World-class professional service organizations similar to GAO's multi-discipline workforce invest nearly 6 percent of their budgets in training staff. When staff time and other overhead costs for training are included, GAO's total investment in training its staff was less than 4 percent in fiscal year 1998. For GAO to continue providing timely and high quality service to the Congress, it needs to conduct a comprehensive reassessment of its workforce skills and invest greater resources in training its staff. One specific area in which GAO needs to increase staff training is the use of the new technology and software application packages that are being implemented throughout the organization.

Technology issues.-GAO is on target for ensuring that its systems are Year 2000 compliant. As of December 31, 1998, GAO had completed 97 percent of the renovation-conversion, replacement, or retirement-phase of its 28 mission critical systems. GAO expects to complete the renovations and validations of these systems by the end of March 1999. GÃO's recent upgrade of its desktop and network hardware and software platforms ensures that these systems are Y2K compliant as well.

As illustrated in the following graphic, from fiscal years 1992 to 1995, GAO made major technology investments to improve the efficiency and effectiveness of its mission-related operations. However, beginning in fiscal year 1996, GAO had to significantly reduce these investments to help achieve the 1995 mandated funding reduction.

Additional resources are now needed to address some immediate and continuing critical information technology needs. One short-term priority will be to replace nonY2K compliant laptop computers and software packages that are no longer vendorsupported. In addition, the agency needs to embark on a comprehensive review of its overall information technology strategy, with an eye toward striking a balance between wants, needs, and affordability.

Work Processes.-Over the past several years, GAO made substantial changes to its work processes and significantly improved the way it conducts its work. As a result, the timeliness and average costs of its reviews have improved. However, GAO must be open to continuous improvement to strike an appropriate balance between timeliness and quality and other factors in light of constrained resources and reduced flexibility. I believe that a comprehensive reassessment of such processes should be conducted every 3 to 5 years, with other enhancements being made continuously. Thus, a comprehensive review is planned after GAO's strategic planning process is completed.

Let me move on to the specifics of GAO's fiscal year 2000 budget request for $388,948,000. I am committed to making GAO as economical, efficient, and effective in its operations as possible. GAO needs to take a long-term look at what it needs to maintain its effectiveness in an environment of scarce resources. With your support, I will conduct a comprehensive review of GAO's needs and resources over the next year.

In the meantime, for fiscal year 2000, I am not seeking additional staff above our fiscal year 1999 funded level of 3,275 FTE's or funding for any major new initiatives. I am requesting funds to permit GAO to maintain its current operations, while adding a few modest increases to address several critical existing programs that have not been adequately funded over the past few years.

The funding level increase I am requesting provides for the following:

Uncontrollable Mandatory Costs.-$24,874,000 is needed to cover uncontrollable mandatory costs. Of this amount, $17,589,000 is needed to cover mandatory pay and benefits increases resulting primarily from federal cost-of-living and locality pay adjustments, and increased participation in the FERS retirement system. In addition, $7,285,000 is being requested to offset uncontrollable reductions in GAO's fiscal year

1999 appropriation base. This amount consists of $6,685,000 that was transferred to GAO in fiscal year 1998 to meet fiscal year 1999 needs, which will not be available in fiscal year 2000, and $600,000 for anticipated declines in reimbursements for GAO audits of government corporations.

Uncontrollable Costs for Inflation.-$1,081,000 is requested to cover uncontrollable price-level increases in transportation, lodging, printing, supplies, contracts, and other essential mission support services, based on OMB's 2-percent inflation index.

Critical Needs.-To help GAO get back on track following its downsizing, $6,825,000 is requested for several critical human capital, work process reengineering, travel, and information technology needs. Additional details about each of these follow.

-Human capital.—$2,500,000 is being requested to permit GAO to administer its performance awards for both SES and non-SES staff at a level comparable to that of the executive branch to help ensure our ability to attract and retain top quality staff with specialized skills. GAO also is requesting $750,000 to increase training for its staff to maximize their use of new technology and software application packages that are being implemented. In addition, during the upcoming year, we plan to begin conducting a comprehensive review of our human capital policies, practices, utilization, and needs. It is expected that this study will identify some important new initiatives, and $500,000 is being requested to provide contract and other support for the study and to develop the initiatives. -Work process reengineering.-$500,000 is being requested to reengineer GAO's work processes to increase its responsiveness to and interface with the Congress and enhance the quality, timeliness, efficiency, and usefulness of its products and services. -Travel.-$875,000 is being requested to meet increased demands for travel, particularly foreign travel, that is necessary as a result of recent congressionally mandated reviews and overseas office closures during GAO's downsizing. These mandates include reviews of such issues as the International Monetary Fund, international Y2K readiness, nuclear weapon arsenals, and war zone reviews in the Balkans and Middle East. -Information technology.-$1.7 million is being requested to support several critical information technology needs. Of this amount, $1 million is needed to fund essential fiscal year 2000 needs, including replacing non-Y2K compliant laptop computers and printers, and upgrading outdated system software that is no longer vendor-supported. Also, $200,000 is needed to develop and implement an information technology disaster recovery process. Similar to its human capital study, GAO also plans to conduct a comprehensive review of its information technology during the next year. Thus, $500,000 is requested to provide contractor and other needed support to conduct this comprehensive review and begin developing initiatives that the review will identify.

CONCLUDING REMARKS

Former Comptroller General Charles A. Bowsher and Acting Comptroller General James F. Hinchman did an exceptional job in leading and steering GAO through several difficult years. As I have stated previously, I have inherited one of the best agencies in the federal government. At the same time, there is always room for improvement, and improvement must be continuous in these challenging times.

GAO needs to lead by example and maximize its capacity in an environment of limited resources. To accomplish this objective, GAO needs to make several targeted and strategic investments in human capital (e.g., training, performance measurement and rewards systems) and information technology to help its employees "work smarter." The dollars that I am seeking will help GAO begin addressing some of these critical needs and remain competitive in recruiting and retaining high caliber and skilled staff. In addition, these funds will help GAO gain a better understanding of its human capital, work processes, and technology needs and identify the best and most economical and effective course of action to pursue to address them in the years ahead.

GAO needs the dollars that I am requesting to effectively transition into the 21st century and to continue providing the valuable service that we have so traditionally provided the Congress and the American people. The actions taken to achieve the mandated spending reductions have left little flexibility in our budget to make the needed enhancements that I believe are critical to maintaining GÃO as a strong, effective, and viable operation into the next century. I respectfully request your support of our fiscal year 2000 budget request.

This concludes my statement. I would be pleased to answer any questions the Members of the Subcommittee may have.

TRAVEL REQUEST

Senator BENNETT. Thank you very much.

As I look over at the list of questions that we prepared, I think you covered virtually all of them in your opening statement. So I will turn to Senator Feinstein while I look for something else. [Laughter.]

Senator FEINSTEIN. You know, Mr. Chairman, when I was mayor and I did the budget every year, I would always go immediately to the department's travel budget because it always was sort of interesting to see. This is the first time since I have been Ranking on this committee that I see travel at $875,000.

Mr. WALKER. Do you mean as far as the request? Is that what you are saying?

Senator FEINSTEIN. Yes.

Why is it so high?

Mr. WALKER. The reason it is so high is, number one, we have reduced the number of field offices that we have from 40 to 16. We have closed all of our offices overseas as part of the downsizing. We used to have an office in Frankfurt to be able to deal with European issues. We used to have an office in Hawaii to deal with Asian issues. Those have all been closed. So, as a result, we have to travel more just to be able to cover the same types of issues that we otherwise would have.

Second, the nature of the requests, Senator, that we have been receiving in recent years have really been more international in scope, for example what is going on in Bosnia, changes in Europe, the financial crisis in Asia, World Bank and IMF activities among other things. What about the mass transit systems in Europe and whether they might serve as a model for what we might need to look at here?

So, as a result, to meet the needs of the Congress and, given our reduced number of offices and locations, we have to travel more. Senator FEINSTEIN. Just for fun, can I get a breakdown of these travel plans, please, as well as last year's?

Mr. WALKER. Absolutely, Senator. We will work with you on how much detail you are looking for.

Senator FEINSTEIN. Just how it was spent.

Mr. WALKER. Sure, we would be happy to do that.

Senator FEINSTEIN. And how you plan on spending this.
Mr. WALKER. Sure.

[The information follows:]

Travel is an essential element of GAO's emphasis on the quality of its work. Audit and evaluation work must be sufficiently representative in scope and in the number and type of locations covered to assure the validity of GAO's conclusions and recommendations. For these reasons, time must be spent on-site to observe first-hand where federal dollars are being spent throughout the United States and in foreign locations.

The additional funds requested for fiscal year 2000 are needed to cover increased travel demands, particularly overseas assignments, resulting from Congressional requests, such as reviews of the International Monetary Fund, international Year 2000 readiness, the Bosnia conflict, emerging foreign markets, and safeguarding nuclear weapons arsenals. These mandates require a higher level of overseas travel than what GAO has normally experienced. Also, our travel requirements have in

creased in recent years due to the closure of 14 field and overseas offices since fiscal year 1992.

In fiscal year 1998, 90 percent of our travel funds were used for mission essential travel. Travel for executive direction and support, training, and other administrative activities accounted for the remaining funds. About 5 percent of the trips taken by audit and evaluation staff were to overseas locations. On average, evaluators spent almost 18 days in travel status at an average per capita cost of about $3,200.

Since fiscal year 1992 there has been a steady decline in both the time and amount spent on travel. In fiscal year 1992, travel funds represented about 5 percent of GAO's appropriation, compared to 3 percent since fiscal year 1998. However, in 1992 GAO began its downsizing efforts with the implementation of a hiring freeze. The hiring freeze was soon followed by a 1995, congressionally mandated, 25percent nominal funding reduction over 2 years. This funding reduction necessitated a reduction-in-force, closure of regional and overseas offices, and reductions in available travel funds. Travel funds used in fiscal 1998 are less than half the amount spent in fiscal year 1992.

GAO's downsizing, combined with annual increases in airline fares and per diem rates, necessitated changes in our business practices. Therefore, as early as fiscal year 1992 GAO began implementing a number of practices to reduce travel costs and maximize funds available for mission essential travel. Technology enhancements through the GAO-wide network using a data collection and analysis application, electronic mail, and videoconferencing have helped GAO improve data and communications exchanges, and reduce travel requirements between headquarters and field locations.

OFFSETTING COLLECTIONS

Senator FEINSTEIN. Thank you very much.
Thanks, Mr. Chairman.

Senator BENNETT. Thank you.

I do have one question that was not covered.

The income from receipts for audit work performed by GAO for other agencies has been consistently declining every year. I assume this is because the agencies use their IG's.

Mr. WALKER. Or external auditors.

Senator BENNETT. Or external auditors, contracted with private sector firms.

Now you are projecting an additional decrease of $600,000 in receipts and you are asking Congress to make that up.

There is a little bit of a disconnect there. If, in fact, you are not doing the work and that is why you are not getting the receipts, why should we pay for it?

Mr. WALKER. Senator, I appreciate your comment. I think the way that I would characterize it is this. We have the people. We have to pay the people. We already have backlogs with regard to our work. We are already down to only 4 percent in discretionary jobs. Therefore, we have more than enough work for these people to do. And yet, we are going to lose the revenues that otherwise we were getting.

So, we would like to keep them gainfully employed, meeting the needs of the Congress. But we have to be able to pay them to do that.

ADDITIONAL COMMITTEE QUESTIONS

Senator BENNETT. OK.

I have nothing further. Thank you very much.

Mr. WALKER. Thank you very much, Mr. Chairman and Senator Feinstein.