see what kind of a mission-oriented system we could design before they would approve some of our computer buys.

But I can tell you this, Mr. Chairman: At the end of this fiscal year, at GAO all the professional people will have modern computers, and we will have our network all but in place. In other words, we might not quite get it by December, but shortly thereafter we will have completely networked the organization. We have also installed video conferencing for example, which has resulted in big savings. We don't need any more for our people in our field offices to get in an airplane and fly to Washington for a 2-hour meeting. We can do it by video conference because we have all our major field offices hooked up. We have cut our travel costs by a third as a result of the investment in video conferencing and our computer network.

One of the other things we hope to do is to move to a missionoriented computer system for our data collection and analysis. I sat in the San Francisco office last year and saw one of my San Francisco field teams working with my Washington team, and they were able to put together a testimony without ever flying to Washington, without ever sending any paperwork. In other words, by using electronic methods, we moved that information to Washington and were able to put testimony together in a few hours.

We are also using new technology to efficiently complete basic auditing tasks. As you know, most of our results are dependent on basic audit work conducted in the field. We have modernized the techniques for picking up that information. For example, in the old days when you would go out, you would develop big spread sheets and have lots of paperwork and a lot of rewriting. Today, with modern computers and modern techniques we are able to pick up the information and scan it; or we utilize computer tapes.

As a result of measures such as these, over the past 10 years before we began downsizing the organization we significantly increased our productivity without any increase in staff, and we more than doubled the number of dollars savings for the American tax

payer.

We have also invested heavily in quality management principles. This began when the Senate Finance Committee, Mr. Chairman, of which you were a Member under Senator Bentsen's leadership, asked us to go out and look at the Baldrige Award program. The Baldrige Award is given to companies that do the best in improving the quality of their processes. As we did that work, my staff came back and said, Mr. Bowsher, you ought to come out and look at these companies personally because some of them are making great strides. They are really making great improvements on their quality and how they do the work. So I went out, and I looked at some of these companies, especially in the auto industry, in which I had some background, having worked my first job out of college at the Chrysler Corporation. And I became convinced that my staff was right.

I also went to Motorola, and I met with Bob Galvin, the CEO of Motorola, and he said that he thought this TQM effort that Dr. Demming and others had gotten started in Japan and now have moved over to the United States was very beneficial for his company, not only in the manufacturing areas but in some of the other

administrative and service areas. I had him come to Washington to speak to our management team and he helped convince me and my team that TQM offered opportunities for improving GAO. We then had Dr. Demming come and visit us on a Saturday, and, of course, he strongly recommended it. He was also very intrigued by the fact that a government agency was willing to give it a good shot, because he said in Japan-and we found this later, talking to the Japanese-the government there has never been willing to look at improving its processes like their manufacturing industry has.

So since 1991 we have had a TQM program to help improve the operations at GAO, and we have made some good progress. For example, we have made good progress in improving communications with our staff by following to a great extent, recommendations from Federal Express. And I might say also that going back a number of years, we redid the format of all our products based on the advice of a consultant out of New York, and we shortened up our products and made them much more readable and useful.

But we do have one major problem left at the GAO. It is one that we ourselves have been aware of for some time. It is one that is brought up when we interview staff and Members of the Congress, and it is one that NAPA mentioned in their report. That is, we do not have a good streamlined process in producing our major reports.

One of the reasons why some of the hearing charts might indicate some lateness is that we have a variety of reports and a variety of products that we have to produce, and we have a lot of different requests coming in. And we have a lot of different events that happen that impact on how we do our work.

When we do 100 testimonies in the first 100 days of the Congress, that means that a lot of people have to be working. A lot of our senior people have to be working on those testimonies. So sometimes they have to set aside their work on a main audit blue book report that they are also doing. But we have never missed a testimony. In other words, we have 100 percent timeliness on doing our testimonies and also in getting the testimonies up to the committees.

We have also made major progress on our briefing reports. This is where we come up and brief someone and then we provide them a report. We used to take weeks to file the report. We now do it in 7 days. That is our goal. And lots of times we do it within 3 or 4 days.

But we still have the major reports that we issue, and we have a major program trying to re-engineer this process. We have a major consultant that is helping us do it, and this is one of the things I was hoping to get done before I go out of office in 18 months. It is not easy, but to me, it is the crucial issue we must solve. As part of improving our assignment management process, we will be doing a risk/complexity assessment, you might say, of each job that comes in. And we have taken the recommendations of NAPA, and have formed a group called "Team Agriculture," which is going to do a prototype on the use of terms of reference that include several items including cost estimates. The terms of reference should improve the communications with the Congress, improve the staffing, and we certainly hope in the end result we

will improve the timeliness of doing our work. And that prototype, which includes 100 staff years in the agriculture area, is what we are hoping will give us the indication of how we can then spread those lessons learned into the rest of the organization.

Many people would like us to move faster on an improvement like that, and I would like to do it, too. But all too often I think, without prototyping, you sometimes think you know the answer, until you try it.

We are committed to improving our processes. It is just not easy. We are in touch with all the big accounting firms and many of the management consulting firms in the type of work that we are in. And all of them are working on this same issue. All of them have had the same problems as GAO. And I think that one of us is going to crack it, I hope we will be able to do it.

I would also like to say as somebody_pointed out, that GAO is the central auditing organization of the Federal Government of the United States and that every other country has such a function. I can tell you this, Mr. Chairman, that GAO is viewed by all of those others as the premier auditing organization of Federal Governments or National Governments. And we have been very active internationally to try to export, literally, how we do our work here with our yellow book standards, our national internal control standards, and in many other ways.

We have also played the same role in State and local government auditing. If you go back to when the New York City fiscal crisis hit in the mid-1970's, most of the cities of this country and none of the States were audited. GAO under my predecessor began working with the State and local governments. We eventually passed legislation with the help of this Committee, and today all of the States and all of the cities under the Single Audit Act have audits and they have financial reports, and much of their work is patterned after the GAO's work.

That has taken a lot of effort, but it has been well worth it because that is what has helped to keep some of the cities and States from coming to Washington for bailouts in this last great recession.

But as we see, we have a situation in the District of Columbia which is very serious, and GAO's reports recently have shown how serious it is. And I think that is a pretty good illustration of how something comes up that we have to deal with that we didn't plan on. We have to put teams of 5 or 10, to adequately respond to requests for work we added and now 12 more people to work in this area. Inevitably, this disrupts some of our other work, but we have to keep moving to where the problems are.

When the S&L crisis came, we traditionally had audited the insurance funds, both the FDIC and the FSLIC insurance funds, and there were no problems in those insurance funds. But in the middle of the 1980's, the problems started. So we had to go out and look at what was causing those problems. We had to go out and look at what were the factors other than the economic factors that were causing them. And one of the big problems was a lack of internal controls. Many of the banks and the S&L's that went down went down pretty much for the same reason as the Singapore situation recently on derivatives: Lack of internal controls. And we have reported on this issue.

We did a lot of work in that area, and we did it by shifting our people from one area to the next. We did not come to the Congress and ask for additional staff.

Downsizing at GAO-Starting in 1992, because the pressure was on to reduce the legislative appropriation, the Congress reduced our appropriation, and we have been coming down from about 5,300 FTEs, to around 4,700, and we have a plan now to come down to 3,975. That would be a 25-percent staff cut at GAO over 5 years. That would save in payroll and benefits alone $130 million a year for the American taxpayer, over $1 billion over 10 years.

So if we go back to what Senator Levin said; he would like to compare GAO's costs against its savings, and I think, this is very important because we don't want to come down in size and not be able to do the work that generates all those billions of dollars of savings and all the other good work that GAO does.

As I said in our annual report last year, we have come down in size and are committed to managing this reduction so that the quality and the impact of our work are not compromised. And that is why we wanted to do it and still want to do it over a 5-year period, of which we have already completed about 3 years. I am quite confident that we can come down in the next 2 years and achieve that 25-percent staff cut.

That, Mr. Chairman, is what we would strongly recommend to the Congress; that we be allowed to do it that way and not have one of these large draconian cuts of like 25 percent in 1 year, because if that happens, we will then have to RIF hundreds of our people, and it will be so disruptive that GAO, which is often referred to as a model by, for example, the Volcker Commission when it looked at personnel and as raised by Mr. Ornstein the other day at a hearing that GAO had improved the working conditions of its people and had attracted the best people to work in the organization. I think we could have a real disaster and no longer be a model, but actually be a mess as an organization if we have to come down very precipitously in 1 year.

So, Mr. Chairman, I hope that we can continue to work with this Committee. We want to work with you. I know that you are interested in re-engineering the government. We feel that we have done quite a bit of re-engineering at GAO already. We have this plan to support and improve our processes, and we would like to do it, but we would like to do it in a very measured way to make sure we are doing it right and we are not getting ourselves into trouble.

Thank you very much. We would be happy to answer any questions.

Chairman ROTH. Well, thank you, Mr. Bowsher. Our goals are the same. As I have already indicated, GAO does discharge an important responsibility. The question is: How can we improve it?

It has been shown in the private sector that better services can often be provided with less people, with less cost, and that is what we are here to do, to try to determine how we can work together in improving what we all agree is a very important organization. Now, in 1992, GAO initiated a downsizing effort, and my understanding from your figures is that you have been successful in cutting your workforce by 12 percent.

Mr. BOWSHER. That is correct.

Chairman ROTH. At the same time, it has not resulted in, as I understand it, any savings, personnel savings. I would also note that I think your so-called TQM initiative—I would like to have a little more information as to what it has resulted in. The information we have is that it has brought about some minor cutting measures like buying better fax machines, not framing congratulatory letters, award certificates. But I think you will agree with me those are not major accomplishments.

Then there has been a lot of concern about the lateness and the fact that the costs of reports have actually gotten worse since the TQM initiative began.

Let me ask you this: Can GAO's internal downsizing efforts produce real dollar savings for the Federal taxpayer? And if so, when do you think that will begin?

Mr. BOWSHER. Well, I think it already has begun, Senator. As I point out, we are down by over 700 staff. Eighty percent of our costs are payroll and overhead, so we have saved the payroll and the benefit costs of the 700 people that are no longer with us.

You point out that the budget doesn't indicate a drop in dollars from 1992, and that is because of the pay increases that are beyond my control. In other words, when Congress passes pay increases for the remaining 90 percent of the people that are still there at GAO each year, in such areas as locality pay and cost of living increases, that, of course, raises the cost of salaries for the remaining people. But if we had not come down by 700 people, you would have had that cost in addition to the cost of GAO current staff.

Also, we spend about 8 percent of our budget on technology improvements to make our organization more effective. But that investment is less than 10 percent of the cost of the people. So, in other words, the investment in the technology pays off in your being able to have a reduced size of GAO. Therefore, my plan is to come down the 25 percent in staff and, as I say, save $130 million.

But if the pay increases and the cost of living and other things go up then that will eat away at some of those savings. But they are real savings because you have that much fewer people.

Now, if I could answer another part of your question, on our TQM program.

Chairman ROTH. Yes.

Mr. BOWSHER. In TQM, we basically have had what I call two major efforts, and if you go to the Honda company in Ohio, for example, or any of the companies that have used these techniques, you will see that they do go at it two different ways. One is they encourage their employees to find ways of saving money improving how they do the work. That is what we have done, and that is what we have highlighted in our Management News reports. And the savings aren't big, generally, but there are some savings, and the people feel that they are contributing to the overall success of your operation. So we have done the same as other companies have, and we have featured it in our Management News.

I think your staff has added that up and indicated that that is the total benefit of TQM. Not at all. If we had not had the TQM process, I am not sure that we could have brought down the organization in the last 3 or 4 years by 700 people and still maintained