that has been of particular interest to you, Mr. Chairman—in 1998, GAO produced guides on business continuity and contingency planning and on testing. The executive branch, the private sector, and other governments both in the U.S. and around the world are using these guides, and many of GAO's recommendations on Y2K issues have been adopted.

OPPORTUNITIES TO ENHANCE GAO SERVICES TO THE CONGRESS

In the short time that I have been in office, I have discovered that GAO has done a lot of things right over the past years. But I also believe in continuous improvement and in leading by example. Based on information gathered during my nomination and confirmation process, meetings with congressional members and GAO's senior management team, and visits to GAO headquarters and field offices, I have identified a number of areas in which I believe that GAO can strengthen its services to the Congress and the American people. Let me share with you some of my preliminary observations and how I plan to go about addressing them.

Actions Initiated Thus Far

During this fiscal year, I am taking a number of actions to enhance GAO's operations and services to the Congress. I have already begun to implement a new strategic planning process, which will be completed before the end of the year, if not sooner. We will be taking a broader, thematic look at the issues facing the government and the nation, while employing a multi-dimensional matrix management approach for addressing these issues. My goal is to take advantage of GAO's strength as a multi-disciplinary professional services organization and build a body of work to help the Congress deal with these emerging issues in a timely fashion, before they become crises.

I am also taking steps to enhance GAO's interface with its client-the Congress. GAO must make sure it has clearly defined, transparent, and consistent guidelines governing our relations with the Congress, no matter which party is the majority and which is the minority. By the end of this year, I also plan to have a program in place for gauging, through direct contact with congressional leaders and members, the level of satisfaction with GAO's products and services. I personally will meet at least annually with the top congressional leaders, and other top GAO executives will meet with key committee leaders.

Last, I also am instituting a matrix management approach to how GAO does its work. Matrix management means taking an integrated approach to mission accomplishment, transcending the boundaries among organizational components and functions, so that the capacity of the whole will exceed that of its parts. The issues with which the Congress must contend are often multidimensional and cross-cutting, and the questions coming GAO's way will be increasingly diverse, complex, and demanding. Matrix management is a key to helping the Congress find integrated solutions to the complex issues facing the nation. Importantly, GAO is a major asset to the Congress in this regard, since it is one of the most, if not the most, diverse and experienced professional services firm on earth. In addition, all GAO professionals are dedicated public servants who put the interests of the Congress, the nation, and the American people ahead of their own personal interests.

Longer-Term Actions

Because of the important role that it has in government, GAO needs to be a strong, well-managed organization that sets the standard for "good government" and leads by example. However, as a result of actions taken to achieve its recent downsizing, GAO is facing several immediate human capital, technology, and work process challenges that must be addressed. At the same time, each of these areas needs an in-depth study to determine the best course of action over the longer-term before any major changes or new investments are made. After all, we must make sure that we are getting the most from our current resource allocation before we ask for more.

GAO's past 7 years. In 1992, GAO began its downsizing efforts with the implementation of a hiring freeze. This was soon followed by a 1995, congressionally mandated, 25-percent nominal funding reduction over 2 years. This funding reduction, however, did not take into account uncontrollable inflation and mandatory pay increases, and separation costs for staff leaving GAO service. As a result, GAO had to take dramatic actions to achieve the mandated funding reduction in such a short time period, which ultimately resulted in a much larger reduction in staff than contemplated. It instituted a reduction-in-force; closed regional offices; imposed a 5-year hiring freeze; eliminated performance rewards; curtailed technology investments; and reduced travel, training, supplies, and other support costs to achieve the overall mandated reduction in spending. GAO is now facing a number of critical human

capital, information technology, and work process challenges that it needs to address.

GAO is a much smaller organization today than it was in 1992. During the 7-year downsizing period, GAO's full-time equivalent (FTE) staffing level was reduced by 39 percent. As illustrated below, GAO had a staffing level of 5,325 FTE's in fiscal year 1992. By fiscal year 1998, its staffing level was reduced to 3,245 FTE's.

During its downsizing, GAO reduced the number of its field offices from 30 in fiscal year 1992 to 16 locations today. This reduction included closing 4 major field offices, 8 sublocations, and 2 overseas offices, as illustrated in the following graphic.

While GAO has recently begun taking steps toward reinvigorating its organization and workforce following the downsizing period, I believe a number of things need to be addressed to make GAO as strong as it needs to be to effectively and efficiently fulfill its mission and serve the needs of the Congress and the American people. The following represent some of the key human capital, technology, and work process issues that GAO faces today.

Human capital issues.-Human capital is GAO's most important asset. As illustrated in the following graphic, over 80 percent of its resources are devoted to its workforce in the form of compensation, benefits, rewards, and training. As outlined below, a number of GAO's human capital programs have been detrimentally affected by its past downsizing. A top priority of my tenure at GAO, as well as an area of review for GAO in the rest of government, will be human capital issues. No organization can maximize its economy, efficiency, and effectiveness without assuring the appropriateness and effectiveness of its human capital (people) strategies. This is especially true in the case of professional service organizations.

As illustrated in the following graphic, GAO's hiring freeze lasted 5 years before it was completely lifted at the beginning of fiscal year 1998. Until 1998, its separations far exceeded its new hires.

The 5-year hiring freeze has had several significant effects on GAO's workforce composition and its ability to recruit and retain high caliber, skilled staff. First, as illustrated in the following graphic, GAO's median age increased from 41 in fiscal year 1992 to 47 today.

As a consequence, the percentage of GAO staff eligible for retirement is also steadily increasing. About 33 percent of GAO's current staff will be eligible for retirement by the end of fiscal year 2004. This represents a four-fold increase from today and poses a major challenge for the agency. As illustrated in the following graphic, almost 60 percent of GAO's current SES and more than one-third of its current evaluator and related staff will reach retirement age by the year 2004. This also represents an approximate four-fold increase from current eligibility levels.

In addition to these workforce-aging issues, GAO's compensation package is not on a level comparable to that of the executive branch. To help achieve its mandated funding reduction, GAO eliminated its performance rewards and recognition programs in fiscal year 1993. As a result, GAO has been on an uneven playing field with the executive branch in its ability to recruit and retain high caliber and skilled staff. Last year, GAO lost more than 50 experienced staff to other federal agencies, 20 percent of who were management. GAO also has been losing staff to the private sector, such as CPA and other professional firms. GAO recently implemented a new performance awards program in fiscal year 1998. However, this program is only modestly funded, and we need to quickly return to a level playing field with the executive branch.

Training is another key issue that GAO and its staff have been facing. As illustrated in the following graphic, the amount of resources devoted to external training for GAO's staff has declined over the past 7 years. While GAO also conducts internal training courses, due to the diversity of the skills, knowledge, and technology needed by our workforce, we must supplement this internal training with selected external technical and specialty training. This is particularly important for individuals who need to maintain professional certifications in their chosen field.