OVERVIEW

GAO is currently in the process of transition. Until fiscal year 1993, GAO had been about the same size for the last 15 to 20 years and had sufficient funding for its operations. Since that time the agency has been faced with the challenge of reducing its size and absorbing large program reductions while still trying to maintain national and international audit coverage. This overview discusses briefly the effects of reductions on agency programs and operations and provides highlights of work accomplished this past year and the focus of work over the next 2 fiscal years.

Over the last 2 years, agency staffing has been reduced by 262 average positions, or by more than 5 percent, and the agency has been faced with a shrinking appropriation that has required reductions in GAO's nonsalary-related accounts by an average of 40 percent to absorb price-level changes and mandatory increases in salaries and benefits. Although the agency is committed to managing these reductions so they will not negatively impact work for the Congress, this commitment is becoming increasingly difficult.

Because about 74 percent of the agency's budget funds staff salaries and benefits, the only way to manage these and future reductions is to reduce staff. To manage effectively, GAO sought and obtained the authority to offer separation incentive payments to staff willing to retire or separate from the agency between October and December 31, 1993. Thus far about 350 staffers have signed up to leave. This action along with imposing a hiring freeze 2 years ago has allowed the agency to manage at reduced appropriation levels without having to furlough or conduct a reduction-in-force, actions that usually result in lower morale and productivity. These actions, however, have caused vacancies in key positions in such critical specialties as economists, statisticians, and ADP specialists. Because of funding constraints, audit staff are being required to perform work using outdated and inadequate equipment and are dealing with a severe shortage of funds for travel and consultant and contract services as well as training. For example, decreased travel funds have required that audit staff reduce the time spent on location gathering data, restrict the number of locations visited, and limit the number of audit team members traveling. This is of concern because of the potentially negative effect on the quality of program audits and other jobs due to inadequate review coverage.

Funding shortages have also delayed capital investments crucial to GAO's continued success. Specifically, the agency needs to continue progress toward the impementation of a computer network capability to allow it to manage a growing workload with a smaller staff. To do this, GAO needs additional funding for hardware, software, and systems support. Also, GAO needs to complete the removal of asbestos and subsequent space renovation of the GAO Building so staff currently located outside the main building can retum at a substantial savings in rent. Delaying these projects will increase future costs.

Although GAO has absorbed some rather large budget reductions over the last 2 years, it has tried to minimize the effect on its congressional workload by continually seeking new and better ways to get the audit and evaluation work done. To ensure continued success, however, the agency needs funding for some capital investments that will achieve future savings. GAO has requested funding in fiscal year 1995 for these investments.

Fiscal Year 1993 Highlights

In fiscal year 1993, GAO issued 1,115 reports to the Congress, congressional committees, individual members, and agency officials. Sixty-five GAO staffers testified a total of 190 times at the request of the Congress on a variety of issues. GAO also issued 3,962 legal decisions and opinions. The agency also responded to requests for information on various issues confronting the Congress and helped gather information and analyze data for the Congress on a number of controversial and complex matters. For

• Defense: GAO reviewed the adequacy of DOD's and defense contractors' controls to prevent the improper use of government funds.

• International affairs: To assist the Congress in its deliberations on the North American Free Trade Agreement (NAFTA), GAO reported on such major issues as NAFTA's efforts to liberalize trade and investment in North America, the treatment of sensitive economic sectors, the rules to implement the agreement, and the potential economic effects.

• Economic development: GAO recommended that the Federal Emergency Management Agency (FEMA) establish a disaster unit to independently assess damage and estimate response needs following a catastrophe and that the President appoint a senior White House official to oversee FEMA and the federal response to disasters.

• Financial management: GAO revealed serious financial management problems in its first-ever financial statement audits of the IRS, U.S. Customs Service, and Education's Guaranteed Student Loan Program, which prompted these agencies to take a several actions to improve financial reporting and the quality of the underlying financial and program performance data.

• Health care: GAO provided significant contributions to the debate on health insurance reform as it relates to affordability and availability of health care.

• Food and agriculture: GAO recommended that Congress consider legislation to move the sugar industry towards a more open market and recommended changes in the peanut program to make it responsive to market forces.

• GAO also produced the transition series, a set of 28 reports, summarizing GAO's findings on major problems confronting federal agencies, as well as economic and management issues facing the Congress and the incoming Administration.

The national value of GAO's work continued to be demonstrated during this past year, and GAO recommendations issued in prior years continued to be implemented. This past fiscal year 1,574 recommendations made by GAO over the last 5 years were implemented. GAO issued 1,649 recommendations in fiscal year 1993 citing specific actions that the Congress and federal agencies could undertake within the next 4 years to improve government operations and reduce costs. During fiscal year 1993, GAO's work contributed to legislative and executive actions that yielded over $14.5 billion in measurable financial benefits, or $33 for ever dollar appropriated for fiscal year 1993.

GAO work often contributes to legislative and executive actions that achieve significant financial benefits to the American taxpayer, as budget reductions, cost avoidance, appropriation deferrals, and revenue enhancements. Following are a few examples of important financial accomplishments achieved in response to GAO reviews recommendations, and information:

• The Congress reduced DOD's fiscal year 1993 funding by $3 billion to eliminate excess inventory and encourage DOD to improve its inventory management practices.

• Health Care Financing Administration (HCFA) took actions to identify and recover mistaken payments owed to the Medicare program, which resulted in $378.4 million in expected Medicare cost benefits.

• The Congress established a uranium enrichment decontamination and decommissioning fund to defray the cost of cleaning up aging uranium enrichment plants for cost benefits of $793 million.

• The Congress amended the Higher Education Act to disallow administrative cost allowance payments to guaranty agencies for student loans that are never consummated; this amendment will result in estimated benefits of $13.9 million.

• In response to information on DOD's information management systems and internal controls, the Congress reduced DOD's fiscal year 1993 budget request by approximately $1.1 billion.

• The Congress raised the maximum penalties for violations of workplace safety and health regulations and child labor laws, which will result in $198 million in increased govemment revenues.

In addition, 190 GAO recommendations adopted in fiscal year 1993 achieved significant nonmonetary accomplishments that led to substantive improvements in government operations, such as the following:

• The Congress enacted legislation that precludes Medicaid state programs from establishing long-term care insurance projects that could increase Medicaid costs.

• Increased consumer protection and regulation of the financial services industries has improved the financial system and its regulatory structure to protect the American public.

GAO provided important objective data to the Congress concerning personnel management issues and problems confronting DOD and the services as DOD continues to downsize and plan for the future.

The Focus of GAO Work in Fiscal Years 1994 and 1995

To optimize its usefulness to the Congress, GAO is placing a strong emphasis on addressing issues the Congress is likely to confront in the next several years. As a part of its planning process, the agency consults broadly with congressional Members and staff as well as with a wide spectrum of government and private experts. GAO's work over the next 2 years will focus on such issues as:

• the soundness of the nation's financial institutions and markets and the adequacy of the industry's regulatory structure;

• the efficiency, the effectiveness, the fairness and the integrity of the tax system;

• the stability and the effectiveness of national income security programs;

• the quality and the financing of educating and training the nation's population;

• health care reform and the structure, the efficiency, the effectiveness, and the quality of care of federal health care programs;

• DOD's proposed reforms, including size and acquisition strategies;

• the reauthorization of several major environmental statutes, including clean water, hazardous and solid waste, Superfund, and the Toxic Substances Control Act; and

• sound financial management practices, including the usefulness of financial reporting in government corporations and major federal agencies.

To effectively use the current level of staff resources to repond in a timely manner to major issues of high congressional and national concern, continue work in areas where long-standing problems involving billions of dollars are at stake, and to analyze and evaluate the effectiveness of federal programs, GAO will require additional funding.

Fiscal Year 1995 Appropriation Request

For fiscal year 1995, GAO is requesting $458,591,000, a net increase of $27,776,000 or 6.4 percent more than appropriated for fiscal year 1994 ($430,815,000). The agency needs $29,030,000 to cover inflation and mandatory cost increases for personnel compensation and salary-related benefits, including cost-of-living adjustments, promotions, locality pay, and ingrade increases. In addition, $13,193,000 is needed to continue progress on two major initiatives-technology modernization and asbestos removal and renovation of the GAO Building. Specifically, this additional funding will permit the (1) continued phase-in of a Local and wide-area network in GAO and installation of modern telecommunications equipment to improve staff communications and reduce dependence on travel expenditures; (2) upgrading of GAO's microcomputer inventory to madmize productivity in these times of significant staff reductions; and (3) continuation of asbestos abatement, equipment upgrades, alterations, maintenance, repairs and renovation of the GAO Building. These funding increases are being off-set by a reduction of 200 average positions and the funding to support these positions ($14,447,000).

Changing Mission and Growing Work Load

Since fiscal year 1983, GAO's audit and evaluation work, which is divided into 36 issue areas, has experienced a dramatic increase in the number of congressional requests and mandates and in the