Shield throughout the Nation. It hasn't solved all the problems, but we couldn't have done that without GAO.

Another area is the highlighted shortcomings in State insurance regulation that permitted fraudulent insurers to operate with impunity, a very big area that involves literally billions and billions of dollars.

Another area, just for instance, is highlighting the loopholes in current Federal and State money-laundering statutes-Mr. Chairman, you have taken a real lead on that-that really permit billions of dollars of drug and criminal proceeds to escape taxation, forfeiture, and seizure.

So just in the work of that Permanent Subcommittee on Investigations alone I think GAO has earned their keep many times over. Now, that does not mean that they should not make improvements. I think that there is room for improvement. I think sometimes I have chaired and am now Ranking Member on the Armed Services Committee. They have done enormous work for us there. Overall, it has been very beneficial.

There are times when GAO takes on, for instance, a detailed examination of a weapons system, and frankly, I think they get in over their heads sometimes because it is very difficult. You don't have expertise in that area to analyze all that is going on in weapons system procurement. They can look at the accounting part of it, but it is very hard for them to always get the evaluation part of it properly. Sometimes I think they don't listen quite enough to the experts in that regard, but even when I don't agree with the report, I find the questions raised by them to be useful in getting the managers over there in the Department of Defense to come up with the answers to those matters.

All in all, I am a strong supporter of GAO, and I hope whatever we do here in reforming GAO will be constructive and will not leave us crippled in terms of basically dealing with waste, fraud, and abuse in the government. And we know there is plenty of it going around.

We all also know that the way people run campaigns out there get out there as if there is a line item in the budget called "Waste, Fraud, and Abuse" and we can simply put an amendment on the floor saying, "Thou shalt not waste any more money or abuse any more money," and it doesn't work that way. You have got to get out there and dig it out. And you have got to have good people digging it out, and they have got to be professional people, and they have got to be able to do the job.

So I hope we will put this in its proper balance as we move forward. I look forward to hearing from Chuck Bowsher and other witnesses.

PREPARED STATEMENT OF SENATOR NUNN

Today, our Committee reviews the work of the National Academy of Public Administration (NAPA) that studied the operations and management of the General Accounting Office. Their study was initiated by our former chairman, Senator Glenn, and our current chairman, Senator Roth, in response to concerns expressed by some about the operations and objectivity of the GAO. Some are calling for drastic cuts in the budget and staffing of the GAO on the order of 25 percent in 1 year alone.

While I have an open mind to any recommendations to improve the GAO and it's operation and look forward to today's testimony, I do not believe cuts in the order

of 25 percent are warranted. The General Accounting Office can proudly point to its record of having saved billions of dollars in its 74-year history. As Members of the Governmental Affairs Committee, we have initiated much of the good work that the General Accounting Office had done over the years. Under my direction as Chairman of the Permanent Subcommittee on Investigations, the General Accounting Office has reviewed dozens of government programs, identifying innumerable areas for improvement In the last few years alone, their work for the Subcommittee has resulted in documented savings to the federal government of over $300 million: $250 million in reduced prison construction costs from recommendations on double bunking and revised square footage standards for the Federal Bureau of Prisons; and $62 million in recommended changes in wage garnishment for defaulted Guaranteed Student Loans.

Beyond these cost savings, the General Accounting Office's work for the Subcommittee has resulted in benefits that are less quantifiable in dollar savings although just as significant. Their work has repeatedly alerted Congress and the Executive Branch to emerging problem areas in the regulatory and law enforcement arenas. Some examples from our own Subcommittee's work include:

• Identifying problems with judicial security that exposed our federal courts and their personnel to terrorist and criminal assault;

• Highlighting the shortcomings of State insurance regulation of the Blue Cross and Blue Shield plans that exposed thousands of subscribers to loss of health care benefits through insurer default;

• Highlighting shortcomings in State insurance regulation that permitted fraudulent insurers to operate with impunity; and

• Highlighting the loopholes in current federal and State moneylaundering statutes that permit billions of dollars of drug and criminal proceeds to escape taxation, forfeiture and seizure.

These are but a few of the many accomplishments of the General Accounting Office. I am sure that we will hear more examples when Comptroller General Bowsher testifies today.

As you know Mr. Chairman, in addition to my duties on this Committee, I have served as the Chairman of the Armed Services Committee and I am now the Ranking Minority Member of that Committee. In these capacities I have had many occasions to call upon the GAO for help in establishing the facts and in understanding defense issues. GAO reports and reviews are an essential element of many of the decisions we make. My experience has shown me that when it comes to accounting issues or issues where facts need to be gathered, analyzed and presented in a logical way, the GAO is superb. The analytical work that the GAO did for the Armed Services Committee on the Service Academies, and on the investigation into the causes of the IOWA explosion come to my mind as excellent examples of helpful and accurate work.

There are areas, however, where the GAO work on defense can be improved. When the GAO ventures into the world of defense policy, for example, one has to wonder why the judgments of the GAO would or should supersede the judgments of experts in the government or on our committees for that matter.

I have also occasionally found that the reports published by the GAO do not give government officials enough credit for correcting problems or enough credit to rebuttals from government officials.

So as I have said, I approach this hearing with an open mind. We need to be mindful of both the strengths and the weaknesses of the GAO as we proceed. I do not believe we should "throw out the baby with the bath water” in an attempt to improve GAO. Now, more than ever, as the need for a more efficient government is apparent, we will need the continued assistance of the General Accounting Office to help Congress ferret out waste, fraud and abuse. With a general decline in the oversight budgets of most of the Congressional committees as well as many Inspectors General, it seems to me that we should examine this issue closely before we make drastic cuts in the budget of the General Accounting Office.

I look forward to hearing from the members of the panel of experts from the National Academy of Public Administration (NAPA) who were tasked to conduct this study on the roles, mission and operation of GAO. I congratulate not only this panel for its excellent work but also Senator Glenn who, as the then-Chairman of the Governmental Affairs Committee, had the foresight to call for such a review. I also wish to commend Senator Roth, our current Chairman, and his staff, for their tireless work in improving not only the GAO, but other government agencies.

Chairman ROTH. Thank you, Senator Nunn. Let me thank each member of the panel. We appreciate your being here today. Your

report has been extremely helpful and, more importantly, we look forward to calling upon your expertise as we move ahead to ensure that GAO not only continues its good work but is shaped to meet the 21st Century.

Mr. CAMPBELL. Thank you very much, sir.

Senator GLENN. Let me just associate myself with the Chairman's remarks. When we started talking about this back in early 1993, I think it was-it has been some time ago now-we took this on, and we all discussed on the Committee and with all of us here what the parameters were that we wanted you to look at. We outlined them, and I think you have done an admirable job in meeting all of our expectations. We appreciate your work. Thank you very much.

Mr. CAMPBELL. Thank you very much.

Chairman ROTH. Thank you very much.

Mr. FOSLER. Thank you, Mr. Chairman.

Chairman ROTH. We will now call upon Comptroller General Bowsher. It is a pleasure to welcome you here once again, Mr. Bowsher. I think it is clear from all the remarks of the panel that everyone is strongly supportive of the General Accounting Office. We think it plays an important role in government, that it will continue to do so, but like all organizations, periodically a review of its activity is in order, particularly with the idea of ensuring that its mission is appropriate for the requirements of today as well as improving the efficiency with which it works.

We welcome you here, Mr. Bowsher, and look forward to your remarks.

TESTIMONY OF HON. CHARLES A. BOWSHER,1 COMPTROLLER GENERAL, U.S. GENERAL ACCOUNTING OFFICE; ACCOMPANIED BY JAMES F. HINCHMAN, SPECIAL ASSISTANT TO THE COMPTROLLER GENERAL

Mr. BOWSHER. Thank you very much, Mr. Chairman.

Chairman ROTH. You might introduce your aide, if you would. Mr. BOWSHER. Yes, with me is Jim Hinchman, who is my Special Assistant. He serves in the capacity of deputy to the Comptroller General at the GAO.

Mr. Chairman and other Members of the Committee, I appreciate very much the support that you have given the GAO, and I have enjoyed working with you over the last 14 years.

I would like to begin, Mr. Chairman, by asking that my full statement be included in the record, and then I will just make a few summary remarks.

Chairman ROTH. So ordered.

Mr. BOWSHER. Thank you. This is an oversight hearing before the Governmental Affairs Committee, which passed the CFO Act, and so I would like to begin by submitting also for the record our annual report.

We have had an annual report for over 8 years now that has certified audited financial statements, which is required in the CFO Act, and it is a model for the rest of the government that we can do this just like your act is requiring. It is important to note that

1The prepared statement of Mr. Bowsher appears on page 78.

the GAO is closing its books in 6 weeks. We can issue a report to the Congress when the Congress comes back in January every year that lays out what our goals were, and our performance achievements. When we get the 24 largest agencies in the Federal Government able to do the same thing, it is going to help rebuild the confidence of the American people in government. And when GAO can audit the consolidated financial report of the entire government in 1997 and that can be issued, I think that, again, will help very much. So I would ask that if you would, put GAO's 1994 annual report into the record, Mr. Chairman.1

Chairman ROTH. Yes. Without objection, so ordered.

Mr. BOWSHER. GAO has also been issuing its Annual Report of Key Performance Indicators for a number of years showing how well the organization is performing. And of course, that again is what is required by this Committee's new Government Performance and Results Act. We are also issuing in the near future a strategic plan of the General Accounting Office as recommended by NAPA, and we have been issuing for some time plans for each of our 35 program issue areas. Consistent with a NAPA recommendation, we will be making those public this year as we revise them and will regularly make these plans available to the public in future years.

So, I would appreciate it if an example of one of our issue area plans could be put in the record.

Chairman ROTH. Without objection.2

Mr. BOWSHER. Now, what kind of results has GAO produced in the last 14 years? There is some indication today, apparently some report that the staff has made, that GAO is not an efficient operation. There is no question that we can improve the efficiency of GAO, but I think we have also made great strides in GAO in the last 14 years.

In 1992, when we issued our annual report to the Congress, we compared what our productivity had been from 1983 and 1984 right through the other 2-year congressional sessions through 1991 and 1992. In that period of 10 years, or five congressional sessions, we significantly increased our productivity with no increase in staff. For example, between 1983-84 and 1992-93 the number of products that we issued went from around 1,800 up to 3,000. The number of testimonies went up from 300 to 566. The number of recommendations increased from 2,177 to 3,368 and the financial benefits that have been talked about so much here, equaled $100 billion in the 1980's, and have already hit more than $100 billion in the first 5 years of the 1990's.

Now, how did GAO make this improvement? How did GAO nearly double its productivity without any increase in staff? We made a lot of changes to do that. We reorganized the GAO and cut the number of divisions from 12 to 6. But, more importantly, we put a great deal more emphasis on our 35 issue areas, six of which are in defense, where we really get the work done. In earlier days, an issue area was headed up by one member of the SES, and we said that if the issue areas can do good work and get the work planned

1 The annual report appears on page 186.

2 Memorandum containing the issue area plans appears in the Appendix on page 266.

properly, we are going to use that level of our management team to do testifying.

One of the reasons today that we can testify as often as we do and as well as we do is that we have every year somewhere between 60, 70, or 80 people representing GAO, all at the SES level, not Presidential appointees-I am the only Presidential appointee at the GAO-that are able to make good testimonies.

So that in the first 100 days of this Congress, we will have done more than 100 testimonies. I don't think there is any agency, except perhaps the Defense Department-that has been able to do that many testimonies in the first 100 days.

To produce these testimonies, we have devolved a great deal of responsibility to our issue area directors, and we have reorganized our SES so I now have two SESers and in some areas three SESers in each of those issue areas. That gives me much more strength and leadership in how we do our work in areas such as agriculture, transportation, health care, or many of the other agencies.

We also made some major changes to the personnel system. We changed to a pay-for-performance system, and during the past 5 years went from where our best people were at the bottom of the pay scale and our poor performers were getting the most pay to where our best performers are now at the top and are being rewarded for doing the best work.

We also have a merit promotion system, and we have a very good merit selection system into the SES. I have asked the Congress for two increases in the SES, and we have gone from 116 to 145. I asked for that for one very simple reason-that is, coming out of Arthur Andersen & Company, one of the biggest and most successful accounting and consulting firms, I looked at the ratio of their partners to my SES, and it was just out of whack. In other words, when Arthur Andersen in 1973 was an organization of 10,000, they had close to 800 partners. If you think of GAO as an organization of 5,000 and only 116 SESers, why, we had literally one-fourth of the leadership. And that impacted productivity because if somebody would be sick or somebody had to get transferred, then we would have to start over with a whole new person.

By having two members of the SES in each of the 35 issue areas, even sometimes three where I know somebody is going to retire, we have continuity of leadership, and that has been a big factor in the work that we can do and the efficiency that we can do it with.

We also decided to recruit the best. GAO is one government agency that can attract the best young people coming out of the major universities and the private sector. We went after the best, and we got them. We sometimes had as many as 5,000 or 7,000 applicants for 250 openings, and we were able to get people with master's degrees, Ph.D.'s, but more importantly, we were able to attract people with the right temperament and skills to do this work. We want to reain those people after we recruit them, so we also have to develop first rate work environments with modern computer work stations. I think there was a statement a few moments ago suggesting that our computer capability was out of date or not quite up to snuff. That was true for a number of years. One of the reasons was that the House Appropriations Committee wanted to