GAO's High-Risk Program
Gao ID: GAO-06-497T March 15, 2006GAO audits and evaluations identify federal programs and operations that in some cases are high risk due to their greater vulnerabilities to fraud, waste, abuse, and mismanagement. Increasingly, GAO also has identified high-risk areas that are in need of broad-based transformations to address major economy, efficiency, or effectiveness challenges. Since 1990 with each new Congress, GAO has reported on its high-risk list. GAO's most recent update, in January 2005, presented the 109th Congress with the latest status of existing and new high-risk areas warranting attention by both the Congress and the administration. Lasting solutions to high-risk problems offer the potential to save billions of dollars, dramatically improve service to the American public, strengthen public confidence and trust in the performance and accountability of our national government, and ensure the ability of government to deliver on its promises.
Our January 2005 high-risk update summarized progress to date in addressing high-risk problems, corrective actions under way, and additional actions needed. As part of that update, the high-risk designation was removed for three areas and four new areas were added to the high-risk list. This administration has looked to our high-risk program on various initiatives such as the President's Management Agenda. Also, federal departments and agencies have shown a continuing commitment to addressing the root causes associated with high-risk challenges. Since GAO's last update, OMB has worked with agencies in getting action plans, with specific goals and milestones, in place for individual high-risk areas. This initiative offers potential for noteworthy progress, but implementing and sustaining the effort will be key to success. The Congress, too, continues to play an important role through its oversight and, where appropriate, legislative action targeted at the problems within high-risk areas. More than 60 hearings involving high-risk areas have taken place since our last update. Today, GAO is designating a new high-risk area: the National Flood Insurance Program. The program, due to the unprecedented magnitude and severity of floods resulting from hurricanes in 2005, has incurred recent losses. These losses--estimated at $23 billion, more than the total claims paid in the history of the program--illustrate the risk associated with the federal government's exposure for claims coverage in catastrophic loss years. This statement also addresses several ongoing high-risk issues: (1) DOD cannot ensure that the more than $200 billion it spends annually is used wisely and results in weapon systems and capabilities delivered to the warfighter as originally promised, or that its business practices, such as the fees paid to its contractors, promote good acquisition outcomes; (2) the Postal Service has made significant progress in addressing some challenges related to its transformation efforts and long-term outlook but continues to face significant challenges, such as declining First-Class Mail volumes and an unsustainable business model, that threaten its financial viability; (3) although DHS has made some progress in the department's transformation and implementation, it continues to face significant challenges in several key areas, such as strategic planning, information sharing, disaster management and partnering with others; and (4) terminations of large underfunded pension plans have created a $23 billion deficit for PBGC's Single Employer Insurance Program and additional claims seem likely in the near future; legislation is pending to address various aspects of these problems.
GAO-06-497T, GAO's High-Risk Program
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Testimony:
Before the Subcommittee on Oversight of Government Management, the
Federal Workforce, and the District of Columbia, Committee on Homeland
Security and Governmental Affairs, U.S. Senate:
For Release on Delivery Expected at 2:30 p.m. EST Wednesday, March 15,
2006:
GAO's High-Risk Program:
Statement of David M. Walker:
Comptroller General of the United States:
GAO-06-497T:
GAO Highlights:
Highlights of GAO-06-497T, a testimony before the Subcommittee on
Oversight of Government Management, the Federal Workforce, and the
District of Columbia, Committee on Homeland Security and Governmental
Affairs, U.S. Senate:
Why GAO Did This Study:
GAO audits and evaluations identify federal programs and operations
that in some cases are high risk due to their greater vulnerabilities
to fraud, waste, abuse, and mismanagement. Increasingly, GAO also has
identified high-risk areas that are in need of broad-based
transformations to address major economy, efficiency, or effectiveness
challenges. Since 1990 with each new Congress, GAO has reported on its
high-risk list. GAO‘s most recent update, in January 2005, presented
the 109th Congress with the latest status of existing and new high-risk
areas warranting attention by both the Congress and the administration.
Lasting solutions to high-risk problems offer the potential to save
billions of dollars, dramatically improve service to the American
public, strengthen public confidence and trust in the performance and
accountability of our national government, and ensure the ability of
government to deliver on its promises.
What GAO Found:
Our January 2005 high-risk update summarized progress to date in
addressing high-risk problems, corrective actions under way, and
additional actions needed. As part of that update, the high-risk
designation was removed for three areas and four new areas were added
to the high-risk list.
This administration has looked to our high-risk program on various
initiatives such as the President‘s Management Agenda. Also, federal
departments and agencies have shown a continuing commitment to
addressing the root causes associated with high-risk challenges. Since
GAO‘s last update, OMB has worked with agencies in getting action
plans, with specific goals and milestones, in place for individual high-
risk areas. This initiative offers potential for noteworthy progress,
but implementing and sustaining the effort will be key to success. The
Congress, too, continues to play an important role through its
oversight and, where appropriate, legislative action targeted at the
problems within high-risk areas. More than 60 hearings involving high-
risk areas have taken place since our last update.
Today, GAO is designating a new high-risk area: the National Flood
Insurance Program. The program, due to the unprecedented magnitude and
severity of floods resulting from hurricanes in 2005, has incurred
recent losses. These losses”estimated at $23 billion, more than the
total claims paid in the history of the program”illustrate the risk
associated with the federal government‘s exposure for claims coverage
in catastrophic loss years.
This statement also addresses several ongoing high-risk issues:
* DOD cannot ensure that the more than $200 billion it spends annually
is used wisely and results in weapon systems and capabilities delivered
to the warfighter as originally promised, or that its business
practices, such as the fees paid to its contractors, promote good
acquisition outcomes.
* The Postal Service has made significant progress in addressing some
challenges related to its transformation efforts and long-term outlook
but continues to face significant challenges, such as declining First-
Class Mail volumes and an unsustainable business model, that threaten
its financial viability.
* Although DHS has made some progress in the department‘s
transformation and implementation, it continues to face significant
challenges in several key areas, such as strategic planning,
information sharing, disaster management and partnering with others.
* Terminations of large underfunded pension plans have created a $23
billion deficit for PBGC's Single Employer Insurance Program and
additional claims seem likely in the near future; legislation is
pending to address various aspects of these problems.
What GAO Recommends:
GAO has made hundreds of recommendations related to areas it has
designated as high risk. Perseverance by the administration in
implementing GAO‘s recommended solutions and continued oversight and
action by the Congress are essential.
www.gao.gov/cgi-bin/getrpt?GAO-06-497T.
To view the full product, click on the link above. For more
information, contact George Stalcup at (202) 512-9490 or
stalcupg@gao.gov.
[End of section]
Mr. Chairman, Senator Akaka, Members of the Subcommittee:
Thank you for the opportunity to discuss GAO's work related to high-
risk areas identified in our 2005 high-risk update. As you know, we are
scheduled to provide our next full update in January 2007, at the
beginning of the 110th Congress. Today, I will talk about continuing
efforts to address problem areas that we have identified through our
high-risk program, discuss several individual high-risk issues, as well
as a range of emerging issues and longer range challenges facing our
government. I am also today designating a new high-risk area, the
National Flood Insurance Program.
I want to commend both of you and this Subcommittee in drawing needed
attention to these important problems. Since our last update report in
January 2005, the hearings you have held and follow-up you have done
has been helpful, particularly for high-risk issues within the
Department of Defense.
As you know, this administration has looked to our high-risk program to
help shape various governmentwide initiatives such as the President's
Management Agenda. Clay Johnson, OMB's Deputy Director for Management,
has directed agencies to develop action plans, complete with goals and
milestones for reducing risk in areas GAO has designated as high risk.
This is very encouraging, although a sustained effort will be needed.
The "high-risk" program was begun in 1990 under the direction of my
immediate predecessor, the Honorable Charles A. Bowsher. Since 1993, we
have issued reports providing updates on the program at the onset of
each new Congress. This effort, which is actively supported by your
subcommittee, as well as the full Senate Committee on Homeland Security
and Governmental Affairs and the House Committee on Government Reform,
has brought a much-needed focus to problems that are impeding effective
government and costing the taxpayers billions of dollars each year.
During my tenure as Comptroller General, our high-risk program has
increasingly focused on those major programs and operations that are in
need of urgent attention and transformation in order to ensure that our
national government functions in the most economical, efficient, and
effective manner possible. We also continue to focus on federal
programs and operations when they are at high risk because of their
greater vulnerabilities to fraud, waste, abuse, and mismanagement.
As this subcommittee knows, we have made hundreds of recommendations to
improve these high-risk operations. Moreover, our focus on high-risk
problems contributed to the Congress enacting a series of
governmentwide reforms to address critical human capital challenges,
strengthen financial management, improve information technology
practices, and instill a more results-oriented government.
Overall, our high-risk program has served to identify and help resolve
serious weaknesses in areas that involve substantial resources and
provide critical services to the public. Since our program began, the
government has taken high-risk problems more seriously and has made
long-needed progress toward correcting them. In some cases, progress
has been sufficient for us to remove the high-risk designation.
For example, in our most recent update, Student Financial Aid Programs
was one of the three areas for which we removed the high-risk
designation. This area had been on the high-risk list since 1990, and
provides an example of the importance and benefit of a strong
management commitment and a sustained effort in addressing these often
long-standing problems. In 1998, the Congress established the
Department of Education's (Education) Office of Federal Student Aid as
the government's first performance-based organization, thus giving it
greater flexibility to better address long-standing management
weaknesses with student aid programs. In 2001, Education created a team
of senior managers dedicated to addressing key financial and management
problems throughout the agency, and in 2002, the Secretary of Education
made removal from GAO's high-risk list a specific goal and listed it as
a performance measure in Education's strategic plan. Education
continued to improve the financial management of student financial aid
programs, taking additional steps to address our concerns about systems
integration, reporting on defaulted loans, and human capital
management, which led to the removal of the high-risk designation for
this area last year.
In fact, 8 of the 16 areas removed from the list over the years were
among the 14 programs and operations we included on our initial high-
risk list in 1990 at the outset of our program. These results
demonstrate that sustained attention and commitment by the Congress and
agencies to resolving serious, long-standing high-risk problems have
paid off, as root causes of the government's exposure for over half the
areas on our original high-risk list have been successfully addressed.
To determine which federal government programs and functions should be
designated high risk, we used our guidance document, Determining
Performance and Accountability Challenges and High Risks.[Footnote 1]In
determining whether a government program or operation is high risk, we
consider whether it involves national significance or a management
function that is key to performance and accountability. We also
consider whether the risk is:
* an inherent problem, such as may arise when the nature of a program
creates susceptibility to fraud, waste, and abuse, or:
* a systemic problem, such as may arise when the programmatic;
management support; or financial systems, policies, and procedures
established by an agency to carry out a program are ineffective,
creating a material weakness.
Further, we consider qualitative factors, such as whether the risk:
* involves public health or safety, service delivery, national
security, national defense, economic growth, or privacy or citizens'
rights, or:
* could result in significantly impaired service; program failure;
injury or loss of life; or significantly reduced economy, efficiency,
or effectiveness.
In addition, we also consider the exposure to loss in monetary or other
quantitative terms. At a minimum, $1 billion must be at risk--major
assets, revenue sources, and so on.
Before making a high-risk designation, we also consider the corrective
measures an agency may have planned or under way to resolve a material
control weakness and the status and effectiveness of these actions.
When legislative and/or agency actions, including those in response to
our recommendations, result in significant and sustainable progress
toward resolving a high-risk problem, we remove the high-risk
designation. Key determinants here include a demonstrated strong
commitment to and top leadership support for addressing problems, the
capacity to do so, a corrective action plan, and demonstrated progress
in implementing corrective measures. These determinations are based on
the independent and professional judgment of appropriate GAO personnel.
Consistent with these criteria, we removed the high-risk designation
for three areas and designated four new high-risk areas as part of our
January 2005 update report.
Our objective for the high-risk list is to bring "light" to these areas
as well as "heat" to prompt needed "actions."
Long-term Fiscal Challenge:
The specific issues I will discuss today--indeed, the specific issues
we discuss in the high-risk reports--all take place in the context of
what is arguably our greatest risk: the long-term fiscal outlook. We
are currently on an imprudent and unsustainable fiscal path. We are a
debtor nation--and we are borrowing from abroad at record rates. And on
the domestic fiscal front the miracle of compounding works against us.
This will only get worse on our current path. Importantly, if we act
before a crisis forces us to act, we can, over time, turn compounding
from an enemy to potential ally.
GAO's high-risk series is part of our effort to assist the Congress in
dealing with one of its important obligations--to exercise prudence and
due care in connection with taxpayer funds. Even if we were operating
in a time of surplus, no government should waste its taxpayers' money.
Further, it is important for everyone to recognize that waste, fraud,
abuse, and mismanagement are not victimless activities. Resources are
not unlimited, and when they are diverted for inappropriate, illegal,
inefficient, or ineffective purposes, both taxpayers and legitimate
program beneficiaries are cheated. Both the administration and the
Congress have an obligation to safeguard benefits for those who deserve
them and avoid abuse of taxpayer funds by preventing diversions. Beyond
preventing obvious abuse, the government also has an obligation to
modernize its priorities, practices, and processes to meet the demands
and needs of today's changing world.
While we should have zero tolerance for fraud and abuse, we must also
recognize that we will never in fact achieve zero fraud and abuse.
Acknowledging this is not giving in; rather, it means we recognize that
safeguarding taxpayer funds will be an ongoing effort.
We should also have zero tolerance for waste--but here we must
recognize that "waste" is a much more difficult concept than "fraud" or
"abuse." The term can be used for things we all would agree are waste-
-for example, paying too much for supplies or unnecessary redundancy or
duplication of administrative functions. The term is also, however,
sometimes used in the debate about government activities and
priorities. One citizen may see a given program or initiative as
wasteful while another sees it as an important governmental activity.
This debate should be part of the reexamination of programs and
activities. I would suggest that it is wasteful to allocate limited
revenues based on wants versus needs versus a more threat-based, risk-
based, or other targeted approach.
In previous testimonies, I have discussed oversight and stewardship of
taxpayer funds on three levels:
* vulnerability to fraud, waste, and abuse;
* improving the economy, efficiency, and effectiveness of programs;
and:
* a fundamental reassessment of government programs and activities--
whether designed as spending programs or tax preferences.
All three levels are important. While the high-risk series is heavily
targeted to the first two of these, it provides information and insight
into the third.
New High-Risk Area: National Flood Insurance Program:
We will continue to use the high-risk designation to draw attention to
the challenges associated with the economy, efficiency, and
effectiveness of government programs and operations in need of broad-
based transformation. Our list of issues continues to evolve over time.
Our objective is to reflect important problem areas identified in our
work, with a goal of identifying the root causes of vulnerabilities and
actions needed on the part of the agencies involved and, if
appropriate, the Congress. In this vein, I would like to call your
attention to the National Flood Insurance Program (NFIP).
* It is highly unlikely that the NFIP will generate sufficient revenues
to repay funds borrowed from the Treasury to cover claims for the
unprecedented magnitude and severity of flood losses resulting from
hurricanes in 2005, as well as any exposure for future claims coverage
in catastrophic loss years.
* Over the last 15 years we have reported on a variety of issues that
affect the program, including concerns related to the sufficiency of
the program's financial resources, compliance with mandatory purchase
requirements, the costly impact of repetitive loss properties, and most
recently our concerns about FEMA's billion dollar flood map
modernization efforts and management and oversight of the NFIP.
* FEMA has taken some steps to address these concerns, for example, by
working to reduce the number of subsidized properties and repetitive
loss properties insured by the NFIP, increase participation in the
program, implement requirements of the Flood Insurance Reform Act of
2004[Footnote 2] and improve its management and oversight of the
program, and more strategically plan to update the nation's flood maps,
the foundation of the NFIP. Nonetheless, the agency faces long-standing
and complex challenges that make it likely that these issues will
continue.
For these reasons, we are today designating a new high-risk area: the
National Flood Insurance Program (NFIP).
The unprecedented magnitude and severity of flood losses resulting from
hurricanes in 2005 illustrated the extent to which the federal
government has exposure for flood claims coverage in catastrophic loss
years and the decision for this designation. The nation's flood losses
in 2005 created unprecedented challenges for the Federal Emergency
Management Agency (FEMA) as the Department of Homeland Security (DHS)
organization responsible for managing the NFIP. As shown in figure 1,
FEMA estimates that Hurricanes Katrina, Rita, and Wilma are likely to
generate claims and associated payments of about $23 billion--far
surpassing the total of about $15 billion in claims paid in the entire
history of the NFIP up to those events.
Figure 1: NFIP Claims Payments from 1968 to August 2005 and Estimated
Payments for Hurricanes Katrina, Rita, and Wilma:
[See PDF for image]
[End of figure]
About 90 percent of all natural disasters in the United States involve
flooding. However, flooding is generally excluded from homeowner
policies that typically cover damage from other losses, such as wind,
fire, and theft. Because of the catastrophic nature of flooding and the
inability to adequately predict flood risks, private insurance
companies have largely been unwilling to underwrite and bear the risk
of flood insurance. The NFIP, established in 1968, provides property
owners with some insurance coverage for flood damage. From its
inception in 1968 until August 2005, the NFIP paid about $15 billion in
insurance claims, primarily from policyholder premiums that otherwise
would have been paid through taxpayer-funded disaster relief or borne
by home and business owners themselves.
During the 1990s, we reported concerns regarding the NFIP, particularly
problems related to the sufficiency of the program's financial
resources to meet future expected losses and compliance with mandatory
purchase requirements. Our work has continued to focus on these issues
since fiscal year 2000, along with issues identified by our work
regarding the challenges FEMA faces in implementing its $1.5 billion
flood map modernization efforts and plans to address repetitive loss
properties and enhance its management and oversight of the program.
To limit the federal government's exposure for claims coverage in
catastrophic loss years, FEMA must continue to provide programs to help
states, communities, and individuals plan and implement mitigation
strategies to reduce damage to homes, schools, public buildings, and
critical facilities from future floods and other hazards for example,
by encouraging them to (1) adopt and enforce more stringent building
codes for construction in areas at risk of flooding and stricter
development regulations and zoning ordinances that steer development
away from areas at risk of flooding and (2) use public funds to acquire
damaged homes or businesses in flood-prone areas, demolish or relocate
the structures, and use properties for open space, wetlands, or
recreational uses. FEMA must also take effective action to address long-
standing program issues and meet several major challenges facing the
NFIP that we have identified in our prior work regarding the inherent
solvency of the program, FEMA's management and oversight of the
program, and modernizing the nation's flood maps to provide an accurate
basis for the NFIP in the future.
The program's financial resources are insufficient to meet future
expected losses, in part because policy subsidies and repetitive loss
properties have contributed to continuing losses to the program.
Specifically, the program is not actuarially sound because of the
number of policies in force that are subsidized--about 29 percent at
the time of our 2003 testimony on this issue.[Footnote 3] As a result
of these subsidies, some policyholders with dwellings that were built
before flood plain management regulations were established in their
communities pay premiums that represent about 35 to 40 percent of the
true risk premium. In January 2006, FEMA estimated a shortfall in
annual premium income because of policy subsidies at $750 million.
Moreover, at the time of our 2004 testimony,[Footnote 4] there were
about 49,000 repetitive loss properties--those with two or more losses
of $1,000 or more in a 10-year period--representing about 1 percent of
the 4.4 million buildings insured under the program. From 1978 until
March 2004, these repetitive loss properties represented about $4.6
billion in claims payments.
The extent of participation in the program may also contribute to its
financial insolvency. Specifically, the level of noncompliance with
current mandatory purchase requirements by affected property owners is
unknown and voluntary participation in the program is limited. Some in
Congress have expressed interest in assessing the feasibility of
expanding mandatory purchase requirements beyond current special high-
risk flood hazard areas.
It is essential that FEMA provide effective management and oversight of
NFIP operations because the agency largely relies on others to address
these issues. FEMA's role for the NFIP is principally one of
establishing policies and standards that others generally implement on
a day-to-day basis and providing financial and management oversight of
those who carry out those day-to-day responsibilities. For example, in
our October 2005 report,[Footnote 5] we said that FEMA faces a
challenge in providing effective oversight of the 95 insurance
companies and thousands of insurance agents and claims adjusters who
are primarily responsible for the day-to-day process of selling and
servicing flood insurance policies.
The unprecedented impact of Hurricane Katrina on hundreds of thousands
of homeowners in the Gulf Coast has also highlighted the importance of
FEMA's efforts to develop accurate, digital flood maps in implementing
its $1.5 billion Flood Map Modernization program. Accurate, up-to-date
flood maps are needed for builders and developers to make good
decisions on where to build and to ensure that property owners have
information on the flood risks they face in rebuilding entire
communities devastated by the hurricanes. However, our work[Footnote 6]
and the work of the DHS Inspector General[Footnote 7] has shown, among
other things, that FEMA faces a major challenge in working with its
contractor and state and local partners of varying technical
capabilities and resources to produce accurate digital flood maps. In
developing those maps, we recommended that FEMA develop and implement
data standards that will enable FEMA, its contractor, and its state and
local partners to identify and use consistent data collection and
analysis methods for developing maps for communities with similar flood
risk. Some stakeholders have questioned the adequacy of FEMA's
estimates of the cost and schedule for completing its map modernization
efforts.
FEMA has taken some steps to address these concerns. Regarding its
efforts to improve the solvency of the program, FEMA reported that the
number of subsidized properties insured by the NFIP dropped from about
70 percent in 1978 to about 30 percent in 1999; however, this trend
appears to have slowed in that since 1999 FEMA reports that the number
of subsidized properties has only decreased by about 6 percent.
Similarly, FEMA has made efforts to reduce the number of repetitive
loss properties. However, FEMA has not yet implemented a pilot program
authorized by the Flood Insurance Reform Act of 2004 specifically
targeting the most severely repetitive loss properties, and, in any
case, this program will only address a small number of these
properties. Specifically, about 6,000 repetitive loss properties that
have accounted for about $792 million in losses since 1978 could be
considered for mitigation efforts funded through the pilot program.
FEMA also has efforts under way to increase participation in the NFIP
by marketing flood insurance policies. However, as noted in a recent
evaluation of mandatory compliance conducted for FEMA,[Footnote 8] FEMA
does not have a central role in implementing the mandatory purchase
requirement. The evaluation recommended that FEMA should explore
opportunities to exercise a leadership role in promoting compliance and
in assisting the federal entities for lending regulation to meet their
obligations related to the mandatory purchase of flood insurance.
Regarding FEMA's management and oversight of the program, the agency is
implementing the Flood Insurance Reform Act (FIRA) of 2004. However, as
we noted in our report,[Footnote 9] FEMA's use of a sampling strategy
for quality control purposes uses an approach that is not statistically
valid, and thus does note provide management with the information
needed to assess the overall performance of the private insurance
companies who sell flood insurance. FEMA needs this information,
including the overall accuracy of the underwriting of NFIP policies and
the adjustment of claims, to have reasonable assurance that program
objectives are being achieved. FEMA program officials did not agree
with our recommendation stating that the agency's method of selecting
samples for operational reviews was more appropriate than the random
probability sample we recommended.
Regarding map modernization efforts, FEMA issued the Multi-Year Flood
Hazard Identification Plan[Footnote 10] that describes FEMA's strategy
for updating flood maps used for NFIP purposes and addresses several of
our recommendations. The current version of the plan (version 1.5,
issued June 2005) updates FEMA's anticipated schedule and funding for
flood map updates through fiscal year 2009. While the plan establishes
levels of risk for determining the level of data definition and
reliability used for flood maps, it does not define criteria (high
population, high density, or high anticipated growth) or how the agency
will apply them in assigning risk categories for flood maps to
determine the level of data definition and reliability needed for
future mapping projects. Echoing these concerns, the DHS Inspector
General in reviewing the plan also concluded, among other things, that
the plan should be revised to improve the sequencing and funding for
mapping efforts in high-risk areas.[Footnote 11] Finally, some have
questioned the adequacy of FEMA's estimates of the cost and schedule
for completing its map modernization efforts. For example, the FEMA
Office of Inspector General reported on this issue in September 2000
noting that implementation would cost $750 million between 2001 and
2007. When we reported on the plan in March 2004, FEMA's estimated cost
had increased to $1 billion for a 5-year program from 2003-2008. By
September 2005, when the DHS Office of Inspector General reviewed the
status of the program, the estimated budget was $1.5 billion for a 6
year program extending to 2009. In testifying on the issue in July
2005, a representative of the Association of State Flood Plain Managers
cited an analysis conducted by the Association in August 2005 which
estimated that FEMA's map modernization program could cost as much as
$2-3 billion.
The increasing frequency, severity, and economic impact of flood events
on the nation place increasing pressure on FEMA and DHS to address
these concerns and enhance the program's ability to provide an
insurance alternative to disaster assistance and reduce future flood
damage through floodplain management. Under my authority, we are
currently reviewing the NFIP in light of the unprecedented demands and
unique challenges the hurricanes of 2005 placed upon FEMA and Gulf
Coast communities. As part of this effort, we are also reassessing many
of the longstanding issues and concerns we and others have raised
regarding the key aspects of the program I have discussed here today.
In conducting our review, we have, and plan to continue to, coordinate
our efforts with this subcommittee and other key Congressional
stakeholders to ensure that you are informed and continue to have the
opportunity to provide input to our ongoing efforts.
The complex and, in many cases, long-standing nature of the management
challenges associated with the NFIP and the flood map modernization
program (upon which the NFIP relies for producing accurate and readily
accessible flood maps) will continue to increase the federal
government's exposure to potentially billions of dollars of NFIP claims
for coverage in future catastrophic loss years. This suggests the need
for greater and sustained national focus and management attention by
both FEMA and DHS. Just as flood insurance reform legislation in
1994[Footnote 12] and 2004 mandated changes to improve the
effectiveness of, and participation in the program, the Congress, too,
will continue to play an important role through legislative actions
needed to assist FEMA and DHS in addressing these challenges. Our
objective in making this new high-risk designation today is to draw
that needed attention and, in turn, action.
Status of Other Selected High-Risk Areas:
For other areas on our 2005 high-risk list, efforts to address problems
continue on several fronts, but major challenges remain. I want to
touch on several current high-risk issues today.
DOD High-Risk Areas Persist:
Given its size and mission, the Department of Defense (DOD) is one of
the largest and most complex organizations to manage in the world. DOD
spends billions of dollars each year to sustain key business operations
that support our forces, including information systems and processes
related to acquisition and contract management, financial management,
supply chain management, business system modernization, and support
infrastructure management. Recent and ongoing military operations in
Iraq and Afghanistan and new homeland defense missions have led to
newer and higher demands on our forces in a time of growing fiscal
challenges for our nation. For years, GAO has reported on
inefficiencies, such as the lack of sustained leadership, the lack of a
strategic and integrated business transformation plan, and inadequate
incentives. Moreover, the lack of adequate transparency and appropriate
accountability across DOD's major business areas results in billions of
dollars of wasted resources annually. To its credit, DOD has embarked
on a series of efforts to reform its business operations, including
modernizing underlying information technology (business) systems.
However, serious challenges and inefficiencies remain. In fact, eight
individual items on GAO's high-risk list and several government wide
high-risk areas apply to DOD. At the highest levels, DOD's civilian and
military leaders appear committed to reform; however, the department
faces significant challenges in achieving its transformation goals. In
addition, this overall transformation effort will take many years of
sustained attention by leaders at all levels in order to succeed.
Management of DOD's Weapon Systems Acquisitions and Contractor
Oversight:
One area in particular that I would like to highlight today pertains to
DOD's management of its major weapon systems acquisitions and its
contractors. As the largest buyer in the federal government and as the
agency entrusted with the nation's defense, DOD has an obligation to
ensure that its funds are spent wisely and result in weapons systems
and capabilities being delivered to the warfighter when needed. Over
the last 5 years, DOD has doubled its planned investments in new weapon
systems from about $700 billion in 2001 to nearly $1.4 trillion in
2006. Overall, DOD now spends more than $200 billion annually on goods
and services. While DOD eventually fields the best weapon systems in
the world, we have consistently reported that the programs take
significantly longer and cost significantly more money and deliver
fewer quantities and capabilities than the business cases that
supported the acquisitions originally promised. Similarly, we have
reported that DOD is unable to assure that it is using sound business
practices to acquire the goods and services needed to meet the
warfighter's needs. DOD's policies may incorporate best practices, but
its actual decisions and actions are not consistent therewith.
Unfortunately, DOD has a track record of over promising and under
delivering in connection with key acquisition and other business
outcomes.
We have identified DOD's weapon systems and contract management as high-
risk areas for more than a decade. While each has some unique issues
that can be addressed on a case-by-case basis, there are other elements
that need to be addressed from a broader acquisition context. In this
regard, we testified earlier this month that the business case and
business arrangements were key to the success of the Army's Future
Combat System (FCS).[Footnote 13] The FCS is a networked family of
weapons and other systems in the forefront of efforts by the Army to
become a lighter, more agile, and more capable combat force. In total,
projected investment costs for the FCS are estimated to be about $200
billion. While we found a number of compelling aspects of the FCS
program, the elements of a sound business case for such an acquisition
program--firm requirements, mature technologies, a knowledge-based
acquisition strategy, a realistic cost estimate, and sufficient
funding--are not yet present. Similarly, we noted that just as
important, DOD needed to ensure the FCS's business arrangements,
primarily in the nature of the development contract and in the lead
system integrator approach, preserved the government's ability to make
informed business decisions in the future.
We looked at one element of a sound business arrangement--the award and
incentives fees provided to the contractors to promote excellence in
performance--in a report issued in December 2005.[Footnote 14] In that
report, we noted that DOD programs routinely engage in award-fee
practices that do not hold contractors accountable for achieving
desired outcomes and undermine efforts to motivate contractor
performance, such as:
* evaluating contractors on award-fee criteria that are not directly
related to key acquisition outcomes (e.g., meeting cost and schedule
goals and delivering desired capabilities to the warfighter);
* paying contractors a significant portion of the available fee for
what award-fee plans describe as "acceptable, average, expected, good,
or satisfactory" performance; and:
* giving contractors at least a second opportunity to earn initially
unearned or deferred fees.
As a result, DOD paid out an estimated $8 billion in award fees on
contracts in GAO's study population, regardless of whether acquisition
outcomes fell short of, met, or exceeded DOD's expectations.
We have identified numerous other examples in which DOD failed to
execute its contracts properly, creating unnecessary risks and paying
higher prices than justified. For example, in March 2005, we reported
that deficiencies in DOD's oversight of service contractors placed DOD
at risk of paying the contractors more than the value of the services
they performed.[Footnote 15] In other reports, we identified numerous
issues in DOD's use of interagency contracting vehicles that
contributed to poor acquisition outcomes.[Footnote 16]
These issues, along with those we have identified in DOD's acquisition
and business management processes, present a compelling case for
change.[Footnote 17] By implementing the recommendations we have made
on individual issues, DOD can improve specific processes and
activities. At the same time, by working more broadly to improve its
acquisition practices, DOD can set the right conditions for becoming a
smarter buyer, getting better acquisition outcomes, and making more
efficient use of its resources in what is sure to be a more fiscally
constrained environment. Then, assessments such as the Quadrennial
Defense Review can be valuable. Unless changes are made, however, DOD
will continue on a course where wants, needs, and affordability are
mismatched, with predictably unsatisfactory results.
U.S. Postal Service Transformation Efforts and Long-term Outlook:
In 2001, we placed the Postal Service's (the Service) transformation
and long-term outlook on our high-risk list because it faced formidable
financial, operational, and human capital challenges that threatened
its long-term viability. We called for prompt, aggressive action by the
Service in addressing these challenges and for a structural
transformation that would modernize the Service's outdated business
model. Since then, the Service has made significant progress in
addressing some of the challenges we identified, such as cutting costs,
improving productivity, downsizing its workforce, and improving its
financial reporting. Much of the Service's recent financial success,
however, was due to legislation passed in 2003 that reduced the
Service's annual pension benefit payments, thus enabling the Service to
achieve record net incomes, repay over $11 billion of outstanding debt,
and delay rate increases until January 2006. Despite the temporary
relief provided by the legislation, the Service continues to face many
challenges that will increase pressure for rate increases both in the
short term and over time. These challenges include:
* generating sufficient revenues as First-Class Mail volume declines
and the mail mix changes to volume growth in primarily lower
contribution mail;
* controlling costs and improving productivity as growth in expenses
continues to outpace revenues; compensation and benefit costs rise;
workhour reductions become more difficult to realize and the number of
delivery points continues to increase;
* addressing other financial issues, such as growing unfunded retiree
health obligations, required multi-billion dollar escrow payments, and
military service pension obligations;
* managing workforce changes related to retirements and network
consolidations;
* providing reliable data to assess performance;
* maintaining high-quality universal services; and:
* addressing external uncertainties, such as pending postal reform
legislation, four vacancies on the Postal Service's Board of Governors,
and potential security risks from biohazard and other threats.
Recently, the Service issued an updated Strategic Transformation Plan
(Plan) that details its goals and strategies for the next 5 years. We
support the intent of the Plan, including the Service's recent efforts
to begin optimizing its operating network. However, as we recently
reported, the success of the Service's optimization efforts will
require enhanced transparency of its decision-making criteria,
effective coordination with all key stakeholders, and a process for
evaluating and measuring performance. Furthermore, we continue to
believe that the Plan's incremental steps alone cannot remedy the major
challenges facing the Service. Despite its efforts, the Service's
underlying business model depends on growing mail volume to mitigate
rate increases and cover its universal service costs. This model is
unsustainable because it lacks the necessary incentives and
flexibilities to achieve sufficient cost savings needed to offset
growing personnel costs, declining mail volumes, and the continued
expansion of the Service's delivery network. We continue to believe
that comprehensive postal reform is urgently needed to modernize the
Service's business model.
Recognizing that the future of postal services remains at risk, the
House and Senate have each passed postal reform bills that now are
pending conference deliberations. Both bills would give the Service
additional flexibility in pricing and allow it to retain earnings,
create incentives to reduce costs and increase efficiency, reduce the
administrative burden of the rate-making process, enhance transparency
and accountability, eliminate the escrow fund, transfer military
service pension costs back to the Department of the Treasury (the
Treasury), and begin prefunding retiree health benefits. The
legislation aims to encourage cost cutting that could restrain future
rate increases and also improves the fairness and balance of cost
burdens for current and future ratepayers by beginning to prefund
retiree health benefits. It is important that this legislation be
enacted as soon as possible to begin the Service's overdue transition
to a modernized business model. Although the legislation may result in
short-term rate increases, these increases are likely to be more modest
and predictable than the significant and frequent rate increases that
would be needed if no action is taken to eliminate the escrow
requirement, transfer military service pension costs back to the
Treasury, and begin prefunding growing retiree health benefit
obligations.
Implementing and Transforming DHS:
We designated DHS's transformation as a high-risk area in 2003 because
DHS had to transform 22 agencies into one department, DHS inherited a
number of operational and management challenges from its component
legacy components, and failure to effectively address its management
challenges and program risks could have serious consequences for our
national security. Overall, DHS has made some progress, but continues
to face serious challenges in several key areas, such as strategic
planning, management, programmatic areas, and forming effective
partnerships to achieve desired outcomes.
* DHS's strategic plan does not detail the associated resources
necessary to carry out its mission and achieve its strategic goals and
to demonstrate the viability of the strategies and approaches presented
for achieving its long-term goals. In addition, stakeholder involvement
in the planning processes of DHS programs requiring stakeholder
coordination to implement has been limited. Also, DHS has called for
risk-based approaches to prioritize its resource investments for
critical infrastructure. However, while some components of DHS have
taken initial steps to apply elements of risk management to operations
and decision making, DHS has not completed a comprehensive national
threat and risk assessment for the department. Any risk-based approach
must involve efforts from and commitment by DHS, the administration,
and the Congress. Moreover, DHS continues to face challenges in
sustained leadership.
* Further, key areas of management pose challenges for DHS leadership,
including financial management, information technology, and human
capital and acquisitions. For example, DHS continues to face
significant financial reporting problems, as evidenced by the
disclaimer opinion on its consolidated financial statements in fiscal
years 2005 and 2004 and continuing financial reporting deficiencies at
Immigration and Customs Enforcement and the Coast Guard. DHS has made
progress in implementing key federal information security requirements,
yet it continues to face challenges in fulfilling the requirements
mandated by the Federal Information Security Management Act. The
district court has partially enjoined DHS's implementation of its human
capital management system, and the lack of clear accountability hampers
DHS's efforts to integrate the acquisition functions of its numerous
organizations into an effective whole:
* Key challenges remain in DHS programmatic areas. A number of
challenges that had been experienced by the Immigration and
Naturalization Service have continued in the new organizations now
responsible for immigration enforcement functions. Several factors
limit Customs and Border Protection's ability to successfully target
containers to determine if they are high risk, including staffing
imbalances. Although DHS has crafted a strategic plan to show how US-
VISIT is aligned with DHS's mission goals and operations, the plan has
yet to be approved, causing its integration with other departmentwide
border security initiatives to remain unclear. In addition, delays by
the Transportation Security Administration continue in deploying
technologies at checkpoints to screen for explosives on the body.
* Finally, in the area of partnering, the response to Hurricane Katrina
demonstrated that DHS also faces challenges when coordinating efforts
across the federal government. During incidents of national
significance, including Hurricane Katrina, the overall coordination of
federal incident management activities is executed through the
Secretary of Homeland Security. Other federal departments and agencies
are to cooperate with the secretary in the secretary's domestic
incident management role. Our initial field work on the response to
Hurricane Katrina indicates that a lack of clarity in roles and
responsibility resulted in disjointed efforts of many federal agencies
involved in the response, a myriad of approaches and processes for
requesting and providing assistance, and confusion about who should be
advised of requests and what resources would be provided within
specific time frames.
PBGC Single-Employer Insurance Program:
We first designated the Pension Benefit Guaranty Corporation (PBGC)'s
single-employer insurance program--a program that insures benefits for
34.2 million workers and retirees in about 28,800 defined benefit
pension plans--for the high risk list in July 2003 because of concerns
about its long-term financial viability. The program remains high risk
as the program's financial condition has worsened from a $9.7 billion
surplus in 2000 to nearly a $22.8 billion accumulated deficit as of the
end of fiscal year 2005. Recent years have produced several
terminations of large underfunded plans and the strong likelihood of
additional terminations in the near future. While cyclical economic
conditions have contributed to the program's financial troubles, it
remains threatened by the results of globalization and deregulation or
competitive restructuring of industries that have led to the bankruptcy
of sponsors with large underfunded plans and a regulatory framework
that has permitted sponsors to defer plan contributions. For example,
total underfunding among insured single-employer plans has exceeded
$450 billion over the last two fiscal years; $108 billion of the
underfunding is attributable to plans sponsored by companies whose
credit quality is below investment grade.
Both the House and Senate recently passed comprehensive pension reform
bills, each with different features that must be resolved in
conference. The bills address many areas of concern that we previously
highlighted, including the appropriate interest rates for liability
valuation, more credible funding standards, increased premiums,
addressing the funding of shutdown benefits, improving the timeliness
of disclosures to participants, and clarifying the uncertain legal
environment for hybrid pension plans. A consequence of even carefully
crafted and well balanced reform is that some additional sponsors could
choose to terminate their plans in a defined benefit system that has
already seen declines in participation. However, such reform remains an
important first step to maintaining a financially stable pension system
that protects the retirement benefits of workers and retirees by
providing employers reasonable funding flexibility in return for
enhanced transparency and accountability for meeting the promises they
make to their employees.
In many ways, the problems facing PBGC's single-employer program
highlight the broader challenges confronting 21ST century American
retirement security. These challenges, including the long term
financial weakness of Social Security and Medicare, the decline of the
private defined benefit pension system, and our poor personal saving
rate (which was negative in 2005), are severe and structural in nature.
Unaddressed, these problems will not only erode the retirement safety
net that was painstakingly built over several generations but threaten
our nation's future economic security and thus the basic living
standards of the American people.
Emerging Issues:
In addition to specific areas that we have designated as high risk,
there are other important broad-based challenges facing our government
that are serious and merit continuing close attention. One of these
involves the use of risk management, a strategy for helping
policymakers make investment and other decisions by assessing risks,
evaluating alternatives, and taking actions under conditions of
uncertainty. Risk management has applications for deliberate acts of
terror as well as natural disasters, such as hurricanes and
earthquakes. We have recently advocated using a risk management
framework for making investment decisions to develop capabilities and
the expertise to use them to respond to catastrophic disasters, such as
Hurricane Katrina.[Footnote 18] Such a strategy has been endorsed by
the Congress and the President as a way to strengthen the nation
against possible terrorist attacks. In this regard, DHS has been
charged with establishing a risk management framework across the
federal government to protect the nation's critical infrastructure and
key resources. DHS's work is done in a setting where substantial gaps
in security remain, but resources for closing these gaps are limited.
Within this context, in January of last year, we noted that DHS had not
completed risk assessments to set priorities on where scarce resources
were most needed. Our December 2005 report examined the risk management
efforts of DHS and found that while a great amount of effort has been
expended, there is a long way to go in implementing risk management in
a way that helps inform decisions on programs and resource
allocation.[Footnote 19] The most progress has been made in assessing
risks of individual assets, such as port facilities and oil refineries.
However, translating this information into comparisons and priorities
across assets and infrastructure sectors remains a major challenge. DHS
is unable to provide adequate assurance to the Congress or the country
that the federal government is in a position to effectively manage risk
in national security efforts.
DHS has much more to do to more effectively manage risk as part of its
homeland security responsibilities within current and expected resource
levels. In the short term, progress depends heavily on continuing to
improve policies and procedures for assessing risks, evaluating
alternatives, and integrating these efforts into the annual cycle of
program and budget review. An area that DHS believes needs further
attention is working with intelligence communities to develop improved
analysis and data on the relative probability of various threat
scenarios. Efforts to strengthen data, methodology, and policy would
help inform decisions on setting relative priorities and on making
spending decisions. In the longer term, progress will rest heavily on
how well DHS coordinates the homeland security risk management effort.
Currently, various risk assessment approaches are being used, and in
many ways, these approaches are neither consistent nor comparable. DHS
has been challenged in establishing uniform policies, approaches,
guidelines, and methodologies for infrastructure protection and risk
management activities within and across sectors. In addition,
integrating disparate systems, such as risk management with program and
budget management, remains a long-term challenge. Shifting
organizations toward this nexus of using risk-based data as part of
annual management review cycles will take time, attention, and
leadership. The Secretary of DHS has said that operations and budgets
of its agencies will be reviewed through the prism of risk, but doing
this is made difficult by the level of guidance and coordination that
has been provided so far.
DOD introduced its version of a risk management framework in 2001 to
enable the department's senior leadership to better balance near-term
demands against preparations for the future. However, in November 2005,
we similarly found that additional steps are needed before this
framework is fully implemented and DOD can demonstrate real and
sustainable progress in using a risk-based and results-oriented
approach to strategically allocate resources across the spectrum of its
investment priorities within current and expected resource
levels.[Footnote 20] We reported that while DOD has established four
risk areas--force management, operational, future challenges, and
institutional--as well as certain performance goals and measures, DOD's
risk management framework's measures (1) do not clearly demonstrate
results, (2) do not provide a well-rounded depiction of performance
across the department, and (3) are not being systemically monitored
across all quadrants. In addition, the framework's performance goals
and measures are not clearly linked to DOD's current strategic plan and
strategic goals.
Without better measures, clear linkages, and greater transparency, DOD
will be unable to fully measure progress in achieving strategic goals
or demonstrate to the Congress and others how it considered risks and
made trade-off decisions, balancing needs and costs for weapon system
programs and other investment priorities. DOD faces four key challenges
that affect its ability to fully implement the risk management
framework, or a similar risk-based and results-oriented management
approach: (1) overcoming cultural resistance to the transformational
change represented by such an approach in a department as massive,
complex, and decentralized as DOD; (2) maintaining sustained leadership
and clear accountability for this cultural transformation; (3)
providing implementation goals and timelines to gauge progress in
transforming the culture; and (4) integrating the risk management
framework with decision support processes and related reform
initiatives into a coherent, unified management approach for the
department. DOD recently stated in its Quadrennial Defense Review (QDR)
Report, issued last month, that it is now taking advantage of lessons
learned from the initial implementation phase to refine and develop a
more robust framework to enable decision making. Unfortunately, our
preliminary review of the QDR suggests that little progress has been
made in choosing between wants, needs, affordability, and
sustainability in connection with major Defense programs and
acquisitions. Furthermore, more emphasis needs to be placed on the
Department's overall business transformation efforts. We will continue
to monitor DOD's efforts in these areas.
We will also continue to monitor other management challenges identified
through our work. While not high risk at this time, these areas warrant
continued attention. For example, at the U.S. Census Bureau (Bureau), a
number of operational and managerial challenges loom large as the
Bureau approaches its biggest enumeration challenge yet, the 2010
Census. The Bureau will undertake an important census test and make
critical 2010 Census operational and design decisions in the coming
months--and we will continue to closely monitor the Bureau's program to
assist the Congress in its oversight and the Bureau in its decision
making.
Both the Executive Branch and the Congress Have Important Roles:
Continued focus by both the executive branch and the Congress is needed
in implementing our recommended solutions for addressing these high-
risk areas.
Top administration officials have expressed their commitment to
maintaining momentum in seeing that high-risk areas receive adequate
attention and oversight. In fact, the current administration has looked
to our high-risk program in shaping such major governmentwide
initiatives as the President's Management Agenda (PMA), which has at
its base many of the areas we had previously designated as high risk.
For example, in 2001, the PMA identified human capital management, an
area which we designated as a governmentwide high-risk issue earlier
that year, as a top priority. Following our January 2003 update, in
which we designated management of federal real property a
governmentwide high-risk area, the administration added a Federal Asset
Management Initiative to the PMA and the President signed an executive
order aimed at addressing long-standing federal real property
management issues.
More recently, the Office of Management and Budget (OMB) has led an
initiative to prompt agencies to develop detailed action plans for each
area on our high-risk list. These plans are to identify specific goals
and milestones to address and reduce the risks identified by us within
each high-risk area. Further, OMB has encouraged agencies to consult
with us regarding the problems our past work has identified, and the
many recommendations for corrective actions they have made. For
example, in cooperation with OMB, DOD has developed a plan to show
progress toward the long-term goal of resolving problems and removing
supply chain management from our list of high-risk areas within the
department. DOD issued the first iteration of the plan in July 2005
and, since then, has regularly updated it. Based on our review of the
plan, we believe it is a good first step toward improving supply chain
management in support of the warfighter although the department faces
challenges and risks in successfully implementing its proposed changes
across the department and measuring progress. Since our October 2005
testimony before you, we have held monthly meetings with DOD and OMB
officials to receive updates on the plan and gain a greater
understanding of the initiatives DOD proposes to implement. Progress to
date on other individual plans has varied, but this initiative offers
the potential for helping to foster progress on long-needed
improvements. Such concerted efforts by agencies and ongoing attention
by OMB are critical; our experience over the past 15 years has shown
that persistence and perseverance is required to fully resolve high-
risk areas.
The Congress, too, will continue to play an important role through its
oversight and, where appropriate, through various legislative actions,
particularly in addressing challenges in broad-based transformations.
As I have repeatedly noted, the creation of a COO/CMO position in
select agencies, especially the Department of Defense, could help to
elevate attention on management issues and transformational change,
integrate various key management and transformation efforts, and
institutionalize accountability in leading these changes. I am pleased
that you have both endorsed this concept by introducing legislation to
create deputy secretary for management positions for the Departments of
Defense and Homeland Security.[Footnote 21] I continue to believe that
there is a strong need for such a senior leadership position to provide
the continued focus and integrated approach required to address the
significant and long-standing transformation and management challenges
facing these departments.
Over the past 13 months, your subcommittee alone has held 5 hearings
relating to our high-risk areas, covering the list in total as well as
individual areas in DOD, including personnel security clearances,
supply chain management, as well as business systems modernization and
overall business transformation. Together, committees and subcommittees
in both houses have held more than 60 hearings since our last high-risk
update report, involving 20 of the 25 areas on GAO's January 2005 high-
risk list. I have personally testified in many of these hearings. This
level of oversight, coupled with related legislation, where
appropriate, is very instrumental to making real and sustainable
progress in these areas.
Forward-looking Focus Needed:
Addressing the important problems identified by our high-risk program
will in many cases encompass the need for transformation and, for some
challenges, require action by both the executive branch and the
Congress. However, if we are going to meet the long-term fiscal
challenge and other emerging challenges confronting the nation, we must
also engage in a fundamental reexamination of what government does and
how it does it, who does it, and how it gets financed.
Although prompted by fiscal necessity, such a fundamental review of
major program and policy areas can also serve the vital function of
updating the federal government's programs and priorities to meet
current and future challenges. While we should be striving to maintain
a government that is free of waste, fraud, abuse, and mismanagement, it
should also remain effective and relevant to a changing society--a
government that is as free as possible of outmoded, duplicative, and
ineffective commitments and operations. Many current federal programs
and policies, in fact, were designed decades ago to respond to trends
and challenges that existed at the time of their creation, and may no
longer be well suited, designed, or targeted to address current
national priorities.
Our recent entry into a new century has helped to remind us of how much
has changed in the past several decades--rapid shifts in the aging of
our population, globalization of economic transactions, significant
advances in technology, and changing security threats. If government is
to effectively address these trends, it cannot accept its existing
programs, policies, and activities as "givens." Outmoded, duplicative,
and effective commitments and operations are an unnecessary burden on
the present and future that can erode the capacity of our nation to
better align its government with the needs and demands of a changing
world and society.
Last year, we pulled together our insights and previous work for the
Congress in another report, entitled 21st Century Challenges:
Reexamining the Base of the Federal Government ([Hyperlink,
http://www.gao.gov/cgi-bin/getrpt?GAO-05-325SP]). That report provides
policymakers with a comprehensive compendium of those areas throughout
government that could be considered ripe for reexamination and review.
It includes a number of illustrative questions for the Congress and
other policymakers to consider as they carry out their various
constitutional responsibilities. These questions span a broad range of
budget categories and federal operations, including discretionary and
mandatory spending and tax policies and programs.
Answering these questions and addressing the challenges raised in the
21st century challenges report will invariably entail difficult
political choices between competing programs that promise benefits to
many Americans but are collectively unaffordable in the long run at
current and expected revenue levels. We recognize that this kind of
examination and the hard choices necessary to mitigate the risks
inherent in conducting "business as usual" may take a generation to
address. But the potential disruption from related changes can be
lessened, and the options policymakers can consider will be greater, if
the necessary policy changes are made sooner rather than later.
However, in the final analysis, as you well know, only elected
officials can decide whether, when, and how best to proceed to address
these important issues.
We hope that our reports on our high-risk program, as well as our
report on 21st Century challenges, along with the follow-up work we are
committed to doing for the Congress, will continue to be used by
various congressional committees, such as yours, as you consider which
areas of government to examine and act on.
Mr. Chairman, Senator Akaka, and members of the subcommittee, this
concludes my testimony. I would be happy to answer any questions you
may have.
(450476):
FOOTNOTES
[1] GAO, Determining Performance and Accountability Challenges and High
Risks, GAO-01-159SP (Washington, D.C.: November 2000).
[2] Bunning-Bereuter-Blumenauer Flood Insurance Reform Act of 2004,
Pub. L. No. 108-264, 118 Stat. 712 (2004).
[3] GAO, Flood Insurance: Challenges Facing the National Flood
Insurance Program, GAO-03-606T (Washington, D.C.: Apr. 1, 2003).
[4] GAO, National Flood Insurance Program: Actions to Address
Repetitive Loss Properties, GAO-04-401T (Washington, D.C.: Mar. 11,
2004).
[5] GAO, Federal Emergency Management Agency: Improvements Needed to
Enhance Oversight and Management of the National Flood Insurance
Program, GAO-06-119 (Washington, D.C.: Oct. 18, 2005).
[6] GAO, Flood Map Modernization: Program Strategy Shows Promise, but
Challenges Remain, GAO-04-417 (Washington, D.C.: Mar. 31, 2004).
[7] Department of Homeland Security, Office of Inspector General,
Office of Information Technology, Challenges in FEMA's Flood Map
Modernization Program, OIG-05-44 (Washington, D.C.: September 2005).
[8] American Institutes for Research, The National Flood Insurance
Program's Mandatory Purchase Requirement: Policies, Processes, and
Stakeholders (Washington, D.C.: March 2005).
[9] GAO, Federal Emergency Management Agency: Improvements Needed to
Enhance Oversight and Management of the National Flood Insurance
Program, GAO-06-119 (Washington, D.C.: Oct. 18, 2005).
[10] Federal Emergency Management Agency, Multi-Year Flood Hazard
Identification Plan, Draft FY04-FY08, Version 1.0 (Washington, D.C.:
November 2004).
[11] Department of Homeland Security, Office of Inspector General,
Office of Information Technology, Challenges in FEMA's Flood Map
Modernization Program.
[12] National Flood Insurance Reform Act of 1994, Pub. L. No. 103-325,
§§ 501-584, 108 Stat. 2160, 2255-87 (1994).
[13] GAO, Defense Acquisitions: Business Case and Business Arrangements
Key for Future Combat System's Success, GAO-06-478T (Washington, D.C.:
Mar. 1, 2006).
[14] GAO, Defense Acquisitions: DOD Has Paid Billions in Award and
Incentive Fees Regardless of Acquisition Outcomes, GAO-06-66
(Washington, D.C.: Dec. 19, 2005).
[15] GAO, Contract Management: Opportunities to Improve Surveillance on
Department of Defense Service Contracts, GAO-05-274 (Washington, D.C.:
Mar.17, 2005).
[16] GAO, Interagency Contracting: Problems with DOD's and Interior's
Orders to Support Military Operations, GAO-05-201 (Washington, D.C.:
Apr. 29, 2005), and Interagency Contracting: Franchise Funds Provide
Convenience, but Value to DOD is Not Demonstrated, GAO-05-456
(Washington, D.C.: July 29, 2005).
[17] GAO, DOD Acquisition Outcomes: A Case for Change, GAO-06-257T
(Washington, D.C.: Nov.15, 2005).
[18] GAO, Hurricane Katrina: GAO's Preliminary Observations Regarding
Preparedness, Response, and Recovery, GAO-06-442T (Washington D.C.:
March 2006).
[19] GAO, Risk Management: Further Refinements Needed to Assess Risks
and Prioritize Protective Measures at Ports and Other Critical
Infrastructure, GAO-06-91 (Washington D.C.: Dec. 15, 2005).
[20] GAO, Defense Management: Additional Actions Needed to Enhance
DOD's Risk-Based Approach for Making Resource Decisions, GAO-06-13
(Washington, D.C.: Nov. 15, 2005).
[21] Senators Ensign, Akaka, and Voinovich introduced S. 780 on April
14, 2005, to create a Deputy Secretary of Defense for Management, who
would report to the Secretary of Defense and serve for a term of 7
years with an annual performance agreement. Senators Akaka and
Voinovich introduced S. 1712 on September 15, 2005, to create a Deputy
Secretary of Homeland Security for Management, who would report to the
Secretary of Homeland Security and serve for a term of 5 years with an
annual performance agreement.
