starting with a town hall meeting at Charlotte Douglas International Airport in December 2012, to gather input on the small knives proposal. TSA officials stated that, during these meetings, TSOs were supportive of the knives proposal and thought it would improve their ability to screen for explosive devices. Federal Air Marshal Service (FAMS): In February 2013, FAMS provided TSA management with comments that led to the small knives decision being more restrictive than TSA executives had originally considered. Specifically, the decision no longer allowed fixed or locking blades, or tactical or combat knives, regardless of length. FAMS officials stated they were generally opposed to allowing small knives on aircraft, but their concerns were mitigated by TSA management's revision of the proposal. TSA also reached out to some external stakeholder groups who, according to TSA, were also supportive of the decision to eliminate small knives, including the Airline Pilots Association, Families of September 11, and DHS's Homeland Security Advisory Council (HSAC). In addition, the TSA Administrator discussed possible changes to the Prohibited Items List in various appearances before Congress from 2010 to 2012 where he expressed the belief that screening personnel should concentrate on items that can cause catastrophic destruction of an aircraft. However, TSA did not discuss the proposal and solicit feedback from other relevant external stakeholders prior to its announcement. For example, TSA did not coordinate with or obtain input from the Aviation Security Advisory Committee (ASAC), which is its primary external advisory group for aviation security matters and whose membership includes various airline industry associations.stakeholders--from whom TSA did not adequately solicit feedback-- subsequently expressed strong opposition to the proposal, which contributed to TSA reversing its decision to implement the proposal. For example, TSA did not adequately consult with flight attendant groups during development of the small knives proposal, including the Association of Flight Attendants--an ASAC member--and the Coalition of Flight Attendant Unions. Specifically, in a November 30, 2012, phone call primarily regarding another matter, TSA informed the AFA president that it was also planning to modify the PIL to remove small knives. AFA officials disagreed with this decision. However, this conversation occurred after TSA had developed the proposal for the decision over the preceding months. Shortly after this meeting, the TSA Administrator approved the decision to remove small knives from the PIL, which was followed by the March 5, 2013, public announcement of the decision. In response to feedback received after its March 5, 2013, public announcement of the small knives decision, TSA conducted a classified briefing with the ASAC. TSA officials met with the ASAC on April 22, 2013, more than a month after TSA's March 5, 2013, public announcement of its proposed change and just prior to its planned implementation date of April 25, 2013, and briefed ASAC members on the announced change. Immediately following this meeting, and on the basis of input received by ASAC members and other stakeholders, the TSA Administrator announced a delay in implementation of the change to allow the agency additional time to more fully coordinate with various external stakeholders groups and incorporate additional input on the change. Following the ASAC briefing and announcement of the delay, TSA held similar briefings with other stakeholder groups including the Victims of Pan Am Flight 103 and the National Air Disaster Alliance/Foundation. On June 5, 2013, the TSA Administrator announced that on the basis of extensive engagement with the ASAC and other stakeholder groups, including law enforcement officials and passenger advocates, TSA would continue to enforce the current PIL and not go forward with the decision to remove small knives from the list. As described earlier, TSA management officials stated that they do not have a formal policy or a specific process for evaluating PIL modifications; this also means that they have no specific requirements for coordinating with stakeholders during development of potential revisions to the PIL. TSA officials stated that if some of the steps for stakeholder coordination defined in other TSA processes for emergency amendments and security directives had been in place for PIL changes--such as obtaining key stakeholder input when developing a security policy change--they may have helped to ensure better stakeholder coordination during consideration of the knives change. For example, TSA officials stated that, in hindsight, meeting with the ASAC and having more in- depth discussions with flight attendants during internal deliberations over modifying the PIL would have improved their efforts to fully coordinate and ensure they appropriately obtained and considered all key stakeholder perspectives. TSA officials also stated that they would have benefited from broader engagement earlier in the process with external groups, such as the ASAC and flight attendants. In the case of the small knives decision, the officials added that this broader and more timely engagement could have provided additional insight into the breadth and depth of potential concerns associated with removing certain items from the PIL. Clear processes outlining the appropriate types of stakeholders to consult--including when in the process stakeholders should be consulted--could help ensure that TSA's process for determining PIL changes is effective and efficient. For example, having clearly defined processes for stakeholder coordination could ensure that TSA fully obtains and considers stakeholder views--consistent with internal control standards and TSA's planning documents--that could help mitigate potential inefficiencies resulting from reversing policy decisions. Going forward, a formal process to ensure the solicitation of input from relevant external stakeholders on proposed changes to the PIL, including when in the PIL modification process TSA officials are to coordinate with such stakeholders, would help provide reasonable assurance that TSA has a more complete understanding of stakeholder perspectives earlier in the decision-making process. This could help avoid rescission of those changes after investing resources in training TSOs and informing the general public of the change, as was the case with the proposed change to remove small knives from the PIL. According to TSA personnel from the Office of Training Workforce and Engagement (OTWE), TSA evaluates on a case-by-case basis what training tools it will use to ensure TSOs are adequately trained to implement a change to the PIL. However, TSA typically provides TSOs with one or more of the following methods to prepare and train them to implement a PIL change: Online training--This type of training is web-based and may be completed by the TSOs either individually or as a group. This training may include test questions to assess the TSOs' mastery of the material. Instructor-led classroom training--Training personnel conduct formal classroom training with multiple TSOs. Informational briefings, bulletins, and memos--These include oral briefings by TSA trainers or supervisors in addition to notifications TSA headquarters sends to field personnel. These methods may be used to notify the field personnel of standard operating procedure changes or other matters. Trainers conduct briefings at the beginning of a TSO shift or may do so at another designated time, such as following a formal training session. The notifications sent by TSA headquarters may include "read and sign" memos, in the case of standard operating procedure changes, or may be presented online for other important matters. TSA training personnel stated that they maintain a flexible approach by using different methods to prepare TSOs to implement PIL changes since the changes have differed in their complexity, and therefore some PIL changes require less training and preparation than others. TSA training personnel stated they work closely with the Office of Security Operations (OSO) to determine the proper approach to prepare TSOs to implement each change. As an example of how the training approach can vary based on the nature of the PIL change, the TSA training officials cited the 2005 change to prohibit all lighters from sterile areas or aircraft as one that required less TSO preparation, in terms of training, compared with the 2013 proposal to remove small knives. This was because the small knives proposal encompassed more variables with regard to which knives could be allowed (e.g., length of knife, type of knife, etc.) and therefore required more evaluation and judgment on the part of the TSOs to implement and operationalize the change correctly. By contrast, for the lighters change, TSOs simply had to know they would not allow any lighters past the checkpoint. In developing training for the rollout of the small knives decision, TSA required all TSOs to complete web-based training, individually or as a TSA's web-based training group, covering the specifics of the change.was followed by a "training brief" that a TSA trainer would provide either (1) immediately following a web-based training group session or (2) as part of a "shift brief" at the beginning of TSOs' work period (after completion of the web-based session) in order to allow TSOs to ask questions and gain clarity on the specifics of the PIL change. TSA required TSOs to complete all training within a 20-day window prior to the planned implementation of the approved knives proposal. TSA's web-based training sessions on the knives decision included images that provided examples of knives and sporting equipment that would not be allowed under the new guidelines. As shown in figure 2, these examples included illustrations of knives that would not be allowed into secure areas or on board aircraft because of their size (length greater than 2.36 inches, width greater than 0.5 inch) and design features (e.g., locking blades, hand-molded grip, etc.) of knives that should be prevented from being carried into sterile areas and on board aircraft. In addition, the training included X-ray images to train TSOs on what an allowed and a disallowed knife would look like on the screen. TSA's web-based training also covered the new procedures associated with knives that TSOs were to follow at the checkpoint, such as requiring travelers to remove any knives they may be carrying from their carry-on baggage or their person so that these items may be screened separately. Last, the web training tested TSOs in their knowledge of the new guidelines for the upcoming PIL change. Similar to the web-based training, TSA's training brief included example images of allowed/disallowed knives and sporting equipment. The training brief also included coverage of the revised standard operating procedures associated with this PIL change. Proposals to add or remove items from TSA's PIL can have critical impacts, not just for the security of millions of air travelers each year, but on the efficiency and effectiveness of passenger screening at airport security checkpoints and perceptions of risk by external stakeholders. Making determinations about potential PIL changes can take time and extensive consideration on the part of TSA as the agency balances its aviation security goals with efficient passenger throughput. While we commend TSA's efforts to consider the risk posed by each item on the PIL, and potential screening efficiencies that may be created by allowing small knives and other items to be carried onto aircraft, conducting the analyses to demonstrate the potential efficiencies and to show that such efficiencies would offset the added risk presented by allowing small knives to be carried on board aircraft would help ensure that critical changes to the PIL will have the intended impact on both security and efficiency. These types of analyses would be consistent with the previous recommendation we made that TSA should strengthen its evaluation of proposed modifications to checkpoint screening procedures. Further, TSA stated in its risk assessment and other planning documents that it would be critical to involve stakeholders in its deliberations regarding the change to the PIL. However, by not taking the necessary steps to sufficiently consult with relevant external stakeholders who may be directly affected by the proposal to allow small knives onto aircraft, TSA ultimately reversed its decision to implement the small knives change to the PIL after having already publicly announced its decision and invested resources in training and implementation. Developing a formal process for stakeholder coordination when making changes to the PIL would help to ensure that TSA's decisions to change the PIL are fully informed by stakeholder perspectives, and help to ensure the efficient use of agency resources when revising and implementing PIL policies. To help ensure its proposed PIL modifications fully account for the views of key external stakeholders in the aviation industry, we recommend that the Transportation Security Administration's Administrator establish a formal process to ensure the solicitation of input from relevant external stakeholders on proposed changes to the PIL, including when in the PIL modification process TSA officials are to coordinate with such stakeholders, before deciding to make a PIL change. We provided a draft of this report to DHS for comment. DHS provided written comments, which are summarized below and reproduced in full in appendix I. TSA concurred with our recommendation and described actions planned to address it. In addition, DHS provided written technical comments, which we incorporated into the report as appropriate. In concurring with our recommendation, DHS agreed with the need for a formal process to ensure the solicitation of input from relevant external stakeholders on proposed changes to the PIL. DHS stated that TSA's senior leadership team works year-round to build and maintain strategic partnerships with various stakeholders to develop policy, share best practices, and participate in setting industry security standards, among other things, and that a formal process for making changes to the PIL will build upon these activities to ensure relevant stakeholders are offered the opportunity to engage with TSA and inform its decisions. DHS stated that a formal process should also make stakeholder engagement more disciplined and concise and result in decisions that are viable and acceptable. TSA has identified the Office of Security Policy and Industry Engagement and the Office of Security Operations as the appropriate offices to create such a process and plans for them to work closely with the Office of Intelligence and Analysis, the Office of the Chief Risk Officer, and the Office of Chief Counsel. TSA plans to create such a formal process by November 30, 2015. This process, when fully implemented, should address the intent of our recommendation. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the appropriate committees and the Secretary of Homeland Security. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-7141 or [email protected]. Contact points for our Office of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this report are listed in appendix III. In addition to the contact named above, Chris Ferencik (Assistant Director), Dan Rodriguez (Analyst-in-Charge), Mike Harmond, Brendan Kretzschmar, Thomas Lombardi, Stanley Kostyla, Susan Hsu, Kathryn Godfrey, Linda Miller, and Eric Hauswirth made key contributions to this report.
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As part of its responsibilities for securing civil aviation, TSA ensures that all passengers and their accessible property are screened and prohibits individuals from carrying onto aircraft items that it determines to be a threat.TSA maintains a public list of such items, known as the Prohibited Items List, and updates it as necessary. In March 2013, TSA announced it would modify the PIL to allow small knives and certain sporting equipment onto aircraft, stating the change would result in more efficient security screening. However, several aviation industry groups opposed the decision, leading TSA to reverse its decision to implement the change. GAO was asked to review TSA's procedures for modifying the PIL. This report examines, among other issues, (1) on what basis TSA modifies the PIL and the extent to which TSA assessed risk when considering recent modifications to the PIL, and (2) the extent to which TSA involved stakeholders when considering these modifications. GAO reviewed TSA's standard operating procedures, risk assessment, documentation of its decisions and stakeholder outreach, and interviewed TSA officials at six airports. This is a public version of a report with Sensitive Security Information that GAO issued in December 2014. Information TSA deemed sensitive has been redacted. Transportation Security Administration (TSA) officials stated that TSA considers four factors when determining whether to make modifications to the Prohibited Items List (PIL), but the agency did not fully assess risk when considering its recent proposed PIL modifications, as GAO has previously recommended. TSA generally considers the following four factors when determining whether to modify the PIL: (1) the security risks posed by each carry-on item, (2) opportunities to improve screening operations and passenger experience, (3) harmonization with international security standards and practices, and (4) stakeholder perspectives. While TSA considered these four factors when making its March 5, 2013, decision to allow small knives and certain sporting equipment on aircraft, TSA officials also reasoned that the proposed change could help screening personnel focus less on lower-threat items, such as small knives, and more on higher-threat items, such as explosives, thereby potentially increasing security for passengers. However, TSA did not conduct sufficient analysis to show that the increased risk of allowing small knives on aircraft--as determined in its risk assessment--would be offset by a resulting reduction in risk from improved screening for explosives. GAO has previously recommended that TSA strengthen its evaluation methods for operationally testing proposed modifications to checkpoint screening procedures, including changes to the PIL. However, TSA has not consistently implemented this recommendation. Conducting additional risk analysis would have allowed TSA to actually measure whether airport screeners would be better able to identify explosives if they no longer had to screen for small knives. GAO continues to believe that TSA should develop and apply sound evaluation methods when considering modifications to the PIL, as GAO recommended in April 2007. TSA did not effectively solicit feedback on its 2013 PIL decision from relevant external stakeholders, some of whom subsequently expressed strong opposition to the decision to remove small knives from the PIL. For example, prior to announcing its decision, TSA did not coordinate with or obtain input from the Aviation Security Advisory Committee, which is TSA's primary external advisory group for aviation security matters and whose membership includes various airline industry associations. Some relevant stakeholders, such as flight attendant groups--from whom TSA did not adequately solicit feedback--subsequently expressed strong opposition to the proposal, which contributed to TSA reversing its decision to implement the change after having already trained screening personnel for its implementation. Having a defined process and associated procedures in place to communicate with relevant stakeholders earlier in the decision-making process could allow TSA to ensure appropriate consideration of their perspectives in the decision-making process. Use of a defined process and associated procedures could also allow TSA to better avoid rescission of any future changes after investing resources in training screening personnel and informing the general public of the change--as happened in the case of TSA's 2013 PIL decision. GAO recommends that TSA establish a formal process for soliciting input from relevant external stakeholders on proposed modifications to the PIL before making changes to it. DHS agreed with the recommendation.
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In the early 1980s, Congress had concerns about a lack of adequate oversight and accountability for federal assistance provided to state and local governments. Before passage of the Single Audit Act in 1984 (the act), the federal government relied on audits of individual grants to help gain assurance that state and local governments were properly spending federal assistance. Those audits focused on whether the transactions of specific grants complied with program requirements. The audits usually did not address financial controls and were, therefore, unlikely to find systemic problems with an entity's fund management. Further, individual grant audits were conducted on a haphazard schedule, which resulted in large portions of federal funds being unaudited each year. In addition, the auditors conducting the individual grant audits did not coordinate their work with the auditors of other programs. As a result, some entities were subject to numerous grant audits each year, while others were not audited for long periods. In response to concerns that large amounts of federal financial assistance were not subject to audit and that agencies sometimes overlapped on oversight activities, Congress passed the Single Audit Act of 1984. The act stipulated that state and local governments that received at least $100,000 in federal financial assistance in a fiscal year have a single audit conducted for that year. The concept of a single audit was created to replace multiple grant audits with one audit of an entity as a whole. State and local governments which received between $25,000 and $100,000 in federal financial assistance had the option of complying with audit requirements of the act or the audit requirements of the federal program(s) that provided the assistance. The objectives of the Single Audit Act, as amended, are to promote sound financial management, including effective internal control, with respect to federal awards administered by nonfederal entities; establish uniform requirements for audits of federal awards administered promote the efficient and effective use of audit resources; reduce burdens on state and local governments, Indian tribes, and nonprofit organizations; and ensure that federal departments and agencies, to the maximum extent practicable, rely upon and use audit work done pursuant to the act. The Single Audit Act adopted the single audit concept to help meet the needs of federal agencies for grantee oversight as well as grantees' needs for single, uniformly structured audits. Rather than being a detailed review of individual grants or programs, the single audit is an organizationwide financial statement audit that includes the audit of the Schedule of Expenditures of Federal Awards (SEFA) and also focuses on internal control and the recipient's compliance with laws and regulations governing the federal financial assistance received. The act also required that grantees address material noncompliance and internal control weaknesses in a corrective action plan, which is to be submitted to appropriate federal officials. The act further required that single audits be performed in accordance with GAGAS issued by GAO. These standards provide a framework for conducting high-quality financial audits with competence, integrity, objectivity, and independence. The Single Audit Act Amendments of 1996 refined the Single Audit Act of 1984 and established uniform requirements for all federal grant recipients. The refinements cover a range of fundamental areas affecting the single audit process and single audit reporting, including provisions to extend the law to cover all recipients of federal financial assistance, including, in particular, nonprofit organizations, hospitals, and universities; ensure a more cost-beneficial threshold for requiring single audits; more broadly focus audit work on the programs that present the greatest financial risk to the federal government; provide for timely reporting of audit results; provide for summary reporting of audit results; promote better analyses of audit results through establishment of a federal clearinghouse and an automated database; and authorize pilot projects to further streamline the audit process and make it more useful. The 1996 amendments required the Director of OMB to designate a Federal Audit Clearinghouse (FAC) as the single audit repository, required the recipient entity to submit financial reports and related audit reports to the clearinghouse no later than 9 months after the recipient's year-end, and increased the audit threshold to $300,000. The criteria for determining which entities are required to have a single audit are based on the total amount of federal awards expended by the entity. The initial dollar thresholds were designed to provide adequate audit coverage of federal funds without placing an undue administrative burden on entities receiving smaller amounts of federal assistance. When the act was passed, the dollar threshold criteria for the audit requirement were targeted toward achieving audit coverage for 95 percent of direct federal assistance to local governments. As part of OMB's biennial threshold review required by the 1996 amendments, OMB increased the dollar threshold for requirement of a single audit to $500,000 in 2003 for fiscal years ending after December 31, 2003. Federal oversight responsibility for implementation of the Single Audit Act is currently shared among various entities--OMB, federal agencies, and their respective Offices of Inspector General (OIG). The Single Audit Act assigned OMB the responsibility of prescribing policies, procedures, and guidelines to implement the uniform audit requirements and required each federal agency to amend its regulations to conform to the requirements of the act and OMB's policies, procedures, and guidelines. OMB issued Circular No. A-133, Audits of States, Local Governments, and Non-Profit Organizations, which sets implementing guidelines for the audit requirements and defines roles and responsibilities related to the implementation of the Single Audit Act. The federal agency that awards a grant to a recipient is responsible for ensuring recipient compliance with federal laws, regulations, and the provisions of the grant agreements. The awarding agency is also responsible for overseeing whether the single audits are completed in a timely manner in accordance with OMB Circular No. A-133 and for providing annual updates of the Compliance Supplement to OMB. Some federal agencies rely on the OIG to perform quality control reviews (QCR) to assess whether single audit work performed complies with OMB Circular No. A-133 and auditing standards. The grant recipient (auditee) is responsible for ensuring that a single audit is performed and submitted when due, and for following up and taking corrective action on any audit findings. The auditor of the grant recipient is required to perform the audit in accordance with GAGAS. A single audit consists of (1) an audit and opinions on the fair presentation of the financial statements and the SEFA; (2) gaining an understanding of internal control over federal programs and testing internal control over major programs; and (3) an audit and an opinion on compliance with legal, regulatory, and contractual requirements for major programs. The audit also includes the auditor's schedule of findings and questioned costs, and the auditee's corrective action plans and a summary of prior audit findings that includes planned and completed corrective actions. Under GAGAS, auditors are required to report on significant deficiencies in internal control and on compliance associated with the audit of the financial statements. Recipients expending more than $50 million in federal funding ($25 million prior to December 31, 2003) are required to have a cognizant federal agency for audit in accordance with OMB Circular No. A-133. The cognizant agency for audit is the federal awarding agency that provides the predominant amount of direct funding to a recipient unless OMB otherwise makes a specific cognizant agency assignment. The cognizant agency for audit provides technical audit advice, considers requests for extensions to the submission due date for the recipient's reports, obtains or conducts QCRs, coordinates management decisions for audit findings, and conducts other activities required by OMB Circular No. A-133. According to OMB officials, the FAC single audit database generates a listing of those agencies that should be designated cognizant agencies for audit based on information on recipients expending more than $50 million. The officials also stated that OMB is responsible for notifying both the recipient and cognizant agency for audit of the assignment. Federal award recipients that do not have a cognizant agency for audit are assigned an oversight agency for audit, which provides technical advice and may assume some or all of the responsibilities normally performed by a cognizant agency for audit. Federal grant awards to state and local governments have increased significantly since the Single Audit Act was passed in 1984. Because single audits represent the federal government's primary accountability tool over billions of dollars each year in federal funds provided to state and local governments and nonprofit organizations, it is important that these audits are carried out efficiently and effectively. As shown in figure 1, the federal government's use of grants to state and local governments has risen substantially, from $7 billion in 1960 to almost $450 billion budgeted in 2007. GAO supported the passage of the Single Audit Act, and we continue to support the single audit concept and principles behind the act as a key accountability mechanism over federal grant awards. However, the quality of single audits conducted under this legislation has been a longstanding area of concern since the passage of the Single Audit Act in 1984. During the 1980s, GAO issued reports that identified concerns with single audit quality, including issues with insufficient evidence related to audit planning, internal control and compliance testing, and the auditors' adherence to GAGAS. The federal Inspectors General as well have found similar problems with single audit quality. The deficiencies we cited during the 1980s were similar in nature to those identified in the recent PCIE report. In June 2002, GAO and OMB testified at a House of Representatives hearing about the importance of single audits and their quality. In its testimony, OMB identified reviews of single audit quality performed by several federal agencies that disclosed deficiencies. However, OMB emphasized that an accurate statistically based measure of audit quality was needed, and should include both a baseline of the current status and the means to monitor quality in the future. We also recognized in our testimony the need for a solution or approach to evaluate the overall quality of single audits. To gain a better understanding of the extent of single audit quality deficiencies, OMB and several federal OIGs decided to work together to develop a statistically based measure of audit quality, known as the National Single Audit Sampling Project. The work was conducted by a committee of representatives from the PCIE, the Executive Council on Integrity and Efficiency (ECIE), and three State Auditors, with the work effort coordinated by the U.S. Department of Education OIG. The Project had two primary objectives: to determine the quality of single audits by performing QCRs of a statistical sample of single audits, and to make recommendations to address any audit quality issues noted. The project conducted QCRs of a statistical sample of 208 audits randomly selected from a universe of over 38,000 audits submitted and accepted for the period April 1, 2003, through March 31, 2004. The sample was split into two strata: Stratum 1: entities with $50 million or more in federal award expenditures, Stratum 2: entities with less than $50 million in federal award expenditures (with at least $500,000). The above split in the sample strata corresponds with the current threshold for designating a cognizant agency, which is for entities that expend more than $50 million in a year in federal awards. Table 1 shows the universe and strata used in the analysis and the reviews completed in the National Single Audit Sampling Project. The project covered portions of the single audit relating to the planning, conducting, and reporting of audit work related to (1) the review and testing of internal control and (2) compliance testing pertaining to compliance requirements for selected major federal programs. The scope of the project included review of audit work related to the SEFA and the content of all of the auditors' reports on the federal programs. The project did not review the audit work and reporting related to the general purpose financial statements. The PCIE project team categorized the audits based on the results of the QCRs into the following three groups: Acceptable--No deficiencies were noted or one or two insignificant deficiencies were noted. This group also includes the subgroup, Accepted with Deficiencies, which is defined as one or more deficiencies with applicable auditing criteria noted that do not require corrective action for the engagement, but should be corrected on future engagements. Audits categorized into this subgroup have limited effect on reported results and do not call into question the auditor's report. Examples of deficiencies that fall into this subgroup are (1) not including all required information in the audit findings; (2) not documenting the auditor's understanding of internal control, but testing was documented for most applicable compliance requirements; and (3) not documenting internal control or compliance testing for a few applicable compliance requirements. Limited Reliability--Contains significant deficiencies related to applicable auditing criteria and requires corrective action to afford reliance upon the audit. Deficiencies for audits categorized into this group have a substantial effect on some of the reported results and raise questions about whether the auditors' reports are correct. Examples of deficiencies that fall into this category are (1) documentation did not contain adequate evidence of the auditors' understanding of internal control or testing of internal control for many or all compliance requirements; however, there was evidence that most compliance testing was performed; (2) lack of evidence that work related to the SEFA was adequately performed; and (3) lack of evidence that audit programs were used for auditing internal control, compliance, and/or the SEFA. Unacceptable--Substandard audits with deficiencies so serious that the auditors' opinion on at least one major program cannot be relied upon. Examples of deficiencies that fall into this group are (1) no evidence of internal control testing and compliance testing for all or most compliance requirements for one or more major programs, (2) unreported audit findings, and (3) at least one incorrectly identified major program. As shown in table 2, the PCIE study estimated that, overall, approximately 49 percent of the universe of single audits fell into the acceptable group. This percentage also includes "accepted with deficiencies." The remaining 51 percent had deficiencies that were severe enough to cause the audits to be classified as having limited reliability or being unacceptable. Specifically, for the 208 audits drawn from the universe, the statistical sample showed the following about the single audits reviewed in the PCIE study: 115 were acceptable and thus could be relied upon. This includes the category of "accepted with deficiencies." Based on this result, the PCIE study estimated that 48.6 percent of the entire universe of single audits were acceptable. 30 had significant deficiencies and thus were of limited reliability. Based on this result, the PCIE study estimated that 16.0 percent of the entire universe of single audits was of limited reliability. 63 were unacceptable and could not be relied upon. Based on this result, the PCIE study estimated that 35.5 percent of the entire universe of single audits was unacceptable. It is important to note the significant difference in results in the two strata. Specifically, 63.5 percent of the audits of entities in stratum 1 (those expending $50 million or more in federals awards) were deemed acceptable, while 48.2 percent of audits in stratum 2 (those expending at least $500,000 but less than $50 million) were deemed acceptable. Because of these differences, it is also important to analyze the results in terms of federal dollars. For the 208 audits drawn from the entire universe, the statistical sample showed the following about the single audits reviewed in the PCIE study: The 115 acceptable audits represented 92.9 percent of the value of federal award amounts reported in all 208 audits the PCIE study reviewed. The 30 audits of limited reliability represented 2.3 percent of the value of federal award amounts reported in all 208 audits the PCIE study reviewed. The 63 unacceptable audits represented 4.8 percent of the value of federal award amounts reported in all 208 audits the PCIE study reviewed. The dollar distributions for the 208 audits reviewed in the study are shown in table 3. The most prevalent deficiencies related to the auditors' lack of documenting an understanding of internal control over compliance requirements, testing of internal control of at least some compliance requirements, and compliance testing of at least some compliance requirements. The PCIE report states that for those audits not in the acceptable group, the project team believes that lack of due professional care was a factor for most deficiencies to some degree. The term due professional care refers to the responsibility of independent auditors to observe professional standards of auditing. GAGAS further elaborate on this concept in the standard on Professional Judgment. Under this standard, auditors must use professional judgment in planning and performing audits and in reporting the results, which includes exercising reasonable care and professional skepticism. Reasonable care concerns acting diligently in accordance with applicable professional standards and ethical principles. Using professional judgment in all aspects of carrying out their professional responsibilities--including following the independence standards, maintaining objectivity and credibility, assigning competent audit staff to the assignment, defining the scope of work, evaluating and reporting the results of the work, and maintaining appropriate quality control over the assignment process--is essential to performing a high quality audit. We previously noted similar audit quality problems in prior reports. In December 1985, we reported that problems found by OIGs in the course of QCRs mostly related to lack of documentation showing whether and to what extent auditors performed testing of compliance with laws and regulations. In March 1986, we reported that our own review of single audits showed that auditors performing single audits frequently did not satisfactorily comply with professional auditing standards. The predominant issues that we found in our previous reviews were insufficient audit work in testing compliance with governmental laws and regulations and evaluating internal controls. We also observed, through discussions with the auditors and reviews of their work, that many did not understand the nature and importance of testing and reporting on compliance with laws and regulations, or the importance of reporting on internal control and the relationship between reporting and the extent to which auditors evaluated controls. As a result, in 1986, we reported that the public accounting profession needed to (1) improve its education efforts to ensure that auditors performing single audits better understand the auditing procedures required, and (2) strengthen its enforcement efforts in the area of governmental auditing to help ensure that auditors perform those audits in a quality manner. Similar to our prior work, the PCIE report presents compelling evidence that a serious problem with single audit quality continues to exist. The PCIE study also reveals that the rate of acceptable audits for organizations with $50 million or more in federal expenditures was significantly higher than for audits for organizations with smaller amounts of federal expenditures. The results also showed that overall, a significant number of audits fell into the groups of limited reliability with significant deficiencies and unacceptable. In our view, the current status of single audit quality is unacceptable. We are concerned that audits are not being conducted in accordance with professional standards and requirements. These audits may provide a false sense of assurance and could mislead users of audit reports regarding issues of compliance and internal control over federal programs. The PCIE report recommended a three-pronged approach to reduce the types of deficiencies noted and improve the quality of single audits: 1. revise and improve single audit standards, criteria, and guidance; 2. establish minimum continuing professional education (CPE) as a prerequisite for auditors to be eligible to conduct and continue to perform single audits; and 3. review and enhance the disciplinary processes to address unacceptable audits and for not meeting training and CPE requirements. More specifically, to improve standards, criteria, and guidance, the PCIE report recommended revisions to (1) OMB Circular No. A-133, (2) the AICPA Statement on Auditing Standards (SAS) No. 74, Compliance Auditing Considerations in Audits of Governmental Entities and Recipients of Governmental Financial Assistance, and (3) the AICPA Audit Guide, Current AICPA Audit Guide, collectively to emphasize correctly identifying major programs for which opinions are make it clear when audit findings should be reported; include more detailed requirements and guidance for compliance testing; emphasize the minimal amount of documentation needed to document the auditor's understanding of, and testing of, internal control related to compliance; provide specific examples of the kind of documentation needed for risk assessment of individual federal programs; present illustrative examples of properly presented findings; specify content and examples of SEFA and any effect on financial emphasize requirements for management representations related to federal awards, similar to those for financial statement audits; provide additional guidance about documenting materiality; and require compliance testing to be performed using sampling in a manner prescribed by the AICPA SAS No. 39, Audit Sampling, as amended, to provide for some consistency in sample sizes. The PCIE report recommendation called on OMB to amend its Circular No. A-133 to require that (1) as a prerequisite to performing a single audit, staff performing and supervising the single audit must have completed a comprehensive training program of a minimum specified duration (e.g., at least 16-24 hours); (2) every 2 years after completing the comprehensive training, auditors performing single audits complete a minimum specified amount of CPE; and (3) single audits may only be procured from auditors who meet the above training requirements. The PCIE report also recommends that OMB develop, or arrange for the development of, minimum content requirements for the required training, in consultation with the National State Auditors Association (NSAA), the AICPA and its Governmental Audit Quality Center (GAQC), and the cognizant and oversight agencies for audit. The report states that the minimum content should cover the essential components of single audits and emphasize aspects of single audits for which deficiencies were noted in this project. In addition, the report recommends that OMB develop, or arrange for the development of, minimum content requirements for the ongoing CPE and develop a process for modifying future content. The report further recommends that OMB encourage professional organizations, including the AICPA, the NSAA, and qualified training providers, to offer training that covers the required content. It also recommends that OMB encourage these groups to deliver the training in ways that enable auditors throughout the United States to take the training at locations near or at their places of business, including via technologies such as Webcasts, and that the training should be available at an affordable cost. The PCIE project report emphasizes that the training should be "hands on" and should cover areas where the project team specifically found weaknesses in the work or documentation in its statistical study of single audits. The report specifically stated that the training should cover requirements for properly documenting audit work in accordance with GAGAS and other topics related to the many deficiencies disclosed by the project, including critical and unique parts of a single audit, such as the auditors' determination of major programs for testing, review and testing of internal controls over compliance, compliance testing, auditing procedures applicable to the SEFA, how to use the OMB Compliance Supplement, and how to audit major programs not included in the Compliance Supplement. The PCIE report concludes that such training would require a minimum of 16 to 24 hours, and that a few hours or an "overview" session will not suffice. We believe that the proposed training requirements would likely satisfy the criteria for meeting a portion of the CPE hours already required by GAGAS. This recommendation focuses on developing processes to address unacceptable audits and auditors not meeting the required training requirements. OMB Circular No. A-133 currently has sanctions that apply to an auditee (i.e., the entity being audited) for not having a properly conducted audit and requires cognizant agencies to refer auditors to licensing agencies and professional bodies in the case of major inadequacies and repetitive substandard work. The report noted that other federal laws and regulations do currently provide for suspension and debarment processes that can be applied to auditors of single audits. Some cognizant and oversight agency participants in the project team indicated that these processes are rarely initiated due to the perception that it is a large and costly effort. As a result, the report specifically recommends that OMB, with federal cognizant and oversight agencies, should (1) review the process of suspension and debarment to identify whether (and if so, how) it can be more efficiently and effectively applied to address unacceptable audits, and based on that review, pursue appropriate changes to the process; and (2) enter into a dialogue with the AICPA and State Boards of Accountancy to identify ways the AICPA and State Boards can further the quality of single audits and address the due professional care issues noted in the PCIE report. The report further recommends that OMB, with federal cognizant agencies, should also identify, review, and evaluate the potential effectiveness of other ways (both existing and new) to address unacceptable audits, including (but not limited to) (1) revising Circular No. A-133 to include sanctions to be applied to auditors for unacceptable work or for not meeting training and CPE requirements, and (2) considering potential legislation that would provide to federal cognizant and oversight agencies the authority to issue a fine as an option to address unacceptable audit work. While we support the recommendations made in the PCIE report, it will be important to resolve a number of issues regarding the proposed training requirement. Some of the unresolved questions involve the following: What are the efficiency and cost-benefit considerations for providing the required training to the universe of auditors performing the approximately 38,500 single audits? How can current mechanisms already in place, such as the AICPA's Government Audit Quality Center (GAQC), be leveraged for efficiency and effectiveness purposes in implementing new training? Which levels of staff from each firm would be required to take training? What mechanisms will be put in place to ensure compliance with the training requirement? How will the training requirement impact the availability of sufficient, qualified audit firms to perform single audits? The effective implementation of the third prong, developing processes to address unacceptable audits and for auditors who do not meet professional requirements, is essential as the quality issues have been long-standing. We support the PCIE recommended actions to make the process more effective and efficient and to help ensure a consistent approach among federal agencies and their respective OIGs overseeing the single audit process. In addition to the findings and recommendations of the PCIE report, we believe there are two other critical factors that need to be considered in determining actions that should be taken to improving audit quality: (1) the distribution of unacceptable audits and audits of limited reliability across the different dollar amounts of federal expenditures by grantee, as found in the PCIE study; and (2) the distribution of single audits by size in the universe of single audits. These factors are critical in effectively evaluating the potential dollar implications and efficiency and effectiveness of proposed actions. The PCIE study found that rates of unacceptable audits and audits of limited reliability were much higher for audits of entities in stratum 2 (those expending less than $50 million in federal awards) than those in stratum 1 (those expending $50 million or more). Table 1 presented earlier in this testimony shows the data from the sample universe of single audits used by the PCIE. Analysis of the data shows that 97.8 percent of the total number of audits (37,671 of the 38,523 total) covered approximately 16 percent ($143.1 billion of the $880.2 billion) of the total reported value of federal award expenditures, indicating significant differences in distributions of audits by dollar amount of federal expenditures. At the same time, the rates of unacceptable audits and audits of limited reliability were relatively higher in these smaller audits. We believe that there may be opportunities for considering size characteristics when implementing future actions to improve the effectiveness and quality of single audits. For instance, there may be merit to conducting a more refined analysis of the distribution of audits to determine whether less-complex approaches could be used for achieving accountability through the single audit process for a category of the smallest single audits. Such an approach may provide sufficient accountability for these smaller programs. An example of a less-complex approach consists of requirements for a financial audit in accordance with GAGAS, that includes the higher level reports on internal control and compliance along with an opinion on the SEFA and additional, limited or specified testing of compliance. Currently, the compliance testing in a single audit is driven by compliance requirements under OMB Circular No. A-133 as well as program-specific requirements detailed in the compliance supplement. A less-complicated approach could be used for a category of the smallest audits to replace the current approach to compliance testing, while still providing a level of assurance on the total amount of federal grant awards provided to the recipient. Another consideration for future actions is strengthening the oversight of the cognizant agency for audit with respect to auditees expending $50 million or more in federal awards. As shown in the data from the sample universe of single audits used by the PCIE, 852 audits (or 2.2 percent) of the total 38,523 audits covered $737.2 billion (or 84 percent) of the reported federal award expenditures. This distribution suggests that targeted and effective efforts on the part of cognizant agencies aimed at improving audit quality for those auditees that expend greater than $50 million could achieve a significant effect in terms of dollars of federal expenditures. We continue to support the single audit concept and principles behind the act as a key accountability mechanism over federal awards. It is essential that the audits are done properly in accordance with GAGAS and OMB requirements. The PCIE report presents compelling evidence that a serious shortfall in the quality of single audits continues to exist. Many of these quality issues are similar in nature to those reported by GAO and the Inspectors General since the 1980s. We believe that actions must be taken to improve audit quality and the overall accountability provided through single audits for federal awards. Without such action, we believe that substandard audits may provide a false sense of assurance and could mislead users of audit reports. While we support the recommendations made in the PCIE report, we believe that a number of issues regarding the proposed training requirements need to be resolved. The PCIE report results also showed a higher rate of acceptable audits for organizations with larger amounts of federal expenditures and showed that the vast majority of federal dollars are being covered by a small percentage of total audits. We believe that there may be opportunities for considering size characteristics when implementing future actions to improve the effectiveness and quality of single audits as an accountability mechanism. Considering the recommendations of the PCIE within this larger context will also be important to achieve the proper balance between risk and cost-effective accountability. In addition to the considerations surrounding the specific recommendations for improving audit quality, a separate effort taking into account the overall framework for single audits may be warranted. This effort could include answering questions such as the following: What types of simplified alternatives exist for meeting the accountability objectives of the Single Audit Act for the smallest audits and what would the appropriate cutoff be for a less-complex audit requirement? Is the current federal oversight structure for single audits adequate and consistent across federal agencies? What alternative federal oversight structures could improve overall accountability and oversight in the single audit process? Are federal oversight processes adequate and are sufficient resources being dedicated to oversight of single audits? What role can the auditing profession play in increasing single audit quality? Do the specific requirements in OMB Circular No. A-133 and the Single Audit Act need updating? Mr. Chairman, we would be pleased to work with the subcommittee as it considers additional steps to improve the single audit process and federal oversight and accountability over federal grant funds. Mr. Chairman and members of this subcommittee, this concludes my statement. I would be happy to answer any questions that you or members may have at this time. For information about this statement, please contact Jeanette Franzel, Director, Financial Management and Assurance, at (202) 512-9471 or [email protected]. Individuals who made key contributions to this testimony include Marcia Buchanan (Assistant Director), Robert Dacey, Abe Dymond, Heather Keister, Jason Kirwan, David Merrill, and Sabrina Springfield (Assistant Director). This is a work of the U.S. government and is not subject to copyright protection in the United States. It may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.
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Federal government grants to state and local governments have risen substantially, from $7 billion in 1960 to almost $450 billion budgeted in 2007. The single audit is an important mechanism of accountability for the use of federal grants by nonprofit organizations as well as state and local governments. However, the quality of single audits conducted under the Single Audit Act, as amended, has been a longstanding area of concern since the passage of the act in 1984. The President's Council on Integrity and Efficiency (PCIE) recently issued its Report on National Single Audit Sampling Project, which raises concerns about the quality of single audits and makes recommendations aimed at improving the effectiveness and efficiency of those audits. This testimony provides (1) GAO's perspective on the history and importance of the Single Audit Act and the principles behind the act, (2) a preliminary analysis of the recommendations made by the PCIE for improving audit quality, and (3) additional considerations for improving the quality of single audits. In the early 1980s, Congress had concerns about a lack of adequate oversight and accountability for federal assistance provided to state and local governments. In response to concerns that large amounts of federal financial assistance were not subject to audit and that agencies sometimes overlapped on oversight activities, Congress passed the Single Audit Act of 1984. The act adopted the single audit concept to help meet the needs of federal agencies for grantee oversight as well as grantees' needs for single, uniformly structured audits. GAO supported the passage of the Single Audit Act, and continues to support the single audit concept and principles behind the act as a key accountability mechanism for federal grant awards. However, the quality of single audits has been a longstanding area of concern since the passage of the act in 1984. In its June 2007 Report on National Single Audit Sampling Project, the PCIE found that, overall, approximately 49 percent of single audits fell into the acceptable group, with the remaining 51 percent having deficiencies severe enough to classify the audits as limited in reliability or unacceptable. PCIE found a significant difference in results by audit size. Specifically, 63.5 percent of the large audits (with $50 million or more in federal award expenditures) were deemed acceptable compared with only 48.2 percent of the smaller audits (with at least $500,000 but less than $50 million in federal award expenditures). The PCIE report presents compelling evidence that a serious problem with single audit quality continues to exist. GAO is concerned that audits are not being conducted in accordance with professional standards and requirements. These audits may provide a false sense of assurance and could mislead users of the single audit reports. The PCIE report recommended a three-pronged approach to reduce the types of deficiencies found and to improve the quality of single audits: (1) revise and improve single audit standards, criteria, and guidance; (2) establish minimum continuing professional education (CPE) as a prerequisite for auditors to be eligible to be able to conduct and continue to perform single audits; and (3) review and enhance the disciplinary processes to address unacceptable audits and for not meeting training and CPE requirements. In this testimony, GAO supports PCIE's recommendations and points out issues that need to be resolved regarding the proposed training and other factors that merit consideration when determining actions to improve audit quality. GAO believes that there may be opportunities for considering size when implementing future actions to improve the effectiveness and quality of single audits. In addition, a separate effort considering the overall framework for single audits could answer such questions as whether simplified alternatives can achieve cost-effective accountability in the smallest audits; whether current federal oversight processes for single audits are adequate; and what role the auditing profession can play in increasing single audit quality.
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The tax gap is an estimate of the difference between the taxes--including individual income, corporate income, employment, estate, and excise taxes--that should have been paid voluntarily and on time and what was actually paid for a specific year. The estimate is an aggregate of estimates for the three primary types of noncompliance: (1) underreporting of tax liabilities on tax returns; (2) underpayment of taxes due from filed returns; and (3) nonfiling, which refers to the failure to file a required tax return altogether or on time. IRS's tax gap estimates for each type of noncompliance include estimates for some or all of the five types of taxes that IRS administers. As shown in table 1, underreporting of tax liabilities accounted for most of the tax gap estimate for tax year 2001. IRS has estimated the tax gap on multiple occasions, beginning in 1979, relying on its Taxpayer Compliance Measurement Program (TCMP). IRS did not implement any TCMP studies after 1988 because of concerns about costs and burdens on taxpayers. Recognizing the need for current compliance data, in 2002 IRS implemented a new compliance study called the National Research Program (NRP) to produce such data for tax year 2001 while minimizing taxpayer burden. IRS has concerns with the certainty of the tax gap estimate for tax year 2001 in part because some areas of the estimate rely on old data, IRS has no estimates for other areas of the tax gap, and it is inherently difficult to measure some types of noncompliance. IRS used data from NRP to estimate individual income tax underreporting and the portion of employment tax underreporting attributed to self-employed individuals. The underpayment segment of the tax gap is not an estimate, but rather represents the tax amounts that taxpayers reported on time but did not pay on time. Other areas of the estimate, such as corporate income tax and employer-withheld employment tax underreporting, rely on decades-old data. Also, IRS has no estimates for corporate income, employment, and excise tax nonfiling or for excise tax underreporting. In addition, it is inherently difficult for IRS to observe and measure some types of underreporting or nonfiling, such as tracking cash payments that businesses make to their employees, as businesses and employees may not report these payments to IRS in order to avoid paying employment and income taxes, respectively. IRS's overall approach to reducing the tax gap consists of improving service to taxpayers and enhancing enforcement of the tax laws. IRS seeks to improve voluntary compliance through efforts such as education and outreach programs and tax form simplification. IRS uses its enforcement authority to ensure that taxpayers are reporting and paying the proper amounts of taxes through efforts such as examining tax returns and matching the amount of income taxpayers report on their tax returns to the income amounts reported on information returns it receives from third parties. IRS reports that it collected over $48 billion in fiscal year 2006 from noncompliant taxpayers it identified through its various enforcement programs. In spite of IRS's efforts to improve taxpayer compliance, the rate at which taxpayers pay their taxes voluntarily and on time has tended to range from around 81 percent to around 84 percent over the past three decades. Any significant reduction of the tax gap would likely depend on an improvement in the level of taxpayer compliance. Congress has been encouraging IRS to develop an overall tax gap reduction plan or strategy that could include a mix of approaches like simplifying code provisions, increased enforcement, and reconsidering the level of resources devoted to enforcement. Some progress has been made toward laying out the broad elements of a plan or strategy for reducing the tax gap. On September 26, 2006, the U.S. Department of the Treasury (Treasury), Office of Tax Policy, released "A Comprehensive Strategy for Reducing the Tax Gap." However, the document generally does not identify specific steps that Treasury and IRS will undertake to reduce the tax gap, the related time frames for such steps, or explanations of how much the tax gap would be reduced. Furthermore, the document mentioned the importance of establishing benchmarks against which progress on each step under the strategy could be measured. It said that after the fiscal year 2008 budget request was released, Treasury and IRS would issue more details in March or April 2007 about the steps they would take to reduce opportunities for evasion and address the tax gap. The 2008 budget request issued on February 5, 2007, suggested 16 legislative changes to expand or improve information reporting, improve compliance by businesses, strengthen tax administration, and expand penalties. It also proposed additional funding for new initiatives aimed at reducing the tax gap. No single approach is likely to fully and cost-effectively address noncompliance and therefore multiple approaches are likely to be needed. The tax gap has multiple causes; spans five types of taxes; and is spread over several types of taxpayers including individuals, corporations, and partnerships. Thus, for example, while simplifying laws should help when noncompliance is due to taxpayers' confusion, enforcement may be needed for taxpayers who understand their obligations but decline to fulfill them. Similarly, while devoting more resources to enforcement should increase taxes assessed and collected, too great an enforcement presence likely would not be tolerated. Simplifying or reforming the tax code, providing IRS more enforcement tools, and devoting additional resources to enforcement are three major tax gap reduction approaches discussed in more detail below, but providing quality services to taxpayers plays an important role in improving compliance and reducing the tax gap. IRS taxpayer services include education and outreach programs, simplifying the tax process, and revising forms and publications to make them electronically accessible and more easily understood by diverse taxpayer communities. For example, if tax forms and instructions are unclear, taxpayers may be confused and make unintentional errors. Quality taxpayer services would also be a key consideration in implementing any of the approaches for tax gap reduction. For example, expanding enforcement efforts would increase interactions with taxpayers, requiring processes to efficiently communicate with taxpayers. Also, changing tax laws and regulations would require educating taxpayers about the new requirements in a clear, timely, and accessible manner. In 2006, we reported that IRS improved its two most commonly used services--telephone and Web site assistance-- for the 2006 filing season. Increased funding financed some of the improvements, but a significant portion has been financed internally by efficiencies gained from increased electronic filing of tax returns and other operational improvements. Although quality service helps taxpayers comply, showing a direct relationship between quality service and compliance levels is very challenging. As required by Congress, IRS is in the midst of a study that is to result in a 5-year plan for taxpayer service activities, which is to include long-term quantitative goals and to balance service and enforcement. Part of the study focuses on the effect of taxpayer service on compliance. A Phase I report was issued in April 2006 and a Phase II report should be completed in fiscal year 2007, which is to include, among other things, a multiyear plan for taxpayer service activities and improvement initiatives. However, in deciding on the appropriate mix of approaches to use in reducing the tax gap, many factors or issues could affect strategic decisions. Among the broad factors to consider are the likely effectiveness of any approach, fairness, enforceability, and sustainability. Beyond these, our work points to the importance of the following: Measuring compliance levels periodically and setting long-term goals. A data-based plan is one key to closing the tax gap. To the extent that IRS can develop better compliance data, it can develop more effective approaches for reducing the gap. Regularly measuring the magnitude of, and the reasons for, noncompliance provides insights on how to reduce the gap through potential changes to tax laws and IRS programs. In July 2005, we recommended that IRS periodically measure tax compliance, identify reasons for noncompliance, and establish voluntary compliance goals. IRS agreed with the recommendations and established a voluntary tax compliance goal of 85 percent by 2009. Furthermore, we have identified alternative ways to measure compliance, including conducting examinations of small samples of tax returns over multiple years, instead of conducting examinations for a larger sample of returns for 1 tax year, to allow IRS to track compliance trends annually. The administration's fiscal year 2008 budget proposal offers this idea by requesting funds to annually study compliance based on a smaller sample size than the 2001 NRP study. Considering the costs and burdens. Any action to reduce the tax gap will create costs and burdens for IRS; taxpayers; and third parties, such as those who file information returns. For example, withholding and information reporting requirements impose some costs and burdens on those who track and report information. These costs and burdens need to be reasonable in relation to the improvements expected to arise from new compliance strategies. Evaluating the results. Evaluating the actions taken by IRS to reduce the tax gap would help maximize IRS's effectiveness. Evaluations can be challenging because it is difficult to isolate the effects of IRS's actions from other influences on taxpayers' compliance. Our work has discussed how to address these challenges, for example by using research to link actions with the outputs and desired effects. Optimizing resource allocation. Developing reliable measures of the return on investment for strategies to reduce the tax gap would help inform IRS resource allocation decisions. IRS has rough measures of return on investment based on the additional taxes it assesses. Developing such measures is difficult because of incomplete data on the costs of enforcement and collected revenues. Beyond direct revenues, IRS's enforcement actions have indirect revenue effects, which are difficult to measure. However, indirect effects could far exceed direct revenue effects and would be important to consider in connection with continued development of return on investment measures. In general though, the effects of tax gap reduction by improving voluntary tax compliance can be quite large. For example, if the estimated 83.7 percent voluntary compliance rate that produced a gross tax gap of $345 billion in tax year 2001 had been 85 percent, this tax gap would have been about $28 billion less; if it had been 90 percent, the gap would have been about $133 billion less. Leveraging technology. Better use of technology could help IRS be more efficient in reducing the tax gap. IRS is modernizing its technology, which has paid off in terms of telephone service, resource allocation, electronic filing, and data analysis capability. However, this ongoing modernization will need strong management and prudent investments to maximize potential efficiencies. The administration's fiscal year 2008 budget proposal requests additional funds under its Business Systems Modernization initiatives. Tax law simplification and reform both have the potential to reduce the tax gap by billions of dollars. The extent to which the tax gap would be reduced depends on which parts of the tax system would be simplified and in what manner, as well as how any reform of the tax system is designed and implemented. Neither approach, however, will eliminate the gap. Further, changes in the tax laws and system to improve tax compliance could have unintended effects on other tax system objectives, such as those involving economic behavior or equity. Simplification has the potential to reduce the tax gap for at least three broad reasons. First, it could help taxpayers to comply voluntarily with more certainty, reducing inadvertent errors by those who want to comply but are confused because of complexity. Second, it may limit opportunities for tax evasion, reducing intentional noncompliance by taxpayers who can misuse the complex code provisions to hide their noncompliance or to achieve ends through tax shelters. Third, tax code complexity may erode taxpayers' willingness to comply voluntarily if they cannot understand its provisions or they see others taking advantage of complexity to intentionally underreport their taxes. Simplification could take multiple forms. One form would be to retain existing laws but make them simpler. For example, in our July 2005 report on postsecondary tax preferences, we noted that the definition of a qualifying postsecondary education expense differed somewhat among some tax code provisions, for instance with some including the cost to purchase books and others not. Making definitions consistent across code provisions may reduce taxpayer errors. Although we cannot say the errors were due to these differences in definitions, in a limited study of paid preparer services to taxpayers, we found some preparers claiming unallowable expenses for books. Further, the Joint Committee on Taxation suggested that such dissimilar definitions may increase the likelihood of taxpayer errors and increase taxpayer frustration. Another tax code provision in which complexity may have contributed to the individual tax gap involves the earned income tax credit, for which IRS estimated a tax loss of up to about $10 billion for tax year 1999. Although some of this noncompliance may be intentional, we and the National Taxpayer Advocate have previously reported that confusion over the complex rules governing eligibility for claiming the credit could cause taxpayers to fail to comply inadvertently. The administration's fiscal year 2008 budget proposes legislative language to simplify eligibility requirements for the credit as well as to clarify the uniform definition of a qualifying child. Another form of simplification could be to broaden the tax base while reducing tax rates, which could minimize incentives for not complying. This base-broadening could include a review of whether existing tax expenditures are achieving intended results at a reasonable cost in lost revenue and added burden and eliminating or consolidating those that are not. Among the many causes of tax code complexity is the growing number of preferential provisions in the code, defined in statute as tax expenditures, such as tax exemptions, exclusions, deductions, credits, and deferrals. The number of these tax expenditures has more than doubled from 67 in 1974 to 161 in 2006, and the sum of tax expenditure estimates rose to nearly $847 billion. Tax expenditures can contribute to the tax gap if taxpayers claim them improperly. For example, IRS's recent tax gap estimate includes a $32 billion loss in individual income taxes for tax year 2001 because of noncompliance with these provisions. Simplifying these provisions of the tax code would not likely yield $32 billion in revenue because even simplified provisions likely would have some associated noncompliance. Nevertheless, the estimate suggests that simplification could have important tax gap consequences, particularly if simplification also accounted for any noncompliance that arises because of complexity on the income side of the tax gap for individuals. Despite the potential benefits that simplification may yield, these credits and deductions serve purposes that Congress has judged to be important to advance federal goals. Eliminating them or consolidating them likely would be complicated, and would likely create winners and losers. Elimination also could conflict with other objectives such as encouraging certain economic activity or improving equity. Similar trade-offs exist with possible fundamental tax reforms that would move away from an income tax system to some other system, such as a consumption tax, national sales tax, or value added tax. Fundamental tax reform would most likely result in a smaller tax gap if the new system has few tax preferences or complex tax code provisions and if taxable transactions are transparent. However, these characteristics are difficult to achieve in any system and experience suggests that simply adopting a fundamentally different tax system may not by itself eliminate any tax gap. Any tax system could be subject to noncompliance, and its design and operation, including the types of tools made available to tax administrators, will affect the size of any corresponding tax gap. Further, the motivating forces behind tax reform likely include factors beyond tax compliance, such as economic effectiveness, equity, and burden, which could in some cases carry greater weight in designing an alternative tax system than ensuring the highest levels of compliance. Changing the tax laws to provide IRS with additional enforcement tools, such as expanded tax withholding and information reporting, could also reduce the tax gap by many billions of dollars, particularly with regard to underreporting--the largest segment of the tax gap. Tax withholding promotes compliance because employers or other parties subtract taxes owed from a taxpayer's income and remit them to IRS. Information reporting tends to lead to high levels of compliance because income taxpayers earn is transparent to them and IRS. In both cases, high levels of compliance tend to be maintained over time. Also, withholding and information reporting help IRS to better identify noncompliant taxpayers and prioritize contacting them, which enables IRS to better allocate its resources. However, designing new withholding or information reporting requirements to address underreporting can be challenging given that many types of income are already subject to at least some form of withholding or information reporting, underreporting exists in varied forms, and the requirements could impose costs and burdens on third parties. Figure 1 shows how much voluntary reporting compliance improves for income subject to withholding or information reporting. Once withholding or information reporting requirements are in place for particular types of income, compliance tends to remain high over time. For example, for wages and salaries, which are subject to tax withholding and substantial information reporting, the percentage of income that taxpayers misreport has consistently been measured at around 1 percent over time. In the past, we have identified a few specific areas where additional withholding or information reporting requirements could serve to improve compliance: Require more data on information returns dealing with capital gains income from securities sales. Recently, we reported that an estimated 36 percent of taxpayers misreported their capital gains or losses from the sale of securities, such as corporate stocks and mutual funds. Further, around half of the taxpayers who misreported did so because they failed to report the securities' cost, or basis, sometimes because they did not know the securities' basis or failed to take certain events into account that required them to adjust the basis of their securities. When taxpayers sell securities like stock and mutual funds through brokers, the brokers are required to report information on the sale, including the amount of gross proceeds the taxpayer received; however, brokers are not required to report basis information for the sale of these securities. We found that requiring brokers to report basis information for securities sales could improve taxpayers' compliance in reporting their securities gains and losses and help IRS identify noncompliant taxpayers. However, we were unable to estimate the extent to which a basis reporting requirement would reduce the capital gains tax gap because of limitations with the compliance data on capital gains and because neither IRS nor we know the portion of the capital gains tax gap attributed to securities sales. Requiring tax withholding and more or better information return reporting on payments made to independent contractors. Past IRS data have shown that independent contractors report 97 percent of the income that appears on information returns, while contractors that do not receive these returns report only 83 percent of income. We have also identified other options for improving information reporting for independent contractors, including increasing penalties for failing to file required information returns, lowering the $600 threshold for requiring such returns, and requiring businesses to report separately on their tax returns the total amount of payments to independent contractors. Requiring information return reporting on payments made to corporations. Unlike payments made to sole proprietors, payments made to corporations for services are generally not required to be reported on information returns. IRS and GAO have contended that the lack of such a requirement leads to lower levels of compliance for small corporations. Although Congress has required federal agencies to provide information returns on payments made to contractors since 1997, payments made by others to corporations are generally not covered by information returns. Information reporting helps IRS to better allocate its resources to the extent that it helps IRS better identify noncompliant taxpayers and the potential for additional revenue that could be obtained by contacting these taxpayers. For example, IRS officials told us that receiving information on basis for taxpayers' securities sales would allow IRS to determine more precisely taxpayers' income for securities sales through its document matching programs and would allow it to identify which taxpayers who misreported securities income have the greatest potential for additional tax assessments. Similarly, IRS could use basis information to improve both aspects of its examination program--examinations of tax returns through correspondence and examinations of tax returns face to face with the taxpayer. Currently, capital gains issues are too complex and time consuming for IRS to examine through correspondence. However, IRS officials told us that receiving cost basis information might enable IRS to examine noncompliant taxpayers through correspondence because it could productively select tax returns to examine. Also, having cost basis information could help IRS identify the best cases to examine face to face, making the examinations more productive while simultaneously reducing the burden imposed on compliant taxpayers who otherwise would be selected for examination. Withholding and information reporting lead to high levels of compliance. Designing new requirements to address underreporting would need to address the challenge that many types of income, including wages and salaries, dividend and interest income, and income from pensions and Social Security are already subject to withholding or substantial information reporting. Also, challenges arise in establishing new withholding or information reporting requirements for certain other types of income that are extensively underreported. Such underreporting may be difficult to determine because of complex tax laws or transactions or the lack of a practical and reliable third-party source to provide information on the taxable income. For example, while withholding or information reporting mechanisms on nonfarm sole proprietor and informal supplier income would likely improve their compliance, comprehensive mechanisms that are practical and effective are difficult to identify. As shown in figure 1, this income is not subject to information reporting, and these taxpayers misreported about half of the income they earned for tax year 2001. Informal suppliers by definition receive income in an informal manner through services they provide to a variety of individual citizens or small businesses. Whereas businesses may have the capacity to perform withholding and information reporting functions for their employees, it may be challenging to extend withholding or information reporting responsibilities to the individual citizens that receive services, who may not have the resources or knowledge to comply with such requirements. Finally, implementing tax withholding and information reporting requirements generally imposes costs and burdens on the businesses that must implement them, and, in some cases, on taxpayers. For example, expanding information reporting on securities sales to include basis information will impose costs on the brokers who would track and report the information. Further, trying to close the entire tax gap with these enforcement tools could entail more intrusive recordkeeping or reporting than the public is willing to accept. The administration's proposed budget for fiscal year 2008 has 16 legislative proposals on tax gap reduction of which 7 relate to expanded information reporting. Two of these proposals involve information reporting on payments to corporations and on the cost basis of security sales, which we discussed earlier in this section of the testimony. The administration also proposes requiring a certified tax identification number from nonemployee service providers (contractors), increased information reporting for certain government payments for property and services, and increased information return penalties. We have done past work related to these proposals and suggested them as options for reducing the tax gap. The remaining 2 proposals would expand broker information reporting and require information reporting on merchant card payment reimbursements. The 7 proposals relating to information reporting account for virtually all the revenue that the budget request's 16 tax gap legislative proposals are projected to raise. The 16 proposals are expected to raise about $29 billion over 10 years, or about 1 percent per year of the 2001 net tax gap amount of $290 billion. About 98 percent of the $29 billion would come from the information reporting proposals. About 85 percent would come from 3 of them--those relating to payments to corporations, basis reporting on security sales, and merchant payment card reimbursements. Devoting more resources to enforcement has the potential to help reduce the tax gap by billions of dollars, as IRS would be able to expand its enforcement efforts to reach a greater number of potentially noncompliant taxpayers. However, determining the appropriate level of enforcement resources to provide IRS requires taking into account many factors, such as how effectively and efficiently IRS is currently using its resources, how to strike the proper balance between IRS's taxpayer service and enforcement activities, and competing federal funding priorities. If Congress were to provide IRS more enforcement resources, the amount of the tax gap that could be reduced depends in part on the size of any increase in IRS's budget, how IRS would manage any additional resources, and the indirect increase in taxpayers' voluntary compliance that would likely result from expanded IRS enforcement. Given resource constraints, IRS is unable to contact millions of additional taxpayers for whom it has evidence of potential noncompliance. With additional resources, IRS would be able to assess and collect additional taxes and further reduce the tax gap. In 2002, IRS estimated that a $2.2 billion funding increase would allow it to take enforcement actions against potentially noncompliant taxpayers it identifies but cannot contact and would yield an estimated $30 billion in revenue. For example, IRS estimated that it contacted about 3 million of the over 13 million taxpayers it identified as potentially noncompliant through its matching of tax returns to information returns. IRS estimated that contacting the additional 10 million potentially noncompliant taxpayers it identified, at a cost of about $230 million, could yield nearly $7 billion in potentially collectible revenue. We did not evaluate the accuracy of the estimate, and as will be discussed below, many factors suggest that it is difficult to estimate reliably net revenue increases that might come from additional enforcement efforts. Although additional enforcement funding has the potential to reduce the tax gap, the extent to which it would help depends on several factors. First, and perhaps most obviously, the amount of tax gap reduction would depend in part on the amount of additional resources. The degree to which revenues would increase from expanded enforcement depends on many variables, such as how quickly IRS can ramp up efforts, how well IRS selects the best cases to be worked, and how taxpayers react to enforcement efforts. Estimating those revenue increases would require assumptions about these and other variables. Because actual experience is likely to diverge from those assumptions, the actual revenue increases are likely to differ from the estimates. The lack of reliable key data compounds the difficulty of estimating the likely revenues. To the extent possible, obtaining better data on key variables would provide a better understanding of the likely results with any increased enforcement resources. With additional resources for enforcement, IRS would be able to assess and collect additional taxes, but the related tax gap reductions may not be immediate. If IRS uses the resources to hire more enforcement staff, the reductions may occur gradually as IRS is able to hire and train the staff. Also, several years can elapse after IRS assesses taxes before it actually collects these taxes. Similarly, the amounts of taxes actually collected can vary substantially from the related tax amounts assessed through enforcement actions by the type of tax or taxpayer involved. In a 1998 report, we found that 5 years after taxes were assessed against individual taxpayers with business income, 48 percent of the assessed taxes had been collected, whereas for the largest corporate taxpayers, 97 percent of assessed taxes had been collected. These various factors need to be taken into account in estimating revenue to be obtained from increased funding. In doing such estimates for its fiscal year 2007 budget, IRS accounted for several factors, including opportunity costs because of training, which draws experienced enforcement personnel away from the field; differences in average enforcement revenue obtained per full-time employee by enforcement activity; and differences in the types and complexity of cases worked by new hires and experienced hires. IRS forecasted that in the first year after expanding enforcement activities, the additional revenue to be collected is less than half the amount to be collected in later years. This example underscores the logic that if IRS is to receive a relatively large funding increase, it likely would be better to provide it in small but steady amounts. The amount of tax gap reduction likely to be achieved from any budget increase also depends on how well IRS can use information about noncompliance to manage the additional resources. Because IRS does not have compliance data for some segments of the tax gap and others are based on old data, IRS cannot easily track the extent to which compliance is improving or declining. IRS also has concerns with its information on whether taxpayers unintentionally or intentionally fail to comply with the tax laws. Knowing the reasons for taxpayer noncompliance can help IRS decide whether its efforts to address specific areas of noncompliance should focus on nonenforcement activities, such as improved forms or publications, or enforcement activities to pursue intentional noncompliance. To the extent that compliance data are outdated and IRS does not know the reason for taxpayer noncompliance, IRS may be less able to target resources efficiently to achieve the greatest tax gap reduction at the least taxpayer burden. IRS has taken important steps to better ensure efficient allocation and use. For example, the NRP study has provided better data on which taxpayers are most likely to be noncompliant. IRS is using the data to improve its audit selection processes in hopes of reducing the number of audits that result in no change, which should reduce unnecessary burden on compliant taxpayers and increase enforcement staff productivity (as measured by direct enforcement revenue). As part of an effort to make the best use of its enforcement resources, IRS has developed rough measures of return on investment in terms of tax revenue that it assesses from uncovering noncompliance. Generally, IRS cites an average return on investment for enforcement of 4:1, that is, IRS estimates that it collects $4 in revenue for every $1 of funding. Where IRS has developed return on investment estimates for specific programs, it finds substantial variation depending on the type of enforcement action. For instance, the ratio of estimated tax revenue gains to additional spending for pursuing known individual tax debts through phone calls is 13:1, versus a ratio of 32:1 for matching the amount of income taxpayers report on their tax returns to the income amounts reported on information returns. In addition to returns on investment estimates being rough, IRS lacks information on the incremental returns on investment from pursuing the "next best case" for some enforcement programs. It is the marginal revenue gain from these cases that matters in estimating the direct revenue from expanded enforcement. Developing such measures is difficult because of incomplete information on all the costs and all the tax revenue ultimately collected from specific enforcement efforts. Because IRS's current estimates of the revenue effects of additional funding are imprecise, the actual revenue that might be gained from expanding different enforcement efforts is subject to uncertainty. Given the variation in estimated returns on investment for different types of IRS compliance efforts, the amount of tax gap reduction that may be achieved from an increase in IRS's resources would depend on how IRS allocates the increase. Although it might be tempting to allocate resources heavily toward areas with the highest estimated return, allocation decisions must take into account diverse and difficult issues. For instance, although one enforcement activity may have a high estimated return, that return may drop off quickly as IRS works its way through potential noncompliance cases. In addition, IRS dedicates examination resources across all types of taxpayers so that all taxpayers receive some signal that noncompliance is being addressed. Further, issues of fairness can arise if IRS focuses its efforts only on particular groups of taxpayers. Beyond direct tax revenue collection, expanded enforcement efforts could reduce the tax gap even more, as widespread agreement exists that IRS enforcement programs have an indirect effect through increases in voluntary tax compliance. The precise magnitude of the indirect effects of enforcement is not known with a high level of confidence given challenges in measuring compliance; developing reasonable assumptions about taxpayer behavior; and accounting for factors outside of IRS's actions that can affect taxpayer compliance, such as changes in tax law. However, several research studies have offered insights to help better understand the indirect effects of IRS enforcement on voluntary tax compliance and show that they could exceed the direct effect of revenue obtained. As table 2 shows, the administration's budget request for fiscal year 2008 proposes additional revenue-producing initiatives, legislative proposals, and non-revenue-producing initiatives. The revenue-producing initiatives generally would fund additional staff to enforce tax laws; the legislative proposals include, for example, new information return requirements that would increase revenue; and the non-revenue-producing initiatives generally would fund infrastructure and Business Systems Modernization changes to support IRS operations. Over the 3 years, the requested funding decreases while the estimated resulting revenue increases. About $410 million is requested for fiscal year 2008 to fund all of these initiatives, which are estimated to bring in about $695 million in increased revenue that year. The estimated cost for the initiatives declines to $355 million in fiscal years 2009 and 2010 and the projected revenues increase to about $2.6 billion in 2010. Costs decline due to start up costs applying only in fiscal year 2008. Revenues increase in part due to improved annual returns from the hiring, training, and deployment of additional staff, but more so due to the phase in of the legislative proposals, particularly the information reporting requirements. The legislative proposals alone are estimated to produce $1.9 billion of the $2.6 billion total additional revenues expected to come from the administration's budget proposals in fiscal year 2010. The revenue effects of the revenue-producing initiatives exclude the likely deterrent effect from IRS enforcement programs as well as any improvement in voluntary compliance due to improved taxpayer services. The revenues expected from these initiatives are small compared to the estimated $290 billion net tax gap for tax year 2001. For instance, all of the revenue-producing initiatives coming largely from additional enforcement staffing are expected to yield about $699 million in fiscal year 2010, or about one-quarter of 1 percent of the tax year 2001 net tax gap. In 2010, the total estimated increased revenues from both the revenue-producing and legislative initiatives, or about $2.6 billion, is about 0.9 percent of the 2001 net tax gap. When taxpayers do not pay all of their taxes, honest taxpayers carry a greater burden to fund government programs and the nation is less able to address its long-term fiscal challenges. Thus, reducing the tax gap is important, even though closing the entire tax gap is neither feasible nor desirable because of costs and intrusiveness. All of the approaches I have discussed have the potential to reduce the tax gap alone or in combination, and no single approach is clearly and always superior to the others. As a result, IRS needs a strategy to attack the tax gap on multiple fronts with multiple approaches. The various proposals in the administration's budget request raise modest dollar amounts compared to the size of the tax gap. This underscores the likelihood that a wide variety of efforts will be needed to make significant progress in addressing the tax gap. We look forward to seeing the administration's expanded outline of steps it will be taking. Mr. Chairman and Members of the Committee, this concludes my testimony. I would be happy to answer any question you may have at this time. For further information on this testimony, please contact Michael Brostek on (202) 512-9110 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this testimony. Individuals making key contributions to this testimony include Thomas Short, Assistant Director; Jeffrey Arkin; Elizabeth Fan; Ronald Jones; Lawrence Korb; and Ellen Rominger. This is a work of the U.S. government and is not subject to copyright protection in the United States. It may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.
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The tax gap--the difference between the tax amounts taxpayers pay voluntarily and on time and what they should pay under the law--has been a long-standing problem in spite of many efforts to reduce it. Most recently, the Internal Revenue Service (IRS) estimated a gross tax gap for tax year 2001 of $345 billion and estimated it would recover $55 billion of this gap, resulting in a net tax gap of $290 billion. When some taxpayers fail to comply, the burden of funding the nation's commitments falls more heavily on compliant taxpayers. Reducing the tax gap would help improve the nation's fiscal stability. For example, each 1 percent reduction in the net tax gap would likely yield $3 billion annually. GAO was asked to discuss the tax gap, various approaches to reduce it, and what the proposed budget for fiscal year 2008 says about it. This testimony discusses the need for taking multiple approaches and to what extent the tax gap could be reduced through three overall approaches--simplifying or reforming the tax system, providing IRS with additional enforcement tools, and devoting additional resources to enforcement. This statement is based on prior GAO work. Multiple approaches are needed to reduce the tax gap. No single approach is likely to fully and cost-effectively address noncompliance since, for example, it has multiple causes and spans different types of taxes and taxpayers. Simplifying or reforming the tax code, providing IRS more enforcement tools, and devoting additional resources to enforcement are three major approaches. Moreover, providing quality services to taxpayers is a necessary foundation for voluntary compliance. Such steps as periodically measuring noncompliance and its causes, setting tax gap reduction goals, optimizing the allocation of IRS's resources, and leveraging technology to enhance IRS's efficiency would also contribute to tax gap reduction. Simplifying the tax code or fundamental tax reform has the potential to reduce the tax gap by billions of dollars. IRS has estimated that errors in claiming tax credits and deductions for tax year 2001 contributed $32 billion to the tax gap. Thus, considerable potential exists. However, these provisions serve purposes Congress has judged to be important and eliminating or consolidating them could be complicated. Fundamental tax reform would most likely result in a smaller tax gap if the new system has few, if any, exceptions (e.g., few tax preferences) and taxable transactions are transparent to tax administrators. These characteristics are difficult to achieve, and any tax system could be subject to noncompliance. Withholding and information reporting are particularly powerful tools to reduce the tax gap. They could help reduce the tax gap by billions of dollars, especially if they make underreported income transparent to IRS. These tools have led to high, sustained levels of taxpayer compliance and improved IRS resource allocation by helping IRS identify and prioritize its contacts with noncompliant taxpayers. As GAO previously suggested, reporting the cost, or basis, of securities sales is one option to improve taxpayers' compliance. However, designing additional withholding and information reporting requirements may be challenging given that many types of income are already subject to reporting, underreporting exists in many forms, and withholding and reporting requirements impose costs on third parties. Devoting additional resources to enforcement has the potential to help reduce the tax gap by billions of dollars. However, determining the appropriate level of IRS enforcement resources requires considering such factors as how well IRS uses its resources and the proper balance between taxpayer service and enforcement activities. If Congress provides IRS more enforcement resources, the amount of tax gap reduction would depend on factors such as the size of budget increases and the indirect increase in taxpayers' voluntary compliance resulting from expanded enforcement. The recent budget request for fiscal year 2008 proposes legislation and new initiatives to reduce the tax gap but expected dollar gains are modest. Further reductions likely would require many more such changes.
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On May 4, 2000, the National Park Service initiated a prescribed burn on federal land at Bandelier National Monument, New Mexico, in an effort to reduce the threat of wildfires in the area. The plan was to burn up to 900 acres. On May 5, 2000, the prescribed burn exceeded the capabilities of the National Park Service, spread to other federal and nonfederal land, and was characterized as a wildfire. On May 13, 2000, the President issued a major disaster declaration, and subsequently, the Secretary of the Interior and the National Park Service assumed responsibility for the fire and the loss of federal, state, local, tribal, and private property. The fire, known as the Cerro Grande fire, burned approximately 48,000 acres in four counties and two Indian pueblos, destroyed over 200 residential structures, and forced the evacuation of more than 18,000 residents. On July 13, 2000, the President signed CGFAA into law. Under CGFAA, each claimant is entitled to be compensated by the United States government for certain injuries and damages that resulted from the Cerro Grande fire. CGFAA required that FEMA promulgate and publish implementing regulations for the Cerro Grande program within 45 days of enactment of the law. On August 28, 2000, FEMA published Disaster Assistance: Cerro Grande Fire Assistance: Interim Final Rule in the Federal Register (Interim Rule). FEMA modified the Interim Rule with a set of implementing policies and procedures on November 13, 2000. FEMA updated these policies and procedures in January and March 2001. After reviewing public comments on the Interim Rule, FEMA finalized and published Disaster Assistance: Cerro Grande Fire Assistance Final Rule (Final Rule) on March 21, 2001. The Congress initially appropriated $455 million to FEMA for the payment of such claims and $45 million for the administration of the Cerro Grande program. In March 2002, FEMA requested, but did not receive, additional appropriated funding of $80 million to cover additional claims and administrative costs. In December 2002, FEMA revised its estimate and requested additional appropriated funding of $155 million, including $5 million for administrative costs. The revised estimate was based on more complete claim information since the final date to submit claims had passed on August 28, 2002. In February 2003, FEMA was appropriated an additional $90 million, of which up to $5 million may be made available for administrative purposes. FEMA stated that only $2 million was used in fiscal year 2003 for administrative purposes. In October 2003, FEMA received an additional appropriation of $38.062 million, of which 5 percent may be made available for administrative costs. After FEMA allocated a specific amount for administrative costs, it had a maximum of $578.6 million available for the payment of claims under CGFAA. During the audit, FEMA provided revised claim data that reflected the amounts shown in table 1. The claimed amounts that FEMA approved for payment through September 9, 2003, included $51.5 million of approved subrogation claims. Pending claims included expected payments for individual, business, governmental, and pueblo claims, and projected liabilities consisted of potential future appeals, potential arbitrations, and contingency for judicial review. CGFAA requires that FEMA submit an annual report to the Congress that provides information about claims submitted under the act. This annual report is to include the amounts claimed, a description of the nature of the claims, and the status or disposition of the claims, including the amounts paid. FEMA's report is to be issued annually by August 28. CGFAA, as amended, requires that we conduct annual audits on the payment of all claims made and report the results of the audits to the Congress within 120 days of FEMA's issuance of its annual report. The act also requires that our report include a review of all subrogation claims for which insurance companies have been paid. In May 2003, we issued our second report on the audit of Cerro Grande claim payments made from inception through August 28, 2002. The report stated that FEMA properly processed and paid claims but overstated amounts paid in its report to the Congress and made two recommendations regarding the reconciliation of the approved and paid amounts in its payment approval and accounting systems. FEMA issued its most recent annual report on August 28, 2003, with claim amounts approved for payment through June 30, 2003. In performing our review, we considered the Standards for Internal Control in the Federal Government. To reaffirm our understanding of the claim review and payment process established by OCGFC and to follow up on the changes made to this process since our last report, we interviewed FEMA officials and analyzed data used in FEMA's annual report to the Congress and data used by FEMA to determine the estimated claim liability. We also reviewed the following: the requirements of CGFAA; the final regulations published in the Federal Register; FEMA's policies and procedures manual; a summary of FEMA's unpaid claim liability estimates as of September 9, 2003; FEMA's fiscal year 2002 audited financial statements; and the fiscal year 2003 approvals, payments, and other documentation concerning the Cerro Grande program and submitted claims. Finally, we selected a statistical sample from the population of all partial and final claimed amounts approved for payment from August 28, 2002, through June 30, 2003, to determine whether FEMA processed, approved, and paid the Cerro Grande fire claims in accordance with its applicable policies and procedures. We selected a dollar unit (statistical) sample of 99 intervals representing 84 claims totaling $21,000,928 that were approved for payment from a population of 1,868 reported partial and final claim amounts that had been approved for payment from August 28, 2002, through June 30, 2003 (FEMA's cutoff date for the annual report to the Congress), to test specific control activities, such as adequacy of supporting documentation, evidence of claims manager and approving official review, and actual payment by FEMA. We obtained and reviewed related supporting documentation for the approved claim payments that were selected from OCGFC's payment approval system. In order to follow up on FEMA's corrective actions to address our prior year recommendations, as well as determine whether FEMA properly reported claim payment information to the Congress, we reviewed OCGFC's reconciliations of claimed amounts that were approved by OCGFC for payment from its payment approval system and the actual claim payments made by FEMA's Disaster Finance Center (DFC) and reported in FEMA's accounting system. Our work was conducted in Denton, Texas, and Washington, D.C., from September 2003 through October 2003 in accordance with generally accepted government auditing standards. We requested agency comments on a draft of this report from the Under Secretary of the Department of Homeland Security's Emergency Preparedness and Response Directorate or his designee. The Director of the Recovery Division of the Department of Homeland Security's Emergency Preparedness and Response Directorate provided written comments on our draft, which are reprinted in appendix I. We discuss the written comments in the "Agency Comments and Our Evaluation" section of this report. Based on the results of our statistical testing, FEMA processed, approved, and paid its claims in accordance with its guidelines that were established and in place at the time the claims were reviewed and processed. FEMA's guidelines for the approval and payment of claims specify the following steps. An injured party submits a Notice of Loss (NOL) to OCGFC to initiate the claim payment process. Upon receipt of the NOL, a claim reviewer contacts the claimant to discuss the claim, explain the claims process, and determine the best means to substantiate the loss or damages. The claim reviewer then assigns a claim number and enters the information into OCGFC's claim-processing database, the Automated Claim Information System, and begins the process of verifying the victim's claim. Upon completion of its review, the claim reviewer prepares a claim payment recommendation package, which specifies that a claimant's injuries or damages occurred as a result of the Cerro Grande fire and that claimed amounts are eligible for compensation under CGFAA. The claim reviewer also inputs reserve amounts equal to the total claimed amounts that he/she expects to be paid into the claim- processing database. A claim supervisor reviews to ensure that a proper investigation of the claim occurred and that the proper documentation exists, among other things, and approves each recommendation package. Upon approval of the claim payment recommendation package, an Approval for Payment form is completed and sent to an OCGFC authorizing official for review and approval. The Comptroller receives a Schedule of Payments, consisting of amounts approved for payment, and reviews a sample of requested and approved payments. The Comptroller then approves the Schedule of Payments, records the approved amounts in OCGFC's payment approval system, and sends the schedules to FEMA's DFC for additional manual processing. FEMA records all payments in its accounting system, the Integrated Financial Management Information System, which is not linked to OCGFC's payment approval system, before funds are disbursed by Treasury. In addition to the above steps from the claim review process, which is used for both partial payments and final payments, the claim reviewer prepares a Proof of Loss (POL) form prior to processing a final payment. This form summarizes all amounts recommended for payment, including those amounts previously paid through a partial payment. The POL form must be signed by the claimant subject to the provisions of 18 U.S.C. SS1001, which establishes criminal penalties for false statements. Once a signed POL form is received, an OCGFC authorized official sends a Letter of Final Determination to tell the claimant the total amount of compensation being offered under CGFAA. Accompanying this letter is a Release and Certification form that the claimant signs if he or she accepts the OCGFC compensation determination, thereby releasing the federal government from any additional claims arising from the Cerro Grande fire. Upon receipt of the signed Release and Certification form, FEMA processes and mails a claimant's final payment. Our review of the statistically selected sample of approved claims determined that the above steps were performed in accordance with FEMA's established approval and payment process. For the period from August 29, 2002, through June 30, 2003, FEMA approved claims in the amount of $40 million for payment, including the partial payment of approved subrogation claims filed by insurance companies. FEMA addressed our prior recommendations related to reconciling the reported amounts approved for payment to amounts actually paid. FEMA reconciled the total amounts approved for payment to the amounts actually paid as of June 30, 2003, which was the cutoff date for its annual report, and as of August 31, 2003. FEMA officials stated they would continue to perform these reconciliations periodically. In reviewing FEMA's annual report to the Congress required by CGFAA, we found that while improvements were made in how FEMA represented the detailed claim information in its report, claim information was no longer summarized in the report, making it less useful and transparent. In our May 2003 report, we recommended that FEMA reconcile the amounts approved for payment in its payment approval system to amounts actually paid in its accounting system and correct all identified errors in its payment approval system. We also recommended that FEMA perform monthly reconciliations of the approved and paid amounts for as long as both systems are used to track and report paid amounts or request additional funding. In response to our recommendations, OCGFC implemented a detailed process that consisted of compiling the claimed amounts by individual claims from both the accounting system and the payment approval system and matching the amounts approved and paid for each claim. It also performed an overall reconciliation of the total amounts approved and paid through June 30, 2003. In performing the detailed matching process, OCGFC compared the individual claim approval data and claim payment data from August 28, 2000, through February 19, 2003, and performed periodic comparisons of individual claims from February 20, 2003, to May 31, 2003, and from June 1 to June 30, 2003. When OCGFC identified differences between amounts reported as paid by FEMA's accounting system and OCGFC's payment approval system, it recorded the adjustments and corrections into its payment approval system to eliminate duplication and made note of data entry errors, which did not require adjustments. The identified differences generally consisted of the following: Duplicate approved amounts that represented a claimed amount that was approved for payment more than once. For example, in one case OCGFC approved a final payment of $934,802. Since the claimant appealed, the amount was not paid. While the claim was being appealed, OCGFC approved a partial payment of $919,802. Both of these amounts appeared as approved payments in its payment approval system. After we brought this duplicate approval to OCGFC's attention during our prior review, it subsequently removed the original unpaid amount from its system during its claims comparison process later in fiscal year 2003. Data entry errors by claim reviewers when entering data into the payment approval or accounting systems. For example, if an incorrect identification number was used to process a payment, no comparison could be made between the approved amount recorded by claim number in the approval system and the paid amount recorded by claimant's identification number in the accounting system. To resolve the situation, OCGFC listed the approved amount as an unmatched item until it located the matching payment that was recorded to a different identification number. In addition to these comparisons of individual claim amounts, FEMA's Financial and Acquisition Management Division (FAMD) performed a complete reconciliation of the total amounts that were approved for payment and paid as of June 30, 2003. We reviewed this overall reconciliation of the total claim amounts approved and paid under CGFAA, from inception through June 30, 2003, and found that all corrections and adjustments identified during OCGFC's comparison were made. FAMD also performed a similar reconciliation of total approved and paid amounts through August 31, 2003, and stated that it plans to perform this overall reconciliation more regularly, at least quarterly. In our prior report, we noted that FEMA improperly reported unreconciled amounts that were approved for payment in its prior annual reports to the Congress as amounts actually paid. In its 2003 annual report to the Congress, FEMA continued to include claimed amounts approved for payment in a detailed schedule of claim information, but it properly identified the amounts as such instead of as paid or expended amounts. However, FEMA's report no longer summarized information on the amounts claimed, amounts approved, and the estimated liabilities for the remainder of the program. In addition, FEMA did not include any information on claims paid as is required under CGFAA. Without this information, FEMA's annual report is less useful to the Congress and other stakeholders. FEMA strengthened its internal controls over its claim approvals and payments by implementing a process to reconcile its detailed approval information to its payment information. This helps improve the accuracy of claims information included in its systems and reports to the Congress. The usefulness and transparency of the report would be further improved if it included summary claim activity information. We recommend that the Secretary of Homeland Security direct the Under Secretary of the Emergency Preparedness and Response Directorate to include summary-level claim information in its annual report to the Congress, including amounts claimed, approved, and paid and remaining estimated program liabilities. FEMA, in a letter from the Director of the Recovery Division of the Department of Homeland Security's Emergency Preparedness and Response Directorate, agreed with our recommendation to include summary-level claim information on amounts claimed, approved, and paid and remaining estimated program liabilities, if any, in its next annual report to the Congress. The Department of Homeland Security's comments are reprinted in appendix I. We are sending copies of this report to the congressional committees and subcommittees responsible for issues related to FEMA and the Department of Homeland Security, the Secretary of the Department of Homeland Security, the Under Secretary of the Department of Homeland Security's Emergency Preparedness and Response Directorate, and the Inspector General of the Department of Homeland Security. Copies will also be made available to others upon request. In addition, this report is available at no charge on GAO's Web site at http://www.gao.gov. If you have any questions about this report, please contact me at (202) 512- 9508 or Steven Haughton, Assistant Director, at (202) 512-5999. The other key contributors to this assignment were Christine Fant and Estelle Tsay. 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The Cerro Grande Fire Assistance Act (CGFAA) mandated that GAO annually audit all claim payments made to compensate the victims of the Cerro Grande Fire in northern New Mexico. For this third report on this topic, GAO determined whether the Federal Emergency Management Agency (FEMA), which is now a part of the Emergency Preparedness and Response Directorate of the Department of Homeland Security, (1) paid fire claims in accordance with applicable guidance and (2) implemented corrective actions to address prior GAO recommendations, including determining if FEMA properly reported claim payments to the Congress. FEMA processed and paid its claims in accordance with its policies and procedures that were established and in place at the time the claims were reviewed and processed. For the period from August 29, 2002, to June 30, 2003, FEMA approved $40 million in claims for payment, including the initial payment of most of the subrogation claims made by insurance companies. In response to GAO's May 2003 report, FEMA established processes to address GAO's recommendations related to reconciling claimed amounts approved with actual amounts paid. These processes included comparing the individual amounts approved for payment to the amounts actually paid from inception through June 30, 2003, by claim, as well as performing complete reconciliations of total amounts that were approved and paid for the same period and as of August 31, 2003. In addition, in our prior report, we noted that FEMA improperly reported unreconciled claim amounts approved for payment as amounts actually paid. In its 2003 annual report, FEMA properly identified claimed amounts as approved amounts for payment rather than actual amounts paid in a schedule that was included in its annual report to the Congress. However, FEMA no longer provided summary information on amounts claimed, amounts approved, and its remaining estimated liabilities in its report to the Congress and did not include any information on claims paid as is required by CGFAA. Without this information, the report is less useful to the Congress and other stakeholders.
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The Resource Conservation and Recovery Act (RCRA) requires EPA to identify which wastes should be regulated as hazardous waste under subtitle C and establish regulations to manage them. For example, hazardous waste landfills, such as those used for disposing ash from hazardous waste incinerators, generally must comply with certain technological requirements. These requirements include having double liners to prevent groundwater contamination as well as groundwater monitoring and leachate collection systems. In 1980 the Congress amended RCRA to, among other things, generally exempt cement kiln dust from regulation under subtitle C, pending EPA's completion of a report to the Congress and subsequent determination on whether regulations under subtitle C were warranted. The Congress required that EPA's report on cement kiln dust include an analysis of (1) the sources and the amounts of cement kiln dust generated annually, (2) the present disposal practices, (3) the potential danger the disposal of this dust poses to human health and the environment, (4) the documented cases of damage caused by this dust, (5) the alternatives to current disposal methods, (6) the costs of alternative disposal methods, (7) the impact these alternatives have on the use of natural resources, and (8) the current and potential uses of cement kiln dust. As of May 1994, there were about 115 cement kiln facilities operating in 37 states and Puerto Rico. Of these, 24 were authorized to burn hazardous waste to supplement their normal fuel. Even with the 1980 exemption, certain aspects of cement kilns' operations must comply with some environmental controls. Under the Clean Air Act, EPA requires cement kiln facilities to comply with ambient air quality standards for particulate matter. Under the Clean Water Act, EPA regulates the discharge of wastewater and storm water runoff from cement kiln facilities. Under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA or Superfund), EPA can require cement kiln facilities to clean up contamination resulting from cement kiln dust. In August 1991, EPA's regulations for boilers and industrial furnaces that burn hazardous waste took effect. While every cement kiln that burns hazardous waste is subject to these regulations, its dust is not classified as hazardous waste if at least 50 percent (by weight) of the materials the kiln processes is normal cement-production raw materials and the kiln's owner or operator demonstrates that burning hazardous waste does not significantly affect the toxicity of the dust. According to EPA Office of Solid Waste officials, of the 24 cement kilns authorized to burn hazardous waste, they are not aware of any that are required to manage the dust as a hazardous waste. Despite these existing controls, in making its regulatory determination in February 1995, EPA stated that additional controls over cement kiln dust are warranted under RCRA because of its potential to harm human health and the environment. EPA also determined that existing regulations, such as those under the Clean Air Act, may also need to be improved because they are not tailored to cement kiln dust or because their implementation is inconsistent among the states. As partial justification, EPA cited 14 cases in which cement kiln dust has damaged groundwater and/or surface water and 36 cases in which cement kiln dust has damaged the air. EPA also cited the general lack of groundwater monitoring systems around dust management units at cement kiln facilities and the current lack of federal regulations to protect groundwater from the risks posed by cement kiln dust. Furthermore, after collecting and analyzing site-specific information, EPA concluded that potential risks did exist at some facilities. Although in 1980 the Congress directed EPA to complete its report on cement kiln dust by 1983 and to determine within 6 months thereafter whether regulations were warranted, EPA did not do so. It completed its report in December 1993 and issued its determination in February 1995.EPA officials said that the agency did not meet these statutory deadlines because, at that time, EPA viewed completing its report on cement kiln dust as a lower priority than other work. According to EPA's Acting Chief of the Special Wastes Branch, the agency ranked completing its report and determination on cement kiln dust a low priority because cement facilities were considered to pose minimal risk because of the very small proportion of them on EPA's National Priorities List. In addition, cement kiln dust exists in smaller volumes in comparison to other high-volume wastes that EPA was required to study, such as wastes from mining for ores and minerals and exploring for oil and gas. EPA wanted to complete studies of these high-volume, temporarily exempt wastes prior to completing its study on cement kiln dust. For example, EPA estimated that the mining industry generated 1.3 billion metric tons of waste in 1982, and it completed its study on these wastes in 1985. EPA officials said that they also needed to meet other statutory time frames for completing standards for other wastes that the agency placed a higher priority on, such as treatment standards for land disposal of hazardous waste. In settlement of a 1989 lawsuit filed against EPA because of its failure to comply with the statutory time frames, EPA entered into a consent decree to publish a report to the Congress on cement kiln dust on or before December 31, 1993. This decree also called for EPA to make a regulatory determination on cement kiln dust by January 31, 1995. RCRA specifically authorizes EPA to modify several requirements that apply to hazardous waste in regulating cement kiln dust. EPA is authorized to modify those requirements that would impose minimum technological standards on new landfills or expansions of existing landfills as well as those that impose corrective action to clean up releases of wastes from units used to dispose of cement kiln dust. EPA is authorized to modify these requirements to accommodate practical difficulties associated with implementing them when disposing of cement kiln dust as well as such site-specific characteristics as the area's climate, geology, hydrology, and soil chemistry. However, any modifications must ensure the protection of human health and the environment. Although RCRA allows EPA to modify several requirements and thus propose different standards for cement kiln dust than those for hazardous waste, EPA has not yet determined which standards might differ and how they might differ. For example, according to Office of Solid Waste officials, it is not clear whether EPA will include a corrective action requirement to clean up releases from cement kiln dust disposal units that is similar to its corrective action requirement to clean up hazardous waste disposal units. These officials said that EPA will likely focus its management standards on dust generated in the future, as opposed to dust that already exists at cement kiln facilities, because RCRA allows EPA to consider several factors in developing standards for cement kiln dust management, including the impact or cost any management standard may have on the cement kiln industry. Furthermore, these officials said that EPA has to be sensitive to the Congress's regulatory reform efforts as well as the agency's goal of taking a more common sense approach to regulating industry. Even though EPA has determined that additional controls are warranted over dust from cement kilns burning hazardous waste as well as dust from those kilns that do not, it has not determined if it will impose the same standards or controls over dust from both types of kilns. EPA's analysis found that concentrations of 12 metals in dust from both types of cement kilns were at higher than normally occurring levels. Dust from cement kilns burning hazardous waste had concentrations of nine of these metals that were the same or lower than dust from cement kilns that did not burn hazardous waste. Conversely, EPA found that concentrations of three metals--cadmium, chromium, and lead--were higher in dust from cement kilns that burn hazardous waste. (See app. I.) Even though the concentrations of these three metals were higher, EPA found that these increases did not result in discernible differences in risk estimates between dust generated by cement kilns that burn hazardous waste and those that do not. EPA also analyzed the extent to which these metals leached, or washed, out of the dust and found no significant difference between cement kilns that burn hazardous waste and those that do not burn this waste. Although EPA has not yet determined what management standards it will impose on cement kiln dust, Office of Solid Waste officials said that the agency may regulate air emissions from cement kilns burning hazardous waste differently from those that do not burn hazardous waste. According to these officials, because dioxins and furans were found in dust from cement kilns burning hazardous waste, EPA is considering revising its regulations for boilers and industrial furnaces to control their emissions. Even though the levels of these hazardous wastes were generally low, EPA believes their presence warrants concern. Even though EPA did not conclude that cement kiln dust should be classified as a hazardous waste, EPA did conclude that some facilities (in addition to those where damage to surface and/or groundwater and the air has been found) do have the potential to pose a threat to human health and the environment. While EPA plans to propose a program to control cement kiln dust within 2 years, if the agency proceeds with developing federal regulations, it could be several more years after that until cement kilns are required to implement these controls. Interim and possible final actions to reduce the current threat that cement kiln dust may pose at some facilities include requiring the cement kiln industry to adopt dust control standards without EPA's first having to proceed through a lengthy regulatory development process and making greater use of existing regulatory authority to control cement kiln dust. One action EPA is considering to control this dust is the use of a cement kiln industry proposal called an enforceable agreement. After drafting the general terms of the agreement, the cement kiln industry has been working with EPA and other interested parties to negotiate what controls would be needed to protect human health and the environment. Some possible industry controls are to require landfills used to dispose of cement kiln dust to have such site-specific features as hydrogeological assessments, groundwater monitoring, surface water management, and measures to control emissions of cement kiln dust. The agreement would also specify that EPA would not impose subtitle C regulations on cement kiln dust. EPA is currently analyzing the agreement's general terms to determine if it is allowable under RCRA and whether it would sufficiently protect human health and the environment. EPA's consideration of this enforceable agreement to manage cement kiln dust has triggered a negative response from environmental groups. For example, the Environmental Defense Fund has questioned EPA's authority to enter into these agreements and their enforceability if EPA does not first develop regulations that contain specific standards. In addition, the Fund questions whether these agreements would provide the same level of protection as federal regulations and whether they would allow for the public involvement that occurs in developing regulations. The Fund also questions how these agreements would affect the citizens' ability to sue and to obtain information through the Freedom of Information Act and whether these agreements would limit federal and state criminal and civil enforcement authorities. Finally, the Fund questions whether these agreements would limit the development of state programs to control cement kiln dust. According to an Office of Solid Waste official, EPA intends to decide by late September 1995 whether it will pursue developing enforceable agreements to control cement kiln dust. Should this approach be challenged in the courts, however, controls over cement kiln dust could be further delayed. A second action under consideration is for EPA and the states to make greater use of existing regulatory authority to control cement kiln dust. Although EPA has determined that current regulations need to be improved for the proper management of cement kiln dust, in the past EPA regional offices and the states have used existing authorities at some facilities to control surface water runoff, emissions from dust piles, and groundwater contamination (i.e., the damage cases mentioned earlier). For example, according to an environmental inspector in Ohio, the state used an enforcement authority under its Remedial Response Act to better control runoff from waste piles that was contaminating a nearby stream. According to a waste management official in Michigan, the state used enforcement authority under its Air Pollution Control Act to better control emissions from dust piles. EPA has also used the Superfund program to clean up groundwater contamination at two facilities. In the course of completing its regulatory determination, EPA's Office of Solid Waste collected information on 83 cement kiln facilities and conducted a series of studies on risk-screening and site-specific risk-modeling that could be used to determine whether existing regulatory authority should be used to control cement kiln dust at particular cement kilns. On the basis of the information collected and analyzed, EPA projected that several cement kiln facilities may be posing a high risk because of such factors as the amount of metals that may exist in dust disposed at those facilities, the lack of dust management controls at those facilities, and other facility-specific factors, such as proximity to agricultural lands. However, EPA's Office of Solid Waste has not provided the results of its risk-screening and risk-modeling studies to other EPA offices or the states that are responsible for investigating facilities and taking necessary enforcement actions. (See app. II for additional information on the results of these studies.) According to Office of Solid Waste officials, much of this information is available in the public docket and EPA's contractor has the computer tapes that were used to develop the risk estimates. However, because they did not believe that most facilities posed the degree of risk that warranted emergency action, they did not provide this information directly to EPA's Office of Enforcement and Compliance Assurance, its regional officials, or state enforcement officials. EPA's RCRA officials in four regions with cement kilns whose dust potentially poses a risk to groundwater said they would be interested in having the facility-specific information EPA's Office of Solid Waste developed to prepare its report and determination. They said that they could provide the information to state environmental officials for the states' use or could take enforcement action themselves if the regions believed the situation warranted it. In those instances in which EPA or the states lack clear enforcement authority, other actions, such as assessing facilities to better understand the risks and working cooperatively with cement kiln owners/operators to reduce these risks, could be taken. Similarly, EPA air and water officials said they would be interested in having facility-specific information for these purposes. It may be several years before EPA completes its management control program for cement kiln dust regardless of whether it decides to issue new regulations or adopt the use of an enforceable agreement to control this dust. EPA obtained information on 83 cement kiln facilities that it used to conduct a series of risk-screening and site-specific risk-modeling studies. While this information is readily available and much of it is in the public docket, EPA has not distributed it to EPA's regional or state enforcement officials because the agency did not believe that the estimated risks warranted emergency action. Even so, EPA believes that some facilities, because of the manner in which their cement kiln dust is managed, could pose a risk. EPA regional and state enforcement officials believe that this information could assist them in determining if action should be taken at some facilities prior to EPA's finalizing its management program to control cement kiln dust. We recommend that the Administrator, EPA, provide to EPA's regional officials and state enforcement officials the risk-screening and site-specific risk-modeling information developed during its study of cement kiln dust so they can use this information to determine whether interim actions are needed to protect human health and the environment. We provided a draft of this report to EPA for its comments. We met with EPA officials, including the Acting Director, Waste Management Division, Office of Solid Waste, who generally concurred with the information presented in this report. They agreed that it would be appropriate for them to provide EPA's regional officials and state enforcement officials information that may be useful to determine whether action should be taken to reduce the risks posed at cement kiln facilities prior to the agency's finalizing its management program to control dust from cement kilns. Office of Solid Waste officials also suggested we clarify certain technical points. We have revised the report accordingly. To determine what priorities EPA set for making its regulatory determination on cement kiln dust, we interviewed officials from EPA's Special Wastes Branch in its Waste Management Division, Office of Solid Waste. To determine if EPA is authorized to modify hazardous waste management requirements in regulating cement kiln dust, we reviewed RCRA and EPA's regulatory determination on cement kiln dust. To determine whether EPA believes that dust from cement kilns that burn hazardous waste should be regulated the same as dust from those not burning such waste, we reviewed EPA's Report to Congress on Cement Kiln Dust, its regulatory determination, and public comments received on that report as well as on other documents. We also discussed the basis for EPA's determination with its Special Wastes Branch officials as well as officials representing the hazardous waste industry, the cement kiln industry, and environmental groups. To determine whether interim actions could be taken to control cement kiln dust while EPA is developing its management control program, we reviewed EPA's legal authority for taking action at facilities that may pose a threat to human health and the environment, reviewed cases in which EPA or the states have used this authority in the past, and discussed EPA's risk-screening and risk-modeling results with Office of Solid Waste officials. We also discussed options EPA and the states have with Special Wastes Branch officials in the Office of Solid Waste, Office of Enforcement and Compliance Assurance officials, EPA attorneys, and EPA and state environmental enforcement officials. We conducted our review between March and June 1995 in accordance with generally accepted government auditing standards. As discussed with your office, this report does not address new information that you provided us recently relating to metals in cement kiln dust. We agreed that we will address that information separately. As arranged with your office, unless you publicly announce this report's contents earlier, we plan no further distribution until 30 days after its publication. At that time, we will send copies of this report to the Administrator of EPA and make copies available to others upon request. Please contact me at (202) 512-6112 if you or your staff have any questions. Major contributors to this report are listed in appendix III. EPA used a model to analyze the effect cement kiln dust could have at 52 facilities if they did not have adequate dust suppression controls for their waste piles. EPA's model projected that over half of these facilities would exceed EPA's health standards for fine particulate matter at plant boundaries and, potentially, at nearby residences. Although almost all of these facilities have some controls to suppress cement kiln dust, EPA does not have information on the adequacy of these controls and EPA officials also noted that they saw cement kiln dust blowing during some visits to 20 facilities. EPA used the same model to analyze the effects of water running off of dust piles at 83 of the facilities. The model projected that 25 facilities could pose higher than acceptable cancer risks or noncancer threats to subsistence farmers and fishermen. Seven of these facilities did not have runoff controls. EPA also estimated that 19 facilities could pose a risk because of dioxins and furans. EPA cautioned, however, that these risk results were based on very limited sampling and modeled worst-case scenarios of unusually high dioxin and furan levels. EPA further cautioned that all of the results from its analyses of indirect exposure risks should be carefully interpreted because its model was still under peer review. Even so, Office of Solid Waste officials said that the results of all of EPA's analyses were cause for concern. EPA's analysis of the effects of cement kiln dust on groundwater found that about half of the cement kiln facilities were built on bedrock having characteristics that allow for the direct transport of groundwater offsite. In its analysis of 31 of these facilities, EPA found that dust from 13 of them could contaminate groundwater at levels that could exceed health standards. None of these 13 facilities had installed man-made liners under their dust piles and 11 lacked leachate collection systems. EPA also found that groundwater at three of these facilities was within 10 feet of the bottom of their dust piles; EPA did not have information on the depth to groundwater at the remaining 10 facilities. In addition, some facilities managed cement kiln dust in quarries that could subsequently fill with water; if this occurs, leachate could more readily contaminate groundwater. In addition to the potential risks from the disposal of cement kiln dust, EPA is concerned over the use of this dust as a substitute for lime to fertilize agricultural fields. According to EPA, this use of cement kiln dust could pose cancer risks and noncancer threats for subsistence farmers if that dust contains relatively high levels of metals and dioxins. Richard P. Johnson, Attorney Gerald E. Killian, Assistant Director Marcia B. McWreath, Evaluator-in-Charge Rita F. Oliver, Senior Evaluator Mary D. Pniewski, Senior Evaluator The first copy of each GAO report and testimony is free. Additional copies are $2 each. Orders should be sent to the following address, accompanied by a check or money order made out to the Superintendent of Documents, when necessary. Orders for 100 or more copies to be mailed to a single address are discounted 25 percent. U.S. General Accounting Office P.O. Box 6015 Gaithersburg, MD 20884-6015 Room 1100 700 4th St. NW (corner of 4th and G Sts. NW) U.S. General Accounting Office Washington, DC Orders may also be placed by calling (202) 512-6000 or by using fax number (301) 258-4066, or TDD (301) 413-0006. Each day, GAO issues a list of newly available reports and testimony. To receive facsimile copies of the daily list or any list from the past 30 days, please call (301) 258-4097 using a touchtone phone. A recorded menu will provide information on how to obtain these lists.
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Pursuant to a congressional request, GAO reviewed the Environmental Protection Agency's (EPA) decisionmaking process with respect to regulating cement kiln dust, focusing on: (1) EPA priorities in making its kiln dust determination; (2) whether EPA is authorized to modify hazardous waste management requirements in regulating cement kiln dust; (3) whether EPA believes that cement kilns burning hazardous waste should be regulated the same as those not burning hazardous waste; and (4) whether interim actions can be taken to control cement kiln dust. GAO found that EPA: (1) does not give as high a priority to making a cement kiln dust determination as developing standards for other wastes considered to be of higher risk; (2) has the statutory authority to modify its hazardous waste regulations to control cement kiln dust as long as the regulations adequately protect human health and the environment; (3) believes that cement kiln dust from both types of kilns could adversely affect human health and the environment, if improperly managed; (4) has not yet determined whether it will subject the dust from the two types of kilns to the same regulations; and (5) is considering interim actions to control cement kiln dust, such as making greater use of existing regulatory authority to enforce controls over the dust and entering into an agreement with the cement kiln industry to impose additional controls over the dust.
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The Army, Navy, and Defense Logistics Agency approach to complying with Department of Defense requirements was to develop economic models to determine the maximum amount of inactive inventory they could retain. The Air Force did not develop an economic retention model; rather it employed a model based on historical usage patterns. Most recently, all the components lowered their maximum levels (referred to as ceilings) for items in economic retention during the 1990s to help them meet inventory reduction targets. The Department requires that an economic model calculating whether to retain an inventory item or dispose of it should compare the cost of retention with the cost of disposal and select the option with the least cost. As the amount of inactive stock increases, the cost of retention increases (more items cost more to hold) and the cost of disposal decreases (with greater amounts of an item on hand, the likelihood of having to repurchase it becomes less). Equilibrium is reached when the additional cost of retention equals that of disposal. This equilibrium level of inventory is the economic retention level--the largest retention amount of an inactive item that can be justified by economic analysis. Any amount of inventory over this level would become eligible for retention on a contingency basis or disposal. Management of the Department's secondary inventory is a complex process, and effectively implementing systemwide improved management approaches has been a long-standing challenge for the Department.However, following the end of the Cold War, the Department recognized that it had unnecessarily high inventories as a result of major reductions in its force structure, and it directed the components to take action to lower inventory levels, including economic retention inventory. In response to this directive, during 1994, the Army, Navy, and Defense Logistics Agency chose to lower economic retention inventory levels by placing a preset maximum retention level that generally fell below the levels calculated by the models. The Air Force lowered its maximum level in 1996. The Department reported its economic retention inventory fell from about $13.8 billion to about $9.4 billion (about 32 percent) between fiscal year 1991 and 1999 (see fig. 1) and by 40 percent when adjusted for inflation. The latter part of this period covers the years when lower ceilings were put in place by the services and Defense Logistics Agency. Although all three services reported reductions in economic retention inventory levels during this time, the changes were uneven. The Air Force reported the smallest decrease in economic retention inventory--from about $5.1 billion to about $4.5 billion (about 12 percent). In contrast, the Army reported a decrease from about $1.3 billion to about $600 million (about 54 percent) and the Navy from about $5.6 billion to about $1.6 billion (over 71 percent). On the other hand, the Defense Logistics Agency reported an increase in economic retention inventory from about $1.8 billion to about $2.7 billion (about 50 percent) as a result of a decision to consolidate management responsibility for all consumable items within the Agency. According to Department data, if it had not required the services to transfer management of large quantities of inventory to the Defense Logistics Agency during the 1990s, the Defense Logistics Agency inventory would have decreased by over a billion dollars. (See app. I for more details on how the composition of secondary and retention inventory changed between fiscal year 1991 and 1999.) It is also important to note that, in response to a congressional mandate, the Department is conducting an independent study of secondary inventory and parts shortages as required by section 362 of the National Defense Authorization Act for Fiscal Year 2000. As described in the authorization act, the independent study is to include analyses of the appropriate levels and use of secondary inventories, alternative methods for disposing of excess inventory, and the application of private sector cost calculation models in determining the cost of secondary inventory storage. According to the Department, the study is scheduled for completion by the end of August 2001. The services and Defense Logistics Agency do not have sound analytic support for their approaches for determining whether they are holding the correct amount of items in economic retention inventory. While components (with the exception of the Air Force) developed individual economic models designed to place inactive inventory in economic retention status as early as 1969, they have not used them since 1994. Instead, components lowered maximum levels of inventory that could be held (referred to as ceilings) to make economic retention determinations that would help achieve agency inventory reduction goals. Agency information indicates that this approach has helped to reduce inventory levels. However, the components have not annually reviewed the analyses used to support their economic retention decisions, as required by the Department, and therefore have no assurance that the inventories held in economic retention status are appropriate. Although the components were not using their economic retention models to manage inventory levels, we did generally review the models. We noted that factors and assumptions within the models differed and were not current without explanation for the differences. Given the differences we found in these models, such as varied and outdated cost factors and assumptions and the lack of support for these factors and assumptions, it is uncertain whether they determine an accurate retention level. A methodology for determining how many items are to be kept in economic retention status, which the Department of Defense requires, should compare the costs of retention to the costs of disposal of an inventory item. The Army, Navy, and Defense Logistics Agency developed models designed for making economic decisions that consider the costs of retention and the costs of disposal. The Air Force does not compare retention and disposal costs in determining economic retention inventories. Instead, the Air Force employs historical usage levels to determine economic retention levels. The components developed their models in different ways and use different factors and assumptions in their models without detailed documentation. The amount of inventory to hold in economic retention varies by model depending on the factors and assumptions in the models. The economic retention models of the three components generally meet the Department's requirements to compare retention costs to disposal costs, but the factors and assumptions in them vary across the components. For example, the Army and Navy use a factor of obsolescence and the Defense Logistics Agency does not. In addition, the values for similar factors used in economic retention models varied among components. For example, the Army's value for loss rates (loss through theft or decay) is 1 percent, the Navy's value is 4 percent, and the Defense Logistics Agency does not use a loss rate. Furthermore, the components have not appropriately updated their model assumptions. For example, prescribed discount rates, a key assumption in all economic retention models, vary across components' models. The Navy uses a 10-percent discount rate and the Army and the Defense Logistics Agency use a 7-percent rate for computing net present values. Neither value matches discount rates recommended by the Office of Management and Budget for a cost-effectiveness analysis, which is the decision to retain or dispose of inventory. The rates are also inconsistent with our guidance on discount rates. For example, for the year 2000, the Office of Management and Budget discount rate for a cost-effectiveness analysis was 4.2 percent for a 30-year analysis; the rate was 2.9 percent in 1999. Further information about component economic models can be found in appendix II of this report. The use of a maximum level to manage economic retention stocks (commonly called ceilings by components) makes the Department vulnerable to retaining items when it is uneconomical to retain them or disposing of items that are economical to keep. The components judgmentally developed their ceilings for economic retention inventory, which differ and have yielded lower levels of economic retention inventory than the levels calculated by the economic retention models. During 1994-96, the components established different ceilings for items in economic retention. A ceiling imposes an upper constraint of years of demand--the quantity needed on an annual basis to meet requirements-- on how much inactive inventory can be retained. Prior to the 1990s, the components had set ceilings on retention inventory that varied but that generally exceeded higher levels determined by their economic retention models. While component ceilings varied in the span of years of demand, they also varied in the total years of inventory covered. The Army ceiling is applied to inventories above active inventory requirements. The Air Force, Navy, and Defense Logistics Agency ceilings apply to their entire inventory requirements, including active inventory. Table 1 summarizes the maximum levels used by each component during the 1990s. According to component officials the components now hold fewer items in economic retention status because the ceilings established in the 1990s replaced the levels calculated by economic retention models. The components' more stringent ceilings result in smaller inventory level determinations than would be calculated with economic retention models. Figure 2 illustrates the level a model might calculate and how a more constrained ceiling would override it. For example, a component's ceiling for economic retention stock is 6 years of demand above requirements. If the model computed an economic retention limit (e.g., 8 years of demand of 25 items a year--200 items) that exceeded the maximum level (e.g., 6 years of demand--150 items), the ceiling (150 items) would be selected as the retention level. The additional stock (50 items) would be moved to other inactive categories (contingency or reutilization status) or be disposed of. Components have not reviewed their economic retention models or the judgmentally established ceilings annually, although required to do so by the Department. The lack of the components' reviews of their retention analyses, either their models or ceilings, raises further questions about the cost-effectiveness of either approach. The Department's required annual reviews are to focus on improving analyses supporting retention decisions by accounting for potential upward or downward trends in demand and/or the uncertainties of predicting future long-term demand based on historical data and improved estimates of costs used in retention decision-making. All components have conducted studies of their economic retention analyses, and initiatives were undertaken to meet inventory reduction goals during the 1990s, such as constraining economic retention model determinations with ceilings. However, no studies had been conducted to determine if economic retention models could be used to establish appropriate Department inventory levels on an economic basis, rather than through the use of ceilings. There was little documentation available supporting the selection of the factors and assumptions used in economic retention models, such as obsolescence rates and discount rates. The various factors and assumptions might be appropriate, but in most cases the components lacked documentation describing why they were selected for use. Furthermore, the limited information that is available about the impact of ceilings indicates that they could be causing uneconomical disposals. For example, the Army Audit Agency produced a March 2000 study that suggested that, while the Agency found no instances in which an item was disposed of when it was more economical to retain it, it concluded, based on the statements of inventory managers, that maximum levels resulted in the disposal of items that were still economical to retain. Inventory managers also told us that maximum levels also caused disposal of items that were still economical to retain, but components were unable to provide data about repurchases of disposed items because of limitations in component databases. Components (other than the Air Force) have developed models designed to make economic retention decisions. However, none of the components currently use their economic retention models. Instead, they and the Air Force use ceilings to limit the amount of economic retention inventory they hold. Components have not properly documented their approaches to economic retention decisions. For example, there are variations in common model factors and assumptions lack consistency and are not current. In addition, the Department did not have sound analytical support for the maximum levels they currently use. As a result, the components cannot currently depend on their models or ceilings to determine retention inventory levels without review and improvement. They also have not annually reviewed their approaches. However, the Department is currently conducting a mandated study of secondary inventory and spare parts shortages. Because the ceilings lack analytical support, and the model factors and assumptions vary without explanation and are out of date, the Department cannot provide reasonable assurance that inventories held in economic retention are the right amount. We recommend that the Secretary of Defense direct the Secretaries of the Army, Navy, and Air Force and the Director of the Defense Logistics Agency, in consultation with the Under Secretary of Defense for Acquisition, Technology, and Logistics, to take the following actions: Taking into consideration the results of the congressionally mandated study, establish milestones for reviewing current and recently used approaches for making decisions on whether to hold or dispose of economic retention inventory to identify actions needed to develop and implement appropriate approaches to economic retention decisions. Annually review their approaches to meet Department regulations to ensure that they have sound support for determining economic retention inventory levels. In written comments on a draft of this report, the Department of Defense partially concurred with our recommendations. The Department agreed with our recommendation that its components needed to annually review the appropriateness of their economic retention inventory levels. Regarding our draft recommendation that the components review their approaches to determining economic retention levels, the Department stated that the need for components' further review of retention decisions would be determined after the completion of an independent study in August 2001 of secondary inventory and parts shortages required by section 362 of the National Defense Authorization Act for Fiscal Year 2000. The results of the study could affect component approaches to making economic retention decisions. The study is to report on such issues as the appropriate levels of secondary inventories, alternative methods for disposing of excess inventory, and the application of private sector cost calculation models in determining the cost of secondary inventory storage. Our recommendation focuses on reviewing the approaches for setting economic retention levels to minimize the possibility of inappropriate retention or disposal decisions. How the study results will affect how the Department should address our recommendation remains to be seen. Therefore, we modified our draft recommendation. We are now recommending that the Department establish milestones for taking action on the study's recommendations as they relate to the economic retention issues that we raised in this report. The Department's comments are reprinted in appendix IV. We are sending copies of this report to the appropriate congressional committees; to the Honorable Donald H. Rumsfeld, Secretary of Defense; the Honorable Joseph W. Westphal, Acting Secretary of the Army; the Honorable Robert B. Pirie, Jr., Acting Secretary of the Navy; the Honorable Lawrence J. Delaney, Acting Secretary of the Air Force; Lieutenant General Henry T. Glisson, Director, Defense Logistics Agency; and the Honorable Mitchell E. Daniels, Jr., Director, Office of Management and Budget. Please contact me at (202) 512-8412 if you have any questions. Key contributors to this report were Charles Patton, Donald Snyder, Scott Pettis, and Charles Perdue. After the end of the Cold War and a subsequent reduction in force structure, the Department of Defense recognized that it had high inventory levels and took action to reduce them. Department secondary inventory levels were reduced by about a third between 1991 and 1999 when adjusted for inflation. All four components reviewed reduced their secondary inventory levels during this time, although the level of reduction varied by component. The percentage of secondary inventory held in economic retention status also was reduced during this time, although there were fluctuations in inventory levels among components. There were also sizable shifts in the amount of consumable and reparable inventories managed by each component. The following sections provide details of Department and component secondary and economic retention inventory trends. The Department reported reductions in its secondary inventory during the 1990s. The amount of secondary inventory fell from $88 billion in 1991 to $64 billion in 1999 (a decline of 27 percent and a 36-percent reduction when adjusted for inflation). As shown in figure 3, component performance in reducing inventory levels was uneven but generally reflected the Department-wide performance. All four components reduced their secondary inventory levels during this time, but component performance in reducing inventory levels varied. The three services reported reductions in their levels of secondary inventories by amounts ranging from 24 to 38 percent. The Defense Logistics Agency realized a slightly smaller decrease of about 10 percent, primarily because the Department transferred management of many consumable inventories from the services to the Defense Logistics Agency during this time. This transfer helped the services meet their inventory reduction goals. In 1999, the portions of secondary inventory managed by components varied, with the Air Force managing the largest share of the Department's secondary inventory, as figure 4 shows. The percent of component secondary inventories held in economic retention status Department-wide fell slightly, from 15.7 percent to 14.7 percent between fiscal year 1991 and 1999. However, there were sizeable shifts in the percent of secondary inventory held in economic retention status by each component. For example, shares of secondary inventory held in economic retention status by the Army and Navy fell while the Air Force and Defense Logistics Agency portions increased (see fig. 5). There was variance in the share of the Department's economic retention inventories managed by Defense components, with the Air Force holding almost half, as figure 6 shows. Currently, the services manage mostly reparable items because management responsibilities for nearly all consumable items have been transferred to the Defense Logistics Agency. On September 30, 1999, over 34 percent ($3.2 billion) of the Department's consumable inventory was in economic retention status. The Defense Logistics Agency managed $2.7 billion (85 percent) of the Department's consumable economic retention inventory. The percentage of total Department consumable and reparable stock in economic retention status as of September 30, 1999, varied widely by component. Department consumable inventory in economic retention status fell by about 42 percent between September 30, 1993, and September 30, 1999. Each service reduced its consumable inventory in economic retention by an average of 73 percent between 1993 and 1999. However, the Defense Logistics Agency's consumable economic retention inventories were reduced by only 26 percent during this time. By 1993, the Defense Logistics Agency consumable retention inventory had more than doubled to $3.7 billion from its 1991 amount of $1.8 billion due to the Consumable Item Transfer program. The 1993 amount subsequently fell to $2.7 billion in 1999. After the transfer of most of the services' consumable items, the Defense Logistics Agency held about 85 percent of the Department's consumable inventory (see fig. 7). The Air Force's share of Department of Defense reparable items in economic retention status increased between 1993 and 1999. The Air Force reparable inventory in economic retention status increased by $526 million (about 14 percent) during this time. In contrast, the Navy reduced reparable inventory in economic retention status by 55 percent and the Army reduced its inventory in economic retention status by 63 percent between 1993 and 1999. By 1999 the Air Force managed over 70 percent of total Department reparable inventories in economic retention--up from 48 percent in 1993 (see fig. 8). The following sections provide more detail on the general factors and specific models the components use to determine economic retention limits and the ceilings the components use. An economic retention methodology for determining how many items are to be kept in economic retention status, which the Department of Defense requires, should compare the costs of retention to the costs of disposal of an inventory item. In practice, the components configure their models in different ways and often use distinct values for the factors and assumptions in their models. The solution the models seek, the economic retention limit, depends on how the models are set up and factors used in the models when calculating retention and disposal costs. The principal factors in calculating the cost of retention include the estimated costs of operating storage facilities based on the estimated value of the item in storage and the probability of damage, theft, or loss. The component responsible for managing the item estimates the cost factors by taking a percentage of the value, or price, of the item. Components typically determine that the appropriate price to use in this calculation is the last price paid for an item. If an item needs repair, this cost is also added. The percentages for all the cost factors are then multiplied by an item's price and totaled to obtain the estimated cost of retention. The end result of these calculations is that the model's estimate of retention cost rises for each additional unit of an item held. Another consideration for determining retention cost is the possibility that an item may become obsolete. An item could be replaced by a new item or the weapon system the item supports could be discontinued. To address this possibility, the value of the item is reduced based on estimates by the managing component of the likelihood it would not be used. For example, if an item is valued at $100 and there is a 0.9 probability that the item would be needed in a future period, then the $100 value of the item would be multiplied by 0.9 to yield a future value of $90, based on the 10-percent possibility of obsolescence. Almost two-thirds of the Department's economic retention stock consists of reparable items. Some reparable items in inactive status are in disrepair or need to be upgraded. In these cases, a repair cost is factored into the calculation, which is typically based on the item's estimated value in its unrepaired condition. Components also subtract an item's repair cost from the price of a new item. Additionally, delivery costs (based on a percentage of the item's price) for moving the item to a repair facility are estimated and added to the computation of retention costs. A key factor in determining the disposal cost of an item is the chance of having to repurchase the item later. To calculate the disposal cost, a component estimates the probability of repurchase and typically multiplies it by the item's estimated price, which is the estimated purchase price in the future. Some components include estimates of administrative costs associated with procuring an item (such as contract costs) and the cost of starting up a production line to manufacture the item. Estimated future prices can be higher than original purchase prices because additional costs could be incurred, such as the administrative costs involved in contracting with a manufacturer, and setup costs. However, items may become obsolete in the future. This estimated reduction in demand caused by obsolescence is also factored into the retention cost. Since the probability of repurchase declines as the amount held increases, the estimated disposal cost of the item declines as more items are held. Additional adjustments to the disposal cost include estimated expenses associated with disposal (such as transportation to a disposal facility and conversion of sensitive items for sale) and administrative costs incurred in selling an item. These costs are estimated as a percentage of the price of an item and added to the disposal cost. Finally, an item's estimated salvage value would be deducted from the estimated disposal cost to obtain the net disposal cost for each unit. The time value of money is also considered in determining whether to retain an item because the costs associated with storing or disposing of an item are incurred in the future. The costs and benefits of retaining or disposing of an item are computed on a present value basis (their value today) to equalize all of the costs and benefits. To make the present value calculation, a discount (interest) rate is used to factor in the time value of money. For example, if the model computes a benefit in one year that equals one dollar, discounting by 10 percent would make that present discounted value today equal to 91 cents. Economic retention models use additional factors to determine whether to accept items offered for return from depots or other activities. If a return is accepted, then the estimated cost associated with that action would have to be included. For example, estimated transportation costs to return an item would be added to estimated storage costs and compared to estimated disposal costs to decide whether to accept the return of an item. The Army, the Navy, and the Defense Logistics Agency use economic models to calculate the economic retention limit for each item they analyze; the components then apply the ceiling limits described in this report. The Air Force model does not compare the costs of retention to the costs of disposal. Instead, the Air Force employs an item's usage history and its retention ceiling to determine whether to dispose of an item. The specific factors and assumptions the three components' models use and the Air Force computation are described in the following sections. The Army model compares retention and disposal values to determine the economic retention limit. In calculating disposal costs, the Army model includes any potential disposal value. In calculating retention costs, the model includes the benefits of retention, i.e., not having to reorder an item. The model also includes the probability of obsolescence. The Army model allows for the possibility of obsolescence to vary depending on the age of the item. The Army uses a 7-percent discount rate to calculate the present value of disposal and retention values. The Navy model compares what it calls holding costs to buy back costs to determine the economic retention requirement. Holding costs include a disposal value minus disposal transportation costs. The model also factors in an inventory loss rate and an obsolescence rate in computing storage costs. The major factors of buy back costs are those costs that would be incurred if the item had to be reordered and include item replacement price, the administrative costs of procurement, and manufacturer's set-up costs to manufacture unique items (if needed). The model computes buy back and retention costs on a present value basis (using a 10-percent discount rate) because reorder costs would be incurred in the future. If the item is reparable, repair costs (if appropriate) are included in the computation to account for the costs that would be incurred for making the item ready for issue. The Defense Logistics Agency's holding costs are determined by computing storage costs times the probability of needing the material. Holding costs are compared to expected disposal costs. If holding costs are less than disposal costs (expected possible costs of reprocurement minus disposal proceeds), the item should be retained. The model can also evaluate whether an item manager should accept a return and pay the associated costs to bring an item back from retail operations or deny the return and take the chance of reprocurement in the future. The costs of accepting a return are added to the expected holding costs, and the sum is compared to the expected cost to dispose and repurchase. The analysis is done on a present value basis using a discount rate of 7 percent because both costs involve potential outlays in the future. The Air Force model does not compute the costs of disposal or storage as required by the Department. The Air Force computation of economic retention limits is based on an item's usage history. The current Air Force model distinguishes between inactive items that have experienced zero demand over a 5-year span, and have no foreseeable demand, and demand items--those with a demand history over the past 5 years. If an item has been categorized as inactive, the retention limit is based on a non-demand amount--called either an insurance or numeric stock objective limit. A maximum of five items is held for numeric stock objective items and a maximum of two items is held for insurance items. According to component officials and other experts, most Air Force items are in these categories. For items that are categorized as demand items, the economic retention limit is determined through several steps. The system computes gross retention levels first by adding 9 years of demand to peak requirements (the highest quarterly demand level for the item from the prior 25 quarters). Second, the minimum retention level for stock needing repairs (unserviceable items) is computed by adding (1) condemned stock for the past 9 years, (2) stock held at supply facilities and (3) peak requirements identical to the factors computed for the gross retention level. Third, these two levels are then adjusted to establish maximum (gross) and minimum inventory levels, which are compared to the number of assets in inventory. Unserviceable items are retained only when the number of serviceable assets falls below the minimum retention level. Table 2 summarizes the factors and assumptions used in component economic retention models. Economic retention models and ceilings are to be applied only to items with predictable and steady annual demand. Limited-demand items-- those with no or infrequent demand in a year--are also held in economic retention status. They are retained even though the probability of demand is low because the lack of the items would seriously hamper the operational readiness of a weapon system. None of these inventory items would be considered for disposal unless they exceeded Department inventory requirements for limited-demand items. The majority of items held in economic retention status fell into limited- demand status. Table 3 details the number and dollar value of items that the retention models and ceilings would analyze and the items that would not be analyzed due to low or no demand. As discussed in the body of this report, components used a variety of maximum levels of demand (commonly called ceilings by components) to further reduce inventory levels (low-demand items noted in table 3 above were not affected by ceiling limits). Three of the four components reviewed imposed ceilings on the number of years of demand for all items, and most inventory control points in the fourth component (the Army) also used ceilings. Through most of the 1990s, the Army set a different ceiling on how many years of demand can make up the retention limit, depending on the characteristics of the item. According to Army officials, in 1992 the Army adjusted its factors to a ceiling of 7 years of demand above requirements for essential items (items that directly support critical parts of a weapon system). The Army used a ceiling of 4 years of demand above requirements for nonessential items (items that do not directly support the critical parts of a weapon system). In December 1999 the Army revised the ceiling limits to 7 years of demand above requirements for serviceable reparables, 6 years of demand above requirements for unserviceable reparables, and 5 years of demand above requirements for all other items. At the same time the Army decided to let each inventory control point set its own ceilings. An Army official at one of its five inventory control points stated that his inventory control point is using the determinations of the economic retention model for setting retention inventory limits without the ceilings. Army officials at the other four inventory control points stated that they have not changed their ceilings. In 1994, the Navy chose to implement ceilings of years of demand depending on the expected future growth of the weapon system. The Navy computation system for inventory calculates a single inventory limit that includes active requirements and inactive inventory. As a result, the demand ceiling (4, 8, or 12 years of total demand) applies to the entire computed demand limit--not just economic retention limits. The ceiling is 12 years of total demand for items supporting new weapon systems. A ceiling of 8 years of total demand is applied to items supporting weapons systems in common use and 4 years of total demand is applied to items supporting weapons systems approaching obsolescence. The Defense Logistics Agency ceiling for items in economic retention, implemented in 1994, is 6 years of total demand. The prior ceiling on years of demand for inactive inventory was 10 years of total demand. The Air Force ceiling for inventory in economic retention status was reduced from 20 years of total maximum demand to 13 years of total maximum demand in 1996, according to Air Force officials. To determine component approaches to making economic retention decisions, we interviewed Department and component officials who managed economic retention models and ceilings in the Defense Logistics Agency, the Army, the Navy, and the Air Force and reviewed documents they provided. Because the Marine Corps had less than 1 percent of the Department's total economic retention inventory, we did not include the Marine Corps in our analysis. We did not independently test or validate the component models or inventory systems. We interviewed officials and gathered relevant documentation for our review at the following locations: The Office of the Deputy Under Secretary of Defense (Logistics), Washington, D.C. The Defense Logistics Agency, Ft. Belvoir, Virginia. The Army Material Systems Analysis Activity, Aberdeen, Maryland. The Air Force Materiel Command, Wright-Patterson Air Force Base, Ohio. The Navy Inventory Control Point, Mechanicsburg, Pennsylvania. To support our analysis of trends in component inventory levels, we analyzed information in the Department of Defense Supply System Inventory Report for September 30 of fiscal years 1991 through 1999. Our analysis included data for fiscal year 1991 through 1999 for trends in economic retention. We reviewed data from these time periods because the Department changed the way dollar estimates of inventory were calculated in 1990; inventory data was reported consistently in the Supply System Inventory Report from 1991 through 1999. Component officials stated that there were differences in the categories of inventory components reported in the Supply System Inventory Report. We did not adjust the Supply System Inventory Report data for this analysis. We analyzed data for reparable and consumable items for fiscal years 1993 through 1999 because the Department first separately reported data on reparable and consumable items in its 1993 Supply System Inventory Report. Our review focused on the models and items with predictable demand. We did not analyze items with limited demand (see app. II). We did not independently test or validate the accuracy of the data reported in these inventory systems. We adjusted Department data to account for inflation as part of our analysis of component performance in realizing inventory reductions over time. We conducted our work between May 1999 and January 2001 in accordance with generally accepted government auditing standards.
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As of September 1999, the Department of Defense (DOD) reported that it owned secondary inventory worth about $64 billion and that $9.4 billion of that inventory is more economical to retain than to dispose of and possibly repurchase later. This report focuses on whether DOD's economic retention decisions are sound. GAO found that military components (other than the Air Force) have developed models to help make economic retention decisions on secondary inventory. However, none of the components now use their economic retention models. Instead, they and the Air Force use ceilings to limit the amount of economic retention inventory they hold. Components have not properly documented their approaches to economic retention decisions. For example, common model factors vary and assumptions are inconsistent and out of date. In addition, DOD lacked sound analytical support for the maximum levels it now uses. As a result, the components cannot depend on their models or ceilings to determine retention inventory levels without review and improvement. They also have not reviewed their approaches annually. As a result, the Department does not have a sound basis for its approach to manage items held in economic retention status. Consequently, the Department cannot guarantee that inventories held in economic retention are the right amount.
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Since passage of the Higher Education Act of 1965, a broad array of federal student aid programs, including loan programs, have been available to help students finance the cost of postsecondary education. Currently, several types of federal student loans administered by Education make up the largest portion of student loans in the United States. Four types of federal student loans are available to borrowers and have features that make them attractive for financing higher education. For example, borrowers are not required to begin repaying most federal student loans until after graduation or when their enrollment status significantly changes. Further, interest rates on federal student loans are generally lower than other financing alternatives, and the programs offer repayment flexibilities if borrowers are unable to meet scheduled payments. As outlined in table 1, the four federal loan programs differ in that interest rates may or may not be subsidized based on the borrower's financial need, loans may be designed to specifically serve undergraduate or graduate and professional students, and loans may serve to consolidate and extend the payment term of multiple federal student loans. Education administers federal student loans and is generally responsible for, among other duties, disbursing, reconciling, and accounting for student loans and other student aid, and tracking loan repayment. Although no other federal agencies have a direct role in administering student loans, other agencies may become involved in the event that a borrower fails to make repayment. For example, Education may coordinate with Treasury to withhold a portion of federal payments to borrowers who have not made scheduled loan repayments. Such payment withholding, known as administrative offset, can affect payments to individuals by various federal agencies. Offsets of income tax refunds would involve the Internal Revenue Service and offsets of Social Security retirement or disability benefits would involve the Social Security Administration. Student loans are also available from private lenders, such as banks and credit unions. Private loans differ from federal loans in that they may require repayment to begin while the student is still in school, they generally have higher interest rates, and the rates may be variable as opposed to fixed. Unlike federal student loans, private student loans may be more difficult to obtain for some potential borrowers because they may require an established credit record and the cost of the loan may depend on the borrower's credit score. Private student loans are a relatively small part of the student loan market, accounting for 10 to 15 percent of outstanding student loan debt--about $150 billion--as of January 2012. Older Americans--that is, Americans in or approaching retirement--may hold student loans for a number of reasons. For example, because such loans may have a 10- to 25-year repayment horizon, older Americans may still be paying off student loan debt that they accrued when they were much younger. They may also have accrued student loan debt in the course of mid- or late-career re-training and education. In addition, they may be holding loans taken out for the education of their children, either through co-signing or through Parent PLUS loans. According to the 2010 SCF, households headed by older individuals are much less likely than those headed by younger individuals to hold student loan debt. As of 2010, about 3 percent of surveyed households headed by people 65 and older--representing approximately 706,000 households--reported some student loan debt. This compares to 24 percent for households headed by those under 65--representing about 22 million households. The decrease in the incidence of student loan debt is even more marked for households headed by the oldest individuals--only 1 percent of those aged 75 or over reported such debt. Although few older Americans have student debt, a majority of households headed by those 65 and older reported having some kind of debt, most commonly home mortgage debt, followed by credit card and vehicle debt. While the incidence of all debt types declines for households headed by those 65 and over, the incidence of student loan debt declines at a much faster rate. For example, the incidence of student loan debt for the 65-74 age group is less than half of that for the 55-64 age group--4 percent compared to 9 percent. In contrast, the incidence of any type of debt for the older age group is only about 17 percent less than the younger age group--65 percent compared to 78 percent. While relatively few older Americans have student debt, data from the SCF suggest that the size of such debt among older Americans may be comparable to that of younger age groups. Among all age groups, the median balances of student and other types of debt are dwarfed by median balances of home mortgage debt. Estimates of median student debt balances for the various age groups range from about $11,400 to about $15,500. Median mortgage debt, in contrast, ranges from about $58,000 to $136,000 among the same groups. Among households headed by those 65 and older, the estimated median student debt was about $12,000, and among those 64 and younger, about $13,000. However, given the small number of older households with student loans, it is important to note that the estimate of student debt for the 65 and older age category is a general approximation. From 2004 to 2010, an increasing percentage of households in all SCF age groups have taken on student loan debt (see fig. 1). During the same period, the percentage of households headed by individuals 65 to 74 who had some student loan debt increased from just under 1 percent in 2004 to about 4 percent in 2010--more than a four-fold increase. The percentage of households having student loan debt in the two youngest age household categories--those 18 to 34 and those 35 to 44--were and remain much larger. Their rate of increase in that type of debt from 2004 to 2010 was comparatively modest--about 40 percent and 80 percent, respectively. Data from Education's NSLDS also indicates substantial growth in aggregate federal student loan balances among individuals in all age groups, especially older Americans. Aggregate federal student loan debt levels more than doubled overall, rising from slightly more than $400 billion in 2005 to more than $1 trillion dollars in 2013 (see fig. 2). The total outstanding student debt for those 65 and older was and remains a small fraction of total outstanding federal student debt. However, debt for this age group grew at a much faster pace--from about $2.8 billion in 2005 to about $18.2 billion in 2013, more than a six-fold increase. Although the Direct PLUS Loan program offers parents of dependent undergraduate students the opportunity to borrow to finance their children's education, data from Education suggests that most federal student loan debt held by older Americans was not incurred on behalf of dependents, but primarily for their own education. About 27 percent of loan balances held by the 50 to 64 age group was for their children, while about 73 percent was for the borrower's own education (see fig. 3). For age groups 65 and over, the percentages of outstanding loan balances attributable to the borrowers' own education are even higher. For those aged 65-74, 82 percent of the outstanding student loan balances was for the individual's own education, and for the 75 and older group, this was true of 83 percent. Because information on the age of the loans was not readily available to us, we do not know the extent to which the debt of older Americans is attributable to recently originated loans or loans originated many years ago during their prime educational years. Although older borrowers hold a small portion of federal student loans, they hold defaulted loans at a higher rate than younger borrowers. Individuals 65 or older held 1 percent of outstanding federal student loans in fiscal year 2013 (see fig. 4). However, 12 percent of federal student loans held by individuals age 25 to 49 were in default, while 27 percent of loans held by individuals 65 to 74 were in default, and more than half of loans held by individuals 75 or older were in default. According to Education data, older borrowers are in default on federal student loans for their children's education less frequently than they are in default on federal student loans for themselves. Specifically, in fiscal year 2013, 17 percent of Parent PLUS loans held by borrowers ages 65 to 74 were in default, while 30 percent of loans for their own education were in default. Delinquent borrowers--those who have missed one or more payments-- have more than a year to resume payments or negotiate revised terms before facing collection procedures. During the initial year of delinquency for Direct Loans, Education and the loan servicers make a number of attempts to help borrowers arrange for payments and avert default (see fig. 5). After the loan has been delinquent for 425 days (approximately 14 months), Education determines whether to take actions intended to recover the money it is owed. These actions can have serious financial consequences for the borrower. For example, Education may charge collection costs up to 25 percent of the interest and principal of the loan. Interest on the debt continues to accumulate during the delinquency and default period. In addition, Education may garnish wages or initiate litigation. Education may also send the loan to a collection agency. The defaulted debt may also be reported to consumer reporting agencies, which can result in lower credit ratings for the borrower. Lower credit ratings may affect access to credit or rental property, increase interest rates on credit, affect employers' decisions to hire, or increase insurance costs in some states. At 425 days, Education may also begin the process to send newly defaulted loans to Treasury to recover the debt by withholding a portion of federal payments--known as offset. Federal payments subject to offset include wages for federal employees, tax refunds, and certain monthly federal benefits, such as Social Security retirement and disability payments. Each year, Education prepares a list of newly defaulted loans for Treasury offset. In 2014, newly defaulted debt must have been more than 425 days delinquent before the July deadline so that it can be sent to Treasury in December. If the debt becomes 425 days delinquent after the cutoff, it would be sent the following December (2015). Thus, the defaulted debt is sent to Treasury 3 to 15 months after 425 days of delinquency--between 17 and 29 months from the last date of payment on the loan (see fig. 6). According to Education officials, loans that have not been paid off are annually recertified as being eligible for offset. After a defaulted loan is certified as eligible for offset to Treasury, certain payments, such as any available tax refunds, are offset immediately, without prior notice to the debtor. Borrowers with monthly benefits available for offset are informed by mail that their benefits will be offset in 60 days and again 30 days before the offset is taken, allowing borrowers an additional 2 months to resume payment on their loan before offset occurs. Treasury assesses a fee for each offset transaction, which is subtracted from the offset payment. Other federal agencies may charge additional fees for each transaction depending on the type of payment being offset. For fiscal year 2014, Treasury's fee was $15 per offset and other agency fees were up to $27. Federal tax refunds are the source for more than 90 percent of offset collection for federal student loan debt. Offsets from Social Security benefits represented roughly $150 million in 2013 or less than 7 percent of the more than $2.2 billion in federal payments offset by Treasury. The number of borrowers, especially older borrowers, who have experienced offsets to Social Security retirement, survivor, or disability benefits to repay defaulted federal student loans has increased over time. In 2002, the first full year during which Social Security benefits were offset by Treasury, about 31,000 borrowers were affected. Of those borrowers, about 19 percent (6,000) were 65 or older. From 2002 through 2013, the number of borrowers whose Social Security benefits were offset has increased roughly 400 percent, and the number of borrowers 65 and over increased roughly 500 percent (see fig. 7). In 2013, Social Security benefits for about 155,000 people were offset and about 36,000 of those were 65 and over. The majority of Social Security benefit offsets for federal student loan debt are from disability benefits rather than retirement or survivor benefits. In 2013, 70.6 percent of defaulted borrowers (105,000) whose Social Security benefits were offset received disability benefits (see fig. 8). That year, about $97 million was collected through offset from disability benefits. For borrowers 65 and over, the majority of Social Security offsets are from retirement and survivor benefits because Social Security disability benefits automatically convert to retirement benefits at the beneficiary's full retirement age, currently 66. About 33,000 borrowers age 65 and over had Social Security retirement or survivor benefits offset in 2013 to repay defaulted federal student loans. The amount of money collected from Social Security benefit offsets to repay defaulted federal student loans has also increased, but the average amount offset on a monthly basis per borrower has remained relatively stable. Treasury collected about $24 million in offsets from Social Security benefits in 2002, about $108 million in 2012, and about $150 million in 2013. However, over this period, the average amount offset on a monthly basis per borrower rose only slightly, from around $120 in the early 2000s to a little over $130 in 2013. Although there are statutory limits under the Debt Collection Improvement Act of 1996 (DCIA) on the amount that Treasury can offset from monthly federal benefits, the current limits may result in monthly benefits below the poverty threshold for certain defaulted borrowers. Social Security benefits are designed to replace, in part, the income lost due to retirement, disability, or death of the worker. The DCIA set a level of $750 per month below which monthly benefits cannot be offset. In 1998, the amount of allowable offset was effectively modified under regulations, to the lesser of 15 percent of the total benefit or the amount by which the benefit exceeds $750 per month, thus creating a standard more favorable to defaulted borrowers. For example, a borrower with a Social Security benefit of $1,000 per month would have an offset of $150, because that is the lesser of 15 percent of the benefit--$150--and the amount of the benefit over $750, which is $250. This offset would leave the borrower with a monthly benefit of $850, which is below the poverty threshold for 2013. The statutory limit of $750 for an offset was above the poverty threshold when it was set, in 1998. The offset limits have not changed since 1998, and the $750 limit represented about 81 percent of the poverty threshold for a single adult 65 and over in 2013. If the $750 limit had been indexed to the changes in the poverty threshold since 1998, in 2013 it would have increased by 43 percent or to about $1,073 (see fig. 9). Borrowers with benefits below this amount would not have been offset. Indexing monthly benefit offset limits to the poverty threshold can prevent some older borrowers from having offsets, but would also reduce Education's recoveries from Social Security offsets. If the offset limit had been indexed to match the rate of increase in the poverty threshold, in 2013, 68 percent of all borrowers whose Social Security benefits were offset for federal student loan debt would have kept their entire benefit, including 61 percent of borrowers 65 and older. An additional 15 percent of all borrowers and borrowers age 65 and older would have kept more of their benefits in that year. However, indexing the offset limit would have reduced the amount collected from Social Security benefits by approximately 60 percent or $94 million in 2013, representing about 4.2 percent of all dollars offset from all sources by Treasury for student loan debt in that year. In conclusion, student loan debt and default are problems for a small percentage of older Americans. As the amount of student loan debt held by Americans age 65 and older increases, the prospect of default implies greater financial risk for those at or near retirement--especially for those dependent on Social Security. Most of the federal student loan debt held by older Americans was obtained for their own education, suggesting that it may have been held for an extended period, accumulating interest over time. The Social Security retirement or survivor benefits of about 33,000 Americans age 65 and older were reduced through offset to meet defaulted federal student loan obligations in 2013. Because the statutory limit at which monthly benefits can be offset has not been updated since it was enacted in 1998, certain defaulted borrowers with offsets are left with Social Security benefits below the poverty threshold. As the baby boomers continue to move into retirement, the number of older Americans with defaulted loans will only continue to increase. This creates the potential for an unpleasant surprise for some, as their benefits are offset and they face the possibility of a less secure retirement. Chairman Nelson, Ranking Member Collins, and Members of the Committee, this completes my prepared statement. I would be pleased to respond to any questions that you may have at this time. If you or your staff have any questions about this testimony, please contact me at (202) 512-7215 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. GAO staff who made key contributions to this testimony are listed in appendix II. To understand the extent to which older Americans have outstanding student loans and how this debt compares to other types of debt, we relied primarily on data from the Federal Reserve Board's Survey of Consumer Finances (SCF), a survey that is conducted once every 3 years and gathers detailed information on the finances of U.S. families. SCF data is publicly available and was extracted from the Federal Reserve Board's website. Specifically, we analyzed data from the 2004, 2007, and 2010 SCF to provide a range of information, including an overview of the percentage of families, by age of head of household, with student debt over time. An important limitation of the data is that debt, including student loans, is reported at the household level. As a result, the SCF survey responses represent the debt of the entire household, not just the head of household. Therefore, it is possible that for some households headed by older Americans, the reported student debt is actually held by children or other dependents that are still members of the household, rather than the older head of household. The NSLDS is a comprehensive national database maintained by the Department of Education that is used to readily access student aid data and track money appropriated as aid for postsecondary students. The database includes data on the various federal student loan programs. this testimony. The NSLDS data we obtained allows us to count federal student loans and loan balances, but not the number of borrowers. Although Education maintains borrower-level data, we were only able to obtain aggregated data by loan type during the course of our analyses. These summary tables reported that about 1,000 of the more than 6 million Parent PLUS loans outstanding in fiscal year 2013 were to borrowers under the age of 25. According to Education, these cases resulted from a reporting issue where the date of birth of the Parent PLUS borrower was the reported as being the same as that of the student. We excluded these Parent PLUS loans from our analysis. To understand the extent to which older Americans defaulted on federal student loans and the possible consequences of such a default, we relied on a number of data sources and agency documents related to federal student loans. To determine the extent to which older Americans have defaulted on federal student loans, we used data from the NSLDS summary tables we received from Education. To evaluate the consequences of default, we reviewed federal law, regulations, and agency documents describing the collection process for defaulted federal student loans, including offset of federal benefit payments through the Treasury Offset Program (TOP). We interviewed officials at Education involved in managing defaulted federal student loans, and we interviewed officials at Treasury, Education, and the Social Security Administration about the process for offsetting Social Security retirement, survivor, and disability benefits through the TOP. In addition, we interviewed Education officials and reviewed relevant documentation regarding Education's debt collection policies and procedures; however, we did not audit their compliance with statutory requirements related to these activities. To describe the extent of Treasury offset of Social Security Administration benefits for federal student loan debt, we used data on offset payments from the TOP for fiscal years 2001 through 2014. We assessed the reliability of this data by reviewing data documentation, conducting electronic testing on the data, and interviewing Treasury staff about the reliability of this data. Because the TOP data does not include the age of borrowers or the type of Social Security benefits that were offset, we obtained such information for relevant borrowers from the Social Security Administration's Master Beneficiary Record using a match on Social Security numbers. We assessed the reliability of the data by reviewing data documentation, obtaining the computer code used to match borrowers to the Master Beneficiary Record, and interviewing the staff at the Social Security Administration who conducted the match. We determined that the data elements we used were sufficiently reliable for the purposes of this testimony. For about 0.25 percent of borrowers, we were unable to determine the borrower's age, and we excluded these borrowers from age-based analyses. For about 4.3 percent of offset payments, we were unable to determine the type of benefit, and we excluded these payments from the analysis of the type of benefit that was offset. To evaluate the extent to which Social Security benefits would have been offset if the $750 limit below which benefits are not offset had been adjusted for changes in the poverty threshold, we analyzed TOP data to impute the amount of a monthly Social Security benefit payment from the size of the offset that was taken from that payment. We then applied a modified set of rules for calculating an offset amount to the imputed benefit, changing the $750 limit to $1,072.50--the adjusted amount for the limit had it been indexed to the poverty threshold--to estimate, for 2013, whether the monthly benefit payment would have been offset had the offset limit increased at the rate of the poverty threshold. In addition to the contact named above, Michael Collins (Assistant Director), Michael Hartnett, Margaret Weber, Christopher Zbrozek, and Lacy Vong made key contributions to this testimony. In addition, key support was provided by Ben Bolitzer, Ying Long, John Mingus, Mimi Nguyen, Kathleen van Gelder, Walter Vance, and Craig Winslow. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.
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Recent studies have indicated that many Americans may be approaching their retirement years with increasing levels of various kinds of debt. Such debt can reduce net worth and income, thereby diminishing overall retirement financial security. Student loan debt held by older Americans can be especially daunting because unlike other types of debt, it generally cannot be discharged in bankruptcy. GAO was asked to examine the extent of student loan debt held by older Americans and the implications of default. This testimony provides information on: (1) the extent to which older Americans have outstanding student loans and how this debt compares to other types of debt, and (2) the extent to which older Americans have defaulted on federal student loans and the possible consequences of default. To address these issues, GAO obtained and analyzed relevant data from the Federal Reserve Board's Survey of Consumer Finances as well as data from the Department of the Treasury, the Social Security Administration, and the Department of Education. GAO also reviewed key agency documents and interviewed knowledgeable staff. Comparatively few households headed by older Americans carry student debt compared to other types of debt, such as for mortgages and credit cards. GAO's analysis of the data from the Survey of Consumer Finances reveals that about 3 percent of households headed by those aged 65 or older--about 706,000 households--carry student loan debt. This compares to about 24 percent of households headed by those aged 64 or younger--22 million households. Compared to student loan debt, those 65 and older are much more likely to carry other types of debt. For example, about 29 percent carry home mortgage debt and 27 percent carry credit card debt. Still, student debt among older American households has grown in recent years. The percentage of households headed by those aged 65 to 74 having student debt grew from about 1 percent in 2004 to about 4 percent in 2010. While those 65 and older account for a small fraction of the total amount of outstanding federal student debt, the outstanding federal student debt for this age group grew from about $2.8 billion in 2005 to about $18.2 billion in 2013. Available data indicate that borrowers 65 and older hold defaulted federal student loans at a much higher rate, which can leave some retirees with income below the poverty threshold. Although federal student loans can remain unpaid for more than a year before the Department of Education takes aggressive action to recover the funds, once initiated, the actions can have serious consequences. For example, a portion of the borrower's Social Security disability, retirement, or survivor benefits can be claimed to pay off the loan. From 2002 through 2013, the number of individuals whose Social Security benefits were offset to pay student loan debt increased about five-fold from about 31,000 to 155,000. Among those 65 and older, the number of individuals whose benefits were offset grew from about 6,000 to about 36,000 over the same period, roughly a 500 percent increase. In 1998, additional limits on the amount that monthly benefits can be offset were implemented, but since that time the value of the amount protected and retained by the borrower has fallen below the poverty threshold. GAO is not making recommendations. GAO received technical comments on a draft of this testimony from the Department of Education, the Department of the Treasury, and the Federal Reserve System. GAO incorporated these comments into the testimony as appropriate.
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The SBInet program is responsible for identifying and deploying an appropriate mix of technology (e.g., sensors, cameras, radars, communications systems, and mounted laptop computers for agent vehicles), tactical infrastructure (e.g., fencing, vehicle barriers, roads,), rapid response capability (e.g., ability to quickly relocate operational assets and personnel) and personnel (e.g., program staff and Border Patrol agents) that will enable CBP agents and officers to gain effective control of U.S. borders. SBInet technology is also intended to include the development and deployment of a common operating picture (COP) that provides uniform data through a command center environment to Border Patrol agents in the field and all DHS agencies and to be interoperable with stakeholders external to DHS, such as local law enforcement. The initial focus of SBInet is on the southwest border areas between ports of entry that CBP has designated as having the highest need for enhanced border security because of serious vulnerabilities. Through SBInet, CBP plans to complete a minimum of 387 miles of technology deployment across the southwest border by December 31, 2008. Figure 1 shows the location of select SBInet projects underway on the southwest border. In September 2006, CBP awarded a prime contract to the Boeing Company for 3 years, with three additional 1-year options. As the prime contractor, Boeing is responsible for acquiring, deploying, and sustaining selected SBInet technology and tactical infrastructure projects. In this way, Boeing has extensive involvement in the SBInet program requirements development, design, production, integration, testing, and maintenance and support of SBInet projects. Moreover, Boeing is responsible for selecting and managing a team of subcontractors that provide individual components for Boeing to integrate into the SBInet system. The SBInet contract is largely performance-based--that is, CBP has set requirements for SBInet and Boeing and CBP coordinate and collaborate to develop solutions to meet these requirements--and designed to maximize the use of commercial off-the-shelf technology. CBP's SBInet PMO oversees and manages the Boeing-led SBInet contractor team. The SBInet PMO workforce includes a mix of government and contractor support staff. The SBInet PMO reports to the CBP SBI Program Executive Director. CBP is executing part of SBInet activities through a series of task orders to Boeing for individual projects. As of September 30, 2007, CBP had awarded five task orders to Boeing for SBInet projects. These include task orders for (1) Project 28, Boeing's pilot project and initial implementation of SBInet technology to achieve control of 28 miles of the border in the Tucson sector; (2) Project 37, for construction approximately 32 miles of vehicle barriers and pedestrian fencing in the Yuma sector along the Barry M. Goldwater Range (BMGR); (3) Program Management, for engineering, facilities and infrastructure, test and evaluation, and general program management services; (4) Fence Lab, a project to evaluate the performance and cost of deploying different types of fences and vehicle barriers; and (5) a design task order for developing the plans for several technology projects to be located in the Tucson, Yuma, and El Paso sectors. In addition to deploying technology across the southwest border, the SBInet PMO plans to deploy 370 miles of single-layer pedestrian fencing and 200 miles of vehicle barriers by December 31, 2008. Whereas pedestrian fencing is designed to prevent people on foot from crossing the border, vehicle barriers are other physical barriers meant to stop the entry of vehicles. The SBInet PMO is utilizing the U.S. Army Corps of Engineers (USACE) to contract for fencing and supporting infrastructure (such as lights and roads), complete required environmental assessments, and acquire necessary real estate. DHS has estimated that the total cost for completing the deployment for the southwest border--the initial focus of SBInet deployment--will be $7.6 billion from fiscal years 2007 through 2011. DHS has not yet reported the estimated life cycle cost for this program, which is the total cost to the government for a program over its full life, consisting of research and development, operations, maintenance, and disposal costs. For fiscal year 2007, Congress appropriated about $1.2 billion for SBInet, about which 40 percent DHS had committed or obligated as of September 30, 2007. For fiscal year 2008, DHS has requested an additional $1 billion. DHS has made some progress to implement Project 28--the first segment of technology on the southwest border, but it has fallen behind its planned schedule. Project 28 is the first opportunity for Boeing to demonstrate that its technology system can meet SBInet performance requirements in a real-life environment. Boeing's inability thus far to resolve system integration issues has left Project 28 incomplete more than 4 months after its planned June 13 milestone to become operational--at which point, Border Patrol agents were to begin using SBInet technology to support their activities, and CBP was to begin its operational test and evaluation phase. Boeing delivered and deployed the individual technology components of Project 28 on schedule. Nevertheless, CBP and Boeing officials reported that Boeing has been unable to effectively integrate the information collected from several of the newly deployed technology components, such as sensor towers, cameras, radars, and unattended ground sensors. Among several technical problems reported were that it was taking too long for radar information to display in command centers and newly deployed radars were being activated by rain, making the system unusable. In August 2007, CBP officially notified Boeing that it would not accept Project 28 until these and other problems were corrected. In September 2007, CBP officials told us that Boeing was making progress in correcting the system integration problems; however, CBP was unable to provide us with a specific date when Boeing would complete the corrections necessary to make Project 28 operational. See figures 2 and 3 below for photographs of SBInet technology along the southwest border. The SBInet PMO reported that is in the early stages of planning for additional SBInet technology projects along the southwest border; however, Boeing's delay in completing Project 28 has led the PMO to change the timeline for deploying some of these projects. In August 2007, SBInet PMO officials told us they were revising the SBInet implementation plan to delay interim project milestones for the first phase of SBInet technology projects, scheduled for calendar years 2007 and 2008. For example, SBInet PMO officials said they were delaying the start dates for two projects that were to be modeled on the design used for Project 28 until after Project 28 is operational and can provide lessons learned for planning and deploying additional SBInet technology along the southwest border. According to the SBInet master schedule dated May 31, 2007, these projects were to become operational in December 2007 and May 2008. Despite these delays, SBInet PMO officials said they still expected to complete all of the first phase of technology projects by the end of calendar year 2008. As of October 15, 2007, the SBInet PMO had not provided us with a revised deployment schedule for this first phase. CBP reports that it is taking steps to strengthen its contract management for Project 28. For example, citing numerous milestone slippages by Boeing during Project 28 implementation, in August 2007, CBP sought and reached an agreement with Boeing to give it greater influence in milestone setting and planning corrective actions on the Project 28 task order. While CBP had selected a firm-fixed-price contract to limit cost overruns on Project 28, CBP officials told us that the firm-fixed-price contract CBP used for Project 28 had limited the government's role in directing Boeing in its decision making process. For example, CBP and contractor officials told us they expressed concern about the timeline for completing Project 28, but CBP chose not to modify the contract because doing so would have made CBP responsible for costs beyond the $20 million fixed-price contract. In mid-August 2007, CBP organized a meeting with Boeing representatives to discuss ways to improve the collaborative process, the submission of milestones, and Boeing's plan to correct Project 28 problems. Following this meeting, CBP and Boeing initiated a Change Control Board. In mid-September representatives from Boeing's SBInet team and its subcontractors continued to participate on this board and vote on key issues for solving Project 28 problems. Although CBP participates on this committee as a non-voting member, a senior SBInet official said the government's experience on the Change Control Board had been positive thus far. For example, the official told us that the Change Control Board had helped improve coordination and integration with Boeing and for suggesting changes to the subcontractor companies working on Project 28. Deploying SBInet's tactical infrastructure along the southwest border is on schedule, but meeting the SBInet program's goal to have 370 miles of pedestrian fence and 200 miles of vehicle barriers in place by December 31, 2008, may be challenging and more costly than planned. CBP set an intermediate goal to deploy 70 miles of new pedestrian fencing by the close of fiscal year 2007 and, having deployed 73 miles by this date, achieved its goal. Table 1 summarizes CBP's progress and plans for tactical infrastructure deployment. Costs for the 73 miles of fencing constructed in fiscal year 2007 averaged $2.9 million per mile and ranged from $700,000 in San Luis, Arizona, to $4.8 million per mile in Sasabe, Arizona. CBP also deployed 11 miles of vehicle barriers and, although CBP has not yet been able to provide us with the cost of these vehicle barriers, it projects that the average per mile cost for the first 75 miles of barriers it deploys will be $1.5 million. Figure 4 presents examples of fencing deployed. CBP estimates costs for the deployment of fencing in the future will be similar to those thus far. However, according to CBP officials, costs vary due to the type of terrain, materials used, land acquisition, who performs the construction, and the need to meet an expedited schedule. Although CBP estimates that the average cost of remaining fencing will be $2.8 million per mile, actual future costs may be higher due to factors such as the greater cost of commercial labor, higher than expected property acquisition costs, and unforeseen costs associated with working in remote areas. To minimize one of the many factors that add to cost, in the past DHS has used Border Patrol agents and DOD military personnel. However, CBP officials reported that they plan to use commercial labor for future infrastructure projects to meet their deadlines. Of the 73 miles of fencing completed to date, 31 were completed by DOD military personnel and 42 were constructed through commercial contracts. While the non-commercial projects cost an average of $1.2 million per mile, the commercial projects averaged over three times more--$4 million. According to CBP officials, CBP plans to utilize exclusively commercial contracts to complete the remaining 219 miles of fencing. If contract costs for deployment of remaining miles are consistent with those to deploy tactical infrastructure to date and average $4 million per mile, the total contract cost will be $890 million, considerably more than CBP's initial estimate of $650 million. Although deployment of tactical infrastructure is on schedule, CBP officials reported that meeting deadlines has been challenging because factors they will continue to face include conducting outreach necessary to address border community resistance, devoting time to identify and complete steps necessary to comply with environmental regulations, and addressing difficulties in acquiring rights to border lands. As of July 2007 CBP anticipated community resistance to deployment for 130 of its 370 miles of fencing. According to community leaders, communities resist fencing deployment for reasons including the adverse effect they anticipate it will have on cross-border commerce and community unity. In addition to consuming time, complying with environmental regulations, and acquiring rights to border land can also drive up costs. Although CBP officials state that they are proactively addressing these challenges, these factors will continue to pose a risk to meeting deployment targets. In an effort to identify low cost and easily deployable fencing solutions, CBP funded a project called Fence Lab. CBP plans to try to contain costs by utilizing the results of Fence Lab in the future. Fence Lab tested nine fence/barrier prototypes and evaluated them based on performance criteria such as their ability to disable a vehicle traveling at 40 miles per hour (see fig. 5), allowing animals to migrate through them, and their cost- effectiveness. Based on the results from the lab, SBInet has developed three types of vehicle barriers and one pedestrian fence that meet CBP operational requirements (see fig. 6). The pedestrian fence can be installed onto two of these vehicle barriers to create a hybrid pedestrian fence and vehicle barrier. CBP plans to include these solutions in a "toolkit" of approved fences and barriers, and plans to deploy solutions from this toolkit for all remaining vehicle barriers and for 202 of 225 miles of remaining fencing. Further, CBP officials anticipate that deploying these solutions will reduce costs because cost-effectiveness was a criterion for their inclusion in the toolkit. SBInet officials also told us that widely deploying a select set of vehicle barriers and fences will lower costs through enabling it to make bulk purchases of construction and maintenance materials. While SBInet Program officials expect SBInet to greatly reduce the time spent by CBP enforcement personnel in performing detection activities, a full evaluation of SBInet's impact on the Border Patrol's workforce needs has not been completed. The Border Patrol currently uses a mix of resources including personnel, technology, infrastructure, and rapid response capabilities to incrementally achieve its strategic goal of establishing and maintaining operational control of the border. Each year through its Operational Requirements Based Budget Program (ORBBP), the Border Patrol sectors outline the amount of resources needed to achieve a desired level of border control. Border Patrol officials state this annual planning process allows the organization to measure the impact of each type of resource on the required number of Border Patrol agents. A full evaluation of SBInet's impact on the Border Patrol's workforce needs is not yet included in the ORBBP process; however, the Border Patrol plans to incorporate information from Project 28 a few months after it is operational. According to agency officials, CBP is on track to meet its hiring goal of 6,000 new Border Patrol agents by December 2008, but after SBInet is deployed, CBP officials expect the number of Border Patrol agents required to meet mission needs to change from current projections, although the direction and magnitude of the change is unknown. In addition, in June 2007, we expressed concern that deploying these new agents to the southwest sectors coupled with the planned transfer of more experienced agents to the northern border will create a disproportionate ratio of new agents to supervisors within those sectors--jeopardizing the supervisors' availability to acclimate new agents. Tucson Sector officials stated CBP is planning to hire from 650 to 700 supervisors next year. To accommodate the additional agents, the Border Patrol has taken initial steps to provide additional work space through constructing temporary and permanent facilities, at a projected cost of about $550 million from fiscal year 2007 to 2011. The SBInet PMO expects SBInet to support day-to-day border enforcement operations; however, analysis of the impact of SBInet technology on the Border Patrol's operational procedures cannot be completed at this time because agents have not been able to fully use the system as intended. Leveraging technology is part of the National Border Patrol Strategy which identifies the objectives, tools, and initiatives the Border Patrol uses to maintain operational control of the borders. The Tucson sector, where Project 28 is being deployed, is developing a plan on how to integrate SBInet into its operating procedures. Border Patrol officials stated they intend to re-evaluate this strategy, as SBInet technology is identified and deployed, and as control of the border is achieved. According to agency officials, 22 trainers and 333 operators were trained on the current Project 28 system, but because of deployment delays and changes to the COP software, the SBInet training curriculum is to be revised by Boeing and the government. Training is continuing during this revision process with 24 operators being trained each week. According to CBP officials, Border Patrol agents are receiving "hands on" training during evening and weekend shifts at the COP workstations to familiarize themselves with the recent changes made to the Project 28 system. However, training is to be stopped once a stabilized version of the COP can be used and both trainers and operators are to be retrained using the revised curriculum. Costs associated with revising the training material and retraining the agents are to be covered by Boeing as part of the Project 28 task order; however, the government may incur indirect costs associated with taking agents offline for retraining. The SBI PMO tripled in size in fiscal year 2007 but fell short of its staffing goal of 270 employees. As of September 30, 2007, the SBI PMO had 247 employees onboard, with 113 government employees and 134 contractor support staff. SBI PMO officials also reported that as of October 19, 2007, they had 76 additional staff awaiting background investigations. In addition, these officials said that a Human Capital Management Plan has been drafted, but as of October 22, 2007, the plan had not been approved. In February 2007, we reported that SBInet officials had planned to finalize a human capital strategy that was to include details on staffing and expertise needed for the program. At that time, SBI and SBInet officials expressed concern about difficulties in finding an adequate number of staff with the required expertise to support planned activities about staffing that shortfalls could limit government oversight efforts. Strategic human capital planning is a key component used to define the critical skills and competencies that will be needed to achieve programmatic goals and outlines ways the organization can fill gaps in knowledge, skills, and abilities. Until SBInet fully implements a comprehensive human capital strategy, it will continue to risk not having staff with the right skills and abilities to successfully execute the program. Project 28 and other early technology and infrastructure projects are the first steps on a long journey towards SBInet implementation that will ultimately require an investment of billions of taxpayer dollars. Some of these early projects have encountered unforeseen problems that could affect DHS's ability to meet projected completion dates, expected costs, and performance goals. These issues underscore the need for both DHS and Boeing, as the prime contractor, to continue to work cooperatively to correct the problems remaining with Project 28 and to ensure that the SBInet PMO has adequate staff to effectively plan and oversee future projects. These issues also underscore Congress's need to stay closely attuned to DHS's progress in the SBInet program to make sure that performance, schedule, and cost estimates are achieved and the nation's border security needs are fully addressed. This concludes my prepared testimony. I would be happy to respond to any questions that members of the Subcommittees may have. For questions regarding this testimony, please call Richard M. Stana at (202) 512-8777 or [email protected]. Other key contributors to this statement were Robert E. White, Assistant Director; Rachel Beers; Jason Berman; Katherine Davis; Jeanette Espinola; Taylor Matheson; and Sean Seales. To determine the progress that the Department of Homeland Security (DHS) has made in implementing the Secure Border Initiative (SBI) SBInet's technology deployment projects, we analyzed DHS documentation, including program schedules, project task orders, status reports, and expenditures. We also interviewed DHS and the U.S. Customs and Border Protection (CBP) headquarters and field officials, including representatives of the SBInet Program Management Office (PMO), Border Patrol, CBP Air and Marine, and the DHS Science and Technology Directorate, as well as SBInet contractors. We visited the Tucson Border Patrol sector--the site where SBInet technology deployment was underway at the time of our review. To determine the progress that Department of Homeland Security (DHS) has made in infrastructure project implementation, we analyzed DHS documentation, including schedules, contracts, status reports, and expenditures. In addition, we interviewed DHS and CBP headquarters and field officials, including representatives of the SBInet PMO, and Border Patrol. We also interviewed officials from the U.S. Army Corps of Engineers and the Department of the Interior. We visited the Tucson and Yuma, Arizona Border Patrol sectors--two sites where tactical infrastructure projects were underway at the time of our review. We did not review the justification for infrastructure project cost estimates or independently verify the source or validity of the cost information. To determine the extent to which CBP has determined the impact of SBInet technology and infrastructure on its workforce needs and operating procedures, we reviewed documentation of the agency's decision to hire an additional 6,000 agents and the progress hiring these agents. We also interviewed headquarters and field officials to track if and how CBP (1) is hiring and training its target number of personnel, (2) it is planning to train new agents on SBInet technology, and (3) it will incorporate the new system into its operational procedures, and any implementation challenges it reports facing in conducting this effort. To determine how the SBInet PMO defined its human capital goals and progress it has made in achieving these goals, we reviewed the office's documentation on its hiring efforts related to SBInet, related timelines, and compared this information with agency goals. We determined that the workforce data were sufficiently reliable for purposes of this report. We also interviewed SBI and SBInet officials to identify challenges in meeting the goals and steps taken by the agency to address those challenges. We performed our work from April 2007 through October 2007 in accordance with generally accepted government auditing standards. This is a work of the U.S. government and is not subject to copyright protection in the United States. It may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.
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In November 2005, the Department of Homeland Security (DHS) established the Secure Border Initiative (SBI), a multiyear, multibillion dollar program to secure U.S. borders. One element of SBI is SBInet--the U.S. Customs and Border Protection (CBP) program responsible for developing a comprehensive border protection system through a mix of security infrastructure (e.g., fencing), and surveillance and communication technologies (e.g., radars, sensors, cameras, and satellite phones). The House Committee on Homeland Security asked GAO to monitor DHS progress in implementing the SBInet program. This testimony provides GAO's observations on (1) SBInet technology implementation; (2) SBInet infrastructure implementation; (3) the extent to which CBP has determined the impact of SBInet technology and infrastructure on its workforce needs and operating procedures; and (4) how the CBP SBI Program Management Office (PMO) has defined its human capital goals and the progress it has made to achieve these goals. GAO's observations are based on analysis of DHS documentation, such as program schedules, contracts, status, and reports. GAO also conducted interviews with DHS officials and contractors, and visits to sites in the southwest border where SBInet deployment is underway. GAO performed the work from April 2007 through October 2007. DHS generally agreed with GAO's findings. DHS has made some progress to implement Project 28--the first segment of SBInet technology across the southwest border, but it has fallen behind its planned schedule. The SBInet contractor delivered the components (i.e., radars, sensors and cameras) to the Project 28 site in Tucson, Arizona on schedule. However, Project 28 is incomplete more than 4 months after it was to become operational--at which point Border Patrol agents were to begin using SBInet technology to support their activities. According to DHS, the delays are primarily due to software integration problems. In September 2007, DHS officials said that the Project 28 contractor was making progress in correcting the problems, but DHS was unable to specify a date when the system would be operational. Due to the slippage in completing Project 28, DHS is revising the SBInet implementation schedule for follow-on technology projects, but still plans to deploy technology along 387 miles of the southwest border by December 31, 2008. DHS is also taking steps to strengthen its contract management for Project 28. SBInet infrastructure deployment along the southwest border is on schedule, but meeting CBP's goal to have 370 miles of pedestrian fence and 200 miles of vehicle barriers in place by December 31, 2008, may be challenging and more costly than planned. CBP met its intermediate goal to deploy 70 miles of new fencing in fiscal year 2007 and the average cost per mile was $2.9 million. The SBInet PMO estimates that deployment costs for remaining fencing will be similar to those thus far. In the past, DHS has minimized infrastructure construction labor costs by using Border Patrol agents and Department of Defense military personnel. However, CBP officials report that they plan to use commercial labor for future fencing projects. The additional cost of commercial labor and potential unforeseen increases in contract costs suggest future deployment could be more costly than planned. DHS officials also reported other challenging factors they will continue to face for infrastructure deployment, including community resistance, environmental considerations, and difficulties in acquiring rights to land along the border. The impact of SBInet on CBP's workforce needs and operating procedures remains unclear because the SBInet technology is not fully identified or deployed. CBP officials expect the number of Border Patrol agents required to meet mission needs to change from current projections, but until the system is fully deployed, the direction and magnitude of the change is unknown. For the Tucson sector, where Project 28 is being deployed, Border Patrol officials are developing a plan on how to integrate SBInet into their operating procedures. The SBI PMO tripled in size during fiscal year 2007, but fell short of its staffing goal of 270 employees. Agency officials expressed concerns that staffing shortfalls could affect the agency's capacity to provide adequate contractor oversight. In addition, the SBInet PMO has not yet completed long-term human capital planning.
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The Troops to Teachers program is a federal program that began operations in 1994 with two goals: (1) to help military personnel affected by downsizing become teachers and (2) to ease the teacher shortage, especially in math and science and in areas with concentrations of children from low-income families. The program offers information on state teacher certification requirements and job referral and job placement assistance to active and former military personnel who are interested in pursuing teaching as a second career after leaving the military. According to TTT program data, military officers represent a major participant group. During 1994 and 1995, the program also offered financial incentives to military personnel and school districts to participate in the program. Participants who received stipends of up to $5,000 and became certified were required to teach for 5 years. School districts could receive grants of up to $50,000 paid over 5 years for each TTT participant they hired. The program stopped awarding new stipends and grants after 1995 when funds were no longer appropriated for this purpose. The program is administered by DoD's Defense Activity for Non- Traditional Education Support (DANTES). DANTES and 24 state TTT offices carry out the program's efforts to ease former military personnel into teaching. (See fig. 1.) States voluntarily join the TTT program. States that wish to join submit proposals to DANTES describing the services they plan to provide and the activities in which they plan to engage to achieve the TTT program goals. If the proposal is approved, DANTES signs a memorandum of agreement with the state agency responsible for the TTT program, most often the state's department of education. DANTES provides funds for state program expenses, although the state TTT representatives are not federal employees. From fiscal year 1994 through 2000, DANTES spent $5.5 million on program administration and provided states with a total of $12.1 million to operate their TTT offices, according to program officials. States that joined the program have had a great deal of flexibility in how they operate the TTT program in their state. State offices determine their own organizational structure, the amount of resources they will devote to the program, and the services they will provide. Sixteen states had joined TTT by 1995 and 8 more joined between 1998 and 2000. DANTES and state TTT offices operate as a network to provide services to military personnel interested in becoming teachers. As part of this network, DANTES serves the following functions: Acting as the central liaison for all the military services and the state education offices and promoting the program at a national level. Approving and monitoring the memorandum of agreements. Working with the states to share recruitment practices. Maintaining the TTT program web site with links to state offices. Facilitating the transition from military life to teaching in the 26 states and the District of Columbia without TTT placement assistance offices. Monitoring the teaching commitments of the people who received stipends and any school districts that received grants on behalf of persons who applied to the TTT program during 1994 and 1995. For their part, most state offices provide a broad range of services, including providing personalized counseling and advice to those who wish to promoting the TTT program to school districts and the military promoting military personnel as potential teachers, maintaining an 800 number and the state link on the TTT web site with information and school district openings, and working to lessen costs and time required for military personnel to obtain certification. The environment in which TTT functions has changed in ways that have implications for the program's future operations. In 1998, the military downsizing leveled off, essentially removing the first goal of the TTT program. DANTES' responsibility for monitoring the teaching commitments of those who received stipends and grants between 1994 and 1995 will end in a few years. Thirteen additional states currently have contacted DANTES and are waiting to join the program, either independently or as a consortium. The Congress appropriated $3 million for TTT in fiscal year 2001 under the Eisenhower Professional Development Program, placing TTT within Education's broader initiative to support teacher recruitment. The Eisenhower Program also provides additional funds in grants to states and/or organizations that wish to develop new avenues for attracting teachers, especially second-career teachers. The President's 2002 budget proposes to support and expand TTT activities through the Transition to Teaching program. The $30 million budget proposed for Transition to Teaching would assist nonmilitary as well as military professionals with becoming teachers. According to TTT records, 3,821 of the 13,756 people accepted into the program were hired as teachers from fiscal years 1994 through 2000. However, this number probably underrepresents the number of people who have used program services and become teachers. Of those participants hired as teachers, over 90 percent remained in teaching past the first year. TTT program records show that 17,459 people applied to the program from fiscal years 1994 through 2000 and, of these, 13,756 were accepted into the program. Of these participants, 3,821, or 28 percent, became teachers. (See table 1.) More than 85 percent of the TTT teachers were hired in states with TTT offices. While no formal documentation was maintained on reasons for the withdrawals of 8,554 applicants accepted in the program who did not become teachers, the TTT program director provided several reasons why some participants withdrew from the program. For instance, some military personnel said they had found a better paying job, some realized that they would not like teaching, and others thought the cost and time of the alternative certification process was onerous. It is difficult to ascertain the full extent of TTT program participation, because program data are incomplete. When the stipends and incentive grants ended after 1995, it became difficult to track the number of people using the program's resources because they were less inclined to complete application forms and respond to surveys that tracked program retention. In addition, with the creation of the TTT web site, people could access information they needed to find certification programs and teaching positions and do so without applying to the program. Consequently, the number of people who used the program to become teachers is probably understated. DANTES officials told us that they believe their numbers undercount the total number of teachers hired as a result of the TTT program. Similarly, some state TTT officials said that DANTES records may substantially undercount the number of former military personnel they have placed in teaching positions. Six of the 10 state TTT officials that we contacted said this was the case, but only 4 states--Colorado, Mississippi, South Carolina, and Texas--kept records with additional information on military persons whom they placed in teaching positions whether or not they completed a TTT program application. Table 2 shows the difference between DANTES' records and state records for the number of teachers hired within these states. Available TTT program data also show that over 90 percent of TTT teachers remained in teaching after their first year. The percent of TTT teachers who remain in teaching for at least 3 years is about the same as that for all teachers nationwide, and the percent of TTT teachers that remain for 5 years is markedly better. (See table 3.) However, these retention rates should be considered in light of the fact that TTT teachers who received stipends had to teach for 5 years to pay off their financial commitment. In addition, these data are based solely on teachers who received funding (2,135) and do not include those who did not. However, a TTT program survey done in 1999 of school districts that hired TTT teachers--including those who completed applications and follow-up surveys but did not receive funding--showed similar results. According to TTT program records and NCEI survey data, a higher percentage of TTT teachers overall taught math, science, special education, and vocational education and taught in inner city schools and high schools than all teachers nationwide. (See table 4.) For example, 20 percent of TTT teachers compared with 5 percent of teachers nationwide taught general special education. Also, a higher percentage of TTT teachers are male (86 percent) and minority (33 percent) than the national percentages (26 percent and 11 percent, respectively). Many states that joined the TTT program said that they did so because the program would enable them to fill positions in subjects or geographic areas in which they had shortages, especially in math, science, special education, and vocational education and in inner city schools. They also cited the program's potential for increasing the diversity of its teacher workforce, some specifically mentioned male and minority teachers as a factor in their decisions to join the TTT program. Several factors may have affected--both positively and negatively--the number of military personnel applying to the TTT program and the number hired as teachers. The positive factors were (1) the TTT stipends, (2) the TTT incentive grants, (3) the increased demand for teachers, and (4) accomplishments of state TTT offices. The negative factors were (1) increased demands for specialized workers, (2) economic growth, and (3) a reduction in the number of officers leaving the military. The following factors may have increased the number of TTT applicants and/or teachers hired. Stipends. During the first 2 years of the program, stipends lowered the cost of obtaining teacher certification for TTT participants. In a DANTES survey of TTT teachers who had completed their 5-year teaching commitment for receiving the stipend, 59 percent reported that the TTT program was very important in making their decision to become a teacher, and 68 percent reported that the stipend was the most important feature of the TTT program. Incentive grants. During the first 2 years of the program, TTT incentive grants lowered the cost to school districts of hiring TTT teachers relative to other job candidates, thereby increasing the demand for TTT teachers. The increased probability of being hired would have made the program more attractive to applicants. Demand for teachers. Education data show that teacher shortages became more widespread in 1998, thus the demand for teachers expanded and intensified. The increased likelihood of employment for TTT teachers after certification could have increased the number of applicants to the program. Accomplishments of state TTT offices. State TTT offices have experienced some success in decreasing the time and cost of teacher certification for military personnel and in increasing the demand among school districts for TTT hires. Both of these accomplishments probably made the program more attractive to potential applicants. More alternative teacher certification programs are available to persons pursuing second careers as teachers, including military personnel, sometimes as a direct result of the TTT program. For example, the Florida, Wisconsin, and Washington state TTT offices played roles in convincing their state legislatures in 2000 to authorize new alternative teacher certification programs. Some state TTT offices, working with DANTES, created opportunities for military personnel to satisfy some teacher certification requirements while still on active duty. For example, the Texas TTT office, working in conjunction with three Texas universities, implemented a distance learning program in the Fall 2000 offering teacher certification classes at military bases worldwide. Texas also worked with DANTES to make its teacher certification examination available at military bases worldwide. Some states lowered the cost of teacher certification for military personnel in response to the efforts of their state TTT office. For example, California and Washington reduced the fees they charged military personnel to take courses at state universities. Outreach and promotional activities by state TTT offices increased school districts' demand for TTT hires. For example, the Colorado, Illinois, North Carolina, and Ohio TTT offices increased the number of school districts that posted their teacher vacancies on the TTT data base. The following factors may have decreased the number of TTT applicants and/or teachers hired. Demand for specialized workers. A nationwide increase in demand for workers with math/science backgrounds, especially in information technology and the sciences, which generally pay higher salaries than teaching, may have attracted potential military personnel with these skills away from pursuing a teaching career. Between 1994 and 1999, the number of workers employed in the mathematical and computer sciences increased by almost 56 percent while total employment increased by about 8.5 percent. Economic growth. The general growth in the economy in the 1990s increased the number of alternative job opportunities for those leaving the military. An important indicator of economic growth and the demand for labor is the unemployment rate. The greater the economic growth, the greater the demand for labor and the lower the unemployment rate. Between 1994 and 1999, the unemployment rate declined from 6.1 percent to 4.2 percent. Reduction in supply of applicants. The number of retired commissioned officers, warrant officers, and high-graded noncommissioned officers declined from 34,335 to 26,612 between 1994 and 1999. This group comprised 76 percent of all TTT applicants during this period. The TTT program is currently functioning in an environment that differs greatly from when it began 7 years ago. Its first purpose, to place military persons affected by downsizing initiatives in the classroom, has essentially been eliminated while its second purpose, to address teacher shortages, has become a more critical national issue. Also, the transition to teacher from a different profession has become easier in many states through new or expanded alternative teacher certification programs. With the recent transfer of TTT from DoD to Education, it is too early to determine how TTT will fit into Education's mission and its broader teacher recruitment and retention initiatives. However, this new environment presents opportunities for Education to explore how best to coordinate the TTT program with other education programs to address the nation's growing teacher shortage problem. We provided Education and DoD with a draft of this report for review, and both agencies provided comments via e-mail. Education noted that it has other programs to increase the number of qualified teachers, including the Transition to Teacher and Eisenhower Professional Development programs, and that the information in the report will be valuable as the Department continues to explore ways that these programs can collaborate and strengthen services. DoD said that it has reviewed the report and accepted the report's conclusions. We are sending copies of this report to the Honorable Roderick R. Paige, Secretary of the Department of Education, and other interested parties. We will also make copies available to others on request. If you or your staffs have any questions about this report, please contact me on (202) 512-7215 or Karen Whiten at (202) 512-7291. Key contributors to this report were Mary Roy, Ellen Habenicht, Richard Kelley, Barbara Smith, and Patrick DiBattista.
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In response to a shortage of math and science teachers and reductions in U.S. military personnel, Congress created the Troops to Teachers (TTT) program in 1992. Until 1995, the program, which was run by the Defense Department, offered stipends to program participants and incentive grants to school districts to hire TTT teachers. Congress transferred the program from DOD to the Department of Education in 1999. This report reviews the program from its beginning in January 1994 until its transfer to Education. GAO found that 13,756 former military personnel applied to the program and were accepted. Of these, 3,821 were hired as teachers from 1994 through 2000; more than 90 percent of those applicants hired as teachers remained in teaching after the first year. However, these participation figures most likely represent the minimum number of former military personnel who used the program's services and became teachers because the figures include only those persons who formally applied to the TTT program and who completed follow-up surveys. Compared with all teachers nationwide, a higher percentage of TTT teachers overall taught math, science, special education, and vocational education and taught in inner city schools and high schools. Factors such as stipends, incentive grants, economic conditions, and state initiatives may have influenced the number of people who applied to the program and became teachers.
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Mr. Chairman and Members of the Subcommittee: I am pleased to be here today to assist the Subcommittee in its review of the Commodity Futures Trading Commission's (CFTC) fiscal year 2000 annual performance plan. Hearings like this one and the one you held last year on CFTC's 1997-2002 strategic plan continue to be an important means of ensuring that the intent of the Government Performance and Results Act of 1993 (Results Act) is met. As you know, annual performance plans can be an invaluable tool for making policy decisions, improving program management, enhancing accountability, and communicating to both internal and external audiences on how the long-term direction outlined in strategic plans is translated into the day-to-day activities of managers and staff. Successful implementation of a performance-based management system, as envisioned by the Results Act, represents a significant challenge requiring sustained agency attention. My testimony today focuses on five areas in which CFTC could improve its performance plan to make it a more useful tool for congressional and executive branch decisionmakers. Although opportunities exist to improve CFTC's fiscal year 2000 performance plan, CFTC actions to date clearly show a good faith effort to comply with the Results Act and the Office of Management and Budget (OMB) guidance in developing its plan. In our discussions with CFTC staff, we found CFTC fully committed to meeting both the requirements of the Act and congressional expectations that the plan inform Congress and the public about CFTC performance goals, including how the agency will accomplish these goals and measure results. In addition, the areas in which CFTC could improve its plan are some of the same areas in which we found that many other federal agencies, including federal financial regulators, could improve their plans. Specifically, CFTC could improve its plan in the following five areas: Performance goals, measures, and targets could provide a clearer picture of intended performance. Mission, goals, and activities could be better connected to more fully demonstrate how CFTC will chart annual progress toward achieving its long-term strategic goals. Crosscutting efforts could be addressed more fully if CFTC worked with the affected federal agencies to develop performance goals and measures that reflect the nature and extent of their common efforts. Strategies and resources used to achieve goals could be discussed in greater detail to better enable congressional and other decisionmakers to judge their reasonableness. The means for verifying and validating that performance information is sufficiently complete, accurate, and consistent, as well as the extent to which such information and the means for collecting, maintaining, and analyzing it are reliable, should be discussed. My comments today apply to the fiscal year 2000 annual performance plan that CFTC prepared for OMB in September 1998. Our assessment of CFTC's plan was based on knowledge of the agency's operations and programs; past reviews of CFTC, including a review of its 1997-2002 strategic plan; results of work on other agencies' performance plans and the Results Act; discussions with CFTC staff; and other information available at the time of our assessment. The criteria we used to determine whether CFTC's plan complied with the requirements of the Results Act were the Results Act itself; OMB guidance on preparing strategic and performance plans (OMB Circular A-11, Part 2); and GAO guidance on assessing agency performance plans. CFTC, an independent agency created by Congress in 1974, administers the Commodity Exchange Act (CEA), as amended. The principal purposes of the CEA are to protect the public interest in the proper functioning of the market's price discovery and risk-shifting functions. In administering the CEA, CFTC is responsible for fostering the economic utility of the futures market by encouraging its efficiency, monitoring its integrity, and protecting market participants from abusive trade practices and fraud. prepared--to a focus on the results of those activities, such as protecting the economic functioning of the commodity futures and option markets. Under the Results Act, strategic plans are the starting point for setting goals and measuring progress towards them. The Results Act requires virtually every executive agency to develop a strategic plan, covering a period of at least 5 years forward from the fiscal year in which the plan is submitted. In September 1997, CFTC formally submitted its fiscal years 1997-2002 strategic plan to Congress and OMB. This plan established three strategic goals: (1) protect the economic functions of the commodity futures and option markets; (2) protect market users and the public; and (3) foster open, competitive, and financially sound markets. The Results Act also requires a federal agency to prepare an annual performance plan covering the program activities set out in its budget. In establishing the requirement for a performance plan, the Results Act establishes the first statutory link between an agency's budget request and its performance planning efforts. The performance plan is to reinforce the connections between the long-term strategic goals outlined in the agency's strategic plan and the daily activities of program managers and staff. Finally, the Results Act requires executive agencies to prepare annual reports on program performance for the previous fiscal year. The performance reports are to be issued by March 31 each year, with the first (for fiscal year 1999) to be issued by March 31, 2000. In each report, the agency is to compare its performance against its goals, summarize findings of program evaluations completed during the year, and describe the actions needed to address any unmet goals. results-oriented, and goals were provided for all measures and internal management challenges; (2) some performance goals were made self-measuring and others were made more objective; (3) certain performance measures were replaced, restated, or deleted; and (4) baselines were established against which annual targets could be compared. Results-oriented, or outcome, goals and measures provide the clearest picture of intended and actual performance. However, most of CFTC's performance goals and measures focus on program outputs--such as the number of meetings attended and number of research projects or reports completed. In our testimony before this Subcommittee last year, we highlighted a similar problem with CFTC's strategic plan. Although we recognize that establishing outcome measures is particularly challenging for regulatory agencies as they move from a focus on the activities they undertake to the results they are trying to achieve, a key shortcoming of CFTC's performance plan is that it relies on output measures that describe completed activities, not program results. Also, these measures are weighted toward measuring the quantity of completed activities, rather than the quality, cost, or timeliness of performance outcomes. As mentioned earlier, the Results Act is intended to shift the focus of government decisionmaking and accountability away from a preoccupation with completed activities to a focus on the results of such activities. The focus of CFTC's performance plan on output measures appears to flow from its strategy of deriving performance goals from program activities. For example, one performance goal is to aggressively identify, investigate, and take action against individuals engaged in fraudulent Internet and media activities. This goal is associated with the program activity of monitoring the Internet and other media for fraudulent activities and other possible violations of the CEA. The measure for the goal is the number of referrals to enforcement authorities generated from Internet and media monitoring--an output of the activity, not an outcome of a program. results-oriented performance goals. For example, the Enforcement Program accomplishment section discusses the effectiveness of its quick-strike ability--the ability to file injunctive actions quickly after detecting fraud--to, among other things, obtain timely injunctive relief and enhance the possibility that customer funds will be recovered. This accomplishment section describes cases, filed within days or weeks of CFTC's discovering an illegal activity, that stopped fraud at an early stage and preserved customer funds. CFTC's performance measures could be made more results-oriented by replacing measures, such as reports on activities related to bringing injunctive actions and sanctioning violators, with more outcome-related measures, such as the percentage of quick-strike cases filed within a certain number of days of starting an investigation that resulted in sanctions and the percentage of funds recovered. CFTC could also learn from the plans of other federal financial regulators that are attempting the transition to results-oriented goals. For example, the National Credit Union Administration is developing new outcome performance goals. One outcome goal of the National Credit Union Administration is to ensure that federally insured credit unions are adequately capitalized. A performance goal is to reduce the percentage of federally insured credit unions that are undercapitalized by 10 percent, from 372 to 335. CFTC's plan could also be improved if performance goals were provided for all activities and performance targets as well as for internal management challenges. Currently, the plan has 16 activities for which no performance goals exist. For example, no performance goal exists for the activity of reviewing and overseeing self-regulatory organization audit and financial practices. Without a performance goal, it is not clear what performance is expected. Also, CFTC's strategic plan identifies several internal management challenges that the performance plan does not address. These challenges include diminishing resources, recruiting and retaining qualified professionals, remaining abreast of current technology, and remaining educated and informed as innovation changes the industry. To better respond to the intent of the Results Act, CFTC could add agencywide performance goals to the plan to address these challenges or incorporate these challenges in existing performance goals and measures. Although not required by the Results Act, CFTC could redefine some performance goals so that they are self-measuring, thereby reducing the complexity of the plan. Currently, all but 2 of CFTC's 31 performance goals are stated as abstract goals--that is, as goals requiring that specific performance measures be defined to assess progress toward their achievement. Performance goals that can be redefined so that they are self-measuring generally have one measure or two or more measures that can be combined. For example, the performance goal for the activity of reviewing the adequacy of self-regulatory organization disciplinary actions might be restated in the following way: On an annual basis, review a certain percentage of self-regulatory organization disciplinary actions to ensure compliance with CFTC standards. This approach, which has been taken by other federal financial regulators, such as the National Credit Union Administration and Federal Deposit Insurance Corporation, clearly defines performance expectations. For example, the Federal Deposit Insurance Corporation has the following performance goal: Market 80 percent of a failing financial institution's assets based on book value at the time of resolution or within 90 days. CFTC's performance plan could also be improved by reducing the extent to which performance goals require interpretation. To the extent possible, goals should not require subjective considerations to dominate measurement. For example, one performance goal is defined as follows: Bring important cases (including matters involving ongoing conduct and complex transactions) aggressively. The performance goal does not define what an important case is or what it means to aggressively bring a case. CFTC's performance plan has 31 performance goals with 228 performance measures to address them. CFTC could replace, restate, or delete performance measures for certain performance goals to strike a better balance between too few and too many measures and to enhance its ability to assess the progress made in achieving performance goals. measure captures the amount of time it takes to process applications or changes, they could be replaced with one measure that captures the percentage of applications and changes processed in 45 days or less. Second, CFTC could restate or delete certain performance measures, because they do not appear to be clearly related to their performance goals and/or appear to be unduly affected by external factors. For example, the number of active futures and option markets is used to measure, in part, two goals: (1) identify traders who can influence futures prices and (2) determine whether traders are influencing futures prices. The number of active futures markets is determined by futures exchanges and other external factors and has little direct bearing on the two goals. As a result, the measure could be deleted. Third, CFTC could restate or delete certain performance measures, because they may have limitations that preclude them from accurately capturing intended performance and may promote unintended consequences. For example, one of the plan's performance goals is to conduct important investigations and refer potential violations to other authorities as appropriate. The performance measures for this goal include the number of documents obtained through subpoena or inspection, number of witnesses from whom testimony was taken, and number of witnesses interviewed. These output-oriented measures could provide an incentive for staff to conduct more interviews, take more testimonies, and obtain more documents than necessary, which could add cost and time to investigations without necessarily contributing commensurately to their success. Although CFTC's performance plan includes annual targets for performance goals, it could make such information more useful by providing baselines, or a context, for assessing the reasonableness and appropriateness of such targets. As we recently reported, agencies that go beyond the requirements of the Results Act and include baseline or trend data for their goals provide a more informative basis for assessing expected performance. year covered by the plan for the number of cease and desist orders, registration sanctions, and trading prohibitions. However, the basis for setting the specific targets and the contributions of these targets to the outcome objective are not readily apparent. Without this contextual information, the reader does not know if CFTC's output-oriented performance targets are reasonable. Consistent with the Results Act, CFTC's performance plan attempts to show the relationship between the agency's annual performance goals and its fiscal years 1997 through 2002 mission and strategic goals. To do so, the plan uses tables that connect each strategic goal to its accompanying set of performance goals, measures, and annual targets. The plan also ranks the agency's outcome objectives by dollars budgeted, which is a starting point for providing useful information about its priorities. However, the plan could better connect mission, goals, and activities by more fully demonstrating how CFTC will chart annual progress toward achieving its long-term strategic goals. As we found with other agency performance plans, CFTC's plan associates one performance goal with multiple program activities and strategic goals. Such associations make it difficult to determine whether all activities are substantially covered or to understand how specific program activities are intended to contribute to CFTC's strategic goals. For example, the performance goal--assess sanctions that are remedial and deter violators--is associated with three different program activities and three different strategic goals. Moreover, the measures and targets for this performance goal differ with each program activity and strategic goal. Similarly, the performance plan's presentation of many separate program areas, program activities, and performance goals, measures, and targets makes it difficult to link CFTC's mission and strategic goals to performance goals across the entire agency. The plan's 31 performance goals and 228 performance measures support 3 strategic goals and 9 strategic objectives, covering 5 program areas. Although the plan's ranking of outcome objectives offers a useful perspective on CFTC's priorities, given the high level of complexity, it is difficult to (1) identify the agency's key priorities among the many goals and measures, (2) differentiate efforts to meet these priorities, and (3) understand what will be achieved if all the performance goals are met. The Results Act seeks to ensure that crosscutting goals of federal programs are consistent; strategies are mutually reinforcing; and, as appropriate, progress is assessed through the use of common performance measures. OMB guidance tasks performance plans with identifying those performance goals that are being mutually undertaken with other federal agencies in support of programs or activities of a crosscutting nature.CFTC's plan recognizes the need to address crosscutting efforts. However, it could more fully address such efforts if the agency worked with the cognizant federal agencies to develop performance goals and measures that better reflect the nature and extent of their common efforts. CFTC's performance plan could be expanded to include performance goals and measures to more adequately address crosscutting efforts, such as those identified in its budget justification that accompanied its performance plan to OMB. These include CFTC's participating in the President's Working Group on Financial Markets; sharing information with other financial regulators; working with the U.S. Department of Agriculture on a risk management education program; contributing to a Department of the Treasury initiative that encourages global financial stability; as well as cooperative enforcement efforts with the Department of Justice, the Federal Bureau of Investigation, the Federal Reserve Board, the Federal Trade Commission, the Securities and Exchange Commission, and the U.S. Postal Inspection Service. CFTC's performance plan briefly discusses CFTC's need to work with other U.S. financial regulators through, among other means, the President's Working Group on Financial Markets. However, the related performance goals and measures do not directly address the type of crosscutting performance that the Working Group was created to address. For example, CFTC's performance goal covering the Working Group is for CFTC to contribute to the performance of the group. The measure for this goal is the number of meetings attended, and the fiscal year 2000 target is two meetings. As supported by OMB guidance, CFTC could strengthen its performance plan by participating with the members of the Working Group and other federal regulators involved in crosscutting programs to develop common performance goals and measures. For example, the continued growth and development of the over-the-counter (off-exchange) derivatives market has raised a number of potential regulatory concerns that affect CFTC and other members of the Working Group. In addition, the potential need to develop a financial markets contingency plan to address the "Year 2000" computer dating problem could involve coordination among CFTC and other federal financial regulators. CFTC's plan provides important information on how strategies and resources will be used to achieve goals. However, expanding this discussion could better enable congressional and other decisionmakers to judge the reasonableness of CFTC's strategies and anticipated resource deployment. Consistent with the Results Act and OMB guidance, CFTC's performance plan attempts to address the strategies that CFTC will use to achieve its performance goals. Although this discussion should cover operational processes, skills, and technologies, CFTC's discussion focuses on the agency's operational processes and, to a much lesser extent, on skills and technologies. Aligning its discussion with CFTC's strategic goals, the plan briefly describes the major activities of each program in relation to its performance goals and measures. In a few cases, the plan also discusses skills or technologies that programs will use in relation to performance goals and measures. The plan could be made more useful by providing additional information on the skills and, if appropriate, technologies used in connection with operational processes to achieve program goals. Also, consistent with the Results Act, CFTC's performance plan discusses the resources that will be applied to achieve the agency's performance goals. Using tables and graphics, the plan shows the amount of budget funding and the number of full-time equivalent employees that will be needed to achieve each strategic goal and the individual outcome objectives covering each strategic goal. CFTC's plan could be further improved by describing the resources required to achieve each performance goal. Although required by the Results Act and OMB guidance, CFTC's fiscal year 2000 performance plan does not describe the procedures that the agency will use to verify and validate that performance information is sufficiently complete, accurate, and consistent. Nor does the plan discuss the extent to which the performance information and the means for collecting, maintaining, and analyzing it are reliable. CFTC's performance plan should be expanded to address these requirements. In addition, to assess progress toward achieving its goals, CFTC will need to collect information on the over 200 performance measures in its plan. For some of these measures, the amount of information to be collected is voluminous and covers activities across CFTC headquarters and regional offices. Errors can occur in collecting, maintaining, processing, and reporting such information--potentially introducing bias and resulting in inaccurate estimates of program performance. As a result, CFTC should have procedures for ensuring that its performance information is free of significant levels of error and that bias is not introduced. Such procedures can include internal controls over data collection, maintenance, and entry, as well as audits, evaluations, and peer reviews. In summary, Mr. Chairman, it is important to recognize that although CFTC's performance planning can be further improved, the Results Act anticipated that the process of developing an effective planning process and plans could take several planning cycles. We look forward to continuing to work with Congress and CFTC to ensure that the requirements of the Results Act are met. Mr. Chairman, this concludes my prepared statement. My colleagues and I would be pleased to answer any questions that you or Members of the Subcommittee may have. The first copy of each GAO report and testimony is free. Additional copies are $2 each. Orders should be sent to the following address, accompanied by a check or money order made out to the Superintendent of Documents, when necessary. VISA and MasterCard credit cards are accepted, also. Orders for 100 or more copies to be mailed to a single address are discounted 25 percent. U.S. General Accounting Office P.O. Box 37050 Washington, DC 20013 Room 1100 700 4th St. NW (corner of 4th and G Sts. NW) U.S. General Accounting Office Washington, DC Orders may also be placed by calling (202) 512-6000 or by using fax number (202) 512-6061, or TDD (202) 512-2537. Each day, GAO issues a list of newly available reports and testimony. To receive facsimile copies of the daily list or any list from the past 30 days, please call (202) 512-6000 using a touchtone phone. A recorded menu will provide information on how to obtain these lists.
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GAO discussed the Commodity Futures Trading Commission's (CFTC) fiscal year (FY) 2000 annual performance plan, focusing on five areas in which CFTC could improve its performance plan. GAO noted that: (1) the annual performance plans can be an invaluable tool for making policy decisions, improving program management, enhancing accountability, and communicating to both internal and external audiences on how the long-term strategic directions outlined in strategic plans are translated into the day-to-day activities of managers and staff; (2) successful implementation of a performance-based management system, as envisioned by the Government Performance and Results Act, represents a significant challenge requiring sustained agency attention; (3) while opportunities exist to improve CFTC's Year 2000 performance plan, actions to date clearly show a good faith effort by CFTC to comply with the Results Act and the Office of Management and Budget (OMB) guidance in developing its plan; (4) in GAO's discussions with CFTC staff, it found CFTC fully committed to meeting both the requirements of the Act and congressional expectations that the plan inform Congress and the public about CFTC performance goals, including how the agency will accomplish these goals and measure results; (5) in addition, the areas in which CFTC could improve its plan are the same areas in which GAO found that many other federal agencies, including federal financial regulators, could improve their plans; and (6) specifically, CFTC could improve its plan in the following five areas: (a) performance goals, measures, and targets could provide a clearer picture of intended performance; (b) mission, goals, and activities could be better connected to more fully demonstrate how CFTC will chart annual progress toward achieving its long-term strategic goals; (c) crosscutting efforts could be addressed more fully if CFTC worked with the affected federal agencies to develop performance goals and measures that reflect the nature and extent of their common efforts; (d) strategies and resources used to achieve goals could be discussed in greater detail to better enable congressional and other decisionmakers to judge their reasonableness; and (e) the means for verifying and validating that performance information is sufficiently complete, accurate, and consistent as well as the extent to which such information and the means for collecting, maintaining, and analyzing it are reliable should be discussed.
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Los Angeles has one of the largest federal court operations in the nation, processing more than 16,000 cases per year and serving an area with more than 11 million people. In downtown Los Angeles, the District Court operations are split between two buildings--the Spring Street Courthouse and the Roybal Federal Building--that are approximately one-quarter mile apart. The Spring Street building, considered by the court to be the main courthouse in Los Angeles, is more than 65 years old and, according to judiciary and GSA officials, requires major renovations and does not currently meet the security or space needs of the judiciary. By contrast, the Roybal building was constructed in the early 1990s and, according to GSA officials, complied with design and security specifications that were in place at the time it was built. However, inefficiencies occur because the court's operations are split between these two buildings. Federal courthouse construction projects are prioritized based on urgency scores assigned by the judiciary--the higher the score, the more urgent the project is considered (see table 1). The Los Angeles court has the highest urgency score of any project in the 5- year plan due to the space, security, and operational inefficiencies presented by the Spring Street Courthouse. To address these concerns, GSA and the judiciary prepared a series of feasibility studies looking at different options for accommodating the court's long-term needs. One option involved constructing a stand-alone building that would consolidate all of the court operations into a single building. GSA and the judiciary also considered constructing a companion building physically connected to the Roybal building. A third alternative that was studied involved the partial or complete demolition of an existing federal building to provide a site for a new courthouse. According to judiciary and GSA officials, after years of study and debate, these options were not selected because of cost or space limitations. For example, AOUSC noted that a consolidated courthouse would cost approximately $480 million. Currently, GSA is proposing the construction of a new 41-courtroom building, as shown in figure 1, to house district court judges and related operations at a location approximately 6/10 of a mile from the Roybal building. Under this proposal, the judiciary would expand its use of the Roybal building for magistrate and bankruptcy judges and related operations. GSA's plan also involves consolidating the U.S. Attorneys Office in the Spring Street building, along with other federal agencies and grand jury suites. The briefing slides in appendix I also contain a map showing the locations of these sites. GSA estimates that constructing the new courthouse will cost approximately $400 million. Funding for this project is contingent on multiple appropriations. In fiscal year 2000, the Senate Committee on Environment and Public Works and the House Committee on Transportation and Infrastructure authorized site acquisition and design of the proposed courthouse, and in the following fiscal year Congress appropriated $35 million for this purpose. In fiscal year 2004, the House Committee on Transportation and Infrastructure authorized additional design and construction of the proposed courthouse in Los Angeles. In that same fiscal year, Congress appropriated $50 million for the project and appropriated $314 million in fiscal year 2005. On November 17, 2004, the Senate Committee on Environment and Public Works also authorized the construction of the new courthouse in Los Angeles. The current project proposal would address the judiciary's need for more space and alleviate some security concerns, but the operational and security concerns related to a split court that contributed to the L.A. Courthouse's high urgency score would remain. More specifically, while Los Angeles's Spring Street Courthouse received a total score of 85 out of a possible 100 points, making it the most urgent project in the judiciary's 5- year plan, 50 of these points were related to the trial court being split into two buildings, a situation that the new project would not resolve. The L.A. Courthouse on Spring Street received high scores in all four criteria that the judiciary considers in assigning an urgency score (see fig. 2). Because the L.A. Courthouse ran out of space in 1995, the judiciary assigned the courthouse a score of 19.5 points using its urgency scoring methodology. In addition, court officials projected that seven judges would not have their own courtrooms within 10 years, resulting in 10.5 points for number of judges without courtrooms. The Spring Street building also received the maximum possible scores for security concerns and operational inefficiencies (30 and 25 points, respectively) because the trial court is split between two separate buildings and, according to the judiciary, the Spring Street building lacks a sufficient number of holding cells for prisoners. According to judiciary officials, it is also difficult to keep prisoners separate from judges and the public in the hallways. To address this last problem, the courthouse has colored, numbered lines designed to guide the U.S. Marshals as they lead prisoners from the detention cells to the courtrooms (see fig. 3). However, court officials said that this system is too confusing and difficult to follow through the narrow halls. Furthermore, many of the building's courtrooms are less than half the size required under the U.S. Courts Design Guide or have major visual obstructions. The current proposal--constructing a new courthouse and expanding the judiciary's use of the Roybal building--addresses some of the conditions that led to the high urgency score. For example, it addresses the judiciary's space constraints by providing additional courtrooms--sized to meet the Design Guide standards--to accommodate the 47 current district and magistrate judges and the 14 additional judges expected by 2011. According to GSA officials, there is also room to build an additional district judge courtroom in the new building and additional magistrate judge courtrooms in the Roybal building to address the judiciary's projected 30-year needs. In addition, the proposal addresses some of the more serious security and operational inefficiencies associated with the Spring Street building, such as providing additional prisoner holding cells, secure prisoner elevators, and separate, secured hallways for prisoners, judges, and the public. Marshals Service officials also told us that a split court would be acceptable from a security standpoint, provided the Marshals Service security standards are followed. In addition, the court would receive the operational benefits of a new building, and under the current proposal, avoid the major structural deficiencies of using the 66-year-old Spring Street building as a courthouse. For example, according to the judiciary and GSA, the Spring Street building has outdated electrical and plumbing systems and requires a seismic retrofit to meet GSA's standards. In contrast, the Roybal Federal Building, which was constructed in the early 1990s, was designed to meet modern operational and security requirements. For example, it is connected to the Metropolitan Detention Center, which houses federal prisoners prior to arraignment and trial, via a secure underground passageway, so that prisoners do not have to be led through public areas on their way to and from the Roybal building cell block. The current proposal's major limitation is that it would still result in a split court, even though consolidating the district court into a single building was one of the main priorities in the judiciary's most recent long-range plan for Los Angeles, published in 1996. Operational and security concerns stemming from a split court led to 50 of the 85 points in the Spring Street Courthouse's urgency score. For example, the building received the maximum possible security score (30 points) because the trial court was split between two buildings--the Roybal building and Spring Street Courthouse. With the court still split between buildings under the current proposal, related operational inefficiencies and security concerns would remain. According to AOUSC and Marshals Service officials, operational inefficiencies would include the need to continue to transport judges, prisoners, and evidence between buildings; confusion among jurors and attorneys over which facility they should report to; and possible delays, misrouting, and loss of time-sensitive documents (such as restraining orders) as they flow between buildings. A split court would also require duplication of several offices and activities. For example, Marshals Service officials said that a split court would require them to replicate much of their security equipment and contract guards to operate the equipment and protect each building. We noted during our review that the judiciary refined its urgency scoring methodology in March 2002 and gave less weight to split court factors. In the judiciary's current 5-year plan, 26 projects are scored under the original methodology and 31 are scored under the refined methodology. The L.A. Courthouse was scored under the original methodology and has not officially been rescored. As a result, we use the original methodology to discuss the L.A. Courthouse's urgency score in this report. In September 2004, the Judicial Conference adopted a 2-year moratorium on 42 courthouse construction projects currently listed on the judiciary's 5-year plan. During this moratorium period, AOUSC officials said that they plan to re-evaluate the urgency scoring methodology as part of a larger review of the design guide standards and the courthouse construction planning process. To meet the long-term judiciary and related needs in Los Angeles, the federal government will likely incur additional construction and operational costs beyond the estimated $400 million for the new courthouse. These funds are designated for costs associated with the proposed courthouse, including the site acquisition and the design and construction costs. However, GSA recognizes that in recent years other courthouse construction projects have had cost escalations. Cost escalations may occur because of planning or design problems, such as changes in the scope or specific design elements in a project, or they may be the result of changes outside of the control of the planners, such as increases in the cost of labor or particular construction materials, such as steel. GSA has initiated actions intended to mitigate this problem, including improving the design modeling process and more closely reviewing project changes during construction. Nevertheless, GSA acknowledges that a potential still exists for all courthouse projects, including the L.A. Courthouse, to incur future escalation in construction costs. In addition to construction costs for the new courthouse, GSA has indicated that additional funds will be needed for construction related to the long-term space needs of the judiciary and other related agencies in Los Angeles. Preliminary estimates from GSA show that these additional costs may exceed $100 million. Specifically: To accommodate the anticipated need for additional magistrate judge courtrooms, GSA told us that it will need to build four additional magistrate courtrooms in the Roybal building to increase the total number of magistrate courtrooms from 16 to 20. GSA has estimated the cost of this renovation to be approximately $10 million. Once the District Court moves out of the Spring Street Courthouse and into the new courthouse, GSA said that it will need to renovate the Spring Street building to convert courtrooms into office space for U.S. Attorneys and other federal agencies. The costs for this project are not currently known, but a 1997 GSA study estimated the cost to be approximately $77 million in 2003 dollars. However, according to GSA, the Spring Street building will require major renovations, whether the judiciary or other federal agencies use it. GSA estimates the costs associated with future expansion in the Roybal building and the new courthouse needed to meet expected judiciary space needs by 2031 to be $21 million. According to GSA, this expansion, if necessary, would involve constructing six additional magistrate courtrooms and judges' chambers in the Roybal building and one district courtroom and judge's chambers in the proposed new courthouse. GSA and judiciary officials have also told us that there will likely be additional operational costs associated with constructing a new courthouse, although the extent of these costs is currently unknown. These officials indicated that there will be moving expenses for the judiciary to relocate to the new courthouse as well as to place all the magistrate judges in the Roybal building. According to GSA officials, the judiciary may also need to lease offsite parking spaces to accommodate court needs, although the total number of parking spaces needed, if any, is unknown at this time. In addition, in order to accommodate additional magistrate courtrooms in the Roybal building, GSA officials indicated that there may be a need to relocate some of the existing federal tenants to leased space or to another federal building in downtown Los Angeles. Judiciary officials in Los Angeles also expressed concerns about additional operational costs that would be incurred as the result of a split court. According to the judiciary, some of the office space and/or staff that would be duplicated in both the new courthouse and the Roybal building include the clerk's office, pretrial services, jury assembly, Marshals Service, and the U.S. Attorneys Office. The additional costs associated with duplicating these offices are unknown at this time because a larger staff and more equipment would be necessary in a consolidated courthouse due to its larger size. However, judiciary officials also acknowledge that a split court would result in higher costs due to operational inefficiencies, including additional travel time between buildings for movement of staff, evidence, and prisoners. We provided AOUSC, GSA, and the Department of Justice with draft copies of this report for their review and comment. AOUSC and GSA provided technical clarifications, which were incorporated as appropriate. The Marshals Service, which is part of the Department of Justice, said that it did not have any comments on the draft. We are providing copies of this report to the appropriate congressional committees, AOUSC, GSA, and the Marshals Service. We will also make copies available to others upon request. In addition, the report will be available at no charge on the GAO Web site at http://www.gao.gov. If you or your staff have any questions about this report, please contact me on (202) 512-2834, or at [email protected], or David Sausville, Assistant Director, on (202) 512-5403, or [email protected]. Other contributors to this report were Keith Cunningham, Jessica Lucas-Judy, Susan Michal-Smith, Alwynne Wilbur, and Dorothy Yee. Proposed Los Angeles Courthouse Project Committee on Environment and Public Works Subcommittee on Transportation and Infrastructure September 23, 2004 Los Angeles has one of the largest federal court operations in the nation, processing approximately 16,000 cases per year and serving an area with more than 11 million people. The U.S. District Court in Los Angeles is ranked as the highest priority project in the judiciary's 5-year construction plan1 based on its high urgency score--a measure of a court's space, security, judges impacted, and operational deficiencies. The Los Angeles courthouse project could be one of the most expensive projects in the federal government's multi- billion dollar courthouse construction program. The judiciary uses its 5-year plan to prioritize requests for new courthouse projects to Congress and to GSA, the federal government's central agency for real property operations. Introduction (continued) the growth of the court, the inefficiencies caused by operating a split court,2 and the fact that the Spring Street building is 66 years old--it requires major renovations and does not meet today's security needs. According to the judiciary's plan, one of the court's main priorities in Los Angeles was to consolidate district court operations (i.e., district judges, magistrate judges, and the district court clerk's office) into one building. Split court refers to a court that has functions housed in multiple buildings in a city. Because of the project's significance, GAO was asked: 1. To what extent does the current Los Angeles courthouse project proposal address the underlying conditions that led to Los Angeles's high urgency score? 2. What construction and other costs, if any, may be required to meet judiciary and related needs in Los Angeles? Inspected the current and planned sites for the U.S. District Court--Central District of California, Los Angeles. Interviewed judges and officials from the U.S. District Court--Central District of California, Los Angeles; and officials from the Administrative Office of the U.S. Courts (AOUSC), General Services Administration (GSA), and U.S. Marshals Service (USMS). Reviewed key documents, including urgency score criteria, planning studies, prospectuses and other budget data. Conducted our work in Los Angeles, CA; and Washington, D.C.; from June through September, 2004, in accordance with generally accepted government auditing standards. GSA's current proposal to construct a new building, while continuing to use the existing Roybal Building, would address the judiciary's need for space and alleviate some security concerns. However, the operational and security concerns related to a split court that resulted in a high urgency score would remain. To meet the long-term judiciary and related needs in Los Angeles, the government will likely incur significant construction and operational costs beyond the estimated $400 million for the new courthouse. Preliminary estimates show that these additional costs may exceed $100 million. court judges and related operations, Retaining the use of the Roybal Federal Building for magistrate and bankruptcy judges and related operations, and Consolidating the U.S. Attorneys Office in the Spring St. building,3 along with other federal agencies and grand jury suites. The U.S. Attorneys Office is related to the judiciary because it is integral to the operations of the U.S. District Court, but is part of the U.S. Department of Justice. GSA estimates the new building will cost about $400 $35 million was authorized in 2000 and then appropriated in fiscal year 2001 for site acquisition and design. $50 million was appropriated in fiscal year 2004 and authorized by the House authorizing committee, but GSA said that it has not been authorized by the Senate. $314 million was proposed in the President's budget, included in the fiscal year 2005 House & Senate appropriations bills,5 and authorized by the House authorizing committee. This amount includes construction, site acquisition, design, and management inspection. H.R. 5025 and S. 2806, 108th Congress. The current project proposal would address the judiciary's need for space and alleviate some security concerns, but the operational and security concerns related to a split court that contributed to the Los Angeles Court's high urgency score, would remain. The year in which the building was or is projected to be completely occupied by the district court and related components, as documented in the judiciary's long-range facilities plan or as determined by the Circuit Judicial Council. Measures the number of judicial officers who currently do not have courtrooms or who are projected not to have them over the next 10 years. Includes whether the trial court is split into separate facilities, whether there is a secure prisoner drop-off, and whether there are separate walkways and elevators for prisoners, judges, and the public. Includes physical building conditions--such as inefficiently designed courtrooms with visual obstructions or operations that are split among locations--that cause significant disruptions to court operations. Urgency Score for Los Angeles Court's The Spring St. Courthouse has a total score of 85 out of 100, which is the highest score of any of the projects in the judiciary's 5-year plan. constraints by providing enough courtrooms for current judges and those expected by 2011, with room to expand to accommodate six additional magistrate judge courtrooms and one additional district judge courtroom. USMS6 officials said that a split court, although not ideal, would be acceptable from a security standpoint if its design manuals are followed. For example, the new building would provide more secure judge and prisoner circulation patterns and increase the number of holding cells. The court would also receive the operational benefits of a new building, avoiding major structural deficiencies (e.g., seismic vulnerability and old electrical systems). USMS provides security for the federal judiciary, including courthouses, and prisoner transport. between two buildings, even though consolidating the district court into one building was one of the main priorities identified in the judiciary's plan for Los Angeles. According to the judiciary and the USMS, a split court causes major operational inefficiencies. Judges, prisoners, and evidence would need to be transported between buildings, and Many offices and activities would likely be duplicated. the Los Angeles Court received under the judiciary's urgency scoring methodology. (The split court accounted for all 30 points for security concerns and 20 of the 25 for operational considerations.) To meet long-term judiciary and related needs in Los Angeles, the government will likely incur additional construction and operational costs beyond the estimated $400 million for the new courthouse. The extent of these costs is unknown, but preliminary estimates show that they may exceed $100 million. $400 million is designated for the site acquisition, design, and construction costs related to the proposed courthouse. On all courthouse construction projects, including Los Angeles, there is a potential for future escalation in costs due to design and planning changes during the construction process. According to GSA, cost escalations and scope changes for courthouse projects have been a nationwide concern in recent years, although GSA has initiated actions intended to address this problem. Renovation of Roybal building to accommodate 4 additional magistrate judge courtrooms. $10 million. Renovation of Spring St. Courthouse into office space for U.S. Attorneys and others. Costs unknown at this time. (A 1997 GSA study estimated costs of $77 million in 2003 dollars.) Future expansion in Roybal and new courthouse to meet judiciary needs by 2031. $21 million. 40 courtrooms at $10,000 per courtroom, and $3.00 - $3.50 per square foot for office space. Leased parking to accommodate judiciary needs at new building. $180 per space per month. (Total number needed, if any, is unknown at this time.) Relocation of existing federal tenants in the Roybal building. Costs unknown at this time. Redundant court offices and staff in the new courthouse and the Roybal building. Costs unknown at this time. probation office, five other court and related offices would require staff and/or offices in both the new courthouse and Roybal. These five offices include: 1. Clerk's Office 4. U.S. Attorneys Office The total costs associated with duplicating these offices are unknown at this time. Although the current proposal addresses the judiciary's space needs, the security and operational concerns that led to Los Angeles's high urgency score will remain and GSA is likely to need significant additional funding to fully address judiciary and related needs in Los Angeles. General Services Administration: Factors Affecting the Construction and Operating Costs of Federal Buildings. GAO-03-609T. Washington, D.C.: April 4, 2003. High-Risk Series: Federal Real Property. GAO-03-122. Washington, D.C.: January 1, 2003. Courthouse Construction: Information on Courtroom Sharing. GAO-02- 341. Washington, D.C.: April 12, 2002. Courthouse Construction: Sufficient Data and Analysis Would Help Resolve the Courtroom-Sharing Issue. GAO-01-70. Washington, D.C.: December 14, 2000. Courthouse Construction: Better Courtroom Use Data Could Enhance Facility Planning and Decisionmaking. GAO/GGD-97-39. Washington, D.C.: May 19, 1997. Courthouse Construction: Information on the Use of District Courtrooms at Selected Locations. GAO/GGD-97-59R. Washington, D.C.: May 19, 1997. Courthouse Construction: Improved 5-Year Plan Could Promote More Informed Decisionmaking. GAO/GGD-97-27. Washington, D.C.: December 31, 1996. Federal Courthouse Construction: More Disciplined Approach Would Reduce Costs and Provide for Better Decisionmaking. GAO/T-GGD-96-19. Washington, D.C.: November 8, 1995. General Services Administration: Better Data and Oversight Needed to Improve Construction Management. GAO/GGD-94-145. Washington, D.C.: June 27, 1994. Federal Judiciary Space: Progress is Being Made to Improve the Long- Range Planning Process. GAO/T-GGD-94-146. Washington, D.C.: May 4, 1994. Federal Judiciary Space: Long-Range Planning Process Needs Revision. GAO/GGD-93-132. Washington, D.C.: September 28, 1993. New L.A. Federal Courthouse: Evidence is Insufficient to Suggest that Congress Reconsider Its Approval. GAO/GGD-88-43BR. Washington, D.C.: March 23, 1988.
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Since the early 1990s, the General Services Administration (GSA) and the federal judiciary have been carrying out a multibillion dollar courthouse construction initiative to address the judiciary's growing space needs. To plan for and make funding decisions on projects, Congress, the Office of Management and Budget, and GSA have relied on a rolling 5-year plan prepared annually by the judiciary that prioritizes new courthouse projects based on an urgency score. The urgency score is based on the year a courthouse runs out of space, the number of judges without courtrooms, security concerns, and operational inefficiencies. In recent years, the L.A. courthouse had the highest urgency score in the judiciary's 5-year plan. At a cost of approximately $400 million, the new courthouse is expected to be one of the most expensive projects in the federal government's courthouse construction program to date. In light of the project's significance, GAO was asked: (1) To what extent does GSA's current L.A. courthouse project proposal address the underlying conditions that led to Los Angeles's high urgency score and (2) what construction and other costs, if any, may be required to meet judiciary and related needs in Los Angeles? The Administrative Office of the U.S. Courts and GSA provided technical comments on this report. GSA's current proposal to construct a new courthouse in Los Angeles, while expanding the judiciary's use of the existing Roybal Federal Building, would address some but not all of the underlying conditions that led to Los Angeles's high urgency score. For example, it would address the judiciary's need for additional space and alleviate some security concerns. There would be space to accommodate the 47 current district and magistrate judges and the 14 additional judges expected by 2011, with room to expand, if needed, for additional judges. The new building would also improve security by providing additional holding cells and separate prisoner walkways and elevators. However, the operational and security concerns related to housing a trial court in multiple buildings (split court) that was a significant factor in Los Angeles's high urgency score would remain. For example, U.S. Marshals Service officials said that a split court would require them to duplicate much of their security equipment and personnel necessary for fulfilling its mission of protecting the courthouses. To meet judiciary and related needs in Los Angeles, the federal government will likely incur additional construction and operational costs beyond the estimated $400 million for the new courthouse. Like other courthouse projects in recent years, GSA officials acknowledge that there is a potential for the L.A. Courthouse to incur future escalation in construction costs due to changes during the design and construction phases, such as increases in raw material and labor costs. Furthermore, additional construction costs will also be incurred to meet the judiciary's space needs over the long term. Preliminary estimates by GSA show that these costs may exceed $100 million. For example, GSA will need to build four additional magistrate courtrooms in the Roybal building and renovate the current courthouse to convert courtrooms into office space for the U.S. Attorneys and other federal agencies. GSA also plans a long-term expansion project to construct seven more courtrooms to meet judiciary space needs by 2031. Judiciary officials also acknowledge that a split court would result in additional operational costs due to duplicate offices and staff in the Roybal building and the new courthouse.
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Since fiscal year 2011, DHS has used changes in the number of apprehensions on the southwest border between ports of entry as an interim measure for border security as reported in its annual performance reports. In fiscal year 2011, DHS reported data meeting its goal to secure the land border with a decrease in apprehensions. In addition to collecting data on apprehensions, Border Patrol collects and analyzes various data on the number and types of entrants who illegally cross the southwest border between the ports of entry, including collecting estimates on the total number of identified--or "known"--illegal entries. Border Patrol's estimate of known illegal entries includes illegal, deportable entrants who were apprehended, in addition to the number of entrants who illegally crossed the border but were not apprehended because they crossed back into Mexico (referred to as turn backs) or continued traveling into the U.S. interior (referred to as got aways). Border Patrol collects these data as an indicator of the potential border threat across locations. Border Patrol data show that apprehensions within each southwest Border Patrol sector decreased from fiscal years 2006 to 2011, generally mirroring the decrease in estimated known illegal entries within each sector. In the Tucson sector, for example, our analysis of Border Patrol data showed that apprehensions decreased by 68 percent from fiscal years 2006 to 2011, compared with a 69 percent decrease in estimated known illegal entries, as shown in figure 1. Border Patrol officials attributed the decrease in apprehensions and estimated known illegal entries from fiscal years 2006 through 2011 within southwest border sectors to multiple factors, including changes in the U.S. economy and successful achievement of its strategic objectives. Border Patrol's ability to address objectives laid out in the 2004 Strategy was strengthened by increases in personnel and technology, and infrastructure enhancements, according to Border Patrol officials. For example, Tucson sector Border Patrol officials said that the sector increased manpower over the past 5 years through an increase in Border Patrol agents that was augmented by National Guard personnel, and that CBP's Secure Border Initiative (SBI) provided border fencing and other infrastructure, as well as technology enhancements. Border Patrol officials also attributed decreases in estimated known illegal entries and apprehensions to the deterrence effect of CBP consequence programs-- programs intended to deter repeated illegal border crossings by ensuring the most efficient consequence or penalty for individuals who illegally enter the United States. Data reported by Border Patrol following the issuance of our December 2012 report show that total apprehensions across the southwest border increased from over 327,000 in fiscal year 2011 to about 357,000 in fiscal year 2012. It is too early to assess whether this increase indicates a change in the trend for Border Patrol apprehensions across the southwest border. Border Patrol collects other types of data that are used by sector management to help inform assessment of its efforts to secure the border against the threats of illegal migration, smuggling of drugs and other contraband, and terrorism. These data show changes, for example, in the (1) percentage of estimated known illegal entrants who are apprehended, (2) percentage of estimated known illegal entrants who are apprehended more than once (repeat offenders), and (3) number of seizures of drugs and other contraband. Border Patrol officials at sectors we visited, and our review of fiscal years 2010 and 2012 sector operational assessments, indicated that sectors have historically used these types of data to inform tactical deployment of personnel and technology to address cross-border threats; however, the agency has not analyzed these data at the national level to inform strategic decision making, according to Border Patrol headquarters officials. These officials stated that greater use of these data in assessing border security at the national level may occur as the agency transitions to the new strategic plan. Apprehensions compared with estimated known illegal entries. Our analysis of Border Patrol data showed that the percentage of estimated known illegal entrants who were apprehended by the Border Patrol over the past 5 fiscal years varied across southwest border sectors. The Tucson sector, for example, showed little change in the percentage of estimated known illegal entrants who were apprehended by Border Patrol over the past 5 fiscal years. Specifically, our analysis showed that of the total number of estimated known aliens who illegally crossed the Tucson sector border from Mexico each year, Border Patrol apprehended 62 percent in fiscal year 2006 compared with 64 percent in fiscal year 2011, an increase of about 2 percentage points. Border Patrol headquarters officials said that the percentage of estimated known illegal entrants who are apprehended is primarily used to determine the effectiveness of border security operations at the tactical--or zone--level but can also affect strategic decision making. The data are also used to inform overall situational awareness at the border, which directly supports field planning and redeployment of resources. Repeat offenders. Changes in the percentage of persons apprehended who have repeatedly crossed the border illegally (referred to as the recidivism rate) is a factor that Border Patrol considers in assessing its ability to deter individuals from attempting to illegally cross the border. Our analysis of Border Patrol apprehension data showed that the recidivism rate has declined across the southwest border by about 6 percentage points from fiscal years 2008 to 2011 in regard to the number of apprehended aliens who had repeatedly crossed the border in the prior 3 years. Specifically, our analysis showed that the recidivism rate across the overall southwest border was about 42 percent in fiscal year 2008 compared with about 36 percent in fiscal year 2011. The Tucson sector had the third-highest recidivism rate across the southwest border in fiscal year 2011, while the highest rate of recidivism occurred in El Centro sector, as shown in figure 2. According to Border Patrol headquarters officials, the agency has implemented various initiatives designed to address recidivism through increased prosecution of individuals apprehended for crossing the border illegally. Seizures of drugs and other contraband. Border Patrol headquarters officials said that data regarding seizures of drugs and other contraband are good indicators of the effectiveness of targeted enforcement operations, and are used to identify trends in the smuggling threat and as indicators of overall cross-border illegal activity, in addition to potential gaps in border coverage, risk, and enforcement operations. However, these officials stated that these data are not used as a performance measure for overall border security because while the agency has a mission to secure the border against the smuggling threat, most smuggling is related to illegal drugs, and that drug smuggling is the primary responsibility of other federal agencies, such as the Drug Enforcement Administration and U.S. Immigration and Customs Enforcement, Homeland Security Investigations. Our analysis of Border Patrol data indicated that across southwest border sectors, seizures of drugs and other contraband increased 83 percent from fiscal years 2006 to 2011, with drug seizures accounting for the vast majority of all contraband seizures. Specifically, the number of drug and contraband seizures increased from 10,321 in fiscal year 2006 to 18,898 in fiscal year 2011. Most seizures of drugs and other contraband occurred in the Tucson sector, with about 28 percent, or 5,299, of the 18,898 southwest border seizures occurring in the sector in fiscal year 2011 as shown in figure 3. Data reported by Border Patrol following the issuance of our December 2012 report show that seizures of drugs and other contraband across the southwest border decreased from 18,898 in fiscal year 2011 to 17,891 in fiscal year 2012. It is too early to assess whether this decrease indicates a change in the trend for Border Patrol seizures across the southwest border. Southwest border sectors scheduled most agent workdays for enforcement activities during fiscal years 2006 to 2011, and the activity related to patrolling the border accounted for a greater proportion of enforcement activity workdays than any of the other activities. Sectors schedule agent workdays across various activities categorized as enforcement or nonenforcement. Across enforcement activities, our analysis of Border Patrol data showed that all sectors scheduled more agent workdays for "patrolling the border"--activities defined to occur within 25 miles of the border--than any other enforcement activity, as shown in figure 4. Border Patrol duties under this activity include patrolling by vehicle, horse, and bike; patrolling with canines; performing sign cutting; and performing special activities such as mobile search and rescue. Other enforcement activities to which Border Patrol scheduled agent workdays included conducting checkpoint duties, developing intelligence, and performing aircraft operations. Border Patrol sectors and stations track changes in their overall effectiveness as a tool to determine if the appropriate mix and placement of personnel and assets are being deployed and used effectively and efficiently, according to officials from Border Patrol headquarters. Border Patrol calculates an overall effectiveness rate using a formula in which it adds the number of apprehensions and turn backs in a specific sector and divides this total by the total estimated known illegal entries-- determined by adding the number of apprehensions, turn backs, and got aways for the sector. Border Patrol sectors and stations report this overall effectiveness rate to headquarters. Border Patrol views its border security efforts as increasing in effectiveness if the number of turn backs as a percentage of estimated known illegal entries has increased and the number of got aways as a percentage of estimated known illegal entries has decreased. Border Patrol data showed that the effectiveness rate for eight of the nine sectors on the southwest border increased from fiscal years 2006 through 2011. For example, our analysis of Tucson sector apprehension, turn back, and got away data from fiscal years 2006 through 2011 showed that while Tucson sector apprehensions remained fairly constant at about 60 percent of estimated known illegal entries, the percentage of reported turn backs increased from about 5 percent to about 23 percent, while the percentage of reported got aways decreased from about 33 percent to about 13 percent, as shown in figure 5. As a result of these changes in the mix of turn backs and got aways, Border Patrol data showed that enforcement effort, or the overall effectiveness rate for Tucson sector, improved 20 percentage points from fiscal year 2006 to fiscal year 2011, from 67 percent to 87 percent. Border Patrol headquarters officials said that differences in how sectors define, collect, and report turn back and got away data used to calculate the overall effectiveness rate preclude comparing performance results across sectors. Border Patrol headquarters officials stated that until recently, each Border Patrol sector decided how it would collect and report turn back and got away data, and as a result, practices for collecting and reporting the data varied across sectors and stations based on differences in agent experience and judgment, resources, and terrain. In terms of defining and reporting turn back data, for example, Border Patrol headquarters officials said that a turn back was to be recorded only if it is perceived to be an "intended entry"--that is, the reporting agent believed the entrant intended to stay in the United States, but Border Patrol activities caused the individual to return to Mexico. According to Border Patrol officials, it can be difficult to tell if an illegal crossing should be recorded as a turn back, and sectors have different procedures for reporting and classifying incidents. In terms of collecting data, Border Patrol officials reported that sectors rely on a different mix of cameras, sign cutting, credible sources, and visual observation to identify and report the number of turn backs and got aways. According to Border Patrol officials, the ability to obtain accurate or consistent data using these identification sources depends on various factors, such as terrain and weather. For example, data on turn backs and got aways may be understated in areas with rugged mountains and steep canyons that can hinder detection of illegal entries. In other cases, data may be overstated--for example, in cases where the same turn back identified by a camera is also identified by sign cutting. Double counting may also occur when agents in one zone record as a got away an individual who is apprehended and then reported as an apprehension in another zone. As a result of these data limitations, Border Patrol headquarters officials said that while they consider turn back and got away data sufficiently reliable to assess each sector's progress toward border security and to inform sector decisions regarding resource deployment, they do not consider the data sufficiently reliable to compare--or externally report--results across sectors. Border Patrol headquarters officials issued guidance in September 2012 to provide a more consistent, standardized approach for the collection and reporting of turn back and got away data by Border Patrol sectors. Each sector is to be individually responsible for monitoring adherence to the guidance. According to Border Patrol officials, it is expected that once the guidance is implemented, data reliability will improve. This new guidance may allow for comparison of sector performance and inform decisions regarding resource deployment for securing the southwest border. Border Patrol officials stated that the agency is in the process of developing performance goals and measures for assessing the progress of its efforts to secure the border between ports of entry and for informing the identification and allocation of resources needed to secure the border, but has not identified milestones and time frames for developing and implementing them. Since fiscal year 2011, DHS has used the number of apprehensions on the southwest border between ports of entry as an interim performance goal and measure for border security as reported in its annual performance report. Prior to this, DHS used operational control as its goal and outcome measure for border security and to assess resource needs to accomplish this goal. As we previously testified, at the end of fiscal year 2010, Border Patrol reported achieving varying levels of operational control of 873 (44 percent) of the nearly 2,000 southwest border miles. For example, Yuma sector reported achieving operational control for all of its border miles. In contrast, the other southwest border sectors reported achieving operational control ranging from 11 to 86 percent of their border miles, as shown in figure 6. Border Patrol officials attributed the uneven progress across sectors to multiple factors, including terrain, transportation infrastructure on both sides of the border, and a need to prioritize resource deployment to sectors deemed to have greater risk of illegal activity. DHS transitioned from using operational control as its goal and outcome measure for border security in its Fiscal Year 2010-2012 Annual Performance Report. Citing a need to establish a new border security goal and measure that reflect a more quantitative methodology as well as the department's evolving vision for border control, DHS established the interim performance goal and measure of the number of apprehensions between the land border ports of entry until a new border control goal and measure could be developed. We previously testified that the interim goal and measure of number of apprehensions on the southwest border between ports of entry provides information on activity levels, but it does not inform program results or resource identification and allocation decisions, and therefore until new goals and measures are developed, DHS and Congress could experience reduced oversight and DHS accountability. Further, studies commissioned by CBP have documented that the number of apprehensions bears little relationship to effectiveness because agency officials do not compare these numbers with the amount of cross-border illegal activity. Border Patrol officials stated that the agency is in the process of developing performance goals and measures for assessing the progress of its efforts to secure the border between ports of entry and for informing the identification and allocation of resources needed to secure the border, but has not identified milestones and time frames for developing and implementing them. According to Border Patrol officials, establishing milestones and time frames for the development of performance goals and measures is contingent on the development of key elements of the 2012-2016 Strategic Plan, such as a risk assessment tool, and the agency's time frames for implementing these key elements--targeted for fiscal years 2013 and 2014--are subject to change. Specifically, under the 2012-2016 Strategic Plan, the Border Patrol plans to continuously evaluate border security--and resource needs--by comparing changes in risk levels against available resources across border locations. Border Patrol officials stated the agency is in the process of identifying performance goals and measures that can be linked to these new risk assessment tools that will show progress and status in securing the border between ports of entry, and determine needed resources, but has not established milestones and time frames for developing and implementing goals and measures because the agency's time frames for implementing key elements of the plan are subject to change. Standard practices in program management call for documenting the scope of a project as well as milestones and time frames for timely completion and implementation to ensure results are achieved. These standard practices also call for project planning--such as identifying time frames--to be performed in the early phases of a program and recognize that plans may need to be adjusted along the way in response to unexpected circumstances. Time frames for implementing key elements of the 2012-2016 Strategic Plan can change; however, milestones and time frames for the development of performance goals and measures could help ensure that goals and measures are completed in a timely manner. To support the implementation of Border Patrol's 2012-2016 Strategic Plan and identify the resources needed to achieve the nation's strategic goal for securing the border, we recommended in our December 2012 report that Border Patrol establish milestones and time frames for developing a (1) performance goal, or goals, for border security between the ports of entry that defines how border security is to be measured and (2) performance measure, or measures--linked to a performance goal or goals--for assessing progress made in securing the border between ports of entry and informing resource identification and allocation efforts. DHS agreed with these recommendations and stated that it plans to establish milestones and time frames for developing goals and measures by November 30, 2013. Milestones and time frames could better position CBP to monitor progress in developing and implementing goals and measures, which would provide DHS and Congress with information on the results of CBP efforts to secure the border between ports of entry and the extent to which existing resources and capabilities are appropriate and sufficient. Chairwoman Miller, Ranking Member Jackson Lee, and members of the subcommittee, this concludes my prepared statement. I would be happy to answer any questions you may have at this time. For further information about this testimony, please contact Rebecca Gambler at (202) 512-8777 or [email protected]. In addition, contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. Individuals making key contributions to this statement included Lacinda Ayers (Assistant Director), Frances A. Cook, Barbara A. Guffy, Stanley J. Kostyla, Brian J. Lipman, Jerome T. Sandau, and Ashley D. Vaughan. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.
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Within DHS, U.S. Customs and Border Protection's (CBP) Border Patrol has primary responsibility for securing the southwest border between ports of entry. CBP reported apprehending over 327,000 illegal entrants and making over 17,150 seizures of drugs along the border in fiscal year 2011. Across the border, most apprehensions (over 38 percent) and drug seizures (28 percent) occurred in the Tucson sector. This statement discusses (1) apprehension and other data CBP collects to inform changes in southwest border security and data used to show effectiveness of resource deployments, and (2) the extent to which Border Patrol has developed goals and measures to identify resource needs under its new strategic plan. This statement is based on GAO's December 2012 report on CBP's management of southwest border resources and prior reports on DHS's efforts to measure border security, with selected updates from February 2013 on Border Patrol fiscal year 2012 operations data. To conduct prior work, GAO analyzed DHS documents and data from fiscal years 2006 to 2011, and interviewed CBP officials, among other things. To conduct selected updates, GAO reviewed Border Patrol data and interviewed Border Patrol officials. Since fiscal year 2011, the Department of Homeland Security (DHS) has used changes in the number of apprehensions on the southwest border between ports of entry as an interim measure for border security as reported in its annual performance plans. In fiscal year 2011, DHS reported a decrease in apprehensions, which met its goal to secure the southwest border. Our analysis of Border Patrol data showed that apprehensions decreased within each southwest border sector from fiscal years 2006 to 2011, generally mirroring decreases in estimated known illegal entries. Border Patrol attributed these decreases in part to changes in the U.S. economy and improved enforcement efforts. In addition to apprehension data, sector management collect and use other data to assess enforcement efforts within sectors. Our analysis of these data show that the percentage of estimated known illegal entrants apprehended from fiscal years 2006 to 2011 varied across southwest border sectors; in the Tucson sector, for example, there was little change in the percentage of estimated known illegal entrants apprehended over this time period. The percentage of individuals apprehended who repeatedly crossed the border illegally declined across the border by 6 percent from fiscal years 2008 to 2011. Further, the number of seizures of drugs and other contraband across the border increased from 10,321 in fiscal year 2006 to 18,898 in fiscal year 2011. Additionally, southwest border sectors scheduled more agent workdays in fiscal year 2011 to enforcement activities for patrolling the border than for any other enforcement activity. The Tucson sector, for example, scheduled 73 percent of workdays for enforcement activities; of these, 71 percent were scheduled for patrolling within 25 miles of the border. Other sectors scheduled from 44 to 70 percent of enforcement workdays for patrolling the border. Sectors assess how effectively they use resources to secure the border, but differences in how they collect and report data preclude comparing results. Border Patrol issued guidance in September 2012 to improve the consistency of sector data collection and reporting, which may allow comparison of performance in the future. Border Patrol is developing performance goals and measures to define border security and the resources needed to achieve it, but has not identified milestones and time frames for developing and implementing goals and measures under its new strategic plan. Prior to fiscal year 2011, DHS used operational control---the number of border miles where Border Patrol had the capability to detect, respond to, and interdict cross-border illegal activity--as its goal and measure for border security and to assess resource needs to accomplish this goal. At the end of fiscal year 2010, DHS reported achieving varying levels of operational control of 873 (44 percent) of the nearly 2,000 southwest border miles. In fiscal year 2011, citing a need to establish new goals and measures that reflect a more quantitative methodology and an evolving vision for border control, DHS transitioned to using the number of apprehensions on the southwest border as an interim goal and measure. As GAO previously testified, this interim measure, which reports on program activity levels and not program results, limits DHS and congressional oversight and accountability. Milestones and time frames could assist Border Patrol in monitoring progress in developing goals and measures necessary to assess the status of border security and the extent to which existing resources and capabilities are appropriate and sufficient. In a December 2012 report, GAO recommended that CBP ensure Border Patrol develops milestones and time frames for developing border security goals and measures to assess progress made and inform resource needs. DHS concurred with these recommendations and plans to address them.
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Since the department's creation in 2003, we have designated the implementation and transformation of DHS as high risk because DHS had to combine 22 agencies--several with major management challenges-- into one department, and failure to effectively address DHS's management and mission risks could have serious consequences for U.S. national and economic security. This high-risk area includes (1) challenges in strengthening DHS's management functions--financial management, human capital, information technology (IT), and acquisition management--(2) the effect of those challenges on DHS's mission implementation, and (3) challenges in integrating management functions within and across the department and its components. On the basis of our prior work, in September 2010 we identified and provided to DHS 31 actions and outcomes that are critical to addressing the challenges within the department's management areas and in integrating those functions across the department. These key actions and outcomes include, among others, validating required acquisition documents in accordance with a department-approved, knowledge-based acquisition process. The Aviation and Transportation Security Act (ATSA) established TSA as the federal agency with primary responsibility for securing the nation's civil aviation system, which includes the screening of all passengers and property transported from and within the United States by commercial passenger aircraft. In accordance with ATSA, all passengers, their accessible property, and their checked baggage are screened pursuant to TSA-established procedures at more than 450 airports presently regulated for security by TSA. These procedures generally provide, among other things, that passengers pass through security checkpoints where they and their identification documents, and accessible property, are checked by transportation security officers (TSO), other TSA employees, or by private-sector screeners under TSA's Screening Partnership Program. TSA relies upon multiple layers of security to deter, detect, and disrupt persons posing a potential risk to aviation security. These layers include TSOs responsible for screening passengers and their carry-on baggage at passenger checkpoints, using technologies that include x-ray equipment, magnetometers, and Advanced Imaging Technology (AIT), among others. In response to the December 2009 attempted terrorist attack, TSA revised its procurement and deployment strategy for AIT, commonly referred to as full-body scanners, increasing the number of AIT units it planned to procure and deploy. TSA stated that AIT provides enhanced security benefits compared with walk-through metal detectors, such as enhanced detection capabilities for identifying nonmetallic threat objects and liquids. AIT produces an image of a passenger's body that a screener interprets. The image identifies objects, or anomalies, on the outside of the physical body but does not reveal items beneath the surface of the skin, such as implants. As of May 2012, TSA has deployed more than 670 AIT units to approximately 170 airports and reported that it plans to deploy a total of about 1,250 AIT units. In January 2012, we issued a classified report on TSA's procurement and deployment of AIT that addressed the extent to which (1) TSA followed DHS acquisition guidance when procuring AIT and (2) deployed AIT units are effective at detecting threats. Another layer of security is checked-baggage screening, which uses technology referred to as explosive detection systems (EDS) and explosives trace detection (ETD). Our past work has found that technology program performance cannot be accurately assessed without valid baseline requirements established at the program start. Without the development, review, and approval of key acquisition documents, such as the mission need statement and operational requirements document, agencies are at risk of having poorly defined requirements that can negatively affect program performance and contribute to increased costs. For example, in June 2010, we reported that more than half of 15 DHS programs we reviewed awarded contracts to initiate acquisition activities without component or department approval of documents essential to planning acquisitions, setting operational requirements, or establishing acquisition program baselines.currently have ongoing work related to this area and we plan to report the results later this year. We made a number of recommendations to help address issues related to these procurements as discussed below. DHS has generally agreed with these recommendations and, to varying degrees, has taken actions to address them. In addition, our past work has found that TSA faces challenges in identifying and meeting program requirements in some of its aviation security programs. For example: We reported in January 2012 that TSA did not fully follow DHS acquisition policies when acquiring AIT, which resulted in DHS approving full AIT deployment without full knowledge of TSA's revised specifications. Specifically, DHS's Acquisition Directive 102 required TSA to notify DHS's Acquisition Review Board (ARB) if AIT could not meet any of TSA's five key performance parameters (KPP) or if TSA changed a KPP during qualification testing. Senior TSA officials acknowledged that TSA did not comply with the directive's requirements, but stated that TSA still reached a "good decision" in procuring AIT and that the ARB was fully informed of the program's changes to its KPPs. Further, TSA officials stated that the program was not bound by the directive because it was a new acquisition process and they believed that the ARB was not fully functioning at the time. DHS officials stated that the ARB discussed the changed KPP but did not see the documents related to the change and determined that TSA must update the program's key acquisition document, the Acquisition Program Baseline, before TSA could deploy AIT units. However, we reported that, according to a February 2010 acquisition decision memorandum from DHS, the ARB approved TSA for full-scale production without reviewing the changed KPP. DHS officials stated that the ARB should have formally reviewed changes made to the KPP to ensure that TSA did not change it arbitrarily. According to TSA, it should have submitted its revised requirements for approval, but it did not because there was confusion as to whether DHS should be informed of all changes. We had previously reported that programs procuring new technologies with fluctuating requirements will have a difficult time ensuring that the acquisition is meeting program needs. DHS acquisition oversight officials agreed that changing key requirements is not a best practice for system acquisitions already under way. As a result, we found that TSA procured and deployed a technology that met evolving requirements, but not the initial requirements included in its key acquisition requirements document that the agency initially determined were necessary to enhance the aviation system. We recommended that TSA should develop a roadmap that outlines vendors' progress in meeting all KPPs. DHS agreed with our recommendation. In July 2011, we reported that TSA revised its EDS requirements to better address current threats, and plans to implement these requirements in a phased approach. However, we reported that some number of EDS machines in TSA's checked baggage screening fleet are configured to detect explosives at the levels established in the 2005 requirements. The remaining EDS machines are configured to detect explosives at 1998 levels. When TSA established the 2005 requirements, it did not have a plan with the appropriate time frames needed to deploy EDSs to meet the requirements. To help ensure that TSA's checked baggage screening machines are operating most effectively, we recommended that TSA develop a plan to deploy EDSs to meet the most recent explosive-detection requirements and ensure that the new machines, as well as machines deployed in airports, are operated at the levels in established requirements. DHS concurred with our recommendation and has begun taking action to address it; for example, DHS reported that TSA has developed a plan to evaluate its current fleet of EDSs to determine the extent to which they comply with these requirements. However, our recommendation is intended to ensure that TSA operate all EDSs at airports at the most recent requirements. Until TSA develops a plan identifying how it will approach the upgrades for currently deployed EDSs--and the plan includes such items as estimated costs and the number of machines that can be upgraded--it will be difficult for TSA to provide reasonable assurance that its upgrade approach is feasible or cost effective. Our prior work has also shown that not resolving problems discovered during testing can sometimes lead to costly redesign and rework at a later date. Addressing such problems before moving to the acquisition phase can help agencies better manage costs. Specifically: In January 2012, we reported that TSA began deploying AIT before it received approval for how it would test AIT. For example, DHS's Acquisition Directive 102 required DHS to approve testing and evaluation master plans--the documents that ensure that programs are tested appropriately--prior to testing. However, we found that DHS did not approve TSA's testing and evaluation master plan until January 2010, after TSA had completed qualification and operational tests and DHS had already approved TSA for full AIT deployment. According to DHS, the DHS Director of Operational Testing and Evaluation assessed the testing of AIT prior to the September 2009 ARB meeting and recommended approving the decision to procure AIT at that meeting, even though the ARB did not approve its testing plans. Additionally, we reported that DHS approved TSA's AIT deployment in September 2009, on the basis of laboratory-based qualification testing results and initial field-based operational testing results that were not completed until later that year. According to DHS officials, the department initially had challenges providing effective oversight to projects already engaged in procurement when the directive was issued. For example, they noted that TSA had begun conducting qualification testing in 2009, but DHS's first AIT oversight meeting under the new directive was not until later that year. As a result, we reported that TSA procured AIT without DHS's full oversight and approval or knowledge of how TSA would test and evaluate AIT. In July 2011, we reported that TSA revised the explosive detection requirements for EDS checked baggage screening machines in 2005 though it did not begin operating EDS systems to meet these 2005 requirements until 2009. We also reported that TSA made additional revisions to the EDS requirements in January 2010 but experienced challenges in collecting explosives data on the physical and chemical properties of certain explosives needed by vendors to develop EDS detection software to meet the 2010 requirements.also needed by TSA for testing the machines to determine whether they meet established requirements prior to their procurement and deployment to airports. TSA and S&T have experienced these challenges because of problems associated with safely handling and consistently formulating some explosives, which have also resulted in problems carrying out the EDS procurement as planned. Further, TSA deployed a number of EDSs that had the software necessary to meet the 2005 requirements, but because testing to compare false-alarm rates had not been completed, the software was not activated, subsequently; these EDSs were detecting explosives at levels established in 1998. According to TSA officials, once completed, the results of this testing to compare false alarm rates would allow them to determine if additional staff are needed at airports to help resolve false alarms once the EDSs are configured to operate at a certain level of requirements. TSA officials told us that they planned to perform this testing as a part of the ongoing EDS acquisition. We recommended that TSA develop a plan to ensure that TSA has the explosives data needed for each of the planned phases of the 2010 EDS requirements before starting the procurement process for new EDSs or upgrades included in each applicable phase. DHS stated that TSA modified its strategy for the EDS's competitive procurement in July 2010 in response to the challenges in working with the explosives for data collection by removing the data collection from the procurement process. TSA's plan to separate the data collection from the procurement process is a positive step, but to fully address our recommendation, a plan is needed to establish a process for ensuring that data are available before starting the procurement process for new EDSs or upgrades for each applicable phase. In June 2011 we reported that S&T's Test & Evaluation and Standards Office, responsible for overseeing test and evaluation of DHS's major acquisition programs, reviewed or approved test and evaluation documents and plans for programs undergoing testing, and conducted independent assessments for the programs that completed operational testing. DHS senior-level officials considered the office's assessments and input in deciding whether programs were ready to proceed to the next acquisition phase. However, the office did not consistently document its review and approval of components' test agents--a government entity or independent contractor carrying out independent operational testing for a major acquisition. We recommended, among other things, that S&T develop mechanisms to document its review of component acquisition documentation. DHS concurred and reported actions underway to address them. In October 2009, we reported that TSA deployed explosives trace portals, a technology for detecting traces of explosives on passengers at airport checkpoints, in January 2006 even though TSA officials were aware that tests conducted during 2004 and 2005 on earlier models of the portals suggested the portals did not demonstrate reliable performance in an airport environment. In June 2006, TSA halted deployment of the explosives trace portals because of performance problems and high installation costs. In our 2009 report, we recommended that, to the extent feasible, TSA ensure that tests are completed before deploying new checkpoint screening technologies to airports. DHS concurred with the recommendation and has taken action to address it, such as requiring more-recent technologies to complete both laboratory and operational tests prior to deployment. We have found that realistic acquisition program baselines with stable requirements for cost, schedule, and performance are among the factors that are important to successful acquisitions delivering capabilities within cost and schedule. Our prior work has found that program performance metrics for cost and schedule can provide useful indicators of the health of acquisition programs and, when assessed regularly for changes and the reasons that cause changes, such indicators can be valuable tools for improving insight and oversight of individual programs as well as the total portfolio of major acquisitions.be accurately assessed without valid baseline requirements established Importantly, program performance cannot at the program start, particularly those that establish the minimum acceptable threshold required to satisfy user needs. According to DHS's acquisition guidance, the program baseline is the contract between the program and departmental oversight officials and must be established at program start to document the program's expected cost, deployment schedule, and technical performance. Establishing such a baseline at program start is important for defining the program's scope, assessing whether all life-cycle costs are properly calculated, and measuring how well the program is meeting its goals. By tracking and measuring actual program performance against this baseline, management can be alerted to potential problems, such as cost growth or changing requirements, and has the ability to take early corrective action. We reported in Aril 2012 that TSA has not had a DHS-approved acquisition program baseline since the inception of the EBSP program more than 8 years ago. Further, DHS did not require TSA to complete an acquisition program baseline until November 2008. According to TSA officials, they have twice submitted an acquisition program baseline to DHS for approval--first in November 2009 and again February 2011. An approved baseline will provide DHS with additional assurances that TSA's approach is appropriate and that the capabilities being pursued are worth the expected costs. In November 2011, because TSA did not have a fully developed life-cycle cost estimate as part of its acquisition program baseline, DHS instructed TSA to revise the life cycle cost estimates as well as its procurement and deployment schedules to reflect budget constraints. DHS officials told us that they could not approve the acquisition program baseline as written because TSA's estimates were significantly over budget. TSA officials stated that TSA is currently working with DHS to amend the draft program baseline and plans to resubmit the revised acquisition program baseline before the next Acquisition Review Board meeting, which is currently planned for July 2012. Establishing and approving a program baseline, as DHS and TSA currently plan to do for the EBSP, could help DHS assess the program's progress in meeting its goals and achieve better program outcomes. In our 2010 report of selected DHS acquisitions, 12 of 15 selected DHS programs we reviewed exhibited schedule delays and cost growth beyond initial estimates. We noted that DHS acquisition oversight officials have raised concerns about the accuracy of cost estimates for most major programs, making it difficult to assess the significance of the cost growth we identified. Leading practices state that the success of a large-scale system acquisition, such as the TSA's EDS acquisition, depends in part on having a reliable schedule that identifies: (1) when the program's set of work activities and milestone events will occur, (2) how long they will take, and (3) how they are related to one another. Leading practices also call for the schedule to expressly identify and define the relationships and dependencies among work elements and the constraints affecting the start and completion of work elements. Additionally, best practices indicate that a well-defined schedule also helps to identify the amount of human capital and fiscal resources that are needed to execute an acquisition. We reported in January 2012 that TSA did not have plans to require vendors to meet milestones used during the AIT acquisition. We recommended that TSA should develop a roadmap that outlines vendors' progress in meeting all KPPs because it is important that TSA convey vendors' progress in meeting those requirements and full costs of the technology to decision makers when making deployment and funding decisions. TSA reported that it hoped vendors would be able to gradually improve meeting KPPs for AIT over time. We reported that TSA would have more assurance that limited taxpayer resources are used effectively by developing a roadmap that specifies development milestones for the technology and having DHS acquisition officials approve this roadmap. DHS agreed with our recommendation. In July 2011, we reported that TSA had established a schedule for the acquisition of EDS machines but it did not fully comply with leading practices, and TSA had not developed a plan to upgrade its EDS fleet to meet the current explosives detection requirements. These leading practices state that the success of a large-scale system acquisition, such as TSA's EDS acquisition, depends in part on having a reliable schedule that identifies when the program's set of work activities and milestone events will occur, amongst other things. For example, the schedule for the EDS acquisition is not reliable because it does not reflect all planned program activities and does not include a timeline to deploy EDSs or plans to procure EDSs to meet subsequent phases of explosive detection requirements. We stated that developing a reliable schedule would help TSA better monitor and oversee the progress of the EDS acquisition. DHS concurred with our recommendation to develop and maintain a schedule for the entire EBSP in accordance with the leading practices identified by GAO for preparing a schedule. DHS commented that TSA had already begun working with key stakeholders to develop and define requirements for a schedule and to ensure that the schedule aligns with the best practices outlined by GAO. In April 2012, we reported that TSA's methods for developing life cycle cost estimates for the EBSP did not fully adhere to best practices for developing these estimates. As highlighted in our past work, a high-quality, reliable cost estimation process provides a sound basis for making accurate and well-informed decisions about resource investments, budgets, assessments of progress, and accountability for results and thus is critical to the success of a program. We reported that TSA's estimates partially met three characteristics and minimally met one characteristic of a reliable cost estimate.concurred with our recommendation that TSA ensure that its life cycle cost estimates conform to cost estimating best practices, and identified efforts underway to address it. DHS also acknowledged the importance of producing life cycle cost estimates that are comprehensive, well documented, accurate, and credible so that they can be used to support DHS funding and budget decisions. In part due to the problems we have highlighted in DHS's acquisition process, the implementation and transformation of DHS remains on our high-risk list. DHS currently has several plans and efforts underway to address the high-risk designation as well as the more specific challenges related to acquisition and program implementation that we have previously identified. For example, DHS initially described an initiative in the January 2011 version of its Integrated Strategy for High Risk Management to establish a framework, the Integrated Investment Life Cycle Model (IILCM), for managing investments across its components and management functions; strengthening integration within and across those functions; and ensuring mission needs drive investment decisions. The department seeks to use the IILCM to enhance resource decision making and oversight by creating new department-level councils to identify priorities and capability gaps, revising how DHS components and lines of business manage acquisition programs, and developing a common framework for monitoring and assessing implementation of investment decisions. We reported in March 2012 that, from the time DHS first reported on the IILCM initiative in January 2011 to its December 2011 revision of its high-risk strategy, the initiative had made little progress though DHS plans to begin using the IILCM by the end of September 2012. In October 2011, to enhance the department's ability to oversee major acquisition programs, DHS realigned the acquisition management functions previously performed by two divisions within the Office of Chief Procurement Officer to establish the Office of Program Accountability and Risk Management (PARM). PARM, which is responsible for program governance and acquisition policy, serves as the Management Directorate's executive office for program execution and works with DHS leadership to assess the health of major acquisitions and investments. To help with this effort, PARM is developing a database, known as the Decision Support Tool, intended to improve the flow of information from component program offices to the Management Directorate to support its governance efforts. DHS reported in its December 2011 Integrated Strategy for High Risk Management that senior executives are not confident enough in the data to use the Decision Support Tool developed by PARM to help make acquisition decisions. However, DHS's plans to improve the quality of the data in this database are limited. At this time, PARM only plans to check the data quality in preparation for key milestone meetings in the acquisition process. This could significantly diminish the Decision Support Tool's value because users cannot confidently identify and take action to address problems meeting cost or schedule goals prior to program review meetings. We reported in March 2012 that DHS has made progress strengthening its management functions, but the department faces considerable challenges. Specifically, DHS has faced challenges overseeing the management, testing, acquisition, and deployment of various technology programs including AIT and EDS. Going forward, DHS needs to continue implementing its Integrated Strategy for High Risk Management and show measurable, sustainable progress in implementing its key management initiatives and corrective actions and achieving outcomes including those related to acquisition management. DHS reported that it plans to revise its Integrated Strategy for High Risk Management in June 2012, which includes management initiatives and corrective actions to address acquisition management challenges, among other management areas. We will continue to monitor and assess DHS's implementation and transformation efforts through our ongoing and planned work, including the 2013 high-risk update that we expect to issue in early 2013. Chairmen Issa and Mica, Ranking Members Cummings and Rahall, and members of the committees, this concludes my prepared statement. I would be pleased to respond to any questions that you may have. For questions about this statement, please contact Steve Lord at (202) 512-4379 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. Individuals making key contributions to this statement include Dave Bruno, Assistant Director; Scott Behen, Analyst-in-Charge; Emily Gunn, and Katherine Trimble. Other contributors include: David Alexander, Tom Lombardi, Jason Lee, Linda Miller, and Jerry Seigler. Key contributors for the previous work that this testimony is based on are listed within each individual product. Checked Baggage Screening: TSA Has Deployed Optimal Systems at the Majority of TSA-Regulated Airports, but Could Strengthen Cost Estimates. GAO-12-266. Washington D.C.: April 27, 2012. Transportation Security Administration: Progress and Challenges Faced in Strengthening Three Key Security Programs. GAO-12-541T. Washington D.C.: March 26, 2012 Aviation Security: TSA Has Made Progress, but Additional Efforts Are Needed to Improve Security. GAO-11-938T. Washington, D.C.: September 16, 2011. Department of Homeland Security: Progress Made and Work Remaining in Implementing Homeland Security Missions 10 Years after 9/11. GAO-11-881. Washington, D.C.: September 7, 2011. Homeland Security: DHS Could Strengthen Acquisitions and Development of New Technologies. GAO-11-829T. Washington, D.C.: July 15, 2011. Aviation Security: TSA Has Taken Actions to Improve Security, but Additional Efforts Remain. GAO-11-807T. Washington, D.C.: July 13, 2011. Aviation Security: TSA Has Enhanced Its Explosives Detection Requirements for Checked Baggage, but Additional Screening Actions Are Needed. GAO-11-740. Washington, D.C.: July 11, 2011. Homeland Security: Improvements in Managing Research and Development Could Help Reduce Inefficiencies and Costs. GAO-11-464T. Washington D.C.: March 15, 2011. High-Risk Series: An Update. GAO-11-278. Washington D.C.: February 16, 2011. Department of Homeland Security: Assessments of Selected Complex Acquisitions. GAO-10-588SP. Washington, D.C.: June 30, 2010. Aviation Security: Progress Made but Actions Needed to Address Challenges in Meeting the Air Cargo Screening Mandate. GAO-10-880T. Washington, D.C.: June 30, 2010. Aviation Security: TSA Is Increasing Procurement and Deployment of Advanced Imaging Technology, but Challenges to This Effort and Other Areas of Aviation Security Remain. GAO-10-484T. Washington, D.C.: March 17, 2010. Aviation Security: DHS and TSA Have Researched, Developed, and Begun Deploying Passenger Checkpoint Screening Technologies, but Continue to Face Challenges. GAO-10-128. Washington, D.C.: October 7, 2009. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.
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Within DHS, TSA is responsible for developing and acquiring new technologies to address transportation-related homeland security needs. TSA's acquisition programs represent billions of dollars in life-cycle costs and support a wide range of aviation security missions and investments, including technologies used to screen passengers and checked baggage such as AIT and EDS, among others. GAO's testimony addresses three key DHS and TSA challenges identified in past work: (1) developing and meeting technology program requirements, (2) overseeing and conducting testing of new screening technologies, and (3) identifying acquisition program baselines (or starting points), program schedules, and costs. This statement will also discuss recent DHS and TSA efforts to strengthen TSA's investment and acquisition processes. This statement is based on reports and testimonies GAO issued from October 2009 through April 2012 related to TSA's efforts to manage, test, and deploy various technology programs. GAO's past work has found that the Department of Homeland Security (DHS) and the Transportation Security Administration (TSA) have faced challenges in developing and meeting program requirements when acquiring screening technologies. GAO's past work has demonstrated that program performance cannot be accurately assessed without valid baseline requirements established at the program start. In June 2010, GAO reported that more than half of the 15 DHS programs GAO reviewed awarded contracts to initiate acquisition activities without component or department approval of documents essential to planning acquisitions, setting operational requirements, or establishing acquisition program baselines. At the program level, in January 2012, GAO reported that TSA did not fully follow DHS acquisition policies when acquiring advanced imaging technology (AIT)--commonly referred to as a full body scanner that identifies objects or anomalies on the outside of the body--which resulted in DHS approving full AIT deployment without full knowledge of TSA's revised specifications. In July 2011, GAO reported that in 2010 TSA revised its explosive detection systems (EDS) requirements to better address current threats and planned to implement these requirements in a phased approach; however, GAO reported that some number of the EDSs in TSA's fleet were configured to detect explosives at the levels established in 2005 while the remaining ones were configured to detect explosives at 1998 levels and TSA did not have a plan with time frames needed to deploy EDSs to meet the current requirements. GAO also reported DHS and TSA challenges in overseeing and testing new technologies. For example, in January 2012, GAO reported that TSA began deploying AIT before it received approval for how it would test AIT. Contrary to DHS's acquisition guidance, TSA approved AIT for deployment prior to DHS's approval of the AIT testing and evaluation plan. In July 2011, GAO also reported that TSA experienced challenges collecting data on the properties of certain explosives needed by vendors to develop EDS detection software and needed by TSA before testing EDS prior to procurement and deployment to airports. TSA and the DHS Science and Technology Directorate experienced these challenges because of problems safely handling and consistently formulating some explosives. The challenges related to data collection for certain explosives resulted in problems carrying out the EDS procurement as planned. DHS and TSA have experienced challenges identifying acquisition program baselines, program schedules, and costs. GAO's prior work has found that realistic acquisition program baselines with stable requirements for cost, schedule, and performance are among the factors that are important to successful acquisitions delivering capabilities within cost and schedule. GAO also found that program performance metrics for cost and schedule can provide useful indicators of the health of acquisition programs. In April 2012 GAO reported that TSA's methods for developing life-cycle cost estimates for the Electronic Baggage Screening Program did not fully adhere to best practices for developing these estimates. DHS has efforts underway to strengthen oversight of technology acquisitions. In part due to the problems GAO highlighted in DHS's acquisition process, the implementation and transformation of DHS remains on GAO's high-risk list. GAO is not making any new recommendations. In prior work, GAO made recommendations to address challenges related to deploying AIT, EDS, and other screening technology to meet requirements; overseeing and conducting testing of AIT and EDS technologies; and incorporating information on costs and schedules, among other things, in making technology acquisition decisions. DHS and TSA concurred and have actions underway to address these recommendations.
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DOD is not receiving expected returns on its large investment in weapon systems. While it is committing substantially more investment dollars to develop and procure new weapon systems, our analysis shows that the 2007 portfolio of major defense acquisition programs is experiencing greater cost growth and schedule delays than programs in fiscal years 2000 and 2005. For example, as shown in table 1, total acquisition costs for 2007 programs have increased 26 percent from first estimates, whereas programs in fiscal year 2000 had increased by 6 percent. Total RDT&E costs for programs in 2007 have increased by 40 percent from first estimates, compared to 27 percent for programs in 2000. The story is no better when expressed in unit costs. Based on our analysis for the 2007 portfolio, 44 percent of DOD's major defense acquisition programs are paying at least 25 percent more per unit than originally expected. The percentage of programs experiencing a 25 percent or more increase in program acquisition unit costs in fiscal year 2000 was 37 percent. The consequence of cost growth is reduced buying power, which can represent significant opportunity costs for DOD. In other words, every dollar spent on inefficiencies in acquiring one weapon system is less money available for other priorities and programs. Total acquisition cost for the current portfolio of major programs under development or in production has grown by nearly $300 billion over initial estimates. As program costs increase, DOD must request more funding to cover the overruns, make trade-offs with existing programs, delay the start of new programs, or take funds from other accounts. Just as importantly, DOD has already missed fielding dates for many programs and many others are behind schedule. Because of program delays, warfighters often have to operate costly legacy systems longer than expected, find alternatives to fill capability gaps, or go without the capability. The warfighter's urgent need for the new weapon system is often cited when the case is first made for developing and producing the system. However, on average, the current portfolio of programs has experienced a 21-month delay in delivering initial operational capability to the warfighter and, in fact, 14 percent are more than 4 years late. In assessing the 72 weapon programs, we found no evidence of widespread adoption of a knowledge-based acquisition process within DOD despite polices to the contrary. Reconciling this discrepancy between policy and practice is essential for getting better outcomes for DOD programs. The majority of programs in our assessment this year proceeded with lower levels of knowledge at critical junctures and attained key elements of product knowledge later in development than expected under best practices (see fig. 1). This exposes programs to significant and unnecessary technology, design, and production risks, and ultimately leads to cost growth and schedule delays. The building of knowledge over a product's development is cumulative, as one knowledge point builds on the next, and failure to capture key product knowledge can lead to problems that eventually cascade and become magnified throughout product development and production. Very few of the programs we assessed started system development with evidence that the proposed solution was based on mature technologies and proven design features. As a result, programs are still working to mature technologies during system development and production, which causes significantly higher cost growth than programs that start development with mature technologies. Only 12 percent of the programs in our assessment demonstrated all of their critical technologies as fully mature at the start of system development and they have had much better outcomes than the others. For those programs in our assessment with immature technologies at development start, total RDT&E costs grew by 44 percent more than for programs that began with mature technologies. More often than not, programs were still maturing technologies late into development and even into production. In addition to ensuring that technologies are mature, best practices for product development suggest that the developer should have delivered a preliminary design of the proposed weapon system based on a robust systems engineering process before committing to system development. This process should allow the developer--the contractor responsible for designing the weapon system--to analyze the customer's expectations for the product and identify gaps between resources and those expectations, which then can be addressed through additional investments, alternate designs, and ultimately trade-offs. Only ten percent of the programs in our assessment had completed their preliminary design review prior to committing to system development. The other 90 percent averaged about 2 1/2 years into system development before the review was completed or planned to be completed. Programs like the Aerial Common Sensor and Joint Strike Fighter did not deliver a sound preliminary design at system development start and discovered problems early in their design activities that required substantial resources be added to the programs or, in the case of Aerial Common Sensor, termination of the system development contract. Knowing that a product's design is stable before system demonstration reduces the risk of costly design changes occurring during the manufacturing of production representative prototypes--when investments in acquisitions become much more significant. Only a small portion of the programs in our assessment that have held a design review captured the necessary knowledge to ensure that they had mature technologies at system development start and a stable system design before entering the more costly system demonstration phase of development. Over half of the programs in our assessment did not even have mature technologies at the design review (knowledge that actually should have been achieved before system development start). Also, less than one-quarter of the programs that provided data on drawings released at the design review reached the best practices standard of 90 percent. We have found that programs moving forward into system demonstration with low levels of design stability are more likely than other programs to encounter costly design changes and parts shortages that in turn caused labor inefficiencies, schedule delays, and quality problems. Even by the beginning of production, more than a third of the programs that had entered this phase still had not released 90 percent of their engineering drawings. In addition, we found that over 80 percent of the programs providing data did not or did not plan to demonstrate the successful integration of the key subsystems and components needed for the product through an integration laboratory, or better yet, through testing an early system prototype by the design review. For example, the Navy's E-2D Advanced Hawkeye moved past the design review and entered systems demonstration without fully proving--through the use of an integration lab or prototype--that the design could be successfully integrated. The program did not have all the components operational in a systems integration lab until almost 2 years after the design review. While the program estimated it had released 90 percent of the drawings needed for the system by the design review, as it was conducting system integration activities, it discovered that it needed substantially more drawings. This increase means that the program really had completed only 53 percent of the drawings prior to the review, making it difficult to ensure the design was stable. In addition to lacking mature technologies and design stability, most programs have not or do not plan to capture critical manufacturing and testing knowledge before entering production. This knowledge ensures that the product will work as intended and can be manufactured efficiently to meet cost, schedule, and quality targets. Of the 26 programs in our assessment that have had production decisions, none provided data showing that they had all their critical manufacturing processes in statistical control by the time they entered into the production phase. In fact, only 3 of these programs indicated that they had even identified the key product characteristics or associated critical manufacturing processes--key initial steps to ensuring critical production elements are stable and in control. Failing to capture key manufacturing knowledge before producing the product can lead to inefficiencies and quality problems. For example, the Wideband Global SATCOM program encountered cost and schedule delays because contractor personnel installed fasteners incorrectly. Discovery of the problem resulted in extensive inspection and rework to correct the deficiencies, contributing to a 15-month schedule delay. In addition to demonstrating that the product can be built efficiently, our work has shown that production and post-production costs are minimized when a fully integrated, capable prototype is demonstrated to show it will work as intended and in a reliable manner. We found that many programs are susceptible to discovering costly problems late in development, when the more complex software and advanced capabilities are tested. Of the 33 programs that provided us data about the overlap between system development and production, almost three-quarters still had or planned to have system demonstration activities left to complete after production had begun. For 9 programs, the amount of system development work remaining was estimated to be over 4 years. This practice of beginning production before successfully demonstrating that the weapon system will work as intended increases the potential for discovering costly design changes that ripple through production into products already fielded. Forty programs we assessed provided us information on when they had or planned to have tested a fully configured, integrated production representative article (i.e., prototype) in the intended environment. Of these, 62 percent reported that they did not conduct or do not plan to conduct that test before a production decision. We also found examples where product reliability is not being demonstrated in a timely fashion. Making design changes to achieve reliability requirements after production begins is inefficient and costly. For example, despite being more than 5 years past the production decision, the Air Force's Joint Air-to-Surface Standoff Missile experienced four failures during four flight tests in 2007, resulting in an overall missile reliability rate of less than 60 percent. The failures halted procurement of new missiles by the Air Force until the problems could be resolved. DOD's poor acquisition outcomes stem from the absence of knowledge that disciplined systems engineering practices can bring to decision makers prior to beginning a program. Systems engineering is a process that translates customer needs into specific product requirements for which requisite technological, software, engineering, and production capabilities can be identified. These activities include requirements analysis, design, and testing in order to ensure that the product's requirements are achievable given available resources. Early systems engineering provides knowledge that enables a developer to identify and resolve gaps before product development begins. Consequently, establishing a sound acquisition program with an executable business case depends on determining achievable requirements based on systems engineering that are agreed to by both the acquirer and developer before a program's initiation. We have recently reported on the impact that poor systems engineering practices have had on several programs such as the Global Hawk Unmanned Aircraft System, F-22A, Expeditionary Fighting Vehicle, Joint Air-to-Surface Standoff Missile and others. When early systems engineering, specifically requirements analysis, is not performed, increased cost risk to the government and long development cycle times can be the result. DOD awards cost reimbursement type contracts for the development of major weapon systems because of the risk and uncertainty involved with its programs. Because the government often does not perform the necessary systems engineering analysis before a contract is signed to determine whether a match exists between requirements and available resources, significant contract cost increases can occur as the scope of the requirements change or becomes better understood by the government and contractor. Another potential consequence of the lack of requirements analysis is unpredictable cycle times. Requirements that are limited and well-understood contribute to shorter, more predictable cycle times. Long cycle times promote instability, especially considering DOD's tendency to have changing requirements and program manager turnover. On the other hand, time- defined developments can allow for more frequent assimilation of new technologies into weapon systems and speed new capabilities to the warfighter. In fact, DOD itself suggests that system development should be limited to about 5 years. This year, we gathered new data focused on other factors we believe could have a significant influence on DOD's ability to improve cost and schedule outcomes. These factors were changes to requirements after development began, the length of program managers' tenure, reliance on contractors for program support, and difficulty managing software development. Foremost, several DOD programs in our assessment incurred requirement changes after the start of system development and experienced cost increases. Among the 46 programs we surveyed, RDT&E costs increased by 11 percent over initial estimates for programs that have not had requirements changes, while they increased 72 percent among those that had requirements changes (see fig. 2). At the same time, DOD's practice of frequently changing program managers during a program's development makes it difficult to hold them accountable for the business cases that they are entrusted to manage and deliver. Our analysis indicates that for 39 major acquisition programs started since March 2001, the average time in system development was about 37 months. The average tenure for program managers on those programs during that time was about 17 months--less than half of what is required by DOD policy. We also found that DOD is relying more on contractors to support the management and oversight of weapon system acquisitions and contracts. For 52 DOD programs that provided information, about 48 percent of the program office staff was composed of individuals outside of DOD (see table 2). In a prior review of space acquisition programs, we found that 8 of 13 cost-estimating organizations and program offices believed the number of cost estimators was inadequate and we found that 10 of those offices had more contractor personnel preparing cost estimates than government personnel. We also found examples during this year's assessment where the program offices expressed concerns about having inadequate personnel to conduct their program office roles. Finally, as programs rely more heavily on software to perform critical functions for weapon systems, we found that a large number of programs are encountering difficulties in managing their software development. Roughly half of the programs that provided us software data had at least a 25 percent growth in their expected lines of code--a key metric used by leading software developers--since system development started. For example, software requirements were not well understood on the Future Combat Systems when the program began; and as the program moves toward preliminary design activities, the number of lines of software code has nearly tripled. Changes to the lines of code needed can indicate potential cost and schedule problems. Our work shows that acquisition problems will likely persist until DOD provides a better foundation for buying the right things, the right way. This involves (1) maintaining the right mix of programs to invest in by making better decisions as to which programs should be pursued given existing and expected funding and, more importantly, deciding which programs should not be pursued; (2) ensuring that programs that are started are executable by matching requirements with resources and locking in those requirements; and (3) making it clear that programs will then be executed based on knowledge and holding program managers responsible for that execution. We have made similar recommendations in past GAO reports. These changes will not be easy to make. They will require DOD to reexamine not only its acquisition process, but its requirement setting and funding processes as well. They will also require DOD to change how it views program success, and what is necessary to achieve success. This includes changing the environment and incentives that lead DOD and the military services to overpromise on capability and underestimate costs in order to sell new programs and capture the funding needed to start and sustain them. Finally, none of this will be achieved without a true partnership among the department, the military services, the Congress, and the defense industry. All of us must embrace the idea of change and work diligently to implement it. The first, and most important, step toward improving acquisition outcomes is implementing a new DOD-wide investment strategy for weapon systems. We have reported that DOD should develop an overarching strategy and decision-making processes that prioritize programs based on a balanced match between customer needs and available department resources---that is the dollars, technologies, time, and people needed to achieve these capabilities. We also recommended that capabilities not designated as a priority should be set out separately as desirable but not funded unless resources were both available and sustainable. This means that the decision makers responsible for weapon system requirements, funding, and acquisition execution must establish an investment strategy in concert. DOD's Under Secretary of Defense for Acquisition, Technology and Logistics--DOD's corporate leader for acquisition--should develop this strategy in concert with other senior leaders, for example, combatant commanders who would provide input on user needs; DOD's comptroller and science and technology leaders, who would provide input on available resources; and acquisition executives from the military services, who could propose solutions. Finally, once priority decisions are made, Congress will need to enforce discipline through its legislative and oversight mechanisms. Once DOD has prioritized capabilities, it should work vigorously to make sure each new program is executable before the acquisition begins. More specifically, this means assuring requirements for specific weapon systems are clearly defined and achievable given available resources and that all alternatives have been considered. System requirements should be agreed to by service acquisition executives as well as combatant commanders. Once programs begin, requirements should not change without assessing their potential disruption to the program and assuring that they can be accommodated within time and funding constraints. In addition, DOD should prove that technologies can work as intended before including them in acquisition programs. More ambitious technology development efforts should be assigned to the science and technology community until they are ready to be added to future generations of the product. DOD should also require the use of independent cost estimates as a basis for budgeting funds. Our work over the past 10 years has consistently shown when these basic steps are taken, programs are better positioned to be executed within cost and schedule. To keep programs executable, DOD should demand that all go/no-go decisions be based on quantifiable data and demonstrated knowledge. These data should cover critical program facets such as cost, schedule, technology readiness, design readiness, production readiness, and relationships with suppliers. Development should not be allowed to proceed until certain knowledge thresholds are met--for example, a high percentage of engineering drawings completed at critical design review. DOD's current policies encourage these sorts of metrics to be used as a basis for decision making, but they do not demand it. DOD should also place boundaries on the time allowed for system development. To further ensure that programs are executable, DOD should pursue an evolutionary path toward meeting user needs rather than attempting to satisfy all needs in a single step. This approach has been consistently used by successful commercial companies we have visited over the past decade because it provides program managers with more achievable requirements, which, in turn, facilitate shorter cycle times. With shorter cycle times, the companies we have studied have also been able to assure that program managers and senior leaders stay with programs throughout the duration of a program. DOD has policies that encourage evolutionary development, but programs often favor pursuing more revolutionary, exotic solutions that will attract funds and support. The department and, more importantly, the military services, tend to view success as capturing the funding needed to start and sustain a development program. In order to do this, they must overpromise capability and underestimate cost. In order for DOD to move forward, this view of success must change. World-class commercial firms identify success as developing products within cost estimates and delivering them on time in order to survive in the marketplace. This forces incremental, knowledge-based product development programs that improve capability as new technologies are matured. To strengthen accountability, DOD must also clearly delineate responsibilities among those who have a role in deciding what to buy as well as those who have role in executing, revising, and terminating programs. Within this context, rewards and incentives must be altered so that success can be viewed as delivering needed capability at the right price and the right time, rather than attracting and retaining support for numerous new and ongoing programs. To enable accountability to be exercised at the program level once a program begins, DOD will need to (1) match program manager tenure with development or the delivery of a product; (2) tailor career paths and performance management systems to incentivize longer tenures; (3) strengthen training and career paths as needed to ensure program managers have the right qualifications for run the programs they are assigned to; (4) empower program managers to execute their programs, including an examination of whether and how much additional authority can be provided over funding, staffing, and approving requirements proposed after the start of a program; and (5) develop and provide automated tools to enhance management and oversight as well as to reduce the time required to prepare status information. DOD also should hold contractors accountable for results. As we have recommended, this means structuring contracts so that incentives actually motivate contractors to achieve desired acquisition outcomes and withholding fees when those goals are not met. DOD has taken actions related to some of these steps. Based in part on GAO recommendations and congressional direction, DOD has recently begun to develop several initiatives that, if adopted and implemented properly, could provide a foundation for establishing sound, knowledge- based business cases for individual acquisition programs and improving program outcomes. For example, DOD is experimenting with a new concept decision review, different acquisition approaches according to expected fielding times, and panels to review weapon system configuration changes that could adversely affect program cost and schedule. In addition, in September 2007 the Office of the Under Secretary of Defense for Acquisition, Technology and Logistics issued a policy memorandum to ensure weapon acquisition programs were able to demonstrate key knowledge elements that could inform future development and budget decisions. This policy directed pending and future programs to include acquisition strategies and funding that provide for two or more competing contractors to develop technically mature prototypes through system development start (knowledge point 1), with the hope of reducing technical risk, validating designs and cost estimates, evaluating manufacturing processes, and refining requirements. Each of the initiatives is designed to enable more informed decisions by key department leaders well ahead of a program's start, decisions that provide a closer match between each program's requirements and the department's resources. DOD also plans to implement new practices similar to past GAO recommendations that are intended to provide program managers more incentives, support, and stability. The department acknowledges that any actions taken to improve accountability must be based on a foundation whereby program managers can launch and manage programs toward greater performance, rather than focusing on maintaining support and funding for individual programs. DOD acquisition leaders have told us that any improvements to program managers' performance hinge on the success of the department's initiatives. In addition, DOD has taken actions to strengthen the link between award and incentive fees with desired program outcomes, which has the potential to increase the accountability of DOD programs for fees paid and of contractors for results achieved. In closing, the past year has seen several new proposed approaches to improve the way DOD buys weapons. These approaches have come from within the department, from highly credible commissions established by the department, and from GAO. They are based on solid principles. If they are to produce better results, however, they must heed the lessons taught--but perhaps not learned--by various past studies and by DOD's acquisition history itself. Specifically, DOD must do a better job of prioritizing its needs in the context of the nation's greater fiscal challenges. It must become more disciplined in managing the mix of programs to meet available funds. If everything is a priority, nothing is a priority. Policy must also be manifested in decisions on individual programs or reform will be blunted. DOD's current acquisition policy is a case in point. The policy supports a knowledge-based, evolutionary approach to acquiring new weapons. However, the practice--decisions made on individual programs--sacrifices knowledge and realism about what can done within the available time and funding in favor of revolutionary solutions. Reform will not be real unless each weapon system is shown to be both a worthwhile investment and a realistic, executable program based on the technology, time, and money available. This cannot be done until the acquisition environment is changed along with the incentives associated with it. DOD and the military services cannot continue to view success through the prism of securing the funding needed to start and sustain new programs. Success must be defined in terms of delivering the warfighter capabilities when needed and as promised and incentives must be aligned to encourage a disciplined, knowledge-based approach to achieve this end. The upcoming change in administration presents challenges as well as opportunities to improve the process and its outcomes through sustained implementation of best practices, as well as addressing new issues that may emerge. Significant changes will only be possible with greater, and continued, department level support, including strong and consistent vision, direction, and advocacy from DOD leadership, as well as sustained oversight and cooperation from the Congress. In addition, all of the players involved with acquisitions--the requirements community; the Joint Chiefs of Staff; the comptroller; the Under Secretary of Defense for Acquisition, Technology and Logistics; and perhaps most importantly, the military services--must be unified in implementing reforms from top to bottom. Mr. Chairmen and Members of the Committee and Subcommittee, this concludes my statement. I will be happy to take any questions that you may have at this time. For further questions about this statement, please contact Michael J. Sullivan at (202) 512-4841. Individuals making key contributions to this statement include Ron Schwenn, Assistant Director; Ridge C. Bowman; Quindi C. Franco; Matthew B. Lea; Brian Mullins; Kenneth E. Patton, and Alyssa B. Weir. Best Practices: Increased Focus on Requirements and Oversight Needed to Improve DOD's Acquisition Environment and Weapon System Quality. GAO-08-294. Washington, D.C.: Feb. 1, 2008. Defense Acquisitions: Assessments of Selected Weapon Programs. GAO- 07-406SP. Washington, D.C.: March 30, 2007. Best Practices: Stronger Practices Needed to Improve DOD Technology Transition Processes. GAO-06-883. Washington, D.C.: September 14, 2006. Best Practices: Better Support of Weapon System Program Managers Needed to Improve Outcomes. GAO-06-110. Washington, D.C.: November 1, 2005. Defense Acquisitions: Major Weapon Systems Continue to Experience Cost and Schedule Problems under DOD's Revised Policy. GAO-06-368. Washington, D.C.: April 13, 2006. DOD Acquisition Outcomes: A Case for Change. GAO-06-257T. Washington, D.C.: November 15, 2005. Defense Acquisitions: Stronger Management Practices Are Needed to Improve DOD's Software-Intensive Weapon Acquisitions. GAO-04-393. Washington, D.C.: March 1, 2004. Best Practices: Setting Requirements Differently Could Reduce Weapon Systems' Total Ownership Costs. GAO-03-57. Washington, D.C.: February 11, 2003. Defense Acquisitions: Factors Affecting Outcomes of Advanced Concept Technology Demonstration. GAO-03-52. Washington, D.C.: December 2, 2002. Best Practices: Capturing Design and Manufacturing Knowledge Early Improves Acquisition Outcomes. GAO-02-701. Washington, D.C.: July 15, 2002. Defense Acquisitions: DOD Faces Challenges in Implementing Best Practices. GAO-02-469T. Washington, D.C.: February 27, 2002. Best Practices: Better Matching of Needs and Resources Will Lead to Better Weapon System Outcomes. GAO-01-288. Washington, D.C.: March 8, 2001. Best Practices: A More Constructive Test Approach Is Key to Better Weapon System Outcomes. GAO/NSIAD-00-199. Washington, D.C.: July 31, 2000. Defense Acquisition: Employing Best Practices Can Shape Better Weapon System Decisions. GAO/T-NSIAD-00-137. Washington, D.C.: April 26, 2000. Best Practices: DOD Training Can Do More to Help Weapon System Programs Implement Best Practices. GAO/NSIAD-99-206. Washington, D.C.: August 16, 1999. Best Practices: Better Management of Technology Development Can Improve Weapon System Outcomes. GAO/NSIAD-99-162. Washington, D.C.: July 30, 1999. Defense Acquisitions: Best Commercial Practices Can Improve Program Outcomes. GAO/T-NSIAD-99-116. Washington, D.C.: March 17, 1999. Defense Acquisitions: Improved Program Outcomes Are Possible. GAO/T- NSIAD-98-123. Washington, D.C.: March 17, 1998. Best Practices: Successful Application to Weapon Acquisition Requires Changes in DOD's Environment. GAO/NSIAD-98-56. Washington, D.C.: February 24, 1998. Best Practices: Commercial Quality Assurance Practices Offer Improvements for DOD. GAO/NSIAD-96-162. Washington, D.C.: August 26, 1996. This is a work of the U.S. government and is not subject to copyright protection in the United States. It may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.
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DOD's investment in weapon systems represents one of the largest discretionary items in the budget. The department expects to invest about $900 billion (fiscal year 2008 dollars) over the next 5 years on development and procurement with more than $335 billion invested specifically in major defense acquisition programs. Every dollar spent inefficiently in acquiring weapon systems is less money available for other budget priorities--such as the global war on terror and growing entitlement programs. This testimony focuses on (1) the overall performance of DOD's weapon system investment portfolio; (2) our assessment of 72 weapon programs against best practices standards for successful product developments; and (3) potential solutions and recent DOD actions to improve weapon program outcomes. It is based on GAO-08-467SP , which included our analysis of broad trends in the performance of the programs in DOD's weapon acquisition portfolio and our assessment of 72 defense programs, and recommendations made in past GAO reports. DOD was provided a draft of GAO-08-467SP and had no comments on the overall report, but did provide technical comments on individual assessments. The comments, along with the agency comments received on the individual assessments, were included as appropriate. We recently released our sixth annual assessment of selected DOD weapon programs. The assessment indicates that cost and schedule outcomes for major weapon programs are not improving. Although well-conceived acquisition policy changes occurred in 2003 that reflect many best practices we have reported on in the past, these policy changes have not yet translated into practice at the program level. None of the weapon programs we assessed this year had proceeded through system development meeting the best practices standards for mature technologies, stable design, and mature production processes--all prerequisites for achieving planned cost, schedule, and performance outcomes. In addition, only a small percentage of programs used two key systems engineering tools--preliminary design reviews and prototypes to demonstrate the maturity of the product's design by critical junctures. This lack of disciplined systems engineering affects DOD's ability to develop sound, executable business cases for programs. Our work shows that acquisition problems will likely persist until DOD provides a better foundation for buying the right things, the right way. This involves making tough decisions as to which programs should be pursued, and more importantly, not pursued; making sure programs are executable; locking in requirements before programs are ever started; and making it clear who is responsible for what and holding people accountable when responsibilities are not fulfilled. Moreover, the environment and incentives that lead DOD and the military services to overpromise on capability and underestimate costs in order to sell new programs and capture funding will need to change. Based in part on GAO recommendations and congressional direction, DOD has begun several initiatives that, if adopted and implemented properly, could provide a foundation for establishing sound, knowledge-based business cases for individual acquisition programs and improving outcomes.
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In response to global challenges the government faces in the coming years, the creation of a Department of Homeland Security provides a unique opportunity to create an extremely effective and performance-based organization that can strengthen the nation's ability to protect its borders and citizens against terrorism. There is likely to be considerable benefit over time from restructuring some of the homeland security functions, including reducing risk and improving the economy, efficiency and effectiveness of these consolidated agencies and programs. Realistically, however, in the short term, the magnitude of the challenges that the new department faces will clearly require substantial time and effort, and will take additional resources to make it fully effective. Recently, we testified that Congress should consider several very specific criteria in its evaluation of whether individual agencies or programs should be included or excluded from the proposed department. Those criteria include the following: Mission Relevancy: Is homeland security a major part of the agency or program mission? Is it the primary mission of the agency or program? Similar Goals and Objectives: Does the agency or program being considered for the new department share primary goals and objectives with the other agencies or programs being consolidated? Leverage Effectiveness: Does the agency or program being considered for the new department create synergy and help to leverage the effectiveness of other agencies and programs or the new department as a whole? In other words, is the whole greater than the sum of the parts? Gains Through Consolidation: Does the agency or program being considered for the new department improve the efficiency and effectiveness of homeland security missions through eliminating duplications and overlaps, closing gaps and aligning or merging common roles and responsibilities? Integrated Information Sharing/Coordination: Does the agency or program being considered for the new department contribute to or leverage the ability of the new department to enhance the sharing of critical information or otherwise improve the coordination of missions and activities related to homeland security? Compatible Cultures: Can the organizational culture of the agency or program being considered for the new department effectively meld with the other entities that will be consolidated? Field structures and approaches to achieving missions vary considerably between agencies. Impact on Excluded Agencies: What is the impact on departments losing components to the new department? What is the impact on agencies with homeland security missions left out of the new department? Federally sponsored research and development efforts, a key focus of the proposed legislation, enhance the government's capability to counter chemical, biological, radiological, and nuclear terrorist threats by providing technologies that meet a range of crisis- and consequence- management needs. Research and development efforts for these technologies, however, can be risky, time consuming, and costly. Such efforts also may need to address requirements not available in off-the-shelf products. These factors limit private and public research and development efforts for these technologies, necessitating federal government involvement and collaboration. Many federal agencies and interagency working groups have recently deployed or are conducting research on a variety of technologies to combat terrorism. Recently deployed technologies include a prototype biological detection system used at the Salt Lake City Olympics and a prototype chemical detection system currently being used in Washington D.C.'s metro system that was developed by DOE. Technologies under development include new or improved vaccines, antibiotics, and antivirals being developed by the National Institutes of Health. In addition, the Centers for Disease Control and Prevention, in collaboration with other federal agencies, are conducting research on the diagnosis and treatment of smallpox. Moreover, the Food and Drug Administration is investigating a variety of biological agents that could be used as terrorist weapons. Other federal agencies such as the Department of Defense and intelligence community are engaged in similar research and development activities, such as research on technology to protect combatants from chemical and biological agents. Certain roles and responsibilities of the Department of Homeland Security in managing research and development need to be clarified. Under the proposed legislation, the Department of Homeland Security would be tasked with developing national policy for and coordinating the federal government's civilian research and development efforts to counter chemical, biological, radiological, and nuclear threats. However, while coordination is important, it will not be enough. Federal agency coordination alone may not address the specific needs of state and local governments, such as those of local police and fire departments that will use this technology. In our view, the proposed legislation should also specify that a role of the new department will be to develop collaborative relationships with programs at all levels of government--federal, state, and local--to ensure that users' needs and research efforts are linked. We also believe the legislation should be clarified to ensure that the new department would be responsible for the development of a single national research and development strategic plan. Such a plan would help to ensure that research gaps are filled, unproductive duplication is minimized, and individual agency plans are consistent with the overall goals. Moreover, the proposed legislation, as written, is unclear about the new department's role in developing standards for the performance and interoperability of new technologies to address terrorist threats. We believe the development of these standards must be a priority of the new department. The limitations of existing coordination and the critical need for a more collaborative, unified research structure has been amply demonstrated in the recent past. We have previously reported that while agencies attempt to coordinate federal research and development programs in a variety of ways, breakdowns occur, leading to research gaps and duplication of effort. Coordination is limited by compartmentalization of efforts because of the sensitivity of the research and development programs, security classification of research, and the absence of a single coordinating entity to ensure against duplication. For example, the Department of Defense's Defense Advanced Research Projects Agency was unaware of U.S. Coast Guard's plans to develop methods to detect biological agents on infected cruise ships and, therefore, was unable to share information on its potentially related research to develop biological detection devices for buildings. Although the proposed legislation states that the new department will be responsible for developing national policy and coordinating research and development, it has a number of limitations that could weaken its effectiveness. First, the legislation tasks the new department with coordinating the federal government's "civilian efforts" only. We believe the new department will also need to coordinate with the Department of Defense and the intelligence agencies that conduct research and development efforts designed to detect and respond to weapons of mass destruction. The proposed transfer of some DOE research and development efforts to the Department of Homeland Security also does not eliminate potential overlaps, gaps, and opportunities for collaboration. Coordination will still be required within and among the 23 DOE national laboratories. For example, our 2001 report noted that two offices within Sandia National Laboratory concurrently and separately worked on similar thermal imagery projects for two different federal agencies, rather than consolidating the requests and combining resources. In addition, local police and fire departments and state and local governments possess practical knowledge about their technological needs and relevant design limitations that should be taken into account in federal efforts to provide new equipment, such as protective gear and sensor systems. To be most effective, the new department will have to develop collaborative relationships with all these organizations to facilitate technological improvements and encourage cooperative behavior. The existing proposal leaves a number of problems unaddressed as well. For example, while the proposed legislation is clear that the position of Undersecretary for Chemical, Biological, Radiological, and Nuclear Countermeasures will be responsible for developing national policy for federal research and development, there is no requirement for a strategic plan for national research and development that could address coordination, reduce potential duplication, and ensure that important issues are addressed. In 2001, we recommended the creation of a unified strategy to reduce duplication and leverage resources, and suggested that the plan be coordinated with federal agencies performing research as well as with state and local authorities. The development of such a plan would help to ensure that research gaps are filled, unproductive duplication is minimized, individual agency plans are consistent with the overall goals, and a basis for assessing the success of the research and development efforts. Also, while the legislation calls for the establishment of guidelines for state and local governments to implement countermeasures for chemical, biological, radiological, and nuclear terrorism threats, it is not clear to us what these guidelines are to entail. In this regard, we believe it will be important to develop standards for the performance and interoperability of new technologies, something that the legislation does not specifically address. For example, we had discussions with officials from the Utah State Department of Health who prepared for the 2002 Winter Olympic Games. These officials said that local police and fire departments had been approached by numerous vendors offering a variety of chemical and biological detection technology for use during the Olympics. However, these state and local officials were unsure of the best technology to purchase and could find no federal agency that would provide guidance on the technologies. They told us that if the science backing up the technology is poor or the data the technology produces are faulty, the technology can do more harm than good. Further, the legislation would allow the new department to direct, fund, and conduct research related to chemical, biological, radiological, nuclear, and other emerging threats on its own. This raises the potential for duplication of efforts, lack of efficiency, and an increased need for coordination with other departments that would continue to carry out relevant research. We are concerned that the proposal could result in a duplication of capacity that already exists in the current federal laboratories. Under Title III of the proposed legislation, a number of DOE programs and activities would be transferred to the new department. Some of these transfers seem appropriate. However, in other cases we are concerned about the transfers because of the potential impact on programs and activities that currently support missions beyond homeland security. Finally, in some cases, transfers proposed by the legislation are not laid out in enough detail to permit an assessment. We discuss each of these groups of transfers below. Title III proposes to transfer to the Department of Homeland Security certain DOE activities that seem appropriate. Specifically, Title III proposes to transfer the nuclear threat assessment program and activities of the assessment, detection, and cooperation program in DOE's international Materials, Protection, and Accountability Program (MPC&A). The threat assessment program and activities, among other things, assesses the credibility of communicated nuclear threats, analyzes reports of illicit nuclear material trafficking, and provides technical support to law enforcement agencies regarding nuclear material/weapons. We would agree with officials of the Office of Nuclear Threat Assessment and Detection who view the potential transfer to the Department of Homeland Security positively. We base our agreement on the fact that, according to officials from DOE, the transfer would not have a negative impact on the rest of the MPC&A program because the functions are separate and distinct. Further, the transfer could tie the office in more closely with the other agencies they work with, such as Customs. Another program that we believe could be appropriately transferred to the new department is the Environmental Measurements Laboratory (EML), located in New York City. This government-operated laboratory operates under the Office of Science and Technology in the Office of Environmental Management at DOE. EML provides program management, technical assistance and data quality assurance for measurements of radiation and radioactivity relating to environmental restoration, global nuclear nonproliferation, and other priority issues for DOE, as well as for other government, national and international organizations. According to the laboratory director, the laboratory is completely in favor of the transfer to the proposed Department of Homeland Security and would fit in very well with it. We believe the transfer is appropriate because, unlike some other transfers proposed under Title III, the entire laboratory would be transferred. While it is a multiprogram laboratory serving several elements of DOE as well as other organizations, serving multiple clients could continue under a "work for others" contracting arrangement whether the laboratory was housed within DOE or the Department of Homeland Security. Title III proposes transferring the parts of DOE's nonproliferation and verification research and development program that conduct research on systems to improve the nation's capability to prepare for and respond to chemical and biological attacks. The legislation also proposes transferring a portion of the program's proliferation detection research. This includes work on developing sensors to help the Coast Guard monitor container shipping at ports of entry. These proposed transfers raise concerns because much of the program's research supports both homeland security and international nonproliferation programs. These programs have broad missions that are not easily separated into homeland security research and research for other purposes and the proposed legislation is not clear how these missions would continue to be accomplished. Furthermore, we are concerned that the legislation does not clearly indicate whether only the programmatic management and funding would move or also the scientists carrying out the research. Moving the scientists may not be prudent. This is because the research is currently conducted by multiprogram laboratories that employ scientists skilled in many disciplines who serve many different missions and whose research benefits from their interactions with colleagues within the laboratory. In addition, we believe transferring control of some scientists within the DOE national laboratories to the Department of Homeland Security could complicate an already dysfunctional DOE organizational structure by blurring lines of authority and accountability. DOE carries out its diverse missions through a network of multilayered field offices that oversee activities at the national laboratories and other DOE facilities widely dispersed throughout the country. The structure inherited by DOE and the different program cultures and management styles within that structure have confounded DOE's efforts to develop a more effective organization. Transferring control of scientists within the national laboratories could complicate the accomplishment of homeland security missions and DOE's other missions by adding additional lines of authority and accountability between the laboratory scientists, DOE, and the Department of Homeland Security. One alternative would be for the new department to contract with DOE's national laboratories to conduct the research under "work for others" contracts. This would allow for direct contact between the Department of Homeland Security and the laboratories conducting the research without creating a new bureaucracy. Many federal agencies such as the Department of Defense and intelligence agencies currently use this contracting arrangement with the national laboratories. We have similar concerns about transferring two other activities to the new department: The advanced scientific computing research program and activities at Lawrence Livermore National Laboratory are developing supercomputer hardware and software infrastructure aimed at enabling laboratory and university researchers to solve the most challenging scientific problems at a level of accuracy and detail never before achieved. Research conducted under the program include; designing materials atom-by-atom, revealing the functions of proteins, understanding and controlling plasma turbulence, designing new particle accelerators and modeling global climate change. This program is an integral part of DOE's efforts to ensure that the nuclear weapons stockpile is safe and secure. This program may be difficult to separate into homeland security research and research for other purposes. The Life Sciences Division within the DOE Office of Science's Biological and Environmental Research Program manages a diverse portfolio of research to develop fundamental biological information and to advance technology in support of DOE's missions in biology, medicine, and the environment. For example, it is determining the whole genome sequences of a variety of infectious bacteria, including anthrax strains--a first step toward developing tests that can be used to rapidly identify their presence in the environment. In both of these instances, the programs serve multiple missions. These dual-purpose programs have important synergies that we believe should be maintained. We are concerned that transferring control over these programs to the new department has the potential to disrupt some programs that are critical to other DOE missions, such as the reliability of our nuclear weapons. We do not believe that the proposed legislation is sufficiently clear on how both the homeland security and these other missions would be accomplished. The details of two other transfers proposed in the legislation are unclear. First, Title III would transfer the intelligence program activities at Lawrence Livermore National Laboratory. These intelligence activities are related to the overall program carried out by DOE's Office of Intelligence. The Office of Intelligence gathers information related to DOE's missions-- energy, nuclear weapons, nuclear proliferation, basic science, radiological research and environmental cleanup. To support this overall intelligence program, Lawrence Livermore National Laboratory, like other weapons laboratories, conducts intelligence activities. At Lawrence Livermore, the "Z" division conducts these activities and has special intelligence expertise related to tracking the nuclear capabilities of countries other than Russia and China. Importantly, the "Z" division receives funding from other DOE programs and/or offices as well as funding from other federal agencies (Department of Defense, Federal Bureau of Investigation, Central Intelligence Agency, etc.). According to officials at DOE Headquarters and Lawrence Livermore National Laboratory, only about $5 million of the division's $30-50 million budget comes from DOE's Office of Intelligence. These officials said the transfer would most likely affect only the $5 million that DOE's Office of Intelligence directly provides to the laboratory, but this is not clear in the proposed legislation. As with other DOE programs discussed in this testimony, the staff that carry out these activities are contractor employees and it is not clear how they would be transferred to the Department of Homeland Security. Moreover, DOE headquarters and other laboratories also have a role in intelligence, and the legislation does not propose to transfer any of their intelligence functions. Another area of Title III where the details are unclear is the transfer of "energy security and assurance program activities." These activities are carried out by the Office of Energy Assurance, which was created in November 2001 to work with state and local government and industry to strengthen the security of the United States through the application of science and technology to improve the reliability and security of the national energy infrastructure. The national energy infrastructure includes (1) physical and cyber assets of the nation's electric power, oil, and natural gas infrastructures; (2) interdependencies among physical and cyber energy infrastructure assets; (3) national energy infrastructure's interdependencies with all other critical national infrastructures. At the time this testimony was being prepared, DOE and the Office of Homeland Security were trying to define the scope of the proposed transfer. Mr. Chairman, this completes my prepared statement. I would be happy to respond to any questions you or other Members of the Committee may have at this time. Contact and Acknowledgments For further information about this testimony, please contact Gary Jones at (202) 512-3841. Gene Aloise, Seto J. Bagdoyen, Ryan T. Coles, Darryl W. Dutton, Kathleen H. Ebert, Laurie E. Ekstrand, Cynthia Norris and Keith Rhodes also made key contributions to this testimony. Homeland Security: Intergovernmental Coordination and Partnership Will Be Critical to Success. GAO-02-901T. Washington, D.C.: July 3, 2002 Homeland Security: Intergovernmental Coordination and Partnership Will Be Critical to Success. GAO-02-900T. Washington, D.C.: July 2, 2002 Homeland Security: Intergovernmental Coordination and Partnership Will Be Critical to Success. GAO-02-899T. Washington, D.C.: July 1, 2002 Homeland Security: New Department Could Improve Coordination but May Complicate Priority Setting. GAO-02-893T. Washington, D.C.: June 28, 2002. Homeland Security: Proposal for Cabinet Agency Has Merit, but Implementation Will Be Pivotal to Success. GAO-02-886T. Washington, D.C.: June 25, 2002. Homeland Security: New Department Could Improve Coordination but May Complicate Public Health Priority Setting. GAO-02-883T. Washington, D.C.: June 25, 2002. Homeland Security: Key Elements to Unify Efforts Are Underway but Uncertainty Remains. GAO-02-610. Washington, D.C.: June 7, 2002. Homeland Security: Responsibility and Accountability for Achieving National Goals. GAO-02-627T. Washington, D.C.: April 11, 2002. Homeland Security: Progress Made; More Direction and Partnership Sought. GAO-02-490T. Washington, D.C.: March 12, 2002. Homeland Security: Challenges and Strategies in Addressing Short- and Long-Term National Needs. GAO-02-160T. Washington, D.C.: November 7, 2001. Homeland Security: A Risk Management Approach Can Guide Preparedness Efforts. GAO-02-208T. Washington, D.C.: October 31, 2001. Homeland Security: Need to Consider VA's Role in Strengthening Federal Preparedness. GAO-02-145T. Washington, D.C.: October 15, 2001. Homeland Security: Key Elements of a Risk Management Approach. GAO-02-150T. Washington, D.C.: October 12, 2001. Homeland Security: A Framework for Addressing the Nation's Efforts. GAO-01-1158T. Washington, D.C.: September 21, 2001. Bioterrorism: The Centers for Disease Control and Prevention's Role in Public Health Protection. GAO-02-235T. Washington, D.C.: November 15, 2001. Bioterrorism: Review of Public Health Preparedness Programs. GAO-02-149T. Washington, D.C.: October 10, 2001. Bioterrorism: Public Health and Medical Preparedness. GAO-02-141T. Washington, D.C.: October 9, 2001. Bioterrorism: Coordination and Preparedness. GAO-02-129T. Washington, D.C.: October 5, 2001. Bioterrorism: Federal Research and Preparedness Activities. GAO-01-915. Washington, D.C.: September 28, 2001. Chemical and Biological Defense: Improved Risk Assessment and Inventory Management Are Needed. GAO-01-667. Washington, D.C.: September 28, 2001. West Nile Virus Outbreak: Lessons for Public Health Preparedness. GAO/HEHS-00-180. Washington, D.C.: September 11, 2000. Chemical and Biological Defense: Program Planning and Evaluation Should Follow Results Act Framework. GAO/NSIAD-99-159. Washington, D.C.: August 16, 1999. Combating Terrorism: Observations on Biological Terrorism and Public Health Initiatives. GAO/T-NSIAD-99-112. Washington, D.C.: March 16, 1999. National Preparedness: Technologies to Secure Federal Buildings. GAO-02-687T. Washington, D.C.: April 25, 2002. National Preparedness: Integration of Federal, State, Local, and Private Sector Efforts Is Critical to an Effective National Strategy for Homeland Security. GAO-02-621T. Washington, D.C.: April 11, 2002. Combating Terrorism: Intergovernmental Cooperation in the Development of a National Strategy to Enhance State and Local Preparedness. GAO-02-550T. Washington, D.C.: April 2, 2002. Combating Terrorism: Enhancing Partnerships Through a National Preparedness Strategy. GAO-02-549T. Washington, D.C.: March 28, 2002. Combating Terrorism: Critical Components of a National Strategy to Enhance State and Local Preparedness. GAO-02-548T. Washington, D.C.: March 25, 2002. Combating Terrorism: Intergovernmental Partnership in a National Strategy to Enhance State and Local Preparedness. GAO-02-547T. Washington, D.C.: March 22, 2002. Combating Terrorism: Key Aspects of a National Strategy to Enhance State and Local Preparedness. GAO-02-473T. Washington, D.C.: March 1, 2002. Chemical and Biological Defense: DOD Should Clarify Expectations for Medical Readiness. GAO-02-219T. Washington, D.C.: November 7, 2001. Anthrax Vaccine: Changes to the Manufacturing Process. GAO-02-181T. Washington, D.C.: October 23, 2001. Chemical and Biological Defense: DOD Needs to Clarify Expectations for Medical Readiness. GAO-02-38. Washington, D.C.: October 19, 2001. Combating Terrorism: Considerations for Investing Resources in Chemical and Biological Preparedness. GAO-02-162T. Washington, D.C.: October 17, 2001. Combating Terrorism: Selected Challenges and Related Recommendations. GAO-01-822. Washington, D.C.: September 20, 2001. Combating Terrorism: Actions Needed to Improve DOD Antiterrorism Program Implementation and Management. GAO-01-909. Washington, D.C.: September 19, 2001. Combating Terrorism: Comments on H.R. 525 to Create a President's Council on Domestic Terrorism Preparedness. GAO-01-555T. Washington, D.C.: May 9, 2001. Combating Terrorism: Accountability Over Medical Supplies Needs Further Improvement. GAO-01-666T. Washington, D.C.: May 1, 2001. Combating Terrorism: Observations on Options to Improve the Federal Response. GAO-01-660T. Washington, DC: April 24, 2001. Combating Terrorism: Accountability Over Medical Supplies Needs Further Improvement. GAO-01-463. Washington, D.C.: March 30, 2001. Combating Terrorism: Comments on Counterterrorism Leadership and National Strategy. GAO-01-556T. Washington, D.C.: March 27, 2001. Combating Terrorism: FEMA Continues to Make Progress in Coordinating Preparedness and Response. GAO-01-15. Washington, D.C.: March 20, 2001. Combating Terrorism: Federal Response Teams Provide Varied Capabilities; Opportunities Remain to Improve Coordination. GAO-01-14. Washington, D.C.: November 30, 2000. Combating Terrorism: Need to Eliminate Duplicate Federal Weapons of Mass Destruction Training. GAO/NSIAD-00-64. Washington, D.C.: March 21, 2000. Combating Terrorism: Chemical and Biological Medical Supplies Are Poorly Managed. GAO/T-HEHS/AIMD-00-59. Washington, D.C.: March 8, 2000. Combating Terrorism: Chemical and Biological Medical Supplies Are Poorly Managed. GAO/HEHS/AIMD-00-36. Washington, D.C.: October 29, 1999. Combating Terrorism: Observations on the Threat of Chemical and Biological Terrorism. GAO/T-NSIAD-00-50. Washington, D.C.: October 20, 1999. Combating Terrorism: Need for Comprehensive Threat and Risk Assessments of Chemical and Biological Attacks. GAO/NSIAD-99-163. Washington, D.C.: September 14, 1999. Chemical and Biological Defense: Coordination of Nonmedical Chemical and Biological R&D Programs. GAO/NSIAD-99-160. Washington, D.C.: August 16, 1999. Combating Terrorism: Use of National Guard Response Teams Is Unclear. GAO/T-NSIAD-99-184. Washington, D.C.: June 23, 1999. Combating Terrorism: Observations on Growth in Federal Programs. GAO/T-NSIAD-99-181. Washington, D.C.: June 9, 1999. Combating Terrorism: Analysis of Potential Emergency Response Equipment and Sustainment Costs. GAO/NSIAD-99-151. Washington, D.C.: June 9, 1999. Combating Terrorism: Use of National Guard Response Teams Is Unclear. GAO/NSIAD-99-110. Washington, D.C.: May 21, 1999. Combating Terrorism: Observations on Federal Spending to Combat Terrorism. GAO/T-NSIAD/GGD-99-107. Washington, D.C.: March 11, 1999. Combating Terrorism: Opportunities to Improve Domestic Preparedness Program Focus and Efficiency. GAO/NSIAD-99-3. Washington, D.C.: November 12, 1998. Combating Terrorism: Observations on the Nunn-Lugar-Domenici Domestic Preparedness Program. GAO/T-NSIAD-99-16. Washington, D.C.: October 2, 1998. Combating Terrorism: Observations on Crosscutting Issues. GAO/T-NSIAD-98-164. Washington, D.C.: April 23, 1998. Combating Terrorism: Threat and Risk Assessments Can Help Prioritize and Target Program Investments. GAO/NSIAD-98-74. Washington, D.C.: April 9, 1998. Combating Terrorism: Spending on Governmentwide Programs Requires Better Management and Coordination. GAO/NSIAD-98-39. Washington, D.C.: December 1, 1997. Disaster Assistance: Improvement Needed in Disaster Declaration Criteria and Eligibility Assurance Procedures. GAO-01-837. Washington, D.C.: August 31, 2001. Chemical Weapons: FEMA and Army Must Be Proactive in Preparing States for Emergencies. GAO-01-850. Washington, D.C.: August 13, 2001. Federal Emergency Management Agency: Status of Achieving Key Outcomes and Addressing Major Management Challenges. GAO-01-832. Washington, D.C.: July 9, 2001. Budget Issues: Long-Term Fiscal Challenges. GAO-02-467T. Washington, D.C.: February 27, 2002. Results-Oriented Budget Practices in Federal Agencies. GAO-01-1084SP. Washington, D.C.: August 2001. Managing for Results: Federal Managers' Views on Key Management Issues Vary Widely Across Agencies. GAO-01-592. Washington, D.C.: May 25, 2001. Determining Performance and Accountability Challenges and High Risks. GAO-01-159SP. Washington, D.C.: November 2000. Managing for Results: Using the Results Act to Address Mission Fragmentation and Program Overlap. GAO-AIMD-97-146. Washington, D.C.: August 29, 1997. Government Restructuring: Identifying Potential Duplication in Federal Missions and Approaches. GAO/T-AIMD-95-161. Washington, D.C.: June 7, 1995. Government Reorganization: Issues and Principles. GAO/T-GGD/AIMD-95-166. Washington, D.C.: May 17, 1995. Grant Programs: Design Features Shape Flexibility, Accountability, and Performance Information. GAO/GGD-98-137. Washington, D.C.: June 22, 1998. Federal Grants: Design Improvements Could Help Federal Resources Go Further. GAO/AIMD-97-7. Washington, D.C.: December 18, 1996.
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Title III of the proposed Department of Homeland Security legislation would task the new department with developing national policy and coordinating the federal government's research and development efforts for responding to chemical, biological, radiological, and nuclear threats. It would also transfer to the new department responsibility for certain research and development programs and other activities, including those of the Department of Energy (DOE). If properly implemented, this proposed legislation could lead to a more efficient, effective and coordinated research effort that would provide technology to protect our people, borders, and critical infrastructure. However, the proposed legislation does not specify that a critical role of the new department will be to establish collaborative relationships with programs at all levels of government and to develop a strategic plan for research and development to implement the national policy it is charged with developing. In addition, the proposed legislation is not clear on the role of the new department in setting standards for the performance and interoperability of new technologies so that users can be confident that the technologies they are purchasing will perform as intended. Some of the proposed transfers of activities from DOE to the new department are appropriate, such as the DOE's nuclear threat assessment program and the Environmental Measurements Laboratory. However, the transfer of some DOE research and development activities may complicate research now being done to accomplish multiple purposes.
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In 1941, President Roosevelt ordered all federal agencies to include in their wartime contracts a provision prohibiting contractors from discriminating against any worker because of race, color, creed, or national origin. President Johnson expanded this principle in 1965 when he issued Executive Order 11246, which required federal contractors and subcontractors, and federally assisted construction contractors, to refrain from discrimination and to take affirmative action to provide equal employment opportunity to all employees and job applicants, regardless of race, color, religion, sex, or national origin. In the early 1970s, equal employment responsibilities were expanded by statute to persons with disabilities and certain disabled and Vietnam era veterans. (See app. I for more information on the legal authorities for OFCCP.) Established in 1966, OFCCP has seen its role evolve over time. Initially, OFCCP served as a policy-making body; using a small nationwide staff, it concentrated primarily on coordinating and monitoring enforcement, while the actual day-to-day enforcement responsibilities were scattered among other federal agencies. In 1978, enforcement responsibilities were transferred from the various federal agencies to OFCCP in order to consolidate activities and improve the efficiency and effectiveness of the investigations. Since then, OFCCP has been primarily responsible for ensuring the compliance of federal contractors, subcontractors, and federally assisted construction contractors with their affirmative action and equal opportunity responsibilities. Today, OFCCP operates with a budget of about $59 million and is authorized for 825 full-time-equivalent (FTE) staff positions. OFCCP's national office in Washington, D.C., directs the nationwide enforcement of equal employment opportunity laws and regulations among federal contractors. Field staff in OFCCP's 10 regional offices and 57 district and area offices conduct the actual enforcement activities. These include reviewing federal contractors' compliance with the applicable laws and regulations, conducting investigations of individual complaints, and providing technical support to federal contractors. While OFCCP monitors the employment practices of federal contractors, OFCCP is actually one of several federal agencies responsible for enforcing equal opportunity laws and regulations. The Equal Employment Opportunity Commission (EEOC), under title VII of the Civil Rights Act of 1964, as amended, investigates charges of employment discrimination because of race, color, religion, sex, or national origin. EEOC also is responsible for investigating discrimination charges in employment based on age, unequal pay, and physical and mental disabilities. There is some overlap in activities of these agencies, and EEOC and OFCCP operate under a memorandum of understanding (MOU) and coordination regulations to minimize any duplication of effort. For example, under the MOU, individual complaints to OFCCP alleging discrimination under title VII are referred to EEOC. Under the coordination regulations, OFCCP acts as EEOC's agent in investigating charges of discrimination brought by certain persons with disabilities. In carrying out its mission and responsibilities, OFCCP focuses most of its resources on compliance reviews (see fig. 1). Through this mechanism, which includes a desk audit and a site visit in most cases, OFCCP analyzes a contractor's hiring and employment practices. OFCCP seeks to determine if these practices comply with laws that it enforces. In most of its reviews OFCCP identifies violations, many of which are considered major. Regardless of the exact nature of the violation, OFCCP's policy is to work with the contractor to resolve the case rather than to impose sanctions, such as canceling the federal contract. In addition to compliance reviews, OFCCP conducts complaint investigations and provides compliance support, such as technical assistance to help federal contractors understand the regulatory requirements and review process. A compliance review, which often takes between 3 and 6 months to complete, usually consists of two phases: a desk audit and a site visit. The desk audit is a systematic review of documents and materials that the contractor under review provides, explaining its efforts to ensure equal employment opportunities. As part of the desk audit, compliance officers compare the representation of women and individual minority groups in the contractor's workforce with that of the workforces of similar federal contractors in the area, and examine the contractor's affirmative action plan. Next, OFCCP usually conducts an on-site review at the contractor's establishment. During this phase, compliance officers investigate potential violations identified in the desk audit, verify the contractor's activities to implement its affirmative action program, and obtain information needed to work with the contractor to resolve any violations. Activities include inspecting the contractor's facilities and reviewing its personnel files (see fig. 2). Compliance reviews tend to uncover violations in the vast majority of cases. OFCCP identified violations in 74 percent of its completed compliance reviews in fiscal year 1994 (see table 1), and OFCCP classified these violations as either major or minor. In 73 percent of the reviews in which violations were identified, OFCCP resolved them with conciliation agreements. Conciliation agreements are used for major violations. Many conciliation agreements address violations such as a contractor's failure to complete a workforce utilization analysis or to correct for problems with its past performances. Some agreements do address outright discrimination, such as one case in which a compliance review uncovered a pattern of discrimination against African American applicants who had been denied jobs at a facility. In addition to the actual conciliation agreement, OFCCP may require the contractor to provide financial compensation to the individual victims of discrimination. For example, in fiscal year 1994, OFCCP reached 553 financial agreements valued at $39.6 million, and, in the case of the discrimination previously cited, the company agreed to pay over $630,000 in back wages to the 32 qualified applicants who had been denied jobs. OFCCP resolved the remaining compliance reviews with letters of commitment, which are used for minor violations such as the need to make technical corrections to a contractor's affirmative action plan. While OFCCP emphasizes bringing contractors into compliance with the employment laws rather than penalizing them for not complying, OFCCP may recommend enforcement proceedings--that is, legal actions--if a contractor fails to resolve discrimination or affirmative action violations. Seventy-five cases were referred for enforcement in fiscal year 1994, and in one such case OFCCP found that a contractor discriminated in compensating a class of minorities and women. The contractor refused to conciliate, and OFCCP then recommended the case for enforcement. After an administrative hearing, the Secretary of Labor may order that a contract be suspended or cancelled, and the contractor may be debarred from doing business with the federal government. Debarments, however, are rare, with five contractors debarred in fiscal year 1994. In two of these cases, the contractors did not honor their conciliation agreements by failing to recruit and hire women, and by filing false reports. Enforcement resources not devoted to compliance reviews are used for complaint investigations and other support activities. OFCCP dedicates about 11 percent of its enforcement hours to investigating specific complaints of employment discrimination. OFCCP investigates cases involving groups of people or patterns of discrimination, as well as individual or group complaints filed under the disability and veterans' laws. In fiscal year 1994, OFCCP completed 802 complaint investigations and found violations in 19 percent of the cases. OFCCP devoted the remainder of its enforcement resources--about 10 percent--to various support activities. Staff give technical assistance, such as advising contractors on how to meet their equal employment opportunity obligations. OFCCP provides this assistance by answering individual questions and sponsoring seminars on OFCCP policies and regulations. OFCCP staff also spend time supporting litigation efforts and completing other activities, such as (1) linking contractors to specific community recruitment and training resources that can help fill workforce deficiencies and (2) reviewing periodic progress reports required by agreements reached during compliance reviews. In fiscal year 1989, OFCCP's staff size was larger than it had been since the early 1980s, and the agency completed a record number of compliance reviews. By fiscal year 1994, OFCCP's budget had decreased by 9 percent in real dollars (see table 2). As OFCCP's budget decreased in real terms, so did the size of its staff. From fiscal year 1989 to fiscal year 1994, OFCCP's total FTE staff decreased by 15 percent, from 970 to 820 (see fig. 3). Moreover, the actual number of compliance officers working at OFCCP decreased by 33 percent and has been below the authorized level since fiscal year 1990, primarily because of attrition and hiring freezes. During this time the number of completed compliance reviews decreased by 33 percent, from 6,232 to 4,179. OFCCP officials explained that part of this decline was due to the decrease in OFCCP's funding and staff levels, as well as a changing emphasis from reviewing a single establishment to undertaking more labor intensive lengthy reviews such as corporate management reviews and construction mega-project reviews. The number of complaint investigations, in which OFCCP reacts to specific complaints filed by a person or persons, also decreased by 39 percent during this period. This drop, from 1,321 to 802 (see fig. 4), was due in large part to a reduction in the number of complaints actually received by OFCCP, according to OFCCP officials. One of the procedures OFCCP uses to initially identify contractors for compliance reviews may not lead to appropriate targeting of contractors. Because OFCCP aggregates data pertaining to all minority groups in a company during its initial selection stages, rather than focusing on data pertaining to each minority group separately, it could overlook companies that discriminate against one or more particular minority groups. Contractors are required to report on the race, ethnicity, and sex of their workforce in each of nine occupational categories. OFCCP then uses these data as part of its process to determine which contractors should be targeted for compliance reviews. This includes comparing the percentage of all minorities and the percentage of women in a contractor's workforce to that of all other federal contractors in similar industries and geographic areas. In completing these comparisons, OFCCP combines the data pertaining to all minorities because, according to OFCCP officials, the aggregated data provide a large enough number of observations for a statistically valid analysis. Aggregated data may conceal possible discrimination against specific minority groups. For example, if 30 percent of a contractor's workforce is composed of minorities, and this percentage mirrors the average minority employment for all similar federal contractors in the area, then the contractor is not as likely to be targeted for review. However, assume that all 30 percent of the contractor's minority workforce are Hispanic when the workforces of similar federal contractors in the area are 15 percent Hispanic and 15 percent African American. While this imbalance in the racial composition of the contractor's workforce indicates that the contractor may be discriminating against African Americans, under OFCCP's current practice of aggregating the data, the contractor may not be identified for a compliance review. OFCCP officials acknowledge that this type of discrimination could occur and that some areas have large enough minority populations for statistically valid analyses. In commenting on a draft of this report, a DOL official stated that OFCCP will test the feasibility of using disaggregated data in identifying contractors for compliance reviews. Compliance reviews--the cornerstone of OFCCP's enforcement strategy--have been successful in identifying violations in nearly three-quarters of the cases. However, the number of such reviews has decreased, as have the agency's resources. At the same time, OFCCP has continued its practice of aggregating data when initially selecting contractors for compliance reviews, which may be inappropriate. Although firms report data by individual racial groups, OFCCP aggregates the data before making its selections, thereby losing an opportunity to target firms that may discriminate against particular racial groups. In order to reduce the likelihood of overlooking contractors that may discriminate against particular racial groups, we recommend that, in targeting contractors for review, OFCCP use existing data on individual minority groups in geographic areas where the minority populations are large enough so that statistically valid analyses can be completed. In reviewing a draft of this report, DOL and OFCCP officials concurred with our recommendation and said they planned to test its feasibility as part of OFCCP's fiscal year 1996 efforts to revise its selection procedures. A copy of DOL's written comments on this report is in appendix IV. OFCCP also provided oral suggestions to clarify certain technical issues, which we incorporated as appropriate. We are sending copies of this report to the Secretary of Labor and the Director of OFCCP, and will make copies available to others on request. Please contact Wayne B. Upshaw, Assistant Director, or me on (202) 512-7014 if you or your staff have any questions about this report. Major contributors to this report are listed in appendix V. Executive Order 11246: This order, issued in 1965, prohibits discrimination in hiring or employment opportunities on the basis of race, color, religion, sex, and national origin. It applies to all contractors and subcontractors holding any federal contracts, or federally assisted contracts exceeding $10,000 annually. In addition, the rules implementing the executive order require contractors and subcontractors with federal contracts of $50,000 or more and 50 or more employees to develop a written affirmative action program that identifies any problem areas in minority employment and provides in detail for specific steps to guarantee equal employment opportunity keyed to the problems. Section 503 of the Rehabilitation Act of 1973: This statute requires government contractors to take affirmative action to employ and advance in employment qualified persons with disabilities. It applies to firms with federal contracts of $10,000 or more annually. Vietnam Era Veterans' Readjustment Assistance Act of 1974 (38 U.S.C. 4212): The affirmative action provision of this statute requires federal contractors and subcontractors to undertake affirmative action for qualified special disabled veterans and Vietnam era veterans. It applies to all federal contracts of $10,000 or more annually. Equal Employment Opportunity in Apprenticeship and Training (29 C.F.R. Part 30): This federal regulation requires equal employment opportunity and affirmative action in apprenticeship programs. It applies to all apprenticeship programs registered with the Department of Labor or with recognized state apprenticeship organizations. In addition, during the course of compliance reviews and complaint investigations, OFCCP checks for compliance with certain aspects of the Immigration Reform and Control Act of 1986 (IRCA) and the Family and Medical Leave Act of 1993 (FMLA). IRCA requires all employers to maintain a verification form pertaining to the citizenship and/or immigration status of new employees. OFCCP examines these records and reports its findings to the Immigration and Naturalization Service. FMLA requires employers to permit employees to take unpaid leave for certain family and medical reasons. Generally, any employee who takes this leave is entitled, upon return, to be restored to the same or an equivalent position without loss of benefits. OFCCP checks for compliance with this act and reports any apparent violations to the Wage and Hour Division of the Department of Labor. Authorized levels (FTEs) OFCCP divides federal contractors into two types: supply and service contractors, and contractors working on federally funded or federally assisted construction projects. Because of the differing nature of the businesses and the amount of time people are employed, OFCCP uses different data and selection criteria when selecting contractors for reviews. Once the contractor is selected, the compliance review procedures are similar, although, on average, supply and service contractor reviews require almost 3 times as many hours to complete as construction contractor reviews and cover almost 10 times as many workers (see table III.1). OFCCP's Equal Employment Data System (EEDS) serves as the basis for selecting supply and service contractors for review. EEDS is developed from the information submitted to a joint reporting committee, which is composed of OFCCP and Equal Employment Opportunity Commission representatives, via the Employer Information Report (EEO-1). This report includes information on the race, ethnicity, and sex of employees in each of nine job categories and is to be filed annually by September 30. Federal regulations require most contractors and subcontractors with 50 or more employees and a federal contract worth more than $50,000 to file the EEO-1 form. Any establishment that serves as a depository of government funds or is a financial institution that is an issuing and paying agent for U.S. savings bonds is required to file. Also, all private sector employers with 100 or more employees are required to file regardless of whether they hold federal contracts. OFCCP policy directs that approximately 84 percent of the establishments selected for review be from a rank listing of "flagged" contractors. Using the information in EEDS, OFCCP ranks contractor establishments on the basis of each contractor's "average utilization value" of minorities and women, with separate values calculated for each. The average utilization rate is derived by first comparing the contractor's percentage of minorities (or women) employed in each of the nine occupational categories to the average employment of minorities (or women) for all federal contractors in the specified industry and geographic area. These nine values are then averaged to arrive at one number that is used as the average utilization value. Contractors are then ranked on the basis of their minority or female utilization value, whichever is lower. In addition, the EEDS produces a "concentration index" that is used to examine how minorities and women are distributed throughout a contractor's workforce. In developing this index, more weight is given to those occupational categories that receive higher wages. Using these two calculations, establishments are then flagged by EEDS as appropriate candidates for further OFCCP review. A contractor is flagged when the establishment's utilization rate is less than 80 percent of the industry average of either minorities or women, and there is a relatively high concentration of either minorities or women in lower wage occupations. Each district office then receives a listing of flagged establishments in its jurisdiction, which are then examined to determine if they are eligible to be reviewed. Contractors are eligible for review if they have not been reviewed in the past 2 years, are not under a court order resulting from equal employment opportunity legislation, and hold a current federal contract. OFCCP policy also directs that about 15 percent of the contractors reviewed are to be chosen at the discretion of OFCCP district directors. In making these discretionary selections, directors are to consider complaints and community concerns about employers, awards of large federal contracts that may increase employment opportunities, establishments that do not file required reports, expansion of employment in an industry or at specific locations, and significant reductions in employment that impact minorities or women. OFCCP does not compile statistics on the specific reasons for selecting contractors for review under the district directors' discretion. The remaining 1 percent of compliance reviews target a randomly selected sample from EEDS. District offices are required to review the randomly selected contractor establishments with more than 100 employees unless the establishment is under a court order resulting from equal employment opportunity litigation; has been reviewed in the last 2 years; or cannot be reviewed for some reason, such as it is no longer in business. Because of the fluctuating and temporary nature of the construction industry, the Department of Labor has historically treated construction contractors separately from supply and service contractors. While those construction contractors that meet the EEO-1 filing requirements should file reports that would be contained in EEDS, the EEDS information is not used in selecting construction contractors for compliance reviews. Instead, OFCCP relies on other sources for information. OFCCP's national office purchases listings of active construction projects in each district and area office's jurisdiction. These listings summarize information on publicly funded construction projects compiled by F.W. Dodge, a private company that publishes construction industry information. They include the contract value and the type of construction project but not the name of the contractor or any information concerning the contractor's employees. The district directors select "likely candidates" from this list. A district director then orders a profile sheet for each project, and this sheet includes owner and general contractor information. OFCCP staff then contact the prime contractor to obtain the names, addresses, and size of the major subcontractors, including the number of personnel and the value of the subcontracts. In selecting construction contractors for review, a district director gives first priority to contractors that have not been reviewed for the longest time, have received substantial federal or federally assisted contracts resulting in large workforces, and employ fewer minorities or women than would reasonably be expected. In addition to those named, the following individuals contributed to this report: Larry Horinko and Robert Sampson did the initial audit work; Nancy Kintner-Meyer assisted with augmenting the audit work and analysis; and Timothy Silva and James Spaulding reviewed and commented on early drafts of the report. The first copy of each GAO report and testimony is free. Additional copies are $2 each. Orders should be sent to the following address, accompanied by a check or money order made out to the Superintendent of Documents, when necessary. Orders for 100 or more copies to be mailed to a single address are discounted 25 percent. U.S. General Accounting Office P.O. Box 6015 Gaithersburg, MD 20884-6015 Room 1100 700 4th St. NW (corner of 4th and G Sts. NW) U.S. General Accounting Office Washington, DC Orders may also be placed by calling (202) 512-6000 or by using fax number (301) 258-4066, or TDD (301) 413-0006. Each day, GAO issues a list of newly available reports and testimony. To receive facsimile copies of the daily list or any list from the past 30 days, please call (301) 258-4097 using a touchtone phone. A recorded menu will provide information on how to obtain these lists.
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Pursuant to a congressional request, GAO provided information on the Department of Labor's Office of Federal Contract Compliance Programs' (OFCCP) oversight of federal contractors' equal employment opportunity (EEO) practices, focusing on: (1) OFCCP fulfillment of its mission and responsibilities; (2) changes in OFCCP resources in recent years; and (3) whether the OFCCP selection procedure for contractor reviews could mask discrimination against specific minority groups. GAO found that: (1) OFCCP uses compliance reviews which compare the racial and gender composition of the contractor's workforce with those of similar federal contractors to ensure that federal contractors use nondiscriminatory employment practices; (2) when OFCCP identifies EEO violations during its compliance reviews, it resolves the violations by working with the contractors rather than imposing sanctions on the contractors; (3) OFCCP recommends enforcement proceedings only if the contractor does not correct its EEO violation; (4) OFCCP uses 11 percent and 10 percent, respectively, of its enforcement resources for complaint investigations and compliance support; (5) from 1989 to 1994, OFCCP financial and staff resources decreased 9 percent and 15 percent, respectively, and the number of compliance reviews completed decreased by 33 percent; (6) although OFCCP aggregates data on all minority employees in a given contractor's workforce during the initial selection stage of compliance reviews, it may overlook a contractor's discriminatory practices against one or more particular minority groups; and (7) OFCCP uses aggregate data to identify contractors for compliance reviews because the data produce a large enough number of observations for a statistically valid analysis.
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On October 25, 1995, Americans were reminded of the dangers that drivers/passengers often face when they travel over railroad crossings in the United States. On that day, in Fox River Grove, Illinois, seven high school students were killed when a commuter train hit a school bus. The potential for tragedies like the one at Fox River Grove is significant--the United States has over 168,000 public highway-railroad intersections. The types of warning for motorists at these crossings range from no visible devices to active devices, such as lights and gates. About 60 percent of all public crossings in the United States have only passive warning devices--typically, highway signs known as crossbucks. In 1994, this exposure resulted in motor vehicle accidents at crossings that killed 501 people and injured 1,764 others. Many of these deaths should have been avoided, since nearly one-half occurred at crossings where flashing lights and descended gates had warned motorists of the approaching danger. In August 1995, we issued a comprehensive report on safety at railroad crossings. We reported that the federal investment in improving railroad crossing safety had noticeably reduced the number of deaths and injuries. Since the Rail-Highway Crossing Program--also known as the section 130 program--was established in 1974, the federal government has distributed about $5.5 billion (in 1996 constant dollars) to the states for railroad crossing improvements. This two-decade investment, combined with a reduction in the total number of crossings since 1974, has significantly lowered the accident and fatality rates--by 61 percent and 34 percent, respectively. However, most of this progress occurred during the first decade, and since 1985, the number of deaths has fluctuated between 466 and 682 each year (see app. 1). Since 1977, the federal funding for railroad crossing improvements has also declined in real terms. Consequently, the question for future railroad crossing safety initiatives will be how best to target available resources to the most cost-effective approaches. Our report discussed several strategies for targeting limited resources to address railroad crossing safety problems. The first strategy is to review DOT's current method of apportioning section 130 funds to the states. Our analysis of the 1995 section 130 apportionments found anomalies among the states in terms of how much funding they received in proportion to three key risk factors: accidents, fatalities, and total crossings. For example, California received 6.9 percent of the section 130 funds in 1995, but it had only 4.8 percent of the nation's railroad crossings, 5.3 percent of the fatalities, and 3.9 percent of the accidents. Senators Lugar and Coats have proposed legislation to change the formula for allocating section 130 funds by linking the amounts of funding directly to the numbers of railroad crossings, fatalities, and accidents. Currently, section 130 funds are apportioned to each state as a 10-percent set-aside of its Surface Transportation Program funds. The second means of targeting railroad crossing safety resources is to focus the available dollars on the strategies that have proved most effective in preventing accidents. These strategies include closing more crossings, using innovative technologies at dangerous crossings, and emphasizing education and enforcement. Clearly, the most effective way to improve railroad crossing safety is to close more crossings. The Secretary of Transportation has restated FRA's goal of closing 25 percent of the nation's railroad crossings, since many are unnecessary or redundant. For example, in 1994, the American Association of State Highway and Transportation Officials found that the nation had two railroad crossings for every mile of track and that in heavily congested areas, the average approached 10 crossings for every mile. However, local opposition and localities' unwillingness to provide a required 10-percent match in funds have made it difficult for the states to close as many crossings as they would like. When closing is not possible, the next alternative is to install traditional lights and gates. However, lights and gates provide only a warning, not positive protection at a crossing. Hence, new technologies such as four-quadrant gates with vehicle detectors, although costing about $1 million per crossing, may be justified when accidents persist at signalled crossings. The Congress has funded research to develop innovative technologies for improving railroad crossing safety. Although installing lights and gates can help to prevent accidents and fatalities, it will not preclude motorists from disregarding warning signals and driving around descended gates. Many states, particularly those with many railroad crossings, face a dilemma. While 35 percent of the railroad crossings in the United States have active warning devices, 50 percent of all crossing fatalities occurred at these locations. To modify drivers' behavior, DOT and the states are developing education and enforcement strategies. For example, Ohio--a state with an active education and enforcement program--cut the number of accidents at crossings with active warning devices from 377 in 1978 to 93 in 1993--a 75-percent reduction. Ohio has used mock train crashes as educational tools and has aggressively issued tickets to motorists going around descended crossing gates. In addition, DOT has inaugurated a safety campaign entitled "Always Expect a Train," while Operation Lifesaver, Inc., provides support and referral services for state safety programs. DOT's educational initiatives are part of a larger plan to improve railroad crossing safety. In June 1994, DOT issued a Grade Crossing Action Plan, and in October 1995, it established a Grade Crossing Safety Task Force. The action plan set a national goal of reducing the number of accidents and fatalities by 50 percent from 1994 to 2004. As we noted in our report, whether DOT attains the plan's goal will depend, in large part, on how well it coordinates the efforts of the states and railroads, whose contributions to implementing many of the proposals are critical. DOT does not have the authority to direct the states to implement many of the plan's proposals, regardless of how important they are to achieving DOT's goal. Therefore, DOT must rely on either persuading the states that implementation is in their best interests or providing them with incentives for implementation. In addition, the success of five of the plan's proposals depends on whether DOT can obtain the required congressional approval to use existing funds in ways that are not allowable under current law. The five proposals would (1) change the method used to apportion section 130 funds to the states, (2) use Surface Transportation Program funds to pay local governments a bonus to close crossings, (3) eliminate the requirement for localities to match a portion of the costs associated with closing crossings, (4) establish a $15 million program to encourage the states to improve rail corridors, and (5) use Surface Transportation Program funds to increase federal funding for Operation Lifesaver. Finally, the action plan's proposals will cost more money. Secretary Pena has announced a long-term goal of eliminating 2,250 crossings where the National Highway System intersects Principal Rail Lines. Both systems are vital to the nation's interstate commerce, and closing these crossings is generally not feasible. The alternative is to construct a grade separation--an overpass or underpass. This initiative alone could cost between $4.5 billion and $11.3 billion--a major infrastructure investment. DOT established the Grade Crossing Safety Task Force in the aftermath of the Fox River Grove accident, intending to conduct a comprehensive national review of highway-railroad crossing design and construction measures. On March 1, 1996, the task force reported to the Secretary that "improved highway-rail grade crossing safety depends upon better cooperation, communication, and education among responsible parties if accidents and fatalities are to be reduced significantly." The report provided 24 proposals for five problem areas it reviewed: (1) highway traffic signals that are supposed to be triggered by oncoming trains; (2) roadways where insufficient space is allotted for vehicles to stop between a road intersection and nearby railroad tracks; (3) junctions where railroad tracks are elevated above the surface of the roadway, exposing vehicles to the risk of getting hung on the tracks; (4) light rail transit crossings without standards for their design, warning devices, or traffic control measures; and (5) intersections where slowly moving vehicles, such as farm equipment, frequently cross the tracks. Under the Federal Railroad Safety Act of 1970, as amended, FRA is responsible for regulating all aspects of railroad safety. FRA's safety mission includes 1) establishing federal rail safety rules and standards; 2) inspecting railroads' track, signals, equipment, and operating practices; and 3) enforcing federal safety rules and standards. The railroads are primarily responsible for inspecting their own equipment and facilities to ensure compliance with federal safety regulations, while FRA monitors the railroads' actions. We have issued many reports identifying weaknesses in FRA's railroad safety inspection and enforcement programs. For example, in July 1990, we reported on FRA's progress in meeting the requirements, set forth in the Federal Railroad Safety Authorization Act of 1980, that FRA submit to the Congress a system safety plan to carry out railroad safety laws. The act directed FRA to (1) develop an inspection methodology that considered carriers' safety records, the location of population centers, and the volume and type of traffic using the track and (2) give priority to inspections of track and equipment used to transport passengers and hazardous materials. The House report accompanying the 1980 act stated that FRA should target safety inspections to high-risk track--track with a high incidence of accidents and injuries, located in populous urban areas, carrying passengers, or transporting hazardous materials. In our 1990 report, we found that the inspection plan that FRA had developed did not include data on passenger and hazardous materials routes--two important risk factors. In an earlier report, issued in April 1989, we noted problems with another risk factor--accidents and injuries. We found that the railroads had substantially underreported and inaccurately reported the number of accidents and injuries and their associated costs. As a result, FRA could not integrate inspection, accident, and injury data in its inspection plan to target high-risk locations. In our 1994 report on FRA's track safety inspection program, we found that FRA had improved its track inspection program and that its strategy for correcting the weaknesses we had previously identified was sound. However, we pointed out that FRA still faced challenges stemming from these weaknesses. First, it had not obtained and incorporated into its inspection plan site-specific data on two critical risk factors--the volume of passenger and hazardous materials traffic. Second, it had not improved the reliability of another critical risk factor--the rail carriers' reporting of accidents and injuries nationwide. FRA published a notice of proposed rulemaking in August 1994 on methods to improve rail carriers' reporting. In February 1996, FRA reported that it intended to issue a final rule in June 1996. To overcome these problems, we recommended that FRA focus on improving and gathering reliable data to establish rail safety goals. We specifically recommended that FRA establish a pilot program in one FRA region to gather data on the volume of passenger and hazardous materials traffic and correct the deficiencies in its accident/injury database. We recommended a pilot program in one FRA region, rather than a nationwide program, because FRA had expressed concern that a nationwide program would be too expensive. The House and Senate Appropriations Conference Committee echoed our concerns in its fiscal year 1995 report and directed the agency to report to the Committees by March 1995 on how it intended to implement our recommendations. In its August 1995 response to the Committees, FRA indicated that the pilot program was not necessary, but it was taking actions to correct the deficiencies in the railroad accident/injury database. For example, FRA had allowed the railroads to update the database using magnetic media and audited the reporting procedures of all the large railroads. We also identified in our 1994 report an emerging traffic safety problem--the industry's excessive labeling of track as exempt from federal safety standards. Since 1982, federal track safety standards have not applied to about 12,000 miles of track designated by the industry as "excepted;" travel on such track is limited to 10 miles per hour, no passenger service is allowed, and no train may carry more than five cars containing hazardous materials. We found in our 1994 report that the number of accidents on excepted track had increased from 22 in 1988 to 65 in 1992--a 195-percent increase. Similarly, the number of track defects cited in FRA inspections increased from 3,229 in 1988 to 6,057 in 1992. However, with few exceptions, FRA cannot compel railroads to correct these defects. According to FRA, the railroads have applied the excepted track provision far more extensively than envisioned. For example, railroads have transported hazardous materials through residential areas on excepted track or intentionally designated track as excepted to avoid having to comply with minimum safety regulations. In November 1992, FRA announced a review of the excepted track provision with the intent of making changes. FRA viewed the regulations as inadequate because its inspectors could not write violations for excepted track and railroads were not required to correct defects on excepted track. FRA stated that changes to the excepted track provision would occur as part of its rulemaking revising all track safety standards. In February 1996, FRA reported that the task of revising track safety regulations would be taken up by FRA's Railroad Safety Advisory Committee. FRA noted that this committee would begin its work in April 1996 but did not specify a date for completing the final rulemaking. The Congress had originally directed FRA to complete its rulemaking revising track safety standards by September 1994. In September 1993, we issued a report examining whether Amtrak had effective procedures for inspecting, repairing, and maintaining its passenger cars to ensure their safe operation and whether FRA had provided adequate oversight to ensure the safety of passenger cars. We found that Amtrak had not consistently implemented its inspection and preventive maintenance programs and did not have clear criteria for determining when a passenger car should be removed from service for safety reasons. In addition, we found that Amtrak had disregarded some standards when parts were not available or there was insufficient time for repairs. For example, we observed that cars were routinely released for service without emergency equipment, such as fire extinguishers. As we recommended, Amtrak established a safety standard that identified a minimum threshold below which a passenger car may not be operated, and it implemented procedures to ensure that a car will not be operated unless it meets this safety standard. In reviewing FRA's oversight of passenger car safety (for both Amtrak and commuter rail), we found that FRA had established few applicable regulations. As a result, its inspectors provided little oversight in this important safety area. For more than 20 years, the National Transportation Safety Board has recommended on numerous occasions that FRA expand its regulations for passenger cars, but FRA has not done so. As far back as 1984, FRA told the Congress that it planned to study the need for standards governing the condition of safety-critical passenger car components. Between 1990 and 1994, train accidents on passenger rail lines ranged between 127 and 179 accidents each year (see app. 2). In our 1993 report, we maintained that FRA's approach to overseeing passenger car safety was not adequate to ensure the safety of the over 330 million passengers who ride commuter railroads annually. We recommended that the Secretary of Transportation direct the FRA Administrator to study the need for establishing minimum criteria for the condition of safety-critical components on passenger cars. We noted that the Secretary should direct the FRA Administrator to establish any regulations for passenger car components that the study shows to be advisable, taking into account any internal safety standards developed by Amtrak or others that pertain to passenger car components. However, FRA officials told us at the time that the agency could not initiate the study because of limited resources. Subsequently, the Swift Rail Development Act of 1994 required FRA to issue initial passenger safety standards within 3 years of the act's enactment and complete standards within 5 years. In 1995, FRA referred the issue to its Passenger Equipment Safety Working Group consisting of representatives from passenger railroads, operating employee organizations, mechanical employee organizations, and rail passengers. The working group held its first meeting in June 1995. An advance notice of proposed rulemaking is expected in early 1996, and final regulations are to be issued in November 1999. Given the recent rail accidents, FRA could consider developing standards for such safety-critical components as emergency windows and doors and safety belts as well as the overall crashworthiness of passenger cars. In conclusion, safety at highway-railroad crossings, the adequacy of track safety inspections and enforcement, and the safety of passenger cars operated by commuter railroads and Amtrak will remain important issues for Congress, FRA, the states, and the industry to address as the nation continues its efforts to prevent rail-related accidents and fatalities. Note 1: Analysis includes data from Amtrak, Long Island Rail Road, Metra (Chicago), Metro-North (New York), Metrolink (Los Angeles), New Jersey Transit, Northern Indiana, Port Authority Trans-Hudson (New York), Southeastern Pennsylvania Transportation Authority and Tri-Rail (Florida). Note 2: Data for Amtrak include statistics from several commuter railroads, including Caltrain (California), Conn DOT, Maryland Area Rail Commuter (excluding those operated by CSX), Massachusetts Bay Transportation Authority, and Virginia Railway Express. Railroad Safety: FRA Needs to Correct Deficiencies in Reporting Injuries and Accidents (GAO/RCED-89-109, Apr.5,1989). Railroad Safety: DOT Should Better Manage Its Hazardous Materials Inspection Program (GAO/RCED-90-43, Nov.17, 1989). Railroad Safety: More FRA Oversight Needed to Ensure Rail Safety in Region 2 (GAO/RCED-90-140, Apr. 27, 1990). Railroad Safety: New Approach Needed for Effective FRA Safety Inspection Program (GAO/RCED-90-194, July 31, 1990). Financial Management: Internal Control Weaknesses in FRA's Civil Penalty Program (GAO/RCED-91-47, Dec.26, 1990). Railroad Safety: Weaknesses Exist in FRA's Enforcement Program (GAO/RCED-91-72, Mar.22, 1991). Railroad Safety: Weaknesses in FRA's Safety Program (GAO/T-RCED-91-32, Apr. 11, 1991). Hazardous Materials: Chemical Spill in the Sacramento River (GAO/T-RCED-91-87, July 31, 1991). Railroad Competitiveness: Federal Laws and Policies Affect Railroad Competitiveness (GAO/RCED-92-16, Nov. 5, 1991) Railroad Safety: Accident Trends and FRA Safety Programs (GAO/T-RCED-92-23, Jan.13, 1992). Railroad Safety: Engineer Work Shift Length and Schedule Variability (GAO/RCED-92-133, Apr. 20, 1992). Amtrak Training: Improvements Needed for Employees Who Inspect and Maintain Rail Equipment (GAO/RCED-93-68, Dec.8, 1992). Amtrak Safety: Amtrak Should Implement Minimum Safety Standards for Passenger Cars (GAO/RCED-93-196, Sep.22, 1993). Railroad Safety: Continued Emphasis Needed for an Effective Track Safety Inspection Program (GAO/RCED-94-56, Apr.22, 1994). Amtrak's Northeast Corridor: Information on the Status and Cost of Needed Improvements (GAO/RCED-95-151BR, Apr. 13, 1995). Railroad Safety: Status of Efforts to Improve Railroad Crossing Safety (GAO/RCED-95-191, Aug. 3, 1995). The first copy of each GAO report and testimony is free. Additional copies are $2 each. Orders should be sent to the following address, accompanied by a check or money order made out to the Superintendent of Documents, when necessary. VISA and MasterCard credit cards are accepted, also. Orders for 100 or more copies to be mailed to a single address are discounted 25 percent. U.S. General Accounting Office P.O. Box 6015 Gaithersburg, MD 20884-6015 Room 1100 700 4th St. NW (corner of 4th and G Sts. NW) U.S. General Accounting Office Washington, DC Orders may also be placed by calling (202) 512-6000 or by using fax number (301) 258-4066, or TDD (301) 413-0006. Each day, GAO issues a list of newly available reports and testimony. To receive facsimile copies of the daily list or any list from the past 30 days, please call (202) 512-6000 using a touchtone phone. A recorded menu will provide information on how to obtain these lists.
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GAO provided information on the safety of highway railroad crossings, commuter passenger rails and adequacy of track safety inspections. GAO found that: (1) the leading cause of death associated with the railroad industry involved railroad crossing accidents; (2) about half of rail-related deaths occur because of collisions between trains and vehicles at public railroad crossings; (3) in 1994, 501 people were killed and 1,764 injured in railroad crossing accidents; (4) to improve the safety of railroad crossings, the Department of Transportation (DOT) must better target funds to high-risk areas, close more railroad crossings, install new technologies, and develop educational programs to increase the public's awareness of railroad crossings; (5) DOT plans are costly and will require congressional approval; (6) the Federal Railroad Administration (FRA) is unable to adequately inspect and enforce truck safety standards or direct transportation officials to the routes with the highest accident potential because its database contains inaccurate information; and (7) Congress has directed FRA to establish sufficient passenger car safety standards by 1999.
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The Anti-Drug Abuse Act of 1988 (P.L. 100-690) requires ONDCP to develop a national drug control strategy, in consultation with agency and department heads and others involved in drug control matters. With the President's approval, this strategy is submitted annually to the Congress. In addition to long- and short-term objectives, it contains information on past and estimated future federal funding in support of efforts to reduce drug supply and demand. Each year since 1983, state alcohol and drug agencies have voluntarily submitted data detailing the fiscal, client, and other aspects of their substance abuse programs to NASADAD. The state, county, and local governments' expenditure data, including federal support, are analyzed and published by NASADAD under a contract with SAMHSA of HHS. Also, SAMHSA collects data on private funding for substance abuse treatment services through its survey of drug and alcohol treatment units. The primary source of our information on contributions from private and community foundations has been the Foundation Center. The Foundation Center, established in 1956, is an independent, nonprofit service organization. Its mission is to foster public understanding of institutional philanthropy by collecting, organizing, analyzing, and disseminating information on foundations, corporate giving, and other topics. The federal government provides a large portion of the financial support for substance abuse treatment and prevention activities. For fiscal year 1994, federal budget authority for treatment and prevention activities was $4.4 billion--a 59-percent increase over the 1990 amount. When adjusted for inflation, this equates to a 41.3-percent increase from 1990 through 1994. Three departments--HHS, VA, and Education--accounted for the vast majority of the 1994 budget authority. The substance abuse programs that federal agencies fund provide a variety of services; however, treatment programs received a much larger proportion of funding than prevention programs in 1994. It should be noted that the data we obtained may not accurately represent total federal support for treatment and prevention because some programs may have been omitted and much of the data has not been independently validated. Federal funding for substance abuse treatment and prevention activities increased by $1.6 billion from fiscal year 1990 through 1994. During this time period, the number of federal agencies that reported funding for treatment and prevention programs rose from 12 to 16. Federal budget authority for fiscal year 1990 was $2.8 billion, but by fiscal year 1994 the funding amount had reached $4.4 billion. (See app. II for federal funding by agency for fiscal years 1990 through 1994.) The most recent data released by ONDCP show that fiscal year 1995 budget authority for treatment and prevention activities increased about $250 million over the 1994 amount. (See app. III.) Comparing the funding in fiscal years 1990 and 1994, changes in the budget authority for substance abuse treatment and prevention activities varied widely among federal agencies. The largest dollar increase occurred in HHS' budget, where budget authority increased by about $800 million, from $1.4 billion to $2.2 billion. This change accounted for about one-half of the total increase in federal funding over the 5-year period. Some of the growth can be attributed to the creation of substance abuse block grants and increased reimbursement for treatment services through Medicare and Medicaid. The changes in funding for substance abuse treatment and prevention services among all 16 agencies ranged from a 196-percent increase to about a 27-percent decrease. The Department of Housing and Urban Development (HUD) had the highest percentage increase in funding. Its budget authority went from $106.5 million to $315 million--the bulk of which appeared to be for increases in drug elimination grants that fund drug prevention and control at public and Native American housing developments. The Department of Justice had the highest percentage decrease. Its budget authority declined from $133 million to about $98 million. Although some offices within Justice experienced increases in their budget authority, the Office of Justice Programs' $50 million decrease resulted in Justice's overall decline in funding for substance abuse treatment and prevention activities. Of the 16 agencies, 3 departments accounted for most of the federal funds that were available for substance abuse treatment and prevention activities in fiscal year 1994. The combined budget authority of HHS, Education, and VA was about $3.68 billion, or 83 percent of the total federal funding for substance abuse treatment and prevention activities for that year. HHS alone, which has the largest number of agencies with substance abuse treatment and prevention programs, accounted for about half of the fiscal year 1994 budget authority. SAMHSA, within HHS, provided more federal funding for substance abuse treatment and prevention activities than any other agency. SAMHSA's fiscal year 1994 budget authority was about $1.4 billion. The National Institutes of Health (NIH), also within HHS, provided the next highest level of funding. Its fiscal year 1994 budget authority was $425.2 million. Figure 1 shows fiscal year 1994 budget authority for substance abuse treatment and prevention activities by agency. Substance abuse treatment services received a larger proportion of federal budget authority than prevention services in fiscal year 1994. Treatment services accounted for $2.6 billion, or about 60 percent of the total federal funding available. (See fig. 2.) Federal agencies' programs provide an array of substance abuse treatment services and prevention activities to a variety of targeted population groups. Treatment comprises an assortment of formal organized services for people who have abused alcohol, other drugs, or both. Treatment services can include diagnostic assessment; detoxification; and medical, psychiatric, and psychological counseling. Prevention activities focus on individuals who may be at risk for alcohol or other drug problems. These activities include providing information and education that increase knowledge of drug abuse and alternative drug-free life styles, encouraging communities to implement responses to drug use, and drug testing. One federal program that provides both treatment and prevention services is Head Start, which offers prevention activities for young children and supporting community-based activities for parents and other family members. Another example is the Pregnant and Postpartum Women and Infants program. In part, it funds demonstration programs that coordinate and link health promotion and treatment services for substance-using pregnant women and their young children. The program also supports treatment services in residential settings that permit infants and children to live with their substance-using mothers. Other programs also provide services for specific populations, such as high-risk youth; elementary, secondary, and postsecondary students; and veterans. Some agencies fund programs whose primary objective is to provide substance abuse treatment and prevention activities. Other agencies' programs include these activities as one component of a nonsubstance abuse program. For example, the main objective of the Department of Agriculture's Special Supplemental Program for Women, Infants, and Children (WIC) program is to provide nutritious food and nutrition education to women and children who are considered to be at nutritional risk. As part of nutrition education, WIC counsels participants about the dangers of substance abuse. Program participants are also referred to substance abuse counseling, when appropriate. Appendix IV contains federal agencies' funding levels for substance abuse treatment and prevention and brief descriptions of the federal programs that provided support for these services for fiscal year 1994. ONDCP was the most comprehensive single source for information on federal substance abuse treatment and prevention funding and programs. However, ONDCP's budget summary data are limited in their coverage of substance abuse programs and are not routinely subjected to large-scale verification. We observed that ONDCP does not always include alcohol treatment and prevention programs in its budget summaries. For example, no information on NIH's National Institute on Alcohol Abuse and Alcoholism is included in NIH's budget authority. Moreover, when we compared ONDCP's data with federal agencies' justifications of budget estimates prepared for congressional appropriations committees, the combined funding for three agencies differed by about $655 million in fiscal year 1994. According to ONDCP officials, the differences are due to the inclusion of alcohol-only programs in the agencies' justification of estimates. ONDCP does not include alcohol-only programs in its budget summary because these programs are not "scored"--that is, categorized--as drug programs. Additionally, VA's 1996 congressional budget justification did not include VA's full complement of treatment programs. Data limitations also stem from the use of different methods of estimating the amount of program funding specifically used for substance abuse treatment and prevention and from different determinations of what constitutes a prevention or treatment program. The combined contributions of state, county, and local governments constitute a sizable portion of the financial support for substance abuse treatment and prevention activities. In fiscal year 1994, these entities spent about $1.6 billion--most of which was used for treatment services. This fiscal year 1994 spending exceeded fiscal year 1990 expenditures by about 22 percent (about 8 percent when adjusted for inflation). Users of these data should note that total spending by state and local governments probably exceeds these reported expenditures. In fiscal years 1990 through 1994, state, county, and local governments' total expenditures increased overall for substance abuse treatment and prevention activities. Combined expenditures rose from $1.3 billion to about $1.6 billion--about a $300 million increase. (App. V shows state, county, and local governments' annual expenditures and the percentage change from fiscal year 1990 through 1994.) On a percentage basis, there was more fluctuation in local governments' spending than in state spending over the 5-year period. Also during this period, combined spending for substance abuse treatment consistently exceeded that for prevention. Although total treatment and prevention expenditures increased over the 5 years, spending for prevention actually decreased by about 1 percent while spending for treatment increased by 26 percent (these percentages equate to 12 and 11 percent, respectively, when adjusted for inflation) (see apps. VI and VII). In fiscal year 1994, treatment services accounted for more than 88 percent of total spending by the entities combined (see fig. 3). The expenditure data voluntarily submitted to NASADAD by state and local governments have a number of inherent limitations. One major limitation is that NASADAD asked states to submit expenditure data only for service providers that received at least some portion of their funding from the state alcohol and drug agency during the state's fiscal year. The data therefore do not include information on providers that did not receive any funding from the state alcohol and drug agency, such as private for-profit agencies. As a result, the overall expenditure data submitted to NASADAD are conservative and probably underestimate total funding expenditures by state governments. Furthermore, state-reported expenditures are not verified by NASADAD; instead, NASADAD asks that states confirm that their data are correct. For some states, complete information is not available on all sources of funding, even for service providers supported by state alcohol and drug agencies. In most of these instances, the amount of unavailable information is probably small. In addition, there are concerns about how consistently providers of treatment and prevention activities classify those activities given the varying interpretations of what constitutes "treatment" and "prevention." The data are also limited by the variations in state fiscal years, raising questions about the appropriateness of comparing expenditures across states. Comprehensive data on private funding of substance abuse treatment and prevention activities over time are sparse. The National Drug and Alcoholism Treatment Unit Survey (NDATUS), which compiled private contributions from various sources, focused on treatment only. NDATUS data show that private funding for substance abuse treatment services amounted to a little over $1 billion in 1993 (the latest year for which data were available). The largest source of private funding was third-party payments by health insurers and health maintenance organizations (about 55 percent of total private funding). Private donations, which included contributions from foundations, accounted for about 7 percent. (See table 1.) Data on private donations from foundations show that the top 25 contributors awarded $39.4 million in grants for substance abuse treatment and prevention programs during 1993 and 1994 (the latest years for which grant data were available). The grant amounts ranged from $306,342 to about $18.5 million (see app. VIII). These grants were provided to nonprofit organizations in the United States and abroad to cover substance abuse treatment and prevention programs, including counseling, education, residential care facilities, halfway houses, support groups, family services, community programs, and services for children of drug-dependent parents. Grants were also awarded for medical research on substance abuse and media projects on substance abuse prevention. Population groups receiving the largest grant amounts were alcohol or drug abusers, children and youths, women and girls, economically disadvantaged individuals, offenders or ex-offenders, and minorities. The private funding data we used had two significant limitations. First, the latest available NDATUS data on private funding sources were for substance abuse treatment only, and these data were for only 1 year--1993. Second, the response rates of treatment providers to the NDATUS survey were low. The response rates were 21.1 percent for third-party payments, 44.9 percent for client fees, and 15.4 percent for private donations. Federal, state, county, and local governments and the private sector all provide funding for substance abuse treatment and prevention activities. The latest and best data available show that (1) the federal government has been a major contributor of funds, providing more than $4 billion in fiscal year 1994; (2) state and local governments spent a little more than $1.5 billion in their 1994 fiscal years; and (3) private funding exceeded $1 billion in 1993. According to the data we collected, the federal government increased its support for treatment and prevention activities from fiscal year 1990 through the end of fiscal year 1994 by about 60 percent. Over the same 5-year period, state, county, and local governments' combined funding for treatment and prevention activities increased by about 22 percent. In commenting on a draft of this report, ONDCP concurred with our findings (see app. IX). NASADAD also commented on a draft of this report and agreed with the manner in which we dealt with data it provided on state, county, and local government expenditures. However, NASADAD commented that the changes in state expenditure levels we reported for the 1990 through 1994 time frame were influenced by the time period we chose to review. NASADAD noted that the fiscal year period 1985 through 1989 showed much higher increases in state expenditures. (See app. X.) We are sending copies of this report to the Secretary of Health and Human Services; the Director of the Office of National Drug Control Policy; the Director of the Office of Management and Budget; the Executive Director of the National Association of State Alcohol and Drug Abuse Directors, Inc.; appropriate congressional committees; and other interested parties. We will also make copies available to others on request. If you or your staff have any questions about this report, please call me at (202) 512-7119. Other major contributors to this report include James O. McClyde, Assistant Director; Jared Hermalin; Roy Hogberg; and Brenda James Towe. To determine the level of federal funding and what federal programs exist for substance abuse treatment and prevention activities, we used three data sources: (1) the Office of National Drug Control Policy's (ONDCP) budget summaries from its National Drug Control Strategies, (2) federal agencies' justifications of estimates for appropriations committees, and (3) the 1995 Catalog of Federal Domestic Assistance. We also interviewed ONDCP officials. Using the ONDCP budget summaries as our primary data source, we identified federal agencies that fund substance abuse treatment and prevention services and obtained funding data and program descriptions starting in fiscal year 1990. The latest ONDCP budget summary available at the time of our analysis contained actual budget authority for fiscal year 1994, budget estimates for fiscal year 1995, and budget requests for fiscal year 1996. We obtained additional funding data from the National Institute on Alcohol Abuse and Alcoholism (NIAAA) because information on its programs was either not included or not specifically identified in ONDCP's budget summaries. The agencies' justifications of estimates were of minimal use because, in most cases, they did not identify substance abuse treatment and prevention funding or provide a description of the programs. Where possible, we compared the justifications with ONDCP's budget summaries. We reviewed the 1995 Catalog of Federal Domestic Assistance but made only minimal use of its data to fill gaps in program descriptions. Information on state, county, and local governments' spending specifically for substance abuse treatment and prevention activities was generated by the National Association of State Alcohol and Drug Abuse Directors (NASADAD) from its computerized database. These data covered state fiscal years from 1990 through 1994 and are based on state-reported expenditures that are not verified by NASADAD. Instead, NASADAD requests that states confirm that their annually reported data are correct. We interviewed NASADAD officials and obtained their views on the state-reported data. To obtain information on private sector funding, we contacted the Department of Health and Human Service's (HHS) Substance Abuse and Mental Health Services Administration (SAMHSA) and numerous other organizations. These groups included the National Association of Addiction Treatment Providers, the Health Insurance Association of America, the American Hospital Association, the National Association of Public Hospitals, and the Center for Addiction and Substance Abuse at Columbia University. However, only SAMHSA provided private funding data for multiple sources. These data were collected in the National Drug and Alcoholism Treatment Unit Survey (NDATUS) of treatment providers and covered funding for treatment services in 1993--the latest year for which data were available. Published data on the private foundations that provided the most funding in grants to nonprofit organizations during 1993 and 1994 were obtained from the Foundation Center. We did not identify any data sources with comprehensive information on private funding of substance abuse prevention activities. We did not verify the federal, state, and private data. The funding data we provide in this report have generally not been adjusted for inflation. In some instances, we did adjust for inflation when presenting changes in funding over time. We conducted our work from February through August 1996 in accordance with generally accepted government auditing standards. Administration for Children and Families Centers for Disease Control and Prevention Health Resources and Services Administration Alcohol, Drug Abuse, and Mental Health Administration (continued) Special Supplemental Program for Women, Infants, and Children (WIC) Bureau of International Narcotics and Law Enforcement National Highway Traffic Safety Administration Office of Territorial and International Affairs (Table notes on next page) Percentage changes are not presented for agencies' subunits. Not applicable because there was no funding in 1 or more years. Administration for Children and Families Centers for Disease Control and Prevention Health Resources and Services Administration Special Supplemental Program for Women, Infants, and Children (WIC) (continued) This appendix provides information on the substance abuse treatment and prevention activities of various federal agencies. Included are funding information and program and activity descriptions. Not included are funding and program descriptions for agencies that devoted less than $1 million to treatment and prevention activities in fiscal year 1994. These agencies accounted for $1.8 million or 0.04 percent of total federal budget authority for that year. In some cases table totals do not add because of rounding. Through the Veterans Health Administration, VA operates a network of substance abuse treatment programs in its medical centers, domiciliaries, and outpatient clinics. Office of Elementary and Secondary Education Drug-Free Schools and Communities Act National Programs (including regional centers) Safe and Drug-Free Schools and Communities Act Family and Community Endeavor Schools (FACES) Office of Special Education and Rehabilitative Services, Rehabilitative Services Administration Office of Special Education Programs Grants for Infants and Families Special Education Special Purpose Funds National Institute on Disability and Rehabilitation Research Rehabilitation Research Training Centers and other programs The Drug-Free School and Communities Act expired at the end of fiscal year 1994; its authorization was extended under the Safe and Drug-Free Schools and Communities Act. Program not in existence or program restructured into another program. The Safe and Drug-Free Schools and Communities Act extends the authorization for the Drug-Free Schools and Communities Act (which expired on Sept. 30, 1994) and broadens it to include activities to prevent violence as well as drug and alcohol use by youth. In 1994, the funds were used exclusively for alcohol, tobacco, and other drug-related prevention activities. In 1994, 90 percent of these funds were used to support grants to local educational agencies (LEA) with serious school crime, violence, and discipline problems. The projects are designed to combat those problems and thereby enhance school safety and promote better access to learning. The remaining funds were divided equally between national leadership activities and support for a national model city program in the District of Columbia, as authorized by the legislation. (Funding for this program is included in the national drug control budget because activities supported with these funds will have an impact on drug prevention as well as on violence prevention.) Family and Community Endeavor Schools (FACES), a subset of the Crime Control Act, supports grants to LEAs and community-based organizations in high-poverty and high-crime areas for programs of integrated services to improve the academic and social development of at-risk students. (Funding for this program is included in the national drug control budget because activities supported with these funds will have an impact on drug prevention as well as on violence prevention.) This state grant program supports a wide range of services for individuals with disabilities, including those whose disabling condition is due to drug abuse, to prepare for and engage in gainful employment. Funds are allocated to states and territories on the basis of their population and per capita income. People with disabilities that result in a substantial impediment are eligible for assistance. Funds also support special demonstration programs that develop innovative methods and comprehensive service programs to help people with disabilities achieve satisfactory vocational outcomes. Special demonstration programs develop innovative methods and comprehensive service programs to help people with disabilities achieve satisfactory vocational outcomes. The program awards discretionary grants to states, agencies, and organizations to pay all or part of the costs of demonstrations, direct services, and related activities. This state grant program supports development and implementation of statewide systems of early intervention for children up to 2 years old with disabilities. No specific information related to drug abuse intervention was provided in the ONDCP 1995 budget summary. These funds support grants, contracts, and cooperative agreements with public agencies; private nonprofit organizations; and, in some cases, for-profit organizations. Activities include research, demonstrations, outreach, training, and technical assistance. No specific information related to drug abuse intervention was provided in the ONDCP 1995 budget summary. Through various discretionary programs, the Institute supports research, demonstrations, and dissemination activities on issues relating to people of all ages with disabilities. No specific information related to drug abuse was provided in the ONDCP 1995 budget summary. Program administration maintains Department of Education staff to administer programs with substance abuse treatment and prevention components. Program not in existence or program restructured into another program. Drug Elimination Grants/Community Partnership Against Crime Empowerment Zones and Enterprise Communities Crime Control Act (Local Partnership Act) Program not in existence or program restructured into another program. Through this program, HUD provides grants to public housing authorities and Indian housing agencies to fight drug problems in their communities. Drug problems are addressed through a comprehensive approach involving enforcement, prevention, and treatment. The grants focus on many areas, including community policing, youth training, recreation, career planning, employment, substance abuse education and prevention; resident services, such as drug treatment or other appropriate social services that address the contributing factors of crime; and clearinghouse services, assessment and evaluation, and technical assistance and training. Funds support programs to empower people and communities to work together to create jobs and opportunity. HUD applies four principles in making the Empowerment Zone and Enterprise Community designations: (1) economic opportunity, (2) sustainable community development, (3) community-based partnerships, and (4) strategic vision for change. No details were provided for this program in the ONDCP 1995 budget summary. The Bureau has a comprehensive drug abuse treatment strategy with four components: drug abuse education, nonresidential drug abuse counseling services, residential drug abuse program, and community-transitional services programming. An estimated 30.5 percent of the sentenced inmate population is drug dependent and requires some type of drug abuse treatment program. Neither the ONDCP budget summary nor the agency's justification of estimates identified the prevention components. Through formula grant funds, the Bureau provides financial and technical assistance to state and local governments to control drug abuse and violent crime and improve the criminal justice system. States are required to prepare statewide antidrug and violent crime strategies. The Bureau also supports national and multistate programs such as the National Crime Prevention Campaign (McGruff the Crime Dog). The Bureau produces and disseminates drug-related data, including data on drug-use history of criminal offenders; offenders under the influence of alcohol or drugs; drug prosecution and sentencing of drug law violators; case processing of drug offenses; drug availability, prevention, and education classes in schools; drug and alcohol rehabilitation programs in the correctional community; and the relationship of drugs and crime. The Bureau also supports the Drugs and Crime Data Center and Clearinghouse, which provides a centralized source of information on drugs and crime. The Institute is the primary federal sponsor of research on crime and its control and is a central resource for information on innovative approaches in criminal justice. As mandated by the Anti-Drug Abuse Act of 1988, the Institute sponsors and conducts research, evaluates policies and practices, demonstrates promising new approaches, provides training and technical assistance, assesses new technology for criminal justice, and disseminates its findings to state and local practitioners and policymakers. This agency has primary responsibility for addressing the needs of the juvenile justice system. Its goal is to aid in the prevention, reduction, and treatment of juvenile crime and delinquency and to improve the administration of juvenile justice by providing financial and technical support to state and local governments, public and private agencies, organizations, and institutions. Program not in existence or program restructured into another program. Program not in existence or program restructured into another program. The program serves as a vehicle for the administration's strategy to fight violent crime by increasing the number of state and local police officers; promoting the use of community policing techniques; and implementing police hiring, education, and training programs. The program primarily awards grants to state and local law enforcement agencies, state and local governments, and community groups to achieve its goals. Employment and Training Administration (Job Training Program) The Department of Labor's Employment and Training Administration administers job training programs, not substance abuse programs. The Administration believes that the positive results of its programs, in terms of enabling participants to acquire new skills and enhance employment ability, contribute to reducing the risk factors associated with substance abuse. The Job Training Partnership Act (JTPA), 29 U.S.C. SS1501 et seq., requires individual assessments for each program participant; specifically encourages outreach activities for individuals who face severe barriers to employment, such as drug and alcohol abuse; and sets as program goals coordination of JTPA programs with other community service organizations, such as drug and alcohol abuse prevention and treatment programs. JTPA also authorizes the Job Corps Alcohol and Other Drug Abuse component to screen trainees for drug and alcohol problems and provide prevention and intervention services. This program provides information on workplace substance abuse through continued development and operation of the Substance Abuse Information Database; data collection on the impact of substance abuse on productivity, safety, and health; support for the Substance Abuse Institute at the George Meany Center for Labor Studies; funding of the workplace model in the fiscal year 1996 Household Survey; and continued work with employer and employee groups to raise awareness of the problems of workplace substance abuse and what can be done to most effectively address those problems. The Department of Defense's counterdrug strategy has among its objectives to reduce the demand for illegal drugs within the Department and its surrounding communities. The demand reduction program supports a counterdrug strategy of early drug abuse identification through testing and treatment of drug abusers and outreach programs for at-risk youth through the military departments and the National Guard Bureau. For community outreach pilot programs, congressional authorization is required to permit counterdrug funds to be spent on programs targeting youth outside the traditional Department community boundaries. The U.S. Courts operate the Substance Abuse Treatment Program. Offenders in this program are referred by the Judiciary and the Bureau of Prisons. The basic goal of the program is to identify and treat substance abusers who are under the supervision of the U.S. Probation Office. The program tries to protect the community by helping these offenders stop their substance abuse. The Corporation for National Service administers programs that address the nation's education, human service, public safety, and environmental needs through the activities of volunteers and that expand the involvement of volunteers in responding to a wide range of community needs, including drug abuse prevention, by reaching high-risk youth and the communities in which they live. Referral and monitoring (Title XVI) Demonstration projects (Title XVI) Disability Insurance Trust Fund (Title II) Program not in existence or program restructured into another program. The Social Security Administration has placed restrictions on Disability Insurance and Supplemental Security Income benefits payments to individuals disabled by drug addiction or alcoholism and has established barriers to prevent a beneficiary from using benefits to support an addiction. In some cases, the Administration imposes treatment requirements on Disability Insurance beneficiaries and establishes referral and monitoring agreements in all states. Special Supplemental Program for Women, Infants, and Children (WIC) WIC provides nutritious supplemental foods to low-income pregnant, postpartum, and breastfeeding women and to infants and children younger than age 5 who are determined by professionals such as physicians, nurses, and nutritionists to be at nutritional risk. Funds flow through participating state agencies to local agencies, which provide supplemental foods to WIC participants along with nutrition education, breastfeeding promotion, and health care referrals. As part of nutrition education, WIC counsels participants about the dangers of substance abuse, including smoking during pregnancy. When appropriate, participants are referred to drug abuse counseling. The ONDCP budget summary and the budget justification do not identify specific prevention program or activity dollars. The Bureau develops, implements, and monitors U.S. international counternarcotics strategies and programs. The Bureau's functions also include foreign policy formation and coordination, program management, and diplomatic initiatives. Neither ONDCP nor the agency's justification of estimates identifies specific prevention components by budget expenditure. However, prevention descriptions are identified within the following FAA program listings. The Federal Aviation Administration (FAA) provides regulatory oversight of the drug and alcohol misuse prevention programs administered by approximately 5,000 aviation industry entities and individual commercial operators. FAA also conducts random drug testing of employees who are designated to be in critical safety positions; reregisters aircraft and conducts periodic renewal of pilot certificates; provides investigative support to all federal, state, and local law enforcement agencies involved in drug enforcement actions; and develops and correlates flight plans and transponder codes to enhance communications between air route traffic control centers and U.S. Customs/Coast Guard facilities. This process assists in identifying airborne drug smugglers by using radar, posting aircraft lookouts, and tracking the movement of suspect aircraft. This funding category supports the postmortem analysis of tissues and fluids from people involved in transportation accidents and incidents and assesses the effects of drugs on the performance of pilot and controller tasks. The office coordinates substance abuse services among rehabilitation centers, emergency shelters, juvenile detention facilities, and community-based prevention and intervention programs. Each Bureau school has a substance abuse prevention program. The schools are allowed flexibility to design the most effective curriculum and counseling services to meet the needs of students. The U.S. Secret Service considers a portion of its costs for full-time- equivalent employees' pay, benefits, and support to be attributable to drug enforcement activities. These activities include criminal investigations, task force involvement, employee and applicant drug testing, and protection involved in other drug-related activities. (continued) Data were not available. Percentage change could not be computed because data were not available. (continued) Data were not available. Percentage change could not be computed because data were not available. (continued) Data were not available. Percentage change could not be computed because data were not available. The Robert Wood Johnson Foundation Meadows Foundation, Inc. Carnegie Corporation of New York The Aaron Diamond Foundation, Inc. Hartford Foundation for Public Giving The Annie E. Casey Foundation Lettie Pate Evans Foundation, Inc. At-Risk and Delinquent Youth: Multiple Federal Programs Raise Efficiency Questions (GAO/HEHS-96-34, Mar. 6, 1996). Drug Courts: Information on a New Approach to Address Drug-Related Crime (GAO/GGD-95-159BR, May 22, 1995). Social Security: Disability Benefits for Drug Addicts and Alcoholics Are Out of Control (GAO/T-HEHS-94-101, Feb. 10, 1994). Drug Use Among Youth: No Simple Answers to Guide Prevention (GAO/HRD-94-24, Dec. 29, 1993). Indian Health Service: Basic Services Mostly Available; Substance Abuse Problems Need Attention (GAO/HRD-93-48, Apr. 9, 1993). Community Based Drug Prevention: Comprehensive Evaluations of Efforts Are Needed (GAO/GGD-93-75, Mar. 24, 1993). Adolescent Drug Use Prevention: Common Features of Promising Community Programs (GAO/PEMD-92-2, Jan. 16, 1992). ADMS Block Grant: Drug Treatment Services Could Be Improved by New Accountability Program (GAO/HRD-92-27, Oct. 17, 1991). Drug Treatment: State Prisons Face Challenges in Providing Services (GAO/HRD-91-128, Sept. 20, 1991). Drug Treatment: Despite New Strategy, Few Federal Inmates Receive Treatment (GAO/HRD-91-116, Sept. 16, 1991). Substance Abuse Treatment: Medicaid Allows Some Services but Generally Limits Coverage (GAO/HRD-91-92, June 13, 1991). ADMS Block Grant: Women's Set-Aside Does Not Assure Drug Treatment for Pregnant Women (GAO/HRD-91-80, May 6, 1991). Drug Abuse: The Crack Cocaine Epidemic--Health Consequences and Treatment (GAO/HRD-91-55FS, Jan. 30, 1991). The first copy of each GAO report and testimony is free. Additional copies are $2 each. Orders should be sent to the following address, accompanied by a check or money order made out to the Superintendent of Documents, when necessary. VISA and MasterCard credit cards are accepted, also. Orders for 100 or more copies to be mailed to a single address are discounted 25 percent. U.S. General Accounting Office P.O. Box 6015 Gaithersburg, MD 20884-6015 Room 1100 700 4th St. NW (corner of 4th and G Sts. NW) U.S. General Accounting Office Washington, DC Orders may also be placed by calling (202) 512-6000 or by using fax number (301) 258-4066, or TDD (301) 413-0006. Each day, GAO issues a list of newly available reports and testimony. To receive facsimile copies of the daily list or any list from the past 30 days, please call (202) 512-6000 using a touchtone phone. A recorded menu will provide information on how to obtain these lists.
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Pursuant to a congressional request, GAO provided information on the financial support provided for substance abuse and treatment activities by federal, state, and local governments and the private sector. GAO found that: (1) federal funding for substance abuse treatment and prevention activities increased from $2.8 billion in fiscal year (FY) 1990 to $4.4 billion in FY 1994; (2) the Departments of Health and Human Services, Education, and Veterans Affairs provided 83 percent of total federal funding for treatment and prevention activities for FY 1994; (3) numerous programs in 16 federal agencies covered a broad range of treatment and prevention services and often targeted specific populations; (4) treatment services included diagnostic assessment, detoxification, and counseling, while prevention activities usually included providing information and education about alternatives to and consequences of alcohol abuse and illicit drug use; (5) state, county, and local governments' total expenditures for treatment and prevention activities increased from about $1.3 billion in FY 1990 to about $1.6 billion in FY 1994; and (6) although data on private-sector funding for substance abuse treatment are very limited, available sources indicate funding of more than $1 billion in 1993.
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The Congress made the eligibility criteria for children to receive SSI more restrictive in order to help ensure that only needy children with severe disabilities are eligible for benefits. From the end of 1989 through 1996, the number of children younger than 18 receiving SSI had more than tripled, from 265,000 to 955,000. This growth occurred after SSA initiated outreach efforts and issued two sets of regulations that made the eligibility criteria for children less restrictive, particularly for children with mental impairments. One regulatory change, issued in December 1990, revised and expanded SSA's medical listings for childhood mental impairments by adding such impairments as attention deficit hyperactivity disorder and incorporating functional criteria into the listings. Examples of such functional criteria include standards for assessing a child's social skills; cognition and communication skills; and the ability to concentrate, keep pace, and persist at tasks at hand. The medical listings are regulations containing examples of medical conditions, including both physical and mental impairments, that are so severe that disability can be presumed for anyone who is not performing substantial gainful activity and who has an impairment that "meets" the criteria--medical signs and symptoms and laboratory findings--of the listing. Since the listings cannot include every possible impairment or combination of impairments a person can have, SSA's rules also provide that an impairment or combination of impairments can "equal" or be "equivalent to" the severity of a listing. There are separate listings for adults and children. The childhood listings are used first in evaluating childhood claims. If the child's impairment does not meet or equal the severity of a childhood listing, the adult listings are considered. The second regulatory change, issued in February 1991 in response to the Sullivan v. Zebley Supreme Court decision, added two new bases for finding children eligible for benefits, both of which required an assessment of a child's ability to function: functional equivalence, which was set at "listing level" severity, and an individualized functional assessment (IFA), which was set at a lower threshold of severity. Functional equivalence is based on the principle that it is the functional limitations resulting from an impairment that make the child disabled, regardless of the particular medical cause. It was added as a basis for eligibility in response to the Supreme Court's determination in the Zebley case that SSA's medical listing of impairments--which had been the only basis for eligibility--was incomplete. Under functional equivalence, a child could be found eligible for benefits if the child's impairment limited his or her functional ability to the same degree as described in a listed impairment. Functional equivalence is particularly appropriate for assessing children with combinations of physical and mental impairments. The IFA allowed children whose impairments were less severe than listing level to be found eligible if their impairments were severe enough to substantially limit their ability to act and behave in age-appropriate ways. A child was generally found eligible under the IFA if his or her impairment resulted in moderate functional limitations in three areas of functioning or a marked limitation in one area and a moderate limitation in another area. In 1995, we reported that the subjectivity of the IFA called into question SSA's ability to ensure reasonable consistency in administering the SSI program, particularly for children with behavioral and learning disorders. We suggested that the Congress consider eliminating the IFA and directing SSA to revise its medical listings. Several welfare reform provisions enacted in August 1996 made the eligibility criteria for disabled children more restrictive: (1) childhood disability was redefined from an impairment comparable to one that would prevent an adult from working to an impairment that results in "marked and severe functional limitations," (2) the IFA was eliminated as a basis for determining eligibility for children, and (3) maladaptive behavior was removed from consideration when assessing a child's personal or behavioral functioning. Thus, such behavior would be considered only once--in the assessment of that child's social functioning--when determining whether the child had a mental impairment severe enough to meet or equal the medical listings. The law also required SSA to redetermine the eligibility of children on the rolls who might not meet the new eligibility criteria because they received benefits on the basis of the IFA or maladaptive behavior. Earlier legislative proposals under consideration in 1995 might have removed from the rolls as few as 45,000 to as many as 190,000 children, according to Congressional Budget Office (CBO) estimates. After the welfare reform legislation was enacted in August 1996 but before SSA issued its regulations, CBO estimated that about 170,000 children on the rolls would no longer be eligible for benefits. After SSA issued its regulations in February 1997, CBO and SSA estimates of children who would be removed from the rolls were very close--131,000 and 135,000, respectively. SSA identified 288,000 children as potentially affected by the changes in the eligibility criteria because they had been awarded benefits on the basis of the IFA or maladaptive behavior. Through February 28, 1998, SSA reviewed the eligibility of 272,232 of the 288,000 children. Of these, 139,693 (51.3 percent) were found eligible to continue to receive benefits and 132,539 (48.7 percent) were found ineligible. Because the number of children deemed ineligible does not yet reflect the results of all appeals, we do not yet know the final outcome on all these cases. Children initially deemed by a disability determination service to be ineligible have 60 days to request reconsideration of their case. If they continue to receive an unfavorable result, they can appeal to an SSA administrative law judge and, finally, to federal court. Recipients can elect to continue receiving benefit payments during the appeal process. Factoring in appeals and experience in conducting redeterminations so far, SSA now estimates that 100,000 children will be removed from the rolls as a result of the redeterminations. In December 1997, SSA issued a report on its "top-to-bottom" review of the implementation of the new regulations to address concerns that children may have had their benefits terminated unfairly. SSA found problems with the adjudication of claims for which mental retardation was the primary impairment as well as potential procedural weaknesses relating to notification of appeal rights and termination of benefits for failure to cooperate with SSA requests for information needed to redetermine eligibility. To remedy these problems, SSA decided to rereview all children whose benefits were terminated or denied on the basis of mental retardation. SSA conducted training in March 1998 to clarify how these claims should be adjudicated. Also, all cases terminated because families did not cooperate with SSA in processing the claim, such as by failing to provide requested medical information or to take the child for a consultative examination, will be rereviewed. SSA found that in two-thirds of these terminations, all the required contacts had not been made or had not been documented in the file. Finally, families of children whose benefits were terminated but did not appeal are being given an additional 60-day period in which to appeal their terminations. Notices of this right as well as the right to continue to receive benefits while the appeal is pending were sent out in February 1998. area. SSA also eliminated the IFA and removed the duplicate consideration of maladaptive behavior from the mental disorders listings. In developing its regulations, SSA concluded that the Congress meant to establish a stricter standard of severity than "one marked, one moderate" limitation, for several reasons. The Congress eliminated the "comparable severity" standard of disability and the IFA, which was created for evaluating impairments less severe than those in the medical listings. A "one marked, one moderate" standard of severity would have retained one of the standards under which children were found eligible under the IFA, which SSA stated would violate the law. Finally, SSA interpreted the conference report to mean that the Congress intended the listings to be the last step in the disability determination process for children. Although SSA articulated the "two marked or one extreme" severity standard in its regulations, it did not modify its existing listings to specifically incorporate functional criteria that would reflect both the new definition of childhood disability and advances in medicine and science. For example, because of advances in treatment, some impairments no longer have as severe an effect on a child's ability to function as they once did. As a result, some listings are set below the "two marked or one extreme" threshold of severity, and cases are being adjudicated at this less severe level as well as at the "two marked or one extreme" severity level. SSA's Office of Program and Integrity Reviews have told us, however, that they would consider this an error. SSA has not identified how many children may have been awarded benefits on the basis of these less severe listings. SSA told us that unreliable coding of the listings used to determine eligibility makes it difficult to quantify the extent of this problem. We do know, however, that some of the listings below the "two marked or one extreme" threshold are for prevalent impairments, including two of six listings for the most common impairment--mental retardation--and three listings for cerebral palsy, one for epilepsy, and one for asthma. Other listings below the "two marked or one extreme" threshold include one listing for juvenile rheumatoid arthritis, one for juvenile diabetes, and two for diabetes insipidus. As of June 1998, SSA had not established a schedule for updating and modifying its listings. SSA's quality assurance statistics on childhood cases show uneven accuracy rates across the states. Although nationally the accuracy rate for decisions on new childhood cases and redeterminations exceeds SSA's standard of 90.6 percent, many states fall below the standard. Specifically, for decisions made on new childhood cases from June 1997 through February 1998, 5 states fell below the 90.6-percent accuracy standard for awards, and 9 states fell below the standard for denials. For redeterminations, 10 states fell below the standard for continuances, and 10 states fell below the standard for cessations. Most of the errors have been in the documentation; that is, there was some deficiency in the evidence that formed the basis for the determination. In these cases, proper documentation of the case could substantiate or reverse the decision. Given the significant changes in adjudicating cases on the basis of the new regulations, these statistics are not surprising. Moreover, childhood cases historically have been among the more difficult cases to adjudicate. We would expect SSA to be monitoring the decisions; identifying areas of difficulty for adjudicators; and providing additional clarification, guidance, and training to improve the accuracy of decisions. In fact, this is exactly what SSA has been doing, although its training schedule was delayed slightly. consistent application of the new regulations. The plan includes special initiatives to ensure the quality of cases readjudicated in response to the top-to-bottom review, as well as initiatives to improve SSA's ongoing quality assurance reviews on childhood cases. For the first time, SSA will be drawing separate samples of new childhood claims and continuing disability reviews. This should allow SSA to provide more timely feedback and policy clarifications on the problems unique to adjudication of childhood claims. SSA also will be measuring the performance of its quality reviewers to ensure that they are accurately and consistently identifying errors. Under this effort, SSA plans to increase its sample of reviewed cases from 1,600 to 6,000 annually. SSA has made substantial progress in implementing the new childhood definition of disability through its rapid redetermination of most of these cases, its action to ensure that the redetermination process is fair, and its ongoing review of the implementation of the new regulations. However, we remain concerned about how accurately and consistently the disability determination process is working for children. Specifically, because some of SSA's listings of impairments require less than "two marked or one extreme" limitation to qualify for benefits, SSA adjudicators are not assessing all children against a uniform severity standard. This is because SSA has neither updated its listings to reflect advances in medicine and science nor modified them to reflect a single standard of severity, despite its authority to do so. Moreover, we noted the need to revise the listings 3 years ago. SSA also needs to continue its efforts to improve decisionmaking for childhood cases to better ensure that adjudicators apply the new eligibility criteria accurately and consistently. In view of the fact that many of SSA's medical listings for children are outdated and allow eligibility to be based upon multiple standards of severity, our May 1998 report recommended that the Commissioner act immediately to update and modify its medical listings to incorporate advances in medicine and science and to reflect a uniform standard of severity. In its comments on our report, SSA officials agreed that SSA should periodically update its listings and stated that it is developing a schedule to accomplish this. The agency stated that it must consult with medical experts to ensure that the listings reflect state-of-the-art medical practice and estimates that it will take several years to complete the revision. However, the agency did not address the need for the listings to reflect a uniform severity standard. We will continue to monitor SSA's implementation of the new eligibility criteria, including the agency's actions to update its medical listings for children, as part of our mandate to report to the Congress by 1999 on the impact of the changes to the SSI program enacted by welfare reform. As part of that effort, we are monitoring what SSA is doing to ensure the accuracy and consistency of childhood disability decisions made under the new eligibility criteria. Please contact me on (202) 512-7215 if you have questions about the information presented in this statement. Supplemental Security Income: SSA Needs a Uniform Standard for Assessing Childhood Disability (GAO/HEHS-98-123, May 6, 1998). SSA's Management Challenges: Strong Leadership Needed to Turn Plans Into Timely, Meaningful Action (GAO/T-HEHS-98-113, Mar. 12, 1998). Supplemental Security Income: Review of SSA Regulations Governing Children's Eligibility for the Program (GAO/HEHS-97-220R, Sept. 16, 1997). Children Receiving SSI by State (GAO/HEHS-96-144R, May 15, 1996). SSA Initiatives to Identify Coaching (GAO/HEHS-96-96R, Mar. 5, 1996). Supplemental Security Income: Growth and Changes in Recipient Population Call for Reexamining Program (GAO/HEHS-95-137, July 7, 1995). Social Security: New Functional Assessments for Children Raise Eligibility Questions (GAO/HEHS-95-66, Mar. 10, 1995). Social Security: Federal Disability Programs Face Major Issues (GAO/T-HEHS-95-97, Mar. 2, 1995). Supplemental Security Income: Recent Growth in the Rolls Raises Fundamental Program Concerns (GAO/T-HEHS-95-67, Jan. 27, 1995). Social Security: Rapid Rise in Children on SSI Disability Rolls Follows New Regulations (GAO/HEHS-94-225, Sept. 9, 1994). The first copy of each GAO report and testimony is free. Additional copies are $2 each. Orders should be sent to the following address, accompanied by a check or money order made out to the Superintendent of Documents, when necessary. VISA and MasterCard credit cards are accepted, also. Orders for 100 or more copies to be mailed to a single address are discounted 25 percent. U.S. General Accounting Office P.O. Box 37050 Washington, DC 20013 Room 1100 700 4th St. NW (corner of 4th and G Sts. NW) U.S. General Accounting Office Washington, DC Orders may also be placed by calling (202) 512-6000 or by using fax number (202) 512-6061, or TDD (202) 512-2537. Each day, GAO issues a list of newly available reports and testimony. To receive facsimile copies of the daily list or any list from the past 30 days, please call (202) 512-6000 using a touchtone phone. A recorded menu will provide information on how to obtain these lists.
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GAO discussed the Social Security Administration's (SSA) implementation of the new eligibility criteria for childhood disability benefits under the Supplemental Security Income (SSI) program. GAO noted that: (1) SSA has made considerable progress in implementing the welfare reform changes in eligibility for SSI children; (2) SSA has taken important steps to safeguard fairness by identifying children whose benefits may have been terminated inappropriately and establishing remedial action to rereview their cases; (3) however, because SSA's medical listings reflect multiple levels of severity, SSA also needs to expedite updating and modifying its medical listings to ensure that all children are assessed against a uniform severity standard; (4) the need to revise the listings is a long-standing problem that GAO reported on in 1995; (5) moreover, SSA needs to take concerted action to follow through on its plan for monitoring and continually improving the quality of decisions regarding children; and (6) consistent with a legislative mandate, GAO will continue to focus its work on SSA's efforts to provide reasonable assurance that it can administer the program consistently and improve the accuracy of childhood disability decisions.
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The Veterans' Health Care Eligibility Reform Act of 1996 required that VA establish an enrollment system to help manage its health care delivery system. VHA's HEC is the business owner of the Enrollment System-- the official system of record for verifying veterans' eligibility for health care benefits and maintaining enrollment information. To enroll for health care benefits, veterans submit an application to either HEC or a VAMC. Application information includes demographic, military service, financial, and insurance information. A veteran may apply online, by mail, by fax, by phone, or in person. Once a veteran submits an application, there are three key steps for processing the application: intake of application, verification of eligibility, and enrollment determination. There may be an additional processing step--resolving a pending application--if enrollment staff need additional information to determine eligibility. According to VHA policy, staff are required to process applications within 5 business days of receipt. Figure 1 provides an overview of the enrollment process, as of June 2017. Intake of application. If a veteran applies in person, or faxes or mails an application to a VAMC, local enrollment staff enter the application information into the VAMC's Veterans Health Information Systems and Technology Architecture (VistA) system. If a veteran applies in person, by phone, or faxes or mails an application to HEC, HEC enrollment staff enter application information into the Enrollment System. A veteran may also apply online, and the application information is directly transmitted into the Enrollment System. Historically, VAMCs have received more than 90 percent of enrollment applications for processing. Verification of eligibility. After the intake of an application, VAMC and HEC staff attempt to verify whether veterans meet eligibility requirements based on their military service and, if applicable, financial information. VAMC staff attempt to verify military service by reviewing supporting documentation provided by veterans (e.g., military discharge or separation papers). If veterans do not provide any documentation of military service, staff will try to verify this information through military service databases. For application information that HEC staff have entered into the Enrollment System or for those applications that have been submitted online with information transmitted directly to the Enrollment System, the system assesses eligibility based on the information entered. Both VistA and the Enrollment System automatically assess whether a veteran's self-reported income meets VHA income thresholds for eligibility, as applicable. VAMC staff are required to ensure that application information is accurately entered into VistA. Application information that is entered into local VistA systems is transmitted nightly into the Enrollment System. Enrollment determination. The Enrollment System makes all enrollment determinations, including those for applications processed at VAMCs. Specifically, the Enrollment System determines whether veterans are enrolled, rejected, or ineligible for health care benefits. Veterans who are enrolled or rejected are placed in a category based on type of eligibility--called a priority group--established to manage the provision of care. For example, priority group 1 consists of veterans who are rated 50 percent or greater based on service-connected disabilities. Priority group 5 consists of veterans who are eligible because their incomes are at or below VHA's eligibility thresholds; and priority group 8g consists of non-service connected veterans whose incomes are above the thresholds, and thus are rejected for health care benefits. HEC sends a letter and a personalized handbook to each veteran once it has made an enrollment determination with the decision and a description of benefits, if applicable. Resolving pending applications. If VAMC or HEC enrollment staff cannot verify veterans' eligibility for making an enrollment determination, the application is categorized as pending. To resolve a pending application, VAMC or HEC staff are to contact the veteran to obtain the missing information (e.g., military service or financial information). VAMC and HEC staff share responsibility for resolving pending applications. For instance, HEC staff may send a pending application for VAMC staff to help process. VAMC staff may also contact HEC staff for assistance in collecting missing information because, for example, according to officials, HEC has greater access to military service databases. VHA enrollment staff, both from HEC and VAMCs, frequently did not process enrollment applications in accordance with VHA's timeliness standards and made incorrect enrollment determinations. VHA, through HEC, is assessing efforts to improve its enrollment processes. Prior studies show that VHA enrollment staff, whether from HEC or VAMCs, frequently did not process enrollment applications within 5 business days in accordance with VHA timeliness standards. Specifically, a June 2016 VHA audit found that HEC staff did not process 143 of 253 applications reviewed (57 percent) within VHA's timeliness standard. The audit found that this occurred, in part, because HEC enrollment staff were not prioritizing workload to focus on processing applications that were approaching the timeliness standard. In response to an audit recommendation, HEC officials said they have begun prioritizing workload to help meet the timeliness standard. A VHA Chief Business Office analysis showed that VAMCs also did not consistently process online applications within 5 business days. According to the analysis, only 35 percent of online applications were processed by VAMCs within 5 business days in fiscal year 2012 and 65 percent through the first 7 months of fiscal year 2016. VAMC officials we contacted said because there is no mechanism for veterans to provide supporting military service records, such as discharge papers, with their online applications, VAMC staff need to obtain the information by querying available military service databases or following up with the veterans, which may cause delays in processing. Several VAMC officials said that HEC should implement automated controls that do not allow veterans to submit online applications without attaching supporting documents that include information needed for making enrollment determinations. Additionally, the overall time needed to process enrollment applications may increase when staff need to place applications in a pending status. In its September 2015 report, VA's Office of Inspector General found that, as of September 2014, the Enrollment System contained nearly 870,000 pending applications, many of which had been pending for more than 5 years. According to the report, 72 percent of those applications were pending because additional financial information was needed from veterans. In response to the report, in 2016, HEC and VAMCs undertook outreach efforts, such as attempting to contact all veterans with pending applications via phone and letters. According to HEC officials, as of May 2017, they were able to resolve about 30 percent of the applications (about 255,000 applications). This included enrolling approximately 88,000 veterans, as well as removing from pending status applications for which HEC officials said veterans were no longer living. HEC officials and VAMC staff in our review said they experienced problems resolving pending applications because they were generally several years old and lacked accurate contact information. HEC officials stated they would continue to work on resolving them, but if staff cannot obtain the information within 365 days, the applications' status will change from pending to closed at that time. Based on our discussions with enrollment staff, we found that none of the VAMCs in our review had a specific policy or procedure for how to resolve pending applications. Officials indicated that they had not received any national procedure or guidance from VHA, nor had they developed local procedures. According to federal internal control standards, management should design control activities, such as policies and procedures, to achieve objectives and respond to risk. In the absence of a standard procedure for VAMCs to use to resolve pending applications, veterans are at risk for experiencing unnecessary delays while waiting for their applications to be processed. For the six VAMCs in our review, we found that, as of March and April 2017, VAMC enrollment staff had not resolved 31 (55 percent) of the 56 pending applications included in our random, nongeneralizable sample of pending applications. (See table 1.) Specifically we found that for 22 (71 percent) of the 31 unresolved applications there was no evidence that VAMC enrollment staff had attempted to contact the veterans to obtain missing military service or financial information, and that 18 of these 22 applications had been in a pending status for 3 months or longer at the time of our review. VAMC officials told us they were not aware that some of the unresolved were in a pending status prior to our review. For the remaining 9 applications, we found VAMC enrollment staff attempted to contact the veterans, but were unable to resolve the application, for example, due to the lack of response from the veteran or lack of valid contact information. These 9 applications had been in a pending status between 2 and 5 months at the time of our review. For the 25 applications that enrollment staff resolved, we found that staff enrolled the veterans for 19, and for the other 6, staff determined the veterans were ineligible or rejected for enrollment. We also found the time it took staff to make an enrollment determination varied widely--ranging from 3 to 119 days. (See table 2.) Officials from five of the six VAMCs told us that based on our review they recognized the need to improve their processes. For example, officials from two VAMCs indicated that they were going to develop a standard operating procedure for identifying pending applications, following up with veterans to obtain missing information, and documenting actions such as the dates that enrollment staff called veterans or mailed letters to resolve outstanding issues. VHA's Compliance and Internal Control Program Office conducted two audits (in April and August 2016), which found that VHA enrollment staff, including those from HEC and VAMCs, frequently made incorrect enrollment determinations. In some cases, veterans were rejected for health care benefits when those veterans should have been enrolled, and in other cases veterans were enrolled when they were ineligible for benefits, according to these audits. Specifically, VHA's audits found the following: HEC had a 12 percent error rate. The April 2016 audit found that HEC enrollment staff made incorrect determinations for 31 of 253 randomly selected applications. The audit found that these errors included a combination of incorrect enrollment and rejection determinations, and the most frequent errors--in 15 of the 31 cases--related to enrollment staff enrolling or rejecting veterans for health care benefits without sufficient documentation, such as proof of military service. Audit findings indicated these applications should have been assigned a pending status. VAMCs had a 27 percent error rate. The August 2016 audit found that VAMC enrollment staff made incorrect determinations for 101 of 381 randomly selected applications. Similar to the audit of HEC, the audit of VAMCs found that errors included a combination of incorrect enrollment and rejection determinations. For example, the audit of VAMCs identified 15 applications for which enrollment staff incorrectly rejected the veterans for health care benefits. According to the audit, VAMC staff should have either enrolled the veterans because they had provided adequate documentation needed to verify their eligibility, or categorized the applications as pending until adequate documentation was obtained such as proof of military service needed to verify eligibility. In addition to the two audits, VHA's Compliance and Internal Control Program Office conducted an informal review that found for a sample of 357 phone applications, enrollment staff made incorrect enrollment determinations for 87 (24 percent ). The most frequent errors again related to staff enrolling or rejecting veterans for health care benefits without sufficient documentation, such as proof of military service. In these instances, the applications should have been assigned a pending status, according to the review. Although documentation on the audits and the informal review did not provide information on specific causes of the errors, officials responsible for conducting the audits indicated that the incorrect enrollment determinations were the result of human error. Through its HEC, VHA is assessing efforts to improve the timeliness of enrollment application processing and the accuracy of enrollment determinations. Specifically, HEC officials established the National Enrollment Improvement, an initiative which includes two efforts to centralize or standardize key aspects of enrollment processes. One effort involves VAMCs' processing of applications using the Enrollment System rather than VistA. To examine potential options, HEC implemented two pilots in 2016: Pilot 1-- implemented May through August 2016, required enrollment staff at three VAMCs to process all applications by entering information directly into the Enrollment System. VAMC enrollment staff participating in this pilot told us they encountered challenges, including not being able to log into the Enrollment System, and frequently had to revert to processing many applications in VistA. In total, the VAMCs processed 239 applications using the Enrollment System, which did not provide HEC sufficient data for determining the pilot's effectiveness, according to the officials responsible for implementing the pilot. Pilot 2--a case study implemented over 2 weeks in December 2016, required enrollment staff at six VAMCs to enter application information for veterans applying in person into an online application for direct transmittal to the Enrollment System. According to officials, a goal of the pilot was to test the automatic verification of military service information against databases to reduce human intervention in verifying eligibility, thereby improving the timeliness and accuracy of enrollment determinations. Similar to the first pilot, technology issues precluded effective processing. For example, automated verification was not consistently successful, and most applications processed (65 of 86) required manual intervention to reach an enrollment determination. In addition, officials said the online application did not always capture information needed to make an enrollment determination. HEC officials told us they did not obtain sufficient information from the pilots to make a decision on which option would replace VAMCs use of VistA for processing applications. As such, HEC officials told us they are planning to conduct a third pilot to further test the option of having VAMCs enter application information directly into the Enrollment System. Officials said they do not have a definitive implementation plan or timeline for conducting this pilot. A second effort under the National Enrollment Improvement involves standardizing the process of resolving pending applications. HEC developed procedures for HEC enrollment staff to use when resolving pending applications. Specifically, when a veteran's application is placed in a pending status, staff are to send the veteran a letter that includes information about why the application is pending; the information HEC needs to make an enrollment determination; and instructions for providing the information to HEC. Additionally, staff are instructed to make phone calls at pre-determined time intervals--8 days, 30 days, 90 days, 180 days, and 310 days after an application becomes pending--in an attempt to contact the veteran to obtain missing information. HEC enrollment staff are also required to document each phone call attempt and the results. If staff are able to obtain the information within 1 year of informing a veteran about an application's pending status, that information is documented, and staff make an enrollment determination. If, after 365 days, staff cannot obtain the information needed to make an enrollment determination, the application status would be changed from pending to closed in the Enrollment System. Although HEC has developed standardized procedures for the resolution of pending applications by HEC staff, it has not communicated these procedures to VAMC enrollment staff. Officials from the six VAMCs in our review indicated they were not aware of HEC's plans to standardize this process, nor had they been asked to provide input or feedback on some of the challenges they have experienced. Furthermore, VAMC officials told us that they had not received any guidance regarding the new procedures and were confused about whether they would continue to have a role in this process. HEC's new procedures do not specify whether VAMCs have a continued role in resolving pending applications and whether the procedures apply to VAMCs, although HEC officials told us that VAMCs would continue to be involved. According to federal internal control standards for information and communication, management should internally communicate the necessary information to achieve the agency's objectives. Communicating quality information down and across reporting lines enables personnel to perform key roles in achieving objectives, addressing risks, and supporting the internal control system. In the absence of HEC coordination and communication with VAMCs about its effort to standardize the process for resolving pending applications, including the role VAMCs will have, there may be duplication of efforts between HEC and VAMC enrollment staff, which could lead to inefficiencies. VHA lacks a standardized process for system-wide oversight of enrollment processes to ensure applications are processed in a timely manner and enrollment determinations are accurate. Further, VHA, through HEC, lacks reliable data to oversee timely processing of applications across VAMCs. HEC has recently implemented an effort to review the accuracy of some enrollment determinations, specifically those for which veterans were found to be ineligible or rejected for health care benefits. VHA has not sufficiently defined through policies or procedures a standardized oversight process that describes and delineates the roles and responsibilities of HEC and VISNs--the networks that manage and oversee VAMCs in their geographic area--in monitoring and evaluating the efficiency and effectiveness of enrollment processes. Although HEC officials said they are responsible for oversight of enrollment processes system-wide and VHA policy generally states that HEC is responsible for performing a second-level review of all enrollment determinations, policies and procedures do not document the key oversight activities that should be conducted, how often they should be done, or the data that should be assessed for ensuring timely and accurate enrollment processes system-wide. Additionally, although HEC officials said VISNs should be overseeing VAMCs' enrollment processes within their networks, we found that VHA's policies do not describe these oversight role and responsibilities. Officials from the six VISNs in our review reported different perspectives about their role in overseeing enrollment processes, and as a result, oversight activities were limited and varied across these VISNs. For example, officials from two of the VISNs in our review considered VISNs to have no role in the oversight of enrollment processes, and primarily provided information from HEC to the VAMCs within their networks. In contrast, an official from another VISN did consider VISNs to have an oversight responsibility, and that VISN is planning to develop a standard set of report requirements for VAMCs within the network to use so that the VISN would have consistent information to use for monitoring VAMCs' enrollment processes. According to federal internal control standards for a control environment, an agency should establish an organizational structure and assign responsibility for achieving its objectives. An oversight structure would help fulfill responsibilities set forth by applicable laws and regulations, and relevant government guidance. Without defining a standardized process for oversight, HEC--VHA's entity responsible for enrollment--may be unable to determine what oversight, if any, is being conducted system- wide and may not have key information about deficiencies in processing enrollment applications. Thus, HEC is limited in its ability to effectively develop systematic solutions and ensure enrollment processes are efficient and resulting in accurate enrollment determinations. HEC officials said they recognized the need to improve the oversight of enrollment processes, and a goal under the National Enrollment Improvement is for HEC to have 100 percent accountability and oversight of applications-- those processed both at HEC and at the VAMCs. VHA--through HEC--does not have complete and reliable data for overseeing the timeliness of processing enrollment applications system- wide. HEC has data about processing timeliness for the applications that it receives. HEC officials said it lacks similar data for those applications received by the VAMCs--which comprised about 90 percent of the applications received system-wide in fiscal year 2016. HEC officials said they are able to monitor processing timeliness for the applications they receive because enrollment staff log the dates of the applications received into a workload tool and track monthly the processing timeliness and application status, such as the percent of applications that remained pending. In contrast, applications received by VAMCs are entered into local VistA systems that do not capture information on the date the application was received, which precludes accurate measurement of the timeliness of application processing. Although VistA captures the date enrollment staff entered the application information into the system, this date may not yield an accurate start date to measure timeliness of processing, specifically for applications received by mail or fax, because there is no assurance the information was entered when the application was received, according to HEC officials and VAMC staff. For example, officials from one VAMC in our review said if mailed or faxed applications are missing military service or financial information, staff do not enter the information into VistA until all the required information is obtained. Absent the information in VistA needed to track and monitor their performance in processing enrollment applications, three of the six VAMCs in our review developed Excel spreadsheets to collect this information. These spreadsheets tracked the dates when applications were received, as well as the enrollment determination made for each. However, such Excel spreadsheets were developed and maintained solely at the discretion of individual VAMCs in our review. HEC and VAMCs in our review also have varying interpretations of how to measure whether VHA's 5 business day timeliness standard has been met. VHA policy states the starting point for measuring adherence with its timeliness standard is the date the application was submitted online by the veteran, time-stamped when received by VAMCs or HEC, or the date the veteran came in person to apply. However, the policy does not define the end point for measuring the amount of time elapsed and does not specify whether the processing time includes the time applications are pending due to missing information. HEC officials told us the end point is the date of an enrollment determination, and measurement of timeliness should include any time the application was pending. Officials from four of the six VAMCs in our review, in contrast, said they considered the timeliness standard met when an application was entered into the system, irrespective of whether an enrollment determination was made or whether the application was pending. According to federal internal control standards for information and communication, management should use quality information to achieve the entity's objectives. Management obtains relevant data from relevant internal and external sources in a timely manner based on identified information requirements. Relevant data collected have a logical connection with identified information requirements, and management evaluates the sources of data for reliability. Without a central repository of reliable data about enrollment processes and a clearly defined measurement of the processing standard, VHA cannot reliably and consistently oversee processing timeliness of enrollment applications, assess the extent to which VAMCs face challenges in meeting the standard, and make appropriate decisions to improve processes system- wide. HEC officials acknowledged their lack of adequate information to monitor timeliness of application processing system-wide and told us they plan to develop the capacity to collect this information. Under the National Enrollment Improvement, HEC officials identified several steps for collecting standardized and centralized data for conducting oversight, including (1) eliminating VAMCs use of VistA for processing enrollment applications and solely using the Enrollment System, which is able to capture application receipt dates, (2) developing standardized procedures for capturing in the Enrollment System the date a mailed application was received, and (3) developing a series of reporting metrics for assessing the timeliness of processing applications across different modes. However, HEC officials told us that they need VHA approval to implement these actions, and as of June 2017, they did not have a timeline for when these actions might be implemented to allow them to accurately track and report on processing timeliness across all modes and VAMCs. HEC has efforts underway and planned to oversee the accuracy of enrollment determinations made system-wide. First, VHA--through HEC--has recently implemented an effort to review the accuracy of enrollment determinations for which veterans were found to be ineligible or rejected for health care benefits. This effort, which began in March 2017, employs a dedicated team of HEC staff to centrally conduct these secondary reviews daily, according to HEC officials. Prior to this date, VHA instructed VAMCs to conduct monthly secondary reviews of the accuracy of these enrollment determinations, and report the results of these reviews to HEC. However, HEC officials said they conducted an internal review of a sample of applications that had undergone this secondary review, and found that 20 to 30 percent still were incorrectly determined to be ineligible or rejected. Although HEC officials said VAMCs should continue these secondary reviews, HEC will also conduct its own independent review of all ineligible or rejected enrollment determinations. HEC officials said they plan to use the results of the reviews for quality assurance and training purposes with HEC and VAMC enrollment staff. Additionally, HEC officials told us they plan to expand their reviews of the accuracy of enrollment determinations and are currently assessing how to conduct second level reviews effectively system-wide. Although VHA policy states that HEC is responsible for performing a second-level review of all enrollment determinations, HEC officials said they have not been fully adhering with this requirement because, primarily, they have been focused on resolving the backlog of pending applications. Timely and accurate processing of veterans' enrollment applications is critical to ensuring that eligible veterans obtain needed health care. Without efficient and effective enrollment processes, veterans may be delayed in obtaining needed services or incorrectly denied benefits. VHA's current enrollment processes are decentralized and fragmented, with enrollment processing spread across 170 individual VAMCs as well as VHA's HEC. The current processes are also prone to delays and errors, such as enrollment staff frequently not meeting the 5-day timeliness standard and making incorrect enrollment determinations when processing veterans' enrollment applications. In particular, in some instances veterans may not have provided all the information HEC or VAMC staff need to process an enrollment application and the application becomes pending. VAMCs, however, do not have effective processes for obtaining information needed to resolve pending applications, which has resulted in veterans experiencing unnecessary delays waiting for enrollment determinations. Although HEC has developed new procedures for its staff to resolve pending applications, the procedures do not delineate whether VAMCs have a continued role in this process or whether they should be following these new procedures. A system-wide standard procedure that clarifies the roles and responsibilities of VAMC enrollment staff in resolving pending applications may help improve efficiency and help ensure that veterans receive a timely response when applying for health care benefits. Additionally, limitations in VHA's oversight further impede its ability to ensure the timeliness of application processing and the accuracy of enrollment determinations system-wide. VHA has not sufficiently defined roles and responsibilities for HEC and VISNs for conducting oversight of enrollment processing. Without establishing and clearly communicating the entity responsible for oversight and the activities that should be routinely conducted, there are no assurances that oversight is being conducted system-wide and deficiencies are being addressed appropriately. Oversight is further challenged by the lack of reliable and consistent data needed to evaluate timeliness of processing enrollment applications, and a clearly defined policy to measure processing timeliness. Due to this lack of data needed for system-wide oversight, VHA may be unable to determine if all veterans who submit an application to VAMCs--which handle a majority of the applications system-wide--are receiving timely enrollment determinations. HEC has efforts planned to improve its oversight; implementing and assessing these efforts may help ensure the timeliness and accuracy of enrollment processes, and help VHA make appropriate system-wide process improvements. We recommend that the Secretary of Veterans Affairs direct the Acting Under Secretary for Health to take the following four actions: 1. Develop and disseminate a system-wide standard operating procedure that clearly defines the roles and responsibilities of VAMCs in resolving pending enrollment applications. 2. Clearly define oversight roles and responsibilities for HEC, and for VISNs as appropriate, to help ensure timely processing of applications and accurate enrollment determinations. 3. Develop procedures for collecting consistent and reliable data system- wide to track and evaluate timeliness of enrollment processes, and institute an oversight mechanism to ensure VAMC and HEC enrollment staff are appropriately following the procedures. 4. Clarify its 5-day timeliness standard for processing enrollment applications, including whether it covers the total time needed to make an enrollment determination and the time applications are pending, and ensure the clarification is communicated system-wide. We provided VA with a draft of this report for its review and comment. VA provided written comments, which are reprinted in appendix I. In its written comments, VA concurred with all four of the report's recommendations, and identified actions it is taking to implement them. In addition, VA provided technical comments which we incorporated as appropriate. We are sending copies of this report to the appropriate congressional committees, the Secretary of the Department of Veterans Affairs, the Acting Under Secretary for Health, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-7114 or at [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix II. In addition to the contact named above, Janina Austin, Assistant Director; David Lichtenfeld, Analyst-in-Charge; Joanna Wu Gerhardt; and Joy Kim made key contributions to this report. Also contributing were Jennie Apter, Muriel Brown, Jacquelyn Hamilton, and Richard Lipinski.
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Enrollment is generally the first step veterans take to access VA health care, thus timely and accurate processing of enrollment applications is critical to help ensure eligible veterans obtain needed care. The Explanatory Statement accompanying the Consolidated Appropriations Act, 2016 included a provision for GAO to examine VA's oversight of patient access to care. This report examines (1) VHA's processes for enrolling veterans for health care benefits and (2) its related oversight. GAO reviewed federal laws, regulations, and VHA policies and procedures. GAO also interviewed officials from HEC and 6 of VHA's 170 VAMCs selected to provide variation in factors such as number of enrollment applications processed and geographic location; reviewed actions to resolve a randomly selected, nongeneralizable sample of pending enrollment applications from these 6 VAMCs; and interviewed HEC and VAMC officials on oversight of enrollment processes. The Department of Veterans Affairs' (VA) Veterans Health Administration's (VHA) implementation and oversight of enrollment processes need improvement to help ensure the timely enrollment of veterans for health care benefits. VHA frequently did not meet timeliness standards: VHA studies conducted in 2016 revealed that enrollment staff frequently did not process veterans' enrollment applications within the timeliness standard of 5 business days. These issues were found both at VHA's Health Eligibility Center (HEC)--the central enrollment processing center--and at local VA medical centers (VAMC) that also process enrollment applications. In response to an audit recommendation, HEC officials said they have begun prioritizing workload to help meet the timeliness standard. Additionally, the overall time needed to process enrollment applications may increase when staff need to place applications in a pending status, as pending applications require additional information, such as military service information, for staff to make enrollment determinations. However, none of the six VAMCs GAO reviewed had a specific policy for how to resolve pending applications. GAO found that VAMC enrollment staff had not resolved more than half of the pending applications GAO reviewed at these six VAMCs, some of which had been pending for more than 3 months at the time of the review. Although HEC developed new procedures for its enrollment staff to use when resolving pending applications, these procedures were not communicated to VAMCs. Officials from the VAMCs GAO reviewed said that they had not received guidance on these procedures and were confused about whether they would continue to have a role in this process. In the absence of HEC communication with VAMCs, there may be inefficiencies in resolving pending applications. VHA, through HEC, is assessing efforts to improve the timeliness of enrollment application processing and the accuracy of enrollment determinations. VHA lacks a standardized oversight process and reliable data to monitor enrollment processes system-wide: Although HEC officials said they are responsible for oversight of enrollment processes system-wide, VHA has neither sufficient policies that delineate this role nor procedures that document key oversight activities that should be conducted. For example, policies do not describe the oversight activities HEC should conduct to help ensure the accuracy of enrollment determinations system-wide. Further, VHA does not have reliable data for overseeing the timeliness of processing enrollment applications at VAMCs, which process 90 percent of the applications system-wide. Officials from the six VAMCs in GAO's review and HEC also had varying interpretations of how to measure the timeliness standard. For example, officials from four of the six VAMCs said the standard was met when enrollment staff entered an application into their local system, irrespective of whether an enrollment determination was made. In contrast, HEC officials said the measurement encompasses the time needed to make an enrollment determination, including any time the application was pending. Without reliable data that are consistently measured, VHA cannot accurately oversee the timeliness of application processing system-wide, or assess the extent to which VAMCs face challenges in implementing enrollment processes. To improve oversight, VHA, through HEC, recently implemented an effort to review the accuracy of some enrollment determinations. GAO recommends that VHA (1) define the responsibilities of VAMCs in resolving pending enrollment applications; (2) define oversight responsibilities to help ensure timely application processing and accurate enrollment determinations; (3) develop procedures for collecting reliable data system-wide to evaluate the timeliness of application processing; and (4) clarify its 5-day timeliness standard. VA concurred with all of GAO's recommendations and identified actions it is taking to implement them.
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Federal regulation is one of the basic tools of government. Agencies issue thousands of rules and regulations each year to implement statutes enacted by Congress. The public policy goals and benefits of regulations include, among other things, ensuring that workplaces, air travel, foods, and drugs are safe; that the nation's air, water, and land are not polluted; and that the appropriate amount of tax is collected. The costs of these regulations are estimated to be in the hundreds of billions of dollars, and the benefits estimates are much higher. Given the size and impact of federal regulation, Congresses and Presidents have taken a number of actions to refine and reform the regulatory process within the past 25 years. In September 1980, RFA was enacted in response to concerns about the effect that federal regulations can have on "small entities," defined by the Act as including small businesses, small governmental jurisdictions, and certain small not-for-profit organizations. As we have previously noted, small businesses are a significant part of the nation's economy, and small governments make up the vast majority of local governments in the United States. However, there have been concerns that these small entities may be disproportionately affected by federal agencies' regulatory requirements. RFA established the principle that agencies should endeavor, consistent with the objectives of applicable statutes, to fit regulatory and informational requirements to the scale of these small entities. RFA requires regulatory agencies--including the independent regulatory agencies--to assess the potential impact of their rules on small entities. Under RFA, an agency must prepare an initial regulatory flexibility analysis at the time a proposed rule is issued unless the head of the agency determines that the proposed rule would not have a "significant economic impact upon a substantial number of small entities." Further, agencies must consider alternatives to their proposed rules that will accomplish the agencies' objectives while minimizing the impacts on small entities. The Act also requires agencies to ensure that small entities have an opportunity to participate in the rulemaking process and requires the Chief Counsel for Advocacy of the Small Business Administration (Office of Advocacy) to monitor agencies' compliance. Among other things, RFA also requires regulatory agencies to review, within 10 years of promulgation, existing rules that have or will have a significant impact on small entities to determine whether they should be continued without change or amended or rescinded to minimize their impact on small entities. Congress amended RFA with the Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA). SBREFA made certain agency actions under RFA judicially reviewable. Other provisions in SBREFA added new requirements. For example, SBREFA requires agencies to develop one or more compliance guides for each final rule or group of related final rules for which the agency is required to prepare a regulatory flexibility analysis, and it requires agencies to provide small entities with some form of relief from civil monetary penalties. SBREFA also requires the Environmental Protection Agency (EPA) and the Occupational Safety and Health Administration to convene advocacy review panels before publishing an initial regulatory flexibility analysis. More recently, in August 2002, President George W. Bush issued Executive Order 13272, which requires federal agencies to establish written procedures and policies on how they would measure the impact of their regulatory proposals on small entities and to vet those policies with the Office of Advocacy. The order also requires agencies to notify the Office of Advocacy before publishing draft rules expected to have a significant small business impact, to consider its written comments on proposed rules, and to publish a response with the final rule. The order requires the Office of Advocacy to provide notification of the requirements of the Act and training to all agencies on how to comply with RFA. The Office of Advocacy published guidance on the Act in 2003 and reported training more than 20 agencies on RFA compliance in fiscal year 2005. In response to congressional requests, we have reviewed agencies' implementation of RFA and related requirements on many occasions over the years, with topics ranging from specific statutory provisions to the overall implementation of RFA. Generally, we found that the Act's overall results and effectiveness have been mixed. This is not unique to RFA; we found similar results when reviewing other regulatory reform initiatives, such as the Unfunded Mandates Reform Act of 1995. Our past reports illustrated both the promise and the problems associated with RFA. RFA and related requirements have clearly affected how federal agencies regulate, and we identified important benefits of these initiatives, such as increasing attention on the potential impacts of rules and raising expectations regarding the analytical support for proposed rules. However, a recurring theme in our findings was that uncertainties about RFA's requirements and varying interpretations of those requirements by federal agencies limited the Act's application and effectiveness. Some of the topics we reviewed, and our main findings regarding impediments to RFA's implementation, are illustrated in the following examples: We examined 12 years of annual reports from the Office of Advocacy and concluded that the reports indicated variable compliance with RFA across agencies, within agencies, and over time--a conclusion that the Office of Advocacy also reached in subsequent reports on implementation of RFA (on the 20th and 25th anniversaries of RFA's enactment). We noted that some agencies had been repeatedly characterized as satisfying RFA requirements, but other agencies were consistently viewed as recalcitrant. Agencies' performance also varied over time or varied by offices within the agencies. We said that one reason for agencies' lack of compliance with RFA requirements was that the Act did not expressly authorize the Small Business Administration (SBA) to interpret key provisions and did not require SBA to develop criteria for agencies to follow in reviewing their rules. We examined RFA implementation with regard to small governments and concluded that agencies were not conducting as many regulatory flexibility analyses for small governments as they might, largely because of weaknesses in the Act. Specifically, we found that each agency we reviewed had a different interpretation of key RFA provisions. We also pointed out that RFA allowed agencies to interpret whether their proposed rules affected small governments and did not provide sufficiently specific criteria or definitions to guide agencies in deciding whether and how to assess the impact of proposed rules on small governments. We reviewed implementation of small business advocacy review panel requirements under SBREFA and found that the panels that had been convened were generally well received. However, we also said that implementation was hindered--specifically, that there was uncertainty over whether panels should have been convened for some proposed rules--by the lack of agreed-upon governmentwide criteria as to whether a rule has a significant impact. We examined other related requirements regarding agencies' policies for the reduction and/or waiver of civil penalties on small entities and the publication of small entity compliance guides. Again, we found that implementation varied across and within agencies, with some of the ineffectiveness and inconsistency traceable to definitional problems in RFA. All of the agencies' penalty relief policies that we reviewed were within the discretion that Congress provided, but the policies varied considerably. Some policies covered only a portion of agencies' civil penalty enforcement actions, and some provided small entities with no greater penalty relief than large entities. The agencies varied in how key terms were defined. Similarly, we concluded that the requirement for small entity compliance guides did not have much of an impact, and its implementation also varied across, and sometimes within, agencies. RFA is unique among statutory requirements with general applicability in having a provision, under section 610, for the periodic review of existing rules. However, it is not clear that this look-back provision in RFA has been consistently and effectively implemented. In a series of reports on agencies' compliance with section 610, we found that the required reviews were not being conducted. Meetings with agencies to identify why compliance was so limited revealed significant differences of opinion regarding key terms in RFA and confusion about what was required to determine compliance with RFA. At the request of the House Committee on Energy and Commerce, we have begun new work examining the subject of regulatory agencies' retrospective reviews of their existing regulations, including those undertaken in response to Section 610, and will report on the results of this engagement in the future. We have not yet examined the effect of Executive Order 13272 and the Office of Advocacy's subsequent guidance and training for agencies on implementing RFA. Therefore, we have not done any evaluations that would indicate whether or not those developments are helping to address some of our concerns about the effectiveness of RFA. While RFA has helped to influence how agencies regulate small entities, we believe that the full promise of the Act has not been realized. The results from our past work suggest that the Subcommittee might wish to review the procedures, definitions, exemptions, and other provisions of RFA, and related statutory requirements, to determine whether changes are needed to better achieve the purposes Congress intended. The central theme of our prior findings and recommendations on RFA has been the need to revisit and clarify elements of the Act, particularly its key terms. Although more recent developments, such as the Office of Advocacy's detailed guidance to agencies on RFA compliance, may help address some of these long-standing issues, current legislative proposals, such as H.R. 682, make it clear that concerns remain about RFA's effectiveness--for example, that agencies are not assessing the impacts of their rules or identifying less costly regulatory approaches as expected under RFA--and the impact of federal regulations on small entities. Unclear terms and definitions can affect the applicability and effectiveness of regulatory reform requirements. We have frequently cited the need to clarify the key terms in RFA, particularly "significant economic impact on a substantial number of small entities." RFA's requirements do not apply if an agency head certifies that a rule will not have a "significant economic impact on a substantial number of small entities." However, RFA neither defines this key phrase nor places clear responsibility on any party to define it consistently across the government. It is therefore not surprising, as I mentioned earlier, that we found compliance with RFA varied from one agency to another and that agencies had different interpretations of RFA's requirements. We have recommended several times that Congress provide greater clarity concerning the key terms and provisions of RFA and related requirements, but to date Congress has not acted on many of these recommendations. The questions that remain unresolved on this topic are numerous and varied, including: Does Congress believe that the economic impact of a rule should be measured in terms of compliance costs as a percentage of businesses' annual revenues, the percentage of work hours available to the firms, or other metrics? If so, what percentage or other measure would be an appropriate definition of "significant?" Should agencies take into account the cumulative impact of their rules on small entities, even within a particular program area? Should agencies count the impact of the underlying statutes when determining whether their rules have a significant impact? What should be considered a "rule" for purposes of the requirement in RFA that agencies review rules with a significant impact within 10 years of their promulgation? Should agencies review rules that had a significant impact at the time they were originally published, or only those that currently have that effect? Should agencies conduct regulatory flexibility analyses for rules that have a positive economic impact on small entities, or only for rules with a negative impact? It is worth noting that the Office of Advocacy's 2003 RFA compliance guide, while reiterating that RFA does not define certain key terms, nevertheless provides some suggestions on the subject. Citing parts of RFA's legislative history, the guidance indicates that exact standards for such definitions may not be possible or desirable, and that the definitions should vary depending on the context of each rule and preliminary assessments of the rule's impact. For example, the guidance points out that "significance" can be seen as relative to the size of a business and its competitors, among other things. However, the guidance does identify factors that agencies might want to consider when making RFA determinations. In some ways, this mirrors other aspects of RFA, such as section 610, where Congress did not explicitly define a threshold for an agency to determine whether an existing regulation should be maintained, amended, or eliminated but rather identified the factors that an agency must consider in its reviews. We do not yet know whether or to what extent the guidance and associated training has helped agencies to clarify some of the long-standing confusion about RFA requirements and terms. Additional monitoring of RFA compliance may help to answer that question. Congress might also want to consider whether the factors that the Office of Advocacy suggested to help agencies define key terms and requirements are consistent with congressional intent or would benefit from having a statutory basis. I also want to point out the potential domino effect of agencies' determinations of whether or not RFA applies to their rules. This is related to the lack of clarity on key terms mentioned above, the potential for agencies to waive or delay analysis under RFA, and the limitation of RFA's applicability to only rules for which there was a notice of proposed rulemaking. The impact of an agency head's determination that RFA is not applicable is not only that the initial and final regulatory flexibility analyses envisioned by the Act would not be done, but also that other related requirements would not apply. These requirements include, for example, the need for agencies to prepare small entity compliance guides, convene SBREFA advocacy panels, and conduct periodic reviews of certain existing regulations. While we recognize, as provided by the Administrative Procedure Act, that notices of proposed rulemaking are not always practical, necessary, or in the public interest, this still raises the question of whether such exemptions from notice and comment rulemaking should preclude future opportunities for public participation and other related procedural and analytical requirements. Our prior work has shown that substantial numbers of rules, including major rules (for example, those with an impact of $100 million or more), are promulgated without going through a notice of proposed rulemaking. We also believe it is important for Congress to reexamine, not just RFA, but how all of the various regulatory reform initiatives fit together and influence agencies' regulatory actions. As I previously testified before this Subcommittee, we have found the effectiveness of most regulatory reform initiatives to be limited and that they merit congressional attention. In addition, we have stated that this is a particularly timely point to reexamine the federal regulatory framework, because significant trends and challenges establish the case for change and the need to reexamine the base of federal government and all of its existing programs, policies, functions, and activities. Our September 2000 report on EPA's implementation of RFA illustrated the importance of considering the bigger picture and interrelationships between regulatory reform initiatives. On the one hand, we reported about concerns regarding the methodologies EPA used in its analyses and its conclusions about the impact on small businesses of a proposed rule to lower certain reporting thresholds for lead and lead compounds. The bigger picture, though, was our finding that after SBREFA took effect EPA's four major program offices certified that almost all (96 percent) of their proposed rules would not have a significant impact on a substantial number of small entities. EPA officials told us this was because of a change in EPA's RFA guidance prompted by the SBREFA requirement to convene an advocacy review panel for any proposed rule that was not certified. Prior to SBREFA, EPA's policy was to prepare a regulatory flexibility analysis for any rule that the agency expected to have any impact on small entities. According to EPA officials, the SBREFA panel requirement made continuation of the agency's more inclusive RFA policy too costly and impractical. In other words, a statute Congress enacted to strengthen RFA caused the agency to use the discretion permitted in RFA to conduct fewer regulatory flexibility analyses. In closing, I would reiterate that we believe Congress should revisit aspects of RFA and that our prior reports have indicated ample opportunities to refine the Act. Despite some progress in implementing RFA and other regulatory reform initiatives since 1980, it is clear from the introduction of H.R. 682 and related bills that Members of Congress remain concerned about the impact of regulations on small entities and the extent to which the rulemaking process encourages agencies to consider ways to reduce the burdens of new and existing rules, while still achieving the objectives of the underlying statutes. Mr. Chairman, this concludes my prepared statement. Once again, I appreciate the opportunity to testify on these important issues. I would be pleased to address any questions you or other Members of the Subcommittee might have at this time. If additional information is needed regarding this testimony, please contact J. Christopher Mihm, Managing Director, Strategic Issues, on (202) 512-6806 or at [email protected]. Tim Bober, Jason Dorn, Andrea Levine, Latesha Love, Joseph Santiago, and Michael Volpe contributed to this statement. Federal Rulemaking: Past Reviews and Emerging Trends Suggest Issues That Merit Congressional Attention. GAO-06-228T. Washington, D.C.: November 1, 2005. Regulatory Reform: Prior Reviews of Federal Regulatory Process Initiatives Reveal Opportunities for Improvements. GAO-05-939T. Washington, D.C.: July 27, 2005. Regulatory Flexibility Act: Clarification of Key Terms Still Needed. GAO-02-491T. Washington, D.C.: March 6, 2002. Regulatory Reform: Compliance Guide Requirement Has Had Little Effect on Agency Practices. GAO-02-172. Washington, D.C.: December 28, 2001. Federal Rulemaking: Procedural and Analytical Requirements at OSHA and Other Agencies. GAO-01-852T. Washington, D.C.: June 14, 2001. Regulatory Flexibility Act: Key Terms Still Need to Be Clarified. GAO-01- 669T. Washington, D.C.: April 24, 2001. Regulatory Reform: Implementation of Selected Agencies' Civil Penalty Relief Policies for Small Entities. GAO-01-280. Washington, D.C.: February 20, 2001. Regulatory Flexibility Act: Implementation in EPA Program Offices and Proposed Lead Rule. GAO/GGD-00-193. Washington, D.C.: September 20, 2000. Regulatory Reform: Procedural and Analytical Requirements in Federal Rulemaking. GAO/T-GGD/OGC-00-157. Washington, D.C.: June 8, 2000. Regulatory Flexibility Act: Agencies' Interpretations of Review Requirements Vary. GAO/GGD-99-55. Washington, D.C.: April 2, 1999. Federal Rulemaking: Agencies Often Published Final Actions Without Proposed Rules. GAO/GGD-98-126. Washington, D.C.: August 31, 1998. Regulatory Reform: Implementation of the Small Business Advocacy Review Panel Requirements. GAO/GGD-98-36. Washington, D.C.: March 18, 1998. Regulatory Reform: Agencies' Section 610 Review Notices Often Did Not Meet Statutory Requirements. GAO/T-GGD-98-64. Washington, D.C.: February 12, 1998. Regulatory Flexibility Act: Agencies' Use of the October 1997 Unified Agenda Often Did Not Satisfy Notification Requirements. GAO/GGD-98- 61R. Washington, D.C.: February 12, 1998. Regulatory Flexibility Act: Agencies' Use of the November 1996 Unified Agenda Did Not Satisfy Notification Requirements. GAO/GGD/OGC-97- 77R. Washington, D.C.: April 22, 1997. Regulatory Flexibility Act: Status of Agencies' Compliance. GAO/GGD- 94-105. Washington, D.C.: April 27, 1994. Regulatory Flexibility Act: Inherent Weaknesses May Limit Its Usefulness for Small Governments. GAO/HRD-91-16. Washington, D.C.: January 11, 1991. This is a work of the U.S. government and is not subject to copyright protection in the United States. It may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.
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Federal regulation is one of the basic tools of government used to implement public policy. In 1980, the Regulatory Flexibility Act (RFA) was enacted in response to concerns about the effect that regulations can have on small entities, including small businesses, small governmental jurisdictions, and certain small not-for-profit organizations. Congress amended RFA in 1996, and the President issued Executive Order 13272 in 2002, to strengthen requirements for agencies to consider the impact of their proposed rules on small entities. However, concerns about the regulatory burden on small entities persist, prompting legislative proposals such as H.R. 682, the Regulatory Flexibility Improvements Act, which would amend RFA. At the request of Congress, GAO has prepared many reports and testimonies reviewing the implementation of RFA and related policies. On the basis of that body of work, this testimony (1) provides an overview of the basic purpose and requirements of RFA, (2) highlights the main impediments to the Act's implementation that GAO's reports identified, and (3) suggests elements of RFA that Congress might consider amending to improve the effectiveness of the Act. GAO's prior reports and testimonies contain recommendations to improve the implementation of RFA and related regulatory process requirements. RFA established a principle that agencies should endeavor to fit their regulatory requirements to the scale of small entities. Among other things, RFA requires regulatory agencies to assess the impact of proposed rules on small entities, consider regulatory alternatives that will accomplish the agencies' objectives while minimizing the impacts on small entities, and ensure that small entities have an opportunity to participate in the rulemaking process. Further, RFA requires agencies to review existing rules within 10 years of promulgation that have or will have a significant impact on small entities to determine whether they should be continued without change or amended or rescinded to minimize their impact on small entities. RFA also requires the Chief Counsel for Advocacy of the Small Business Administration (Office of Advocacy) to monitor agencies' compliance. In response to Executive Order 13272, the Office of Advocacy published guidance in 2003 on how to comply with RFA. In response to congressional requests, GAO reviewed agencies' implementation of RFA and related requirements on many occasions, with topics ranging from specific statutory provisions to the overall implementation of RFA. Generally, GAO found that the Act's results and effectiveness have been mixed; its reports illustrated both the promise and the problems associated with RFA. On one hand, RFA and related requirements clearly affected how federal agencies regulate and produced benefits, such as raising expectations regarding the analytical support for proposed rules. However, GAO also found that compliance with RFA varied across agencies, within agencies, and over time. A recurring finding was that uncertainties about RFA's requirements and key terms, and varying interpretations by federal agencies, limited the Act's application and effectiveness. GAO's past work suggests that Congress might wish to review the procedures, definitions, exemptions, and other provisions of RFA to determine whether changes are needed to better achieve the purposes Congress intended. In particular, GAO's reports indicate that the full promise of RFA may never be realized until Congress revisits and clarifies elements of the Act, especially its key terms, or provides an agency or office with the clear authority and responsibility to do so. Attention should also be paid to the domino effect that an agency's initial determination of whether RFA is applicable to a rulemaking has on other statutory requirements, such as preparing compliance guides for small entities and periodically reviewing existing regulations. GAO also believes that Congress should reexamine not just RFA but how all of the various regulatory reform initiatives fit together and influence agencies' regulatory actions. Recent developments, such as the Office of Advocacy's RFA guidance, may help address some of these long-standing issues and merit continued monitoring by Congress
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Although VA has been authorized to collect third-party health insurance payments since 1986, it was not allowed to use these funds to supplement its medical care appropriations until enactment of the Balanced Budget Act of 1997. Part of VA's 1997 strategic plan was to increase health insurance payments and other collections to help fund an increased health care workload. The potential for increased workload occurred in part because the Veterans' Health Care Eligibility Reform Act of 1996 authorized VA to provide certain medical care services not previously available to veterans without service-connected disabilities or low incomes. VA expected that collections from third-party payments, copayments, and deductibles would cover the majority of costs for higher- income veterans without service-connected disabilities. These veterans increased from about 4 percent of all veterans treated in fiscal year 1996 to about 20 percent in fiscal year 2001. To collect from health insurers, as shown in figure 1, VA uses five related processes to manage the information needed to bill and collect. The patient intake process involves gathering insurance information and verifying that information with the insurer. The medical documentation process involves properly documenting the health care provided to patients by physicians and other health care providers. The coding process involves assigning correct codes for the diagnoses and medical procedures based on the documentation. Next the billing process serves to create and send bills to insurers based on the insurance and coding information. Finally, the accounts receivable process includes processing payments from insurers and following up with insurers on outstanding or denied bills. In 1999, VA adopted a new fee schedule, called "reasonable charges," which are itemized fees based on diagnoses and procedures, and the new schedule allows VA to bill in a way that more accurately captures the care provided. Previously, VA had nine charges for inpatient care and one charge for outpatient care. These charges were not specific to the care provided. For example, VA had charged the same per diem rate for any patient in a surgical bed section regardless of the care provided. In addition, before adopting the new fee schedule, VA had billed all outpatient visits, including surgery, based on VA's average outpatient cost of $229, a single rate that had limited VA's ability to collect higher amounts for more expensive care. In contrast, when the reasonable charges fee schedule was adopted in September 1999, an outpatient hernia surgery charge increased to about $6,500; and an office visit charge for an established patient decreased to a range of about $22 to $149, depending on the care given. By linking charges to the care provided, VA created new bill-processing demands--particularly in the three areas of documenting care, coding that care, and processing bills per episode of care. First, VA must be prepared to provide an insurer supporting medical documentation for the itemized charges. Second, VA must accurately assign medical diagnoses and procedure codes to set appropriate charges, a task which requires coders to search through medical documentation and various databases to identify all billable care. Third, in contrast to a single bill for an episode of care under the previous fee schedule, under reasonable charges VA must prepare a separate bill for each provider involved in the care and an additional bill if a hospital facility charge applies. For fiscal year 2002, VA collected third-party payments of $687 million, a 32 percent increase over its fiscal year 2001 collections. The increased collections in fiscal year 2002 resulted from VA's submitting and collecting for more bills than previously. According to three network revenue managers we interviewed, billings increased mainly because of a reduction of billing backlogs and improvements in the processes necessary to collect under the new reasonable charges fee schedule. Nevertheless, VA's ability to collect was limited by problems such as missed billing opportunities. VA does not know how many dollars remain uncollected because of such limitations. For fiscal year 2002, VA collected $687 million, up 32 percent compared to the $521 million collected during fiscal year 2001. The increased collections reflected VA's processing a higher volume of bills than it did in the prior fiscal year. VA processed and received payments for over 50 percent more bills in fiscal year 2002 than in fiscal year 2001. VA's collections grew at a lower percentage rate than the number of paid bills because the average payment per paid bill dropped 18 percent compared to the prior fiscal year. Average payments dropped primarily because a rising proportion of VA's paid bills were for outpatient care rather than inpatient care. Since the charges for outpatient care were much lower on average, the payment amounts were typically lower as well. VA had difficulties establishing the collections processes to bill under a new fee schedule, processes which were necessary to achieve the increased billing and collections in fiscal year 2002. Although VA anticipated that the shift to reasonable charges would yield higher collections, collections dropped in fiscal year 2000 after implementing the new fee schedule in September 1999. VA attributed that drop to its being unprepared to bill under reasonable charges, particularly because of its lack of proficiency in developing medical documentation and coding to appropriately support a bill. As a result, VA reported that many VA medical centers developed billing backlogs after initially suspending billing for some care. As shown in figure 2, VA's third-party collections increased in fiscal year 2001--reversing fiscal year 2000's drop in collections--and increased again in fiscal year 2002. After initially being unprepared in fiscal year 2000 to bill reasonable charges, VA began improving its implementation of the processes necessary to bill and increase its collections. According to VA, by the summer of 2000, facilities had sufficiently implemented processes to move forward with billing under reasonable charges. By the end of fiscal year 2001, VA had submitted 37 percent more bills to insurers than in fiscal year 2000. VA submitted even more in fiscal year 2002, over 8 million bills that constituted a 54 percent increase over the number in fiscal year 2001. VA officials cited various sources for an increased number of bills in fiscal year 2002. Managers we spoke with in three networks--Network 2 (Albany), Network 9 (Nashville), and Network 22 (Long Beach)--mainly attributed the increased billing to reductions in billing backlogs. They also cited an increased number of patients with billable insurance as a factor for the increased billing. In addition, a May 2001 change in the reasonable- charges fee schedule for medical evaluations allowed billing for a facility charge in addition to billing for the professional service charges, a change that contributed to the higher volume of bills in fiscal year 2002. Increased collections for fiscal year 2002 reflected VA's improved ability to manage the volume and billing processes required to produce multiple bills under reasonable charges, according to three network revenue managers. Networks 2 (Albany) and 9 (Nashville) reduced backlogs, in part by hiring more staff, contracting for staff, or using overtime to process bills and accounts receivable. Network 2 (Albany), for instance, managed an increased billing volume through mandatory overtime for billers. Managers we interviewed in all three networks noted better medical documentation provided by physicians to support billing. In Network 22 (Long Beach) and Network 9 (Nashville), revenue managers reported coders were getting better at identifying all professional services that can be billed under reasonable charges. In addition, the revenue manager in Network 2 (Albany) said that billers' productivity had risen from 700 to 2,500 bills per month over a 3-year period, as a result of gradually increasing productivity standards and a streamlining of their jobs to focus solely on billing. Studies have suggested that operational problems--missed billing opportunities, billing backlogs, and inadequate pursuit of accounts receivable--limited VA's collections in the years following the implementation of reasonable charges. After examining activities in fiscal years 2000 and 2001, a VA Inspector General report estimated that VA could have collected over $500 million more than it did. About 73 percent of this uncollected amount was attributed to a backlog of unbilled medical care; most of the rest was attributed to insufficient pursuit of delinquent bills. Another study, examining only professional-service charges in a single network, estimated that $4.1 million out of $4.7 million of potential collections was unbilled for fiscal year 2001. Of that unbilled amount, 63 percent was estimated to be unbillable primarily because of insufficient documentation. In addition, the study found coders often missed services that should have been coded for billing. According to the Director of the Revenue Office, VA could increase collections by working on operational problems. These problems included unpaid accounts receivable and missed billing opportunities due to insufficient identification of insured patients, inadequate documentation to support billing, and coding problems that result in unidentified care. During April through June 2002, three network revenue managers told us about backlogs and processing issues that persisted into fiscal year 2002. For example, although Network 9 (Nashville) had above average increases in collections for both inpatient and outpatient care, it still had coding backlogs in four of six medical centers. According to Network 9's (Nashville) revenue manager, eliminating the backlogs for outpatient care would increase collections by an estimated $4 million for fiscal year 2002, or 9 percent. Additional increases might come from coding all inpatient professional services, but the revenue manager did not have an estimate because the extent to which coders are capturing all billable services was unknown. Moreover, although all three networks reported that physicians' documentation was improving for billing, they reported a continuing need to improve physicians' documentation. In addition, Network 22 (Long Beach) reported that accounts receivable staff had difficulties keeping up with the increased volume of bills because it had not hired additional staff or contracted help for accounts receivable. As a result of these operational limitations, VA lacks a reliable estimate of uncollected dollars, and therefore does not have the basis to assess its systemwide operational effectiveness. Some uncollected dollars resulting from currently missed billing opportunities--such as billable care missed in coding--are not readily quantified. Other uncollected dollars--such as those from backlogged bills and uncollected accounts receivable--are either only partially quantifiable or their potential contribution to total collections is uncertain. For example, even though the uncollected dollars in older accounts receivable can be totaled, the yield in payments through more aggressive pursuit of accounts receivable is uncertain. This is because, according to VA officials, some portion of the billed dollars is not collectable due to VA inappropriately billing for services not covered by the insurance policy, billing against a terminated policy, or not closing out the accounts receivable after an insurer paid the bill. VA continues to implement its 2001 improvement plan and is planning more improvements. Although the improvement plan could potentially improve operations and increase collections, it is not scheduled for full implementation until December 2003. In May 2002, VA created a new office in VHA, the Chief Business Office, in part to address collections issues. According to VA officials, this office is developing a new approach to improvements, which will include initiatives beyond those in the improvement plan. VA's improvement plan was designed to increase collections by improving and standardizing its collections processes. The plan's 24 actions are to address known operational problems affecting revenue performance. These problems include unidentified insurance for some patients, insufficient documentation for billing, shortages of coding staff, gaps in the automated capture of billing data, insufficient pursuit of accounts receivable, and uneven performance across collections sites. The plan seeks increased collections through standardization of policy and processes in the context of decentralized management, in which VA's 21 network directors and their respective medical center directors have responsibility for the collections process. Since management is decentralized, collections procedures can vary across sites. For example, sites' procedures can specify a different number of days waited until first contacting insurers about unpaid bills and can vary on whether to contact by letter, telephone, or both. The plan intends to create greater process standardization, in part, by requiring certain collections processes, such as the use of electronic medical records to provide coders better access to documentation and legible records. When fully implemented, the plan's actions can improve collections to the extent that they can reduce operational problems such as missed billing opportunities. For example, two of the plan's actions--requiring patient contacts prior to scheduled appointments to gather insurance information and electronically linking VA to major insurers to identify patients' insurance--are intended to increase the number of patients identified with insurance. A recent study estimated that 23.8 percent of VA patients in fiscal year 2001 had billable care, but VA actually billed for the care of only 18.3 percent of patients. This finding suggests that VA could have billed for 30 percent more patients than it actually billed. VA has implemented some of the improvement plan's 24 actions, which were scheduled for completion at various times through 2003, but is behind the plan's original schedule. The plan had scheduled 15 of the 24 actions for completion through May 25, 2002, but, as shown in figure 3, VA had designated only 8 as completed, as of the last formal status report on the plan in May 2002. Some of the plan's actions that VA has designated as completed needed additional work. For example, although VA designated electronic billing as completed in the May 2002 report, in August 2002 a VA official indicated that 20 hospitals were still working on a step required to transmit bills to all payers. In other cases, VA has designated an action completed by mandating it in a memorandum or directive. However, mandating an action in the past has not necessarily ensured its full implementation. For example, although an earlier 1998 directive required patient preregistration, the 2001 improvement plan reported that preregistration was not implemented consistently across VA and thus mandated its use. Officials in VHA's new Chief Business Office told us that this office is developing a new approach for improving third-party collections. According to the Chief Business Officer, the Under Secretary of Health proposed, and the Secretary approved, the establishment of the Chief Business Office to underscore the importance of revenue, patient eligibility, and enrollment functions; and to give strategic focus to improving these functions. He said the new approach can help increase revenue collections by further revising processes and providing a new business focus on collections. Officials in this office told us that the new approach will combine these and other actions with the actions in the improvement plan. For example, the Chief Business Office's improvement strategy incorporates electronic transmission of bills and of third-party payments, which are part of the 2001 improvement plan. The new approach also encompasses initiatives beyond the improvement plan, such as the one in the Under Secretary of Health's May 2002 memorandum that directed all facilities to refer accounts receivable older than 60 days to a collection agency, unless a facility can document a better in-house process. According to the Deputy Chief Business Officer, this initiative has shown some sign of success-- with outstanding accounts receivables dropping from $1,378 million to $1,317 million from the end of May to the end of July 2002, a reduction of about $61 million or 4 percent. Another initiative in the new approach is the Patient Financial Services System (PFSS). PFSS is an automated financial system focused on patient accounts, which is intended to overcome operational problems in VA's current automated billing system. For example, VA's automated system for clinical information was not designed to provide all of the episode-of-care information, such as the health care provider and diagnoses, that are required for billing. The development of PFSS is tied to a demonstration project of a financial system, which is now being designed for Network 10 (Cincinnati). According to the Deputy Chief Business Officer, VA anticipates awarding a PFSS contract by April 1, 2003. The Chief Business Office's plan is to install this financial system in other facilities and networks if it is successfully implemented in the Network 10 (Cincinnati) demonstration. The Chief Business Office also intends to improve collections by developing better performance measures, which will be similar to those used in the private sector. For example, the office intends to use the measure of gross days revenue outstanding, which indicates the pace of collections relative to the amount of accounts receivable. During fiscal year 2003, the office plans to hold network and facility directors accountable for collections through standards that are tied to these performance measures. In addition, the Chief Business Officer said that tracking performance with these measures could help identify further opportunities for collections improvements. The Chief Business Office is developing the new initiatives, which it had not formalized into a planning document as of August 2002. Certain key decisions were under consideration. For example, the Chief Business Officer was considering whether to centralize some processes at the network or national level and was developing the performance standards that would be required for holding network and facility directors accountable. Moreover, according to the Chief Business Officer, implementing PFSS will require the office to resolve some issues, including making its existing systems provide sufficient data to support the new financial system. As VA faces increased demand for medical care, third-party collections for nonservice-connected conditions remain an important source of alternative revenue to supplement VA's resources. Our work and VA's continuing initiatives to improve collections suggest that VA could collect additional supplemental revenues because it has not collected all third- party payments that it could in fiscal year 2002. However, VA does not have an estimate of the amount of uncollected dollars, which it needs to assess the effectiveness of its current processes. VA has been improving its billing and collecting under the new fee schedule established in 1999, but VA has not completed its efforts to address problems in collections operations. In this regard, fully implementing VA's 2001 improvement plan could help VA maximize future collections by addressing problems such as missed billing opportunities. However, the plan's reliance on directives, in some cases, to achieve increased collections is not enough to ensure full implementation and optimal performance. The Chief Business Office's new approach could also enhance collections. VA's new Chief Business Office's challenge is to ensure such performance by identifying root causes of problems in collections operations, providing a focused approach to addressing the root causes, establishing performance measures, and holding responsible parties accountable for achieving the performance standards. However, it is too early to evaluate the extent to which VA will be able to address operational problems and further increase collections by fully implementing its 2001 plan and new approach. The Department of Veterans Affairs provided written comments on a draft of this report, which are found in appendix II. VA generally agreed with our findings that it continues to make improvements in increased collections and VHA's Business Office is developing new initiatives to further enhance collections. In addition, VA clarified that it may, under limited circumstances, collect from Medicare although generally it may not do so. We changed our report accordingly. VA also suggested that our title was misleading because it stated that VA continues to address problems in its collections operations rather than stating that VA is building infrastructure to implement effective collections operations. We believe that our title is accurate because VA continues to address problems that we and others have identified in VA's collections operations. VA has acknowledged such problems in the past, including unidentified insurance for some patients, insufficient documentation for billing, and shortages of coding staff. VA continues to implement the 2001 improvement plan that it developed to address these and other problems. VA's new initiatives also address problems, such as gaps in automated capture of billing data, that have been previously identified. As arranged with your office, unless you release its contents earlier, we plan no further distribution of this report until 30 days after its issuance date. At that time, we will send copies of this report to the Secretary of Veterans Affairs, interested congressional committees, and other interested parties. We will also make copies available to others upon request. In addition, this report will be available at no charge on GAO's Web site at http://www.gao.gov. If you or your staff have any questions about this report, please call me at (202) 512-7101. James Musselwhite and Terry Hanford also contributed to this report. To assess the Department of Veterans Affairs' (VA's) progress with collections in fiscal year 2002, we obtained and examined data on VA's third-party bills and collections. We also interviewed officials in VA headquarters and in three VA health care networks to understand the reasons for the increased collections compared to fiscal year 2001 as well as any operational problems. To provide information on VA's 2001 improvement plan and its emerging new approach to improvements, we reviewed relevant VA documents and interviewed VA officials. We conducted interviews from April through June 2002 with managers in three networks concerning collections. In addition, we gathered data on third-party bills and collections for fiscal years 2001 and 2002. Our review of the improvement plan's implementation started with its completion status in March 2002 and ended with its status through May 2002, which was the date of VA's last formal report on the plan's status. An official in the Chief Business Office told us in September 2002 that a new status report for the 2001 plan was planned but not yet available. During August through October 2002, we gathered information from officials in the Chief Business Office about additional improvement initiatives. To better understand the increased collections in fiscal year 2002 and any limitations to those collections, we judgmentally selected three networks for more detailed study. These networks provided different examples of above- and below-average growth in collections, considered separately for inpatient care and outpatient care. (See table 1.) Based on available data at the time of selection, Network 9 (Nashville) had above-average collections increases for both inpatient care and outpatient care bills. Network 2 (Albany) exceeded average collections increases for only outpatient care bills, whereas Network 22 (Long Beach) had above-average collections increases for only inpatient care bills. Although we did not verify VA data on collections and bills, we used the data reported by VA's Revenue Office in its analyses of third-party collections. The data source is VA's Veterans Health Information Systems and Technology Architecture National Database. This database includes data for collections from various sources--including third-party payments, patient copayments, and proceeds from sharing agreements in which VA sells services to the Department of Defense and other providers.
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The Department of Veterans Affairs (VA) collects health insurance payments, known as third-party collections, for veterans' health care conditions it treats that are not a result of injuries or illnesses incurred or aggravated during military service. In September 1999, VA adopted a new fee schedule, called "reasonable charges," that it anticipated would increase revenues from third-party collections. In 2001, GAO testified that problems in VA's collections operations diminished VA's collections. For this report, GAO was asked to examine VA's third-party collections and problems in collections operations for fiscal year 2002 as well as its initiatives to improve collections. VA's fiscal year 2002 third-party collections rose by 32 percent, continuing an upward trend that began in fiscal year 2001. The increase in collections reflected VA's improved ability to manage the larger billing volume and more itemized bills required under its new fee schedule. Billings increased mainly due to a reduction of billing backlogs and improved collections processes--such as better medical documentation prepared by physicians, more complete identification of billable care by coders, and more bills prepared per biller--according to VA managers in three regional health care networks. However, VA continues to address operational problems, such as missed billing opportunities, that limit the amount VA collects. To address operational problems and further increase collections, VA has several initiatives under way and is developing additional ones. VA has been implementing initiatives in its 2001 improvement plan that was designed to address operational problems, such as unidentified insurance for some patients, insufficient documentation of services for billing, shortages of coding staff, and insufficient pursuit of accounts receivable. VA's last formal status report in May 2002 designated only 8 of the plan's 15 initiatives scheduled for completion by that time as having been completed. VA continues implementation of this plan and is also developing new initiatives, such as an automated financial system to better serve billing needs. It is too early to evaluate the extent to which VA's full implementation of its 2001 plan and new initiatives will be able to address operational problems and further increase third-party collections. In commenting on a draft of this report, VA generally agreed with our findings.
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The Aviation and Transportation Security Act (ATSA), enacted in November 2001, created TSA and gave it responsibility for securing all modes of transportation. As part of this responsibility, TSA oversees security operations at the nation's more than 400 commercial airports, including establishing requirements for passenger and checked baggage screening and ensuring the security of air cargo transported to, from, and within the United States. TSA has operational responsibility for conducting passenger and checked baggage screening at most airports, and has regulatory, or oversight, responsibility, for air carriers who conduct air cargo screening. While TSA took over responsibility for passenger checkpoint and baggage screening, air carriers have continued to conduct passenger watch-list matching in accordance with TSA requirements, which includes the process of matching passenger information against the No Fly List and Selectee lists before flights depart. TSA is currently developing a program, known as Secure Flight, to take over this responsibility from air carriers for passengers on domestic flights, and plans to assume from the U.S. Customs and Border Protection (CBP) this pre-departure name-matching function for passengers on international flights traveling to or from the United States. Prior to ATSA, passenger and checked baggage screening had been performed by private screening companies under contract to airlines. ATSA established TSA and required it to create a federal workforce to assume the job of conducting passenger and checked baggage screening at commercial airports. The federal screener workforce was put into place, as required, by November 2002. Passenger screening systems are composed of three elements: the people (TSOs) responsible for conducting the screening of airline passengers and their carry-on items, the technology used during the screening process, and the procedures TSOs are to follow to conduct screening. Collectively, these elements help to determine the effectiveness and efficiency of passenger screening operations. TSA's responsibilities for securing air cargo include, among other things, establishing security rules and regulations governing domestic and foreign passenger air carriers that transport cargo, domestic and foreign all-cargo carriers that transport cargo, and domestic freight forwarders. TSA is also responsible for overseeing the implementation of air cargo security requirements by air carriers and freight forwarders through compliance inspections, and, in coordination with DHS's Science and Technology (S&T) Directorate, for conducting research and development of air cargo security technologies. Air carriers (passenger and all-cargo) are responsible for implementing TSA security requirements, predominantly through TSA-approved security programs that describe the security policies, procedures, and systems the air carrier will implement and maintain to comply with TSA security requirements. Air carriers must also abide by security requirements issued by TSA through security directives or emergency amendments to air carrier security programs. Air carriers use several methods and technologies to screen domestic and inbound air cargo. These include manual physical searches and comparisons between airway bills and cargo contents to ensure that the contents of the cargo shipment matches the cargo identified in documents filed by the shipper, as well as using approved technology, such as X-ray systems, explosives trace detection systems, decompression chambers, explosive detection systems, and certified explosive detection canine teams. Under TSA's security requirements for domestic, outbound and inbound air cargo, passenger air carriers are currently required to randomly screen a specific percentage of nonexempt air cargo pieces listed on each airway bill. TSA's air cargo security requirements currently allow passenger air carriers to exempt certain types of cargo from physical screening. For such cargo, TSA has authorized the use of TSA-approved alternative methods for screening, which can consist of verifying shipper information and conducting a visual inspection of the cargo shipment. TSA requires all-cargo carriers to screen 100 percent of air cargo that exceeds a specific weight threshold. As of October 2006, domestic freight forwarders are also required, under certain conditions, to screen a certain percentage of air cargo prior to its consolidation. TSA, however, does not regulate foreign freight forwarders, or individuals or businesses that have their cargo shipped by air to the United States. Under the Implementing Recommendations of the 9/11 Commission Act of 2007, DHS is required to implement a system to screen 50 percent of air cargo transported on passenger aircraft by February 2009, and 100 percent of such cargo by August 2010. The prescreening of airline passengers who may pose a security risk before they board an aircraft is one of many layers of security intended to strengthen commercial aviation. To further enhance commercial aviation security and in accordance with the Intelligence Reform and Terrorism Prevention Act of 2004, TSA is developing the Secure Flight program to assume from air carriers the function of matching passenger information against government-supplied terrorist watch-lists for domestic flights. TSA expects to assume from air carriers the watch-list matching for domestic flights beginning in January 2009 and to assume this watch-list matching function from CBP for flights departing from and to the United States by fiscal year 2010. TSA has taken steps to strengthen the three key elements of the screening system--people (TSOs and private screeners), screening procedures, and technology--but has faced management, planning and funding challenges. For example, TSA has implemented several efforts intended to strengthen the allocation of its TSO workforce. We reported in February 2004 that staffing shortages and TSA's hiring process had hindered the ability of some Federal Security Directors (FSD)--the ranking TSA authorities responsible for leading and coordinating security activities at airports--to provide sufficient resources to staff screening checkpoints and oversee screening operations at their checkpoints without using additional measures such as overtime. Since that time, TSA has developed a Staffing Allocation Model to determine TSO staffing levels at airports. FSDs we interviewed during 2006 as part of our review of TSA's staffing model generally reported that the model is a more accurate predictor of staffing needs than TSA's prior staffing model. However, FSDs expressed concerns about assumptions used in the fiscal year 2006 model related to the use of part-time TSOs, TSO training requirements, and TSOs' operational support duties. To help ensure that TSOs are effectively utilized, we recommended that TSA establish a policy for when TSOs can be used to provide operational support. Consistent with our recommendation, in March 2007, TSA issued a management directive that provides guidance on assigning TSOs, through detail or permanent promotion, to duties of another position for a specified period of time. We also recommended that TSA establish a formal, documented plan for reviewing all of the model assumptions on a periodic basis to ensure that the assumptions result in TSO staffing allocations that accurately reflect operating conditions that may change over time. TSA agreed with our recommendation and, in December 2007, developed a Staffing Allocation Model Rates and Assumptions Validation Plan. The plan identifies the process TSA plans to use to review and validate the model's assumptions on a periodic basis. Although we did not independently review TSA's staffing allocation for fiscal year 2008, TSA's fiscal year 2009 budget justification identified that the agency has achieved operational and efficiency gains that enabled them to implement or expand several workforce initiatives involving TSOs. For example, TSA implemented the travel document checker program at over 259 of the approximately 450 airports nationwide during fiscal year 2007. This program is intended to ensure that only passengers with authentic travel documents access the sterile areas of airports and board aircraft. TSA also deployed 643 behavior detection officers to 42 airports during fiscal year 2007. These officers screen passengers by observation techniques to identify potentially high-risk passengers based on involuntary physical and physiological reactions. In addition to TSA's efforts to strengthen the allocation of its TSO workforce, TSA has taken steps to strengthen passenger checkpoint screening procedures to enhance the detection of prohibited items. However, we have identified areas where TSA could improve its evaluation and documentation of proposed procedures. In April 2007, we reported that TSA officials considered modifications to its standard operating procedures (SOP) based on risk information (threat and vulnerability information), daily experiences of staff working at airports, and complaints and concerns raised by the traveling public. We further reported that for more significant SOP modifications, TSA first tested the proposed modifications at selected airports to help determine whether the changes would achieve their intended purpose, as well as to assess its impact on screening operations. However, we reported that TSA's data collection and analyses could be improved to help TSA determine whether proposed procedures that are operationally tested would achieve their intended purpose. We also found that TSA's documentation on proposed modifications to screening procedures was not complete. We recommended that TSA develop sound evaluation methods, when possible, to assess whether proposed screening changes would achieve their intended purpose and generate and maintain documentation on proposed screening changes that are deemed significant. DHS generally agreed with our recommendations and TSA has taken some steps to implement them. For example, for several proposed SOP changes considered during the fall of 2007, TSA provided documentation that identified the sources of the proposed changes and the reasons why the agency decided to accept or reject the proposed changes. With respect to technologies, we reported in February 2007 that S&T and TSA were exploring new passenger checkpoint screening technologies to enhance the detection of explosives and other threats. Of the various emerging checkpoint screening projects funded by TSA and S&T, the explosive trace portal, the bottled liquids scanning device, and Advanced Technology Systems have been deployed to airport checkpoints. A number of additional projects have initiated procurements or are being researched and developed. For example, TSA has procured 34 scanners for screening passenger casts and prosthetic devices to be deployed in July 2008. In addition, TSA has procured 20 checkpoint explosive detection systems and plans to deploy these in August 2008. Further, TSA plans to finish its testing of whole body imagers during fiscal year 2009 and begin deploying 150 of these units by fiscal year 2010. Despite TSA's efforts to develop passenger checkpoint screening technologies, we reported that limited progress has been made in fielding explosives detection technology at airport checkpoints in part due to challenges S&T and TSA faced in coordinating research and development efforts. For example, we reported that TSA had anticipated that the explosives trace portals would be in operation throughout the country during fiscal year 2007. However, due to performance and maintenance issues, TSA halted the acquisition and deployment of the portals in June 2006. As a result, TSA has fielded less than 25 percent of the 434 portals it projected it would deploy by fiscal year 2007. In addition to the portals, TSA has fallen behind in its projected acquisition of other emerging screening technologies. For example, we reported that the acquisition of 91 whole body imagers was previously delayed in part because TSA needed to develop a means to protect the privacy of passengers screened by this technology. While TSA and DHS have taken steps to coordinate the research, development and deployment of checkpoint technologies, we reported in February 2007 that challenges remained. For example, TSA and S&T officials stated that they encountered difficulties in coordinating research and development efforts due to reorganizations within TSA and S&T. Since our February 2007 testimony, according to TSA and S&T, coordination between them has improved. We also reported that TSA did not have a strategic plan to guide its efforts to acquire and deploy screening technologies, and that a lack of a strategic plan or approach could limit TSA's ability to deploy emerging technologies at those airport locations deemed at highest risk. TSA officials stated that they plan to submit the strategic plan for checkpoint technologies mandated by Division E of the Consolidated Appropriations Act, 2008, during the summer of 2008. We will continue to evaluate S&T's and TSA's efforts to research, develop and deploy checkpoint screening technologies as part of our ongoing review. TSA has taken steps to enhance domestic and inbound air cargo security, but more work remains to strengthen this area of aviation security. For example, TSA has issued an Air Cargo Strategic Plan that focused on securing the domestic air cargo supply chain. However, in April 2007, we reported that this plan did not include goals and objectives for addressing the security of inbound air cargo, or cargo transported into the United States from a foreign location, which presents different security challenges than cargo transported domestically. We also reported that TSA had not conducted vulnerability assessments to identify the range of security weaknesses that could be exploited by terrorists related to air cargo operations. We further reported that TSA had established requirements for air carriers to randomly screen air cargo, but had exempted some domestic and inbound cargo from screening. With respect to inbound air cargo, we reported that TSA lacked an inspection plan with performance goals and measures for its inspection efforts, and recommended that TSA develop such a plan. TSA is also taking steps to compile and analyze information on air cargo security practices used abroad to identify those that may strengthen DHS's overall air cargo security program, as we recommended. According to TSA officials, the agency's proposed Certified Cargo Screening Program (CCSP) is based on their review of foreign countries' models for screening air cargo. TSA officials believe this program will assist the agency in meeting the requirement to screen 100 percent of cargo transported on passenger aircraft by August 2010, as mandated by the Implementing Recommendations of the 9/11 Commission Act of 2007. Through TSA's proposed CCSP, the agency plans on allowing the screening of air cargo to take place at various points throughout the air cargo supply chain. Under the CCSP, Certified Cargo Screening Facilities (CCSF), such as shippers, manufacturing facilities and freight forwarders that meet security requirements established by TSA, will volunteer to screen cargo prior to its loading onto an aircraft. Due to the voluntary nature of this program, participation of the air cargo industry is critical to the successful implementation of the CCSP. According to TSA officials, air carriers will ultimately be responsible for screening 100 percent of cargo transported on passenger aircraft should air cargo industry entities not volunteer to become a CCSF. In July 2008, however, we reported that TSA may face challenges as it proceeds with its plans to implement a system to screen 100 percent of cargo transported on passenger aircraft by August 2010. Specifically, we reported that DHS has not yet completed its assessments of the technologies TSA plans to approve for use as part of the CCSP for screening and securing cargo. We also reported that although TSA has taken steps to eliminate the majority of exempted domestic and outbound cargo that it has not required to be screened, the agency currently plans to continue to exempt some types of domestic and outbound cargo from screening after August 2010. Moreover, we found that TSA has begun analyzing the results of air cargo compliance inspections and has hired additional compliance inspectors dedicated to air cargo. However, according to agency officials, TSA will need additional air cargo inspectors to oversee the efforts of the potentially thousands of entities that may participate in the CCSP once it is fully implemented. Finally, we reported that more work remains for TSA to strengthen the security of inbound cargo. Specifically, the agency has not yet finalized its strategy for securing inbound cargo or determined how, if at all, inbound cargo will be screened as part of its proposed CCSP. Over the past several years, TSA has faced a number of challenges in developing and implementing an advanced prescreening system, known as Secure Flight, which will allow TSA to assume responsibility from air carriers for comparing domestic passenger information against the No Fly and Selectee lists. We reported in February 2008 that TSA had made substantial progress in instilling more discipline and rigor in developing and implementing Secure Flight, but that challenges remain that may hinder the program's progress moving forward. For example, TSA had taken numerous steps to address previous GAO recommendations related to strengthening Secure Flight's development and implementation, as well as additional steps designed to strengthen the program. Among other things, TSA developed a detailed, conceptual description of how the system is to operate, commonly referred to as a concept of operations; established a cost and schedule baseline; developed security requirements; developed test plans; conducted outreach with key stakeholders; published a notice of proposed rulemaking on how Secure Flight is to operate; worked with CBP to integrate the domestic watch list matching function with the international watch list matching function currently operated by CBP; and issued a guide to key stakeholders (e.g., air carriers and CBP) that defines, among other things, system data requirements. Collectively, these efforts have enabled TSA to more effectively manage the program's development and implementation. However, challenges remain that may hinder the program's progress moving forward. In February 2008, we reported that TSA had not (1) developed program cost and schedule estimates consistent with best practices; (2) fully implemented its risk management plan; (3) planned for system end-to-end testing in test plans; and (4) ensured that information- security requirements are fully implemented. To address these challenges, we made several recommendations to DHS and TSA to incorporate best practices in Secure Flight's cost and schedule estimates and to fully implement the program's risk-management, testing, and information- security requirements. DHS and TSA officials generally agreed with these recommendations. We will continue to evaluate TSA's efforts to develop and implement Secure Flight as part of our ongoing review. Our work has identified homeland security challenges that cut across DHS's and TSA's mission and core management functions. These issues have impeded the department's and TSA's progress since its inception and will continue to confront the department as it moves forward. For example, DHS and TSA have not always implemented effective strategic planning efforts and have not yet fully developed performance measures or put into place structures to help ensure that they are managing for results. For example, with regard to TSA's efforts to secure air cargo, we reported in October 2005 and April 2007 that TSA completed an Air Cargo Strategic Plan that outlined a threat-based risk-management approach to securing the nation's domestic air cargo system. However, TSA had not developed a similar strategy for addressing the security of inbound air cargo, including how best to partner with CBP and international air cargo stakeholders. In addition, although DHS and TSA have made risk-based decision making a cornerstone of departmental and agency policy, TSA could strengthen its application of risk management in implementing its mission functions. For example, TSA incorporated risk-based decision making when making modifications to airport checkpoint screening procedures, to include modifying procedures based on intelligence information and vulnerabilities identified through covert testing at airport checkpoints. However, in April 2007, we reported that TSA's analyses that supported screening procedural changes could be strengthened. For example, TSA officials based their decision to revise the prohibited items list to allow passengers to carry small scissors and tools onto aircraft based on their review of threat information--which indicated that these items do not pose a high risk to the aviation system--so that TSOs could concentrate on higher threat items. However, TSA officials did not conduct the analysis necessary to help them determine whether this screening change would affect TSO's ability to focus on higher-risk threats. We also reported that, although improvements are being made, homeland security roles and responsibilities within and between the levels of government, and with the private sector, are evolving and need to be clarified. For example, we reported that opportunities exist for TSA to work with foreign governments and industry to identify best practices for securing air cargo, and recommended that TSA systematically compile and analyze information on practices used abroad to identify those that may strengthen the department's overall security efforts. TSA has subsequently reviewed the models used in two foreign countries that rely on government-certified screeners to screen air cargo to facilitate the design of the agency's proposed CCSP. Regarding efforts to respond to in- flight security threats, which, depending on the nature of the threat, could involve more than 15 federal agencies and agency components, in July 2007, we recommended that DHS and other departments document and share their respective coordination and communication strategies and response procedures, to which DHS agreed. Mr. Chairman this concludes my statement. I would be pleased to answer any questions that you or other members of the committee may have at this time. For further information on this testimony, please contact Cathleen A. Berrick at (202) 512-3404 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. In addition to the contact named above, Chris Currie; Joe Dewechter; Vanessa DeVeau; Thomas Lombardi; Steve Morris, Assistant Director; Meg Ullengren; and Margaret Vo made contributions to this testimony. This is a work of the U.S. government and is not subject to copyright protection in the United States. It may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.
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Since its inception in November 2001, the Transportation Security Administration (TSA) has focused much of its efforts on aviation security, and has developed and implemented a variety of programs and procedures to secure the commercial aviation system. TSA funding for aviation security has totaled about $26 billion since fiscal year 2004. This testimony focuses on TSA's efforts to secure the commercial aviation system through passenger screening, strengthening air cargo security, and watch-list matching programs, as well as challenges that remain. It also addresses crosscutting issues that have impeded TSA's efforts in strengthening security. This testimony is based on GAO reports and testimonies issued from February 2004 through July 2008 including selected updates obtained from TSA officials in June and July 2008. DHS and TSA have undertaken numerous initiatives to strengthen the security of the nation's commercial aviation system, including actions to address many recommendations made by GAO. TSA has focused its efforts on, among other things, more efficiently allocating, deploying, and managing the Transportation Security Officer (TSO) workforce--formerly known as screeners; strengthening screening procedures; developing and deploying more effective and efficient screening technologies; strengthening domestic air cargo security; and developing a government operated watch-list matching program, known as Secure Flight. For example, in response to GAO's recommendation, TSA developed a plan to periodically review assumptions in its Staffing Allocation Model used to determine TSO staffing levels at airports, and took steps to strengthen its evaluation of proposed procedural changes. TSA also explored new passenger checkpoint screening technologies to better detect explosives and other threats, and has taken steps to strengthen air cargo security, including increasing compliance inspections of air carriers. Finally, TSA has instilled more discipline and rigor into Secure Flight's systems development, including preparing key documentation and strengthening privacy protections. While these efforts should be commended, GAO has identified several areas that should be addressed to further strengthen security. For example, TSA made limited progress in developing and deploying checkpoint technologies due to planning and management challenges. In addition, TSA faces resource and other challenges in developing a system to screen 100 percent of cargo transported on passenger aircraft in accordance with the Implementing Recommendations of the 9/11 Commission Act of 2007. GAO further identified that TSA faced program management challenges in the development and implementation of Secure Flight, including developing cost and schedule estimates consistent with best practices; fully implementing the program's risk management plan; developing a comprehensive testing strategy; and ensuring that information security requirements are fully implemented. A variety of crosscutting issues have affected DHS's and TSA's efforts in implementing its mission and management functions. For example, TSA can more fully adopt and apply a risk-management approach in implementing its security mission and core management functions, and strengthen coordination activities with key stakeholders. For example, while TSA incorporated risk-based decision making when modifying checkpoint screening procedures, GAO reported that TSA's analyses that supported screening procedural changes could be further strengthened. DHS and TSA have strengthened their efforts in these areas, but more work remains.
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Since 2000, legacy airlines have faced unprecedented internal and external challenges. Internally, the impact of the Internet on how tickets are sold and consumers search for fares and the growth of low cost airlines as a market force accessible to almost every consumer has hurt legacy airline revenues by placing downward pressure on airfares. More recently, airlines' costs have been hurt by rising fuel prices (see figure 1). This is especially true of airlines that did not have fuel hedging in place. Externally, a series of largely unforeseen events--among them the September 11th terrorist attacks in 2001 and associated security concerns; war in Iraq; the SARS crisis; economic recession beginning in 2001; and a steep decline in business travel--seriously disrupted the demand for air travel during 2001 and 2002. Low fares have constrained revenues for both legacy and low cost airlines. Yields, the amount of revenue airlines collect for every mile a passenger travels, fell for both low cost and legacy airlines from 2000 through 2004 (see figure 2). However, the decline has been greater for legacy airlines than for low cost airlines. During the first quarter of 2005, average yields among both legacy and low cost airlines rose somewhat, although those for legacy airlines still trailed what they were able to earn during the same period in 2004. Legacy airlines, as a group, have been unsuccessful in reducing their costs to become more competitive with low cost airlines. Unit cost competitiveness is key to profitability for airlines because of declining yields. While legacy airlines have been able to reduce their overall costs since 2001, these were largely achieved through capacity reductions and without an improvement in their unit costs. Meanwhile, low cost airlines have been able to maintain low unit costs, primarily by continuing to grow. As a result, low cost airlines have been able to sustain a unit cost advantage as compared to their legacy rivals (see figure 3). In 2004, low cost airlines maintained a 2.7 cent per available seat mile advantage over legacy airlines. This advantage is attributable to lower overall costs and greater labor and asset productivity. During the first quarter of 2005, both legacy and low cost airlines continued to struggle to reduce costs, in part because of the increase in fuel costs. Weak revenues and the inability to realize greater unit cost-savings have combined to produce unprecedented losses for legacy airlines. At the same time, low cost airlines have been able to continue producing modest profits as a result of lower unit costs (see figure 4). Legacy airlines have lost a cumulative $28 billion since 2001 and are predicted to lose another $5 billion in 2005, according to industry analysts. First quarter 2005 operating losses (based on data reported to DOT) approached $1.45 billion for legacy airlines. Low cost airlines also reported net operating losses of almost $0.2 billion, driven primarily by ATA's losses. Since 2000, as the financial condition of legacy airlines deteriorated, they built cash balances not through operations but by borrowing. Legacy airlines have lost cash from operations and compensated for operating losses by taking on additional debt, relying on creditors for more of their capital needs than in the past. In the process of doing so, several legacy airlines have used all, or nearly all, of their assets as collateral, potentially limiting their future access to capital markets. In sum, airlines are capital and labor intensive firms subject to highly cyclical demand and intense competition. Aircraft are very expensive and require large amounts of debt financing to acquire, resulting in high fixed costs for the industry. Labor is largely unionized and highly specialized, making it expensive and hard to reduce during downturns. Competition in the industry is frequently intense owing to periods of excess capacity, relatively open entry, and the willingness of lenders to provide financing. Finally, demand for air travel is highly cyclical, closely tied to the business cycle. Over the past decade, these structural problems have been exacerbated by the growth in low cost airlines and increasing consumer sensitivity to differences in airfares based on their use of the Internet to purchase tickets. More recently airlines have had to deal with persistently high fuel prices--operating profitability, excluding fuel costs, is as high as it has ever been for the industry. Airlines seek bankruptcy protection for such reasons as severe liquidity pressures, an inability to obtain relief from employees and creditors, and an inability to obtain new financing, according to airline officials and bankruptcy experts. As a result of the structural problems and external shocks previously discussed, there have been 160 total airline bankruptcy filings since deregulation in 1978, including 20 since 2000, according to the Air Transport Association. Some airlines have failed more than once but most filings were by smaller carriers. However, the size of airlines that have been declaring bankruptcy has been increasing. Of the 20 bankruptcy filings since 2000, half of these have been for airlines with more than $100 million in assets, about the same number of filings as in the previous 22 years. Compared to the average failure rate for all types of businesses, airlines have failed more often than other businesses. As figure 5 shows, in some years, airline failures were several times more common than for businesses overall. With very few exceptions, airlines that enter bankruptcy do not emerge from it. Of the 146 airline Chapter 11 reorganization filings since 1979, in only 16 cases are the airlines still in business. Many of the advantages of bankruptcy stem from legal protection afforded the debtor airline from its creditors, but this protection comes at a high cost in loss of control over airline operations and damaged relations with employees, investors, and suppliers, according to airline officials and bankruptcy experts. Contrary to some assertions that bankruptcy protection has led to overcapacity and under pricing that have harmed healthy airlines, we found no evidence that this has occurred either in individual markets or to the industry overall. Such claims have been made for more than a decade. In 1993, for example, a national commission to study airline industry problems cited bankruptcy protection as a cause for the industry's overcapacity and weakened revenues. More recently, airline executives have cited bankruptcy protection as a reason for industry over capacity and low fares. However, we found no evidence that this had occurred and some evidence to the contrary. First, as illustrated by Figure 6, airline liquidations do not appear to affect the continued growth in total industry capacity. If bankruptcy protection leads to overcapacity as some contend, then liquidation should take capacity out of the market. However, the historical growth of airline industry capacity (as measured by available seat miles, or ASMs) has continued unaffected by major liquidations. Only recessions, which curtail demand for air travel, and the September 11th attack, appear to have caused the airline industry to trim capacity. This trend indicates that other airlines quickly replenish capacity to meet demand. In part, this can be attributed to the fungibility of aircraft and the availability of capital to finance airlines. Similarly, our research does not indicate that the departure or liquidation of a carrier from an individual market necessarily leads to a permanent decline in traffic for that market. We contracted with Intervistas/GA2, an aviation consultant, to examine the cases of six hub cities that experienced the departure or significant withdrawal of service of an airline over the last decade (see table 1). In four of the cases, both local origin-and-destination (i.e., passenger traffic to or from, but not connecting through, the local hub) and total passenger traffic (i.e., local and connecting) increased or changed little because the other airlines expanded their traffic in response. In all but one case, fares either decreased or rose less than 6 percent. We also reviewed numerous other bankruptcy and airline industry studies and spoke to industry analysts to determine what evidence existed with regard to the impact of bankruptcy on the industry. We found two major academic studies that provided empirical data on this issue. Both studies found that airlines under bankruptcy protection did not lower their fares or hurt competitor airlines, as some have contended. A 1995 study found that an airline typically reduced its fares somewhat before entering bankruptcy. However, the study found that other airlines did not lower their fares in response and, more importantly, did not lose passenger traffic to their bankrupt rival and therefore were not harmed by the bankrupt airline. Another study came to a similar conclusion in 2000, this time examining the operating performance of 51 bankrupt firms, including 5 airlines, and their competitors. Rather than examine fares as did the 1995 study, this study examined the operating performance of bankrupt firms and their rivals. This study found that bankrupt firms' performance deteriorated prior to filing for bankruptcy and that their rivals' profits also declined during this period. However, once a firm entered bankruptcy, its rivals' profits recovered. Under current law, legacy airlines' pension funding requirements are estimated to be a minimum of $10.4 billion from 2005 through 2008. These estimates assume the expiration of the Pension Funding Equity Act (PFEA) at the end of this year. The PFEA permitted airlines to defer the majority of their deficit reduction contributions in 2004 and 2005; if this legislation is allowed to expire it would mean that payments due from legacy airlines will significantly increase in 2006. According to PBGC data, legacy airlines are estimated to owe a minimum of $1.5 billion this year, rising to nearly $2.9billion in 2006, $3.5 billion in 2007, and $2.6 billion in 2008. In contrast, low cost airlines have eschewed defined benefit pension plans and instead use defined contribution (401k-type) plans. However, pension funding obligations are only part of the sizeable amount of debt that carriers face over the near term. The size of legacy airlines' future fixed obligations, including pensions, relative to their financial position suggests they will have trouble meeting their various financial obligations. Fixed airline obligations (including pensions, long term debt, and capital and operating leases) in each year from 2005 through 2008 are substantial. Legacy airlines carried cash balances of just under $10 billion going into 2005 (see figure 7) and have used cash to fund their operational losses. These airlines fixed obligations are estimated to be over $15 billion in both 2005 and 2006, over $17 billion in 2007, and about $13 billion in 2008. While cash from operations can help fund some of these obligations, continued losses and the size of these obligations put these airlines in a sizable liquidity bind. Fixed obligations in 2008 and beyond will likely increase as payments due in 2006 and 2007 may be pushed out and new obligations are assumed. The enormity of legacy airlines' future pension funding requirements is attributable to the size of the pension shortfall that has developed since 2000. As recently as 1999, airline pensions were overfunded by $700 million based on Security and Exchange Commission (SEC) filings; by the end of 2004 legacy airlines reported a deficit of $21 billion (see figure 8), despite the termination of the US Airways pilots plan in 2003. Since these filings, the total underfunding has declined to approximately $13.7 billion, due in part to the termination of the United Airline plans and the remaining US Airways plans. The extent of underfunding varies significantly by airline. At the end of 2004, prior to terminating its pension plans, United reported underfunding of $6.4 billion, which represented over 40 percent of United's total operating revenues in 2004. In contrast, Alaska reported pension underfunding of $303 million at the end of 2004, or 13.5 percent of its operating revenues. Since United terminated its pensions, Delta and Northwest now appear to have the most significant pension funding deficits--over $5 billion and nearly $4 billion respectively--which represent about 35 percent of 2004 operating revenues at each airline. The growth of pension underfunding is attributable to 3 factors. Assets losses and low interest rates. Airline pension asset values dropped nearly 20 percent from 2001 through 2004 along with the decline in the stock market, while future obligations have steadily increased due to declines in the interest rates used to calculate the liabilities of plans. Management and labor union decisions. Pension plans have been funded far less than they could have on a tax deductible basis. PBGC examined 101 cases of airline pension contributions from 1997 through 2002, and found that while the maximum deductible contribution was made in 10 cases, no cash contributions were made in 49 cases where they could have contributed. When airlines did make tax deductible contributions, it was often far less than the maximum permitted. For example, the airlines examined could have contributed a total of $4.2 billion on a tax deductible basis in 2000 alone, but only contributed about $136 million despite recording profits of $4.1 billion (see figure 9). In addition, management and labor have sometimes agreed to salary and benefit increases beyond what could reasonably be afforded. For example, in the spring of 2002, United's management and mechanics reached a new labor agreement that increased the mechanics' pension benefit by 45 percent, but the airline declared bankruptcy the following December. Pension funding rules are flawed. Existing laws and regulations governing pension funding and premiums have also contributed to the underfunding of defined benefit pension plans. As a result, financially weak plan sponsors, acting within the law, have not only been able to avoid contributions to their plans, but also increase plan liabilities that are at least partially insured by PBGC. Under current law, reported measures of plan funding have likely overstated the funding levels of pension plans, thereby reducing minimum contribution thresholds for plan sponsors. And when plan sponsors were required to make additional contributions, they often substituted "account credits" for cash contributions, even as the market value of plan assets may have been in decline. Furthermore, the funding rule mechanisms that were designed to improve the condition of poorly funded plans were ineffective. Other lawful plan provisions and amendments, such as lump sum distributions and unfunded benefit increases may also have contributed to deterioration in the funding of certain plans. Finally, the premium structure in PBGC's single-employer pension insurance program does not encourage better plan funding. The cost to PBGC and participants of defined benefit pension terminations has grown in recent years as the level of pension underfunding has deepened. When Eastern Airlines defaulted on its pension obligations of nearly $1.7 billion in 1991, for example, claims against the insurance program totaled $530 million in underfunded pensions and participants lost $112 million. By comparison, the US Airways and United pension terminations cost PBGC $9.6 billion in combined claims against the insurance program and reduced participants' benefits by $5.2 billion (see table 2). In recent pension terminations, because of statutory limits active and high salaried employees generally lost more of their promised benefits compared to retirees and low salaried employees. For example, PBGC generally does not guarantee benefits above a certain amount, currently $45,614 annually per participant at age 65. For participants who retire before 65 the benefits guaranteed are even less; participants that retire at age 60 are currently limited to $29,649. Commercial pilots often end up with substantial benefit cuts when their plans are terminated because they generally have high benefit amounts and are also required by FAA to retire at age 60. Far fewer nonpilot retirees are affected by the maximum payout limits. For example, at US Airways fewer than 5 percent of retired mechanics and attendants faced benefit cuts as a result of the pension termination. Tables 3 and 4 summarize the expected cuts in benefits for different groups of United's active and retired employees. It is important to emphasize that relieving legacy airlines of their defined benefit funding costs will help alleviate immediate liquidity pressures, but does not fix their underlying cost structure problems, which are much greater. Pension costs, while substantial, are only a small portion of legacy airlines' overall costs. As noted previously in figure 3, the cost of legacy airlines' defined benefit plans accounted for a 0.4 cent, or 15 percent difference between legacy and low cost airline unit costs. The remaining 85 percent of the unit cost differential between legacy and low cost carriers is attributable to factors other than defined benefits pension plans. Moreover, even if legacy airlines terminated their defined benefit plans it would not fully eliminate this portion of the unit cost differential because, according to labor officials we interviewed, other plans would replace them. While the airline industry was deregulated 27 years ago, the full effect on the airline industry's structure is only now becoming evident. Dramatic changes in the level and nature of demand for air travel combined with an equally dramatic evolution in how airlines meet that demand have forced a drastic restructuring in the competitive structure of the industry. Excess capacity in the airline industry since 2000 has greatly diminished airlines' pricing power. Profitability, therefore, depends on which airlines can most effectively compete on cost. This development has allowed inroads for low cost airlines and forced wrenching change upon legacy airlines that had long competed based on a high-cost business model. The historically high number of airline bankruptcies and liquidations is a reflection of the industry's inherent instability. However, this should not be confused with causing the industry's instability. There is no clear evidence that bankruptcy has contributed to the industry's economic ills, including overcapacity and underpricing, and there is some evidence to the contrary. Equally telling is how few airlines that have filed for bankruptcy protection are still doing business. Clearly, bankruptcy has not afforded these companies a special advantage. Bankruptcy has become a means by which some legacy airlines are seeking to shed their costs and become more competitive. However, the termination of pension obligations by United Airlines and US Airways has had substantial and wide-spread effects on the PBGC and thousands of airline employees, retirees, and other beneficiaries. Liquidity problems, including $10.4 billion in near term pension contributions, may force additional legacy airlines to follow suit. Some airlines are seeking legislation to allow more time to fund their pensions. If their plans are frozen so that future liabilities do not continue to grow, allowing an extended payback period may reduce the likelihood that these airlines will file for bankruptcy and terminate their pensions in the coming year. However, unless these airlines can reform their overall cost structures and become more competitive with low cost competition; this will be only a temporary reprieve. This concludes my statement. I would be pleased to respond to any questions that you or other Members of the Subcommittee may have at this time. For further information on this testimony, please contact JayEtta Hecker at (202) 512-2834 or by e-mail at [email protected]. Individuals making key contributions to this testimony include Paul Aussendorf, Anne Dilger, Steve Martin, Richard Swayze, and Pamela Vines. This is a work of the U.S. government and is not subject to copyright protection in the United States. It may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.
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Since 2001, the U.S. airline industry has confronted unprecedented financial losses. Two of the nation's largest airlines--United Airlines and US Airways--went into bankruptcy, terminating their pension plans and passing the unfunded liability to the Pension Benefit Guaranty Corporation (PBGC). PBGC's unfunded liability was $9.6 billion; plan participants lost $5.2 billion in benefits. Considerable debate has ensued over airlines' use of bankruptcy protection as a means to continue operations, often for years. Many in the industry and elsewhere have maintained that airlines' use of this approach is harmful to the industry, in that it allows inefficient carriers to reduce ticket prices below those of their competitors. This debate has received even sharper focus with pension defaults. Critics argue that by not having to meet their pension obligations, airlines in bankruptcy have an advantage that may encourage other companies to take the same approach. GAO is completing a report for the Committee due later this year. Today's testimony presents preliminary observations in three areas: (1) the continued financial difficulties faced by legacy airlines, (2) the effect of bankruptcy on the industry and competitors, and (3) the effect of airline pension underfunding on employees, airlines, and the PBGC. U.S. legacy airlines have not been able to reduce their costs sufficiently to profitably compete with low cost airlines that continue to capture market share. Internal and external challenges have fundamentally changed the nature of the industry and forced legacy airlines to restructure themselves financially. The changing demand for air travel and the growth of low cost airlines has kept fares low, forcing these airlines to reduce their costs. They have struggled to do so, however, especially as the cost of jet fuel has jumped. So far, they have been unable to reduce costs to a level with their low-cost rivals. As a result, legacy airlines have continued to lose money--$28 billion since 2001. Although some industry observers have asserted that airlines undergoing bankruptcy reorganization contribute to the industry's financial problems, GAO found no clear evidence that historically airlines in bankruptcy have financially harmed competing airlines. Bankruptcy is endemic to the industry; 160 airlines filed for bankruptcy since deregulation in 1978, including 20 since 2000. Most airlines that entered bankruptcy have not survived. Moreover, despite assertions to the contrary, available evidence does not suggest that airlines in bankruptcy contribute to industry overcapacity or that bankrupt airlines harm competitors by reducing fares below what other airlines are charging. While bankruptcy may not be detrimental to rival airlines, it is detrimental for pension plan participants and the PBGC. The remaining legacy airlines with defined benefit pension plans face over $60 billion in fixed obligations over the next 4 years, including $10.4 billion in pension obligations--more than some of these airlines may be able to afford given continued losses. While cash from operations can help fund some of these obligations, continued losses and the size of these obligations put these airlines in a sizable liquidity bind. Moreover, legacy airlines still face considerable restructuring before they become competitive with low cost airlines.
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BLM leases federal lands to private companies for the production of onshore oil, gas, and coal resources, generally through a competitive bidding process. BLM offers for lease parcels of land nominated by industry and the public, as well as some parcels that BLM itself identifies. If BLM receives any bids, called bonus bids, on an offered lease that are at or above a minimum acceptable bid amount, the lease is awarded to the highest bidder, and, for oil and gas, a lump-sum payment in the amount of the bid is due to ONRR when BLM issues the lease. For coal, the winning bidder pays the bonus bid in five equal payments, with one of the payments being paid at the time of the lease sale. For oil and gas leases, BLM requires a uniform national minimum acceptable bid of $2 per acre. For coal leases, BLM requires a minimum bid of $100 per acre, and the bid must meet or exceed BLM's estimate of the fair market value of the lease. In addition to the competitive bidding process, companies may obtain leases through two additional processes. For oil and gas, tracts of land that do not receive a bid in the initial offer are made available noncompetitively the next day and remain available for noncompetitive leasing for a period of 2 years after the initial competitive auction, with priority given to offers based on the date and time of filing. For coal, companies may request that a certain amount of contiguous land be added to an existing lease in what is called a lease modification process. Lands acquired through lease modification are added to the existing lease without a competitive bidding process, but the federal government must receive the fair market value of the lease of the added lands either by cash payment or adjustment of the royalty applicable to the lands added to the lease. Leases specify a rental rate--a fixed annual charge until production begins on the leased land, or, when no production occurs, until the end of the period specified in the lease. For oil and gas leases, generally the rental rate is $1.50 per acre for the first 5 years and $2 per acre each year thereafter. For coal, the rental rate is at least $3 per acre. Oil and gas parcels are generally leased for a primary term of 10 years, but lease terms may be extended if, for example, oil or gas is produced in paying quantities. Coal parcels are leased for an initial 20-year period and may be extended if certain conditions are met. Once production of the resource starts, the federal government is to receive royalty payments based on a percentage of the value of production--known as the royalty rate. For onshore oil and gas leases, the Mineral Leasing Act of 1920 sets the royalty rate for competitive leases at not less than 12.5 percent of the amount or value of production. However, until January 2017, BLM regulations generally established a fixed royalty rate of 12.5 percent. For noncompetitive leases, the act, as amended, sets the royalty rate at a fixed rate of 12.5 percent. For coal, royalty rates depend on the type of mine--surface or underground. BLM is authorized to establish royalty rates above 12.5 percent for surface mines, but according to agency officials, BLM generally sets the rate at 12.5 percent, the statutory and regulatory minimum royalty rate. For underground mines, BLM sets the rate at 8 percent, the rate prescribed in regulation. Royalties for oil and gas are calculated based on the value of the resource at the wellhead, and any deductions or allowances are taken after the royalty rate is applied. For coal, certain costs are deducted from the price of coal at the first point of sale, including transportation and processing allowances, before the amount is calculated for royalty purposes. The royalty rate paid by the coal company after such allowable deductions have been factored in, along with any royalty rate reductions, is called the effective royalty rate. Federal royalty rates differ from the royalty rates that state governments charge for production on state lands and the rates that companies pay for production on private lands. Table 1 shows federal royalty rates and rates for six states that represented more than 90 percent of federal oil, gas, and coal production in fiscal year 2015. According to state officials, as of March 2017, royalty rates for oil and gas production charged by these states vary but tend to be higher than federal royalty rates, while royalty rates for coal production charged by these states are generally the same as federal rates. Less is known about the royalty rates for production on private lands because of the proprietary nature of lease contracts, but a few published reports suggest that private royalty rates range from 12.5 percent to 25 percent for oil and gas production and from 3 percent to 10 percent for coal production. In fiscal year 2016, approximately 157 million barrels of oil, 3.14 trillion cubic feet of gas, and 295 million tons of coal were produced on federal lands, according to ONRR data. These numbers represented about 6 percent of total U.S. onshore oil production, 10 percent of total U.S. onshore gas production, and 40 percent of total U.S. coal production, according to our analysis of EIA data. The federal government collected approximately $2.5 billion in gross revenue from the production of these resources on federal lands in fiscal year 2016. The majority of this revenue generally has come from royalties--about $2 billion, or 80 percent of total revenues in fiscal year 2016. As figure 1 shows, royalties comprised a larger percentage of the total revenue from oil and gas production than from coal production in 2016. (See appendix I for additional data on production and revenues from oil, gas, and coal development on federal and American Indian lands from fiscal year 2007 through 2016.) Private companies develop oil, gas, and coal on federal lands within the context of broader energy markets, and conditions in those markets have changed. Overall oil and gas production has increased after decades of decline or general stability--between 2008 and 2016, total U.S. oil production increased by 77 percent and gas production increased by 35 percent. During that same period, federal onshore oil production increased by 59 percent while federal onshore gas production declined by 18 percent. According to EIA, almost all of the increase in overall oil and gas production has centered on oil and gas plays located in shale and other tight rock formations, spurred by advances in production technologies such as horizontal drilling and hydraulic fracturing. However, as figure 2 shows, major tight oil and shale gas plays--those plays that, according to EIA data, have represented more than 90 percent of growth in oil and gas development from 2011 to 2016--are mostly located on nonfederal lands. In 2016, about 15 percent of the major tight oil and shale gas plays in the contiguous United States overlapped federal lands, according to our analysis of EIA and the U.S. Geological Survey data. In contrast to oil and gas production, both federal and total U.S. coal production have declined since 2008. Federal coal production declined 19 percent from 2008 to 2015, while total U.S. coal production declined more than 23 percent in the same period. According to EIA, the decline in total U.S. coal production can be attributed to a lower international demand for coal, increased environmental regulations, and low natural gas prices (natural gas is an alternative for coal in the electricity market). As figure 3 shows, about 5 percent of the major coal basins in the contiguous United States overlapped federal lands in 2013, according to our analysis of EIA and U.S. Geological Survey data. Major coal basins that overlap with federal lands are primarily concentrated in the Powder River Basin in parts of Wyoming and Montana. Raising federal royalty rates for onshore oil, gas, and coal could decrease production on federal lands, according to studies we reviewed and stakeholders we interviewed. Increasing royalty rates would increase the total costs for producers, thus making production on federal lands less attractive to companies, according to some stakeholders. Companies may respond by producing less on federal lands and more on nonfederal lands. However, stakeholders disagreed about the extent to which production could decrease because they said other factors may influence energy companies' development decisions. Oil and gas. We identified two studies--one by the CBO and one by Enegis, LLC--that modeled the effects of different policy scenarios on oil and gas production on federal lands. Both studies suggested that a higher royalty rate could decrease production on federal lands by either a small amount or not at all. The CBO study concluded that raising the royalty rate to 18.75 percent would lead to "reductions in production would be small or even negligible" over 10 years, particularly if the increased federal royalty rate remained equal to or below the royalty rates for production on state or private lands. As discussed above, the current 12.5 percent federal royalty rate is generally the same or lower than rates charged by the six states in which more than 90 percent of federal oil and gas was produced in fiscal year 2015. In addition, the Enegis, LLC, study showed that demand for new federal competitive leases--or the extent to which oil and gas companies would compete for new leases--would generally decrease over 25 years if the royalty rate were raised to 16.67 percent, 18.75 percent, or 22.5 percent. For each of these three royalty rate increases, the study examined several different scenarios that varied with respect to key factors, including company costs and company responses. The study showed declines in production under all scenarios except those in which companies completely absorbed the higher costs resulting from higher royalty rates. In scenarios in which companies could absorb the costs--potentially in market conditions in which higher oil and gas prices help buffer companies from the effects of increased royalty rates--there would be no change in production levels. The three increased royalty rates modeled resulted in oil production declines ranging from 0 barrels to approximately 70 million barrels over 25 years (or, about 2.8 million barrels per year--the equivalent of about 1.8 percent of fiscal year 2016 onshore federal oil production). The three increased royalty rates modeled also resulted in gas production declines over 25 years ranging from 0 cubic feet to 85 billion cubic feet (or about 3.4 billion cubic feet per year--the equivalent of less than 1 percent of onshore federal gas production in fiscal year 2016). Coal. We also identified two studies that analyzed the effects of different policy scenarios on coal production on federal lands. The first study, by the CEA, examined how raising the federal royalty rate could affect coal production on federal lands after 2025 using a series of scenarios. Under the first scenario, equivalent to raising royalty rates to 17 percent in 2025, the study predicted that federal production would decrease by 3 percent once the changes were fully implemented. The other two scenarios, each equivalent to raising royalty rates to 29 percent in 2025, predicted that federal production would decrease by 7 percent. The second study, by Mark Haggerty, Megan Lawson, and Jason Pearcy, modeled an increase in the effective royalty rate, which is the rate companies actually pay after processing and transportation allowances are factored in. The study found that the modeled increase in the effective royalty rate led to a decrease in federal coal production of less than 1 percent per year. Results of the two studies differed in how an increase in coal royalty rates might affect nonfederal coal production. The CEA study determined that an increase in federal royalty rates would raise the national price of coal, improving the competitiveness of nonfederal coal and slightly increasing nonfederal coal production. According to the CEA study, coal mines in Wyoming and Montana--representing more than 86 percent of federal coal production in fiscal year 2015--are some of the largest, most productive, and lowest-cost mines. According to EIA, in 2015 the average market price of coal from the Appalachian region, which comes primarily from production on state and private lands, was $60.61 per ton, while the average market price of coal from the Powder River Basin, where the majority of federal coal is produced, was $13.12 per ton. We previously reported that underground mining, which is mostly concentrated in the eastern region, is more costly than surface mining, resulting in a higher sale price. At the same time, eastern coal has more heat, or energy, content per ton than western coal, which raises the value of eastern coal. CEA concluded that raising the royalty rate would decrease this price gap between Appalachian and Powder River Basin coal, thus making Appalachian and other nonfederal coal slightly more competitive. The study by Haggerty, Lawson, and Pearcy states that substitution between federal and nonfederal coal could occur, but is unlikely for several reasons, including federal ownership in western states and the inherent difference in the qualities of coal. The study states that substitution between federal and nonfederal coal could occur if federal and nonfederal coal are in close proximity. However, the authors note that where federal ownership of coal dominates, in states like Wyoming, Montana, and Colorado where the majority of federal coal is produced, states tend to adopt federal policy changes. Also according to the study, transportation from the mine to the power plant is highly specialized, and power plants are engineered to maximize efficiency of the specific type of coal in the region. Switching from one type of coal to another could involve substantial conversion costs for coal power plants. Stakeholders we interviewed suggested that several factors could influence the extent to which oil, gas, and coal production might be affected if federal royalty rates were increased, including the following. Market conditions and prices. Some stakeholders noted that market conditions and prices play an important role in determining whether raising federal royalty rates could affect production on federal lands. BLM officials suggested that raising federal royalty rates is less likely to have a negative effect on production when oil and gas prices are high. For example, increasing royalty rates from 12.5 percent to 16.67 percent would increase the cost of producing oil by about $2 a barrel at oil prices as of March 2017. In addition, according to a few stakeholders we interviewed and a 2015 report by the Congressional Research Service, any negative effect on production from higher rates could be limited to or affect areas with marginal oil and gas wells, which are usually wells with low production rates and/or higher production costs. As for coal, some stakeholders said that in an already challenging market, increased costs could further discourage production. According to EIA data, total U.S. coal production declined 23 percent from 2008 to 2015. In a 2012 report, we found that various market and regulatory factors may influence the future use of coal, including the price of natural gas, demand for electricity, and environmental regulations. A few stakeholders we interviewed said there has been little interest in further coal development in their regions, which include the western and midwestern regions of the country. Since fiscal year 2012, the number of coal lease sales on federal lands has generally declined. We previously reported that there was limited competition for coal leases because of the significant capital investment and time required; additionally, from January 2016 to March 2017 the Secretary of the Interior placed a pause on significant new federal coal leasing decisions, with limited exemptions and exclusions. Cost advantages of different resources. A few stakeholders told us that the competitiveness of federal lands for development depends less on the royalty rate charged and more on the location of the best resources--such as areas with low exploration and production costs. For example, as discussed above, most of the areas with major U.S. tight oil and shale gas plays and major U.S. coal basins do not overlap with federal lands. A few stakeholders suggested that an increase in the federal royalty rates for coal would not cause companies to switch from federal to nonfederal coal because of the cost advantages of federal coal, which is primarily concentrated in surface mines in the West. According to EIA data, all coal extracted from the Powder River Basin in 2015 was from surface mining, which we previously reported has lower extraction and production costs. In contrast, the majority of coal production from the Appalachian region in 2015 was from underground production, which we previously reported is more costly to extract. Increasing the royalty rate on federal lands would not cause operators to switch from federal to nonfederal coal, according to a few stakeholders, because companies producing coal on federal lands would still have a cost advantage over companies producing coal on nonfederal lands. Regulatory burden of federal development. Some stakeholders we spoke with stated that there is already a higher regulatory burden for oil and gas companies to develop resources on federal lands than on nonfederal lands, and one stakeholder noted that an increase in federal royalty rates would decrease the competitiveness of federal lands versus state or private lands. In addition, BLM officials noted that about half the public comments BLM received through its 2015 Advance Notice of Proposed Rulemaking also noted there is a higher regulatory burden on federal lands. According to BLM officials, when federal and nonfederal coal are located on adjoining tracts the cost of production will be identical unless the nonfederal land has a different royalty rate, which officials say is unlikely. Assuming the royalty rate is the same, officials stated that the main difference between federal and nonfederal coal is the additional regulatory burden of producing on federal lands. In addition, a few stakeholders stated that companies may avoid mining federal lands for coal when possible in order to avoid the required environmental assessments, which add time to the leasing process. Officials from two state offices we interviewed said that the history of increasing royalty rates for oil and gas production on state lands suggests that increasing the federal royalty rate would not have a clear impact on production. In particular, officials from Colorado and Texas said that they have raised their state royalty rates without a significant effect on production on state lands. In February 2016, Colorado increased its royalty rate for oil and gas production from 16.67 percent to 20 percent, and, according to state officials, there had been no slowdown in interest in new leases as of August 2016. In fact, Colorado state officials said they were unsure whether the higher royalty rate played much of a role in companies' decision making. Additionally, Texas officials told us that over 30 years ago, Texas began charging a 25-percent royalty for most oil and gas leases on state lands, and this increase has not had a noticeable impact on production or leasing. Officials at BLM said about half of the public comments they received through BLM's 2015 Advance Notice of Proposed Rulemaking suggested that an increase in royalty rates would not have a clear impact on production. Raising federal royalty rates for onshore oil, gas, and coal could increase overall federal revenues, according to studies we reviewed and stakeholders we interviewed. Higher rates could have two opposing effects on federal revenues. First, as discussed above, raising royalty rates could lead to decreased production on federal lands, and, consequently, decreased revenues. Second, revenues would increase on any production that does occur because of higher royalty rates on that production. The studies we reviewed show that raising federal royalty rates could increase federal revenues for oil, gas, and coal. Some stakeholders we interviewed said any effects on federal revenue would depend on how increasing royalty rates for oil, gas, and coal would affect bonus bid revenue, while others said overall market conditions, among other factors, need to be considered. Oil and gas. The studies we reviewed for oil and gas estimate that raising the federal royalty rate could increase net federal revenue between $5 million and $38 million per year (equivalent to around 0.7 percent to around 5.2 percent of net oil and gas royalties in fiscal year 2016). According to the CBO study, the effect on federal revenue would initially be small but would increase over time because a change in the royalty rate would apply only to new leases and the affected parcels would not go into production immediately. For example, CBO found that 6 percent of royalties collected in 2013 came from leases issued in the previous 10 years. CBO estimated that if the royalty rate for onshore oil and gas parcels were raised from 12.5 percent to 18.75 percent, net federal revenue would increase by $200 million over the first 10 years, and potentially by much more over the following decade, depending on market conditions. Similarly, according to the Enegis study, net federal revenues would increase under the scenarios that modeled raising the royalty rate to 16.67 percent, 18.75 percent, or 22.5 percent. Under these scenarios, estimated increases in net federal revenue range from $125 million to $939 million over 25 years. Coal. Both studies for coal also suggested that a higher royalty rate could lead to an increase in federal revenues. For example, the modeling scenarios in the CEA study that raised the royalty rate to the equivalent of 17 percent or 29 percent predicted a range of increases in government revenues from $0 to $730 million annually after 2025, with approximately half of that revenue going to the federal government. By comparison, in fiscal year 2016, the federal government collected more than $536 million in coal royalty payments, according to ONRR data. The revenue range included zero to take into account the possibility that bonus bids could be lost entirely, but the study stated that this was an extremely conservative assumption, and that the increase in royalty revenue would be vastly larger than any decrease in bonus bid revenue. The study by Haggerty, Lawson, and Pearcy suggested that total average royalty revenues could increase by $141 million per year if the effective royalty rate were raised. This study did not consider the effect on bonus bid revenue from a royalty rate increase. Stakeholders we interviewed also suggested that the effect on bonus bid revenue could influence the extent to which raising federal royalty rates would increase revenues from oil, gas, and coal production. For example, some stakeholders stated that companies would be more likely to offer lower bonus bids if they had to pay higher royalty payments, but a few stakeholders believed that the net impact on federal revenue would be minimal because royalties are a more significant portion of total revenues than bonus bids. For oil and gas, royalties could offset losses from other revenue sources, such as bonus bids and rents. Although royalties also constitute the majority of revenue for coal, bonus bids represent a larger percentage of total revenue in comparison with oil and gas revenue. For example, in fiscal year 2016 only 8 percent of total revenue from oil and gas development on federal lands was from bonus bids, while in the same year the comparable figure for coal was 42 percent. However, a few stakeholders said that any decrease in bonus bids from an increase in coal royalty rates would likely be offset by a larger increase in royalty revenue. In addition, BLM officials stated that raising the royalty rate could make some federal coal uneconomical to mine, resulting in fewer royalty payments to the federal government. BLM officials stated that an operator can justify a capital investment to produce coal on federal lands if the potential for revenue outweighs the cost of production. According to officials, increasing the royalty rate would add to the cost of production, which could cause an operator to bypass federal coal, thus causing the government to miss out on revenue. As discussed above, some stakeholders said any effects on federal revenue would depend on how increasing royalty rates for oil, gas, and coal would affect bonus bid revenue, and others said overall market conditions, among other factors, need to be considered. We provided a draft of this report to Interior for review and comment. The agency provided technical comments, which we incorporated as appropriate. We are sending copies of this report to the appropriate congressional committees, the Secretary of the Interior, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff members have any questions about this report, please contact me at (202) 512-3841 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix II. Figure 4 shows trends in onshore oil, gas, and coal production and revenue on federal lands over the last 10 years. Tables 2 and 3 show which federal agencies have ownership over the associated federal surface lands that overlap the major tight oil and shale gas plays and major coal basins, as well as which major plays and basins are on tribal lands. Tables 4, 5, and 6 show royalty and other revenues and oil, gas, and coal production on federal lands; on American Indian lands; and, for comparison, in federal offshore areas for fiscal years 2015 and 2016. In addition to the contact named above, Quindi Franco (Assistant Director), Richard Burkard, Greg Campbell, Colleen Candrl, Tara Congdon, Cindy Gilbert, Michael Kendix, Courtney Lafountain, Jessica Lewis, John Mingus, Cynthia Norris, Caroline Prado, Sara Sullivan, Kiki Theodoropoulos, Barbara Timmerman, and Amy Ward-Meier made key contributions to this report.
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In fiscal year 2016, the federal government collected about $2.5 billion in revenue associated with onshore oil, gas, and coal production on federal lands, including about $2 billion from royalties. Federal royalty rates sometimes differ from the rates states charge for production on state lands. For example, state oil and gas rates tend to be higher than federal royalty rates and state coal rates are generally the same as federal rates in the six states representing more than 90 percent of federal oil, gas, and coal production in fiscal year 2015. The explanatory statement accompanying the Consolidated Appropriations Act for fiscal year 2016 includes a provision for GAO to review issues related to royalty rates. This report describes what is known about how raising federal royalty rates would affect (1) oil, gas, and coal production on federal lands and (2) the federal revenue associated with such production. GAO reviewed an extensive list of studies and selected for more in-depth review four that modeled the effects of raising federal royalty rates--one study conducted by the Congressional Budget Office, one by the Council of Economic Advisers in the Executive Office of the President, one prepared for the Bureau of Land Management, and one by researchers. GAO also interviewed officials from federal and state agencies, industry groups, non-governmental organizations, academia, and other knowledgeable stakeholders. GAO is not making recommendations in this report. Interior reviewed a draft of this report and provided technical comments that GAO incorporated as appropriate. Raising federal royalty rates--a percentage of the value of production paid to the federal government--for onshore oil, gas, and coal resources could decrease oil, gas, and coal production on federal lands but increase overall federal revenue, according to studies GAO reviewed and stakeholders interviewed. However, the extent of these effects is uncertain and depends, according to stakeholders, on several other factors, such as market conditions and prices. Production . One study GAO reviewed found that oil and gas production could decrease by less than 2 percent per year if royalty rates increased from their current 12.5 percent to 22.5 percent, based on fiscal year 2016 production data. Another study stated the effect on production could be "negligible" over 10 years if royalty rates increased to 18.75 percent, particularly if the increased federal royalty rate remained equal to or below the royalty rates for production on state or private lands. Regarding coal, one study suggested that raising the federal royalty rate for coal to 17 percent would decrease production on federal lands by up to 3 percent after changes were fully implemented after 2025, while a second study said that increasing the effective rate--the rate actually paid by companies after processing and transportation allowances have been factored in, along with any royalty rate reductions--might decrease production on federal lands by less than 1 percent per year. Some stakeholders said that several other factors could influence the extent to which oil, gas, and coal production might decline. For example, some stakeholders said current market conditions, the cost advantages of different resources, and the regulatory burden associated with production on federal lands could influence the extent to which production might decline. Revenue . The oil and gas studies that GAO reviewed estimated that raising the federal royalty rate could increase net federal revenue between $5 million and $38 million per year. One of the studies stated that net federal revenue would increase under three scenarios that modeled raising the royalty rate from the current 12.5 percent to 16.67 percent, 18.75 percent, or 22.5 percent, while the other study noted that the effect on federal revenue would initially be small but would increase over time. Both coal studies suggested that a higher royalty rate could lead to an increase in federal revenues. One of the studies suggested that raising the royalty rate to 17 percent or 29 percent might increase federal revenue by up to $365 million per year after 2025. The other study suggested that increasing the effective rate could bring in an additional $141 million per year in royalty revenue. Stakeholders GAO interviewed cited other factors that could influence the extent to which raising federal royalty rates could increase revenues--in particular, how bonus bids, another revenue source, could be affected. Some of the stakeholders stated that companies would be more likely to offer lower bids to obtain a lease for the rights to extract resources if they had to pay higher royalties.
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Over their lifetimes, men and women differ in many ways that have consequences for how much they will receive from Social Security and pensions. Women make up about 60 percent of the elderly population and less than half of the Social Security beneficiaries who are receiving retired worker benefits, but they account for 99 percent of those beneficiaries who receive spouse or survivor benefits. A little less than half of working women between the ages of 18 and 64 are covered by a pension plan, while slightly over half of working men are covered. The differences between men and women in pension coverage are magnified for those workers nearing retirement age--over 70 percent of men are covered compared with about 60 percent of women. Labor force participation rates differ for men and women, with men being more likely, at any point in time, to be employed or actively seeking employment than women. The gap in labor force participation rates, however, has been narrowing over time as more women enter the labor force, and the Bureau of Labor Statistics predicts it will narrow further. In 1948, for example, women's labor force participation rate was about a third of that for men, but by 1996, it was almost four-fifths of that for men. The labor force participation rate for the cohort of women currently nearing retirement age (55 to 64 years of age) was 41 percent in 1967 when they were 25 to 34 years of age. The labor force participation rate for women who are 25 to 34 years of age today is 75 percent--an increase of over 30 percentage points. Earnings histories also affect retirement income, and women continue to earn lower wages than men. Some of this difference is due to differences in the number of hours worked, since women are more likely to work part-time and part-time workers earn lower wages. However, median earnings of women working year-round and full-time are still only about 70 percent of men's. The lower labor force participation of women leads to fewer years with covered earnings on which Social Security benefits are based. In 1993, the median number of years with covered earnings for men reaching 62 was 36 but was only 25 for women. Almost 60 percent of men had 35 years with covered earnings, compared with less than 20 percent of women. Lower annual earnings and fewer years with covered earnings lead to women's receiving lower monthly retired worker benefits from Social Security, since many years with low or zero earnings are used in the calculation of Social Security benefits. On average, the retired worker benefits received by women are about 75 percent of those received by men. In many cases, a woman's retired worker benefits are lower than the benefits she is eligible to receive as the spouse or survivor of a retired worker. Women tend to live longer than men and thus may spend many of their later retirement years alone. A woman who is 65 years old can expect to live an additional 19 years (to 84 years of age), and a man of 65 can expect to live an additional 15 years (to 80 years of age). By 2070, the Social Security Administration projects that a 65-year-old woman will be able to expect to live another 22 years, and a 65-year-old-man, another 18 years. Additionally, husbands tend to be older than their wives and so are likely to die sooner. Differences in longevity do not currently affect the receipt of monthly Social Security benefits but can affect income from pensions if annuities are purchased individually. women. The authors estimated that, after 35 years of participation in the plan at historical yields and identical contributions, the difference in investment behavior between men and women can lead to men having a pension portfolio that is 16 percent larger. Social Security provisions and pension plan provisions differ in several ways (see app. I for a summary). Under Social Security, the basic benefit a worker receives who retires at the normal retirement age (NRA) is based on the 35 years with the highest covered earnings. The formula is progressive in that it guarantees that higher-income workers receive higher benefits, while the benefits of lower-income workers are a higher percentage of their preretirement earnings. The benefit is guaranteed for the life of the retired worker and increases annually with the cost of living. may elect, along with the spouse, to take a single life annuity or a lump-sum distribution if allowed under the plan. When workers retire, they are uncertain how long they will live and how quickly the purchasing power of a fixed payment will deteriorate. They run the risk of outliving their assets. Annuities provide insurance against outliving assets. Some annuities provide, though at a higher cost or reduced initial benefit, insurance against inflation risk, although annuity benefits often do not keep pace with inflation. Many pension plans are managed under a group annuity contract with an insurance company that can provide lifetime benefits. Individual annuities, however, tend to be costly. Under Social Security, the dependents of a retired worker may be eligible to receive benefits. For example, the spouse of a retired worker is eligible to receive up to 50 percent of the worker's basic benefit amount, while a dependent surviving spouse is eligible to receive up to 100 percent of the deceased worker's basic benefit. Furthermore, divorced spouses and survivors are eligible to receive benefits under a retired worker's Social Security record provided they were married for at least 10 years. If the retired worker has a child under 18 years old, the child is eligible for Social Security benefits, as is the dependent nonelderly parent of the child. The retired worker's Social Security benefit is not reduced to provide benefits to dependents and former spouses. Pensions, both public and private, generally do not offer the same protections to dependents as Social Security. Private and public pension benefits are based on a worker's employment experience and not the size of the worker's family. At retirement, a worker and spouse normally receive a joint and survivor annuity so that the surviving spouse will continue to receive a pension benefit after the retired worker's death. A worker, with the written consent of the spouse, can elect to take retirement benefits in the form of a single life annuity so that benefits are guaranteed only for the lifetime of the retired worker. payment options. Under this act, a joint and survivor annuity became the normal payout option and written spousal consent is required to choose another option. This requirement was prompted partly by testimony before the Congress by widows who stated that they were financially unprepared at their husbands' death because they were unaware of their husbands' choice to not take a joint and survivor annuity. Through the spousal consent requirement, the Congress envisioned that, among other things, a greater percentage of married men would retain the joint and survivor annuity and give their spouses the opportunity to receive survivor benefits. The monthly benefits under a joint and survivor annuity, however, are lower than under a single life annuity. Moreover, pension plans do not generally contain provisions to increase benefits to the retired worker for a dependent spouse or for children. As under Social Security, divorced spouses can also receive part of the retired worker's pension benefit if a qualified domestic relations order is in place. However, the retired worker's pension benefit is reduced in order to pay the former spouse. The three alternative proposals of the Social Security Advisory Council would make changes of varying degrees to the structure of Social Security. The key features of the proposals are summarized in appendix II. The Maintain Benefits (MB) plan would make only minor changes to the structure of current Social Security benefits. The major change that would affect women's benefits is the extension of the computation period for benefits from 35 years to 38 years of covered earnings. Currently, earnings are averaged over the 35 years with the highest earnings to compute a worker's Social Security benefits. If the worker has worked less than 35 years, then some of the years of earnings used in the calculation are equal to zero. Extending the computation period for the lifetime average earnings to 38 years would have a greater impact on women than on men. Although women's labor force participation is increasing, the Social Security Administration forecasts that fewer than 30 percent of the women retiring in 2020 will have 38 years of covered earnings, compared with almost 60 percent of men. The Individual Accounts (IA) plan would keep many features of the current Social Security system but add an individual account modeled after the 401(k) pension plan. Workers would be required to contribute an additional 1.6 percent of taxable earnings to their individual account, which would be held by the government. Workers would direct the investment of their account balances among a limited number of investment options. At retirement, the distribution from this individual account would be converted by the government into an indexed annuity. The IA plan, like the MB plan, would extend the computation period to 38 years; it would also change the basic benefit formula by lowering the conversion factors at the higher earnings level. This plan would also accelerate the legislated increase in the normal retirement age and then index it to future increases in longevity. As a consequence of these changes, basic Social Security benefits would be lower for all workers, but workers would also receive a monthly payment from the annuitized distribution from their individual account, which proponents claim would offset the reduction in the basic benefit. In addition to extending the computation period, elements of the IA plan that would disproportionately affect women are the changes in benefits received by spouses and survivors, since women are much more likely to receive spouse and survivor benefits. The spouse benefit would be reduced from 50 percent of the retired worker's basic benefit amount to 33 percent. The survivor benefit would increase from 100 percent of the deceased worker's basic benefit to 75 percent of the couple's combined benefit if the latter was higher. These changes would probably result in increased lifetime benefits for many women. Additionally, at retirement a worker and spouse would receive a joint and survivor annuity for the distribution of their individual account unless the couple decided on a single life annuity. Security payroll tax into the account, which would not be held by the government. Proponents of the PSA plan claim that over a worker's lifetime the tier I benefits plus the tier II distribution would be larger than the lifetime Social Security benefits currently received by retired workers. The worker would direct the investment of his or her account assets. At retirement, workers would not be required to annuitize the distribution from their personal security account but could elect to receive a lump-sum payment. This could potentially affect women disproportionately, since the worker is not required to consult with his or her spouse regarding the disposition of the personal account distribution. Under the PSA plan, the tier I benefit for spouses would be equal to the higher of their own tier I benefit or 50 percent of the full tier I benefit. Furthermore, spouses would receive their own tier II accumulations, if any. The tier I benefit for a survivor would be 75 percent of the benefit payable to the couple; in addition, the survivor could inherit the balance of the deceased spouse's personal security account assets. Many of the proposed changes to Social Security would affect the benefits received by men and by women differently. The current Social Security system is comparable to a defined benefit plan's paying a guaranteed lifetime benefit that is increased with the cost of living. Each of the Advisory Council proposals would potentially change the level of that benefit, and two of the proposals would create an additional defined contribution component. Not only would retired worker benefits be changed by these proposals, but the level of benefits for spouses and survivors would be affected. the account balances at retirement would depend on the contributions made to the worker's account and investment returns or losses on the account assets. Since women tend to earn lower wages, they would be contributing less, on average, than men to their accounts. Furthermore, even if contributions were equal, women tend to be more conservative investors than men, which could lead to lower investment returns. Consequently, women would typically have smaller account balances at retirement and would receive lower benefits than men. The difference in investment strategy could lead to a situation in which men and women with exactly the same labor market experiences receive substantially different Social Security benefits. The extent to which investor education can close the gap in investment behavior between men and women is unknown. The two Advisory Council proposals with individual or personal accounts differ in the handling of the distribution of the account balances at retirement. The IA plan would require annuitization of the distribution at retirement, and choosing a single life annuity or a joint and survivor annuity would be left to the worker and spouse. If the single life annuity option for individual account balances was chosen, then the spouse would receive the survivor's basic benefit after the death of the retired worker plus the annuitized benefit based on the work records of both individuals. The PSA plan would not require that the private account distribution be annuitized at retirement. A worker and spouse could take the distribution as a lump sum and attempt to manage their funds so that they did not outlive their assets. If the assets were exhausted, the couple would have only their basic tier I benefits, plus any other savings and pension benefits. Furthermore, even if personal account tier II assets were left after the death of the retired worker, the balance of the PSA account would not necessarily have to be left to the survivor. If a worker and spouse chose to purchase an annuity at retirement, then the couple would receive a lower monthly benefit than would be available from a group annuity. although the expected lifetime payments would be the same, the monthly payments to the woman would be lower, since women have longer life expectancies. Even though the current provisions of Social Security are gender neutral, differences during the working and retirement years may lead to different benefits for men and women. For example, differences in labor force attachment, earnings, and longevity lead to women's being more likely than men to receive spouse or survivor benefits. Women who do receive retired worker benefits typically receive lower benefits than men. As a result of lower Social Security benefits and the lower likelihood of receiving pension benefits, among other causes, elderly single women experience much higher poverty rates than elderly married couples and elderly single men. Social Security is a large and complex program that protects most workers and their families from income loss because of a worker's retirement. Public and private pension plans do not offer the social insurance protections that Social Security does. Pension benefits are neither increased for dependents nor generally indexed to the cost of living as are Social Security benefits. Typically, at retirement a couple will receive a joint and survivor annuity that initially pays monthly benefits that are 15 to 20 percent lower than if they had chosen to forgo the survivor benefits with a single life annuity. Furthermore, under a qualified domestic relations order, a divorced retired worker's pension benefits may be reduced to pay benefits to a former spouse. While the three alternative proposals of the Social Security Advisory Council are intended to address the long-term financing problem, they would make changes that could affect the relative level of benefits received by men and women. Each of the proposals has the potential to exacerbate the current differences in benefits between men and women. Narrowing the gap in labor force attachment, earnings, and investment behavior may reduce the differences in benefits. But as long as these differences remain, men and women will continue to experience different outcomes with regard to Social Security benefits. This concludes my prepared statement. I would be happy to answer any questions you or other Members of the Subcommittee may have. For more information on this testimony, please call Jane Ross on (202) 512-7230; Frank Mulvey, Assistant Director, on (202) 512-3592; or Thomas Hungerford, Senior Economist, on (202) 512-7028.
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GAO discussed the impacts of proposals to finance and restructure the Social Security system, specifically the impacts on the financial well-being of women. GAO noted that: (1) its work shows that, despite the provisions of the Social Security Act that do not differentiate between men and women, women tend to receive lower benefits than men; (2) this is due primarily to differences in lifetime earnings because women tend to have lower wages and fewer years in the workforce; (3) women's experience under pension plans also differs from men's not only because of earnings differences but also because of differences in investment behavior and longevity; (4) moreover, public and private pension plans do not offer the same social insurance protections that Social Security does; (5) furthermore, some of the provisions of the Social Security Advisory Council's three proposals may exacerbate the differences in men and women's benefits; (6) for example, proposals that call for individual retirement accounts will pay benefits that are affected by investment behavior and longevity; and (7) expected changes in women's labor force participation rates and increasing earnings will reduce but probably not eliminate these differences.
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The 340B Program was created following the enactment of the Medicaid Drug Rebate Program and gives 340B covered entities discounts on outpatient drugs comparable to those made available to state Medicaid agencies. HRSA is responsible for administering and overseeing the 340B Program. Eligibility for the 340B Program, which is defined in the PHSA, has expanded over time, most recently through the Patient Protection and Affordable Care Act, which extended eligibility to additional types of hospitals. Entities generally become eligible by receiving certain federal grants or by being one of six hospital types. Eligible grantees include clinics that offer primary and preventive care services, such as Federally Qualified Health Centers, clinics that target specific conditions or diseases that raise public health concerns or are expensive to treat, and state-operated AIDS Drug Assistance Programs, which serve as a "payer of last resort" to cover the cost of providing HIV-related medications to certain low-income individuals. Eligible hospitals include certain children's hospitals, free-standing cancer hospitals, rural referral centers, sole community hospitals, critical access hospitals, and general acute care hospitals that serve a disproportionate number of low-income patients, referred to as disproportionate share hospitals (DSH). To become a covered entity and participate in the program, eligible entities must register with HRSA and be approved. Entity participation in the 340B program has grown over time to include more than 38,000 entity sites, including more than 21,000 hospital sites and nearly 17,000 federal grantee sites (see fig. 1). To be eligible for the 340B Program hospitals must meet certain requirements intended to ensure that they perform a government function to provide care to the medically underserved. First, hospitals generally must meet specified DSH adjustment percentages to qualify. Additionally, they must be (1) owned or operated by a state or local government, (2) a public or private nonprofit corporation that is formally delegated governmental powers by a unit of state or local government, or (3) a private, nonprofit hospital under contract with a state or local government to provide health care services to low-income individuals who are not eligible for Medicaid or Medicare. All drug manufacturers that supply outpatient drugs are eligible to participate in the 340B Program and must participate in order to have their drugs covered by Medicaid. To participate, manufacturers are required to sign a pharmaceutical pricing agreement with HHS in which both parties agree to certain terms and conditions. The 340B price for a drug--often referred to as the 340B ceiling price--is based on a statutory formula and represents the highest price a participating drug manufacturer may charge covered entities. Covered entities must follow certain requirements as a condition of participating in the 340B Program. For example covered entities are prohibited from subjecting manufacturers to "duplicate discounts" in which drugs prescribed to Medicaid beneficiaries are subject to both the 340B price and a rebate through the Medicaid Drug Rebate Program. covered entities are also prohibited from diverting any drug purchased at the 340B price to an individual who does not meet HRSA's definition of a patient. This definition, issued in 1996, outlines three criteria that generally state that diversion occurs when 340B discounted drugs are given to individuals who are not receiving health care services from covered entities or are only receiving non-covered services, such as inpatient hospital services. (See table 1 for more information on HRSA's definition of an eligible patient.) Covered entities are permitted to use drugs purchased at the 340B price for all individuals who meet the 340B Program definition of a patient regardless of whether they are low-income, uninsured, or underinsured. A covered entity typically purchases and dispenses 340B drugs through pharmacies--either through an in-house pharmacy, or through the use of a contract pharmacy arrangement, in which the covered entity contracts with an outside pharmacy to dispense drugs on its behalf. The adoption and use of contract pharmacies is governed by HRSA guidance. HRSA's original guidance permitting the use of contract pharmacies limited their use to covered entities that did not have in-house pharmacies and allowed each covered entity to contract with only one outside pharmacy. However, March 2010 guidance lifted the restriction on the number of pharmacies with which a covered entity could contract. Since that time, the number of unique contract pharmacies has increased significantly, from about 1,300 at the beginning of 2010 to around 18,700 in 2017 (see fig. 2); and, according to HRSA data, in 2017, there were more than 46,000 contract pharmacy arrangements. HRSA guidance requires a written contract between the covered entity and each contract pharmacy. Covered entities are responsible for overseeing contract pharmacies to ensure compliance with prohibitions of drug diversion and duplicate discounts. HRSA guidance indicates that covered entities are "expected" to conduct annual independent audits of contract pharmacies, leaving the exact method of ensuring compliance up to the covered entity. Drug manufacturers also must follow certain 340B Program requirements. For example, HRSA's nondiscrimination guidance prohibits manufacturers from distributing drugs in ways that discriminate against covered entities compared to other providers. This includes ensuring that drugs are made available to covered entities through the same channels that they are made available to non-340B providers, and not conditioning the sale of drugs to covered entities on restrictive conditions, which would have the effect of discouraging participation in the program. In our September 2011 report, we found that HRSA's oversight of the 340B Program was weak because it primarily relied on covered entities and manufacturers to police themselves and ensure their own compliance with program requirements. Upon enrollment into the program, HRSA requires participants to self-certify that they will comply with applicable 340B Program requirements and any accompanying agency guidance, and expects participants to develop the procedures necessary to ensure and document compliance, informing HRSA if violations occur. HRSA officials told us that covered entities and manufacturers could also monitor each other's compliance with program requirements, but we found that, in practice, participants could face limitations to such an approach. Beyond relying on participants' self-policing, we also found that HRSA engaged in few activities to oversee the 340B Program and ensure its integrity, which agency officials said was primarily due to funding constraints. Further, although HRSA had the authority to conduct audits of program participants to determine whether program violations had occurred, at the time of our 2011 report, the agency had never conducted such an audit. In our 2011 report, we concluded that changes in the settings where the 340B Program was used may have heightened the concerns about the inadequate oversight we identified. In the years leading up to our report, the settings where the 340B Program was used had shifted to more contract pharmacies and hospitals than in the past, and that trend has continued in recent years. We concluded that increased use of the 340B Program by contract pharmacies and hospitals may have resulted in a greater risk of drug diversion to ineligible patients, in part because these facilities were more likely to serve patients that did not meet the definition of a patient of the program. To address these oversight weaknesses, we recommended that the Secretary of HHS instruct the administrator of HRSA to conduct selective audits of covered entities to deter potential diversion. In response to that recommendation, in fiscal year (FY) 2012, HRSA implemented a systematic approach to conducting annual audits of covered entities that is outlined on its website. Now numbering 200 per year, HRSA audits include entities that are randomly selected based on risk-based criteria (approximately 90 percent of the audits conducted each year), and entities that are targeted based on information from stakeholders (10 percent of the audits conducted). (See table 2 for the number of audits conducted by HRSA from FY 2012-2017.) As a result of the audits already conducted, HRSA has identified instances of non-compliance with program requirements, including violations related to drug diversion and the potential for duplicate discounts. The agency has developed a process to address non- compliance through corrective action plans. The results of each year's audits are available on HRSA's website. In our 2011 report, we found that HRSA's guidance on three key program requirements lacked the necessary level of specificity to provide clear direction, making it difficult for participants to self-police or monitor others' compliance, and raising concerns that the guidance could be interpreted in ways that were inconsistent with its intent. First, we found that HRSA's nondiscrimination guidance was not sufficiently specific in detailing practices manufacturers should follow to ensure that drugs were equitably distributed to covered entities and non- 340B providers when distribution was restricted. Some stakeholders we interviewed for the 2011 report, such as covered entities, raised concerns about the way certain manufacturers interpreted and complied with the guidance in these cases. We recommended that HRSA further clarify its nondiscrimination guidance for cases in which distribution of drugs is restricted and require reviews of manufacturers' plans to restrict distribution of drugs at 340B prices in such cases. In response, HRSA issued a program notice in May 2012 that clarified HRSA's policy for manufacturers that intend to restrict distribution of a drug and provided additional detail on the type of information manufacturers should include in such restricted distribution plans. In addition, we found a lack of specificity in HRSA's guidance on two other issues--the definition of an eligible patient and hospital eligibility for program participation. Specifically, we found that HRSA's guidance on the definition of an eligible patient lacked the necessary specificity to clearly define the various situations under which an individual was considered eligible for discounted drugs through the 340B Program. As a result, covered entities could interpret the definition either too broadly or too narrowly. At the time of our report, agency officials told us they recognized the need to provide additional clarity around the definition of an eligible patient, in part because of concerns that some covered entities may have interpreted the definition too broadly to include non-eligible individuals, such as those seen by providers who were only loosely affiliated with a covered entity. HRSA had not issued guidance specifying the criteria under which hospitals that were not publicly owned or operated could qualify for the 340B Program. For example, we found HRSA guidance lacking on one of the ways hospitals could qualify for the program, namely by executing a contract with a state or local government to provide services to low-income individuals who are not eligible for Medicaid or Medicare. Specifically, we found that HRSA did not outline any criteria that must be included in such contracts, such as the amount of care a hospital must provide to these low-income individuals, and did not require the hospitals to submit their contracts for review by HRSA. As a result, hospitals with contracts that provided a small amount of care to low-income individuals not eligible for Medicaid or Medicare could claim 340B discounts, which may not have been what the agency intended. Given the lack of specificity in these areas, we recommended that HRSA (1) finalize new, more specific guidance on the definition of an eligible patient, and (2) issue guidance to further specify the criteria that hospitals not publicly owned or operated must meet to be eligible for the 340B program. HRSA agreed with these recommendations and had planned to address them in a comprehensive 340B Program regulation that it submitted to the Office of Management and Budget for review in April 2014. However, HRSA withdrew this proposed regulation in November 2014 following a May 2014 federal district court ruling that the agency had not been granted broad rulemaking authority to carry out all the provisions of the 340B program. After this ruling, the agency issued a proposed omnibus guidance in August 2015 to interpret statutory requirements for the 340B program in areas where it did not have explicit rulemaking authority, including further specificity on the definition of a patient of a covered entity and hospital eligibility for 340B program participation. However, in January 2017, the agency withdrew the guidance following the administration's January 20 memorandum directing agencies to withdraw or postpone regulations and guidance that had not yet taken effect. In July 2017, HRSA indicated that it was working with HHS to determine next steps regarding the proposed Omnibus Guidance, which included the patient definition, but that it was unable to further clarify guidance on hospital eligibility without additional authority. Given the increase in the number of contract pharmacies in the 340B Program and concerns that contract pharmacy arrangements present an increased risk to the integrity of the program, we were asked to review contract pharmacy use under the 340B Program. For this review, we are planning to address the following four questions. To what extent do the various types of covered entities use contract pharmacies and where are the pharmacies located? What, if any, financial arrangements do covered entities have with contract pharmacies and third-party administrators related to the administration and dispensing of 340B drugs, and how, if at all, this varies by entity type? To what extent do covered entities provide low-income, uninsured patients with discounts on drugs dispensed by contract pharmacies? How, if at all, do covered entities and HRSA ensure compliance with 340B program requirements at contract pharmacies? We are in the early stages of this work, and we expect to issue a future report on 340B contract pharmacies. Chairman Murphy, Ranking Member DeGette, and Members of the Committee, this concludes my statement. I would be pleased to respond to any questions you may have. For further information about this statement, please contact Debra A. Draper at (202) 512-7114 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this testimony. Key contributors to this statement were Michelle Rosenberg, Assistant Director; Rotimi Adebonojo, Jennie Apter; and Amanda Cherrin. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.
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According to HRSA, the purpose of the 340B Program, which was created in 1992, is to enable covered entities to stretch scarce federal resources to reach more eligible patients, and provide more comprehensive services. Covered entities can provide 340B drugs to patients regardless of income or insurance status and generate revenue by receiving reimbursement from patients insurance. The program does not specify how this revenue is to be used or whether discounts are to be passed on to patients. The number of participating covered entity sites--currently about 38,000--has almost doubled in the past 5 years and the number of contract pharmacies increased from about 1,300 in 2010 to around 18,700 in 2017. In recent years, questions have been raised regarding oversight of the 340B Program, particularly given the program's growth over time. In September 2011, GAO identified inadequacies in HRSA's oversight of the 340B program and made recommendations for improvement. This statement describes (1) HRSA actions in response to GAO recommendations to improve its program oversight, and (2) ongoing GAO work regarding the 340B program and HRSA oversight. For this statement, GAO obtained information and documentation from HRSA officials about any significant program updates and steps they have taken to implement the 2011 GAO recommendations. More detailed information on the objectives, scope, and methodology can be found in GAO's September 2011 report. The 340B Drug Pricing Program requires drug manufacturers to sell outpatient drugs at discounted prices to covered entities--eligible clinics, hospitals, and others--to have their drugs covered by Medicaid. Covered entities are only allowed to provide 340B drugs to certain eligible patients. Entities dispense 340B drugs through in-house pharmacies or contract pharmacies, which are outside pharmacies entities contract with to dispense drugs on their behalf. The number of contract pharmacies has increased significantly in recent years. In its September 2011 report, GAO found that the Health Resources and Services Administration's (HRSA) oversight of the 340B program was inadequate to ensure compliance with program rules, and GAO recommended actions that HRSA should take to improve program integrity, particularly given significant growth in the program in recent years. HRSA has taken steps to address two of GAO's four recommendations: HRSA initiated audits of covered entities . GAO found that HRSA's oversight of the 340B Program was weak because it primarily relied on covered entities and manufacturers to ensure their own compliance with program requirements and HRSA engaged in few oversight activities. GAO recommended that HRSA conduct audits of covered entities and in fiscal year 2012, HRSA implemented a systematic approach to conducting annual audits of covered entities. HRSA now conducts 200 audits a year, which have identified instances of non-compliance with program requirements, including the dispensing of drugs to ineligible patients. HRSA clarified guidance for manufacturers. GAO found a lack of specificity in guidance for manufacturers for handling cases in which distribution of drugs is restricted, such as when there is a shortage in drug supply. GAO recommended that HRSA refine its guidance. In May 2012, HRSA clarified its policy for when manufacturers restricted distribution of a drug and provided additional detail on the type of information manufacturers should include in their restricted distribution plans. HRSA has not clarified guidance on two issues. GAO also found that HRSA guidance on (1) the definition of an eligible patient and (2) hospital eligibility criteria for program participation lacked specificity and recommended that HRSA clarify its guidance. HRSA agreed that clearer guidance was necessary and, in 2015, released proposed guidance that addressed both issues. However, earlier this year, the agency withdrew that guidance in accordance with recent directives to freeze, withdraw, or postpone pending federal guidance. Given particular concerns that the significant escalation in the number of contract pharmacies poses a potential risk to the integrity of the 340B Program, GAO was asked to examine this issue and expects to issue a future report, in which it plans to address the extent to which covered entities use contract pharmacies; financial arrangements between covered entities and pharmacies; the provision of discounts on drugs dispensed by contract pharmacies to low-income, uninsured patients; and how covered entities and HRSA ensure compliance with 340B program requirements at contract pharmacies.
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Before discussing the specifics of H.R. 4246, I would like to provide an overview of the risks of severe disruption facing our nation's critical infrastructure and the steps being taking to address these risks. In particular, the explosive growth in computer interconnectivity over the past 10 years has significantly increased the risk that vulnerabilities exploited within one system will affect other connected systems. Massive computer networks now provide pathways among systems that if not properly secured, can be used to gain unauthorized access to data and operations from remote locations. While the threats or sources of these problems can include natural disasters, such as earthquakes, and system- induced problems, such as the Year 2000 (Y2K) date conversion problem, government officials are increasingly concerned about attacks from individuals and groups with malicious intentions, such as terrorists and nations engaging in information warfare. The resulting damage can vary, depending on the threat. Critical operations can be disrupted or otherwise sabotaged, sensitive data can be read and copied, and data or processes can be tampered with. A significant concern is that terrorists or hostile foreign states could launch computer-based attacks on critical systems, such as those supporting energy distribution, telecommunications, and financial services, to severely damage or disrupt our national defense or other operations, resulting in harm to the public welfare. Understanding these risks to our computer-based infrastructures and determining how best to mitigate them are major information security challenges. The federal government is beginning to take steps to address those challenges. In 1996, the President's Commission on Critical Infrastructure Protection was established to investigate our nation's vulnerability to both cyber and physical threats. In its October 1997 report, Critical Foundations:ProtectingAmerica'sInfrastructures,the Commission described the potential devastating implications of poor information security from a national perspective. In May 1998, Presidential Decision Directive 63 (PDD 63) was issued in response to this report and recognized that addressing computer-based risks to our nation's critical infrastructures required a new approach that involves coordination and cooperation across federal agencies and among public- and private-sector entities and other nations. PDD 63 created several new entities for developing and implementing a strategy for critical infrastructure protection. In addition, it tasked federal agencies with developing critical infrastructure protection plans and establishing related links with private industry sectors. Since then, a variety of activities have been undertaken, including development and review of individual agency critical infrastructure protection plans, identification and evaluation of information security standards and best practices, and efforts to build communication links with the private sector. In January 2000, the White House released its NationalPlanfor InformationSystemsProtectionas a first major element of a more comprehensive effort to protect the nation's information systems and critical assets from future attacks. This plan focuses largely on federal efforts being undertaken to protect the nation's critical cyber-based infrastructures. Subsequent plans are to address a broader range of concerns, including the specific roles industry and state and local governments will play in protecting physical and cyber-based infrastructures from deliberate attacks as well as international aspects of critical infrastructure protection. The end goal of this process is to develop a comprehensive national strategy for critical infrastructure assurance, as envisioned by PDD 63, and to have this plan fully operational in 2003. The plan proposes achieving its twin goals of making the U.S. government a model of information security and developing public-private partnerships to defend our national infrastructure through 10 programs listed in figure 1. The program involving sharing attack warning and information specifically seeks to bolster information exchange efforts with the private sector. In particular, the program aims to establish a Partnership for Critical Infrastructure Security and a National Infrastructure Assurance Council to increase corporate and government communications about shared threats to critical information systems. It also encourages the creation of Information Sharing and Analysis Centers (ISAC) to facilitate public- private sector information sharing about actual threats and vulnerabilities in individual infrastructure sectors. Two ISACs are already in operation: (1) the Financial Services ISAC, which exclusively serves the banking, securities, and insurance industries, and (2) the National Coordinating Center for Telecommunications, which is a joint industry/government organization. Several more ISACs are expected to be established by the end of the year. Partnerships such as the ISACs are central to addressing critical infrastructure protection. However, some in the private sector have expressed concerns about voluntarily sharing information with the government. For example, concerns have been raised that industry could potentially face antitrust violations for sharing information with other industry partners, have their information be subject to the Freedom of Information Act (FOIA), or face potential liability concerns for information shared in good faith. H.R. 4246 was introduced on April 12, 2000, with the aim of addressing these concerns and encouraging the secure disclosure and exchange of information about cyber security problems and solutions. In many respects, the bill is modeled after the Year 2000 Information and Readiness Disclosure Act, which provided limited exemptions and protections for the private sector in order to facilitate the sharing on information on Y2K readiness. In particular, H.R. 4246: protects information being provided by the private sector from disclosure by federal entities under FOIA or disclosure to or by any third party, prohibits the use of the information by any federal and state organization or any third party in any civil actions, and enables the President to establish and terminate working groups composed of federal employees for the purposes of engaging outside organizations in discuss to address and share information about cyber security. In essence, the bill seeks to enable the federal government to ask industry questions about events or incidents threatening critical infrastructures, correlate them at a national level in order to build a baseline understanding of infrastructures, and use these baselines to identify anomalies and attacks--something it is not doing now. Addressing similar concerns proved valuable in addressing the Y2K problem. Although Y2K was a unique and finite challenge, it parallels the critical infrastructure challenge in some important respects. Like critical infrastructure protection, for instance, Y2K spanned the entire spectrum of our national, as well as the global, economy. Moreover, given the scores of interdependencies among private sector companies, state and local governments, and the federal government, a single failure in one system could have repercussions on an array of public and private enterprises. As a result, public/private information sharing was absolutely essential to ensuring compliance in supply chain relationships and reducing the amount of Y2K work. Early on, Y2K information bottlenecks were widespread in the private sector. According to the President's Council on Year 2000 Conversion,antitrust issues and a natural tendency to compete for advantage made working together on Y2K difficult, if not inconceivable, for many companies. Moreover, the threat of lawsuits had companies worried that they would be held liable for anything they said about the Y2K compliance of products or devices they used or test processes and results for them. Legal considerations also prevented companies from saying anything about their own readiness for date change. Thus, as noted by the council, their business partners, as well as the general public, may have assumed the worst. According to the council, the Year 2000 Information and Readiness Disclosure Act paved the way for more disclosures about Y2K readiness and experiences with individual products and fixes. Several major telecommunications companies, for example, indicated their willingness to share Y2K information with smaller companies who contacted them. And the leaders of the electric power industry began a series of regional conferences for local distribution companies in which they discussed identified problems and solutions, particularly with embedded chips, as well as testing protocols and contingency planning. Moreover, the act helped facilitate the work of the more than 25 sector- based working groups established by the council and other outreach activities. For example, the council and federal agencies were able to establish partnerships with several private-sector organizations, such as the North American Electric Reliability Council, to gather information critical to the nation's Y2K efforts and to address issues such as contingency planning. Concerned about the lack of information in some key industry areas, the council also convened a series of roundtable meetings in the spring and summer of 1999, which helped to shed light on the status of readiness efforts relating to pharmaceuticals, food, hospital supplies, transit, public safety, the Internet, education, and chemicals. The assessment reports resulting from these and other activities substantially increased the nation's understanding of the Y2K readiness of key industries. Removing barriers to information sharing between government and industry can similarly enhance critical infrastructure protection. Both government and industry are key components of the infrastructure, both are potential targets for cyber threats, and both face significant gaps in effectively dealing with the threats. As such, both must work together to identify threats and vulnerabilities and to develop response strategies. In particular, by combining information concerning the type of incidents and attacks experienced with the information obtained through federal intelligence and law enforcement sources, the government can develop and share more informative warnings and advisories. In turn, companies can develop a better understanding of the threats facing their particular infrastructures and be better prepared to take appropriate actions to protect their sectors. By addressing private sector concerns about sharing information, H.R. 4246 could have a positive effect similar to the one the Year 2000 Information and Readiness Disclosure Act had in resolving the Y2K problem. At the same time, there are two formidable challenges to making this legislation a success. First, while information sharing is important, the government needs to be sure that it is collecting the right type of information, that it can effectively synthesize and analyze it, and that it can appropriately share its analysis. A significant amount of work still needs to be done just in terms of ensuring that the right type of information is collected. For example, what information is required that will enable the government to detect a nationally significant cyber attack? Will information on intrusions, software anomalies, or reports of significant system failures provide an accurate baseline for making these determinations? Today, officials in the intelligence community do not know with real certainty what constitutes a cyber attack. Further, a 1996 Defense Science Board report stressed that understanding the information warfare process and indications of information warfare attacks will likely require an unprecedented effort to collect, consolidate, and synthesize data from a range of owners of infrastructure assets. The ISACs being established to facilitate public- private sector information sharing can assist in meeting this challenge. However, as noted earlier, only two ISACS are in operation and proposals regarding these centers are presented only in broad terms in the administration's preliminary National Plan for Information Systems Protection. Once the government is sure that it is asking for the right type of information, it will need effective mechanisms for collecting and analyzing it. Building a common operational picture of critical infrastructures and determining if an attack is underway requires the government to develop capabilities to quickly and accurately correlate information from different infrastructures and reports of security incidents. This is a complex and challenging task in itself. Data on possible threats--ranging from viruses, to hoaxes, to random threats, to news events, and computer intrusions-- must be continually collected and analyzed from a wide spectrum of globally distributed sources in addition to sector-based groups. Nevertheless, fusing the right information from the public and private sectors in an operational setting is essential to detecting, warning, and responding to information-based attacks. The National Infrastructure Protection Center (NIPC), located in the Federal Bureau of Investigation, is charged with this mission, but it is not clear whether NIPC has the right tools and resources needed to successfully coordinate information collection efforts with the private sector and to effectively correlate and analyze information received. We are currently engaged in an effort to review this capability. In addition to collecting and analyzing data, the federal government needs to be able to effectively share information about infrastructure threats. Again, NIPC is charged with this responsibility and we are also reviewing its capability with respect to this issue. But, already, results in this area have been mixed. In December 1999, NIPC provided early warnings about a rash of denial-of-service attacks prominently on its website--2 months before the attack arrived in full force-and offered a tool that could be downloaded to scan for the presence of the denial of service code. However, as we recently testified,NIPC had less success with the ILOVEYOU virus. NIPC first learned of the virus at 5:45 a.m. EDT from an industry source, yet it did not issue an alert about the virus on its own web page until 11 a.m.--hours after many federal agencies were reportedly hit. This notice was a brief advisory; NIPC did not offer advice on dealing with the virus until 10 p.m. that evening. The lack of a more effective early warning clearly affected most federal agencies. Only 7 of 20 we contacted were spared widespread infection, which resulted in slowing some agency operations and requiring the diversion of technical staff toward stemming the virus' spread and cleaning "infected" computers. Moreover, NIPC did not directly warn the financial services ISAC about the impending threat. The second challenge to realizing the goals of H.R. 4246 is that, to truly engage the private sector, the federal government needs to be a model for computer security. Currently, the federal government is not a model. As emphasized in the National Plan for Information Systems Protection, the federal government specifically needs to be able to demonstrate that it can protect its own critical assets from cyber attack as well as lead research and development and educational efforts in the field of computer security. However, audits conducted by GAO and agency inspectors general show that 22 of the largest federal agencies have significant computer security weaknesses, ranging from poor controls over access to sensitive systems and data, to poor control over software development and changes, to nonexistent or weak continuity of service plans. Importantly, our audits have repeatedly identified serious deficiencies in the most basic controls over access to federal systems. For example, managers often provided overly broad access privileges to very large groups of users, affording far more individuals than necessary the ability to browse, and sometimes modify or delete, sensitive or critical information. In addition, access was often not appropriately authorized or documented; users often shared accounts and passwords or posted passwords in plain view; software access controls were improperly implemented; and user activity was not adequately monitored to deter and identify inappropriate actions. While a number of factors have contributed to weak federal information security, such as insufficient understanding of risks, technical staff shortages, and a lack of system and security architectures, the fundamental underlying problem is poor security program management. Agencies have not established the basic management framework needed to effectively protect their systems. Based on our 1998 studyof organizations with superior security programs, this involves managing information security risks through a cycle of risk management activities that include (1) assessing risk and determining protection needs, (2) selecting and implementing cost-effective policies and controls to meet these needs, (3) promoting awareness of policies and controls and of the risks that prompted their adoption, and (4) implementing a program of routine tests and examinations for evaluating the effectiveness of policies and related controls. Additionally, a strong central focal point can help ensure that the major elements of the risk management cycle are carried out and can serve as a communications link among organizational units. I would also like to emphasize that while individual agencies bear primary responsibility for the information security associated with their own operations and assets, there are several areas where governmentwide criteria and requirements also need to be strengthened. Specifically, there is a need for routine periodic independent audits of agency security programs to provide a basis for measuring agency performance and information for strengthened oversight. As we recently testified,a bill has been introduced in the Senate this year--the Proposed Government Information Security Act (S. 1993)--which provides a requirement for such audits. There is also a need for more prescriptive guidance regarding the level of protection that is appropriate for their systems, strengthened central leadership and coordination of information security- related activities across government, strengthened incident detection and response capabilities, and adequate technical expertise and funding. For example, central leadership and coordination of information security- related activities across government is lacking. Under current law, responsibility for guidance and oversight of agency information security is divided among a number of agencies, including the Office of Management and Budget (OMB), which is responsible for developing information security policies and overseeing agency practices; the National Institute of Standards and Technology, which is charged with developing technical standards and providing related guidance for sensitive data; and the National Security Agency, which is responsible for setting information security standards for national security agencies. Other organizations are also becoming involved through the administration's critical infrastructure protection initiative, including NIPC; the Critical Infrastructure Assurance Office, which is working to foster private-public relationships; and the Federal Computer Incident Response Capability (FedCIRC), which is the central coordination and analysis facility dealing with computer security-related issues affecting the civilian agencies and departments across the federal government. While some coordination is occurring, overall, this has resulted in a proliferation of organizations with overlapping oversight and assistance responsibilities. Absent is a strong voice of leadership and a clear understanding of roles and responsibilities. As we recently testified,having strong, centralized leadership has been critical to addressing other governmentwide management challenges. For example, vigorous support from officials at the highest levels of government was necessary to prompt attention and action to resolving the Y2K problem. Similarly, forceful, centralized leadership was essential to pressing agencies to invest in and accomplish basic management reforms mandated by the Chief Financial Officers Act. To achieve similar results for critical infrastructure protection, the federal government must have the support of top leaders and more clearly defined roles for those organizations that support governmentwide initiatives. In summary, by removing private sector concerns about sharing information on critical infrastructure threats, H.R. 4246 can facilitate private-public partnerships and help spark the dialogue needed to identify threats and vulnerabilities and to develop response strategies. For the concepts in H.R. 4246 to work, however, this legislation needs to be accompanied by aggressive outreach efforts; effective centralized leadership; and good tools for collecting, analyzing, and sharing information. Moreover, the federal government cannot realistically expect to engage private-sector participation without putting its own house in order. Doing so will require concerted efforts by senior executives, program managers, and technical specialists to institute the basic management framework needed to effectively detect, protect against, and recover from critical infrastructure attacks. Moreover, it will require cooperative efforts by executive agencies and by the central management agencies, such as OMB, to address crosscutting issues and to ensure that improvements are realized. Mr. Chairman, this concludes my statement. I would be happy to answer any questions you or other Members of the Subcommittee may have. For questions regarding this testimony, please contact Jack L. Brock, Jr. at (202) 512-6240. Individuals making key contributions included Cristina Chaplain, Michael Gilmore, and Paul Nicholas. (512009)
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Pursuant to a congressional request, GAO discussed the proposed Cyber Security Information Act of 2000 (H.R. 4246), focusing on how it can enhance critical infrastructure protection and the formidable challenges involved with achieving the goals of the bill. GAO noted that: (1) by removing key barriers that are precluding private industry from sharing information about infrastructure threats and vulnerabilities, H.R. 4246 can help build the meaningful private-public partnerships that are integral to protecting critical infrastructure assets; (2) however, to successfully engage the private sector, the federal government itself must be a model of good information security; (3) currently, it is not; (4) significant computer security weaknesses--ranging from poor controls over access to sensitive systems and data, to poor control over software development and changes, to nonexistent or weak continuity of service plans--pervade virtually every major agency; (5) and, as illustrated by the recent ILOVEYOU computer virus, mechanisms already in place to facilitate information sharing among federal agencies about impeding threats and vulnerabilities have not been working effectively; and (6) moreover, the federal government may not yet have the right tools for identifying, analyzing, coordinating, and disseminating the type of information that H.R. 4246 envisions collecting from the private sector.
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Under the Federal Food, Drug, and Cosmetic Act, FDA is responsible for ensuring that medical devices are reasonably safe and effective before they go to market (premarket) and that marketed device products remain safe (postmarket). Two FDA centers, CDRH and CBER, are responsible for reviewing applications to market medical devices. CDRH reviews applications for the majority of these devices, such as artificial hearts, dialysis machines, and radiological devices. CBER reviews applications for devices used in the testing and manufacture of biological products, including diagnostic tests intended to screen blood donors (such as for the human immunodeficiency virus), as well as therapeutic devices used in cell and gene therapies. FDA also inspects manufacturers' establishments to assess compliance with good manufacturing practices (GMP). During these inspections, FDA investigators examine manufacturing facilities, records of manufacturing processes, and corrective action programs. Nine types of applications for medical devices and biological products are subject to the MDUFMA performance goals established by the Secretary of Health and Human Services for fiscal years 2005 or 2006: Original Premarket Approval (PMA) applications are generally required when the device is new or when the risks associated with the device are considerable (as would be the case if the device is to be implanted in the body for life-supporting purposes). Expedited PMAs are used when FDA has granted priority status to an application to market a medical device because it is intended to treat or diagnose a life-threatening or irreversibly debilitating disease or condition and to address an unmet medical need. Premarket Reports are applications required for high-risk devices originally approved for a single use (that is, use on a single patient during a single procedure) that a manufacturer has reprocessed for additional use. Premarket Notifications, or 510(k)s, are applications used when the intent is to market a type of device that may be substantially equivalent to a legally marketed device that was not subject to premarket approval. Panel-Track Supplements are applications used to supplement approved PMAs or Premarket Reports. These supplements typically request approval of a significant change in the design or performance of a device, or for a new purpose for using a device. 180-Day PMA Supplements are also used to supplement approved PMAs or Premarket Reports. These supplements typically request approval of a significant change in aspects of a device, such as its design, specifications, or labeling, when demonstration of reasonable assurance of safety and effectiveness either does not require new clinical data or requires only limited clinical data. Biologics license applications (BLA) request permission to introduce and license biological products into interstate commerce. There are two types of BLAs that are tied to MDUFMA performance goals. Priority BLAs are for products that would, if approved, involve a significant improvement in the safety or effectiveness of the treatment, diagnosis, or prevention of a serious or life-threatening disease. Nonpriority BLAs are considered standard BLAs. BLA Supplements are used to supplement approved BLAs by requesting approval of a change to a licensed biological product. When the change has the substantial potential to affect the safety or effectiveness of the product, FDA approval is required prior to product distribution. There are MDUFMA performance goals linked to three types of BLA supplements-- BLA manufacturing supplements that require prior approval and two types of BLA efficacy supplements. Manufacturing supplements that require prior approval address proposed changes in the manufacture of the biologic and generally do not require submission of substantive clinical data. Efficacy supplements include both standard and priority efficacy supplements and require submission of substantive clinical data. BLA Resubmissions and BLA Efficacy Supplement Resubmissions are used to respond to a letter from FDA indicating that the information included in a BLA or BLA Efficacy Supplement was deficient. FDA classifies these resubmissions into two groups according to the type of information they provide. For Class 1 resubmissions, the new information may include matters related to product labeling, safety updates, and other minor clarifying information. For Class 2 resubmissions, the new information could warrant presentation to an advisory committee or a reinspection of the manufacturer's device establishment. Each of the 2005 and 2006 MDUFMA performance goals are linked to actions FDA takes under one of three processes for reviewing medical device applications: the PMA review process, the 510(k) review process, and the BLA review process. Under the PMA review process, FDA reviews applications for new devices or those for which risks associated with the device are considerable. Applications reviewed under this process include Original PMAs, Expedited PMAs, Premarket Reports, Panel-Track Supplements, and 180- Day PMA Supplements. After an initial screening of an application and determination that the review should proceed, FDA multidisciplinary staff conduct a scientific review of the application. (See fig. 1.) If FDA determines that it needs significant additional information to complete its scientific review, FDA issues a "major deficiency letter" to the manufacturer identifying the information that is required. The manufacturer can respond to FDA's request by submitting an amendment to the original application. FDA then proceeds with its review of the amended application. FDA can issue additional major deficiency letters and review additional amendments until FDA determines that it has sufficient information to make a decision. As part of its review, FDA may refer applications to an external advisory committee for evaluation. FDA takes this step when a device is the first of its kind or when the agency believes it would be useful to have independent expertise and technical assistance to properly evaluate the safety and effectiveness of the device. For applications referred to an advisory committee, the committee provides input to FDA on the safety and effectiveness of the devices. Taking the committee's input into consideration, FDA then makes a decision. FDA may make one of five decisions. FDA may (1) issue an order approving the application, which allows the manufacturer to begin marketing the device; (2) send the manufacturer an "approvable" letter pending a GMP inspection, which indicates that FDA should be able to approve the device after the agency determines that the manufacturer's device establishment is in compliance with GMP requirements; (3) send the manufacturer an approvable letter indicating that the agency should be able to approve the device if the manufacturer can make minor corrections or clarifications to the application; (4) issue a "not approvable" letter informing the manufacturer that FDA does not believe that the application can be approved because the data provided by the manufacturer do not demonstrate that the device is reasonably safe and effective; or (5) issue an order denying approval of the application, which informs the manufacturer that the agency has completed its scientific review, identified major safety or effectiveness problems, and decided not to approve the application. Two of these possible decisions result in issuance of letters indicating that an application has informational deficiencies--approvable letters requesting minor corrections or clarifications and not approvable letters. The manufacturer can respond to these letters by submitting an amendment to the original application. FDA then reviews the amendment. FDA can issue additional letters indicating that information is deficient and review additional amendments until FDA determines that it has sufficient information to determine whether to approve or deny the application. For example, if FDA determines that a manufacturer's amendment to an approvable letter requesting minor corrections or clarifications does not address all of FDA's questions, then FDA can issue another approvable letter pending minor corrections or clarifications or a not approvable letter. Under the 510(k) review process, FDA reviews applications to market a device that may be substantially equivalent to a legally marketed device that was not subject to premarket approval (see fig. 2). FDA staff conduct a scientific review of the application. When a 510(k) application lacks information necessary for FDA to reach a decision, the agency may issue an "additional information" letter that indicates that the information is insufficient. The manufacturer may then submit additional information. Once FDA has obtained sufficient information from the manufacturer, FDA may make one of three decisions: FDA may decide that (1) the device is substantially equivalent and therefore may be marketed, (2) the device is not substantially equivalent and may not be marketed, or (3) a 510(k) application was not required because the product is not regulated as a device or the device is exempt from the requirements for premarket notification. Under the BLA review process, FDA determines whether to approve licenses for biological products (see fig. 3). Applications reviewed under this process include BLAs, BLA Supplements, BLA Resubmissions, and BLA Supplement Resubmissions. After an initial screening of an application and determination that the review should proceed, staff conduct a multidisciplinary scientific review of the application. As part of its review, FDA may refer applications to an external advisory committee. After reviewing the application and taking into consideration any input from an external advisory committee, FDA may make one of two decisions. FDA may issue (1) an approval letter or (2) a "complete response" letter, which informs the manufacturer of deficiencies in the information provided in the application. The manufacturer can provide the information specified in a "complete response" letter in a BLA Resubmission or BLA Supplement Resubmission. The MDUFMA performance goals specify a length of time for taking an action during the review process, which can include making a decision. The goals designate a certain percentage of these actions that must occur within the specified period for FDA to meet the performance goals. To assess its performance against the MDUFMA performance goals, FDA measures the time the agency takes to complete certain actions and make decisions--but not the time it takes a manufacturer to respond to a letter from FDA. The data for measuring FDA's performance against a specific fiscal year's MDUFMA performance goals are based on all the applications the agency received in that year, known as a cohort, and are not complete until all applicable actions have been taken. As a result, data are preliminary until FDA has completed all actions tied to the goal for all applications in a cohort--a process that, for PMAs, can take up to 3 or 4 years. For example, one performance goal established for fiscal year 2005 is tied to amendments to PMAs that are submitted in response to major deficiency or not approvable letters. Data on FDA's performance on this goal will not be complete until after FDA has issued all major deficiency and not approvable letters it decides to issue for applications received in fiscal year 2005 and then either (1) received, reviewed, and acted on all amendments submitted in response or (2) determined that manufacturers have withdrawn their applications. For fiscal year 2005, FDA is to meet 20 performance goals and for fiscal year 2006 FDA is to meet an additional 6 performance goals, for a total of 26. (See table 1.) The percentage of applications for which the action must be taken within the specified time frame is higher in fiscal year 2006 than in fiscal year 2005 for 16 of the performance goals that are applicable for both years. The limited data available indicate that FDA has been meeting some MDUFMA performance goals established for fiscal year 2005. It is uncertain, however, whether FDA will ultimately meet the fiscal year 2005 performance goals once reviews for all the applications are complete. We found that FDA met most of the MDUFMA fiscal year 2005 performance goals for which there were sufficiently complete data to measure the agency's performance. When FDA did not have sufficiently complete data to evaluate performance against a MDUFMA performance goal, we reviewed preliminary data and found that FDA took actions tied to most of these other fiscal year 2005 goals within specified time frames. Data from the first 6 months of fiscal year 2005 are not sufficiently complete to evaluate FDA's performance against MDUFMA performance goals because some applications are pending review and because manufacturers are likely to submit additional applications and amendments for review. Our analysis shows that FDA met most of the MDUFMA 2005 performance goals for which there were sufficiently complete data to measure performance (see fig. 4). These data were from applications that FDA received in fiscal years 2003 and 2004 and were used to measure the agency's performance against about half of the performance goals established for fiscal year 2005. As of March 31, 2005, FDA had sufficiently complete data from applications received in fiscal year 2003 to measure performance against 11 of the 20 goals established for fiscal year 2005. FDA met 9 of those 11 goals and did not meet 2 of them. For applications received in fiscal year 2004, FDA had sufficiently complete data to measure performance against 10 of the 20 goals. It met 9 and did not meet 1 of these goals. For example, one of FDA's 2005 performance goals requires the agency to issue a first major deficiency letter within 150 days for 75 percent of PMAs, Panel-Track Supplements, and Premarket Reports that the agency received during the fiscal year and found to be incomplete. For applications in the fiscal year 2003 and 2004 cohorts, respectively, FDA issued 22 of 26 (85 percent) and 23 of 28 (82 percent) first major deficiency letters within 150 days, thus meeting the goal. FDA had complete data on its performance against this performance goal from both the fiscal year 2003 and 2004 cohorts--there were no other applications that FDA received during these years for which a first major deficiency letter can be issued. Figure 4 also shows that FDA had sufficiently complete data on applications received in both fiscal years 2003 and 2004 on 2 performance goals established for fiscal year 2005 that are tied to 510(k) applications, the type of MDUFMA-related medical device application that FDA receives most frequently. These data indicate that FDA met 1 of the 2 goals with applications received in fiscal year 2003 and met both goals for applications received in fiscal year 2004. Sufficiently complete data were also available on applications received in fiscal years 2003 and 2004 to evaluate FDA's performance on 3 of the 2005 performance goals tied to 180-Day PMA Supplements, the type of MDUFMA-related application that FDA receives second most frequently. FDA met 2 of these 3 goals on applications received in 2003 and met the 3 goals on applications received in 2004. As figure 4 shows, FDA's data from applications received in fiscal years 2003 and 2004 and the first 6 months of fiscal year 2005 are not sufficiently complete to evaluate the agency's performance against some fiscal year 2005 goals. The preliminary data available on these goals suggest that when FDA took actions tied to fiscal year 2005 performance goals, it generally did so within specified time frames. As of March 31, 2005, FDA had preliminary data from applications received in fiscal year 2003 on 7 of the 9 performance goals for fiscal year 2005 for which data were not sufficiently complete to evaluate performance. FDA took actions tied to 5 of the 7 goals within the specified time frames. For applications received in fiscal year 2004, FDA had preliminary data for 7 of the 10 performance goals for which data were not sufficiently complete, and the agency took actions tied to these 7 goals within the specified time frames. FDA also had preliminary performance data from applications received in the first 6 months of fiscal year 2005 for 11 of the 20 goals. FDA took actions tied to these 11 goals within the specified time frames. These preliminary results could change as FDA completes its review of pending applications and additional applications or amendments. For example, one of FDA's 2005 performance goals for expedited PMAs was to take action within 170 days for 70 percent of amendments containing complete responses to a major deficiency or not approvable letter. As of March 31, 2005, FDA had taken action within 170 days on two of two such amendments (100 percent) to applications in the fiscal year 2003 cohort and four of five (80 percent) in the fiscal year 2004 cohort and had received no such amendments for applications in the fiscal year 2005 cohort. These preliminary performance results could change, however, if manufacturers submit additional amendments to applications in any of the three cohorts. Based on the limited data that were available as of March 31, 2005, it is unclear whether or to what extent FDA will meet the fiscal year 2005 MDUFMA performance goals because the agency's performance could change as the agency completes its review of applications. For example, some applications are pending review because FDA has not reached a decision about the application or because the manufacturer has not responded to a letter from FDA indicating that the application included insufficient information for FDA to complete its review. Our analysis shows that as of March 31, 2005, about half of the applications FDA had received during the first 6 months of fiscal year 2005--831 of 1,792--were pending. (See table 2, which also shows the number of pending applications from the fiscal year 2003 and 2004 cohorts.) The percentage of pending applications varied by application type. For example, for the fiscal year 2005 cohort, 22--95.7 percent--of 23 PMAs and Panel-Track Supplements were pending further action, while 4--33.3 percent--of 12 BLA Supplements were pending. As previously noted, FDA's preliminary performance results could also change if manufacturers submit additional applications or amendments, as is likely. For example, FDA received 1,703 510(k) applications during the first 6 months of fiscal year 2005, about half the number it received in each of the 2 preceding full fiscal years (3,805 and 3,432 for fiscal years 2003 and 2004, respectively). These data suggest that as of March 31, 2005, FDA had received about half of the 510(k) applications that it may receive in fiscal year 2005. Similarly, performance results for applications FDA received in fiscal years 2003, 2004, and 2005 could change as manufacturers respond to requests for additional information or submit amendments to their applications. For example, as of March 31, 2005, FDA had issued letters requesting additional information for 659 of the 510(k) applications it received during the first 6 months of fiscal year 2005. It is likely that FDA will receive responses to these requests from manufacturers. The limited data available on FDA's performance suggest that FDA is likely to meet some of its fiscal year 2006 performance goals. Our analysis of FDA's performance for applications received in fiscal years 2003 and 2004 shows that FDA has been meeting most of the MDUFMA 2006 performance goals for which it had sufficiently complete data. We also reviewed FDA's preliminary data from applications received in fiscal years 2003 and 2004 and the first 6 months of fiscal year 2005, and found that FDA took actions tied to most of the remaining fiscal year 2006 goals within specified time frames. Preliminary performance results could change as the agency completes actions for applications received in fiscal years 2003, 2004, and 2005 and FDA's performance could change as it receives applications in fiscal year 2006. FDA has taken several steps to help meet the MDUFMA performance goals. Our analysis of FDA's past performance shows that FDA met most, but not all, of the MDUFMA 2006 performance goals for which it had sufficiently complete data. (See fig. 5.) As of March 31, 2005, FDA had sufficiently complete data from applications received in fiscal year 2003 to measure performance against 14 of 26 goals established for fiscal year 2006. FDA met 12 of those 14 goals. FDA also had sufficiently complete data from applications received in fiscal year 2004 to measure performance against 12 performance goals and met 9 of those 12 goals. Figure 5 also shows that FDA had sufficiently complete data from both fiscal years 2003 and 2004 on 2 performance goals established for fiscal year 2006 that are tied to 510(k) applications, the type of MDUFMA-related medical device application that FDA receives most frequently. These data indicate that FDA met 1 of the 2 goals for applications received in both fiscal years 2003 and 2004. Sufficiently complete data were available for applications received in fiscal years 2003 and 2004 to evaluate performance on 3 of the 2006 performance goals tied to 180-Day PMA Supplements, the type of MDUFMA-related application that FDA receives second most frequently. FDA met 2 of these 3 goals on applications received in both fiscal years. Figure 5 also shows that preliminary performance data from applications received in fiscal years 2003 and 2004 and the first 6 months of fiscal year 2005 indicate that FDA took actions tied to most of the remaining fiscal year 2006 performance goals within specified time frames. Of 12 performance goals for which data on applications received in fiscal year 2003 were not sufficiently complete to evaluate performance, FDA had preliminary data on 7. FDA took actions tied to 5 of these 7 goals within the specified time frames. Of 14 performance goals for which FDA did not have sufficiently complete data from applications received in fiscal year 2004, FDA had preliminary data for 8 and took actions tied to these 8 goals within the specified time frames. FDA had preliminary data from applications received in the first 6 months of fiscal year 2005 for 13 of the 26 goals established for fiscal year 2006. FDA took actions tied to these 13 goals within the established time frames. These performance results could change as the agency completes actions for applications received in fiscal years 2003, 2004, and 2005 and FDA's performance could change as it receives applications in fiscal year 2006. In general, when sufficient data indicated that FDA's performance results for applications received in a fiscal year met the performance goal established for fiscal year 2005, then the agency also met the performance goal established for fiscal year 2006, even when the 2006 goal required FDA to take action within specified time frames on a greater percentage of applications. There were two exceptions that involved issuing not approvable letters as a first action on 180-Day PMA Supplements received in fiscal year 2004 and issuing additional information letters as a first action for 510(k)s received in fiscal year 2004. In each of these cases, FDA met the performance goal established for fiscal year 2005, but did not meet the goal established for fiscal year 2006. To help meet its MDUFMA performance goals, FDA has taken several steps consistent with those outlined by the Secretary of Health and Human Services in his November 2002 letter establishing those goals. For example, FDA issued additional guidance to manufacturers on topics related to medical device applications in fiscal year 2004 and 2005. To help implement MDUFMA, CDRH hired 55 new staff (such as medical officers, scientists, and engineers) in fiscal year 2004 and 44 new staff in fiscal year 2005. According to FDA, prior to the enactment of the Medical Device User Fee Stabilization Act of 2005, there was uncertainty about the continuation of the MDUFMA program, and as a result, most of these new employees were hired on a temporary basis. Moreover, CDRH instituted a hiring freeze for MDUFMA-related positions in May 2005. FDA also said that as a consequence of hiring fewer personnel than planned to perform tasks associated with the MDUFMA program, implementation of improvements FDA intended to make was constrained. For example, fewer new guidance documents were drafted, fewer existing guidance documents were updated, and the modernization of data systems proceeded at a slower pace than FDA intended. An FDA spokesman told us that CDRH may lift its freeze on hiring new staff by the start of fiscal year 2006. In written comments on a draft of this report, FDA concurred with our findings. FDA also provided clarifying technical comments, which we incorporated. FDA's comments are reprinted in appendix I. We are sending copies of this report to the Secretary of Health and Human Services and the Acting Commissioner of FDA, appropriate congressional committees, and other interested parties. We will also make copies available to others on request. In addition, the report is available at no charge on the GAO Web site at http://www.gao.gov. If you or your staffs have questions about this report, please contact me at (202) 512-7119 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix II. In addition to the contact named above, James McClyde, Assistant Director, and Kristen Joan Anderson made key contributions to this report.
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The Food and Drug Administration (FDA) reviews applications from manufacturers that wish to market medical devices in the United States. To facilitate prompt approval of new devices and clearance of devices that are substantially equivalent to those legally on the market, the Congress passed the Medical Device User Fee and Modernization Act of 2002 (MDUFMA). The act authorizes FDA to collect user fees from manufacturers and, in return, requires FDA to meet performance goals tied to the agency's review process. These goals are linked to certain actions FDA may take during the application review process. The goals specify lengths of time for taking these actions and the percentage of actions the agency is to take within specified time frames. MDUFMA requires GAO to report on whether FDA is meeting performance goals established by the Secretary of Health and Human Services for fiscal year 2005 and whether FDA is likely to meet the goals established for fiscal year 2006. GAO analyzed data provided by FDA that are based on actions taken on applications FDA received from October 1, 2002, through March 31, 2005. GAO used FDA's performance on applications received in fiscal years 2003 and 2004 as an indicator of the agency's likely performance. Limited available data indicate that FDA has been meeting some MDUFMA performance goals established for fiscal year 2005. It is uncertain, however, whether FDA will meet all of the goals. FDA met most of the MDUFMA 2005 performance goals for which data were sufficiently complete to measure the agency's performance. As of March 31, 2005, FDA had sufficiently complete data from applications received in fiscal year 2003 to measure performance against 11 of the 20 goals established for fiscal year 2005. FDA met 9 of those 11 goals. For applications received in fiscal year 2004, FDA had sufficiently complete data to measure performance against 10 goals and met 9 of them. When FDA did not have sufficiently complete data to evaluate performance, GAO reviewed preliminary data from applications received in fiscal years 2003, 2004, and 2005. These data suggest that FDA has taken actions tied to many of the fiscal year 2005 goals within specified time frames. These data are preliminary because some applications from each year were pending within the review process and FDA could receive and act on additional applications or amendments to applications. For example, as of March 31, 2005, about half of the applications FDA had received in fiscal year 2005 were pending action by FDA or responses from manufacturers. Because FDA's performance against the MDUFMA performance goals is based on the percentages of actions the agency takes on applications within required time frames, FDA's performance results could change as the agency completes actions on all applications and amendments for which the performance goals apply. The limited data available on FDA's performance suggest that FDA is likely to meet some fiscal year 2006 performance goals. GAO's analysis of FDA's past performance shows that FDA met most of the MDUFMA 2006 performance goals for which it had sufficiently complete data to evaluate its performance. As of March 31, 2005, FDA has sufficiently complete data from applications received in fiscal year 2003 to measure performance against 14 of 26 goals established for fiscal year 2006. FDA met 12 of those 14 goals. FDA also had sufficiently complete data from applications received in fiscal year 2004 to measure performance against 12 performance goals and met 9 of those 12 goals. GAO also reviewed preliminary data from applications FDA received in fiscal years 2003, 2004, and 2005 and found that FDA took actions tied to many of the fiscal year 2006 goals within specified time frames. Most of these results are preliminary, however, and FDA's performance could change as the agency completes actions for applications received in fiscal years 2003, 2004, and 2005 and receives applications in fiscal year 2006. FDA concurred with GAO's findings.
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If workers believe that they have been discriminated against in an employment matter, they may generally file a charge with EEOC, one of several federal agencies responsible for enforcing equal employment opportunity (EEO) laws and regulations. Under title VII of the Civil Rights Act of 1964, EEOC investigates--and may litigate, on its own behalf or on behalf of the charging party--charges of employment discrimination because of race, color, religion, sex, or national origin. EEOC has similar responsibility under the Age Discrimination in Employment Act of 1967, which prohibits employment discrimination against workers aged 40 and older; under the Equal Pay Act of 1963, which prohibits payment of different wages to men and women doing the same work; and under the Americans With Disabilities Act, which prohibits employment discrimination against workers with physical or mental disabilities. In April 1995, EEOC announced changes in the way it processes private-sector employment discrimination charges. As soon as guidance and implementation instructions are issued, EEOC will begin categorizing charges according to three priorities. The first category is for charges that appear more likely than not to involve discrimination, and these charges will be fully investigated. The second category includes charges that appear to have some merit but will require additional evidence to determine whether a violation occurred. The third category includes charges that can be immediately dismissed without investigation. EEOC also announced that it will initiate in October 1995 a voluntary ADR program using mediation to handle some of its workplace discrimination charges. Under this planned program, some employees filing charges and their employers will work with a neutral mediator to settle discrimination disputes, rather than go through EEOC's traditional investigative procedures. If the employer and employee fail to reach a resolution, the charge will be returned to EEOC's regular caseload. If EEOC investigates the charge, it notifies the employer of the charge and requests information from the employer and any witnesses with direct knowledge of the incident that led to the discrimination charge. If the evidence obtained by the EEOC investigator does not show reasonable cause to believe discrimination occurred--for example, the employee was terminated for poor performance and not due to discrimination--EEOC dismisses the case after issuing a "no cause" finding and a right-to-sue letter. When the evidence shows that reasonable cause exists to believe discrimination occurred, EEOC tries conciliation. If conciliation attempts fail, EEOC may go to court on behalf of the employee, although it rarely chooses to do so. EEOC officials have said that the Commission lacks sufficient legal staff to significantly increase the number of cases it can litigate effectively. When EEOC decides not to go to court, it issues the employee a right-to-sue letter, which allows the employee to sue. While charges filed with EEOC may lead to legal relief for employees with valid claims, each charge results in costs to the employer, even though most are found to be in compliance with the law. Although the employee does not pay for the EEOC investigation, he or she may incur psychological costs while pursuing the claim, the average time of which was 328 days in fiscal year 1994. The federal government also incurs costs for each charge investigated. ADR approaches are being considered by employers because "almost any system is quicker, cheaper, and less harrowing than going to court," according to an official of the Equal Employment Advisory Council, an employers' group. Their concerns have recently increased as a result of (1) multimillion dollar jury awards to employees and (2) the provision in the Civil Rights Act of 1991 that permits punitive damages in cases of intentional discrimination under title VII of the Civil Rights Act of 1964 and the Americans With Disabilities Act. In addition, a 1991 U.S. Supreme Court decision upholding mandatory arbitration for statutory claims concerning employment disputes in the securities industry has led to consideration of arbitration in particular. Finally, some employers feel that ADR approaches can minimize the adversarial relationship between employer and employee resulting from such complaints. The Commission was appointed at the request of the President by the Secretary of Commerce and the Secretary of Labor to address three questions: What (if any) new methods or institutions should be encouraged, or required, to enhance workplace productivity through labor-management cooperation and employee participation? What (if any) changes should be made in the present legal framework and practices of collective bargaining to enhance cooperative behavior, improve productivity, and reduce conflict and delay? What (if anything) should be done to increase the extent to which workplace problems are directly resolved by the parties themselves, rather than through recourse to state and federal courts and governmental bodies? In researching this third question, the Commission considered the range of federal and state laws regulating the workplace, including those ensuring minimum wages and maximum hours; a safe and healthy workplace; secure and accessible pension and health benefits; adequate notice of plant closings and mass layoffs; unpaid family and medical leave; and bans on wrongful dismissal, as well as those outlawing discrimination on the basis of race, sex, religion, age, or disability. According to the Commission's December 1994 report, both employers and employees agree that, if private arbitration is to serve as a legitimate form of private-sector enforcement of public employment law, arbitration policies must provide a neutral arbitrator who knows the laws in question and understands the concerns of the parties, a fair and simple method by which the employee can obtain the necessary information to present his or her claim, a fair method of cost-sharing between the employer and employee to ensure affordable access to the system for all employees, the right to independent representation if the employee wants it, a range of legal remedies equal to those available through litigation, a written opinion by the arbitrator explaining his or her rationale for the sufficient judicial review to ensure that the result is consistent with employment laws. The Commission noted, however, that most experts who had testified before it agreed that imposition of fairness standards must not turn arbitration into a second court system. In our review of employers' arbitration policies, we found that some do not meet the fairness standards recently proposed by the Commission on the Future of Worker-Management Relations. Using the Commission's six standards, we evaluated dispute resolution policies provided by 26 employers that reported using arbitration to resolve discrimination complaints by employees not covered under collective bargaining agreements. Most of these policies, which are discussed below, are recent: 15 had been implemented in the past 5 years. Almost 90 percent of employers that had more than 100 employees and filed EEO reports with EEOC in 1992 use at least one ADR approach to resolve discrimination complaints. The reported use of these approaches, which ranges from about 80 percent for fact finding to about 9 percent for external mediation, is shown in figure 1. Almost 40 percent of these employers use a trained mediator from within the company to help resolve disputes. Only about 10 percent of employers use arbitration. Arbitration was mandatory for all covered employees for about one-fourth to one-half of the employers using this approach. In addition to those firms whose policies include arbitration, 8.4 percent of employers with more than 100 employees that filed EEO reports with EEOC in 1992 reported that they are considering implementing a policy requiring arbitration of employee discrimination complaints. A dispute resolution policy frequently has a series of steps, such as those discussed below, that can be linked to different ADR approaches. Usually, a policy that includes arbitration has it as the final step. (See fig. 2 for an example of a dispute resolution system that includes arbitration.) In step 1, an employee with a complaint is encouraged to discuss the matter with his or her immediate supervisor. The employee and supervisor should make sincere, good faith efforts to resolve the matter. If the employee prefers not to present the matter directly to the immediate supervisor or if they cannot resolve the matter, the employee then discusses the matter with a representative of the establishment's human resources department and decides whether to proceed to the next step. In step 2, the employee may request that a representative of the establishment's human resources department conduct an assessment of the dispute and help the employee and supervisor reach a resolution. If resolution has not been reached, an employee may proceed to step 3 and request an investigation by a representative of the establishment's human resources department. The results of the investigation are discussed with the appropriate senior manager and the employee. The senior manager decides how the complaint should be resolved. A decision letter is sent to both the employee and supervisor at the end of this step. An employee who is dissatisfied with the senior manager's decision may request that the problem be reviewed by a review board, which is composed of an executive, a manager, and a representative from the corporate human resources office. The employee may request the help of an executive adviser in preparing for this step. At the end of step 4, the board will make a final company decision on the dispute's merits, including corrective action, if appropriate. If an employee is dissatisfied with the board's decision, he or she may submit the complaint to binding arbitration, which is step 5 of this company's dispute resolution policy. An employee must give notice within 20 working days of the date the board reached its decision. The arbitration is to be administered in accordance with the procedures of the American Arbitration Association (AAA), a nonprofit organization that trains arbitrators and maintains lists of arbitrators who can be used to resolve different types of disputes, including labor-management and employment disputes. The arbitration will be heard by an arbitrator who is licensed to practice law in the state in which the arbitration takes place. Under this company's policy, the employer and the employee share equally the fees and costs of the arbitrator, although the arbitrator may order the company to pay the employee's costs in excess of 2 weeks' salary if the employee demonstrates a continuing inability to pay his or her entire share. Larger employers with larger human resource and legal staffs might be assumed to be more likely to use arbitration. However, we found no statistically significant difference in use of arbitration based on business size. Figure 3 shows the percentage of businesses using arbitration by size. Since arbitration has long been a feature of grievance procedures in the collective bargaining arena, employers that have collective bargaining agreements with some of their workers might be more likely to use arbitration with those not covered by collective bargaining. Figure 4, which shows that businesses with some union workers are nearly three times as likely as those with no union workers to use arbitration, lends credence to this notion. In its final report, the Commission states that the arbitrator selection process should allow both the employer and the affected employee(s) to participate. The arbitrator should be selected from a roster of qualified arbitrators who have training and experience in the area of law covering the dispute being arbitrated and are certified by professional associations specializing in such dispute resolution. The process should ensure that rosters include significant numbers of women and minorities. Neither party should be able to limit the roster unilaterally to avoid the possibility that the arbitrator selected will be biased in favor of that party. While we did not evaluate the qualifications or demographics of the panels from which arbitrators would be chosen, we noted that in 22 of the 26 policies we examined, both the employee and employer are directly involved in selecting the arbitrator. In 12 policies, this is done with the help of AAA. Immediately after the complaint is filed, AAA simultaneously sends an identical list of people chosen from its panel of employment arbitrators to both the employer and the employee. The employer and the employee (1) strike any names they object to and (2) number the remaining names in order of preference. In a single arbitrator case, the employer and the employee may each strike up to three names. AAA chooses an arbitrator from among those approved on both lists in accordance with the designated order of preference. If no agreement is reached on any of the names, AAA makes the appointment from other members of the panel. In seven policies we reviewed, the employer and employee alternate striking names from a list. One policy rather vaguely calls for selection "based on the parties' preferences." In two policies, the employer selects the names on the list, but the employee is involved in selecting the arbitrator. In one of the remaining four policies, the employer unilaterally selects the arbitrator, while the other three do not discuss arbitrator selection. According to the Commission, employees should have the opportunity to gather the relevant information they need to support their legal claims. Employees pursuing a discrimination complaint, for example, should be granted access to their personnel files. Broader access to personnel files should also be available to employees bringing systemic discrimination claims. During arbitration, an employee with a complaint should be allowed at least one deposition, with a company official of the employee's choosing. The arbitrator should be empowered to expand discovery (pretrial or prehearing procedure by which one party gains information held by the other) to include any material he or she finds valuable for resolving the dispute. Only three policies we reviewed discuss access to information. One policy states that discovery will be allowed and governed under the discovery rules of the state code of civil procedure unless otherwise agreed to by the parties; one policy provides for 2 days of depositions; and the remaining policy limits the taking of depositions to one company representative, two other persons, and one expert witness named by the company but also allows requests for documents related to the complaint. To ensure impartiality of the arbitrator, the Commission proposes that both the employee and the employer contribute to the arbitrator's fee. Ideally, the employee contribution should be capped in proportion to the employee's salary to avoid discouraging claims by low-wage workers. Seven policies do not address cost sharing. In four policies, the employer pays for all arbitration costs; costs are to be shared equally in nine policies; and the employee share is either capped or limited to less than half the costs in the remaining six policies. For example, one employer pays all costs in excess of $50. Another firm pays 80 percent of the arbitration costs, while the employee is responsible for 20 percent. According to the Commission, both employers and employees agree that fairness requires the right of independent representation if the employee wants it. AAA rules state that "any party may be represented by counsel or by any other representative." Twenty-one of the policies we reviewed permit the employee to be represented by an attorney during arbitration. Four policies do not address representation. Only one policy specifically states that representation by an attorney will not be permitted. The Commission states that the introduction of a workplace arbitration system should not curb substantive employee protections. This means that private arbitration should offer employees the same array of remedies available in court. Arbitrators should be allowed to award whatever relief--including reinstatement, back pay, additional economic damages, punitive awards, injunctive relief, and attorney's fees--would be available in court under the law in question. Eighteen of the 26 policies do not address legal remedies--such as monetary compensation--available to the arbitrator. Of the eight remaining policies, seven state that the arbitrator can use any remedy available under law, while one policy prohibits the arbitrator from assessing damages beyond those required to compensate for actual losses. The Commission states that the arbitrator should issue a written opinion that states the findings of fact and reasons that led to his or her decision. This opinion need not correspond in style or length to a court opinion. However, it should set out, in understandable terms, the basis for the arbitrator's ruling. Ten policies do not address the form of the arbitrator's decision. The remaining 16 policies require the arbitrator to provide a written ruling, but specific provisions of these policies vary considerably. For example, one policy requires the decision to "contain findings of fact and conclusions of law supporting the decision and the award," while another states that the written opinion should not include findings of fact and conclusions of law unless requested by both the employer and the employee. According to the Commission, judicial review of an arbitrator's ruling must ensure that the ruling reflects an appropriate understanding and interpretation of the relevant legal doctrines. A reviewing court should defer to an arbitrator's findings of fact as long as it has substantial evidentiary basis. However, the reviewing court's authoritative interpretation of the law should bind arbitrators much as it now binds administrative agencies and lower courts. For example, if an arbitration decision on a sexual harassment complaint disregards the standard set for such claims by the Supreme Court, the reviewing court should have the power to overturn the arbitration decision as inconsistent with current law. No policies require that the arbitration decision reflects an appropriate understanding and interpretation of relevant legal doctrines and be reviewable by a court on that basis. Sixteen policies call for the arbitration results to be "final and binding." However, none of these policies specifically provide for judicial review. The remaining 10 policies do not address reviewing the arbitrator's opinion. Almost all employers that had more than 100 employees and filed EEO reports with the EEOC in 1992 have established some sort of grievance procedure using one or more ADR approaches. However, relatively few use arbitration, and even fewer make it mandatory for employees. Existing arbitration policies vary greatly. If expected to conform with all the criteria for fairness recently proposed by the Commission on the Future of Worker-Management Relations, most would not do so. This is especially true when considering the criteria for an employee's opportunity to obtain information for empowering the arbitrator to use remedies equal to those available under law and for providing that the arbitrator's decision be subject to judicial review concerning the arbitrator's interpretation of relevant legal doctrines. We are sending copies of this report to interested congressional committees, the Chairman of the Equal Employment Opportunity Commission, and other interested parties. Please call Cornelia Blanchette, Associate Director, on (202) 512-7014, or me if you or your staff have any questions. Other major contributors to this report are listed in appendix III. We designed a questionnaire to obtain information on the use of alternative dispute resolution (ADR) approaches by private-sector businesses to resolve discrimination complaints brought by employees not covered by collective bargaining agreements. We discussed development of this questionnaire with the Equal Employment Advisory Committee, a nonprofit association of employers; Chorda Conflict Management, Inc., an Austin, Texas, consulting firm that helps employers design dispute resolution systems; and the National Task Force on Civil Liberties in the Workplace of the American Civil Liberties Union. Before mailing our questionnaire, we pretested it with officials of five employers. Results of the pretests indicated that questions, terms, and definitions were generally familiar, clear, and free from confusion. During the face-to-face pretest, officials completed the questionnaire as if they had received it in the mail. Our staff recorded the time necessary to complete the survey and any difficulties that respondents experienced. Once the questionnaire was completed, we used a standardized series of questions to gain feedback on difficulties and questions encountered with each item. We surveyed a nationally representative sample of businesses with more than 100 employees in 1992, the most recent year for which data were available. To determine our universe, we used the 1992 EEO-1 data file maintained by the EEOC. This file consists of reports required to be filed by all businesses with more than 100 employees during the reporting period, as well as certain firms with fewer than 100 employees if they are government contractors. We deleted consolidated reports and reports from businesses that reported having less than 100 employees. This yielded a universe of about 87,500 businesses. We sent the survey to a sample of 2,000 businesses. The sample was selected from three different strata by size: 100 to 499 employees, 500 to 999 employees, and 1,000 or more employees. We sent questionnaires to random samples of businesses in each of the three strata. We obtained an overall response rate of 75.0 percent. Response rates for individual strata ranged from 63.6 percent to 80.0 percent. Table I.1 shows the universe of potential establishments, the sample size, and the number of establishments for which questionnaires were received by strata. As agreed with the requesters' offices, we pledged that businesses' responses would be kept confidential. A sample questionnaire showing aggregate responses and percentages appears in appendix II. We calculated sampling errors for estimates from this survey at the 95-percent confidence level. This means the chances are about 19 out of 20 that the actual percentage being estimated falls within the range covered by our estimate, plus or minus the sampling error. Sampling errors for estimates discussed in this report are shown in table I.2. Sampling error (percentage points) We weighted the data to account for different sampling rates and varying response rates among the strata. Therefore, our data reflect national estimates for businesses with more than 100 employees and are based on the assumption that the nonrespondents are similar to the respondents. To obtain more detailed information on dispute resolution policies, we then telephoned the 132 respondents that reported using arbitration to resolve discrimination complaints brought by workers not covered by a collective bargaining agreement. As shown in table I.3, we eventually received and analyzed 26 policies. The Congress has asked the U.S. General Accounting Office (GAO) to conduct a study of employers' personnel policies, including arbitration, for resolving disputes that arise under federal equal employment statutes for employees not covered under collective bargaining agreements. These disputes arise from allegations of discrimination because of race, sex, religion, country of origin, age, or disability. 1. If yes, in responding to the following questions, please answer only for this establishment, that is, the corporate level of your organization. As part of our study, we are sending this questionnaire to a random sample of business establishments to collect information on the policies and practices they use to resolve employment discrimination disputes. This questionnaire should take about 15 minutes to complete. Most of the questions can be answered quickly and easily by checking boxes. If no, please respond only for this establishment even if it is part of a larger organization. 2. We will keep your responses to the questionnaire strictly confidential. Only those responsible for the analysis of the survey data will know how you have responded. When GAO reports the results of this survey, no questionnaire response will be attributed to any specific establishment. Your responses will be combined with those of other respondents and reported in the aggregate. About how many employees (full-time and part-time) does this business establishment currently employ? (Enter number)(n=1365) - 100-499 - 500-999 - 1000+ - 13.0% 63.5% 10.5% 13.0% 3. Are the employees at this business establishment covered or not covered by collective bargaining agreements? (Check one)(n=1496) For the purposes of this survey, we would like you to respond for this business establishment alone, even if it is part of a larger organization.If this establishment is a corporate headquarters, please respond only for the corporate headquarters level of the organization. If you have any questions about this questionnaire, please call Mr. Bob Sampson collect at (202) 512-7251. Thank you for your help. About what proportion of employees at this establishment are NOT covered by a collective bargaining agreement? (Enter percentage) 7. For the remainder of the questionnaire, please consider your employee discrimination complaint resolution policies and practices as they relate to only those employees who are NOT covered by a collective bargaining agreement. 2. 1.0% Only those in certain positions or certain 8. 9. For those employees who were hired before that date, does this policy begin to apply to them when their status changes (for example, promotion, transfer, position change)?(Check one)(n=5) Question in this section are about negotiation. By "negotiation," we mean a discussion of a complaint by the parties and, if appropriate, their counsel with the goal of setting the terms of a resolution. Negotiation does not require involvement of a neutral party. Negotiation could include an "open door" policy. 1. 65.6% Yes 2. 34.4% No 10. Does this establishment have a policy to use negotiation as a method to resolve discrimination complaints that arise under federal equal employment status? (Check One)(n=1448) Is this establishment considering instituting a policy to use negotiation to resolve discrimination complaints? (Check one)(n=301) 15. For this section, our questions are about fact finding. By "fact finding," we mean having a neutral party (either someone within the company or external to the company) investigate a complaint and develop findings that may form the basis for resolution. This would not include formal complaint investigations by government agencies, such as the Equal Employment Opportunity Commission (EEOC). Does this establishment have a policy to use fact finding as a method to resolve discrimination complaints that arise under federal equal employment statutes? (Check one)(n=1446) 16. Is the establishment considering instituting a policy to use fact finding to resolve discrimination complaints? (Check one)(n=241) 17. For this section, our questions are about peer review. By "peer review," we mean a panel of employees or employees and managers working together to resolve employment complaints. Does this policy apply to all those not covered by a collective bargaining agreement or only to those in certain positions or located in certain divisions or departments?(Check one)(n=1199) Does this establishment have a policy to use peer review as a method to resolve discrimination complaints?(Check one)(n=1447) 1. 99.2% All 2. 80.1% No 2. 0.8% Only those in certain positions or certain 18. Is this establishment considering instituting a policy to use peer review to resolve discrimination complaints?(Check one)(n=1136) Does this policy apply to only those who were hired on or after a certain date?(Check one) (n=1196) Does this policy apply to all those not covered by a collective bargaining agreement or only to those in certain positions or located in certain divisions or departments?(Check one)(n=305) 23. Questions in this section are about internal mediation. By "internal medication," we mean a process for resolving disputes in which a neutral party--trained in mediation techniques--from within the company helps the disputing parties negotiate a mutually acceptable agreement. This process does not involve an imposed solution. Does this policy apply to only those who were hired (n=305) on or after a certain date?(Check one) Does this establishment have a policy to use internal mediation as a method to resolve these discrimination complaints?(Check one)(n=1448) For those employees who were hired before that date, does this policy begin to apply to them when their status changes (for example, promotion, transfer, position change)?(Check one)(n=4) 24. Is this establishment considering instituting a policy to use internal mediation to resolve discrimination complaints?(Check one)(n=908) 2. 0% No 25. Is peer review voluntary for everyone it applies to, voluntary for some that it applies to, or mandatory for everyone that it applies to?(Check one)(n=300) Does this policy apply to all those not covered by a collective bargaining agreement or only to those in certain positions or located in certain division of department?(Check one)(n=524) 1. 69.2% Voluntary for all 1. 99.1% All 2. 5.0% Voluntary for some 2. 0.9% Only those in certain positions or certain 3. 25.7% Mandatory for all 26. For those employees who were hired before that date, does this policy begin to apply to them when their status changes (for example, promotion, transfer, position change)?(Check one)(n=5) 30. Is this establishment considering instituting a policy to use external mediation to resolve discrimination complaints?(check one)(n=1336) 2. 13.7% No 31. Is internal mediation voluntary for everyone it applies to, voluntary for some that applies to, or mandatory for everyone that it applies to?(Check one) (n=520) Does this policy apply to all those not covered by a collective bargaining agreement or only to those in certain positions or located in certain divisions or departments?(check one)(n=101) 1. 84.6% All 1. 75.0% Voluntary for all 2. 15.4% Only those in certain positions or certain 2. 1.9% Voluntary for some 3. 23.1% Mandatory for all 32. For this section, our questions are about external mediation. By "external mediation," we mean a process for resolving disputes in which a neutral party--trained in medication techniques--external to the company helps the disputing parties negotiate a mutually acceptable agreement. This process does not involve an imposed solution. 33. For those employees who were hired before that date, does this policy begin to apply to them when their status changes (for example, promotion, transfer, position change)?(check one)(n=4) Does this establishment have a policy to use external mediation as a method to resolve discrimination complaints?(check one)(n=1448) 34. 39. Questions in this section are about arbitration. By "arbitration," we mean having a neutral party (an arbitrator external to the company) decide how the complaint is to be resolved. The arbitrator's decision is usually binding on both parties. Does this establishment have a policy to use arbitration as a method to resolve discrimination complaints?(check one)(n=1448) 40. Is this policy to use arbitration voluntary for everyone it applies to, voluntary for some that it applies to, or mandatory for everyone that it applies to?(check one)(n=126) Is this establishment considering instituting a policy to use arbitration to resolve discrimination complaints?(check one)(n=1307) 41. Does this business establishment use any other dispute resolution methods to resolve discrimination complaints?(check one)(n=1344) Does this policy apply to all those not covered by a collective bargaining agreement or only to those in certain positions or located in certain divisions or departments?(check one)(n=130) Of the discrimination complaints resolved in the pas year, about what proportion of these complaints were ultimately resolved by each method listed below?(Enter percentage) (n=846) (n=846) (n=850) (n=847) (n=851) (n=851) (n=847) Listed below are various methods this establishment may have used during the resolution process for those employees who are not covered by collective bargaining agreements. Once again, consider those disputes resolved in the part year.In about what proportion of these cases were each of these methods used during the resolution process? (Check one for each method) Cases in which the method was used (n=673) 16.8% 12.8% 10.7% 6.8% 12.5% (n=769) (n=521) (n=577) (n=496) (n=492) (n=381) Thank you for participating in this study. methods or any questions asked in the questionnaire, please write them in the space provided below. If you have any additional comments about employment dispute resolution (n=178) Please provide the following information about the person we should call if additional information or clarification is needed. Name of person to call: ) HEHS/SL/7-94 (205272) In addition to those named above, the following individuals made important contributions to this report: Susan Poling provided legal advice and analyzed the policies we received; Catherine Baltzell reviewed the technical sections of the report and wrote the technical appendix; Susan Lawes designed and pretested the survey questionnaire; Joel Grossman designed the telephone survey of employers who reported using arbitration; Patricia Bundy managed the questionnaire responses and the telephone survey; Joan Vogel analyzed the questionnaire responses; and Linda Stokes assisted with the telephone survey. The first copy of each GAO report and testimony is free. Additional copies are $2 each. Orders should be sent to the following address, accompanied by a check or money order made out to the Superintendent of Documents, when necessary. Orders for 100 or more copies to be mailed to a single address are discounted 25 percent. U.S. General Accounting Office P.O. Box 6015 Gaithersburg, MD 20884-6015 Room 1100 700 4th St. NW (corner of 4th and G Sts. NW) U.S. General Accounting Office Washington, DC Orders may also be placed by calling (202) 512-6000 or by using fax number (301) 258-4066, or TDD (301) 413-0006. Each day, GAO issues a list of newly available reports and testimony. To receive facsimile copies of the daily list or any list from the past 30 days, please call (301) 258-4097 using a touchtone phone. A recorded menu will provide information on how to obtain these lists.
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Pursuant to a congressional request, GAO reviewed the: (1) extent to which private-sector employers use alternative dispute resolution (ADR) approaches in resolving discrimination complaints of employees not covered by collective bargaining agreements; and (2) fairness of private-sector employers' arbitration policies. GAO found that: (1) in fiscal year 1994, the Equal Employment Opportunity Commission (EEOC) received over 90,000 discrimination complaints from employees; (2) ADR approaches include negotiation, fact finding, peer review, internal mediation, external mediation, and arbitration; (3) almost all employers with more than 100 employees use one or more ADR approaches to resolve discrimination complaints; (4) some employers' arbitration policies do not meet the fairness standards proposed by the Commission on the Future of Worker-Management Relations; (5) almost 40 percent of private-sector employers use a trained mediator from within the company to help resolve disputes, and only 10 percent of these employers use arbitration; (6) firms that have some workers covered by collective bargaining agreements are more likely to use arbitration; and (7) arbitration is usually the final step in a grievance policy, which includes other ADR approaches.
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Dramatic increases in computer interconnectivity, especially in the use of the Internet, are revolutionizing the way our government, our nation, and much of the world communicate and conduct business. The benefits have been enormous. Vast amounts of information are now literally at our fingertips, facilitating research on virtually every topic imaginable; financial and other business transactions can be executed almost instantaneously, often on a 24-hour-a-day basis; and electronic mail, Internet web sites, and computer bulletin boards allow us to communicate quickly and easily with a virtually unlimited number of individuals and groups. In addition to such benefits, however, this widespread interconnectivity poses significant risks to our computer systems and, more important, to the critical operations and infrastructures they support. For example, telecommunications, power distribution, water supply, public health services, and national defense--including the military's warfighting capability---law enforcement, government services, and emergency services all depend on the security of their computer operations. The speed and accessibility that create the enormous benefits of the computer age likewise, if not properly controlled, allow individuals and organizations to inexpensively eavesdrop on or interfere with these operations from remote locations for mischievous or malicious purposes, including fraud or sabotage. Reports of attacks and disruptions abound. The March 2001 report of the "Computer Crime and Security Survey," conducted by the Computer Security Institute and the Federal Bureau of Investigation's San Francisco Computer Intrusion Squad, showed that 85 percent of respondents (primarily large corporations and government agencies) had detected computer security breaches within the last 12 months. Disruptions caused by virus attacks, such as the ILOVEYOU virus in May 2000 and 1999's Melissa virus, have illustrated the potential for damage that such attacks hold. A sampling of reports summarized in Daily Reports by the FBI's National Infrastructure Protection Center during two recent weeks in March illustrates the problem further: A hacker group by the name of "PoizonB0x" defaced numerous Government officials are increasingly concerned about attacks from individuals and groups with malicious intent, such as crime, terrorism, foreign intelligence gathering, and acts of war. According to the FBI, terrorists, transnational criminals, and intelligence services are quickly becoming aware of and using information exploitation tools such as computer viruses, Trojan horses, worms, logic bombs, and eavesdropping sniffers that can destroy, intercept, or degrade the integrity of and deny access to data. As greater amounts of money are transferred through computer systems, as more sensitive economic and commercial information is exchanged electronically, and as the nation's defense and intelligence communities increasingly rely on commercially available information technology, the likelihood that information attacks will threaten vital national interests increases. In addition, the disgruntled organization insider is a significant threat, since such individuals often have knowledge that allows them to gain unrestricted access and inflict damage or steal assets without a great deal of knowledge about computer intrusions. Since 1996, our analyses of information security at major federal agencies have shown that federal systems were not being adequately protected from these threats, even though these systems process, store, and transmit enormous amounts of sensitive data and are indispensable to many federal agency operations. In September 1996, we reported that serious weaknesses had been found at 10 of the 15 largest federal agencies, and we concluded that poor information security was a widespread federal problem with potentially devastating consequences. In 1998 and in 2000, we analyzed audit results for 24 of the largest federal agencies: both analyses found that all 24 agencies had significant information security weaknesses. As a result of these analyses, we have identified information security as a high-risk issue in reports to the Congress since 1997--most recently in January 2001. Evaluations published since July 1999 show that federal computer systems are riddled with weaknesses that continue to put critical operations and assets at risk. Significant weaknesses have been identified in each of the 24 agencies covered by our review. These weaknesses covered all six major areas of general controls--the policies, procedures, and technical controls that apply to all or a large segment of an entity's information systems and help ensure their proper operation. These six areas are (1) security program management, which provides the framework for ensuring that risks are understood and that effective controls are selected and implemented, (2) access controls, which ensure that only authorized individuals can read, alter, or delete data, (3) software development and change controls, which ensure that only authorized software programs are implemented, (4) segregation of duties, which reduces the risk that one individual can independently perform inappropriate actions without detection, (5) operating systems controls, which protect sensitive programs that support multiple applications from tampering and misuse, and (6) service continuity, which ensures that computer-dependent operations experience no significant disruptions. Weaknesses in these areas placed a broad range of critical operations and assets at risk for fraud, misuse, and disruption. In addition, they placed an enormous amount of highly sensitive data--much of it pertaining to individual taxpayers and beneficiaries--at risk of inappropriate disclosure. The scope of audit work performed has continued to expand to more fully cover all six major areas of general controls at each agency. Not surprisingly, this has led to the identification of additional areas of weakness at some agencies. While these increases in reported weaknesses are disturbing, they do not necessarily mean that information security at federal agencies is getting worse. They more likely indicate that information security weaknesses are becoming more fully understood--an important step toward addressing the overall problem. Nevertheless, our analysis leaves no doubt that serious, pervasive weaknesses persist. As auditors increase their proficiency and the body of audit evidence expands, it is probable that additional significant deficiencies will be identified. Most of the audits covered in our analysis were performed as part of financial statement audits. At some agencies with primarily financial missions, such as the Department of the Treasury and the Social Security Administration, these audits covered the bulk of mission-related operations. However, at agencies whose missions are primarily nonfinancial, such as the Departments of Defense and Justice, the audits may provide a less complete picture of the agency's overall security posture because the audit objectives focused on the financial statements and did not include evaluations of systems supporting nonfinancial operations. In response to congressional interest, during fiscal years 1999 and 2000, we expanded our audit focus to cover a wider range of nonfinancial operations. We expect this trend to continue. To fully understand the significance of the weaknesses we identified, it is necessary to link them to the risks they present to federal operations and assets. Virtually all federal operations are supported by automated systems and electronic data, and agencies would find it difficult, if not impossible, to carry out their missions and account for their resources without these information assets. Hence, the degree of risk caused by security weaknesses is extremely high. The weaknesses identified place a broad array of federal operations and assets at risk of fraud, misuse, and disruption. For example, weaknesses at the Department of the Treasury increase the risk of fraud associated with billions of dollars of federal payments and collections, and weaknesses at the Department of Defense increase the vulnerability of various military operations. Further, information security weaknesses place enormous amounts of confidential data, ranging from personal and tax data to proprietary business information, at risk of inappropriate disclosure. For example, in 1999, a Social Security Administration employee pled guilty to unauthorized access to the administration's systems. The related investigation determined that the employee had made many unauthorized queries, including obtaining earnings information for members of the local business community. Such risks, if inadequately addressed, may limit government's ability to take advantage of new technology and improve federal services through electronic means. For example, this past February, we reported on serious control weaknesses in the Internal Revenue Service's (IRS) electronic filing system, noting that failure to maintain adequate security could erode public confidence in electronic filing, jeopardize the Service's ability to meet its goal of 80 percent of returns being filed electronically by 2007, and deprive it of financial and other anticipated benefits. Specifically, we found that, during the 2000 tax filing season, IRS did not adequately secure access to its electronic filing systems or to the electronically transmitted tax return data those systems contained. We demonstrated that unauthorized individuals, both internal and external to IRS, could have gained access to these systems and viewed, copied, modified, or deleted taxpayer data. In addition, the weaknesses we identified jeopardized the security of the sensitive business, financial, and taxpayer data on other critical IRS systems that were connected to the electonic filing systems. The IRS Commissioner has stated that, in response to recommendations we made, IRS has completed corrective action for all of the critical access control vulnerabilities we identified and that, as a result, the electronic filing systems now satisfactorily meet critical federal security requirements to protect the taxpayer. As part of our audit follow up activities, we plan to evaluate the effectiveness of IRS's corrective actions. I would now like to describe the risks associated with specific recent audit findings at agencies of particular interest to this subcommittee. Information technology is essential to the Department of Energy's (DOE) scientific research mission, which is supported by a large and diverse set of computing systems, including very powerful supercomputers located at DOE laboratories across the nation. In June 2000, we reported that computer systems at DOE laboratories supporting civilian research had become a popular target of the hacker community, with the result that the threat of attacks had grown dramatically in recent years. Further, because of security breaches, several laboratories had been forced to temporarily disconnect their networks from the Internet, disrupting the laboratories' ability to do scientific research for up to a full week on at least two occasions. In February 2001, the DOE's Inspector General reported network vulnerabilities and access control weaknesses in unclassified systems that increased the risk that malicious destruction or alteration of data or the processing of unauthorized operations could occur. In February, the Department of Health and Human Services' Inspector General again reported serious control weaknesses affecting the integrity, confidentiality, and availability of data maintained by the department.Most significant were weaknesses associated with the department's Health Care Financing Administration, which was responsible, during fiscal year 2000, for processing more than $200 billion in medicare expenditures. HCFA relies on extensive data processing operations at its central office to maintain administrative data, such as Medicare enrollment, eligibility, and paid claims data, and to process all payments for managed care. HCFA also relies on Medicare contractors, who use multiple shared systems to collect and process personal health, financial, and medical data associated with Medicare claims. Significant weaknesses were also reported for the Food and Drug Administration and the department's Division of Financial Operations. The Environmental Protection Agency (EPA) relies on its computer systems to collect and maintain a wealth of environmental data under various statutory and regulatory requirements. EPA makes much of its information available to the public through Internet access in order to encourage public awareness of and participation in managing human health and environmental risks and to meet statutory requirements. EPA also maintains confidential data from private businesses, data of varying sensitivity on human health and environmental risks, financial and contract data, and personal information on its employees. Consequently, EPA's information security program must accommodate the often competing goals of making much of its environmental information widely accessible while maintaining data integrity, availability, and appropriate confidentiality. In July 2000, we reported serious and pervasive problems that essentially rendered EPA's agencywide information security program ineffective. Our tests of computer-based controls concluded that the computer operating systems and agencywide computer network that support most of EPA's mission-related and financial operations were riddled with security weaknesses. In addition, EPA's records showed that its vulnerabilities had been exploited by both external and internal sources, as illustrated by the following examples. In June 1998, EPA was notified that one of its computers was used by a remote intruder as a means of gaining unauthorized access to a state university's computers. The problem report stated that vendor- supplied software updates were available to correct the vulnerability, but EPA had not installed them. In July 1999, a chat room was set up on a network server at one of EPA's regional financial management centers for hackers to post notes and, in effect, conduct on-line electronic conversations. In February 1999, a sophisticated penetration affected three of EPA's computers. EPA was unaware of this penetration until notified by the FBI. In June 1999, an intruder penetrated an Internet web server at EPA's National Computer Center by exploiting a control weakness specifically identified by EPA about 3 years earlier during a previous penetration of a different system. The vulnerability continued to exist because EPA had not implemented vendor software updates (patches), some of which had been available since 1996. - On two occasions during 1998, extraordinarily large volumes of network traffic--synonymous with a commonly used denial-of-service hacker technique--affected computers at one of EPA's field offices. In one case, an Internet user significantly slowed EPA's network activity and interrupted network service for over 450 EPA computer users. In a second case, an intruder used EPA computers to successfully launch a denial-of-service attack against an Internet service provider. In September 1999, an individual gained access to an EPA computer and altered the computer's access controls, thereby blocking authorized EPA employees from accessing files. This individual was no longer officially affiliated with EPA at the time of the intrusion, indicating a serious weakness in EPA's process for applying changes in personnel status to computer accounts. Of particular concern was that many of the most serious weaknesses we identified--those related to inadequate protection from intrusions through the Internet and poor security planning--had been previously reported to EPA management in 1997 by EPA's inspector general. The negative effects of such weaknesses are illustrated by EPA's own records, which show several serious computer security incidents since early 1998 that have resulted in damage and disruption to agency operations. As a result of these weaknesses, EPA's computer systems and the operations that rely on them were highly vulnerable to tampering, disruption, and misuse from both internal and external sources. EPA management has developed and begun to implement a detailed action plan to address reported weaknesses. However, the agency does not expect to complete these corrective actions until 2002 and continued to report a material weakness in this area in its fiscal year 2000 report on internal controls under the Federal Managers' Financial Integrity Act of 1982. The Department of Commerce is responsible for systems that the department has designated as critical for national security, national economic security, and public health and safety. Its member bureaus include the National Oceanic and Atmospheric Administration, the Patent and Trademark Office, the Bureau of the Census, and the International Trade Administration. During December 2000 and January 2001, Commerce 's inspector general reported significant computer security weaknesses in several of the department's bureaus and, last month, reported multiple material information security weaknesses affecting the department's ability to produce accurate data for financial statements. These included a lack of formal, current security plans and weaknesses in controls over access to systems and over software development and changes. At the request of the full committee, we are currently evaluating information security controls at selected other Commerce bureaus. The nature of agency operations and their related risks vary. However, striking similarities remain in the specific types of general control weaknesses reported and in their serious negative impact on an agency's ability to ensure the integrity, availability, and appropriate confidentiality of its computerized operations--and therefore on what corrective actions they must take. The sections that follow describe the six areas of general controls and the specific weaknesses that were most widespread at the agencies covered by our analysis. Each organization needs a set of management procedures and an organizational framework for identifying and assessing risks, deciding what policies and controls are needed, periodically evaluating the effectiveness of these policies and controls, and acting to address any identified weaknesses. These are the fundamental activities that allow an organization to manage its information security risks cost effectively, rather than react to individual problems in an ad-hoc manner only after a violation has been detected or an audit finding reported. Despite the importance of this aspect of an information security program, poor security program management continues to be a widespread problem. Virtually all of the agencies for which this aspect of security was reviewed had deficiencies. Specifically, many had not developed security plans for major systems based on risk, had not documented security policies, and had not implemented a program for testing and evaluating the effectiveness of the controls they relied on. As a result, agencies were not fully aware of the information security risks to their operations, had accepted an unknown level of risk by default rather than consciously deciding what level of risk was tolerable, had a false sense of security because they were relying on controls that were not effective, and could not make informed judgments as to whether they were spending too little or too much of their resources on security. With the October 2000 enactment of the government information security reform provisions of the fiscal year 2001 National Defense Authorization Act, agencies are now required by law to adopt the practices described above, including annual management evaluations of agency security. Access controls limit or detect inappropriate access to computer resources (data, equipment, and facilities), thereby protecting these resources against unauthorized modification, loss, and disclosure. Access controls include physical protections--such as gates and guards--as well as logical controls, which are controls built into software that require users to authenticate themselves through the use of secret passwords or other identifiers and limit the files and other resources that an authenticated user can access and the actions that he or she can execute. Without adequate access controls, unauthorized individuals, including outside intruders and terminated employees, can surreptitiously read and copy sensitive data and make undetected changes or deletions for malicious purposes or personal gain. Even authorized users can unintentionally modify or delete data or execute changes that are outside their span of authority. For access controls to be effective, they must be properly implemented and maintained. First, an organization must analyze the responsibilities of individual computer users to determine what type of access (e.g., read, modify, delete) they need to fulfill their responsibilities. Then, specific control techniques, such as specialized access control software, must be implemented to restrict access to these authorized functions. Such software can be used to limit a user's activities associated with specific systems or files and to keep records of individual users' actions on the computer. Finally, access authorizations and related controls must be maintained and adjusted on an ongoing basis to accommodate new and terminated employees, and changes in users' responsibilities and related access needs. Significant access control weaknesses were reported for all of the agencies covered by our analysis, as evidenced by the following examples: Accounts and passwords for individuals no longer associated with the agency were not deleted or disabled; neither were they adjusted for those whose responsibilities, and thus need to access certain files, changed. At one agency, as a result, former employees and contractors could and in many cases did still read, modify, copy, or delete data. At this same agency, even after 160 days of inactivity, 7,500 out of 30,000 users' accounts had not been deactivated. Users were not required to periodically change their passwords. Managers did not precisely identify and document access needs for individual users or groups of users. Instead, they provided overly broad access privileges to very large groups of users. As a result, far more individuals than necessary had the ability to browse and, sometimes, modify or delete sensitive or critical information. At one agency, all 1,100 users were granted access to sensitive system directories and settings. At another agency, 20,000 users had been provided access to one system without written authorization. Use of default, easily guessed, and unencrypted passwords significantly increased the risk of unauthorized access. During testing at one agency, we were able to guess many passwords based on our knowledge of commonly used passwords and were able to observe computer users' keying in passwords and then use those passwords to obtain "high level" system administration privileges. Software access controls were improperly implemented, resulting in unintended access or gaps in access-control coverage. At one agency data center, all users, including programmers and computer operators, had the capability to read sensitive production data, increasing the risk that such sensitive information could be disclosed to unauthorized individuals. Also at this agency, certain users had the unrestricted ability to transfer system files across the network, increasing the risk that unauthorized individuals could gain access to the sensitive data or programs. To illustrate the risks associated with poor authentication and access controls, in recent years we have begun to incorporate network vulnerability testing into our audits of information security. Such tests involve attempting--with agency cooperation--to gain unauthorized access to sensitive files and data by searching for ways to circumvent existing controls, often from remote locations. Our auditors have been successful, in almost every test, in readily gaining unauthorized access that would allow intruders to read, modify, or delete data for whatever purpose they had in mind. Further, user activity was inadequately monitored. At one agency, much of the activity associated with our intrusion testing was not recognized and recorded, and the problem reports that were recorded did not recognize the magnitude of our activity or the severity of the security breaches we initiated. Application software development and change controls prevent unauthorized software programs or modifications to programs from being implemented. Key aspects of such controls are ensuring that (1) software changes are properly authorized by the managers responsible for the agency program or operations that the application supports, (2) new and modified software programs are tested and approved prior to their implementation, and (3) approved software programs are maintained in carefully controlled libraries to protect them from unauthorized changes and to ensure that different versions are not misidentified. Such controls can prevent both errors in software programming as well as malicious efforts to insert unauthorized computer program code. Without adequate controls, incompletely tested or unapproved software can result in erroneous data processing that, depending on the application, could lead to losses or faulty outcomes. In addition, individuals could surreptitiously modify software programs to include processing steps or features that could later be exploited for personal gain or sabotage. Weaknesses in software program change controls were identified for almost all of the agencies where such controls were evaluated. Examples of weaknesses in this area included the following: Testing procedures were undisciplined and did not ensure that implemented software operated as intended. For example, at one agency, senior officials authorized some systems for processing without testing access controls to ensure that they had been implemented and were operating effectively. At another, documentation was not retained to demonstrate user testing and acceptance. Implementation procedures did not ensure that only authorized software was used. In particular, procedures did not ensure that emergency changes were subsequently tested and formally approved for continued use and that implementation of "locally developed" (unauthorized) software programs was prevented or detected. Agencies' policies and procedures frequently did not address the maintenance and protection of program libraries. Segregation of duties refers to the policies, procedures, and organizational structure that help ensure that one individual cannot independently control all key aspects of a process or computer-related operation and thereby conduct unauthorized actions or gain unauthorized access to assets or records without detection. For example, one computer programmer should not be allowed to independently write, test, and approve program changes. Although segregation of duties alone will not ensure that only authorized activities occur, inadequate segregation of duties increases the risk that erroneous or fraudulent transactions could be processed, improper program changes implemented, and computer resources damaged or destroyed. For example, an individual who was independently responsible for authorizing, processing, and reviewing payroll transactions could inappropriately increase payments to selected individuals without detection; or a computer programmer responsible for authorizing, writing, testing, and distributing program modifications could either inadvertently or deliberately implement computer programs that did not process transactions in accordance with management's policies or that included malicious code. Controls to ensure appropriate segregation of duties consist mainly of documenting, communicating, and enforcing policies on group and individual responsibilities. Enforcement can be accomplished by a combination of physical and logical access controls and by effective supervisory review. Segregation of duties weaknesses were identified at most of the agencies covered by our analysis. Common problems involved computer programmers and operators who were authorized to perform a variety of duties, thus providing them the ability to independently modify, circumvent, and disable system security features. For example, at one data center, a single individual could independently develop, test, review, and approve software changes for implementation. Segregation of duties problems were also identified related to transaction processing. For example, at one agency, 11 staff members involved with procurement had system access privileges that allowed them to individually request, approve, and record the receipt of purchased items. In addition, 9 of the 11 had system access privileges that allowed them to edit the vendor file, which could result in fictitious vendors being added to the file for fraudulent purposes. For fiscal year 1999, we identified 60 purchases, totaling about $300,000, that were requested, approved, and receipt-recorded by the same individual. Operating system software controls limit and monitor access to the powerful programs and sensitive files associated with the computer systems operation. Generally, one set of system software is used to support and control a variety of applications that may run on the same computer hardware. System software helps control and coordinate the input, processing, output, and data storage associated with all of the applications that run on the system. Some system software can change data and program code on files without leaving an audit trail or can be used to modify or delete audit trails. Examples of system software include the operating system, system utilities, program library systems, file maintenance software, security software, data communications systems, and database management systems. Controls over access to and modification of system software are essential in providing reasonable assurance that operating system-based security controls are not compromised and that the system will not be impaired. If controls in this area are inadequate, unauthorized individuals might use system software to circumvent security controls to read, modify, or delete critical or sensitive information and programs. Also, authorized users of the system may gain unauthorized privileges to conduct unauthorized actions or to circumvent edits and other controls built into application programs. Such weaknesses seriously diminish the reliability of information produced by all of the applications supported by the computer system and increase the risk of fraud, sabotage, and inappropriate disclosure. Further, system software programmers are often more technically proficient than other data processing personnel and, thus, have a greater ability to perform unauthorized actions if controls in this area are weak. The control concerns for system software are similar to the access control issues and software program change control issues discussed earlier. However, because of the high level of risk associated with system software activities, most entities have a separate set of control procedures that apply to them. Weaknesses were identified at each of the agencies for which operating system controls were reviewed. A common type of problem reported was insufficiently restricted access that made it possible for knowledgeable individuals to disable or circumvent controls in a variety of ways. For example, at one agency, system support personnel had the ability to change data in the system audit log. As a result, they could have engaged in a wide array of inappropriate and unauthorized activity and could have subsequently deleted related segments of the audit log, thus diminishing the likelihood that their actions would be detected. Further, pervasive vulnerabilities in network configuration exposed agency systems to attack. These vulnerabilities stemmed from agencies' failure to (1) install and maintain effective perimeter security, such as firewalls and screening routers, (2) implement current software patches, and (3) protect against commonly known methods of attack. Finally, service continuity controls ensure that when unexpected events occur, critical operations will continue without undue interruption and that crucial, sensitive data are protected. For this reason, an agency should have (1) procedures in place to protect information resources and minimize the risk of unplanned interruptions and (2) a plan to recover critical operations, should interruptions occur. These plans should consider the activities performed at general support facilities, such as data processing centers, as well as the activities performed by users of specific applications. To determine whether recovery plans will work as intended, they should be tested periodically in disaster simulation exercises. Losing the capability to process, retrieve, and protect information maintained electronically can significantly affect an agency's ability to accomplish its mission. If controls are inadequate, even relatively minor interruptions can result in lost or incorrectly processed data, which can cause financial losses, expensive recovery efforts, and inaccurate or incomplete financial or management information. Controls to ensure service continuity should address the entire range of potential disruptions. These may include relatively minor interruptions, such as temporary power failures or accidental loss or erasure of files, as well as major disasters, such as fires or natural disasters that would require reestablishing operations at a remote location. Service continuity controls include (1) taking steps, such as routinely making backup copies of files, to prevent and minimize potential damage and interruption, (2) developing and documenting a comprehensive contingency plan, and (3) periodically testing the contingency plan and adjusting it as appropriate. Service continuity control weaknesses were reported for most of the agencies covered by our analysis. Examples of weaknesses included the following: Plans were incomplete because operations and supporting resources had not been fully analyzed to determine which were the most critical and would need to be resumed as soon as possible should a disruption occur. Disaster recovery plans were not fully tested to identify their weaknesses. At one agency, periodic walkthroughs or unannounced tests of the disaster recovery plan had not been performed. Conducting these types of tests provides a scenario more likely to be encountered in the event of an actual disaster. The audit reports cited in this statement and in our prior information security reports include many recommendations to individual agencies that address specific weaknesses in the areas I have just described. It is each individual agency's responsibility to ensure that these recommendations are implemented. Agencies have taken steps to address problems and many have good remedial efforts underway. However, these efforts will not be fully effective and lasting unless they are supported by a strong agencywide security management framework. Establishing such a management framework requires that agencies take a comprehensive approach that involves both (1) senior agency program managers who understand which aspects of their missions are the most critical and sensitive and (2) technical experts who know the agencies' systems and can suggest appropriate technical security control techniques. We studied the practices of organizations with superior security programs and summarized our findings in a May 1998 executive guide entitled Information Security Management: Learning From Leading Organizations (GAO/AIMD-98-68). Our study found that these organizations managed their information security risks through a cycle of risk management activities that included assessing risks and determining protection needs, selecting and implementing cost-effective policies and controls to meet these needs, promoting awareness of policies and controls and of the risks that prompted their adoption among those responsible for complying with them, and implementing a program of routine tests and examinations for evaluating the effectiveness of policies and related controls and reporting the resulting conclusions to those who can take appropriate corrective action. In addition, a strong, centralized focal point can help ensure that the major elements of the risk management cycle are carried out and serve as a communications link among organizational units. Such coordination is especially important in today's highly networked computing environments. This cycle of risk management activities is depicted below. This cycle of activity, as described in our May 1998 executive guide, is consistent with guidance on information security program management provided to agencies by the Office of Management and Budget (OMB) and by NIST. In addition, the guide has been endorsed by the federal Chief Information Officers (CIO) Council as a useful resource for agency managers. We believe that implementing such a cycle of activity is the key to ensuring that information security risks are adequately considered and addressed on an ongoing basis. While instituting this framework is essential, there are several steps that agencies can take immediately. Specifically, they can (1) increase awareness, (2) ensure that existing controls are operating effectively, (3) ensure that software patches are up-to-date, (4) use automated scanning and testing tools to quickly identify problems, (5) propagate their best practices, and (6) ensure that their most common vulnerabilities are addressed. None of these actions alone will ensure good security. However, they take advantage of readily available information and tools and, thus, do not involve significant new resources. As a result, they are steps that can be made without delay. Due to concerns about the repeated reports of computer security weaknesses at federal agencies, in 2000, the Congress passed government information security reform provisions require agencies to implement the activities I have just described. These provisions were enacted in late 2000 as part of the fiscal year 2001 NationalDefense Authorization Act. In addition to requiring these management improvements, the new provisions require annual evaluations of agency information security programs by both management and agency inspectors general. The results of these reviews, which are initially scheduled to become available in late 2001, will provide a more complete picture of the status of federal information security than currently exists, thereby providing the Congress and OMB an improved means of overseeing agency progress and identifying areas needing improvement. During the last two years, a number of improvement efforts have been initiated. Several agencies have taken significant steps to redesign and strengthen their information security programs; the Federal Chief Information Officers Council has issued a guide for measuring agency progress, which we assisted in developing; and the President issued a National Plan for Information Systems Protection and designated the related goals of computer security and critical infrastructure protection as a priority management objective in his fiscal year 2001 budget. These actions are laudable. However, recent reports and events indicate that they are not keeping pace with the growing threats and that critical operations and assets continue to be highly vulnerable to computer-based attacks. While OMB, the Chief Information Officers Council, and the various federal entities involved in critical infrastructure protection have expanded their efforts, it will be important to maintain the momentum. As we have noted in previous reports and testimonies, there are actions that can be taken on a governmentwide basis to enhance agencies' abilities to implement effective information security. First, it is important that the federal strategy delineate the roles and responsibilities of the numerous entities involved in federal information security and related aspects of critical infrastructure protection. Under current law, OMB is responsible for overseeing and coordinating federal agency security; and NIST, with assistance from the National Security Agency (NSA), is responsible for establishing related standards. In addition, interagency bodies, such as the CIO Council and the entities created under Presidential Decision Directive 63 on critical infrastructure protection are attempting to coordinate agency initiatives. While these organizations have developed fundamentally sound policies and guidance and have undertaken potentially useful initiatives, effective improvements are not taking place, and it is unclear how the activities of these many organizations interrelate, who should be held accountable for their success or failure, and whether they will effectively and efficiently support national goals. Second, more specific guidance to agencies on the controls that they need to implement could help ensure adequate protection. Currently agencies have wide discretion in deciding what computer security controls to implement and the level of rigor with which they enforce these controls. In theory, this is appropriate since, as OMB and NIST guidance states, the level of protection that agencies provide should be commensurate with the risk to agency operations and assets. In essence, one set of specific controls will not be appropriate for all types of systems and data. However, our studies of best practices at leading organizations have shown that more specific guidance is important. In particular, specific mandatory standards for varying risk levels can clarify expectations for information protection, including audit criteria; provide a standard framework for assessing information security risk; and help ensure that shared data are appropriately protected. Implementing such standards for federal agencies would require developing a single set of information classification categories for use by all agencies to define the criticality and sensitivity of the various types of information they maintain. It would also necessitate establishing minimum mandatory requirements for protecting information in each classification category. Third, routine periodic audits, such as those required in the government information security reforms recently enacted, would allow for more meaningful performance measurement. Ensuring effective implementation of agency information security and critical infrastructure protection plans will require monitoring to determine if milestones are being met and testing to determine if policies and controls are operating as intended.
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This testimony discusses GAO's analysis of security audits at federal agencies. The widespread interconnectivity of computers poses significant risks to federal computer systems and the operations and the infrastructures they support. GAO's evaluations show that federal computer systems are riddled with weaknesses that continue to put critical operations and assets at risk. GAO found weaknesses in following six areas: (1) security program management, (2) access controls, (3) software development and change controls, (4) segregation of duties, (5) operating systems controls, and (6) service continuity. Weaknesses in these areas place a broad range of critical operations and assets at risk for fraud, misuse, and disruption. Federal agencies have tried to address these problems, and many have good remedial efforts underway. However, these efforts will not be fully effective and lasting unless they are supported by a strong agencywide security management framework. Establishing such a management framework requires that agencies take a comprehensive approach that involves both (1) senior agency program managers who understand which aspects of their missions are the most critical and sensitive and (2) technical experts who know the agencies' systems and can suggest appropriate technical security control techniques.
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AHRQ and the Office for Civil Rights (OCR) within HHS share responsibility for implementing the Patient Safety Act. AHRQ is responsible for listing PSOs, providing technical assistance to PSOs, implementing and maintaining the NPSD, and analyzing the data submitted to the NPSD. OCR has responsibility for interpreting, implementing, and enforcing the confidentiality protections. To help implement the Patient Safety Act, AHRQ and OCR developed the legislation's implementing regulations, which took effect January 19, 2009. The Patient Safety Act establishes criteria that organizations must meet and required patient safety activities that the organizations must perform after being listed as PSOs. The criteria include an organizational mission to improve patient safety and the quality of health care delivery; use of collected data to provide direct feedback and assistance to providers to minimize patient risk; staff who are qualified to perform analyses on patient safety data; and adequate policies and procedures to ensure that patient safety data are kept confidential. Required PSO activities include activities such as efforts to improve patient safety and the quality of health care delivery. (See app. II for the complete list of criteria and required PSO activities as specified in the Patient Safety Act.) The criteria allow for many types of organizations to apply to AHRQ to be listed as a PSO. These organizations may include public and private entities, for-profit and not- for-profit organizations, and entities that are a component of another organization, such as a hospital association or health system. A PSO must attest for the initial listing period that it will comply with the criteria and that it has policies and procedures in place that will allow it to perform the required activities of a PSO. When reapplying for subsequent 3-year listing periods, a PSO must attest that it is complying with the criteria and that it is in fact performing each of the required activities. The regulations require AHRQ staff to review written PSO applications documenting PSO attestations to each of the statutory criteria and required activities. In the case of certain PSOs that are component organizations, the regulations also require the applicant to complete an additional set of attestations and disclosure statements detailing the relationship between the component and parent organizations. The regulations require that after AHRQ staff review the application materials and related information, the applicant will be listed, conditionally listed, or denied. When a provider elects to use the services of a listed PSO, the Patient Safety Act provides privilege and confidentiality protections for certain types of data regarding patient safety events that providers collect for the purposes of reporting to a PSO. In general, the Patient Safety Act excludes the use of patient safety data in civil suits, such as those involving malpractice claims, and in disciplinary proceedings against a provider. While certain states have laws providing varying levels of privilege and confidentiality protections for patient safety data, the Patient Safety Act provides a minimum level of protection. Regulations implementing the Patient Safety Act address the circumstances under which patient safety data may be disclosed, such as when used in criminal proceedings, authorized by identified providers, and among PSOs or affiliated providers. OCR has the authority to conduct reviews to ensure that PSOs, providers, and other entities are complying with the confidentiality protections provided by the law. OCR also has the authority to investigate complaints alleging that patient safety data has been improperly disclosed and to impose a civil money penalty of up to $11,000 per violation. The Patient Safety Act requires HHS to create and maintain the NPSD as a resource for PSOs, providers, and qualified researchers. The law specifies that the NPSD must have the capacity to accept, aggregate, and analyze non-identifiable patient safety data voluntarily submitted to the NPSD by PSOs, providers, and other entities. Providers may submit non- identifiable data directly to the NPSD, or work with a PSO to submit patient safety data. Neither PSOs nor providers are required by either the Patient Safety Act or regulation to submit data to the NPSD. Figure 1 shows the intended flow of patient safety data and other information among providers, PSOs, and the NPSD. The Patient Safety Act authorizes HHS to develop common formats for reporting patient safety data to the NPSD. According to the Patient Safety Act, these formats may include the necessary data elements to be collected and provide common and consistent definitions and a standardized computer interface for processing the data. While most U.S. hospitals have some type of internal reporting system for collecting data on patient safety events, they often have varying ways of collecting and organizing their data. This variation makes it difficult to accurately compare patient safety events across systems and providers and can be a barrier to developing solutions to improve patient safety. If providers or PSOs choose to submit patient safety data to the NPSD, AHRQ requires that these data be submitted using the common formats, because using the common formats is necessary so that data in the NPSD can be aggregated and analyzed. Aggregation and analysis of data is important for developing the "lessons learned" or "best practices" across different institutions that may help improve patient safety. The Patient Safety Act and its implementing regulations provide additional measures PSOs must follow whether or not they intend to submit the data they collect to the NPSD. The Patient Safety Act regulations require PSOs to collect patient safety data from providers in a standardized manner that permits valid comparisons of similar cases among similar providers, to the extent to which these measures are practical and appropriate. To meet this requirement, the regulation specifies that PSOs must either (1) use the common formats developed by AHRQ when collecting patient safety data from providers, (2) utilize an alternative format that permits valid comparisons among providers, or (3) explain to AHRQ why it would not be practical or appropriate to do so. The Patient Safety Act also requires any data regarding patient safety events that is submitted to the NPSD be non-identifiable. According to the Patient Safety Act, users can access non-identifiable patient safety data only in accordance with the confidentiality protections established by the Patient Safety Act. The Patient Safety Act's regulations provide technical specifications for making patient safety data non-identifiable. Finally, the Patient Safety Act states AHRQ must analyze the data that are submitted to the NPSD and include these analyses in publicly available reports. Specifically, under the Patient Safety Act, AHRQ is required to submit a draft report on strategies to improve patient safety to the IOM within 18 months of the NPSD becoming operational and a final report to Congress 1 year later. The Patient Safety Act requires this report to include effective strategies for reducing medical errors and increasing patient safety, as well any measures AHRQ determines are appropriate to encourage providers to use the strategies, including use in any federally funded programs. In addition, the Patient Safety Act states HHS must use data in the NPSD to analyze national and regional statistics, including trends and patterns of health care errors, and include any information resulting from such analyses in its annual reports on health care quality. AHRQ listed 65 PSOs from November 2008 to July 2009. However, few of the 17 PSOs we randomly selected to interview had entered into contracts or other business agreements with providers to serve as their PSO, and only 3 PSOs reported having begun receiving patient safety data or providing feedback to providers. PSO officials identified several reasons why they have not yet engaged with providers. Some PSOs are still establishing various aspects of their operations; some are waiting for the common formats for collecting patient safety data to be finalized by AHRQ; and some are still engaged in marketing their services and educating providers about the federal confidentiality protections offered by the Patient Safety Act. Although the regulations implementing the Patient Safety Act did not become effective until January 19, 2009, AHRQ began listing PSOs earlier, in November 2008. By July 2009, AHRQ had listed 65 PSOs in 26 states and the District of Columbia. AHRQ officials told us that in listing PSOs they accepted PSOs' attestations that the PSOs met the certification requirements established in the Patient Safety Act--that is, to be a listed PSO, an entity must have policies and procedures in place to perform the required activities of a PSO and will comply with additional criteria for listing. For continued listing beyond the initial period, PSOs must attest that they have contracts with more than one provider and are in fact performing each of the required activities. The 65 PSOs AHRQ had listed represent a wide range of organizations, including some that provided patient safety services for many years prior to being listed as well as new organizations specifically established to function as a PSO under the Patient Safety Act. AHRQ officials told us that the organizations listed as PSOs include consulting firms that have provided patient safety services for a range of providers and specialties, as well as organizations with a focus on patient safety in a specific area such as medical devices, hand hygiene, or pediatric anesthesia. The listed PSOs also include vendors of patient safety reporting software and components of state hospital associations. AHRQ officials told us that the services PSOs deliver to individual providers will likely vary, depending on the specific contractual or other business agreements the PSOs establish with providers. For example, a small hospital may want to contract with a PSO to provide all its internal quality improvement services, while a large hospital may just contract with a PSO to obtain the legal protections under the Patient Safety Act and to contribute data to the NPSD. While officials of 13 of the 17 PSOs we interviewed indicated they provided some patient safety services prior to being listed, all 17 PSOs stated that the services they planned to make available included the collection and analysis of patient safety data, the de- identification of patient safety data for submission to the NPSD, feedback, and patient safety training. While AHRQ has listed 65 PSOs, few PSOs we interviewed have entered into contracts or other business agreements with providers to serve as their PSO. Only 4 of the 17 listed PSOs we interviewed had any contracts or other agreements with providers to serve as their PSO. Furthermore, according to PSO officials, only 3 of these PSOs had begun to receive patient safety data or provide feedback to providers. PSO officials identified several reasons why they had yet to begin working with providers and receiving patient safety data as of July 2009. These reasons include the following: The need to complete the development of various components of their business operations. Some PSO officials we interviewed told us they still need to determine various components of their operations. For example, officials from some PSOs told us they have yet to determine their fee structure for working with providers. Officials from 6 of 17 PSOs we interviewed stated they were or would be contracting with other PSOs to receive services, such as information technology systems support or data security. Nine PSOs reported they had not yet determined whether they would be contracting for some services. In addition, while officials from most of the PSOs we interviewed indicated they planned to submit patient safety data to the NPSD, 4 had not yet determined how they will make data non-identifiable before sending it to the NPSD. The need to obtain AHRQ's final common formats for collecting data on patient safety events. Officials from some PSOs we interviewed indicated they needed the common formats to be finalized by AHRQ before beginning to work with providers. While use of AHRQ's common formats to collect data from providers is not required under the regulations, most PSOs we interviewed plan to use the common formats for collecting data on patient safety events and submitting these data to the NPSD. Officials from 7 of the 17 PSOs we interviewed said they plan to require providers to submit data using the common formats, and 4 PSOs said they will not require them of providers but will either convert the reports they receive to the common formats or adapt their existing reporting system to include the common formats. The need to educate providers about the federal confidentiality protections. Officials from several of the 17 PSOs we interviewed told us they faced challenges in addressing provider concerns related to the scope of the confidentiality protections and that these concerns needed to be addressed before providers would be willing to engage the services of a PSO. Some of these PSO officials described challenges in communicating details of the confidentiality protections. According to AHRQ officials, the rules for when, where, and how patient safety data are protected from disclosure are both complex and interrelated with the privacy rules for protected health information under HIPAA. AHRQ officials acknowledged the need to work with PSOs to clarify the rules governing the confidentiality of patient safety data so PSOs can better communicate these to providers. AHRQ officials indicated they would address these issues in upcoming quarterly conference calls they hold with PSO representatives. (See appendix I for examples of ways established patient safety reporting systems communicate legal protections for providers and the data they submit.) AHRQ is in the process of implementing the NPSD and developing its associated components that are necessary before the NPSD can receive patient safety data--(1) the common formats PSOs and providers will be required to use if submitting patient safety data to the NPSD and (2) a method for making these data non-identifiable. If each of these components is completed on schedule, AHRQ officials expect that the NPSD could begin receiving patient safety data from hospitals in February 2011. AHRQ officials could not provide a time frame for when they expect the NPSD to be able to receive patient safety data from other providers. AHRQ also has preliminary plans for how to allow the NPSD to serve as an interactive resource for providers and PSOs and for how AHRQ will analyze NPSD data to help meet its reporting requirements under the Patient Safety Act. AHRQ is in the process of developing the NPSD, and AHRQ officials expect that the NPSD could begin receiving patient safety data from hospitals by February 2011. Specifically, AHRQ established a 3-year contract with Westat effective September of 2007 to develop the NPSD, which is being set up as a database that AHRQ officials stated is essential for meeting the requirements of the act. AHRQ and Westat officials told us that completion of the NPSD depends on both the development of the common formats that will be used to submit patient safety data to the NPSD and on the development of a method for making the data non- identifiable. If each of these components is completed on schedule, AHRQ officials expect that the NPSD could begin to receive patient safety data from hospitals by February 2011. AHRQ is finalizing the common formats that PSOs and hospitals will be required to use if submitting patient safety data to the NPSD. AHRQ officials expect that the common formats could be available for hospitals to use in submitting data electronically to the NPSD by September 2010. AHRQ began developing the common formats for hospitals in 2005 by reviewing the data collection methods of existing patient safety systems. In 2007, AHRQ contracted with the National Quality Forum (NQF) to assist with the collection and assessment of public comments on a preliminary version of the common formats that was released in August 2008. These common format forms are used to collect information on patient safety events, including information about when and where an event occurred, a description of the event, and patient demographic information. AHRQ issued the common formats for hospitals in paper form in September 2009, and is in the process of making electronic versions available for hospitals and PSOs to use when submitting data to the NPSD. Specifically, AHRQ officials told us that they are in the process of developing technical specifications that private software companies and others can use to develop electronic versions of the common formats. According to AHRQ officials, hospitals and PSOs will need these electronic versions of the common formats in order to submit data to the NPSD. Their current project plan indicates that the technical specifications will be completed by March 2010. AHRQ officials estimate that electronic versions of the common formats could be available to hospitals and PSOs by September 2010. AHRQ officials stated that they expect eventually to develop common formats for providers in other health care settings, such as nursing homes and ambulatory surgical centers. Furthermore, AHRQ officials told us that that they plan on developing future versions of the common formats capable of collecting data from the results of root cause analyses that providers may conduct. However, AHRQ officials were unable to provide an estimate for when the common formats for other providers will be available or when the capability to collect information from root cause analyses will be available. The Patient Safety Act also requires that data submitted to the NPSD be made non-identifiable by removing information that could be used to identify individual patients, providers, or facilities. To help PSOs and providers meet this requirement, AHRQ contracted with the Iowa Foundation for Medical Care (IFMC) to operate a PSO Privacy Protection Center (PPC) that will develop a method for making patient safety data non-identifiable and assist PSOs and providers by removing any identifiable patient or provider information from the data before submission to the NPSD. Current AHRQ and PPC project plans indicate that the PPC should be ready to receive and make patient safety data non- identifiable beginning in September 2010. AHRQ officials told us that this process involves not only removing information from each record that could be used to identify patients, providers, or reporters of patient safety information, but also determining whether identities could be determined from other available information and using appropriate methods to prevent this type of identification from occurring. AHRQ officials told us that PPC officials are working with experts to develop the PPC's method for making data non-identifiable. AHRQ officials stated that their rationale for establishing the PPC was to determine a method for making data non-identifiable, provide a cost savings for PSOs, encourage data submission to the NPSD, and create consistency in the non-identifiable data that are submitted to the NPSD. According to AHRQ officials, the PPC will provide its services to PSOs at no charge and will submit non-identifiable patient safety data on behalf of PSOs to the NPSD. However, PSOs are not required to use the PPC and may choose to make their patient safety data non-identifiable internally or with the help of a contractor of their choice. AHRQ project plans indicate that the PPC will be able to submit data to the NPSD beginning in February 2011, approximately 5 months after the PPC begins receiving data from hospitals. AHRQ officials stated that this time period is necessary, in part, because the PPC needs to begin receiving data before it can determine if its method for rendering data non- identifiable is appropriate or needs to be adjusted. For example, if the PPC receives a sufficient volume of data, then officials expect to be able to submit data on individual patient safety events and have it remain non- identifiable. If the volume of data is too low, however, PPC officials expect to have to aggregate data from individual events so that it remains non- identifiable once submitted to the NPSD, in which case AHRQ officials stated they may delay submission of data to the NPSD until a sufficient volume is received. AHRQ officials noted that it is impossible to determine in advance the volume of data that will be submitted to the PPC due to the voluntary nature of submissions. As a result, the level of detail that will exist in the NPSD data cannot be determined in advance of data being received and processed by the PPC. Figure 2 summarizes key dates in AHRQ's efforts to develop the NPSD and its related components. The Patient Safety Act requires that the NPSD serve as an interactive resource for providers and PSOs, allowing them to conduct their own analyses of patient safety data. To meet this requirement, AHRQ has developed plans to allow providers to query the NPSD to obtain information on patient safety events, including information on the frequencies and trends of such events. AHRQ's contract with Westat to construct the NPSD includes a series of tasks for developing, testing, and implementing this interactive capability of the NPSD. The contract specifies that these interactive capabilities will be available within 12 months of the NPSD beginning to receive patient safety information. Based on AHRQ's estimate that the NPSD may be operational by February 2011, the interactive capabilities of the NPSD could be available by February 2012. However, AHRQ officials indicated that they had not yet determined the specific types of information that will be available to PSOs and providers as this will depend, in part, on the level of detail that is included in the NPSD data after the data are made non-identifiable. The Patient Safety Act also states that HHS must use the information reported into the NPSD to analyze national and regional statistics, including trends and patterns of health care errors, and to identify and issue reports on strategies for reducing medical errors and increasing patient safety after the NPSD becomes operational. To do this, AHRQ has developed preliminary plans for analyzing the data that will be submitted to the NPSD. According to AHRQ officials, these plans specify how the agency will analyze NPSD data to determine trends and patterns, such as the frequency with which certain types of adverse events happen across providers based on the data they may submit to the NPSD. However, AHRQ has yet to develop plans for more detailed analyses of NPSD data that could be useful for identifying strategies to reduce medical errors. Officials explained that these plans will not be developed until the NPSD begins receiving data and they are able to determine the level of detail in the data and what analyses it will support. Despite the potential for standardization provided by the common formats, AHRQ officials have identified important limitations in the types of analyses that can be performed with the data submitted to the NPSD. For example, AHRQ officials explained that because submissions to the NPSD are voluntary, the trends and patterns produced from the NPSD will not be nationally representative and, therefore, any analyses conducted cannot be used to generate data that are generalizable to the entire U.S. population. In addition, officials stated that the results from some analyses may be unreliable because there is no way to control for duplicate entries into the NPSD, which could occur if a provider submits a single patient safety event report to more than one PSO. Finally, AHRQ officials noted that it will be difficult to determine the prevalence or incidence of adverse events in specific populations. They told us that determining prevalence or incidence rates requires information on the total number of people at risk for such events, and that the patient safety data submitted to the NPSD will not include this information. (See appendix I for more information about the ways established patient safety reporting systems analyze data to develop solutions that improve patient safety.) AHRQ is still in the early stages of listing PSOs and developing plans for how it will analyze NPSD data and report on effective strategies for improving patient safety, as required under the Patient Safety Act. As a result, we cannot assess whether, or to what extent, the law has been effective in encouraging providers to voluntarily report data on patient safety events and to facilitate the development and adoption of improvements in patient safety. In addition, because improvements to patient safety depend on the voluntary participation of providers and PSOs, it remains uncertain whether the goals of the Patient Safety Act will be accomplished even after AHRQ completes its implementation. For example, providers will have to decide whether to work with a PSO and the extent to which they will report patient safety data to both the PSO and the NPSD. Whether the process results in specific recommendations for improving patient safety will depend on the volume and quality of the data submitted and on the quality of the analyses conducted by both PSOs and by AHRQ. Finally, if these recommendations are to lead to patient safety improvements, providers must recognize their value and take actions to implement them. The Department of Health and Human Services reviewed a draft of this report and provided technical comments, which we have incorporated as appropriate. We will send copies of this report to the Secretary of Health and Human Services and other interested parties. In addition, the report is available at no charge on the GAO Web site at http://www.gao.gov. If you or your staff have questions about this report, please contact me at (202) 512-7114 or [email protected]. Contact points for our Office of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff members who made key contributions to this report are listed in appendix III. Because the Agency for Healthcare Research and Quality's (AHRQ) efforts to list Patient Safety Organizations and implement the Network of Patient Safety Databases are relatively new but some other patient safety reporting systems are already established, we identified examples of how selected established patient safety reporting systems encourage reporting of patient safety event information by providers and facilitate the development of improvements in patient safety. We judgmentally selected five established patient safety reporting systems from a list of such systems compiled by AHRQ. We selected systems that collected data for learning purposes and that appeared in a literature review we conducted of 45 relevant articles in peer-reviewed, trade, or scholarly publications published since January 2000. After selecting the systems, we conducted structured interviews with representatives of these systems to identify examples of ways that these systems encouraged providers to submit patient safety data for analysis and used the data collected by their systems to help develop improvements in patient safety. The system representatives we interviewed provided common examples that we have grouped into four areas: Practices that encourage providers to learn from patient safety data, rather Communication intended to clearly explain legal protections for providers and the data they submit; Data collection tools intended to standardize the data providers submit; Data analyses that produce actionable feedback. Practices that encourage providers to learn from patient safety data, rather than blame individuals. Representatives from all five patient safety reporting systems we reviewed said their systems encourage providers to learn from patient safety data as a way to improve patient safety, and not blame individuals for an event. According to system representatives, one way they did this was to emphasize the value of the data collected by the system for learning ways to reduce the risk that a certain event will recur. For example, representatives from one system said they created posters to hang in health care facilities from which the system collected patient safety data. Representatives from this system explained that the posters described a patient safety event about which the system received data as well as the solutions the system developed to improve patient safety. Another practice representatives said they used is allowing providers to submit data anonymously. Four out of five system representatives said their systems offered providers a way to submit data anonymously. Communication intended to clearly explain legal protections for providers and the data they submit. Many of the representatives we interviewed from patient safety reporting systems told us that their systems communicate information intended to clearly explain the legal protections afforded providers and the patient safety data they submit. For example, one system in our review provided guidance for providers on how to clearly label data to invoke the confidentiality protections associated with patient safety data under a law that protects data in this system. Representatives from another patient safety reporting system told us that communicating information about available legal protections can be particularly important for systems that collect data from providers in multiple states, because the legal protections for providers and patient safety data vary from state to state. For example, representatives from two patient safety reporting systems with users in multiple states said their systems provided customized legal information for providers based on the state confidentiality laws that applied to each provider's location. A representative from one of these systems also said that the legal information the system offered helped providers understand what types of data to submit and encouraged them to submit it. Data collection tools intended to standardize the data providers submit. Representatives from all five systems told us they had developed tools intended to standardize the data providers submit to their patient safety databases. For some systems these tools include common formats and computer systems. Some of the representatives explained that standardizing the information providers submit helps ensure that patient safety events, especially events involving clinical terms, are classified in the same way. Some representatives also said that if a system did not define clinical terms for providers, providers may define events differently, which can limit the system's ability to analyze submitted patient safety data. Furthermore, the representatives said, standardizing terms increased the value of the data as it is aggregated, as well as any resulting analyses. Representatives from all five systems said the ability to collect and aggregate standardized patient safety data allowed them to identify patterns in patient safety events, which they believed enabled their systems to suggest ways to improve patient safety. Some system representatives said that standardizing the way providers submit patient safety data allowed them to streamline the data collection process for providers. Some representatives said they designed their data collection protocols to allow providers to fulfill additional reporting requirements related to accreditation or quality improvement functions, such as submitting data regarding certain patient safety events to the Joint Commission. Representatives from one system said that their systems did this to make collecting and submitting patient safety data more efficient for providers and thereby increase the likelihood that providers would submit such data to the patient safety reporting system. In another example, one system built a feature into its computer program that allowed providers to transfer data directly from providers' in-house databases to the patient safety data collection system, a data collection method system representatives said accounted for approximately 40 percent of all data received from providers. Data analyses that produce actionable feedback. Representatives from all five patient safety reporting systems told us that their systems analyzed submitted data to develop actionable steps providers could implement to improve patient safety. According to the representatives, their systems aggregated data from provider submissions and used these data for both quantitative analyses, such as trend or frequency analyses, and qualitative analyses, which examine narrative data to determine whether there were any common themes across events. Representatives from all five systems said they used both qualitative and quantitative analyses because neither method alone was completely sufficient to develop improvements to patient safety. For example, one system's representatives said they conducted qualitative analyses such as using a computer program to analyze and group the narrative data providers submitted to learn about the factors that contributed to patient safety events. The same representatives explained that their system also conducted quantitative analyses such as trend analyses on events to see how often they occur. Representatives from all the systems said they used various methods to encourage providers to implement the improvements to patient safety the systems helped develop. Examples of methods they used included sending an e-mail from the system when new content was published on the system's Web site, hosting Web conferences, and publishing analyses in trade or scholarly publications. All the representatives said their systems collaborated with other organizations to increase the likelihood that the improvements they developed were implemented. For example, one system worked with a statewide coalition of organizations in the quality improvement field to encourage providers to implement the patient safety improvements the system developed. In addition to the contact named above, William Simerl, Assistant Director; Eric R. Anderson; Eleanor M. Cambridge; Krister Friday; Kevin Milne; and Andrea E. Richardson made key contributions to this report.
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The Institute of Medicine (IOM) estimated in 1999 that preventable medical errors cause as many as 98,000 deaths a year among hospital patients in the United States. Congress passed the Patient Safety and Quality Improvement Act of 2005 (the Patient Safety Act) to encourage health care providers to voluntarily report information on medical errors and other events--patient safety data--for analysis and to facilitate the development of improvements in patient safety using these data. The Patient Safety Act directed GAO to report on the law's effectiveness. This report describes progress by the Department of Health and Human Services, Agency for Healthcare Research and Quality (AHRQ) to implement the Patient Safety Act by (1) creating a list of Patient Safety Organizations (PSO) so that these entities are authorized under the Patient Safety Act to collect patient safety data from health care providers to develop improvements in patient safety, and (2) implementing the network of patient safety databases (NPSD) to collect and aggregate patient safety data. These actions are important to complete before the law's effectiveness can be evaluated. To do its work, GAO interviewed AHRQ officials and their contractors. GAO also conducted structured interviews with officials from a randomly selected sample of PSOs. AHRQ has made progress listing 65 PSOs as of July 2009. However, at the time of GAO's review, few of the 17 PSOs randomly selected for interviews had entered into contracts to work with providers or had begun to receive patient safety data. PSO officials told GAO that some PSOs were still establishing aspects of their operations; some were waiting for AHRQ to finalize a standardized way for PSOs to collect data from providers; and some PSOs were still engaged in educating providers about the confidentiality protections offered by the Patient Safety Act. AHRQ is in the process of developing the NPSD and its associated components--(1) the common formats PSOs and providers will be required to use when submitting patient safety data to the NPSD and (2) a method for making patient safety data non-identifiable, or removing all information which could be used to identify a patient, provider, or reporter of patient safety information. If each of these components is completed on schedule, AHRQ officials expect that the NPSD could begin receiving patient safety data from hospitals by February 2011. AHRQ officials could not provide a time frame for when they expect the NPSD to be able to receive patient safety data from other providers. AHRQ also has preliminary plans for how to allow the NPSD to serve as an interactive resource for providers and PSOs and for how AHRQ will analyze NPSD data to help meet certain reporting requirements established by the Patient Safety Act. According to AHRQ officials, plans for more detailed analyses that could be useful for identifying strategies to reduce medical errors will be developed once the NPSD begins to receive data.
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Since 1990, we have regularly reported on government operations that we have identified as high risk due to their vulnerability to fraud, waste, abuse, and mismanagement, or the need for transformation to address economy, efficiency, or effectiveness challenges. Our high-risk program-- which is intended to help inform the congressional oversight agenda and to guide efforts of the administration and agencies to improve government performance--has brought much-needed focus to problems impeding effective government and costing billions of dollars. In 1990, we designated 14 high-risk areas. Since then, generally coinciding with the start of each new Congress, we have reported on the status of progress to address previously designated high-risk areas, determined whether any areas could be removed or consolidated, and identified new high-risk areas. Since 1990, a total of 60 different areas have appeared on the High-Risk List, 24 areas have been removed, and 2 areas have been consolidated. On average, high-risk areas that have been removed from the list remained on it for 9 years after they were initially added. Our experience has shown that the key elements needed to make progress in high-risk areas are top-level attention by the administration and agency leaders grounded in the five criteria for removal from the High-Risk List, as well as any needed congressional action. The five criteria for removal that we issued in November 2000 are as follows: Leadership Commitment. The agency demonstrates strong commitment and top leadership support. Capacity. The agency has the capacity (i.e., people and resources) to resolve the risk(s). Action Plan. A corrective action plan exists that defines the root cause and solutions, and provides for substantially completing corrective measures, including steps necessary to implement solutions we recommended. Monitoring. A program has been instituted to monitor and independently validate the effectiveness and sustainability of corrective measures. Demonstrated Progress. The agency is able to demonstrate progress in implementing corrective measures and in resolving the high-risk area. These five criteria form a road map for efforts to improve and ultimately address high-risk issues. Addressing some of the criteria leads to progress, while satisfying all of the criteria is central to removal from the list. In our April 2016 report, we provided additional information on how agencies had made progress addressing high-risk issues. Figure 1 shows the five criteria for removal for a designated high-risk area and examples of actions taken by agencies as cited in that report. Importantly, the actions listed are not "stand alone" efforts taken in isolation from other actions to address high-risk issues. That is, actions taken under one criterion may also be important in meeting other criteria. For example, top leadership can demonstrate its commitment by establishing a corrective action plan including long-term priorities and goals to address the high-risk issue and using data to gauge progress-- actions which are also vital to monitoring criteria. VA officials have expressed their commitment to addressing the concerns that led to the high-risk designation for VA health care. As part of our work for the 2017 high-risk report, we identified actions VA had taken, such as establishing a task force, working groups, and a governance structure for addressing the five areas of concern contributing to the designation: (1) ambiguous policies and inconsistent processes; (2) inadequate oversight and accountability; (3) information technology (IT) challenges; (4) inadequate training for VA staff; and (5) unclear resource needs and allocation priorities. For example, in July 2016, VA chartered the GAO High Risk List Area Task Force for Managing Risk and Improving VA Health Care to develop and oversee implementation of VA's plan to address the root causes of the five areas of concern we identified in 2015. VA's task force and associated working groups are responsible for developing and executing the department's high-risk mitigation plan for each of the five areas of concern we identified. VA also executed two contracts with a total value of $7.8 million to support its actions to address the concerns behind the high-risk designation. These contracts--with the MITRE Corporation and Atlas Research, LLC--are intended to provide additional support for actions such as developing and executing an action plan, creating a plan to enhance VA's capacity to manage the five areas, and assisting with establishing the management functions necessary to oversee the five high-risk-area working groups. On August 18, 2016, VA provided us with an action plan that acknowledged the deep-rooted nature of the areas of concern, and stated that these concerns would require substantial time and work to address. Although the action plan outlined some steps VA plans to take over the next several years to address the concerns that led to its high-risk designation, several sections were missing critical actions that would support our criteria for removal from the High-Risk List, such as analyzing the root causes of the issues and measuring progress with clear metrics. In our feedback to VHA on drafts of its action plan, we highlighted these missing actions and also stressed the need for specific timelines and an assessment of needed resources for implementation. For example, VA plans to use staff from various sources, including contractors and temporarily detailed employees, to support its high-risk-area working groups, so it is important for VA to ensure that these efforts are sufficiently resourced. As we reported in the February 2017 high-risk report, when we applied the five criteria for High-Risk List removal to each of the areas of concern, we determined that VA has partially met two of the five criteria: leadership commitment and an action plan. VA has not met the other three criteria for removal: capacity to address the areas of concern, monitoring implementation of corrective actions, and demonstrating progress. It is worth noting that although both criteria were rated as partially met, the department made significantly less progress in developing a viable action plan than it has in demonstrating leadership commitment. Specifically, VA partially met the action plan criterion for only one of the five areas of concern--ambiguous policies and inconsistent processes--whereas VA partially met the leadership commitment criterion for four out of five areas of concern. The following is a summary of the progress VA has made in addressing the five criteria for removal from the High-Risk List for each of the five areas of concern we identified. Summary of concern. When we designated VA health care as a high- risk area in 2015, we reported that ambiguous VA policies led to inconsistent processes at local VA medical facilities, which may have posed risks for veterans' access to VA health care. Since then, we highlighted the inconsistent application of policies in two recent reports examining mental health and primary care access at VA medical facilities in 2015 and 2016, respectively. In both reports, we found wide variation in the time that veterans waited for primary and mental health care, which was in part caused by a lack of clear, updated policies for appointment scheduling; therefore, we recommended that VA update these policies. These ambiguous policies contributed to errors made by appointment schedulers, which led to inconsistent and unreliable wait-time data. For mental health, we also found that two policies conflicted, leading to confusion among VA medical center staff as to which wait-time policy to follow. In 2015, VA resolved this policy conflict by revising its mental health handbook, but other inconsistent applications of mental health policy have not yet been addressed, such as our recommendation to issue guidance about the definitions used to calculate veteran appointment wait times, and communicate any changes to those definitions within and outside VHA. 2017 assessment of VA's progress. Based on actions taken since 2015, VA has partially met our criteria for removal from the High-Risk List for this area of concern for leadership commitment and action plan. VA has partially met the leadership commitment criterion because it established a framework for developing and reviewing policies--with the goal of ensuring greater consistency and clarity--and set goals for making the policy-development process more efficient. VA has partially met the action plan criterion for this high-risk area of concern because its action plan described an analysis of the root causes of problems related to ambiguous policies and inconsistent processes, an important aspect of an action plan. However, VA has not met our criteria for removal from the High-Risk List for capacity, monitoring, and demonstrated progress for this area of concern because it has not addressed gaps that exist between its stated goals and available resources, addressed inconsistent application of policies at the local level, or demonstrated that its actions are linked to identified root causes. Summary of concern. In our 2015 high-risk report, we found that VA had problems holding its facilities accountable for their performance because it relied on self-reported data from facilities, its oversight activities were not sufficiently focused on compliance, and it did not routinely assess policy implementation. We continued to find a lack of oversight in our October 2015 review of the efficiency and timeliness of VA's primary care. For example, we found inaccuracies in VA's data on primary care panel sizes, which are used to help medical centers manage their workload and ensure that veterans receive timely and efficient care. We found that while VA's primary care panel management policy required facilities to ensure the reliability of their panel size data, it did not assign responsibility for verifying data reliability to regional- or national-level officials or require them to use the data for monitoring purposes. As a result, VA could not be assured that local panel size data were reliable, or know whether its medical centers had met VA's goals for efficient, timely, and quality care. We recommended that VA incorporate an oversight process in its primary care panel management policy that assigns responsibility, as appropriate, to regional networks and to VA's central office for verifying and monitoring panel sizes. 2017 assessment of VA's progress. VA has partially met the leadership commitment criterion for this area of concern because it established a high-level governance structure and adopted a new model to guide the department's oversight and accountability activities. However, VA has not met our criteria for removal from the High-Risk List for capacity, action plan, monitoring, or demonstrated progress for this area of concern because the department continues to rely on existing processes that contribute to inadequate oversight and accountability. Summary of concern. In our 2015 high-risk report, we identified limitations in the capacity of VA's existing IT systems, including the outdated, inefficient nature of certain systems and a lack of system interoperability as contributors to VA's IT challenges related to VA health care. We have continued to report on the importance of VA working with the Department of Defense to achieve electronic health record interoperability. In August 2015, we reported on the status of these interoperability efforts and noted that the departments had engaged in several near-term efforts focused on expanding interoperability between their existing electronic health record systems. However, we were concerned by the lack of outcome-oriented goals and metrics that would more clearly define what VA and the Department of Defense aim to achieve from their interoperability efforts. Accordingly, we recommended that the departments establish a time frame for identifying outcome- oriented metrics and define related goals for achieving interoperability. In February 2017, we reported that VA has begun to define an approach for identifying outcome-oriented metrics focused on health outcomes in selected clinical areas, and it also has begun to establish baseline measurements. We intend to continue monitoring the departments' efforts to determine how these metrics define and measure the results achieved by interoperability between the departments. 2017 assessment of VA's progress. VA has partially met our leadership commitment criterion by involving top leadership from VA's Office of Information & Technology in this area of concern, but it has not met our four remaining criteria for removing IT challenges from the High-Risk List. For example, VA has not demonstrated improvement in several capacity actions, such as establishing specific responsibilities for its new functions, improving collaboration between internal and external stakeholders, and addressing skill gaps. VA also needs to conduct a root cause analysis that would help identify and prioritize critical actions and outcomes to address IT challenges. Summary of concern. When identifying this area of concern in our 2015 high-risk report, we described several gaps in VA's training, as well as burdensome training requirements. We have continued to find these issues in our subsequent work. For example, in our December 2016 report on VHA's human resources (HR) capacity, we found that VA's competency assessment tool did not address two of the three personnel systems under which VHA staff may be hired. We recommended that VHA (1) develop a comprehensive competency assessment tool for HR staff that evaluates knowledge of all three of VHA's personnel systems and (2) ensure that all VHA HR staff complete it so that VHA may use the data to identify and address competency gaps among HR staff. Without such a tool, VHA will have limited insights into the abilities of its HR staff and will be ill-positioned to provide necessary support and training. 2017 assessment of VA's progress. VA has not met any of our criteria for removing this area of concern from the High-Risk List. VA intends to establish a comprehensive health care training management policy and a mandatory annual training process; however, as of December 2016, VA officials said they had not begun drafting a new policy to replace an outdated document from 2002 that contains training requirements that are no longer relevant. The high-level nature of the descriptions in the action plan and lack of action to update outdated policies and set goals for improving training shows that VA lacks leadership commitment to address the concerns that led to our inclusion of this area in the 2015 high-risk report. Summary of concern. In our 2015 high-risk report, we described gaps in the availability of data needed for VA to identify the resources it needs and ensure they are effectively allocated across VA's health care system as contributors to our concern about unclear resource needs and allocation priorities. We have continued to report on this concern. For example, in our September 2016 report on VHA's organizational structure, we found that VA devoted significant time, effort, and funds to generate recommendations for organizational structure changes intended to improve the efficiency of VHA operations. However, the department then either did not act or acted slowly to implement the recommendations. Without robust processes for evaluating and implementing recommendations, there was little assurance that VHA's delivery of health care to the nation's veterans would improve. We recommended that VA develop a process to ensure that it evaluates organizational structure recommendations resulting from internal and external reviews of VHA. This process should include documenting decisions and assigning officials or offices responsibility for ensuring that approved recommendations are implemented. We concluded that such a process would help VA ensure that it is using resources efficiently, monitoring and evaluating implementation, and holding officials accountable. 2017 assessment of VA's progress. VA's actions have partially met our criterion for leadership commitment but not met the other four criteria for removing this area of concern from the High Risk List. VA's planned actions do not make clear how VHA, as the agency managing VA health care, is or will be incorporated into VA's new framework for the strategic planning and budgeting process. It is also not clear how the framework will be communicated and reflected at the regional network and medical center levels. VA also has not identified what resources may be necessary to establish and maintain new functions at the national and local levels, or established performance measures based on a root cause analysis of its unclear resource needs and allocation priorities. Since we added VA health care to our High-Risk List in 2015, VA's leadership has increased its focus on implementing our prior recommendations, but additional work is still needed. Between January 2010 and February 2015 (when we first designated VA health care as a high-risk area), we made 178 recommendations to VA related to VA health care. When we made our designation in 2015, the department only had implemented about 22 percent of them. Since February 2015, we have made 74 new recommendations to VA related to VA health care, for a total of 252 recommendations from January 1, 2010 through February 15, 2017 (when we issued the 2017 high-risk report). VA has implemented about 50 percent of these recommendations. However, there continue to be more than 100 open recommendations related to VA health care, almost a quarter of which have remained open for 3 or more years. We believe that it is critical that VA implement our recommendations not only to remedy the specific weaknesses we previously identified, but because they may be symptomatic of larger underlying problems that also need to be addressed. Since the 2015 high-risk report, we have made new recommendations to VA relating to each of the five areas of concern. (See table 1.) VA has taken an important step toward addressing our criteria for removal from the High-Risk List by establishing the leadership structure necessary to ensure that actions related to the High-Risk List are prioritized within the department. It is imperative, however, that VA demonstrate strong leadership support as it continues its transition under a new administration, address weaknesses in its action plan, and continue to implement our open recommendations. As a new administration sets its priorities, VA will need to integrate those priorities with its high-risk-related actions, and facilitate their implementation at the local level through strategies that link strategic goals to actions and guidance. In its action plan, VA separated its discussion of department-wide initiatives, like MyVA, from its description of High-Risk List mitigation strategies. We do not view high-risk mitigation strategies as separate from other department initiatives; actions to address the High-Risk List can, and should be, integrated in VA's existing activities. VA's action plan did not adequately address the concerns that led to the high-risk designation because it lacked root cause analyses for most areas of concern, as well as clear metrics and identified resources needed for achieving VA's stated outcomes. This is especially evident in VA's plans to address the IT and training areas of concern. In addition, with the increased use of community care programs, it is imperative that VA's action plan include a discussion of the role of community care in decisions related to policies, oversight, IT, training, and resource needs. VA will also need to demonstrate that it has the capacity to sustain efforts by devoting appropriate resources--including people, training, and funds--to address the high-risk challenges we identified. Until VA addresses these serious underlying weaknesses, it will be difficult for the department to effectively and efficiently implement improvements addressing the five areas of concern that led to the high-risk designation. We will continue to monitor VA's institutional capacity to fully implement an action plan and sustain needed changes in all five of our areas of concern. To the extent we can, we will continue to provide feedback to VA officials on VA's action plan and areas where they need to focus their attention. Additionally, we have ongoing work focusing on VA health care that will provide important insights on progress, including the policy development and dissemination process, implementation and monitoring of VA's opioid safety, Veterans Choice Program implementation, physician recruitment and retention, and processes for enrolling veterans in VA health care. Finally, we plan to also continue to monitor VA's efforts to implement our recommendations and recommendations from other reviews such as the Commission on Care. To this end, we believe that the following GAO recommendations require VA's immediate attention: improving oversight of access to timely medical appointments, including the development of wait-time measures that are more reliable and not prone to user error or manipulation, as well as ensuring that medical centers consistently and accurately implement VHA's scheduling policy. improving oversight of VA community care to ensure--among other things--timely payment to community providers. improving planning, deployment, and oversight of VA/VHA IT systems, including identifying outcome-oriented metrics and defining goals for interoperability with DOD. ensuring that recommendations resulting from internal and external reviews of VHA's organizational structure are evaluated for implementation. This process should include the documentation of decisions and assigning officials or offices responsibility for ensuring that approved recommendations are implemented. Moreover, it is critical that Congress maintain its focus on oversight of VA health care to help address this high-risk area. Congressional committees responsible for authorizing and overseeing VA health care programs held more than 70 hearings in 2015 and 2016 to examine and address VA health care challenges. As VA continues to change its health care service delivery in the coming years, some changes may require congressional action--such as VA's planned consolidation of community care programs after the Veterans Choice Program expires. Sustained congressional attention to these issues will help ensure that VA continues to improve its management and delivery of health care services to veterans. Chairman Isakson, Ranking Member Tester, and Members of the Committee, this concludes my statement. I would be pleased to respond to any questions you may have. For further information about this statement, please contact Debra A. Draper at (202) 512-7114 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. Key contributors to this statement were Malissa G. Winograd (Analyst-in-Charge), Jennie Apter, Jacquelyn Hamilton, and Alexis C. MacDonald. High-Risk Series: Progress on Many High-Risk Areas, While Substantial Efforts Needed on Others. GAO-17-317. Washington, D.C.: February 15, 2017. VA Health Care: Actions Needed to Ensure Medical Facility Controlled Substance Inspection Programs Meet Agency Requirements. GAO-17-242. Washington, D.C.: February 15, 2017. Veterans Affairs Information Technology: Management Attention Needed to Improve Critical System Modernizations, Consolidate Data Centers, and Retire Legacy Systems. GAO-17-408T. Washington, D.C.: February 7, 2017. Veterans Health Administration: Management Attention Is Needed to Address Systemic, Long-standing Human Capital Challenges. GAO-17-30. Washington, D.C.: December 23, 2016. VA Health Care: Improved Monitoring Needed for Effective Oversight of Care for Women Veterans. GAO-17-52. Washington, D.C.: December 2, 2016. Veterans Health Care: Improvements Needed in Operationalizing Strategic Goals and Objectives. GAO-17-50. Washington, D.C.: October 21, 2016. VA Health Care: Processes to Evaluate, Implement, and Monitor Organizational Structure Changes Needed. GAO-16-803. Washington, D.C.: September 27, 2016. Veterans' Health Care: Improved Oversight of Community Care Physicians' Credentials Needed. GAO-16-795. Washington, D.C.: September 19, 2016. VA IT Management: Organization Is Largely Centralized; Additional Actions Could Improve Human Capital Practices and Systems Development Processes. GAO-16-403. Washington, D.C.: August 17, 2016. Veterans Affairs: Sustained Management Attention Needed to Address Numerous IT Challenges. GAO-16-762T. Washington, D.C.: June 22, 2016. VA's Health Care Budget: In Response to a Projected Funding Gap in Fiscal Year 2015, VA Has Made Efforts to Better Manage Future Budgets. GAO-16-584. Washington, D.C.: June 3, 2016. Veterans Crisis Line: Additional Testing, Monitoring, and Information Needed to Ensure Better Quality Service. GAO-16-373. Washington, D.C.: May 26, 2016. Veterans' Health Care: Proper Plan Needed to Modernize System for Paying Community Providers. GAO-16-353. Washington, D.C.: May 11, 2016. VA Health Care: Actions Needed to Improve Newly Enrolled Veterans' Access to Primary Care. GAO-16-328. Washington, D.C.: March 18, 2016. DOD and VA Health Care: Actions Needed to Help Ensure Appropriate Medication Continuation and Prescribing Practices. GAO-16-158. Washington, D.C.: January 5, 2016. VA Mental Health: Clearer Guidance on Access Policies and Wait-Time Data Needed. GAO-16-24. Washington, D.C.: October 28, 2015. VA Primary Care: Improved Oversight Needed to Better Ensure Timely Access and Efficient Delivery of Care. GAO-16-83. Washington, D.C.: October 8, 2015. VA Health Care: Oversight Improvements Needed for Nurse Recruitment and Retention Initiatives. GAO-15-794. Washington, D.C.: September 30, 2015. Electronic Health Records: Outcome-Oriented Metrics and Goals Needed to Gauge DOD's and VA's Progress in Achieving Interoperability. GAO-15-530. Washington, D.C.: August 13, 2015. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.
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VA operates one of the largest health care delivery systems in the nation, including 168 medical centers and more than 1,000 outpatient facilities organized into regional networks. Enrollment in the VA health care system has grown significantly, from 7.9 million in fiscal year 2006 to almost 9 million in fiscal year 2016. Over that same period, VA's Veterans Health Administration's total budgetary resources have increased substantially, from $37.8 billion in fiscal year 2006 to $91.2 billion in fiscal year 2016. Since 1990, GAO has regularly updated the list of government operations that it has identified as high risk due to their vulnerability to fraud, waste, abuse, and mismanagement, or the need for transformation to address economy, efficiency, or effectiveness challenges. VA health care was added as a high-risk area in 2015 because of concerns about VA's ability to ensure the timeliness, cost-effectiveness, quality, and safety of veterans' health care. GAO assesses High-Risk List removal against five criteria: (1) leadership commitment, (2) capacity, (3) action plan, (4) monitoring, and (5) demonstrated progress. This statement, which is based on GAO's February 2017 high-risk report, addresses (1) actions VA has taken over the past 2 years to address the areas of concern that led GAO to designate VA health care as high risk, (2) the number of open GAO recommendations related to VA health care, and (3) additional actions VA needs to take to address the concerns that led to the high-risk designation. The Department of Veterans Affairs (VA) has taken action to partially meet two of the five criteria GAO uses to assess removal from the High-Risk List (leadership commitment and an action plan), but it has not met the other three (agency capacity, monitoring efforts, and demonstrated progress). Specifically, VA officials have taken leadership actions such as establishing a task force, working groups, and a governance structure for addressing the issues that led to the high-risk designation. VA provided GAO with an action plan in August 2016 that acknowledged the deep-rooted nature of the five areas of concern GAO identified: (1) ambiguous policies and inconsistent processes; (2) inadequate oversight and accountability; (3) information technology challenges; (4) inadequate training for VA staff; and (5) unclear resource needs and allocation priorities. Although VA's action plan outlined some steps VA plans to take over the next several years, several sections were missing analyses of the root causes of the issues, resources needed, and clear metrics to measure progress. Also of concern are the more than 100 open recommendations GAO has made between January 2010 and February 2017 related to VA health care, almost a quarter of which have been open for 3 or more years. Since February 2015, GAO has made 74 new recommendations relating to the areas of concern. To address its high-risk designation, additional actions are required of VA, including: (1) demonstrating stronger leadership support as it continues its transition under a new administration; (2) developing an action plan to include root cause analyses for each area of concern, clear metrics to assess progress, and the identification of resources for achieving stated outcomes; and (3) implementing GAO's recommendations, not only to remedy the specific weaknesses identified, but because they may be symptomatic of larger underlying problems that also need to be addressed. Until VA addresses these serious underlying weaknesses, it will be difficult for the department to effectively and efficiently implement improvements addressing the five areas of concern that led to the high-risk designation.
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APHIS is the lead federal agency for preventing infestations of harmful foreign pests and diseases, protecting U.S. agriculture, and preserving the marketability of agricultural products in the United States and abroad. The agency's Plant Protection and Quarantine unit (PPQ) exercises regulatory authority to inspect agricultural imports, as well as nonagricultural products that may carry pests, largely through its Agricultural Quarantine Inspection (AQI) activities. In fiscal year 1996, APHIS allocated an estimated $151.9 million for AQI activities and had about 2,600 inspectors located at 172 land, sea, and air ports of entry. APHIS has other inspection duties, such as inspections of imported and exported live animals, that are not the subject of this report. APHIS is one of the three primary Federal Inspection Service (FIS) agencies responsible for monitoring the entry of cargo and passengers into the United States. The two other FIS agencies are the U.S. Customs Service in the Department of the Treasury and the Immigration and Naturalization Service (INS) in the Department of Justice. The U.S. Customs Service is primarily concerned with collecting duties on imports, enforcing antismuggling laws, and interdicting narcotics and drugs. INS inspects foreign visitors to determine their admissibility into the United States and guards against illegal entry. Recent multilateral trade agreements--the North American Free Trade Agreement (NAFTA) and the results of the General Agreement on Tariffs and Trade's Uruguay Round of Multilateral Trade Negotiations (Uruguay Round)--have provisions that affect APHIS' inspection activities. Both agreements contain provisions on signatories' use of sanitary and phytosanitary standards that limit the introduction of foreign pests and diseases. To prevent the standards from impeding agricultural trade, they must be based on scientific principles and risk assessment, provide a level of protection appropriate to the risk faced, and not restrict trade more than necessary. APHIS' inspection workload has increased dramatically since 1990 because of growth in imports and exports, increased travel, and increased smuggling. Furthermore, policy changes have exacerbated workload demands by increasing pressure to expedite the processing of passengers and cargo into the United States. The workload has been directly affected by the increase in international trade and travel between fiscal years 1990 and 1995. Overall, the volume of exports and imports rose 45 percent and 52 percent, respectively, while agricultural exports and imports increased 35 percent and 31 percent, respectively. Moreover, the number of international passengers traveling to the United States increased almost 50 percent, reaching 55 million passengers in fiscal year 1995. Furthermore, increases in the number of ports of entry, as well as increased risk at existing ports, have expanded APHIS' workload. Along the Mexican border alone, six new border stations were approved between 1988 and 1993, while several other major facilities are scheduled for expansion. According to APHIS officials, each new port of entry requires at least five inspectors. Along the U.S.-Canadian border, changes in risks associated with passengers and cargo have created the need for increased inspections. APHIS staff at the Blaine, Washington, port told us that increased risks were responsible for an increase from 4 inspectors in 1990 to 18 in 1996. In addition to conducting inspections, inspectors are responsible for reviewing and issuing certificates for agricultural exports, working on temporary assignments away from their normal work location, and performing other duties, such as preventing smuggling and fumigating cargo. As exports increase, inspectors have had to issue and review a growing number of certificates for U.S. exports. Temporary duty assignments range from domestic emergency eradication of pests and diseases and foreign preclearance activities to meetings and training. Studies in California and Florida have found that the smuggling of agricultural products into the United States has grown and presents a serious pest risk. As a result of increased smuggling activity across the Canadian and Mexican borders, APHIS inspectors are performing antismuggling activities, such as working on investigations and surveillance of markets and border areas. Along with the greater inspection workload, inspectors face increasing pressure to expedite the flow of goods and people across U.S. borders. Responding to the growing importance of trade to the national economy and to recent trade agreements, APHIS has taken an active role in facilitating trade. Towards this end, APHIS and its FIS partners have adopted new customer service standards to move the increasing import and passenger volume through ports of entry within specific periods. For passengers, these standards call upon the agencies to clear international airline passengers within 45 minutes of arrival. Similarly, APHIS has adopted standards to schedule inspections of perishable cargo within 3 hours of being notified of its arrival. APHIS acknowledges the conflict between enforcement responsibilities and trade facilitation and is seeking an appropriate balance as guidance for the inspection program. APHIS made a number of changes to its inspection program to respond to the demands of its growing workload. It shifted funds and staff away from other programs to the inspection program, broadened the range of inspection techniques, and stepped up efforts to coordinate with the other FIS agencies. In addition, to help measure the effectiveness of its inspections and to form a basis for making further improvements, APHIS recently initiated an effort to compare the rate at which restricted items are entering the United States, and the risks associated with those items, with the inspection rates at individual ports of entry. This effort is designed to determine if the current inspection program is adequately addressing the risks of harmful pests and disease entering the country and to identify which of the country's ports of entry are most vulnerable to such risks. APHIS has been shifting more funds into inspection activities since fiscal year 1990. Through fiscal year 1996, the budget for AQI activities rose 78 percent to $151.9 million, while APHIS' overall funding rose 20 percent. To provide this increased funding, APHIS reduced its spending for several other programs, such as the brucellosis eradication program, which fell from $59 million in 1990 to $23 million in 1996. The 1990 and 1996 farm bills also authorized the collection of and expanded access to user fees for inspections. User fees have become the principal revenue source for the AQI program, accounting for about $127 million of program revenues in fiscal year 1996. (See app. II for more detail on funding and staffing for fiscal years 1990-96.) Since 1990, APHIS has raised AQI staffing levels about 44 percent--from 1,785 to 2,570 positions. The agency shifted positions from other programs to meet the increased workload. In addition, as a result of the 1996 farm bill's provisions allowing greater access to user fee revenues and removing a staff ceiling, APHIS is in the process of hiring about 200 new inspectors. APHIS has taken several steps to make better use of its inspection resources. To supplement the normal practice of performing visual inspections of selected cargo and baggage, APHIS has significantly expanded the use of alternative inspection practices, such as detector dogs and x-ray equipment. APHIS increased the number of detector dog teams from 12 in 1989 to 48 in 1996. Inspectors are also periodically using inspection blitzes--highly intensive inspections of baggage or cargo--to augment their visual inspection of selected items. To improve its ability to select passengers for inspection, APHIS is refining the list of risk characteristics that inspectors use in selecting passenger bags for inspection. Roving inspectors currently use these selection characteristics in airports to make referrals for agricultural inspection. The agency is also studying opportunities to use roving inspectors at land border ports. Finally, APHIS is funding research on new x-ray technology that will identify air passengers' baggage containing restricted items. APHIS has also attempted to reduce the workload at entry ports by (1) inspecting passengers and products in the country of origin or (2) allowing lower-risk products to enter with less intensive scrutiny. Under the first effort, APHIS has staff oversee or conduct inspections to preclear products and passenger baggage in the country of origin so that inspectors at receiving U.S. ports primarily monitor these products or baggage. APHIS' International Services unit now operates cargo preclearance inspections in 29 countries and limited passenger preclearance programs in 2 countries. In addition, APHIS initiated a cargo release program along the Mexican border to reduce inspections of high-volume, low-risk commodities and allow the products to enter with less intensive scrutiny. For example, according to APHIS, the port of entry with the highest volume of agricultural imports from Mexico--Nogales, Arizona--had about 75 percent of its shipments in 1995 in the cargo release program. In addition to taking steps aimed at improving the use of its own resources, APHIS is working with the other FIS agencies--Customs and INS--to improve coordination. For example, several work units are working with the FIS agencies, through Port Quality Improvement Committees, to improve port operations and are cross-training FIS staff to educate them on APHIS' inspection needs. In 1996, the FIS agencies and the Department of State issued a report with recommendations for improving screening of passengers as they arrive at U.S. borders. In 1996, APHIS began providing computer equipment to 33 maritime ports and 26 airports to enable them to link up with information in Custom's databases on cargo and prior violations. APHIS is trying to improve the linkage with the cargo manifest database to overcome early problems in obtaining and reviewing cargo information. For example, APHIS is developing its Automated Targeting System, which will automatically scan Custom's cargo manifest database to identify shipments for inspection. In October 1996, APHIS began implementing the AQI Results Monitoring Program, which is intended to measure the effectiveness of its inspections nationwide and provide information on which ports of entry pose the highest risk of having harmful pests and diseases enter the country. At each port, the program will also identify risks of harmful pest and disease entry associated with various commodities, their country of origin, and their means of entry. APHIS expects the program to be in place at most ports of entry by September 1997. The results monitoring program uses random surveys of cargo and passengers entering the United States to estimate the rates at which restricted items are entering the country and the risks of harmful pests and diseases associated with those items. The program allows APHIS to determine whether the number of inspections performed at a given location for a given commodity adequately address the risk posed. The program replaces the traditional measure of inspection performance, the quantity of material intercepted, with new performance indicators related to risks associated with commodities entering the country. This approach will enable APHIS to modify its inspection program to reduce the threat of harmful pests while not unduly restricting trade. Despite the changes in resources and activities, APHIS' inspection program at most of the ports we visited has not kept pace with the increasing pressure from its growing workload and mission. Heavy workloads have often led APHIS inspectors to shortcut cargo inspection procedures, thereby jeopardizing the quality of the inspections conducted. Furthermore, APHIS has little assurance that it is deploying its limited inspection resources efficiently and effectively because of weaknesses in the staffing models it uses for making such decisions. APHIS' inspectors are to follow certain procedures when examining goods and passengers entering the United States in order to minimize the possibility of pest infestation and disease. However, at 11 of the 12 ports that we examined, inspectors were not always implementing these procedures for the (1) number of inspections that should be conducted, (2) number of samples of a shipment that should be examined, or (3) manner in which a sample should be selected. According to regional APHIS officials and internal studies, these types of problems may not be limited to the sites we visited. At 11 ports of entry we visited, including the 3 busiest ports in the United States, inspectors said that they are unable to examine enough vehicles or cargo containers to consider their inspection to be representative of the movement of goods, to control the flow of restricted goods, and to minimize risk of pests and disease. Several of these inspectors said that they were not confident that the frequency of inspections was adequate to manage the risks. For example: At the Mexican border crossing with the heaviest passenger vehicle volume in the country, a supervisory inspector said the staff were inspecting less than 0.1 percent of the passenger vehicular traffic because of the high volume of traffic and the low number of referrals from FIS officials who initially screen the vehicles. APHIS officials have set a target of inspecting about 2 percent of all passenger vehicles. Because of staffing shortages, one work unit along the U.S.-Mexican border can provide inspector coverage of a busy pedestrian crossing for only 8 of the 18 hours of port operations. As a result of a low staffing level and the numerous other duties that must be carried out at a busy U.S.-Canadian border location, an APHIS manager told us that inspectors cannot maintain a regular presence at any of the four border crossings at the port. The inspectors are available to inspect only when the other FIS agencies make referrals to APHIS. Problems in conducting a sufficient number of inspections were not limited to the locations we visited. An APHIS headquarters official told us the agency does not conduct any inspections at 46 northern and 6 southern ports of entry. Instead, the agency relies on the other FIS agencies to perform agricultural inspections, when needed, at these low-volume ports, although the risks are unknown. In addition, even for the inspections that they conduct, inspectors do not always examine the number of samples suggested by the guidance. For example, inspectors at two ports of entry told us that they were unable to inspect a large enough sample in a given cargo shipment to meet APHIS' inspection guidance. More specifically, during peak season at one high-volume port along the southern border, inspectors usually inspected one box from each shipment selected for inspection, or less than 0.5 percent of the shipment. This is far less than the 2-percent sample recommended in APHIS' guidance. At another port--the second largest in the country--inspectors curtailed their inspections of cut flowers, which are considered a high-risk cargo. The APHIS port director said that inspectors are able to conduct only cursory inspections during high-volume periods because the flowers are perishable and the cut flower industry has continually pressured both political representatives and APHIS to have inspections performed more quickly. Finally, in contrast to recommended inspection procedures, APHIS inspectors do not always select samples in a manner that ensures that the samples are representative of the shipment being inspected. APHIS' guidance emphasizes the importance of selecting representative samples and specifically cautions against "tailgate inspections"--inspections of goods that are stored near openings and that may not be representative. A random survey of refrigerated cargo containers in Miami, conducted by APHIS and the state of Florida, documented the pitfalls of such inspections. The survey found that less than 40 percent of the pests discovered in the survey were located near the container opening. Despite the limitations associated with tailgate inspections, inspectors at five ports said they routinely use them in inspecting cargo containers. This practice extends beyond the ports we visited: A 1996 APHIS report on cargo inspection monitoring noted that many ports have resorted to tailgate inspections because of heavy trade volume. In addition to tailgate inspections, we found one port using another sampling practice that also reduced assurance that the samples examined represented the entire shipment. In Miami, the second busiest port in the country, we observed inspectors allowing import brokers of cut flowers to select samples for inspection. With this practice, brokers could select samples that are likely to pass inspection, which reduces the credibility of the inspection. The staffing models that APHIS uses to allocate its inspection resources have several weaknesses that undermine the agency's ability to ensure that inspectors are deployed to areas that pose the highest risk of entry of pests or disease. The weaknesses fall in three areas. First, the staffing models rely on inaccurate inspection workload data, which could skew the models' analyses. Second, the models do not contain risk assessment information similar to that produced by the results monitoring program because APHIS has not determined how to include risk data in the model's design. This limitation restricts APHIS' ability to place inspection resources at the ports of entry with the highest risks of pest and disease introduction. Finally, the models are not used to allocate inspection resources on a national basis. Rather, they are used only to allocate resources within APHIS regions. APHIS' staffing models are intended to help determine the number of inspectors that should be stationed at various locations across the country. There are four separate models for calculating staffing needs at airports, land border crossings, maritime ports, and plant inspection stations. Each of the models calculates staffing needs by, in essence, multiplying various measures of workload activity (such as number of inspections, number of vehicle arrivals, and number of pest interceptions) by the time it takes to complete these activities and converting that product into an estimate of the number of inspectors needed. The accuracy of the workload data used in the models is key to ensuring that projected staffing needs are also accurate. However, APHIS has little assurance that the data are accurate. The inspection workload data used in the model generally comes from APHIS' Workload Accomplishment Data System (WADS). APHIS officials at all levels of the inspection program questioned the accuracy of the data in this system because of inconsistencies in the way the data were compiled at ports and reported through regional offices to APHIS headquarters. APHIS inspectors told us that some data they submitted, such as information on endangered species, was inaccurately reported or did not appear in the national WADS summaries. Officials in one region said some data were omitted because they were not useful at the national level, while inaccurate data may be due to data entry error. Furthermore, workload statistics were often estimates of activity rather than real-time information. Finally, we found that another source of inaccurate data in WADS can be traced to the poor quality of inspections. If, for example, inspectors are reporting the results of tailgate inspections rather than inspections of representative samples of cargo, WADS data on the number of interceptions could be misleading. A second weakness with the current staffing models is that they do not take into consideration variations in the risks of harmful pests and disease entering the country. These risks can vary by several factors, such as the commodity, country of origin, port of entry and means of entry. The results monitoring program may be able to provide this type of analyses. However, APHIS officials have not yet determined how to incorporate this information into the models. Furthermore, there are some concerns about the accuracy of the results monitoring program because it too is based, in part, upon information from the WADS. Finally, the potential benefits of using the staffing models are limited because they are not used to allocate inspection resources on a national level. APHIS has instructed its regions and ports to use the staffing models to help allocate staff at the regional and port levels. However, regional officials at two of the four regions told us that they use the staffing models primarily for budget development, not for allocating staff among the ports within their regions. APHIS faces a difficult mission--to ensure that tons of cargo and millions of passengers entering the United States do not bring in harmful pests or diseases. Its mission will only become more difficult as the volume of trade increases and the pressure to facilitate trade through expedited inspections becomes greater. In the ports we visited--which included the country's three busiest ports of entry--APHIS inspectors are struggling to meet these challenging work demands. Unfortunately, these demands have sometimes resulted in shortcutting inspection procedures, such as performing tailgate inspections and allowing brokers to choose the samples for inspection. In turn, these shortcuts have diminished the quality of inspections and reduced assurance that an APHIS-inspected shipment entering the United States contains no harmful pests or diseases. In view of APHIS' increasing workload, it is critical that the agency be able to allocate its limited inspection resources to the ports of entry with the highest risks of pest and disease introduction. APHIS currently does not have the management tools to do so. Specifically, the workload information in the WADS is key to staffing allocation decisions. However, APHIS officials question the accuracy of the WADS information, noting, among other things, that the system does not include all needed workload information and some of the information that it does include are estimates that may be inaccurate. Beyond problems with the workload information, APHIS' current staffing models do not factor into consideration variations by commodity, country of origin, and other factors for the risk of pest or disease introduction. APHIS' results monitoring program will provide important information on risk. However, APHIS officials have not yet determined how this information will be integrated into their staffing models or staffing decisions. Finally, APHIS has not made a commitment to using its staffing models to allocate inspection resources from a national perspective. Rather, it plans to examine resource allocations only within regions. As a result, APHIS may lack the flexibility for effectively shifting its resources to target them to the highest risks. To better ensure that APHIS identifies harmful pests and diseases through the inspections that it conducts, the Secretary of Agriculture should direct the Administrator of APHIS to issue guidance that emphasizes the need for APHIS inspectors to adhere to minimum inspection standards in terms of the methods used to select samples from shipments chosen for inspection. We recognize that meeting these minimum standards may result in fewer inspections, but we believe that a smaller number of reliable inspections is preferable to a larger number of inspections that do not comply with inspection guidelines. To strengthen APHIS' ability to allocate its inspection resources more effectively and efficiently, we recommend that the Secretary of Agriculture direct the Administrator of APHIS to develop and implement plans that will improve the reliability of data in the WADS; integrate a risk assessment factor, developed on the basis of the results monitoring program, into its staffing allocation process; and position APHIS to evaluate inspection resources in terms of national rather than regional needs. We provided a draft of this report to APHIS for its review and comment. Appendix IV contains APHIS' written response to our draft report. APHIS agreed that the issues identified in each of our four recommendations needed to be addressed and indicated actions under way to address them. For example, to ensure that APHIS inspectors adhere to minimum inspection standards, APHIS said that it will provide guidance to reinforce the importance of using the best possible procedures for preventing pests from becoming established and will ensure that the inspection standards are consistent with the risk determinations conducted through the results monitoring activity. To improve the data in the WADS, APHIS plans to ensure that inspection program policies are consistently applied nationwide and that the data used in decisionmaking are accurate and reliable. To integrate a risk assessment factor into its staffing process, APHIS is developing a prototype model of staffing guidelines to integrate data from its results monitoring and risk assessments. To evaluate inspection resources in terms of national needs, APHIS is consolidating its four PPQ regions into two and believes that this will contribute significantly to achieving national consistency in all APHIS programs. To assess APHIS' inspection program, we reviewed various studies of pest exclusion efforts and interviewed officials at APHIS headquarters, two regional offices, and work units at 12 ports of entry around the country. At work units, we observed actual inspections; obtained data on workload, operating procedures, and mission; and discussed recent developments and changes to the inspection program. Ports we visited were on the northern and southern borders of the United States and included international airports, seaports, rail yards, and mail stations. We performed our review from May 1996 through March 1997 in accordance with generally accepted government auditing standards. Appendix I provides details on our objectives, scope, and methodology. This report is being sent to congressional committees responsible for U.S. agriculture; the Secretaries of Agriculture and the Treasury; the U.S. Attorney General; the Administrator, APHIS; the Commissioners, U.S. Customs Service and Immigration and Naturalization Service; and other interested parties. We will also make copies available to others on request. Please contact me at (202) 512-5138 if you or your staff have any questions. Major contributors to this report are listed in appendix V. The objective of our review was to assess the effectiveness of the U.S. Department of Agriculture's Animal and Plant Health Inspection Service (APHIS) in minimizing the risks to agriculture from pests and diseases entering the United States. Specifically, we (1) identified recent developments that challenge the Agricultural Quarantine and Inspection (AQI) program's resources and ability to carry out its mission, (2) reviewed APHIS' efforts to cope with these developments, and (3) reviewed the effectiveness of the inspection program in keeping pace with workload changes. We conducted our review at APHIS headquarters, two regional offices, and work units at 12 ports of entry located in the four APHIS regions responsible for plant inspection programs. APHIS management officials guided our selection of the ports we visited in order to ensure that these locations were representative of the challenges and problems faced by APHIS inspectors at all 172 staffed ports of entry. Ports we visited were on the northern and southern borders of the United States and included international airports, seaports, rail yards, and mail stations. Table I.1 lists the work units that we visited. To identify recent developments affecting the inspection program's workload and mission, we reviewed statistical reports on agricultural imports and exports and international air passenger arrivals from 1990 through 1995. We also reviewed reports prepared by APHIS and state agriculture agencies on trends in workload volume and changes in pest risk. APHIS provided data on the cost of foreign pest and disease infestations to U.S. agriculture, but we did not verify the accuracy of the data or the methodology used. At the ports of entry we visited, we discussed changes in the volume and complexity of the port's workload and analyzed data on the number of phytosanitary export certificates issued by the inspection staff. We also contacted APHIS' regulatory enforcement officials who analyze trends in smuggling agricultural goods into the United States. We identified increases in ports of entry by reviewing reports from the General Services Administration (GSA) and discussing these increases with GSA headquarters officials. To assess changes in APHIS' mission, we reviewed APHIS' mission statements, internal reports, and organizational initiatives. At all locations, we discussed with officials the impact of recent trade agreements or other developments on APHIS' workload and mission. To review the changes APHIS has made to cope with recent developments, we identified changes in resource allocations to the AQI program by reviewing APHIS' budget and staffing documents for 1990 through 1996 and reports on user fees. We discussed with APHIS officials (1) shifts in staffing and funding, (2) programs used to reduce the inspection workload at U.S. ports of entry, (3) program priorities, (4) the implementation and use of the results monitoring program and staffing models, and (5) inspection coordination with the other Federal Inspection Service (FIS) agencies. We analyzed data on inspection techniques and technologies and discussed the use of various techniques with APHIS officials at all the locations we visited. At several ports of entry, we observed the use of x-ray equipment and detector dogs in inspections. We discussed border cargo release programs with APHIS field staff at U.S.-Mexican border ports we visited and preclearance programs with officials from the APHIS International Services unit. To evaluate the overall effectiveness of the inspection program, we reviewed inspection manuals and discussed policies, procedures, and requirements with APHIS headquarters officials. At the ports of entry we visited, we discussed with port directors, supervisors, and inspectors how inspections are conducted and how they could be improved. We also reviewed studies and documents on various APHIS and FIS initiatives aimed at improving inspections and discussed these initiatives with officials at the locations we visited. Additionally, we observed inspections for various modes of entry into the United States--airport cargo and arriving international air passengers; pedestrians, vehicle and bus passengers, and truck cargo at land border crossings; maritime cargo and ships at seaports; rail cars and rail passengers; and international mail stations. We performed our review from May 1996 through March 1997 in accordance with generally accepted government auditing standards. APHIS significantly increased its funding and staffing for the AQI program in the 1990s in an effort to keep pace with growing workload demands. APHIS' funding for the program rose by 78 percent from fiscal year 1990 through 1996. Figure II.1 lists the funding allocations APHIS made for the inspection program for fiscal years 1990-96. Inspection staffing levels rose about 44 percent from fiscal year 1990 through 1996. Figure II.2 lists the authorized staffing levels for inspection activities. The AQI program is APHIS' first line of defense in protecting U.S. agriculture from harmful pests and diseases. To implement the inspection program, APHIS has prepared manuals to guide inspections of commercial shipments and passengers and developed an array of inspection techniques. These manuals show that a reliable and credible cargo inspection program requires an adequate number of inspections and the selection of individual inspection samples that are representative of whole shipments. Procedures for inspecting commercial shipments vary according to such factors as the type of product, risk levels associated with the product, and country of origin. Detecting the presence of plant pests or contaminants in a commercial shipment is predicated on inspecting a sample of the shipment. The procedures include guidance for ensuring that the sample is representative of the whole shipment. Inspection procedures for pedestrians, passengers, and passenger vehicles follow a two-stage process, primary and secondary inspection. Primary inspection involves screening passengers, their baggage, and vehicles by questioning the passengers, reviewing their written declaration, and visually observing for referral for further examination. APHIS is refining the characteristics used in the screening process to select passengers and baggage for secondary inspection. Secondary inspection involves a more detailed questioning of the passenger and a visual examination of baggage contents, if necessary. To detect pests and contraband, AQI staff use a range of strategies, such as screening, detector dogs, and x-rays. For airline flights, APHIS has also developed a list of low-, medium-, and high-risk countries of origin to help guide the selection process in the primary inspection area. Ron E. Wood, Assistant Director Dennis Richards Mary K. Colgrove-Stone Michael J. Rahl Jonathan M. Silverman The first copy of each GAO report and testimony is free. Additional copies are $2 each. Orders should be sent to the following address, accompanied by a check or money order made out to the Superintendent of Documents, when necessary. VISA and MasterCard credit cards are accepted, also. Orders for 100 or more copies to be mailed to a single address are discounted 25 percent. U.S. General Accounting Office P.O. 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GAO reviewed the Animal and Plant Health Inspection Service's (APHIS) efforts to minimize the risks to agriculture from pests and diseases entering the United States, focusing on: (1) recent developments that could challenge the ability of APHIS' Agricultural Quarantine and Inspection program to carry out its mission; (2) APHIS' efforts to cope with these developments; and (3) the effectiveness of the inspection program in keeping pace with workload changes. GAO noted that: (1) several developments are challenging APHIS' ability to effectively manage its inspection program; (2) key among these is the rapid growth in international trade and travel since 1990, which has dramatically increased the amount of cargo and the number of passengers that inspectors are to examine; (3) in addition, policy changes that emphasize facilitating trade and customer service have put pressure on APHIS to carry out its increased inspection responsibilities more quickly in order to speed the flow of passengers and trade; (4) APHIS has taken several steps to cope with these developments; (5) it increased funding and staffing for inspections by about 78 percent and 44 percent, respectively, from fiscal year (FY) 1990 to 1996; (6) the agency has attempted to improve the efficiency and effectiveness of its inspections by: (a) using other inspection techniques in addition to visual inspections, such as x-ray technology and detector dogs, to pinpoint prohibited agricultural products, such as untreated fruits, vegetables, and meats from countries that present a higher risk for pests and diseases; and (b) coordinating with other Federal Inspection Service agencies to maximize inspection activities; (7) APHIS began implementing its results monitoring program in FY 1997 to better understand which ports of entry and commodities pose the highest risks of entry for harmful pests and disease; (8) despite these changes, inspectors at the ports GAO visited are struggling to keep pace with increased workloads; (9) heavy workloads have led to inspection shortcuts, which raise questions about the efficiency and overall effectiveness of these inspections; (10) on a broader scale, APHIS' efforts to address its workload problems are hampered by inadequate information for determining how to best deploy its inspectors; (11) in particular, its current staffing models, mathematical formulas used to help determine inspection staffing needs, are not based on reliable information and do not incorporate risk assessment factors similar to those being developed in its results monitoring program; and (12) consequently, APHIS has little assurance that it is deploying its limited inspection resources at the nation's ports of entry that are most vulnerable to the introduction of pests and diseases.
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WIOA required federal and state officials to build a new framework for the workforce system over the two years following its enactment. This framework included the federal regulations implementing the law, and state plans outlining each state's overall strategy for workforce development and how that strategy will meet identified skill needs for job seekers and employers. All states submitted their first plans under WIOA to DOL and Education by April 1, 2016, and the federal agencies issued final regulations in June 2016. Although final regulations were not issued by the time states submitted their plans, the federal agencies had previously issued proposed regulations and guidance, and had provided technical assistance to states. According to DOL and Education officials, they approved all of the state plans with conditions that each state needed to address to meet requirements. In July 2016, these plans and the common performance measures for the six core programs took effect. (See fig.1.) WIOA requires that states submit unified state plans to DOL every four years and revisit these plans every two years, submitting their planned modifications to the relevant federal agencies for approval. Among other changes, WIOA requires that state workforce development boards, consisting of the governor, representatives from business and labor communities, and various state officials, assist in the development of "unified" state plans covering six core programs. The six programs are administered by DOL and Education (see table 1). States were required to submit either unified or combined plans for implementing WIOA. Unified plans include planning for the six core programs. Such plans were optional under the prior authorizing law, the Workforce Investment Act of 1998 (WIA). Combined plans include planning for the six core programs, as well as planning for one or more additional programs and activities. In these plans, states are required to include career pathways strategies, which help job seekers obtain employment or education, and sector partnership strategies, which engage employers in the workforce system. States are also required to identify regions that will implement regional planning strategies to coordinate local services, among other activities. Career pathways strategies align and integrate education, job training, counseling, and support services to help individuals obtain postsecondary education credentials and employment in in-demand occupations. WIOA defines in-demand occupations as those that currently have or are projected to have enough positions in an industry sector to have a significant impact on the state, regional, or local economy. Industry or sector partnership strategies organize multiple employers and key stakeholders, such as education and training programs, in a particular industry into a working group that focuses on the shared goals and human resources needs of that industry. Regional planning strategies allow for strategic planning across local workforce area boundaries for the purposes of coordinating services and administrative cost-sharing, among other activities. Career pathways and sector partnership strategies are often interconnected. In order to design career pathways programs that train workers for jobs that employers need to fill, these programs need input from employers, which can be gained through sector partnerships. DOL has noted that one of the key elements of developing a comprehensive career pathways system is to identify industry sectors and engage employers. With respect to the requirement that states establish regions, DOL regulations state that the purpose of these regions is to align workforce development activities and resources with larger regional economic development areas and available resources to provide coordinated and efficient services to both job seekers and employers. This is a change from WIA, which permitted but did not require regional planning. Under WIOA, states must designate local workforce areas, draw regional boundaries, and assign local areas to these regions. In practice, states need to designate local areas before they can assign them to regions. If local areas dispute their local area designations, they may appeal them to the state board, and if the state board denies the appeal, they may appeal to DOL. In assigning local areas to regions, states are required to consult local officials and consider labor market and economic development areas. After states establish regions, local boards are to work together to develop regional plans that incorporate local plans for each local area in the region, collect and analyze regional labor market data, develop regional sector partnerships, and coordinate the sharing of administrative costs, among other responsibilities. In our previous work on leading strategic planning practices, we have noted the importance of stakeholder involvement, assessing the environment, and aligning activities, processes, and resources to meet goals and objectives during the early phases of strategic planning. Under WIOA, states are required to address all of these aspects of strategic planning: Involving stakeholders. WIOA requires that state boards have diverse membership, which helps involve relevant stakeholders in the planning process. WIOA also features a "sunshine provision" to disclose board proceedings and information regarding the state plan. In addition, as previously noted, states must consult local officials when establishing regions. Assessing the environment. The state plan must assess the current environment in which employment and training programs operate by including analyses of state economic conditions and labor market information, among others. Aligning activities and resources. The state plan must include a strategy for aligning the core programs, other state or local partner programs, and other resources available to the state to achieve its strategic vision and goals. The five states we selected as case studies reported using three main approaches to develop plans for implementing WIOA provisions related to career pathways, sector partnerships, and regional planning. Specifically, states 1) built on their prior experience with career pathways and sector partnerships, which officials viewed as interconnected, 2) increased the involvement of stakeholders in the planning process compared to past efforts, and 3) used multiple sources of labor market information (LMI) to identify employer needs and draw the boundaries of the new regions required under WIOA. Officials in each of the five states told us that they intended their state plans to provide a high-level vision that allows regions and local areas the flexibility to develop workforce strategies that respond to specific regional and local needs. Each of the five selected states had experience with career pathways, sector partnerships, or both prior to the enactment of WIOA, and officials in these states told us that WIOA provided an opportunity to enhance the strategies they already had in place. In contrast, each of the states had less prior experience with regional planning. Colorado officials said they began implementing sector partnerships in 2005 and have incorporated lessons learned over time, including ensuring that these partnerships are led by the business community. Under WIOA, Colorado officials plan to expand and enhance their network of business-led sector partnerships. They also plan to use these partnerships to help design career pathways programs by identifying the knowledge, skills, and abilities that employers are seeking for in-demand jobs. Similarly, Pennsylvania's state plan proposes building on over 10 years of experience with sector partnerships by increasing technical assistance and seeking additional funding for these partnerships, and exploring the development of a certification program for such partnerships. In Ohio, officials also said they plan to further develop their existing sector partnership efforts, including identifying and disseminating best practices from six pilot partnerships that they funded with grants in 2014. They also plan to implement two new career pathways initiatives: an initiative to encourage greater enrollment of Temporary Assistance for Needy Families (TANF) participants in employment and training services, and a new wage pathway model that provides an alternative to the traditional career pathway model. According to Ohio officials, this wage pathway model provides low-income, low-skill youth who are not yet ready to enter a career pathway program with on-the-job skills training and supportive services to help them make a successful transition to a career pathway program and obtain an in-demand occupation. Officials in four of the five states said their previous state plans under WIA served as the foundation for their WIOA plans because the new law supported their existing strategies. For example, California officials said that WIOA's shift in emphasis from matching job seekers with open positions to helping job seekers increase their skills and education aligns with the state board's efforts to promote these goals in California over the last five years. Similarly, Ohio officials told us that some of their efforts to reform their workforce system over the last several years have emphasized the development and expansion of career pathways and sector partnerships, which aligns with WIOA's emphasis on these strategies. In contrast to career pathways and sector partnerships, officials in only three of the five states reported they had some prior experience with regional planning. In California, Colorado, and Ohio, officials said they had some type of regional structure in place prior to the enactment of WIOA, while officials in Kentucky and Pennsylvania said they were relatively new to regional planning. Overall, officials in each of the five states said they had less prior experience with regional planning than with career pathways or sector partnership strategies, and told us that they have made or will make major changes to implement new regional requirements under WIOA. In each of the five selected states, officials reported involving a wide range of stakeholders in enhancing or developing career pathways, sector partnerships, or regional planning strategies, and sought their input in various ways. For example, officials said they included stakeholders such as state agencies overseeing core programs, state agencies overseeing other partner programs, local workforce boards, community colleges, business and industry representatives, labor organizations, and community-based organizations. According to officials, state workforce boards sought input from stakeholders in various ways, such as organizing cross-program or issue area planning committees or discussion groups, holding statewide or regional meetings, and conducting focus groups or surveys. Compared to past planning efforts, each of the five states reported that they have increased stakeholder involvement in WIOA planning by engaging existing stakeholders to a greater extent, and four of the five states also reported involving new stakeholders. Each of the five states included the six core programs in their plans, as required by WIOA, and four states developed combined plans that also included other partner programs (see table 2). According to state officials, some of these core or other partner programs were involved in previous workforce planning efforts but had greater involvement in the WIOA planning process, while others were new stakeholders under WIOA. For example, officials in two states said they involved the state agency overseeing the Vocational Rehabilitation program to a greater extent under WIOA, and officials in the other three states said that the WIOA planning process was the first time they involved this agency in workforce planning efforts. Beyond the core and other partner programs included in the state plan, officials in four of the five states reported involving other new stakeholders in WIOA planning. While they varied by state, these new stakeholders included state agencies such as Kentucky Adult Education and the Department of Corrections and Rehabilitation in California, as well as organizations representing particular interests, such as a local chapter of the National Skills Coalition in Colorado and an initiative supporting better jobs for individuals with disabilities in Ohio. In addition, these new stakeholders included new members of the state workforce development board. For example, in Colorado, officials said they sought new board members with expertise in a variety of areas, including youth and disability issues. In Kentucky, officials told us they focused on identifying new members who could represent the interests of the business community, and that these new members have helped to design career pathways by sharing their knowledge about the skills and certifications needed for in-demand jobs. Officials in two of the five states reported that this increased involvement from stakeholders enhanced awareness about the roles and services of other related programs. For example, California officials said that through the WIOA planning process, state agencies have exchanged detailed information about their programs, including eligibility requirements, the types of services they provide, and how they deliver these services. In Colorado, officials similarly reported that greater stakeholder involvement led to increased awareness across programs and cross-training of staff. Specifically, officials said they cross-trained more than 1,000 staff from a variety of programs on the eligibility requirements for and services provided by other programs to which they refer job seekers, including the core and other partner programs in the state plan, as well as the unemployment insurance program and career and technical education programs, among others. In addition, officials in four of the five states--California, Colorado, Kentucky, and Ohio--reported that involving new stakeholders in the planning process uncovered opportunities to better serve individuals with barriers to employment. In Ohio, officials said they involved the state agency that oversees the Vocational Rehabilitation program and advocates for individuals with disabilities in planning efforts for the first time, which helped identify opportunities to better serve these individuals through the workforce system. For example, these officials said that including these stakeholders led them to train staff at all of their one-stop centers on disability awareness. In addition, a Colorado official told us that involving new stakeholders in the planning process led workforce programs to assess their efforts to conduct outreach and provide services to homeless individuals. Overall, officials in each of the five states reported that the WIOA planning process reinforced important lessons from past planning efforts about when and how to obtain stakeholder input. For example, Kentucky officials noted the importance of having all stakeholders--including the business community--provide input into the planning process from the very beginning. Similarly, Colorado officials said they used a transparent planning process that involved county commissioners, local workforce boards, and the business community to ensure buy-in and support for the state plan. Each of the five selected states consulted multiple sources of labor market information (LMI), which helped officials in some states better align career pathways strategies with employer needs, and helped officials in all five states draw regional boundaries and assign local workforce areas to those proposed regions. Specifically, each of the five states reported they supplemented the traditional LMI provided by the state LMI office with real-time LMI, and three of them--Colorado, Kentucky, and Ohio--reported validating this information with employers to confirm its accuracy as they developed their state plans. In these three states, officials said that validating this information with employers helped better align their career pathways strategies with employers' needs. In Colorado, officials said one example is that when they asked employers to review projections that the state would experience a shortage of workers in the medical industry over the next 10 years, employers said they actually would need more workers over a shorter time period. Officials then used this information to focus their career pathways strategies on preparing individuals to fill the jobs projected to have worker shortages by identifying entry-level jobs that could eventually lead to these higher-level jobs. In Ohio, officials said they surveyed employers to identify their most urgent workforce needs and incorporated this information into a searchable online database of in-demand jobs that guided their planning. According to officials, this information from employers helped better align career pathways strategies with employers' needs for workers with certain credentials or certificates. In each of the five selected states, officials told us they also used multiple sources of LMI to help draw the proposed boundaries of the new regions required under WIOA. Specifically, officials in each of the states said they considered labor market and economic development areas, as required by WIOA, in addition to a variety of other factors. These factors included the locations of key industries, commuting patterns, local workforce areas' existing partnerships across local area boundaries, and where population centers were located. Officials in each of the five states told us that they intend their state plans to provide a high-level vision that allows regions and local areas the flexibility to develop workforce strategies that respond to specific regional and local needs. For example, Colorado officials said they intend their state plan to provide a framework for regional and local entities as they develop career pathways strategies that are driven by the needs of regional industries. The state plan references Colorado's step-by-step guide for building regional career pathways systems, including goals, outcomes, and the roles of different partners. Similarly, California officials described their plan as a broad conceptual framework for building regional and local partnerships rather than an operations manual. The plan requires regions to develop customized "regional sector pathway" programs, which are career pathways programs that help job seekers attain postsecondary credentials that are valued by employers and aligned with regional workforce needs. To implement their state plans, officials in each of the five states said they have developed, are developing, or plan to develop guidance for regional and local planning, including guidance on implementing career pathways and sector partnerships. For example, in September 2016, California issued guidance for developing regional and local plans which sets the state's policy direction for these plans and clarifies the purpose of the regional plan as compared to the local plan. According to the guidance, the primary purpose of regional plans is to develop regional sector pathway programs, while the primary purpose of local plans is to facilitate job seekers' access to local services that lead to regional sector pathway programs. The state plans to provide additional guidance and technical assistance materials about model regional and local partnerships, including best practices, as local officials develop and implement these plans. In two states, officials told us that regional and local plans were due by June 2016, and in the other three states, officials said they expect regions and local areas to submit these plans by spring 2017. Furthermore, officials in all five states said they expect regional or local plans to address how funding could be shared across programs to implement career pathways and sector partnership strategies, although they acknowledged that these decisions will involve further discussions between state and local partners. Officials in three states said they did not address cost-sharing issues in their state plans because they believed that the state plan was not the right vehicle for addressing these issues or because they did not have sufficient time to make these decisions prior to the submission deadline. Officials in the selected states reported facing challenges establishing regions, which they addressed by revising their regional boundaries or increasing the number of regions and by providing incentives for future regional collaboration or innovation. As previously noted, a change under WIOA is that states are required to establish regions, which may be made up of multiple local workforce areas that are to work together to develop regional workforce plans. According to DOL, the purpose of these regions is to align workforce development activities and resources with larger regional economic development areas and available resources in order to provide coordinated and efficient services to both job seekers and employers. In addition, DOL stated that regional partnerships better support the implementation of sector partnership and career pathways strategies, and may also lower costs and increase the effectiveness of service delivery through greater coordination. As previously noted, officials in each of the five selected states reported that they have made or will make major changes to implement these new regional requirements under WIOA, even though three of the states had some prior experience with regional planning. To draw proposed regional boundaries and assign local workforce areas to these regions, officials in the five selected states said they reviewed multiple sources of LMI and also consulted with local officials. For example, California officials told us that they developed a draft regional map in consultation with local workforce boards and state workforce associations. Officials in Colorado and Ohio said they considered dividing some local workforce areas into multiple regions in order to reflect regional labor markets or existing economic development regions. Colorado proposed this approach in its initial state plan. Specifically, Colorado officials told us they proposed dividing a large local area that covers most of the state into four different regions to align with regional economies. However, state officials said that when DOL conducted an early review of their state plan during the public comment period before they officially submitted it, DOL officials advised them that they could not divide a single local area into multiple regions. (For Colorado's initial and final regional maps, see appendix II.) DOL's final regulations also reflect this interpretation of WIOA in that they require regions to consist of one or more local areas. DOL officials explained that if local areas were divided into multiple regions, they would be required to participate in multiple regional planning efforts, which could be burdensome. Given that local areas cannot be split between regions, officials noted the importance of drawing local area boundaries in order to align them with regional economies, although they acknowledged that this can be challenging due to historical and political factors. For example, some local officials may be reluctant to change local area boundaries that have been in place for many years. Despite their efforts to consult local officials when developing proposed regions, officials in four states said they faced challenges due to local workforce areas' concerns about becoming part of a region, including questions about funding and the possibility that regional priorities could differ from local priorities. As a result, in three states officials told us they revised regional boundaries or increased the number of regions in response to feedback or appeals from local areas. For example, in California, after the state board received and granted appeals from two local areas, officials told us they made minor changes to regional boundaries. Officials said that one local area requested it be assigned to a different region due to commuting patterns and its existing relationships with community colleges. Similarly, Colorado officials said that successful state-level appeals from two local areas led them to revise regional boundaries and create two new regions. In addition, Ohio officials told us their initial draft plan included five regions but they ultimately designated 10 regions after a local area successfully appealed its local area designation to DOL, and the federal agencies issued final regulations, both of which affected the overall regional configuration. In three of the five states, the next step in their regional planning process is for regions and local areas to develop workforce plans. DOL and Education officials said they are aware that states have faced challenges designating regions, and plan to provide states with technical assistance on implementing other WIOA regional planning requirements. In addition, the agencies have developed the Innovation and Opportunity Network, an online community of practice through which they can facilitate technical assistance, information sharing, and training to help states, regions, and local areas implement WIOA. To help ensure that regional planning efforts continue to progress, officials in four of the five states reported that their states are providing incentives for collaboration or innovation at the regional level. For example, California officials said the state is using a portion of the governor's discretionary WIOA funding to support the SlingShot initiative, which aims to build the regional coordination and leadership necessary for effective regional planning. This initiative supports collaborative efforts by a broad range of stakeholders within a region to identify and then work to solve employment challenges. California is also using discretionary funding to support the Workforce Accelerator Fund initiative, which aims to better align existing programs to accelerate employment outcomes for populations with barriers to employment. In Kentucky, officials said the state is supporting regional collaboration and innovation by using the governor's discretionary funding to encourage the development of regional sector partnerships. In addition, a Kentucky official said the state is also using a private grant to fund regional efforts to develop career pathways and sector partnership strategies and ensure that they help job seekers obtain credentials that are valued by employers. We provided a draft of this report to the Department of Education and the Department of Labor for review and comment. Both departments provided technical comments, which we incorporated as appropriate. We are sending copies of this report to the appropriate congressional committees, the Secretary of Labor, the Secretary of Education, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-7215 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix III. We examined 1) the approaches selected states have taken to develop plans for implementing Workforce Innovation and Opportunity Act (WIOA) provisions related to career pathways, sector partnerships, and regional planning, and 2) the related planning challenges, if any, these states have encountered and how they have addressed them. To address both objectives, we reviewed relevant federal laws, regulations, and guidance; conducted case studies in five states; and interviewed federal Department of Labor (DOL) and Department of Education (Education) officials. To conduct case studies, we selected five states (California, Colorado, Kentucky, Ohio, and Pennsylvania), which were among those identified by national associations as 1) having substantial experience developing and implementing career pathways, sector partnerships, or regional planning prior to WIOA, and/or 2) making significant changes to implement any of these strategies under WIOA. Specifically, we asked four national associations that represent or have researched the state entities involved in WIOA strategic planning--the National Association of Workforce Boards, National Association of State Workforce Agencies, National Governors Association, and National Skills Coalition--to identify states that met one or both of our selection criteria. Associations could recommend states in any of the following six categories: experienced with career pathways strategies; experienced with sector partnership strategies; experienced with regional planning strategies; making significant changes to implement career pathways strategies; making significant changes to implement sector partnership making significant changes to implement regional planning strategies. To select states that had various levels of experience with these three strategies, we considered input from national associations and reviewed relevant reports. Specifically, we considered the number of recommendations that individual states received, and maximized representation across the categories in which the states were recommended. We also considered the number of associations that recommended an individual state. In addition, we reviewed information from two National Skills Coalition reports on sector partnerships and state plans. All five selected states were mentioned in at least one of these reports. In the selected states, we interviewed officials including the executive leadership of the state workforce development board, state board members, and state agency officials--such as officials from the state workforce, human services, or education agency--who were involved in developing the state plan. The information we obtained from state officials provides in-depth examples but is not generalizable to all states. In order to gather further information on their planned strategies and corroborate information from interviews, we reviewed the plans submitted by these five states to DOL and Education and other relevant documentation, such as documents summarizing the state planning process, state board meeting minutes and agendas, state guidance for local workforce areas, and other reports or materials produced by the state board. After reviewing and analyzing information from the states, we asked the state officials we interviewed to review relevant portions of the draft report for accuracy. We conducted this performance audit from September 2015 to November 2016 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. According to Colorado state workforce board officials, they proposed dividing a large local workforce area that covers most of the state into four different regions to align with regional economies. However, officials said that when the Department of Labor (DOL) conducted an early review of their state plan during the public comment period, before they officially submitted it, DOL officials advised them that they could not divide a single local area into multiple regions (see fig. 2). DOL's final regulations also reflect this interpretation of WIOA in that they require regions to consist of one or more local areas. In addition to the contact named above, Danielle Giese (Assistant Director), Caitlin Croake (Analyst-in-Charge), Jennifer Cook, Adam Gomez, Drew Nelson, and Paul Wright, along with Susan Aschoff, Holly Dye, Suellen Foth, Alex Galuten, Farrah Graham, Thomas James, Bill MacBlane, Dan Meyer, Chris Morehouse, Mimi Nguyen, Michelle Sager, and Almeta Spencer made significant contributions to this report. Workforce Innovation and Opportunity Act: Information on Planned Changes to State Reporting and Related Challenges. GAO-16-287. Washington, D.C.: March 7, 2016. Workforce Innovation and Opportunity Act: Performance Reporting and Related Challenges. GAO-15-764R. Washington, D.C.: Sept. 23, 2015. Workforce Investment Act: Local Areas Face Challenges Helping Employers Fill Some Types of Skilled Jobs. GAO-14-19. Washington, D.C.: Dec. 2, 2013. Workforce Investment Act: Innovative Collaborations between Workforce Boards and Employers Helped Meet Local Needs. GAO-12-97. Washington, D.C.: Jan. 19, 2012.
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Enacted in 2014, WIOA aims, in part, to increase coordination among federal workforce development programs, which are administered primarily by DOL and Education. GAO was asked to review selected states' approaches for addressing certain WIOA provisions in their state workforce plans. GAO examined 1) approaches selected states have taken to develop plans for implementing career pathways, sector partnerships, and regional planning strategies, and 2) related planning challenges these states have encountered and how they have addressed them. GAO reviewed relevant federal laws, regulations, and guidance. GAO also conducted case studies in five states (California, Colorado, Kentucky, Ohio, and Pennsylvania). GAO selected these states based on input from national associations about their level of experience with career pathways, sector partnerships, and regional planning strategies, and GAO's review of relevant reports. In these states, GAO interviewed state workforce board officials and agency officials who were involved in developing the state plan. The information GAO obtained provides in-depth examples but is not generalizable to all states. GAO also reviewed state plans and other relevant documentation. In addition, GAO interviewed DOL and Education officials. Officials in five selected states reported using three main approaches to develop plans for implementing career pathways, sector partnerships, and regional planning strategies under the Workforce Innovation and Opportunity Act (WIOA). GAO selected states that had various levels of experience with these strategies. Specifically, as a condition of receiving funding, federal agencies require state plans under WIOA to include career pathways strategies, which align education, job training, and support services to help job seekers obtain employment. These plans must also include sector partnership strategies, which help employers in an industry address shared goals and hiring needs. In addition, states are required to establish regions, which may be made up of multiple local workforce areas. According to the Department of Labor (DOL), these regions are intended in part to align workforce activities with regional economies. To address these requirements, officials in each of the five states reported: Building on prior experience to enhance career pathways, sector partnerships, or both strategies . For example, Pennsylvania's state plan proposes building on over 10 years of experience with sector partnerships by increasing technical assistance for them and exploring the development of a certification program for these partnerships. Increasing the involvement of stakeholders, which uncovered ways to enhance services in most selected states . For example, Ohio officials said they involved the state agency that oversees employment services for individuals with disabilities and advocates for these individuals in planning efforts for the first time, which led them to provide training on disability awareness for staff at all local workforce centers. Using multiple sources of labor market information, which helped better align career pathways strategies with employer needs in some selected states . For example, Colorado officials said they asked employers to review projected worker shortages in the medical industry over the next 10 years, and employers said they would need more workers over a shorter period of time. Officials used this information to focus their career pathways strategies on preparing individuals to eventually fill the jobs that were projected to have worker shortages. Officials in four of the states GAO selected reported facing challenges establishing regions due to local areas' concerns, which they addressed by revising regional boundaries or increasing the number of regions and by providing incentives for regional collaboration or innovation. In three states, officials said they revised their regions in response to local concerns. For example, California officials said they redrew regional boundaries after a local area requested that it be assigned to a different region based on commuting patterns, among other factors. In addition, to encourage regional collaboration or innovation, officials in four states reported providing financial incentives. For example, a Kentucky official said the state is using a private grant to fund regional efforts to develop career pathways and sector partnership strategies. Additionally, DOL and Department of Education (Education) officials told us that they plan to support states with related technical assistance. GAO is not making recommendations in this report. DOL and Education provided technical comments on a draft of this report, which GAO incorporated as appropriate.
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In 1972, the Congress established the Construction Grants Program to provide grants to help local governments construct wastewater treatment facilities. These federal grants provided most of the funding for these projects, with the remainder provided by the local government constructing the project. In 1987, the Congress began to phase out that program and authorized the creation of SRFs, which provide loans to local governments and others. The states are required to match SRF capitalization grants at a rate of at least one state dollar for every five federal dollars. The states have the option of increasing the amount of SRF funds available to lend by issuing bonds guaranteed by the money in the SRFs. According to a national survey, as of June 30, 1995 (the latest data available), the states collectively had $18.9 billion in their SRF accounts; over one-half of this amount (approximately $11 billion) was provided by federal capitalization grants. (The appendix provides additional information on the nine states' sources and uses of funds.) For the most part, the Congress gave the states flexibility to develop SRF loan assistance programs that meet their particular needs. However, the states must ensure that the projects funded with loans issued up to the amount of the federal capitalization grants meet two types of federal requirements. The first type includes those contained in the various statutes that apply generally to federal grant programs. These requirements--also called "cross-cutting" authorities--promote national policy goals, such as equal employment opportunity and participation by minority-owned businesses. The second type applies various provisions applicable to the Construction Grants Program (known as title II requirements because that program was authorized by title II of the Federal Water Pollution Control Act Amendments of 1972). These include compliance with the federal prevailing-wage requirement. The title II requirements apply only to those projects wholly or partially built before fiscal year 1995 with funds made directly available by federal capitalization grants. The transfer of federal funds to SRFs begins when the Congress appropriates funds annually to EPA. EPA then allots capitalization grants to the individual states, generally according to percentages specified in the Clean Water Act. To receive its allotment, a state has up to 2 years to apply for its capitalization grant. In order to apply, a state must, among other things, propose a list of potential projects to solve water quality problems and receive public comments on that list. After completing the list and receiving its capitalization grant, a state generally has 2 years to receive payments of the grant amount (via increases in its letter of credit). After each such increase, a state has up to 1 year to enter into binding commitments to fund specific projects. Next, a binding commitment is typically converted into a loan agreement. We collected detailed information on the use of revolving funds by nine states with SRF programs--Arizona, Florida, Illinois, Louisiana, Maryland, Missouri, Oregon, Pennsylvania, and Texas. We selected these states because they provide diversity in terms of the size and complexity of their SRF programs and other factors, such as geographic location. However, the conditions in these states are not necessarily representative of the conditions in all 51 SRFs. We used a questionnaire and follow-up discussions to collect information on SRF activities and finances from program officials from the nine states. We also interviewed EPA headquarters and regional officials who are responsible for the SRF program. We did not attempt to independently verify the information collected from EPA or the states. The data cited in this statement are as of the end of the applicable state's fiscal year or the federal fiscal year, as appropriate. In seven of the nine states, the state fiscal year ends on June 30; in Texas, it ends on August 31; and in Florida, it ends on September 30, which is also the end of the federal fiscal year. The overall amount of funds lent by the nine states increased between 1995 and 1996, from $3.3 billion to $4.0 billion. The amount lent by each state also increased. During the same time period, seven states increased their percentage of funds lent, and two states maintained or decreased their percentage of funds lent. All nine states increased the amount of funds they lent between 1995 and 1996. Six states increased their amount by 15 to 29 percent. For example, Pennsylvania increased the amount lent by 17 percent, from $267 million to $311 million. The other three states increased their amount of funds lent by 30 percent or more. The largest change--95 percent--was in Arizona, which increased from $50 million to $99 million. Seven of the nine states increased their percentage of funds lent between 1995 and 1996. Three states increased their percentage by 17 percentage points or more. Four other states increased theirs by 2 to 9 percentage points. Finally, one state's percentage stayed the same, and another state's declined by 2 percentage points. Among the nine states, the percentage of funds lent at the end of 1996 ranged from 60 to 99 percent. Specifically, five states lent 80 percent or more of their available funds, another three states lent 70 to 79 percent, and the final state lent 60 percent. Officials in eight of the nine states cited one or more factors at the federal level as affecting the amount and percentage of funds they lent. In seven states, officials said that uncertainty about the reauthorization of the SRF program discouraged some potential borrowers. Also, in seven states, officials cited a concern about compliance with federal requirements, including possible increases in project costs because of a federal prevailing-wage requirement. Finally, in three states, officials identified other reasons, such as federal restrictions on the use of SRF funds. Officials in seven of the nine states said that the lack of reauthorization of the Clean Water Act limited their success in lending funds. Among other things, the lack of reauthorization made it difficult to assure the communities applying for loans that SRF funds would be available to finance their projects and created uncertainty among communities about the terms of their loans. Officials from the seven states generally agreed that the amount and timing of federal funding became more uncertain after the SRF program's authorization expired at the end of September 1994. These officials said that, prior to 1994, they used the amounts in the authorizing legislation to help determine how much money they would have to lend each year. According to these officials, these amounts also helped reassure the communities that federal funding would be available for projects. These officials said that the uncertainty created by the lack of reauthorization made it difficult for states to schedule projects and assure the communities applying for loans that construction money would be available when needed. In addition, Pennsylvania officials said that the lack of reauthorization caused some communities to delay accepting SRF loans because they hoped for more favorable loan terms after the act was reauthorized. Specifically, the Congress has considered a proposal to extend the maximum term for an SRF loan, in certain cases, from 20 years to as much as 40 years and to provide lower interest rates. The state officials said that the communities were interested in both longer repayment periods and lower interest rates. According to a Pennsylvania official, several communities in the state had a loan approved by the state but had not formally accepted the loan. In three cases, local officials told us that they were delaying further action pending the act's reauthorization; the total dollar value of the loans was about $15 million. The Pennsylvania official told us that small, low-income communities in particular would benefit from the proposal to lengthen the repayment period. For example, in March 1995 Pennsylvania approved a $3 million loan for Burrell Township, which has approximately 3,000 people. However, as of October 1996, the community had not accepted the loan on the chance that a reauthorized act would provide for a longer loan term and thus lower annual repayments. Officials in seven of the nine states said that compliance with the federal requirements made financing projects with SRF funds less attractive and, in some cases, caused communities to turn down SRF loans. In particular, five states raised concerns that a federal prevailing-wage requirement could make SRF-financed projects more expensive to construct than projects constructed with other funds. While the title II requirements--which include the federal prevailing-wage requirement--ceased to apply to new projects after October 1, 1994, state officials said they were concerned that these requirements would be reinstated in the reauthorization act. For example, an Arizona official said that the prevailing-wage requirement could inflate a project's costs from 5 to 25 percent. A Louisiana official said that the community of East Baton Rouge Parish withdrew its 1990 SRF loan application for a project to serve about 120,000 people when it discovered that the prevailing-wage requirement would increase the labor cost of the project by more than $1.1 million--31 percent. Louisiana officials said that before the prevailing-wage requirement expired, the state had experienced difficulties in making loans largely because local officials perceived the requirement as increasing project costs. The officials said that Louisiana's lending rate increased in part because the wage requirement expired. The state's lending rate was 44 percent at the end of 1994, before the requirement expired; 62 percent at the end of 1995; and 79 percent at the end of 1996. EPA officials said they were aware that many states had a concern about the prevailing-wage requirement. They noted, however, that the requirement expired at the end of September 1994 and that the continued application of the requirement would be a state's management decision. They also noted that, even before the requirement expired, it applied only to projects funded with federal capitalization grants (as opposed to projects funded solely with state matching or borrowed funds, for example). Also, they noted that some states have chosen to continue requiring projects to comply with the requirement, even though they are no longer required to do so; however, they said, both Arizona and Louisiana no longer apply the requirement to projects they fund. Officials from three states identified other factors at the federal level that constrained lending. These included the awarding of federal funds directly for selected communities and federal restrictions on the use of SRF funds. Maryland and Pennsylvania officials said that the earmarking of federal funds--not from the SRF program--for specific communities raised the expectation in other communities that if they waited long enough, they might also receive funds directly. This expectation reduced these communities' incentive to apply for an SRF loan. For example, a Maryland official said that state SRF lending was limited by a congressional decision to provide federal funds directly for a project in Baltimore, which SRF officials had expected to finance. He said that the City of Baltimore turned down the SRF loan because it received $80 million in federal grant funds for the project in 1993 and 1994. The state official said that it took time to find other communities to borrow the money that was originally set aside for the Baltimore project. The state increased its percentage of funds lent from 61 percent at the end of 1995 to 70 percent at the end of 1996. Officials from Missouri said that certain federal restrictions on the use of SRF funds limit the amount of loans they can make. For example, a state official cited restrictions on financing the costs of acquiring land. Under the Clean Water Act, SRF loans cannot be made to purchase land unless the land itself is an integral part of the waste treatment processes. Thus, wetlands used to filter wastewater as part of the treatment process are an eligible expense under the act. However, other lands, such as the land upon which a treatment plant would be built, are not eligible. According to the official, because purchasing land for a wastewater treatment facility represents a large portion of the facility's cost but is ineligible for SRF financing, some communities are discouraged from seeking SRF loans. In Pennsylvania and Arizona, the amount of funds lent was limited by decisions on how to manage the loan fund. These decisions related to how to use SRF funds in Pennsylvania and how to publicize the program in Arizona. Pennsylvania established a state-funded program, independent of the SRF, in March 1988 to help communities finance wastewater and other projects. In the early years of the SRF program, Pennsylvania officials decided to finance about $248 million in wastewater projects with these state funds rather than wait for SRF funding to become available, according to state officials. According to these officials, the state decided to fund these projects as soon as possible with state funds to reduce public health risks. For example, about $30 million was awarded to the City of Johnstown to upgrade an existing treatment plant and thereby prevent raw sewage overflows and inadequately treated wastewater from being discharged into surface waters. According to a state official, Pennsylvania's percentage of funds lent would have been higher if the state had chosen to fund the $248 million in projects with SRF funds. In that case, he said, Pennsylvania's total amount of funds lent through the end of 1996 would have been $558 million, instead of $310 million, and the state would have lent all available funds, instead of 60 percent of those funds. Likewise, in Arizona, state decisions limited the amount of funds lent. According to a state official, efforts to inform local government officials about the SRF program and interest them in participating were not effective in the program's early years. This difficulty was compounded by restrictive provisions of state law that further limited the amount of SRF funds lent.The state official said that the outreach effort was refocused in 1995. He also noted that the approval of changes in state laws in 1995 and 1996 helped create a more positive atmosphere for outreach, even before the changes took effect. Arizona's percentage of funds lent was 55 percent at the end of 1995 and 81 percent at the end of 1996. Under the Clean Water State Revolving Fund (SRF) Program, the states use funds from six primary sources to make loans for wastewater treatment and related projects. These are: state matching funds, borrowed funds, unused funds from the Construction Grants Program, repayments of loans, and earnings on invested funds. All nine states received federal grants and provided state matching funds. These two sources generally accounted for most of the money in the nine states' revolving funds. Four of the nine states borrowed money for their revolving funds. Five states transferred unused funds from the old Construction Grants Program. All nine states received some loan repayments. Finally, eight states had investment earnings on loan repayments. Table I.1 shows the amount and sources of funding for the nine states we reviewed through each state's fiscal year 1996. To determine the percentage of funds lent by each state as of the end of 1995 and 1996, we divided the total amount of funds lent by the total funds available to lend, as defined above, both as of the end of the year. This method was based on the approach used by the Ohio Water Development Authority in conducting annual SRF surveys during 1992 through 1995. Table I.2 shows the amount and percentage of funds lent for the nine states for each state's fiscal year 1995 and 1996. Amount of funds lent (thousands of dollars) The first copy of each GAO report and testimony is free. Additional copies are $2 each. Orders should be sent to the following address, accompanied by a check or money order made out to the Superintendent of Documents, when necessary. VISA and MasterCard credit cards are accepted, also. Orders for 100 or more copies to be mailed to a single address are discounted 25 percent. U.S. General Accounting Office P.O. Box 6015 Gaithersburg, MD 20884-6015 Room 1100 700 4th St. NW (corner of 4th and G Sts. NW) U.S. General Accounting Office Washington, DC Orders may also be placed by calling (202) 512-6000 or by using fax number (301) 258-4066, or TDD (301) 413-0006. Each day, GAO issues a list of newly available reports and testimony. To receive facsimile copies of the daily list or any list from the past 30 days, please call (202) 512-6000 using a touchtone phone. A recorded menu will provide information on how to obtain these lists.
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GAO discussed selected states' experience with the Environmental Protection Agency's (EPA) Clean Water State Revolving Fund program, focusing on: (1) the amount of funds lent and the percentage of available funds lent, as of the end of each state's fiscal year 1996; and (2) information on factors at the federal and state levels that constrained the amount and percentage of funds lent. GAO noted that: (1) the nine states increased the total amount of funds they lent from $3.3 billion in 1995 to $4.0 billion in 1996; (2) all nine states increased the amount they lent by 15 percent or more, and three states achieved increases of 30 percent or more; (3) in addition, seven of the nine states increased the percentage of available funds they lent; (4) of these seven, three states increased this proportion by 17 percentage points or more; (5) nevertheless, the percentage of funds lent as of the end of 1996 varied substantially among the nine states; (6) specifically, five states had lent 80 percent or more of their available funds, three states had lent between 70 and 79 percent, and one state had lent 60 percent; (7) in eight of the nine states, officials identified the expiration of the authorizing legislation, as well as federal requirements, as affecting the amount and percentage of funds lent; (8) for example, officials in seven states said the legislation's expiration created uncertainty about the loan conditions that might apply in the future and caused some communities to postpone seeking or accepting loans; (9) also, officials in seven states said that other federal requirements, such as a prevailing-wage provision, discouraged some communities from seeking loans; and (10) finally, in two states, officials said that state program decisions constrained lending.
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For decades, fingerprint analysis has been the most widely used biometric technology for positively identifying arrestees and linking them with any previous criminal record. Beginning in 2010, the FBI began incrementally replacing the Integrated Automated Fingerprint Identification System (IAFIS) with Next Generation Identification (NGI) at an estimated cost of $1.2 billion. NGI was not only to include fingerprint data from IAFIS and biographic data, but also to provide new functionality and improve existing capabilities by incorporating advancements in biometrics, such as face recognition technology. As part of the fourth of six NGI increments, the FBI updated the Interstate Photo System (IPS) to provide a face recognition service that allows law enforcement agencies to search a database of about 30 million photos to support criminal investigations. NGI-IPS users include the FBI and selected state and local law enforcement agencies, which can submit search requests to help identify an unknown person using, for example, a photo from a surveillance camera. When a state or local agency submits such a photo, NGI-IPS uses an automated process to return a list of 2 to 50 possible candidate photos from the database, depending on the user's specification. Figure 1 describes the process for a search requested by state or local law enforcement. In addition to the NGI-IPS, the FBI has an internal unit called Facial Analysis, Comparison and Evaluation (FACE) Services that provides face recognition capabilities, among other things, to support active FBI investigations. FACE Services not only has access to NGI-IPS, but can search or request to search databases owned by the Departments of State and Defense and 16 states, which use their own face recognition systems. Figure 2 shows which states partnered with FBI for FACE Services requests, as of August 2016. Unlike NGI-IPS, which primarily contains criminal photos, these external systems primarily contain civil photos from state and federal government databases, such as driver's license photos and visa applicant photos. The total number of face photos available in all searchable repositories for FACE Services is over 411 million, and the FBI is interested in adding additional federal and state face recognition systems to its search capabilities. Biometric images specialists for FACE Services manually review candidate photos from their external partners before returning at most the top 1 or 2 photos as investigative leads to the requesting FBI agents. However, according to FACE Services officials, if biometric images specialists determine that none of the databases returned a likely match, they do not return any photos to the agents. Federal agency collection and use of personal information, including face images, is governed primarily by two laws: the Privacy Act of 1974 and the privacy provisions of the E-Government Act of 2002. The Privacy Act places limitations on agencies' collection, disclosure, and use of personal information maintained in systems of records. The Privacy Act requires that when agencies establish or make changes to a system of records, they must notify the public through a system of records notice (SORN) in the Federal Register. According to the Office of Management and Budget (OMB) guidance, the purposes of the notice are to inform the public of the existence of systems of records; the kinds of information maintained; the kinds of individuals on whom information is maintained; the purposes for which they are used; and how individuals can exercise their rights under the Privacy Act. The E-Government Act of 2002 requires that agencies conduct Privacy Impact Assessments (PIAs) before developing or procuring information technology (or initiating a new collection of information) that collects, maintains, or disseminates personal information. The assessment helps agencies examine the risks and effects on individual privacy and evaluate protections and alternative processes for handling information to mitigate potential privacy risks. OMB guidance also requires agencies to perform and update PIAs as necessary where a system change creates new privacy risks, for example, when the adoption or alteration of business processes results in personal information in government databases being merged, centralized, matched with other databases or otherwise significantly manipulated. Within the Department of Justice (DOJ), preserving civil liberties and protecting privacy is a responsibility shared by department level offices and components. As such, DOJ and the FBI have established oversight structures to help protect privacy and oversee compliance with statutory requirements. For example, while the FBI drafts privacy documentation for its face recognition capabilities, DOJ offices review and approve key documents developed by the FBI--such as PIAs and SORNs. However, the FBI did not update the NGI-IPS PIA in a timely manner when the system underwent significant changes and did not develop and publish a PIA for FACE Services before that unit began supporting FBI agents. Additionally, DOJ did not publish a SORN that addresses the collection and maintenance of photos accessed and used through the FBI's face recognition capabilities until after our 2016 review. Consistent with the E-Government Act and OMB guidance, DOJ developed guidance that requires initial PIAs to be completed at the beginning of development of information systems and any time there is a significant change to the information system in order to determine whether there are any resulting privacy issues. DOJ published a PIA at the beginning of the development of NGI-IPS in 2008, as required. However, the FBI did not publish a new PIA or update the 2008 PIA before beginning to pilot NGI-IPS in December 2011 or as significant changes were made to the system through September 2015. During that time, the FBI used NGI-IPS to conduct over 20,000 searches to assist in investigations throughout the pilot. Similarly, DOJ did not approve a PIA for FACE Services when it began supporting investigations in August 2011. As a new use of information technology involving the handling of personal information, it too, required a PIA. Figure 3 provides key dates in the implementation of these face recognition capabilities and the associated privacy notices. During the course of our review, DOJ approved the NGI-IPS PIA in September 2015 and the FACE Services PIA in May 2015--over three years after the NGI-IPS pilot began and FACE Services began supporting FBI agents with face recognition services. DOJ and FBI officials stated that these PIAs reflect the current operation of NGI-IPS and FACE Services. However, as the internal drafts of these PIAs were updated, the public remained unaware of the department's consideration for privacy throughout development of NGI-IPS and FACE Services. This is because the updates were not published, as required. Specifically, delays in the development and publishing of up-to-date PIAs for NGI-IPS and FACE Services limited the public's knowledge of how the FBI uses personal information in the face recognition search process. Additionally, DOJ did not publish a SORN, as required by the Privacy Act, that addresses the collection and maintenance of photos accessed and used through the FBI's face recognition capabilities until May 5, 2016-- after completion of our review. At that time, the FBI published a new SORN that reported the modification of the Fingerprint Identification Records System to be renamed the Next Generation Identification (NGI) System. However, according to OMB guidance then in effect, the SORN must appear in the Federal Register before the agency begins to operate the system, e.g., collect and use the information. While the new SORN addresses face recognition, those capabilities have been in place since 2011. Throughout this period, the agency collected and maintained personal information for these capabilities without the required explanation of what information it is collecting or how it is used. Completing and publishing SORNs in a timely manner is critical to providing transparency to the public about the personal information agencies plan to collect and how they plan to use the information. In our May 2016 report, we made two recommendations to DOJ regarding its processes to develop privacy documentation, and DOJ officials disagreed with both. We recommended that DOJ assess the PIA development process to determine why PIAs were not published prior to using or updating face recognition capabilities. DOJ officials did not concur with this recommendation, and stated that the FBI has established practices that protect privacy and civil liberties beyond the requirements of the law. Further, DOJ stated that it developed PIAs for both FACE Services and NGI-IPS, as well as other privacy documentation, throughout the development of the these capabilities that reflect privacy choices made during their implementation. For example, DOJ officials stated that it revised the FACE Services PIA as decisions were made. We agree that, during the course of our review, DOJ published PIAs for both FACE Services and NGI-IPS. However, as noted in the report, according to the E-Government Act and OMB and DOJ guidance, PIAs are to be assessments performed before developing or procuring technologies and upon significant system changes. Further, DOJ guidance states that PIAs give the public notice of the department's consideration of privacy from the beginning stages of a system's development throughout the system's life cycle and ensures that privacy protections are built into the system from the start-not after the fact-when they can be far more costly or could affect the viability of the project. In its response to our draft report, DOJ officials stated that it will internally evaluate the PIA process as part of the Department's overall commitment to improving its processes, not in response to our recommendation. In March 2017, we followed up with DOJ to obtain its current position on our recommendation. DOJ continues to believe that its approach in designing the NGI system was sufficient to meet legal privacy requirements and that our recommendation represents a "checkbox approach" to privacy. We disagree with DOJ's characterization of our recommendation. We continue to believe that the timely development and publishing of future PIAs would increase transparency of the department's systems. We recognize the steps the agency took to consider privacy protection during the development of the NGI system. We also stand by our position that notifying the public of these actions is important and provides the public with greater assurance that DOJ components are evaluating risks to privacy when implementing systems. We also recommended DOJ develop a process to determine why a SORN was not published for the FBI's face recognition capabilities prior to using NGI-IPS, and implement corrective actions to ensure SORNs are published before systems become operational. DOJ agreed, in part, with our recommendation and submitted the SORN for publication after we provided our draft report for comment. However: DOJ did not agree that the publication of a SORN is required by law. We disagree with DOJ's interpretation regarding the legal requirements of a SORN. The Privacy Act of 1974 requires that when agencies establish or make changes to a system of records, they must notify the public through a SORN published in the Federal Register. DOJ's comments on our draft report acknowledge that the automated nature of face recognition technology and the sheer number of photos now available for searching raise important privacy and civil liberties considerations. DOJ officials also stated that the FBI's face recognition capabilities do not represent new collection, use, or sharing of personal information. We disagree. We believe that the ability to perform automated searches of millions of photos is fundamentally different in nature and scope than manual review of individual photos, and the potential impact on privacy is equally fundamentally different. By assessing the SORN development process and taking corrective actions to ensure timely development of future SORNs, the public would have a better understanding of how personal information is being used and protected by DOJ components. The Criminal Justice Information Services (CJIS), which operates FBI's face recognition capabilities, has an audit program to evaluate compliance with restrictions on access to CJIS systems and information by its users, such as the use of fingerprint records. However, at the time of our review, it had not completed audits of the use of NGI-IPS or FACE Services searches of external databases. State and local users have been accessing NGI-IPS since December 2011 and have generated IPS transaction records since then that would enable CJIS to assess user compliance. In addition, the FACE Services Unit has used external databases that include primarily civil photos to support FBI investigations since August 2011, but the FBI had not audited its use of these databases. Standards for Internal Control in the Federal Government call for federal agencies to design and implement control activities to enforce management's directives and to monitor the effectiveness of those controls. In 2016, we recommended that the FBI conduct audits to determine the extent to which users of NGI-IPS and biometric images specialists in FACE Services are conducting face image searches in accordance with CJIS policy requirements. DOJ partially concurred with our recommendation. Specifically, DOJ concurred with the portion of our recommendation related to the use of NGI-IPS. DOJ officials stated that the FBI specified policy requirements with which it could audit NGI-IPS users in late 2014, completed a draft audit plan during the course of our review in summer 2015, and expects to begin auditing use of NGI-IPS in fiscal year 2016. As of March 2017, DOJ reported that the CJIS Audit Unit began assessing NGI-IPS requirements at participating states in conjunction with its triennial National Identity Services audit and that as of February 2017, the unit had conducted NGI-IPS audits of four states. At the time we issued our 2016 report, DOJ officials did not fully comment on the portion of our recommendation that the FBI audit the use of external databases, because FBI officials said the FBI does not have authority to audit these systems. As noted in the report, we understand the FBI may not have authority to audit the maintenance or operation of databases owned and managed by other agencies. However, the FBI does have a responsibility to oversee the use of the information by its own employees. As a result, our recommendation focuses on auditing both NGI-IPS users, such as states and FACE Services employees, as well as FACE Services employees' use of information received from external databases--not on auditing the external databases. We continue to believe that the FBI should audit biometric images specialists' use of information received from external databases to ensure compliance with FBI privacy policies and to ensure images are not disseminated for unauthorized purposes or to unauthorized recipients. In March 2017, DOJ provided us with the audit plan the CJIS Audit Unit developed in June 2016 for NGI-IPS users. DOJ officials said CJIS developed an audit plan of the FACE Services Unit to coincide with the existing triennial FBI internal audit for 2018. However, DOJ did not provide the audit plan for the FACE Services Unit. DOJ officials said the methodology would be the same as the audit plan for NGI-IPS, but that methodology does not describe oversight on use of information obtained from external systems accessed by FACE Services employees. Therefore, we believe DOJ is making progress towards meeting, but has not fully implemented our recommendation. In May 2016, we reported that prior to accepting and deploying NGI-IPS, the FBI conducted testing to evaluate how accurately face recognition searches returned matches to persons in the database. However, the tests were limited because they did not include all possible candidate list sizes and did not specify how often incorrect matches were returned. According to the National Science and Technology Council and the National Institute of Standards and Technology, the detection rate (how often the technology generates a match when the person is in the database) and the false positive rate (how often the technology incorrectly generates a match to a person in the database) are both necessary to assess the accuracy of a face recognition system. The FBI's detection rate requirement for face recognition searches states when the person exists in the database, NGI-IPS shall return a match of this person at least 85 percent of the time (the detection rate). However, the FBI only tested this requirement with a candidate list of 50 potential matches. In these tests, according to FBI documentation, 86 percent of the time, a match to a person in the database was correctly returned. Further, FBI officials stated that they have not assessed how often NGI-IPS face recognition searches erroneously match a person to the database (the false positive rate). As a result, we recommended that the FBI conduct tests of NGI-IPS to verify that the system is sufficiently accurate for all allowable candidate list sizes and ensure that both the detection rate and the false positive rate are identified for such tests. With the recommended testing, the FBI would have more reasonable assurance that NGI-IPS provides investigative leads that help enhance, rather than hinder or overly burden, criminal investigation work. If false positives are returned at a higher than acceptable rate, law enforcement users may waste time and resources pursuing unnecessary investigative leads. In addition, the FBI would help ensure that it is sufficiently protecting the privacy and civil liberties of U.S. citizens enrolled in the database. Specifically, according to a July 2012 Electronic Frontier Foundation hearing statement, false positives can alter the traditional presumption of innocence in criminal cases by placing more of a burden on the defendant to show he is not who the system identifies him to be. The Electronic Frontier Foundation argues that this is true even if a face recognition system such as NGI-IPS provides several matches instead of one, because each of the potentially innocent individuals identified could be brought in for questioning. In comments on our draft report in 2016, and reiterated during recommendation follow-up, as of March 2017, DOJ did not concur with this recommendation. DOJ officials stated that the FBI has performed accuracy testing to validate that the system meets the requirements for the detection rate, which fully satisfies requirements for the investigative lead service provided by NGI-IPS. We disagree with DOJ. A key focus of our recommendation is the need to ensure that NGI-IPS is sufficiently accurate for all allowable candidate list sizes. Although the FBI has tested the detection rate for a candidate list of 50 photos, NGI-IPS users are able to request smaller candidate lists-- specifically between 2 and 50 photos. FBI officials stated that they do not know, and have not tested, the detection rate for other candidate list sizes. According to these officials, a smaller candidate list would likely lower the detection rate because a smaller candidate list may not contain a likely match that would be present in a larger candidate list. However, according to the FBI Information Technology Life Cycle Management Directive, testing needs to confirm the system meets all user requirements. Because the accuracy of NGI-IPS's face recognition searches when returning fewer than 50 photos in a candidate list is unknown, the FBI is limited in understanding whether the results are accurate enough to meet NGI-IPS users' needs. DOJ officials also stated that searches of NGI-IPS produce a gallery of likely candidates to be used as investigative leads, not for positive identification. As a result, according to DOJ officials, NGI-IPS cannot produce false positives and there is no false positive rate for the system. We disagree with DOJ. The detection rate and the false positive rate are both necessary to assess the accuracy of a face recognition system. Generally, face recognition systems can be configured to allow for a greater or lesser number of matches. A greater number of matches would generally increase the detection rate, but would also increase the false positive rate. Similarly, a lesser number of matches would decrease the false positive rate, but would also decrease the detection rate. Reporting a detection rate of 86 percent without reporting the accompanying false positive rate presents an incomplete view of the system's accuracy. FBI, DOJ, and OMB guidance all require annual reviews of operational information technology systems to assess their ability to continue to meet cost and performance goals. For example, the FBI's Information Technology Life Cycle Management Directive requires an annual operational review to ensure that the fielded system is continuing to support its intended mission, among other things. In 2016, we reported that the FBI had not assessed the accuracy of face recognition searches of NGI-IPS in its operational setting--the setting in which enrolled photos, rather than a test database of photos--are used to conduct a search for investigative leads. According to FBI officials, the database of photos used in its tests is representative of the photos in NGI-IPS, and ongoing testing in a simulated environment is adequate. However, according to the National Institute of Standards and Technology, as the size of a photo database increases, the accuracy of face recognition searches performed on that database can decrease due to lookalike faces. FBI's test database contains 926,000 photos while NGI-IPS contains about 30 million photos. As a result, we recommended the FBI conduct an operational review of NGI-IPS at least annually that includes an assessment of the accuracy of face recognition searches to determine if it is meeting federal, state, and local law enforcement needs and take actions, as necessary, to improve the system. In 2016, DOJ concurred with this recommendation. As of March 2017, FBI officials stated they implemented the recommendation by submitting a paper to solicit feedback from users through the Fall 2016 Advisory Policy Board Process. Specifically, officials said the paper requested feedback on whether the face recognition searches of the NGI-IPS are meeting their needs, and input regarding search accuracy. According to FBI officials, no users expressed concern with any aspect of the NGI-IPS meeting their needs, including accuracy. Although FBI's action of providing working groups with a paper presenting GAO's recommendation is a step, FBI's actions do not fully meet the recommendation. FBI's paper was presented as informational, and did not result in any formal responses from users. We disagree with FBI's conclusion that receiving no responses on the informational paper fulfills the operational review recommendation, which includes determining that NGI-IPS is meeting user's needs. As such, we continue to recommend the FBI conduct an operational review of NGI-IPS at least annually. In 2016 we reported that FBI officials did not assess the accuracy of face recognition systems operated by external partners. Specifically, before agreeing to conduct searches on, or receive search results from, these systems, the FBI did not ensure the accuracy of these systems was sufficient for use by FACE Services. Standards for Internal Controls in the Federal Government call for agencies to design and implement components of operations to ensure they meet the agencies mission, goals, and objectives, which, in this case, is to identify missing persons, wanted persons, suspects, or criminals for active FBI investigations. As a result, we recommended the FBI take steps to determine whether each external face recognition system used by FACE Services is sufficiently accurate for the FBI's use and whether results from those systems should be used to support FBI investigations. In comments on our draft report in 2016, and reiterated during recommendation follow-up in 2017, DOJ officials did not concur with this recommendation. DOJ officials stated that the FBI has no authority to set or enforce accuracy standards of face recognition technology operated by external agencies. In addition, DOJ officials stated that the FBI has implemented multiple layers of manual review that mitigate risks associated with the use of automated face recognition technology. Further, DOJ officials stated there is value in searching all available external databases, regardless of their level of accuracy. We disagree with the DOJ position. We continue to believe that the FBI should assess the quality of the data it is using from state and federal partners. We acknowledge that the FBI cannot and should not set accuracy standards for the face recognition systems used by external partners. We also do not dispute that the use of external face recognition systems by the FACE Services Unit could add value to FBI investigations. However, we disagree with FBI's assertion that no assessment of the quality of the data from state and federal partners is necessary. We also disagree with the DOJ assertion that manual review of automated search results is sufficient. Even with a manual review process, the FBI could miss investigative leads if a partner does not have a sufficiently accurate system. The FBI has entered into agreements with state and federal partners to conduct face recognition searches using over 380 million photos. Without actual assessments of the results from its state and federal partners, the FBI is making decisions to enter into agreements based on assumptions that the search results may provide valuable investigative leads. For example, the FBI's accuracy requirements for criminal investigative purposes may be different than a state's accuracy requirements for preventing driver's license fraud. By relying on its external partners' face recognition systems, the FBI is using these systems as a component of its routine operations and is therefore responsible for ensuring the systems will help meet FBI's mission, goals and objectives. Until FBI officials can assure themselves that the data they receive from external partners are reasonably accurate and reliable, it is unclear whether such agreements are beneficial to the FBI, whether the investment of public resources is justified, and whether photos of innocent people are unnecessarily included as investigative leads. Chairman Chaffetz, Ranking Member Cummings, and Members of the Committee, this concludes my prepared statement. I would be happy to respond to any questions you may have. For questions about this statement, please contact Diana Maurer at (202) 512-8777 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. Individuals making key contributions to this statement include Dawn Locke (Assistant Director), Susanna Kuebler (Analyst-In-Charge), Jennifer Beddor, Eric Hauswirth, Richard Hung, Alexis Olson, and David Plocher. Key contributors for the previous work that this testimony is based on are listed in the previously issued product. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.
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Technology advancements have increased the overall accuracy of automated face recognition over the past few decades. This technology has helped law enforcement agencies identify criminals in their investigations. However, privacy advocates and members of the Congress remain concerned regarding the accuracy of the technology and the protection of privacy and individual civil liberties when technologies are used to identify people based on their biological and behavioral characteristics. This statement describes the extent to which the FBI ensures adherence to laws and policies related to privacy regarding its use of face recognition technology, and ensure its face recognition capabilities are sufficiently accurate. This statement is based on our May 2016 report regarding the FBI's use of face recognition technology and includes agency updates to our recommendations. To conduct that work, GAO reviewed federal privacy laws, FBI policies, operating manuals, and other documentation on its face recognition capability. GAO interviewed officials from the FBI and the Departments of Defense and State, which coordinate with the FBI on face recognition. GAO also interviewed two state agencies that partner with FBI to use multiple face recognition capabilities. In May 2016, GAO found that the Federal Bureau of Investigation (FBI) had not fully adhered to privacy laws and policies and had not taken sufficient action to help ensure accuracy of its face recognition technology. GAO made six recommendations to address these issues. As of March 2017, the Department of Justice (DOJ) and the FBI disagreed with three recommendations and had taken some actions to address the remainder, but had not fully implemented them. Privacy notices not timely. In May 2016, GAO recommended DOJ determine why privacy impact assessments (PIA) were not published in a timely manner (as required by law) and take corrective action. GAO made this recommendation because FBI did not update the Next Generation Identification-Interstate Photo System (NGI-IPS) PIA in a timely manner when the system underwent significant changes or publish a PIA for Facial Analysis, Comparison and Evaluation (FACE) Services before that unit began supporting FBI agents. DOJ disagreed on assessing the PIA process stating it established practices that protect privacy and civil liberties beyond the requirements of the law. GAO also recommended DOJ publish a system of records notice (SORN) and assess that process. DOJ agreed to publish a SORN, but did not agree there was a legal requirement to do so. GAO believes both recommendations are valid to keep the public informed on how personal information is being used and protected by DOJ components. GAO also recommended the FBI conduct audits to determine if users of NGI-IPS and biometric images specialists in the FBI's FACE Services unit are conducting face image searches in accordance with DOJ policy requirements. The FBI began conducting NGI-IPS user audits in 2017. Accuracy testing limited. In May 2016, GAO recommended the FBI conduct tests to verify that NGI-IPS is accurate for all allowable candidate list sizes to give more reasonable assurance that NGI-IPS provides leads that help enhance criminal investigations. GAO made this recommendation because FBI officials stated that they do not know, and have not tested, the detection rate for candidate list sizes smaller than 50, which users sometimes request from the FBI. GAO also recommended the FBI take steps to determine whether systems used by external partners are sufficiently accurate for FBI's use. By taking such steps, the FBI could better ensure the data from external partners do not unnecessarily include photos of innocent people as investigative leads. However, FBI disagreed with these two recommendations, stating the testing results satisfy requirements for providing investigative leads and that FBI does not have authority to set accuracy requirements for external systems. GAO continues to believe these recommendations are valid because the recommended testing and determination of accuracy of external systems would give the FBI more reasonable assurance that the systems provide investigative leads that help enhance, rather than hinder or overly burden, criminal investigation work. GAO also recommended the FBI conduct an annual operational review of NGI-IPS to determine if the accuracy of face recognition searches is meeting federal, state, and local law enforcement needs and take actions, as necessary. DOJ agreed and in 2017 FBI stated they implemented the recommendation by submitting a paper to solicit feedback from NGI-IPS users on whether face recognition searches are meeting their needs. However, GAO believes these actions do not fully meet the recommendation because they did not result in any formal response from users and did not constitute an operational review. GAO continues to recommend FBI conduct an operational review of NGI-IPS at least annually. In May 2016, DOJ and the FBI partially agreed with two recommendations and disagreed with another on privacy. FBI agreed with one and disagreed with two recommendations on accuracy. GAO continues to believe that the recommendations are valid.
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ONDCP was established by the Anti-Drug Abuse Act of 1988 to, among other things, enhance national drug control planning and coordination and represent the drug policies of the executive branch before Congress. In this role, the office is responsible for (1) developing a national drug control policy, (2) developing and applying specific goals and performance measurements to evaluate the effectiveness of national drug control policy and National Drug Control Program agencies' programs, (3) overseeing and coordinating the implementation of the national drug control policy, and (4) assessing and certifying the adequacy of the budget for National Drug Control Programs. The 2010 Strategy is the inaugural strategy guiding drug policy under President Obama's administration. For the 2010 Strategy, ONDCP changed its approach from publishing a 1-year Strategy to publishing a 5- year Strategy, which ONDCP is to update annually. The annual updates are to provide an implementation progress report as well as an opportunity to make adjustments to reflect policy changes. ONDCP established two overarching policy goals in the 2010 Strategy for (1) curtailing illicit drug consumption and (2) improving public health by reducing the consequences of drug abuse, and seven subgoals under them that delineate specific quantitative outcomes to be achieved by 2015, such as reducing drug-induced deaths by 15 percent. To support the achievement of these two policy goals and seven subgoals (collectively referred to as goals), the Strategy and annual updates include seven strategic objectives and multiple action items under each objective, with lead and participating agencies designated for each action item. ONDCP reported that about $25.2 billion was provided for drug control programs in fiscal year 2012. Of this, $10.1 billion, or 40 percent, was allocated to drug abuse prevention and treatment programs. The 15 federal departments, agencies, and components (collectively referred to as agencies) we selected for our review of drug abuse prevention and treatment programs collectively allocated about $4.5 billion in fiscal year 2012 to such programs. These agencies included the Substance Abuse and Mental Health Services Administration, Department of Education, Department of Housing and Urban Development, National Highway Traffic Safety Administration, Office of Justice Programs, and Bureau of Prisons, among others. The HIDTA program was established in 1988 and is a federally funded program administered by ONDCP that brings together federal, state, and local law enforcement agencies into task forces that conduct investigations of drug-trafficking organizations in designated areas. The HIDTA program is focused on counternarcotics. However, HIDTA program resources may also be used for other purposes such as to assist law enforcement agencies in investigations and activities related to terrorism and the prevention of terrorism. There are 28 HIDTAs across the United States, and each has an Investigative Support Center that serves to support the HIDTA program by providing analytical case support, promoting officer safety, preparing and issuing drug threat assessments, and developing and disseminating intelligence products. The HIDTA and RISS programs operate three separate systems that have (1) event deconfliction functions to determine when multiple federal, state, or local law enforcement agencies are conducting enforcement actions--such as raids, undercover operations, or surveillances--in proximity to one another during a specified time period, or (2) target deconfliction functions, which determine if multiple law enforcement agencies are investigating, for example, the same person, vehicle, weapon, or business. Individual HIDTAs have used the Secure Automated Fast Event Tracking Network (SAFETNet) system, which has had event deconfliction functions, among other functions, since 2001 to help ensure officer safety. In 2009, the HIDTA program introduced deconfliction features into the Case Explorer system that differed from SAFETNet by providing a free service that is tied to its performance management process. In 2009, RISS developed RISSafe to provide event deconfliction to its members and those not being served by another system. Pursuant to federal legislation enacted in 2010, we conduct routine investigations to identify programs, agencies, offices, and initiatives with duplicative goals and activities within departments and government-wide and report annually to Congress. In March 2011 and February 2012, we issued our first two annual reports to Congress in response to this requirement. On the basis of the framework established in these reports, we used the following definitions for assessing drug abuse prevention and treatment programs and field-based information sharing entities: Fragmentation occurs when more than one federal agency (or more than one organization within an agency) is involved in the same broad area of national interest. Overlap occurs when fragmented agencies or programs have similar goals, engage in similar activities or strategies to achieve them, or target similar beneficiaries. Duplication occurs when two or more agencies or programs are engaged in the same activities or provide the same services to the same beneficiaries. In our March 2013 report, we found that ONDCP and other federal agencies had not made progress toward achieving most of the goals articulated in the 2010 National Drug Control Strategy. In the Strategy, ONDCP established seven goals related to reducing illicit drug use and its consequences by 2015. As we reported in March 2013, our analysis showed that of the five goals for which primary data on results were available, one showed progress and four showed either no change or movement away from the 2015 goals. For example, no progress had been made on the goal to reduce drug use among 12- to 17-year-olds by 15 percent. According to the data source for this measure--the National Survey on Drug Use and Health--this was primarily due to an increase in the rate of reported marijuana use, offset by decreases in the rates of reported use of other drugs. Table 1 shows 2010 Strategy goals and progress toward meeting them, as of March 2013. We reported in March 2013 that, according to ONDCP officials, a variety of factors could affect achievement of these goals, such as worsening economic conditions, changing demographics, or changing social or political environments; the passage of state laws that decriminalize marijuana use or allow its use for medical purposes; failure to obtain sufficient resources to address drug control problems; insufficient commitment from agency partners; and the need for new action items that include initiatives or activities beyond those that are under way or planned. We reported that ONDCP officials stated that the office's new Performance Reporting System (PRS) is to provide more specific information about where the Strategy is on or off track and prompt diagnostic reviews to identify causal factors contributing to any problems identified, as discussed below. ONDCP released the 2015 Strategy on November 17, 2015, and it is an annual update to the 2010 Strategy. Since our March 2013 report, ONDCP has begun reporting progress toward two goals where data were not initially available. According to data available to date, the Strategy shows progress toward achieving one goal, no progress on three goals, and mixed progress on the remaining three goals. Overall, none of the goals in the 2010 Strategy have been fully achieved. Table 2 shows the 2010 Strategy goals and ONDCP's reported progress toward meeting them. In March 2013, we reported that ONDCP established the PRS to monitor and assess progress toward meeting Strategy goals and objectives and issued a report (the PRS report) describing the system with the 2012 Strategy update. The PRS includes interagency performance measures and targets under each Strategy objective. For example, 1 of the 6 performance measures under the objective to strengthen efforts to prevent drug use in our communities is the average age of initiation for all illicit drug use, which has a 2009 baseline of 17.6 years of age and a 2015 target of 19.5 years of age. According to the PRS report, system information is to be used to inform budget formulation and resource allocation, Strategy implementation, and policy making, among other things. As part of our review, we assessed PRS measures and found them to be generally consistent with attributes of effective performance management identified in our prior work as important for ensuring performance measures demonstrate results and are useful for decision making. For example, we found that the PRS measures are clearly stated, with descriptions included in the 2012 PRS report, and all 26 of them have or are to have measurable numerical targets. In addition, the measures were developed with input from stakeholders through an interagency working group process, which included participation by the Departments of Education, Justice, and Health and Human Services, among others. The groups assessed the validity of the measures and evaluated data sources, among other things. We reported in March 2013 that, according to ONDCP officials, information collected through the PRS is to provide valuable insights to help identify where the Strategy is on track and when further problem solving and evaluation are needed. At that time, the system was still in its early stages and ONDCP had not issued its first report on the results of the system's performance measures. Accordingly, operational information was not available to evaluate the system's results. ONDCP officials stated that when results are determined to not be on track to meet 2015 targets, the PRS is to serve as a trigger for an interagency review of potential causes of performance gaps and options for improvement. We reported that, according to these officials, ONDCP plans to assess the effectiveness of the PRS more comprehensively to determine how well it is working and whether any adjustments need to be made after the system has been operational for a longer period of time. We also reported that these plans should help increase accountability for improving results and enhance the system's effectiveness as a mechanism to monitor progress toward Strategy goals and objectives and assess where further action is needed to improve progress. ONDCP released its annual PRS report on November 17, 2015. The 2015 report assesses progress on the Strategy's goals, as well as performance measures related to each of the Strategy's objectives, and discusses future actions required to achieve these goals and measures. ONDCP has assessed the extent of overlap and potential for duplication across federal drug abuse prevention and treatment programs and identified opportunities for increased coordination, as we recommended in March 2013. Specifically, we reported that drug abuse prevention and treatment programs were fragmented across 15 federal agencies that funded or administered 76 programs in fiscal year 2011, and identified overlap in 59 of these programs because they can provide or fund at least one drug abuse prevention or treatment service that at least 1 other program can provide or fund, either to similar population groups or to reach similar program goals. For example, 6 programs reported that they can provide or fund drug abuse prevention services for students and youth in order to support program goals of preventing drug use and abuse among young people. All 6 of these programs also reported that they can provide or fund services to conduct outreach and educate youth on drug use. As part of our review, we also conducted a more in-depth analysis in two selected areas where we identified overlap--programs for youth and programs for offenders. We reported that agency officials who administer programs in these two areas took various efforts to coordinate overlapping programs or services, which can serve to minimize the risk of duplication. For example, using an interagency agreement, the Department of Education jointly administers the Safe Schools/Healthy Students program with the Departments of Justice and Health and Human Services to provide complementary educational, mental health, and law enforcement services to prevent youth violence and drug use. We found in March 2013 that although the agencies' coordination efforts in these two areas were consistent with practices that we had previously reported federal agencies use to implement collaborative efforts, not all of the programs surveyed were involved in coordination efforts with other federal agencies. Specifically, officials from 29 of the 76 (about 40 percent) programs surveyed reported no coordination with other federal agencies on drug abuse prevention or treatment activities in the year prior to our survey. Furthermore, we reported that although ONDCP coordinates efforts to develop and implement the Strategy and National Drug Control Program Budget, it had not systematically assessed drug abuse prevention and treatment programs to examine the extent of overlap and potential for duplication and identify opportunities for greater coordination. As a result, we recommended that ONDCP conduct such an assessment. ONDCP concurred with our recommendation and has implemented it. In July 2014, ONDCP published an assessment of drug abuse prevention and treatment programs in its fiscal year 2015 Budget and Performance Summary, which was released with the annual Strategy. ONDCP reported that it conducted this assessment by (1) preparing an inventory of federal agency drug abuse prevention and treatment program activities, starting with those in our report; (2) mapping the beneficiaries and services provided by each program activity to determine the extent of overlap; and (3) reviewing overlapping programs to assess the level of coordination activities, among other steps. The assessment found that these programs generally serve distinct beneficiaries in distinct settings, which helps prevent overlap and duplication. In the cases where overlap could occur, ONDCP's review of grant awards made under the programs determined that duplication did not occur over a 3-year period ending in 2013. Further, according to the assessment, the agencies managing overlapping programs have coordinated through interagency collaboration, coordinated grant applications, and other activities. However, ONDCP found that programs that provide drug abuse prevention and treatment services to support efforts to address homelessness would benefit from greater coordination. In August 2014, ONDCP stated that it is working to ensure additional coordination in this area by, for example, providing guidance to relevant agencies during the office's budget and oversight review process on improving coordination of grant programs that offer similar treatment and recovery support services to homeless clients. ONDCP's assessment states that the office will continue to monitor the programs that overlap, as well as any new federal programs that are added to prevent and treat substance use disorders. According to the assessment, this monitoring is to include requiring regular reporting from the agencies as a part of interagency drug abuse prevention and treatment working group meetings and working with the agencies to ensure greater coordination and opportunities to consolidate programs as a part of the annual budget process. As a result of ONDCP's actions in response to our recommendation, the office will be better positioned to help ensure that federal agencies undertaking similar drug abuse prevention and treatment efforts better leverage and more efficiently use limited resources. Our April 2013 report found that ONDCP, DHS, and DOJ did not hold HIDTAs or the four other types of field-based information sharing entities we reviewed--Joint Terrorism Task Forces, Federal Bureau of Investigation Field Intelligence Groups, RISS centers, and state and major urban area fusion centers--accountable for coordinating with one another or assessing opportunities for further enhancing coordination to help reduce the potential for overlap and achieve efficiencies. Specifically, we found that while the five types of field-based entities have distinct missions, roles, and responsibilities, their activities can overlap. For example, across the eight urban areas that we reviewed, we identified 91 instances of overlap in some analytical activities--such as producing intelligence reports--and 32 instances of overlap in investigative support activities, such as identifying links between criminal organizations. These entities conducted similar activities within the same mission area, such as counterterrorism, and for similar customers, such as federal or state agencies. Across the eight urban areas, 34 of the 37 field-based entities we reviewed conducted an analytical or investigative support activity that overlapped with that of another entity. We reported that this can lead to benefits, such as the corroboration of information, but may also burden customers with redundant information. In our April 2013 report, ONDCP, DHS, and DOJ officials acknowledged that field-based entities working together and sharing information are important, but they do not hold their entities accountable for such coordination. For example, HIDTA Investigative Support Centers have a performance measurement program that holds the centers accountable for referring leads to other HIDTAs and other agencies, but the program does not include measures about the HIDTA's ability to coordinate with other field-based entities. Further, ONDCP, DHS, and DOJ officials stated that they ultimately rely on the leadership of their respective field-based entities to ensure that successful coordination is occurring because the leaders in these entities are most familiar with the other stakeholders and issues in their areas, and are best suited to develop working relationships with one another. Officials at 22 of the 37 entities we reviewed agreed that successful coordination depends most on personal relationships, but they noted that coordination can be disrupted when new leadership takes over at an entity. Officials at 20 of the 37 entities also stated that measuring and monitoring coordination could alleviate the process of starting over when new personnel take over at a partner entity and ensure that maintaining coordinated efforts is a priority. We concluded that a mechanism--such as performance metrics--that holds entities accountable for coordination and enables agencies to monitor and evaluate the results of their efforts could help provide the agencies with information on the effectiveness of coordination among field-based entities and help reduce any unnecessary overlap in entities' efforts. We recommended that the agencies collaborate to develop such a mechanism. Similarly, our April 2013 report found that ONDCP, DHS, and DOJ had not assessed opportunities to implement practices that were identified as enhancing coordination. Officials at each of the 37 entities in the eight urban areas we reviewed described how practices such as serving on one another's governance boards or, in some cases, colocating with other entities allowed or could allow them to achieve certain benefits. These include better understanding the missions and activities of the other entities, coordinating the production of analytical products, and sharing resources such as subject matter experts. In their view, this helped to increase coordination, leverage resources, and avoid or reduce the negative effects of unnecessary overlap and duplication in their analytical, tactical, and dissemination activities. We recommended that the agencies collaborate to perform a collective assessment of where these and other practices that can enhance coordination could be implemented. ONDCP and DHS concurred with both of our recommendations and DOJ generally agreed with the intent of the recommendations. Since our April 2013 report, the agencies have taken steps to address them. Specifically, ONDCP, DHS, and DOJ have existing forums they can use to work together in developing metrics and conducting assessments to better ensure coordination, and collectively monitor and evaluate results achieved. These forums include, for example, the Fusion Center Subcommittee of the Information Sharing and Access Interagency Policy Committee. In July 2015, the subcommittee met and agreed to modify its 2015 work plan to address the collection, analysis, and reporting of data pertaining to field-based information sharing entities. According to DHS officials, these data are to focus on field-based collaboration, including governance, colocation, and other information sharing, analytic, and conflict-avoidance topics. Since the July 2015 meeting, DHS has assisted ONDCP and DOJ in developing an assessment template, based on common data elements it collects in its annual assessment of state and major urban area fusion centers. Although ONDCP, DHS, and DOJ have taken actions to address our recommendations, the agencies do not yet have a collective mechanism that will hold field-based entities accountable for coordinating with one another and allow the agencies to monitor progress and evaluate results across entities. Such a mechanism could help entities maintain effective relationships when new leadership is assigned and avoid unnecessary overlap in activities, which can also help entities to leverage scarce resources. Further, the agencies have not conducted a collaborative assessment of where practices that enhance coordination can be applied to reduce overlap, collaborate, and leverage resources for their respective field-based information sharing entities. Such an assessment would allow the agencies to provide recommendations or guidance to the entities on implementing these practices. ONDCP has connected each of the systems that HIDTAs use to deconflict operations, an action that can reduce risks to officer safety and inefficiencies. Our April 2013 report found that the HIDTA and RISS programs operate three separate systems that have event or target deconfliction functions to determine when multiple federal, state, or local law enforcement agencies are conducting enforcement actions--such as raids, undercover operations, or surveillances--in proximity to one another during a specified time period. As we reported in 2013, HIDTAs have used the SAFETNet system, which has had event deconfliction functions, among other functions, since 2001 to help ensure officer safety. In 2009, the HIDTA program introduced deconfliction features into the Case Explorer system that differed from SAFETNet by providing a free service that is tied to its performance management process. In 2009, the RISS program developed RISSafe to provide event deconfliction to its members and those not being served by another system. Accordingly, HIDTAs and RISS centers were operating duplicative deconfliction systems--that is, systems that aim to ensure that law enforcement officers are not conducting enforcement actions at the same time in the same place or investigating the same target--which could pose risks to officer safety and lead to inefficiencies. Table 3 provides details about the features of these three systems. Law enforcement officers generally enter events into a deconfliction system electronically or by calling a watch center. Individuals operating a watch center plot the location of the event on a map and notify the officer for whom contact information is available in the systems of other officers who have entered conflicting events into the same system. When events are not deconflicted, officer safety can be at risk. For example, HIDTA and RISS officials described instances when officers did not deconflict drug busts, which led to undercover officers from different agencies drawing guns on one another thinking the other officers were drug dealers. The officials added that, had the events been deconflicted, the officers would have been aware of one another's presence. As shown in figure 1, entities within a state can use one or more of the systems. In our April 2013 report, we found that HIDTA and RISS officials had taken steps to connect target deconfliction systems--those that inform agencies when they are investigating the same individuals, weapons, vehicles, or businesses--and two of three event deconfliction systems. However, HIDTA officials had not finalized plans to make the remaining event deconfliction system, SAFETNet, interoperable with the other two systems. Accordingly, we recommended that the Director of ONDCP work with the appropriate HIDTA officials to develop milestones and time frames for actions needed to make SAFETNet interoperable in order to prevent unnecessary delays in reducing risks to officer safety and lessening the burden on law enforcement agencies that are currently using multiple systems to notify agencies when they are conducting conflicting enforcement actions. ONDCP concurred with the recommendation and, in May 2015, completed the steps to achieve interoperability among the three event deconfliction systems. According to an official at the HIDTA that operates the Case Explorer deconfliction system, as of October 2015, more than 1,500 agencies are participating in the three systems. The official added that more than 159,000 events have been entered, and more than 800 events have been matched among the three systems. Chairman Meadows, Ranking Member Connolly, and members of the subcommittee, this concludes my prepared statement. I would be happy to respond to any questions you may have. If you or your staff members have any questions about this testimony, please contact David Maurer at (202) 512-8777 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. Other contributors included Eric Erdman, Assistant Director; Kevin Heinz; and Johanna Wong. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.
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ONDCP is responsible for coordinating the implementation of drug control policy across the federal government and funds HIDTAs that aim to support the disruption and dismantlement of drug-trafficking and money-laundering organizations. This statement addresses the extent to which ONDCP (1) has achieved Strategy goals and has mechanisms to monitor progress, (2) has assessed overlap and potential duplication across federal drug abuse prevention and treatment programs and identified coordination opportunities, (3) holds HIDTAs accountable for coordination with other field-based information sharing entities and has assessed opportunities for coordination, and (4) has connected existing systems to coordinate law enforcement activities. This statement is based on a March 2013 report ( GAO-13-333 ), an April 2013 report ( GAO-13-471 ), and selected updates as of November 2015. For the updates, GAO analyzed ONDCP documents on progress toward Strategy goals and drug abuse prevention and treatment programs and contacted ONDCP and HIDTA officials. GAO reported in March 2013 that the Office of National Drug Control Policy (ONDCP) and other agencies had not made progress toward achieving most of the goals in the 2010 National Drug Control Strategy (the Strategy) and ONDCP had established a new mechanism to monitor and assess progress. In the Strategy, ONDCP established seven goals related to reducing illicit drug use and its consequences to be achieved by 2015. As of March 2013, GAO's analysis showed that of the five goals for which primary data on results were available, one showed progress and four showed no progress. GAO also reported that ONDCP established a new monitoring system intended to provide information on progress toward Strategy goals and help identify performance gaps and options for improvement. At that time, the system was still in its early stages, and GAO reported that it could help increase accountability for improving progress. In November 2015, ONDCP issued its annual Strategy and performance report, which assess progress toward all seven goals. The Strategy shows progress in achieving one goal, no progress on three goals, and mixed progress on the other three goals. Overall, none of the goals in the Strategy have been fully achieved. ONDCP has assessed the extent of overlap and potential for duplication across federal drug abuse prevention and treatment programs and identified opportunities for increased coordination, as GAO recommended in March 2013. According to ONDCP's July 2014 assessment, these programs generally serve distinct beneficiaries in distinct settings, which helps prevent overlap and duplication. However, ONDCP found that programs that provide drug abuse prevention and treatment services to address homelessness would benefit from greater coordination. ONDCP noted that it was taking steps to address this issue. GAO reported in April 2013 that ONDCP-funded High Intensity Drug Trafficking Area (HIDTA) Investigative Support Centers and four other types of field-based information sharing entities had overlapping analytical and investigative support activities. However, ONDCP and the Departments of Homeland Security (DHS) and Justice (DOJ)--the federal agencies that oversee or provide support to the five types of field-based entities--were not holding entities accountable for coordination or assessing opportunities to implement practices that could enhance coordination, reduce unnecessary overlap, and leverage resources. ONDCP agreed with GAO's recommendations to work with DHS and DOJ to develop measures and assess opportunities to enhance coordination of field-based entities. Since July 2015, the agencies have worked through an interagency committee to make plans for collecting data on field-based collaboration, but have not yet fully addressed GAO's recommendations. ONDCP has connected each of the systems that HIDTAs use to coordinate law enforcement activities, as GAO recommended in April 2013. Specifically, GAO reported in 2013 that HIDTAs and Regional Information Sharing System centers operated three systems that duplicate the same function--identifying when different law enforcement entities may be conducting a similar enforcement action, such as a raid at the same location--resulting in some inefficiencies. In May 2015, ONDCP completed connecting all three systems, which helps reduce risks to officer safety and potentially lessens the burden on law enforcement agencies that were using multiple systems. GAO has made prior recommendations to ONDCP to assess overlap in drug prevention and treatment programs; develop measures and assess opportunities to enhance coordination of field-based entities; and connect existing coordination systems. ONDCP concurred and reported actions taken or underway to address them. GAO is not making new recommendations in this testimony.
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In March 2008, we reported that the IRIS program is at serious risk of becoming obsolete because the agency has not been able to complete timely, credible chemical assessments or decrease its backlog of 70 ongoing assessments. In addition, assessment process changes EPA had recently made, as well as other changes EPA was considering at the time of our review, would have further reduced the timeliness, credibility, and transparency of IRIS assessments. Among other things, we concluded the following: EPA was unable to routinely complete IRIS assessments in a timely manner. From 2000 to 2007, EPA completed on average about five IRIS assessments a year. The more recent trend has been a decline in productivity: In fiscal years 2006 and 2007, EPA completed two assessments each year; in 2008, EPA completed five assessments--four of which were related chemicals assessed and peer reviewed together but finalized individually; and thus far in fiscal year 2009, EPA has finalized one assessment. Further, as we reported in 2008, because EPA staff time was dedicated to completing assessments in the backlog, EPA's ability to both keep the more than 540 existing assessments up to date and initiate new assessments was limited. We found that 48 of the 70 assessments being conducted as of December 2007 had been in process for more than 5 years--and 12 of those, for more than 9 years. These time frames have lengthened. Currently, of those 70 assessments, 58 have now been ongoing for more than 5 years--and 31 of those for more than 9 years. We also found that EPA's efforts to finalize IRIS assessments have been thwarted by a combination of factors. These factors include (1) the Office of Management and Budget's (OMB) requiring two additional reviews of IRIS assessments by OMB and other federal agencies with an interest in the assessments, such as the Department of Defense, and (2) EPA management decisions, such as delaying some assessments to await the results of new research. The two new OMB/interagency reviews of draft assessments involve other federal agencies in EPA's IRIS assessment process in a manner that limits the credibility and transparency of, and hinders EPA's ability to manage, IRIS assessments. For example, some of these agencies' review comments could be influenced by the potential for increased environmental cleanup costs and other legal liabilities if EPA issued an IRIS assessment for a chemical that resulted in a decision to regulate the chemical to protect the public. Moreover, the input these agencies provide to EPA is treated as "deliberative" and is not released to the public. Regarding EPA's ability to manage its IRIS assessments, in 2007 OMB required EPA to terminate five assessments that for the first time addressed acute, rather than chronic, exposure--even though EPA had initiated this type of assessment to help it implement the Clean Air Act. The changes to the IRIS assessment process that EPA was considering but had not yet issued at the time of our 2008 review would have added to the already unacceptable level of delays in completing IRIS assessments and further limited the credibility of the assessments. For example, the changes would have allowed potentially affected federal agencies to have assessments suspended for up to 18 months to conduct additional research. As we reported in 2008, even one delay can have a domino effect, requiring the assessment process to essentially be repeated to incorporate changing science. In April 2008, EPA issued a revised IRIS assessment process. As we testified before this subcommittee in May 2008, the new process was largely the same as the draft we had evaluated during our review and did not respond to the recommendations in our March 2008 report. Moreover, some key changes were likely to further exacerbate the credibility and productivity concerns we had identified. For example, EPA's revised process formally defined comments on IRIS assessments from OMB and other federal agencies as "deliberative" and excluded them from the public record. As we have stated, it is critical that input from all parties-- particularly agencies that may be directly affected by the outcome of IRIS assessments--be publicly available. In addition, the estimated time frames under the revised process, especially for chemicals of key concern, would have likely perpetuated the cycle of delays to which the majority of ongoing assessments have been subject. Instead of streamlining the process, as we had recommended, EPA institutionalized a process that from the outset was estimated to take 6 to 8 years for some chemicals of key concern that are both widespread and likely to cause cancer or other serious health effects. This was particularly problematic because of the substantial rework often required to take into account changing science and methodologies. Overall, EPA's May 2009 IRIS assessment process reforms represent significant improvements and, if implemented effectively, would be largely responsive to the recommendations made in our March 2008 report. First, the new process and the memorandum announcing it indicate that the IRIS assessment process will be entirely managed by EPA, including the interagency consultations (formerly called OMB/interagency reviews). Under EPA's prior process, these two interagency reviews were required and managed by OMB--and EPA was not allowed to proceed with assessments at various stages until OMB notified EPA that it had sufficiently responded to comments from OMB and other agencies. The independence restored to EPA under the new process is critical in ensuring that EPA has the ability to develop transparent, credible IRIS chemical assessments that the agency and other IRIS users, such as state and local environmental agencies, need to develop adequate protections for human health and the environment. Second, the new process addresses a key transparency concern highlighted in our 2008 report and testimonies. As we recommended, it expressly requires that all written comments on draft IRIS assessments provided during the interagency consultation process by other federal agencies and White House offices be part of the public record. Third, the new process streamlines the previous one by consolidating and eliminating some steps. Importantly, EPA eliminated the step under which other federal agencies could have IRIS assessments suspended in order to conduct additional research, thus returning to EPA's practice in the 1990s of developing assessments on the basis of the best available science. As we highlighted in our report, as a general rule, requiring that IRIS assessments be based on the best science available at the time of the assessment is a standard that best supports the goal of completing assessments within reasonable time periods and minimizing the need to conduct significant levels of rework. Fourth, as outlined in the EPA Administrator's memorandum announcing the new IRIS process, the President's budget request for fiscal year 2010 includes an additional $5 million and 10 full-time-equivalent staff positions for the IRIS program, which is responsive to our recommendation to assess the level of resources that should be dedicated to the IRIS program in order to meet user needs and maintain a viable IRIS database. We are encouraged by the efforts EPA has made to adopt most of our recommendations, including those addressing EPA's ability to manage its IRIS assessment process, transparency practices, and streamlining the lengthy IRIS assessment process. The changes outlined above reflect a significant redirection of the IRIS process that, if implemented effectively, can help EPA restore the credibility and increase the productivity of this important program. While these broad reforms provide a sound general framework for conducting IRIS assessments, the manner in which EPA implements the new process will determine whether the agency will be able to overcome its long-standing productivity problems and complete credible and transparent assessments. Specifically, management attention is warranted on certain aspects of the new process that are incomplete or lack clarity. EPA's estimated time frames of about 2 years for standard IRIS assessments--those that are not particularly complex or controversial-- do not include the time required to complete two steps that are nonetheless included in the assessment process. As a result, EPA has likely understated the time required to complete an assessment. The steps lacking time frames--the scientific literature review and the request to the public and other agencies to submit relevant research (the data call-in)-- are integral to developing an assessment. In prior IRIS assessment processes, EPA provided time frames for these steps. Importantly, including the time frames for these steps would likely bring the estimated overall time for completing standard assessments closer to 3 years. We note that this more realistic time frame may be problematic because when assessments take longer than 2 years, they can become subject to substantial delays stemming from the need to redo key analyses to take into account changing science and assessment methodologies. While EPA states that some IRIS assessments may take longer because of their complexity, large scientific literature base, or high profile, the agency does not provide any guidance on likely or expected time frames for assessments of these chemicals. This is noteworthy because we found that EPA has not been able to complete assessments of the most important chemicals of concern, such as those likely to cause cancer or other significant health effects. For example, EPA's assessment of dioxin has been ongoing for 18 years. It is critical that EPA establish time frames to enable the agency to manage complex assessments. EPA's new process does not include a discussion of key planning steps. Specifically, it omits important preassessment steps included in prior processes--such as a call for nominations of chemicals to be assessed and the establishment of the IRIS agenda, which is list of chemicals that EPA plans to assess. Accordingly, it is not clear whether or when EPA will implement our recommendation that it provide at least 2 years' notice of planned assessments. Among other things, doing so would give agencies and the public more advance notice of planned assessments and enable external parties with an interest in a given chemical to, for example, complete relevant research before the start of an IRIS assessment. Particularly in light of the fact that EPA's estimates for completing assessments are likely understated, we believe that the agency should continue to look for additional opportunities to streamline its process. For example, it is not clear why EPA could not solicit comments from other federal agencies at the same time it sends the initial draft assessment to independent peer reviewers and publishes it in the Federal Register for public comment. In addition to reducing overall assessment time frames, this change could enhance transparency. Specifically, by obtaining the first draft of the assessment at the same time as the other federal agencies, the public and peer reviewers could have greater assurance that the draft had not been inappropriately biased by policy considerations of these agencies, including ones that may be affected by the assessment's outcome, such as the Departments of Defense and Energy. Some of these agencies and their contractors could, for example, face increased cleanup costs and other legal liabilities if EPA issued an IRIS assessment for a chemical that resulted in a decision to regulate the chemical to protect the public. The new assessment process states that "White House offices" will be involved in the interagency consultation process but does not indicate which offices. Given that (1) EPA will be performing the coordinating role that OMB exercised under the prior process and (2) the purpose of these consultations is to obtain scientific feedback, it is unclear whether OMB will continue to be involved in the interagency consultation process. EPA has specified in its new assessment process that written comments provided by other federal agencies will become part of the public record. However, it is silent as to the purpose of the consultation meetings and, if applicable, whether EPA plans to document for the public record any significant oral agreements or decisions made at the consultation meetings. In order to ensure transparency and alleviate any concerns of potential bias in the assessments, it will be important for EPA to be clear on these matters. In addition to addressing these issues, the viability of the IRIS program will depend on effective and sustained management and oversight. Collectively, a number of factors that can impede the progress of IRIS assessments present significant management challenges. These include the following: Unlike a number of other EPA programs with statutory deadlines for completing various activities, no enforceable deadlines apply to the IRIS program. We have stated in previous testimonies on the IRIS program that if EPA is not able to effectively maintain this critical program, other approaches, including statutory requirements, may need to be explored. We believe the absence of statutory deadlines may contribute to EPA's failure to complete timely IRIS assessments. For example, assessment schedules can easily be extended--and consistently are. These chronic delays in completing IRIS assessments have detrimental consequences for EPA's ability to develop timely and scientifically sound decisions, policies, and regulations. Science and methodologies are constantly changing. Thus, there will always be a tension between assessing the best available science and waiting for more information. IRIS will remain viable only if it returns to its model of using the best science available at the time of its assessments and plans for periodic updates of assessments to identify the need for revisions. An overarching factor that affects EPA's ability to complete IRIS assessments in a timely manner is the compounding effect of delays--even one delay can have a domino effect, requiring the process to essentially be repeated to incorporate changing science. For example, delays often require repeating reviews of the scientific literature on a chemical to take into account the time that has passed since the literature review was completed; this, in turn, may require detailed analyses of any new studies found to be relevant. Long-standing difficulties in completing assessments of chemicals of key concern--those that are both widespread and likely to cause significant health issues--stem in part from challenges by external parties, including those that may be impacted by EPA regulation of chemicals should an assessment lead to such action. Such challenges are to be expected and can be best addressed by EPA's focusing on the best available science, credible expert review, and completing the assessments. The IRIS assessment process has been frequently changed in recent years; IRIS process reforms, such as those recently issued, are not established in a regulation or statute and thus can easily be altered. As we have reported, EPA's continual changes present a challenge to the chemical managers who are undertaking the assessments, particularly in the absence of current operating procedures to guide chemical managers on basic procedures and program management responsibilities for the development, review, and finalization of IRIS assessments. In conclusion, EPA's most recent changes to the IRIS assessment process appear to represent a significant improvement over the process put in place in 2008. That is, if implemented effectively, the changes may appropriately restore to EPA its control of the IRIS process, increase the transparency of the process, and streamline aspects of the process, among other things. We believe that the agency's ability to produce timely, credible, and transparent assessments will also depend in large measure on clear implementation procedures and rigorous management oversight, given the numerous factors that can impede EPA's ability to complete timely IRIS assessments and the lack of clarity on some aspects of the new process. Perhaps most importantly, EPA needs to hold itself more accountable to the public and Congress for carrying out this important component of its mission, especially since the IRIS program is discretionary. Mr. Chairman, this concludes my prepared statement. I would be happy to respond to any questions that you or other Members of the Subcommittee may have at this time. For further information about this testimony, please contact John B. Stephenson at (202) 512-3841 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. Contributors to this testimony include Christine Fishkin (Assistant Director), Laura Gatz, Richard P. Johnson, Summer Lingard, Nancy Crothers, Antoinette Capaccio, and Carol Kolarik. Scientific Integrity: EPA's Efforts to Enhance the Credibility and Transparency of Its Scientific Processes. GAO-09-773T. Washington, D.C.: June 9, 2009. High-Risk Series, An Update. GAO-09-271. Washington, D.C.: January 2009. EPA Science: New Assessment Process Further Limits the Credibility and Timeliness of EPA's Assessments of Toxic Chemicals. GAO-08-1168T. Washington, D.C.: September 18, 2008. Chemical Assessments: EPA's New Assessment Process Will Further Limit the Productivity and Credibility of Its Integrated Risk Information System. GAO-08-810T. Washington, D.C.: May 21, 2008. Toxic Chemicals: EPA's New Assessment Process Will Increase Challenges EPA Faces in Evaluating and Regulating Chemicals. GAO-08-743T. Washington, D.C.: April 29, 2008. Chemical Assessments: Low Productivity and New Interagency Review Process Limit the Usefulness and Credibility of EPA's Integrated Risk Information System. GAO-08-440. Washington, D.C.: March 7, 2008. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.
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The Environmental Protection Agency's (EPA) Integrated Risk Information System (IRIS) contains EPA's scientific position on the potential human health effects of exposure to more than 540 chemicals. Toxicity assessments in the IRIS database constitute the first two critical steps of the risk assessment process, which in turn provides the foundation for risk management decisions. Thus, IRIS is a critical component of EPA's capacity to support scientifically sound environmental decisions, policies, and regulations. GAO's 2008 report on the IRIS program identified significant concerns that, coupled with the importance of the program, caused GAO to add EPA's processes for assessing and controlling toxic chemicals as a high-risk area in its January 2009 biennial status report on governmentwide high-risk areas requiring increased attention by executive agencies and Congress. This testimony discusses (1) the findings from GAO's March 2008 report Chemical Assessments: Low Productivity and New Interagency Review Process Limit the Usefulness and Credibility of EPA's Integrated Risk Information System and related testimonies and (2) GAO's preliminary evaluation of the revised IRIS assessment process EPA issued on May 21, 2009. For this testimony, GAO supplemented its prior audit work with a preliminary review of the new assessment process and some IRIS productivity data. In March 2008, GAOreported that the viability of the IRIS program is at risk because EPA has been unable to complete timely, credible chemical assessments or decrease its backlog of ongoing assessments. In addition, assessment process changes EPA had recently made, and other changes itwas considering at the time of GAO's review, would have further reduced the timeliness, credibility, and transparency of IRIS assessments. Among other things, GAO found that EPA's efforts to finalize IRIS assessments have been impeded by a combination of factors, including the Office of Management and Budget's (OMB) requiring two additional reviews of IRIS assessments by OMB and other federal agencies with an interest in the assessments, such as the Department of Defense. Moreover, the two OMB/interagency reviews involved other federal agencies in EPA's IRIS assessment process in a manner that hindered EPA's ability to manage its assessments and limited their credibility and transparency. For example, the input these agencies provided to EPA was treated as "deliberative" and was not released to the public. In April 2008, EPA issued a revised IRIS assessment process. As GAO testified before this subcommittee in May 2008, the new process did not respond to GAO's March 2008 recommendations, and some key changes were likely to further exacerbate the credibility and productivity concerns GAO had identified. Overall, EPA's May 2009 IRIS assessment process reforms represent significant improvements and, if implemented effectively, would be largely responsive to GAO's March 2008 recommendations. For example, under the new process EPA is to manage the entire assessment process, including the interagency reviews. Under EPA's prior process, these reviews were required and managed by OMB--and at various stages, EPA was not allowed to proceed with assessments until OMB notified EPA that it had sufficiently responded to comments from OMB and other agencies. The independence restored to EPA under the new process will be critical to ensuring that EPA has the ability to develop transparent, credible IRIS chemical assessments. While the broad reforms provide a sound general framework for conducting IRIS assessments, the manner in which EPA implements the new process will determine whether the agency will be able to overcome its long-standing productivity problems and complete credible and transparent assessments. Specifically, certain aspects of the new process are incomplete or lack clarity and thus warrant management attention. For example, EPA has likely understated the time required to complete an assessment because its estimated time frames do not include the time required to complete two key steps. Overall, the viability of the IRIS program will depend on effective and sustained management and oversight, especially given the number of factors that can impede the progress of IRIS assessments. For example, even one delay in an assessment can have a domino effect, requiring the process to essentially be repeated to incorporate changing science. In addition, unlike some other EPA programs with statutory deadlines for completing various activities, the IRIS program is discretionary. GAO believes the absence of legal consequences for delays in completing assessments may contribute to EPA's failure to complete timely IRIS assessments.
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The reports of sexual misconduct at Aberdeen Proving Grounds led the Secretary of Defense to establish the Federal Advisory Committee on Gender-Integrated Training and Related Issues and to ask the Defense Advisory Committee on Women in the Services to meet with trainees and trainers. These incidents also prompted the Secretary of the Army to establish the Senior Review Panel on Sexual Harassment. In November 1996, the Secretary of the Army established the Senior Review Panel on Sexual Harassment. The panel's mission was to make recommendations to improve the human relations environment in which soldiers live and work, with the specific goal of eradicating sexual harassment in the Army. The panel consisted of seven members, including two retired general officers recalled to active duty, two active duty general officers, a senior noncommissioned officer, and two DOD civilians. The Senior Review Panel forwarded its report and recommendations to the Secretary of the Army in July 1997. It included 40 recommendations, of which 14 dealt with training and related issues. In June 1997, the Secretary of Defense established the Federal Advisory Committee on Gender-Integrated Training and Related Issues. The Secretary of Defense established the Committee as a result of the sexual misconduct incidents at Aberdeen Proving Grounds. Former Senator Nancy Kassebaum Baker chaired a panel of 11 that included civilians, retired officers, and a retired senior noncommissioned officer. The Secretary directed the Committee to assess the training programs and policies of the Army, Navy, Air Force, and Marine Corps and make recommendations to improve initial entry training. The Committee issued its report to the Secretary of Defense on December 16, 1997. It made 30 recommendations covering the full cycle from recruitment through basic and advanced training. The Defense Advisory Committee on Women in the Services (DACOWITS) has been advising secretaries of Defense since George Marshall established the Committee in 1951. DACOWITS, which consists of 30 to 40 civilians, makes recommendations to the Secretary on the roles of women in the Armed Forces and on quality of life issues affecting readiness. As part of its mission, DACOWITS members conduct annual visits to selected Army, Air Force, Navy, Marine Corps, and Coast Guard installations, both here and overseas. These visits serve two purposes: (1) to provide the Secretary of Defense with insight into the thoughts and perceptions of servicemembers in the fleet and the field and (2) to determine what issues DACOWITS will concentrate on in the future. In November 1996, the former Secretary of Defense requested that DACOWITS visit training installations to meet with trainees and trainers in the training environment. In February 1997, the current Secretary of Defense endorsed the request. DACOWITS provided a report to the Secretary of Defense summarizing these visits. In its report, DACOWITS recommended continued visits to training installations, but made no recommendations on military training. The Army's Senior Review Panel on Sexual Harassment formed four teams, one to review Army policies and three for data collection. Each field team consisted, on the average, of six military personnel and one civilian. The Chair, the Vice-Chair, or the Deputy Assistant Secretary of the Army (a member of the panel) accompanied each field team during their visits. Other panel members traveled with the teams as often as possible. Visits lasted 1 to 4 days depending on the numbers of participants in the various activities. Before the visits, the participants for the individual interviews, focus groups, and survey were selected and scheduled. Generally, the visit started with a briefing to present the purpose of the activity and a description of the team's data collection efforts. Next, the team divided into smaller groups to conduct individual interviews, conduct focus groups, or administer surveys. These activities ran concurrently and team members rotated to different activities at different times. Visits ended with a briefing providing commanders the opportunity to begin corrective actions. Panel members and the working group collaborated in writing the panel's report. Once a near final draft was generated, the panel members met for a final review and agreement on the content. The panel on Sexual Harassment issued its report to the Secretary of the Army in July 1997. The Army's Senior Review Panel on Sexual Harassment used four methods to collect data: individual interviews, focus groups, surveys, and observations. According to the senior social scientist detailed to the panel, the field teams conducted interviews and focus groups using carefully developed protocols to obtain human relations environment information. Members of field teams conducted individual interviews with 808 military and civilian Army leaders and personnel in Army support groups. Focus groups consisted of randomly selected, single-gender groups of 8 to 12 people organized by ranks or categories. Participants totaled 7,401 soldiers and 1,007 civilians. Facilitators and note takers of the same gender as the groups conducted the sessions. All data obtained through these two activities were entered into a computer for analysis. The working group, which consisted of more than 40 military and civilian personnel, developed main themes or categories and placed the perceptions data under the categories. Data were then analyzed by rank, by gender, and by question. The written surveys addressed leadership, cohesion, and sexual harassment. Field teams administered the surveys to 22,952 servicemembers. Surveys were developed for trainees, trainers, and the general Army population. The working group analyzed survey data using a standard statistical analysis software package. Statistically projectable results appear in the report by question and, in some cases, by gender. Observations were made during visits to barracks and other facilities and to engage in informal conversations with military and civilian personnel, family members, and others. The seven panel members, supported by the working group, collected data at 59 Army installations worldwide selected using a stratified random sampling design. Stratification was based on the type and location of the installation. The study took 8 months to complete and obtained information from over 32,000 Army personnel. The panel's methodology supported making conclusions and recommendations. Focus groups were used in conjunction with surveys to not only confirm the survey data but also provide texture and perspective to the data. The focus groups were of an appropriate size and were all asked the same questions, in the same order by trained moderators. However, the number of questions asked of many of the focus groups was significantly greater than the five or six questions recommended by focus group literature. For example, the set of questions for trainee focus groups consisted of 15 questions and the set for trainers consisted of 13 questions. Focus group discussions were not tape recorded because it was feared that this would inhibit the participants, but notes were taken by a note taker and were content-analyzed. The notes from each focus group session were destroyed, after the responses were entered in the database and verified for accuracy, to assure that participant confidentiality was maintained. Destroying the original documentation to assure confidentiality is considered an appropriate measure by social scientists. In addition, the completed survey forms were also destroyed to assure participant confidentiality. In volume two, the panel provides an extensive discussion of its methodology. Volume two provides details on how participants were selected, copies of the focus group questions, the surveys, and the interview questions. Results of the surveys were included in the report as well as the most frequently heard responses in the focus groups. Furthermore, a sufficient amount of data are presented in volume one of the report, which outlines the panel's conclusions and recommendations, to allow the reader to evaluate them. An area of controversy arose because the survey developers did not pretest the survey questions. We were told by the senior social scientist attached to the panel, that tight time frames precluded the panel from carrying out a pretest of the survey form. Normally, a pretest is performed to identify problem questions, problems with language interpretations, unclear instructions, or to determine if there are some questions that respondents will refuse to answer. In this instance, the survey form contained six questions that some respondents in early administrations found inflammatory, offensive, and an invasion of privacy and resulted in some refusals to complete the survey. Subsequently, those questions were eliminated and a revised form was used. The data on the six questions were not included in the database, which resulted in an accusation that the panel had eliminated important data from its analysis. The report disclosed the problem and its resolution in the methodology section. We believe that the panel acted responsibly in eliminating the offending questions to avoid having a negative effect on the survey return rate. The controversy, however, demonstrates the importance of pretesting survey forms before conducting a survey. The Federal Advisory Committee on Gender-Integrated Training and Related Issues saw its role as listening to the views of trainees, trainers, supervisors, and service officials and providing the Secretary of Defense with its best judgment about what should be done to improve training. Small teams of Committee members visited 17 training installations and operational units to gather opinions. Most Committee members visited installations from two services. While the Committee Chairman visited installations for all four services, no Committee member or Committee staff member visited all of the installations. Once at an installation, the Committee members followed the same general schedule: reveille, breakfast with new servicemembers, meetings with command officials, and interviews and focus groups before lunch. After lunch with support personnel, the Committee members conducted additional focus groups and interviews. At the end of each visit, they met with command officials to discuss their findings. Installation visits generally lasted 1 day, although visits to basic training sites were 2-day trips. The visits to the training installations and operational units occurred in September and October 1997. The Committee had two public meetings, the first in July 1997 and the second in October 1997. At the July meeting, service representatives provided information on the services' recruiting and training programs. At the October 1997 meeting, Committee members discussed their observations and agreed to a partial list of recommendations for the report. The Committee's staff drafted the report based on the discussions they heard during their installation visits and the public meeting, and memorandums submitted by some of the Committee members in preparation for the October meeting. Committee members received the draft report in early December and revisions were made based on their comments. The Committee Chair discussed the report with Committee members in a series of one-on-one telephone calls to arrive at the final recommendations. The Committee's primary means of collecting information involved focus group discussions. The Committee held 199 focus groups, soliciting opinions from more than 1,000 trainees, 500 trainers, 300 first-term servicemembers, and 275 supervisors at U.S. training installations and operational units. Participants were randomly selected under the supervision of the installations' inspectors general. Trainees who participated in the focus groups were within 2 weeks of completing their training. Participants in the trainer focus groups were trainers for at least 1 year. First term participants were in their initial assignment and had been on the job between 6 and 18 months. Generally, the Committee met with equal numbers of females and males, although, because of the limited number of female trainers and supervisors, this was not always possible. Focus groups included about 10 to 15 people each and were gender-segregated. All of the focus groups were moderated by Committee members, and generally two Committee members or a Committee member and a Committee staff member attended each session. The Committee members worked from a set of questions tailored for each service and each type of focus group. Although the number of questions varied by type of focus group, the set of questions for all basic training focus groups consisted of 20 questions, some of which had multiple parts. While some focus groups were scheduled to last only 30 to 45 minutes, most focus group sessions lasted nearly an hour. Committee members also conducted over 100 interviews with service officials, including commanding officers, inspectors general, company or squadron commanders, and senior noncommissioned officers. They also met with representatives of support groups such as chaplains, equal opportunity officers, medical officers, and legal officers. The value of the information included in the Committee's report for making conclusions and recommendations is limited because the Committee did not follow recommended focus group methodology. The Committee believed that a more flexible approach to the discussions would enhance the quality of the exchange between the participants and the Committee members. However, the fact that the same questions were not asked of each similar focus group, along with the number of questions, size of the groups, and length of the sessions may have combined to limit full discussion. In addition, the focus groups' discussions were not systematically recorded. As a result, the extent to which the recommendations are supported by the Committee's work cannot be assessed. The Committee staff provided the Committee members with questions for the focus groups. However, according to the staff director, the Committee members were told that the questions were guidelines and that they did not have to be asked as written. Because the Committee members had the flexibility to ask any question they desired, the responses should not be compared with each other. Also, the number of questions provided to the panel members were far more than the five to six focus group literature recommends. For example, the staff provided 20 questions, some of which had several parts, for the Committee to ask Army trainees at Fort Leonard Wood, Missouri. Fifteen trainees participated in the 1-hour focus groups at this installation. If the entire hour was spent on the questions, there would have only been 3 minutes spent on each question and only 15 seconds for each participant to respond. We do not believe that would have been enough time for a meaningful discussion of a question. Finally, even if all the questions were asked as they were written, they were not always asked in the same order each time. Social science literature suggests that the same questions asked in a different sequence may result in different responses. The absence of documentation of the comments made in the individual focus groups was the most serious methodological shortcoming. While the Committee members took notes during each focus group, these notes were not made part of the Committee's records nor were they summarized and included in the report. Without documentation, it is impossible to determine if the Committee's work supports its recommendations. Also, the lack of documentation prevented the Committee from analyzing the data to know what comments they heard or how often similar comments were made. Knowing how often a particular kind of comment was made and the subgroup of the person who made it are ways of putting the comments in perspective and filtering biases. The report of the Federal Advisory Committee on Gender-Integrated Training and Related Issues does not include a sufficient discussion of the Committee's methodology and work process. For example, the report states that the Committee conducted discussion groups with randomly selected servicemembers, but it does not explain the random selection process. In addition, the use of terminology such as "randomly selected" implies a level of scientific rigor that was not achieved in this study. The report does not identify the make-up of the discussion groups, discuss what type of data analysis was done or not done, or mention any limitations with the data. Limitations that we believe should have been mentioned are that the report was based on opinions and the results cannot be generalized to the entire military training population. Also, the report often presents opinions in a manner that they can be misinterpreted as facts based on empirical data. For example, the report says that the Committee members observed that integrated housing is contributing to a higher rate of disciplinary problems, but, according to the Chairman, the Committee did not obtain any data to support this statement. In addition, the report contains many statements that include words like "most", "many", and "majority". These words lead a reader to believe that the Committee counted responses to particular questions or polled the focus group participants. The Chairman said that the Committee does not have quantitative data. The report also does not explain the process the Committee used to formulate its recommendations. Although the Committee held a public meeting in October 1997 after its installation visits had been completed, the recommendations on separate barracks for male and female recruits and on the organization of gender-segregated platoons, divisions, and flights were not made until after that meeting. Furthermore, those recommendations were not discussed by the Committee as a whole, but rather in a series of calls to individual Committee members. The mission of the DACOWITS effort was to provide the Secretary of Defense with an overview of broad issues raised by trainees and trainers of both genders throughout initial entry training. A secondary purpose was to help determine what issues DACOWITS would concentrate on in the future. The Chair and the Executive Director of DACOWITS selected seven members (all were women) to visit training installations. Members were selected based on their DACOWITS experience and the quantity and quality of their previous installation reports. Typical visits were conducted by one DACOWITS member and lasted 2 days. Visits began with a briefing by the commanding officer about the school and its mission, followed by trainee, trainer, and supervisor focus groups. At the end of a visit, the DACOWITS member met with command officials to share the results of the focus groups. Reports, summarizing the most frequently heard comments from the various focus groups, were written at the conclusion of each visit. In addition, the seven members met at DACOWITS' 1997 fall conference to discuss the results of their visits. Using the reports and the conference discussion, the 1997 DACOWITS Chair wrote the report. The report was released by the Secretary of Defense in January 1998. DACOWITS used focus groups as its primary means of data gathering. Overall, they solicited the opinions of over 1,200 trainees, trainers, and supervisors in the Army, the Navy, the Marines, the Air Force, and the Coast Guard in focus group discussions at 12 gender-integrated training schools at 9 installations. The schools included enlisted basic, intermediate, and advance training, and officer advanced training. Most focus groups were gender-segregated and trainees, trainers, and supervisors were in separate focus groups as well. DACOWITS requested trainees with at least 40 percent of training completed. Many trainees had completed their training and were awaiting graduation. The groups averaged 20 participants and sessions lasted about 60 minutes, although some were shorter. Before meeting with the Committee members, focus group participants viewed an 18-minute video that explained the mission of DACOWITS and highlighted some of the gender equality issues that DACOWITS had worked on in the past such as sexual harassment, discrimination, child care, and the combat exclusion policy. The video set the stage for the two open-ended questions that all the participants were asked: (1) "How is it going?" and (2) "If you had five minutes to speak with the Secretary of Defense, what would you tell him?" According to the former Chair, DACOWITS uses these questions during all installation visits. Training installation visits took place between July and November 1997. At the conclusion of each visit, a DACOWITS member completed a standardized installation visit report summarizing the most frequently heard comments from the focus groups. The comments included in these reports were entered into a computer and sorted by frequency across the services as well as by individual service. Issues were included in the report to the Secretary based on frequency. The individual installation visit reports support the opinions and perceptions that appear in the report to the Secretary of Defense. Some focus groups may have been too large or may not have had enough time to allow ample participation by most of the participants. The literature suggests that focus groups should be no larger than 12 participants. During the DACOWITS visits to the training schools, some groups were as large as 20 participants. Groups larger than 12 usually do not allow sufficient opportunity to actively participate in the discussion and are more difficult to manage. Also, the majority of the sessions were about an hour long and some ran for only 45 minutes, about half the time recommended by focus group literature. DACOWITS used two questions to generate discussion. However, time may still have been a problem, since the questions were very open-ended and could be taken in virtually any direction by a participant. This would likely have the effect of increasing the amount of time needed as each participant not only answered the discussion questions, but also reacted and responded to the issues raised by others. DACOWITS did not document the individual focus groups as recommended by focus group literature. Instead, DACOWITS members prepared installation visit reports which summarized the opinions they heard most frequently. While the installation reports document the work performed and the issues surfaced during the training installation visits, they do not capture enough information about the discussions in each focus group to be really useful. For example, they do not provide enough information on the rank or gender of the groups that raised the issue which would help put the comments into perspective. As we stated earlier, all of the DACOWITS members making installation training installation visits were women. Some focus group literature suggests that the gender of the moderator and the gender of the focus group should be the same, particularly when the issues being discussed are sensitive or have a direct bearing on the opposite sex. Also, some focus group literature suggests that men are more likely to tell a woman moderator what they think will impress or please her rather than what they think. The use of female moderators for male focus groups, in conjunction with the women's advocacy impression that the video is likely to have conveyed, may have made some males hesitant to raise issues or perceptions that might be construed as anti-female. Because DACOWITS did not document each of its focus groups it is impossible to determine if the use of women moderators with all-male focus groups had an effect on the responses of the male participants. The DACOWITS report provides some methodological information for the reader, but does not provide some key information. First, the report does not provide any details on how the Committee members documented the focus groups. Second, the report does not clearly explain the process used by DACOWITS to determine what issues would be included in the report. Third, while the report provides some detail about the make-up of the focus groups it does not describe how the focus group participants were selected. It should be noted however, as recommended by focus group literature, the report clearly states its two major limitations: (1) the opinion and perception information included in the report has not been independently validated or confirmed and ( 2) the Committee did not visit any gender-segregated training facilities. Also, in accordance with the limitations of the methodology, the DACOWITS report made no conclusions or recommendations on military training. We provided a draft of this report to DOD, the Chairman of the Federal Advisory Committee on Gender-Integrated Training and Related Issues, and the former Chair and Military Director of DACOWITS for comment. We discussed our report with Department of the Army officials, who concurred with our observations on the Army's Senior Review Panel on Sexual Harassment. We also discussed the draft report with the Executive Director of the Federal Advisory Committee on Gender-Integrated Training and Related Issues who suggested some clarifications to the report, which we considered and made as appropriate. In addition, we discussed the draft with the military director of DACOWITS, who stated that DACOWITS does not aim to meet the standards of academic research but instead uses focus groups to collect opinions and identify issues for further study. Finally, we discussed the draft with the former Chair of DACOWITS who suggested some technical corrections which we made as appropriate. We reviewed the reports from the Army's Senior Review Panel on Sexual Harassment, the Federal Advisory Committee on Gender-Integrated Training and Related Issues, and DACOWITS. We reviewed literature on the conduct and use of focus groups, since that was a common methodology across the three studies. We focused on the methodological information provided in the reports, including any limitations on the use of the information. We reviewed supporting documents to determine if the evidence collected supports making conclusions and recommendations. We did not evaluate the validity of specific conclusions and recommendations made by any of the studies. We met with the Chairman and Executive Director of the Federal Advisory Committee on Gender-Integrated Training and Related Issues, the former Chair and Military Director of DACOWITS, and with the senior social scientist of the Army's Senior Review Panel on Sexual Harassment to thoroughly explore the approach and methodology used in these efforts. Our review was requested by the former Ranking Minority Member of the House National Security Committee and Mr. Meehan. We are addressing the report to the current Ranking Minority Member of the House National Security Committee, Mr. Skelton, as a courtesy. We are addressing this letter to Senator Robb because it is related to other work on gender issues in the military that we have undertaken at his request. We conducted our review in February and March 1998 in accordance with generally accepted government auditing standards. We are sending copies of this report to the Secretaries of Defense, the Army, the Air Force, and the Navy; the Chairman of the Joint Chiefs of Staff; and the Commandant of the Marine Corps. We will make copies available to any other interested parties. The major contributors to this report were Carol R. Schuster, William E. Beusse, Carole F. Coffey, George M. Delgado, and Kathleen M. Joyce. If you or your staff have any questions concerning this report, please call me on (202) 512-5140. Focus groups are carefully planned small group discussions involving people with similar characteristics who are knowledgeable about an issue but do not know each other well. The views expressed in focus groups are not necessarily representative of a population and statistical estimates cannot be derived from the results. Furthermore, focus groups cannot be used to determine the extent of a problem. Focus groups produce qualitative data that provide insights into attitudes, perceptions, and opinions of the participants. They are most often used before, during, or after quantitative research procedures such as surveys. For example, focus groups can be used before a survey is undertaken to help a research team learn about the target audience or determine the appropriateness of the questionnaire. Focus groups are often used with surveys to confirm findings and to obtain greater breadth and depth of information. Finally, focus groups are often used as a follow-up to surveys to help interpret responses. On occasion, focus groups are used alone when opinions and perceptions are more important than how many people hold such views. The size of the focus group is an important, but often overlooked, element of a successful group discussion. The literature on focus groups suggests that an appropriate size for a focus group is 6 to 12 people. A focus group with fewer than six participants sometimes has problems with productivity because the group has fewer experiences to share. Also, small groups can be more easily affected by people who know each other, by uncooperative participants, or by participants who view themselves as experts on the topic. Groups that have more than 12 people usually do not allow people sufficient opportunity to actively participate in the discussion, making the groups difficult to manage. The composition of the focus group is also important. Participants should share some similar characteristics but be diverse enough to allow for differences of opinions. The topic of discussion and the information to be obtained dictate the types of characteristics shared. However, generally participants should be similar in age, occupation, education, and social class. Focus groups with distinct differences among participants such as trainees and trainers or junior and senior enlisted personnel do not work well because of limited understanding of other lifestyles and situations. Furthermore, some participants may be inhibited and defer to those they believe to be better educated or more experienced or of a higher social class. Sometimes, the gender of participants can affect the outcome of a focus group and some social scientists recommend against mixing genders because men and women tend to perform for each other. When the opinions of disparate groups are needed, focus group literature recommends holding separate groups for each distinct group. Focus group discussions are conducted informally and guided by trained moderators who encourage participants to share their thoughts and experiences. Trained, experienced moderators are critical to the success of a focus group. An unqualified moderator can easily undermine the reliability and validity of focus group findings. Successful moderators are good listeners, who can make people feel relaxed and anxious to talk. Moderators must control a group without being obvious and be aware of time. Since literature suggests that focus groups should be scheduled for 90 minutes and run no more than 120 minutes, moderators need to be able to keep the discussion on track and move the participants from one topic to the next. Moderators should be aware of the influence that they have on the type and amount of data obtained. Moderators must be aware of their own biases that might affect the validity of the data and take care not to provide cues to participants about desirable responses and answers. If dealing with sensitive subjects where views could vary according to factors such as gender or race, it is recommended that the moderator be similar in gender or race to the participants. Finally, moderators must have sufficient knowledge of the topic to put comments in perspective and followup on critical areas of concern. Questions are the heart of the focus group discussion. The literature on focus groups suggests five or six questions for a discussion group. The questions need to be carefully thought-out and phrased to result in the maximum amount of information in the limited time available. Questions should not suggest potential answers and yes or no questions should be avoided. Questions should be asked in the same order in every focus group and questions should be sequenced from most important to least important to ensure that the most necessary information is obtained from the participants if time runs out. The sequence is important because the questions may interact with one another to form the stimulus that generates the responses. If the questions are asked in a different order at each focus group, the stimulus is changed and the response will be different. The results of the focus groups' discussions should be documented on a session by session basis. Focus group literature agrees that the best way to do that is by tape recording supplemented with written notes. However, if a tape recording is not feasible or inhibiting to the participants, note taking can be sufficient provided they are complete enough to be analyzed. A systematic analysis of focus group data is also important. The analysis can be either qualitative or quantitative, but it must be systematic and verifiable. It must be systematic in that it follows a documented step-by-step process and verifiable to permit others to arrive at similar conclusions using available documents and the raw results. Social scientists have noted that there is a tendency for novice researchers to see selectively only those parts of the discussion that confirms their particular point of view. Often, a researcher will go into the discussion with certain hunches of how participants might feel. As a result, the researcher tends to look for evidence to support these hunches and overlook data that present different points of view. A systematic and verifiable process helps researchers in filtering out bias and assuring that they present the data as objectively as possible. Once data are collected and analyzed, the data should be reported and, if appropriate, conclusions and recommendations made. A report should clearly state what the purpose of the study was, what its scope was, how the data were collected and analyzed, and what, if any, significant limitations exist on the data or the use of the data. For example, studies that used focus groups as the primary method of data collection should clearly state that the data being reported is opinion or perception. If the opinions have been substantiated by other types of data, this should be clearly stated in the report. The report should also include the results of the focus groups, and the results should be clearly stated so that a reader can come to the same conclusions as the report writers. The following is excerpted from Army press reports that accompanied the report of the Senior Review Panel's report on Sexual Harassment in the Army as well as the executive summary of the report: Sexual harassment exists throughout the Army, crossing gender, rank, and racial lines; gender discrimination is more common than sexual harassment. Army leaders are the critical factor in creating, maintaining and enforcing an environment of respect and dignity in the Army; too many leaders have failed to gain the trust of their soldiers. The Army lacks institutional commitment to the Equal Opportunity program and soldiers distrust the equal opportunity program. Trainees believe the overwhelming majority of drill sergeants and instructors perform competently and well, but "respect" as an Army core value is not well institutionalized in the Initial Entry training process. Recommendations of the panel were broad-based and covered a wide variety of Army processes including: leader development, equal opportunity policy and procedures, initial entry training soldierization, unit and institutional training, command climate, and oversight. "The panel studied the full training cycle including recruiting, basic training, and advanced skills training. Its recommendations covered the training cadre, housing of recruits, fitness programs and follow-on advance training. Among the several recommendations made for recruiting, the panel proposed better preparing recruits mentally and physical for basic training. It also recommended ways to improve the training cadre. It recommended that physical training requirements be toughened and made more uniform throughout the services. The panel also suggested that emphasis on discipline be carried over from basic to advance training. The panel recommended that value training be incorporated into all initial entry training programs and that training get more resources. "During visits to training installations, the panel concluded that men and women should be housed in separate barracks and train separately at the operational unit level -- the Army platoon, the Navy division and the Air Force flight. In the Marine Corps men and women live, eat, and train separately. The panel recommended that gender-integrated training continue for field training, technical training and classroom work." "The scope of DACOWITS' training installation visits included all elements of initial entry training, including basic training, advanced individual training, and officer advanced training. The majority of issues raised by trainees, trainers, and supervisors of trainers were similar across all of the Armed Forces. "The most frequently raised issues by women and men and trainees and trainers alike were artificial gender relationships imposed at training installations, the persistence of gender discriminatory behaviors at many locations; the relationship between trainer attitudes and gender climates; the under valuation of trainers, especially women trainers; the need for greater gender integration to train field and fleet ready servicemembers, the need to increase physical training opportunities and standards; the need to improve screening of new recruits and to harmonize recruiting quality and practices; the under resourcing of training schools and the need to improve support services for women trainees." The first copy of each GAO report and testimony is free. Additional copies are $2 each. Orders should be sent to the following address, accompanied by a check or money order made out to the Superintendent of Documents, when necessary. VISA and MasterCard credit cards are accepted, also. Orders for 100 or more copies to be mailed to a single address are discounted 25 percent. U.S. General Accounting Office P.O. Box 37050 Washington, DC 20013 Room 1100 700 4th St. NW (corner of 4th and G Sts. NW) U.S. General Accounting Office Washington, DC Orders may also be placed by calling (202) 512-6000 or by using fax number (202) 512-6061, or TDD (202) 512-2537. Each day, GAO issues a list of newly available reports and testimony. To receive facsimile copies of the daily list or any list from the past 30 days, please call (202) 512-6000 using a touchtone phone. A recorded menu will provide information on how to obtain these lists.
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GAO reviewed three studies on gender-related issues affecting initial entry training in the Department of Defense (DOD), focusing on: (1) how the groups conducted their work; (2) how well the work supported making conclusions and recommendations; (3) the availability of documentation supporting the report; and (4) the extent to which the final report described the study methodology and disclosed limitations. GAO noted that: (1) the Army's Senior Review Panel on Sexual harassment used four methods to collect data: individual interviews, focus groups, surveys, and observations; (2) during its 8 months of work, the panel visited 59 installations worldwide, conducted interviews with 808 military and civilian Army personnel, ran focus groups with over 8,000 soldiers and civilians, and surveyed 22,952 individuals; (3) the use of multiple methods of data gathering, the rigor with which the various methods were conducted, and the publication of the data in the report provides ample support for making conclusions and recommendations; (4) the Federal Advisory Committee (FAC) on Gender-Integrated Training and Related Issues used focus groups as its primary method of data gathering; (5) although FAC conducted over 300 focus groups and individual interviews, their value for making conclusions and recommendations is limited because the Committee did not: (a) systematically collect the same information from all groups; (b) document the information generated in each of the interviews and focus groups; or (c) explain how what was heard in the interviews and focus groups led to their conclusions and recommendations; (6) in addition, the length of the focus group sessions, the number of participants, and the number of questions addressed may not have provided adequate time for full participation of the respondents on all issues; (7) given these limitations, the extent to which the Committee's work supports its conclusions and recommendations cannot be determined; (8) the Defense Advisory Committee on Women in the Services (DACOWITS) also used focus groups of trainees, trainers, and supervisors in the Army, Air Force, Navy, Marine Corps, and Coast Guard to identify what issues concerned women and men at training installations; (9) members of the DACOWITS held focus group discussions at 12 schools at 9 installations in the United States and prepared a summary report of the results at each installation; (10) the DACOWITS Chair used these to prepare a report to the Secretary of Defense that accurately reflected the opinions and perceptions cited in the individual installation reports; (11) the DACOWITS focus groups were: (a) larger than recommended in the literature; (b) were sometimes not long enough to allow meaningful participation; and (c) were not recorded or documented on a group-by-group basis; and (12) the DACOWITS report summarized the opinion and perception data obtained from focus groups; and (13) it made no conclusions or recommendations on military training based on that information.
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EPA defines brownfields as abandoned, idled, or underused industrial or commercial sites where expansion or redevelopment is complicated by real or perceived environmental contamination. Usually, the contamination is less extensive than sites on EPA's priority list for cleanup. We have reported that liability and other concerns have deterred many potential developers from using brownfields and that, instead, they use uncontaminated sites in suburban areas referred to as greenfields. The Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) authorizes EPA to clean up hazardous waste sites and to compel parties responsible for contamination to perform or pay for the cleanups. Developers' avoidance of brownfields has contributed to a loss of employment opportunities for city residents, a loss of tax revenues for city governments, and an increase in urban sprawl. To encourage more redevelopment of brownfields and promote cleanups, the Congress has considered several legislative proposals, both as separate bills and as part of legislation to reauthorize the Superfund program, that would help address liability concerns and provide economic incentives. In November 1993, EPA introduced the Brownfield Economic Redevelopment Initiative, for which the Outreach and Special Projects Staff--referred to in this report as the brownfield program office--has primary responsibility. This office reports to the Assistant Administrator for Solid Waste and Emergency Response, who also manages the Superfund program. The brownfield initiative is a commitment by EPA to help communities revitalize brownfields, both environmentally and economically, and mitigate potential health risks. EPA has begun four major efforts to implement this initiative: (1) providing grants for brownfield pilot projects for site assessment and cleanup planning; (2) clarifying liability and other issues associated with cleaning up sites to return them to productive use; (3) building partnerships and outreach for brownfield redevelopment among federal agencies, state and local governments, and communities; and (4) fostering local job development and training initiatives related to brownfield activities. EPA funds assessment pilot projects through cooperative agreements with state, local, and tribal governments, which use the funds to assess, identify, characterize, and plan cleanup activities at contaminated sites targeted for redevelopment. In general, an individual recipient can get a one-time grant of up to $200,000. EPA began funding these pilot projects in September 1993. At the time of our review, the agency had used $21 million to fund 121 projects in 41 states, including 45 projects in fiscal year 1997. EPA plans to fund an additional 100 projects in fiscal year 1998. EPA provided financial support to state, local, and tribal governments to help them create revolving loan funds that would provide low-interest loans to public and private entities for site cleanups. Any site that had been formally assessed before October 1, 1995, to characterize the nature and extent of contamination could be eligible for a loan. EPA allocated $8.4 million in fiscal year 1997 funds to 24 state, local, and tribal governments to begin these revolving funds. Because the Congress directed EPA not to use any of its fiscal year 1998 funds on this program activity, EPA is planning to reallocate $35 million it intended to use on revolving loan funds to some of the remaining program categories. EPA provides state and tribal governments with funds to enhance and develop voluntary cleanup programs that states often use to clean up brownfields. States have used fiscal year 1997 funds for such activities as (1) completing regulations for voluntary cleanup programs, (2) purchasing equipment to support program administration, (3) paying the salaries of agency staff to develop program procedures, (4) helping states and tribes to build their own capacity to oversee cleanups, and (5) promoting greater community involvement. In fiscal year 1997, EPA allocated $9.4 million for programs to assist 42 states and two tribal governments; in fiscal year 1998, the agency plans to allocate $15 million for programs to assist all 50 states and more tribal governments. EPA uses funds from the program category for targeted site assessments to pay either its contractors or the states through cooperative agreements to identify the extent of contamination at those sites where the work can be performed faster and more cheaply than if done by the local governments. EPA regions reported that they used $2.3 million in fiscal year 1997 to fund 27 targeted site assessments and that they plan to fund an additional 30 assessments with the $3 million budgeted for fiscal year 1998. EPA enters into environmental job training grants and agreements with educational institutions and professional organizations for (1) environmental curriculum development that incorporates brownfields, (2) community outreach and information dissemination on brownfields, and (3) job training in hazardous waste cleanup and employment assistance at cleanup sites. Since fiscal year 1993, EPA has allocated a small portion of general funds to make five job training awards, three of them in fiscal year 1997. The agency plans to make an additional 10 awards with a $2.8 million increase in Superfund resources that was made available for job training in fiscal year 1998. Through an interagency agreement, the remaining $3 million that had been budgeted for environmental job training has been allocated to the National Institute for Environmental Health Sciences to provide training on such issues as workers' safety. EPA funds outreach to constituents affected by brownfields; technical assistance to state, local, and tribal governments on brownfield redevelopment; and brownfield-related research. Typically, the agency awards grants and agreements to educational, governmental, research, and community organizations to, among other things, disseminate information and conduct research on issues related to site redevelopment and potential health risks from contaminants. During fiscal year 1997, EPA funded 11 such grants and agreements. The decreased amount from $6.3 million in fiscal year 1997 to $4.5 million in fiscal year 1998 reflects EPA's plan to fund more agency personnel to manage the increased number of assessment pilots. EPA's Office of Policy, Planning, and Evaluation awards agreements and contracts to research and community organizations to provide analytical tools and products for urban development and brownfield activities. For example, EPA awarded a $45,000 cooperative agreement in fiscal year 1997 for a 2-day conference and workshop that included some discussion of brownfield issues specifically affecting developers and lenders. The office awarded four agreements totaling $183,000 and five contracts totaling $422,000 in fiscal year 1997. The office plans about the same level of activity for fiscal year 1998. In fiscal year 1997, EPA assigned approximately 33 employees in headquarters and field offices to manage brownfield activities at a cost of $2.5 million; in fiscal year 1998, the agency plans to almost double the amount of funds and increase staff to 57 employees. The managers within the Outreach and Special Projects Staff--referred to in this report as the brownfield program managers--explained that EPA needs more staff to manage the increasing number of grants, cooperative agreements, and pilot projects to state, local, and tribal governments. Although recipients do not have to compete against each other for funds from either EPA's outreach, technical assistance, and research program category or its job training program category, the agency has established criteria and set up an approval process to award funds for brownfield activities. EPA's Outreach and Special Projects Staff awarded funds to nonprofit organizations if their unsolicited proposals addressed one of the following four broad criteria:increase community involvement in brownfields; promote the redevelopment of brownfields; provide for site assessment and cleanup; and promote the principal of sustainable development--that future economic well-being depends on the ability to sustain a healthy environment and productive, renewable natural resources. The managers said they often rejected proposals that did not meet at least one of the four criteria, but they could not document the number and type of rejected proposals. According to the brownfield program managers, they used the following process to approve the 24 awards we reviewed. If a proposal met at least one of the four criteria, it went through an internal EPA and, under some circumstances, an external review process. The brownfield program managers first checked their computerized tracking system of all federally funded outreach, technical assistance, research, and job training activities to ensure that the proposal would not duplicate ongoing awards. They then sent various proposals to other EPA offices, such as the Office of Research and Development and the Office of Policy, Planning, and Evaluation, that had conducted similar activities for their concurrence. They also sent proposals to the Office of General Counsel (OGC) to determine if the action complied with existing law, although they were not required to do this to approve an award. Furthermore, they sent certain proposals to other federal agencies, such as the Department of Housing and Urban Development, that had conducted similar activities for review of the proposals' technical and scientific merit. The brownfield program managers explained that EPA did not use a process whereby organizations had to compete for outreach, technical assistance, research, and job training funds as it used to make funding awards in some of the other brownfield program categories, such as assessment pilot projects. This is because, generally, the organization submitting an outreach or job training proposal serves a unique group of constituents that is affected by brownfields or has unique brownfield expertise. EPA guidance allows the agency to use unique qualifications as a justification for a noncompetitive award. The EPA brownfield program managers maintained that going through the expense of widely publicizing available funding and conducting a competitive process to screen hundreds of applications is not cost-effective, especially given the small amounts of the awards. For example, these managers explained that one recipient, the International City/County Management Association, represents city and county managers nationwide whose jurisdictions are directly affected by brownfields. EPA believes this association could more quickly poll its members to determine what brownfield assistance they need EPA to provide and more quickly disseminate information to them about successful brownfield redevelopment efforts than EPA could. According to the program managers, EPA also provided a cooperative agreement to the Institute for Responsible Management because its director has years of experience in brownfields. They explained that because of this experience, the director can help the pilot communities organize themselves and focus on brownfield cleanup and redevelopment options. The director can also provide research, information, and troubleshooting to these groups as well as document the lessons learned and success stories so other communities can benefit from them. EPA has used the same approval process for the five grants it had awarded for job training at the time of our review. For example, the agency provided funds in fiscal year 1997 to the Hazardous Materials Training and Research Institute at East Iowa Community College District to conduct workshops for community college faculty on how to build environmental curricula for job training, especially relating to cleaning up contaminated sites. According to the program managers, this award was made because of the Institute's success in developing training programs through awards from EPA's Office of Research and Development. They said that EPA is now working on a strategic plan for its training activities and will use it to determine whether or not to fund future job training proposals. The 24 awards made since 1993 that we reviewed with brownfield-related activities totaled $9.6 million. These funds came from the allotment to the brownfield program office, the Superfund Trust Fund, and general funds from either the brownfield or other EPA program offices. Recipients used these awards to provide outreach, technical assistance, research, and job training to support both brownfields specifically and Superfund or other programs more generally. We determined that about $3.7 million of these funds were for the following more specific brownfield activities, although some portion of the activities provided by the remaining funds could also indirectly benefit brownfields: issue reports or other documents on redevelopment activities; sponsor forums, conferences, or other meetings to disseminate research regarding brownfield issues and policies; conduct or sponsor workshops on brownfield issues or policies and on developing environmental curricula for job training related to hazardous waste cleanup; conduct research on brownfield and redevelopment issues, such as insurance coverage for entities conducting cleanups; and establish or develop programs to identify barriers to brownfield development. Recipients also used the awards to perform other activities, including the development of educational materials or tools and databases on redevelopment case studies. Appendix II provides a more detailed description of the activities funded under each of the 24 grants and agreements. In conducting these activities, recipients have spent most of the awarded funds on (1) their own personnel costs, including fringe benefits; (2) indirect costs, such as overhead; and (3) contractual services, such as any consultants used. They also have spent smaller portions of their funds on expenses for travel to enable their staff and participants to attend conferences and forums; equipment, such as copying machines; and supplies. Our review of the files for each of the 24 awards and our interviews with various members of the Outreach and Special Projects Staff responsible for managing some of the individual awards showed that project officers were monitoring recipients' activities. This monitoring consisted primarily of project officers' making periodic telephone calls to recipients to discuss the status of funded activities, attending some of the functions sponsored by the recipients, meeting with recipients at EPA headquarters, and reviewing quarterly and final reports that the recipients were required to submit to EPA. In these reports, recipients give detailed descriptions of the activities that were accomplished under their awards, and, in some cases, describe the status of the overall budget, if EPA had made this a specific reporting requirement. While EPA's Office of Administration and Resources Management encouraged project officers to conduct both on-site visits to recipients and more formal semiannual or annual project reviews, the files for our sample of 24 awards did not document that project officers were conducting these activities. Although the brownfield program managers stated that project officers were meeting informally with recipients, the project officers for two of the three recipients we audited had not visited them. The brownfield program managers explained that because of the relatively small monetary value of these awards, ranging from $20,000 to $2.7 million with a median of $168,000, the formal on-site visits were not cost-effective and that more formal reviews were not necessary because the project officers' other monitoring activities were adequate. Once a grant or agreement has been completed, each project officer is also responsible for conducting a final closeout review to determine whether the recipient has completed all technical work and met all requirements before EPA makes or denies the final payment to the recipient and recovers any unused funds. We determined that 2 of the 11 completed awards in our sample were due to be closed out--closeout must occur within 180 days of a completed grant or agreement--and EPA had conducted both closeouts. For example, to close out a cooperative agreement issued to the Northeast-Midwest Institute, whose project period ended on March 31, 1997, the recipient submitted its final financial status report on April 25, 1997, certifying that it had spent the funds. The project officer for this cooperative agreement reviewed this report along with the recipient's final quarterly report to close out the agreement on May 5, 1997. Project officers are not required to conduct a detailed financial audit of the recipients' expenditures as part of the closeout review. The brownfield program mangers stated that an audit would not be cost-effective because the awards have relatively small monetary values. Instead, EPA's regulations require recipients to maintain supporting financial records of all expenditures, such as receipts and invoices, on-site for 3 years after completion of a grant or agreement. During that period, recipients can be subject to an audit either by EPA's OIG or a single audit under provisions in OMB Circular A-133, entitled "Audits of States, Local Governments, and Non-Profit Organizations." According to this guidance, a recipient that spends at least $300,000 in federal funds in 1 year shall have a single or program-specific audit conducted for that year. The federal agency that has provided the most funds to the recipient for that year is responsible for coordinating that audit. The grant and agreement files we reviewed contained information that verified such single audits were being conducted, however, EPA's awards were not sampled during these audits because of their relatively low monetary amounts. In addition, EPA OIG staff stated that they were unlikely to audit these grants and agreements unless they received information of wrongdoing. In our detailed on-site audit of the financial records for three recipients, we determined that, overall, they were spending the funds in accordance with OMB's guidance. During our review of agency files for the 24 awards, we noted that EPA's OGC had cautioned the program offices that initiated the awards that external reviewers might determine that some of the activities were not allowable under the statute EPA had used to make the awards. If so, recipients would have to return all funds, even if they had completed the agreed-to activities. EPA used section 311(c) of CERCLA as authority for awarding at least portions of 14 of the awards we reviewed. This section authorizes EPA to use grants, cooperative agreements, and contracts to conduct and support research on ways to detect hazardous substances and evaluate the risks they pose to human health. However, in internal memorandums to the program offices that initiated 9 of the 14 awards, EPA's OGC stated that, while section 311(c) can be construed to authorize those awards, it did not explicitly authorize the proposed activities and thus warned that subsequent reviewers could question whether those activities were really health-related research and disallow the expenditures. For example, OGC raised this issue on a $1 million cooperative agreement authorized under section 311(c), whose recipient conducted meetings and training and issued publications to educate local communities on issues regarding Superfund, brownfields, and special concerns of minority communities located near hazardous waste sites. OGC has encouraged the program offices to seek explicit statutory authority from the Congress for the activities funded through the nine awards. According to the brownfield program managers and OGC representatives, because the statutory language is relatively broad, EPA has interpreted it to authorize the use of funds for these types of brownfield research activities. They also said that as a result, OGC did not disapprove the awards and the program offices went forward with them. Because the activities being conducted are mainly related to the Superfund program and funded with trust fund money, EPA has had to use CERCLA authority to make these awards rather than other environmental statutes, even though these other statutes more clearly provide for the types of sociological, economic, and policy research EPA has conducted with these awards. The program managers stated that although the administration, in its 1994 Superfund reauthorization proposal, did include language to clarify the authority, the bill did not pass, and the agency is considering whether to pursue clearer statutory authority through other means. We did not try to independently determine whether the nine awards were made in accordance with CERCLA because EPA's OIG is addressing this issue as part of an ongoing review covering a broader sample of grants and agreements across numerous EPA programs and environmental statutes. We provided copies of a draft of this report to EPA for review and comment. The agency generally agreed that the report accurately describes EPA's brownfield activities. (See app. III for a copy of EPA's comments.) The agency asked us to clarify that it used various statutory authorities to fund the different types of brownfield activities it conducted. For example, the agency noted that it used either CERCLA section 311(c) or RCRA section 8001 to make awards for brownfield research. The authority used depended on whether the activities were to detect and assess hazardous substances and evaluate their effects on the environment or were related to more general solid and hazardous waste management activities. In response, where appropriate, we noted the statutory bases used to fund brownfield awards. The agency also noted that only portions of several of the awards we discuss in appendix II, such as its award with the University of Maryland at Baltimore for training regarding hazardous substances, are being used for brownfield activities. We had already noted this in several sections of the report because the scope of our work included any award that supported brownfield activities, either wholly or in part. Finally, EPA suggested several technical changes to the report, which we incorporated where appropriate. We performed our work from July 1997 through February 1998 in accordance with generally accepted governmental auditing standards. As arranged with your office, unless you publicly announce its contents earlier, we plan no further distribution of this report until 30 days from the date of this letter. At that time, we will send copies to the EPA Administrator and other interested parties. We will also make copies available to others upon request. If you or your staff have any questions, please contact me at (202) 512-6111. Major contributors to this report are listed in appendix IV. The Chairman of the House Committee on Commerce asked us to review EPA's brownfield expenditures. Specifically, we were to determine (1) what activities EPA supported with the funds it targeted for brownfields in its fiscal years 1997 and 1998 budgets; (2) what criteria and approval process EPA used to award grants and agreements within its program categories for Outreach, Technical Assistance, and Research and Job Training that included brownfield funds or activities since 1993; (3) how recipients used the funds provided by the awards in these two categories; and (4) how EPA monitors and oversees these grants and agreements. To determine the activities EPA supported with its brownfield allotments and the criteria, approval process, and monitoring applied to outreach and job training awards; we contacted EPA brownfield program managers within the Outreach and Special Projects Staff, the office with jurisdiction for brownfield activities within the Office of Solid Waste and Emergency Response. We also obtained program data from two of EPA's databases, its overall grants database and its specific brownfield awards database, and funding data from the agency's supporting budget documents. To determine how recipients used funds in the outreach and job training program categories, we reviewed EPA's files for 24 of the 30 grants and agreements containing some brownfield funding or activities that EPA had awarded in these two categories between fiscal years 1993 through 1997. We did not receive information for the remaining six grants and agreements that EPA had awarded late in fiscal year 1997 in time to conduct a review of EPA's files for these awards. To obtain additional information for each grant or agreement, we contacted EPA's Grants Administration Office, which has oversight jurisdiction for grants and agreements, and EPA's Financial Management Office. To further test how recipients had used the funds, we selected 3 of the 11 completed outreach and job training grants and agreements for a more detailed, on-site financial audit. We focused on completed, rather than ongoing, grants and agreements because they would allow us to more fully cover all our review objectives, including questions on oversight. We focused on grants and agreements from 1993 through 1996 because 1993 was the earliest year EPA had made brownfield awards, and awards from 1997 did not have a long history of recipients' expenditures. We audited three awards with the highest total dollar value--one within the EPA program category of outreach, technical assistance, and research; the second within the EPA program category of job training; and a third that had been awarded by an EPA regional office within either category to determine if the region used criteria and oversight that differed from headquarters. We discussed our selection of awards with EPA's Outreach and Special Projects Staff and these program managers concurred with our selection of awards made to the Hazardous Materials Training and Research Institute at Eastern Iowa Community College District, the International City/County Management Association, and the Northeast-Midwest Institute. For the detailed audit of the three completed awards, we (1) interviewed the technical and financial managers with responsibilities for those awards; (2) reviewed a majority of the records, invoices, receipts, and other documentation that justified the expenditures in each of the budget categories; (3) determined the purpose of those expenditures; and (4) determined whether those expenditures had been made in accordance with Office of Management and Budget (OMB) circulars. This guidance included OMB Circular A-21 (rev. August 29, 1997) and OMB Circular A-122 (rev. August 29, 1997). Major activities covered by award Develop an organization to facilitate and help ensure full tribal participation in EPA's decision-making process on waste management issues that will affect tribal health and the environment. Provide outreach and technical assistance to identify environmental issues to help ensure full tribal participation in the brownfield pilot application process. Promote ways to clean up and redevelop brownfield sites by such activities as -- conducting roundtable meetings to address various brownfield issues (e.g., barriers to redevelopment and innovative approaches for brownfield revitalization), -- develop and maintain a national brownfield redevelopment database of brownfield sites, and -- establish a network of local officials to serve as technical experts on issues related to brownfield cleanup. Study and report on the relative importance of environmental hazards and regulatory requirements as barriers to brownfield redevelopment. Analyze the potential effects of a proposed residential capital gains tax cut and develop a workshop to market this provision for brownfield redevelopment. Study and report on policies and programs that can help reduce health risks and other problems associated with brownfield redevelopment, and identify and quantify the reduced developmental pressures on greenfields. Develop publications from a series of forums on Superfund effects on local communities. Develop a consortium and guidance manual on base closures. Produce two videos on ways governments can work together to clean brownfield sites. (continued) Major activities covered by award Develop an independent membership organization to promote environmentally and economically smart development decisions. The organization will support members by researching policies and tools on brownfield redevelopment and serve as a clearinghouse for information and peer exchange. Conduct meetings and training and issue publications to educate local governments and communities on various issues associated with contamination at hazardous waste sites, including international and other brownfield issues and local government involvement at Superfund sites. Through the creation of the Joint Center for Sustainable Communities, provide local elected officials with advice, information, and financial support on sustainable community development issues, such as brownfield redevelopment and curbing urban sprawl. Develop a model brownfield redevelopment plan for member mayors to use to adapt to their unique situations. Hold six consultations to increase the awareness of locating hazardous waste sites in low-income neighborhoods and communities of color, and publish the results and findings of those consultations. Conduct research, convene meetings, provide training, and issue publications on state and EPA issues related to the Superfund program, such as state requirements for cleanup programs and brownfield revitalization. Research and publish 20 case studies on the cleanup and reuse of brownfield sites and share the results with targeted groups of local leaders through at least two constituent meetings. To help reduce the health risks and other problems associated with brownfields, conduct a series of activities, including -- monitor changes to brownfield and other cleanup legislation and publish information on these changes to educate constituents, and -- publish "how-to" booklets on environmental site cleanup, workforce development, and other issues important to brownfield cleanup and redevelopment. Conduct conferences, develop models, and issue research papers on federal barriers to brownfield redevelopment and ways to achieve smart growth while protecting public health. (continued) Major activities covered by award Conduct forums to promote public discussion on brownfield redevelopment. Form a Brownfield Oversight Community Action Team to learn about and monitor the progress of community brownfield cleanups, as well as educate communities and publicize information on associated health effects, redevelopment barriers, and other brownfield issues. Compile and disseminate information, such as lessons learned, on EPA's brownfield pilot projects. Assist members in participating in community-based brownfield redevelopment activities through public dialogues, research, and other outreach initiatives, and in establishing and maintaining a national brownfield internet site. Sponsor a conference and workshop to make developers, lenders, and local governments aware of smart growth (i.e., environmentally and economically smart decisions), brownfield redevelopment, and other issues. Publish a catalogue of organizations that focus on issues directly related to sustainable development and identify actions to overcome its barriers. Conduct several workshops for community colleges on opportunities for environmental education and training, and provide on-going follow-up and technical assistance to colleges in such issues as brownfield redevelopment. Deliver training to small and minority-owned contractors that remove hazardous waste from contaminated sites, including brownfield sites. Develop a curriculum to educate law students and practicing attorneys on a variety of human health and environmental protection issues, including brownfield redevelopment. (Table notes on next page) Note 1: Unless otherwise noted, funds were provided by EPA's Outreach and Special Projects Staff. Note 2: Funding associated with brownfield activities includes funding from Superfund, EPA's general funds, and other sources. An interagency agreement with the Department of Housing and Urban Development. Harriet Drummings, Staff Evaluator The first copy of each GAO report and testimony is free. Additional copies are $2 each. Orders should be sent to the following address, accompanied by a check or money order made out to the Superintendent of Documents, when necessary. VISA and MasterCard credit cards are accepted, also. Orders for 100 or more copies to be mailed to a single address are discounted 25 percent. U.S. General Accounting Office P.O. Box 37050 Washington, DC 20013 Room 1100 700 4th St. NW (corner of 4th and G Sts. NW) U.S. General Accounting Office Washington, DC Orders may also be placed by calling (202) 512-6000 or by using fax number (202) 512-6061, or TDD (202) 512-2537. Each day, GAO issues a list of newly available reports and testimony. To receive facsimile copies of the daily list or any list from the past 30 days, please call (202) 512-6000 using a touchtone phone. A recorded menu will provide information on how to obtain these lists.
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Pursuant to a congressional request, GAO reviewed the grants and agreements the Environmental Protection Agency (EPA) awarded since fiscal year 1993 under two program categories of brownfield expenditures, focusing on the: (1) criteria and process EPA used to award these grants and agreements; (2) uses recipients made of these funds; and (3) monitoring and oversight EPA provided for them. GAO noted that: (1) EPA primarily uses its brownfield funds to help state, local, and tribal governments build their capacities to assess, clean up, and revitalize brownfield sites; (2) EPA is using the majority of its $126 million in brownfield funds for fiscal years 1997 and 1998 to: (a) help these groups identify, assess, characterize, and develop clean-up plans for brownfield sites; (b) provide them with seed money to create revolving loan funds that they could use to award low-interest loans for cleanups; (c) support state development of programs that provide incentives for voluntary cleanup of sites, especially brownfields; and (d) provide outreach to groups affected by brownfields, technical assistance to them on clean-up and redevelopment methods, and research for them on brownfield issues; (3) EPA is using the remaining brownfield funds for support and other program activities, such as EPA's personal costs; (4) EPA set up four broad criteria and an approval process to award funds noncompetitively to nonprofit organizations for their unsolicited proposals to provide outreach, technical assistance, research, and job training; (5) the criteria included increasing community involvement at brownfields, promoting redevelopment, providing for site assessments, and sustaining a clean environment for the future; (6) if the proposals met one of the four criteria, the managers responsible for most of the brownfield activities explained that they generally would fund the proposals if the nonprofit organization represented unique constituents affected by brownfields, such as tribes, or offered unique brownfield expertise or experience; (7) although EPA has used the same process and criteria to award a few job training grants and agreements, it is developing a strategic plan to use as criteria for making future awards; (8) since fiscal year 1993, award recipients have used $3.7 million from the 24 outreach and job training awards GAO reviewed to conduct brownfield-specific activities; (9) award recipients used additional funds from the 24 awards for outreach and job training activities in support of the broader Superfund program or other EPA programs, although some of these activities would also indirectly help promote brownfield cleanup and redevelopment; and (10) EPA staff responsible for managing the 24 awards GAO reviewed were monitoring the overall status of the budget for each award and the content and quality of recipients' activities through various means.
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In January 2001, we reported on Department of Defense management challenges and noted that the Department has had serious weaknesses in its management of logistics functions and, in particular, inventory management. We have identified inventory management as a high-risk area since 1990. Despite years of efforts to resolve its inventory problems, the Department still has spare parts shortages. (See app. I for examples from our reports on management weaknesses related to the Army's spare parts shortages.) We are also reviewing Department of Defense's practice of cannibalization of parts on aircraft; this report will be completed at a later date. In a separate report issued earlier this year, we indicated that current financial information did not show the extent to which funds were used for spare parts. The Department of Defense planned to annually develop detailed financial management information on spare parts funding uses but had not planned to provide it to the Congress. When we recommended that the Secretary of Defense routinely provide this information to the Congress as an integral part of the Department's annual budget justification, the Department agreed to do so. The Department of Defense submits quarterly reports to the Congress regarding military readiness. The reports describe readiness problems and remedial actions, comprehensive readiness indicators for active components, and unit readiness indicators. The Army's readiness reports provide assessments of its major systems, which include aircraft. The readiness goal for aircraft is to have 70 to 80 percent mission capable. The Apache (AH-64) is the Army's main attack helicopter and is equipped to destroy, disrupt, or delay enemy forces. Originally produced in fiscal year 1982, it is designed to fight and survive during the day and night and in adverse weather throughout the world. The Blackhawk (UH-60), first fielded in 1978, primarily performs air assault, air cavalry, and medical evacuation missions. The Chinook (CH-47), first used in Vietnam in 1962, moves artillery, ammunition, personnel, and supplies on the battlefield. Figure 1 shows the Apache, Blackhawk, and Chinook helicopters. The Army's spare parts include reparable and consumable parts. Reparable parts are expensive items, such as hydraulic pumps, navigational computers, and landing gear, that can be fixed and used again. The Aviation and Missile Command manages reparable parts. The Corpus Christi Army Depot and contractors repair helicopters and aviation reparable parts. The Defense Logistics Agency provides the Army consumable parts (e.g., nuts, bearings, and fuses), which are used extensively to fix reparable parts and aircraft, and manages a large part of the warehousing and distribution of reparable parts. The Defense Supply Center, Richmond, is the lead center for managing aviation consumable spare parts. Figure 2 shows the process for providing spare parts to Army helicopter units and the repair facilities. While the Apache, Blackhawk, and Chinook helicopters generally met their mission-capable goals during fiscal years 1999-2000, indicating that parts shortages have not affected mission capability, supply availability rates and the cannibalization of parts indicate that spare parts shortages have indeed been a problem. These parts shortages created inefficiencies in maintenance processes and procedures that have lowered morale of maintenance personnel. As shown in figure 3, during fiscal years 1996-2000, the three helicopters we reviewed generally met their mission-capable goals. In fiscal year 1996, the Blackhawk's mission-capable rate was 79.25 percent, which according to an Aviation and Missile Command official, was just slightly below its readiness goal of 80 percent. Also, the Command official mentioned the Blackhawk probably did not exactly meet its mission-capable goal for many reasons, including several aviation safety action messages that were issued that year. These messages identified maintenance, technical, or general problems for which the safety condition of the aircraft had been determined to be a low to medium risk. The Chinook and the Apache did not meet their mission-capable goal of 75 percent in August and November 1999, respectively, when the entire fleet of helicopters was grounded because of "safety restrictions." A safety restriction pertains to any defect or hazardous condition that can cause personal injury, death, or damage to aircraft, components, or repair parts for which a medium to high safety risk has been determined. The Chinook was grounded because of a cracked gear in the transmission, which was already in short supply before the safety restriction. The gear changes the direction of power from the engine and reduces the speed that turns the rotor blades (see fig. 4). The Apache helicopters were grounded because of transmission clutch failures. According to an Army official, the clutch engages and disengages the gears in the transmission. Also, Aviation and Missile Command officials mentioned the grounding of these helicopters created demands for parts that the wholesale system did not have available. The safety concerns coupled with the lack of spare parts contributed to these helicopters' failure to meet their mission-capable goals. As shown in figure 5, during fiscal years 1999-2000, parts for the Apache and Blackhawk helicopters seldom met the Army's supply availability goal of 85 percent. The supply availability rate is the percentage of requisitions filled at the wholesale inventory level. The goal is designed to measure the overall effectiveness of the wholesale system. While the Blackhawk met the supply availability goal only twice during the 2-year period, the Apache never met the goal. We identified several reasons for spare parts shortages, which will be discussed later. To compensate for the lack of spare parts, maintenance personnel use cannibalizations or substitutions of parts from one aircraft to another. According to the Army Aviation Maintenance Field Manual 3-04.500, cannibalization is done when, among other things, (1) the aircraft from which the exchanged parts will be used is grounded and awaiting repair parts; (2) needed repair parts are on order before the cannibalization; (3) the parts will return the other aircraft to a mission-capable status; and (4) all possible alternatives (local procurement or manufacturers) have been tried without success. A January 2000 aviation logistics study showed that cannibalization is an accepted maintenance practice at the unit level to return aircraft to mission-capable status. According to a Fort Campbell 101st Airborne Division official, the principal reason for cannibalizations is the nonavailability of serviceable repair parts. The results from our spare parts review showed that cannibalizations at Fort Campbell were done on the Apache and Blackhawk main fuel controls, the Blackhawk engines, and the Chinook rotary wing head. The rotary wing head is the main assembly of the rotor system that produces lift, thrust, and directional control needed for helicopter flight. Figure 6 shows the rotary wing head. Fort Campbell's contractor maintenance personnel also used cannibalizations on the Apache housing assembly and actuator bracket and the Chinook aircraft access door. The actuator bracket anchors the servocylinder to the aircraft. Although the previous examples show units' reliance on cannibalization to overcome the unavailability of parts, the practice does not resolve spare parts shortages. According to the Army's Deputy Chief of Staff for Logistics, supply shortages, which are masked through extensive use of cannibalizations, are a continuing problem the Army is working to resolve. As we testified in May 2001, according to Army officials, only a small portion of Army cannibalizations are reported (only for serial-numbered parts). The Army does not track cannibalizations servicewide and does not require subordinate commands to do so. Therefore, the full extent to which this practice is used is unknown. However, the Floyd D. Spence National Defense Authorization Act for Fiscal Year 2001 (P.L. 106-398, sec. 371) requires the Department of Defense to measure, on a quarterly basis, the extent to which units remove usable parts, supplies, or equipment from one vehicle, vessel, or aircraft in order to render a different system operational. The Department is working to establish definitions, standards, and a shared framework for the collection and reporting of data on cannibalization. The first report of these data is targeted for the April-June 2001 Quarterly Readiness Report to the Congress. Although cannibalization may keep aircraft flying, it is not an efficient practice. According to the January 2000 aviation logistics study, this practice doubles the hours dedicated to a single maintenance effort. With limited hours available to conduct repairs and maintenance, the duplication of effort is a significant factor in whether or not to use the practice. Also, as we testified in May 2001, this practice requires at least twice the maintenance time of normal repairs because it involves removing and installing components from two aircraft instead of one (see fig. 7). Additionally, when a mechanic removes a part from an aircraft to place on another one, the risk of damaging the aircraft and/or the "good" part in the process is magnified. As we testified in May 2001, evidence suggests that cannibalizations have negatively affected morale because they are sometimes seen as routinely making unrealistic demands on maintenance personnel. According to a Fort Campbell official, the added workload of cannibalization detracts from the quality of life for aircraft maintenance soldiers. Also, an Army official said the added workload degrades maintenance soldiers' morale.Cannibalizations may need to be quickly performed at any time, day or night, to meet operational commitments. In such cases, personnel must continue working until the job is done, regardless of how much time it takes. Further, in August 1999 we reported that the majority of factors cited by military personnel as sources of dissatisfaction and reasons for leaving the military were work-related circumstances such as the lack of parts and materials to successfully complete daily job requirements. Our review showed that the primary reasons for shortages of spare parts for the Apache, Blackhawk, and Chinook helicopters were demands not anticipated for parts and delays in obtaining parts from a contractor. Also, problems concerning overhaul and maintenance of spare parts created shortages. A contributing factor, which was not identified in our review but which Army and Defense Logistics Agency officials acknowledged, was the difficulty in obtaining parts for these aging helicopters because original manufacturers may no longer be in business. We selected for review 90 spare parts for the Apache (32 parts), Blackhawk (34 parts), and Chinook (24 parts) helicopters. Officials at the units and repair facilities identified shortages of these 90 parts as not being available to complete repairs. (See app. II for a list of these parts.) Table 1 shows the reasons for the shortages, by helicopter, for the 90 spare parts we reviewed. The major reason for the shortages of the 90 spare parts we reviewed was that demands for parts were not anticipated due to unforeseen safety concerns, the recalculation of parts' useful life, and other sudden increases in demands. The Army and the Defense Logistics Agency forecast the demand for parts using past data on the usage of parts, when available. According to an Army document, a demand that was not anticipated results in the need for parts that the Army had not planned for when determining requirements for parts. A June 2000 Army Audit Agency report also cited demands that were not anticipated as a main factor causing parts shortages. Parts identified as causing safety problems resulted in unanticipated demands for spare parts and created shortages. For example, according to a safety message, because a cracked gear in a Chinook transmission was discovered during an overhaul, the entire fleet was grounded in August 1999. According to an Aviation and Missile Command item manager, units sent transmissions suspected of having problems to the Corpus Christi Army Depot for repair. Also, the item manager mentioned the safety issue exacerbated an already existing condition because the Command never had enough transmissions on hand to meet the average monthly demand. Causes of this condition were identified as long lead times to (1) award contracts and (2) manufacture and repair transmissions. Since the safety concerns, the demands have increased significantly; and as of March 2001, 75 transmissions were on back order. Similarly, according to a February 2000 safety message, an engineering analysis indicated that the retirement life for the Apache main rotor blade attach pins (see fig. 8) needed to be reduced because specific pins might not provide the proper fit and would result in significant degradation of the pins' life due to fatigue. (The pins attach the helicopter blade to the main rotor.) Units were required to inspect all main rotor pins and replace defected pins with new ones that last longer. In June 2000, demands for the pins increased, and the Command's record shows that 81 pins were on back order and 14 pins were on hand to support the average monthly demands for 30 pins. The recalculated useful life of parts also resulted in unanticipated demands for parts that the Army had not planned for and created shortages. According to an Aviation and Missile Command team leader of the Apache Systems Engineering Office, the useful life of the Apache's housing assembly (see fig. 9) and rotor damper (see fig. 10) changed because the Command conducted test flights that recorded the accurate fatigue factors for parts. The official said that recalculating the parts' useful life based on accurate data instead of estimates reduced their useful life. In August 2000, the Aviation and Missile Command records show that the Command had only three usable Apache housing assemblies on hand when its useful life was recalculated and reduced from 1,981 to 1,193 hours, about a 40-percent reduction. As a result, repairs had to be made more frequently, and there were more demands for the housing assemblies than were available. Similarly, the Command's record shows that the Command had only seven usable Apache rotor dampers on hand when its useful life was reduced from 3,710 to 2,057 hours, about a 45-percent reduction. In September 2000, demands for the rotor dampers increased, and the Command's record shows that 53 were on back order and the average monthly demand was 65. Finally, parts that were ordered more frequently than expected caused shortages when increases in demand for the items were not anticipated. For example, field units' demands for bearings used on the Blackhawk helicopters outpaced the contractor's production. According to an Aviation and Missile Command item manager, a new bearing was introduced in 1996. The Command's records show that before the new, improved bearing was introduced, units replaced this bearing every 70 hours. This new bearing lasts 4,000 hours and the contractor could not produce enough to meet the demand. In March 2000, Army records show that 976 bearings were on back order. According to a Command item manager, the increase in demand for the bearings occurred because (1) units were stockpiling the bearings and (2) the parts were being replaced worldwide on all Blackhawk helicopters because they lasted longer. The item manager stated the units were no longer ordering excessive quantities of bearings and that as of May 2001, there were 300 on hand and 423 on back order. Likewise, the Command experienced a 25-percent increase in demands for Apache fuel boost pumps (see fig. 11). A Command team leader for the Apache airframe was uncertain as to what caused the surge in demand but commented that it was not unusual for parts to fail because of the aircraft's age. The Command's record shows that unexpected failures of motors occurred during repairs, which delayed production of fuel boost pumps to meet increased demands. Also, the Command's record shows that in October 2000, there were 45 back orders and no usable fuel boost pumps on hand to meet the average monthly demand for three. Poor contractor performance and delays in negotiating a contract also resulted in parts shortages. For example, Defense Logistics Agency records show that as a result of a contractor's late deliveries of Apache shear bolts, the Agency did not have the parts available for Apache users. Agency records show that the contract was terminated and another one was awarded to a different contractor. Also, Army records show that the Command had difficulty negotiating with a sole-source contractor to provide Apache servocylinders at reasonable prices. Because of the time it took the Aviation and Missile Command to award the contract, the parts were not provided to the users when needed. Due to a shortage of parts, the Corpus Christi Army Depot experienced problems that prevented it from repairing and overhauling aviation parts in a timely manner. In May 1999, the Corpus Christi Army Depot received a requirement to overhaul 20 Blackhawk T-700 engines (see fig. 12). In July 1999, the depot received the fiscal year 2000 requirement to overhaul 30 engines, which increased to 65 in October 1999 and to 80 in December 1999. Because of these increases, the depot did not have enough time to determine the parts needed to support the overhaul requirements and the parts were not available to complete repairs in a timely manner. Also, the depot did not have the personnel available to respond quickly to the dramatic increases in overhaul requirements and thus the Depot could not repair parts in a timely manner. Further, in June 2000 an Aviation and Missile Command record showed that the average demand for Blackhawk T-700 engines was 7 per month, 66 engines were on back order, and 249 engines needed to be repaired. Another maintenance problem we identified was a shortage of parts used to repair cold section modules, a compressor section in the T-700 engine. The repair of cold section modules was also impacted by the need for personnel to support the overhauls of Blackhawk T-700 engines. Aircraft age was not a reason for the 90 spare parts shortages we reviewed. However, Army and Defense Logistics Agency officials informed us the age of the Apache, the Blackhawk, and the Chinook is a factor contributing to parts shortages for these systems. The aircraft were originally developed in the 1980s, 1970s, and 1960s, respectively, and they are expected to be useful for a number of years. The Commander of the Army Materiel Command said in 1999 that the Army expects to maintain an upgraded model of the almost 40-year-old Chinook for an additional 30 years. He added that because of the aircraft's ages, parts consumption increases, inventory is depleted, cannibalization is necessary, and procurement costs of replenishment stocks increase. According to the Defense Logistics Agency's November 2000 Aging Aircraft Program Management Plan, because of the extended age of these systems, the Army is concerned about the degradation of their structural integrity and the hard-to-find structural and electrical parts. Also, according to a report prepared for the Defense Microelectronics Activity, manufacturing sources for spare parts can be diminished because of uneconomical production requirements and the limited availability or increasing cost of items and raw materials used in the manufacturing process. Army and Defense Logistics Agency officials commented, and the plan states, that this issue is serious because the original contractors that produced some spare parts for aging weapon systems may no longer be in business or may have upgraded their production lines to accommodate technologically advanced parts. However, we did not find this factor to be a reason for the shortages of the parts we reviewed. The Army and the Defense Logistics Agency have initiatives under way or planned to revolutionize and integrate logistics processes, upgrade aging aircraft, and improve the supply of aviation parts. The concept for the initiatives generally addresses the reasons we identified for spare parts shortages. The Army has developed a Strategic Logistics Plan intended to integrate the modernization and transformation of logistics processes throughout many organizations. The Army initiatives we identified are linked to the plan's asset management process, which is designed to match available assets with needs, identify shortages of assets, and interface with government and industry suppliers to buy additional assets. We have previously reported problems with the way Army has implemented its logistics initiatives and recommended that it develop a management framework for its initiatives, to include a comprehensive strategy and performance plan. The Army has actions under way to address the recommendation; therefore, we are not making any additional recommendations at this time. The various Army-wide, Army Materiel Command, and Defense Logistics Agency initiatives are described in the following sections. Among the efforts the Army has under way to improve the availability of spare parts are its Strategic Logistics Plan, Logistics Transformation Plan, Single Stock Fund, Velocity Management, and National Maintenance Program. The Army has developed a Strategic Logistics Plan intended to integrate the modernization and transformation of logistics processes throughout many organizations. Under its Strategic Logistics Plan, the Army hopes to change from its current reactive approach to one that is more effective, efficient, and responsive. The initiatives planned or under way that are designed to resolve spare parts shortages are linked to the asset management process under the Army's planned change in approach. The plan was last updated on May 11, 2000, to show how the Army will achieve its synchronization goals by meeting the requirements of the Government Performance and Results Act (P.L. 103-62 (1993)). The next update is planned for the fall 2001 and is to include a timeline with milestones and metrics to track, measure, and better manage the transformation process. In September 1999, we recommended that the Army develop a management framework to include a comprehensive strategy and a performance plan for implementing its initiatives. In March 2000, the Department of Defense issued Defense Reform Initiative 54, which requires each military service to submit an annual logistics transformation plan. The purpose of this plan is to document, on an annual basis, the planned actions and related resources for implementing logistics initiatives, including actions that directly support the Department's Logistics Strategic Plan. Initiative 54 requires that the services' transformation plans include each of the key management framework elements specified in our prior reports. In response to our previous recommendation, in May 2000 the Army decided to combine preparation of its Strategic Logistics Plan with its response to Defense Reform Initiative 54. In July 2000, the Army developed its Logistics Transformation Plan in response to initiative 54. However, we did not evaluate this plan to determine whether its management framework included a comprehensive strategy and performance plan. Since the Army is taking actions on our previous recommendation to develop a management framework, we are not making new recommendations at this time. We are now reviewing the adequacy of the strategic logistics planning process within the Department of Defense and component commands, and this review will include the services' logistics transformation plans. This report will be completed later this year. The Army's single stock fund is a business process reengineering initiative to improve the availability of secondary items logistics and financial processes in the Army Working Capital Fund, Supply Management business area. The fund is aimed at improving the availability of spare parts by, among other things, (1) providing worldwide access to parts down to the installation levels, (2) consolidating separate national-level and retail elements into a single fund, and (3) integrating logistics and financial automated information systems. In 1987 the Army began to study its stock fund operations. The Army's single stock fund program campaign plan was approved by the Vice Chief of Staff in November 1997, and during the first quarter of fiscal year 2002, the Army plans to transfer all stocks, which include wholesale and retail inventories, to the single management by Army Materiel Command. In September 1995, the Army established its Velocity Management Program to develop a faster, more flexible, and more efficient logistics pipeline. The program's goals, concept, and top management support parallel improvement efforts in private sector companies. The program's overall goal is to eliminate unnecessary steps in the logistics pipeline that delay the flow of supplies through the system. The program consists of Army-wide process improvement teams for the following four areas: the ordering and shipping of supplies, repair cycle, inventory levels and locations (also known as stockage determination), and financial management. This Army-wide initiative, which was announced in July 1999, is designed to maximize repair capabilities and optimize the use of available resources at all maintenance levels within the Army. The initiative centralizes the management of all Army sustainment maintenance programs while decentralizing the actual repair of components and parts. The workload will be distributed across depot and installation activities, and repairs will be made based on national need for an item. Additionally, the Army plans to upgrade its aging aircraft through its Recapitalization Program (a part of the National Maintenance Program), which it will achieve by overhauling components of and upgrading its aircraft. The purpose of this program is to (1) extend aircraft service life; (2) reduce operating and support costs; (3) improve reliability, maintainability, safety, and efficiency; and (4) enhance capability. A limited number of weapon systems will begin this process in fiscal year 2002, with full-scale upgrades beginning in fiscal year 2003. The Apache, Blackhawk, and Chinook helicopters have been identified as candidates for the program. The Army Materiel Command has several initiatives under way to help resolve spare parts shortages, including (1) identifying processes for forecasting requirements for spare parts, (2) analyzing the spare parts program to identify issues that affect aviation spare parts shortages, and (3) working with contractors to provide spare parts. These initiatives are separate from those in the Army's Strategic Logistics Plan. In July 2000, the Army Materiel Command established the Forecasting and Support Techniques Working Group to identify processes for forecasting requirements for spare parts and to develop a plan to resolve any identified problems. The Army uses forecasting to develop quantity and resource requirements for inventory. Its basic principles are to maintain current data on customer demand, lead times for obtaining parts, internal process costs, stock levels, and replenishment of parts in a timely manner. In January 2001, the working group had prioritized several issues for its review. In August 2000, the Army Materiel Command established the Spare Parts Shortages Integrated Process Team to analyze the spare parts program and to initially focus on aviation parts managed by the Aviation and Missile Command. The team identified issues that have affected spare parts shortages, including (1) an increase in demands that led to reduced availability of reparable parts; (2) understated times for administration and production of spare parts, which resulted in the reduced availability of consumable and reparable parts; and (3) changes in requirements as the result of problems with parts that affected aircraft safety and readiness and minimally affected the availability of spare parts. The team recommended the issues be used to influence the next budget submission. The Aviation and Missile Command is attempting to help resolve spare parts shortages by establishing partnerships with key contractors to reduce the time it takes to provide spare parts once a need has been identified. The Aviation and Missile Command focuses on ensuring that the prime contractors' focus is maintained on readiness, lead times, spare parts reliability, and rapid response to customer needs. Among the efforts the Defense Logistics Agency has under way to improve the availability of spare parts are its Aviation Investment Strategy, Aging Aircraft Program, and contracts for consumable parts. The Defense Logistics Agency's major initiative to resolve aircraft spare parts shortages is its Aviation Investment Strategy. This fiscal year 2000 initiative focuses on replenishing consumable aviation repair parts that have been identified as having availability problems that affect readiness. To achieve this initiative, the Agency plans to invest $17.3 million in aviation spare parts for the Army from fiscal years 2000 through 2003. As of fiscal year 2000, about $4.8 million had been obligated for this purpose. The purpose of the Defense Logistics Agency's Aging Aircraft Program is to consistently meet the goals for spare parts availability for the Army, Navy, and Air Force aviation weapon systems. The program's focus will be to (1) provide inventory control point personnel with complete, timely, and accurate information on current and projected parts requirements; (2) reduce customers' wait times for parts for which sources or production capability no longer exist; and (3) create an efficient and effective program management structure and processes that will achieve the stated program goals. The Aging Aircraft Program Management Plan was issued in November 2000, and the Agency plans to invest about $20 million on this program during 2001-2007. The Defense Supply Center Richmond has a 2-year contract with an option for 3 years with one contractor and a 5-year contract with another contractor for consumable Army aircraft spare parts. According to a Defense Supply Center Richmond document, the use of best commercial practices will benefit aircraft users through improved delivery schedules and reduced inventory storage and administrative costs. In written comments on a draft of this report, the Principal Assistant Deputy Under Secretary of Defense for Logistics and Materiel Readiness indicated that the Department of Defense generally concurred with the report. The Department's comments are reprinted in their entirety in appendix III. To determine the impact spare parts shortages had on three selected Army helicopters, we obtained and reviewed (1) Department of Defense Quarterly Readiness Reports to the Congress for April 1999 through September 2000 and (2) additional readiness data from the Army's Deputy Chief of Staff for Logistics, Arlington, Virginia. Additionally, we had discussions with officials at the Army Materiel Command, Alexandria, Virginia. We did not independently verify the readiness data. We selected the three helicopters for review because the helicopters experienced spare parts shortages during fiscal year 2000. To determine whether selected helicopters met supply availability goals, we obtained and reviewed the Army Materiel Command's fiscal year 1999-2000 supply availability rates for the Apache, Blackhawk, and Chinook helicopters. We did not independently verify the supply availability data. To determine why the helicopters experienced spare parts shortages, we interviewed officials at the Army Aviation and Missile Command, Huntsville, Alabama, and reviewed selected Army safety messages from August 1999 through February 2000 to identify the parts that caused the safety concerns. To determine the impact of parts shortages on maintenance practices and personnel, we reviewed the Army regulation on materiel policy and retail maintenance operations and an Army study on cannibalizations. We also reviewed our previous work on how cannibalizations adversely affect personnel and maintenance and our report that cited the lack of spare parts as hampering retention of military personnel. Additionally, we interviewed an official at the 101st Airborne Division, Fort Campbell, Kentucky, on the impact cannibalizations had on maintenance. To determine the reasons for the shortages of spare parts for the Apache, Blackhawk, and Chinook helicopters, we obtained computerized lists of spare parts that caused the helicopters to be not mission capable from the Army Aviation and Missile Command from October 1999 through July 2000 and from the Defense Supply Center, Richmond, Virginia, for fiscal year 2000. Also, we visited and obtained lists of spare parts shortages that caused delays in repairing helicopters from (1) Fort Campbell's 101st Airborne Division as of September 13, 2000; (2) Fort Campbell's Aviation Logistics Management Division, DynCorp Aerospace Operations, as of April 18, 2000; and (3) the Corpus Christi Army Depot, Corpus Christi, Texas, as of August 23, 2000. From the lists, we selected all 15 parts from the Fort Campbell's 101st Airborne Division and randomly selected 75 spare parts from the other locations for the Apache (32), Blackhawk (34), and Chinook (24) for further review (a total of 90 parts). Because of the size of our sample, we did not project the results of the sample to the universe of all helicopters' parts shortages. Once we identified the 90 spare parts shortages, we provided them to the inventory control points, the Army Aviation and Missile Command, and the Defense Supply Center, Richmond, to obtain their reasons for the shortages along with supporting documentation. To determine whether the aging of the aircraft contributed to spare parts shortages, we reviewed congressional Army testimony and documentation from the Defense Logistics Agency, Fort Belvoir, Virginia, and interviewed Army and Defense Logistics Agency officials. To determine whether management weaknesses contributed to spare parts shortages, we reviewed our prior reports on Army and Department of Defense inventory and financial management problems. To determine what overall actions are planned or under way to address spare parts shortages for Army aircraft, we visited and obtained documentation and views from program officials at the Army's Office of the Deputy Chief of Staff, Logistics; the Army Materiel Command; the Army Aviation and Missile Command; the Defense Logistics Agency; and the Defense Supply Center, Richmond. We also compared the reasons for the spare parts shortages we found with the overall initiatives under way or planned to determine whether they were being addressed. We did not review the plans or the specific initiatives. Our review was performed from August 2000 to June 2001 in accordance with generally accepted government auditing standards. We are sending copies of this report to the Secretaries of Defense and the Army; the Director, Defense Logistics Agency; and the Director, Office of Management and Budget. We will make copies available to other interested parties upon request. Please contact me at (202) 512-8412 if you or your staff have any questions regarding this report. Key contributors to this report were Lawson Gist, Jr.; Jose Watkins; Carleen Bennett; and Nancy Ragsdale. In January 2001, we reported that the Department of Defense had serious weaknesses in its management of logistics functions and, in particular, inventory management. Although not specifically identified with the systems we reviewed, these management weaknesses directly or indirectly contribute to the shortage of spare parts the Army is facing. For example: We reported in April 1997 that the Army needed to improve its logistics pipeline for aviation parts and reduce logistics costs by incorporating private sector best practices. We found that the Army's repair pipeline was slow, unreliable, and inefficient. One contributing factor was a lack of consumable parts needed to complete repairs. We reported in October 1997 that the Army needed to improve its management of the weapon system and equipment modification program to eliminate difficulties in obtaining spare parts. We found that program sponsors had been inconsistent in providing initial spare parts and ensuring spare parts were added to the supply system. We reported in June 2000 that the Army needed to strengthen and follow procedures to control shipped items, which include spare parts and other inventory items. We found that the Army did not know the extent to which shipped inventory had been lost or stolen because of weaknesses in its inventory control procedures and financial management practices. In addition, the Department of Defense's long-standing financial management problems may contribute to the Army's spare parts shortages. As we recently reported, weaknesses in inventory accountability information can affect supply responsiveness. Lacking reliable information, the Department of Defense has little assurance that all items purchased are received and properly recorded. The weaknesses increase the risk that responsible inventory item managers may request funds to obtain additional, unnecessary items that may be on hand but not reported. Blackhawk part 1. Actuating cylinder 2. Bearing ball 3. Bearing plan 4. Cable assembly 5. Circuit card assembly 6. Connecting link 7. Digital microcircuit 8. Fuel tank 9. G axis seal kit 10.Gear box assembly 11. Magnetic compass 12. Metallic tube 13. Packing with retain 14. Pipe hanger 15. Preformed packing 16. Pressurizing 17. Protective dust cap 18. Repair kit 19. Sas actuator assembly 20. Shaft assembly 21.Shaft fitting 22. Solid rivet 23. Tubeless tire 24. Armored wing assembly 25. Belt aircraft safety 26. Electro actuator 27. Roller bearing 22. Assembly actuator bracket 23. Left-hand nacelle 24. Modification kit 25. Mounting bracket 26. Power supply 27. Servocylinder28. Servocylinder29. Servocylinder30. Servocylinder31. Shear bolt 32. Shock strut assembly 14. Aircraft access door 15. Annular bearing ball 16. Control swashplate 17. Hydraulic cylinder 18. Shouldered shaft 19. Time totalizator meter 28.Cold section module 29. Engine aircraft 30. Main fuel control 31. T-700 engine aircraft 20. Aircraft engine 21. Rotary wing head 32. Cylinder assembly 33. Flutter dampener 34. Multimeter 22. Close tolerance bolt 23. Plastic spir tubing 24. Sleeve bushing There were multiple reasons for parts shortages, but for the purposes of our analysis, we used the most predominant reason. Defense Logistics: Information on Apache Helicopter Support and Readiness (GAO-01-630, July 17, 2001). Defense Inventory: Opportunities Exist to Expand the Use of Defense Logistics Agency Best Practices (GAO/NSIAD-00-30, Jan. 26, 2000). Army Logistics: Status of Proposed Support Plan for Apache Helicopter (GAO/NSIAD-99-140, July 1, 1999). Defense Inventory: Status of Inventory and Purchases and Their Relationship to Current Needs (GAO/NSIAD-99-60, Apr. 16, 1999). Defense Inventory: DOD Could Improve Total Asset Visibility Initiative With Results Act Framework (GAO/NSIAD-99-40, Apr. 12, 1999). Major Management Challenges and Program Risks: Department of Defense (GAO/OCG-99-4, Jan. 1, 1999). Defense Depot Maintenance: Use of Public-Private Partnering Arrangements (GAO/NSIAD-98-91, May 7, 1998). Inventory Management: DOD Can Build on Progress by Using Best Practices for Reparable Parts (GAO/NSIAD-98-97, Feb. 27, 1998). Defense Inventory: Management of Surplus Usable Aircraft Parts Can Be Improved (GAO/NSIAD-98-7, Oct. 2, 1997). Inventory Management: The Army Could Reduce Logistics Costs for Aviation Parts by Adopting Best Practices (GAO/NSIAD-97-82, Apr. 15, 1997).
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The military's ability to carry out its mission depends on its having adequate supplies of spare parts on hand for maintenance and repairs. Shortages are a key indicator that the billions of dollars being spent on these parts are not being used effectively, efficiently, and economically. Despite additional funding from Congress, the Army still has concerns about spare parts shortages. Spare parts shortages for the Apache, Blackhawk, and Chinook helicopters have harmed operations and lowered morale among maintenance personnel. Cannibalization of parts from one aircraft to another is an inefficient practice that results in double work for the maintenance personnel, masks parts shortages, and lowers morale. Parts were unavailable for various reasons, including higher-than-expected demand for parts, delays in obtaining parts from contractors, and problems with overhaul and maintenance. Another factor contributing to the shortage was the Army's inability to obtain parts for these aging aircraft from the original manufacturers, which sometimes had gone out of business. The Army and the Defense Logistics Agency have efforts planned or underway to improve the availability of aviation spare parts. Once these initiatives are further along, GAO will review them to determine whether they can be enhanced.
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Borrowers obtain residential mortgages through either mortgage lenders or brokers. Mortgage lenders can be federally or state-chartered banks or mortgage lending subsidiaries of these banks or of bank holding companies. Independent lenders, which are neither banks nor affiliates of banks, also may fund home loans to borrowers. Mortgage brokers act as intermediaries between lenders and borrowers, and for a fee, help connect borrowers with various lenders that may provide a wider selection of mortgage products. Federal banking regulators--Office of the Comptroller of the Currency (OCC), the Board of Governors of the Federal Reserve System (Federal Reserve), Federal Deposit Insurance Corporation (FDIC), National Credit Union Administration (NCUA), and Office of Thrift Supervision (OTS)-- have, among other things, responsibility for ensuring the safety and soundness of the institutions they oversee. To pursue this goal, regulators establish capital requirements for banks; conduct on-site examinations and off-site monitoring to assess their financial conditions; and monitor their compliance with applicable banking laws, regulations, and agency guidance. As part of their examinations, for example, regulators review mortgage lending practices, including underwriting, risk-management, and portfolio management practices, and try to determine the amount of risk lenders have assumed. From a safety and soundness perspective, risk involves the potential that either anticipated or unanticipated events may have an adverse impact on a bank's capital or earnings. In mortgage lending, regulators pay close attention to credit risk--that is the concerns that borrowers may become delinquent or default on their mortgages and that lenders may not be paid in full for the loans they have issued. Certain federal consumer protection laws, including the Truth in Lending Act and its implementing regulation, Regulation Z, apply to all mortgage lenders and brokers that close loans in their own names. Each lender's primary federal supervisory agency has responsibility for enforcing Regulation Z and generally uses examinations and consumer complaint investigations to check for compliance with both the act and its regulation. In addition, the Federal Trade Commission (FTC) is responsible for enforcing certain federal consumer protection laws for brokers and lenders that are not depository institutions, including state-chartered independent mortgage lenders and mortgage lending subsidiaries of financial holding companies. However, FTC is not a supervisory agency. FTC uses a variety of information sources in the enforcement process, including FTC investigations, consumer complaints, and state and federal agencies. State banking and financial regulators are responsible for overseeing independent lenders and mortgage brokers and generally do so through licensing that mandates certain experience, education, and operations requirements to engage in mortgage activities. States also may examine independent lenders and mortgage brokers to ensure compliance with licensing requirements, review their lending and brokerage functions, and look for unfair or unethical business practices. In the event such practices or consumer complaints occur, regulators and attorneys general may pursue actions that include license suspension or revocation, monetary fines, and lawsuits. From 2003 through 2005, AMP lending grew rapidly, with originations increasing threefold from less than 10 percent of residential mortgages to about 30 percent. Most of the originations during this period consisted of interest-only ARMs and payment-option ARMs, and most of this lending occurred in higher-priced regional markets concentrated on the East and West Coasts. For example, based on data from mortgage securitizations in 2005, about 47 percent of interest-only ARMs and 58 percent of payment- option ARMs were originated in California, which contained 7 of the 20 highest-priced metropolitan real estate markets in the country. On the East Coast, Virginia, Maryland, New Jersey, and Florida as well as Washington, D.C., exhibited a high concentration of AMP lending in 2005. Other examples of states with high concentrations of AMP lending include Washington, Nevada, and Arizona. These areas also experienced higher rates of home price appreciation during this period than the rest of the United States. In addition to this growth, the characteristics of AMP borrowers have changed. Historically, AMP borrowers consisted of wealthy and financially sophisticated borrowers who used these specialized products as financial management tools. However, today a wider range of borrowers use AMPs as affordability products to purchase homes that might otherwise be unaffordable using conventional fixed-rate mortgages. Although AMPs have increased affordability for some borrowers, they could lead to increased payments or "payment shock" for borrowers and corresponding credit risk for lenders. Unless the mortgages are refinanced or the properties sold, AMPs eventually reach points when interest-only and deferred payment periods end and higher, fully amortizing payments begin. Regulators and consumer advocates have expressed concern that some borrowers might not be able to afford these higher monthly payments. To illustrate this point, we simulated what would happen to a borrower in 2004 that made minimum monthly payments on a $400,000 payment-option ARM. As figure 1 shows, the borrower could see payments rise from $1,287 to $2,931, or 128 percent, at the end of the 5-year payment- option period. In addition, with a wider range of AMP borrowers now than in the past, those with fewer financial resources or limited equity in their homes might find refinancing their mortgages or selling their homes difficult, particularly if their loans have negatively amortized or their homes have not appreciated in value. In addition, borrowers who cannot afford higher payments and may become delinquent or default on their mortgages may pose credit risks to lenders because these borrowers may not repay their loans in full. Lenders also may have increased risks to themselves and their customers by relaxing underwriting standards and through risk-layering. For example, some lenders combined AMPs with less stringent income and asset verification requirements than traditionally permitted for these products or lent to borrowers with lower credit scores and higher debt-to-income ratios. Although regulatory officials have expressed concerns about AMP risks and underwriting practices, they said that banks and lenders generally have taken steps to manage the resulting credit risk. Federal and state banking regulatory officials and lenders with whom we spoke said most banks have diversified their assets to manage the credit risk of AMPs held in their portfolios, or have reduced their risk through loan sales or securitization. In addition, federal regulatory officials told us that while underwriting trends may have loosened over time, lenders have generally attempted to mitigate their risk from AMP lending. For example, OCC and Federal Reserve officials told us that most lenders qualify payment-option ARM borrowers at fully indexed rates, not at introductory interest rates, to help ensure that borrowers have financial resources to manage future mortgage increases, or to pay more on their mortgages than the minimum monthly payment. OCC officials also said that some lenders may mitigate risk by having some stricter criteria for AMPs than for traditional mortgages for some elements of their underwriting standards. Although we are encouraged by these existing risk mitigation and management strategies, most AMPs issued between 2003 and 2005, however, have not reset to require fully amortizing payments, and it is too soon to tell how many borrowers will eventually experience payment shock or financial distress. As such, in our report we agree with federal regulatory officials and industry participants that it was too soon to tell the extent to which AMP risks may result in delinquencies and foreclosures for borrowers and losses for banks that hold AMPs in their portfolios. However, we noted that past experience with these products may not be a good indicator for future AMP performance because the characteristics of AMP borrowers have changed. Regulatory officials and consumer advocates expressed concern that some AMP borrowers may not be well-informed about the terms and risks of their complex AMP loans. Obstacles to understanding these products include advertising that may not clearly or effectively convey AMP risks, and federal mortgage disclosure requirements that do not require lenders to tailor disclosures to the specific risks of AMPs to borrowers. Marketing materials that we reviewed indicated that advertising by lenders and brokers may not clearly provide information to inform consumers about the potential risks of AMPs. For example, one advertisement we reviewed promoted a low initial interest rate and low monthly mortgage payments without clarifying that the low interest rate would not last the full term of the loan. In other cases, promotional materials emphasized the benefits of AMPs without effectively explaining the associated risks. Some advertising, for example, emphasized loans with low monthly payment options without effectively disclosing the possibility of interest rate changes or mortgage payment increases. One print advertisement we reviewed for a payment- option ARM emphasized the benefit of a low initial interest rate but noted in small print on its second page that the low initial rate applied only to the first month of the loan and could increase or decrease thereafter. Regulatory officials noted that current Regulation Z requirements address traditional fixed-rate and adjustable-rate products, but not more complex products such as AMPs that feature risks such as negative amortization and payment shock. To better understand the quality of AMP disclosures, we reviewed eight interest-only and payment-option ARM disclosures provided to borrowers from federally regulated lenders. These disclosures were provided to borrowers between 2004 and 2006 by six federally regulated lenders that collectively made over 25 percent of the interest- only and payment option ARMs produced in 2005.We found that these disclosures addressed current Regulation Z requirements, but some did not provide full and clear explanations of AMP risks such as negative amortization or payment shock. For example, as shown in figure 2, the disclosure simply states that monthly payments could increase or decrease on the basis of interest rate changes, which may be sufficient for a traditional ARM product, but does not inform borrowers about the potential magnitude of payment change, which may be more relevant for certain AMPs. In addition, most of the disclosures we reviewed did not explain that negative amortization, particularly in a rising interest rate environment, could cause AMP loans to reset more quickly than borrowers anticipated and require higher monthly mortgage payments sooner than expected. In addition, the AMP disclosures generally did not conform to leading practices in the federal government, such as key "plain English" principles for readability or design. For example, the Securities and Exchange Commission's "A Plain English Handbook: How to Create Clear SEC Disclosure Documents (1998)" offered guidance for developing clearly written investment product disclosures and presenting information in visually effective and readable ways. The sample disclosures we reviewed, however, were generally written with language too complex for many adults to fully understand. Most of the disclosures also used small, hard-to- read typeface, which when combined with an ineffective use of white space and headings, made them even more difficult to read and buried key information. Federal banking regulators have taken a range of actions--including issuing draft interagency guidance, seeking industry comments, reinforcing messages about AMP risks and guidance principles in many forums, and taking other individual regulatory actions--to respond to concerns about the growth and risks of AMP lending. Federal banking regulators issued draft interagency guidance in December 2005 that recommended prudent underwriting, portfolio and risk management, and information disclosure practices related to AMP lending. The draft guidance calls for lenders to consider the potential impact of payment shock on borrowers' capacity to repay their mortgages and to qualify borrowers on their ability to make fully amortizing payments on the basis of fully indexed interest rates. It also recommends that lenders develop written policies and procedures that describe portfolio limits, mortgage sales and securitization practices, and risk-management expectations. In addition, to improve consumer understanding of AMPs, the draft guidance suggests that lender communications with borrowers, including advertisements and promotional materials, be consistent with actual product terms, and that institutions avoid practices that might obscure the risks of AMPs to borrowers. When finalized, the guidance will apply to all federally regulated financial institutions. During the public comment period for the guidance, lenders and others suggested in their letters that the stricter underwriting recommendations were overly prescriptive and might put federally and state-regulated banks at a competitive disadvantage because the guidance would not apply to independent mortgage lenders or brokers. Lenders said that this could result in fewer mortgage choices for consumers. Consumer advocates questioned whether the guidance would actually help protect consumers. They noted that guidance might be difficult to enforce because it does not carry the same force as law or regulation. Federal banking regulatory officials are using these comments as they finalize the guidance. Even before drafting the guidance, federal regulatory officials had publicly reinforced their concerns about AMPs in speeches, at conferences, and through the media. According to a Federal Reserve official, these actions have raised awareness of AMP issues and reinforced the message that financial institutions and the general public need to manage risks and understand these products. Some regulatory officials have also taken agency-specific steps to address AMP lending, including reviewing high-risk lending, which would include AMPs, and improving consumer education about AMP risks. For example, FDIC officials told us that they have developed a review program to identify high-risk lending areas and evaluate risk management and underwriting approaches. NCUA officials said that they have informally contacted their largest credit unions to assess the extent of AMP lending at these institutions. OTS officials said that they have performed a review of OTS's 68 most active AMP lenders to assess and respond to potential AMP lending risks and OCC have begun to conduct reviews of their lenders' AMP promotional and marketing materials to assess how well they inform consumers. In response to concerns about disclosures, the Federal Reserve officials told us that they initiated a review of Regulation Z that includes reviewing the disclosures required for all mortgage loans, including AMPs, and have begun taking steps to consider disclosure revisions. During the summer of 2006, the Federal Reserve held hearings across the country on home-equity lending, AMP issues, and the adequacy of consumer disclosures for mortgage products. According to Federal Reserve officials, the Federal Reserve is currently reviewing the hearing transcripts and public comment letters to help develop plans and recommendations for revising Regulation Z. In addition, they said that they are currently revising their consumer handbook on ARM loans, known as the CHARM booklet, to include information about AMPs. Finally, in May 2006, FTC officials said that they sponsored a public workshop that explored consumer protection issues as a result of AMP growth in the mortgage marketplace and worked with federal banking regulators and other federal departments to create a brochure to assist consumers with mortgage information. State banking and financial regulatory officials from the eight states in our sample expressed concerns about AMP lending in their states; however, most relied on their existing regulatory system of licensing and examining mortgage lenders and brokers to stay abreast of and react to AMP issues. Most of the officials in our sample expressed concern about AMP lending and the negative effects it could have on consumers, including how well consumers understood complex AMP loans and the potential impact of payment shock, financial difficulties, or default and foreclosure. Other officials expressed concern about whether consumers received complete information about AMPs, saying that federal disclosures were complicated, difficult to comprehend, and often were not very useful to consumers. In addition to these general consumer protection concerns, some state officials spoke about state-specific issues. For example, Ohio officials expressed AMP concerns in the context of larger economic concerns, noting that AMP mortgages were part of wider economic challenges facing the state. Ohio already has high rates of mortgage foreclosures and unemployment that have hurt both Ohio's consumers and its overall economy. In Nevada, officials worried that lenders and brokers have engaged in practices that sometimes take advantage of senior citizens by offering them AMP loans that they either did not need or could not afford. Most of the state regulatory officials said that they have relied upon state law to license mortgage lenders and brokers and ensure they meet minimum experience and operations standards. Most said they also periodically examine these entities for compliance with state licensing, mortgage lending, and consumer protection laws, including applicable fair advertising requirements. As such, most of the regulatory officials relied on systems already in place to investigate AMP issues or complaints and, when needed, used applicable licensing and consumer protection laws to respond to problems such as unfair and deceptive trade practices. Some state regulatory officials with whom we spoke said they have taken other actions to better understand the issues associated with AMP lending and expand consumer protections. For example, some states such as New Jersey and Nevada have gathered data on AMPs to better understand AMP lending and risks. Others, such as New York, plan to use guidance developed by regulatory associations to help oversee AMP lending by independent mortgage lenders and brokers. In summary, it is too soon to tell the extent to which payment shock will produce financial distress for some borrowers and induce defaults that would affect banks that hold AMPs in their portfolios. However, the popularity, complexity, and widespread marketing of AMPs highlight the importance of mortgage disclosures to help borrowers make informed mortgage decisions. As a result, while we commend the Federal Reserve's efforts to review and revise Regulation Z, we recommended in our report that the Board of Governors of the Federal Reserve System consider amending federal mortgage disclosure requirements to improve the clarity and comprehensiveness of AMP disclosures. In response to our recommendation, the Federal Reserve said that it will conduct consumer testing to determine appropriate content and formats and use design consultants to develop model disclosure forms intended to better communicate information. Chairmen of the subcommittees, this completes my prepared statement. I would be pleased to respond to any questions you or other Members may have at this time. For additional information about this testimony, please contact Orice M. Williams on (202) 512-5837 or at [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. Individuals making key contributions to this testimony include Karen Tremba, Assistant Director; Tania Calhoun; Bethany Claus Widick; Stefanie Jonkman; Marc Molino; Robert Pollard; Barbara Roesmann; and Steve Ruszczyk. This is a work of the U.S. government and is not subject to copyright protection in the United States. It may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.
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Alternative mortgage products (AMPs) can make homes more affordable by allowing borrowers to defer repayment of principal or part of the interest for the first few years of the mortgage. Recent growth in AMP lending has heightened the importance of borrowers' understanding and lenders' management of AMP risks. GAO's report discusses the (1) recent trends in the AMP market, (2) potential AMP risks for borrowers and lenders, (3) extent to which mortgage disclosures discuss AMP risks, and (4) federal and selected state regulatory response to AMP risks. GAO used regulatory and industry data to analyze changes in AMP monthly payments under various scenarios; reviewed available studies; and interviewed relevant federal and state regulators and mortgage industry groups, and consumer groups. From 2003 through 2005, AMP originations, comprising mostly interest-only and payment-option adjustable-rate mortgages, grew from less than 10 percent of residential mortgage originations to about 30 percent. They were highly concentrated on the East and West Coasts, especially in California. Federally and state-regulated banks and independent mortgage lenders and brokers market AMPs, which have been used for years as a financial management tool by wealthy and financially sophisticated borrowers. In recent years, however, AMPs have been marketed as an "affordability" product to allow borrowers to purchase homes they otherwise might not be able to afford with a conventional fixed-rate mortgage. Because AMP borrowers can defer repayment of principal, and sometimes part of the interest, for several years, some may eventually face payment increases large enough to be described as "payment shock." Mortgage statistics show that lenders offered AMPs to less creditworthy and less wealthy borrowers than in the past. Some of these recent borrowers may have more difficulty refinancing or selling their homes to avoid higher monthly payments, particularly in an interest-rate environment where interest rates have risen or if the equity in their homes fell because they were making only minimum monthly payments or home values did not increase. As a result, delinquencies and defaults could rise. Federal banking regulators stated that most banks appeared to be managing their credit risk well by diversifying their portfolios or through loan sales or securitizations. However, because the monthly payments for most AMPs originated between 2003 and 2005 have not reset to cover both interest and principal, it is too soon to tell to what extent payment shocks would result in increased delinquencies or foreclosures for borrowers and in losses for banks. Regulators and others are concerned that borrowers may not be well-informed about the risks of AMPs, due to their complexity and because promotional materials by some lenders and brokers do not provide balanced information on AMPs benefits and risks. Although lenders and certain brokers are required to provide borrowers with written disclosures at loan application and closing, federal standards on these disclosures do not currently require specific information on AMPs that could better help borrowers understand key terms and risks. In December 2005, federal banking regulators issued draft interagency guidance on AMP lending that discussed prudent underwriting, portfolio and risk management, and consumer disclosure practices. Some lenders commented that the recommendations were too prescriptive and could limit consumer choices of mortgages. Consumer advocates expressed concerns about the enforceability of these recommendations because they are presented in guidance and not in regulation. State regulators GAO contacted generally relied on existing regulatory structure of licensing and examining independent mortgage lenders and brokers to oversee AMP lending.
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The UN headquarters buildings are in need of renovation. The original UN headquarters complex, located in New York City and constructed between 1949 and 1952, no longer conforms to current safety, fire and building codes and does not meet UN technology or security requirements. Over the last 50 years there have been no major renovations or upgrades to the buildings or their systems. For example, the UN headquarters complex lacks fire sprinklers, has a deteriorating window structure, and is vulnerable to catastrophic electrical failures. In September 2005, the headquarters complex was shut down and the staff sent home because a main breaker for electrical power to the top floors of the Secretariat building failed, causing it to fuse to the electrical panel. This failure could have resulted in a major fire. As host country, the United States financed construction of the original complex by providing the UN with a no-interest loan. The rest of the complex was built between 1960 and 1982 and funded through the UN's regular budget or private donations. In December 2002, the General Assembly endorsed the CMP to renovate the UN headquarters complex and approved funds to further develop the conceptual designs and cost estimate. In May 2003, we reported that the resulting renovation planning was reasonable, but that additional management controls and oversight were needed. Since our last report, the UN has completed design development of the renovation. In April 2006, the UN appropriated $23.5 million to finance the renovation's preconstruction phase and committed $77 million to finance the construction of temporary conference space and supplementary office space rental (swing space). However, the General Assembly has not yet decided whether to approve implementation of the CMP. In a February 2003 resolution, the General Assembly stressed the importance of oversight in implementing the CMP and requested that all relevant oversight bodies, such as OIOS, initiate immediate oversight activities. In our 2003 report on the CMP, we noted that OIOS assigned one staff member to begin researching the CMP on a part-time basis. OIOS officials also stated that they had requested funding for OIOS to hire contractors to help evaluate the CMP, project management plan, and security upgrades. In July 2005, OIOS reported that it had two auditors reviewing the CMP. OIOS's authority spans all UN activities under the Secretary-General. OIOS derives its funding from (1) regular budget resources, which are funds from assessed contributions from member states that cover normal, recurrent activities such as the core functions of the UN Secretariat and (2) extrabudgetary resources, which come from the budgets for UN peacekeeping missions financed through assessments from member states, voluntary contributions from member states for a variety of specific projects and activities, and budgets for the voluntarily financed UN funds and programs. Our work on the Oil for Food program demonstrates the weakness inherent in OIOS's reliance on extrabudgetary resources. OIOS audited some aspects of the Oil for Food program and identified hundreds of weaknesses and irregularities, but it lacked the resources and independence needed to provide full and effective oversight of this large, costly, and complex UN effort. As the program was implemented, the Oil for Food program was further weakened by inadequate attention to internal controls, including establishing clear responsibility and authority and identifying and addressing program risks. In addition to oversight, an effective procurement process is one of the keys to success for any large scale construction project. For more than a decade, experts have called on the UN to correct serious weaknesses in its procurement process. In addition, the UN procurement process has been under increasing stress in recent years as procurement spending has more than tripled to keep pace with a rapidly growing peacekeeping program. The UN Department of Management, through its 70-person UN Procurement Service, is ultimately responsible for developing UN procurement policies. Because the UN is a multilateral institution, our oversight authority does not directly extend to the UN, but instead extends through the United States' membership in the organization. In recognition of this factor, we conduct UN-related work only in response to specific requests from committees with jurisdiction over UN matters. Congressional interest in this area has been high in recent years, and many of our ongoing or recently completed requests are both bicameral and bipartisan in nature. The UN is vulnerable to fraud, waste, abuse, and mismanagement due to a range of weaknesses in existing oversight practices. The General Assembly mandate creating OIOS calls for it to be operationally independent. In addition, international auditing standards state that an internal oversight activity should have sufficient resources to effectively achieve its mandate. In practice, however, OIOS's independence is impaired by constraints that UN funding arrangements impose. In our April 2006 report concerning OIOS, we recommended that the Secretary of State and the Permanent Representative of the United States to the UN work with member states to support budgetary independence for OIOS. Both the Department of State and OIOS generally agreed with our findings and recommendation. In passing the resolution that established OIOS in August 1994, the General Assembly stated that the office should exercise operational independence and that the Secretary-General, when preparing the budget proposal for OIOS, should take into account the independence of the office. The UN mandate for OIOS was followed by a Secretary-General's bulletin in September 1994 stating that OIOS discharge its responsibilities without any hindrance or need for prior clearance. In addition, the Institute of Internal Auditors' (IIA) standards for the professional practice of auditing, which OIOS and its counterparts in other UN organizations formally adopted in 2002, state that audit resources should be appropriate, sufficient, and effectively deployed. These standards also state that an internal audit activity should be free from interference and that internal auditors should avoid conflicts of interest. International auditing standards also state that financial regulations and the rules of an international institution should not restrict an audit organization from fulfilling its mandate. UN funding arrangements severely limit OIOS's ability to respond to changing circumstances and reallocate its resources among its multiple funding sources, OIOS locations worldwide, or its operating divisions-- Internal Audit Divisions I and II; the Investigations Division; and the Monitoring, Evaluation, and Consulting Division--to address changing priorities. In addition, the movement of staff positions or funds between regular and extrabudgetary resources is not allowed. For example, one section in the Internal Audit Division may have exhausted its regular budget travel funds, while another section in the same division may have travel funds available that are financed by extrabudgetary peacekeeping resources. However, OIOS would breach UN financial regulations and rules if it moved resources between the two budgets. Since 1996, an increasing share of OIOSis total budget is comprised of extrabudgetary resources. OIOSis regular budget and extrabudgetary resources increased in nominal terms from $21.6 million in fiscal biennium 1996-1997 to $85.3 million in fiscal biennium 2006-2007. Over that period, OIOSis extrabudgetary funding increased in nominal terms, from about $6.5 million in fiscal biennium 1996-1997 to about $53.7 million in fiscal biennium 2006-2007. The majority of OIOS's staff (about 69 percent) is funded with extrabudgetary resources, which increased due to extrabudgetary resources for audits and investigations of peacekeeping operations, including issues related to sexual exploitation and abuse. OIOS is dependent on UN funds and programs and other UN entities for resources, access, and reimbursement for the services it provides. These relationships present a conflict of interest because OIOS has oversight authority over these entities, yet it must obtain their permission to examine their operations and receive payment for its services. OIOS negotiates the terms of work and payment for services with the manager of the program it intends to examine, and heads of these entities have the right to deny funding for oversight work proposed by OIOS. By denying OIOS funding, UN entities could avoid OIOS audits or investigations, and high-risk areas could potentially be excluded from timely examination. For example, the practice of allowing the heads of programs the right to deny funding to internal audit activities prevented OIOS from examining high-risk areas in the UN Oil for Food program, where billions of dollars were subsequently found to have been misused. Moreover, in some cases, fund and program managers have disputed fees charged by OIOS for investigative services rendered. For example, 40 percent of the $2 million billed by OIOS after it completed its work is currently in dispute, and since 2001, less than half of the entities have paid OIOS in full for investigative services it has provided. According to OIOS officials, the office has no authority to enforce payment for services rendered, and there is no appeal process, no supporting administrative structure, and no adverse impact on an agency that does not pay or pays only a portion of the bill. In our April 2006 report concerning OIOS, we recommended that the Secretary of State and the Permanent Representative of the United States to the UN work with member states to support budgetary independence for OIOS. In commenting on the official draft of that report, OIOS and the Department of State (State) agreed with our overall conclusions and recommendations. OIOS stated that observations made in our report were consistent with OIOS's internal assessments and external peer reviews. State fully agreed with GAO's findings that UN member states need to ensure that OIOS has budgetary independence. However, State does not believe that multiple funding sources have impeded OIOS's budgetary flexibility. We found that current UN financial regulations and rules are very restrictive, severely limiting OIOS's ability to respond to changing circumstances and to reallocate funds to emerging or high priority areas when they arise. OIOS formally adopted the Institute for Internal Auditors' (IIA) international standards for the professional practice of internal auditing in 2002. Since then, OIOS has begun to develop and implement the key components of effective oversight. However, the office has yet to fully implement them. Moreover, shortcomings in meeting key components of international auditing standards could undermine the office's effectiveness in carrying out its functions as the UN's main internal oversight body. Effective oversight demands reasonable adherence to professional auditing standards. In our April 2006 report on OIOS, we also recommended that the Secretary of State and the Permanent Representative of the United States to the UN work with member states to support OIOS's efforts to more closely adhere to international auditing standards. OIOS has adopted a risk management framework to link the office's annual work plans to risk-based priorities, but it has not fully implemented this framework. OIOS began implementing a risk management framework in 2001 for prioritizing the allocation of resources to those areas that have the greatest exposure to fraud, waste, and abuse. OIOS's risk management framework includes plans for organization-wide risk assessments to categorize and prioritize risks facing the organization; it also includes client-level risk assessments to identify and prioritize risk areas facing each entity for which OIOS has oversight authority. Although OIOS's framework includes plans to perform client-level risk assessments, as of April 2006, out of 25 entities that comprise major elements of its "oversight universe," only three risk assessments had been completed. As a result, OIOS officials cannot currently provide reasonable assurance that the entities they choose to examine are those that pose the highest risk, nor that their audit coverage of a client focuses on the areas of risk facing that client. OIOS officials told us they plan to assign risk areas more consistently to audits proposed in their annual work plan during the planning phase so that, by 2008, at least 50 percent of their work is based on a systematic risk assessment. Although OIOS's annual reports contain references to risks facing OIOS and the UN organization, the reports do not provide an overall assessment of the status of these risks or the consequence to the organization if the risks are not addressed. For instance, in February 2005, the Independent Inquiry Committee reported that many of the Oil for Food program's deficiencies, identified through OIOS audits, were not described in the OIOS annual reports submitted to the General Assembly. A senior OIOS official told us that the office does not have an annual report to assess risks and controls and that such an assessment does not belong in OIOS's annual report in its current form, which focuses largely on the activities of OIOS. The official agreed that OIOS should communicate to senior management on areas where the office has not been able to examine significant risk and control issues, but that the General Assembly would have to determine the appropriate vehicle for such a new reporting requirement. While OIOS officials have stated that the office does not have adequate resources, they do not have a mechanism in place to determine appropriate staffing levels to help justify budget requests, except for peacekeeping oversight services. For peacekeeping audit services, OIOS does have a metric--endorsed by the General Assembly--that provides one professional auditor for every $100 million in the annual peacekeeping budget. Although OIOS has succeeded in justifying increases for peacekeeping oversight services consistent with the large increase in the peacekeeping budget since 1994, it has been difficult to support staff increases in oversight areas that lack a comparable metric, according to OIOS officials. For the CMP, OIOS reported that it had extrabudgetary funds from the CMP for one auditor on a short-term basis, but that the level of funding was not sufficient to provide the oversight coverage intended by the General Assembly. To provide additional oversight coverage, OIOS assigned an additional auditor exclusively to the CMP, using funds from its regular budget. OIOS staff have opportunities for training and other professional development, but OIOS does not formally require or systematically track staff training to provide reasonable assurance that all staff are maintaining and acquiring professional skills. UN personnel records show that OIOS staff took a total of more than 400 training courses offered by the Office of Human Resources Management in 2005. Further, an OIOS official said that, since 2004, OIOS has subscribed to IIA's online training service that offers more than 100 courses applicable to auditors. Although OIOS provides these professional development opportunities, it does not formally require staff training, nor does it systematically track training to provide reasonable assurance that all staff are maintaining and acquiring professional skills. OIOS policy manuals list no minimum training requirement. OIOS officials said that, although they gather some information on their use of training funds for their annual training report to the UN Office of Human Resources Management, they do not maintain an office wide database to systematically track all training taken by their staff. In our April 2006 report on OIOS, we also recommended that the Secretary of State and the Permanent Representative of the United States to the UN work with member states to support OIOS's efforts to more closely adhere to international auditing standards. In commenting on the official draft of that report, OIOS and State agreed with our overall conclusions and recommendations. OIOS stated that observations made in our report were consistent with OIOS's internal assessments and external peer reviews. While the UN has yet to finalize its CMP procurement strategy, to the extent that it relies on current UN processes, implementation of the planned renovation is vulnerable to the procurement weaknesses that we have identified. We have identified problems affecting the UN's bid protest process, headquarters contract review committee, vender rosters, procurement workforce, ethics guidance for procurement personnel, and procurement manual. In our April 2006 report on UN procurement, we recommended that the Secretary of State and the Permanent Representative of the United States to the UN work with member states to encourage the UN to establish an independent bid protest mechanism, address problems facing its principal contract-review committee, implement a process to help ensure that it conducts business with qualified vendors, and to take other steps to improve UN procurement. The UN has not established an independent process to consider vendor protests, despite the 1994 recommendation of a high-level panel of international procurement experts that it do so as soon as possible. Such a process would provide reasonable assurance that vendors are treated fairly when bidding and would also help alert senior UN management to situations involving questions about UN compliance. An independent bid protest process is a widely endorsed control mechanism that permits vendors to file complaints with an office or official who is independent of the procurement process. The General Assembly endorsed the principle of independent bid protests in 1994 when it recommended for adoption by member states a model procurement law drafted by the UN Commission on International Trade Law. Several nations, including the United States, provide vendors with an independent process to handle complaints. The UN's lack of an independent bid protest process limits the transparency of its procurement process by not providing a means for a vendor to protest the outcome of a contract decision to an independent official or office. At present, the UN Procurement Service directs its vendors to file protests to the Procurement Service chief and then to his or her immediate supervisor. If handled through an independent process, vendor complaints could alert senior UN officials and UN auditors to the failure of UN procurement staff to comply with stated procedures. As a result of recent findings of impropriety involving the Procurement Service, the United Nations hired a consultant to evaluate the internal controls of its procurement operations. One of the consultant's conclusions was that the UN needs to establish an independent bid protest process for suspected wrongdoing that would include an independent third-party evaluation as well as arbitration, due process, and formal resolution for all reports. While UN procurement has increased sharply in recent years, the size of the UN's Headquarters Committee on Contracts and its support staff has remained relatively stable. The committee's chairman and members told us that the committee does not have the resources to keep up with its expanding workload. The number of contracts reviewed by the committee has increased by almost 60 percent since 2003. The committee members stated that the committee's increasing workload was the result in part of the complexity of many new contracts and increased scrutiny of proposals in response to recent UN procurement scandals. The committee is charged with evaluating proposed contracts worth more than $200,000 and advising the Department of Management as to whether the contracts are in accordance with UN Financial Regulations and Rules and other UN policies. However, concerns regarding the committee's structure and workload have led UN auditors to conclude that the committee cannot properly review contract proposals. It may thus recommend contracts for approval that are inappropriate and have not met UN regulations. Earlier this year, OIOS reiterated its 2001 recommendation that the UN reduce the committee's caseload and restructure the committee "to allow competent review of the cases." The UN does not consistently implement its process for helping to ensure that it is conducting business with qualified vendors. As a result, the UN may be vulnerable to favoring certain vendors or dealing with unqualified vendors. The UN has long had difficulties in maintaining effective rosters of qualified vendors. In 1994, a high-level group of international procurement experts concluded that the UN's vendor roster was outdated, inaccurate, and inconsistent across all locations. In 2003, an OIOS report found that the Procurement Service's roster contained questionable vendors. OIOS later concluded that as of 2005 the roster was not fully reliable for identifying qualified vendors that could bid on contracts. While the Procurement Service became a partner in an interagency procurement vendor roster in 2004 to address these concerns, OIOS has found that many vendors that have applied through the interagency procurement vendor roster have not submitted additional documents requested by the Procurement Service to become accredited vendors. The UN has not demonstrated a commitment to improving its professional procurement staff through training, establishment of a career development path, and other key human capital practices critical to attracting, developing, and retaining a qualified professional workforce. Due to significant control weaknesses in the UN's procurement process, the UN has relied disproportionately on the actions of its staff to safeguard its resources. Recent studies indicate that Procurement Service staff lack knowledge of UN procurement policies. Moreover, most procurement staff lack professional certifications attesting to their procurement education, training, and experience. The UN has not established requirements for procurement staff to obtain continuous training, resulting in inconsistent levels of training across the procurement workforce. Furthermore, UN officials acknowledged that the UN has not committed sufficient resources to a comprehensive training and certification program for its procurement staff. In addition, the UN has not established a career path for professional advancement for procurement staff. Doing so could encourage staff to undertake progressive training and work experiences. The UN has been considering the development of specific ethics guidance for procurement officers for almost a decade, in response to General Assembly directives dating back to 1998. While the Procurement Service has drafted such guidance, the UN has made only limited progress toward adopting it. Such guidance would include a declaration of ethics responsibilities for procurement staff and a code of conduct for vendors. The UN has yet to include guidance for construction procurement into its procurement manual. In June 2005, a UN consultant recommended that the UN develop separate guidelines in the manual for the planning and execution of construction projects. These guidelines could be useful in planning and executing CMP procurement. Moreover, the UN has not updated its procurement manual since January 2004 to reflect current UN procurement policy. As a result, procurement staff may not be aware of changes to procurement procedures that the UN has adopted over the past 2 years. A Procurement Service official who helped revise the manual in 2004 stated that the Procurement Service has been unable to allocate resources needed to update the manual since that time. In our April 2006 report on UN procurement, we recommended that the Secretary of State and the Permanent Representative of the United States to the UN work with member states to encourage the UN to establish an independent bid protest mechanism, address problems facing its principle contract-review committee, implement a process to help ensure that it conducts business with qualified vendors, and to take other steps to improve UN procurement. In commenting on the official draft of this report, the Department of State stated that it welcomed our report and endorsed its recommendations. The UN did not provide us with written comments. To conduct our study of UN oversight, we reviewed relevant UN and OIOS reports, manuals, and program documents, as well as the international auditing standards of the IIA and the International Organization of Supreme Auditing Institutions. The IIA standards apply to internal audit activities-- not to investigations, monitoring, evaluation, and inspection activities. However, we applied these standards OIOS-wide, as appropriate, in the absence of international standards for non-audit oversight activities. We met with senior State officials in Washington, D.C., and senior officials with the U.S. Missions to the UN in New York, Vienna, and Geneva. At these locations, we also met with the UN Office of Internal Oversight Services management officials and staff; representatives of Secretariat departments and offices as well as the UN funds, programs, and specialized agencies; and the UN external auditors--the Board of Auditors (in New York) and the Joint Inspection Unit (in Geneva). We reviewed relevant OIOS program documents, manuals, and reports. To assess the reliability of OIOS's funding and staffing data, we reviewed the office's budget documents and discussed the data with relevant officials. We determined the data were sufficiently reliable for the purposes of this testimony. To assess internal controls in the UN procurement process, we used an internal control framework that is widely accepted in the international audit community and has been adopted by leading accountability organizations. We assessed the UN's control environment for procurement, as well as its control activities, risk assessment process, procurement information processes, and monitoring systems. In doing so, we reviewed documents and information prepared by OIOS, the UN Board of Auditors, the UN Joint Inspection Unit, two consulting firms, the Department of Management's Procurement Service, the Department of Peacekeeping Operations, and State. We interviewed UN and State officials and conducted structured interviews with the principal procurement officers at each of 19 UN field missions. If implemented, the CMP will be a large and unique endeavor for the UN. Effective internal oversight and management of the procurement process will be necessary for the successful completion of the project. However, weaknesses in internal oversight and procurement could impact implementation of the CMP. Recent UN scandals, particularly in the Oil for Food program, demonstrate the need for significant reforms in these areas. Although OIOS has a mandate establishing it as an independent oversight entity and to conduct oversight of the CMP, the office does not have the budgetary independence it requires to carry out its responsibilities effectively. In addition, OIOS's shortcomings in meeting key components of international auditing standards could undermine the office's effectiveness in carrying out its functions as the UN's main internal oversight body. Effective oversight demands reasonable budgetary independence, sufficient resources, and adherence to professional auditing standards. OIOS is now at a critical point, particularly given the initiatives to strengthen UN oversight launched as a result of the World Summit in the fall of 2005. In moving forward, the degree to which the UN and OIOS embrace international auditing standards and practices will demonstrate their commitment to addressing the monumental management and oversight tasks that lie ahead. Failure to address these long-standing concerns would diminish the efficacy and impact of other management reforms to strengthen oversight at the UN. While the UN has yet to finalize its CMP procurement strategy, to the extent that it relies on the current process, we have identified numerous weaknesses with the existing procurement process that could impact implementation of the CMP. Long-standing weaknesses in the UN's procurement office have left UN procurement funds highly vulnerable to fraud, waste, and abuse. Many of these weaknesses have been identified and documented by outside experts and the UN's own auditors for more than a decade. Sustained leadership at the UN will be needed to correct these weaknesses and establish a procurement system capable of fully supporting the UN's expanding needs. This concludes my testimony. I would be pleased to take your questions. Should you have any questions about this testimony, please contact me at (202) 512-9601 or [email protected]. Other major contributors to this testimony were Phyllis Anderson and Maria Edelstein, Assistant Directors; Joy Labez, Pierre Toureille, Valerie L. Nowak, Jeffrey Baldwin-Bott, Michaela Brown, Joseph Carney, Debbie J. Chung, Kristy Kennedy, Clarette Kim, J.J. Marzullo, and Barbara Shields. This is a work of the U.S. government and is not subject to copyright protection in the United States. It may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.
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The UN headquarters buildings are in need of renovation. The Capital Master Plan is an opportunity for the organization to renovate its headquarters buildings and ensure conformity with current safety, fire, and security requirements. Estimated by the UN to cost about $1.6 billion, the renovation will require a substantial management effort by the UN--including the use of effective internal oversight and procurement practices. Based on recently issued work, GAO (1) examined the extent to which UN funding arrangements for its Office of Internal Oversight Services (OIOS) ensure independent oversight and the consistency of OIOS's practices with key international auditing standards and (2) assessed the UN's procurement processes according to key standards for internal controls. The effective implementation of the planned UN renovation is vulnerable due to a range of weaknesses in existing internal oversight and procurement practices. In particular, UN funding arrangements adversely affect OIOS's budgetary independence and compromise OIOS's ability to investigate high-risk areas. In addition, while the UN has yet to finalize a specific procurement process for the UN Capital Master Plan, to the extent that it relies on UN procurement processes, it remains vulnerable to the numerous procurement weaknesses that GAO have previously identified. First, UN funding arrangements constrain OIOS's ability to operate independently as mandated by the General Assembly and required by international auditing standards. While OIOS is funded by a regular budget and 12 other revenue streams, UN financial regulations and rules severely limit OIOS's ability to respond to changing circumstances and reallocate resources among revenue streams, locations, and operating divisions. Thus, OIOS cannot always direct resources to high-risk areas that may emerge after its budget is approved. Second, OIOS depends on the resources of the funds, programs, and other entities it audits. The managers of these programs can deny OIOS permission to perform work or not pay OIOS for services. UN entities could thus avoid OIOS audits or investigations, and high-risk areas can be and have been excluded from timely examination. OIOS has begun to implement key measures for effective oversight, but some of its practices fall short of the applicable international auditing standards it has adopted. OIOS develops an annual work plan, but the risk management framework on which the work plans are based is not fully implemented. OIOS officials report the office does not have adequate resources, but they also lack a mechanism to determine appropriate staffing levels. Furthermore, OIOS has no mandatory training curriculum for staff. While the UN has yet to finalize its Capital Master Plan procurement strategy, to the extent that it relies on the current process, implementation of the Capital Master Plan remains vulnerable to numerous procurement weaknesses. For example, the UN has not established an independent process to consider vendor protests that could alert senior UN officials of failures by procurement staff to comply with stated procedures. Also, the chairman of the UN procurement contract review committee has stated that his committee does not have the resources to keep up with its expanding workload. In addition, the UN does not consistently implement its process for helping to ensure that it is conducting business with qualified vendors. GAO also found that the UN has not demonstrated a commitment to improving its professional procurement staff despite long-standing shortcomings and has yet to complete action on specific ethics guidance for procurement officers.
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Located within the Department of Commerce, USPTO administers U.S. patent and trademark laws while ensuring the creation of valid, prompt, and proper intellectual property rights. According to the Strategic Plan, USPTO's mission is to ensure that the intellectual property system contributes to a strong global economy, encourages investment in innovation, fosters entrepreneurial spirit, and enhances the quality of life. USPTO also advises the administration on all domestic and global aspects of intellectual property. USPTO management consults with a Patent Public Advisory Committee and a Trademark Public Advisory Committee. These committees are comprised of voting members from the private sector and non-voting members from the three unions represented at USPTO--the Patent Office Professional Association and two chapters of the National Treasury Employees Union. The committees not only review USPTO policies, goals, performance, budget, and user fees related to patents and trademarks, but also issue annual reports to the President, the Secretary of Commerce, and the House and Senate Committees on the Judiciary. Fees and volume of patent activity are different for small and large entities. Small entities receive a 50 percent discount on many patent fees. The majority of patent applicants are large entities filing applications for utility patents. USPTO has estimated that in recent years patent applications from large entities have comprised over 60 percent of all patent applications received; small entities have accounted for the remainder. In fiscal year 2001, utility patents represented over 90 percent of all patents granted that year. The number of patent applications filed nearly doubled during fiscal years 1990 through 2001, increasing from about 164,000 to about 326,000, and USPTO's Corporate, Business, and Strategic Plans projected that the number of applications would increase to between 351,000 and 368,000 in fiscal year 2002. Moreover, each plan projects that the number of applications will increase in the future--10 percent annually under the Corporate and Business Plans and 5 percent annually for fiscal years 2003 and 2004 and 7 percent annually for fiscal years 2005 through 2007 under the Strategic Plan. The Corporate Plan projected that the number of applications would increase to about 539,000 in fiscal year 2006; the Business and Strategic Plans project that the number of applications filed will increase in fiscal year 2007 to about 593,000 and 454,000, respectively. The lower projection under the Strategic Plan reflects the reduced number of applications expected for fiscal years 2002 and 2003 due, in part, to a slowdown in the economy. For fiscal year 2002, the Business Plan assumed an application growth rate of about 12 percent and the Strategic Plan assumed a growth rate of 3 percent; for fiscal year 2003, the growth rate projected by the Business and Strategic Plans were 10 percent and 5 percent, respectively. The application growth rate is a key factor in projecting business indicators, such as pendency, staffing needs, and funding requirements. For example, if the number of applications decreases, the number of examiners needed to process those applications decreases. (See app. I, p. 20.) The number of patents granted increased by over 90 percent during fiscal years 1990 through 2001, increasing from about 90,000 to about 171,000, and USPTO's three plans projected that the number would increase to a range of about 167,000 to 171,000 in fiscal year 2002. Furthermore, the three plans project that the number of patents granted will increase in the future. The Corporate Plan projected that the number of patents granted would increase to about 192,000 by fiscal year 2006, and the Business and Strategic Plans project that the number of patents granted will increase in fiscal year 2007 to about 314,000 and 374,000, respectively. (See app. I, p. 21.) USPTO's inventory of unprocessed patent applications increased by nearly 250 percent from fiscal year 1990 to 2001, increasing from about 96,000 to about 332,000, and USPTO's three plans projected that the inventory would increase to between 393,000 and 512,000 in fiscal year 2002. The Corporate and Business Plans also project increases in the future, while the Strategic Plan projects a decrease. The Corporate Plan projected that the application inventory would increase to almost 1.3 million by the end of fiscal year 2006, and the Business Plan projects that the inventory would increase to about 584,000 through fiscal year 2007. The Strategic Plan, which would speed up some of the proposed changes in the Business Plan and make other fundamental changes, projects that the inventory will decrease to about 144,000 through fiscal year 2007. The decrease projected in the Strategic Plan reflects several changes in assumptions, including fewer new patent applications. (See app. I, p. 22.) Patent pendency increased from 18.3 months to 24.7 months between fiscal years 1990 and 2001. Projections of patent pendency beyond fiscal year 2001 vary widely under USPTO's three plans. USPTO's three plans projected that pendency would increase to between 26.1 months and 26.7 months in fiscal year 2002. The Corporate Plan projected that pendency would be 38.6 months in fiscal year 2006, and the Business and Strategic Plans project it will be 25.5 months and 20.3 months, respectively, in fiscal year 2007. According to USPTO officials, pendency time in the Strategic Plan reflects a proposed fundamental redesign of the patent search and examination system. (See app. I, p. 23.) The number of patent examiners on board at the end of the fiscal year increased from 1,699 to 3,061, or about 80 percent, from fiscal year 1990 to 2001. During this period, USPTO annually hired an average of 380 new examiners and lost an average of 236 examiners through attrition. Further, USPTO's Business and Strategic Plans projected that the number of examiners on board at the end of fiscal year 2002 would be 3,435 and 3,595, respectively. Moreover, both plans project increases in the number of examiners through fiscal year 2007--to 5,735 in the Business Plan and to 4,322 in the Strategic Plan. (See app. I, pp. 24-26.) Between fiscal years 1999 and 2001, fee collections increased from $887 million to $1.085 billion and funding requirements (USPTO's appropriations) increased from $781 million to $1.039 billion. For fiscal year 2002, the Business and Strategic Plans projected fee collections of $1.373 billion (includes $27 million for employee pension and annuitant health benefits proposed by the President) and $1.198 billion, respectively, and both plans projected that funding requirements would be $1.128 billion. Further, fee collections and funding requirements are projected to increase in the future under both plans, but at different rates. Under the Business Plan, fee collections are projected to increase from $1.527 billion in fiscal year 2003 to $2.078 billion in fiscal year 2007, and funding requirements are projected to increase from $1.365 billion to $2.078 billion during the same time period. Under the Strategic Plan, fee collections are projected to increase from $1.527 billion in fiscal year 2003 to $1.823 billion in fiscal year 2007, and funding requirements are projected to increase from $1.365 billion to $1.823 billion during that period. (See app. I, pp. 27-28.) There are a number of differences between USPTO's Business and Strategic Plans, as shown in the following examples. (See app. I, p. 29.) The patent pendency definition is different under each plan. Under the Business Plan, pendency is measured from the date an application is filed. However, under the Strategic Plan, pendency would be measured from the date an applicant pays the examination fee. According to USPTO officials, this definition is different than the definition under the Business Plan because of the proposed fundamental redesign of the patent search and examination system. Also, according to the Strategic Plan, this definition is the same measure--the examination duration period--used by the European Patent Office and the Japan Patent Office. This change in definition is partly responsible for the reduction in pendency under the Strategic Plan. Historically, applicants have paid a single fee that covered filing and examination; under the Strategic Plan there would be separate filing and examination fees. The applicant has two options for paying fees under the Strategic Plan. Under the first option, applicants may elect to pay the patent application fee and examination fee at the same time. Under the second option, applicants may elect to pay the application fee and defer examination and paying the examination fee for up to 18 months. According to USPTO, applicants that take advantage of the deferred examination do so for various reasons, such as to decide the merits of pursuing the patent or to avoid the early expenditure of funds. USPTO estimates that about 9 percent of all applicants will defer examination. The Strategic Plan redefines patent pendency as the examination duration period. As a result, under the first option the pendency measure is the same as under the Business Plan--it begins from the date the patent application is filed. However, under the second option pendency begins when the examination fee is paid. Table 1 shows USPTO's projections of patent pendency under three scenarios using different assumptions. The first scenario shows the Business Plan's pendency projections. The second scenario is based upon the Strategic Plan where an applicant pays the filing fee and examination fee at the same time, thus seeking immediate examination. The third scenario is based on the Strategic Plan where an applicant pays the filing fee and then defers examination. Regarding the third scenario, the Strategic Plan notes that to determine the average total pendency under the Strategic Plan (from the date an application is filed to issue of a patent or abandonment of the application), 9 months should be added to the plan's calculation to reflect the estimated average examination deferral period. According to USPTO officials, fewer months should be added in the early years. Table 1 shows for the third scenario that when the deferral time is added, average pendency from filing until patents are granted or applications are abandoned would be longer under the Strategic Plan than under the Business Plan for those applicants who elect to defer examination of their applications. USPTO noted that the fiscal year 2008 difference between the 18 months in the second scenario and the 27 months in the third scenario is a measure of deferred examination. Patent examiners' responsibility for the search function on most domestic applications would also be eliminated under the Strategic Plan. Instead, with the exception of a new class of applicant--the micro-entity-- applicants would arrange for such searches by private organizations, foreign patent offices, or others; USPTO would continue to do searches for micro-entities. This change would allow examiners more time to focus on the examination function. USPTO assumes under the Strategic Plan that a portion of the patent examiners' time will be refocused from non- examination to examination functions. USPTO officials told us that most of the refocused time would result from eliminating the search function. The detailed action plans supporting the Strategic Plan show that eliminating the search function would increase examiners' productivity between 5 and 20 percent. Almost 2,100 more new patent examiners would be hired under the Business Plan than under the Strategic Plan--4,750 versus 2,688. This difference reflects revised assumptions about new hires and the number of examiners expected to leave. Under the Business Plan, USPTO expects to hire 950 examiners and assumes a 10 percent attrition rate each year during fiscal years 2003 through 2007. Under the Strategic Plan, USPTO expects to hire 750 examiners annually for fiscal years 2003 and 2004 and 396 examiners annually for fiscal years 2005 through 2007. USPTO assumes 11 percent and 8 percent attrition rates for fiscal years 2003 and 2004, respectively, and 9 percent attrition annually for fiscal years 2005 through 2007. Fewer examiners would be required under the Strategic Plan because fewer new applications are anticipated and examiners would no longer be required to do the search function for most patent applications. Patent fee restructuring would be implemented in fiscal year 2004 under the Business Plan, and by October 1, 2002, under the Strategic Plan. There would be a one-time surcharge of 19.3 percent on patents and 10.3 percent on trademarks in fiscal year 2003 under the Business Plan, but no surcharge under the Strategic Plan. USPTO officials told us that the restructured fees would need to be put in place earlier than proposed under the Business Plan to compensate for the elimination of the one-time surcharge and the expected decrease in patent applications, and to implement changes proposed to improve quality and reduce pendency. Fee collections and funding requirements projected for fiscal year 2003 in the Business Plan would be the same in the Strategic Plan--$1.527 billion in fee collections and $1.365 billion in funding requirements--but the specifics would change. For example, the Strategic Plan's patent-funding requirements would increase by about $27 million and trademark-funding requirements would decrease by the same amount. Furthermore, projected funding requirements for fiscal years 2003 through 2007 would total about $539 million less under the Strategic Plan than under the Business Plan-- $8.396 billion versus $8.935 billion--as a result of changing assumptions, such as fewer patent applications filed and fewer patent examiners needed. For fiscal years 2004 through 2007, the Business and Strategic Plans both predict that fee collections and funding requirements will equal each other. There would be some significant changes in the patent fee structure under legislation proposed on June 20, 2002. While the proposed filing fee under the Strategic Plan would be lower than the current filing fee, a new examination fee would be added and other fees would be higher. In addition, some new fees would be established for such things as surcharges authorized by the USPTO Director in certain instances. For example, a surcharge could be charged for any patent application whose specification and drawings exceed 50 sheets of paper. (See app. I, p. 30.) Generally, large entities would pay higher fees under the proposed legislation. The current fee structure provides that large entities pay a $740 patent filing fee that covers both the filing and examination of the patent application. While the proposed legislation would have large entities pay a $300 patent filing fee, it would also require applicants that request examination (assumed by USPTO to be 90 percent of the large entity applicants) to pay an additional $1,250 examination fee. Patent issue fees would also be higher under the proposed legislation. Consequently, a large entity that receives a utility patent would incur a fee increase of nearly $1,200, or about 59 percent, over current fees. Furthermore, the three fees to maintain the patent through its useful life would be higher. If a large entity maintains the patent through the payment of the three maintenance fees, the total fee increase resulting from the proposed legislation would be nearly $4,100, or about a 51 percent increase over current fees. (See app. I, p. 31.) Small entities also would pay increased fees under the proposed legislation, as shown in table 2. Instead of paying a $370 patent filing fee (50 percent of the $740 fee for large entities) that covers both the filing and examination of the patent application under the current fee structure, small entities would pay a $150 patent filing fee (50 percent of the new $300 fee) under the proposed legislation. However, small entities that request examination (assumed by USPTO to be 90 percent of the small entity applicants) also would have to pay the new $1,250 examination fee; with the exception of the new "micro-entity" category, small entities would not get a discount on the new examination fee. In addition, issue fees for small entities are also higher. As a result, a small entity that receives a utility patent would incur a fee increase of over $1,200, or about 121 percent, over current fees. Furthermore, because maintenance fees are higher, if a small entity maintains the patent through the payment of the three maintenance fees, the total fee increase resulting from the proposed legislation would be nearly $2,700, or about a 67 percent increase over current fees. We provided a copy of our draft report to USPTO for review and comment. USPTO responded that the factual information in our draft report provides a good picture of USPTO's transition to its new Strategic Plan. USPTO added that the Strategic Plan is USPTO's road map for creating, over the next 5 years, an agile and productive organization fully worthy of the unique leadership role the American intellectual property system plays in the global economy. In addition, USPTO provided technical clarifications and corrections to our draft report, which we incorporated as appropriate. USPTO's comments are presented in appendix II. To provide information on past and future USPTO operations, including information on the number of patent applications filed, patents granted, inventory of patent applications, patent pendency, patent examiner staffing, and fee collections and funding requirements, we reviewed key USPTO documents, such as its April 2001 Corporate Plan, February 2002 Business Plan, and June 2002 Strategic Plan. We also reviewed various budget documents, performance and accountability reports, planning and other internal documents, and historical data provided by the agency. In addition, we interviewed USPTO senior management and other officials, as well as representatives of the Patent Public Advisory Committee and the Patent Office Professional Association. Recognizing that a detailed examination of the Strategic Plan would be premature until congressional action is taken on the fee legislation proposal and USPTO's fiscal year 2003 budget request, we agreed to identify some of the differences between the Business and Strategic Plans. We compared selected aspects of those plans, including key assumptions and proposed operating changes. We also discussed with USPTO officials how USPTO develops projections of key business indicators, such as pendency and funding requirements. For example, we obtained information about USPTO's Patent Production Model, which is a computer-based system that estimates staffing needs, production, pendency, and other key business indicators for managerial decisionmaking. To determine how the current patent-fee structure would change under the proposed fee legislation, we compared current fees with the June 20, 2002, fee legislation proposal. We obtained USPTO officials' views on the accuracy of our analysis. In addition, we reviewed the results of published analyses of the fee proposal by others, including the American Intellectual Property Law Association and the Intellectual Property Owners Association. Although we did not independently verify the data provided by USPTO, to the extent feasible we corroborated it with other agency sources. We performed our work from April 2002 through July 2002 in accordance with generally accepted government auditing standards. As agreed with your offices, unless you publicly announce its contents earlier, we plan no further distribution of this report until 7 days after the date of this letter. At that time, we will send copies to appropriate House and Senate Committees; the Under Secretary of Commerce for Intellectual Property and Director of the United States Patent and Trademark Office; the Chief Financial Officer and Chief Administrative Officer, USPTO; the Secretary of Commerce; and the Director, Office of Management and Budget. This letter will also be available on GAO's home page at http://www.gao.gov. If you or your staffs have any questions concerning this report, please call me on (202) 512-6225. Key contributors to this report included John P. Hunt, Jr., Byron S. Galloway, and Don Pless. This appendix contains the information used to brief the staff of Representative Lamar Smith on July 12, 2002, and the staff of the Chairman of the Joint Economic Committee on July 25, 2002. U.S. Patent and Trademark Office: Information on Past and Future Operations July 25, 2002 U.S. Patent and Trademark Office (USPTO) Background (con't.) Objectives, Scope, and Methodology (con't.) Patent Applications Filed (Fiscal years 1990-2001) and Corporate, Business, and Strategic Plan Projections (Fiscal years 2002-2007) Patents Granted (Fiscal years 1990-2001) and Corporate, Business, and Strategic Plan Projections (Fiscal years 2002-2007) End-of-Year Patent Inventory (Fiscal years 1990-2001) and Corporate, Business, and Strategic Plan Projections (Fiscal years 2002-2007) Total Patent Pendency (Fiscal years 1990-2001) and Corporate, Business, and Strategic Plan Projections (Fiscal years 2002-2007) Employment of Patent Examiners (Fiscal years 1990-2001) and Business and Strategic Plan Projections (Fiscal years 2002-2007) Patent Examiners Hired (Fiscal years 1990-2001) and Business and Strategic Plan Projections (Fiscal years 2002-2007) Examiners Who Left (Fiscal years 1990-2001) and Business and Strategic Plan Projections (Fiscal years 2002-2007) Fee Collections and Funding Requirements (Fiscal years 1999-2001) and Business Plan Projections (Fiscal years 2002-2007) Fee Collections and Funding Requirements (Fiscal years 1999-2001) and Strategic Plan Projections (Fiscal years 2002-2007) compensate for the eliminated FY 2003 patent fee surcharge and the expected decrease in patent applications. New examination fee would be added; 50 percent small entity discount would not apply to examination fee. Issue fee would be higher. The combined filing, examination, and issue fees would be higher. All three maintenance fees would be higher. New fees would be created, such as a surcharge authorized by the USPTO Director in certain instances. A new "micro-entity" category would be created; with a discount on the examination fee to be prescribed by the USPTO Director. Utility patents include chemical, electrical, and mechanical applications. In fiscal year 2001, utility patents represented over 90 percent of all patents granted that year. How Patent Fee Structure Would Change Under Proposed Legislation (con't.)
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The U.S. Patent and Trademark Office (USPTO) has a staff of 6,426 and collected $1.1 billion in patent and trademark fees in fiscal year 2001. As the U.S. economy depends increasingly on new innovations, the need to patent or trademark quickly the intellectual property resulting from such innovations becomes more important. Expressing concerns about USPTO's plans for the future, Congress directed USPTO to develop a 5-year plan. In February 2001, USPTO issued its first 5-year plan, called the USPTO Business Plan. Because the Director of USPTO did not believe that the Business Plan went far enough, in June 2002, USPTO produced another 5-year plan, called the 21st Century Strategic Plan. GAO found that patent activity grew substantially from 1990 through 2001. The numbers of patent applications filed and patents granted nearly doubled; the inventory of patent applications nearly tripled; patent pendency increased from slightly over 18 months to nearly 25 months, and the number of patent examiners increased by about 80 percent. Furthermore, in fiscal year 2001, both fee collections and agency funding requirements exceeded $1 billion for the first time in the agency's history. Although both 5-year plans cover the same period, the assumptions and projected results of the Business Plan are different in several ways from the Strategic Plan. The administration's recent legislative proposal to restructure patent fees to implement the Strategic Plan would result in higher fees for the majority of patent applications--large entities--that receive utility patents and maintain such patents in to the future. Consequently, total fees for these applicants would increase by $4,100 or 51 percent. Also, total fees for most small entities would increase $2,700 or 67 percent over current fees.
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We reviewed RTC's 1992 resolutions process to determine if it provided for compliance with the FDICIA least-cost requirements. We reported that three of RTC's corporate policies raised compliance issues. These policies did not (1) ensure that uninsured depositors would absorb their shares of thrift losses if necessary to achieve least costly resolutions; (2) require RTC to evaluate other available resolution methods prior to selling the assets of thrifts in conservatorship; or (3) require RTC to estimate the cost of liquidating thrifts in conservatorship as of the earliest of three dates specified by the act, which is usually the date when RTC passes the failed thrift through a receivership and is appointed conservator. We also found numerous documentation shortcomings from our review of a sample of 1992 resolutions. For instance, RTC did not always fully document the bases of the evaluations of the resolution alternatives considered, including the consideration given to all nonconforming bids received from potential acquirers, as its procedures required. Further, RTC generally did not document the rationale for the marketing strategy it selected. We recommended that RTC evaluate the resolution methods that are potentially available before selling the assets of a failed thrift and make liquidation cost estimates at the earliest of the three dates specified by FDICIA. We also recommended that RTC document the consideration given all nonconforming bids and the rationale for the agency's preferred marketing strategy for resolving a failed thrift. We made no recommendation concerning uninsured depositors, because RTC changed its policy in September 1993 to better ensure that uninsured depositors would absorb their shares of thrift losses if necessary to achieve the least costly resolution. RTC agreed to initiate actions to improve its documentation, but it maintained that its policies on asset sales during conservatorship and on the timing of its liquidation cost estimates were consistent with FDICIA. We said that unless RTC changed its policies in these areas, neither we nor RTC could assure Congress that RTC was fully complying with FDICIA's least-cost requirements. Although over 1,300 savings associations failed from 1980 through 1992, failures since the beginning of 1993 have declined dramatically. Also, the December 17, 1993, passage of the RTC Completion Act (Public Law 103-204, 107 Stat. 2369)--which provided RTC the funds needed to resolve failed thrifts--has enabled RTC to resolve all but one of its backlog of thrifts in conservatorship as of December 31, l994. When a thrift fails, the Office of Thrift Supervision (OTS) or the thrift's state chartering authority usually appoints RTC as conservator or receiver. As conservator, RTC operates a failed thrift pending its final resolution, and as receiver, it administers the closing of an insolvent thrift and liquidates all assets not disposed of in conservatorship or at resolution. However, some failing thrifts are resolved prior to being placed into conservatorship through the accelerated resolution program (ARP), which OTS operates jointly with RTC. This program enables OTS to place a thrift it considers to be in serious financial difficulty into ARP for the purpose of selling the troubled thrift's assets, deposits, and other liabilities to a healthy institution before the thrift fails. During 1993, eight thrifts failed and were placed in RTC conservatorships, and one failing thrift was resolved through ARP. In 1994, no thrifts failed and two failing thrifts were resolved through ARP. Further, due primarily to funding provided by the RTC Completion Act, 80 of the 81 thrifts in RTC conservatorships as of December 31, 1992, as well as the 8 thrifts placed in conservatorships in 1993, were all resolved by the end of 1994. RTC officials told us they intend to resolve any further troubled thrifts via ARP or ARP-like transactions by selling the thrift's assets, deposits, and other liabilities to a healthy institution prior to the thrift's failure. They also said they expect few--if any--additional thrift failures through June 30, 1995, at which time RTC's responsibility for resolving failed and failing thrifts ends. The Federal Deposit Insurance Corporation assumes responsibility for resolving troubled thrifts as of July 1, 1995. The primary objective of this, our second, annual review was to determine the extent to which RTC's resolution process enabled it to comply with FDICIA requirements to select the least costly alternatives for resolving failed institutions. To address the objective, we judgmentally selected and reviewed three thrifts that were resolved between January 1, 1993, and June 30, l994. In each of these resolutions, RTC applied at least one of the three new resolution policies it established since January 1, 1993. The new policies involve (1) pro rata sharing of resolution losses by uninsured depositors when necessary to achieve the least costly resolution, (2) discontinuing the sale of performing loans during conservatorship, and (3) extending preference to minority bidders in making resolution decisions. We reviewed the three resolutions to determine whether RTC's resolution process, as modified by these policy changes, provided for compliance with FDICIA's least-cost requirements. We selected one of the three resolutions we reviewed because it was the only failed thrift that was affected by the September 1993 uninsured depositor policy change. It was also 1 of 14 failed thrifts in which RTC discontinued the sale of performing loans. We chose the other two resolutions because they involved preferences extended to minority bidders. In addition, one of the two failed thrifts was a major resolution with assets in excess of $1 billion. To address our objective, we analyzed the three resolutions, reviewed pertinent policies and procedures, and interviewed RTC officials and staff. We modified and used the data collection instrument we developed in our first review to document and evaluate the information from our three resolution cases, paying particular attention to the effect the three new policies had on the least-cost determinations. As in our first review, we collected data from the inception of resolution activity through the final resolution decision. We then compared the results of the three case studies with the results of our first-year case studies to identify any improvements or additional shortcomings in RTC's resolution process. During our assessment of the three resolutions, we reviewed the accuracy of the financial calculations RTC used to estimate the cost of available resolution alternatives. However, due to the subjectivity inherent in the valuation of assets and in the estimation of future asset recoveries, we assessed the adequacy of RTC's resolution process to select the least costly alternative. We did not determine whether, in fact, the least costly resolution alternative was selected, because the ultimate cost of a resolution cannot be identified until all remaining assets are sold and liabilities are paid by RTC as receiver, which generally takes several years. Further, the results of our review of the three resolutions are not generalizable to all of the resolutions done by RTC since January 1, 1993. RTC provided written comments on a draft of this report. The comments are summarized on page 8 and reprinted in appendix I. We did our work between June and October 1994 at RTC headquarters in Washington, D.C. Our work was done in accordance with generally accepted government auditing standards. RTC changed its corporate policies to require that uninsured depositors share in thrift losses if necessary to achieve least costly resolutions and to curtail its practice of selling performing assets during conservatorship operations. These changes brought RTC into compliance with FDICIA's uninsured depositor requirements and enabled RTC to better conform with the act's requirement that it evaluate other resolution methods before selling assets. In addition, RTC's implementation of a policy to extend a preference to minority bidders when making resolution decisions appeared consistent with FDICIA's least-cost requirements. Also, for the three resolutions we reviewed, RTC continued to select the resolution method it determined to be the least costly and took several actions in response to recommendations resulting from our first review that have enhanced its resolution process. Specifically, it improved the documentation of its marketing strategies, the consideration given to bids that did not conform to its preferred marketing strategies, and the bases for its resolution decisions. It also changed the timing of its liquidation cost estimates. Our review of the one resolution that involved the uninsured depositor policy change showed that consistent with FDICIA requirements, RTC paid uninsured depositors only that portion of their uninsured deposits equal to the expected pro rata share of the estimated proceeds from the resolution of the failed institution. RTC initially paid the uninsured depositors a 50-percent advance dividend, which was calculated by multiplying the book value of the assets by a percentage based on RTC's historical asset recovery rates, and then RTC reduced that amount by an arbitrarily determined 18 percent to provide a conservative cushion. About 6 months later, RTC was able to pay an additional 24 percent on the basis of actual asset recoveries. This resolution also involved the policy change concerning the timing of asset sales during conservatorships. Prior to the change, RTC generally sold high-quality assets, such as marketable securities, investments, and performing loans, from thrifts in conservatorship through a process called "downsizing." RTC believed this approach maximized returns on asset disposition and, as a general proposition, resulted in least-cost resolutions. However, we were critical of RTC's downsizing policy in our report on 1992 resolutions, because the policy was at variance with FDICIA's requirement that RTC evaluate other available methods of thrift resolution prior to selling assets. RTC's March 1993 policy change generally required that high-quality assets be retained in conservatorships, although--except for certain performing assets such as one-to-four family mortgages--they could be sold within 45 days of the announced resolution date of a thrift. Thus, performing assets could be sold at or around the time the thrift was to be marketed, providing RTC greater opportunity to assess available resolution methods prior to commencing asset sales. RTC changed the policy primarily because it found that retaining high-quality assets provided conservatorships a better return than selling the assets and investing the proceeds in lower yielding securities. In our view, this policy change made good economic sense and enabled RTC to better conform with the FDICIA requirement that it evaluate available resolution methods before selling high-quality assets. Our review of the resolution case file showed that consistent with the revised policy, RTC retained high-quality assets in the conservatorship until close to the resolution date before selling them. We also found that RTC explored market interest in the thrift, selected the resolution alternative it determined to be the least costly, and adequately documented its marketing rationale and the bases for its resolution decision. RTC also made an initial liquidation cost estimate as of the date the thrift was placed in conservatorship to estimate the expected proceeds from resolution, which was necessary to determine the advance dividend to be paid to uninsured depositors. In addition, RTC made a second liquidation cost estimate, valuing assets based on its asset valuation review process, for purposes of determining the least costly resolution alternative. RTC officials told us they will follow this practice with future failed thrifts that are placed in conservatorship, but their intent is to resolve any further failing thrifts through ARP or ARP-like transactions. Either the new practice or ARP or ARP-like transactions will better provide for RTC's conformance with FDICIA. We also noted improvements in RTC's resolution process during our review of the case files of the two other thrift resolutions we selected. We found, for example, that RTC adequately documented the marketing rationale, the bases for its resolution decisions, and the consideration given to bids that did not conform to its preferred marketing strategy. It also selected the resolution alternative it determined to be the least costly. These two resolved thrifts were subject to RTC's new policy, which gave a preference to offers from minority bidders for acquiring thrifts or their branches located in predominantly minority neighborhoods (PMN). This PMN policy, mandated by the RTC Completion Act, essentially required RTC to give a minority bidder the opportunity to match the high nonminority bid and thus become the winning bidder. The program's premise was that the matching minority bid would result in the least possible resolution cost to RTC, since it is to be considered only after RTC has determined the least costly resolution alternative based on its review of all bids received. Our review of the two resolutions showed that RTC applied its PMN policy as designed, which was consistent with the least-cost provisions of FDICIA. In one of the resolutions, minority buyers were successful bidders for two of the five PMN offices of an entire thrift located in a PMN because their bids, considered with all other bids, produced the least costly resolution alternative. In the second resolution, the otherwise winning minority bidder for the thrift's two PMN offices did not get the required regulatory approval, and thus its bids were disallowed. In both resolutions, RTC selected the bids that it determined to be the least costly alternative. RTC has made substantive improvements to its resolution process. It changed its treatment of uninsured depositors and now complies with related FDICIA requirements; it changed the timing of its sales of high-quality assets from thrifts in conservatorship and the timing of its liquidation cost estimates, thereby better providing for its conformance with the act's requirements; and it improved various aspects of its resolution documentation, as we had recommended. RTC also continued to select the resolution alternatives it determined to be least costly for the three resolutions we reviewed, including the selection of alternatives for the two resolutions involving RTC's new PMN program. As our review did not disclose significant noncompliance, and unless thrift failures accelerate by June 30, 1995, we do not plan to issue further reports on RTC's compliance with the least-cost provisions of FDICIA. RTC, in its written comments on a draft of this report, agreed with the content and conclusions. RTC's comments are reprinted in appendix I. We are sending copies of this report to RTC's Deputy and Acting Chief Executive Officer; the Chairman of the Thrift Depositor Protection Oversight Board; the Chairman, Federal Deposit Insurance Corporation; and other interested parties. This report was prepared under the direction of Mark J. Gillen, Assistant Director, Financial Institutions and Markets Issues. Other major contributors are listed in appendix II. If there are any questions about this report, please contact me on (202) 512-8678. Jeanne Barger, Evaluator-in-Charge The first copy of each GAO report and testimony is free. Additional copies are $2 each. Orders should be sent to the following address, accompanied by a check or money order made out to the Superintendent of Documents, when necessary. Orders for 100 or more copies to be mailed to a single address are discounted 25 percent. U.S. General Accounting Office P.O. Box 6015 Gaithersburg, MD 20884-6015 Room 1100 700 4th St. NW (corner of 4th and G Sts. NW) U.S. General Accounting Office Washington, DC Orders may also be placed by calling (202) 512-6000 or by using fax number (301) 258-4066, or TDD (301) 413-0006. Each day, GAO issues a list of newly available reports and testimony. To receive facsimile copies of the daily list or any list from the past 30 days, please call (301) 258-4097 using a touchtone phone. 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Pursuant to a legislative requirement, GAO reviewed the Resolution Trust Corporation's (RTC) compliance with a statutory requirement to: (1) resolve failed thrifts in the least costly manner; and (2) calculate and document its evaluation of alternative resolutions of failed thrifts. GAO found that: (1) RTC has improved its resolution process and curtailed its practice to sell performing loans during conservatorship in order to comply with the least cost requirement; (2) RTC policy to extend a preference to minority bidders when making resolution decisions appears consistent with the least cost requirement; (3) for the three resolutions it reviewed, RTC chose the resolution alternative it determined to be the least costly and, in response to GAO recommendations, adequately documented its marketing strategies and the bases for its resolution decisions; (4) where relevant, RTC has implemented changes to its corporate policies regarding the treatment of uninsured depositors and the timing of asset sales during conservatorships, which brought RTC into compliance with other statutory requirements as well as the least cost requirement; (5) RTC has changed the timing of its liquidation cost estimates so that it makes its initial estimate when a failed thrift is placed in conservatorship; (6) among other things, RTC initial liquidation cost estimates determine the amount of estimated losses uninsured depositors must absorb; and (7) RTC efforts to resolve failing thrifts through its accelerated resolution program have brought RTC into better conformance with the least-cost statutory requirement.
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To function properly, the U.S. securities industry and capital markets require timely and accurate flows of electronic information. This information is transmitted through and processed within a vast network of computerized systems managed by stock, options, and futures exchanges; broker-dealers; banks; mutual funds; and various other organizations. These systems handle such tasks as displaying price quotations, routing orders to buy or sell, executing trades, and transferring securities and payments (clearance and settlement). In addition, SEC has internal systems that help it perform its regulatory responsibilities. All of these systems are potentially vulnerable to errors or malfunction as a result of the impending date changeover. The Year 2000 problem is rooted in the way dates are recorded and computed in many computer systems. For the past several decades, systems have typically used two digits to represent the year, such as "97" to represent 1997, in order to conserve on electronic data storage and reduce operating costs. With this two-digit format, however, the year 2000 is indistinguishable from 1900, 2001 from 1901, and so on. As a result of this ambiguity, system or application programs that use dates to perform calculations, comparisons, or sorting may generate incorrect results when working with years after 1999. For example, a broker-dealer with a system that is not compliant may be unable to receive payment information in January 2000 for securities that it sold in December 1999 if its computer systems fail to accept incoming data with a Year 2000 date. In a speech to international bankers, the president of the New York Federal Reserve Bank indicated that the Year 2000 software date change poses a major risk for world financial markets and that the world economy could be damaged if efforts to address the Year 2000 problem are not carried out correctly. SEC is the primary federal agency responsible for overseeing the securities markets in the United States. It promulgates regulations, reviews market operations, conducts inspections of market participants, and takes enforcement actions in response to violations of the securities laws and accompanying regulations. The securities laws allow SEC to delegate some of its responsibilities to the entities that operate the various stock and options markets as SROs. SROs develop and enforce rules for their members. They include the New York Stock Exchange, the National Association of Securities Dealers, and other regional securities exchanges that maintain the physical securities or their electronic equivalent. The SROs directly oversee their member broker-dealers, which buy and sell securities on behalf of customers. SEC oversees the SROs as well as investment companies that sell mutual funds, investment advisers who dispense investment advice or manage customer funds, and transfer agents who maintain records on behalf of companies that issue securities. Consequently, SEC and the SROs have primary responsibility for ensuring that Year 2000 problems in the securities industry do not adversely affect individual investors or the securities markets. Various organizations provide guidance for assessing, planning, and managing Year 2000 readiness programs. For example, we and other organizations, such as information technology consulting firms, have issued guidance for agencies and firms seeking assistance in formulating their Year 2000 remediation efforts. Our guidance on addressing the Year 2000 problem, contained in Year 2000 Computing Crisis: An Assessment Guide (GAO/AIMD-10.1.14, Sept. 1997), incorporates guidance and practices identified by leading organizations in the information technology industry. Our assessment guide recommends that organizations proceed through a five-phased approach to resolving their Year 2000 computing issues. These phases are awareness, assessment, renovation, validation, and implementation. SEC appears to be using a similar approach but has organized its program into six phases by dividing the validation phase into internal testing and integrated testing. In May 1997, OMB issued a format for federal agencies to report on the progress of their Year 2000 efforts. Specifically, OMB has asked that each agency report its total number of mission-critical systems; the number that are currently Year 2000 compliant; and the progress made in replacing, repairing, or retiring those systems that are not yet compliant. Although the guidance applies to a large number of federal agencies, SEC was not one of the agencies required to report. The Securities Industry Association, an organization that represents a large segment of the securities industry, is playing an important role in coordinating the industry's Year 2000 efforts. This association has established a steering committee--made up of representatives from various SROs, broker-dealers, investment companies, third party software vendors, and others--to develop a strategy for industry remediation and coordinated testing schedules. To evaluate how SEC's report discussed the agency's efforts to address the Year 2000 problem for its internal systems and identify any ways that future reports could be improved, we interviewed officials in SEC's Office of Information Technology. We also reviewed internal reports, plans, and timetables concerning the agency's efforts to repair its own systems. To evaluate how SEC's report discussed the efforts of market participants to address the Year 2000 problem, we interviewed SEC officials in the various divisions and offices within the agency responsible for overseeing SROs, broker-dealers, investment companies, investment advisers, and other market participants. We also reviewed documents SEC had collected from market participants to assess what type of information the agency had analyzed and thus could summarize in future reports. In addition, we assessed the extent to which SEC's report contained information that related to the various criteria set out in our own guidance for addressing Year 2000 issues and in the OMB guidance for selected federal agencies reporting on their Year 2000 efforts. We requested comments on a draft of this report from the Chairman, SEC. SEC provided written comments, which are discussed at the end of this report and reprinted in appendix II. SEC also suggested technical changes, which we incorporated where appropriate. We conducted our review from August 1997 through January 1998 in accordance with generally accepted government auditing standards. SEC's June 1997 report provided an overview of its own and industry participants' efforts to prepare for the year 2000. To assemble the report, SEC formed a task force that included representatives of each of its major operating divisions. These divisional representatives contacted various market participants under the representatives' jurisdiction by letter or telephone, requested and reviewed documents provided by these participants, and discussed Year 2000 issues as part of on-site examinations of some participants. They compiled the report from the information provided and structured it to address the specific questions you raised in your December 6, 1996, letter that requested annual SEC progress reports. SEC's report provided a high-level description of the status of Year 2000 remediation efforts for SEC internal systems, including detailed information on the status of SEC mission-critical systems. For mission-critical systems, the report discussed the total number of systems, how many are currently Year 2000 compliant, and how many are not compliant and will be either replaced or renovated. The report also provided SEC's schedule for completing some of the phases of the remediation process for mission-critical systems. SEC did not report the status of its critical internal systems in relation to its six-phased approach for achieving Year 2000 readiness. Indicating the status of its critical systems in relation to the six phases would provide a more structured means to assess the progress SEC has made in addressing the Year 2000 problem for its internal systems. The report also described SEC's efforts to promote awareness of the Year 2000 problem throughout the securities industry. It included a listing of the major organizations that SEC contacted within the securities industry and a description of how it coordinated its efforts with these organizations to ensure that systems throughout the securities industry are being readied for the year 2000. The organizations contacted included associations that represented SROs, broker-dealers, transfer agents, investment companies, and investment advisers. The report also provided a discussion of issues relating to public company financial statements, including auditing, auditor independence, and other accounting considerations. Finally, the report discussed SEC's guidance to public companies regarding the extent to which these companies should include information in their public disclosure filings if the costs or consequences of the Year 2000 problem would have a material effect on reported financial information. Although it provided an overview of the status of its own and securities industry participants' efforts to address the Year 2000 problem, the report did not identify those systems that might be critical to the continued functioning of the U.S. securities markets. Furthermore, it did not provide sufficient information about the timing and status of efforts by SROs, broker-dealers, investment companies, and other market participants to address their systems. In addition, it did not discuss what efforts will be made to address systems or organizations that have fallen behind schedule or what contingency planning is occurring to address systems that will not be ready in time. Such information is being required by OMB from other federal agencies and provides a more complete picture of Year 2000 readiness. According to our assessment guide, identifying and assessing mission-critical systems are important because an enterprisewide inventory of information systems and their components provides the necessary foundation for Year 2000 program planning. Identifying and addressing Year 2000 problems in critical systems are essential to ensuring that securities market operations continue without disruption and could also help market participants focus on their most critical systems as part of their overall efforts. Since May 1997, OMB has required selected federal agencies to report on the total number of mission-critical systems each has; the number of such systems that are currently Year 2000 compliant; and whether remaining systems are being replaced, repaired, or retired. SEC's report identified the number of internal systems SEC considered critical to its operations, but did not provide similar information on market participants' systems considered critical to the continued functioning of the U.S. securities markets. SEC officials said that they had determined whether SROs had conducted detailed inventories and identified critical systems because of the importance of these entities to the securities markets. The officials said that they generally had not collected similar information from market participants such as broker-dealers or investment companies because they had concentrated on ensuring that these participants were aware of and beginning to focus on Year 2000 problems. In addition, the officials said they also had begun identifying the steps these participants had taken to address the problems. However, they did not report the extent to which market participants' systems had progressed through SEC's six-phased process. An SEC official also told us that SEC did not include more detailed information on market participants' systems in its report because the participants considered the information to be sensitive and SEC had promised to maintain its confidentiality. However, it may be possible to report more detailed information without compromising the confidentiality of data from specific market participants. One way to do so would be to report summary data by type of securities market participant, with separate breakouts grouping the numbers of systems managed by industry segments, such as SROs, broker-dealers, investment companies, investment advisers, or transfer agents. This would provide more detail without identifying specific data or market participants. To indicate the status of systems most likely to have a significant impact on the continued functioning of the U.S. securities markets, SEC could group the summary data by some measure of their size or importance to the market, such as the percentage of total market trading volume or market capitalization that each grouping represented. Appendix I shows examples of ways to report this information for the securities industry based on OMB's suggested reporting format. SEC's June 1997 report also did not indicate time frames that market participants are following for completing the various phases necessary to address the Year 2000 problem. For example, our assessment guide indicates that organizations should have been finished with the first two phases of the process--awareness and assessment--by around mid-1997 and should already have initiated activities to renovate systems with date-related deficiencies. According to SEC officials, they have generally asked market participants to describe the expected time frames associated with each organization's Year 2000 readiness program, and SEC intends to track these organizations' progress against these time frames as part of its oversight. For example, SEC intends to track most organizations against the time frames established by the Securities Industry Association, which it considered to be more aggressive than the time frames established by other organizations, such as OMB. However, this information was not included in the June 1997 report. Such information would provide an essential measure of progress for critical systems. SEC's report also did not provide information concerning the steps to be taken to address systems or organizations that have fallen behind schedule in addressing the Year 2000 problem. OMB requires selected federal agencies to include exception reports in their annual and quarterly reports for mission-critical systems that are being replaced or repaired and are at least 2 months behind schedule. OMB expects these exception reports to include an explanation of why the systems are behind schedule, a description of what is being done to accelerate the effort, a new schedule for replacement or completion of the remaining phases, and a description of the funding and other resources necessary to achieve compliance. The reporting of such information allows OMB to make an assessment of whether the steps being taken to correct such systems are adequate for getting them back on schedule. SEC's report also did not contain sufficient information to assess the level of contingency planning that it and market participants are conducting as part of preparing for the year 2000. SEC officials said that securities market participants were generally not far enough along in the overall Year 2000 process to be involved in detailed contingency planning yet, but recognized its importance. Because the year 2000 is less than 2 years away, contingency planning for systems that will not be ready is an important part of any organization's preparations. As noted in our assessment guide, correcting the Year 2000 problem is difficult because systems frequently consist of multiple programs, operating systems, computer languages, and hardware platforms. Resolving date coding problems for computer systems is a labor-intensive and time-consuming process, and some systems, portions of systems, or instances of date dependencies may be overlooked during the remediation process. Therefore, having sound contingency plans, which involves identifying or designing alternative means for processing information, will be important for ensuring the continued functioning of the securities markets. Developing and reporting on such plans soon might help reveal certain alternatives or contingencies to be unworkable, too expensive, or otherwise impractical. Monitoring an organization's efforts to ensure that its computer systems are ready will become even more critical as the year 2000 draws nearer. In this regard, annual reports from SEC may not provide sufficiently timely information. Recognizing the time-critical nature of the Year 2000 problem, OMB's reporting guidance for selected federal agencies requests that these organizations provide quarterly reports on the status of their Year 2000 efforts. Other organizations are requiring even more frequent reporting. For example, the Treasury Department is requiring its bureaus to report their status monthly. More frequent reporting by SEC would help to identify any problems sooner and thus provide Congress and SEC additional time to take action should the need arise. Because SEC was primarily concerned with promoting and assessing awareness of the Year 2000 problem, its June 1997 report focused on the early stages of the industry's preparations for the year 2000 and did not provide specific information on the status of particular systems. However, as the year 2000 approaches, information similar to that required by OMB, but reported more frequently, would provide a better indication of the progress being made to ensure the readiness of systems critical to the continued functioning of the U.S. securities markets. We recommend that the Chairman, SEC, include in SEC's Year 2000 status reports to Congress information similar to that required of other federal agencies by OMB. Specifically, SEC reports should include information on the systems critical to the continued functioning of the U.S. securities markets; the progress made in moving critical systems through the various phases of achieving Year 2000 compliance; the time frames required to complete each phase of the process; the efforts necessary to address systems that are behind schedule; and the contingency plans for systems that may not be ready in time. SEC should also report such information more frequently, such as quarterly update briefings, to keep Congress informed as the year 2000 approaches. SEC provided us with written comments on a draft of this report. (See app. II.) SEC generally agreed with our recommendation that it report more specific, detailed information to Congress on the industry's Year 2000 progress. SEC also agreed with our suggestions to focus particularly on the industry's overall progress in moving its operations through the various phases of achieving Year 2000 compliance and on providing contingency planning information for the 1998 report. SEC also agreed that an annual report to Congress may not provide sufficiently timely information. It said that it is currently providing briefings to certain congressional staff and would be willing to include the staff of any member of Congress in such briefings. If made available to all interested Members and staff and conducted as frequently as needed, such briefings could meet the intent of our recommendation. SEC stated, however, that OMB reporting requirements are not a workable model for reporting on the systems of entities that SEC regulates. Specifically, SEC stated that it is not feasible to provide all the information required by OMB for the mission critical and non-mission-critical systems of every regulated entity in the securities industry because of the size of the industry, limited SEC resources, and the SEC's sharing of oversight authority. We used the OMB reporting requirements as an example of how SEC could improve its reporting on the progress being made to ensure the readiness of systems critical to ongoing market operations. We did not intend that SEC report detailed information for the mission-critical and non-mission-critical systems of each regulated entity, although each entity should be tracking the progress of its own systems. We believe that, for Congress to have the information necessary to assess industry readiness, SEC needs to identify and provide detailed information on those systems that are critical to the functioning of the industry as a whole. Such systems likely include those related to trading, clearing, and other functions important to market operations, as well as those used by major market participants. We revised the text and recommendation to clarify our intent and discuss alternative ways to consolidate information about these critical systems in appendix I. For example, rather than reporting the status of systems for every member of an exchange or every broker-dealer, SEC could, at a minimum, report on the combined status of the systems for the major exchanges and largest broker-dealers. As arranged with your office, unless you publicly announce this report's contents earlier, we plan no further distribution of it until 15 days after the date of the letter. We will then send copies to other interested members of Congress, SEC, the New York Stock Exchange, the National Association of Securities Dealers, and other relevant organizations. Copies will be made available to others on request. Please contact me on (202) 512-8678 if you or your staff have any questions. Major contributors to this report are listed in appendix III. The following table represents a possible format for reporting information on the readiness of securities market participants' electronic systems. Other equally acceptable reporting formats or means of presenting this information likely exist. The format presented here seeks to capture several key aspects of the information, including some measure of importance for the entities (such as percentage of market trading volume); the extent to which systems are already compliant; and for those that are not, how far along in the six phases of the Year 2000 readiness process they are. The names of individual organizations would not have to be identified but instead information could be combined and presented for groups of organizations, as shown. Further, the percentage of systems that have completed each Year 2000 phase may not accurately reflect the amount of work remaining to be done if the larger systems with more lines of code remain unfinished. In such cases, market participants could disclose more information to better describe the actual work remaining. Milestone: (date) Milestone: (date) Milestone: (date) Milestone: (date) Milestone: (date) Milestone: (date) John Stephenson, Assistant Director Gary Mountjoy, Assistant Director Karen Bell, Senior Auditor The first copy of each GAO report and testimony is free. Additional copies are $2 each. Orders should be sent to the following address, accompanied by a check or money order made out to the Superintendent of Documents, when necessary. VISA and MasterCard credit cards are accepted, also. Orders for 100 or more copies to be mailed to a single address are discounted 25 percent. U.S. General Accounting Office P.O. Box 37050 Washington, DC 20013 Room 1100 700 4th St. NW (corner of 4th and G Sts. NW) U.S. General Accounting Office Washington, DC Orders may also be placed by calling (202) 512-6000 or by using fax number (202) 512-6061, or TDD (202) 512-2537. Each day, GAO issues a list of newly available reports and testimony. To receive facsimile copies of the daily list or any list from the past 30 days, please call (202) 512-6000 using a touchtone phone. A recorded menu will provide information on how to obtain these lists.
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Pursuant to a congressional request, GAO reviewed the Securities and Exchange Commission's (SEC) report on the status of its efforts to ensure that its computer systems, as well as those used by participants in the securities industry, are ready for the date changeover in the year 2000, focusing on: (1) SEC's June 1997 report on the status of year 2000 compliance by SEC, the securities industry, and public companies to identify any ways that future reports might be improved; (2) the adequacy of SEC's oversight of the year 2000 remediation efforts directed at its internal systems, self-regulatory organizations (SRO), broker-dealers, and other regulated entities; and (3) the guidance SEC has provided to public companies for disclosing year 2000 remediation efforts. GAO noted that: (1) SEC's first report in June 1997 provided an overview of the efforts that SEC and various industry participants had made to address year 2000 issues, but did not contain the specific, detailed information that Congress will need to assess progress as the year 2000 approaches; (2) according to an agency official, SEC had collected more detailed information from some market participants, such as SROs; (3) the official said that SEC did not include this information in the report because SEC had been focused on assessing the extent to which market participants were aware of the year 2000 problem and had begun taking steps to address it; (4) the Office of Management and Budget's (OMB) reporting format offers guidance on the type of detailed information SEC might provide Congress in future reports; (5) such information includes: (a) the systems considered critical to the continued functioning of the U.S. securities markets; (b) the progress made in moving these systems through the various phases of achieving year 2000 compliance; (c) the timeframes required to complete each phase; (d) the efforts necessary to address systems that are behind schedule; and (e) the contingency plans for systems that may not be ready in time; and (6) also, as the year 2000 approaches and less time to make adjustments is available, SEC's yearly progress updates may be too infrequent for congressional needs.
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The 2010 NPR report described the administration's approach to maintaining the U.S. nuclear deterrent capability while pursuing further reductions in nuclear weapons. The 2010 NPR was the third comprehensive assessment of U.S. nuclear policy and strategy conducted by the United States since the end of the Cold War; previous reviews were completed in 1994 and 2001. The Office of the Secretary of Defense and the Joint Staff led the effort in consultation with the Departments of State and Energy. Other organizations participated, including the military departments, the combatant commands, the Departments of Homeland Security and Treasury, the Office of the Director of National Intelligence, and the National Security Council and its supporting interagency bodies. The 2010 NPR report focused on five objectives: 1. preventing nuclear proliferation and nuclear terrorism; 2. reducing the role of U.S. nuclear weapons in the U.S. national security 3. maintaining strategic deterrence and stability at lower nuclear force 4. strengthening regional deterrence and reassuring U.S. allies and 5. sustaining a safe, secure, and effective nuclear arsenal. The third of these objectives--maintaining strategic deterrence and stability at reduced nuclear force levels--emphasizes the importance of bilateral and verifiable reductions in strategic nuclear weapons in coordination with Russia. In support of this objective, the United States signed a new Strategic Arms Reduction Treaty with Russia--known as New START--on April 8, 2010, which entered into force on February 5, 2011. New START gives Russia and the United States 7 years to reduce their strategic delivery vehicles and strategic nuclear warheads--under the counting rules outlined in the treaty--and will remain in force for 10 years. According to DOD's April 2014 report on its plan to implement New START, DOD plans to maintain 400 deployed intercontinental ballistic missiles; 240 deployed submarine-launched ballistic missiles; and 60 deployed heavy bombers. The 60 heavy bombers consist of B-52s and B-2s. Taken together, these add up to 700 deployed delivery vehicles and fall within the New START limits that go into force in 2018. DOD and military service officials told us these numbers reflect DOD's current planned strategic force structure for implementing New START. Figure 1 shows DOD's planned deployed strategic force structure for implementing New START, including the number of delivery vehicles for each leg of the triad. In 2011, the President directed DOD to conduct a follow-on analysis to the NPR, which reviewed U.S. nuclear deterrence requirements. The review resulted in the development of the President's nuclear employment guidance and a DOD report on this nuclear employment guidance, which was completed in June 2013. The review was led by DOD and included senior-level participation by the Office of the Secretary of Defense, the Joint Chiefs of Staff, Strategic Command, the Department of State, the Department of Energy, the Office of the Director of National Intelligence, and the National Security Staff (now known as the National Security Council). As indicated in DOD's 2013 report on the President's nuclear employment guidance, the review assessed what changes to nuclear employment strategy could best support the five key objectives of the 2010 NPR and a sixth objective: achieve U.S. and allied objectives if deterrence fails. In June 2013, DOD completed a Strategic Choices Management Review, which, according to DOD officials, considered reductions in nuclear forces, among other things. According to the Secretary of Defense, the purpose of the Strategic Choices Management Review was to understand the effect that further budget reductions would have on the department and to develop options to deal with these reductions. Figure 2 shows a timeline of events and reviews related to DOD's assessment of U.S. nuclear forces from 2010 through 2014. DOD assessed the need for each leg of the strategic triad in support of the 2010 NPR and considered other reductions to nuclear forces in subsequent reviews. The department identified advantages of each leg of the triad and concluded that retaining all three would help maintain strategic deterrence and stability. The 2010 NPR report states that the administration considered various options for U.S. nuclear force structure, including options in which the United States would eliminate one leg of the triad. DOD officials also told us that the department had assessed nuclear force reductions as part of subsequent reviews, including during the development of the President's nuclear employment guidance, the 2013 Strategic Choices Management Review, and the development of DOD's plan to implement New START. The 2010 NPR report identified advantages of each leg of the triad that DOD decided warrant retaining all three, even in light of the planned reductions under New START. These advantages--including the survivability of the sea-based leg; the intercontinental ballistic missiles' contribution to stability; and the ability of the nuclear-capable bombers to visibly forward deploy--are further described in Navy and Air Force acquisition documents completed both before and after the 2010 NPR, from 2008 through 2014. These acquisition documents do not include an assessment of the strategic triad as a whole but help define and clarify the advantages that are identified in the 2010 NPR report. In addition to identifying the advantages of each leg, the 2010 NPR report indicates that retaining all three legs best maintains strategic stability at reasonable cost while reducing risk against potential technical problems or vulnerabilities. The 2010 NPR report states that for the planned reductions under New START, DOD considered force structure options in which the department would eliminate a leg of the triad. DOD officials told us that in senior-level force structure meetings in support of the NPR, DOD and key stakeholders discussed and considered alternatives to a triad for U.S. strategic force structure. DOD officials were unable to provide us documentation of the NPR's analysis of the strategic force structure options that were considered; officials from the Office of the Secretary of Defense, Joint Staff, and Strategic Command told us that much of the NPR analysis on the consideration of different strategic force structure options was discussed in senior-level meetings and was not documented. In addition to the discussions and analysis of options for alternative strategic force structures that occurred during the development of the 2010 NPR, Strategic Command, Air Force, and Navy officials told us that they had also analyzed alternative strategic force structures in advance of the NPR discussions. We reviewed examples of Air Force and Strategic Command analyses and reported on these in our classified report. DOD's 2013 unclassified report on the President's nuclear employment guidance states that DOD also assessed potential reductions in U.S. nuclear forces in the follow-on review to the NPR that led to the development of the 2013 Presidential nuclear employment guidance. The report says that, in that review, the President determined that the United States can safely pursue up to a one-third reduction in deployed nuclear weapons from the level established in New START, while still ensuring the security of the United States and U.S. allies and partners and maintaining a strong and credible strategic deterrent. DOD officials told us that to avoid large disparities in nuclear capabilities, the report also stated the administration's intent to seek negotiated cuts with Russia. However, such negotiations have not yet begun as of August 2016. DOD officials told us that, in the June 2013 Strategic Choices Management Review--which supported the department's budget review--the department considered cutting nuclear forces and capabilities. The purpose of the Strategic Choices Management Review was to examine the potential effect of additional anticipated budget reductions on the department and generally review how DOD would allocate resources when executing its fiscal year 2014 budget and preparing its fiscal years 2014 through 2019 budget plans. According to DOD officials, the administration and the department ultimately decided against the options to reduce nuclear forces that were considered in the 2013 Strategic Choices Management Review. As we have previously reported, DOD considered alternatives to its strategic force structure in senior-level meetings for implementing New START. According to DOD officials, in these senior-level meetings-- which were organized by the Joint Staff and led by the Office of the Under Secretary of Defense for Policy--DOD finalized its recommendations to the National Security Council for the strategic force structure to implement the treaty. DOD officials told us that, during these meetings, DOD participants considered options to comply with the treaty. They also told us that DOD ultimately recommended maintaining 400 deployed intercontinental ballistic missiles, 240 deployed submarine-launched ballistic missiles, 60 deployed heavy bombers, 54 nondeployed intercontinental ballistic missile silos, 40 nondeployed submarine- launched ballistic missile launch tubes, and 6 nondeployed nuclear- capable heavy bombers. According to officials, the National Security Council approved this recommendation, which is reflected in DOD's April 2014 report on its plan to implement New START. We provided a draft of the classified version of this report to DOD for review and comment. In response to that draft report, DOD provided technical comments that we have incorporated as appropriate. We are providing copies of this report to the appropriate congressional committees, the Secretary of Defense, the Secretary of the Air Force, the Secretary of the Navy, the Secretary of the Army, the Joint Staff, and the Under Secretary of Defense for Policy. In addition, this report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-9971 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this report are listed in the appendix. Joseph W. Kirschbaum, (202) 512-9971 or [email protected]. In addition to the contact named above, Penney Harwell Caramia (Assistant Director), Scott Fletcher, Jonathan Gill, Joanne Landesman, Amie Lesser, Brian Mazanec, Timothy Persons, Steven Putansu, Michael Shaughnessy, and Sam Wilson made key contributions to this report.
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Since the 1960s, the United States has deployed nuclear weapons on three types of strategic delivery vehicles collectively known as the strategic triad. The triad comprises the sea-based leg (submarine-launched ballistic missiles), ground-based leg (intercontinental ballistic missiles), and airborne leg (nuclear-capable heavy bombers). As a result of arms control agreements and strategic policies, the number of U.S. nuclear weapons and strategic delivery vehicles has been reduced substantially; however, the strategic triad has remained intact. DOD and the Department of Energy are planning to invest significant resources to recapitalize and modernize the strategic triad in the coming decades. The departments projected in 2015 that the costs of maintaining U.S. nuclear forces for fiscal years 2016 through 2025 would total $319.8 billion, and DOD expects recapitalization and modernization efforts to extend into the 2030s. GAO was asked to review DOD's analysis of the decision to retain all three legs of the strategic triad. This report describes the processes DOD used in supporting that decision. GAO reviewed documentation and interviewed officials from DOD and the military services on the key reviews DOD carried out from 2009 to 2014-- including the 2010 Nuclear Posture Review--in analyzing its strategic force structure. The Department of Defense (DOD) assessed the need for each leg of the strategic triad in support of the 2010 Nuclear Posture Review and considered other reductions to nuclear forces in subsequent reviews. The department identified advantages of each leg of the triad and concluded that retaining all three would help maintain strategic deterrence and stability. The advantages DOD identified include the survivability of the sea-based leg, the intercontinental ballistic missiles' contribution to stability, and the ability of the nuclear-capable bombers to visibly forward deploy. The 2010 Nuclear Posture Review Report states--and DOD officials also told GAO--that the administration has considered various options for the U.S. nuclear force structure, including options in which DOD would eliminate one leg of the triad. For example, Strategic Command, Air Force, and Navy officials told GAO that they had analyzed alternative strategic force structures in preparation for the 2010 Nuclear Posture Review. DOD officials also told GAO that the department had assessed nuclear force reductions as part of reviews conducted after the Nuclear Posture Review, including during the development of the President's 2013 nuclear employment guidance, the 2013 Strategic Choices Management Review, and DOD's 2014 plan to implement the New Strategic Arms Reduction Treaty (New START) with Russia. The figure shows DOD's current planned strategic force structure for implementing New START, including the number of delivery vehicles that would be retained for each leg of the triad. This is a public version of a classified report GAO issued in May 2016. It excludes classified information on warhead levels, the specific advantages of each leg of the triad, and some of the analyses of alternatives that were considered. GAO is not making any recommendations in this report. DOD provided technical comments, which were incorporated as appropriate.
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The demands upon judges' time are largely a function of both the number and complexity of the cases on their dockets. Some types of cases may demand relatively little time, and others may require many hours of work. To measure the case-related workload of district court judges, the Judicial Conference has adopted weighted case filings. The purpose of the district court case weights was to create a measure of the average judge time that a specific number and mix of cases filed in a district court would require. Importantly, the weights were designed to be descriptive not prescriptive--that is, the weights were designed to develop a measure of the national average amount of time that judges actually spent on specific types of cases, not to develop a measure of how much time judges should spend on specific types of cases. Moreover, the weights were designed to measure only case-related judge workload. Judges have noncase-related duties and responsibilities, such as administrative tasks, that are not reflected in the case weights. With few exceptions, such as cases that are remanded to a district court from the courts of appeals, each civil and criminal case filed in a district court is assigned a case weight. Each case filed in a district court is assigned a case weight based on the subject matter of the case. The weight of the overall average case is 1.0. All other weights were established relative to this national average case. Thus, a case with a weight of 0.5 would be expected to require on average about half as much judge time as the national average case, and a case with a value of 2.0 would be expected to require on average about twice as much judge time as the national average case. Case weights for criminal felony defendants are applied on a per defendant basis. For example, the case weight for heroin/cocaine distribution is 2.27. If such a case involved two defendants, the court would be credited with a weight of 4.54--two times the assigned case weight of 2.27. Of course, the actual amount of time a judge may spend on any specific case may be more or less than the national average for that type of case. Total weighted filings for a district are determined by summing the case weights associated with all the cases filed in the district during the year. Weighted case filings per authorized judgeship--is the total annual weighted filings divided by the total number of authorized judgeships for the district. For example, if a district had total weighted filings of 4,600 and 10 authorized judgeships, its weighted filings per authorized judgeship would be 460. The Judicial Conference uses weighted filings of 430 or more per authorized judgeship as an indication that a district may need one or more additional judgeships. Thus, a district with 460 weighted filings per authorized judgeship could be considered for an additional judgeship. The Judicial Conference approved the use of the current district court case weights in 1993. The weights are based on a "case-tracking time study," conducted between 1987 and 1993, in which judges recorded the amount of time spent on each of their cases included in the study. The study included about 8,100 civil cases and about 4,200 criminal cases. Overall, the weighted case filings, as approved in 1993, are a reasonably accurate method of measuring the average judge time that a specific number and mix of cases filed in a district court would require. The methodology used to develop the case weights was reasonable. It used a valid sampling procedure, developed weights based on actual case-related time recorded by judges from case filing to disposition, and included a measure (standard errors) of the statistical confidence in the final weight for each weighted case type. The case weights are almost 10 years old, and the time data on which they were based are as much as 15 years old. Changes since the case weights were finalized in 1993, such as changes in the characteristics of cases filed in federal district courts and in case management practices, may affect how accurately the weights continue to reflect the time burden on district court judges today. For example, since 1993, new civil causes of action (such as telemarketing issues) and criminal offenses (such as new terrorism offenses) needed to be accommodated within the existing case- weight structure. According to FJC officials, where the new cause of action or criminal offense is similar to an existing case-weight type, the weight for the closest case type is assigned. Where the new cause of action or criminal offense is clearly different from any existing case-weight category, the weight assigned is that for either "all other" civil cases or "all other" criminal cases. The Subcommittee on Judicial Statistics of the Judicial Conference's Committee on Judicial Resources has approved the research design for revising the current case weights, with the goal of having new weights submitted to the Resources Committee for review in the summer of 2004. The design for the new case weights relies on three sources of data for specific types of cases: (1) data from automated databases identifying the docketed events associated with cases; (2) data from automated sources on the time associated with courtroom events for cases, such as trials or hearings; and (3) estimated time data from structured, guided discussion among experienced judges on the time associated with noncourtroom events for cases, such as reading briefs or writing opinions. Although the proposed methodology appears to offer the benefit of reduced judicial burden (no time study data collection), potential cost savings, and reduced calendar time to develop the new weights, we have two principal concerns about the research design--the challenge of obtaining reliable, comparable data from two different automated data systems for the analysis and the limited collection of actual data on the time judges spend on cases. The design assumes that judicial time spent on a given case can be accurately estimated by viewing the case as a set of individual tasks or events in the case. Information about event frequencies and, where available, time spent on the events would be extracted from existing administrative data bases and reports and then used to develop estimates of the judge-time spent on different types of cases. For event data, the research design proposes using data from new technology (the Case Management/Electronic Case Filing System) that is currently being introduced into the court system for recording case management information. However, not all courts have implemented the new system, and data from the existing and new systems will have to be integrated to obtain and analyze the event data. FJC researchers, who would conduct the research, recognize the challenges this poses and have developed a strategy for addressing the issues, which includes forming a technical advisory group from FJC, the Administrative Office of the U.S. Courts, and individual courts to develop a method of reliably extracting and integrating data from the two case management systems for analysis. Second, the research design does not require judges to record time spent on individual cases. Actual time data would be limited to that available from existing reports on the time associated with courtroom events and proceedings for different types of cases. However, a majority of district judges' time is spent on case-related work outside the courtroom. The time required for noncourtroom events would be derived from structured, guided discussions of groups of 8 to 13 experienced district court judges in each of the 12 geographic circuits (about 100 judges in all). The judges would develop estimates of the time required for different events in different types of cases within each circuit, using FJC-developed "default values" as the reference point for developing their estimates. These default values would be based in part on the existing case weights and in part on other types of analyses. Following the meetings of the judges in each circuit, a national group of 24 judges (2 from each circuit) would consider the data from the 12 circuit groups and develop the new weights. The accuracy of judges' time estimates is dependent upon the experience and knowledge of the participating judges and the accuracy and reliability of the judges' recall about the time required for different events in different types of cases--about 150 if all the case types in the current case weights were used. These consensus data cannot be used to calculate statistical measures of the accuracy of the resulting case weights. Thus, it will not be possible to objectively, statistically assess how accurate the new case weights are--weights on whose accuracy the Judicial Conference will rely in assessing judgeship needs in the future. A time study conducted concurrently with the proposed research methodology would be advisable to identify potential shortcomings of the event-based methodology and to assess the relative accuracy of the case weights produced using that methodology. In the absence of a concurrent time study, there would be no objective statistical way to determine the accuracy of the case weights produced by the proposed event-based methodology. The principal workload measure that the Judicial Conference uses to assess the need for additional courts of appeals judges is adjusted case filings. We found that adjusted case filings are based on data available from standard statistical reports for the courts of appeals. The measure is not based on any empirical data about the judge time required by different types of cases in the courts of appeals. The Judicial Conference's policy is that courts of appeals with adjusted case filings of 500 or more per three-judge panel may be considered for one or more additional judgeships. Courts of appeals generally decide cases using constantly rotating three-judge panels. Thus, if a court had 12 authorized judgeships, those judges could be assigned to four panels of three judges each. In assessing judgeship needs for the courts of appeals, the Conference may also consider factors other than adjusted case filings, such as the geography of the circuit or the median time from case filings to dispositions. Adjusted case filings are used for 11 of the 12 courts of appeals. It is not used for the Court of Appeals for the D.C. Circuit. A FJC study of that court's workload determined that adjusted case filings were not an appropriate means of measuring the court's judgeship needs. The court had a high proportion of administrative agency appeals that occurred almost exclusively in the Court of Appeals for D.C. and were more burdensome than other types of cases in several respects--e.g., more independently represented participants per case, more briefs filed per case, and a higher rate of case consolidation. Essentially, the adjusted case filings workload measure counts all case filings equally, with two exceptions. First, cases refiled and approved for reinstatement are excluded from total case filings. Second, two-thirds of pro se cases--defined by the Administrative Office as cases in which one or both of the parties are not represented by an attorney--are deducted from total case filings (that is, they are effectively weighted at 0.33). For example, a court with 600 total pro se filings in a fiscal year would be credited with 198 adjusted pro se case filings (600 x 0.33). The remaining nonpro se cases would be weighted at 1.0 each. Thus, a court of appeals with 1,600 case filings (excluding reinstatements)--600 pro se cases and 1,000 nonpro se cases--would be credited with 1,198 adjusted case filings (198 discounted pro se cases plus 1,000 nonpro se cases). If this court had 6 judges (allow two panels of 3 judges each), it would have 599 adjusted case filings per 3-judge panel, and, thus, under Judicial Conference policy, could be considered for an additional judgeship. The current court of appeals workload measure represents an effort to improve the previous measure. In our 1993 report on judgeship needs assessment, we noted that the restraint of individual courts of appeals, not the workload standard, seemed to have determined the actual number of appellate judgeships the Judicial Conference requested. At the time the current measure was developed and approved, using the new benchmark of 500 adjusted case filings resulted in judgeship numbers that closely approximated the judgeship needs of the majority of the courts of appeals, as the judges of each court perceived them. The current courts of appeals case-related workload measure principally reflects a policy decision using historical data on filings and terminations. It is not based on empirical data regarding the judge time that different types of cases may require. On the basis of the documentation we reviewed, we determined that there is no empirical basis for assessing the potential accuracy of adjusted filings a measure of case-related judge workload. In our report, we recommended that the Judicial Conference of the United States update the district court case weights using a methodology that supports an objective, statistically reliable means of calculating the accuracy of the resulting weights; and develop a methodology for measuring the case-related workload of courts of appeals judges that supports an objective, statistically reliable means of calculating the accuracy of the resulting workload measure(s) and that addresses the special case characteristics of the Court of Appeals for the D.C. Circuit. In a May 27, 2003, letter to GAO, the Chair of the Committee on Judicial Resources said that the development of the new case weights will use substantial data already collected and that our report did not reflect the sophisticated methodology the FJC had designed for the study nor acknowledge the substantial increased costs and time involved in a time study that was likely to offer little or no added value for the investment. The letter also noted that the workloads of the courts of appeals entail important factors that have defied measurement, including the significant differences in the courts' case processing techniques. The Deputy Director of FJC, in a May 27, 2003, letter agreed that the estimated data on noncourtroom judge time in the new study would not permit the calculation of standard errors. However, the integrity of the resulting case-weight system could still be evaluated on the basis of adherence to the procedures that will be used to gather the data and promote their reliability. We believe that our analysis and recommendations are sound and that the importance and costs of creating new Article III federal judgeships requires the best possible case-related workload data to support the assessment of the need for more judgeships. That concludes my statement, Mr. Chairman, and I would be pleased to answer any questions you or other Members of the Subcommittee may have. For further information regarding this testimony, please contact William O. Jenkins, Jr., at (202) 512-8777. Individuals making key contributions to this testimony included David Alexander, Kriti Bhandari, R. Rochelle Burns, and Chris Moriarity. Whether the district court case weights are a reasonably accurate measure of district judge case-related workload is dependent upon two variables: (1) the accuracy of the case weights themselves and (2) the accuracy of classifying cases filed in district courts by the case type used for the case weights. If case filings are inaccurately identified by case type, then the weights are inaccurately calculated. Because there are fewer categories used in the courts of appeals workload measure, there is greater margin for error. The database for the courts of appeals should accurately identify (1) pro se cases, (2) reinstated cases, and (3) all cases not in the first two categories. All current records related to civil and criminal filings that are reported to the Administrative Office of the U.S. Courts (AOUSC) and used for the district court case weights are generated by the automated case management systems in the district courts. Filings records are generated monthly and transmitted to AOUSC for inclusion in its national database. On a quarterly basis, AOUSC summarizes and compiles the records into published tables, and for given periods these tables serve as the basis for the weighted caseload determinations. In responses to written questions, AOUSC described numerous steps taken to ensure the accuracy and completeness of the filings data, including the following: Built-in, automated quality control edits are done when data are entered electronically at the court level. The edits are intended to ensure that obvious errors are not entered into a local court's database. Examples of the types of errors screened for are the district office in which the case was filed, the U.S. Code title and section of the filing, and the judge code. Most district courts have staff responsible for data quality control. A second set of automated quality control edits are used by AOUSC when transferring data from the court level to its national database. These edits screen for missing or invalid codes that are not screened for at the court level, such as dates of case events, the type of proceeding, and the type of case. Records that fail one or more checks are not added to the national database and are returned electronically to the originating court for correction and resubmission. Monthly listings of all records added to the national database are sent electronically to the involved courts for verification.
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GAO appeared before the Subcommittee on Courts, the Internet, and Intellectual Property, House Committee on the Judiciary to discuss the results of our review and assessment of case-related workload measures for district court and courts of appeals judges. Biennially, the Judicial Conference of the United States, the federal judiciary's principal policymaking body, assesses the judiciary's needs for additional judgeships. If the Conference determines that additional judgeships are needed, it transmits a request to Congress identifying the number, type (courts of appeals, district, or bankruptcy), and location of the judgeships it is requesting. In assessing the need for additional district and appellate court judgeships, the Judicial Conference considers a variety of information, including responses to its biennial survey of individual courts, temporary increases or decreases in case filings, and other factors specific to an individual court. However, the Conference's analysis begins with the quantitative case-related workload measures it has adopted for the district courts and courts of appeals--weighted case filings and adjusted case filings, respectively. These two measures recognize, to different degrees, that the time demands on judges are largely a function of both the number and complexity of the cases on their dockets. Some types of cases may demand relatively little time and others may require many hours of work. GAO found that the district court weighted case filings, as approved in 1993, appear to be a reasonably accurate measure of the average time demands that a specific number and mix of cases filed in a district court could be expected to place on the district judges in that district. The methodology used to develop the case weights was based on a valid sampling procedure, developed weights based on actual case-related time recorded by judges from case filing to disposition, and included a measure (standard errors) of the statistical confidence in the final weight for each weighted case type. The case weights, however, are about 10 years old, and the data on which the weights are based are as much as 15 years old. Changes since 1993, such as the characteristics of cases filed in federal district courts and changes in case management practices, may have affected whether the 1993 case weights continue to be a reasonably accurate measure of the average time burden on district court judges resulting from a specific volume and mix of cases. The Judicial Conference's Subcommittee on Judicial Statistics has approved a research design for updating the current case weights, and we have some concerns about that design. The design would include limited data on the time judges actually spend on specific types of cases. The proposed design would not include collecting actual data on the non-courtroom time that judges spend on different types of cases. Estimates of the non-courtroom time required for specific types of cases would be based on estimates derived from the structured, guided discussions of about 100 experienced judges meeting in 12 separate groups (one for each geographic circuit). The accuracy of case weights developed on such consensus data cannot be assessed using standard statistical methods, such as the calculation of standard errors. Thus, it would not be possible to objectively, statistically assess how accurate the new case weights are. Adjusted case filings, the principal quantitative measure used to assess the case-related workload of courts of appeals judges, are based on available data from standard statistical reports from the courts of appeals. The measure is not based on any empirical data about the judge time required by different types of cases in the courts of appeals. The measure essentially assumes that all cases filed in the courts of appeals, with the exception of pro se cases--those in which one or both parties are not represented by an attorney--require the same amount of judge time. On the basis of the documentation we reviewed, there is no empirical basis on which to assess the accuracy of adjusted filings as a measure of case-related workload for courts of appeals judges. Whether the district court case weights are a reasonably accurate measure of district judge case-related workload is dependent upon two variables: (1) the accuracy of the case weights themselves and (2) the accuracy of classifying cases filed in district courts by the case type used for the case weights. If case filings are inaccurately identified by case type, then the weights are inaccurately calculated.
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To ensure the trustworthiness, reliability, and character of personnel in positions with access to classified information, DOD relies on a multiphased personnel security clearance process. Figure 1 shows six phases that could be involved in determining whether to grant an actual or a potential job incumbent a clearance. The three phases shown in gray are those that are most transparent to individuals requesting an initial clearance, and they are the three phases that were the primary focus of the findings in this testimony. At the time of our September 2006 report, our independent analysis of timeliness data showed that industry personnel contracted to work for the federal government waited more than 1 year on average to receive top secret security clearances, and government statistics did not portray the full length of time it takes many applicants to obtain clearances. We found delays in all phases of the clearance process that we examined, and government statistics did not account for the full extent of the delays. Delays in the clearance process may cost money and pose threats to national security (see table 1). As table 1 shows, industry personnel granted eligibility for top secret clearances from DISCO from January to February 2006 waited an average of 446 days for their initial clearances or 545 days for their clearance updates. DOD may, however, have issued interim clearances to some of these industry personnel, which might have allowed them to begin work before they received their final clearances. IRTPA requires that beginning in December 2006, 80 percent of clearances be completed in an average of 120 days. Delays were found in each phase of the clearance process that we examined: Application submission. The application-submission phase of the clearance process took an average of 111 days for the initial clearances that DISCO adjudicated in January and February 2006 (see table 1). The starting point for our measurement of this phase was the date when the application was submitted by the facility security officer. Our end point for this phase was the date that OPM scheduled the investigation into its Personnel Investigations Processing System. We used this starting date because the government can begin to incur an economic cost if an industry employee cannot begin work on a classified contract because of delays in obtaining a security clearance and this end date because OPM currently uses this date as its start point for the next phase in the clearance process. The government plan for improving the clearance process noted that "investigation submission" (i.e., application submission) is to be completed within an average of 14 calendar days or less. Therefore, the 111 days taken for the application-submission phase was nearly 100 more days on average than allocated. Several factors contributed to the amount of time we observed in the application- submission phase, including rejecting applications multiple times because of inaccurate information (as reported in an April 2006 DOD Office of Inspector General report); multiple completeness reviews--the corporate facility security officer, DISCO adjudicators, and OPM staff; and manually entering data from paper applications if eQIP was not used. Investigation. Investigations for the initial top secret clearances of industry personnel adjudicated in January and February 2006 took an average of 286 days, compared to OMB's 180-day goal for that period (see table 1). During the same period, investigations for top secret clearance updates or "reinvestigations" took an average of 419 days, almost one and a half times as long as the initial investigations (no goal is given for clearance updates or reinvestigations). The mandated February 2007 OMB report to Congress noted that "Reinvestigation timeliness has not been addressed, because the improvement effort focused on individuals for whom initial security clearances are required to perform work." Our September 2006 report identified many factors that inhibited the speed with which OPM can deliver investigative reports to DISCO and other adjudication facilities. Those causes included backlogged cases that prevent the prompt start of work on new cases, the relative inexperience of the investigative workforce, slowness in developing the capability to investigate overseas leads, and difficulty obtaining access to data in governmental records. Adjudication. DISCO adjudicators took an average of 39 days to grant initial clearance eligibility to the industry personnel in our population (see table 1). The measurement of this phase for our analysis used the same start and stop dates that OPM uses in its reports, starting on the date that OPM closed the report and continuing through the date that DISCO adjudicators decided clearance eligibility. IRTPA requires that at least 80 percent of the adjudications made from December 2006 through December 2009 be completed within an average of 30 days. As of June 2006, DISCO reported that it had adjudicated 82 percent of its initial top secret clearances within 30 days. Delays in any phase of the clearance process cost money and threaten national security. Delays in completing initial security clearances may have a negative economic impact on the costs of performing classified work within or for the U.S. government. For example, in a May 2006 congressional hearing, a representative of a technology association testified that retaining qualified personnel resulted in salary premiums as high as 25 percent for current clearance holders. Delays in completing clearance updates can have serious but different negative consequences than those stemming from delays in completing initial clearance-eligibility determinations. In 1999, the Joint Security Commission reported that delays in initiating reinvestigations for clearance updates create risks to national security because the longer individuals hold clearances the more likely they are to be working with critical information. The statistics that OMB and OPM have provided to Congress on the timeliness of the personnel security clearance process do not convey the full magnitude of the investigation-related delays facing the government. While our September 2006 report noted additional problems with the transparency of the timeliness statistics, I will review our concerns about five such issues: (1) limited information on reinvestigations for clearance updating, (2) not counting the total number of days to finish the application-submission phase, (3) shifting some investigation-related days to the adjudication phase or not counting them, (4) not counting the total number of days to complete closed pending cases, and (5) not counting the total number of days to complete investigations sent back for rework. Limited information on reinvestigations for clearance updating. In its mandated February 2007 report to Congress, OMB acknowledged that "reinvestigation timeliness has not been addressed," but the findings from our population of industry personnel (obtained using DOD's, instead of OPM's, database to assess timeliness) indicated that clearance update reinvestigations took about one and a half times as long as the initial investigations. The absence of timeliness information on clearance update reinvestigations does not provide all stakeholders--Congress, agencies, contractors attempting to fulfill their contracts, and employees awaiting their clearances--with a complete picture of clearance delays. We have noted in the past that focusing on completing initial clearance investigations could negatively affect the completion of clearance update reinvestigations and thereby increase the risk of unauthorized disclosure of classified information. Not counting all days to finish the application-submission phase. OMB's February 2007 report noted that its statistics do not include "the time to hand-off applications to the investigative agency." The gray section of the application-submission phase in table 1 shows some of the activities that were not counted when we examined January and February 2006 clearance documentation for industry personnel. These activities could be included in timeliness measurements depending on the interpretation of what constitutes "receipt of the application for a security clearance by an authorized investigative agency"--IRTPA's start date for the investigation phase. Shifting some investigation-related days to the adjudication phase or not counting them. In our September 2006 report, we raised concerns about how the time to complete the adjudication phase was measured. The activities in the gray section of the adjudication phase in table 1 show that the government's procedures for measuring the time required for the adjudication phase include tasks that occur before adjudicators actually receive the investigative reports from OPM. More recently, OMB's February 2007 report to Congress noted that its timeliness statistics do not include "the time to ... hand-off investigation files to the adjudicative agency" and estimated this handling and mailing time at up to 15 days. Not counting all days for closed pending cases. OPM's May 2006 testimony before Congress did not indicate whether the timeliness statistics on complete investigations included a type of incomplete investigation that OPM sometimes treats as being complete. In our February 2004 report, we noted that OPM's issuance of "closed pending" investigations--investigative reports sent to adjudication facilities without one or more types of source data required by the federal investigative standards--causes ambiguity in defining and accurately estimating the backlog of overdue investigations. In our February 2004 report, we also noted that cases that are closed pending the provision of additional information should continue to be tracked separately in the investigation phase of the clearance process. According to OPM, from February 20, 2005, through July 1, 2006, the number of initial top secret clearance investigative reports that were closed pending the provision of additional information increased from 14,841 to 18,849, a 27 percent increase. DISCO officials and representatives from some other DOD adjudication facilities have indicated that they will not adjudicate closed pending cases since critical information is missing. OPM, however, has stated that other federal agencies review the investigative reports from closed pending cases and may determine that they have enough information for adjudication. Combining partially completed investigations with fully completed investigations overstates how quickly OPM is supplying adjudication facilities with the information they require to make their clearance-eligibility determinations. Not counting all days when inadequate investigations are returned. OMB's February 2007 report stated that its statistics do not include the time incurred to "return the files to the investigative agency for further information." OPM's procedure is to restart the measurement of investigation time for the 1 to 2 percent of investigative reports that are sent back for quality control reasons, which does not hold OPM fully accountable for total investigative time when deficient products are delivered to its customers. In fact, restarting the time measurement for reworked investigations could positively affect OPM's statistics if the reworked sections of the investigation take less time than did the earlier effort to complete the large portion of the investigative report. IRTPA establishes timeliness requirements for the security clearance process. Specifically, it states that "each authorized adjudicative agency shall make a determination on at least 80 percent of all applications for a personnel security clearance pursuant to this section within an average of 120 days after the date of receipt of the application for a security clearance by an authorized investigative agency." IRTPA did not identify situations that could be excluded from mandated timeliness assessments. Without fully accounting for the total time needed to complete the clearance process, Congress will not be able to accurately determine whether agencies have met IRTPA-mandated requirements or determine if legislative actions are necessary. OPM provided incomplete investigative reports to DOD adjudicators, which they used to determine top secret clearance eligibility. Almost all (47 of 50) of the sampled investigative reports we reviewed were incomplete based on requirements in the federal investigative standards. In addition, DISCO adjudicators granted clearance eligibility without requesting additional information for any of the incomplete investigative reports and did not document that they considered some adjudicative guidelines when adverse information was present in some reports. Granting clearances based on incomplete investigative reports increases risks to national security. In addition, use of incomplete investigative reports and not fully documenting adjudicative considerations may undermine the government's efforts to increase the acceptance of security clearances granted by other federal agencies. In our review of 50 initial investigations randomly sampled from the population used in our timeliness analyses, we found that 47 of 50 of the investigative reports were missing documentation required by the federal investigative standards. The missing data were of two general types: (1) the absence of documentation showing that an investigator gathered the prescribed information in each of the applicable 13 investigative areas and included requisite forms in the investigative report and (2) the absence of information to help resolve issues (such as conflicting information on indebtedness) that were raised in other parts of the investigative report. The requirements for gathering these types of information were identified in federal investigative standards published about a decade ago. At least half of the 50 reports did not contain the required documentation in 3 investigative areas: residence (33 of 50), employment (32), and education (27). In addition, many investigative reports contained multiple deficiencies within each of these areas. For example, multiple deficiencies might be present in the residence area because investigators did not document a rental record check and an interview with a neighborhood reference. Moreover, 44 of the 50 investigative reports had 2 to 6 investigative areas out of a total of 13 areas with at least one piece of missing documentation. We also found a total of 36 unresolved issues in 27 of the investigative reports. The three investigative areas with the most unresolved issues were financial consideration (11 of 50 cases), foreign influence (11), and personal conduct (7). Federal standards indicate that investigations may be expanded as necessary to resolve issues. According to OPM, (1) issue resolution is a standard part of all initial investigations and periodic reinvestigations for top secret clearances and (2) all issues developed during the course of an investigation should be fully resolved in the final investigative report provided to DOD. One investigative report we examined serves as an example of the types of documentation issues we found during our review. During the course of this particular investigation, the subject reported having extramarital affairs; however, there was no documentation to show that these affairs had been investigated further. Also, the subject's clearance application indicated cohabitation with an individual with whom the subject had previously had a romantic relationship, but there was no documentation that record checks were performed on the cohabitant. Moreover, information in the investigative report indicated that the subject had defaulted on a loan with a balance of several thousand dollars; however, no other documentation suggested that this issue was explored further. When we reviewed this and other deficient investigative reports with OPM Quality Management officials, they agreed that the investigators should have included documentation to resolve the issues. While we found that the interview narratives in some of the 50 OPM investigative reports were limited in content, we did not identify them as being deficient for the purposes of our analysis because such an evaluation would have required a subjective assessment that we were not willing to make. For example, in our assessment of the presence or absence of documentation, we found a 35-word narrative for a subject interview of a naturalized citizen from an Asian country. It stated only that the subject did not have any foreign contacts in his birth country and that he spent his time with family and participated in sports. Nevertheless, others with more adjudicative expertise voiced concern about the issue of documentation adequacy. Top officials representing DOD's adjudication facilities with whom we consulted were in agreement that OPM-provided investigative summaries had been inadequate. When we reviewed our findings in meetings with the Associate Director of OPM's investigations unit and her quality management officials they cited the inexperience of the rapidly expanded investigative workforce and variations in training provided to federal and contractor investigative staff as possible causes for the incomplete investigative reports we reviewed. Later, in official agency comments to our September 2006 report, OPM's Director indicated that some of the problems that we reported were the result of transferred staff and cases when OPM accepted DOD investigative functions and personnel. However, OPM had had 2 years to prepare for the transfer between the announced transfer agreement in February 2003 and its occurrence in February 2005. Furthermore, the staff and cases were under OPM control until the investigative reports were subsequently transferred to OPM for adjudication in January or February of 2006. In addition, 47 of the 50 investigative reports that we reviewed were missing documentation even though OPM had quality control procedures for reviewing the reports before they were sent to DOD. In our November 2005 testimony evaluating the government plan for improving the personnel security clearance process, we stated that developers of the plan may wish to consider adding other indicators of the quality of investigations. During our review, we asked the Associate Director of OPM's Investigations Unit if OMB and OPM had made changes to the government plan to address quality measurement and other shortcomings we identified. OPM's Associate Director said that the plan had not been modified to address our concerns but that implementation of the plan was continuing. Our review found that DISCO adjudicators granted top secret clearance eligibility for all 47 of the 50 industry personnel whose investigative reports did not have full documentation. In making clearance-eligibility determinations, the federal guidelines require adjudicators to consider (1) guidelines covering 13 specific areas, such as foreign influence and financial considerations; (2) adverse conditions or conduct that could raise security concerns and factors that might mitigate (alleviate) the condition for each guideline; and (3) general factors related to the whole person. According to a DISCO official, DISCO and other DOD adjudicators are to record information relevant to each of their eligibility determinations in JPAS. They do this by selecting applicable guidelines and mitigating factors from prelisted responses and may type up to 3,000 characters of additional information. The adjudicators granted eligibility for the 27 industry personnel whose investigative reports (discussed in the prior section) contained unresolved issues without requesting additional information or documenting in the adjudicative report that the information was missing. The following is an example of an unresolved foreign influence issue, which was not documented in the adjudicative report, although DISCO officials agreed that additional information should have been obtained to resolve the issue before the individual was granted a top secret clearance. A state-level record check on an industry employee indicated that the subject was part owner of a foreign-owned corporation. Although the DISCO adjudicator applied the foreign influence guideline for the subject's foreign travel and mitigated that foreign influence issue, there was no documentation in the adjudicative report to acknowledge or mitigate the foreign-owned business. When we asked why adjudicators did not provide the required documentation in JPAS, the DISCO officials as well as adjudication trainers said that adjudicators review the investigative reports for sufficient documentation to resolve issues and make judgment calls about the amount of risk associated with each case by weighing a variety of past and present, favorable and unfavorable information about the person to reach an eligibility determination. Seventeen of the 50 adjudicative reports were missing documentation on a total of 22 guidelines for which issues were present in the investigative reports. The missing guideline documentation was for foreign influence (11), financial considerations (5), alcohol consumption (2), personal conduct issues (2), drug involvement (1), and foreign influence (1). DISCO officials stated that procedural changes associated with JPAS implementation contributed to the missing documentation. DISCO began using JPAS in February 2003, and it became the official system for all of DOD in February 2005. Before February 2005, DISCO adjudicators were not required to document the consideration of a guideline issue unless the adverse information could disqualify an individual from being granted a clearance eligibility. After JPAS implementation, DISCO adjudicators were trained to document in JPAS their rationale for the clearance determination and any adverse information from the investigative report, regardless of whether an adjudicative guideline issue could disqualify an individual from obtaining a clearance. The administrators also attributed the missing guideline documentation to a few adjudicators attempting to produce more adjudication determinations. Decisions to grant clearances based on incomplete investigations increase risks to national security because individuals can gain access to classified information without being vetted against the full federal standards and guidelines. Furthermore, if adjudication facilities send the incomplete investigations back to OPM for more work, the adjudication facilities must use adjudicator time to review cases more than once and then use additional time to document problems with the incomplete investigative reports. Incomplete investigations and adjudications undermine the government's efforts to move toward greater clearance and access reciprocity. An interagency working group, the Security Clearance Oversight Steering Committee, noted that agencies are reluctant to be accountable for poor quality investigations, adjudications conducted by other agencies or organizations, or both. To achieve fuller reciprocity, clearance-granting agencies need to have confidence in the quality of the clearance process. Without full documentation of investigative actions, information obtained, and adjudicative decisions, agencies could continue to require duplicative investigations and adjudications. Incomplete timeliness data limit the visibility of stakeholders and decision makers in their efforts to address long-standing delays in the personnel security clearance process. For example, not accounting for all of the time used when personnel submit an application multiple times before it is accepted limits the government's ability to (1) accurately monitor the time required for each step in the application-submission phase and (2) identify positive steps that facility security officers, DISCO adjudicators, OPM investigative staff, and other stakeholders can take to speed the process. The timeliness-related concerns identified in my testimony show the fragmented approach that the government has taken to addressing clearance problems. When I testified before this Subcommittee in November 2005, we were optimistic that the government plan for improving the clearance process prepared under the direction of OMB's Deputy Director for Management would be a living document that would provide the strategic vision for correcting long-standing problems in the personnel security clearance process. However, nearly 2 years after first commenting on the plan, we have not been provided with a revised plan that lays out how the government intends to address the shortcomings that we identified in the plan during our November 2005 testimony. Continued failure to address the shortcomings we have cited could significantly limit the positive impact that the government has made in other portions of the clearance process through improvements such as hiring more investigators and promoting reciprocity. While eliminating delays in the clearance process is an important goal, the government cannot afford to achieve that goal by providing investigative and adjudicative reports that are incomplete in the key areas required by federal investigative standards and adjudicative guidelines. Also, the incomplete investigative and adjudicative reports could suggest to some security managers that there is at least some evidence to support agencies' concerns about the risks that may come from accepting the clearances issued by other federal agencies, and thereby negatively affect OMB's efforts toward achieving greater reciprocity. Further, as we pointed out in November 2005, the almost total absence of quality metrics in the governmentwide plan for improving the clearance process hinders Congress's oversight of these important issues. Finally, the missing documentation could have longer-term negative effects, such as requiring future investigators and adjudicators to devote time to obtaining the documentation missing from current reviews when it is time to update the clearances currently being issued. Mr. Chairman and Members of the Subcommittee, this concludes my prepared statement. I would be happy to answer any questions you may have at this time. For further information regarding this testimony please contact me at (202)512-5559 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. Individuals who made key contributions to this testimony are Jack E. Edwards, Assistant Director; Kurt A. Burgeson; Nicolaas C. Cornelisse; Alissa H. Czyz; Ronald La Due Lake; Beverly C. Schladt; and Karen D. Thornton. DOD Personnel Clearances: Questions and Answers for the Record Following the Second in a Series of Hearings on Fixing the Security Clearance Process. GAO-06-693R. Washington, D.C.: June 14, 2006. DOD Personnel Clearances: New Concerns Slow Processing of Clearances for Industry Personnel. GAO-06-748T. Washington, D.C.: May 17, 2006. DOD Personnel Clearances: Funding Challenges and Other Impediments Slow Clearances for Industry Personnel. GAO-06-747T. Washington, D.C.: May 17, 2006. GAO's High-Risk Program. GAO-06-497T. Washington, D.C.: March 15, 2006. Questions for the Record Related to DOD's Personnel Security Clearance Program and the Government Plan for Improving the Clearance Process. GAO-06-323R. Washington, D.C.: January 17, 2006. DOD Personnel Clearances: Government Plan Addresses Some Long- standing Problems with DOD's Program, But Concerns Remain. GAO-06- 233T. Washington, D.C.: November 9, 2005. Defense Management: Better Review Needed of Program Protection Issues Associated with Manufacturing Presidential Helicopters. GAO-06- 71SU. Washington, D.C.: November 4, 2005. Questions for the Record Related to DOD's Personnel Security Clearance Program. GAO-05-988R. Washington, D.C.: August 19, 2005. DOD Personnel Clearances: Some Progress Has Been Made but Hurdles Remain to Overcome the Challenges That Led to GAO's High-Risk Designation. GAO-05-842T. Washington, D.C.: June 28, 2005. DOD's High-Risk Areas: Successful Business Transformation Requires Sound Strategic Planning and Sustained Leadership. GAO-05-520T. Washington, D.C.: April 13, 2005. High-Risk Series: An Update. GAO-05-207. Washington, D.C.: January 2005. This is a work of the U.S. government and is not subject to copyright protection in the United States. It may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.
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Individuals working for the private industry are playing a larger role in national security work conducted by Department of Defense (DOD) and other federal agencies. As of May 2006, industry personnel held about 34 percent of DOD-maintained personnel security clearances. The damage that the unauthorized disclosure of classified information can cause to national security necessitates the prompt and careful consideration of who is granted a security clearance. Long-standing delays in determining clearance eligibility and other challenges led GAO to designate the DOD personnel security clearance program as a high-risk area in January 2005 and again in GAO's January 2007 update of the high-risk areas. In February 2005, DOD transferred its security clearance investigations functions to the Office of Personnel Management (OPM) and now obtains almost all of its clearance investigations from OPM. The Office of Management and Budget (OMB) is responsible for effective implementation of policy relating to determinations of eligibility for access to classified information. This testimony addresses the timeliness of the process and completeness of documentation used to determine eligibility of industry personnel for top secret clearances in January and February 2006. This statement relies primarily on GAO's September 2006 report (GAO-06-1070). GAO's analysis of timeliness data showed that industry personnel contracted to work for the federal government waited more than 1 year on average to receive top secret clearances, longer than OMB- and OPM-produced statistics would suggest. GAO's analysis of 2,259 cases in its population showed the process took an average of 446 days for initial clearances and 545 days for clearance updates. While the government plan has a goal for the application-submission phase of the process to take 14 days or less, it took an average of 111 days. In addition, GAO's analyses showed that OPM used an average of 286 days to complete initial investigations for top secret clearances, well in excess of the 180-day goal specified in the plan that OMB and others developed for improving the clearance process. Finally, the average time for adjudication (determination of clearance eligibility) was 39 days, compared to the 30-day requirement that began in December 2006. An inexperienced investigative workforce, not fully using technology, and other causes underlie these delays. Delays may increase costs for contracts and risks to national security. In addition, statistics that OMB and OPM report to Congress on the timeliness of the clearance process do not portray the full length of time it takes many applicants to receive a clearance. GAO found several issues with the statistics, including limited information on reinvestigations for clearance updating and failure to measure the total time it took to complete the various phases of the clearance process. Not fully accounting for all the time used in the process hinders congressional oversight of the efforts to address the delays. OPM provided incomplete investigative reports to DOD, and DOD personnel who review the reports to determine a person's eligibility to hold a clearance (adjudicators) granted eligibility for industry personnel whose investigative reports contained unresolved issues, such as unexplained affluence and potential foreign influence. In its review of 50 investigative reports for initial clearances, GAO found that that almost all (47 of 50) cases were missing documentation required by federal investigative standards. Moreover, federal standards indicate expansion of investigations may be necessary to resolve issues, but GAO found at least one unresolved issue in 27 of the reports. GAO also found that the DOD adjudicators granted top secret clearance eligibility for all 27 industry personnel whose investigative reports contained unresolved issues without requesting additional information or documenting in the adjudicative report that the information was missing. In its November 2005 assessment of the government plan for improving the clearance process, GAO raised concerns about the limited attention devoted to assessing quality in the clearance process, but the plan has not been revised to address the shortcomings GAO identified. The use of incomplete investigations and adjudications in granting top secret clearance eligibility increases the risk of unauthorized disclosure of classified information. Also, it could negatively affect efforts to promote reciprocity (an agency's acceptance of a clearance issued by another agency) being developed by an interagency working group headed by OMB's Deputy Director.
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Advances in information technology and the explosion in computer interconnectivity have had far-reaching effects, including the transformation from a paper-based to an electronic business environment and the capability for rapid communication through e- mail. Although these developments have led to improvements in speed and productivity, they also require the development of ways to manage information that is increasingly in electronic rather than paper form. For federal agencies, such information includes e-mail messages that may have the status of federal records. Under the Federal Records Act, each federal agency is required to make and preserve records that (1) document the organization, functions, policies, decisions, procedures, and essential transactions of the agency and (2) provide the information necessary to protect the legal and financial rights of the government and of persons directly affected by the agency's activities. These records, which include e-mail records, must be effectively managed. If they are not, individuals might lose access to benefits for which they are entitled, the government could be exposed to unwarranted legal liabilities, and historical records of vital interest could be lost forever. In addition, agencies with poorly managed records risk increased costs when attempting to search their records in response to Freedom of Information Act requests or litigation-related discovery actions. Accordingly, agencies are required to develop records management programs to ensure that they have appropriate recordkeeping systems with which to manage and preserve their records. Among the activities of a records management program are identifying records and sources of records and providing records management guidance, including agency-specific recordkeeping practices that establish what records need to be created in order to conduct agency business. Agencies are also required to schedule their records: that is, to identify and inventory records, appraise their value, determine whether they are temporary or permanent, and determine how long the temporary records should be kept. The act also gives the National Archives and Records Administration (NARA) responsibilities for oversight and guidance of federal records management, which includes management of e-mail records. NARA works with agencies to schedule records, and it must approve all records schedules. Records schedules may be specific to an agency, or they may be general, covering records common to several or all agencies. According to NARA, records covered by general records schedules make up about a third of all federal records. For the other two thirds, NARA and the agencies must agree upon specific records schedules. No record may be destroyed unless it has been scheduled. For temporary records, the schedule is of critical importance, because it provides the authority to dispose of the record after a specified time period. (For example, General Records Schedule 1, Civilian Personnel Records, provides instructions on retaining case files for merit promotions; agencies may destroy these records 2 years after the personnel action is completed, or after an audit by the Office of Personnel Management, whichever is sooner.) Once a schedule has been approved, the agency must issue it as a management directive, train employees in its use, and apply its provisions to temporary and permanent records. NARA has issued regulations that specifically address the management of e-mail records. As with other records, agencies are required to establish policies and procedures that provide for appropriate retention and disposition of e-mail records. NARA further specified that for each e-mail record, agencies must preserve certain transmission data--names of sender and addressees and message date. Further, except for a limited category of "transitory" e-mail records, agencies are not permitted to store the recordkeeping copy of e-mail records in the e-mail system, unless that system has certain features, such as the ability to group records into classifications according to their business purposes and to permit easy and timely retrieval of both individual records and groupings of related records. These recordkeeping features are important to ensure that e-mail records remain both accessible and usable during their useful lives. For example, it is essential to be able to classify records according to their business purpose so that they can be retrieved in case of mission need. Further, if records cannot be retrieved easily and quickly, or they are not retained in a usable format, they do not serve the mission or historical purpose that led to their being preserved. If agencies do not keep their e-mail records in systems with the required capabilities, records may also be at increased risk of loss from inadvertent or automatic deletion. If agency e-mail systems do not have the required recordkeeping features, either agencies must copy e-mail records to a separate electronic recordkeeping system, or they must print e-mail messages (including associated transmission information that is needed for purposes of context) and file the copies in traditional paper recordkeeping files. NARA's regulations allow agencies to use either paper or electronic recordkeeping systems for record copies of e- mail messages, depending on the agencies' business needs. The advantages of using a paper-based system for record copies of e-mails are that it takes advantage of the recordkeeping system already in place for the agency's paper files and requires little or no technological investment. The disadvantages are that a paper-based approach depends on manual processes and requires electronic material to be converted to paper, potentially losing some features of the electronic original; such manual processes may be especially burdensome if the volume of e-mail records is large. The advantage of using an electronic recordkeeping system, besides avoiding the need to manage paper, is that it can be designed to capture certain required data (such as transmission data) automatically. Electronic recordkeeping systems also make searches for records on particular topics much more efficient. In addition, electronic systems that are integrated with other applications may have features that make it easier for the user to identify records, and potentially could provide automatic or partially automatic classification functions. However, as with other information technology investments, acquiring an electronic recordkeeping system requires careful planning and analysis of agency requirements and business processes; in addition, electronic recordkeeping raises the issue of maintaining electronic information in an accessible form throughout its useful life. Because of its nature, e-mail can present particular challenges to records management. First, the information contained in e-mail records is not uniform: it may concern any subject or function and document various types of transactions. As a result, in many cases, decisions on which e-mail messages are records must be made individually. Second, the transmission data associated with an e- mail record--including information about the senders and receivers of messages, the date and time the message was sent, and any attachments to the messages--may be crucial to understanding the context of the record. Third, a given message may be part of an exchange of messages between two or more people within or outside an agency, or even of a string (sometimes branching) of many messages sent and received on a given topic. In such cases, agency staff need to decide which message or messages should be considered records and who is responsible for storing them in a recordkeeping system. Finally, the large number of federal e-mail users and high volume of e-mails increase the management challenge. According to NARA, the use of e-mail results in more records being created than in the past, as it often replaces phone conversations and face-to-face meetings that might not have been otherwise recorded. These challenges have been recognized by NARA and the records management community in numerous studies and articles. A 2001 survey of federal recordkeeping practices conducted by a contractor for NARA concluded, among other things, that managing e-mail was a major records management problem and that the quality of recordkeeping varied considerably across agencies. In addition, the study concluded that for many federal employees, the concept of a "record" and what should be scheduled and preserved was not clear. A 2005 NARA-sponsored survey of federal agencies' policy and practices for electronic records management concluded that procedures for managing e-mail were underdeveloped. The study, performed by the University of Maryland Center for Information Policy, stated that most of the surveyed offices had not developed electronic recordkeeping systems, but were instead maintaining recordkeeping copies of e-mail and other electronic documents in paper format. However, all of the offices also maintained electronic records (frequently electronic duplicates of paper records). According to the study team, the agencies did not establish electronic recordkeeping systems due to financial constraints, and implementing such systems was a considerable challenge that increased with the size of the agency. As a result, organizations were maintaining unsynchronized parallel paper and electronic systems, resulting in extra work, confusion regarding which is the recordkeeping copy, and retention of many records beyond their disposition date. Most recently, a NARA study team examined in 2007 the experiences of five federal agencies (including itself) with electronic records management applications, with a particular emphasis on how these organizations used these applications to manage e-mail. The purpose of the study was to gather information on the strategies that organizations are using that may be useful to others. Among the major conclusions from the survey was that implementing an electronic records management application requires considerable effort in planning, testing, and implementation, and that although the functionality of the software product itself is important, other factors are also crucial, including agency culture, training provided, and management and information technology support. With regard to e-mail in particular, the survey concluded that e-mail messages can constitute the most voluminous type of record that is filed into records management applications. Our work on e-mail records management demonstrates that agencies continue to face challenges similar to those identified by the prior studies. While our results are preliminary and we are not able to project them beyond the agencies we reviewed, I believe they help illustrate the difficulties agencies can face when applying NARA's requirements to today's operating environment. Three of the four agencies we reviewed--FTC, DHS, and EPA--had policies in place that generally complied with NARA's guidance on how to identify and preserve e-mail records, but each was missing one applicable requirement. Specifically, the policies at EPA and FTC did not instruct staff on the management and preservation of e- mail records sent or received from nongovernmental e-mail systems (such as commercial Web-based systems). Both EPA and FTC officials told us that these instructions were not provided because the staff were informed that use of outside e-mail systems for official business was prohibited. However, whenever access to such external systems is available at an agency, providing these instructions is still required. DHS's policy did not specify that draft documents circulated via e-mail may be federal records. DHS officials recognized that their policies did not specifically address the need to assess the records status of draft documents, and said they planned to address the omission during an ongoing effort to revise the policies. The policy at one of the four agencies, HUD, was missing three of eight applicable requirements. One element of the policy was inconsistent with NARA's regulation: it required only the sender of an e-mail message to review it for potential records status, but the regulation states that e-mail records could include both messages sent or received. HUD officials acknowledged that its policy omits the recipient's responsibility for determining the record status of e- mail messages and stated that its e-mail policy fell short of fully implementing NARA regulations in this regard because the department's practice is not to use e-mail for business matters in which official records would need to be created. However, this practice does not remove the requirement for agency employees to assess e-mail received for its record status, because the agency cannot know that employees will not receive e-mail with record status; the determination of record status depends on the content of the information, not its medium. In addition, two other requirements were missing from HUD's policy: it did not state, as required, that recordkeeping copies of e- mail should not be stored in e-mail systems and that backup tapes should not be used for recordkeeping purposes. HUD officials stated that they considered that these requirements were met by a reference in their policy to the NARA regulations in which these requirements appear. However, this reference is not sufficient to make clear to staff that e-mail systems and backup tapes are not to be used for recordkeeping. While agency policies were generally compliant with recordkeeping regulations, these policies were not applied consistently. Specifically, for 8 of the 15 senior officials we reviewed, e-mail messages that qualified as records were not being appropriately identified and preserved. Instead, the officials generally kept every message within their e-mail systems. Each of the four agencies generally followed a print and file process to preserve e-mail records in paper-based recordkeeping systems because their e-mail systems did not have required record-keeping capabilities. Factors contributing to this lack of compliance with recordkeeping requirements were the lack of adequate staff support and the volume of e-mail received--several of these officials had thousands or even tens of thousands of messages in their e-mail system accounts. Another reason was that keeping every e-mail ensured that no information was lost, which was seen as safe from a legal standpoint. However, by keeping every message, they were potentially increasing the time and effort that would be needed to search through and review all the saved messages in response to an outside inquiry, such as a Freedom of Information Act request. In addition, by not keeping the e-mail in an appropriate recordkeeping system, these officials were making it more difficult for their agencies to find information by subject. Appropriately identifying and saving record material also allows agencies to avoid expending resources on unnecessarily preserving nonrecord material and on keeping record material beyond its usefulness (that is, beyond the date when it can be disposed of according to the records schedule). In contrast, many of the officials whose e-mail records were appropriately managed delegated responsibility for this task to one or more administrative staff members. These individuals were responsible for identifying which e-mail messages qualified as records and ensuring that the message and any attachments were preserved according to the agency's records management policies. Generally, this required that they print the message, including any attachments and transmission information (who the message was to and from and when it was sent), and place the paper copy in a file. Printing and filing copies of e-mail records is acceptable under NARA's regulations. However, printing copies of e-mails can lead to an agency maintaining multiple copies of the message in both paper and electronic formats, which can lead to agencies' expending resources on duplicative storage, as well as confusion over which is the recordkeeping copy. Further, as with all electronic documents, conversion to paper entails the risk of losing some features of the electronic original. Awareness of federal records requirements is also an ongoing concern. At one department, training for senior officials on their records management responsibilities took place only at the beginning of the current administration. Officials who joined the department subsequently were not trained on records management. Similarly, several administrative staff responsible for managing the e-mail of senior officials told us that they had not been trained to recognize a record. A draft bill, the Electronic Communications Preservation Act, would mandate agencies to transition to electronic records management by requiring the Archivist of the United States to promulgate regulations governing agency preservation of electronic communications that are federal records. Among other things, the regulations would * require the electronic capture, management, and preservation of * require that such electronic records are readily accessible for retrieval through electronic searches; and * require the Archivist to develop mandatory minimum functional requirements for electronic records management applications to meet the first two requirements. The legislation would also require agencies to comply with the new regulations within 4 years of enactment. Requiring a governmentwide transition to electronic recordkeeping systems could help federal agencies improve e-mail management. For example, storing e-mail records in an electronic repository could make them easier to search and potentially speed agency responses to Freedom of Information Act requests. As our review shows, agencies recognize that devoting significant resources to creating paper records from electronic sources is not a viable long- term strategy and have accordingly begun to plan or implement such a system. The 4-year deadline in the draft bill could help expedite this transition. In addition, the development of minimum functional requirements by NARA should reduce the development risk that could have resulted from multiple agencies concurrently developing similar systems. By providing time both for standards to be developed and implemented by agencies, these provisions recognize the need for a well-planned process. Like any investment in information technology, the development of electronic recordkeeping systems will have to be carefully managed to avoid unnecessary cost and performance risks. However, once implemented, such systems could potentially provide the efficiencies of automation and avoid the expenditure of resources on duplicative manual processes and storage. In summary, the increasing use of e-mail is resulting in records management challenges for federal agencies. For example, the large number of federal e-mail users and the high volume of e-mails present challenges, particularly in the current paper-based environment. While agency e-mail policies generally contained required elements, about half of the senior officials we reviewed were not following these policies and were instead maintaining their e-mail messages within their e-mail accounts, where records cannot be efficiently searched, are not accessible to others who might need the information in the records, and are at increased risk of loss. Several agencies are considering developing electronic recordkeeping systems, but until such systems are implemented, agencies may have reduced assurance that information that is essential to protecting the rights of individuals and the federal government is being adequately identified and preserved. Mr. Chairman, this concludes my testimony today. I would be happy to answer any questions you or other members of the subcommittee may have. If you have any questions concerning this testimony, please contact Linda Koontz, Director, Information Management Issues, at (202) 512-6240, or [email protected]. Other individuals who made key contributions to this testimony were Timothy Case, Barbara Collier, Jennifer Stavros-Turner, and James Sweetman. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.
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Federal agencies are increasingly using electronic mail (e-mail) for essential communication. In doing so, they are potentially creating messages that have the status of federal records, which must be managed and preserved in accordance with the Federal Records Act. To carry out the records management responsibilities established in the act, agencies are to follow implementing regulations that include specific requirements for e-mail records. In view of the importance that e-mail plays in documenting government activities, GAO was asked to testify on issues relating to the preservation of electronic records, including e-mail. As agreed, GAO's statement discusses challenges facing agencies when managing their e-mail records, as well as current policies and practices for managing e-mail messages that qualify as federal records. This testimony is primarily based on preliminary results of ongoing work, in which GAO is examining, among other things, e-mail policies at four agencies of contrasting sizes and structures (the Department of Homeland Security, the Environmental Protection Agency, the Federal Trade Commission, and the Department of Housing and Urban Development), as well as the practices of selected senior officials. E-mail, because of its nature, presents challenges to records management. First, the information contained in e-mail records is not uniform: it may concern any subject or function and document various types of transactions. As a result, in many cases, decisions on which e-mail messages are records must be made individually. Second, the transmission data associated with an e-mail record--including information about the senders and receivers of messages, the date and time the message was sent, and any attachments to the messages--may be crucial to understanding the context of the record. Third, a given message may be part of an exchange of messages between two or more people within or outside an agency, or even of a string (sometimes branching) of many messages sent and received on a given topic. In such cases, agency staff need to decide which message or messages should be considered records and who is responsible for storing them in a recordkeeping system. Finally, the large number of federal e-mail users and high volume of e-mails increase the management challenge. Preliminary results of GAO's ongoing review of e-mail records management at four agencies show that not all are meeting the challenges posed by e-mail records. Although the four agencies' e-mail records management policies addressed, with a few exceptions, the regulatory requirements, these requirements were not always met for the senior officials whose e-mail practices were reviewed. Each of the four agencies generally followed a print and file process to preserve e-mail records in paper-based recordkeeping systems, but for about half of the senior officials, e-mail records were not being appropriately identified and preserved in such systems. Instead, e-mail messages were being retained in e-mail systems that lacked recordkeeping capabilities. (Among other things, a recordkeeping system allows related records to be grouped into classifications according to their business purposes.) Unless they have recordkeeping capabilities, e-mail systems may not permit easy and timely retrieval of groupings of related records or individual records. Further, keeping large numbers of record and nonrecord messages in e-mail systems potentially increases the time and effort needed to search for information in response to a business need or an outside inquiry, such as a Freedom of Information Act request. Factors contributing to this practice were the lack of adequate staff support and the volume of e-mail received. In addition, agencies had not ensured that officials and their responsible staff received training in recordkeeping requirements for e-mail. If recordkeeping requirements are not followed, agencies cannot be assured that records, including information essential to protecting the rights of individuals and the federal government, is being adequately identified and preserved.
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Violence against women can include a range of behaviors such as hitting, pushing, kicking, sexually assaulting, using a weapon, and threatening violence. Violence sometimes includes verbal or psychological abuse, stalking, or enforced social isolation. Victims are often subjected to repeated physical or psychological abuse. The federal public health agencies that address violence against women include CDC, NIH, HRSA, and the Substance Abuse and Mental Health Services Administration (SAMHSA). They focus on activities such as defining and measuring the magnitude of violence, identifying causes of violence, and evaluating and disseminating promising prevention, intervention, and treatment strategies. CDC's National Center for Injury Prevention and Control and National Center for Chronic Disease Prevention and Health Promotion have funded efforts to document the prevalence of violence against women, improve maternal health, and prevent intimate partner violence. CDC's National Center for Health Statistics operates the National Vital Statistics System, which maintains a national database of death certificate information. The National Center for Health Statistics has a contract with each state to support routine production of annual vital statistics data, generally covering from one- fourth to one-third of state vital statistics operating costs. NIH has funded research to study violence against women through several of its institutes--the National Institute on Alcohol Abuse and Alcoholism, National Institute of Child Health and Human Development, National Institute on Drug Abuse, National Institute of Nursing Research, and National Institute of Mental Health--and the National Center for Research Resources. HRSA's Maternal and Child Health Bureau, as part of its mission to promote and improve the health of mothers and children, funds demonstration grant programs that focus on violence against women during the prenatal period. SAMHSA funds efforts focused on the mental health and substance abuse treatment of women who have been victims of violence. The federal criminal justice agencies that address violence against women are OJP's Violence Against Women Office (VAWO), National Institute of Justice (NIJ), and Bureau of Justice Statistics (BJS). Using VAWA funds, VAWO administers grants to help states, tribes, and local communities improve the way criminal justice systems respond to intimate partner violence, sexual assault, and stalking. VAWO also works with victims' advocates and law enforcement agencies to develop grant programs that support a range of services for victims, including advocacy, emergency shelters, law enforcement protection, and legal aid. VAWO administers these funds through both formula and discretionary grant programs. NIJ conducts and funds research on a variety of topics, including violence, drug abuse, criminal behavior, and victimization. BJS collects, analyzes, publishes, and disseminates information on crime, criminal offenders, victims of crime, and the operation of justice systems at all levels of government. The FBI administers the Uniform Crime Reporting Program (UCR). Under this program, city, county, and state law enforcement agencies voluntarily provide information on eight crimes occurring in their jurisdictions: criminal homicide, forcible rape, robbery, aggravated assault, burglary, larceny-theft, motor vehicle theft, and arson. The FBI assembles and publishes the data and distributes them to contributing local agencies, state UCR programs, and others interested in the nation's crime problems. CDC homicide data indicate that from 1995 through 1999, homicide was the second leading cause of death for women aged 15 to 24, after accidents. CDC data also show that almost 2,600 women of childbearing age (15 through 44) were homicide victims in 1999. BJS reported that intimate partner homicides accounted for about 11 percent of all murders nationwide in that year. Seventy-four percent of these murders (1,218 of 1,642) were of women. About 32 percent of all female homicide victims were murdered by an intimate partner, in comparison to about 4 percent of all male homicide victims. There is no current national estimate of the prevalence of violence against pregnant women. Estimates that are currently available cannot be generalized or projected to all pregnant women. CDC's PRAMS develops statewide estimates of the prevalence of violence for women whose pregnancies resulted in live births; 1998 estimates for 15 participating states ranged from 2.4 percent to 6.6 percent. Research on whether women are at increased risk for violence during pregnancy is inconclusive. However, CDC reported that study findings suggest that, for most abused women, physical violence does not seem to be initiated or to increase during pregnancy. National data are also not available on the number of pregnant homicide victims, and such data at the state level are limited. The two federal agencies collecting homicide data, the FBI and CDC, do not identify the pregnancy status of homicide victims. CDC is exploring initiatives that could result in better data on homicides of pregnant women. There is no current national estimate measuring the prevalence of violence during pregnancy--that is, the proportion of pregnant women who experience violence. Some state- and community-specific estimates are available, but they cannot be generalized or projected to all pregnant women. CDC developed PRAMS, an ongoing population-based surveillance system that generates state-specific data on a number of maternal behaviors, such as use of alcohol and tobacco, and experiences--including physical abuse--before, during, and immediately following a woman's pregnancy. CDC awards grants to states to help them collect these data. The number of states that participate in PRAMS has increased since its inception. Five states and the District of Columbia participated in fiscal year 1987 and 32 states and New York City participated in fiscal year 2001. CDC officials reported that lack of funds has prevented additional states from being added; six states were approved for participation in PRAMS but were not funded in 2002. CDC's goal is to fund all states that want the surveillance system. The estimated 1998 PRAMS prevalence rates of physical abuse by husband or partner during pregnancy, which CDC reported for 15 states, ranged from 2.4 percent to 6.6 percent. (See app. II for PRAMS prevalence estimates for the 15 participating states and a description of PRAMS's methodology.) States participating in PRAMS use a consistent data collection methodology that allows for comparisons among states, but it does not allow for development of national estimates because states participating in PRAMS were not selected to be representative of the nation. In addition, PRAMS data cannot be generalized to all pregnant women because they represent only those women whose pregnancies resulted in live births; the data do not include women whose pregnancies ended with fetal deaths or abortions or women who were victims of homicide. PRAMS is based on self-reported data and, because some women are unwilling to disclose violence, the findings may underestimate abuse. Studies have also estimated the prevalence of violence within certain states and communities and among narrowly defined study populations. These estimates lack comparability and cannot be generalized or projected to all pregnant women. Many of the studies do not employ random samples and are disproportionately weighted toward specific demographic or socioeconomic populations. Most of the 11 such studies we reviewed, which were published from 1998 through 2001, found prevalence rates of violence during pregnancy ranging from 5.2 percent to 14.0 percent. In a CDC-sponsored 1996 review of the literature, the majority of studies reported prevalence levels of 3.9 percent to 8.3 percent. The variability in estimates could reflect differences in study populations and methodologies, such as differences in how violence is defined, the time period used to measure violence, and the method used to collect the data. Research on whether being pregnant places women at increased risk for violence is inconclusive. CDC reported that additional research is needed in this area, but that current study findings suggest that for most abused women, physical violence does not seem to be initiated or to increase during pregnancy. Although some women experience violence for the first time during pregnancy, the majority of abused pregnant women experienced violence before pregnancy. In one study we reviewed, only 2 percent of women who reported not being abused before pregnancy reported abuse during pregnancy. The same study also found that, for some women, the period of pregnancy may be less risky, with violence abating during pregnancy; 41 percent of the women who reported abuse in the year before pregnancy did not experience abuse during pregnancy. Studies have found other factors to be associated with violence during pregnancy, including younger age of the woman, lower socioeconomic status, abuse of alcohol and other drugs by victims and perpetrators of violence, and unintended pregnancy. To increase the generalizability of research on the prevalence and risk of violence to women during pregnancy, researchers have reported the need for more population-based studies that would allow for comparisons of pregnant and nonpregnant women. These studies would draw their samples from all pregnant women, not just those receiving health care or giving birth, as well as nonpregnant women. Such research could indicate whether pregnant women are at increased risk for violence compared to their nonpregnant counterparts. Researchers have also suggested using methodologies that consistently define and measure the prevalence of violence. A recent report by the Institute of Medicine on family violence recommended that the Secretary of HHS establish new, multidisciplinary education and research centers to, among other things, conduct research on the magnitude of family violence and the lack of comparability in current research. There is also little information available on violence against pregnant women that results in homicide. The FBI and CDC are the two federal agencies that collect and report information on homicides nationwide; however, neither agency collects data on whether female homicide victims were pregnant or recently pregnant. According to CDC, 17 states, New York City, and Puerto Rico collect data related to pregnancy status on their death certificates, but the data collected are not comparable. Included in these data are victims who may not have been pregnant at the time of death but had been "recently" pregnant; in addition, states' criteria for recent pregnancy ranged from 42 days to 1 year after birth. (See app. III for a list of the questions on pregnancy status that states include on their death certificates.) The ability to identify pregnant homicide victims from death certificates is limited. While there are questions on some states' death certificates regarding pregnancy status, officials in the four states we contacted (Illinois, Maryland, New Mexico, and New York) told us that these data are incomplete and may understate the number of pregnant homicide victims. For example, if the pregnancy item on the death certificate is left blank, there is no way to easily determine whether an autopsy, if conducted, included a test or examination for pregnancy. Moreover, researchers have reported that physicians completing death certificates after a pregnant woman's death failed to report that the woman was pregnant or had a recent pregnancy in at least 50 percent of the cases. To address these limitations, all four states we contacted are making efforts to compare death certificate data with other datasets and records-- such as medical examiners' reports--to identify pregnant or recently pregnant homicide victims. They told us that they are reviewing the data in order to determine if there is something they can do to prevent violent deaths of pregnant women or help women who are victimized. For example, the Maryland medical examiner's office conducted a study of the deaths of females aged 10 to 50 to determine if these women were pregnant when they died. Several sources of data--death certificates, medical examiners' reports, and recent live birth and fetal death records-- from a 6-year period were linked. Of the 247 women who were identified as pregnant or recently pregnant, 27 percent were identified through examining cause of death information on death certificates. The remaining 73 percent were identified by matching the woman's death certificate with recent birth and fetal death records and by reviewing data from medical examiners' records, such as autopsy reports or police records. Similarly, New York officials determined through dataset links (death certificates, fetal death records, recent birth certificates, and hospital discharge records) that, in 1997, 9 of 174 female homicide victims aged 10 to 54 were pregnant or recently pregnant at the time of death, rather than the 1 of 174 that death certificate data alone would have indicated. Officials from New York and Maryland told us these efforts to link datasets are dependent on records being computerized. Some state officials also told us they did not have the resources to conduct these analyses on a continuing basis. There are two federal initiatives under development that propose to collect data on the number of homicides of pregnant women. CDC is proposing a revision of the U.S. standard certificate of death used for the National Vital Statistics System to include five categories related to pregnancy status. (See fig. 1.) Each state has the option of adopting the U.S. standard certificate for its death certificate or excluding or adding data elements. If the revision is approved, CDC expects several states to implement it in 2003, with an increasing number using it each year. CDC is also beginning to implement the National Violent Death Reporting System (NVDRS), which, as currently envisioned, would collect data that could determine the number of pregnant homicide victims. CDC plans to collect data from a variety of state and local government databases on deaths resulting from homicide and suicide. Like the Maryland and New York efforts, NVDRS would link several databases, such as death and medical examiners' records, to identify pregnant homicide victims. According to CDC, implementation of NVDRS depends on future funding; full implementation would take at least 5 years. The estimated federal cost of this system is $10 million in start-up costs and $20 million in annual operating costs; these estimates primarily consist of expenditures for providing technical assistance to the states and funding for state personnel to collect the data. Violence prevention strategies for both pregnant and nonpregnant women include measures to prevent initial incidents of violence, such as educating women about warning signs of abuse, and intervention activities that identify and respond to violence after it has occurred. Typically, the initial component of an intervention is screening, or asking women about their experiences with violence. Many health care organizations and providers recommend routine screening for intimate partner violence. Studies have found, however, that fewer than half of physicians routinely screen for violence during prenatal visits. Reasons for physicians' reluctance to screen include lack of training on how to screen and how to respond if a woman discloses violence. Violence prevention strategies also include criminal justice measures, which focus on apprehending, sentencing, incarcerating, and rehabilitating batterers. Little information is available on the effectiveness of violence prevention strategies and programs. Researchers have reported the need for evaluations of the effectiveness of screening protocols and batterer intervention programs. Measures to prevent violence against pregnant women are similar to those to prevent violence against all women. Public health violence prevention programs can include primary prevention measures to keep violence from occurring in the first place and interventions that ask women about their experiences with violence and respond if violence has occurred. Criminal justice strategies to prevent violence against women focus on apprehending, sentencing, incarcerating, and rehabilitating batterers. Efforts to prevent initial incidents of violence concentrate on attitudes and behaviors that result in violence against women. These efforts include educating children, male and female, about ways to handle conflict and anger without violence and social norms about violence, such as attitudes about the acceptability of violence toward women. They also include training parents, police officers, and other community officials to be resources for youth seeking assistance about teenage dating violence. Primary prevention efforts also have been targeted to pregnant women. For example, the Domestic Violence During Pregnancy Prevention Program in Saginaw, Michigan, provided 15-minute counseling sessions to pregnant women who reported that they had not experienced violence. Women were educated about intimate partner violence and given tools and information to help prevent abuse in their lives, including information on behaviors typical of abusive men, warning signs of abuse, and community resources. Interventions to deal with violence that has occurred are designed to identify victims and to prevent additional violence through such actions as providing an assessment of danger, developing a safety plan, and providing information about and referral to community resources. For example, HRSA has funded a demonstration program to develop or enhance systems that identify pregnant women experiencing intimate partner violence and provide appropriate information and links to services. The HRSA program funds four projects; each project is funded at $150,000 a year for 3 years. Screening for the presence of violence is generally the initial component of intervention efforts to prevent additional violence against pregnant women. Many experts view the period of pregnancy as a unique opportunity for intervention. Pregnant women who receive prenatal care may have frequent contact with providers, which allows for the development of relationships that may facilitate disclosure of violence. For example, the American College of Obstetricians and Gynecologists (ACOG) recommends that physicians screen all patients for intimate partner violence and that screening for pregnant women occur at several times over the course of their pregnancies. Some women do not disclose abuse the first time they are asked, or abuse may begin later in pregnancy. Some of the barriers to women's disclosure of violence are fear of escalating violence, feelings of shame and embarrassment, concern about confidentiality, fear of police involvement, and denial of abuse. In addition, some health care officials told us that the period of pregnancy may be a difficult time for a woman to leave or take action against the abuser because of financial concerns and pressures to provide the child with a father. Studies have found that fewer than half of physicians routinely screen women for violence during pregnancy. For example, a survey of ACOG fellows reported that 39 percent of respondents routinely screened for violence at the first prenatal visit. The study found that screening was more likely to occur when the obstetrician-gynecologist suspected a patient was being abused. Another study that surveyed primary care physicians who provide prenatal care found that only 17 percent of respondents routinely screened at the first prenatal visit and 5 percent at follow-up visits. Across the 15 states with PRAMS data for 1998, from 25 percent to 40 percent of women reported that a physician or other health care provider talked to them about intimate partner violence during any of their prenatal care visits. CDC and providers of prevention services have reported that reasons for physicians' reluctance to screen women for violence include lack of time and resources, personal discomfort about discussing the topic, concern about offending patients, belief that asking invades family privacy, and frustration with patients who are not ready to leave or who return to their abusers. Lack of training and education on how to screen for intimate partner violence and lack of knowledge about what to do if a woman reports experiencing intimate partner violence have also been cited as barriers to physician screening. In its report on family violence, the Institute of Medicine stated that health professionals' training and education about family violence are inadequate and recommended that the Secretary of HHS establish education and research centers to develop training programs that prepare health professionals to respond to family violence. Criminal justice approaches to preventing violence against women include apprehending and sanctioning the batterer, preventing further contact between the abuser and the victim, and connecting the victim to community services. In addition, batterer intervention programs, which have existed for over 20 years as a criminal justice intervention, are often used as a component of pretrial or diversion programs or as part of sentencing. Batterer programs can include classes or treatment groups, evaluation, individual counseling, or case management; their goals are rehabilitation and behavioral change. To assist communities, policymakers, and individuals in combating violence against women, the National Advisory Council on Violence Against Women and VAWO developed a Web-based resource for instruction and guidance. These guidelines include recommendations for strengthening prevention efforts and improving services and advocacy for victims. For example, the guidelines recommend that communities increase the cultural and linguistic competence of their sexual assault, intimate partner violence, and stalking programs by recruiting and hiring staff, volunteers, and board members who reflect the composition of the community the program serves. The guidelines also recommend that all health and mental health care professional school and continuing education curricula include information on the prevention, detection, and treatment of sexual assault and intimate partner violence. Researchers have reported that little information is available on the effectiveness of strategies to prevent and reduce violence against women. For example, many health care organizations and providers advocate routine screening of pregnant women for intimate partner violence, but questions have been raised about the effectiveness of screening, the most effective way to conduct screening, and the optimal times for conducting screening. In addition, limited information is available on the impact of screening on women and their children. A CDC official told us that CDC has not issued guidelines or recommendations related to routine screening for violence in health care settings, primarily due to the lack of scientific evidence about the effectiveness of screening. CDC recently funded a cooperative agreement to measure the effectiveness of an intimate partner violence intervention that includes evaluation of a screening protocol and computerized screening. The results of the study are expected to provide data on the array of outcomes that need to be considered in implementing intervention programs to decrease intimate partner violence. CDC officials told us that additional studies are necessary to evaluate screening and intervention strategies and that CDC is in the process of identifying additional study topics and designs that could complement this effort. CDC and other researchers on violence against women and providers of prevention services have identified several other areas in which research could be fruitful. For example, they have reported the need to develop information on the most effective ways to promote women's develop and evaluate the effectiveness of programs that coordinate community resources from the medical, social services, law enforcement, judicial, and legal systems; and develop and evaluate the effectiveness of prevention strategies that incorporate cultural perspectives in serving ethnic and immigrant populations. An example of an effort to conduct such research is HRSA's program to improve interventions for pregnant women experiencing violence; however, the projects' evaluation components are small and, according to HHS, their results may not be generalizable to the nation. Each funded project will evaluate whether its intervention was effective in improving rates of screening, assessment, and referral or links to community services; the projects may also assess the impact of the intervention on women's behaviors. For example, the Comprehensive Services program in Baltimore is assessing whether the project was effective in linking families to needed services and whether women report improvement in their physical or psychosocial status after the intervention. The Systems for Pregnancy Education and Awareness of Safety in New York is evaluating whether the project increases the number of women who disclose violence and receive services and referrals to community services, such as shelters. The Perinatal Partnership Against Domestic Violence in Seattle is evaluating the effectiveness of screening protocols and interventions that are tailored to the culture and values of women who are Asian and Pacific Islanders. Researchers have also reported that there is little evaluative information on the effectiveness of violence prevention programs for batterers. A VAWO-funded study of the effectiveness of batterer programs concluded that they have modest effects on violence prevention when compared with traditional probationary practices and that there is little evidence to support the effectiveness of one batterer program over another in reducing recidivism. The study concluded, however, that batterer programs are a small but critical element in an overall violence prevention effort that includes education, arrest, prosecution, probation, and victim services. The study authors advocated experimenting with different program approaches and performing outcome evaluations of batterer programs. The magnitude of the problem of violence against pregnant women is unknown. Current collaborative efforts by federal and state governments to gather and analyze more complete and comparable data could improve policymakers' knowledge of the extent of this violence and guide future research and resource allocation. These efforts can also help in setting priorities for prevention strategies. Continuing evaluation of prevention strategies and programs could help identify successful approaches for reducing violence against women. We provided a draft of this report to Justice and HHS for comment. Justice informed us that it did not have any comments. HHS agreed with our finding that limited information is available regarding violence against pregnant women. HHS also noted reasons why the data are incomplete, such as the difficulty of collecting data from a representative sample of pregnant victims because they are such a small percentage of the U.S. population. Other reasons HHS cited are legal and ethical issues in conducting research on this population, such as maintaining privacy and confidentiality. HHS commented that several states are conducting mortality reviews to better understand pregnancy-related deaths and their underlying causes. HHS raised several issues that it considers important regarding violence against women, such as the need to evaluate factors correlated with violence against women, and identified additional efforts within the department that focus on intimate partner violence. We recognize that there are many issues and efforts related to violence against women; however, our focus was on violence against pregnant women, and therefore much of our discussion relates to this population. HHS noted that although HRSA's demonstration program to improve interventions for pregnant women experiencing violence will result in new qualitative information, the evaluation component is small and the findings would likely be limited. We modified our discussion of this program to indicate that it is a small demonstration program and its results may not be generalizable to the nation. In response to HHS's comments, we added a description of another demonstration program focused on violence against pregnant women that HRSA plans to initiate in June 2002. HHS also provided technical comments, which we incorporated where appropriate. (HHS's comments are reprinted in app. IV.) As arranged with your office, unless you publicly announce its contents earlier, we plan no further distribution of this report until 30 days after its issue date. We will then send copies to the Secretary of Health and Human Services; the Attorney General; the Administrator of the Health Resources and Services Administration; the Directors of the Centers for Disease Control and Prevention, National Institutes of Health, Office of Justice Programs, and Federal Bureau of Investigation; appropriate congressional committees; and others who are interested. We will also make copies available to others on request. If you or your staff have any questions, please contact me at (202) 512-8777 or Janet Heinrich, Director, Health Care--Public Health Issues, at (202) 512-7119. Additional GAO contacts and the names of other staff members who made contributions to this report are listed in appendix V. To do our work, we interviewed and obtained information from officials at the Department of Health and Human Services' Centers for Disease Control and Prevention (CDC), Health Resources and Services Administration (HRSA), and National Institutes of Health, and the Department of Justice's Office of Justice Programs (OJP) and Federal Bureau of Investigation (FBI). We also interviewed representatives of and obtained information from the American College of Obstetricians and Gynecologists, Institute of Medicine, Family Violence Prevention Fund, National Coalition Against Domestic Violence, and National Association of Medical Examiners; several state domestic violence coalitions; and researchers. To determine the availability of information on the prevalence and risk of violence against pregnant women, we reviewed literature on the prevalence and risk of violence to women during pregnancy. We identified 11 studies published since 1998 that contained prevalence estimates and assessed their methodologies to ensure the appropriateness of the data collection and analysis methods and the conclusions. We also interviewed CDC officials and reviewed data collected through CDC's Pregnancy Risk Assessment Monitoring System (PRAMS). To determine the availability of data on the number of pregnant women who are victims of homicide in the United States, we interviewed officials and collected and analyzed homicide statistics and reports from CDC, the FBI, and OJP's Bureau of Justice Statistics. We also interviewed officials from state departments of health and vital statistics in Illinois, Maryland, New Mexico, and New York to determine how they collect and use data on pregnant homicide victims. We selected these states because, in addition to collecting pregnancy data on their state death certificates, they are active in collecting and analyzing information from various sources to study maternal health issues. The states were not intended to be representative of all states. We also interviewed and obtained information from CDC and Justice officials to identify federal initiatives that are under way to improve the availability of information on homicides of pregnant women. To identify strategies and programs to prevent violence against pregnant women, we gathered information through a literature review and interviews with and information collected from researchers and officials from federal agencies, health care associations, and advocacy groups. We reviewed a HRSA-funded program (with projects located in Illinois, Maryland, New York, and Washington) and two other programs (located in Michigan and Pennsylvania) because they focused specifically on violence against pregnant women and served varied populations, including adolescents, diverse ethnic groups, and women with substance abuse problems. We conducted our work from July 2001 through April 2002 in accordance with generally accepted government auditing standards. CDC developed PRAMS, a population-based survey of women whose pregnancies resulted in live births. CDC awards grants to states to help them collect information on women's experiences and behaviors before, during, and immediately following pregnancy. CDC funded about $6.2 million for PRAMS in fiscal year 2001; grant awards to states ranged from $100,000 to $150,000. CDC's funding for PRAMS also includes costs for CDC staff and contractors to provide technical support to the states. States participating in PRAMS use a consistent methodology to collect data. Each state selects a stratified sample of new mothers every month from eligible birth certificates and then collects data through mailings and follow-up telephone calls to nonrespondents. A birth certificate is eligible for the PRAMS sample if the mother was a resident of the state. For 1998, the most recent year for which CDC has reported comprehensive data for PRAMS, states used a standardized questionnaire that asked women if their husbands or partners physically abused them during their most recent pregnancy. PRAMS defined physical abuse as pushing, hitting, slapping, kicking, or any other way of physically hurting someone. Table 1 lists 1998 PRAMS estimates of the prevalence of intimate partner violence during pregnancy. Question Was there a pregnancy in last 90 days or 42 days? If female, was there a pregnancy in the past 3 months? If female, indicate if pregnant or birth occurred within 90 days of death. If female, was there a pregnancy in the past 3 months? Was decedent pregnant or 90 days postpartum? If female, was there a pregnancy in the past 12 months? If deceased was female 10-49, was she pregnant in the last 90 days? Indicate if the decedent was pregnant or less than 90 days postpartum at time of death. If female, was decedent pregnant in the past 12 months? If deceased was female 10-49, was she pregnant in the last 90 days? If female, was there a pregnancy in the past 3 months? If female, was she pregnant at death or any time 90 days prior to death? Was decedent pregnant within last 6 weeks? If female, was decedent pregnant in last 6 months? If female under 54, pregnancy in last 12 months? Was deceased pregnant within 18 months of death? If female, was deceased pregnant? Was decedent pregnant at time of death; within last 12 months? If female, was there a pregnancy in last 3 months? In addition to those named above, contributors to this report were Janina Austin, Nancy Kawahara, Emily Gamble Gardiner, Geoffrey Hamilton, Anthony Hill, Hiroshi Ishikawa, Alice London, Behn Miller, and Sara-Ann Moessbauer.
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The Violence Against Women Act funds programs that shelter battered women, training for law enforcement officers and prosecutors, and research on violence against women. Available data on the number of pregnant women who are victims of violence are incomplete and lack comparability. There is no current national estimate of the prevalence of violence against pregnant women. Available estimates cannot be generalized to all pregnant women, and little information is available on the number of pregnant homicide victims. Health and criminal justice officials have designed multiple strategies to prevent violence against women, but their effect is unknown. Strategies to prevent violence against pregnant women are similar to those to prevent violence against all women and include public health efforts to prevent violence in the first place, intervention activities that identify and respond to violence after it occurs, and criminal justice strategies that focus on incarcerating or rehabilitating batterers.
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Since the 1960s, the United States has used polar-orbiting and geostationary satellites to observe the earth and its land, ocean, atmosphere, and space environments. Polar-orbiting satellites constantly circle the earth in a nearly north-south orbit, providing global coverage of conditions that affect the weather and climate. As the earth rotates beneath it, each polar-orbiting satellite views the entire earth's surface twice a day. In contrast, geostationary satellites maintain a fixed position relative to the earth from a high orbit of about 22,300 miles in space. Both types of satellites provide a valuable perspective of the environment and allow observations in areas that may be otherwise unreachable. Used in combination with ground, sea, and airborne observing systems, satellites have become an indispensable part of monitoring and forecasting weather and climate. For example, polar-orbiting satellites provide the data that go into numerical weather prediction models, which are a primary tool for forecasting weather days in advance--including forecasting the path and intensity of hurricanes. Geostationary satellites provide the graphical images used to identify current weather patterns and provide short-term warning. These weather products and models are used to predict the potential impact of severe weather so that communities and emergency managers can help prevent and mitigate its effects. Federal agencies are currently planning and executing major satellite acquisition programs to replace existing polar and geostationary satellite systems that are nearing the end of their expected life spans. However, these programs have troubled legacies of cost increases, missed milestones, technical problems, and management challenges that have resulted in reduced functionality and major delays to planned launch dates over time. We and others--including an independent review team reporting to the Department of Commerce and its Inspector General-- have raised concerns that problems and delays with environmental satellite acquisition programs will result in gaps in the continuity of critical satellite data used in weather forecasts and warnings. According to officials at NOAA, a polar satellite data gap would result in less accurate and timely weather forecasts and warnings of extreme events, such as hurricanes, storm surges, and floods. Such degradation in forecasts and warnings would place lives, property, and our nation's critical infrastructures in danger. The importance of having such data available was highlighted in 2012 by the advance warnings of the path, timing, and intensity of Superstorm Sandy. Given the criticality of satellite data to weather forecasts, concerns that problems and delays on the new satellite acquisition programs will result in gaps in the continuity of critical satellite data, and the impact of such gaps on the health and safety of the U.S. population, we concluded that the potential gap in weather satellite data is a high-risk area. We added this area to our High-Risk List in 2013 and it remains on the 2015 update to the High-Risk List that was issued yesterday. For over 40 years, the United States has operated two separate operational polar-orbiting meteorological satellite systems: the Polar- orbiting Operational Environmental Satellite series, which is managed by NOAA, and the Defense Meteorological Satellite Program (DMSP), which is managed by the Air Force. Currently, there is one operational Polar- orbiting Operational Environmental Satellite (called the Suomi National Polar-orbiting Partnership, or S-NPP) and two operational DMSP satellites that are positioned so that they cross the equator in the early morning, midmorning, and early afternoon. In addition, the government relies on data from a European satellite, called the Meteorological Operational satellite, or Metop.operational polar satellite constellation. In addition to the polar-orbiting satellites, NOAA operates GOES as a two-satellite geostationary satellite system that is primarily focused on the United States (see figure 2). The GOES-R series is the next generation of satellites that NOAA is planning; the satellites are planned to replace existing weather satellites, the first of which is due to reach the end of its useful life in 2015. The ability of the satellites to provide broad, continuously updated coverage of atmospheric conditions over land and oceans is important to NOAA's weather forecasting operations. NOAA is responsible for GOES-R program funding and overall mission success, and has implemented an integrated program management structure with NASA for the GOES-R program. Within the program office, there are two project offices that manage key components of the GOES-R system. NOAA has delegated responsibility to NASA to manage the Flight Project Office, including awarding and managing the spacecraft contract and delivering flight-ready instruments to the spacecraft. The Ground Project Office, managed by NOAA, oversees the Core Ground System contract and satellite data product development and distribution. The program estimates that the development for all four satellites in the GOES-R series will cost $10.9 billion through 2036. In 2013, NOAA announced that it would delay the launch of the GOES-R and S satellites from October 2015 and February 2017 to March 2016 and May 2017, respectively. These are the current anticipated launch dates of the first two GOES-R satellites; the last satellite in the series is planned for launch in 2024. In September 2010, we recommended that NOAA develop and document continuity plans for the operation of geostationary satellites that include the implementation procedures, resources, staff roles, and time tables needed to transition to a single satellite, a foreign satellite, or other solution. In September 2011, the GOES-R program provided a draft plan documenting a strategy for conducting operations if there were only a single operational satellite. GAO, Geostationary Weather Satellites: Progress Made, but Weaknesses in Scheduling, Contingency Planning, and Communicating with Users Need to Be Addressed, GAO-13-597, (Washington, D.C.: Sept. 9, 2013). on the potential impact of a satellite failure and identifying timelines for implementing mitigation solutions. We subsequently assessed NOAA's progress in implementing this recommendation in our December 2014 report and will discuss our results at today's hearing. The JPSS program has recently completed significant development activities. For example, the program completed a major development milestone--the critical design review for the JPSS-1 mission--in April 2014. This is a significant accomplishment because the review affirms that the satellite design is appropriately mature to continue with development. Furthermore, NOAA is currently developing JPSS within its cost and schedule baselines. However, while JPSS development is still within its overall life cycle cost baseline, key components have experienced cost growth. Between July 2013 and July 2014, the total program cost estimate increased by $222 million (or 2 percent). More than half of this increase was for three instruments. Program officials cited multiple reasons for these cost increases, including technical issues, additional testing, and the purchase of new parts. If JPSS costs were to continue to grow at this rate, the program could end up costing $2 billion more than expected by 2025. Therefore, moving forward, it will be important for NOAA and NASA managers to aggressively monitor and control components that are threatening to exceed their expected costs. Also, while the launch date of the JPSS-1 satellite has not yet been affected, key components, such as the satellite's major instruments, have encountered delays in development and testing. Figure 3 compares key planned completion dates for the JPSS-1 spacecraft and its instruments from July 2013 to their actual or planned completion dates as of July 2014. JPSS program officials provided multiple reasons for the schedule changes, including technical issues the Advanced Technology Microwave Sounder (ATMS) instrument experienced during testing, a schedule adjustment to align with NOAA's geostationary satellite acquisition, and the October 2013 government shutdown. These delays have caused a reduction in schedule margin prior to the JPSS-1 satellite integration and testing phase. Further, because of the technical issues experienced on ATMS, the instrument has now become the critical path for the entire JPSS-1 mission and only 1 month of schedule reserve remains until its expected delivery in March 2015. It will be important for NOAA and NASA managers to quickly resolve the instrument's technical issues before it becomes a more serious threat to the mission schedule and launch date. In October 2013, the JPSS program office reported that a gap between the S-NPP satellite and the JPSS-1 satellite in the afternoon orbit could be as short as 3 months, which is 15 months less than NOAA estimated in 2012. However, we believe that this estimate is likely too optimistic. There are several reasons why this potential gap could occur sooner and last longer than NOAA currently anticipates. Inconsistent launch date plans: The program's analysis that JPSS-1 will be operational by June 2017 is inconsistent with NOAA's launch date commitment of March 2017, given that the program office estimates 6 months for on-orbit checkout and calibration/validation before the satellite data are operational. Unproven predictions about the on-orbit checkout and validation phase: The on-orbit checkout and calibration/validation phase could take longer than the program's estimated 6 months if there are issues with the instruments or ground systems. Also, additional algorithm work may be needed after the satellite launches, which could extend the validation time frame. Exclusion of a key risk: The JPSS program's gap assessment does not factor in the potential for satellite failures from space debris that are too small to be tracked and avoided. Thus, the S-NPP mission could end earlier than its 5-year design life, resulting in a gap period that occurs sooner and lasts longer than expected. As a result, a gap in polar satellite data may occur earlier and last longer than NOAA anticipates. In one scenario, S-NPP would last its full expected 5-year life (to October 2016), and JPSS-1 would launch as soon as possible (in March 2017) and undergo on-orbit testing for 6 months as predicted by the JPSS program office (until September 2017). In that case, the data gap would extend 11 months. Any problems encountered with JPSS-1 development resulting in launch delays, launch problems, or delays in the planned 6-month on-orbit test period could extend the gap period to as much as 5 years and 8 months. Figure 4 depicts possible gap scenarios. NOAA officials acknowledge that the gap assessment has several limitations and stated that they plan to update it. Until NOAA updates its gap assessment to include more accurate assumptions and key risks, the agency risks making decisions based on a limited understanding of the potential timing and length of a gap. Experts within and outside of NOAA identified almost 40 alternatives for mitigating potential gaps in polar satellite data, which offer a variety of benefits and challenges. The alternatives can be separated into two general categories. The first category includes actions to prevent or limit a potential gap by providing JPSS-like capabilities. The second category includes actions that could reduce the impact of a potential gap by (a) extending and expanding the use of current data sources with capabilities similar to the JPSS program; (b) enhancing modeling and data assimilation; (c) developing new data sources; or (d) exploring opportunities with foreign and domestic partners. While all of the alternatives have trade-offs, several alternatives may represent the best known options for reducing the impact of a gap: Extending legacy satellites, continuing to obtain data from European midmorning satellites, and ensuring legacy and European satellites' data quality remains acceptable; Obtaining additional observations of radio occultation Advancing 4-dimensional data assimilation and the next generation global forecast model to make more efficient use of data still available and produce improved techniques for evaluating data; Increasing high-performance computing capacity, a key factor for enabling greater resolution in existing and future models, which drives the pace of development for assimilation of data that could further improve NOAA's models. Government and industry best practices call for the development of contingency plans to maintain an organization's essential functions in the case of an adverse event. NOAA developed its original polar satellite gap contingency plan in October 2012. We reported in September 2013 that NOAA had not yet selected the strategies from its plan to be implemented, or developed procedures and actions to implement the selected strategies and made a recommendation to address these shortfalls. In February 2014, NOAA updated its polar satellite gap contingency plan. NOAA made several improvements in this update, such as including additional alternatives that experts identified, and accounting for additional gap scenarios. However, additional work remains for NOAA's contingency plan to fully address government and industry best practices for contingency planning. Until NOAA fully addresses key elements to improve its contingency plan, it may not be sufficiently prepared to mitigate potential gaps in polar satellite coverage. NOAA has also experienced challenges in implementing key activities outlined in the plan. Among a list of available alternatives, NOAA identified 21 mitigation projects that are to be implemented in order to address the potential for satellite data gaps in the afternoon polar orbit. NOAA has demonstrated progress by implementing initial activities on these gap mitigation projects. However, NOAA has experienced delays in executing other key activities. For example: A planned upgrade to the National Weather Service's operational high-performance computing capacity was to occur by December 2014. According to NOAA officials, an interim upgrade is planned to occur in February 2015, with the full upgrade expected to be completed by July 2016. NOAA does not plan to complete observing system experiments that are to supplement its numerical weather prediction models in the absence of afternoon polar-orbiting satellite data until 4 months later than planned. Multiple projects have been affected by a major shortfall in the availability of high-performance computing for research and development efforts during fiscal year 2014. Because a potential near-term data gap could occur sooner and last longer than expected, NOAA's ongoing gap mitigation efforts are becoming even more critical. According to Office of Management and Budget guidance, projects that require extensive development work before they can be put into operation are inherently risky and should be prioritized by comparing their costs and outcomes to other projects within a portfolio. However, the agency has not prioritized or accelerated activities most likely to address a gap because it has been focused on implementing many different initiatives to see which ones will have the most impact. NOAA officials stated that further prioritization among mitigation activities was not warranted because the activities were fully funded and were not dependent on the completion of other activities. We disagree. There are dependencies among projects that would benefit from prioritization. While it makes sense to investigate multiple mitigation options, unless NOAA assesses the activities that have the most promise and accelerates those activities, it may not be sufficiently prepared to mitigate near-term data gaps. After spending 10 years and just over $5 billion, the GOES-R program has completed important steps in developing its first satellite, and has entered the integration and test phase of development for the satellite. While the GOES-R program is making progress, it has experienced recent and continuing schedule delays. As we have previously reported, problems experienced during the integration and test phase often lead to cost and schedule growth. In 2013, we reported that technical issues on both the flight and ground projects had the potential to cause further delays to the program schedule. By the time of our latest report, in December 2014, these and all other major milestones have been further delayed by 5 to 8 months. The GOES-R program cited multiple reasons for these recent delays, including challenges in completing software deliverables and completing communication testing for the spacecraft. In addition to these intermediate delays, NOAA moved the launch commitment date of the first GOES-R satellite to March 2016. Further, the program's actions to mitigate schedule delays introduce some risks, and could therefore increase the amount of the delay. For example, the program attempted to mitigate delays by performing system development while concurrently working on detailed planning. In addition, the program has responded to prior delays by eliminating selected repetitive tests and moving to a 24-hour-a-day, 7-day-a-week spacecraft integration testing schedule. We have previously reported that overlapping planning and development activities and compressing test schedules are activities that increase the risk of further delays because there would be little time to resolve any issues that arise. A key element of a successful test phase is appropriately identifying and handling any defects or anomalies that are discovered during testing. While the GOES-R program has sound defect management policies in place and is actively performing defect management activities, there are several areas in which defect management policies and practices are inconsistent. Among the shortfalls are a number of cross-cutting themes, including in performing and recording information pertinent to individual defects, and in reporting and tracking defect information. The GOES-R program has also not efficiently closed defects on selected components. Specifically, data for the GOES ground system shows that 500 defects remained open as of September 2014. Defect data for the spacecraft show that it is also taking an increasing amount of time to close hardware-related defects. Until the program addresses shortfalls in defect management and reduces the number of open defects, it may not have a complete picture of remaining issues and faces an increased risk of further delays to the GOES-R launch date. The program is now reaching a point where additional delays in starting end-to-end testing could begin to adversely affect its schedule. As of August 2014, program officials could not rule out the possibility of further delays in the committed launch date. GOES satellite data are considered a mission-essential function because of their criticality to weather observations and forecasts. Because of the importance of GOES satellite data, NOAA's policy is to have two operational satellites and one backup satellite in orbit at all times. However, NOAA is facing a period of up to 17 months when it will not have a backup satellite in orbit. Specifically, in April 2015, NOAA expects to retire one of its operational satellites (GOES-13) and to move its backup satellite (GOES-14) into operation. Thus, the agency will have only two operational satellites in orbit--and no backup satellite--until GOES-R is launched and completes an estimated 6-month post-launch test period. Figure 5 shows the potential gap in backup coverage, based on the launch and decommission dates of GOES satellites. During the time when no back-up satellite would be available, there is a greater risk that NOAA would need to either rely on older satellites that are beyond their expected operational lives and may not be fully functional, rely on a foreign satellite, or operate with only a single operational satellite. Due in part to the risks mentioned above, NOAA is also facing an increased risk of further delays to the March 2016 GOES-R launch date. Any delay to the GOES-R launch date would extend the time without a backup to more than 17 months. Government and industry best practices call for the development of contingency plans to maintain an organization's essential functions--such as GOES satellite data--in the case of an adverse event. In September 2013, we reported on weaknesses in the contingency plans for NOAA's geostationary satellites. NOAA has improved its plan to mitigate gaps in satellite coverage. In February 2014, NOAA released a new satellite contingency plan in response to these recommendations. This plan improved upon many, but not all, of the best practices. Specifically, the plan improved in six areas and stayed the same in four areas. GOES-R program officials stated that it is not feasible to include strategies to prevent delays in launch of the first GOES-R satellite in the contingency plan, because such strategies are not static. While actively managing the program to avoid a delay is critical, it is also important that NOAA management and the GOES-R program consider and document feasible alternatives for avoiding or limiting such a launch delay. Until NOAA addresses the remaining shortfalls in its GOES-R gap mitigation plan, the agency cannot be assured that it is exploring all alternatives or that it is able to effectively prepare to receive GOES information in the event of a failure. Both the JPSS and GOES-R programs continue to carry risks of future launch delays and potential gaps in satellite coverage; implementing the recommendations in our December 2014 reports should help mitigate those risks. In the JPSS report released in December, we recommended, among other things, that NOAA update the JPSS program's assessment of potential polar satellite data gaps to include more accurate assumptions about launch dates and the length of the data calibration period, as well as key risks such as the potential effect of space debris on JPSS and other polar satellites expected lifetimes; revise its existing contingency plan to address shortfalls noted in the 2014 report, such as identifying DOD's and Japan's plans to continue weather satellite observations, including recovery time objectives for key products, completing the contingency plan with selected strategies, and establishing a schedule with meaningful timelines and linkages among mitigation activities; and investigate ways to prioritize mitigation projects with the greatest potential benefit to weather forecasting in the event of a gap in JPSS satellite data. In the GOES report released in December, we recommended that NOAA, among other things, add information to the GOES satellite contingency plan on steps planned or underway to mitigate potential launch delays. For both reports, NOAA agreed with our recommendations and identified steps it plans to take to implement them. Specifically, with regard to the JPSS report, NOAA stated that it will make the necessary changes to its gap mitigation report and establish a process to prioritize mitigation projects. With regard to the GOES report, NOAA stated that it would add information to the GOES satellite contingency plan on steps planned or underway to mitigate potential launch delays. In summary, NOAA has made progress on both the JPSS and GOES-R programs, but key challenges remain before the new satellites are launched and operational, and it is important that the agency take action to ensure that potential near-term gaps in satellite data are minimized or mitigated. On the JPSS program, NOAA has recently completed significant development activities and is working to launch its next polar-orbiting environmental satellite as soon as possible. However, the program continues to face increasing costs and schedule delays on key components. Further, the program's estimate of a 3-month potential gap in satellite data may be overly optimistic because it was based on inconsistent and unproven assumptions and did not account for key risks. NOAA has made improvements to its polar satellite gap contingency plan, but has experienced delays in executing key mitigation activities, and has not prioritized or accelerated activities most likely to address a gap. On the GOES-R program, progress in moving through integration and testing has been accompanied by challenges in maintaining its schedule on major milestones and controlling costs for key components. Further schedule delays could affect the committed launch date of the first GOES satellite. NOAA could experience a gap in satellite data coverage if GOES-R is delayed further and one of the two remaining operational satellites experiences a problem. NOAA has made improvements to its geostationary satellite contingency plan, but the plan still does not sufficiently address mitigation options for a launch delay. Faced with an anticipated gap in the polar satellite program and a potential gap in backup coverage on the geostationary satellite program, NOAA has taken steps to study alternatives, establish mitigation plans, and improve its satellite contingency plans. However, these plans do not yet sufficiently address options to mitigate such gaps. Until NOAA prioritizes mitigation activities with the greatest potential to reduce the impact of gaps in weather forecasting, it may not be sufficiently prepared to mitigate them. Chairman Bridenstine, Ranking Member Bonamici, Chairman Loudermilk, Ranking Member Beyer, and Members of the Subcommittees, this completes my prepared statement. I would be pleased to respond to any questions that you may have at this time. If you have any questions on matters discussed in this testimony, please contact David A. Powner at (202) 512-9286 or at [email protected]. Other key contributors include Colleen Phillips (assistant director), Alexander Anderegg, Christopher Businsky, Shaun Byrnes, Kara Lovett Epperson, Rebecca Eyler, Nancy Glover, Franklin Jackson, Nicole Jarvis, Joshua Leiling, James MacAulay, Lee McCracken, Karl Seifert, Kate Sharkey, and Shawn Ward. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.
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NOAA is procuring the next generation of polar and geostationary weather satellites to replace aging satellites that are approaching the end of their useful lives. Both new sets of satellites will provide critical weather forecasting data over the next two decades. GAO has reported that gaps in polar satellite coverage and in backup coverage for geostationary satellites are likely in the near future. Given the criticality of satellite data to weather forecasts, concerns that problems and delays on the new satellite acquisition programs will result in gaps in the continuity of critical satellite data, and the impact of such gaps on the health and safety of the U.S. population, GAO added mitigating weather satellite gaps to its High-Risk List in 2013 and it remains on the 2015 update to the High-Risk List. GAO was asked to testify on two recently released reports on NOAA's satellite programs, specifically on (1) the JPSS program's status, the potential for a gap and mitigation alternatives, and contingency plans, and (2) the GOESR program's status, potential for a gap, and contingency plans. The National Oceanic and Atmospheric Administration's (NOAA) $11.3 billion Joint Polar Satellite System (JPSS) program has recently completed significant development activities and remains within its cost and schedule baselines; however, recent cost growth on key components is likely unsustainable, and schedule delays could increase the potential for a near-term satellite data gap. In addition, while the program has reduced its estimate for a near-term gap in the afternoon orbit, its gap assessment was based on incomplete data. A gap in satellite data may occur earlier and last longer than NOAA anticipates. The figure below depicts a possible 11-month gap, in which the current satellite lasts its full expected 5-year life (until October 2016) and the next satellite is launched in March 2017 and undergoes on-orbit testing until September 2017. Multiple alternatives to prevent or reduce the impact of a gap exist. Key options for reducing the impact of a near-term gap include extending legacy satellites, obtaining additional observations such as data from aircraft, advancing data assimilation and a global forecast model, and increasing high performance computing capacity. While NOAA has improved its contingency plan by identifying mitigation strategies and specific activities, the agency's plan has shortfalls such as not assessing the cost and impact of available alternatives. In addition, NOAA has not yet prioritized mitigation projects most likely to address a gap, and key mitigation projects have been delayed. Until the agency addresses these shortfalls, the agency will have less assurance that it is prepared to deal with a near-term gap in polar satellite coverage. NOAA's $10.8 billion Geostationary Operational Environmental Satellite-R (GOES-R) program has also made major progress on its first satellite. However, the program has continued to experience delays in major milestones and has not efficiently closed defects on selected components, both of which could increase the risk of a launch delay. As the GOES-R program approaches its expected launch date of March 2016, it faces a potential gap of more than a year during which an on-orbit backup satellite would not be available. Specifically, there could be no backup from April 2015 (when an operational satellite is expected to reach its end-of-life) through September 2016 (after GOES-R completes its post-launch test period). Any delay to the GOES-R launch date would extend the length of time without a backup satellite and, if an operational satellite were to experience a problem during that time, there could be a gap in GOES coverage. NOAA has improved its plan to mitigate gaps in satellite coverage, but it does not yet include steps for mitigating a delayed launch. In its recently issued reports, GAO recommended that NOAA update its polar data gap assessment, address shortfalls in both its polar and geostationary contingency plans, and prioritize mitigation projects most likely to address a gap in polar satellite coverage. NOAA concurred with GAO's recommendations and identified steps it is taking to implement them.
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Although intercollegiate sports may bring to mind nationally televised football and basketball games, 4-year schools' intercollegiate sports programs vary widely, from small programs involving fewer than 10 teams with expenditures of less than $1 million to large programs with more than 900 student-athletes and expenditures in excess of $50 million. At many schools, intercollegiate athletic competition serves primarily to meet the needs of student-athletes--to give them opportunities to develop their athletic ability as they pursue their courses of study. Schools also view intercollegiate athletics as a means of recruiting prospective students. At schools with large athletic programs, sports serve as an important focal point for students, faculty and staff, alumni, surrounding communities, and the national television audience. Typically, schools with the largest number of athletic programs and facilities belong to Division I-A of the NCAA, and those with smaller programs are members of NCAA Divisions II or III or the second major national collegiate association, NAIA. Most 4-year postsecondary institutions with intercollegiate athletic programs participate in one of these two associations. NCAA, the larger, administers intercollegiate athletics for over 1,000 4-year (baccalaureate degree-granting) schools. Division I member schools are further divided into three categories--I-A, I- AA, and I-AAA--with those that have larger football programs generally placed in I-A and those without football programs in I-AAA. Division I-AA schools sponsor football but are not subject to the spectator attendance requirements that apply to Division I-A schools. In April 2000, NAIA consisted of 330 member institutions. The NAIA does not have divisions except for basketball and football, which each have Divisions I and II. Although no federal monies fund intercollegiate sports programs, federal involvement has arisen in part as a result of civil rights legislation. For example, at schools receiving federal financial assistance, all education programs and activities--including intercollegiate athletic programs--are subject to title IX of the Education Amendments of 1972, which prohibits discrimination on the basis of sex. Federal regulations implementing title IX require that men and women be provided equitable opportunities to participate in intercollegiate athletics, and equitable scholarships, facilities, equipment, supplies, and other benefits. The Department of Education's Office for Civil Rights assesses schools' compliance with these requirements. To comply with requirements concerning equitable opportunities to participate in intercollegiate sports, schools must meet any one of the three following criteria, which Education refers to as parts of a three-part test: (1) intercollegiate-level participation opportunities for male and female students are provided in numbers substantially proportionate to their respective enrollments, or (2) the institution can show a history and continuing practice of program expansion that is demonstrably responsive to the developing interests and abilities of the members of the underrepresented gender, or (3) it can be demonstrated that the interests and abilities of the members of the underrepresented gender have been fully and effectively accommodated by the present program. Since the early 1980s, the number of women participating in intercollegiate sports has increased substantially. Although male athletes still outnumber their female counterparts, the growth in their programs has been much smaller and the number of women's teams now exceeds the number of men's teams. The percentage of male undergraduates who participate in intercollegiate athletics is essentially the same as it was in 1981-82, while the percentage of women has increased considerably. The rapid growth in women's participation in intercollegiate sports since 1981-82 has narrowed the gap between genders (see fig. 1). The number of women in intercollegiate sports increased by 81 percent (from 90,000 to 163,000 participants) and the number of men increased by 5 percent (from 220,000 to 232,000 participants) between 1981-82 and 1998-99. The growth in women's participation was fastest during the early 1980s and in the 1990s. Men's participation also grew in the early 1980s, but peaked in 1985-86. Since then, it decreased modestly, then fluctuated within a narrow range. The growth in the number of women athletes may reflect, in part, the rapid increase in women's undergraduate enrollment. From 1981-82 to 1998-99 women's undergraduate enrollment grew by 30 percent, compared to 6 percent for men. However, women's participation also grew as an overall percentage of women undergraduates. Women athletes made up 3.9 percent of women undergraduates in 1981-82 and 5.5 percent in 1998-99. In contrast, the portion of undergraduate men participating in athletics remained relatively steady, starting and ending the period at 9.3 percent. The trends in the number of women participants varied by sport. For example, table 1 shows that the biggest increase in the number of women participants--about 18,000--was in soccer. Though participation increased in most sports, five sports reported decreases in participation. The biggest decline occurred in gymnastics, with nearly 700 fewer women gymnasts in 1998-99 than in 1981-82. In men's sports, increases and decreases were more evenly balanced, with increases in the number of participants in 14 sports and decreases in 12. As shown in table 2, the greatest increase in numbers of participants occurred in football, with about 7,200 more players. Football also had the greatest number of participants--approximately 60,000, or about twice as many as the next largest sport. Wrestling experienced the largest decrease in participation--a drop of more than 2,600 participants. Though the number of male participants was greater than the number of female participants in 1998-99, there were 330 more women's teams than men's teams. The average women's team had fewer athletes than the average men's team. From 1981-82 to 1998-99, the number of women's intercollegiate sports teams increased by 66 percent (from 5,695 to 9,479 teams). Most sports saw an increase in the number of teams, with the largest increase occurring in women's soccer, where the number of teams rose from 80 to 926. The greatest decrease occurred in gymnastics, where the number of teams fell from 190 to 90 (see table 3). Half of men's sports saw a decline in the number of teams. Two sports had no change and the remaining sports (nearly half) had an increase in the number of teams. As with women's sports, the largest increase came in soccer (135 new teams). Football, the sport that saw the largest increase in the number of participants, saw a decrease of 37 teams, mainly from NAIA schools. Gymnastics, fencing, and rifle saw the largest percentage decline in the number of teams. The largest decrease in the number of teams was in wrestling (171 teams) (see table 4). About 80 percent of schools added one or more women's sports teams during the 1992-93 to 1999-2000 period, and more than two-thirds did so without discontinuing any teams. Student interest in a particular sport was often cited as an influence behind many of these decisions. Gender equity considerations also often influenced decisions to add women's teams and discontinue men's teams, particularly at schools with large athletic programs. The financial impact of adding or discontinuing teams varied widely by size of program and by sport. Overall, among the 1,191 college and universities responding to the questionnaire, 963 added at least one team and 307 discontinued at least one (see fig. 2). However, of the 948 schools that added one or more women's teams, 72 percent did so without discontinuing any teams. Only about 16 percent of all respondents neither added nor discontinued a team from 1992-93 through 1999-2000. In total, schools added nearly three times as many women's teams as men's teams during this period--1,919 teams for women, compared with 702 for men. They discontinued more than twice as many men's teams--386 teams for men, 150 for women. Schools with smaller programs were more likely to add men's teams. Only about 3 percent of the schools with the largest intercollegiate athletic programs (NCAA Division I-A) added one or more men's teams, compared with 39 percent for NCAA Division III schools and 54 percent of NAIA schools (see table 5). The level of student interest was the factor schools cited most often as greatly or very greatly influencing their most recent decision to add both men's and women's teams (see fig. 3). Overall, 52 percent of the respondents that had added a women's sports team indicated that student interest was a great or very great influence in the decision, and nearly as many schools (47 percent) cited the need to meet gender equity goals or requirements. Other factors cited less frequently when adding a women's team included the availability of adequate facilities and sufficient equipment, the growth in the number of teams to compete against, community interest, and enough improvement in a club team's skill to compete at the varsity intercollegiate level. The factors that most influenced recent decisions to add women's teams varied by the size of a school's intercollegiate athletic programs. For example, respondents from NCAA Division I-A schools compared to Division III schools more often cited gender equity considerations (82 percent versus 35 percent) and community interest (35 percent versus 12 percent) as a great or very great influence. Division III schools cited the availability of adequate facilities and sufficient equipment (30 percent, compared with 24 percent in Division I-A.) Both types of schools cited student interest about as often (60 percent versus 55 percent). For men's sports, the pattern of which factors most influenced schools' decisions to add a team was somewhat different, particularly with regard to gender equity goals or requirements. As was the case for the addition of women's teams, student interest was the factor cited most often (49 percent) as influencing the addition of men's teams. After student interest, the factor cited most often was the availability of sufficient facilities and adequate equipment (32 percent), followed by community interest (23 percent). Gender equity considerations, an influential factor for adding a women's team, was cited by only 4 percent of schools that had added a men's team. The level of student interest was the most often cited factor in schools' most recent decisions to discontinue men's and women's teams (see fig. 4). Among the 272 responding schools that discontinued a men's team, 91 (33 percent) cited lack of student interest as a great or very great influence, 83 (31 percent) cited the need to meet gender equity goals or requirements, and 82 (30 percent) cited the need to reallocate budget resources to other sports. Factors affecting decisions to discontinue men's teams varied with the size of a school's program. Among schools with large intercollegiate athletic programs, gender equity considerations more often figured as a great or very great influence. At NCAA Division I-A schools, for example, a majority (54 percent) of the respondents discontinuing a men's team cited gender equity considerations as a great or very great influence. Insufficient student interest in the sport was not often cited; only 6 percent of respondents cited it as a great or very great influence. In contrast, among NCAA Division III respondents, the absence of sufficient student interest in the sport was the most often-cited factor (44 percent cited it as a great or very great influence). The need to reallocate resources to other sports was the next most often-cited factor (cited by 26 percent), followed by decreases in the budget and gender equity considerations (each cited by 21 percent). Decisions to discontinue a women's team were generally most often driven by the level of student interest. Of the 123 schools that discontinued one or more women's teams, 58 percent cited the lack of student interest as a great or very great influence. The next most often-cited influences were the team's inability to compete at the desired level and the absence of adequate facilities and sufficient equipment. The most recent addition of an intercollegiate team increased the average school's total intercollegiate expenditures by an estimated 6 percent, and the most recent discontinuation of a team reduced expenditures by 4 percent. In general, schools with larger intercollegiate programs experienced smaller percentage changes in their expenditures, as shown in table 6. For example, adding a women's team at the NCAA Division I-A level increased costs an average of 3 percent, compared to 5 percent for NCAA Division III and 9 percent for NAIA. The comparable averages for recent additions of men's teams were 2, 8, and 13 percent. The effect of adding or discontinuing a team also varied by sport (see table 7). For example, schools estimated that adding women's soccer typically increased expenditures by 6 percent, while adding football teams increased expenditures by an average of 31 percent. Discontinuing men's tennis decreased expenditures by an average of 2 percent, while discontinuing football decreased expenditures an average of 24 percent. The 307 responding schools that discontinued a team during the 1992-93 to 1999-2000 period typically spent 3 months or less between making the proposal to discontinue a team and making a final decision. Most schools informed the campus community of the proposed discontinuation before the decision was final. Once the decision was made to discontinue a team, however, most did not provide a written explanation for their decision. Most schools held meetings to discuss the proposal with groups in the campus community. Schools with larger athletic programs more often included other interested parties, such as alumni or members of booster clubs. Affected athletes usually continued to receive athletic financial aid after the sport was discontinued. Most decisions to discontinue a team were considered and implemented within a few months following the initial proposal, according to the responses from the colleges and universities concerning the team they most recently discontinued during the 1992-93 to 1999-2000 period. The median of the reported amount of time between making such a proposal to reaching a final decision was 2 months. In 38 percent of cases, both the proposal and the final decision came in the same month. In about 5 percent of cases, the schools took more than a year to reach a final decision. The amount of time before the team stopped participating was also brief. For about one-third of the schools, the team had already stopped participating before the final decision to discontinue the sport was made. For another 26 percent, participation stopped during the month the final decision was made. For another 17 percent of the respondents, participation ended by the third month following the final decision. Only about 5 percent allowed sports teams to continue to play for a year or more past the time when a final decision was made. In most cases the proposal to discontinue the team came from within the athletic department, although college administrations were a common source at schools with smaller athletic programs. About 60 percent said the proposal originated with the athletic department. At NCAA Division I-A schools, the figure was 83 percent. For NAIA and NCAA Division I-AAA schools, about one-third of the proposals originated from the school administration. For example, at NAIA schools that discontinued a sport, the athletic department initiated 46 percent of the proposals and school administration initiated 38 percent. Similarly, at NCAA Division I-AAA schools that discontinued a sport, athletic departments initiated 50 percent of the proposals and the school administration initiated another 36 percent. Most colleges and universities (186 of the 307 schools discontinuing a team) informed the campus community of the possibility of discontinuing the team before the decision was final. Large schools, such as those in NCAA Division I-A, were most likely to use a press release to inform the campus community of the possibility of discontinuing the sport. NCAA Division III schools more often provided the information by mail to individuals or used other means such as meetings with athletes and staff. Most of the schools discontinuing a team (64 percent) informed affected athletes of the decision in the month it was finalized. About 20 percent of these schools indicated that they informed the affected athletes of the decision during the 3 months preceding the final decision. About 10 percent of these schools indicated that they informed the affected student athletes of a decision in the months following a final decision. Typically these schools informed the athletes within a month or two. Overall, less than half (41 percent) of schools that discontinued a sports team provided a written explanation. This varied somewhat by the size of schools' athletic programs. NCAA Division I-A and I-AA schools were least likely to provide a written explanation to affected athletes; about one- quarter of them did so. Members of NCAA Divisions II and III and NAIA were more likely to provide a written explanation; about half did so. More than two-thirds of the schools that discontinued intercollegiate athletic teams did so without allowing an appeal of the decision. The proportion of schools allowing an appeal varied little by size of schools' athletic programs--from a low of 25 percent among Division I-AA schools to a high of 36 percent among Division I-AAA schools. Several schools described their appeals process as a meeting with the athletic director. Most schools, however, described appeals as meetings with school administrators or organizational units outside the athletics department. For example, schools allowed student-athletes to appeal to the dean of students, athletic council, the school's president, or the board of trustees. One respondent described an appeal involving an open forum at which all interested parties could speak; others provided opportunities for a written appeal. About 80 percent of the schools (170 of the 212 responding schools that discontinued a team)--aside from Division III schools which are prohibited from providing athletic financial aid--indicated that they allowed their student-athletes to continue receiving aid even though the team was being discontinued. This was most often the case at NCAA Division I schools; continued aid was available at 90 percent of these schools. This was less often the case at Division II schools, where 72 percent of schools indicated that student athletes could continue to receive aid. For about 86 percent of the schools that continued to provide assistance, the aid was available until the athlete graduated. At most of the rest, the aid was made available for up to 1 year. Among all NCAA and NAIA schools discontinuing a team, 86 percent assisted affected athletes in transferring to another institution's intercollegiate athletics program. However, affected athletes who remained enrolled at the school did not necessarily have the opportunity to compete in that sport at the club level. Only 41 percent gave the affected athletes that opportunity. A majority of the 1,191 school officials reported that they have been able to add one or more teams without discontinuing others. They used a variety of strategies to do so, including obtaining funding from nonschool sources and finding ways to contain costs. The four schools we reviewed in depth used strategies that ranged from fundraising to awarding fewer scholarships. The 693 schools that added one or more intercollegiate athletic teams over the 1992-93 to 1999-2000 period without discontinuing a team did so more often by obtaining additional revenue than by containing costs and reallocating revenue. Sources of funds tended to vary with the size of the intercollegiate athletic program. As shown in table 8, NCAA Division I-A schools tended to rely on revenue from other sports and from outside sources. Schools with smaller programs, particularly those in NCAA Division III and NAIA, most often used additional funds from the institution's general fund. In some cases, they reallocated existing resources by, for example, trimming travel expenses for all teams and using the savings to help fund the new team. For more detailed information concerning how schools added teams without discontinuing opportunities for athletes on other teams, we visited four colleges and universities to learn how they enhanced their athletic programs. We selected these four because they represented various sizes of schools and athletic programs, and different regions of the country (see table 9). They used combinations of innovative strategies that, as the survey reported, placed greater emphasis on increasing athletic revenue than on cutting costs in other programs. Fundraising strategies included renting out athletic facilities, and cost-containment approaches included trimming administrative expenditures. Though all four schools have unique characteristics, directors from each athletic program articulated factors that were key to facilitating successful program expansion without discontinuing teams. Table 10 lists these factors. All four schools cited the first three factors and two of the four schools cited the last factor. One of the athletic directors acknowledged, however, that a "one size fits all" approach may not be feasible and that these approaches may not apply to other schools. Athletic directors also identified several specific revenue-generating approaches for adding teams without discontinuing others. Donations. The smaller Division I-A school revitalized a business relationship with the chief executive officer of a local private firm. This individual's prominence, in turn, encouraged financial support from the rest of the business community. Substantial donations from fans and locally based corporations also enabled the school to add new teams and build facilities such as a new football stadium, a sports complex with a softball field, a track, a soccer field, and a planned Olympic-sized pool. Similarly, at the larger Division I-A school, large donations helped the school to add teams and increase the capacity of its football stadium, build a new basketball and ice hockey arena, and upgrade locker facilities. Rental fees. Another revenue-generating strategy was to rent out athletic facilities for other purposes and use the fees to expand the athletic program. For example, the football stadiums or basketball arenas at the Division I-A schools were used to host cultural and entertainment events such as concerts, or to serve as venues for prominent athletic events such as a World Cup soccer match. In addition, the smaller Division I-A school took advantage of its proximity to a prominent venue by letting the public use the football stadium parking lot to accommodate overflow event parking; the annual proceeds of $200,000 were all allocated to the women's program. At the Division III school, local high school teams rented the football field for practice and special athletic events. In addition to focusing on raising revenue, one athletic director told us that it was important to maintain flexibility in the use of funds available to the athletic department. For example, the larger Division I-A school's athletic department requires that any earnings in excess of a specified rate of return on endowment funds designated for specific teams be available for general intercollegiate athletic department uses. This gives the athletic director greater flexibility in allocating resources. All four schools we visited also took various steps to reduce current or avoid incurring additional expenditures. These included the following strategies: Recruiting most prospective student-athletes via telephone rather than Denying requests for some teams to be elevated from club to varsity Replacing a retiring full-time faculty member with a coach who also assumed other administrative duties, Limiting the size of the football team roster, Trimming administrative costs, Not awarding the maximum number of scholarships allowed, and Limiting team travel outside the region to one trip every 2 to 3 years to minimize travel expenses. Another cost-containment strategy involved establishing partnerships between the school and the local community. Such partnerships reflected the schools' ability to capitalize on the unique characteristics of their geographic location. For example, the larger Division I-A school planned to undertake a cost-sharing project with the city and local school district to build a boathouse on a local river that would accommodate rowing teams from the university, high school, and general public. The smaller Division I- A school teamed with a local hospital offering a nationally recognized sports medicine program. Through the arrangement, the hospital provides free services, including a portable medical facility at sports events and physical screenings for each athlete. The Division III school formed a partnership with a locally based professional men's basketball team. Under the agreement, the team was able to practice at the school's basketball courts in exchange for funding a new hardwood floor for the courts and renovations to the men's and women's locker rooms. We provided a draft of this report to the Department of Education for comment, and it did not provide comments. We are sending copies of this report to the Honorable Roderick R. Paige, Secretary of Education; appropriate congressional committees; representatives of NCAA and NAIA; and other interested parties. Please call me at (202) 512-7215 if you or your staff have any questions about this report. Key contacts and staff acknowledgments for this report are listed in appendix II. As agreed with your offices, we focused our review of intercollegiate athletics on addressing the following questions: How did the number of men's and women's intercollegiate sports participants and teams at 4-year colleges and universities change in the 2 decades since the1981-82 school year? How many colleges and universities added and discontinued teams since the 1992-93 school year, and what influenced their most recent decisions to add and discontinue teams? How did colleges and universities make and implement decisions to discontinue intercollegiate sports? When colleges and universities added teams, what types of strategies did they use to avoid discontinuing sports teams or severely reducing their funding? To determine the number of men's and women's intercollegiate sports participants and teams, we gathered participation statistics from the two largest 4-year intercollegiate athletic associations--the National Association of Intercollegiate Athletics (NAIA) and the National Collegiate Athletic Association (NCAA). Some schools were members of both associations. For example, of the 787 NCAA members and 515 NAIA members in 1981-82, 117 were dual-membership schools. By 1998-99, NCAA had 1,041 members and NAIA had 339 members, 61 of which were dual members as of April 1999, according to the NCAA. Based on the number of teams and average team sizes, we estimated that these schools accounted for about 3 percent of male and 2 percent of female participants in 1997-98. Because dual-membership schools report their participation statistics to both associations, we counted their statistics only once to avoid double-counting the numbers of teams and participants. The adjusted participation statistics were used to calculate net change in number of teams, number of participants, and participation rates between 1981-82 and 1998-99. To estimate rates of participation, we divided the total estimated number of participants for both associations by the estimated total number of full-time undergraduates enrolled at all 4-year institutions. To the extent that an individual student participated in more than one sport, our calculation of the number of participants may be overstated because these individuals are counted more than once in the statistics. In addition, some 4-year institutions are not members of either NAIA or NCAA, and they were excluded from our analyses. Although we did not verify the accuracy of the statistics provided by the NCAA and NAIA, they are the best available data and are widely used by researchers to study intercollegiate athletic participation. To respond to the other three questions, we developed and administered a questionnaire to gather information from athletic directors at all 4-year colleges and universities that were members of either the NAIA or NCAA. We pretested a draft questionnaire at six schools and subsequently revised it based on their comments. In May 2000, we mailed the final questionnaire to 1,310 institutions including 326 NAIA members and 1,040 NCAA members (both active and provisional members.) This included 56 4-year colleges and universities that were members of both NCAA and NAIA. By October 2000, we had received 1,191 usable questionnaire responses for an overall response rate of 91 percent. In some cases, however, respondents did not respond to all applicable questions. The questionnaire asked athletic directors for the total number of women's and men's intercollegiate sports teams added and discontinued during the 1992-93 to 1999-2000 school-year period. When calculating the number of new teams added, we excluded teams that had not yet begun participating in intercollegiate competition by the end of the 1999-2000 school year. Similarly, when calculating the number of teams discontinued, we excluded teams whose last day of intercollegiate competition was after the end of the 1999-2000 school year. We asked each school that added or discontinued a team to respond to additional questions concerning only the most recently added and most recently discontinued men's and women's sports teams. We reviewed athletic directors' questionnaire responses for consistency and in many cases contacted them or their staff to resolve inconsistencies, but we did not otherwise verify the information provided in the questionnaire responses. To identify types of strategies that colleges and universities used to avoid discontinuing sports teams or severely reducing their funding, we used the questionnaire to collect information on how schools paid for new teams. We analyzed these responses for schools that had added some teams without discontinuing others. To get some specific examples of how schools augmented their athletic program without eliminating teams or severely reducing their funding, we visited four selected colleges and universities that were NCAA member schools. We chose these schools in order to achieve variation in a number of characteristics, including geographic diversity, whether the school was public or private, size of the athletic department budget, whether the school awarded athletic scholarships, whether sports were profitable, and whether the school sponsored football. At each school, we interviewed the athletic director and other staff involved in administering the athletic program and toured the athletic facilities. In addition to the individuals named above, Joel I. Grossman, Elsie M. Picyk, Meeta Sharma, Sharon M. Silas, Stanley G. Stenersen, Jason M. Suzaka, and James P. Wright made key contributions to this report. Gender Equity: Men's and Women's Participation in Higher Education (GAO-01-128, Dec. 15, 2000). Interscholastic Athletics: School District Provide Some Assistance to Uninsured Student Athletes (GAO/HEHS-00-148, Sep. 12, 2000). Intercollegiate Athletics: Comparison of Selected Characteristics of Men's and Women's Programs (GAO/HEHS-99-3R, June 18, 1999). Intercollegiate Athletics: Status of Efforts to Promote Gender Equity (GAO/HEHS-97-10, Oct. 25, 1996). Intercollegiate Athletics: Compensation Varies for Selected Personnel in Athletic Departments (GAO/HRD-92-121, Aug. 19, 1992).
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The number of women participating in intercollegiate athletics at four-year colleges and universities increased substantially between school years 1981-82 and 1998-99, while the number of men participating increased more modestly. The total number of women's teams increased by 3,784 teams, compared to an increase of 36 men's teams. In all, 963 schools added teams and 307 discontinued teams since 1992-93. The two factors cited most often as greatly influencing the decision to add or discontinue teams were the need to address student interest in particular sports and the need to meet gender equity goals and requirements. Schools that discontinued men's teams also found the need to reallocate the athletic budget to other sports. Colleges and universities that discontinued a team typically took three months or less between originating the proposal and making the final decision. Most schools informed members of the campus community of the possibility that the team would be discontinued, and most held meetings with campus groups before making the final decision. Most schools offered to help affected athletes transfer to other schools, and students receiving athletics-related financial aid continued to receive financial aid for at least some period after the team was disbanded. Schools that were able to add one or more teams without discontinuing others used various strategies to increase athletic program revenue and contain costs. Some schools relied on the institution's general fund, while others used private sources and athletic facility rental fees.
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The ISS program began in 1993 with several partner countries: Canada, the 11 member nations of the European Space Agency, Japan, and Russia. From 1994 through 2010, NASA estimates that it directly invested over $48 billion in development and construction of the on-orbit scientific laboratory, the ISS. NASA intended ISS assembly to be complete much sooner than it was. For example, in 1995, NASA expected to ISS assembly to be finished by June 2002, whereas the agency actually completed assembly in 2010. With ISS expected to be in use only through 2015, this slower pace shortened the amount of time NASA had available to take advantage of the significant monetary investment and to fully utilize the station. As a result, the NASA Authorization Act of 2010 required the NASA Administrator to take all actions necessary to ensure the safe and effective operation of the ISS through at least September 30, 2020. The ISS is the largest orbiting man-made object. (See fig. 1) It is composed of about 1 million pounds of hardware, brought to orbit over the course of a decade. The ISS includes (1) primary structures, that is, the external trusses which serve as the backbone of the station and the pressurized modules that are occupied by the ISS crew, and (2) functional systems made up of replaceable units, that is, systems that provide basic functionality such as life support and electrical power that are made of modular components that are replaceable by astronauts on orbit. The ISS was constructed to support three activities: scientific research, technology development, and development of industrial applications. The facilities aboard the ISS allow for ongoing research in microgravity, studies of other aspects of the space environment, tests of new technology, and long-term space operations. The facilities also enable a permanent crew of up to six astronauts to maintain their physical health standards while conducting many different types of research, including experiments in biotechnology, combustion science, fluid physics, and materials science, on behalf of ground-based researchers. Furthermore, the ISS has the capability to support research on materials and other technologies to see how they react in the space environment. NASA planned for the space shuttle to serve as the means of transporting crew, hardware, and supplies to the ISS through the end of the station's life. However, in 2004, President George W. Bush announced his Vision for Space Exploration (Vision) that included direction for NASA to develop new spaceflight systems under the Constellation program to replace the space shuttle as NASA's primary spaceflight system. The Vision also included provisions for NASA to pursue commercial alternatives or providing transportation and other services to support the ISS after 2010.NASA established the Commercial Crew and Cargo Program in 2005 to facilitate the private demonstration of safe, reliable, and cost-effective transportation services and purchase these services commercially. When the Constellation program was cancelled in 2010, the commercial vehicles became NASA's primary focus for providing cargo and crew transportation to the ISS. The success of commercial efforts became even more important in 2010 when Congress authorized the extension of space station operations until at least 2020 from 2015, and the President directed that NASA transition the role of human transportation to low- earth orbit to commercial space companies. The greatest challenge facing NASA is transporting cargo and crew to and from the ISS to make effective use of the ISS. NASA plans to rely on ISS international partner and new commercial launch vehicles to transport cargo and crew to and from the ISS until at least 2020. NASA hopes to begin using new commercial cargo vehicles in 2012 and crew vehicles to transport astronauts to and from the ISS beginning in 2017. NASA's decision to rely on the new commercial vehicles is inherently risky because the vehicles are still in development and not yet proven or fully operational. NASA is relying on 51 flights of international partner and commercial vehicles to transport cargo to the ISS from 2012 through 2020, but agreements for international flights after 2016 are not in place and the commercial vehicles are unproven. NASA has agreements in place with the European and Japanese space consortiums for their respective vehicles--the European Automated Transfer Vehicle (ATV), and the Japanese H-II Transfer Vehicle (HTV)--to conduct cargo resupply missions beginning in 2012 through 2016. The ATV and HTV are unmanned vehicles that have flown to the ISS, and carry such items as hardware and water.of 12 international partner launches--8 from 2012 to 2016 and 4 from 2017 through 2020. NASA does not have agreements in place for international partners to provide cargo services to the ISS beyond 2016. NASA plans to use the ATV for a number of cargo flights through 2014, but no longer anticipates its use after that time. NASA plans to use HTV for a number of cargo flights through 2016, but its negotiations with the Japanese partners for flights beyond 2016 are in their infancy. NASA's current plans anticipate employing a total NASA also plans to use two types of domestic commercial launch vehicles to maintain ISS from 2012 through 2020. Development of these vehicles--the Falcon 9 and Antares initiated effort known as Commercial Orbital Transportation Services. These vehicles are being developed by private industry corporations-- Falcon 9 by SpaceX and Antares by Orbital Sciences Corporation. In late 2008, NASA awarded contracts to both companies to provide cargo transport services to the ISS. Only SpaceX will be able to safely return significant amounts of cargo to earth, such as the results of scientific experiments. NASA anticipates that SpaceX will begin providing that capability in 2012. --was fostered under a NASA- Commercial vehicles are essential to sustaining and utilizing the ISS. As table 1 indicates, SpaceX and Orbital are scheduled to fly 20 (71 percent) of the 28 launches NASA plans through 2016 and follow-on commercial resupply vehicles are expected to fly 19 (83 percent) of the 23 launches from 2017 through 2020. The Antares was previously known as the Taurus II. This plan relies on commercial vehicles meeting anticipated--not proven--flight rates. As we have previously reported, both SpaceX and Orbital are working under aggressive schedules and have experienced delays in completing demonstrations. SpaceX flew its first demonstration mission in December 2010, some 18 months late, because of such factors as design issues and software development. Currently, SpaceX's next demonstration launch to the ISS has been delayed from November 2011 to late April 2012 because of additional testing and resolution of some technical issues such as electromagnetic interference. Likewise, Orbital experienced programmatic changes and developmental difficulties that led to multiple delays of several months' duration. In May 2011 testimony, we noted that Orbital's inaugural demonstration mission had been delayed to December 2011. Currently, this flight has been delayed further to August or September 2012, primarily because of issues related to construction and testing of the launch pad at Wallops Island, Virginia. NASA has made efforts to accommodate delays in commercial vehicle development, including use of the final shuttle flight in July 2011 to pre-position additional ISS spares. However, if the commercial vehicle launches do not occur as planned in 2012, the ISS could lose some ability to function and sustain research efforts due to a lack of alternative launch vehicles to support the ISS and return scientific experiments back to earth. If the international partner agreements and commercial service provider contracts do not materialize as NASA plans for the years beyond 2016, this could lead to a potential cargo shortfall. As we reported in 2011, NASA's strategic planning manifests showed that, when anticipated growth in national laboratory demands and margin for unforeseen maintenance needs are accounted for, the 56 flights NASA was planning for at the time of our review might not cover all of NASA's anticipated needs. These shortfalls amounted to a total of 2.3 metric tons-- approximately the cargo that one SpaceX commercial vehicle will be able to transport to the ISS. As of March 2012, NASA has cut its planned number of flights from 2012 through 2020 from the 56 flights we reported to 51 flights. However, its current ongoing analysis is no longer projecting a cargo shortfall even with the decreased number of flights. According to an ISS program official, cargo estimates, particularly beyond 2013, are for planning purposes and could change as they are updated frequently based on launch vehicle availability and the ISS's need for spares. NASA faces two major challenges in transporting crew to the ISS-- adjusting its acquisition strategy for crew vehicles to match available funding and deciding if and when to purchase crew seats on the Russian Soyuz in case domestic commercial crew vehicles are not available as planned in 2017. In 2010, President Obama directed NASA to transition the role of transporting humans to low-Earth orbit to commercial space companies. Consequently, in 2010 and 2011 NASA entered into funded and unfunded Space Act agreementsdevelop and test key technologies and subsystems to further commercial with several companies to development of crew transportation services. NASA's intent was to encourage private sector innovation and to procure safe, reliable transportation services to the space station at a reasonable price. Under this acquisition approach, NASA plans to procure seats for crew transportation to the ISS from the private sector through at least 2020. In 2011, we reviewed NASA's plans for contracting for additional commercial crew development efforts and found that the agency's approach employed several good acquisition practices including competitive contracting that--if implemented effectively--limit the government's risk. As we also noted in that report, NASA's funding level for fiscal year 2012 is almost 50 percent less than it anticipated when it developed its approach for procuring commercial crew services. Given this funding level, NASA indicated it could not award contracts to multiple providers, which weakened prospects for competition in subsequent phases of the program. The main premise of its procurement approach to control costs--full and open competition for future phases of the program--therefore was likely no longer viable. Without competition, NASA could become dependent on one contractor for developing and providing launch services to the space station. Reliance on a sole source for any product or service increases the risk that the government will pay more than expected, since no competitors exist to help control market prices. As a result of this funding decrease, NASA adjusted its acquisition strategy. The agency now plans to enter into another round of Space Act agreements to further the development of commercial crew vehicles and has delayed the projected purchase of commercial crew transportation until 2017. Additionally, the agency faces another looming challenge--a decision about if and when to purchase crew space on the Russian Soyuz vehicle. NASA will likely need to decide by the end of 2013 whether to purchase additional seats that might be needed beyond 2016 because the lead time for acquiring additional seats on the Soyuz is 3 years. However, in the 2013 time frame, NASA cannot be fully confident that domestic crew efforts will succeed because the vehicles will not yet have entered the test and integration phase of development. Furthermore, the decision to purchase crew seats on the Russian Soyuz is complicated by restrictions found in the Iran, North Korea, and Syria Nonproliferation Act. These restrictions prohibit NASA from making certain payments to Russia in connection with the ISS unless the President makes a determination. NASA currently has a statutory exemption from this restriction that allows certain types of payments, but that exemption expires in 2016. According to NASA officials, the agency has begun working toward resolution of this problem, but the issue is not yet resolved. NASA's greatest challenge to utilizing the ISS for its intended purpose-- scientific research--is inextricably linked with the agency's ability to carry scientific experiments and payloads to and from the ISS. International partner vehicles have much less cargo capacity than the space shuttle did to carry supplies to the ISS and no ability to return research payloads back to earth. The Russian Soyuz vehicle has some ability to transport research payloads back to earth, but the capability is minimal at only 132 pounds. As mentioned previously, SpaceX, however, will provide NASA with the capability to transport research payloads back to earth. Consequently, if the new commercial launch vehicles are not available as planned, the impact on ISS utilization could be dramatic. In the past, NASA officials have told us that the impact of failures or significant delays in developing the commercial cargo capability would be similar to the post-Columbia shuttle disaster scenario,in a "survival mode" and moved to a two-person crew, paused assembly activities, and operated the ISS at a lower altitude to relieve propellant burden. NASA officials stated that if the commercial cargo vehicles are delayed, they would pursue a course of "graceful degradation" of the ISS until conditions improve. In such conditions, the ISS would only conduct minimal science experiments. where NASA operated the ISS Nonetheless, NASA expects scientific utilization to increase since construction of the ISS is complete. The ISS has been continuously staffed since 2000 and now has a six-member crew. The primary objective for the ISS through 2011 was construction, so research utilization was not the priority. Some research was conducted as time and resources permitted while the crew on board performed assembly tasks. NASA projects that it will utilize approximately 50 percent of the U.S. ISS research facilities for its own research. As we reported in 2009, however, NASA's scientific utilization of the ISS is constrained by limited crew time. Limiting factors include the size of the crew on board the station; the necessary division of crew work among many activities that include maintenance, operations, and research; and the need to share research facilities with international partners. Per statutory direction, NASA has opened the remaining facilities to other federal government entities and private industry and is operating the ISS as a national laboratory. As we reported in 2009, NASA may face challenges in the management and operation of ISS National Laboratory research. There is currently no direct analogue to the ISS National Laboratory, and though NASA currently manages research programs at the Jet Propulsion Laboratory and its other centers that it believes possess similar characteristics to other national laboratories, NASA has limited experience managing the type of diverse scientific research and technology demonstration portfolio that the ISS could eventually represent. GAO-10-9. this database when issuing solicitations for funded opportunities to support research payload activities. Since the establishment of CASIS as the management body of ISS research is relatively recent, we have not examined its effectiveness; therefore, it is too early for us to say whether it will be successful in ensuring full scientific utilization of the station as a national laboratory. We recently reported that NASA has an appropriate and reasonable approach in place to determine the spares needed for the ISS as well as to assess ISS structural health and safety. Estimating ISS spares and gauging the structural health and safety of the ISS are not simple challenges. Among the many factors to be assessed are the reliability of key components, NASA's ability to deliver spares to the ISS, the projected life of structures that cannot be replaced, and in-depth analysis of those components and systems that affect safety. While some empirical data exist, because the ISS is a unique facility in space, assessing its extended life necessarily requires the use of sophisticated analytical techniques and judgments. NASA's approach to determining necessary spare parts for the ISS relies on a statistical process. The statistical process and methodology being used to determine the expected lifetimes of replacement units is a sound and commonly accepted approach within the risk assessment community that considers both manufacturers' predictions and the systems' actual performance. NASA also has a reasonable process for establishing performance goals for various functions necessary for utilization and determining through modeling whether available spares are sufficient to meet goals through 2020, but the rationale for establishing performance goals has not been systematically documented. NASA is also using reasonable analytical tools to assess structural health and determine whether ISS hardware can operate safely through 2020. NASA currently anticipates that--with some mitigation--the ISS will remain structurally sound for continued operations through 2020. NASA also is using reasonable methodologies to identify replacement units and other hardware that could cause serious damage to the ISS if they were to fail. Through 2015, NASA plans to develop methods to mitigate issues identified and expects to begin implementing corrective actions as plans are put in place. In summary, although NASA has done a credible job of ensuring that the ISS can last for years to come, the question that remains is whether NASA will be able to service the station and productively use it for science. Routine launch support is essential to both, but the road ahead depends on successfully overcoming several complex challenges, such as technical success, funding, international agreements, and management and oversight of the national laboratory. Finally, if any of these challenges cannot be overcome, it will be contingent upon NASA to ensure that all alternatives are explored--in a timely manner--to make full use of the nation's significant investment in ISS. Chairman Hall, Ranking Member Johnson, and Members of the Committee, this concludes my prepared statement. I would be pleased to respond to any questions that you may have at this time. For questions about this statement, please contact me at (202) 512-4841 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this testimony. Individuals making key contributions to this statement include Shelby S. Oakley, Assistant Director; John Warren, Tana Davis, and Alyssa Weir. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.
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Construction of the International Space Station (ISS) required dedication and effort on the part of many nations to be successful. Further, the funding necessary to accomplish this task was significant, with the United States alone directly investing nearly $50 billion in its development. As construction of the on-orbit laboratory is complete, now is the time for the United States and its partners to make use of this investment and recently, Congress took steps to extend the life of the ISS until at least 2020. GAO has cautioned for years that NASA should ensure it has a capability to access and utilize the space station following retirement of the space shuttle in 2011. We have highlighted the challenges associated with transporting cargo and crew to and from the ISS, as well as the difficulties NASA faces in ensuring the ISS supports its purpose of scientific research and in safely operating the station. Some risks have been realized. For example, commercial vehicles are significantly behind schedule--with the first launch to the space station planned for 2012. GAO's statement today will focus on the progress NASA has made and the challenges the agency faces in accessing, ensuring full utilization of, and sustaining the ISS. To prepare this statement, GAO relied on prior relevant work on the ISS and NASA's commercial cargo and crew efforts and conducted a limited amount of additional work to update planned flight information. NASA plans to use international partner and new domestic commercial launch vehicles to access, utilize, and sustain the International Space Station from 2012 through 2020. However, the agency faces challenges in transporting cargo and crew to the ISS as well as ensuring the station is fully utilized. NASA's decision to rely on the new commercial vehicles to transport cargo starting in 2012 and to transport crew starting in 2017 is inherently risky because the vehicles are not yet proven and are experiencing delays in development. Further, NASA does not have agreements in place for international partners to provide cargo services to the ISS beyond 2016. The agency will also face a decision regarding the need to purchase additional seats on the Russian Soyuz vehicle beyond 2016, likely before commercial vehicles have made significant progress in development, given the three-year lead time necessary for acquiring a seat. This decision is further complicated because restrictions prohibit NASA from making certain payments to Russia in connection with the ISS unless the President makes a determination. Further, NASA currently expects to transport all cargo needed by the ISS in 51 flights through 2020, but if international partner agreements and commercial service contracts do not materialize as the agency plans for the years beyond 2016, the situation could lead to a potential cargo shortfall. If NASA can access the station, it will next be challenged with fully utilizing the ISS national laboratory for its intended purpose--scientific research. To take steps to meet this challenge and consistent with a 2009 GAO recommendation, in 2011 NASA selected an organization to centrally oversee ISS national laboratory research decision-making. It is too soon, however, to determine whether this organization is ensuring full scientific utilization of the ISS. Regardless of the efforts of the management body, as GAO noted in a 2009 report, constraints on crew time for conducting science could also impact full utilization. If NASA can overcome its challenges related to accessing the station, it has reasonable approaches in place for estimating spare parts and assessing the structural health of the space station. These approaches provide NASA with increased assurance that the agency will have sufficient spares and will put mitigations in place to effectively and safely utilize the space station.
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Distance education is not a new concept, but in recent years, it has assumed markedly new forms and greater prominence. Distance education's older form was the correspondence course--a home study course generally completed by mail. More recently, distance education has increasingly been delivered in electronic forms, such as videoconferencing and the Internet. Some of these newer forms share more features of traditional classroom instruction. For example, students taking a course by videoconference generally participate in an actual class in which they can interact directly with the instructor. Many postsecondary schools have added or expanded electronically-based programs, so that distance education is now relatively common across the entire postsecondary landscape. We estimate that in the 1999-2000 school year, about 1.5 million of the 19 million students involved in postsecondary education took at least one electronically transmitted distance education course. Education reports that an estimated 84 percent of four-year institutions will offer distance education courses in 2002. While newer forms of distance education may incorporate more elements of traditional classroom education than before, they can still differ from a traditional educational experience in many ways. For example, Internet- based distance education, in which coursework is provided through computer hookup, may substitute a computer screen for face-to-face interaction between student and instructor. Chat rooms, bulletin boards, and e-mail become common forms of interaction. Support services, such as counseling, tutoring, and library services, may also be provided without any face-to-face contact. As the largest provider of student financial aid to postsecondary students (an estimated $52 billion in fiscal year 2002), the federal government has a substantial interest in the quality of distance education. Under Title IV of the HEA, the federal government provides grants, work-study wages, and student loans to millions of students each year. For the most part, students taking distance education courses can qualify for this aid in the same way as students taking traditional courses. Differences between distance education and traditional education pose challenges for federal student aid policies and programs. For example, in 1992, the Congress added requirements to the HEA to deal with problems of fraud and abuse at correspondence schools--the primary providers of distance education in the early 1990's. These requirements placed limitations on the use of federal student aid at these schools due to poor quality programs and high default rates on student loans. Such problems demonstrate why it is important to monitor the outcomes of such forms of course delivery. In monitoring such courses, the federal government has mainly relied on the work of accrediting agencies established specifically for providing outside reviews of an institution's educational programs. Our analysis of the NPSAS showed that the estimated 1.5 millionpostsecondary students who have taken distance education courses have different demographic characteristics when compared with the characteristics of postsecondary students who did not enroll in distance education. These differences included the following. Distance education students are older. As figure 1 demonstrates, students who took all their courses through distance education tended to be older, on average, when compared to other students. Distance education students are more likely to be married. Figure 2 shows that graduate and undergraduate students that took all of their courses through distance education are more likely to be married than those taking no distance education courses. Undergraduates taking distance education courses are more likely to be female. Women represented about 65 percent of the undergraduate students who took all their courses through distance education. In contrast, they represented about 56 percent of undergraduates who did not take a distance education course. For graduate students, there was no significant difference in the gender of students who took distance education courses and those who did not. Distance education students are more likely to work full-time. As figure 3 shows, a higher percentage of distance education students work full-time when compared to students who did not take any distance education courses. This difference was greatest among graduate students where about 85 percent of the students that took all of their courses through distance education worked full-time compared to 51 percent of students who did not take any distance education courses. Distance education students are more likely to be part-time students. As might be expected, distance education students tend to go to school on a part-time basis. For undergraduates, about 63 percent of the students who took all their courses through distance education were part-time students while about 47 percent of the students who did not take any distance education courses were part-time students. This trend also occurred among graduate students (about 79 percent of those who took their entire program through distance education were part-time students compared with about 54 percent of those who did not take any distance education courses). Distance education students have higher average incomes. Figure 4 shows that in general, graduate students that took distance education courses tended to have higher average incomes than students that did not take any distance education courses. We found similar patterns for undergraduate students. In addition to the demographic characteristics of distance education students, NPSAS provides certain insights on the characteristics of institutions that offer distance education programs. Among other things, it provides data on the modes of delivery that institutions used to provide distance education and the types of institutions that offered distance education. Public institutions enrolled the most distance education students. For undergraduates, public institutions enrolled more distance education students than either private non-profit or proprietary institutions. Of undergraduates who took at least one distance education class, about 85 percent did so at a public institution (about 79 percent of all undergraduates attended public institutions), about 12 percent did so at private non-profit institutions (about 16 percent of all undergraduates attended private non-profit institutions), and about 3 percent did so at proprietary schools (about five percent of all undergraduates attended proprietary schools). For graduate students, public institutions also enrolled more--about 63.5 percent--distance education students than private non-profit or proprietary schools (32 and 4.5 percent, respectively). About 58 percent, 40 percent, and two percent of all graduate students attended public institutions, private non-profit, and proprietary schools, respectively. Institutions used the Internet more than any other mode to deliver distance education. Postsecondary institutions used the Internet more than any other mode to deliver distance education. At the three main types of institutions (public, private non-profit, and proprietary), more than half of the undergraduate students who took at least one distance education course did so over the Internet. Over 58 percent of undergraduate distance education students at public institutions used the Internet and over 70 percent of undergraduate distance education students at private non-profit and proprietary schools also used the Internet. Institutions that offered graduate programs also used the Internet as the primary means of delivering distance education courses. For graduate students who took at least one distance education class, 65 percent of students at public institutions used the Internet, compared with about 69 percent of students at private non-profit institutions, and about 94 percent of students at proprietary institutions. Institutions enrolled the most distance education students in subjects related to business, humanities, and education. For undergraduates, about 21 percent of students who took their entire program through distance education studied business and 13 percent studied courses related to the humanities. This is similar to patterns of students who did not take any distance education classes (about 18 percent studied business and about 15 percent studied humanities). For graduate students, about 24 percent of students who took their entire program through distance education enrolled in courses related to education and about 19 percent studied business. Again, this is similar to patterns of graduate students who did not take any distance education classes (about 23 percent studied education and about 17 percent studied business). Federal student aid is an important consideration for many students who take distance education courses, although not to the same degree as students in more traditional classroom settings. Students who took their entire program through distance education applied for student aid at a lower rate than students who did not take any distance education courses (about 40 percent compared with about 50 percent), and fewer also received federal aid (about 31 percent compared with about 39 percent). Nonetheless, even these lower percentages for distance education represent a substantial federal commitment. A number of issues related to distance education and the federal student aid program have surfaced and will likely receive attention when the Congress considers reauthorization of the HEA or when Education examines regulations related to distance education. Among them are the following: "Fifty percent" rule limits aid to correspondence and telecommunication students in certain circumstances. One limitation in the HEA--called the "50 percent rule"--involves students who attend institutions that provide half or more of their coursework through correspondence or telecommunications classes or who have half or more of their students enrolled in such classes. When institutions exceed the 50 percent threshold, their students become ineligible to receive funds from federal student aid programs. As distance education becomes more widespread, more institutions may lose their eligibility. Our initial work indicates about 20 out of over 6,000 Title IV-eligible institutions may face this problem soon or have already exceeded the 50 percent threshold. Without some relief, the students that attend these institutions may become ineligible for student aid from the federal government in the future. As an example, one institution we visited already offers more than half its courses through distance education; however, it remains eligible for the student aid program because it has received a waiver from Education's Distance Education Demonstration Program. Without a change in the statute or a continuation of the waiver, more than 900 of its students will not be eligible for student aid from the federal government in the future. To deal with this issue, the House passed the Internet Equity and Education Act of 2001 (H.R. 1992) in October 2001. The House proposal allows a school to obtain a waiver for the 50 percent rule if it (1) is already participating in the federal student loan program, (2) has a default rate of less than 10 percent for each of the last three years for which data are available, and (3) has notified the Secretary of Education of its election to qualify for such an exemption, and has not been notified by the Secretary that such election would pose a significant risk to federal funds and the integrity of Title IV programs. The Senate is considering this proposal. Federal student aid policies treat living expenses differently for some distance education students. Currently, students living off-campus who are enrolled in traditional classes or students enrolled in telecommunications classes at least half-time can receive an annual living allowance for room and board costs of at least $1,500 and $2,500, respectively. Distance learners enrolled in correspondence classes are not allowed the same allowance. Whether to continue to treat these distance education students differently for purposes of federal student aid is an open policy question. Regulations Relating to "Seat" Time. Institutions offering distance education courses that are not tied to standard course lengths such as semesters or quarters have expressed difficulty in interpreting and applying Education's "seat rules," which are rules governing how much instructional time must be provided in order for participants to qualify for federal aid. In particular, a rule called the "12-hour rule" has become increasingly difficult to implement. This rule was put in place to curb abuses by schools that would stretch the length of their educational programs without providing any additional instruction time. Schools would do this to maximize the amount of federal aid their students could receive and pass back to the school in the form of tuition and fees. The rule defined each week of instruction in a program that is not a standard course length as 12 hours of instruction, examination, or preparation for examinations. Some distance education courses, particularly self-paced courses, do not necessarily fit this model. Further, the rule also produces significant disparities in the amount of federal aid that students receive for the same amount of academic credit, based simply on whether the program that they are enrolled in uses standard academic terms or not. In August 2002, Education proposed replacing the 12-hour rule with a "one- day rule," which would require one day of instruction per week for any course. This rule currently applies to standard term courses, and as proposed, it would cover, among other things, nonstandard term courses. Education plans to publish final regulations that would include this change on or before November 1, 2002. Some institutions that might provide nonstandard distance education courses remain concerned, however, because Education has not identified how the "one-day rule" will be interpreted or applied. In considering changes in policy that are less restrictive but that could improve access to higher education, it will be important to recognize that doing so may increase the potential for fraud if adequate management controls are not in place. While our work examining the use of distance education at Minority Serving Institutions (MSIs) is not yet completed, the preliminary data indicate that MSIs--and more specifically, minority students at MSIs-- make less use of distance education than students at other schools. NPSAS includes data for a projectable number of students from Historically Black Colleges and Universities and Hispanic Serving Institutions, but it only includes one Tribal College. We plan to send a questionnaire to officials at all three MSI groups to gain a better understanding of their use of distance education technology. In the meantime, however, the available NPSAS data showed the following: Students at Historically Black Colleges and Universities tend to use distance education to a lesser extent than non-MSI students. About 6 percent of undergraduate students at Historically Black Colleges and Universities enrolled in at least one distance education course and about 1.1 percent took their entire program through distance education. These rates are lower than students who took at least one distance education course or their entire program through distance education at non-MSIs. Hispanic students attending Hispanic Serving Institutions use distance education at a lower rate than their overall representation in these schools. About 51 percent of the undergraduates at Hispanic Serving Institutions are Hispanic, but they comprise only about 40 percent of the undergraduate students enrolled in distance education classes. This difference is statistically significant. Similarly, our analysis also shows that the greater the percentage of Hispanic students at the institution, the lower the overall rate of distance education use at that school. Since NPSAS includes data from only one Tribal College, we were unable to develop data on the extent that Tribal College students use distance education. However, our visits to several Tribal Colleges provide some preliminary insights. Our work shows that distance education may be a viable supplement to classroom education at many Tribal Colleges for a number of reasons. Potential students of many Tribal Colleges live in communities dispersed over large geographic areas--in some cases potential students might live over a hundred miles from the nearest Tribal College or satellite campus--making it difficult or impossible for some students to commute to these schools. In this case, distance education is an appealing way to deliver college courses to remote locations. Additionally, officials at one Tribal College told us that some residents of reservations may be place-bound due to tribal and familial responsibilities; distance education would be one of the few realistic postsecondary education options for this population. Also important, according to officials from some Tribal Colleges we visited, tribal residents have expressed an interest in enrolling in distance education courses. The HEA focuses on accreditation--a task undertaken by outside agencies--as the main tool for ensuring quality in postsecondary programs, including those offered through distance education. The effectiveness of these accreditation reviews, as well as Education's monitoring of the accreditation process, remains an important issue. To be eligible for federal funds, a postsecondary institution or program must be accredited by an agency recognized by Education as a reliable authority on quality. Education recognizes 58 separate accrediting agencies for this purpose, of which only 38 are recognized for Title IV student aid purposes. The 58 accrediting agencies operate either regionally or nationally, and they accredit a wide variety of institutions or programs, including public and private, non-profit two-year or four-year colleges and universities; graduate and professional programs; proprietary vocational and technical training programs; and non-degree training programs. Some accrediting agencies accredit entire institutions and some accredit specialized programs, departments, or schools that operate within an institution or as single purpose, freestanding institutions. The HEA and regulations issued by Education establish criteria under which Education will recognize an accreditation agency as a reliable authority regarding the quality of education. The HEA states that accrediting agencies must assess quality in 10 different areas, such as curriculum, student achievement, and program length. Under the HEA, an accrediting agency is required to include distance education programs when assessing quality. In doing so, an accrediting agency must consistently apply and enforce its standards with respect to distance education programs as well as other educational programs at the institution. Our analysis in this area is not as far along as it is for the other topics we are discussing today. We plan to review a number of accreditation efforts to determine the way in which accrediting agencies review distance education programs. We expect that our work will address the following issues: How well accrediting agencies are carrying out their responsibilities for reviewing distance education. The HEA does not contain specific language setting forth how distance learning should be reviewed. Instead, it identifies key areas that accrediting agencies should cover, including student achievement and outcomes, and it relies on accrediting agencies to develop their own standards for how they will review distance education programs. We will look at how accrediting agencies are reviewing distance education programs and the standards that are being used. How well Education is carrying out its responsibilities and whether improvements are needed in Education's policies and procedures for overseeing accrediting agencies. Under the HEA, Education has authority to recognize those agencies it considers to be reliable authorities on the quality of education or training provided. Accrediting agencies have an incentive to seek Education's recognition because without it, students at the institutions they accredit would not be eligible to participate in federal aid programs. We will conduct work to identify what improvements, if any, are needed in Education's oversight of accrediting agencies. In closing, distance education has grown rapidly over the past few years and our work indicates that distance learning might present new educational opportunities for students. Congress and the Administration need to ensure that changes to the HEA and regulations do not increase the chances of fraud, waste, or abuse to the student financial aid programs. At the request of this Committee, and members of the House Committee on Education and the Workforce, we will continue our study of the issues that we have discussed today. Mr. Chairman, this concludes my testimony. I will be happy to respond to any questions you or other members of the Committee may have.
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Increasingly, the issues of distance education and federal student aid intersect. About one in every 13 postsecondary students enrolls in at least one distance education course, and the Department of Education estimates that the number of students involved in distance education has tripled in just 4 years. As the largest provider of financial aid to postsecondary students, the federal government has a considerable interest in distance education. Overall, 1.5 million out of 19 million postsecondary students took at least one distance education course in the 1999-2000 school year. The distance education students differ from other postsecondary students in a number of respects. Compared to other students, they tend to be older and are more likely to be employed full-time while attending school part-time. They also have higher incomes and are more likely to be married. Many students enrolled in distance education courses participate in federal student aid programs. As distance education continues to grow, several major aspects of federal laws, rules, and regulations may need to be reexamined. Certain rules may need to be modified if a small, but growing, number of schools are to remain eligible for student aid. Students attending these schools may become ineligible for student aid because their distance education programs are growing and may exceed statutory and regulatory limits on the amount of distance education an institution can offer. In general, students at minority serving institutions use distance education less extensively than students at other schools. Accrediting agencies play an important role in reviewing distance education programs. They, and Education, are "gatekeepers" with respect to ensuring quality at postsecondary institutions--including those that offer distance education programs.
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Surveillance radars allow air traffic controllers to manage aircraft operating in the airspace around airports and to expedite the flow of air traffic into and out of airports by reducing the separation between aircraft. Currently, radar coverage for the Cherry Capital Airport is provided by a long-range surveillance radar in Empire, Michigan, 20 miles away from the airport. Although the radar is located near the Cherry Capital Airport, its signals are transmitted over 300 miles away to the Air Route Traffic Control Center in Minneapolis, where the controllers there are responsible for using instrument flight or radar rules to control the aircraft approaching and departing the airport outside a 5-mile radius of the airport. Controllers at the Cherry Capital Airport use visual flight rules or visual procedures to manage aircraft within the 5-mile radius during the normal tower operating hours from 7 a.m. to 10 p.m. However, aircraft are allowed to take off and land at the airport when the tower is closed. FAA conducted a study in 1994 to assess the benefits and costs of installing a surveillance radar at the airport. The results showed that the potential benefits of installing a radar exceeded the costs. Therefore, FAA concluded that the airport qualified for a radar. Because no radar was available and funds were unavailable to purchase a new radar, FAA added the airport to a waiting list of other qualifying airports. At the request of Members of Congress, FAA conducted another benefit-cost study in 1996 to determine whether the airport still qualified for a radar. The results of that study showed that the costs exceeded the benefits, thereby disqualifying the airport for a radar, and FAA removed the airport from its waiting list of qualifying airports. At our request, FAA conducted another benefit-cost study in 1997 to determine whether the airport qualified for a surveillance radar. That study's results also showed that the costs exceeded the benefits and that the airport did not qualify for a radar. FAA uses a multifaceted process to determine which airports should get surveillance radars. (See fig. 1.) First, FAA officials at the airport identify an operational need--such as the need to reduce delays to aircraft taking off and landing and the risks of midair and terrain collisions--that they believe a surveillance radar would satisfy. They then submit a written request to the appropriate FAA regional office. FAA airport officials identify need? Did regional FAA officials validate airports? Did airport meet the benefit-cost ratio of 1.0 or greater? Airport no longer considered for radar needs? available? Surveillance radar installed Second, FAA regional officials review the request to determine whether an operational need exists, assess the airport's need relative to those of other airports in the region, and prioritize all airports within the region that have valid radar needs. If regional officials determine that a need exists, the request is forwarded to FAA headquarters. They also include an estimate of the equipment and annual operating costs in the region's annual budget. If they determine that an operational need does not exist, the airport is no longer considered a potential candidate for a surveillance radar. Third, FAA headquarters officials use the agency's Investment Criteria for Airport Surveillance Radar, dated May 1983, to determine whether an airport identified by the regional officials as a candidate for a radar meets FAA's cost-effectiveness criteria. Specifically, the officials conduct a detailed study using site-specific air traffic data, along with estimated equipment and operating costs, to assess the potential benefits and costs for installing a radar at the airport. If the benefits exceed the costs, further consideration is given to the request. If the costs exceed the benefits--that is, if the benefit-cost ratio is less than 1.0--the airport is no longer considered a potential candidate for a surveillance radar. Fourth, FAA headquarters officials validate the operational needs by considering, among other things, the level of air traffic operations at the airport and the complexity of its airspace compared with those of other airports nationwide. If the officials conclude that a radar is needed, the request is approved. If FAA headquarters cannot validate the operational needs, the airport is no longer considered a potential candidate for a surveillance radar. Finally, if a radar is available from another airport where an upgraded radar has been installed, or if funds are available to purchase a new radar, the radar is acquired and installed at the airport. Otherwise, the airport is placed on a waiting list. Once radars or funds become available, however, FAA must determine whether the airports on the waiting list still meet its cost-effectiveness criteria by using the latest air traffic operations data. Airports that do not meet the criteria are no longer considered candidates for a surveillance radar. In addition to the radar requests initiated by FAA airport and regional officials, the Congress may mandate that a surveillance radar be installed at an airport. If the Congress designates funds with the mandate, the request does not have to follow FAA's decision-making process. If the Congress does not designate funds, however, the request must follow the process, according to FAA headquarters officials. The Congress has mandated that FAA install surveillance radars at eight airports. These airports are included in appendix I. Although FAA's decision-making process was in place in 1994, agency officials did not follow it before concluding that the Cherry Capital Airport qualified for a radar. For example, after conducting the 1994 benefit-cost study and determining that the airport met FAA's cost-effectiveness criteria, agency officials prematurely concluded that Cherry Capital qualified for a radar. They did not assess the airport's operational needs relative to the needs of other airports or consider the radar coverage already provided by the long-range surveillance radar nearby in Empire, Michigan. According to FAA officials, if these factors had been considered, the Cherry Capital Airport would not have qualified for a surveillance radar. The officials also told us that even if the airport had a benefit-cost ratio of 1.0 or greater, it still would not get a surveillance radar because other airports have greater operational needs and the airport already receives better radar coverage than many airports that have surveillance radars on site. They added that if a radar was installed at the airport, its signal would most likely be transmitted to another air traffic control facility where other controllers would be responsible for controlling aircraft approaching and departing the Cherry Capital Airport, an arrangement similar to the present one at the airport. In accordance with its decision-making process, FAA used its investment criteria to identify the factors to consider when conducting the 1994, 1996, and 1997 benefit-cost studies for the Cherry Capital Airport. The officials calculated benefit-cost ratios of 1.66 in 1994, 0.68 in 1996, and 0.78 in 1997, which resulted in the airport meeting FAA's cost-effectiveness criteria in 1994, but not in 1996 and 1997. We found that an overstatement of air traffic growth was the primary reason the airport met the investment criteria in 1994. FAA officials considered the potential efficiency and safety benefits, estimated the equipment and annual operating costs, and projected air traffic operations when conducting the benefit-cost studies. To calculate the efficiency and safety benefits of installing a surveillance radar, FAA considered travelers' time saved because of the potential reductions in the delays to aircraft and the lives saved and injuries avoided because of the reductions in the risks of midair and terrain collisions. To compute the benefits represented by reduced delays to aircraft and collision risks, FAA used projections of air traffic operations at the airport, the average time required for aircraft takeoffs and landings, and the percentage of time that weather conditions at the airport would require controllers to use radar to manage the air traffic. To compute the equipment and annual operating costs, FAA estimated the costs for the acquisition and installation of the radar and the annual costs for controller and support staff salaries, training, utilities, and for maintenance. The benefits and the annual operations and maintenance costs were estimated over a 15-year period and discounted to the present time using the discount rate published by the Office of Management and Budget. FAA used both national and site-specific data to compute the benefits and costs. For example, the values for travelers' time saved, lives saved, and injuries avoided were national data published annually by the Department of Transportation. The estimated costs for acquiring the radar were FAA's purchase price for the surveillance radar plus other necessary equipment and personnel training costs. The projections of air traffic operations were specific to the Cherry Capital Airport. Although the results of benefit-cost studies depend on several factors, FAA officials told us that the projections of air traffic operations--particularly aircraft operations controlled by instrument flight or radar rules--were the most critical factors because they affect the level of benefits that would be achieved as a result of having a surveillance radar at the airport. They commented that there was a direct correlation between the projections of air traffic operations and the benefits--as air traffic increases, so do the potential for delays to aircraft and the risks of collision, and, thus, the benefits of installing a radar at the airport also increase. In particular, we found that FAA's criteria give more weight to aircraft, such as air carriers and commuter aircraft, that carry the largest number of passengers because the higher the number of passengers, the greater the potential efficiency and safety benefits to be achieved from saving travelers' time and avoiding collisions that could cause injuries and deaths. Therefore, according to FAA headquarters officials, the potential efficiency and safety benefits calculated for having a surveillance radar at the Cherry Capital Airport, which is mainly a general aviation airport, would be less than those calculated for airports that service a larger number of commercial air carriers and commuter aircraft. FAA considered the installation of the same type of surveillance radar in all three of its studies on the Cherry Capital Airport. We found, however, that the estimated equipment costs in the 1997 study were over $8 million higher than the costs included in the other studies. Specifically, the equipment costs in the 1994 and 1996 studies totaled about $12.9 million and $13.5 million, respectively; whereas, the equipment costs totaled $22 million in the 1997 study. In contrast, the annual operating costs in the 1994 and 1996 studies totaled $611,000 and $677,000, respectively, compared with $167,000 in the 1997 study. FAA could not explain why such significant differences existed in the cost figures or provide documentation to support the costs included in the 1994 and 1996 studies. They did, however, provide support for the costs included in the 1997 study. FAA headquarters officials speculated that the costs differed because the 1994 and 1996 studies only included the costs for a surveillance radar and not the costs for the necessary auxiliary equipment. To develop the air traffic projections in the 1996 and 1997 studies, FAA officials considered the historical air traffic growth at the Cherry Capital Airport and the mix of aircraft using the airport. As shown in table 1, they assumed that air traffic at the airport would grow, on average, about 1 percent annually. The FAA officials were uncertain about how the higher projections in the 1994 study were developed. They told us that the original projections were probably based on historical data, but were adjusted upward based on input from headquarters, regional, and district officials to reflect a 4.2-percent projected average annual growth rate, also shown in table 1. We could not determine the basis for the adjustments because FAA did not maintain supporting documentation. Nevertheless, FAA headquarters and regional officials, as well as the FAA officials and controllers at the Cherry Capital Airport, all agreed that the 1994 projections were overstated. For the 1996 and 1997 studies, FAA based its projections on actual air traffic growth at the airport over the 10-year periods preceding the 1996 (1986 through 1995) and 1997 (1987 through 1996) studies. As shown in table 2, the actual annual growth of air traffic from fiscal year 1986 through fiscal year 1996 ranged from an increase of 22.5 percent to a decrease of about 6.5 percent. According to FAA officials, the large increase in air traffic in fiscal year 1987 was due to the introduction of new air carrier service at the airport. Because the officials did not expect such a large increase in air traffic to reoccur in future years, they excluded the surge in air traffic in fiscal year 1987 from the air traffic projections in the 1996 and 1997 studies. Therefore, the resulting average annual growth rate used in the 1996 and 1997 studies was about 1 percent. Also, as illustrated in tables 1 and 2, the 128,704 projected air traffic operations included in the 1996 study more closely tracked the 128,419 actual operations that occurred in 1996 than the 148,000 operations projected in the 1994 study. Even so, the 123,957 actual air traffic operations reported for fiscal year 1997 were considerably less than the 152,000 projected in the 1994 study, the 130,078 projected in the 1996 study, and the 130,318 projected in the 1997 studies. Since air traffic projections were the most critical factors influencing the results of the benefit-cost studies for the Cherry Capital Airport, we requested air traffic projections developed by the state of Michigan and Traverse City transportation planning officials to determine what impact their projections would have had on the results of FAA's 1997 study. We found, however, that the state and local officials relied routinely on FAA's air traffic projections and, therefore, that using their projections would not have had any impact on the 1997 study results. We did, however, identify another set of air traffic projections developed in 1996 (based on 1994 actual air traffic data), which had been used by two consulting firms. The firms used the projections in studies conducted for the Michigan Department of Transportation and the Northwestern Regional Airport Commission to identify facility improvements needed at the Cherry Capital Airport, such as expanding the terminal building and parking areas. The projections the firms used were based on a higher annual air traffic growth rate and a higher baseline of air traffic operations than FAA's projections. Whereas FAA projected an average annual growth rate of 1 percent in its 1996 and 1997 studies, the firms projected a growth rate of about 1.5 percent. Also, FAA's actual air traffic count of 124,000 for 1994 included only aircraft operations that were managed by the Cherry Capital and the Minneapolis controllers. The firms added 18,000 operations to FAA's air traffic count by including an estimate of aircraft operations that were not managed by the controllers because they occurred at Cherry Capital when the tower was closed. While the firms' count might have been appropriate for determining facility needs, FAA's count was more appropriate for determining radar needs. Nonetheless, we asked FAA to conduct a benefit-cost study using the firms' projections to determine the impact on the 1997 study. When the air traffic projections developed by the firms were used, they produced a benefit-cost ratio of 1.35, which exceeded the minimal threshold for meeting FAA's cost-effectiveness criteria to qualify for a surveillance radar. However, as mentioned previously, FAA officials told us that even if the airport were to achieve a benefit-cost ratio of 1.0 or greater, it still would not get a surveillance radar because other airports have greater operational needs and the airport already receives better radar coverage than many other airports that have surveillance radars. In response to the safety concerns raised by Members of Congress and controllers at the Cherry Capital Airport, such as the greater risk of aircraft collisions that results from increased air traffic, FAA installed a Terminal Automated Radar Display and Information System (TARDIS) in 1997 to help the controllers locate and identify aircraft approaching or departing the airspace around the airport. The TARDIS is a commercial, off-the-shelf system that consists of a computer, monitor, and software costing about $23,000. Although the system displays data, such as aircraft speed and altitude, received directly from the surveillance radar in Empire, Michigan, the Cherry Capital controllers can only use it as a visual aid and cannot use it to control or separate aircraft. According to FAA regulations, the Cherry Capital Airport controllers can only use visual procedures or visual flight rules to track aircraft. Controllers at the Cherry Capital Airport told us that the TARDIS has helped them manage air traffic better, but that they have had difficulty using it. They said that, on occasion, the information the TARDIS has displayed on aircraft identification and altitude, for example, has overlapped and has sometimes been unreadable. FAA headquarters and regional officials agreed that the data display problem exists occasionally but said that it is not unique to the TARDIS at the Cherry Capital Airport. They commented that the problem does not compromise safety at the airport because the additional equipment is only intended to be used as a visual aid and not to control air traffic. Moreover, the Minneapolis controllers use the radar in Empire to track aircraft flying under instrument flight rules until control of the aircraft is switched, via radio contact, to the Cherry Capital controllers. The switch usually occurs within a 5- or 10-mile radius of the airport. Also, FAA's regulations require that pilots contact the Cherry Capital controllers prior to entering the airport's airspace. According to the officials, the TARDIS provides two benefits to the Cherry Capital controllers--enhanced traffic monitoring capabilities and data directly from the radar in Empire. Even if the automated system at the Minneapolis facility fails, the TARDIS would still receive data from the Empire radar. Beginning in 1999 and continuing through 2004, FAA plans to retire all of the older airport surveillance radars (ASR), specifically ASR-7 and ASR-8, which were installed in the 1960s and 1970s. These radars, currently located at 101 airports, will be replaced as part of FAA's efforts to modernize its air traffic control system with new, technologically advanced ASR-11 radars, which cost over $5 million each. During our review, we found that 75 of the 101 airports scheduled to have their radars upgraded had fewer total air traffic operations than the Cherry Capital Airport in 1996 and that FAA will spend well over $375 million to purchase replacement radars for these airports. This cost does not include the additional expenditures for auxiliary equipment and for the modifications to airport infrastructure required for the effective operation of the radars. We noted that FAA officials routinely conduct benefit-cost studies using air traffic operations as one of the critical factors in deciding whether it would be cost-effective to install surveillance radars at airports without radars. Yet FAA officials did not conduct similar studies to determine whether it would be cost-beneficial to replace all of the existing ASR-7 and ASR-8 radars, to prioritize replacement of the radars, or to assess whether the circumstances that initially warranted installation of the radars at the airports had changed over the years. The officials agreed that the results of benefit-cost studies would be a relevant factor in deciding whether to install the replacement radars. But they said they have no plans to conduct such studies because they believe that it would be very difficult to discontinue radar operations at an airport found not to qualify because the public's perception would be that safety was being reduced, even if safety was not compromised and other circumstances warranted the discontinuance of radar operations. FAA's past practice has been that once an airport gets a radar, it qualifies for a replacement radar regardless of changes in the air traffic or the other circumstances that initially warranted the radar. Although FAA has criteria for discontinuing radar operations, the agency has never done so. FAA officials also explained that there may be other important reasons, besides cost-effectiveness, for replacing or installing a radar at an airport. These reasons include an airport's location; the complexity of the airspace surrounding an airport; the capacity of an airport to serve multiple satellite airports; the capacity of an airport to provide relief capacity to hub or major airports on an as needed basis; and national security. We asked FAA for documentation of the operational needs that showed why the radars were installed initially at the 75 airports with fewer total air traffic operations than the Cherry Capital Airport that are scheduled to have their radars replaced. In response, FAA headquarters officials contacted the airports to obtain information on the rationale for installing the radars. Among the reasons FAA provided were that some of the airports provide radar services to the Air National Guard, military bases, and multiple satellite airports or serve as alternates for major airports or that the radars are the only sources for radar coverage in mountainous areas. FAA also cited congressional interest as a reason for installing surveillance radars at some airports. We were unable to verify the validity of FAA's rationales because FAA did not have records dating back to the 1960s and 1970s to document why the radars were installed. FAA's information, however, shows that at some of the airports, the circumstances that originally justified the installation of radars no longer exist. See appendix II for a list of the 75 airports and more details about FAA's justifications for the initial installation of the radars in 1960s and 1970s. Although installing and retaining radars at some of the airports with fewer total air traffic operations than the Cherry Capital Airport might be justified, conducting benefit-cost studies and revalidating the operational needs would ensure that (1) radars are installed or replaced first at the airports that have the greatest needs and (2) FAA is not spending millions of dollars to replace radars when continued operation of the existing radars might not be justified. Since FAA already has a process in place for conducting benefit-cost studies, we believe that the time and costs associated with conducting similar studies to determine the effectiveness of replacing existing radars would be minimal. An overstatement of projected air traffic growth was the primary reason the Cherry Capital Airport met FAA's cost-effectiveness criteria in 1994, and agency officials prematurely concluded that the airport qualified for a surveillance radar. FAA officials expected a higher rate of growth for air traffic at the airport in future years, and as a result, the potential benefits of installing a radar were greater than the costs. If FAA had included less optimistic air traffic projections in its 1994 study, the Cherry Capital Airport would not have met the agency's cost-effectiveness criteria. Furthermore, if FAA had followed its decision-making process by assessing the airport's needs relative to other airports' needs and considered the existing radar coverage, the airport would not have been considered for a surveillance radar. Even if the benefits exceeded the costs, there was no guarantee that the airport would get a radar because of the competing needs of other airports within the region and the quality of service that the radar in Empire, Michigan, already provides to the Cherry Capital Airport. Safety and confidence in the national airspace system are very important, and several factors must be considered when making decisions regarding the installation and replacement of surveillance radars. However, FAA's current plans to install replacement radars without conducting benefit-cost studies and revalidating operational needs may result in the agency spending millions of dollars to replace radars at airports with fewer air traffic operations than the Cherry Capital Airport, which does not meet FAA's cost-effectiveness criteria for having a radar. FAA's perceived difficulties in discontinuing radar operations at an airport only elevate the need for conducting benefit-cost studies and assessing the operational needs. We believe that conducting benefit-cost studies and assessing operational needs before replacing the radars would allow FAA to obtain the convincing data needed to ensure that the equipment is installed at the airports that have the greatest needs and that FAA could use the data to prioritize the installation of the radars at qualifying airports. In addition, conducting these analyses would give FAA the opportunity to reassess the benefits and costs of replacing the equipment and ensure that funds are not spent to modernize radars at airports where continued radar operations might not be justified. Because of current budget constraints and the future expenditures associated with installing radars as part of the effort to modernize the nation's air traffic control system, we recommend that the Secretary of Transportation direct the Administrator of the Federal Aviation Administration to conduct benefit-cost studies to validate the cost-effectiveness and revalidate the need for the radars at airports scheduled to receive replacement radars and to use the results of the studies in prioritizing the replacement of the radars at qualifying airports. Furthermore, the Federal Aviation Administration should advise the Congress on the results of these studies for its consideration during deliberations on the Department of Transportation's budget request. We provided copies of a draft of this report to the Department of Transportation and the Federal Aviation Administration for review and comment. We met with Federal Aviation Administration officials, including the Project Leader, Integrated Product Team/Terminal Surveillance Program, Communications, Navigation, Surveillance, and Infrastructure Directorate, Air Traffic Services; and Business Manager, Integrated Product Team/Terminal Surveillance Program, Office of Communication, Navigation, and Surveillance Systems, Research and Acquisitions. We also met with Department of Transportation officials from the Offices of the Assistant Secretaries for Administration and for Budget and Program Performance. The agencies generally agreed with the findings, conclusions, and recommendation presented, but commented that we should include information in the report on instrument flight rule operations and ASR-9 radars located at airports that had fewer total air traffic operations than the Cherry Capital Airport in 1996. Specifically, the agencies noted that instrument flight rule operations may be a better indicator of the need for a radar at airports than total air traffic operations and, thus, could have an impact on the results of benefit-cost studies. In addition, they commented that some airports that currently have ASR-9 surveillance radars, which were installed in the 1980s, also had fewer total air traffic operations than the Cherry Capital Airport did in 1996. Although the Federal Aviation Administration currently has no plans to replace these radars, the agencies noted that the equipment will need to be replaced over the next 10 years. The Federal Aviation Administration reiterated that the results of benefit-cost studies also could be used to revalidate the operational needs for the radars before they are replaced. However, the agency has no plans to conduct such studies for these airports. In response to the agencies' comments, we included more detailed information about the airports that currently have ASR-9 radars in appendix I and information about airports' instrument flight rule operations in appendix II. The agencies also suggested several changes to improve the accuracy and clarity of the report that we incorporated where appropriate. We performed audit work at FAA's headquarters in Washington, D.C.; the Great Lakes Regional Office in Chicago; the Air Route Traffic Control Center in Minneapolis; and the Cherry Capital Airport in Traverse City, Michigan. To determine what process FAA currently has in place for determining which airports that do not have radars may be eligible for surveillance radars, we interviewed officials at FAA's headquarters, regional, and airport offices; and reviewed and analyzed pertinent FAA criteria, regulations, procedural, and other guidance documents. To identify the factors FAA considered when conducting the 1994, 1996, and 1997 benefit-cost studies, we analyzed the studies and supporting documents, FAA's Investment Criteria for Airport Surveillance Radar, dated May 1983, and other guidance documents for conducting such studies. We interviewed FAA headquarters officials currently responsible for conducting benefit-cost studies. We also obtained information on the factors FAA considered when developing air traffic projections, analyzed the projections, and compared actual and projected air traffic operations. In addition, we interviewed representatives of local planning and public interest groups located in the Traverse City area that were familiar with the Cherry Capital Airport's air traffic operations to obtain information on past and anticipated air traffic growth, the need for a surveillance radar, and the safety concerns at the airport. To determine the impact other air traffic projections would have had on the results of FAA's 1997 benefit-cost study, we interviewed FAA officials and controllers working at the Cherry Capital Airport, officials of the Michigan Department of Transportation and the Traverse City Planning Commission, and representatives of two aviation consulting firms. We obtained air traffic projections from the consulting firms and had FAA headquarters officials conduct sensitivity analyses using the projections. Although we evaluated what impact the projections would have had on the results of the 1997 study, we did not evaluate the methodologies used by the consulting firms to develop their projections because this was not part of the scope of our review. To determine what actions FAA has taken to address the safety concerns raised by Members of Congress, air traffic controllers, and local citizens, we obtained information on the operational capabilities of the TARDIS and on how the equipment is intended to be used through interviews with FAA headquarters and regional officials, the Cherry Capital controllers, and airport officials. In addition, we collected data from FAA that identified the airports with fewer total air traffic operations than the Cherry Capital Airport in 1996 that are scheduled to receive replacement surveillance radars. We discussed with FAA headquarters officials the rationales for initially installing surveillance radars at the airports and when the existing radars are scheduled to be replaced. However, we did not contact representatives at the airports to verify the information provided by FAA headquarters officials. We also obtained data on airports that currently have ASR-9 radars and fewer total air traffic operations than the Cherry Capital Airport. We performed our review from October 1997 through May 1998 in accordance with generally accepted government auditing standards. We are providing copies of this report to interested congressional committees; the Secretary of Transportation; the Administrator, FAA; and the Members of Congress representing the Traverse City area. We will also make copies available to others on request. If you or your staff have any questions or need additional information about this report, please call me at (202) 512-2834. Major contributors to this report are listed in appendix III. Nantucket Memorial (Nantucket, MA) Theodore Francis Green State (Providence, RI) Portland International (Portland, ME) Spokane International (Spokane, WA) Atlantic City International (Atlantic City, NJ) Fort Wayne International (Fort Wayne, IN) Roswell Industrial Air Center (Roswell, NM) Charlottesville-Albermarle (Charlottesville, VA) Cedar Rapids Municipal (Cedar Rapids, IA) Harrisburg International (Harrisburg, PA) -- Provides coverage and services in challenging terrain environment (continued) Walker Field (Grand Junction, CO) Huntsville International-Carl T. Jones Field (Huntsville, AL) Rogue Valley International (Medford, OR) Rio Grande Valley International (Brownsville, TX) Lynchburg Regional-Preston Glenn Field (Lynchburg, VA) Fayetteville Regional/Grannis (Fayetteville, NC) Missoula International (Missoula, MT) Eastern West Virginia Regional-Shepard Field (Martinsburg, WV) -- Congressional mandate in 1991 -- Radar signal will be remoted to the terminal radar approach control facility at Dulles International Airport (Table notes on next page) Not applicable. Not available. Scheduled date for installing radarreliever airport for Detroit Metropolitan Airport -- Provides services to corporate travelers, including General Motors and services for a large naval flight training center interest-- Radar was installed after an accident and services for a military base -- Former Air Force base and services for a military base -- Former Air Force base provided approach control services for the Department of Defense's Strategic Air Command Base and services in mountainous terrain -- Flight school at airport -- Provides services to numerous satellite airports -- Low-visibility airport during winter months (continued) Scheduled date for installing radarand services to the Air National Guard and military bases and services to the Air National Guard and services for military bases 95,129 -- Air route traffic control center does not have adequate coverage of the airspace -- Formerly a hub for Ozark Airlines and services to Air National Guard base -- Airport has capability to provide air route traffic control services interest -- Provides services to corporate travelers, including Goodyear Corporation and Timkin Roller Bearing 123,894 -- Air National Guard (continued) Scheduled date for installing radarand services for the Camp Grant military base -- Provided services for military training flights because Chicago O'Hare could not accommodate these aircraft -A hub for United Parcel Service 93,875 -- Provides coverage in mountainous terrain -- Air route traffic control center does not have adequate coverage of the airspace 80,435 -- Provides coverage in mountainous terrain -- No long-range surveillance radar coverage available and services for military training interest -- Provides coverage and services for the Air Force Reserves interest -- Provides coverage in mountainous terrain (continued) Scheduled date for installing radarand services to the largest B1 bomber base -- Provides services to five satellite airports and services for military practice approaches -- Provides services to satellite airports -- Provides services to the largest civil fleet of helicopters 27,441 -- Alternate airport for Honolulu -- Island with highest terrain; heavy rainfall area, limited visibility -- Stopover for flights to and from Australia and New Zealand 97,804 -- Stopover airport for flights from Europe -- Alternate airport for Boston Logan International 61,011 -- Air National Guard fighter wing -- Minihub for air cargo operations -- Largest city in South Dakota interest -- Provides services to satellite airports 144,338 -- FAA takeover of a when new airport was built in 1963 to cover growth in general aviation, military, and air carrier traffic (continued) Scheduled date for installing radarand services to the military -- Previously provided approach control services to the Department of Defense's Strategic Air Command base to 12 satellite airports -- Provides coverage and services to 100 scheduled air carriers daily 66,418 -- Only airport with primary radar within 120 miles -- Provides services to the Air National Guard for a combined air traffic control center and terminal radar approach control facility in San Juan, PR to 18 satellite airports -- Alternate airport for Chicago O'Hare -- Provides overflight services to and from Chicago O'Hare congressional mandate; however, no documentation available -- Provides support for surrounding restricted military area activities (continued) Scheduled date for installing radarinterest -- Provides coverage in mountainous terrain -- Moody Aviation trains bush pilots for missionary work to 10 satellite airports -- Air route traffic control center does not have adequate coverage of the airspace for Longview and Tyler, TX, airports -- Provides services for oil industry business jet air traffic 102,407 -- Provides service to corporate travelers, including John Deere Corporation for air taxi and military approaches 103,273 -- Provides coverage in mountainous terrain 221,673 -- Provides coverage and services to an Air National Guard base -- Provides approach control services for northwest Arkansas, including Fayetteville, AR to four satellite airports and to military air traffic (continued) Scheduled date for installing radar69,160 -- Provides coverage in mountainous terrain -- Provides services to satellite airports -- Previously provided approach control services to the Seneca Army Air Depot to nine satellite airports -- Third-largest approach control facility and fourth-busiest airport in the state and services to the Air National Guard -- Provides coverage and services to overflow and diverted traffic from Minneapolis -- Previously provided services to two Air Force base squadrons and services to the Air National Guard and four satellite airports (continued) Scheduled date for installing radarfor the Mayo Clinic, including lifeguard flights -- Alternate airport for Minneapolis airport -- Airport has one of the few Global Positioning System Heliport instrument approaches -- Provides services for large cargo operations to the Air National Guard and satellite airports -- Provides tower air route traffic control services and services to Fort Benning Military Base -- Provides services to 19 satellite airports -- Sequences turboprops and props into Atlanta Hartsfield and services to the Air National Guard -- Provides coverage for detecting and interdicting aircraft involved in illegal drug activities 82,573 -- FAA takeover of a Department of Defense site -- Provides services for military practice approaches (continued) Dallas-Fort Worth Metroplex -- Provides air traffic relief services to an air route traffic control center and services to the Air National Guard -- Indiana State University student pilot training -- Midnight freight operations coverage gap for terminal radar approach control in Houston interest -- Provides services for oil industry related air traffic -- Provides coverage in mountainous terrain 63,842 -- Provides coverage in mountainous terrain (continued) Not applicable. Janet Barbee Sharon Dyer Wanda Hawkins Mehrzad Nadji John Thomson The first copy of each GAO report and testimony is free. Additional copies are $2 each. Orders should be sent to the following address, accompanied by a check or money order made out to the Superintendent of Documents, when necessary. VISA and MasterCard credit cards are accepted, also. Orders for 100 or more copies to be mailed to a single address are discounted 25 percent. U.S. General Accounting Office P.O. Box 37050 Washington, DC 20013 Room 1100 700 4th St. NW (corner of 4th and G Sts. NW) U.S. General Accounting Office Washington, DC Orders may also be placed by calling (202) 512-6000 or by using fax number (202) 512-6061, or TDD (202) 512-2537. Each day, GAO issues a list of newly available reports and testimony. To receive facsimile copies of the daily list or any list from the past 30 days, please call (202) 512-6000 using a touchtone phone. A recorded menu will provide information on how to obtain these lists.
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Pursuant to a legislative requirement, GAO reviewed the benefit-cost studies that the Federal Aviation Administration (FAA) conducted for the Cherry Capital Airport in 1994, 1996, and 1997, focusing on: (1) FAA's decisionmaking process for installing surveillance radars at airports; (2) the factors, including costs, benefits, and air traffic projections, that FAA considered when conducting the 1994, 1996, and 1997 studies; (3) the impact, if any, that air traffic projections developed by other sources would have had on the results of the 1997 study; (4) actions FAA has taken to address safety concerns at the airport; and (5) FAA's plans to replace surveillance radars at airports with fewer total air traffic operations than the Cherry Capital Airport. GAO noted that: (1) FAA uses a multifaceted process to determine which airports should get surveillance radars; (2) this process includes completing a benefit-cost study, assessing an airport's need for a surveillance radar compared with the needs of other airports, and determining the availability of radar equipment or funds to purchase needed radar equipment; (3) in its 1994 benefit-cost study for the Cherry Capital Airport, FAA officials overstated the projected air traffic growth; (4) this overstated growth was the primary reason FAA concluded that the airport met its cost-effectiveness criteria; (5) moreover, in 1994, FAA officials did not follow the agency's decisionmaking process and prematurely concluded that the Cherry Capital Airport qualified for a surveillance radar; (6) when conducting the 1994, 1996, and 1997 benefit-cost studies, FAA considered the potential efficiency and safety benefits; (7) with the higher growth rate used in the 1994 study, the benefits exceeded the costs of installing a surveillance radar, so the Cherry Capital Airport met FAA's cost-effectiveness criteria; but with the lower growth rate used in the 1996 and 1997 studies, it did not qualify; (8) the air traffic projections were the most critical factors influencing the results of FAA's benefit-cost studies; (9) to address the safety concerns, FAA installed an automated display and information system at the Cherry Capital Airport in 1997; (10) while the controllers told GAO that the equipment can help them better manage air traffic and improve safety, they have difficulty using it because information on aircraft identification and altitude is sometimes unreadable on the display monitor; (11) beginning in 1999, FAA plans to replace the existing surveillance radars installed in the 1960s and 1970s at 101 airports as part of its efforts to modernize its air traffic control system; (12) seventy-five of the 101 airports had fewer total air traffic operations in 1996 than the Cherry Capital Airport did; (13) although FAA conducts benefit-cost studies and uses air traffic operations as a basis for determining the cost-effectiveness of installing surveillance radars at airports, agency officials did not conduct similar studies to determine whether it would be cost-effective to replace existing radars at the 101 airports or to prioritize the replacement of the radars; and (14) FAA has no plans to undertake such efforts because agency officials believe that it would be very difficult to discontinue radar operations at an airport because of the public's perception that safety would be reduced.
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Individuals often first learn about vehicle donation programs through advertisements. Vehicle donation advertisements can be found on billboards, truck banners, and television, as well as in newsletters and even on small paper bags. Some of the most common mediums for vehicle donation advertisements include the radio, newspapers, and the Internet. Based on a sample of advertisements we reviewed, we found that advertisements for vehicle donations often identified that individuals could claim tax deductions for the donations, the donations served charitable purposes, and the donors' vehicles would be towed free of charge. Figure 1 identifies the most common claims made in the newspaper, radio, and Internet advertisements we reviewed. IRS has expressed concern about some vehicle donation advertisements. According to an official from IRS's Tax Exempt Division, tax deduction claims are potentially deceptive when they do not specify that taxpayers must itemize their deductions to claim a vehicle donation, since many taxpayers do not itemize. Of the 147 advertisements we reviewed, 117 identified that taxpayers could claim a tax deduction, but only 7 advertisements specified that donors must itemize in order to claim a deduction. IRS also expressed concern when advertisements claim donors can value their vehicles at full, or maximum, market value when claiming a tax deduction. IRS does not define full or maximum value, but believes these claims may be misleading since vehicles are required to be valued at fair market value. IRS stated that these advertisements may be particularly misleading when they also claim that vehicles will be accepted whether they are running or not. Fair market value equals what a vehicle would sell for on the market, and takes into account a vehicle's condition and mileage, among other factors. Of the 117 advertisements we reviewed that mention tax deductions, 38 specified that donors could claim fair market value on their tax returns when donating their vehicles; while 8 identified that a donor could claim full or maximum market value. Other advertisements referred potential donors to the IRS Web site, an accountant, used car guides such as the Kelley Blue Book, or other sources for guidance on claiming a tax deduction. After deciding to donate a vehicle to charity, a donor will generally encounter one of two types of vehicle donation programs: those operated by charities (in-house) and those operated by a for-profit or not-for profit fund-raiser (fund-raiser). Donors may not know whether they are donating vehicles directly to charities or through fund-raisers. Figure 2 identifies the vehicle donation process for both in-house and fund-raiser vehicle donation programs. For in-house programs, charities, typically larger ones, advertise for vehicle donations, and respond to donor's initial call inquiring about a donation. After the charity determines that it will accept the vehicle, it arranges to have the vehicle picked up, often towed, and delivered to wherever it will be stored until it is liquidated. The charity provides the donor with a receipt when the vehicle is picked up, or at a later time to document the donation for tax purposes. At the time the vehicle is picked up, the charity obtains the title of the vehicle from the donor, and some charities may provide donors with state-required forms (e.g., release of liability) or references for establishing the tax deductible value of their donated vehicles (e.g., Kelley Blue Book or IRS guidance). Charities we spoke with stated that it is up to the donor to establish the vehicle's value. Once the donated vehicles are collected, they are generally sold at auto auctions or salvaged for parts, but may also be sold to auto dealers or to the general public. Charities with in- house programs keep 100 percent of the net proceeds after deducting costs associated with processing the vehicles. For fund-raiser programs, fund-raisers generally perform some or all of the tasks associated with advertising, vehicle pick up, and vehicle disposal. After deducting expenses, fund-raisers keep a portion of the net proceeds from the vehicle sale or salvage, providing the remainder of the proceeds to the specified charity. A charity working with a fund-raiser may have no oversight of the process, leaving the operation of the program, and distribution of proceeds, up to the fund-raiser. The relationship between charities and fund-raisers varies, depending on the agreements they have established. Some commercial fund-raisers may handle vehicle donation programs for many charities. For example, one national fund-raiser has contracts with about 140 charities, and another works with about 200 charities. Charities may also contract with multiple fund-raisers. Fund-raisers often support smaller charities that would not otherwise be able to participate in vehicle donation programs. For example, at one California charity, a staff person spent half her time working with two vehicle donation fund-raisers, which together generated about $110,000 for the first six months of the current year (approximately 8 - 10 percent of its annual budget). In addition to the in-house and fund-raiser programs described above, we identified some variations in how vehicle donation programs operate. For example, see the following: Some charities refurbish donated vehicles for their own program services or clients, rather than for sale or salvage. One state consortium of 14 charities jointly runs a vehicle donation program in conjunction with a wrecking yard. The charities share in oversight of the operations, such as inspecting donated vehicles and monitoring vehicle donation reports. Donors can select one charity to receive the proceeds, or proceeds are split among members of the consortium equally if no charity is designated. One large charity runs a national vehicle donation program and serves regional offices as a fund-raiser would, charging its regions vehicle processing costs. Some of the charity's affiliates choose other fund- raisers and do not participate in the national program. Another large charity runs a national program and serves charity affiliates but also has a nonprofit vehicle donation program for other smaller charities. The total proceeds a charity receives from a vehicle donation may be less than what a donor expects. We identified two factors that contribute to this difference. First, charities and fund-raisers often sell vehicles at auto auctions for wholesale or liquidation prices or to salvage yards for parts, rather than obtaining the amount they would receive if vehicles were sold to private parties. Second, vehicle processing and fund-raising costs are subtracted from vehicle revenue, further lowering proceeds. According to a 2001 survey of charitable donors commissioned by the Wise Giving Alliance, donors expect at least 70 to 80 percent of a charity's funds to be used for charitable purposes rather than fund-raising or administrative costs. Actual charity receipts reported to state officials for charity fund-raising are less. For example, in New York telemarketing fund-raisers (not specifically vehicle donations) returned 32 percent of funds raised for charities in 2000. Although donors are often motivated by serving a charitable cause when donating their vehicle, the results of donor surveys identified that individuals are also motivated by the ability to claim a tax deduction and to dispose of an unwanted vehicle. Figure 3 provides an example of the amount a charity received from an actual vehicle donation. In this case, a 1983 truck was donated in 2001 to a charity whose vehicle donation program is operated through a fund-raiser. The gross sale price for the truck (sold at an auction) was $375. After deducting fund-raiser and advertising expenses, net proceeds totaled $63.00. This amount was divided evenly between the fund-raiser and charity, leaving the charity with $31.50 from the vehicle donation. The donor claimed a deduction of $2,400 on his or her tax return, based on the fair market value of the vehicle as identified in a used car guidebook. Charities operating in-house vehicle donation programs incur costs associated with processing vehicles for sale or salvage, but do not incur additional fees generally associated with fund-raiser programs. Processing costs cannot be compared among in-house programs because charities may record their costs differently. One of the few in-house charities we spoke with reported that it earned a net average of 42 to 44 percent of the sales price of donated vehicles. Another charity operating a national program for local affiliates reported a range of 13 to 32 percent net proceeds for programs operating for over 2 years, and a deficit to slightly in excess of breakeven for newer programs. Proceeds received by charities participating in vehicle donation programs run by fund-raisers also varied, in part due to the different processing costs deducted by fund-raisers, as well as different agreements between charities and fund-raisers for splitting net proceeds. Some charities receive a percentage of the net proceeds, after the fund-raisers costs are deducted. Other charities receive the net proceeds remaining after the fund-raiser deducts a flat fee for expenses. California is the only state that systematically captures information on the percentage of proceeds received by charities through vehicle donation programs. However, California only captures information related to programs run by fund-raisers, and cannot separately identify the number of charities that operate in-house programs. According to a report from the California State Attorney General's Office, less than 1 percent of registered charities in California have vehicle donation programs that are managed by commercial fund-raisers. In 2000, these fund-raisers generated approximately $36.8 million in sales revenue, with about $11.3 million (31 percent on average) being returned to the charities. As shown in figure 4, California charities received proceeds from fund-raiser programs ranging from less than 20 percent to over 80 percent of the net proceeds from vehicles, but most were in the 40 - 59 percent range. Issues relating to charity proceeds from fund-raising reached the Supreme Court on March 3, 2003, in arguments related to "Ryan v. Telemarketing Associates". The Attorney General of Illinois is appealing a decision of the Illinois Supreme Court to dismiss fraud charges against Telemarketing Associates. At issue were solicitations implying that cash donations would go to a charity to buy food baskets and blankets for needy veterans, while only 15 percent of the funds raised actually went to the charity. As part of the case, donor affidavits were reviewed stating that some individuals would not have donated if they knew the percentage of proceeds the charity would actually receive. The Supreme Court has ruled in three previous cases that percentage-based limitations on charitable solicitations were unconstitutional. The Supreme Court decision in this case is not expected until July 2003. We plan to conduct a national survey of charities to further review vehicle donation proceeds received by charities and fund-raisers. We will identify any concerns regarding the amount of net proceeds fund-raisers keep from vehicle donations and the significance of vehicle donation programs to charity operations. Charities may consider proceeds from vehicle donations to be a welcomed, if not crucial, source of revenue to support their operations. For example, one charity stated that vehicle donations are "just keeping their heads above water." The results of donor surveys we reviewed indicated that the ability to claim a tax deduction is one of the most important reasons individuals donate vehicles to charity. However, we found that a small percentage of Americans claim tax deductions for vehicle donations. Specifically, we reviewed a representative sample of taxpayer returns that claimed noncash contributions for the tax year 2000. Of the 129 million returns filed that year, a projected 0.6 percent, or an estimated 733,000 returns, had tax deductions for vehicle donations. We also found that deductions for vehicle donations accounted for a small fraction of forgone tax revenue. Based on the sample we reviewed, vehicle donation deductions totaled an estimated $2.5 billion of the $47 billion in noncash contributions claimed. Stocks and thrift store donations accounted for most of the tax dollars deducted for noncash charitable contributions. We estimate that in 2000, vehicle donations deductions lowered taxpayers' income tax liability by an estimated $654 million of the $1 trillion tax liability reported on returns. IRS guidance limits the amount of an allowable deduction to the vehicle's fair market value, or the amount a willing, knowledgeable buyer would pay for the vehicle. We reviewed each deduction for vehicle donations in our sample to determine the average value claimed for donated vehicles in 2000, and whether these values fell within the ranges identified in a nationally recognized blue book. We estimated that the average value claimed for donated vehicles in 2000 was $3,370, and that the amounts claimed for almost all of these vehicles fell within the blue book. However, since we did not have additional information regarding the vehicles' condition and mileage, we could not determine whether reported values accurately reflected fair market value. For a donor to claim a vehicle tax deduction, the contribution must be made to a qualified organization. Churches and most nonprofit charitable, educational, and medical organizations are qualified. We submitted the names of charities from our sample that taxpayers reported on their returns to IRS to verify whether the recipient organization was qualified to receive tax deductible donations. Of the 22 charities IRS reviewed, it was able to verify that 10 of the charities were qualified to receive tax- deductible donations. IRS could not determine whether the remaining 12 charities were qualified organizations because it needed more information than taxpayers reported on their tax returns, such as the organizations' full names and addresses and employer identification numbers. IRS has a compliance program to review noncash donations, including vehicle donations generating revenue over $5,000, which compares the amounts received by a charity upon the sale of a donated item with the amount claimed by the taxpayer as the fair market value of the item. Although differences exist between fair market values and the proceeds from items sold at wholesale prices, this program gives IRS an indication of whether a particular donation should be further scrutinized. However, IRS has no data identifying whether cases referred for further review by this program are ever pursued. IRS is also in the process of implementing a National Research Program, which may provide data on compliance issues dealing with vehicle donations and other noncash contributions. Under the program, officials will randomly select about 49,000 tax year 2001 returns to determine whether taxpayers complied with statutory income, expense, and tax reporting requirements. Returns with noncash contributions, including donated vehicles, could be subject to audit to verify donation claims. Once this project is completed, IRS plans to assess individuals' compliance related to deductions for noncash contributions, and determine whether more enforcement is needed to help ensure proper reporting in this area. IRS and other organizations, including the National Association of State Charity Officials and the Better Business Bureau, have issued guidance on steps potential donors should take before donating their vehicles to charity and claiming associated tax deductions. These steps include the following: Verify that the recipient organization is a tax-exempt charity. Potential donors can search IRS's Publication 78, which is an annual cumulative list of most organizations that are qualified to receive deductible contributions. Determine whether the charity is properly registered with the state government agency that regulates charities. The state regulatory agency is generally the state attorney general's office or the secretary of state. Ask questions about how the donated vehicle will be used to determine whether it will be used as intended. Such questions include the following: Will the vehicle be fixed up and given to the needy? Will it be resold, and if so, what share of the proceeds will the charity receive? Itemize deductions in order to receive a tax benefit from the donation. The decision to itemize is determined by whether total itemized deductions are greater than the standard deduction. Deduct only the fair market value of the vehicle. The fair market value takes into account many factors, including the vehicle's condition, and can be substantially different from the blue book value. IRS Publication 526, "Charitable Deductions," and IRS Publication 561, "Determining the Value of Donated Property," provide instructions on how to calculate the fair market value of donated property. Document the charitable contribution deduction. IRS Publication 526 identifies requirements for the types of receipts taxpayers must obtain and the forms they must file. Follow state law regarding the car title and license plates. Generally, the donor should ensure that the title of the vehicle is transferred to the charity's name, by contacting the state department of motor vehicles, and keep a copy of the title transfer. Donors are also advised to remove the license plates, if allowed by the state. The IRS and the states have identified few significant occurrences of abuse by charities and fund-raisers operating vehicle donation programs. However, the guidance above may help potential donors avoid donating vehicles to organizations that have not complied with laws or regulations related to vehicle donation activities, and prevent problems sometimes encountered with vehicle title transfers. For example, see the following: IRS revoked the charity status for one Florida organization that solicited boat donations after finding that its charitable activities were insubstantial, and that proceeds were kept for personal gain.
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According to the Internal Revenue Service (IRS), charities are increasingly turning to vehicle donation programs as a fund- raising activity, resulting in increased solicitations for donated vehicles. Therefore, to make informed decisions about donating their vehicles, taxpayers should be aware of how vehicle donation programs operate, the role of fund- raisers and charities in the vehicle donation process, and IRS rules and regulations regarding allowable tax deductions. Due to the increased use of vehicle donation programs, GAO was asked to describe (1) the vehicle donation process, (2) the amount of proceeds received by charities and fund-raisers, (3) donor tax deductions, and (4) taxpayer cautions and guidance. Revenue from donated vehicles is a welcomed, and sometimes crucial, source of income for a number of charities. Donors, by following available guidance and making careful selection of charities for their donations, can provide charity support while benefiting themselves through tax deductions or disposing of unwanted vehicles. Taxpayers generally first learn about vehicle donation programs through advertisements. Interested donors call the advertised number and either reach a charity that operates its program in-house, or a third-party fund-raiser acting on the charity's behalf. The charity or fund-raiser asks questions of the potential donor regarding the vehicle, and then collects and sells the vehicle for proceeds. The proceeds a charity receives from a vehicle donation may be less than what a donor expects. Two factors contribute to this difference. First, charities often sell vehicles at auto auctions for wholesale prices rather than the prices donors may receive if they sold their vehicles themselves. Second, vehicle processing costs--whether the charity's or the fund-raiser's--- as well as the fund-raiser's portion of net proceeds further reduces the amount of proceeds a charity receives. Of the 129 million individual returns filed for tax year 2000, an estimated 733,000 returns had tax deductions for vehicle donations that lowered taxpayers' tax liability by an estimated $654 million. No data exist on whether these deductions were appropriately claimed. To assist donors in making decisions regarding vehicle donations, IRS and other organizations have issued guidance on steps potential donors should take before making vehicle donations. These steps include verifying that the recipient organization is tax-exempt, asking questions about vehicle donation proceeds, and deducting only the fair market value of the vehicle on tax returns.
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The GAT Board, the Recovery Board, and OMB, have initiatives under way to improve the accuracy and availability of federal spending data. The GAT Board, with a mandate of providing strategic direction, has four working groups charged with developing approaches for improving the quality of data in federal contract, grants, and financial management systems, and for expanding the availability of these data to improve oversight of federal funds. The working groups represent the federal procurement, grants, financial management, and oversight communities and include interagency forums such as the Chief Acquisition Officers Council and the Council for Inspectors General for Integrity and Efficiency. (See appendix I for more information on the GAT Board working groups.) For example, the GAT Board established the Procurement Data Standardization and Integrity Working Group to develop approaches that ensure that contracting data are accurate and contract transactions can be tracked from purchase order through vendor payments. The GAT Board selected DOD to lead this effort in order to leverage its long-standing efforts to increase the accuracy of contract data submitted to the Federal Procurement Data System-Next Generation (FPDS-NG). Through these working groups, the GAT Board has begun to develop approaches to (1) standardize data elements across systems; (2) link financial management systems with award systems so that spending data can be reconciled with obligations; and (3) use the data to help identify and reduce fraud, waste, and abuse. However, the GAT Board's mandate does not provide it with the authority to implement these reforms; therefore, it must rely on its working groups' lead agencies to implement approaches that it has approved. Moreover, the GAT Board has no dedicated funding, so its strategic plan is short-term and calls for an incremental approach that builds upon ongoing agency initiatives. We found that standardizing data and having a uniform convention for indentifying contract and grant awards throughout their life cycle are the first steps in ensuring data quality and tracking spending data. Without this uniformity, reporting and tracking spending data is inefficient and burdensome. Current efforts are focused on identifying approaches to standardize contract and grant award data elements to improve data accuracy, and to date some progress has been made, such as: Based in part on work of the GAT Board for the Federal Acquisition Regulatory Council, DOD proposed a regulation requiring federal agencies to use a uniform procurement identifier--a number that could be attached to a contract so it can be tracked across various systems throughout the procurement process. OMB, working with the GAT Board, issued new guidance that requires all federal agencies to establish unique identification numbers for financial assistance awards. While this guidance could help bring greater consistency to grant award data, it only requires agencies to assign award numbers unique within their agency and thus does not provide the same level of uniformity as is required for contracts. OMB has noted that standardizing an identifier format could cause problems for agency systems because some agencies structure their award identifiers to track particular characteristics of grants for their internal use. Through its work with the GAT Board, HHS examined more than 1,100 individual data elements used by different agencies and found wide variation in terminology and associated definitions that impacted how spending was captured, tracked, and reported. The Recovery Board recently concluded its Grant Reporting Information Project that tested the feasibility of using the website FederalReporting.gov to collect data on non-Recovery Act grant expenditures. The Recovery Board's analysis of the project supported using FederalReporting.gov for grant reporting and validated the effectiveness of using a universal award identifier. The GAT Board is also building on Treasury's effort to integrate financial management systems to track spending better. Its Financial Management Working Group is developing recommendations for a work plan that will seek to leverage Treasury's on-going transparency and system modernization efforts. For example, the board is building on Treasury's initiative to standardize payment transaction processes, which will consolidate more than 30 agency payment systems into a single application. This application will process agency payment requests using a standardized payment request format, which all agencies that use Treasury disbursing services will be directed to use by October 1, 2014. The GAT Board also intends to leverage Treasury's plans to develop a centralized repository with detailed and summarized records of payment transactions from all federal agencies including payments reported by the federal agencies that disburse their own payments. The Payment Information Repository will contain descriptive data on payments that can be matched with other data to provide additional information regarding the purpose, program, location, and commercial recipient of the payment. A third area on which federal transparency efforts have focused is on using existing data to enhance spending oversight. Data mining applications are emerging as essential tools to inform management decisions, develop government-wide best practices and common solutions, and effectively detect and combat fraud in federal programs. For example, predictive analytic technologies can identify fraud and errors before payments are made, while data-mining and data-matching techniques can identify fraud or improper payments that have already been awarded. The Recovery Board's Recovery Operations Center (ROC) uses data analytics to monitor Recovery Act spending and has provided several inspectors general with access to these tools. ROC staff were able to notify agencies that they had awarded Recovery funds to companies that were debarred. ROC analysts also found hidden assets that resulted in a court ordering the payment of a fine, and indentified several individuals employed by other entities while receiving worker's compensation benefits. The GAT Board's Data Analytics Working Group has set a goal of expanding on the ROC's work to develop a shared platform for improving fraud detection in federal spending programs. This approach relies on the development of data standards. It will provide a set of analytic tools for fraud detection to be shared across the federal government. Although this work is just starting, working group members have identified several challenges including reaching consensus among federal agencies on a set of common data attributes to be used and obtaining changes needed to existing privacy laws to allow access to certain types of protected data and systems. A forum we co-hosted in January 2013, along with the Council of the Inspectors General on Integrity and Efficiency and the Recovery Board, explored these challenges and identified next steps to address them. Forum participants identified a range of challenges, including a lack of data standards and a universal award identifier that limit data sharing across the federal government and across federal, state, and local agencies. Working groups or other structures have been formed to forward these issues. For example, we are leading a community of practice for federal, state, and local government officials to discuss challenges and opportunities related to data sharing within and across government agencies. In many cases, the transparency initiatives of the GAT and Recovery Boards, OMB, and key federal agencies build on lessons learned from the operation of existing transparency systems. But as new transparency initiatives get under way, we believe there are opportunities to give additional consideration to these lessons to help ensure new transparency programs and policies are implemented successfully. First, we found that in implementing the Recovery Act, OMB directed recipients of covered funds to use a series of standardize data elements and report centrally into the Recovery Board's reporting web site. The transparency envisioned under the Recovery Act required the development of a system that could quickly trace billions of dollars disbursed to thousands of recipients, across a variety of programs. Agencies had systems in place that captured such information as award amounts, funds disbursed, and, to varying degrees, progress being made by recipients. However, the lack of uniform federal data and reporting standards made it difficult to obtain these data from federal agencies. Because agencies did not collect spending data in a consistent manner, the most expedient approach for Recovery Act reporting was to collect data from fund recipients, which placed additional burden on them to provide these data. Federal fund recipients we spoke to said that the lack of consistent data standards and commonality in how data elements are defined and reported places undue burden on them because it can result in having to report the same information multiple times and requires recipients to enter data manually, which can impact the accuracy of the data. For example, a nonprofit group representative who participated in one of our focus groups said that they had to report the same information through 15 different reporting platforms, so having data standards and single reporting platform would make the reporting process more efficient. Given the longer time frames to develop current transparency initiatives, OMB and the GAT Board are working toward greater data consistency by focusing on data standards. Citing agency budgetary constraints and the potential of emerging technologies for extracting nonstandard data elements from disparate systems, the GAT Board and OMB are taking incremental steps toward increasing data standardization. Their plans, however, do not include long-term steps, such as working toward uniform award identifiers that would improve award tracking with less burden on recipients. Second, we found that early in the development of both the Recovery Act reporting system and its procedures, federal officials listened to the concerns of recipients and made changes to guidance in response, which helped ensure they could meet those requirements. Given the daunting task of rapidly establishing a system to track billions of dollars in Recovery Act funding, OMB and the Recovery Board implemented an iterative process which allowed many stakeholders to provide insight into the challenges that could impede their ability to report Recovery Act expenditures. Federal fund recipients we spoke with stressed the importance of having a formal mechanism to provide feedback to the federal government as guidance is crafted and before new transparency reporting requirements are established to ensure that the guidance is clear and understandable. Such guidance will ensure that the data they report are accurate, on time, and minimally burdensome. Although, the GAT Board has implemented a structure that leverages the expertise of federal officials with in-depth knowledge of federal procurement, grant- making, and financial management operations, the board does not have any formal mechanisms, other than the federal rule-making process, to obtain input from non-federal fund recipients. As we learned through our work examining Recovery Act implementation, without similar outreach under the current initiatives, reporting challenges may not be addressed, potentially impairing the data's accuracy and completeness, and increasing burden on those doing the reporting. Third, we found that the under the Recovery Act, specific requirements and responsibilities for transparency were clearly laid out in statute, which provided unprecedented transparency and helped to ensure that the act's transparency requirements were implemented within tight time frames. The Recovery Act specified the timing of reporting, including its frequency and deadlines, and the items that needed to be included in the reporting. The act also required the Recovery Board to conduct and coordinate oversight of the funds and to deploy a data-collection system and a public-facing website to provide spending data to the public. Unlike the GAT Board, the Recovery Board had funding which was used to provide staff and resources for developing and operating its data collection system, website, and oversight activities. In contrast, authority for implementing the current transparency initiatives is not as clearly defined and authority for expanding transparency is centered in an executive order rather than legislation. An official from an association representing federal fund recipients told us that of clear reporting guidance was essential for ensuring compliance with reporting requirements, especially for recipients with limited resources. Moreover, unlike under the Recovery Act, new transparency initiatives are being funded through existing agency resources using agency personnel, as separate funding is unavailable. As, we have previously reported, given the importance of leadership to any collaborative effort, transitions and inconsistent leadership, which can occur as administrations change, can weaken the effectiveness of any collaborative efforts, and result in a lack of continuity. We found that the GAT Board's vision for comprehensive transparency reform will take several years to implement, and therefore, continuity of leadership becomes particularly important. Going forward, without clear, legislated authority and requirements, the ability to sustain progress and institutionalize transparency initiatives may be jeopardized as priorities shift over time. In our recently released report, we recommended that OMB and the GAT Board develop a long-term strategy for implementing data standards across the federal government and for obtaining input from federal fund recipients. Specifically, we recommended that the Director of OMB, in collaboration with the members of the GAT Board, take the following two actions: Develop a plan to implement comprehensive transparency reform, including a long-term timeline and requirements for data standards, such as establishing a uniform award identification system across the federal government. Increase efforts for obtaining input from stakeholders, including entities receiving federal funds, to address reporting challenges, and strike an appropriate balance that ensures the accuracy of the data without unduly increasing the burden on those doing the reporting. The GAT Board, OMB and other cognizant agencies generally agreed with our recommendations and identified actions underway or planned, which they believe will operationalize comprehensive transparency reforms and help them obtain stakeholder input. Our recently issued report also suggested that Congress could consider legislating transparency requirements and establish clear lines of authority to ensure that recommended approaches for improving spending data transparency are implemented across the federal government. Among other things, this will ensure effective decision making and the efficient use of resources dedicated to enhancing the transparency of federal spending data. Chairman Warner, Ranking Member Ayotte, and Members of the Task Force, this completes my prepared statement. I would be pleased to respond to any questions that you may have at this time. If you or your staff have any questions about this testimony, please contact me at (202) 512-6806 or [email protected]. Contact points for our Office of Congressional Relations and Public Affairs may be found on the last page of this statement. GAO staff who made key contributions to this testimony are Carol L. Patey, Assistant Director and Kathleen M. Drennan, Ph.D., Analyst-in-Charge. Additional contributions to our detailed report were made by Gerard S. Burke, Patricia Norris, Cynthia M. Saunders, Ph.D., Robert Robinson, Jessica Nierenberg, Judith Kordahl, and Keith O'Brien. The Government Accountability and Transparency Board (GAT Board) is composed of the following 11 members designated by the President from among agency inspectors general, agency chief financial officers or deputy secretaries, and senior officials from OMB. The President designates a chairman from among the members. Director, Defense Procurement and Acquisition Policy, U.S. Assistant Secretary, Department of the Treasury Deputy Secretary, U.S. Department of Veterans Affairs Assistant Secretary for Financial Resources and Chief Financial Department of Defense Inspector General, U.S. Postal Service Inspector General, U.S. Department of Energy Inspector General, National Science Foundation Inspector General, U.S. Department of Health and Human Services Deputy Controller, Office of Management and Budget Officer, U.S. Department of Health and Human Services Inspector General, U.S. Department of Transportation Inspector General, U.S. Department of Education The GAT Board established four working groups, as shown in table 1.
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The federal government spends more than $3.7 trillion annually, with more than $1 trillion awarded through contracts, grants, and loans. Improving transparency of this spending is essential to improve accountability. Recent federal laws have required increased public information on federal awards and spending. This testimony is based on GAO's recently issued report GAO-13-758 . It addresses (1) the status of transparency efforts under way and (2) the extent to which new initiatives address lessons learned from the Recovery Act. GAO reviewed relevant legislation, executive orders, OMB circulars and guidance, and previous GAO work, including work on Recovery Act reporting. GAO also interviewed officials from OMB, the GAT Board, and other federal entities; government reform advocates; associations representing fund recipients; and a variety of contract and grant recipients. Several federal entities, including the Government Accountability and Transparency Board (GAT Board), the Recovery Accountability and Transparency Board (Recovery Board), and the Office of Management and Budget (OMB), have initiatives under way to improve the accuracy and availability of federal spending data. The GAT Board, through its working groups, developed approaches to standardize key data elements to improve data integrity; link financial management systems with award systems to reconcile spending data with obligations; and leverage existing data to help identify and reduce fraud, waste, and abuse. With no dedicated funding, GAT Board plans are incremental and leverage ongoing agency initiatives and resources designed to improve existing business processes as well as improve data transparency. These initiatives are in an early stage, and some progress has been made to bring greater consistency to contract and grant award identifiers. The GAT Board's mandate is to provide strategic direction, not to implement changes. Further, while these early plans are being developed with input from a range of federal stakeholders, the GAT Board and OMB have not developed mechanisms for obtaining input from non-federal fund recipients. Lessons from implementing the transparency objectives of the Recovery Act could help inform these new initiatives: Standardize data to integrate systems and enhance accountability. Similar to the GAT Board's current focus on standardization, the Recovery Board recognized that standardized data would be more usable by the public and the Recovery Board for identifying potential misuse of federal funds. However, reporting requirements under the Recovery Act had to be met quickly. Because agencies did not collect spending data in a consistent manner, the most expedient approach was to collect data from fund recipients, even though similar data already existed in agency systems. Given the longer timeframes to develop current transparency initiatives, OMB and the GAT Board are working toward greater data consistency by focusing on data standards. Their plans, however, do not include long-term steps, such as working toward uniform award identifiers, that would improve award tracking with less burden on recipients. Obtain stakeholder involvement as reporting requirements are developed. During the Recovery Act, federal officials listened to the concerns of recipients and made changes to guidance in response, which helped ensure they could meet those requirements. Without similar outreach under the current initiatives, reporting challenges may not be addressed, potentially impairing the data's accuracy and completeness, and increasing burden on those reporting. Delineate clear requirements and lines of authority for implementing transparency initiatives. Unlike the present efforts to expand spending transparency, the Recovery Act provided OMB and the Recovery Board with clear authority and mandated reporting requirements. Given this clarity, transparency provisions were carried out successfully and on time. Going forward, without clear, legislated authority and requirements, the ability to sustain progress and institutionalize transparency initiatives may be jeopardized as priorities shift over time. In its report GAO recommended that the director of OMB, with the GAT Board, develop a long-term plan to implement comprehensive transparency reform, and increase efforts for obtaining stakeholder input to ensure reporting challenges are addressed. Further, Congress should consider legislating transparency requirements and establishing clear authority to implement these requirements to ensure that recommended approaches for improving transparency are carried out across the federal government. The GAT Board, OMB and other cognizant agencies generally concurred with GAO's recommendations.
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The President's Vision for Space Exploration for NASA announced in 2004 calls for the retirement of the shuttle upon completion of the ISS and the creation of new vehicles for human space flight that will allow a return to the moon by 2020 and voyages to Mars and points beyond. The shuttle manifest currently consists of 16 flights--15 to complete assembly and integration of the ISS and a servicing mission to the Hubble Space Telescope. The first new space vehicles currently are targeted to begin operating no later than 2014--thereby creating a potential gap in U.S. human space flight. Congress has voiced concern over the United States not having continuous access to space. NASA has made it a priority to minimize the gap to the extent possible. NASA has begun planning for the retirement of the shuttle, scheduled for 2010, by identifying best practices in closing facilities and the transitioning of capabilities. Specifically, NASA has conducted a number of benchmarking studies of previous closures and realignment of large programs, including the Titan IV rocket fly-out, the F/A-18 C/D fighter production close, and the Navy Base Realignment and Closure activities. The benchmarking efforts have highlighted to NASA the importance of having a plan, effective communication, human capital management, and effective program management tools. NASA's benchmarking effort also showed that closing and transitioning facilities, equipment, and people is expensive and time consuming. Among the lessons learned is that, historically, it has taken 3.5 years to close down an installation and another 3 years to complete the transition of the property. NASA's Office of the Inspector General has recently reviewed NASA's plan for the space shuttle transition and recommended, among other improvements, that the two affected space directorates finalize and implement the Human Space Flight Transition Plan. Development of the Orion crew capsule, Ares I launch vehicle, and other exploration systems needed to implement the Vision is dependent on a "go as you can afford to pay" approach, wherein lower-priority efforts will be deferred, descoped, or discontinued to allow NASA to stay within its available budget profile. In recent testimony, the NASA Administrator said that the cost associated with returning the shuttle to flight, continued shuttle operations, and recent budget reductions had the combined effect of increasing the gap by delaying the first manned Orion test flight by 6 months. In an effort to address the gap in U.S. capability to resupply the space station following retirement of the shuttle, NASA is investing in commercial space transportation services. NASA's expectation is that by acquiring domestic orbital transportation services it will be able to send cargo and, in the future, transport crews to the ISS in a cost-effective manner. NASA refers to this as the Commercial Orbital Transportation Services project. The project is in the early stages of development. Should these commercial services prove to be unreliable or more costly than anticipated, NASA will need to purchase space transportation from its international partners to meet obligations to the ISS until the new Orion spacecraft become operational. We have undertaken a substantial body of work over the past 3 years that has highlighted the significant challenges that NASA will face as it retires the shuttle and transitions to exploration activities. One key challenge is sustaining the shuttle workforce through the retirement of the shuttle while ensuring that a viable workforce is available to support future activities. Another key challenge will be developing the Orion Crew Exploration Vehicle within cost, schedule, and performance goals. Additionally, our ongoing work has identified a number of other areas that may present challenges during the transition period. Some of these challenges include managing the supplier base to ensure its continued viability, developing the Ares I Crew Launch Vehicle, and completing and supporting the space station. The Space Shuttle Program's workforce is critical to the success of the Vision. The shuttle workforce currently consists of approximately 2,000 civil service and 15,000 contractor personnel, including a large number of engineers and scientists. In 2005, we reported that NASA had made limited progress toward developing a detailed strategy for sustaining a critically skilled shuttle workforce to support space shuttle operations. We reported that significant delays in implementing a strategy to sustain the shuttle workforce would likely lead to larger problems, such as funding and failure to meet NASA program schedules. Accordingly, we concluded that timely action to address workforce issues is critical given their potential impact on NASA-wide goals such as closing the gap in human spaceflight. When we performed our work several factors hampered the ability of the Space Shuttle Program to develop a detailed long-term strategy for sustaining the critically skilled workforce necessary to support safe space shuttle operations through retirement. For example, at that time, the program's focus was on returning the shuttle to flight, and other efforts such as determining workforce requirements were delayed. In our report, we recommended that NASA begin identifying the Space Shuttle Program's future workforce needs based upon various future scenarios. Scenario planning could better enable NASA to develop strategies for meeting future needs. NASA concurred with our recommendation. It has acknowledged that shuttle workforce management and critical skills retention will be a major challenge for the agency as it progresses toward retirement of the space shuttle and has taken action to address this issue. For example, since we made our recommendation, NASA has developed an agencywide strategic human capital plan and developed workforce analysis tools to assist it in identifying critical skills needs. NASA has also developed a human capital plan specifically for sustaining the shuttle workforce through the retirement and, then transitioning the workforce. Additionally, in March 2006, the Senate Appropriations Subcommittee on Commerce, Justice, Science, and Related Agencies, and NASA asked the National Academy of Public Administration (NAPA) to assist the agency in planning for the space shuttle's retirement and transition to future exploration activities. In February 2007, a NAPA panel recommended that the Space Shuttle Program adopt a RAND model for projecting a core workforce because of its emphasis on "long-term scheduling projections, quantification of core competencies and proficiencies, and analysis of overlapping mission needs." Under the RAND model, an organization maintains a core capability for any competency that will be needed in the future. According to NAPA, this model is useful where a given expertise is not immediately required, but is likely to be needed in the future--in this case, for the Orion Crew Exploration Vehicle. In July 2006, we reported that NASA's acquisition strategy for the Orion Crew Exploration Vehicle placed the project at risk of significant cost overruns, schedule delays, and performance shortfalls because it committed the government to a long-term contract before establishing a sound business case. Our past work has shown that developing a sound business case--one that matches requirements to available and reasonably expected resources before committing to a new product development effort--reduces risk and increases the likelihood of successful outcomes. For a program to increase its chances of success, high levels of knowledge should be demonstrated before significant commitments are made (i.e., they should be following a knowledge-based approach to product development). At the time of our report, NASA had yet to develop key elements of a sound business case, including well-defined requirements, mature technology, a preliminary design, and firm cost estimates that would support its plans for making a long-term commitment. Without such knowledge, NASA cannot predict with any confidence how much the program will cost, what technologies will or will not be available to meet performance expectations, and when the vehicle will be ready for use. NASA acknowledged that it would not have these elements in place until the project's Preliminary Design Review scheduled for fiscal year 2008. As a result, we recommended that the NASA Administrator modify the agency's acquisition strategy for the Orion Crew Exploration Vehicle to ensure that the agency does not commit itself, and in turn the federal government, to a long-term contractual obligation prior to establishing a sound business case at the project's Preliminary Design Review. Although it initially disagreed with our recommendation, NASA subsequently took steps to address some of the concerns we raised. Specifically, NASA modified its acquisition strategy for the Orion project and changed the production and sustainment portions of the contract into options. The agency will decide whether to exercise these options after the project's critical design review in 2009. While these changes are in line with our recommendation and a step in a positive direction, we continue to believe NASA's acquisition strategy is risky because it does not fully conform to a knowledge-based acquisition approach. Attempting to close that gap by pushing forward development of the Orion Crew Exploration Vehicle without first obtaining the requisite knowledge at key points could very well result in the production of a system that not only does not meet expectations but ends up costing more and actually increases the gap. Since we last testified on this subject in September 2006, NASA has successfully completed its first major milestone for the Orion project. It has completed the Systems Requirements Review. This was a major step toward obtaining the information critical for making informed decisions. According to NASA's Orion contracting officer, NASA is also in the process of renegotiating the Orion contract to extend the Initial Operational Capability date of the system to 2014. Further, while this change will increase contract costs, the increase has already been accounted for in the Orion budget because the agency has been planning the change for over a year. In addition, risks associated with schedule, cost, and weight continue to be identified for the Orion project. As we have previously testified, sound project management and oversight will be key to addressing the risks that remain for the Orion project as it proceeds with its acquisition approach. To help mitigate the risks, we have recommended in the past that NASA have in place markers (i.e., criteria) to assist decision makers in their monitoring of the project at key junctures in the development process. Such markers are needed to provide assurance that projects are proceeding with and decisions are being based upon the appropriate level of knowledge and can help to lessen project risks. NASA has recently issued its updated program and project management requirements for flight systems in response to our recommendation. Changes to the policy, including the incorporation of key decision points throughout the project development life cycle, should provide an avenue for decision makers to reassess project decisions at key points in the development process to ensure that continued investment is appropriate. However, it should be noted that implementation of the policy in a disciplined manner will ensure success, not the existence of the policy itself. Currently, we are evaluating the development of NASA's latest human- rated launch vehicle--the Ares I Crew Launch Vehicle. When completed, the Ares I vehicle will be capable of delivering the Orion spacecraft to low earth orbit for ISS missions and for exploration missions to the moon. As initially conceived by NASA in the Exploration Systems Architecture Study completed in 2005, the Ares I design would rely on the existing solid rocket boosters and main engines from the space shuttle as major components of its two stages. The current design for the Ares I, however, diverges from the initial design set forth in the architecture study and now includes elements from the Apollo-era Saturn V launch vehicle. Current plans are for Ares I to evolve the solid rocket boosters from the Space Shuttle Program from four segments to five segments and to build a new upper-stage engine based on an original Saturn V design. NASA maintains that these changes are necessary to increase commonality between the Ares I and the planned Ares V cargo launch vehicle and to reduce overall development costs for implementing the Vision. As NASA's design for the Ares I continues to evolve, careful planning and coordination between the Orion and Ares I development teams will be critical to ensuring that current developmental efforts result in hardware that satisfies the future requirements of these systems. Subsequently, any development problems on either of these systems could result in increasing the gap. Our ongoing work is aimed at assessing whether NASA's acquisition strategy for Ares I reflects the effect of changes to the Ares I design incorporated since the Ares I was first conceived in the Exploration Systems Architecture Study as a shuttle-derived alternative. Also, we are evaluating the extent to which NASA's Ares I acquisition strategy incorporates knowledge-based concepts designed to minimize technical and programmatic risk. The Orion Crew Exploration Vehicle and the Ares I Crew Launch Vehicle are the first in a series of new systems to be developed in support of exploration activities. NASA's careful management of these projects must preclude historical instances of cost and schedule growth. Indeed, while NASA has had many successes in the exploration of space, such as landing the Pathfinder and Exploration Rovers on Mars, NASA has also experienced its share of unsuccessful missions, unforeseen cost overruns, and difficulty bringing a number of projects to completion. For example, NASA has made several attempts to build a second generation of reusable human spaceflight vehicle to replace the space shuttle, such as the National Aero-Space Plane, the X-33 and X-34, and the Space Launch Initiative, that never accomplished its objective of fielding a new reusable space vehicle. We estimate that these unsuccessful development efforts have cost approximately $4.8 billion since the 1980s. The high cost of these unsuccessful efforts and the potential costs of implementing the Vision make it important that NASA achieve success in developing new systems for its new exploration program. NASA's plans to retire the shuttle have the potential to greatly impact the supplier base that has been supporting that program for the last several decades, as well as mold the future supplier base needed for its exploration program. Over the next few years, NASA will be making decisions about its supplier base needs, including which suppliers will be required for the remainder of the Space Shuttle Program, which will no longer be required for the program, and which will be needed to support exploration efforts. One concern is that NASA will be unable to sustain suppliers necessary to support the exploration program during the period between the shuttle's retirement and resumption of human space flight. Also of concern is that those suppliers determined by NASA as not needed for the exploration program will prematurely end their services, thus jeopardizing the safe and efficient completion of shuttle activities. In addition, issues such as obsolescence--already being experienced by some shuttle projects--could have an impact on the exploration program given the planned use of heritage hardware for some components of the Constellation projects. In an attempt to address these potential issues, NASA has been developing and implementing plans and processes to manage the transition of its supplier base. We are in the process of assessing how well NASA is positioning itself to effectively manage its supplier base to ensure both sustainment of the Space Shuttle Program through its scheduled retirement in 2010 and successful transition to planned exploration activities. The shuttle is uniquely suited for transporting crew and cargo to and from the ISS. However, with scheduled retirement of the shuttle in 2010, NASA and its international partners will be challenged to fully support ISS operations until 2014, when the new crew exploration vehicle is scheduled to come on line. To fill this gap, NASA plans to rely on its international partners and commercial services to provide ISS logistics and crew rotation. Two recent studies have raised serious concerns about whether future ISS operations can be continuously supported. A 2006 report by the National Research Council noted that the capabilities, schedules, and funding requirements for NASA, international partners, and commercial cargo and crew vehicles were not yet firm enough to give the panel confidence that ISS exploration mission objectives have a high likelihood of being fulfilled. A February 2007 report by the International Space Station Independent Safety Task Force, which was required by the NASA Authorization Act of 2005, noted that the transition from the space shuttle to post-shuttle systems for logistical support to the ISS will require careful planning and phasing of new capabilities. Specifically, care must be taken to ensure adequate logistics and spares are provided to maintain a viable station. The task force report went on to say that if a commitment is made to an emerging logistics delivery capability and the capability does not materialize, then logistical support to the ISS could be lost for some time, seriously decreasing the utility of the space station and possibly resulting in its abandonment. We are reviewing NASA's plans for meeting ISS logistics and maintenance requirements after the shuttle retires, identifying the main risks to meeting ISS logistics and maintenance requirements, and assessing NASA's plans for addressing the risks. NASA has not developed a comprehensive cost estimate for transitioning or disposing of Space Shuttle Program facilities and equipment. This poses a financial risk to the agency. As NASA executes the remaining missions needed to complete the assembly of and provide support for the ISS, it will simultaneously begin the process of disposing of shuttle facilities and hardware that the Space Shuttle Program will no longer need, or, transitioning such facilities and hardware to the other NASA programs. As the ninth largest federal government property holder, NASA owns more than 100,000 acres, as well as over 3,000 buildings and 3,000 other structures totaling over 44 million square feet. Currently, the Space Shuttle Program uses 654 facilities valued in excess of $5 billion. The Space Shuttle Program also manages equipment dispersed across government and its contractors valued at more than $12 billion. NASA is in the process of evaluating its Space Shuttle Program facilities and equipment requirements and identifying existing facilities and equipment that will no longer be needed to support shuttle operations. Constellation and other NASA programs will determine whether they need any of the facilities or equipment released by the Space Shuttle Program. According to NASA officials, assessments currently project that only 70 to 80 of the existing facilities are needed to support the development or operation of future exploration systems. In cases where facilities or equipment are no longer required by the Space Shuttle Program, no other use is identified, or it is selected for disposal, it will transition to the resident NASA field center for disposition. It is worth noting that even before the retirement of the shuttle, over 10 percent of NASA's facilities are underutilized or not utilized at all. One option NASA has is to lease underutilized facilities in exchange for cash and/or in-kind consideration, such as improvement of NASA's facilities or the provision of services to NASA. As directed by the NASA Authorization Act of 2005, we recently reported on NASA's Enhanced Use-Leasing Program. Congress authorized NASA to employ enhanced-use leasing at two demonstration centers. This allowed the agency to retain the proceeds from leasing out underutilized real property and to accept in-kind consideration in lieu of cash for rent. The act allows NASA to deposit the net proceeds (i.e., net of leasing costs) in a no-year capital account to use later for maintenance, capital revitalization, and improvement of the facilities, albeit only at the demonstration centers--Ames Research Center and Kennedy Space Center. However, unlike other agencies with enhanced-use leasing authority, NASA is not authorized to lease back the property during the term of the lease. Furthermore, we found that the agency does not have adequate controls in place to ensure accountability and transparency and to protect the government. We recommended that the NASA Administrator develop an agencywide enhanced use leasing policy that establishes controls and processes to ensure accountability and protect the government's interests including developing mechanisms to keep the Congress fully informed of the agency's enhanced use leasing activity. NASA concurred with our recommendations. After not receiving additional authority in the NASA Authorization Act of 2005, the agency is again requesting that the Congress extend enhanced use leasing authority to at least six NASA centers. NASA currently has other leasing authorities, but they require the agency to return to the U.S. Treasury any amounts exceeding cost. Further, NASA has indicated that it is preparing a package of legislative and administrative tools to help in the transition from the Space Shuttle Program to the Constellation Program. For example, in addition to requesting authority for increased use of enhanced use leasing, a NASA official informed us that one tool the agency might consider pursuing is the ability to keep the funds within NASA from the sale of facilities and equipment, rather than returning such funds to the Treasury. NASA does not have a comprehensive estimate of the environmental clean up costs associated with the transition and disposal of Space Shuttle Program facilities and equipment. The agency must comply with federal and state environmental laws and regulations, such as the National Environmental Policy Act of 1969, as amended, the Resource, Conservation, and Recovery Act of 1976, as amended, and the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended, in identifying and mitigating the environmental concerns. Although NASA has an approach for identifying environmental risks, in our report on major challenges facing the nation in the 21st century, we pointed out that progress in cleaning up sites frequently does not meet expected time frames and the costs dramatically exceed available funding levels. For example, it cost the Titan IV program approximately $300 million over six years on cleaning facilities, equipment, and tools. At this time, the extent of the Space Shuttle Program's environmental liabilities is not yet fully known. Paying for this liability may require a significant future outflow of funds at the same time that NASA will be facing many other competing demands for its limited dollars, such as development of Orion, Ares I, and other exploration projects. As it moves away from flying the shuttle, the NASA acknowledges that it must realign where necessary and plan for a workforce that will not be quite as large. NASA projects fewer resources will be required for operating and sustaining hardware, especially during vehicle processing and launch operations. The reduction in reusability of future space systems will also result in less refurbishing. In addition, as new space systems are designed, emphasis will shift to personnel with skills in systems development and engineering, program management and systems integration. Unfortunately, these skills will be in high demand at a time when other federal agencies and the private sector have similar needs. NASA projects that by fiscal year 2012 the total number of personnel needed to meet its strategic goals will decrease from 18,100 to 17,000. The agency is taking advantage of the flexibilities outlined in the NASA Flexibility Act of 2004 to attract highly qualified candidates, however, continued buy-outs and the threat of a reduction in force have created a feeling of instability among the science and engineering workforce. NASA's senior leaders recognize the need for an effective workforce strategy in achieving mission success. NASA has a strategic human capital plan, but more work is needed in workforce planning and deployment. In addition, NASA's transition to full cost accounting in fiscal year 2004 resulted in a number of its centers experiencing less than Full Time Equivalent utilization, a situation referred to by NASA as "uncovered capacity." The Administrator has committed to operating and maintaining 10 centers and transferred work to those centers with identified uncovered capacity. We are examining whether several federal agencies, including NASA, are taking sufficient steps to address their workforce challenges in a timely and comprehensive manner, while sustaining focus on its mission and programmatic goals. Specifically, we are assessing the extent to which NASA's human capital framework is aligned with its strategic mission and programmatic goals; whether NASA is effectively recruiting, developing, and retaining critically skilled staff; and what internal or external challenges NASA faces in achieving its workforce needs. As noted earlier, NAPA recently completed a study that made recommendations to NASA on how to achieve a flexible and scalable workforce by integrating its acquisition and workforce planning processes. Since 1990, GAO has designated NASA's contract management as high risk principally because NASA has lacked a modern financial management system that can provide accurate and reliable information on contract spending and has placed little emphasis on product performance, cost controls, and program outcomes. NASA has made progress toward implementing a disciplined project management processes, but it has made only limited progress in certain areas such as reengineering NASA's contractor cost reporting process. As we reported, the current Integrated Enterprise Management Program does not provide the cost information that program managers and cost estimators need to develop credible estimates and compare budgeted and actual cost with the work performed on the contract. NASA plans to spend billions of dollars to develop a number of new capabilities, supporting technologies, and facilities that are critical to enabling space exploration missions. The development of such capabilities will be largely dependent on NASA contractors--on which NASA spends about 85 percent of its annual budget. Because of such a large reliance on contractors to achieve its mission, it is imperative that NASA be able to track costs and the means to integrate financial decisionmaking with scientific and technical leadership by providing decisionmakers accurate information. To its credit, NASA is working to improve business processes and integrating disparate systems in order to improve efficiencies, reduce redundant systems, and improve business information available to the acquisition community and mission support organizations. However, more effort will be needed to make the cultural transformation a reality. The Vision for Space Exploration puts NASA on a bold new mission. Implementing the Vision over the coming decades will require hundreds of billions of dollars and a sustained commitment from multiple administrations and Congresses over the length of the program. How well NASA overcomes the transition challenges that we and others have identified will not only have an effect on NASA's ability to effectively manage the gap in the U. S. human access to space, but also will affect the agency's ability to secure a sound foundation of support for the President's space exploration policy. Consequently, it is incumbent upon NASA to ensure that these challenges are being addressed in a way that establishes accountability and transparency to the effort. Mr. Chairman and Members of the Subcommittee, this concludes my prepared statement. I would be happy to answer any questions you may have at this time. For further information regarding this testimony, please contact Allen Li at (202) 512-4841 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this testimony. GAO staff who made key contributions to this testimony include Greg Campbell, Richard Eiserman, Yanina Golburt, James L. Morrison, Jeffrey M. Niblack, Shelby S. Oakley, Jose A. Ramos, Sylvia Schatz, and John Warren. This is a work of the U.S. government and is not subject to copyright protection in the United States. It may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.
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On January 14, 2004, the President announced a new Vision for space exploration that directs the National Aeronautics and Space Administration (NASA) to focus its efforts on returning humans to the moon by 2020 in preparation for future, more ambitions missions. Implementing the Vision will require hundreds of billions of dollars and a sustained commitment from multiple administrations and Congresses. Some of the funding for implementing exploration activities is expected to come from funding freed up after the retirement of the Space Shuttle, scheduled for 2010, and projected termination of U.S. participation in the International Space Station by 2016. Congress, while supportive of the effort has voiced concern over the potential gap in human space flight. In the NASA Authorization Act of 2005, Congress stated that it is the policy of the United States to have the capability for human access to space on a continuous basis. NASA has made it a priority to minimize the gap to the extent possible. GAO provides no recommendations in this statement. However, GAO continues to emphasize that given the Nation's fiscal challenges and NASA's past difficulty developing systems within cost, schedule, and performance parameters, it is imperative that the agency adequately manage this transition in a fiscally competent and prudent manner. NASA is in the midst of a transition effort of a magnitude not seen since the end of the Apollo program and the start of the Space Shuttle Program more than 3 decades ago. This transition will include a massive transfer of people, hardware, and infrastructure. Based on ongoing and work completed to-date, we have identified a number of issues that pose unique challenges to NASA as it transitions from the shuttle to the next generation of human space flight systems while at the same time seeking to minimize the time the United States will be without its own means to put humans in space. These issues include: sustaining a viable workforce; effectively managing systems development efforts; managing the supplier base; providing logistical support to the International Space Station; identifying and disposing of property and equipment; ensuring adequate environmental remediation; and transforming its business processes and financial management system. NASA already has in place many processes, policies, procedures and support systems to carry out this transition. However, successful implementation of the transition will depend on thoughtful execution and effective oversight. How well NASA overcomes some of the challenges we have identified will not only have an effect on NASA's ability to effectively manage the gap in the U.S. human access to space, but will also affect the agency's ability to secure a sound foundation for the President's space exploration policy.
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In the United States, product safety, including fire safety, is largely promoted through a process of consensus-based standards and voluntary certification programs. ANSI establishes requirements to ensure that standards are formulated through a consensus-based process that is open and transparent and that adequately considers and resolves comments received from manufacturers, the fire safety community, consumers, government agencies, and other stakeholders. Standards are generally developed in the technical committees of organizations that include independent laboratories, such as Underwriters Laboratories; and trade and professional associations, such as the American Society for Testing and Materials. These entities form a decentralized, largely self-regulated network of private, independent, standards-development organizations. For those organizations that choose to follow ANSI procedures, ANSI performs audits and investigations to ensure that standards-development organizations follow approved consensus-based procedures for establishing standards. Standards promulgated by such organizations can become part of a system of American National Standards currently listed by ANSI. Overall, according to NFPA, the U.S. standards community maintains over 94,000 active standards, both American National Standards and others. These 94,000 active standards include private sector voluntary standards as well as regulatory and procurement standards. The process of developing consensus-based standards is designed to balance the needs of consumers, federal and nonfederal regulators, and manufacturers. According to ANSI officials, new standards are commonly adopted or existing ones are frequently revised because manufacturers express a need for such actions on the basis of the development of new products. Representatives of other parties--such as regulators or consumers--may raise concerns about product safety and performance. For marketing and consumer safety purposes, product manufacturers may have their products tested at independent testing laboratories to certify that the products meet applicable product standards. This testing and certification process is called "product conformity testing and certification." Some local, state and federal agencies require such testing and certification. For example, manufacturers of electrical home appliances have their products tested and certified by Underwriters Laboratories to enable them to attest that the products meet safety standards regarding fire, electrical shock, and casualty hazards. Alternatively, where acceptable, manufacturers can certify on their own that their products were tested and met applicable standards. Standards are also voluntarily accepted and widely used by manufacturers and regulatory agencies to provide guidance and specifications to manufacturers, contractors, and procurement officials. Each year millions of products are sold in the United States and throughout the world that bear the mark of testing organizations. Consumers, manufacturers, and federal agencies follow the very widespread, internationally recognized practice of relying on consensus standards and testing at laboratories to promote public safety. In the case of facilities and residences, the most extensive use of the standards is their adoption into model building codes by reference. Model building codes contain standards published by many organizations, including professional engineering societies, building materials trade associations, federal agencies, and testing laboratories. When erecting facilities; renovating offices; and purchasing equipment, materials, and supplies, federal agencies rely on the fire safety standards developed by private standards-development organizations. Furthermore, the federal government has historically encouraged its agencies to use standards developed by these organizations. For example, in its 1983 Circular A-119, OMB encouraged agencies to use these standards. Moreover, the National Technology Transfer and Advancement Act of 1995 requires agencies to use standards developed or adopted by voluntary consensus bodies, except when it is inconsistent with applicable law or otherwise impractical. Essentially, OMB Circular A-119 and the act direct federal agencies to use voluntary consensus standards whenever possible. They also direct federal agencies to consult with and participate, when appropriate, in standards-setting organizations and provide explanations when they do not use voluntary consensus standards in their procurement or regulatory activities. As of June 2001, according to NFPA, about 15 percent of the estimated 94,000 standards effective in the United States had been developed by civilian federal agencies. Furthermore, the Public Buildings Amendments of 1988 require GSA to construct or alter buildings in compliance with the national building codes and other nationally recognized codes to the maximum extent feasible. Federal agencies also engage in a variety of activities related to certifying that products conform to standards. For example, the National Institute of Standards and Technology publishes directories listing more than 200 federal government procurement and regulatory programs in which agencies are actively involved in procuring or requiring others to procure products meeting certification, accreditation, listing, or registration requirements. Furthermore, many federal agencies participate in the development of fire standards and product-testing procedures. For example, GSA participates on technical committees, such as those of NFPA and Underwriters Laboratories. As a result, GSA specifies numerous products and building code regulations that meet standards and testing requirements from standards-development organizations and testing laboratories. In addition, voluntary standards and the testing of products to those standards are widely accepted by other civilian federal agencies, such as the departments of Agriculture, Housing and Urban Development, the Interior, Labor, Transportation, and the Treasury as well as the Environmental Protection Agency. The federal government has no comprehensive, centralized database regarding the incidence of fires in federal facilities or the causes of such fires. According to NFPA, fires in office facilities, including federal civilian facilities, annually cause about 90 injuries and about $130 million in property damages. Although responsible for maintaining a national fire incident database and for serving as the lead agency in coordinating fire data collection and analysis, the U.S. Fire Administration does not collect data on the number of fires in federal office facilities and the causes of those fires, nor about specific types of products involved in the fires. For its part, GSA collects a minimal amount of information in the facilities for which it is responsible--about 330 million square feet in over 8,300 buildings--to determine the number and causes of fires that have occurred in the facilities. In addition, like the U.S. Fire Administration, NFPA does not gather specific information about whether a fire occurred on private or government property or whether the fire involved specific products. Thus, these databases do not contain sufficiently detailed data to allow the identification of fire incidents in federal facilities or fires associated with specific product defects. Also, the government does not have a mechanism for providing fire incident data to standards- development organizations when they consider the revision of product standards and testing procedures. As a result of a lack of detailed data collection and reporting systems, the government cannot assess the number and causes of fires in federal facilities and therefore cannot determine if any action is needed to ease the threat of fire. Certain private sector firms take steps to identify the nature of the fire threat in their facilities. For example, to help insurance companies, communities, and others evaluate fire risks, the Insurance Services Office, an affiliate of the insurance industry of the United States, maintains detailed records and performs investigations about individual properties and communities around the country, including such factors as the physical features of buildings, detailed engineering analyses of building construction, occupancy hazards, and internal and external fire protection. In addition, the Marriott Corporation, a worldwide hotel chain, maintains data on fires throughout its facilities. According to a Marriott official, Marriott uses this information to assess the risk of fire in its facilities and to take corrective actions. At the same time, the number and causes of fires in federal workspace are not known. The federal government--an employer of over two million civilian employees--does not have a system for centrally and comprehensively reporting fire incidents in its facilities and the causes of those incidents. For example, according to GSA officials, the agency-- which manages over 300 million square feet of office space--collects information on fires that cause over $100,000 in damage. However, when we requested this information, GSA could not provide it and provided examples of only two fires. According to a GSA official, GSA cancelled a requirement for its regional offices to report smaller fires to a central repository. GSA explained that it found the task of reporting smaller fires to be very labor intensive and time consuming. GSA also found that analysis of the reported information could not determine specific fire trends. Databases that are available and maintained by federal agencies--such as databases of the Department of Labor, Consumer Product Safety Commission, and U.S. Fire Administration--do not provide sufficient detail for determining the number and causes of fires in federal facilities, including the products involved in the fires. For example, according to the Department of Labor (Labor), 7 civilian federal employees died (excluding the 21 who died in forest or brush fires), and 1,818 civilian federal employees were injured while at work as a result of fires or explosions between 1992 and 1999. Although Labor gathers information about federal employees' injuries and fatalities caused by fires, this information does not identify details, such as the cause of the fire. Furthermore, because of a lack of reporting detail, the data do not lend themselves to an analysis of what specific products may have been involved in the fire and whether the product had been certified as meeting appropriate product standards. Within Labor, OSHA's Office of Federal Agency Programs, the Bureau of Labor Statistics, and the Office of Workers' Compensation Programs routinely gather information about federal employee injuries and fatalities. OSHA's Office of Federal Agency Programs, whose mission is to provide guidance to each federal agency on occupational and health issues, also collects annual injury statistics from each federal agency. These statistics are in aggregated form, however, and do not provide detail about the nature or source of the injury. The Department of Labor's Bureau of Labor Statistics has been collecting information on federal employee fatalities since 1992 through its Census of Fatal Occupational Injuries (CFOI). This census contains information regarding work-related fatality data that the federal government and the states have gathered from workers' compensation reports, death certificates, the news media, and other sources. According to the CFOI, between 1992 and 1999, 7 civilian federal employees were fatally injured due to fire-related incidents while working (excluding the 21 who died in brush or forest fires). Although the fatal injuries census does identify federal employee fatalities due to fires, it does not contain details about the fire, such as the cause of the fire or the types of products or materials that may have been involved in the fire. Also within the Department of Labor, the Office of Workers' Compensation Programs maintains information about federal employees or families of federal employees who have filed claims due to work-related traumas. The office was able to provide from its database information about the claims of federal employees or their families resulting from fire- related incidents. According to the Office of Workers' Compensation, between 1992 and 1999 1,818 civilian federal employees were injured in federal workspace as a result of fire-related incidents while working. However, this information includes data only for those federal employees who actually filed claims. Similar to CFOI data, this database does not contain additional details about the fire, such as the cause of the fire or the types of products or materials that may have been involved in the fire. The Consumer Product Safety Commission maintains a variety of data on product recalls and incidents related to consumer products. However, none of the four databases that it maintains can identify information about federal facilities or federal employees. The U.S. Fire Administration is chartered as the nation's lead federal agency for coordinating fire data collection and analysis. However, the national fire incident databases maintained by the U.S. Fire Administration do not gather specific information about whether a fire occurred on private or government property or whether the fire involved specific products. The Fire Administration maintains the National Fire Incident Reporting System (NFIRS)--a national database through which local fire departments report annually on the numbers and types of fires that occur within their jurisdictions, including the causes of those fires. Reporting, however, is voluntary; according to the U.S. Fire Administration, this results in about one-half of all fires that occur each year being reported. In addition, the U.S. Fire Administration does not collect data on the number of fires in federal office facilities and the causes of those fires, nor about specific types of products involved in a fire. According to its comments on a draft of our report, the Fire Administration does not have the resources or authority to implement a nationwide study of fires in federal workspace. In addition to the federal databases, NFPA also maintains a national fire incident database. According to NFPA, between 1993 and 1997, an average of 6,100 fires occurred per year in federal and nonfederal office space, resulting in an average of 1 death, 91 injuries, and $131.5 million in property damage per year. NFPA's estimates are based on information that fire departments report to the Fire Administration's NFIRS system and on information from NFPA's annual survey. NFPA annually samples the nation's fire departments about their fire experiences during the year; using this data, NFPA projects overall information about fires and their causes to the nation as a whole. However, neither the U.S. Fire Administration nor NFPA gathers specific information about whether a fire occurred on private or government property or whether the fire involved specific products. In the past, the federal government has collected data regarding fires occurring on federal property. The Federal Fire Council was originally established by Executive Order within GSA in 1936 to act as an advisory agency to protect federal employees from fire. The council was specifically authorized to collect data concerning fire losses on government property. However, the council moved to the Department of Commerce in 1972 and was abolished in 1982. Along with manufacturers, consumer representatives, fire safety officials, and others, the federal government is one of several important stakeholders involved in the standards-development process. However, as previously discussed, the government does not consistently and comprehensively collect information on fire incidents in federal facilities, and hence it cannot systematically provide these data to standards- development organizations for consideration during revisions of standards. Furthermore, some federal agencies may be slow to respond to information about failures of certain products, including those products intended to suppress fires. In at least one case, a fire sprinkler product that failed in both the work place and the testing laboratory, as early as 1990, continued to be used in federal facilities, and it has only recently been replaced at some facilities. This case is discussed below. Omega sprinklers were installed in hundreds of thousands of nonfederal facilities and in about 100 GSA-managed buildings. In 1990, a fire occurred at a hospital in Miami, FL, resulting in four injuries. During this fire, Omega sprinklers failed to activate. Through 1998, at least 16 additional fires occurred, during which Omega sprinklers failed to work, including a May 16, 1995, fire at a Department of Veterans Affairs hospital in Canandaigua, NY. During the New York fire, an Omega sprinkler head located directly over the fire failed to activate. Losses resulting from these and other fires were estimated at over $4.3 million (see table 1). Although none of the fires reported in table 1 occurred in Fairfax County, VA, the County fire department became concerned that many of the sprinklers were installed in public and private facilities in the county. Throughout the mid-1990s, by publicizing its concerns about the sprinklers, the County fire department contributed to the widespread dissemination of information about the sprinklers in the media. In addition, tests performed in 1996 at independent testing laboratories-- Underwriters Laboratories and Factory Mutual Research Corporation-- revealed failure rates of 30 percent to 40 percent. On March 3, 1998, the Consumer Product Safety Commission announced that it had filed an administrative complaint against the manufacturer, resulting in the October 1998 nationwide recall of more than 8 million Omega sprinklers. The agency began investigating Central Sprinkler Company's Omega sprinklers in 1996 when an agency fire engineer learned about a fire at a Marriott hotel in Romulus, MI, where an Omega sprinkler failed to activate. After identifying that there was a hazard that warranted recalling the product, the Commission staff sought a voluntary recall from Central. Unable to reach such an agreement with Central, the agency's staff were authorized to file an administrative complaint against the company. Moreover, the Commission attempted to coordinate with other federal agencies, such as the Department of Veterans Affairs and GSA. The Department of Veterans Affairs participated in the recall in accordance with the terms of the Commission's settlement agreement with the manufacturer. GSA officials stated that they became aware of the problems associated with Omega sprinklers in 1996 after hearing about them from the news media and Fairfax County Fire Department officials. GSA began a survey to identify the 100 GSA-managed buildings that contained the sprinklers. It also pursued an agreement with the manufacturer, resulting in a 1997 negotiated settlement for the replacement of some 27,000 devices in GSA- controlled buildings. Officials from OSHA stated that they were unsure about when they became aware of the problems associated with Omega sprinklers. An agency official explained that OSHA generally does not monitor information regarding problems with specific products, except for Consumer Product Safety Commission recalls. According to OSHA, it checks such recalls only informally and within the limited context of one of its programs, but not as a part of its primary compliance efforts. In addition, according to OSHA officials, when OSHA did find out about the Omega sprinklers problems, it took no action because such problems are outside the agency's jurisdiction unless the problems involve noncompliance with applicable OSHA requirements. According to an OSHA official, OSHA does issue "Hazard Information Bulletins" that could potentially contain information about failures of specific products. However, these bulletins do not generally duplicate Consumer Product Safety Commission recall information and do not generally concern consumer products. Federal facilities not controlled by GSA--including those of Capitol Hill (the House of Representatives, the Capitol, the Senate, and the Library of Congress) and the Smithsonian Institution--have either recently replaced or are just now replacing the defective Omega sprinklers. According to an official of the Architect of the Capitol, although the facility's management was aware of the problems with the sprinklers, it continued using them because of cost considerations. At the time our review was completed, the Architect of the Capitol had removed and replaced the Omega sprinklers from all of the House of Representatives buildings and Capitol buildings, most of the Senate buildings, and one of the Library of Congress' buildings. The Architect of the Capitol was also in the process of replacing them in the remainder of the Senate and Library buildings. In addition, according to the Chief Fire Protection Engineer of the Smithsonian, agreement for a free-of-cost replacement of the Omega sprinklers has been reached, although the process of replacing them had not begun at the time we completed our work. At your request, we also reviewed concerns about the extent to which information technology equipment--such as computer printers, monitors, and processing units--could be a source of fires in offices, homes, and other places, including federal workspace. A private testing laboratory in Sweden recently performed experiments that suggested that some types of information technology equipment could be subject to damage from flames that originate from external sources. In response to these concerns, the Information Technology Industry Council convened a panel of stakeholders--including the Consumer Product Safety Commission, Underwriters Laboratories, and others--to study the issue. The panel found that information technology equipment did not pose a widespread fire threat in the United States. According to the representatives of the American Chemistry Council, the threat of information technology equipment fires from external sources is mitigated by the presence of various types of flame retardants in the casings of this equipment. Moreover, representatives of the Information Technology Industry Council stated that the industry has a policy of making its equipment as safe as possible for consumers. They agreed, however, that the issue of the flammability of information technology equipment needed further study. Fires, even relatively small ones, can have tragic and costly consequences. Knowing the numbers and types of fires in workspace, as well as the causes of fires and any products involved, is critical for understanding the extent of the risk of fire and can lead to identification and implementation of steps to reduce this risk. Some private sector organizations--for example, a major hotel chain and some insurance organizations--track the number of fires in different types of facilities and their causes. Such information is used to manage this risk and reduce property damage, injuries, and the loss of life. However, the federal government, which employs over two million people in space that GSA and other agencies manage, collects very limited information on fires and lacks information on the risk of fires in its workspace. Without more complete information on fires, the federal government--a key player in the standards- development process--cannot provide timely information on the causes of fires in federal facilities to standards-development organizations for their use in developing and revising standards, testing procedures, and certification decisions. Collecting and analyzing data on the risk of fire in its workspace could enable the government to better protect its employees and enhance its ability to participate in producing standards that would better protect the public at large from fire. We recommend that the Administrator, U.S. Fire Administration, in conjunction with the Consumer Product Safety Commission, GSA, OSHA, and other federal agencies that the Fire Administration identifies as being relevant, examine whether the systematic collection and analysis of data on fires in federal workspace is warranted. If they determine that data collection and analysis are warranted, data that should be considered for collection and analysis include: the number of fires in federal workspace; property damage, injuries, and deaths resulting from such fires; and the causes of these fires, including any products involved. In addition, the agencies should discuss, among other topics deemed relevant, the availability of resources for implementing any data collection system and any needed authority to facilitate federal agencies' cooperation in this effort. We provided copies of a draft of this report to the heads of the Federal Emergency Management Agency's Fire Administration and GSA, as well as the Consumer Product Safety Commission and the Department of Labor. Because of its role in testing Omega sprinklers, we also provided a copy of the report to Underwriters Laboratories. Although Underwriters Laboratories had no comments on the draft, the other recipients of the draft provided comments via E-mail. These comments, and our responses to them, are discussed below. In commenting on our draft report, the Director of the Fire Administration's National Fire Data Center agreed in principle with our recommendation by stating that Fire Administration officials would gladly meet with GSA and others to examine whether specialized data collection is warranted. We welcome the Fire Administration's proposal. In addition, the Fire Administration listed several obstacles to the creation of a complete and accurate fire incident reporting system: (1) its lack of resources, (2) its lack of authority to require other federal agencies to report fires, and (3) its lack of on-site management and control over an existing fire incident reporting system, the National Fire Incident Reporting System (NFIRS). Moreover, the Fire Administration does not specifically collect data on the number and causes of fires in federal office facilities, and no indication exists that the fire problem in federal facilities differs significantly from the overall national fire experience in similar workplace environments. We agree that data on federal fires are not currently collected, and we would cite this lack of information as a significant reason for exploring the need for a system to report the number and causes of fires in federal space. We further agree that a lack of resources, of authority to compel fire incident reporting, and of management over reporting may pose serious obstacles to improved fire incident reporting; therefore, we urge that the Fire Administration address these factors with other agencies when it meets with them to discuss the need for more specialized reporting on fires in federal work space. GSA senior program officials commented on a draft or our report. They requested that we delete a statement in our draft report that GSA could not provide us with complete information on fires that caused over $100,000 damage in federal facilities it manages. GSA said that our statement was not germane. We declined to make this change because the statement is germane to our discussion about a lack of information on fires in the federal workplace. GSA's inability to provide the information we requested serves to illustrate this very point. In addition, we added information in our report regarding GSA's explanation that it had cancelled a previous requirement for its regional offices to report smaller fires to a central repository. GSA explained that such reporting was labor intensive and time consuming, and analyses of this information could not yield specific fire trends. We agree with GSA that some reporting requirements may be labor intensive, time consuming, and not helpful. Therefore, in our view, as stated above and as reflected in our recommendation, the Fire Administration should address these factors with GSA and other agencies when it meets with them to discuss the need for more specialized reporting on fires in federal work space. GSA did not comment on the recommendation in the draft of our report. In addition, Department of Labor officials provided technical and clarifying comments, all of which we incorporated into our report. However, they did not comment on the recommendation. The Department of Labor's Bureau of Labor Statistics Assistant Commissioner, Office of Safety and Health, provided additional data regarding the number of federal employees who died as a result of fires or explosions from 1992 through 1999, clarifying that most of these fatalities occurred outside of federal buildings. The Department's Occupational Safety and Health Administration's Acting Director for Policy provided additional information, which we incorporated into our report, about the extent of its involvement in the Omega sprinkler case and the rationale for the actions it took. The Consumer Product Safety Commission stated that its comments were editorial in nature, and we revised our report to incorporate these comments. As arranged with your office, unless you publicly announce its contents earlier, we plan no further distribution of this report until 30 days after the date of this letter. At that time, we will send copies of this report to the cognizant congressional committees; the Administrator, General Services Administration; the Chairman, Consumer Product Safety Commission; the Secretary of Labor; and the Administrator, Federal Emergency Management Agency. We will also make copies available to others on request. If you have any questions about this report, please contact me at (202) 512- 4907. Key contributors to this report were Geraldine Beard, Ernie Hazera, Bonnie Pignatiello Leer, Bert Japikse, and John Rose. Our report (1) provides information on the federal government's reliance on private voluntary fire standards and testing products against those standards and (2) discusses whether data that are available about fire incidents and their causes in civilian federal facilities are sufficient to protect federal workers from the threat of fire. To examine the government's reliance on fire safety standards and testing, we reviewed policies and procedures regarding how standards-setting organizations and independent laboratories establish fire safety standards and test products, as well as the roles of federal agencies and other interested parties in these processes. We contacted standards- development organizations, including Factory Mutual Research, Underwriters Laboratories, Southwest Research Institute, the American National Standards Institute (ANSI), and the American Society for Testing and Materials. We also obtained information regarding how testing and standards-setting laboratories and organizations consider fire incident data and other information about fire hazards when revising fire safety standards and testing procedures. We obtained and analyzed regulatory and statutory criteria regarding the federal role in fire safety standards and testing. We interviewed federal officials from the General Services Administration (GSA), the National Institute of Standards and Technology, the U.S. Fire Administration, the Consumer Product Safety Commission, and the Department of Labor, as well as officials from standards- development organizations. We also interviewed fire protection officials, including officials from the International Association of Fire Fighters, the International Association of Fire Chiefs, and the Fairfax County, VA, Fire Department to obtain information on setting standards and testing products. To examine whether data are available about incidents and causes of fires in civilian federal facilities, we contacted GSA, the manager of about 40 percent of all civilian, federal office space. However, GSA does not routinely collect information about all fires that occur in federal facilities. Therefore, we obtained and analyzed fire protection incident data from the Fire Administration and the National Fire Protection Association (NFPA). The U.S. Fire Administration maintains the National Fire Incident Reporting System, which is the world's largest national annual database of fire incident information. State participation is voluntary, with 42 states and the District of Columbia providing reports. The data in the National Fire Incident Reporting System comprise roughly one half of all reported fires that occur annually. NFPA annually surveys a sample (about one- third) of all U.S. fire departments to determine their fire experiences during the year. NFPA uses this annual survey together with the National Fire Incident Reporting System to produce national estimates of the specific characteristics of fires nationwide. Through a review of the databases, we found that there was not sufficient detail to determine which of the fires reported occurred in federal facilities. In addition, the fire departments do not document the name brands of any product that might have been involved in a fire. However, NFPA was able to provide information about fires that have occurred in office space (federal and nonfederal) from 1993 through 1998. Finally, we did not conduct a reliability assessment of NFPA's database or the National Fire Incident Reporting System. We also attempted to determine the number of civilian federal employees who may have been injured or killed as a result of a fire-related incident while at work. In this regard, we obtained information from the Bureau of Labor Statistics' Census of Fatal Occupational Injuries (CFOI) regarding civilian federal employee fatalities from 1992 through 1999. The federal government and the states work together to collect work-related fatality data from workers' compensation reports, death certificates, news stories, and other sources for CFOI. All 50 states participate in CFOI. The Bureau of Labor Statistics was able to provide information from CFOI describing the number of civilian federal employees fatally injured due to fire-related incidents while at work. We also obtained information from the Office of Workers' Compensation Programs from 1992 through April 2001 regarding civilian federal employees or their families who have filed for workmen's compensation as a result of an injury or fatality due to a fire-related incident while at work. However, the data represent only those incidents for which a civilian federal employee or the family filed a claim. With the limited data available from the fatal injuries census and Office of Workers' Compensation Programs, we were unable to do an analysis of the number of claims filed due to bombings, such as the April 1995 Murrah Federal Building bombing in Oklahoma City, OK, and the August 1998 bombing of the U.S. Embassy in Dar Es Salaam, Tanzania. In addition, according to CFOI, the fatality data do not include fatalities due to bombings, such as the Oklahoma City bombing and the Dar Es Salaam bombing. When a fatality is reported, CFOI requires that Assaults and Violent Acts, Transportation Accidents, Fires, and Explosions reports take precedence in the reporting process. When two or more of these events occur, whoever inputs the information selects the first event listed. The Bureau of Labor Statistics classified the Oklahoma City bombing deaths as homicides under the Assaults and Violent Acts category. In addition, the Office of Workers' Compensation Programs was able to provide information on the number of injuries to civilian federal employees that its Dallas District Office reported for 1995 as resulting from explosions. According to the Office of Workers' Compensation Programs, it is likely that many of these injuries resulted from the Oklahoma City bombing. Furthermore, the databases do not contain any details of fires. We used the fatality data from CFOI, because it is the more comprehensive source of federal employee fatality information. Finally, we did not conduct a reliability assessment of the Bureau of Labor Statistics' CFOI database or the database of the Office of Workers' Compensation Programs. We also obtained information about fire incidents related to consumer products by contacting the Consumer Product Safety Commission. The Commission maintains several databases that allow it to conduct trend analyses of incidents involving various types of products, including the National Electronic Injury Surveillance System, a Death Certificate File, the Injury or Potential Injury Database, and the In-Depth Investigation File. In addition, the Commission maintains a library (paper files) of information on products that have been recalled. However, none of these sources contained information that would identify information about federal facilities, federal employees, or product brand names, with the exception of those that have been recalled. To examine the quality and limitations of these data, we reviewed relevant documents and interviewed officials from organizations that compile and report the data, including the National Fire Protection Association, Fire Administration, Consumer Product Safety Commission, Occupational Safety and Health Administration, Bureau of Labor Statistics, Office of Workers' Compensation Programs, and National Institute of Standards and Technology. As requested, we examined details about reporting incidents and concerns involving Omega sprinkler heads and how standards-development organizations, federal agencies, and others responded to reports about the failures of these devices. We contacted officials from, and in some cases obtained documentation from, the Fairfax County (VA) Fire Department. We also contacted various federal regulatory agencies or agencies that used or were indirectly involved in using Omega sprinklers, including GSA, the Consumer Product Safety Commission, Occupational Safety and Health Administration, National Institute of Standards and Technology, Architect of the Capitol, Smithsonian Institution, and Department of Veterans Affairs. We also contacted officials from various laboratories that had tested Omega sprinklers, including Underwriters Laboratories, Factory Mutual, and the Southwest Research Institute. We also interviewed officials from the Marriott Corporation, which, along with Fairfax County, had publicized the problems associated with the sprinklers. As requested, we also reviewed concerns about the possible flammability of information technology equipment. In this regard, we inquired and obtained information about such factors as the types of flame retardants currently used in the casings of information technology equipment and concerns about the environmental and health impacts of these substances, the standards used to mitigate the flammability of information technology equipment, and the tests used to determine the flammability of this equipment. Our sources of information were the American Chemistry Council; the Great Lakes Chemistry Council; the Information Technology Industry Council; the National Association of State Fire Marshals; SP (a private testing laboratory in Sweden); the National Fire Protection Association; Underwriters Laboratories; and federal agencies, including the U.S. Consumer Product Safety Commission and the U.S. Department of Commerce's National Institute of Standards and Technology. We conducted our work from December 2000 through August 2001 in accordance with generally accepted government auditing standards. American Society for Testing and Materials Southwest Research Institute Underwriters Laboratories, Inc.
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Developing fire protection standards and testing products against them are critical to promoting fire safety. Business offices, including federal facilities, experience thousands of fires, more than $100 million in property losses, and dozens of casualties each year. Knowing the number and types of fires in the workplace, as well as their causes, is critical to understanding and reducing fire risks. Some private-sector groups track the number and causes of fires in different types of buildings. Such information is used to manage risk and reduce property damage, injuries, and deaths. However, the federal government collects little information on the fire risks in its facilities. As a result, the federal government cannot provide standards-development organizations with timely information that could be used to develop or revise fire safety standards, testing procedures, and certification decisions. Collecting and analyzing such data would help the government to better protect its employees and would contribute to the production of better standards to protect the public from fire.
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Bank capital performs several important functions. Among other things, capital acts as a financial cushion to absorb unexpected losses, promotes public confidence in the solvency of the institution and the stability of the banking sector, and provides protection to depositors and deposit insurance funds. Because of capital's role in absorbing losses, promoting confidence, and protecting depositors, federal banking regulations require banking organizations to maintain adequate capital, and regulators set minimum capital levels to help ensure that institutions do so, including a target total minimum risk-based capital ratio--that is, the ratio of capital to risk-weighted assets. Federal law authorizes banking regulators to take a variety of actions to ensure capital adequacy, including informal and formal enforcement actions. Federal banking regulators generally expect institutions to hold capital at levels higher than regulatory minimums. Capital rules in the United States generally follow a framework of measures adopted by the Basel Committee. U.S. federal banking regulators have adopted various risk-based capital regimes over the past decades. Under these frameworks, assets and off-balance-sheet exposures are assigned to one of several broad risk categories according to the obligor (for example, the person or legal entity contractually obligated on an exposure), or if relevant, the guarantor or the nature of the collateral. Banking organizations multiply the aggregate dollar amount or exposure amount in each risk category by the risk weight associated with that category. The resulting risk-weighted amounts from each of the risk categories are added together, and generally this sum is the banking organization's total risk-weighted assets, which comprises the denominator of the risk-based capital ratio. For example, a $1,000 on- balance-sheet asset at a 20 percent risk weight would equal $200 in risk- weighted assets. An additional $1,000 on-balance-sheet asset at a 50 percent risk weight would equal $500 in risk-weighted assets, for a total of $700 in risk-weighted assets (compared to the $2,000 in total assets). The risk weights enable one to calculate the amount of capital a banking organization would need to hold for a given asset--its "capital charge"--in order to meet the minimum risk-based capital ratio requirements. To meet an 8 percent minimum total capital ratio requirement, the organization with the $700 in risk-weighted assets in the previous example would need to hold $56 in capital ($700x0.08). The minimum total capital charge for the $1,000 on-balance-sheet asset that was risk-weighted at 20 percent would be $16 ($1,000x0.2x0.08), while the minimum capital charge for the $1,000 on-balance-sheet asset that was risk-weighted at 50 percent would be $40 ($1,000x0.5x0.08). Risk weights for mortgages and other mortgage-related assets have been included in a number of these regulatory capital frameworks over the years, including the following: The Basel Capital Accord (Basel I), which was adopted in 1988 and implemented in the United States in the early 1990s, established a system of generally applicable risk weights for specific assets (including mortgage-related assets) to calculate total risk-weighted assets and defined a minimum total risk-based capital ratio (the ratio of regulatory capital to risk-weighted assets) of 8 percent with limited exceptions. Under this system, all assets of a certain category--for example, commercial loans--were assigned a flat risk weight without regard for differences in credit quality among the assets in that category (simple risk-bucket approach). Asset categories were classified into one of four risk-weight buckets--0 percent, 20 percent, 50 percent, or 100 percent. Amendments to the U.S. federal banking regulators' rules adopted in 2001 implemented a multilevel, ratings-based approach to assess capital requirements on asset securitizations-- including mortgage- backed securities (MBS)--based on their relative exposure to credit risk. The approach used credit ratings from nationally recognized statistical rating organizations (NRSRO) to measure relative exposure to credit risk and determine the associated risk-based capital requirement. In 2007, U.S. federal banking regulators adopted capital rules for large internationally active banking organizations that were based on a revised framework published by the Basel Committee in 2006 (Basel II). Only large, internationally active banks--banks with consolidated total assets (excluding assets held by an insurance underwriting subsidiary of a bank holding company) of $250 billion or more or with consolidated total on-balance-sheet foreign exposure of $10 billion or more--were required to adopt the advanced approaches for measuring risk (including mortgage-related credit risk) established in the Basel II-based rules. Under these rules, the advanced internal ratings-based approach used risk parameters determined by a bank's internal systems as inputs into a formula developed by supervisors for calculating minimum regulatory capital and expanded the use of credit ratings to measure credit risk. U.S. federal banking regulators promulgated a final rule in 2013 to incorporate many of the changes included in the Basel III framework. Among other changes, the final rule includes a new standardized approach for credit risk to replace the Basel I generally applicable risk-based capital rule. The final rule also removed references to credit ratings that were in the Basel I generally applicable rule and the advanced internal ratings-based approach, consistent with requirements in Section 939A of the Dodd-Frank Act. Other entities that hold mortgages and mortgage-related assets have different capital requirements. For example, in 1992 the Office of Federal Housing Enterprise Oversight, which at the time was the regulator for the enterprises, adopted minimum capital requirements based on the enterprises' on-balance-sheet assets and off-balance-sheet obligations. Nonbank financial institutions that service mortgages for the enterprises and Ginnie Mae must comply with minimum capital and net worth requirements those entities have issued. The Basel III final rule adopted in 2013 by the U.S. federal banking regulators and generally effective as of January 2015 incorporates higher risk weights for certain mortgage-related exposures while leaving others unchanged (see table 1). For example, the risk weights for most single- family residential mortgages are largely unchanged by the final rule. However, the final rule changed the risk weights for some mortgage- related securitization exposures and for mortgage servicing assets. Risk weights for residential first-lien mortgages on one-to-four family properties that are held in banks' portfolios have remained largely unchanged since the adoption of the Basel I-based rules. Under the standardized approach outlined in the Basel III-based final rule, the portions of mortgages that are conditionally guaranteed by U.S. government agencies, such as the Federal Housing Administration or the Department of Veterans Affairs, are assigned 20 percent risk weights under the standardized approach--essentially unchanged since Basel I. Other mortgages--and the portions of mortgages not guaranteed by U.S. government agencies--secured by one-to-four family residential properties are assigned a 50 percent risk weight, provided that such loans are: secured by a property that is either owner-occupied or rented; made in accordance with prudent underwriting standards, including standards relating to the loan amount as a percentage of the appraised value of the property; not 90 days or more past due or carried in nonaccrual status; and not restructured or modified (other than through the Department of the Treasury's Home Affordable Modification Program). Also, if a banking organization holds the first-lien and junior-lien residential mortgage exposures, and no other party holds an intervening lien, the institution must combine the exposures and treat them as a single loan secured by a first lien to determine the loan-to-value ratio and assign a risk weight. Banking organizations are required to assign a 100 percent risk weight to a first-lien residential mortgage exposure that does not meet the criteria previously listed and to junior-lien residential mortgage exposures if the banking organization does not hold the first lien on the property. The advanced internal ratings-based approach requires banking organizations to use a formula defined in regulation to determine the capital requirements for residential mortgage exposures, which are grouped into segments that have similar (homogeneous) risk characteristics. The formula for the capital charge for nondefaulted residential mortgage exposures uses values for the probability of default and loss given default that each bank derives from its internal systems (see app. I). For example, applying a probability of default of 3 percent and losses given default of 20 percent to a segment of nondefaulted residential mortgages would result in a risk weight of about 50 percent using this formula. This formula is unchanged since it went into effect in 2008. Under this advanced approach, defaulted residential mortgage exposures that are covered by an eligible U.S. government guarantee have a capital charge of 1.6 percent for the portion that is covered by the guarantee--an implicit 20 percent risk weight (0.016 / 0.08 = 0.2). The previous rules did not include a separate provision for defaulted residential mortgage exposures covered by a government guarantee. Defaulted residential mortgage exposures not covered by an eligible U.S. government guarantee have a capital charge of 8 percent, which implies a risk weight of 100 percent. The standardized approach and the advanced approach both assign a risk weight of 50 percent to pre-sold construction loans with a legally binding sales contract unless the purchase contract is cancelled, in which case a banking organization must assign a 100 percent risk weight. The Basel III-based final rule keeps the risk weights for government- and enterprise-guaranteed MBS outlined under the previous rules but changes how the risk weights for private-label securities are calculated. Under the standardized approach, residential MBS guaranteed by Ginnie Mae have a risk weight of 0 percent, while residential MBS issued and guaranteed by Fannie Mae and Freddie Mac have a risk weight of 20 percent--unchanged since Basel I. As shown previously in table 1, risk weights for other MBS that qualify as securitization exposures can range from 20 percent to 1,250 percent under either the standardized or the advanced approaches. Previously, risk weights for securitization exposures could be as low as 7 percent under the advanced approach. Under the current rules, banks using the advanced internal-ratings based approach must also apply the standardized approach. If banks are unable to use the formulas and approaches defined in the final rule for the standardized and advanced approaches--for example, because they do not have data to calculate all the inputs--they must apply the 1,250 percent risk weight to their securitization exposures. The Basel III final rule establishes two methods for calculating risk weights for securitization exposures under the standardized approach: The simplified supervisory formula approach relies on objective inputs to calculate risk weights for securitization exposures using a formula. To use this approach, a bank needs to know the performance of the underlying assets. The "gross-up" approach involves calculating an amount of capital for the bank's exposure as well as for the portion of more senior exposures (that is, the least risky tranches, which are given priority for repayment), if any, for which the bank's exposure provides support. If a bank does not have access to the inputs required to calculate the simplified supervisory formula approach, or prefers a simpler approach, the gross-up approach can be applied. Banks that are subject to another rule, the market risk rule, must use the simplified supervisory formula approach. Banks that are not subject to this other rule may choose to use either method but must use the same method across all exposures. The simplified supervisory formula approach takes into account the weighted average capital charge for the underlying exposures, delinquency level of the underlying collateral, and the relative size and seniority of the security in the securitization structure (see app. II for the details of the formula). The current balances of all the underlying exposures in the securitization structure are used to calculate the attachment and detachment points for each level, or tranche, of the structure. Losses are first borne by the lowest tranches. Once a tranche experiences a total loss, the next tranche immediately senior to it begins to bear any additional losses. The following hypothetical securitization structure illustrates the simplified supervisory formula approach for a securitization backed by a pool of residential mortgages that would be risk-weighted at 50 percent. For such a securitization, the typical capital charge of the underlying mortgage pool is 4 percent (50 percent risk weight multiplied by 8 percent minimum risk- based capital ratio). Assuming that 5 percent of the mortgages in the pool are delinquent and have a risk weight of 100 percent (for an 8 percent capital charge), the weighted average capital charge of the mortgage pool would be 4.2 percent. The risk weights for each of the tranches can be calculated using the formula outlined in the final rule and described in appendix II. The risk-weight results for a pool that does not involve resecuritizations are shown in table 2. If 10 percent of the underlying mortgage pool is delinquent, the weighted average capital charge would be 4.4 percent, and the tranche risk weights for the lower (more risky) tranches would increase, reflecting the increased likelihood of losses on these tranches. In both scenarios, the most senior tranches would have risk weights of 20 percent. Risk weights for other securitization exposures, such as real estate mortgage investment conduits, can also be calculated using the simplified supervisory formula approach. Similarly, the credit risk transfer transactions the enterprises have engaged in with various investors would be treated as securitization exposures for banks that hold these notes. In most cases, these notes would have risk weights at or near 1,250 percent due to the holders of the notes being in or near the first-loss position. Previously, under the Basel I-based rules that most banks were subject to through 2014, some private-label securitization exposures were assigned general risk weights while others were given risk weights based on credit ratings. For example, privately issued MBS backed by mortgages that would qualify for the 50 percent risk weight would receive a 50 percent risk weight, subject to certain conditions. Mortgage securitization exposures--including direct credit substitutes, recourse, and residual interests--that were externally rated were assigned risk weights between 20 percent (for long-term credit ratings of AAA or AA) and 200 percent (for BB ratings, which indicate higher risk). The gross-up approach in the Basel III-based rule is the same as an approach that was available under the previous rules. To calculate risk- weighted assets under the gross-up approach, a banking organization determines three inputs along with the exposure amount: the pro rata share, the enhanced amount, and the applicable risk weight. The pro rata share is the par value of the banking organization's exposure as a percentage of the par value of the tranche in which the securitization exposure resides--for example, a $5,000 exposure in a $10,000 junior tranche of one-to-four family residential mortgages would be a 50 percent pro rata share. The enhanced amount is the par value of all tranches that are more senior to the tranche in which the exposure resides. These more senior tranches are "enhanced"--that is, their credit profiles are improved by--the subordinated tranches. If the total securitization in the previous example is $100,000, the par value of all tranches that are more senior to the tranche in which the bank has an interest is $90,000. The applicable risk weight is the weighted-average risk weight of the underlying exposures in the securitization as calculated under the standardized approach. For mortgages not guaranteed by the federal government (as in the previous example), the underlying exposures can have risk weights of either 50 percent or 100 percent. The weighted-average risk weight would be 75 percent if half of the total amount of underlying mortgages had a risk weight of 50 percent and the remaining underlying exposures had a risk weight of 100 percent. For the previous example, assume the weighted-average risk weight of the underlying exposures is 50 percent (that is, all the mortgages meet all of the requirements discussed previously, such as not 90 days past due and not restructured or modified). The risk weight would then be applied to the bank's interest--$5,000--plus the pro rata share of the more senior tranches--50 percent of $90,000. In other words, $50,000 ($5,000 plus $45,000) would be multiplied by the 50 percent risk weight. The result, $25,000, is equivalent to a 500 percent risk weight on the bank's $5,000 exposure. The bank would then multiply the $25,000 by the minimum capital requirement of 8 percent to determine that the capital requirement for the $5,000 exposure is $2,000. For the advanced internal ratings-based approach, the Basel III-based final rule eliminates the credit ratings-based approach that had been the primary method for determining risk weights for securitization exposures under the previous rules. The credit ratings-based approach assigned risk weights to securitization exposures based on their seniority in the securitization structure and the effective number of exposures (as determined by a formula), as well as their external ratings from one or more NRSROs or inferred ratings. These risk weights ranged from 7-20 percent for the highest investment grade (long-term) securitization exposures (e.g., AAA) to 35-100 percent for the lowest investment grade exposures (e.g., BBB+, BBB, BBB-) to 250-650 percent for exposures one category below investment grade (e.g., BB+, BB, BB-). The primary method for banks using the advanced internal ratings-based approach to calculate capital requirements for securitization exposures is the supervisory formula approach. The supervisory formula approach was an alternative method banks could use under the Basel II-based rules for securitization exposures for which there was no applicable external or inferred credit rating. It has remained largely unchanged from the Basel II- based rules with one significant exception: a 20 percent risk-weight floor, rather than a 7 percent risk-weight floor, now applies to all securitization exposures. The supervisory formula approach requires banks to calculate several input parameters on an ongoing basis. These include the exposure's credit enhancement level and thickness; the exposure-weighted average loss given default for the underlying exposures to the securitization transaction and the effective number of underlying exposures (both determined by formulas specified in the final rule); and the capital requirements for the underlying exposures, such as those for residential mortgage exposures described earlier. If banks using the advanced internal ratings-based approach are unable to calculate the inputs for the supervisory formula approach, they may use the simplified supervisory formula approach described earlier. The Basel III-based final rule changes the treatment of mortgage servicing assets by (1) lowering the cap on the amount of mortgage servicing assets that can be included in capital calculations, which reflects, in part, the uncertainty regarding the ability of banking institutions to realize value from these assets, especially under adverse financial conditions, and (2) increasing the risk weights. Mortgage servicing assets are the contractual rights owned by a banking organization to service (for a fee) mortgage loans that are owned by others. Under previous rules, banks included up to 90 percent of fair value or 100 percent of book value of mortgage servicing assets in their capital calculations, whichever was lower, and mortgage servicing assets were subject to 100 percent risk weight. In contrast, the final rule caps the recognition of mortgage servicing assets at 10 percent of the common equity component of tier 1 capital. Mortgage servicing assets exceeding the 10 percent threshold must be deducted from common equity. Deductions from common equity reduce the numerator in banks' calculations of their risk-based capital ratios. Mortgage servicing asset amounts that are not deducted from common equity are currently subject to a 100 percent risk weight, and that risk weight will increase to 250 percent beginning January 1, 2018, when the phase-in period ends. The future increase in the risk weight will increase risk-weighted assets, the denominator for banks' risk-based capital ratios. As a result, both the stricter cap and higher risk weight on mortgage servicing assets will reduce banks' risk-based capital ratios, making the required minimum level more difficult to maintain. The final rule does not apply to the enterprises or nonbank financial institutions. The enterprises' previous regulator, the Office of Federal Housing Enterprise Oversight, established risk-based capital requirements that were defined by stress test scenarios rather than fixed risk weights. A simulated stress test was used to project the enterprises' financial performance over a 10 year period and measure capital adequacy, or the amount of capital required to survive a prolonged period of economic stress without new business or active risk management action. When the enterprises were placed in conservatorship in 2008, their new regulator, the Federal Housing Finance Agency, suspended the enterprises' capital requirements. Nonbank financial institutions such as nonbank mortgage servicers follow capital requirements established by Ginnie Mae and the enterprises in order to service loans these entities guaranteed, but these requirements do not involve risk weights. The minimum capital requirements that are currently in place or that have been proposed are shown in table 3. The full impact of the changes to capital requirements for holdings of mortgage-related assets remains uncertain because insufficient time has passed since these changes took effect for both banks and nonbank mortgage servicers, and for some assets the changes have not yet been fully phased in. However, our past work suggested that--based on analysis of data included in banks' Consolidated Reports of Condition and Income (commonly referred to as Call Reports) and Credit Union 5300 Call Reports--many lenders generally appeared to be participating in residential mortgage lending much as they had in the past. In addition, data on mortgage debt outstanding published by the Federal Reserve indicate that holdings of mortgage debt for one-to-four family properties have remained consistent with trends that predate the 2014-2015 changes in risk weights (see fig. 1): (1) mortgage debt held or guaranteed by the enterprises holding steady, (2) mortgage debt held by depository institutions also holding steady, (3) mortgage debt held or guaranteed by Ginnie Mae continuing to increase slightly, and (4) mortgage debt backing private-label securities continuing its steady decline. But increased risk weights for some mortgage-related assets, among other factors, can have potential implications for banks' decisions about securitizing and servicing mortgages and investing in MBS. Securitizing mortgages creates exposures that may carry increased risk weights for banks. These exposures can include mortgage servicing assets, recourse obligations, and residual interests. As discussed previously, the cap on the amount of mortgage servicing assets that can be included in capital calculations is now lower than it previously was--10 percent of common equity rather than either 90 percent of fair value or 100 percent of book value. Banks that exceed the cap may need to hold more capital for these assets. In addition, mortgage servicing assets will have a higher risk weight under the final rule beginning in 2018, which will also increase the capital required for these assets. Fewer banks may want to retain these servicing rights and instead may seek to sell them to nonbank financial institutions that are not subject to the final rule. The total amount of mortgage servicing assets held by banks peaked in 2009 and generally has been decreasing in subsequent years, according to data compiled by SNL Financial. In 2016 reports on mortgage servicing and nonbank servicers, we found that the share of U.S. residential mortgages serviced by nonbank servicers increased from approximately 6.8 percent in the first quarter of 2012 to approximately 24.2 percent in the second quarter of 2015, while the share serviced by the largest nationwide, regional, and other banks decreased from about 75.4 percent to about 58.6 percent over the same period. Banking organizations may face recourse obligations (for example, to repurchase mortgages they have sold to others) when loans default within a certain period after the sale. Banks reported a decreasing amount of residential mortgages serviced for others with recourse, according to data compiled by SNL Financial, but this trend predates the Basel III-based final rule. Under current credit risk retention rules, banks must retain an interest equal to at least 5 percent of the credit risk for mortgage-backed securities they sponsor unless the security qualifies for an applicable exemption, including being exclusively backed by mortgages that meet the definition of a "qualified mortgage." These residual interests are included in risk-weighted assets and may carry higher risk weights under the Basel III-based rules than under the previous rules, depending on how they are structured. Residual interests that are structured as a vertical slice of the securitization structure (meaning the sponsor retains a 5 percent interest in each tranche) would have a lower risk weight than residual interests that are structured as a horizontal slice of the securitization (meaning the sponsor retains the most junior 5 percent interest in the securitization structure). Few transactions involving the securitization of mortgages that do not meet the qualified mortgage definition have been completed since the rule went into effect. Instead, banks may be electing to hold these mortgages in their portfolios or to originate loans that meet the qualified mortgage definition, including those that can be sold to the enterprises. The increase in banks' holdings of securities backed by the enterprises could be evidence of this latter scenario, as banks often deliver loans to the enterprises in exchange for enterprise MBS. Holdings of enterprise MBS would have lower risk weights than holding whole loans in portfolio (whether or not they meet the qualified mortgage definition). Finally, the Basel III-based final rule largely left unchanged the historically lower risk weights of MBS guaranteed by the enterprises vis-a-vis other mortgage-related assets, which can influence the demand for these securities relative to whole loans and privately issued MBS. While holdings of MBS guaranteed by Ginnie Mae retain a 0 percent risk weight and holdings of MBS guaranteed by the enterprises retain a 20 percent risk weight under the standardized approach (and their treatment under the advanced approach has not changed), holdings of privately issued MBS may face higher risk weights than under the prior rules. For privately issued MBS that have an external credit rating, the minimum weight increased from 7 percent to 20 percent for banks subject to the advanced approach, and the junior tranches of these MBS are likely subject to higher risk weights in part because credit ratings can no longer be used to calculate risk weights. According to data compiled by SNL Financial, banks' holdings of MBS guaranteed by Ginnie Mae and the enterprises have been increasing while their holdings of other residential MBS have been decreasing, but these trends predate the changes to risk weights for privately issued MBS. We sought and received technical comments on a draft of this report from the Board of Governors of the Federal Reserve System, Office of the Comptroller of the Currency, and Federal Deposit Insurance Corporation and incorporated their comments and feedback into the final report. We are sending copies of this report to the appropriate congressional committees and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-8678 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix III. Under the advanced internal ratings-based approach, residential mortgages are included in retail exposures. Generally, a banking organization must calculate retail risk-weighted asset amounts in four distinct phases: 1. Phase 1 - Categorization of exposures During this phase, the banking organization determines which of its exposures are wholesale exposures, retail exposures, securitization exposures, or equity exposures. Retail exposures are further categorized as residential mortgage exposures, qualifying revolving exposures, or other retail exposures. 2. Phase 2 - Segmentation of retail exposures During the second phase, a banking organization must group the retail exposures in each retail subcategory into segments that have homogeneous risk characteristics. A banking organization must also segment defaulted retail exposures separately from nondefaulted retail exposures. 3. Phase 3 - Assignment of risk parameters to segments of retail exposures During phase 3, the banking organization must associate a probability of default (PD), a loss given default (LGD), and an exposure at default (EAD) to each segment of retail exposures such as residential mortgages. KK=LLLLLL xNNNN-1(PPLL)+RxNN-1(0.999) -(LLLLLLxPPLL) where K represents the capital charge; N(.) means the cumulative distribution function for a standard normal random variable; N-1(.) means the inverse cumulative distribution function for a standard normal random variable; and R is the non-defaulted exposures correlation factor. For residential mortgage exposures, R is set equal to 0.15 in the Basel III- based final rule. KK=0.2 xNNNN-1(0.03)+0.15xNN-1(0.999) 0.85 NN-1(0.03)=-1.88079 NN-1(0.999)=3.09023 KK=0.2 xNN-1.88079+0.3873x3.09023 0.92195 KK=0.2 xNN(-0.74185)-(0.006) NN(-0.74185)=0.22909 KK=0.2 x0.22909-(0.006) KK=.03982,or approximately 4% -(0.2x0.03) -(0.006) The capital charge, K, reflects the risk weight multiplied by the minimum capital requirement. Therefore, dividing the capital charge of approximately 4 percent by the minimum capital requirement of 8 percent produces a risk weight of about 50 percent. -22.3214(0.0604-0.0104) -22.3214(0.0304-0) In addition to the contact named above, Karen Tremba (Assistant Director), Don Brown (Analyst-in-Charge), M'Baye Diagne, Rachel DeMarcus, Marc Molino, Jennifer Schwartz, and Tyler Spunaugle made significant contributions to this report.
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During the 2007-2009 financial crisis, many banking organizations lacked capital of sufficient quality and quantity to absorb substantial losses on mortgages and mortgage-related assets, revealing these assets to be riskier than previously thought. In response to the crisis, banking regulators around the world moved to strengthen requirements for capital adequacy. In the United States, the Dodd-Frank Wall Street Reform and Consumer Protection Act introduced, among other things, new capital requirements for bank holding companies and savings and loan holding companies. Internationally, in December 2010 the Basel Committee on Banking Supervision (which had issued the Basel I and Basel II frameworks) issued the Basel III framework--a comprehensive set of reforms to strengthen global capital and liquidity standards--with the goal of promoting a more resilient banking sector. Under this framework, banks apply risk weights to different assets to determine the amount of capital they need to meet regulatory requirements. GAO was asked to explain how capital requirements for a mortgage depend upon how it is financed and how the requirements have changed since the crisis. This report examines the risk weights for residential mortgages and certain other mortgage-related assets under the U.S. Basel III-based rule and how they compare to those in effect under prior capital regimes and for nonbank entities. GAO examined information on capital requirements from current and past rules. GAO received technical comments from the banking regulators, which were incorporated as appropriate. Rules for capital adequacy require banks to hold a percentage of their assets as capital to act as a financial cushion to absorb unexpected losses. Under current rules, banks must hold capital equal to at least 8 percent of risk-weighted assets. Since the early 1990s, U.S. federal banking regulators have used a risk-weighting system under which banks multiply asset amounts by factors, known as risk weights, to calculate risk-weighted assets. Different types of assets have different risk weights that attempt to capture the assets' relative risk. The Basel III-based final rule adopted in 2013 by the U.S. federal banking regulators incorporates higher risk weights for certain mortgage-related assets while leaving others unchanged from prior capital regimes (Basel I and Basel II). Most banks use the standardized approach for calculating risk-weighted assets, but large internationally active banks use an advanced approach that relies on formulas established by the regulators and inputs from their internal systems. Under the standardized approach, the risk weights for single-family residential mortgages are largely unchanged by the final rule. Similarly, the risk weights under this approach for residential mortgage-backed securities (MBS) guaranteed by Ginnie Mae, Fannie Mae, and Freddie Mac have not changed since Basel I. Under the advanced approach, large internationally active banks use a formula defined in regulation to determine the capital requirements for residential mortgage exposures, which include whole loans as well as MBS guaranteed by Ginnie Mae, Fannie Mae, and Freddie Mac. This formula has not changed since it went into effect in 2008 under the Basel II-based rule. For both approaches, the ways for determining risk weights for securitization exposures and mortgage servicing assets have changed under the final rule, which may increase these risk weights. As required by the Dodd-Frank Wall Street Reform and Consumer Protection Act, the final rule eliminates the use of credit ratings for determining risk weights for securitization exposures, instead relying on regulator-established formulas. Also, the final rule reduces the cap on mortgage servicing assets that can be included in capital calculations and will raise the risk weight from 100 percent to 250 percent. The Basel III-based final rule largely left in place the historically lower risk weights of MBS guaranteed by Fannie Mae and Freddie Mac vis-a-vis other mortgage-related assets, which can influence the demand for these securities relative to whole loans and privately issued MBS. However, the full impact of changes in risk weights for holdings of mortgage-related assets remains uncertain because insufficient time has passed since these changes took effect, and for some assets the changes have not yet been fully phased in. GAO's recent work suggested that many lenders generally appeared to be participating in residential mortgage lending much as they had before capital requirements changed. Also, data on mortgage debt outstanding and on banks' holdings of different assets indicate that trends in holdings of mortgage debt and mortgage-related assets that predate the changes in risk weights have continued. But increased risk weights for some mortgage-related assets may lead to changes in banks' decisions about securitizing and servicing mortgages.
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SSA's programs touch the lives of almost every individual in this country. Its Old Age, Survivors, and Disability Insurance (OASDI) programs--which comprise what is commonly called Social Security--provide benefits to retired and disabled workers and their dependents and survivors; its Supplemental Security Income (SSI) program provides assistance to aged, blind, and disabled individuals with limited income and resources. In addition to paying benefits, SSA issues Social Security numbers to eligible individuals and maintains and provides earnings records for individuals working under employment covered by the program. SSA also helps process claims for black lung benefits and provides support to other programs, such as Medicare, Medicaid, and Railroad Retirement. More than 50 million beneficiaries receive benefits and services under SSA's programs, which in fiscal year 1996 accounted for $386 billion--nearly one-quarter of the nation's $1.6 trillion in federal expenditures. SSA administers its programs through five core business processes--enumeration, earnings, claims, postentitlement, and informing the public. Through these processes, as shown in table 1, SSA processes claims for benefits, adjudicates appeals on disputed decisions, and handles the millions of actions required each year to keep beneficiary records current and accurate. SSA serves the public through its central office in Baltimore, Maryland, and a network of field offices that includes 10 regional offices, approximately 1,300 field offices, and a nationwide toll-free telephone number. Field offices are located in cities and rural communities across the nation and are the agency's physical point of contact with beneficiaries and the public. SSA also depends on 54 state DDS offices, along with one federally administered DDS, to help process claims under its disability insurance programs. State DDSs provide crucial support to the initial disability claims process--one that accounts for a large proportion of SSA's workload--through their role in determining an individual's medical eligibility for disability benefits. DDSs make decisions regarding disability claims in accordance with federal regulations and policies; the federal government reimburses 100 percent of all DDS costs in making disability determination decisions. The DDSs, during fiscal year 1996, processed more than 2 million initial disability determination claims. The process begins when individuals apply for disability benefits at an SSA field office, where determinations are made on whether they meet nonmedical criteria for eligibility. The field office then forwards these applications to the appropriate state DDS, where a disability examiner collects the necessary medical evidence to make the initial determination of whether the applicant meets the definition of disability. Once the applicant's medical eligibility is determined, the DDS forwards this decision to SSA for final processing. Both SSA and the DDSs rely on information systems to support the processing of benefits. SSA uses an information processing network that links its distributed (field level) operations with its centralized mainframe computers at headquarters. Each core process is supported by hundreds of software programs that enable field office staff to perform data collection and on-line editing of client information, using either terminals or recently installed personal computers that communicate with SSA's centralized mainframe computers. These mainframe computers establish and update beneficiary claims, process applications for Social Security numbers, and establish and maintain individuals' earnings histories. SSA's Chief Information Officer (CIO) provides primary oversight of the agency's information systems investments; the Office of the Deputy Commissioner for Systems (referred to as the Office of Systems) is responsible for managing all facets of information systems planning, development, acquisition, and operation. State DDSs rely primarily on their internal systems to process medical determinations. In general, DDS computers are comprised of unique state-owned hardware of various ages and stages of completion and with differing capacity and maintenance levels. Similarly, the types of systems and levels of software used vary according to individual state needs. The majority of the DDSs--42 of the 54--use software developed by two private contractors, while the remaining 12 DDSs--referred to as independent DDSs--either process disability claims manually or use software that they have developed. DDS systems are linked to SSA's mainframe computers via the National Disability Determination Service System (NDDSS). Records are established on the NDDSS through direct input by DDS staff or by uploading data from local databases. Since 1992, SSA's Office of Systems has been responsible for disability system development. The office serves as the focal point for all disability-related hardware and software initiatives for the DDSs and is responsible for ensuring the integration of these activities on an enterprise basis. Because of its heavy reliance on technology, the Year 2000 problem presents SSA with the enormous challenge of reviewing all of its computer software and making the conversions required to ensure that its systems can handle the first change to a new century since the computer age began. The CIO has overall responsibility for the Year 2000 program; however, day-to-day responsibility for ensuring that changes are made to all systems used by SSA and the DDSs to support core business processes resides with the Office of Systems. In assessing the actions taken by SSA to address the Year 2000 problem, we reviewed numerous documents, including its Year 2000 tactical plan, systems inventories, test plans, and implementation schedules. We also analyzed internal tracking reports developed by the agency to monitor the progress of its Year 2000 activities, as well as its Year 2000 quarterly reports submitted to the Office of Management and Budget (OMB). We discussed SSA's Year 2000 program activities with officials in various headquarters offices, including the Offices of the Deputy Commissioners for Systems; Operations; Finance, Assessment, and Management; and Programs and Policy. We also met with management and staff at SSA's program service centers in Birmingham, Alabama, and Philadelphia, Pennsylvania, and at its regional office in Atlanta, Georgia. In addition, we examined Year 2000 program activities at DDS offices in Albany, New York; Birmingham, Alabama; and Decatur, Georgia. We also interviewed representatives of the two private contractors responsible for performing Year 2000 work at most of the DDSs. We used our Year 2000 assessment guide in evaluating SSA's and the DDSs' readiness to achieve Year 2000 compliance. We conducted our review from January 1997 through September 1997, in accordance with generally accepted government auditing standards. We requested comments on a draft of this report from the Commissioner of Social Security or his designee. The Commissioner provided written comments, which are discussed in the "Agency Comments" section and are reprinted in appendix I. At 12:01 a.m. on January 1, 2000, many computer systems worldwide could malfunction or produce inaccurate information simply because the date has changed. Unless corrected, such failures could affect SSA benefits payments received by millions of Americans. The problem is rooted in how dates are recorded and computed. For the past several decades, systems have typically used two digits to represent the year--such as "97" for 1997--to save electronic storage space and reduce operating costs. In such a format, however, 2000 is indistinguishable from 1900. As an example of the potential impact of this ambiguity, a beneficiary born in 1925 and therefore turning 75 in 2000 could be seen as being negative 25 years old (if "now" is 1900)--not even born yet--and therefore ineligible for benefits that the individual had been receiving. Correcting this problem will not be easy or inexpensive and must be done while such systems continue to operate. Many of the government's computer systems were developed 20 to 25 years ago, use a wide array of computer languages, and lack full documentation. Systems may contain up to several million lines of software code that must be examined for potential date-format problems. The enormous challenge involved in correcting these systems is primarily managerial. Agencies' success or failure will be determined largely by the quality of their program management and executive leadership. Top agency officials must understand the importance and urgency of this undertaking and communicate this to all employees. The outcome of these efforts will also depend on the extent to which agencies have institutionalized key systems-development and program-management practices, and on their experience with such large-scale software development or conversion projects. Accordingly, agencies must assess their information resources management capabilities and, where necessary, upgrade them. In so doing, they should consider soliciting the assistance of other organizations experienced in these endeavors. To assist agencies with these tasks, our assessment guide discusses the scope of the challenge and offers a structured, step-by-step approach for reviewing and assessing an agency's readiness to handle the Year 2000 problem. The guide describes in detail five phases, each of which represents a major Year 2000 program activity or segment. These are the following: Awareness. This is a critical first step. Although many people may have heard about a Year 2000 problem, they may not know what it entails or why it matters. For agency personnel, this knowledge is imperative. This is also the phase in which the team within the agency that will take the lead in correcting the problem is identified. The team then examines the problem's potential impact, gauges the adequacy of agency resources, develops a strategy, and secures strong, visible executive support. Assessment. The main thrust of this phase is separating mission-critical systems--which must be converted or replaced--from important ones that should be converted or replaced and marginal ones that may be addressed now or deferred. Since the Year 2000 problem is primarily a business problem, it is essential to assess its likely impact on the agency's major business functions. Following this, information systems in each business area should be inventoried and prioritized; project teams are then established and program plans devised. Testing strategies must be identified, and contingency planning must be initiated as well. Renovation. This phase deals with actual changes--converting, replacing, or eliminating selected systems and applications. In so doing, it is important to consider the complex interdependencies among them. Changes must be consistent agencywide and information about them clearly disseminated to users. Validation. Here, agencies test, verify, and validate all converted or replaced systems and applications, ensuring that they perform as expected. This critical phase may take over a year and consume up to half of the Year 2000 program's budget and resources. It is essential that agencies satisfy themselves that their testing procedures can meet the challenge and that their results can be trusted. Implementation. Deploying and implementing Year 2000 compliant systems and components requires extensive integration and acceptance testing. And since not all agency systems will be converted or replaced simultaneously, it may be wise to operate in a parallel processing environment for a time, using old and new systems side by side. Such redundancy can act as a fail-safe mechanism until it is clear that all changed systems are operating correctly. In February 1997 OMB, in consultation with the CIO Council, set governmentwide Year 2000 program milestones for completing the majority of the work in each phase of an agency's Year 2000 activities. According to OMB's schedule, the assessment phase for mission-critical systems, including performing an enterprisewide inventory, was to be completed by the end of June 1997. SSA began examining the Year 2000 problem almost a decade ago and since then has taken various steps to raise agency awareness of the issue. In addition, it has made significant progress in assessing and renovating much of the software on its centralized mainframe systems--the systems that are essential to processing beneficiary claims and providing other services vital to the public. SSA first became aware of the Year 2000 problem in 1989, when one of the systems supporting its OASDI program experienced problems projecting dates past 1999. Drawing from its experiences in addressing this problem, SSA's Office of Systems took the lead in raising awareness of the Year 2000 issue and its potential magnitude and impact on the agency's operations. As part of these efforts, the Office of Systems developed a Year 2000 tactical plan that presented the agency's strategy for addressing the problem. It also established a committee composed of senior management to gain executive support for the project's activities, as well as a Year 2000 project team with responsibility for coordinating and reporting on the status of activities. During its assessment phase, SSA completed key steps necessary for determining the extent to which its centralized mainframe systems were Year 2000 compliant. These steps included developing an inventory of these systems, procuring a software tool to assist in identifying date fields that needed changing, and developing program plans and schedules for addressing these systems. During this phase, SSA also established a strategy for testing its system solutions. According to the Assistant Deputy Commissioner for Systems, SSA's overall approach gave highest priority to the major databases and mainframe systems developed and centrally managed by the Office of Systems because systems officials believed that these systems contained about 95 percent of all of the agency's mission-critical software. The Assistant Deputy Commissioner defined the agency's mission-critical software as being that which directly or indirectly affects SSA's core business processes, such as the processing and issuance of monthly beneficiary checks. According to internal reports generated to track SSA's progress, these systems have about 24,000 software modules and approximately 34 million lines of computer code. At the time of our review, SSA had made significant progress in the renovation of its mission-critical mainframe systems. Specifically, SSA reported that it had completed renovation and regression testing for almost 80 percent of its software modules. In addition, it had developed a Year 2000 test facility, as well as plans for conducting forward-date and integration testing. SSA expects all of its mission-critical systems to be certified as Year 2000 compliant and implemented by January 1999. An agencywide assessment and inventory of information systems and their components provide the necessary foundation for detailed Year 2000 program planning. A thorough analysis and inventory ensure that all systems are identified and linked to a specific business area or process and that all crosscutting systems are considered. Without a complete agencywide assessment, SSA cannot give full consideration to the extent of its Year 2000 problem and the level of effort required to correct it. Moreover, until such an assessment has been completed, SSA increases the risk that benefits and services will be disrupted. SSA did not include the DDS systems in its initial assessment of systems that it considered a priority for correction. SSA acknowledges that these systems are mission-critical because of their importance in determining whether an individual is medically eligible to receive disability payments. Accordingly, in December 1996 SSA began taking steps to assess the level of effort required to address the Year 2000 problem at the DDSs. These steps included contracting with the two vendors that originally installed software in 42 of the 54 state DDSs to inventory, assess, renovate, and test this software for Year 2000 compliance. Within these offices, the contractors also are responsible for ensuring that the production databases and NDDSS interfaces are Year 2000 compliant. SSA will require the 12 independent DDSs whose software was not installed by these contractors to perform their own corrective actions or, in a limited number of cases, will perform corrective actions for them. Even with Year 2000 action now underway, however, the potential magnitude of the DDS problem makes systems correction by January 1, 2000, a high-risk area. In particular, although Office of Systems personnel believe that their assessment of centralized mainframe systems considered about 95 percent of the agency's mission-critical software, inventories and assessments for most DDSs have not yet been completed. SSA therefore cannot yet know the full level of effort that will be required to make these mission-critical systems Year 2000 compliant. Estimates of the amount of software used by the DDSs suggest that extensive work would be necessary to make them Year 2000 compliant. Specifically, according to representatives of the two contractors, among the 42 DDSs for which they are responsible, about 33 million lines of software code must be considered for Year 2000 changes. They explained that because the software used by these DDSs to process disability claims has been modified over time to meet individual state needs, 42 different systems must essentially be assessed. In addition, although SSA did not have information on the total amount of disability software used by the independent DDSs, officials in just one of the offices that we visited said that they will have to review approximately 600,000 lines of code, involving over 400 programs, to determine where corrective action is needed. Because DDS operations are vital to SSA's ability to process initial disability claims, it is important that these systems be addressed as soon as possible. Disruptions to this service due to incomplete Year 2000 conversions will prevent or delay SSA's assistance to millions of individuals across the country. In discussing the status of Year 2000 activity for the DDSs, SSA's Assistant Deputy Commissioner for Systems acknowledged the need for more diligence in assessing and renovating the states' systems and said that SSA oversight of this work will increase. An essential yet challenging aspect of SSA's Year 2000 work will be ensuring that data exchanges with other federal and state agencies and businesses are Year 2000 compliant. This will not be easy, and cooperation and assistance from other agencies and organizations will be crucial. However, given the vast number of entities with which SSA exchanges data, it is a necessary step to avoid having SSA's own data corrupted by noncompliant information from other sources. SSA recognizes the importance of this matter and has taken a number of steps to address it. Because many of these steps were under development at the time of our review, we could not judge their effectiveness. As the year 2000 rapidly approaches, however, SSA must be diligent in implementing measures to monitor progress in this area and, where necessary, protect the integrity and usefulness of its data. At the same time, SSA needs to have contingency plans to ensure that strategies exist for mitigating any risks associated with this and any of the other Year 2000 related issues that can affect the agency's ability to provide Social Security and other benefits and services to the public. In addressing the Year 2000 problem, agencies need assurance that data received from other organizations are accurate. Even if an agency has made its own systems Year 2000 compliant, they can still be contaminated by incorrect data entering from external sources. To combat this, agencies must inventory and assess all internal and external data exchanges and coordinate Year 2000 compliance activities, including, if necessary, the development of appropriate bridges to maintain the integrity of replaced or converted systems and the data within them. SSA exchanges data files with hundreds of federal and state agencies and thousands of businesses. These files contain data from such organizations as the Internal Revenue Service, the Department of the Treasury, and the states. Such exchanges may involve, for example, data reported on individuals' tax-withholding forms, or data pertaining to state wages and unemployment compensation. Unless SSA is able to exchange data that is Year 2000 compliant, program benefits and eligibility computations that are derived from the data provided through these exchanges may be compromised and SSA's databases corrupted. SSA has for some time recognized the seriousness of this problem and is taking action to address it. In 1995, it began sending letters to its data exchange partners to advise them of the Year 2000 issue and the agency's plans for addressing it. During our review, SSA was in the process of coordinating with external organizations on issues concerning data formats, schedules for conversion and completion, and the need for bridging to enable the exchange of data that are not compliant. In addition, to facilitate data exchange compliance, SSA has developed a database that maintains information on the status of compliance activities related to all of its incoming and outgoing file exchanges. At the time of our review, this database contained information on over 6,700 files that are exchanged with external organizations. Given the magnitude of its data exchanges, one of SSA's biggest challenges will be coordinating its compliance work with that of its exchange partners and, where necessary, developing mechanisms to ensure the continued processing of its data. It will be critical for SSA to protect against the potential for introducing and propagating errors from one organization to another. In discussing SSA's strategy for addressing this matter, the Assistant Deputy Commissioner for Systems stated that priority will be given to ensuring the compliance of data files received from external sources that affect SSA's ability to process and pay benefits. SSA has identified approximately 100 files in this category, although the Year 2000 project director stated that this number could change as SSA continues to review and include compliance information in its tracking system. Further, because the accuracy of the data SSA receives is as important as whether the data are presented in the correct format, the Assistant Deputy Commissioner for Systems said that SSA plans to develop, and subject all incoming data files to "reasonableness" edit checks. These are positive steps on SSA's behalf to ensure the integrity and accuracy of its data after the year 2000 arrives. However, SSA must be diligent in implementing strategies and measures that facilitate its coordination of compliance activities with other agencies and that give it precise knowledge of the status of its data exchanges. Contingency planning is essential to Year 2000 risk management. It is the mechanism by which an organization ensures that its core business processes will continue if corrective work has not been completed. Agencies should develop realistic contingency plans, including the use of manual or contract procedures, to ensure the continuity of their major business processes. At the time of our review, SSA officials acknowledged the importance of contingency planning but had not developed specific plans to address how SSA would continue to support its core business processes if its Year 2000 conversion activities experienced unforeseen disruptions. SSA officials believe that the agency's early start in addressing the initiative will ensure that all systems are converted before any system failures are experienced. In addition, SSA did not believe it had an alternative to completing its Year 2000 work on time since it cannot process and ensure the payment of benefits without its many integrated systems. In response to our concerns regarding the need for such plans, however, the Assistant Deputy Commissioner for Systems said that SSA will develop contingency plans to ensure the continued operation of systems supporting its core business processes. In this regard, SSA established a Year 2000 contingency workgroup and has begun outlining a contingency strategy for these processes. Like other federal agencies, SSA is vulnerable to systems failures resulting from the computer software changes necessitated by the new millennium. Given that SSA's programs touch virtually all of us, it is especially vital that this agency make sufficient plans to ensure that it achieves Year 2000 compliance on time. SSA has made significant progress in addressing many of the systems that are critical to its mission and is regarded by many as a leader in the federal arena. Nonetheless, the agency is at risk of not being able to adequately process disability benefits at the turn of the century because it has not assessed and corrected systems used by the state DDS offices to support the processing of initial disability claims. Within the last year, SSA has begun to address the DDS issue. But until it has made a full assessment of these systems, it will not know the magnitude of the problem and, therefore, the level of effort required to correct it. Further, while SSA officials clearly recognize the importance of solving the Year 2000 problem, to reduce the risk of failure with its own effort, it is vital that the agency take every measure possible to ensure that it is well positioned to deal with unexpected problems and delays. This includes promptly addressing critical data exchange issues as well as implementing Year 2000 contingency planning. In light of the importance of SSA's function to most Americans and the risks associated with its Year 2000 program, we recommend that the Commissioner of Social Security direct SSA's Chief Information Officer, in conjunction with the Deputy Commissioner for Systems, to take the following actions: Require expeditious completion of the assessment of mission-critical systems at all state DDS offices and use the results of this assessment to develop a Year 2000 plan that identifies, for each system, the specific tasks and resources required and specific schedules and milestones for completing all tasks and phases of the conversion for each state system. Strengthen SSA's monitoring and oversight of all state DDS Year 2000 activities, including ensuring that all conversion milestones are met and that contractors and independent states submit biweekly reports that identify progress against milestones in renovating all claims processing software, databases, and data interfaces. Include in SSA's quarterly reports to OMB information on the status of DDS Year 2000 activities. Require expeditious completion of the agency's Year 2000 compliance coordination with all data exchange partners and of efforts to include specific information on the status of compliance activities in the automated data exchange tracking system. SSA should then use this system to measure and report on the progress and coordination of its data exchange compliance activities. Develop contingency plans that articulate specific strategies for ensuring the continued operation of core business functions if planned corrections are not completed in time or if systems fail to operate as intended. These plans should fully consider the disability claims processing functions within the DDSs and the development and activation of manual or contract procedures, as appropriate. In commenting on a draft of this report, SSA agreed with all five of our recommendations and identified specific actions that it will take to ensure an adequate transition to the year 2000. SSA also offered a specific comment directed to particular language in the draft report, which we incorporated where appropriate. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from its date. At that time, we will provide copies to the Commissioner of Social Security; the Director, Office of Management and Budget; appropriate congressional committees; and other interested parties. Copies will also be made available to others upon request. Please contact me at (202) 512-6253 or by e-mail at [email protected] if you have any questions concerning this report. Major contributors to this report are listed in appendix II. The following is GAO's comment on the Social Security Administration's letter of October 2, 1997. 1. Report revised to reflect SSA's comment. Valerie C. Melvin, Assistant Director Mirko J. Dolak, Technical Assistant Director William G. Barrick, Senior Information Systems Analyst Michael A. Alexander, Senior Information Systems Analyst William N. Isrin, Operations Research Analyst Michael P. Fruitman, Communications Analyst The first copy of each GAO report and testimony is free. Additional copies are $2 each. Orders should be sent to the following address, accompanied by a check or money order made out to the Superintendent of Documents, when necessary. VISA and MasterCard credit cards are accepted, also. Orders for 100 or more copies to be mailed to a single address are discounted 25 percent. U.S. General Accounting Office P.O. Box 37050 Washington, DC 20013 Room 1100 700 4th St. NW (corner of 4th and G Sts. NW) U.S. General Accounting Office Washington, DC Orders may also be placed by calling (202) 512-6000 or by using fax number (202) 512-6061, or TDD (202) 512-2537. Each day, GAO issues a list of newly available reports and testimony. To receive facsimile copies of the daily list or any list from the past 30 days, please call (202) 512-6000 using a touchtone phone. A recorded menu will provide information on how to obtain these lists.
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Pursuant to a congressional request, GAO reviewed the Social Security Administration's (SSA) actions to achieve Year 2000 information systems compliance, focusing on the adequacy of steps taken by SSA to ensure that computing problems related to the year 2000 are fully addressed, including its oversight of state disability determinations services' (DDS) Year 2000 program activities. GAO noted that: (1) SSA first recognized the potential impact of the Year 2000 problem almost a decade ago, and was able to launch an early response to this challenge; (2) it initiated early awareness activity and has made significant progress in assessing and renovating mission-critical mainframe software that enables it to provide social security benefits and other assistance to the public; (3) because of the knowledge and experience gained through its early Year 2000 efforts, SSA has come to be regarded as a federal leader in addressing this issue; (4) SSA's Assistant Deputy Commissioner for Systems chairs the Chief Information Officers Council's Subcommittee on the Year 2000 and works with other federal agencies to address Year 2000 issues across government; (5) while SSA deserves credit for its leadership, the agency remains at risk that not all of its mission-critical systems--those necessary to prevent the disruption of benefits--will be corrected before January 1, 2000; (6) at particular risk are the systems that have not yet been assessed for the 54 state DDSs that provide vital support to SSA in administering its disability insurance programs; (7) private contractors SSA hired to make 42 of the 54 state DDS systems Year 2000 compliant reported that these offices had at least 33 million additional lines of software code that must be assessed and, where necessary, renovated; (8) given the potential magnitude of this undertaking, SSA could face major disruptions in its ability to process initial disability claims for millions of individuals throughout the country if these systems are not addressed in time for corrective action to be completed before the change of century; (9) SSA also faces the challenge of ensuring that its critical data exchanges with federal and state agencies and other businesses are Year 2000 compliant; (10) it has taken a number of positive steps in this direction, such as identifying incoming and outgoing file exchanges with the external business community and developing a database to maintain information on the status of compliance activities; (11) however, because SSA must rely on the hundreds of federal and state agencies and the thousands of businesses with which it exchanges files to make their systems compliant, SSA faces a definite risk that inaccurate data will be introduced into its databases; and (12) that risk could be magnified if SSA does not develop contingency plans to ensure the continuity of its critical systems and activities should systems not be corrected in time.
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The Corps is the world's largest public engineering, design, and construction management agency. Located within the Department of Defense, the Corps has both military and civilian responsibilities. Through its Civil Works Program, the Corps plans, constructs, operates, and maintains a wide range of water resources projects. The Corps' Civil Works Program has nine major functional areas, also known as business lines: Navigation, Flood Risk Management, Environment, Recreation, Hydropower, Water Supply, Emergency Management, Regulatory Program, and Support for Others.organized into three tiers: a national headquarters in Washington, D.C., 8 regional divisions, and 38 local district offices (see fig. 1). The major steps in developing a Corps construction project are shown in figure 2. Usually, the Corps becomes involved in water resource construction projects when a local community perceives a need or experiences a problem that is beyond its ability to solve and contacts the Corps for assistance. If the Corps does not have the statutory authority required for studying the problem, the Corps must obtain authorization from Congress before proceeding. Studies have been authorized through legislation, typically a WRDA, or, in some circumstances, through a committee resolution by an authorizing committee. Next, the Corps must receive an appropriation to study the project, which it seeks through its annual budget request to Congress. Under WRDA 2007 amendments, after receiving authorization and an appropriation, studies were conducted in two phases: reconnaissance and feasibility. at full federal expense to determine if the problem warranted federal participation in a feasibility study and how the problem could be addressed. During the reconnaissance phase, the Corps also assessed the level of interest and support from nonfederal entities such as state, tribal, county, or local governments or agencies that may become sponsors. If the Corps determined that further study was warranted, the district office typically sought agreement from the local sponsor to share costs for a feasibility study. WRRDA 2014 eliminated the reconnaissance phase to accelerate the study process and allow the Corps to proceed directly to the feasibility study. The conference report accompanying WRRDA 2014 also states that the Corps may terminate a study when it is clear there is no demonstrable federal interest for a project or that construction of the project is not possible for technical, legal, or financial reasons.guidance on the elimination of the reconnaissance phase. Pub. L. No. 110-114, SS 2043(b), 121 Stat. 1041 (2007). the problem and make recommendations on whether the project is worth pursuing and how the problem should be addressed. Corps guidance states that typical feasibility studies should be completed in 18 to 36 months. According to Corps documents, the district office conducts the study and the needed environmental studies and documents the results in a feasibility report that includes a total project cost estimate based on the recommended plan. The Chief of Engineers reviews the report and decides whether to sign a final decision document, known as the Chief's Report, recommending the project for construction. The Chief of Engineers transmits the Chief's Report and the supporting documentation to Congress through the Assistant Secretary of the Army for Civil Works and the Office of Management and Budget. Congress may authorize the project's construction in a WRDA or other legislation. When Congress approves a project for construction, it typically authorizes a total cost for the project based on estimates prepared by the Corps. Most construction projects are authorized during the preconstruction engineering and design phase. The purpose of this phase is to complete any additional planning studies and all of the detailed, technical studies and designs needed to begin construction of the project. Once the construction project has been authorized and preconstruction engineering and design has been funded through completion of the plans and specifications for the first construction contract, the Corps seeks funds to construct the project through the annual budget formulation process. As part of the budget process, the Army, with input and data from Corps headquarters, division, and district offices, develops a budget request for the agency. Beginning in fiscal year 2006, the Corps introduced what it refers to as performance-based budgeting as a way to focus funding requests on those projects with the highest anticipated return on investment, rather than a wider set of projects that meet budget policies as it sought to do in the past. Under its current budget formulation process, the Corps uses performance metrics to evaluate projects' estimated future outcomes and gives priority to those it determines have the highest expected returns for the national economy and the environment, as well as those that reduce risk to human life. Budget justification materials are provided to the House and Senate Appropriations Committee for consideration. Through the conference committee reports accompanying appropriations acts, Congress directs funds for individual projects in increments over the course of several years. The Corps considers a project or study to have been appropriated funds if the project or study has received such direction in a committee report. If the project has been appropriated funds, the district enters into a cost-sharing agreement with the nonfederal sponsor. Once funds have been appropriated and a cost-sharing agreement is in place, the construction phase can begin and the Corps may obligate funds for a project. Construction is generally managed by the Corps but performed by private contractors. During construction, the Corps may request and Congress may enact scope or cost changes. Under current federal statute, the process for deauthorizing construction studies is initiated if the study has not been appropriated funds for 5 consecutive fiscal years. Specifically, the Secretary of the Army is required to annually transmit to Congress a list of water resources studies that have not been completed and have not been appropriated funds in the last 5 full fiscal years.that list to appropriate funds, or the study is deauthorized. Congress has 90 days after the submission of Current federal statute also requires a similar deauthorization process for construction projects. The Secretary of the Army is required to transmit to Congress a list of projects--or separable elementshad funds obligated for 5 full consecutive fiscal years. Beginning with WRDA 2007, this list was required to be sent to Congress annually; prior --that have not to WRDA 2007, the list was required biennially.obligated for planning, design, or construction of a project on that list during the next fiscal year, the project is deauthorized, and the Secretary of the Army is to publish the list of deauthorized projects in the Federal Register. The Corps' report of a $62 billion backlog list of more than 1,000 projects is incomplete because the agency does not track all of its authorized construction projects and studies. Specifically, the Corps does not enter all authorized projects and studies into its databases because of the absence of a policy to do so. As a result, we found the Corps' reported backlog list likely underestimates the complete construction backlog. Without having complete information on its backlog, the Corps does not know the full extent of unmet water resources needs of the nation, and Congress does not have complete information to make informed decisions on project and study authorizations and appropriations. We found that the Corps' reported backlog likely under-represents the complete backlog of construction projects in terms of both cost and number of projects. According to Corps headquarters officials, the backlog list is manually maintained by one staff person as a secondary duty. Our past work has found that using manual processes to maintain data can hinder an organization's ability to ensure that data are complete and accurate. Corps officials said, and our review found, that some projects that were authorized are included on the backlog list, but not their associated cost, therefore raising questions about the validity of the $62 billion estimate. For example, the Amite River and Tributaries, Louisiana, East Baton Rouge Parish Watershed project was authorized in WRDA and modified most recently in WRDA 2007 for a total cost of $187 1999million, but according to Corps officials, construction funds have not been appropriated for this project. Although the project's name appears on the Corps' backlog list, there is no dollar amount associated with that project, so the cost is not included in the Corps' reported backlog list. We found a total of 12 projects authorized in WRDA 1999 that are included in the Corps' reported backlog list but do not have an associated cost. However, internal control standards in the federal government call for agencies to clearly and promptly document transactions and other significant events from authorization to completion. Corps headquarters officials acknowledged that information was missing from their databases and said they do not currently have an estimate for the cost or number of projects that are not included in their databases. Corps headquarters officials told us that the agency does not have a policy instructing district offices to enter projects that are authorized but have not been appropriated funds into their databases, and it is left to the discretion of the district offices to do so. Officials from 1 of the 16 district offices we spoke with said the district has developed guidance to enter all authorized projects into the Corps' centralized databases, regardless of whether the projects had funds appropriated. Officials at the 15 other district offices told us they enter projects into the Corps' databases only after funds are appropriated. Corps headquarters officials said that the agency's databases were created primarily as project management databases, and therefore, projects are generally not entered into the databases until they are active and funds are appropriated. However, federal standards for internal control call for agencies to document internal control in management directives, administrative policies, or operating manuals and be readily available for examination. We also have previously found that it is important to have agencywide policies and procedures to help ensure consistent treatment, especially if employees are geographically dispersed. Without written policies or guidance, Corps district offices will likely continue to inconsistently enter projects that are authorized but not funded into their databases, and that will continue to result in incomplete data. In the absence of authorized projects not consistently being entered into the Corps' centralized databases, officials from 10 of the 16 district offices we spoke with said they maintained their own lists of authorized projects, including those that were authorized but did not have funds appropriated. Officials from some of these districts said that they do so in order to maintain contact with nonfederal sponsors and so that they have complete project information for budget presentation preparations. Officials from two district offices we interviewed said that they do not maintain a list of authorized projects that did not have funds appropriated, but nonfederal sponsors often contact them regarding these projects, so the officials were aware of them. Officials from three districts we interviewed said they do not maintain a list of all authorized projects in their district and are unable to estimate how many projects from their district are not included in the Corps' databases. Officials in one of these districts said that they are unaware of the number of projects that have been authorized and not funded but estimated the number to be large. The Corps' reported backlog does not include studies. Corps officials stated the agency does not track a backlog of all authorized studies, nor does it have a policy instructing districts to do so, due to manpower and resource constraints. However, because federal statute requires the Corps to submit a list to Congress of incomplete water resources studies for which no funds have been appropriated for 5 full fiscal years, the Corps needs to know which studies are eligible for deauthorization. Without having this data, the Corps cannot comply with the requirement to submit a list to Congress identifying studies for deauthorization that have not had funds appropriated for 5 fiscal years. Without having a complete backlog list of projects and studies, it is difficult for the Corps to know the full universe of unmet water resources needs in the country. Our prior work also found that the Corps' budget presentation is not transparent and only includes information on the According to projects the President proposes to fund in the budget year.that work, congressional users of the Corps' budget presentation said that not having information on all projects limits the ability of Congress to make fully informed decisions. Similarly, WRDA 2007 required the Corps to submit an annual fiscal transparency report, including a list of all projects that have been authorized but for which construction is not complete. The Corps has not submitted this report. The Corps estimates it will submit the comprehensive backlog report of projects required in WRRDA 2014 by March 2015, once it completes its new database that is discussed below. Until the Corps submits such a report to Congress, lawmakers will not have complete information to make informed decisions on construction project and study authorizations and appropriations. Corps headquarters officials recognize that they are missing project backlog data for some authorized projects and have begun to implement an initiative known as the Smart Use of Systems Initiative, which is designed to add projects to a new agency database. One of the goals of this initiative is to create a database to include all authorized projects. Headquarters officials said the agency hired a contractor in February 2014 to create an inventory of all projects that were authorized since the passage of WRDA 1986. This inventory is a major component of a new, centralized project database called the Civil Works Integrated Funding Database. They said to create this inventory, the contractor will search WRDA 1986 and other legislation, such as appropriations acts, that may include project authorizations, and then match those projects with information contained in the Corps' databases. Officials said this process will require the contractor to work closely with Corps staff because projects may have different names in legislation than the project names contained in the Corps' databases. According to Corps headquarters officials, once the contractor completes the inventory of all projects authorized since WRDA 1986, Corps headquarters officials will add those projects authorized prior to WRDA 1986. Corps headquarters officials said that once the new database has been implemented, district or headquarters officials will be required to enter data on new construction projects following authorization. As of the end of June 2014, Corps headquarters officials said that the contractor has completed the initial phase of the inventory of projects authorized since WRDA 1986 and that the contractor is updating the inventory based on comments from Corps headquarters officials. These officials estimate the Civil Works Integrated Funding Database will contain all authorized projects by the end of the 2014 calendar year. Officials said the inventory will not include authorizations for studies and have not determined what, if any, mechanisms they would put in place to track these studies. However, federal internal control standards call for agencies to have mechanisms in place to appropriately document transactions and other significant events. The Corps has not identified all eligible construction projects and studies for deauthorization and has not complied with statutory requirements to notify Congress of all projects and studies eligible for deauthorization. As discussed earlier, the Corps does not require its district offices to enter all authorized projects into its databases; therefore, the agency is unlikely to identify as eligible for deauthorization those projects that are excluded from the database and have not had funds obligated for 5 fiscal years. In addition, the Corps has not complied with its statutory requirements to notify Congress of all projects that have not had funds obligated in 5 fiscal years and cannot demonstrate it has notified Congress of projects eligible for deauthorization on an annual basis. Moreover, the Corps has not notified Congress of eligible studies for deauthorization as required by statute. As discussed earlier, not all projects are included in the Corps' databases because the agency does not have policies and procedures in place to enter all authorized projects; therefore, some projects that have not had obligations in 5 fiscal years are unlikely to appear on the Corps' list of projects eligible for deauthorization. Corps headquarters officials said that the project deauthorization process begins when Corps headquarters officials and contractors query the agency's centralized project databases to identify any project that has not had obligations in the previous 5 fiscal years. Corps headquarters officials then send a memorandum (deauthorization memorandum) outlining statutory deauthorization provisions for projects along with the draft list of projects that are eligible for deauthorization to the division offices, which in turn are to send the list to the district offices for verification, according to these officials. As part of this effort, district offices are to verify, among other things, the project name, the last year the project had funds obligated, whether it met deauthorization criteria as outlined in statute, and an explanation of why the project has not had funds obligated. As stated previously, the Corps does not generally enter projects into its databases until funds are appropriated, therefore, the Corps' list of projects eligible for deauthorization is unlikely to contain those authorized projects that have not been appropriated funds nor obligated funds within 5 full fiscal years, as required by statute. Although Corps headquarters officials said that this deauthorization process occurs annually, headquarters officials provided us with the lists of projects that were verified and returned by the division and district offices for one year (2012). The deauthorization memorandum instructs the district offices to review and verify the information contained on the draft list. Headquarters officials said that district officials also are to add information on the year in which the project was authorized to the list of eligible projects, but that information is not currently included in the Corps' databases. However, the deauthorization memorandum does not specify that district offices are to add projects missing from the list that have not had funds obligated for 5 years. Officials we interviewed from 5 of the 16 Corps district offices in our review said they do not attempt to identify and add projects to the draft list because they were not aware that they were to do so. Officials from two other district offices said their division does not send the draft list to them unless there are projects for that district listed, so there would not be an opportunity for these district offices to add projects in such situations. However, officials from three other district offices we spoke with added projects to the headquarters draft list. For example, Charleston district officials said they added seven projects to the 2012 headquarters draft list that were authorized in WRDA 2007 but had not had funds appropriated and therefore did not have funds obligated. However, neither Corps headquarters nor the Assistant Secretary of the Army for Civil Works transmitted a list to Congress for projects eligible for deauthorization for fiscal year 2012 as required under statute. The Corps has not consistently complied with statutory deauthorization notification requirements. Specifically, with respect to project notification requirements, the Corps has not notified Congress of all deauthorization eligible projects, nor has the Corps consistently provided Congress notification in the required time frames. With respect to study notification requirements, the Corps has not notified Congress of deauthorization eligible water resources studies. As stated previously, current statutory requirements provide for a project to be reported to Congress for deauthorization if such projects have not been obligated funds for 5 consecutive fiscal years, and then to be automatically deauthorized if funds are not obligated in the next fiscal year after transmittal of the list to Congress. However, Corps district officials told us that they have recommended projects that headquarters officials have identified as eligible for deauthorization not be included on the list of projects sent to Congress, even though funds were not obligated for those projects for 5 consecutive fiscal years. Specifically, officials from 6 district offices informed us that they typically add comments to a draft list asking that a project not be included on the list of projects eligible for deauthorization if a nonfederal sponsor is still interested in pursuing the project or if the district finds continued federal interest in the project. Due to staff turnover at headquarters and missing documentation on past deauthorization efforts, headquarters officials said they are unable to determine the reasons why projects were not identified as eligible for deauthorization. Moreover, Corps headquarters officials were unable to provide us with agency guidance or policy used to determine what projects they consider exempt from project deauthorization eligibility. In our analysis of the 2011 draft list of projects eligible for deauthorization sent to the district offices, we found that headquarters had included 43 projects on the draft list that had not been obligated funds from fiscal year 2007 through 2011--the 5 fiscal years preceding the date of the list for Congress. However, 41 of those 43 projects were not included in the Corps' list of projects eligible for deauthorization that was sent to Congress. According to headquarters officials, some of the 41 projects may not have been eligible for deauthorization because, for example, they were Continuing Authorities Projects, which are not subject to deauthorization, or the project was incorporated into another ongoing project. Although Corps headquarters officials were unable to provide us with the lists that included district comments, officials from 6 of the district offices we interviewed told us that projects may be removed from consideration by headquarters if nonfederal sponsors support projects or if there is continued federal interest in projects that have not had funds obligated for 5 fiscal years, for example: The Galveston district has had a project on the Corps headquarters draft list of projects eligible for deauthorization in 2010, 2011, 2012, and 2013. Galveston district officials said the nonfederal sponsor expressed continued interest in the project and requested that the project not be deauthorized. According to Corps data, funds have not been obligated for this project since 2006 but the project has not been deauthorized. The Jacksonville district has had a project on the headquarters list of projects eligible for deauthorization in 2010, 2011, 2012, and 2013. According to Jacksonville district officials' comments on the 2012 list, Corps data the nonfederal sponsor continued to support the project.showed that funds have not been obligated for this project since 2006 but it has not been deauthorized. The Louisville district had a project on the headquarters list of projects eligible for deauthorization in 2008 and 2009. Louisville district officials said construction on some components of the project are not yet complete because the nonfederal sponsor has not been able to contribute its portion of the funds for those components. Because the nonfederal sponsor is still interested and some construction had been completed, district officials said they did not recommend that the project be included in the list of projects eligible for deauthorization. According to Corps data, funds have not been obligated for this project since 1998 but it has not been deauthorized. The Corps' decision to remove projects from their draft list when such projects have not had funds obligated for 5 fiscal years and thereby not notify Congress of all projects eligible for deauthorization is not consistent with statutory requirements. As a result, Congress has not received a complete list of projects eligible for deauthorization, and some projects may still be listed as authorized without being subject to deauthorization as specified in statute. Officials we interviewed from 10 of 16 district offices said that the 5-year time frame for deauthorizing projects without obligations, as specified in statute, is too short of a time frame to be eligible for deauthorization. For example, officials in 4 of the 16 district offices we interviewed cited the current economic climate, including reductions in the Corps' budget and fewer funds available for construction projects, as reasons why a project should not be deauthorized as it might still have value to the communities after the 5-year period. Additionally, officials from 2 Corps district offices said some projects may not receive priority in the agency's budget For example, an official from the Alaska district said that request.projects within his district tend to rank lower than projects in high-traffic ports, such as New York and Long Beach, but authorized construction projects are still important to the Alaskan community and should not be deauthorized. Reports show that having a large backlog can have negative effects. For example, a 2007 report by the National Academy of Public Administration states that a backlog complicates the budgeting process and provides an incentive to spread funding widely, over many projects, rather than to complete high priority projects that have already begun construction. That report recommended that the Corps and Congress work to eliminate the backlog of projects that have little chance of being funded. Similarly, the National Academy of Sciences reported in 2011 that the backlog leads to projects being delayed, conducted in a stop-start manner, and contributes to overall inefficient project delivery. National Academy of Public Administration, Prioritizing America's Water Resources Investments: Budget Reform for Civil Works Construction Projects at the U.S. Army Corps of Engineers (Washington, D.C.: February 2007). Current federal statute requires the Secretary of the Army to transmit to Congress a list of authorized projects or separable elements of projects that have had no obligations during the previous 5 full fiscal years. However, Corps headquarters officials were unable to provide us with copies of most of the deauthorization lists the agency has been required to send to Congress since WRDA 1996. Specifically, the Corps located 4 lists (2006, 2010, 2011, and 2012) out of the 12 lists that were transmitted to Congress for fiscal years 1997 through 2013, as required. GAO/AIMD-00-21.3.1. policies, or operating manuals and be readily available for examination. Without having documented policies or procedures that outline the deauthorization process, Corps headquarters officials and officials from the Assistant Secretary of the Army for Civil Works may not be clear about the specific responsibilities of each office, and Congress may not be notified annually about projects eligible for deauthorization. Under what is commonly referred to as the Federal Records Act, each federal agency is required to make and preserve records. However, the Corps does not have a recordkeeping policy in place with respect to project deauthorizations, which has resulted in incomplete records of documents related to the deauthorization process, including documents sent to Congress. Without records and recordkeeping policies related to project deauthorizations, the Corps will have difficulty ensuring that its transactions related to deauthorization are done in a manner to comply with the statutory records management requirements. In addition, historical records related to project deauthorizations could be lost due to the absence of a recordkeeping policy and not be available for public access in the event of a Freedom of Information Act request. In addition to requiring the Corps to send lists of projects eligible for deauthorization to Congress, federal statute requires the publication of projects that are deauthorized in the Federal Register. According to the deauthorization memorandum, Corps headquarters officials are responsible for publishing in the Federal Register the list of projects that are deauthorized, as well as a list of projects removed from the list of projects eligible for deauthorization due to resumption of funding or reauthorization. The Corps has published 3 lists (1999, 2003, and 2009) of projects that are deauthorized in the Federal Register during the 12 fiscal years from 1997 to 2013 during which the agency was subject to the statutory project deauthorization requirements. Corps headquarters officials told us that the statute does not specify dates for publishing projects that are deauthorized in the Federal Register. In addition, Corps headquarters officials told us that the Corps has no formal written policy or guidelines consistent with federal standards for internal control, to ensure that lists of projects that are deauthorized are published in the Federal Register. Without having documented policies or procedures that outline the deauthorization process, the Corps cannot ensure that projects deauthorized by operation of the statute are published in the Federal Register as required. The Corps has not complied with statutory requirements to submit to Congress an annual list of incomplete water resources studies that have been authorized but for which no funds have been appropriated during the prior 5 full fiscal years. As discussed earlier, Corps headquarters officials told us the agency does not track studies and therefore cannot identify studies that meet deauthorization eligibility requirements. Moreover, the Corps does not require studies to be entered into its databases until funds have been appropriated. Corps headquarters officials also said the agency does not have policies and procedures outlining a process to identify and submit to Congress a list of studies eligible for deauthorization and have not submitted lists of studies eligible for deauthorization to Congress, as required by statute, due to manpower and resource constraints. Without having a mechanism to compile data on studies or a documented policy and procedures in place to deauthorize studies as noted in federal internal control standards,Corps cannot comply with deauthorization requirements for studies specified in statute, and the agency, Congress, and nonfederal sponsors have incomplete information on what is feasible to address the water resources needs of the country. The Corps' incomplete construction backlog and declining appropriations for construction projects have left communities uncertain when or if their projects will be completed. Although the Corps has taken the initial steps of compiling a database to include all authorized projects, the agency faces challenges in identifying backlogged projects and projects eligible for deauthorization. Specifically, the agency does not have complete data on its backlogged projects, because it does not have documented policies or procedures to enter projects into its databases when authorized as called for by federal standards for internal control. Without such guidance, it is likely that the Corps will continue to have incomplete data on such projects and cannot know the full extent of the construction project backlog, making it difficult to effectively deauthorize all eligible projects and for the Corps and Congress to effectively prioritize projects and plan the agency's work. In addition, the Corps was unable to locate all of the lists of projects eligible for deauthorization that it has been required to transmit to Congress since 1997, and the Corps has published lists of deauthorized projects in the Federal Register inconsistently during that time period. Without a recordkeeping policy in place as required by statute and without a documented policy and procedures outlining the deauthorization process consistent with federal standards for internal control, the Corps cannot ensure that projects eligible for deauthorization are submitted to Congress and that projects deauthorized by operation of the statute are published as required in the Federal Register. Furthermore, although federal statute places study-related deauthorization requirements on the Corps, the Corps has not complied with these provisions. Moreover, the Corps does not have a mechanism to compile data on studies or a documented policy and procedures for identifying eligible studies for deauthorization, as called for by federal standards for internal control. As such, the Corps, Congress, and nonfederal sponsors will not have complete information for making fully informed decisions on what is feasible to address the water resources needs of the country. To ensure that the Corps meets the statutory requirements related to deauthorization of projects, we recommend that the Secretary of Defense direct the Secretary of the Army to direct the Chief of Engineers and Commanding General of the U.S. Army Corps of Engineers to take the following four actions: Establish and implement a written policy to ensure all authorized projects are entered into the agency's database and tracked. Once the new database includes all authorized projects, determine what projects are eligible for deauthorization, transmit the list to Congress, and publish projects that are deauthorized in the Federal Register. Establish and implement written policies and procedures documenting the project deauthorization process, from initial compilation of a list of eligible projects to submitting the list to Congress and publishing the projects that are deauthorized in the Federal Register. Establish and implement a policy for record-keeping to ensure that documents related to deauthorization are maintained as federal records. To ensure that the Corps meets the statutory requirements related to deauthorization of incomplete water resources studies, we recommend that the Secretary of Defense direct the Secretary of the Army to direct the Chief of Engineers and Commanding General of the U.S. Army Corps of Engineers to take the following three actions: Establish a mechanism for tracking all authorized studies and establish and implement a written policy to ensure all authorized studies are tracked. Establish and implement policies and procedures documenting the deauthorization process for studies, from initial compilation of a list of eligible studies to submitting the list to Congress. Determine what studies are eligible for deauthorization and transmit the list to Congress. We provided a draft of this report for review and comment to the Department of Defense. In its written comments, reprinted in appendix II, the department concurred with our recommendations and noted that it will take steps to address those recommendations. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies of this report to the appropriate congressional committees, the Secretary of Defense, the Secretary of the Army, the Chief of Engineers and Commanding General of the U.S. Army Corps of Engineers, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512- 3841 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III. This report examines (1) the extent to which the Corps tracks data on its backlog of construction projects and studies, and (2) the extent to which the Corps identifies construction projects and studies eligible for deauthorization, and meets statutory deauthorization requirements. For purposes of this report, the Corps' backlog includes any study or project that was authorized but for which the study or the construction is not yet complete. Our work focused on the deauthorization processes for construction studies and projects in fiscal years 1997 to 2013. We chose this time frame based on amendments to the deauthorization requirements enacted in WRDA 1996 and because the Corps did not have complete obligations data for fiscal year 2014 at the time of our review. To determine the extent to which the Corps tracks data on its backlog of construction studies and projects as well as the extent to which the Corps identifies eligible construction studies and projects for deauthorization, we reviewed relevant federal statutes and the Corps' policies and procedures related to data collection and deauthorization processes. We also obtained the Corps' obligations data for fiscal years 1997 to 2013 in an attempt to recreate the Corps' methods to identify projects for deauthorization. However, after multiple interviews with Corps headquarters officials responsible for the agency's databases to discuss discrepancies, we determined the data were not reliable for our purposes because not all authorized projects were contained in the databases. We found that the obligations data that the Corps had were sufficiently reliable for us to compare those projects with the projects the Corps includes in its backlog and to compare with the Corps' draft deauthorization lists. We also reviewed data dictionaries, user guides, and other documentation that the Corps provided for the agency's databases. We reviewed these documents to help determine how the Corps used its databases to guide its deauthorization processes and to assess data reliability. We also reviewed deauthorization documents produced by the Corps from 1997 to 2013. These documents included draft deauthorization lists created by Corps headquarters, draft deauthorization lists that were verified by the division and district offices, lists of projects eligible for deauthorization that were sent to Congress, and Federal Register notices pertaining to deauthorized projects. Corps headquarters officials located one year of draft deauthorization lists that were verified from the division and district offices. We also reviewed any draft deauthorization lists that were provided by district officials we spoke with. Corps headquarters officials provided us with four (2006, 2010, 2011, and 2012) lists of projects eligible for deauthorization the agency sent to Congress from 1997 to 2013. We interviewed Corps headquarters officials to obtain additional information on the agency's policies and procedures for tracking its construction backlog and to determine the process the agency uses to create a list of studies and projects eligible for deauthorization. In addition, we spoke with nonfederal sponsors of Corps projects who are members of two national associations, to determine how they were affected by the Corps' backlog and deauthorization process. We selected these associations to represent the Corps' water resources projects and with membership that includes nonfederal sponsors of Corps water resources projects. The views of representatives from these associations are not generalizable, but they provided perspectives on the Corps' backlog and deauthorization processes. We also interviewed officials from a nonprobability sample of 16 of 38 Corps domestic civil works district offices to determine how district offices track data on studies and projects and implement the deauthorization process. We selected a non-probability sample of district offices that met our selection criteria of (1) geographical representation of two district offices in each of the Corps' 8 civil works division offices and (2) number of projects per district office. Specifically, we selected the district offices with the most projects and the district offices with the least projects in each of the 8 division offices, based on a list, provided by Corps headquarters officials, of construction projects by division and district. Project data was obtained from headquarters officials and included active projects in each of the Corps districts. We used this data for the purpose of selecting our non-probability sample, and determined it was sufficiently reliable for this purpose. Because this is a non-probability sample, the experiences and views of the Corps district officials are not representative of, and cannot be generalized to, all Corps districts. However, these experiences and views provide illustrative examples of how district offices track projects and implement the deauthorization process. We conducted this performance audit from July 2013 to August 2014 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In addition to the individual named above, key contributors to this report included Vondalee R. Hunt (Assistant Director), Cheryl Arvidson, Danny Baez, Elizabeth Beardsley, Cindy Gilbert, Geoffrey Hamilton, Kristin Hughes, Lisa S. Moore, Jerome Sandau, and Holly Sasso.
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The Corps reports having a backlog of more than 1,000 authorized water resources construction projects in its Civil Works Program that it estimates to cost more than $62 billion to complete, as of June 2014. Federal statute requires the Corps to identify for deauthorization projects that have had no obligations for 5 years and studies that have had no appropriations for 5 years. Once a project or study is deauthorized, it must be reauthorized to begin or resume construction or study. GAO was asked to review the Corps' construction backlog and deauthorization processes. This report examines (1) the extent to which the Corps tracks its backlog of construction projects and studies, and (2) the extent to which the Corps identifies construction projects and studies eligible for deauthorization, and meets statutory deauthorization requirements. GAO reviewed legislation, Corps policy, guidance, and documentation of its backlog and deauthorization process. GAO interviewed Corps headquarters officials and officials from 16 of the Corps' 38 domestic civil works districts, selected based on geographical representation and number of projects. The U.S. Army Corps of Engineers' (Corps) backlog list of authorized water resources construction projects is incomplete because the agency does not track all authorized projects and the list does not include studies. Specifically, GAO found that the backlog does not include some projects that were authorized but were not appropriated funds. Corps headquarters officials said that the agency does not have a policy instructing its district offices to enter into their databases projects that are authorized but have not been appropriated funds and that it is up to the discretion of the district offices to do so. Corps officials also stated that the agency does not include studies on its backlog, nor does it have a policy instructing district offices to track studies. Federal internal control standards state that agencies are to document internal controls in management directives, administrative policies, or operating manuals to help ensure consistent treatment. Officials at 15 of 16 district offices told GAO that they enter projects into the databases only after funds are appropriated. The Corps has begun to take steps to include all authorized projects in a new agency database; however, this database will not include studies. Federal internal control standards call for agencies to have mechanisms to appropriately document transactions and other significant events. Without written policies requiring districts to track all projects and studies and a mechanism to track studies, the Corps may continue to have an incomplete backlog list. The absence of a complete backlog list of projects and studies will likely make it difficult for the Corps to know the full universe of unmet water resource needs of the country, and Congress to make informed decisions when authorizing projects and studies, and appropriating funds. The Corps has not identified all eligible construction projects and studies for deauthorization and has not complied with statutory requirements to notify Congress of all projects and studies eligible for deauthorization. The agency is unlikely to identify those projects that have been excluded from the databases and had no funds obligated for 5 fiscal years, because, as discussed above, the Corps does not require districts to enter all authorized projects into its databases. Officials GAO interviewed from 5 of 16 districts said they likely would not identify and add projects to the draft deauthorization eligible list because they were not required to do so. Moreover, the Corps has not complied with statutory requirements to notify Congress of all projects that have not had obligations in 5 fiscal years. Specifically, the Corps cannot demonstrate it transmitted a list of projects eligible for deauthorization 8 times in the 12 years it was required to do so since 1997. Corps headquarters officials said that the process and communication mechanisms for deauthorizing projects are not in Corps policies or procedures. Without documented policies and procedures consistent with federal standards for internal control, the Corps may continue its inconsistent publishing of deauthorization lists. In addition, the Corps has not complied with requirements to identify studies for deauthorization because officials have said the agency does not have the policies and procedures in place to do so. Without having the data, as discussed above, or policies and procedures in place to identify studies for deauthorization, the Corps and Congress will not have complete information to make decisions when prioritizing the water resources needs of the country. GAO recommends, among other things, that the Corps establish and implement policies to ensure projects and studies are tracked; establish a mechanism to track studies; and develop and implement policies to identify projects and studies that meet deauthorization criteria, and notify Congress. The Department of Defense concurred with the recommendations.
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