This is the accessible text file for GAO report number GAO-06-417T entitled 'Fiscal Year 2007 Budget Request' which was released on March 10, 2006. This text file was formatted by the U.S. Government Accountability Office (GAO) to be accessible to users with visual impairments, as part of a longer term project to improve GAO products' accessibility. Every attempt has been made to maintain the structural and data integrity of the original printed product. Accessibility features, such as text descriptions of tables, consecutively numbered footnotes placed at the end of the file, and the text of agency comment letters, are provided but may not exactly duplicate the presentation or format of the printed version. The portable document format (PDF) file is an exact electronic replica of the printed version. We welcome your feedback. Please E-mail your comments regarding the contents or accessibility features of this document to Webmaster@gao.gov. 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. 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. Testimony: Before the Committee on Appropriations, House of Representatives: United States Government Accountability Office: GAO: For Release on Delivery Expected at 10:00 a.m. EST: March 10, 2006: Fiscal Year 2007 Budget Request: Statement of David M. Walker: Comptroller General of the United States: GAO-06-417T: Mr. Chairman and Members of the Committee: I am pleased to appear before the Committee today in support of the fiscal year 2007 budget request for the U.S. Government Accountability Office (GAO). This request will help us continue our support of the Congress in meeting its constitutional responsibilities and will help improve the performance and ensure the accountability of the federal government for the benefit of the American people. Budget constraints in the federal government grew tighter in fiscal years 2005 and 2006. In developing our fiscal year 2007 budget, we considered those constraints consistent with GAO's and the Committee's desire to "lead by example." In fiscal year 2007, we are requesting budget authority of $509.4 million, a reasonable 5 percent increase over our fiscal year 2006 revised funding level. In the event Congress acts to hold federal pay increases to 2.2 percent, our requested increase will drop to below 5 percent. This request will allow us to continue making improvements in productivity, maintain our progress in technology and other transformation areas, and support a full-time equivalent (FTE) staffing level of 3,267. This represents an increase of 50 FTEs over our planned fiscal year 2006 staffing level and will allow us to rebuild our workforce to a level that will position us to better respond to increasing supply and demand imbalances in areas such as disaster assistance, the global war on terrorism, homeland security, forensic auditing, and health care. I am proud of the work we accomplished this past fiscal year in support of the Congress and the American people. We provided our congressional clients with timely, objective, and reliable information on how well government programs and policies are working and, when needed, recommendations for improvement. In the years ahead, our support to the Congress will likely prove to be even more critical because of the pressures created by our nation's current and projected budget deficit and growing long-term fiscal imbalance. Indeed, as it considers those fiscal pressures, the Congress will be grappling with tough choices about what government does, how it does business, and who should do the government's business. GAO is a valuable tool for helping the Congress review, reprioritize, and revise existing mandatory and discretionary spending programs and tax policies. Additionally, through its involvement domestically with the federal, state, and local audit community and internationally with its national audit office counterparts, GAO has played--and will continue to play--an important role in helping to ensure the financial integrity of U.S. funds expended at home and abroad. GAO-led efforts to develop and implement the first-ever strategic plans for the National Intergovernmental Audit Forum and the International Organization of Supreme Audit Institutions have helped improve the effectiveness of these audit organizations and GAO to work more efficiently and cost-effectively. In an effort to identify areas for potential improvement, GAO underwent two peer reviews in fiscal year 2005. We obtained a clean opinion on our performance audit practice from an international team of experienced auditors--the first time that we have sought such an opinion. The independent reviewers concluded that we have designed and implemented an effective system of quality controls to provide reasonable assurance of complying with generally accepted government auditing standards, which are designed to ensure that audits of government activities are objective, independent, and reliable. This opinion validated that the Congress and the American people can rely on our work and products. Also during fiscal year 2005, GAO received an unqualified report, or clean opinion, on the results of the external peer review of its financial audit practice. External peer reviews are conducted on a 3-year cycle, and this is the fourth such clean opinion that GAO has received from an external peer reviewer since the program began in fiscal year 1996. The external peer reviewer, KPMG LLP, found that the system of quality control for GAO's financial auditing practice met professional standards and that GAO in fact complied with the standards. In fiscal year 2005, we met or exceeded targets for 10 of our 14 performance measures, while setting or matching all-time records for 3 measures. We documented $39.6 billion in financial benefits--a return of $83 for every dollar we spent--and over 1,400 nonfinancial benefits- -a record for us. Our targets for fiscal years 2006 and 2007 will continue to challenge the agency in our efforts to support the Congress and serve the American people. Beginning with fiscal year 2006, we will add 2 internal operations measures to the list. These 2 new performance measures will assess how well our mission and people are supported by our infrastructure operations staff. In fiscal year 2005, we issued two products that will assist the Congress as it addresses future challenges. Recognizing the importance and scope of these reports, we provided a copy to every member of Congress and each Committee, as well as the White House. Our report entitled 21st Century Challenges: Reexamining the Base of the Federal Government provides a series of illustrative questions related to 12 areas of federal activity as well as our perspective on various strategies and approaches that should be considered as a possible means to address the issues and questions raised in the report. Drawing on our institutional knowledge and extensive program evaluation and performance assessment work for the Congress, we presented over 200 specific 21st century questions illustrating the types of hard choices our nation needs to face as it reexamines what the federal government should do, how it should do it, and how it should be financed. We also issued our High-Risk Series: An Update, which identifies federal areas and programs at risk of fraud, waste, abuse, and mismanagement and those in need of broad-based transformations. The issues affecting many of these areas and programs may take years to address, and the report will serve as a useful guide for the Congress's future programmatic deliberations and oversight activities. The current administration has looked to our high-risk program in shaping governmentwide initiatives such as the President's Management Agenda, which has at its base many of the areas we had previously identified as high risk. The Office of Management and Budget (OMB), in consultation with GAO, is currently working to ensure that agencies develop detailed action plans to address high-risk areas, with the ultimate objective, over time, of seeing these items removed from our high-risk list. As in past years, during fiscal year 2005, our work covered a number of major topics of concern to the nation and, in some cases, the world. For example, we reported on the nation's long-term fiscal challenges, the financial condition of the airline industry, spending and reconstruction activities related to Iraq and Afghanistan, and strengthening the visa process as an antiterrorism tool. We also examined the Department of Defense's (DOD's) transformation challenges, base realignment and closure issues, increasing the strategic focus of federal acquisitions, protecting against identity theft, the oversight of electricity markets, zero down-payment mortgages, and immigration enforcement. We testified many times before the Congress, contributing to the public debate on a variety of topics that included Social Security reform, pension reform, postal reform, GSE oversight, wildland fire management, gasoline prices, the flu vaccine, veterans' health care, benefits for members of the Reserves and National Guard, digital broadcast television, long-term health care financing, passport fraud detection, reducing the tax gap, information security, and a range of financial management and accountability issues. In addition, we conducted a range of work on a variety of legislative branch agencies and projects, including the Capitol Visitor's Center, the Architect of the Capitol, and the U.S. Capitol Police. This past year we also continued to take steps internally to help us achieve our goal of being a model federal agency and a world-class professional services organization. These steps helped us to address our three major management challenges--human capital, physical security, and information security. Through the GAO Human Capital Reform Act of 2004, the Congress granted GAO several additional human capital flexibilities that will allow us, among other things, to move to an even more performance-oriented and market-based compensation system. As you have heard me say many times, our most valuable asset is our people, and the flexibilities granted in this act will help us to continue to modernize our people-related policies and strategies, which, in turn, will help ensure that we are well-equipped to serve the Congress and the American people in the years to come. As a result, we are continuing to take a range of actions designed to modernize our human capital policies and practices. In fiscal year 2005, we adopted a broad pay band approach and a more performance-oriented pay system for our administrative staff. In fiscal year 2006, we implemented a more market-based and skills-, knowledge-, and performance-oriented classification and pay system for all of our employees. My testimony today will focus on our budget request for fiscal year 2007 to support the Congress and serve the American people and on our performance and results with the funding you provided us in fiscal year 2005. GAO's Fiscal Year 2007 Request to Support the Congress: Our fiscal year 2007 budget request will provide us the resources necessary to achieve our performance goals in support of the Congress and the American people. This request will allow GAO to improve productivity and maintain progress in technology and other transformation areas. We continue to streamline GAO, modernize our policies and practices, and leverage technology so that we can achieve our mission more effectively and efficiently. These continuing efforts allow us to enhance our performance without significant increases in funding. Our fiscal year 2007 budget request represents a modest increase of about $25 million (or 5 percent) over our fiscal year 2006 revised funding level--primarily to cover uncontrollable mandatory pay and price level increases. This request reflects a reduction of nearly $5.4 million in nonrecurring fiscal year 2006 costs used to offset the fiscal year 2007 increase. This request also includes about $7 million in one-time fiscal year 2007 costs, which will not recur in fiscal year 2008, to upgrade our business systems and processes. As the Congress addresses the devastation in the Gulf Coast region from Hurricane Katrina and several other major 2005 hurricanes, GAO is supporting the Congress by assessing whether federal programs assisting the people of the Gulf region are efficient and effective and result in a strong return on investment. In order to address the demands of this work; better respond to the increasing number of demands being placed on GAO, including a dramatic increase in health care mandates; and address supply and demand imbalances in our ability to respond to congressional interest in areas such as disaster assistance, homeland security, the global war on terrorism, health care, and forensic auditing, we are seeking your support to provide the funding to rebuild our staffing level to the levels requested in previous years. We believe that 3,267 FTEs is an optimal staffing level for GAO that would allow us to more successfully meet the needs of the Congress. In preparing this request and taking into account the effects of the fiscal year 2006 rescission, we revised our workforce plan to reduce fiscal year 2005 hiring and initiated a voluntary early retirement opportunity for staff in January 2006. These actions better support GAO's strategic plan for serving the Congress, better align GAO's workforce to meet mission needs, correct selected skill imbalances, and allow us to increase the number of new hires later in fiscal year 2006. Our revised hiring plan represents an aggressive hiring level that is significantly higher than in recent fiscal years, and it is the maximum number of staff we could absorb during fiscal year 2006. These actions will also position us to more fully utilize our planned FTE levels of 3,217 and 3,267 in fiscal years 2006 and 2007, respectively. Our fiscal year 2007 budget request includes approximately $502 million in direct appropriations and authority to use about $7 million in estimated revenue from rental income and reimbursable audit work. Table 1 summarizes the changes we are requesting in our fiscal year 2007 budget. Table 1: Fiscal Year 2007 Budget Request, Summary of Requested Changes: Dollars in thousands. FY 2006 enacted budget authority; Amount: $489,560; FTEs: 3,217; Less: rescission; Amount: $(4,896); FY 2006 revised budget authority; Amount: $484,664. FY 2007 requested changes: Nonrecurring fiscal year 2006 costs; Amount: $(5,380); Cumulative percentage change: (1%). Mandatory pay costs; FTEs: 50; Amount: $18,469; Cumulative percentage change: 3%. Price level changes; Amount: $4,073; Cumulative percentage change: 4%. Relatively controllable costs; Amount: $7,528. Adjustment due to rounding; Amount: $1. Subtotal - requested changes; FTEs: 50; Amount: $24,691; Cumulative percentage change: 5%. Total FY 2007 budget authority required to support GAO operations; FTEs: 3,267; Amount: $509,355. Source: GAO. [End of table] Our fiscal year 2007 budget request supports three broad program areas: Human Capital, Engagement Support, and Infrastructure Operations. Consistent with our strategic goal to be a model agency, we have undertaken a number of initiatives to implement performance-based, market-oriented compensation systems; adopt best practices; benchmark service levels and costs; streamline our operations; cross-service and outsource activities; and leverage technology to increase efficiency, productivity, and results. The Human Capital Program provides the resources needed to support a diverse, highly educated, knowledge-based workforce comprising individuals with a broad array of technical and program skills and institutional memory. This workforce represents GAO's human capital-- its greatest asset--and is critical to the agency's success in serving the Congress and the nation. Human Capital Program costs represent nearly 80 percent of our requested budget authority. To further ensure our ability to meet congressional needs, we plan to allocate approximately $17 million for Engagement Support to: * conduct travel, a critical tool to accomplish our mission of following the federal dollar cross the country and throughout the world, and to ensure the quality of our work; * contract for expert advice and assistance when needed to meet congressional timeframes for a particular audit or engagement; and: * ensure a limited presence in the Middle East to provide more timely, responsive information on U.S. activities in the area. In addition, we plan to allocate about $91 million--or about 18 percent of our total request--for Infrastructure Operations programs and initiatives to provide the critical infrastructure to support our work. These key activities include information technology, building management, knowledge services, human capital operations, and support services. Performance, Results, and Plans: In fiscal year 2005, the Congress focused its attention on a broad array of challenging issues affecting the safety, health, and well- being of Americans here and abroad, and we were able to provide the objective, fact-based information that decision makers needed to stimulate debate, change laws, and improve federal programs for the betterment of the nation. For example, as the war in Iraq continued, we examined how DOD supplied vehicles, body armor, and other materiel to the troops in the field; contributed to the debate on military compensation; and highlighted the need to improve health, vocational rehabilitation, and employment services for seriously injured soldiers transitioning from the battlefield to civilian life. We kept pace with the Congress's information needs about ways to better protect America from terrorism by issuing products and delivering testimonies that addressed issues such as security gaps in the nation's passport operations that threaten public safety and federal efforts needed to improve the security of checked baggage at airports and cargo containers coming through U.S. ports. We also explored the financial crisis that weakened the airline industry and the impact of this situation on the traveling public and airline employees' pensions. We performed this work in accordance with our strategic plan for serving the Congress, consistent with our professional standards, and guided by our core values (see appendix 1). See table 2 for examples of how GAO assisted the nation in fiscal year 2005. Goal: 1; Description: Provide timely, quality service to the Congress and the federal government to address current and emerging challenges to the well-being and financial security of the American people; GAO provided information that helped to: * Improve the transition from active duty to civilian status for veterans with serious war- related injuries; * Address long-term health care financing pressures on state and local government budgets; * Identify challenges associated with transferring the Medicare appeals process from the Social Security Administration and HHS; * Improve patient safety at Department of Veterans' Affairs hospitals; * Improve the security of Social Security numbers; * Address the challenges of pension reform; * Strengthen the security screening process for passengers and checked baggage at the nation's airports; * Improve the oversight of Federal Housing Administration single-family and multifamily lenders; * Improve the oversight of electricity markets by the Federal Energy Regulatory Commission; * Identify challenges associated with the Department of Energy's (DOE's) nuclear facility designs; * Monitor the growth in the digital television market; * Analyze issues contributing to the declining financial condition of the airline industry. Goal: 2; Description: Provide timely, quality service to the Congress and the federal government to respond to changing security threats and the challenges of global interdependence; GAO provided information that helped to: * Improve the management of funds for the global war on terrorism; * Increase the security of cargo containers to prevent terrorist activity; * Alert the Congress to issues affecting the DOD's major weapon systems; * Analyze funding options for a new federal foreign assistance program-- the Millennium Challenge Account; * Promote government efforts to address threats to the security of the nation's information systems; * Strengthen the visa process as an antiterrorism tool; * Improve management of the U.S. Coast Guard's Deepwater Program; * Shape the debate on improving military pay and benefits; * Strengthen the U.S. strategic export control system; * Identify improvements needed to secure critical IT systems used by U.S. financial markets; * Report to the Congress on the 2005 base realignment and closures (BRAC) defense transformation. Goal: 3; Description: Help transform the federal government's role and how it does business to meet 21st century challenges; GAO provided information that helped to: * Increase the public's understanding of the federal government's long- term fiscal challenges; * Implement governmentwide civil service reforms; * Oversee federal tax policy; * Increase debts collected from criminals; * Decrease improper payments made by the USDA Food Stamp Program and other federal agencies; * Manage multibillion dollar IT modernizations and investments at the Department of Homeland Security (DHS) and Office of Personnel Management; * Improve agencies' strategic purchasing practices; * Examine changes in key areas of federal activity that could affect the federal government's fiscal future; * Enhance the knowledge base on comprehensive national indicators; * Improve postal operations through reform legislation. Goal: 4; Description: Maximize the value of GAO by being a model federal agency and a world-class professional services organization; GAO provided information that helped to: * Foster among other federal agencies GAO's innovative human capital practices, such as broad pay bands; * performance-based compensation; * and workforce planning and staffing strategies, policies, and processes; * Share GAO's model business and management processes and other transformation-related information with counterpart organizations in the United States and abroad. Source: GAO. [End of table] Outcomes of Our Work and the Road Ahead: During fiscal year 2005 we monitored our performance using 14 annual performance measures that capture the results of our work; the assistance we provided to the Congress; and our ability to attract, retain, develop, and lead a highly professional workforce (see table 3). For example, in fiscal year 2005 our work generated $39.6 billion in financial benefits, primarily from actions agencies and the Congress took in response to our recommendations. Of this amount, about $19 billion resulted from changes to laws or regulations, $12.8 billion resulted from agency actions based on our recommendations to improve services to the public, and $7.7 billion resulted from improvements to core business processes. See figure 1 for examples of our fiscal year 2005 financial benefits. Many of the benefits that result from our work cannot be measured in dollar terms. During fiscal year 2005, we recorded a total of 1,409 other benefits. For instance, we documented 75 instances where information we provided to the Congress resulted in statutory or regulatory changes, 595 instances where federal agencies improved services to the public, and 739 instances where agencies improved core business processes or governmentwide reforms were advanced. These actions spanned the full spectrum of national issues, from ensuring the safety of commercial airline passengers to identifying abusive tax shelters. See figure 2 for additional examples of GAO's other benefits in fiscal year 2005. One way we measure our effect on improving the government's accountability, operations, and services is by tracking the percentage of recommendations that we made 4 years ago that have since been implemented. At the end of fiscal year 2005, 85 percent of the recommendations we made in fiscal year 2001 had been implemented, primarily by executive branch agencies. Putting these recommendations into practice will generate tangible benefits for the nation over many years. During fiscal year 2005, experts from our staff testified at 179 congressional hearings covering a wide range of complex issues (see table 4). For example, our senior executives testified on improving the security of nuclear material, federal oversight of mutual funds, and the management and control of DOD's excess property. Over 70 of our testimonies were related to high-risk areas and programs (see table 5). Table 3: Agencywide Summary of Annual Measures and Targets: [See PDF for image] [End of table] Figure 1: GAO's Selected Major Financial Benefits Reported in Fiscal Year 2005: [See PDF for image] [End of figure] Figure 2: GAO's Selected Other (Nonfinancial) Benefits Reported in Fiscal Year 2005: [See PDF for image] [End of figure] Table 4: Selected Testimony Issues, Fiscal Year 2005: [See PDF for image] [End of table] GAO’s High-Risk Program: Issued to coincide with the start of each new Congress, our high-risk update, first used in 1993, has helped Members of the Congress who are responsible for oversight and executive branch officials who are accountable for performance. Our high-risk program focuses on major government programs and operations that need urgent attention or transformation to ensure that our government functions in the most economical, efficient, and effective manner possible. Overall, our high- risk program has served to identify and help resolve a range of serious weaknesses that involve substantial resources and provide critical services to the public. Table 5 details our 2005 high-risk list. Table 5: GAO's 2005 High-Risk List: [See PDF for image] [End of table] Concluding Remarks: We are grateful for the Congress’s continued support of our joint effort to improve government and for providing the resources that allow us to be a world-class professional services organization. We are proud of the positive impact we have been able to affect in government over the past year and believe an investment in GAO will continue to yield substantial returns for the Congress and the American people. Our nation will continue to face significant challenges in the years ahead. GAO’s expertise and involvement in virtually every facet of government positions us to provide the Congress with the timely, objective, and reliable information it needs to discharge its constitutional responsibilities. This concludes my statement. I would be pleased to answer any questions the Members of the Committee may have. Appendix I: Serving the Congress--GAO's Strategic Plan Framework: [See PDF for image] [End of figure] [End of section]