Management Problems Facing the Bush Administration

U.S. TREASURY
Government at the Brink
Volume I.
Urgent Federal
Government
Management
Problems Facing
the Bush
Administration
Senator Fred Thompson
Committee on
Governmental Affairs
United States Senate
Washington, DC
June, 2001
i.
Table of Contents Volume I.
Preface by Senator Fred Thompson………………………………………………………………………………………… 1
Report Overview …………………………………………………………………………………………………………………. 3
A. Federal Workforce Problems ……………………………………………………………………………………………. 9
B. Financial Management Problems……………………………………………………………………………………… 24
C. Information Technology Problems …………………………………………………………………………………… 35
D. Overlap and Duplication…………………………………………………………………………………………………. 54
Appendix: Top Management Challenges Most Frequently Identified by Inspectors General ………. 68
1
Obviously we will never completely
eliminate fraud, waste, and error in an
operation as large and complex as the
federal government. Some of the
ludicrous situations we uncover,
however, make you wonder if anyone is
even trying.
The only thing we really need to solve
these problems is leadership.
A PREFACE BY SENATOR
FRED THOMPSON
Like most Americans, I had heard about waste,
fraud, and abuse committed in the federal
government long before I came to Washington.
But after being here for just a few years, I realized
I didn’t know the half of it. Because of its size and
scope, and the terrible way it is managed, the
federal government wastes billions and billions of
your tax dollars every year. The waste, fraud, and
abuse reported to the Governmental Affairs
Committee each year is staggering.
Of course, no one knows exactly how much fraud,
waste, and mismanagement cost the taxpayers
because the federal government makes no effort to
keep track of it. But, based on just a few examples
from reports by the General Accounting Office and
agency Inspectors General, we came up with a
figure of $220 billion–$35 billion in just one year
alone.
Obviously we will never completely eliminate
fraud, waste, and error in an operation as large and
complex as the federal government. Some of the
ludicrous situations we uncover, however, make
you wonder if anyone is even trying. For example,
Medicare paid millions of dollars for services
allegedly rendered to beneficiaries after Medicare’s
own records showed they were deceased.
Prisoners get food stamps and other federal
benefits to which they’re obviously not entitled.
The Internal Revenue Service issued a $15,000 tax
refund to someone who actually owed $350,000 in
delinquent taxes.
In this report, I hope to illuminate some of the root
causes of the mismanagement that persist in the
federal government. This report does not attempt
to capture all of the serious management
challenges that the government faces. Rather, we
are focusing on four of the core problems that
agencies face – workforce management, financial
management, information technology management,
and overlap and duplication.
More significant than just wasting money, these
problems mean that the government can’t do
everything it is supposed to do. When the federal
government wastes money, it can’t use that money
for the benefit of the American people. For
instance, as I’ve mentioned, the Medicare program
wasted almost $12 billion last year. That $12
billion could have gone to providing better health
care for more of our elderly citizens. Or, it could
help pay for the prescription drugs needed by most
Medicare recipients.
These problems – workforce management,
financial management, information technology
management, and overlap and duplication – aren’t
new. They weren’t created by the Clinton
Administration. But the Clinton Administration
didn’t give them the attention they deserved, either.
The Congress has passed law after law to address
these problems, but nothing ever seems to improve.
We have the tools to fix these problems. But the
amount of money wasted each year just seems to
grow. And like it or not, these are the problems the
Bush Administration and the new Congress, both
Republicans and Democrats, have inherited. If
these problems are left to fester, they will further
2
erode Americans’ trust in government. More
importantly, Americans will not get the benefits
they deserve from the investments they make with
their taxes. And that money will continue being
wasted.
The only thing we really need to solve these
problems is leadership. If the President and the
leadership in Congress make a priority out of
solving these problems, they will get solved. If the
White House demands that the Defense
Department get its financial books in order, they
will do it. If Congress joins together to insist that
agencies reduce waste, they will do it. We have to
put our money where our mouth is, of course. It
will require an investment to solve these problems.
But, solving them will reap rewards in the future.
After being Chairman of the Governmental Affairs
Committee now for more than four years, I am
convinced that the best way to secure our nation’s
economic future is to solve many of the
management problems facing our government. If
we don’t solve them now, we will have
surrendered our ability to address other problems in
the future when the retirement of the baby boomers
will place increased demand on our resources.
3
The Bush Administration has inherited
a series of truly daunting problems,
which have developed over many years.
[T]he most pervasive and critical of all
[problems] throughout the federal
government: federal workforce
management, financial management,
information technology management,
and program overlap and duplication.
REPORT OVERVIEW
At the start of a new Administration,
Washington’s attention naturally centers on
policy. Lurking below the surface, however,
are a host of management problems that will
severely test the Administration’s ability to
execute its policy agenda. Management
problems of the nature and magnitude facing the
federal government would attract the highest
priority attention from private sector executives,
who know they couldn’t do business without
first solving them. While the problems are just
as devastating for the federal government, they
tend to fester largely under the radar screen in
Washington.
The purpose of this report is to draw attention to
these problems and highlight the urgent need to
resolve them. The report lays down some
markers on where we are today and what needs
to be done to fix the management mess in
Washington. The Bush Administration has
inherited a series of truly daunting problems,
which have developed over many years. While
not of their making, the new Administration
now faces the consequences of these problems.
They need to take them on and solve
them—something their predecessors failed to
do. Otherwise, much that they try to accomplish
will inevitably fail.
The work of the government’s objective and
nonpartisan internal auditors—the General
Accounting Office (GAO) and agency
Inspectors General (IGs)—provides irrefutable
evidence that the new Administration begins
with an array of problems of unprecedented
depth and breadth. The federal government’s
core management problems have persisted for
years, and, in fact, have grown worse. GAO and
IGs report on much the same problems —
literally hundreds of them — year after year:
C In 1990, GAO launched its biennial
“high-risk list” of the areas throughout
the federal government that are most
vulnerable to fraud, waste, and abuse. It
started with 14 problem areas. The
current GAO high-risk list, issued just
this year, contains 23 problem areas.
Eight of the original 14 high-risk
problems are still on the list
today—more than a decade later.
C The IGs report to Congress each year on
the most serious management problems
facing their agencies. For the most part,
they also list the same problems year
after year. (See Appendix.)
Listed below are ten of the worst examples of
waste, fraud, and abuse in the federal
government’s recent history. This report
discusses in greater detail four overarching
problem areas that are the most pervasive and
critical of all throughout the federal
4
The Federal Government’s
Top Ten
Worst Examples of Mismanagement
1. THE BIG DIG – Boston’s Central Artery –is the most expensive federal infrastructure project in the nation’s
history. Its cost continues to rise and is now estimated at $13.6 billion; an almost 525 percent increase
from the original $2.6 billion.
2. ABUSING THE TRUST OF AMERICAN INDIANS – The Department of the Interior does not know what
happened to more than $3 billion it holds in trust for American Indians. A judge overseeing this case called
it “fiscal and governmental irresponsibility in its purest form.”
3. DEPARTMENT OF DEFENSE FINANCIAL MANAGEMENT – there is widespread agreement that the
Department of Defense finances are a shambles. It wastes billions of dollars each year, and can not
account for much of what it spends.
4. NASA Mismanagement Causes Mission Failures – In spectacular example after example, NASA lost billions
because of mismanagement of some of its biggest programs. The cause of the Mars Polar Lander failure,
for example, was that one team used English measurements (inches, feet, and pounds) to design and
program the vehicle, while another used metric measurements.
5. MEDICARE WASTE, FRAUD, AND ABUSE – Medicare wastes almost $12 billion every year on improper
payments. It misspent that $12 billion last year from the fee-for-service part of Medicare alone, which was
about 7 percent of the total fee-for-service budget. The amounts wasted on improper Medicare payments
would go a long way toward funding a prescription drug benefit or other program enhancements.
6. SECURITY VIOLATIONS AT THE DEPARTMENT OF ENERGY – The Department does not adequately
safeguarded America’s nuclear secrets. In just one case, an employee was dead for 11 months before
department officials noticed that he still had four secret documents signed out.
7. IRS FINANCIAL MISMANAGEMENT – The IRS manages its finances worse than most Americans. The
agency does not even know how much it collects in Social Security and Medicare taxes. GAO found
significant delays – sometimes up to 12 years – in recording payments made by taxpayers.
8. VETERANS AFFAIRS PUTS PATIENT HEALTH AT RISK – The Department of Veterans Affairs IG found that
“[A hospital’s Food Service] shares the loading dock with the Environmental Management Service’s
hazardous waste containers. Dirty Environmental Management Service and red biohazard carts were
located next to the area where food is transported to the kitchen.”
9. BILKING TAXPAYERS OUT OF STUDENT FINANCIAL AID – Federal student aid programs are rife with fraud
and abuse. A cottage industry of criminals advise people on how to cheat to get federal loans and grants.
In one case, scam artists passed off senior citizens taking crafts classes as “college students” who
qualified for federal Pell grants.
10. UNEMPLOYMENT INSURANCE FRAUD – A Las Vegas, Nevada man illegally collected at least $230,500 in
fraudulent Unemployment Insurance benefits from four different states between September, 1996 and
November, 1999. He set up 13 fake companies and submitted bogus claims based on false reported wages
for 36 non-existent claimants using the names and Social Security numbers of dead people, and then
collected the claims by mail from California, Massachusetts, Texas and Nevada.
government: workforce management, financial
management, information technology
management, and overlap and duplication. The
second volume of this report includes
descriptions of these and other critical problems
at a number of individual agencies.
Workforce management. The federal
government has a major “people” crisis whose
full dimensions are just now emerging. Aging
workforces compounded by the employee
“downsizing” of recent years have left many
agencies dangerously short of employees with
the necessary skills and experience to do their
jobs. Downsizing was conducted as a numbers
game, carried out randomly to reduce employees
to arbitrary predetermined levels. The federal
government reduced staffing without cutting
5
back on anything that it does.
The situation will get worse since one-third to
one-half of the remaining federal workforce may
retire over the next 5 years. The Hart-Rudman
Commission on National Security has reported
that “the quality of personnel serving in
government is critically important to U.S.
national security in the 21st century.” The
federal government, like the private sector, will
become increasingly reliant on information
technology. But the federal government has
trouble hiring and keeping employees with the
high-tech skills it so badly needs.
On top of these problems, the federal civil
service system—the process the federal
government uses to hire and promote
workers—is broken. One expert says it
“underwhelms at almost every task it
undertakes,” including hiring, training,
rewarding, and dealing with poor performers.
Understandably, few of our young people
express an interest in federal service. Concern
is mounting that problems with the political
appointment process are likewise discouraging
many capable people from accepting top
positions in public service.
Inadequate workforces affect everything that the
government does and make all of its other
management and performance problems that
much worse. It came as no surprise when GAO
recently designated workforce management,
which it refers to as “human capital,” a
government-wide high-risk problem.
Financial management. The federal government
as a whole and some of its largest agencies can’t
pass a basic financial audit. Last year, all major
federal agencies got their financial statements in
on time, and more got unqualified (“clean”)
opinions than ever before. That’s a step in the
right direction. However, it’s only a first step.
All that a clean opinion means is that the agency
could balance its books for one day—September
30 (the last day of the government’s fiscal
year)—and it takes most agencies months after
the end of the fiscal year to figure out what that
balance was. Furthermore, many agencies pass
their financial audits only after massive and
costly accounting efforts that cover up their
underlying problems and divert resources from
fixing them.
This would be like an ordinary couple taking off
work and spending two solid weeks at home
trying to figure out what their checkbook
balance was six months ago. They may be able
to do it, but it doesn’t help them manage their
finances or avoid bouncing checks today. The
same holds true for the federal government.
Hardly any federal agency can actually use its
financial systems for day-to-day management.
Financial management is the direct subject of
four GAO high-risk problems and a contributing
factor to many more. The IGs at almost all
major agencies have designated financial
management as a critical problem. Needless to
say, the government can’t operate efficiently
when agencies don’t know how much money
they have, how much they spend, or how much
their programs cost.

Information technology management. The
advances in computers and information
technology that revolutionized private sector
business practices have yet to register with the
federal government. Agencies seem unable to
use technology to enhance their efficiency and
effectiveness, and they have consistently
mismanaged major computer projects.
Weaknesses in government computer systems
make them vulnerable to attacks from
international and domestic terrorists, crime
6
A degree of public skepticism toward
our government is a healthy thing.
Rampant cynicism is not.
rings, and everyday “hackers.” These
weaknesses threaten our national security and
jeopardize the confidentiality of vast amounts of
sensitive information on individuals that the
government holds.
Information technology management is a critical
problem at all major agencies. GAO has
designated computer security a governmentwide high-risk problem. We should expect the
government to provide the same range and
quality of services as the private sector,
including service over the phone and via the
Internet. But this won’t happen until the
government has the high tech equipment in
place to deliver such services and knows how to
use it.
Overlap and duplication. The federal
government operates myriad spending
programs, regulatory programs, subsidies, tax
breaks, and other forms of federal intervention.
They have accumulated randomly over the
years, in response to the real or perceived needs
of the moment. Once created, however, it is
virtually impossible to eliminate any of these
programs even if they have long since served
their purpose. The Comptroller General
recently testified before the Governmental
Affairs Committee that, “[i]n program area after
program area, we have found that unfocused and
uncoordinated crosscutting programs waste
scarce resources, confuse and frustrate taxpayers
and program beneficiaries, and limit overall
program effectiveness.” The way the
government is currently organized can only be
described as chaos.
Why do all these problems matter? Beyond the
obvious waste of taxpayer money, they cause
real hardships for all Americans. Mismanaged
and ineffective programs cheat their intended
beneficiaries. They pose safety and security
risks for our citizens. They also have important
implications for the major policy issues that
Washington decision-makers face. Here are just
a few examples that the report describes in more
detail:
C Staffing problems threaten the Social
Security Administration’s ability to
provide timely and accurate service to
the public.
• Poor financial and information systems
at the IRS benefit tax cheats and burden
honest taxpayers.
C Federal air traffic controllers are being
held less accountable for errors that
could affect public safety.
C The Navy is investigating how hackers
broke into one of its computers and stole
the source codes to a missile guidance
program.
C Because dozens of our embassies
overseas don’t even have e-mail, foreign
governments just bypass them and
communicate directly with Washington.
Finally, these management problems exact a
terrible toll on public trust and confidence in the
federal government. A degree of public
skepticism toward our government is a healthy
thing. Rampant cynicism is not. Its effects can
be seen in the increasing public apathy toward
our political processes and lack of interest in
public service. The combined effect of this
cynicism and indifference creates a vicious
cycle. The more detached the public is from
Washington, the more insular and the less
7
If we can develop the political will to
take on these problems, solutions will
surely follow. If not, we should
probably hang it up.
responsive Washington will become.
Furthermore, our leaders can’t really be
effective if the public feels it can’t trust them.
What can the Bush Administration and
Congress do to turn things around? First, the
tools are in place to fix things. Congress has
enacted an arsenal of management improvement
laws over the last decade. They include the
Chief Financial Officers Act, the Federal
Financial Management Improvement Act, the
Government Performance and Results Act, the
Clinger-Cohen Act, and the Government
Information Security Act, which was enacted
just last year. Second, the Bush Administration
has the benefit of a host of recommendations
that GAO and IGs have already offered to fix
many of the problems. The Governmental
Affairs Committee and its Subcommittee on
Government Management also have issued
recent reports containing recommendations
addressing many of the problems.
However, even though federal agencies have a
wealth of tools and proposed solutions, the same
core problems persist year after year with little
concrete evidence of progress. Why? The
missing ingredient up to now has been
leadership and sustained commitment from the
President and Congress. If we can develop the
political will to take on these problems,
solutions will surely follow. If not, we should
probably hang it up. Therefore, before we can
get serious action on the specific
recommendations already out there, several
other things first have to happen:
C Political leadership: The President and
Congress must make clear in word and
deed that resolving these management
problems is one of their priorities, and
that they will keep after the agencies and
the government’s key management
agency, the Office of Management and
Budget, until the job is done.
C Agency follow up: The Office of
Management and Budget and the
agencies must establish specific
performance goals, measures, strategies,
and timetables to resolve the problems.
They should use as a starting point
potential solutions that have already
been identified.

C Investing in improvements: As part of
their improvement strategies, agencies
and the Office of Management and
Budget must identify funding needed to
resolve the problems and Congress must
be willing to provide it. If done right,
relatively modest investments in
improvements will repay themselves
many times over.

C Linking funding to results: Both the
President and the Congress need to
insist on reliable performance
information to determine what’s
working and what’s not, and then hold
agencies and programs accountable
where it counts—in their budgets.
Where programs overlap, we should
concentrate our resources on those that
work best or can be made to work best.
Of course, the fact that a program is not
performing well doesn’t automatically
mean it should be defunded. Maybe it
8
We are in a new millennium with a
new economy. We need to get the
federal government into the 21st
Century, even if we have to drag it in
kicking and screaming.
needs a legislative fix or even
more funding. However, letting
non-performing programs
simply continue as is should not
be an option.
Will we actually move the federal government
into a new era of sound management and
effective performance? That’s very much an
open question at this point. However, there are
some positive signs. Many dedicated career
employees in the executive branch are working
hard to turn things around. Also, there are early
signs that the Bush Administration is taking
management and performance improvement
seriously.
This year may provide our best chance—and
maybe our last chance—to jump-start real
management reform. We can’t afford to pass it
by. We are in a new millennium with a new
economy. We need to get the federal
government into the 21st Century, even if we
have to drag it in kicking and screaming. Once
we do that—and only after we do that—can we
expect to regain some of the confidence that the
American people once had in their federal
government. Hopefully, this report will help
get things moving.
II. FOUR CORE PROBLEMS: THEIR NATURE, CONSEQUENCES,
AND POTENTIAL SOLUTIONS
A. FEDERAL WORKFORCE PROBLEMS
Unfortunately, it took until [2000] for the [Clinton] administration to
acknowledge that human resources is a government-wide management priority
. . . What would have been far more useful for the next administration and
Congress when they take office in January is not a list of ideas to solve
problems, but a list of problems that have been solved.
Federal Times Editorial
October 30, 2000
The Bush Administration has inherited a real
mess when it comes to the federal workforce.
The government faces an emerging
workforce—or, as some like to say, “human
capital”—crisis. Many agencies lack the right
employees with the right skills to do their jobs,
or to furnish the public with the services it needs
at the quality levels it deserves.
During the 1990’s, the Clinton Administration
set out to cut, or “downsize,” agency staffs in
order to make the federal government “smaller
and smarter.” They didn’t meet either of these
goals. Their downsizing hardly made a dent in
the true size of government. What it did do was
create a “brain drain” that cost the government
many of its most experienced and valuable
employees, as well as many lower level
employees. Furthermore, they reduced staffing
without cutting back on anything that the federal
government does or improving how it does it.
In short, the federal government wound up
doing the same old things in the same old ways,
but with fewer experienced workers.
The workforce crisis figures to get steadily
worse as many more “baby boomer” federal
employees retire. Over the next 5 years, up to
half of the remaining federal employees may
leave through normal or early retirement. Due
to the hiring freezes and recruiting problems of
recent years, agencies don’t have good
replacements for them.
These personnel problems add up to a recipe for
disaster. The government has a host of other
management problems, and sub-par workforces
make all of them worse. The GAO just
designated human capital management a
government-wide “high-risk” problem. In doing
so, Comptroller General David Walker, head of
the GAO, stated: “Widespread inattentiveness to
strategic human capital management has created
a governmentwide risk—one that is
fundamental to the federal government’s ability
to effectively serve the American people, both
now and in the future.”1
This means that workforce problems are one of
the largest contributors to fraud, waste, and
mismanagement in the federal government. The
GAO and the agencies’ own IGs have cited staff
weaknesses as a top management problem at
almost all the major federal agencies. See
Appendix.
1
“Human Capital: Meeting the
Governmentwide High-Risk Challenge,” GAO-01-
357T (February 1, 2001), p.3.
10
The evidence suggests that the nonstrategic way in which downsizing was
accomplished actually detracted from
the capacity of agencies to carry out
essential functions and made them
more vulnerable to fraud, waste, and
mismanagement.
SHORTSIGHTED STAFF CUTS
The Clinton Administration’s downsizing
treated employee cuts strictly as a numbers
game, designed to get down to arbitrary staff
levels that largely ignored agency workforce
needs. However, even the numbers didn’t add
up. According to one leading expert, Paul
Light, the true federal workforce of today
actually is larger than it was in 1993 when
former President Clinton declared that “the era
of big government is over.” Light points out
that most of the employee reductions of the
1990’s were defense-related and were
attributable primarily to the end of the Cold
War. He also notes that a substantial but
unknown number of former federal jobs
migrated to a “shadow” federal workforce made
up of private sector employees as well as state
and local government employees who carry out
federal mandates. This happens when the
government contracts with a private company to
do government work. According to Light, when
this shadow workforce is taken into account, the
“era of big government” is still very much with
us.2

Likewise, there is no evidence that the 1990’s
downsizing made the government more efficient
or effective. Indeed, it clearly had the opposite
effect. The cuts did not take into account the
skills or performance of employees, or the
importance of the jobs they did. The primary
method of downsizing was to offer across-theboard cash “buyouts” in order to pay older
employees to leave. Many were offered early
retirement at age 50. This took away some of
the government’s best talent. The evidence
suggests that the non-strategic way in which
downsizing was accomplished actually detracted
from the capacity of agencies to carry out
essential functions and made them more
vulnerable to fraud, waste, and mismanagement.
The Department of Housing and Urban
Development is a poster child for the effects of
irrational downsizing. It had been clear for
years that the Department’s workforce was
inadequate to carry out its existing programs.
The Clinton Administration’s response was to
further reduce the Department’s staff while
adding even more programs. The Department’s
IG criticized this approach:
The adequacy of staff resources
in the Department has long been
a concern of the Inspector
General’s Office and a root
cause of many of HUD’s
material weaknesses. Our
audits have consistently found a
mismatch between the number
and complexity of HUD’s
programs and the capability of
HUD staff to administer those
programs. . . . In my mind,
adding more weight to an
already weak foundation makes
HUD a more vulnerable
2
See generally Paul C. Light, “The True Size
of Government” (1999).
11
organization.3
The federal government intended to compensate
for employee staff reductions by making more
efficient use of technology. This approach
worked for many private sector businesses, but
it didn’t work for the federal government. It
failed because the government shot itself in the
foot by getting rid of the very people it needed
to improve its use of technology:
C Due to staff reductions through
downsizing, agencies now lack the
skilled employees needed to take
advantage of information technology,
and they are at a competitive
disadvantage in hiring such
professionals. They also lack the
necessary in-house expertise to oversee
information technology work that they
have outsourced to contractors.4
TOP-HEAVY BUREAUCRACIES
The 1990’s downsizing also made the federal
workforce more top-heavy and less efficient
since most cuts occurred at the lowest staff
levels. In addition to letting more experienced
workers retire, the government also eliminated
jobs that were the easiest to cut, meaning those
with the highest turnover rates and the lowest
political profile. Supposed reductions in middle
management levels often amounted to nothing
more than changing titles. The number of
political appointees, senior career officials, and
middle managers remained steady while layers
of hierarchy actually expanded. This effect can
be seen in the title inflation of recent years:
C From 1993 to 1998, many new senior
political positions were established with
such titles as “deputy to the deputy
secretary,” “principal assistant deputy
under secretary,” and “associate
principal deputy assistant secretary.”
There are now about 2,800 political
appointee positions, and their elaborate
titles pay by the word. Reducing these
positions by just 600 would save
taxpayers about $700 million over 10
years.5
THE FAILED CIVIL SERVICE SYSTEM
On top of the problems with the composition of
the federal workforce, the civil service
system—the process the federal government
uses to hire and promote workers—is itself
broken. The complex and outmoded federal
civil service system takes too long to hire
people. It fails to hold employees accountable
for their performance. It shields poor
performers and does little to encourage and
reward conscientious and hard-working
employees. Too many good workers don’t get
enough responsibility and support, so they
become demoralized and leave. Too many poor
or marginal workers slide by for 20 or 30-year
careers, and even advance, without any real
accountability. One expert observed that the
civil service system “underwhelms at almost
every task it undertakes. It is slow in the hiring,
almost useless in the firing, overly permissive in
the promoting, [and] out of touch with actual
3
Testimony of Susan Gaffney, Inspector
General of the Department of Housing and Urban
Development, before the Subcommittee on Housing
and Transportation of the Senate Banking Committee
(September 26, 2000.)
4General Accounting Office, “Human Capital:
Managing Human Capital in the 21st Century,” GAO/TGGD-00-77 (March 9, 2000).
5Congressional Budget Office, “Budget
Options” (February 2001).
12
performance in the rewarding . . . .”6
The need for performance accountability is not
just an internal government concern. The
actions of federal employees can have an
immediate impact on the public. Unfortunately,
some agencies seem to be going in the wrong
direction when it comes to holding their
employees accountable for their performance:
C “Operational errors,” or violations of
aircraft in-flight separation
requirements, are a key air travel safety
indicator. Operational errors have
doubled in recent years and are now at a
record high. However, the Federal
Aviation Administration made air traffic
controllers less accountable for these
errors. A controller who had more than
three such errors within a prescribed
period used to be subject to
reassignment, remedial training, or
decertification. Now, the agency has
agreed with its union to reduce
operational errors to “technical
violations” that carry no remedial
consequences. The National
Transportation Safety Board has
objected to this change.7

Apart from its day-to-day problems, the basic
federal civil service model—built around a
cradle-to-grave career from entry level to
retirement with virtually guaranteed job
security—is outdated. Today’s workers seek
greater mobility and have different motivations,
needs, and wants than in the past:
Gone are the days when talented
employees would endure hiring
delays and a mind-numbing
application process to get an
entry-level government job.
Gone, too, are the days when
talented employees would accept
slow but steady advancement
through towering government
bureaucracies in exchange for a
thirty-year commitment. In the
midst of a growing labor
shortage, government is
becoming an employer of last
resort.8
It will be hard to solve many of the challenges
the federal government faces in attracting the
kind of workforce it needs. However, the
government doesn’t even do a good job with
simple things it can easily control. A recent
survey of newly hired federal employees found
serious complaints about the recruiting and
hiring process. Many new hires said they were
not even treated with common courtesy:
C New hires reported that the time
between submission of an application
and being scheduled for an interview
was unreasonably long. The delay
between the time they were told they
had a job and being able to report for
work also was too long. The new hires
complained of not receiving timely
feedback, or receiving no feedback at
all, on the status of their applications.
Finally, they did not receive quality
6
Paul C. Light, “The New Public Service”
(1999), p. 2.
7
“FAA Policy on Controller Errors
Questioned,” Government Executive Magazine Daily
Briefing, (February 20, 2001). 8
Paul C. Light, “The New Public Service”
(1999), p. 1.
13
service from federal hiring
personnel.9
A recent study demonstrates how far Uncle Sam
lags behind all other types of employers in
attracting and retaining the high-tech workforce
it needs to take advantage of modern technology
to improve its efficiency, service, and
accessibility. It’s no surprise that the federal
government has trouble competing with the
private sector for these workers. However, the
federal government also is less competitive than
private, non-profit organizations, academic
institutions, and state and local governments.
The study rated all of these potential employers
“high,” “medium,” or “low” on five factors for
hiring and keeping high-tech workers. The
federal government came in dead last. See
Table I.10
THE PUBLIC CAN’T AFFORD
A SUB-PAR FEDERAL WORKFORCE
The government’s personnel problems aren’t
just an “inside the Beltway” issue. They affect
everything the government does and everyone it
touches—in other words, all of us. Here are just
a few examples:
C The military services are struggling to
meet their recruiting goals. More firsttime enlistees are failing to re-enlist than
ever before. There also are shortages of
junior officers, intelligence analysts,
computer programmers, and pilots.
C Untrained and inexperienced staff at the
Interior Department mismanage billions
of dollars in Indian Trust Funds.
C Energy Department staff lack the
contract management skills needed to
oversee projects to clean up radioactive
and hazardous waste sites.
C Difficulties in replacing experienced
federal fire personnel threaten
9U.S. Merit Systems Protection Board,
“Competing for Federal Jobs: Job Search Experiences
of New Hires” (February 2000).
10National Academy of Public Administration,
“Comparative Study of Information Technology Pay
Systems,” Executive Summary (March 2001), p. 10.
Table I: What Factors Make a Worker Take a Job?
Employer Salary Work life/
benefits
Rewards/
recognition
Advancement/
training
Recruiting
tools
Private High High High High High
Academic Medium High Medium Medium Medium
Non-profit Medium Medium Medium Medium High
State government Low Medium Medium Medium Medium
Local government Low Medium Medium Low Low
Federal
government
Low High Low Low Low
14
firefighting capabilities during
catastrophic events.
C The Veterans Affairs Department faces
a nationwide shortage of nurses at its
facilities that puts veterans at risk.
These examples are just the tip of the iceberg.
Many others can be found at almost all major
federal agencies. See Table II.
Numerous agencies that deal directly with the
public don’t have the staffs to provide our
citizens timely and quality service. Each year,
the Internal Revenue Service gets tens of
millions of telephone calls from taxpayers
seeking help on topics ranging from simple
inquiries about the status of their returns to
complex tax law questions. IRS has trouble
hiring and keeping the staff needed to provide
timely and quality responses to the public—and
the public pays the price through poor customer
service:
C In random tests this year, IG auditors
were unable to access IRS employees
through the agency’s toll-free number
over one-third of the time. When the
calls did go through, IRS employees
incorrectly answered almost half the test
questions that the auditors posed. (The
questions were taken from IRS’ own list
of frequently asked questions.)11

The Social Security Administration is another
agency that provides vital information and
services to large segments of our population. In
the past, the agency prided itself on providing
good service to the public. However, the
agency’s own IG reports that staff downsizing
and hiring restrictions, on the one hand, and the
increasing volume and complexity of caseloads,
on the other, threaten the agency’s ability to
serve the public. These concerns are echoed by
Stanford Ross, Chairman of the Social Security
Advisory Board. He says that the quality of
service has deteriorated in recent years, and the
problems are likely to grow:
Unless there’s fundamental
change, we will soon see
disruptions of service. The
Social Security agency lacks the
ability to handle existing
workloads, and those workloads
are bound to increase over the
next decade. . . . Everybody
knows there’s a long-term deficit
in the financing of Social
Security. But there’s also a
deficit in the agency’s ability to
provide good service, and that
should be equally alarming to
Congress and the public.12
Among the problems at the Social Security
Administration:
C Beneficiaries often can’t get accurate
information over the phone.
C People who visit Social Security offices
find them overcrowded, and often wait
two to four hours for assistance.
C The quality of benefit determinations is
falling, and some claimants must resort
to a slow and overloaded appeals
process.
11David C. Williams, Treasury Inspector
General for Tax Administration, Statement for the
Record before the House Ways and Means Oversight
Subcommittee (April 3, 2001), p. 2.
12“Federal Panel Warns Bush of Social
Security Problems,” New York Times (February 19,
2001).
15
C Two-thirds of initial disability benefit
determinations are reversed on
administrative appeal within the agency.
C Payments are delayed or calculated
incorrectly.
C Bogus Social Security numbers have
become a prime tool of illegal activity,
in part because the agency issues Social
Security numbers without sufficiently
reviewing identity documents submitted
to support the applications.
C Fraud and error are on the increase in all
of the agency’s major programs.13
Unfortunately, the agency doesn’t seem to be
fully acknowledging or coming to grips with its
personnel problems. It even sweeps some of
them under the carpet. For example:
The Social Security
Administration reports that it
meets its goal of answering 95
percent of calls to its 800
number within 5 minutes.
However, this is misleading. In
1999, 20 million of the 79
million callers to the 800
number got a busy signal or
abandoned their calls before they
navigated through the process.
In the end, only 59 million of the
79 million callers, or about 75
percent, actually talked to an
agency employee or finished
using the agency’s automated
system.14
The government’s personnel problems also have
major national security consequences. The HartRudman Commission on National Security
singled out improving the federal workforce as
one of the key things that must be done to
protect our citizens from international terrorism
and other threats to their security:
As it enters the 21st century, the
United States finds itself on the
brink of an unprecedented crisis
of competence in government.
The maintenance of American
power in the world depends on
the quality of U.S. government
personnel, civil and military, at
all levels. We must take
immediate action to ensure that
the United States can meet
future challenges.15
One of several national security concerns
highlighted by the Hart-Rudman Commission
and others is the impact of federal personnel
problems on our intelligence capabilities. For
example, the Commission emphasized the
government’s challenges in recruiting and
retaining individuals with the language skills
and cultural expertise needed to conduct policy
and intelligence analysis for a wider range of
countries, regions, and issues. The Commission
also stressed the need for talented information
13The agency reported the following
overpayment levels for last year: $1.334 billion for Old
Age and Survivors Insurance, $1.281 billion for
Disability Insurance, and $1.644 billion for
Supplemental Security Income. Social Security
Administration, “Performance and Accountability
Report for Fiscal Year 2000,” p. 51. Each of these
overpayment figures is higher than for the previous
year.
14Testimony of Stanford Ross, Chairman of
the Social Security Advisory Board, before the House
Ways and Means Social Security Subcommittee
(February 10, 2001).
15U.S. Commission on National Security/21st
Century, “Road Map for National Security: Imperative
for Change” (February 2001).
16
[T]he federal government has virtually
ignored its workforce problems up to
now.
technology professionals to run sophisticated
intelligence platforms.16

Many agencies have their own security
problems brought on in part by inadequate
security staffs within their agencies. The
following examples illustrate this problem:
C The Defense Department’s security
clearance process “virtually collapsed”
during the 1990’s. The Department has
a backlog of almost a half-million
security clearance investigations for
employees. It takes well over a year to
complete a top secret clearance. This
means that vital positions dealing with
the government’s most sensitive
national security data go unfilled, or the
people in those positions operate with
grossly outdated clearances. These
problems stem, in part, from
productivity problems among
investigators and ill-considered staff
cuts.17
C As of May 2000, the Commerce
Department’s Patent and Trademark
Office had failed to request required
background checks on 113 employees
hired since October 1997, all of whom
had access to sensitive proprietary
business data. For 1,626 employees
hired since 1970, there was no
documentation of security investigations
in the Office’s database.18
C A White House panel formed to
investigate security problems at the
Energy Department found that:
“Organizational disarray, managerial
neglect and a culture of arrogance—both
at Energy Department headquarters and
the labs themselves—conspired to create
an espionage scandal waiting to
happen.” The panel’s public report cited
the example of a Department employee
who was dead for 11 months before
officials noticed that he still had four
secret documents signed out.19
THE NEED FOR LEADERSHIP AND
PRIORITY ATTENTION
As with many other critical problems,
approaches to workforce management represent
a stark contrast between the private sector and
the federal government. Private sector firms
take a strategic approach to workforce issues.
They analyze which of their functions are
important and systematically identify the
employee skills and characteristics needed to
perform those functions well. Then, they make
16Ibid., p. 98.
17Testimony of Robert Lieberman, Defense
Department Acting IG, before the House Government
Reform Subcommittee on National Security (March 2,
2001).
18Inspector General, Department of
Commerce, “Improved Internal Controls Needed for
Office of Human Resources,” BTD-12830 (September
2000).
19Doyle McManus and Bob Drogin, “Nuclear
Security Panel Assails Energy Department,” Los
Angeles Times (June 15, 1999), p. A1.
17
[W]e need to send the signal that public
service is an honorable and worthwhile
calling.
the investments needed to hire, develop, and
retain employees with these skills and
characteristics. By contrast, the federal
government has virtually ignored its workforce
problems up to now. Only in its last year did
the Clinton Administration start paying attention
to personnel problems—and then only after the
Comptroller General and some Members of
Congress sounded the alarm bell.
WHAT CAN BE DONE?
After years of neglect, the full range of the
federal government’s workforce problems is just
starting to surface. Clearly, the government is
way behind the curve and has much ground to
make up. The problems obviously won’t be
solved overnight, but we can begin with a few
basics.
C Identifying the right number of
employees with the right skills:
Agencies have to figure out how many
employees with what kinds of skills they
need to accomplish their missions.
Then, they have to compare the
workforce they have with the one they
need and pinpoint the gaps. This kind of
workforce planning may seem like
nothing more than common sense. Yet,
it must be a radical concept for the
federal government since it’s never
really been done before in a systematic
way.
C Getting the right employees hired:
Agencies have to figure out how to get
the people they need on board.
Obviously, the government must
improve its recruiting and hiring
processes. Agencies can start by
streamlining their administrative
processes to eliminate unreasonable
delays in hiring decisions and actions.
More fundamentally, they must find
ways to get good people to want to work
for the federal government. This means
making public service more attractive to
our best and brightest—both those just
getting out of school and those with
more experience.
We need to send the signal that public service is
an honorable and worthwhile calling. There
was a time when salary limits and other
perceived disadvantages of government service
were at least partially offset by the sense that
those entering public service could help their
fellow citizens and “make a difference.” We
need to restore this way of thinking. For
starters, we need to stop criticizing federal
employees unfairly. Federal employees
themselves are not the problem. The vast
majority of them work hard and serve the
taxpayers as well as they can, given the
conditions under which they operate.
C Keeping employees motivated and
productive: Once agencies get good
people on board, they must keep them
motivated and productive. They must
have meaningful work and enough
freedom and responsibility to get it
done. We can reduce management
hierarchies and improve methods of
doing business in ways that will
encourage innovation and initiative. Of
course, restructuring management levels
must be done in a thoughtful and
strategic way to ensure that it enhances
the ability of agencies to perform their
20This table is based on examples taken from many GAO and IG reports. It does not attempt to cover all
significant federal workforce problems.
18
missions. Employees must be
held accountable for their
performance, and they must be
evaluated and rewarded in a
meaningful, performance-based
way. Today’s federal
performance appraisal and pay
systems don’t do nearly enough
either to reward good performers
or to deal with poor performers.
Clearly, the new Administration has its work cut
out for it as it starts to tackle the massive
workforce challenges it has inherited. However,
we’re finally recognizing these challenges.
Hopefully, the new Administration will prove
ready to tackle these problems and eventually
solve them.
TABLE II: AGENCIES WITH REPORTED SERIOUS WORKFORCE PROBLEMS20
Agency Problem(s)
Agriculture
Department
Resistance from the Department’s organizational units and employees impedes efforts
to reorganize and modernize the Department. As a result, little has changed in how the
Department serves its customers.
The nation’s food safety system suffers from inconsistent oversight, poor coordination,
and inefficient use of staff.
Shortages of experienced fire personnel in the Forest Service threaten firefighting
capabilities during catastrophic events. The impact was felt during the 1999 Big Bar
and Kirk fires in California, according to a recent report released by the Forest Service.
Forest Service personnel who were certified to manage wild fires did not participate
and/or were not made available by management; in some instances, there were not
enough qualified personnel.
Employee complaints of discrimination have been a problem at the Department for
years. Due to management turnover and inadequate staff expertise, the Department
doesn’t process complaints within required time lines.
Commerce
Department
Lack of sufficient experienced staff with the right skills, along with limited funds for
training and travel, limit the ability of Commerce and other trade agencies to monitor
and enforce trade agreements and to obtain favorable resolutions of compliance
problems.
Increasing applications and inexperienced staff at the Patent and Trademark Office
result in undeserving patents slipping through. This, in turn, poses a critical threat to
an economy that runs on intellectual property.
The Patent and Trademark Office failed to request required background checks on 113
employees hired since October 1997, all of whom had access to sensitive proprietary
business data. For 1,626 employees hired since 1970, there was no documentation of
security investigations in the Office’s database.
19
Defense
Department
The military services struggle to meet recruiting goals. Attrition among first-time
enlistees is at an all time high. There are shortages among junior officers, and
problems in retaining intelligence analysts, computer programmers, and pilots.
On the civilian side, the lack of sufficiently skilled and experience staff, following
downsizing, threatens contracting and logistics activities.
The Hart-Rudman Commission on National Security reports that the United States is
“on the brink of an unprecedented crisis of competence in government” that reaches
civilian and military personnel at all levels.
Due to lengthy delays and huge backlogs in completing security clearances, vital
positions dealing with the government’s most sensitive national security data go
unfilled or the people in those positions operate with grossly outdated clearances. The
security clearance problems themselves stem from staffing inadequacies within the
Department.
Education Department The Department’s staff may lack the knowledge and skills to manage their information
technology operations.
Energy
Department
Employees lack the contract management skills needed to oversee large projects, such
as the cleanup of radioactive and hazardous waste sites.
Estimates for the National Ignition Facility have expanded from $2.1 billion with
completion in 2002 to $3.5 billion with completion in 2008. Neither the Department’s
headquarters staff nor its field managers have the skills to oversee the managerial and
technical complexities of this large project. The cost overruns and schedule delays
caused in part by this skills gap have the potential to reappear on other large contracts.
The Stockpile Stewardship Program is faced with a shortage of skilled management
and technical staff. The proportion of offices with vacant or acting managers has
increased from 17 percent in 1996 to almost 65 percent in 2000. In light of the
competitive job market and the attrition of skilled staff, many believe that staffing
shortages will reach crisis proportions by the end of this decade.
Numerous studies have identified pervasive security weaknesses at the Department. A
White House panel condemned the Department as a “dysfunctional bureaucracy that
has proven it is incapable of reforming itself” when it comes to security. The panel
concluded that “organizational disarray, managerial neglect and a culture of arrogance
— both at Energy Department headquarters and the labs themselves — conspired to
create an espionage scandal waiting to happen.” One employee was dead for 11
months before Department officials noticed that he still had four secret documents
signed out.
Health and Human
Services Department
Responsibility for running the Medicare program is fragmented. Frequent leadership
changes hamper long-term Medicare initiatives and consistent management strategies.
The Department’s Health Care Financing Administration, which operates Medicare,
has had 19 administrators or acting administrators in the 24 years of its existence.
20
Health and Human
Services Department
(continued)
The Department’s workforce doesn’t have the skills needed to meet recent statutory
requirements relating to Medicare. For example, employees lack experience overseeing
preferred provider organizations, private fee-for-service plans, and medical savings
accounts, and monitoring the performance of health maintenance organizations.
Inadequate staff capacity likewise could leave Medicare unprepared to handle future
population growth and medical technology advances.
Employees who lack basic accounting skills and training handle enormous transactions.
Inexperienced Department employees made accounting errors in Medicare trust funds
(ultimately discovered and resolved) that totaled $32 billion.
Housing and Urban
Development
Department
Workload imbalances and insufficient or inexperienced staff pose problems for many
of the Department’s programs.
Despite these workload imbalances, the Department recently invested 10 percent of its
resources in employees called “Community Builders,” who reported that they spent
more than half their time on public relations activities.
Interior Department Management of the $3 billion in Indian trust funds is left to untrained and
inexperienced staff in the Bureau of Indian Affairs. As a result, trust beneficiaries
have no assurance that their account balances are accurate or that their assets are safe.
Difficulties replacing experienced fire personnel threaten firefighting capabilities.
Insufficient fire safety training contributes to fire safety risks at visitor centers, hotels,
and other national park buildings.
The National Park Service can’t monitor the performance of park managers or hold
them accountable for the results of park operations.
The park concessions program suffers because of the inadequate qualifications and
training of the National Park Service’s concession specialists and concessions
contracting staff.
The Bureau of Land Management has only four rangers to patrol over one million acres
at the Algodones Dunes in California. The result is chaos. According to an internal
agency report, the Dunes have become “unsafe for family recreation activity,” due to
drug and alcohol use and general lawlessness. Near-riots on weekends feature crowds
hurling beer cans and other objects at rangers, and yelling, “Kill the cops.” During
President’s Day weekend, one ranger was hit with a bag of fecal matter, while another
was injured when deliberately run over by a dune buggy.
Justice Department The Immigration and Naturalization Service lacks the staff to perform intelligence
functions. This, in turn, hampers efforts to combat the growing problem of alien
smuggling.
The Immigration and Naturalization Service also has problems hiring and retaining
Border Patrol agents. It missed its Congressionally mandated goal to hire 1,000 new
agents in fiscal year 1999.
Labor Department The Pension Benefit Guarantee Corporation may not have the right mix of contractor
and federal employees needed to meet future workload challenges.
21
State Department Quality of life problems at overseas posts, limited career development opportunities,
and personnel management weakness hamper recruitment and retention of Foreign
Service Officers. The Department is short 700 Foreign Service officers, or 15 percent
of its requirements.
Staffing shortfalls hamper counter-narcotics programs and efforts to combat visa fraud.
The Department processes about 9 million visa applications annually. Attempts to
falsify or alter visas are a constant problem. The Department has inexperienced staff
and insufficient training for consular line officers, and overseas anti-fraud units receive
inadequate supervision.
The Hart-Rudman Commission on National Security describes the State Department as
“demoralized and dysfunctional.”
Transportation
Department
Federal Aviation Administration air traffic control modernization is fraught with cost,
schedule, and performance problems due in part to an organizational “culture” and
management structures that impair the acquisition process.
Operational errors by air traffic controllers that violate aircraft in-flight separation
requirements are at a record high. Yet, the Federal Aviation Administration recently
made the controllers less accountable for their operational errors. The National
Transportation Safety Board objected to this action since air separation violations are a
key safety indicator.
Coast Guard personnel routinely perform extra duty and serve on overly long
deployments with too little experience and training. This leads to a host of readiness
problems. For example, 30 percent of Vessel Traffic System radar jobs are not filled.
The average time in grade for chief aviation mechanics has dropped 50 percent since
1995. More than 80 percent of small boat stations stand 24-hour duty for three days
straight. Lost workdays from shore injuries are up 29 percent. Mishap rates for some
boats have risen. Aircraft ground mishap rates are up almost 50 percent.
Treasury
Department
Customs Service officers annually processes over 20 million import entries, valued at
almost one trillion dollars, and over 450 million persons entering the United States.
Despite this vast workload, the agency lacks reliable systems and data to assign its
employees where they are most needed.
IRS lacks reliable cost and operational information to measure the effectiveness of its
tax collection and enforcement programs and to judge whether it is appropriately
allocating its staff resources among competing management priorities.
IRS provides poor service to the public. In random tests this year, IG auditors were
unable to access the IRS toll-free number over one-third of the time. When the calls
did go through, IRS employees incorrectly answered almost half (47 percent) of the test
questions that the auditors posed. (The questions were taken from IRS’ own list of
frequently asked questions.) The IG auditors found similar problems when they visited
47 taxpayer assistance centers in 11 states. IRS employees incorrectly answered 49
percent of their test questions.
22
Veterans Affairs
Department
A national nursing shortage could adversely affect efforts to improve patient safety at
the Department’s medical facilities and could put veterans at risk.
The Department missed by wide margins its Fiscal Year 1999 performance goals for
processing veterans’ benefit claims timely and accurately. Training and recruitment
programs are inadequate to ensure a sufficient workforce of competent claims
processors, which undermines efforts to reduce claims processing backlogs and errors.
Agency for
International
Development
Staffing shortfalls in the procurement area have hampered the Agency’s ability to
initiate and monitor contracts, thus delaying reconstruction assistance in the wake of
natural disasters in Central America and the Caribbean.
Environmental
Protection Agency
The EPA has no systematic means to determine the right size or skills its workforce
needs to carry out the agency’s mission. It faces demands for new skills due to
technological changes, shifts in its environmental responsibilities, and the growing
retirement eligibility of its staff.
The EPA’s employees have suffered from abuses. In August 2000, a senior manager
won a $600,000 verdict in a race and sex discrimination suit against the agency. In
another case, the EPA was found to have retaliated against the director of its Office of
Research and Development laboratory in Athens, GA, after she testified before
Congress about problems in the agency.
General Services
Administration
As a result of downsizing and restructuring, major program streamlining, and personnel
reductions through attrition and buyouts, many of the agency’s knowledgeable and
experienced staff have been lost. The remaining workforce is aging, and nearly half of
its employees will be eligible to retire in the next 5 years. These staff weaknesses
threaten the agency’s ability to operate efficiently and effectively, and increase
vulnerability to fraud and waste.
National Aeronautics
and Space
Administration
According to several internal studies, the reduction of NASA’s shuttle workforce by
one-third since 1995 has led to an overworked and fatigued workforce. Staff and skill
losses pose potentially serious problems for the safety and feasibility of the increased
launch rates planned to support the International Space Station.
In 1999, NASA lost all four of its spacecraft bound for Mars, costing taxpayers $360
million and bringing the entire Mars program to a halt. The problems resulted from
simple negligence, such as forgetting to convert feet to meters, caused in part by
inexperienced staff.
Nuclear Regulatory
Commission
The Commission’s organizational culture is struggling with the new “risk- informed”
regulatory approach. Further, the Commission’s ability to maintain the skills needed to
achieve its mission and fill the gaps created by growing retirement eligibilities could be
threatened by the decline in university enrollments in nuclear engineering and other
fields related to nuclear safety.
Office of Personnel
Management
With its government-wide responsibilities for personnel management, the Office of
Personnel Management is at the center of the federal workforce crisis. It needs to do
much more than it has in the past to direct, support, and review workforce improvement
efforts throughout the federal government.
23
Small Business
Administration
Improving personnel management is one of the Small Business Administration’s most
serious challenges. Its workforce has decreased by more than 20 percent over the last
decade, while it has made major changes in the way it delivers goods and services. For
example, the Small Business Administration now uses public-private partnerships to
perform many functions previously done by its own employees. The agency needs to
make sure it has a workforce with the right skills to handle its new ways of doing
business.
Social Security
Administration
Increasing demand for services, the imminent retirement of a large part of its
workforce, changing customer expectations, and mixed success in past technology
investments challenge the Social Security Administration’s ability to meet its service
delivery demands. These demands include faster and more accurate benefit claims
determinations and increased emphasis on returning the disabled to work.
In the coming years, applications for disability insurance will more than double over
1999 levels, applications for retirement benefits will increase by 20 percent over 1999
levels, and the number of non-English speaking customers will continue to rise. This
will place an enormous strain on the agency as one-half of its current employees
become eligible to retire by 2009.
Customer service problems already are emerging. About 20 million calls to the
agency’s 800-number in 1999 were not completed. Almost 20 percent of answers to
callers with general questions that did not relate to their specific benefits were
inaccurate. Also in 1999, the Social Security Advisory Board reported that people who
visited an agency field office encountered crowded waiting areas and long waiting
times for service.
24
Officials at the Defense Department
are making more than 57,000
purchases a day! Unfortunately, these
same officials can’t tell us what they
bought or whether they even needed
what they got.
B. FINANCIAL MANAGEMENT PROBLEMS
The Defense Department, which is talking about needing an additional $50
billion – they want $50 more for every minute since Jesus Christ was born; that
is $50 billion – a year to meet readiness requirements. Yet the Defense
Department does not know with any certainty how much money it currently has
available.
Senator Robert Byrd (WV)
Statement on Department of Defense
Financial Management
July 10, 1998
Most Americans balance their checkbooks on a
regular basis. Both small businesses and major
corporations have to make certain that their
books are balanced—that they know how much
money is coming in, how much money is going
out, and where that money is going. This is not
true of the federal government.
Neither the federal government as a whole nor
many major agencies can pass a basic financial
audit. The books don’t add up, major
expenditures are missing, large amounts of
property and equipment can’t be located, and
often, agencies don’t even know how much they
have. These problems are longstanding, but they
have been worsened by the growth of the federal
government.
Take, for example, the Department of Defense.
In 1999, the Department of Defense made about
14.8 million individual purchases totaling about
$140 billion in goods and services.1
This means
that the officials at the Defense Department are
making more than 57,000 purchases a day!
Unfortunately, these same officials can’t tell us
what they bought or whether they even needed
what they got.
Senator Robert Byrd (WV) recently took to the
Senate floor to describe the problems facing the
Defense Department. He said:
The Defense Department, which
is talking about needing an
additional $50 billion dollars a
year to meet readiness
requirements, does not know
with any certainty how much
money it currently has available
and cannot pass the test of
receiving a clean audit opinion
on its financial statements. . . .
Examples of DOD’s financial
1Department of Defense Inspector General,
Semiannual Report to the Congress (April 1, 2000 –
September 30, 2000).
25
management weaknesses abound.
For instance, the GAO found that
the Defense Department could
not reconcile a $7 billion
difference between its available
fund balances and the Treasury’s.
GAO also discovered that the
Department of Defense was
unable to substantiate the $378
billion it had reported as total net
reporting costs in 1999. 2
Senator Charles Grassley (IA) also took to the
Senate floor to rail against the Department of
Defense’s financial mismanagement. He began
with a quote of Senator Byrd’s: “The Pentagon’s
books are in such utter disarray that no one
knows what America’s military actually owns or
spends.” Senator Grassley continued:
As Senator Byrd knows, this
quote contains a very powerful
message. This is the message
that I glean from that quote: The
Pentagon does not know how
much it spends. It does not know
if it gets what it orders in goods
and services. And the Pentagon,
additionally, does not have a
handle on its inventory. If the
Pentagon does not know what it
owns and spends, then how does
the Pentagon know if it needs
more money? We, as Senators,
presume already that the
Pentagon needs more
money—because there is kind of
a bipartisan agreement to that,
and President Bush won an
election with that as one of his
key points. We need to know
more, and a sound accounting
system is the basis for that
judgment.3
When you’re talking about such a large
organization and so much money, it’s hard to
grasp the breadth of the problem. But in
example after example, the Defense
Department’s poor financial management has
resulted in spectacular waste. Some of those
examples:
• The GAO reported recently that the
Navy wrote off more than $3 billion in
inventory as “lost in transit.” A lot of
this property was later delivered. But,
because it had no record of the property,
the Navy may have ended up making a
number of unnecessary purchases.4

• The Navy also wrote off as “lost” almost
$600,000 in generators. Although those
generators were later found, the Navy
had already purchased more than $1
million worth of replacement generators
and had initiated purchase orders for
additional generators valued at about $2
million.5

• In 1999, the Army took an inventory of
2
147 Cong. Rec. S1236, (daily ed. February 8,
2001) (statement of Senator Byrd).
3
147 Cong. Rec. S1249 (daily ed. February
13, 2001) (statement of Senator Grassley).
4General Accounting Office, “Defense
Inventory: Continuing Challenges in Managing
Inventories and Avoiding Adverse Operational
Effects,” GAO/T-NSIAD-99-83 (February 25, 1999),
p. 4, 7-8.
5General Accounting Office, “Department of
the Navy: Breakdown of In-Transit Inventory Process
Leaves It Vulnerable to Fraud,”
GAO/OSI/NSIAD-00-61 (February 2, 2000).
26
its assets. It found 56 airplanes, 32 tanks,
and 36 Javelin-command launch units for
which it had no centrally located records.
The problems associated with a lack of
accountability over such equipment
should be obvious. But when managers
have no records of classified and
sensitive items, such as aircraft guidedmissile launchers, the consequences
could be disastrous.6
As you can see, the problems of the Defense
Department’s financial management are legion.
But the Department of Defense is not alone.
Many other agencies of the federal government
have similar problems:
• The Internal Revenue Service, the agency
that collects your taxes, does not know
how much it actually collects in Social
Security and Medicare taxes. It allocates
money to those programs based on an
estimate given to it by the Treasury
Department.7

• The Education Department reported in its
financial statements that it had $7.5
billion in the bank, when it actually owed
that money to the U.S. Treasury. In
addition, because of its poor financial
management, $1.9 million in Department
of Education funds was wired to bank
accounts when fraudulent direct deposit
forms were submitted to the Department
on behalf of two South Dakota school
districts. The perpetrators then used this
money to purchase two luxury cars
valued at nearly $97,000 and a house
worth $135,000. The fraud was
discovered only after a car salesman
contacted the FBI because of apparent
false credit information, not because it
was discovered by the Department of
Education.8
• The Department of Agriculture was
unable to account for more than $5
billion of receipts and expenditures.
That means it could not tell you who
some of that $5 billion was collected
from, where it had gone or to whom
some of it was owed. The Department’s
financial mismanagement has also
resulted in food stamp overpayments,
large errors in accounting records, and
accountability breakdowns.9

• An estimated $1.3 billion—or 7
percent—of the Agriculture
Department’s fiscal year 1999 food
stamp payments was determined to be
overpayments. That means the federal
government provided food stamp
recipients over $1 billion in food stamps
that they were not entitled to receive.10
6General Accounting Office, “Defense
Inventory: Army Needs to Strengthen and Follow
Procedures to Control Shipped Items,” GAO/NSIAD
-00-109, (June 23, 2000).
7General Accounting Office, “Financial Audit:
IRS’s Fiscal Year 2000 Financial Statements,” GAO-01-
394 (March 1, 2001).
8Department of Education Inspector General,
“Semiannual Report to the Congress” (April 1, 2000 –
September 30, 2000).
9Department of Agriculture Inspector General,
Testimony before the Senate Committee on
Agriculture, Nutrition, and Forestry’s Subcommittee on
Research, Nutrition, and General Legislation on the
Status of Financial Management at the Department
of Agriculture (September 27, 2000).
10Ibid.
27
• Accounting system records at the
Agriculture Department showed
purchases of a motor vehicle valued at
$97 million, 5 other motor vehicles with
a recorded value of over $8 million, and
a microscope with a recorded value of
$11 million.11
• Auditors also identified numerous
instances in which accountable officers
were unable to locate property listed in
the Agriculture Department’s personal
property inventory records.12
Federal agencies have a big problem with
overpayments, which often result when agencies
lack good information about their debts and their
debtors. Some of the more egregious examples
of improper payments include the following:
• Between 1994 and 1999, contractors with
the Department of Defense voluntarily
returned nearly $1.2 billion they were
paid inadvertently. In addition, according
to the GAO, the Defense Department was
seeking to recover $3.6 billion in
problem payments to contractors, at least
$225 million of which was the result of
duplicate payments, overpayments, and
payments for goods not received.13
• According to the IG at the Department of
Education, the Department made
duplicate payments totaling about $151
million during fiscal year 2000. Again,
the Department didn’t discover the
errors. Someone else did.14
• The Department of Housing and Urban
Development’s severe financial
management weaknesses caused it to
make over $900 million in erroneous
payments to subsidize low income
housing. In addition, because it didn’t
keep track of what it was spending, the
Department didn’t spend $151 million
which Congress had specifically
authorized for public housing.15
• The Medicare program makes billions of
dollars in improper payments annually.
Last year, $12 billion in improper
payments were made in the fee-forservice program alone. Some of the
payments made were for medically
unnecessary services, non-covered
services, or were the result of coding
errors. In many cases, Medicare is
billed for services that were never
provided.16
One of the main reasons federal agencies and
departments can’t keep track of their finances is
that they don’t have the right systems in place to
record the transactions they make. The Defense
11Ibid.
12Ibid.
13General Accounting Office, “Financial
Management: Billions in Improper Payments Continue
to Require Attention,” GAO-01-44 (October 2000) page
23.
14Department of Education Inspector General,
Semiannual Report to the Congress (April 1, 2000 –
September 30, 2000).
15Department of Housing and Urban
Development Inspector General, Testimony before the
House Committee on Government Reform,
Subcommittee on Government Management,
Information, and Technology (March 22, 2000).
16Department of Health and Human Services
Inspector General, “Improper Fiscal Year 2000
Medicare Fee-for-Service Payments,” A-17-00-02000
(February 5, 2001).
28
Department, for example, doesn’t have a single
one of its major parts that can pass an audit.
Many agencies have systems and procedures that
are so complicated that one simple mistake can
cost millions of dollars. But because the
agencies aren’t trying hard enough to catch such
errors, they can go undetected for months or
years. Take, for example, an official at the
Department of Health and Human Services. The
GAO recently reported that a clerical error made
month after month by this inexperienced member
of the staff at the Health Care Financing
Administration “resulted in the [Hospital
Insurance] Trust Fund being overinvested by
approximately $14 billion and the
[Supplementary Medical Insurance] Trust Fund
being underinvested by approximately $18
billion.” As a result, GAO reports, “the
[Hospital Insurance] Trust Fund realized excess
interest earnings of about $112 million and the
[Supplementary Medical Insurance] Trust Fund
suffered a loss of about $232 million in interest
earnings.”17 This error occurred because of
weaknesses in fundamental problems like
inadequate training and supervision in the
Medicare program. Luckily, the agency caught
the error and corrected it. But the oversight
raises the question of how many other errors go
undetected. You can bet there are a lot.
According to the GAO, many leading private
organizations it has studied “have already
implemented, or are in the process of
implementing, an enterprisewide system to
integrate financial and operating data to support
both management decision-making and external
reporting requirements. . . . [T]hese systems
provide financial analysts, accountants, and
business unit managers access to the same cost,
performance, and profitability information.”18
The systems currently in place throughout the
federal government certainly do not have this
objective. In fact, it’s often difficult to discern
the reason for the systems, if there’s any reason
at all. When you look at the method the
Department of Defense uses for tracking its
contract payments, as you can see below in
Table III, it’s immediately apparent why the
Department doesn’t know to whom it owes
money, doesn’t know to whom it has paid
money, or why it makes innumerable contract
payment errors.
HOW OFTEN DO YOU BALANCE
YOUR CHECKBOOK?
Even though their systems don’t produce
reliable information about agency spending on
a regular basis, most agencies check their books
once a year to make sure the numbers add up.
But they only do it only because the law requires
17General Accounting Office, “Medicare
Financial Management: Clerical Errors in the Medicare
Hospital Insurance and Supplementary Medical
Insurance Trust Funds,” Report Number GAO-01-39R
(October 31, 2000).
18General Accounting Office, “Executive
Guide: Creating Value Through World Class Financial
Management,” GAO/AIMD-00-134 (April 2000).
[M]ost agencies check their books once
a year to make sure the numbers add
up. But they only do it only because the
law requires that their financial
statements be audited.
[N]o private sector firm could stay in
business if it had the same financial
problems as the federal government.
29
that their financial statements be audited. Some
agencies pass financial audits—meaning they’ve
balanced their books—only by undertaking
“heroic” efforts that mask problems with their
financial systems. At the end of each year, they
actually pay large accounting firms to come up
with the amounts listed on their balance sheet.
These are numbers that should be produced
automatically by the agencies’ systems. This
process, in an organization as large as the federal
government, costs the taxpayers millions and
millions each year. It clearly diverts resources
from the problems they were meant to address.
As the GAO wrote in its most recent High-Risk
Series:
Many agencies have been able
to obtain unqualified audit
opinions only through heroic
efforts, which include using
extensive ad hoc procedures and
billions of dollars in adjustments
to derive numbers as of a single
point in time—the end of the
fiscal year. These efforts are
often completed months after the
end of the fiscal year. The
fundamental problem is that
agency financial systems cannot
routinely provide the
information.19
19General Accounting Office, High-Risk
Series: An Update, GAO-01-263 (January 2001).
SRD1
ADS
IPC
IAPS
CAPS
DJAS
1 Bill
Pay
MOCAS
DPPS
DSDS
SABRS
GAFS
STARS
STANFINS
BCAS
APADE
ITIMP
SAACONS
SPS
CEFT
Debt
Mgt
Prevailidation
Table III: SYSTEM USED BY THE DEPARTMENT OF DEFENSE
TO TRACK CONTRACT AND VENDOR PAYMENTS
Source: The Department of Defense
30
It is important to put the government’s financial
management in perspective. Private corporations
are required to file financial statements
periodically with the Securities and Exchange
Commission. According to the Securities and
Exchange Commission, “All investors, whether
large institutions or private individuals, should
have access to certain basic facts about an
investment prior to buying it. To achieve this,
the [Commission] requires public companies to
disclose meaningful financial and other
information to the public, which provides a
common pool of knowledge for all investors to
use to judge for themselves if a company’s
securities are a good investment. Only through
the steady flow of timely, comprehensive and
accurate information can people make sound
investment decisions.”20 Although the Securities
and Exchange Commission, a federal
government agency, places these requirements on
private companies, the federal government
cannot produce the same information on a regular
basis. But the fact is, no private sector firm
could stay in business if it had the same financial
problems as the federal government.
Few federal agencies can actually use their
financial systems for day-to-day management.
Agencies can’t tell you how much programs cost.
Sure, at the end of the year, they can say what
they spent, at least in some cases. But they can’t
tell you what they spent in overhead, staffing
costs, etc. Agriculture Department IG Roger
Viadero testified recently, “[T]he Department, as
a whole, does not know whether it correctly
reported monies to be collected in total, how
much money is collected, the cost of its
operations, or any other meaningful measure of
financial performance.”21 Agencies just don’t
have that information. And the consequences of
the government’s poor financial management
are severe.
WHY DOES FINANCIAL
MANAGEMENT MATTER?
If we don’t know how much programs cost or
how much agencies are spending, we can’t tell
whether the American people are getting what
they paid for. Moreover, waste, fraud, and
abuse, exacerbated by poor financial
management, take away scarce resources from
federal activities. According to the Comptroller
General, the consequences of this
mismanagement mean that “federal funds are
diverted from their intended uses or
beneficiaries, revenues owed are not effectively
identified or collected, [and] excessive
inventories and procurement costs drive federal
costs higher than they need to be for some
areas.”22
One of the clearest cases where financial
mismanagement cheats the American citizen is
when agencies or programs distribute federal
funds to those who are not entitled to receive
them. In 1999, the Governmental Affairs
Committee asked the GAO to find out how
much money was given out improperly each
year by federal agencies. Astonishingly, we
discovered that only a few agencies even keep
track of such things. But in the 17 programs for
which improper payments have been recorded,
20Securities and Exchange Commission website
(can be found at www.sec.gov).
21 Testimony before the Senate Agriculture
Committee’s Subcommittee on Research, Nutrition, and
General Legislation (September 27, 2000).
22General Accounting Office, “Congressional
Oversight: Opportunities to Address Risks, Reduce
Costs, and Improve Performance,” GAO/T-AIMD-00-
96 (February 17, 2000).
31
agencies estimate that an incredible $19.1 billion
was improperly distributed in one year. These
programs included Medicare, Food Stamps, and
Disability Insurance. In 2000, we asked GAO to
look at improper payments again. And with just
21 programs reporting, the amount of money
wasted the next year grew even higher—to $20.7
billion!
• When Medicare makes almost $12 billion
annually in improper payments, it takes
money out of the Medicare Trust Fund
that would otherwise go to provide health
care to the elderly. Twelve billion dollars
is a big piece of what it would cost to
provide prescription drug benefits to the
nation’s senior citizens.
• The Department of Agriculture pays $1.3
billion in food stamps to those who
shouldn’t receive them. But it also fails
to provide food stamps to eligible
families who may be going hungry.
• When the Department of Housing and
Urban Development pays out money to
house the poor, it often gives cash to
those who don’t deserve it—$935 million
worth. There are millions of Americans
who need a helping hand. When the
Housing Department wastes money on
those who may not need it, it cheats those
who really need housing assistance.
One of the agencies that makes the most
improper payments is the Internal Revenue
Service. The Congress set a policy that
individuals who make a low income, but pay a
high amount of Social Security and Medicare
taxes may be entitled to a tax refund. Those
people—low-income working people—are
entitled to money back from the federal
government. Yet a recent study by the IRS’s IG
cited one study that said only 65 percent of
those entitled to it actually received the tax
refund. That report also cited studies that found
that 25 to 30 percent of Earned Income Tax
Credits were paid improperly.23 That means that
between $5 to 10 billion was paid to those who
23General Accounting Office, “Financial
Management: Billions in Improper Payments Continue
to Require Attention,” GAO-01-44 (October 2000).
32
were not entitled to the payments. The program
that Congress designed was meant to serve the
working poor, but because of the way the
program is mismanaged, those who aren’t
entitled to the benefits are getting federal tax
dollars improperly while those who should be
getting them are going without.
The federal government also has a hard time
making the right payments to contractors and
grantees. While you shop around for the best
offers, clip coupons, and check your receipts, the
government pays the same bills twice, never
looks for discounts, and regularly pays more than
it owes. Table V lists $18 million in
overpayments made to contractors at the Defense
Supply Center in Philadelphia. (See Table V.)
In addition to wasting scarce resources, financial
mismanagement often interferes substantially
with an agency’s ability to serve the American
people. Take, for instance, the Internal Revenue
Service. Although its financial management has
improved, the agency still suffers major
problems. In a recent audit of the IRS, the GAO
found the following:
• Significant delays—of up to 12
years—in crediting taxpayers with the
payments they made. GAO discovered
many payments that were never credited
to the right account, some dating back as
far as the 1980’s.
• The IRS credited the wrong account
Table V: Overpayments Made by the Defense Supply Center, Philadelphia
Type of Overpayment Identified Recovered
Discounts Owed to the Government
The Discount was not offered to the Supply Center but it was offered to
commercial customers. $12,033,919 $1,709,855
The Supply Center was notified of the discounted price on its bill, but paid
full price anyway. 609,373 306,656
A discount was deducted from the price charge to the Supply Center, but at
the wrong rate 104,237 98,858
Vendor charged the Supply Center more than its “most favored” customer,
who paid the lowest price. 1,851,865 925,943
The Supply Center paid the same bill more than once. 597,153 437,549
Unposted credit memorandum (As a result of returned merchandise, vendor
sent a credit memo that remained outstanding.) 1,429,998 1,267,435
Accounting error 440,985 450102
Price protection (Losses to the value of a retailer’s inventory, should a
vendor reduce prices to other retailers.) 519,128 124,329
Allowances (The vendor failed to give financial considerations in exchange
for meeting specific requirements, such as advertising or promotional sales.) 33,797 0
Shortage discrepancy (Vendor sent fewer than the quantity ordered.) 421 421
All other errors 266,000 23,130
Total $17,886,876 $5,344,278
Source: Profit Recovery Group International
33
with a $68 million payment from a
deceased individual’s estate. Even
though that estate was owed a $7 million
refund, the IRS didn’t correct its error
until 2 years had passed.24
• Sometimes, because it didn’t record a
taxpayer’s payment, the IRS didn’t
release liens it held on properties owned
by those taxpayers. In one case, a
taxpayer had paid off his three
outstanding taxes by October 1998.
However, as of December 1999—14
months later—IRS had not released the
lien against the taxpayer’s property.25
Another consequence of poor financial
management and agencies’ failure to accurately
report the costs of the programs they operate is
that Congress and the President end up
distributing federal revenue without knowing
how much an agency actually needs, how much
it will actually spend, or, perhaps most important,
whether the expenditure of those funds will
actually produce the intended result. If the
federal government is to improve its service to
the American people while safeguarding the
taxes it invests, it must improve its financial
management.
WHAT CAN BE DONE?
Poor financial management in the federal
government has been a problem for many years.
Like a family that doesn’t balance its
checkbook, the federal government has to try
and figure out where its money was spent. We
should insist that agencies keep track of what
they spend and what they owe on a regular
basis. Clearly, the most important thing the
federal government can do is design and install
the systems that will track the government’s
assets, expenditures, and debts in an efficient
and reliable way. According to the IGs and
other auditors, only 3 of 24 major federal
agencies have systems in place today. We
should expect that every federal agency has
systems in place that provide reliable, useful,
and timely information to manage day-to-day
operations, and that appropriate emphasis be
placed on these systems to ensure that this
occurs sooner rather than later.
There are many other things the federal
government can do to better track what it owes
and what it spends. In a recent report, the GAO
made a series of recommendations on how to
create “value through world-class financial
management.” GAO analyzed the financial
management practices of high performing
private sector organizations, like Boeing, Pfizer,
and Hewlett-Packard, as well as some in the
public sector, like the states of Massachusetts,
Texas and Virginia.26 The report detailed
several seemingly simple ideas that the federal
government could implement to improve its
financial management. In that report, some of
GAO’s recommendations included the
following:
• Make financial management an entitywide priority: Strong leadership is
24General Accounting Office, “Financial Audit:
IRS’ Fiscal Year 2000 Financial Statements”
(GAO-01-394), March 1, 2001.
25General Accounting Office, “Internal
Revenue Service: Recommendations to Improve
Financial and Operational Management” (GAO-01-42),
November 19, 2000.
26General Accounting Office, “Executive
Guide: Creating Value Through World Class Financial
Management,” GAO/AIMD-00-134 (April 2000).
34
needed to ensure that everyone in the
organization understand the importance
of sound financial management. This
includes training employees on good
financial management practices.
• Design financial accounting systems to
provide information that managers and
employees need to assess the quality and
efficiency of what they are doing.
Agency managers and employees will
understand the importance of financial
management only if they can use
financial information to do their job
better.
From the experience of the federal government
thus far, it is clear that the design and
implementation of financial management systems
is difficult. Time after time, government
agencies have invested millions—sometimes
billions—on systems that don’t work. Once a
sound design has been developed, agency
management must gain the support of Congress
and the President and follow through on the rapid
implementation of the system and processes
necessary to provide accurate financial
information on a regular basis.
In addition to these recommendations, agencies
should evaluate their progress throughout the
year to ensure that the processes in place are
working, that agency activities are efficient and
effective, and that taxpayers’ dollars are not
being wasted. Accordingly, agencies should do
the following:
• Report the amount wasted each year.
With this annual estimate, agencies can
begin to understand why they waste and
work to reduce the waste in the future.

• Communicate and coordinate payments
with other agencies. One of the most
outrageous examples of waste in the
federal government is when one agency
makes a payment that another agency
would have recommended be withheld.
For instance, the IRS often gives tax
refunds to individuals who are
delinquent in paying their student loans.
Likewise, the Department of Health and
Human Services pays health care costs
for some individuals whom the Social
Security Administration knows are dead.
We must improve the ways in which
agencies share information so these
mistakes don’t continue in the future.
We need to avoid these types of errors
before they occur.
• Recover the money. When we do
identify cases where the government has
overpaid, we should employ every tactic
we can to recover the money. The
government can use a process called
“recovery auditing” to recoup
overpayments, and it should do so.
35
C. INFORMATION TECHNOLOGY PROBLEMS
The United States is currently confronting what can best be described as another
industrial revolution. The rapid acceleration of computer and telecommunications
technology is a major reason for the appreciable increase in our productivity in
this expansion, and is likely to continue to be a significant force in expanding
standards of living into the twenty-first century.
Alan Greenspan
Chairman
Federal Reserve System
July 10, 1998
During the last decade, people have become
more dependent on computers to do business
with the private and public sectors. For
example, agencies like the IRS allow taxpayers
to file their returns electronically, states provide
residents with the ability to renew their car
registrations online, and more and more federal
departments are posting benefit information on
their Web sites. These technological advances
have offered unprecedented opportunities for the
federal government to use information
technology (IT) to improve agency performance,
reduce costs, and enhance its responsiveness to
the public. Unfortunately, the federal
government still lags behind the private sector
in managing its technology assets for proven
results.
Over the past several years, the United States
has witnessed amazing innovations in the ability
of technology to store, manipulate, display,
exchange, and transmit data. Private companies
have harnessed these new technologies, which
they are using to increase dramatically the speed
of business transactions, the accessibility of
information, and the storage capacity of
Table VI: Recent Innovations in Information Technology
• Since the 1960’s, the number of transistors placed on a computer chip have doubled roughly every 18
months.
• The capacity of today’s data storage technologies is doubling every nine months and the average price
per megabyte of storage has declined from $11.54 in 1998 to an estimated $0.02 in 1999.
• Similar improvements have occurred in communications technologies. The carrying capacity of fiber
optics is currently doubling every 12 months.
• Between 1994 and 1998, the price of telecommunications equipment declined by 2 percent per year.
• In January 2000, the World Wide Web contained more than one billion unique pages, compared to 100
million in October 1997.
Source: Department of Commerce
Digital Economy 2000
36
complex databases. All types of information are
instantly available through the Internet, and
ordering products online has never been easier.
Meanwhile, the federal government is still at the
entrance ramp to the information superhighway.
Even with $40 billion dollars devoted solely to
information technology, the government is
barely making any progress.
Many Americans look at the federal government
and wonder, “Where is my money going? Why
hasn’t the government used these incredible
advances to improve the efficiency of its
services?” The Washington Post, for example,
recently highlighted problems that the State
Department was having with its e-mail and
computers:
• Many [employees overseas] do not have
e-mail. Indeed the department depends
on a cable system developed during
World War II for much of its diplomatic
communications.
• The State Department’s computer
system is so outdated that Germany and
some other foreign governments have
been bypassing American embassies
because it is easier to e-mail Washington
directly than American diplomats down
the block.
• The Department runs four separate,
incompatible computer systems that
cannot access the Internet. Some
officials have three computers on their
desks so they can use all the systems.1
Four years ago, Congress passed legislation
requiring agencies to implement new
management procedures aimed at increasing
their ability to make better use of their
information technology assets. The law, known
as the Clinger-Cohen Act, was a result of the
Governmental Affairs Committee’s reviews of
failed computer system acquisitions such as the
IRS’s $7 billion Tax Systems Modernization
project and the National Weather Service’s
more than $500 million Advanced Weather
Interactive Processing System. A recent
investigation into federal agencies’ compliance
with the Clinger-Cohen Act revealed that most
agencies are not using common sense to
determine what computer systems they need, to
manage their systems effectively, or to
determine the costs of their systems. For
example, 17 of 24 agencies do not follow the
best practices used by the private sector to
manage their major information technology
projects, and a quarter of the agencies listed
projects that were significantly over budget and
behind schedule.2
ALIGNING TECHNOLOGY WITH
THE ROLE OF THE AGENCY
A big part of the problem is that officials don’t
know what type of technology they need to do
their jobs. Information technology raises a
1Alan Sipress, “Trying to Turn Around a
Strapped State Department: Powell Tackles Old
Technology, Personnel Woes,” The Washington Post
(February 23, 2001).
2
Investigative Report of Senator Fred
Thompson on Federal Agency Compliance with the
Clinger-Cohen Act (October 20, 2000).
Many Americans look at the federal
government and wonder, “Where is my
money going? Why hasn’t the
government used these incredible
advances to improve the efficiency of
services?”
37
range of thorny issues, such as how to manage
and integrate complex information management
processes, computer hardware and software,
telecommunications, and networks. Also, most
importantly, agencies don’t properly align
information technology purchases with their
needs. More often than not, agencies don’t
evaluate or review their programs to determine
what type of technologies should be used to help
them achieve their goals. In fact, during the
investigation, it was discovered that agencies
were all too often unable to determine the
impact of information technology on overall
performance.
CONTINUOUS IMPROVEMENT
The government does not use computer
technology to streamline administrative
processes. Like the private sector, government
could eliminate unnecessary costs by analyzing
the way current computer systems set up
repeatable processes needed to conduct business
on a daily basis.3
With new innovations in
office administration, it is simple to determine
if technologies could streamline current
practices and thereby reduce costs. Agencies
need to find out the value of their business
processes either prior to or as part of major
system purchases or upgrades. For instance,
agencies like the Department of Agriculture
have initiated efforts to overhaul their services
because of their work in reconfiguring their
administrative processes. However, agencies
like the Department of Education and the
Department of Interior have only done the
analysis and have not applied the results of their
efforts to making any agency-wide business
process changes.
OVERCOMING THE
TIME-TECHNOLOGY DILEMMA
Technology changes at a rapid rate, and yet, the
government adopts these technologies at a much
slower pace. Part of the reason for this is that
the government contracting process is different
and therefore more time consuming.
Determining what an agency needs to buy,
receiving funding approval, and evaluating bids
prior to awarding a contract can be long and
arduous. During this lengthy process,
technology advances. This is especially true
when the government decides to buy large,
complicated systems. Because it seems as
though the federal government is incapable of
completing large, technical projects on schedule
or within budget, or incorporating new
technologies fast enough, the Clinger-Cohen
Act requires agencies to buy systems on a much
smaller scale. This is referred to as modular
contracting and allows agencies to buy in
incremental modules so they can integrate new
technologies into the systems faster.
Below are a number of examples of how
inefficiently the government manages large
scale technical projects. Table VIII, at the end
of this section, describes the case of the
“Railway Killer,” the worst example of what
can happen when technology projects are not
managed appropriately.
• In 1999, the Bureau of Land
Management pulled the plug on its
much-anticipated electronic system for
instant online access to millions of land
and mineral lease records. The
3Businesses intent on taking full advantage of
innovative technologies often find they have to rethink
the way they operate and reorganize their operations.
This process of reorganization has, in itself, sometimes
produced its own round of innovation. Entire steps in
the production and distribution of goods and services
are being eliminated in favor of, for example, just-intime inventory.
38
Automated Land and Mineral Record
System could not be made to work even
after 15 years of development at a cost
of $67 million. According to reports,
Bureau officials continued to hold out
hope that the system eventually would
work despite repeated warnings of
significant cost overruns and missed
deadlines by government auditors.4
• For the first quarter of Fiscal Year 2000,
the Department of Transportation could
not identify about $16 million worth of
projects in the cost accounting system
due to computer programming and
technical design flaws with the labor
distribution system. According to the
Department’s IG, important internal
controls to offset design problems and
identify reporting errors had not been
put in place when the system was
designed.5
• Faced with rapidly growing traffic
volume and aging equipment, the
Federal Aviation Administration
initiated an ambitious Air Traffic
Control modernization program in 1981.
This project entailed acquiring new
facilities, as well as a vast network of
radar, automated data processing,
navigation, and communications
equipment. Over the past 19 years, the
project “has experienced cost overruns,
schedule delays, and performance
shortfalls of large proportion.”6
In 1986,
it was estimated that the modernization
would be completed at a cost of $12
billion. It is now estimated the
modernization will cost $45 billion
through 2005.7
According to GAO,
some of the causes of the program’s
problems include the way the agency
buys complex software, the lack of an
effective information technology
management structure, and an
organizational culture that has impaired
the acquisition process.
• Major projects within the Air Traffic
Control modernization also continue to
experience cost overruns and schedule
delays. According to the IG, 11
programs “were averaging a 29 percent
cost growth and a 17-month schedule
delay.”
8
As a matter of illustration,
Table VII9
shows the cost growth and
schedule slippage for one major
component, the Wide Area
Augmentation System (WAAS).10
4
“Federal Agency Scraps Costly Computer
System,” Associated Press State and Local Wire, June
3, 1999.
5Department of Transportation, Office of
Inspector General, “Report on Design of the Cost
Accounting System for Research and Acquisitions,”
Report No. FI-2001-013 (December 18, 2000), p. 3.
6General Accounting Office, “High-Risk
Series: An Update,” GAO-01-263 (January 2001), p.
108.
7A portion of this growth has resulted because
the capacity of the system has increased.
8Department of Transportation, Office of
Inspector General, “Survey of the Federal Aviation
Administration’s Integrated Product Development
System,” AV-2000-110 (August 29, 2000).
9General Accounting Office, “Major
Management Challenges and Program Risks:
Department of Transportation,” GAO-01-253 (January
2001), p. 29.
10The Wide Area Augmentation System
(WAAS) is a ground-and satellite-based navigation
system that is intended to improve the current ground-
39
Table VII: Delay in the Implementation of and Growth in the Cost of
the Wide Area Augmentation System, a Major Component of the
Modernization of America’s Air Traffic Control System
1994 January 1998 January 1999 September 1999
System Cost Estimate $508 million $1.007 billion $1.007 billion $2.484 billion
Date System was to be
Partially Available
June 1997 July 1999 September 2000 September 2000*
Date System to be
Fully Available
December 2000 December 2001 To Be Determined December 2006
Note: Since 1996, the Federal Aviation Administration has included life-cycle costs for developing, operating,
and maintaining projects. WAAS development costs have changed essentially because costs for such things as
technical engineering and program support were left out of the earlier estimates and the cost for satellites was not
included as a development cost but was included as a WAAS operating cost. In June 2000, GAO reported that
while FAA estimated that the life-cycle cost for the Wide Area Augmentation System was $3.188 billion, this
cost could grow by at least $200 million.
* The Federal Aviation Administration did not meet this milestone and has not yet determined when it will be
able to do so.
Note: The Federal Aviation Administration recently announced that it would begin providing precision landing
and guidance by September 2003. This capability provides less precision than what the FAA promised to deliver
in the timeframes depicted in the table. Currently, the FAA does not know when it can deliver WAAS’ promised
capability.
• Over a decade ago, the IRS began
modernizing the inefficient and outdated
systems it used to process tax returns
and respond to taxpayer inquiries. The
goal was to create a virtually paper-free
work environment where taxpayer
account updates are rapid, and taxpayer
information is readily available to IRS
employees to respond to taxpayer
inquiries. In 1996, however, GAO
warned that, “IRS continues to spend
billions more on [the Tax System
Modernization] with little assurance of
successfully delivering effective systems
within established time frames and cost
figures.”11 Spending was suspended in
1996, after it was reported that the IRS
had spent over $3 billion without
receiving comparable value. Congress
now requires the IRS to submit plans to
incrementally modernize its systems.12
based navigation system, which requires pilots to fly
less efficient routes to arrive at their destination.
11General Accounting Office, “Tax Systems
Modernization: Management and Technical
Weaknesses Must Be Overcome To Achieve Success,”
GAO/T-AIMD-96-75 (March 26, 1996).
12Using this approach, organizations take
large, complex modernization efforts and break them
into projects that are narrow in scope and brief in
duration. This enables organizations to determine
whether a project delivers promised benefits within cost
40
• The Department of Defense spent $41.3
million on a project to create a system to
track the Department’s ammunition.
Unfortunately, according to the IG, after
8 years of work, “the [Department of
Defense] did not produce a working
system or even have one near
completion.”13
• The Department of Defense spent more
than $76 million on the Defense
Security Case Control Management
System, which was meant to track the
myriad security investigations conducted
by the Department and was expected to
reduce processing time for all cases.
According to the Department’s IG,
however, the system “did not meet
performance expectations” and “times
for investigations were not reduced.”14
• The Defense Joint Accounting System
was originally designed to unify the
accounting systems of various entities
within the Department of Defense, but
several Defense organizations, namely
the Navy and the Air Force, were
allowed to opt out of it. Nonetheless,
the Department continued with the more
than $700 million project (originally
estimated at $500 million), despite the
fact that its projected savings decreased
dramatically. According to the Inspector
General, “These cost increases,
combined with a decreasing return on
investment, represent an increased risk
that the system will not be the most costeffective alternative to perform
[Department of Defense] general fund
accounting.”15
• The Defense Environmental Security
Corporate Information Management
Program would have provided better
coordination of the Department of
Defense’s environmental mission.
However, after expenditures of over
$100 million and 9 years of work, the
project could not demonstrate success
and the Department’s IG recommended
scrapping it.16
• In 1997, the State Department provided
posts worldwide with a software
package, the “Resource Allocation
Budget Integration Tool.” In 1998, just
one year later, the State Department
decided that the program had a number
of deficiencies and needed to be
replaced.17
and risk limitations and allows them to correct
problems before significant dollars are expended,
which in turn reduces the risk of program failure.
13Department of Defense, Office of Inspector
General, “Development and Implementation of a Joint
Ammunition System,” D-2001-014 (December 6,
2000).
14Department of Defense, Office of Inspector
General, “Program Management of the Defense
Security Service Case Control Management System,”
D-2001-019 (December 15, 2000).
15Department of Defense, Office of Inspector
General, “Acquisition of the Defense Joint Accounting
System,” D-2000-151 (June 16, 2000).
16Department of Defense, Office of Inspector
General, “Defense Environmental Security Corporate
Information Management Program,” D-2001-015
(December 7, 2000).
17Department of State and the Broadcasting
Board of Governors, Office of Inspector General,
“Inquiry Into The Procurement of Contractor Support
For the International Affairs Global Resource
Database,” 01-PP-002 (November 2000).
41
• In 1992, the Health Care Financing
Administration initiated the Medicare
Transaction System, which was intended
to replace Medicare’s multiple
contractor-operated claims-processing
systems with a single system. It was to
be fully implemented before the end of
1998. According to GAO, the system
originally was supposed to cost $151
million. By 1997, the estimated cost of
the project had increased to about $1
billion. Faced with serious technical
and managerial problems and runaway
costs, the agency terminated the contract
in 1997.18
• The Department of Energy duplicated
procurement efforts because it had not
developed software standards or
effectively used Department-wide
software contracts.19 As a result, 45
different offices awarded separate
contracts for the same major database
program. Twenty-four offices awarded
separate contracts for the same Internet
security program. A lack of a consistent
policy also led to significant price
variations for the same program. Two
separate offices purchased the same
word processing software at prices that
differed by 44 percent, $232 versus $335
per user license. One office spent
$200,000 to purchase software to permit
the use of data received from other
Department locations. About 23 percent
of the organizations that provided
information indicated that they used
three or more different electronic mail
and word processing applications.20
• In July 1995, the Department of Energy
implemented a database to contain upto-date and reliable real property
information. Upon investigation,
however, it was determined that the data
in the system was inaccurate and
incomplete. Some data had never been
entered into the system. This occurred
because some field sites maintained
their own site-specific real property
systems and did not use the new system
to manage property. Department of
Energy managers at the Savannah River
Site identified more than 176 pieces of
property that had not been entered in the
system. On the other hand, 416 pieces
of property that had been entered into
the system could not be located.21
• The Department of Agriculture initiated
“Info Share” in 1993 to improve the
delivery of services to its constituents by
coordinating the planning, acquisition,
development, implementation, and
management of information. In 1994,
the program was reevaluated because of
numerous difficulties it was
experiencing. Managers had made
18General Accounting Office, “Medicare
Transaction System: Success Depends Upon Correcting
Critical Managerial and Technical Weaknesses,”
GAO/AIMD-97-78 (May 1997).
19Developing and implementing an effective
software acquisition policy is a well-recognized best
practice. An effective acquisition strategy helps to
guarantee the compatibility of data that is shared
between locations and computer systems and also
enables the purchaser to take advantage of volume
discounts.
20Department of Energy, Office of Inspector
General, “Commercial Off-The-Shelf Software
Acquisition Framework,” DOE/IG-0463 (March 2000).
21Department of Energy, Office of Inspector
General, “Facilities Information Management System,”
DOE/IG-0468 (April 2000).
42
commitments to new technologies
without adequately defining
requirements, performing the necessary
analyses, or conducting sufficient
testing. In 1995, the IG reported that
over $33 million had already been spent
on the project. The Info Share system
was subsequently terminated, although
the concept of consolidating the
Department’s administrative areas
continued. The goal of combining the
Department’s various information
databases, however, has been extended
indefinitely.22
• The U.S. Agency for International
Development initiated the New
Management System to perform eight
accounting and management functions.23
After considering opportunities to use an
off-the-shelf accounting system, the
Agency decided in 1994 to develop its
own system. Because the Agency did
not follow accepted software
development practices, the system they
developed had design deficiencies,
software defects, and could not operate
effectively across the agency’s network.
Despite these problems, the Agency
deployed the system worldwide as the
primary system for conducting its
business in 1996.24 After one year, the
Agency had to suspend operations at
overseas missions and to limit the
processing of financial transactions to
Washington, D.C., offices. By the end
of fiscal year 1998, even though the
Agency had invested about $100 million
to develop the New Management
System,25 officials decided to replace it
with an off-the-shelf system known as
Phoenix.26
• The Department of Commerce began
planning for the acquisition and
development of a new financial system
in 1992 and awarded a contract for
system development in 1994. It was to
be fully implemented by 1998. In 1994,
the Department estimated that it would
cost $41 million for an integrated
system. By 1996, the estimated cost had
increased to $56 million.27 In addition,
the deployment schedules had been
22This figure did not fully take into account
agency costs for employees who worked on Info Share
strategies and the cost of procurements made utilizing
Info Share contracts. When these costs were
considered, the total cost exceeded $115 million.
23However, it was developed and deployed to
perform only four of the functions: accounting,
budgeting, procurement, and operations.
24Such a high-risk approach deviated from
guidance calling for agencies to thoroughly test system
performance and demonstrate that the system could
work effectively in an operational environment.
25More precise estimates are not possible
because the agency lacked a reliable cost methodology
to properly segregate the system and non-system work.
26During the pre-implementation phase of
Phoenix, the agency employed external assessments to
make sure that it was using best practices as a risk
reduction measure. Phoenix is being implemented in
several phases and continued attention is needed to
ensure success. To attain this goal, the agency is faced
with the challenges to integrate various overseas
subsystems that feed financial information into the
financial system in Washington, D.C.
27The revised development costs, however, do
not include substantial costs projected for in-house
staff resources and earlier “pre-development” costs.
43
significantly extended. When the
contract was awarded, the Department
believed that the system it was buying
satisfied about 80 percent of its
requirements. The remaining
requirements were to be completed
through contractor-provided software
modifications in six months under a
fixed price contract. However, the
contractor was not able to deliver the
modifications, and some of the existing
capabilities did not perform as expected.
Although the software package was
accepted in 1996, it still did not satisfy
the necessary requirements. In 1998, the
scope of the system was scaled back
when several administrative functions
were dropped. The new system will cost
more, arrive later, and do less than what
was first envisioned. Despite this, the
Department believes the new system
will meet its requirements, but it is not
projected to be fully implemented until
2003.
• The Customs Service launched a major
initiative in 1994 to reorganize,
streamline, and modernize the
automated system that supports
operations. The “Automated
Commercial Environment” system was
intended to collect, analyze, and
disseminate import-related data in a way
that would facilitate the movement of
goods into the United States. In 1996,
GAO reported that the Customs Service
was not “effectively applying critical
management practices” to the project.
Specifically, the Customs Service
started buying equipment before it
determined where and how the import,
passenger, and export process would
occur, and they did not identify the
information needs of the organization
and consider alternative ways of meeting
them.28 In 1999, GAO stated that the
management approach being undertaken
“failed consistently on other agency
modernization efforts over the past two
decades, [and] has been abandoned by
successful organizations.” Finally,
GAO determined that the Customs
Service “lacks the capability to develop
or acquire [the system’s] software
effectively.”29
• In 1987, the Office of Personnel
Management initiated the “Automated
Processing System” to process
retirement benefits for the Federal
Employee Retirement System. In
September 1995, the agency decided to
temporarily stop the development
process. A review board recommended
that the project be terminated unless
major changes were implemented. Four
months later, the Office of Personnel
Management and the Office of
Management and Budget agreed that the
project should be terminated. According
to the review board’s report, the Office
of Personnel Management had invested
over 8 years and $25 million on the
project.
• The Department of Housing and Urban
Development initiated the “Financial
28General Accounting Office, “Customs
Service Modernization: Strategic Information Must Be
Improved for National Automation Program to
Succeed,” GAO/AIMD-96-57 (May 1996).
29General Accounting Office, “Customs
Service Modernization: Serious Management and
Technical Weaknesses Must Be Corrected,”
GAO/AIMD-99-41 (February 1999).
44
Systems Integration” program in 1991
with a goal of implementing an
integrated financial management system.
While this goal has remained the same,
the strategy for achieving it — along
with the costs and completion
dates—has changed dramatically.30 In
1991, the Department proposed
replacing about 100 financial and
management systems with nine
integrated systems at an estimated cost
of $103 million. In 1993, the
Department abandoned this plan and
developed a new strategy. The new plan
called for the Department to develop a
“core” financial system and various
program offices to develop financial and
management systems to support their
specific requirements. These systems
would then be integrated with the core
system at a cost of about $209 million
and would be fully deployed by
December 1998. In 1997, the plan
changed once more. The schedule
slipped again, and the deployment was
delayed until October 1999. New
systems were also added. According to
GAO, the cost increases and schedule
delays were the result of “inadequate
project management and oversight.”
The IG agreed with this analysis: “These
frequent changes have made it difficult
for the Department to measure
performance and progress, and control
costs.”31
• Similar problems existed with
components of the Department of
Housing and Urban Development’s
Financial Systems Integration program.
The Single Family Acquired Asset
Management System, for example,
which was developed and deployed as
part of the 1993 project, was delivered
late and over budget. Furthermore, the
system did not meet user needs because
it was poorly managed.3 2 The
Department originally estimated that the
system would be developed and
deployed for about $3.2 million in 6
months. But the Department awarded
the contract to develop the system
before adequately defining its
requirements. As a result, the cost of the
system grew to over $32 million, it was
deployed 10 months late, and it failed to
meet the needs of its users.
• The IG at the Department of Housing
and Urban Development reviewed six
high-profile IT projects that were funded
between 1992 and 1999. The results of
the review found that the “[a]verage
productivity of the projects is 10 times
less than industry average for similar
projects.”33 Also, the projects did not
follow the Department’s system
development guidelines and
documentation requirements or industryaccepted practices for project planning
and risk assessment.
30General Accounting Office, “HUD
Information Systems: Improved Management Practices
Needed to Control Integration Cost and Schedule,”
GAO/AIMD-99-25 (December 18, 1998).
31Department of Housing And Urban
Development, Office of Inspector General, “Attempt to
Audit the Fiscal Year 1999 Financial Statements,” 00-
FO-177-0003 (March 1, 2000), p. 18.
32Op Cit. GAO/AIMD-99-25.
33Department of Housing and Urban
Development, Office of Inspector General, “HUD
Information Technology Investment Practices,” 00-DP166-0001 (October 29, 1999).
45
The federal government’s dependence
on computers makes it susceptible to
devastating disruptions in critical
services, as well as in computer-based
safety and financial controls. Such
disruptions could be caused by
sabotage, natural disasters, or
widespread system faults.
COMPUTER SECURITY WEAKNESSES
Part of the mismanagement of agency
information technology systems results from the
government’s inability to protect its systems and
data from internal or external attack. Since
1997, the Committee on Governmental Affairs
has heard from security experts, senior
government officials and the GAO about the
persistent security risks associated with the
government’s information holdings. The
security of federal government computer
systems is of great importance to the Committee
and the nation. Advancements in technology
have forced us to look more closely at the
factors that may compromise our government’s
security. Those factors – widely accessible data
and instantaneous communication — increase
the risks that information will be misused,
possibly to commit fraud or other crimes, or that
sensitive information will be inappropriately
disclosed. The federal government’s
dependence on computers makes it susceptible
to devastating disruptions in critical services, as
well as in computer-based safety and financial
controls. Such disruptions could be caused by
sabotage, natural disasters, or widespread
system faults. Hearings of the Committee on
Governmental Affairs have uncovered and
identified failures of information security
affecting our international security and
vulnerability to domestic and international
terrorism. The Committee also directed GAO to
prepare a “best practices” guide on computer
security for federal agencies to use and asked
GAO to study computer security vulnerabilities
at several federal agencies.
The Governmental Affairs Committee’s
hearings highlighted our nation’s vulnerability
to computer attacks—from international and
domestic terrorists to crime rings to everyday
hackers. And while there has been some action
to improve federal information security, more
improvement is needed. Last year, members of
the Committee worked to ensure passage of the
Government Information Security Act, which
builds on the basic framework for managing
information security by better defining roles
among federal agencies to begin to develop a
fully secure government. GAO has issued a
number of reports on the ineffectiveness of
government computer security controls. Below
are a few examples of inadequate government
information security.

• “[C]ontinued weaknesses . . . increase
the risk of disruption in services and
make [the Department] of Education’s
loan data vulnerable to unauthorized
access, inadvertent or deliberate misuse,
fraudulent use, improper disclosure, or
destruction, all of which could occur
without detection.”34
• “[P]ervasive computer security
weaknesses at the Department of the
Treasury’s Financial Management
Service placed billions of dollars of
34General Accounting Office, “Major
Management Challenges And Program Risks:
Department of Education,” GAO-01-245 (January
2001), p. 15.
46
payments and collections at significant
risk of loss from fraud, vast amounts of
sensitive data at risk of inappropriate
disclosure, and critical computer-based
operations at risk of serious
disruption.”35
• “[C]omputer systems at the Department
of Energy’s laboratories supporting
civilian research had become a popular
target of the hacking community with
the result that the threat of attacks had
grown dramatically in recent years. . . .
[B]ecause of security breaches, several
laboratories had been forced to
temporarily disconnect their networks
from the Internet, disrupting the
laboratories’ ability to do scientific
research for up to a full week on at least
two occasions.”36
• “[P]ervasive weaknesses in the Corps of
Engineers’ computer controls at its data
processing centers and other Corps’ sites
could allow both hackers and numerous
legitimate users to improperly modify,
inappropriately disclose, and/or destroy
sensitive and financial data, including
Privacy Act data such as social security
numbers and other personal information.
These weaknesses also increase the
vulnerability of other Department of
Defense networks and systems to which
the Corps’ network is linked.”37
• Allegations were made that the Idaho
National Engineering Laboratory sold
surplus computer equipment that
contained sensitive data to an Idaho
businessman. GAO concluded that
some of the computers sold may have
contained sensitive data, but did not
determine how many.38
• A contractor at the Savannah River Site
“failed to comply with Department and
Savannah River Site requirements for
disposal of surplus computers.
Specifically, [the contractor] did not
clear stored information, including
sensitive unclassified information and
Unclassified Controlled Nuclear
Information, from all surplus
computers.”39
• In 1996, GAO reported that unknown
and unauthorized individuals had been
increasingly attacking and gaining
access to highly sensitive unclassified
information at the Department of
Defense. These attacks ranged from
being nuisances to being a serious threat
to national security.40
• To determine the extent to which the
State Department’s systems are
vulnerable to unauthorized attack, GAO
directed and supervised penetration
35General Accounting Office, “High-Risk
Series: An Update,” GAO-01-263 (January 2001), p.
101.
36Ibid., p. 101.
37Ibid., p. 101.
38General Accounting Office, “Department of
Energy Procedures Lacking to Protect Computerized
Data,” GAO/AIMD-95-118 (June 1995).
39Department of Energy, Office of the
Inspector General, “Semiannual Report to the
Congress” (September 30, 2000), p. 17.
40General Accounting Office, “Information
Security: Computer Attacks at Department of Defense
Pose Increasing Risks,” GAO/AIMD-96-84 (May
1996).
47
testing of State Department systems.
GAO’s reviews and testing revealed the
susceptibility of the State Department’s
systems to unauthorized access and that
unauthorized retrieval of sensitive
information from such systems was
possible. Testers were able to
download, delete, and modify data, add
new data, shut down servers, and
monitor network traffic. This activity
went largely undetected, further
underscoring the State Department’s
serious vulnerability to attack.41
• The GAO conducted an evaluation of
the National Aeronautics and Space
Administration’s information
technology security program in 1999.
GAO determined that NASA’s program
did not include key elements of a
comprehensive information technology
security management program because it
did not assess risks, effectively
implement controls, provide training,
monitor policy compliance, or provide
incident response capabilities.42
• A teenage hacker was nabbed by an
Army cybercrimes investigation unit
after he successfully hacked three Army
servers, an Air Force server, and two
private sector computers. The military
servers were domain servers, computers
that function as the “white pages of the
Internet.” According to the Army, when
hackers get access to such servers they
can redirect network traffic anywhere
they wish.43
PRIVACY
Governmentwide management weaknesses not
only lead to lax computer security practices, but
also undermine the ability of the government to
keep the trust of the public. Because weak
computer security management puts personal
information at risk of being viewed, modified or
altered, the government is unable to protect the
very information it collects. And while it is up
to a consumer to choose which company he or
she will do business with based on their privacy
policies, they have no choice but to provide the
government with financial, health, and other
personal information in order to comply with
federal requirements and to be able to receive
certain government program benefits. Below
are a number of examples of how the
government has been unable to protect sensitive
personal data.
• Social Security Administration:
According to a 1997 Price Waterhouse
audit of the Social Security
Administration, the agency has several
deficiencies that could “adversely affect
[its] ability to meet internal objectives,”
such as the failure to properly record and
account for transactions. The auditors
also suggested that the Social Security
Administration work to strengthen its
agency-wide computer security program
to protect against the risk of
unauthorized access to sensitive benefits 41General Accounting Office, “Computer
Security: Pervasive, Serious Weaknesses Jeopardize
State Department Operations,” GAO/AIMD-98-145
(May 1998).
42General Accounting Office, “Information
Security: Many NASA Mission-Critical Systems Face
Serious Risks,” GAO/AIMD-99-47 (May 1999).
43Joshua Dean, “Teen Convicted of Hacking
Military Computers,” GovExec (March 27, 2001).
48
information.44
• Environmental Protection Agency:
The Department’s IG discovered in 1997
that the agency was vulnerable to hacker
attacks. Hackers raided the EPA six
times from October 1992 to November
1997. In its 1998 Federal Managers’
Financial Integrity Act report, EPA
acknowledged that its computer security
plans were “deficient or non-existent,
potentially placing agency organizations
in a state of non-compliance with federal
and agency regulations.”
• State Department: In March 1998,
State Department officials shut down
systems after investigators found data
indicating that an unauthorized person
had used computers at two undisclosed
overseas posts. As a result of an
October 1997 intrusion, the two posts
were limited in their access to the
network, which forced the State
Department to circulate delicate
information on paper via courier.45
• State Department: During extensive
tests at the State Department in 1996
and 1997, GAO investigators, with
assistance from a major accounting
firm, succeeded in breaking into State
Department networks by dialing in from
modems. The investigators also
thwarted building security and walked
into areas where there were unattended
computers and servers. A user
identification and password were taped
to one computer. Once inside the
Department’s networks, GAO reported,
“We were able to access sensitive
information. In addition, we could have
performed system administration actions
that would have allowed us to
download, delete and modify these data,
add new data, shut down servers, and
monitor network traffic.” The systems
that GAO penetrated held performance
appraisals, international financial data,
travel arrangements, e-mail, and
passwords.”46
• Department of Commerce: In August
2000, a Commerce Department security
official in charge of investigating the
private backgrounds of Department
employees, was suspended for
downloading and storing a “monolithic”
stash of porn files on his government
computer and on the Department’s
Intranet, posing a security risk for the
entire system. The official allegedly
maintained files with pictures and
graphics of female employees which he
juxtaposed with pornographic material
of naked women posing in sexual
positions and performing sex acts. In
the past, several female employees had
filed sexual harassment complaints
against him, but the complaints were
allegedly “overlooked” by the director of
the security office.47
44Alison Maxwell, “SSA Audit Sees Fraud
Potential ,” GovExec.com (December 5, 1997).
45“State Dept. Computers Vulnerable,”
GovExec.com, (March 24, 1998).
46General Accounting Office, “Computer
Security: Pervasive, Serious Weaknesses Jeopardize
State Department Operations,” GAO/AIMD-98-145
(May 1998).
47Paul Sperry, “Cyberporn Scandal Hits
Commerce Department,” WorldNetDaily (September
27, 2000).
49
• Department of Agriculture: The
Agriculture IG has found over 600
security vulnerabilities in agency
computer systems. Systems which have
been easily hacked include the
following: the National Agricultural
Statistics Service quantity/price database
which, if altered, could “drastically
impact world commodity markets”; the
Rural Development’s $56 billion loan
portfolio; and the Food Safety and
Inspection Service database that ensures
a safe meat and poultry supply.48
• Internal Revenue Service: During last
year’s tax filing season, the IRS did not
take adequate steps to protect the
security of electronic filing systems and
electronically transmitted taxpayer data.
As a result, unauthorized individuals,
both inside and outside the IRS, could
have gained access to the IRS electronic
filing systems and viewed and modified
taxpayer data.49
WHAT CAN BE DONE?
In order to remedy some of the central problems
underlying the way the government does
business, agencies must fully implement the
Clinger-Cohen Act by investing wisely,
ensuring they are aligning technology with
business needs, continuously improving
processes, and using contracting procedures that
allow them to keep up with the pace of
technology. In short, agency managers need to
understand that technology is changing the way
business is conducted in both the private and the
public sectors. Automating for automating’s
sake neither achieves results nor savings.
Automating in connection with mission goals
and program needs will help agencies produce
results.
Executive agencies and departments should:
• Emphasize early oversight and planning:
Target oversight of computer
acquisitions on the early phases of
programs to encourage agencies to
reevaluate how they do business before
spending money on automation.
• Avoid reinventing existing technology:
Ensure that developing unique systems
is the exception rather than the rule. It
should be rare for the government to
purchase anything but commercially
available hardware and software.
• Size projects to manageable levels:
Adopt an evolutionary approach to
systems acquisition by splitting
acquisitions in smaller stand-alone
segments. Each subsequent piece
should be required to be compatible
with its predecessors.
• Encourage innovation: As technology
changes, what is appropriate in today’s
environment may be obsolete tomorrow.
The government needs to be flexible in
incorporating new technology.
• Create incentives for contractors to
perform better: Consider past
management performance in meeting
cost, schedule, and performance goals as
48Testimony of Roger C. Viadero, before the
House Appropriations Subcommittee on Agriculture,
Rural Development, Food and Drug Administration,
and Related Agencies (February 17, 2000), p. 21.
49General Accounting Office, “Information
Security: IRS Electronic Filing Systems,” GAO-01-306
(February 2001).
50
one factor in selecting a contractor.
• Communicate lessons learned:
Encourage the foundation of interagency
advisory working groups to share
experience about computer systems
acquisitions.
• Review existing large computer systems
acquisitions: Review existing
acquisitions to determine if current plans
for automation will achieve the best
value for the taxpayer.
With regard to security issues, executive
agencies and departments should:
• Examine the security risks: Assess the
organization’s security risks and develop
ways to reduce the most critical risks in
a cost-effective manner.
• Implement risk reduction approaches:
As risk factors change, the approaches
should be updated.
• Educate users: Help users understand
the importance of reducing security
risks. This will enable users to think
twice before revealing sensitive data and
more likely to report suspicious activity.
• Monitor the effectiveness of the risk
reduction approaches: Since new
technology is being introduced rapidly,
and related security approaches are often
lagging behind, the organization must
keep abreast of new risks and new ways
to reduce those risks.
50“Computer Chaos: Billions Wasted Buying Federal Computer Systems”, Investigative Report of Senator
William S. Cohen (October 12, 1994).
51Department of Justice, Office of Inspector General, “Follow-up Review: Immigration and Naturalization
Service Management of Automation Programs,” 99-19 (July 1999).
52Biometrics are individually-unique biological measurements such as fingerprints, hand geometry, facial
recognition, or retinal patterns. The system is an automated identification system that allows Service employees to
identify and track illegal or criminal aliens through the rapid and accurate electronic comparisons of their
fingerprints. Fingerprints are the most commonly used biometrics.
51
Table VIII: The Case of the “Railway Killer”
Sufficient computer capabilities can make the difference in catching a deadly
criminal. . .
Senator William S. Cohen
Investigative Report 50
Much of the discussion concerning mismanagement in the federal government deals with wasted
resources and missed opportunities. In some cases, however, mismanagement has real human
costs and involves real human lives. One such example involves the Department of Justice and
six years of mismanagement within the Immigration and Naturalization Service.
In 1994, the computer systems at the Immigration and Naturalization Service were woefully
inadequate. In fact, information was primarily located in paper files that had to be manually
shipped to immigration offices. The process, which takes months, led to the Service being
unable to identify, apprehend, and deport criminal aliens.
In 1995, the Immigration and Naturalization Service began work to improve its automated
systems through 12 initiatives. In 1996, the 12 initiatives were reorganized into 8 functional
program areas. According to the IG, these 8 functional program areas were mismanaged from
the start. The IG, for example, reported that the Service “does not adequately manage its
automation programs despite the fact that it has now spent over $800 million on these programs
during [fiscal years] 1995 to 1997.”51 The IG went on to say that, “INS still cannot sufficiently
track the status of its projects to determine whether progress is acceptable. . . . Also, INS staff
were unable to adequately explain how funds were spent.”
One of the 12 initiatives was for biometrics identification systems.52 Supposedly, the Service had
given the deployment of the biometrics identification systems, or IDENT, a high priority,
especially at Border Patrol facilities in the Southwest.
Despite this priority, the systems encountered immediate problems. In 1998, the IG reported that
the Service was “not making consistent and effective use of IDENT as a tool for border
53Department of Justice, Office of Inspector General, “Review of the Immigration and Naturalization
Service’s Automated Biometric Identification System (IDENT),” I-98-10 (March 1998).
54The lookout database contains fingerprints and photographs of approximately 400,000 aliens who have
been previously deported by the INS or who have a significant criminal history.
55Department of Justice, Office of Inspector General, “The Rafael Resendez-Ramirez Case: A Review of
the INS’s Actions and the Operation of Its IDENT Automated Fingerprint Identification System” (March 20, 2000).
56Ibid.
52
enforcement.”53 The IG went on to identify the following specific problems:
• “[T]he Border Patrol must enroll all apprehended aliens in IDENT. Currently, the Border
Patrol is enrolling less than two-thirds of apprehended aliens in IDENT.”
• “[The Service] must enter the fingerprints of all deported aliens and known criminal
aliens into the . . . database. INS is failing in this regard. INS has entered the fingerprints
of only 41 percent of the aliens deported and excluded in Fiscal Year 1996. . . [T]his
results in previously deported aliens (including aggravated felons) being released from
INS custody when subsequently apprehended because INS is unaware of their
immigration or criminal histories.”
• “INS needs to coordinate with the United States Attorney for each district along the
Southwest border to establish a border enforcement and prosecution strategy that takes
advantage of IDENT.”
• “[T]here were virtually no controls in place to ensure the quality of data entered into the
[system’s] lookout database.54 As a result, we found duplicate records and invalid data. . .
Contributing to IDENT data quality problems has been a lack of IDENT training.”
These deficiencies led to tragic human consequences in the case of Rafael Resendez-Ramirez, a
Mexican national who has an extensive criminal record and is accused of committing several
murders in the United States.55 He was implicated in a murder near Houston in 1998. In early
1999, the Houston police contacted INS investigators several times seeking assistance in the
search for Resendez. In June 1999, the Federal Bureau of Investigation formed a multi-agency
task force in Houston to capture Resendez and also placed him on its list of “Ten Most Wanted
Fugitives.”
Unfortunately, if the INS had done its job, these events never would have occurred because:
• Resendez had been apprehended by the Border Patrol “seven times in 1998 while
crossing the border illegally, had been enrolled in IDENT each time, and had been
‘voluntarily returned’ to Mexico each time without formal proceedings.”56
• On June 1, 1999 – at the same time that state and federal warrants for Resendez were
outstanding – Border Patrol agents had “apprehended him crossing the border illegally,
processed him in IDENT, and voluntarily returned him to Mexico the same day. Upon
investigation, the IG found that none of the INS employees who were contracted by other
law enforcement agents seeking Resendez had placed a “lookout” for him in the system.
57Ibid.
53
When agents apprehended Resendez as he attempted to illegally cross the border, nothing
alerted employees to the fact that he was wanted or had an extensive criminal record. The
IG concluded that the problems found in the Resendez case were indicative of, and partly
caused by, larger problems in the design and implementation of IDENT.57 Specifically,
• “IDENT was not . . . linked with other INS or criminal databases.”
• “Although one of the stated missions of IDENT is to help the INS identify and apprehend
criminal aliens, . . . many INS employees viewed it primarily as a database to help the
Border Patrol track repeat illegal border crossers, not as a useful tool for other INS
components.”
• “IDENT training . . . was ineffective or non-existent. . . . We found a distinct and
widespread lack of knowledge about the lookout policy among the Houston investigators
. . . many of whom acknowledged that they did not know about the lookout policy and did
not use IDENT.”
54
D. OVERLAP AND DUPLICATION
No government ever voluntarily reduces itself in size. Government programs,
once launched, never disappear. Actually, a government bureau is the nearest
thing to eternal life we’ll ever see on this earth!
Ronald Reagan
October 27, 1964
Overlap and duplication abound in the federal
government. In virtually all things that the
government touches, multiple programs
operated by multiple agencies try to solve the
same problems. Table IX provides a number of
examples. Here are just a few:
C Seven different federal agencies
administer 40 different programs aimed
primarily at job training.
C Eight different federal agencies operate
50 different programs to assist the
homeless.
C Nine agencies operate 27 teen pregnancy
programs.
C Seventeen agencies monitor and enforce
over 400 international trade agreements.
C There are about 100 different funded
programs serving at-risk or delinquent
youths.
C Seventy different agencies gather and
analyze statistical data.
C Seventeen departments and agencies
operate 515 research and development
laboratories.
C Over 40 agencies are engaged in
activities to combat terrorism.
Where did they all come from? Federal
agencies and programs have mushroomed over
time, evolving more-or-less randomly in
response to the real or perceived needs of the
moment. As former President Reagan aptly
noted, agencies and programs hardly ever
die—even after they have clearly outlived their
usefulness. Rather than fixing, replacing, or
eliminating dubious programs, we tend to layer
new programs on top of the existing ones.
Charles Bowsher, the former U.S. Comptroller
General and head of the GAO, stated in
testimony some years ago before the Senate
Governmental Affairs Committee:
The case for reorganizing the
federal government is an easy
one to make. Many departments
and agencies were created in a
different time and in response to
problems very different from
today’s. Many have
accumulated responsibilities
beyond their original purposes.
As new challenges arose or new
needs were identified, new
programs and responsibilities
were added to departments and
agencies with insufficient regard
to their effects on the overall
delivery of services to the
public.1
1General Accounting Office, “Government
Reorganization: Issues and Principles,” GAO/TGGD/AIMD-95-166 (May 17, 1995), pp. 2-3.
55
Nothing has changed since then. Indeed, the
problem has only grown worse.
Redundant federal programs obviously are
wasteful and inefficient. They also do a
disservice to those people who depend on them.
The current Comptroller General, David
Walker, made this point in his recent testimony
before the Governmental Affairs Committee:
[O]ur work has repeatedly
shown that mission
fragmentation and overlap are
widespread. Unfocused and
uncoordinated programs waste
scarce funds, confuse and
frustrate program customers,
and limit overall program
effectiveness.2
More usually doesn’t mean better when it comes
to federal programs. Ironically, multiple and
overlapping programs, each with its own unique
processes and requirements, often work against
the very beneficiaries they are intended to help.
Sometimes the intended beneficiaries just fall
through the cracks. For example, GAO found:
There are over 90 early
childhood programs in 11
federal agencies and 20 offices.
The “system” of multiple early
childhood programs with firm
cutoffs could lead to disruptions
in services from even slight
changes in a child’s family
status. While multiple programs
target disadvantaged preschoolaged children, most such
children do not participate in
any preschool program.
3
Likewise, services aren’t coordinated among the
diffuse 130 programs in 19 agencies that serve
the disabled. As a result, some people with
disabilities may receive duplicate services while
others face service gaps.4

Overlapping programs often have different, and
even inconsistent, eligibility standards. This
limits the ability of state and local governments,
which often administer these programs, to make
sense out of them. It also confuses and
frustrates potential applicants. For example, of
the 40 different programs with job training as
their main purpose, 33 primarily serve single
target groups. Ten of these programs are
targeted at Native Americans. However, there
are distinctions even within the targeted
populations. One of the Native American
programs serves only disabled people while
another serves only Native Hawaiians.5
Also,
there may be fine distinctions within the same
eligibility factor. For example, “economically
disadvantaged” is defined differently among
some job training programs. A member of a
family of four with an income of $20,040 would
be eligible to participate in one of these
2General Accounting Office, “Managing in the
New Millennium: Shaping a More Efficient and
Effective Government for the 21st Century,” GAO/TOCG-00-9 (March 29, 2000), p. 22.
3General Accounting Office, “Management
Reform: Continuing Attention Is Needed to Improve
Government Performance,” GAO/-GGD-00-128 (May
4, 2000), p. 13. (Emphasis supplied)
4General Accounting Office, “Managing for
Results: Using the Results Act to Address Mission
Fragmentation and Program Overlap,” GAO/AIMD-97-
146 (August 1997), p. 27.
5General Accounting Office, “Multiple
Employment and Training Programs: Overlapping
Programs Indicate Need for Closer Examination of
Structure,” GAO-01-71 (October 2000), pp. 5-6.
56
programs, but would be ineligible for another.6
With respect to community development
programs aimed at improving poor or distressed
neighborhoods, GAO reported:
The fragmentation of federal
programs among at least 12
federal departments and
agencies imposes a burden on
distressed urban communities
seeking assistance. Historically,
there has been little
coordination among the
agencies, which have been
protective of their own resources
and separate organizational
missions. . . . [C]ommunity
organizations have to piece
together a complex web of
funding from private and public
sources.7
The fact that multiple agencies and programs
have similar purposes is not necessarily a bad
thing. Some overlap is inevitable given the size
and complexity of the federal government’s
legitimate responsibilities. Indeed, overlap
sometimes provides valuable checks and
balances. However, no rational person could
defend the scattershot, uncoordinated maze of
agencies and programs that make up today’s
federal government. We probably need more
than one program dealing with at-risk youths,
but 131 programs? The sheer numbers of
agencies and programs in area after area defy
reason and common sense. No one could
seriously argue that all these overlapping
agencies and programs are necessary or that they
are equally effective.
WHAT CAN BE DONE?
Few would dispute that the government in
Washington cannot do effectively all it is now
charged with doing. There’s an obvious need to
bring some order out of this chaos. However,
meaningful reform of the federal government
won’t come from just reshuffling current
organizational boxes and redistributing current
programs. We need to take a fresh look at what
Washington does and how it does it. Our
Founding Fathers designed a government of
defined and limited powers. Imagine their
dismay if they knew the size and scope of the
federal government today. We need to return to
the limited but effective government that the
Founders intended. This means divesting the
federal government of functions it is not well
suited to perform. However, and every bit as
important, it also means ensuring that the
federal government does a better job of
performing its core responsibilities.
It won’t be easy. For one thing, there are major
political hurdles to clear. Everyone can agree in
the abstract that the federal government has
bitten off more than it can chew, and that it
spends too much on wasteful or ineffective
programs. When it comes to specifics, however,
the going gets tougher. Over time, virtually
every agency and program breeds an entrenched
constituency that feeds off it and defends any
challenges to the status quo. These
constituencies are often very effective. They
may believe quite sincerely in their pet
programs. After all, one person’s wasteful
program is another person’s livelihood. In any
6General Accounting Office, “Managing for
Results: Barriers to Interagency Coordination,”
GAO/GGD-00-106 (March 2000), pp. 12-13.
7General Accounting Office, “Managing for
Results: Using the Results Act to Address Mission
Fragmentation and Program Overlap,” GAO/AIMD-97-
146 (August 1997), p. 23.
57
event, such narrowly focused and intense special
interests can often trump broad-based reform
efforts. Hence, Ronald Reagan’s axiom that the
closest thing to immortality is a government
agency or program. Jonathan Rauch made the
same point in a recent article:
The government is, of its nature,
inseparable and inalienable
from the million commitments it
has made and the million
interest groups it has spawned.
Converting the electorate’s
shuddering waves of discontent
into the hundreds or thousands
of alterations to programs
affecting specific groups is like
converting earthquake energy
into steam power: possible in
theory but elusive in practice.8
There are various ways to try to overcome, or
get around, the special interests. Some have
proposed mandatory periodic “sunset” reviews
to force agencies and programs to re-justify
themselves from time to time. Another idea is
a government restructuring commission that
would develop objective reform proposals for
expedited Congressional up-or-down votes. A
third possibility is to give the President broader
authority to reorganize the government.
Even if we can muster the political will to
seriously rethink what Washington does, the
task will be daunting. Most agencies and
programs can’t explain in a clear and
meaningful what they’re trying to accomplish,
and they can’t measure in a credible way how
well they’re accomplishing it. Right now, we
simply don’t have the information we need to
make rational judgments about which programs
are working and which are not—much less to
compare their relative performance.
Obviously, questions about the merit and
relative merit of federal programs involve
subjective value judgments. This is the essence
of our political system. However, such
judgments should be the product of honest and
open debate that is informed by objective and
fact-based analysis. We need to muster useful
and reliable information about how programs
are performing in order to engage in such
debates and make such judgments. Getting that
kind of information should be the first step
toward trying to make sense out of what we do
in Washington.
8
Jonathan Rauch, “Government’s End,”
National Journal, January 8, 2000.
9
The examples in this table are compiled from many different GAO reports and other sources. They are by
no means exhaustive. Virtually all federal functions involve multiple agencies and programs.
58
TABLE IX: EXAMPLES OF PROGRAM OVERLAP AND FRAGMENTATION9
PROGRAM AREAS OVERLAP AND FRAGMENTATION
Border control There are long-standing coordination problems between the two
agencies responsible for primary inspections at U.S. land border
points of entry: the Customs Service and the Immigration and
Naturalization Service. These problems complicate efforts to deal
with changing and expanding international business as well as
increasing international migration flows.
The FBI, the Customs Service, the Drug Enforcement Agency, the
Coast Guard, and the Immigration and Naturalization Service all
investigate illegal alien smugglers.
Combating terrorism Over 40 federal agencies are involved in activities to combat
terrorism. Their combined spending on these activities exceeds
$10 billion annually.
Community development The federal government assists urban communities through a
complex web involving at least 12 federal agencies and hundreds
of programs in the areas of housing, economic development, and
social services. For example, the Department of Housing and
Urban Development operates 23 self-sufficiency and economic
opportunity programs that target tenants of public and assisted
housing, or low and moderate income residents in certain
geographic areas.
According to GAO, many of these categorical programs may make
sense when considered individually; taken together, however, they
often work at cross purposes. Historically, there has been little
coordination among the federal agencies, which are protective of
their own resources and separate organizational missions. This
imposes burdens on distressed urban communities seeking
assistance, as they try to piece together and navigate through a
complex web of funding.
59
Drug control, prevention,
and treatment
Responsibility for federal drug control strategies and their
implementation is fragmented among more than 50 federal
agencies.
There is duplication and overlap in the analysis and reporting of
drug intelligence data by federal agencies.
Four agencies are responsible for coordinating or developing
narcotics detection technologies. Some of them have differing
views on the need for various detection technologies.
At least 70 programs in 13 federal departments and agencies could
be used to provide substance abuse prevention services for youths.
These overlapping programs create difficulties for those seeking
the most appropriate services and funding sources. Insufficient
information exists on the accomplishments of the different federal
programs.
The number of federal agencies involved in substance abuse
treatment and prevention has increased from 12 to 16 in recent
years.
There are at least 19 federal programs devoted exclusively to
substance abuse prevention.
Early childhood
development
There are over 90 early childhood programs scattered among 11
federal agencies and 20 offices. The “system” of multiple early
childhood programs with firm cutoffs can lead to disruptions in
service from even slight changes in a child’s family status. While
multiple programs target disadvantaged preschool-aged children,
most such children do not participate in any preschool program.
Nine federal agencies and departments administer 69 programs
supporting education and care for children under age 5.
The Departments of Education and Health and Human Services
have 4 different programs addressing low-income child care or
education: the Child Care and Development Fund, Social Services
Block Grant, and Head Start program at HHS, and Education’s
“Title I” program.
60
Economic development There are 342 federal economic development-related programs
administered by a multitude of agencies. A majority of these
programs are in the Departments of Agriculture, Commerce,
Health and Human Services, and Housing and Urban
Development, as well as the Small Business Administration.
However, 13 of the 14 federal cabinet departments and many more
agencies and administrations operate economic development
programs.
Consolidation or elimination of similar programs, such as those
managed by the Department of Housing and Urban Development,
the Department of Commerce’s Economic Development
Administration, and the Appalachian Regional Commission would
help eliminate duplication and fragmentation of federal assistance
programs aimed at economic development.
61
Education Seven agencies administer 40 different programs that have job
training as their main purpose. Of the 40 programs, 33 primarily
serve single target groups. For example, 10 serve Native
Americans, 5 serve youths, and 5 serve veterans. Many of the
targeted programs overlap by providing similar services, but not
all members of the target group may participate. For example, one
of the Native American programs serves only disabled people
while another serves only Native Hawaiians.
Despite decades of efforts to better coordinate job training
programs, conflicting eligibility requirements and differences in
annual operating cycles still hamper the provision of needed
services. For example, nine programs which target the
economically disadvantaged use several different standards for
measuring income level, defining family or household, and
determining what is included in income. Sixteen programs that
target youth have four different operating cycles.
There are 29 federal programs that provide early education and
care as their primary purpose. While the Education Department
administers most of these programs, the Department of Health and
Human Services administers most of their funding—$8 billion of
the total $9 billion annually. The two Departments are trying to
develop common performance outcome indicators for these
programs (e. g., children will leave kindergarten ready to learn to
read). However, it is too soon to tell if these efforts will be
sufficient to improve services for children.
Migrant education is another area where better coordination is
needed. Different federal eligibility requirements for programs
targeting migrant children create service gaps, impede service
delivery, and complicate transfers between programs.
At least nine agencies engage in a variety of activities to promote
math and science education, with total expenditures of about $ 2.5
billion annually. However, because these agencies don’t submit
their materials to a central clearinghouse, as required by law,
educators lack a comprehensive list of federally funded materials
and may have trouble learning what materials are available.
At least 86 teacher training programs in 9 federal agencies fund
similar types of services.
62
Environmental programs The Department of Health and Human Services and the
Environmental Protection Agency need to better coordinate their
efforts to reduce, monitor, and develop methods for measuring
human exposure to toxic chemicals.
At least five federal agencies have spent nearly $1 billion in
support of 12 international environmental agreements. There were
significant differences in both the amount of their spending and in
the purposes for which the money was spent.
At least 72 federal programs and other initiatives in 8 departments
and agencies assist states, municipalities, individuals, and others
in their efforts to improve and protect water quality from various
pollution threats.
Federal land
management
The Interior Department’s National Park Service, Fish and
Wildlife Service, and Bureau of Land Management, and the
Agriculture Department’s Forest Service all deal with federal land
management. Their responsibilities have become increasingly
similar over time. The issues they address, such as managing
forested areas and controlling wildfires, transcend their
administrative boundaries and require increased collaboration with
each other and with other entities, such as states and private
landowners.
All four of the agencies acquire new recreational lands. The
Bureau of Land Management and the Forest Service both operate
land exchange programs, which are poorly managed.
GAO has suggested that Congress consider reorganizing or
streamlining federal land management programs and agencies.
Federal property
management
The Departments of Justice and Treasury maintain separate
forfeited asset funds that have inventories totaling about $1.8
billion. According to GAO, the Departments could save the
taxpayers money and improve efficiency by consolidating the
management of their two funds. For example, the two
Departments use separate contractors to handle seized assets, such
as cars, at the same locations. However, the Departments have
consistently rejected a GAO recommendation dating back to 1991
to consolidate management of the two funds.
63
Financial regulation The Treasury Department, Federal Reserve, Securities and
Exchange Commission, and Commodities Futures Trading
Commission assess risks that cut across regulatory and industry
boundaries.
A number of different federal agencies conduct examinations of
various types of financial institutions.
Four federal agencies—the Federal Reserve System, the Federal
Trade Commission, and the Departments of Justice and Housing
and Urban Development—all handle fair lending issues. These
agencies need to develop procedures to share information on
consumer complaints.
Food safety Federal responsibilities for ensuring the safety of the Nation’s
food are highly fragmented, with as many as 12 different federal
agencies spending more than $1 billion annually to administer
over 35 food safety laws. For example, the Agriculture
Department inspects meat pizzas while the Department of Health
and Human Service inspects non-meat pizzas. Until these
responsibilities are consolidated, federal food safety efforts will
continue to suffer from inconsistent oversight, poor coordination,
and inefficient allocation of resources.
Foreign relations Countries formerly part of the Soviet Union have received
assistance through over 200 federal programs operated by 23
different federal departments and agencies.
Sixteen federal agencies fund international educational, cultural,
and training exchange activities through about 75 programs.
Homelessness There are 50 different federal homeless assistance programs,
administered by 8 different agencies. About 15 to 17 of these
programs are targeted specifically at the homeless. The programs
are highly fragmented since each program has its own eligibility
criteria, application procedures, and other requirements.
64
International trade At least 17 federal agencies monitor and enforce over 400 U.S.
trade agreements. As the number of trade agreements and partners
increases, monitoring and enforcing foreign compliance with these
agreements has become more complex. They include far-reaching
World Trade Organization agreements, which cover about $1.4
trillion in annual U.S. trade with 135 countries, as well as
significant bilateral agreements with key trading partners like
Japan and China.
Ten federal agencies offer services that promote U.S. exports,
often in an inefficient and confusing manner. This fragmentation
adversely affects the U.S. business community and taxpayers.
At least 12 federal agencies have some responsibility for
addressing sanitary measures of other countries that may prohibit
the importation of U.S. agricultural products. However, no single
agency exercises overall direction of federal efforts in this area.
For example, it was unclear which agency should lead federal
efforts to address a Chinese ban on certain U.S. wheat products.
Law enforcement At least 45 different federal agencies conduct federal criminal
investigations. Collectively, these agencies employ about 50,000
investigators.
Many federal agencies maintain their own internal “police
departments.”
Military acquisitions The military services and defense agencies purchase guided
weapons on the basis of their individual requirements. They have
refused to consolidate overlapping and redundant acquisition
programs. Consequently, the Defense Department has a
proliferation of acquisition programs for guided weapons with a
total investment of about $16.6 billion over the next 10 years.
This will result in doubling the inventory of guided weapons that
may be necessary to meet national objectives.
Military services and defense agencies also have long procured
and operated multiple long-haul telecommunications systems to
meet their individual needs. This has resulted in at least 87
independent telecommunications networks, costing more than $89
million annually, that are fragmented and redundant.
65
Military health care The Army, Navy, and Air Force provide services through medical
centers and clinics involving about 580 treatment facilities with
annual costs of about $16 billion. There is much redundancy and
waste. For example, the Washington, D.C., area has three large
military health facilities—Walter Reed, Bethesda, and Malcolm
Grow. These facilities provide duplicative services, and in some
cases lack sufficient workloads. Yet, the military services have
resisted any efforts to consolidate their medical departments into a
single health agency.
The Defense Department and the Department of Veterans Affairs
have failed to cooperate on sharing medical resources for veterans
health care. According to GAO, Congress may need to intervene
to provide direction and guidance to the Departments.
Nuclear health and safety The Environmental Protection Agency and the Nuclear Regulatory
Commission are responsible for setting the standards to regulate
certain radiation levels. However, they can’t agree on the level of
radiation that is safe.
People with disabilities The federal government operates at least 70 programs to assist
people with disabilities. About 30 of these programs, with
estimated expenditures of $110 billion annually, are aimed
primarily at assisting the disabled. However, because of lack of
coordination among these programs, some people with disabilities
receive duplicate services while others face service gaps.
Research and
development
Seventeen federal departments and agencies operate a total of 515
federal research and development laboratories, including those run
by contractors. The Department of Agriculture reported the
largest number of laboratories (185). Laboratories in the
Departments of Defense, Energy, Health and Human Services, and
the National Aeronautics and Space Administration accounted for
88 percent of the funding.
The Environmental Protection Agency, the National Science
Foundation, and the Departments of Commerce, Energy, and
Transportation all are working to create fuel-efficient automobiles.
Several agencies are conducting research and development to
counter chemical and biological threats. Most are within the
Defense and Energy Departments. However, the two Departments
are not coordinating sufficiently to ensure that potential overlaps,
gaps, and opportunities for collaboration are addressed.
66
Rural development Using data from the Bureau of the Census and the Catalog of
Federal Domestic Assistance, GAO identified 88 federal rural
development programs. The web of policies, programs, and
regulations accompanying federal funding for rural development
makes service delivery inefficient, according to local and regional
officials.
At least 28 federal programs administered by 15 federal agencies
provide funds that were either specifically designated for
telecommunications projects in rural areas or could be used for
that purpose. Rural development experts and public officials have
pointed to the need to make these multiple telecommunications
programs easier to identify and use.
Federal water programs, which are intended to promote the
efficient use of finite water resources for the Nation’s agriculture
and rural water systems, are inconsistent and work at cross
purposes. As many as 8 different federal agencies administer 17
different programs just in the area of rural water and wastewater
systems. Each of these programs has its own set of regulations.
The complexity and number of programs hamper the ability of
rural areas to use them.
Satellite control systems Federal defense, intelligence, and civilian agencies operate
separate satellite control systems to ensure that satellites reach
their planned orbits and perform as intended. The agencies need
to make more efficient use of the several hundred million dollars
spent annually on these efforts. However, the Defense
Department has done little to foster integrated and compatible
satellite control for all government space activities since it was
directed to do so by the 1996 national space policy.
Statistical programs At least 70 different federal agencies engage in statistical
activities, at a total annual cost of over $2.75 billion. These
fragmented and decentralized activities cause inefficiency, poor
allocation of taxpayer resources, and barriers to data sharing
among agencies. They also impose burdens on those who provide
statistical data to the federal government, as well those who use
the data.
67
Teen pregnancy
prevention
The Department of Health and Human Services has 27 different
programs and services to prevent teen pregnancy; eight other
agencies also operate such programs. These programs spend at
least $200 million annually. However, with so many programs
and agencies, coordination is increasingly necessary and complex.
Telemedicine “Telemedicine” refers to communication technologies that help
deliver medical care by linking medical personnel with patients at
distant or remote locations. Over 35 federal organizations within
nine departments and independent agencies operate or support
telemedicine efforts at an annual cost of at least $646 million.
Opportunities exist to share the lessons learned and benefits of
these initiatives, but there is no government-wide strategy to do
so.
Youth programs There are about 130 federal programs on the books to serve at-risk
or delinquent youths. About 100 of these programs are actually
funded, at a total annual cost of more than $4 billion. Most of
these are relatively small programs with budgets of about $10
million that provide multiple services and have multiple target
groups, raising questions about their overall efficiency.
Eight federal agencies administer at least 46 programs earmarked
for youth development.
APPENDIX: TOP MANAGEMENT CHALLENGES MOST FREQUENTLY IDENTIFIED
BY INSPECTORS GENERAL (DECEMBER 2000)
Agency
Information
Technology
Management
& Security
Results Act
Compliance,
Implementation &
Accountability
Financial
Management &
Annual
Statements
Procurement
& Grant
Management
Human
Capital
&
Staffing
Service
to the
Public
Public
Health
&
Safety
Physical
Infrastructure
1. USAID X X X X
2. Agriculture X X X X X
3. Commerce X X X X X
4. Defense X X X X X X
5. Education X X X X X
6. Energy X X X X X
7. HHS X X X X X X
8. HUD X X X X X X
9. Interior X X X X X X
10. Justice X X X X X X
11. Labor X X X X X
12. State X X X X X X X
13. Transportation X X X X X X X X
14. Treasury X X X X
15. Veterans Affairs X X X X X
16. EPA X X X X X X
17. FEMA X X X X X X
18. FDIC X X X X
19. GSA X X X X X X X
20. IRS X X X X X
21. NASA X X X X X X
22. NSF X X X X X
23. NRC X X X X X X X
24. OPM X X X X X
25. SBA X X X X X
26. SSA X X X X
27. Postal Service X X X X X
TOTAL 27 23 21 20 18 17 15 7
Source: President’s Council on Integrity & Efficiency