fraud-two high risk areas; and oversight of IRS initiatives under the Government Performance and Results Act.

An immediate steep reduction in the tax area's resources will undermine GAO's ability to do the work that Congress has come to expect in the oversight of IRS.

GAO'S FEDERAL MANAGEMENT ISSUE AREA

The Federal Management Issue Area is GAO's central focal point for a broad range of critical bipartisan issues on federal management and statistical information. This area's work includes studies on regulatory reform, progress in implementing the Government Performance and Results Act (GPRA), financial problems of the D.C. government, the integration of management systems and processes, improvements needed to the decennial census, and improvements in the quality, reliability and usefulness of leading social and economic statistical indicators.

Nearly 100 percent of the area's workload is requested by Congress, and many of its responsibilities are at the forefront of the congressional agenda. The area's reports have been a key source of information to Congress, highlighting changes to the federal government's regulatory structure and processes; its NPR studies have become essential resource documents for Congress and other decisionmakers as they seek major cost savings and fundamental improvements in federal government service delivery and customer satisfaction; and the area's work continues to provide critical information and perspective on the successful implementation of GPRA.

A 25 percent budget reduction would require termination of several bodies of work addressing critical federal management issues and reduction of others. Committees likely to be impacted most from such a cut, that accounted for nearly 60 percent of the area's work in fiscal year 1994, are Senate Governmental Affairs, House Banking and Financial Services, House Government Reform and Oversight and its Civil Service and Postal Service Subcommittees. This work depends on a newly established cadre of broad-gauged professionals selected from within GAO to look at government as a whole. Specifically,

-mandated work under the GPRA would have to be severely curtailed. GAO would likely still produce its legislatively mandated June 1997 report, but the scope of the effort would be restricted because of reduced oversight of special initiatives at the departmental and program level.

-overview work on the NPR of interest to a large number of committees would be terminated. While individual issue areas could continue to monitor the more familiar NPR efforts in their program areas, GAO would no longer be able to provide summary or crosscutting analysis of NPR efforts.

-the area's ability to respond to a long-term request from the Senate Governmental Affairs Committee to assist in development of a Blueprint for Government Reform would be severely hampered. In particular, the area would lose much of its ability to meet one of the central aspects of the request-the development of an integrated body of work that provides a complete picture of the opportunities to streamline the government.

-work on the federal regulatory burden of interest to Senate Governmental Affairs, House Ways and Means, and House Economic and Educational Opportunities would also have to be fundamentally rescoped, and work on critical statistics issues would be severely hampered; for example, the area would lose the skills just being deployed to work on technical issues affecting the Consumer Price Index and on information dissemination policy.

A 25 percent budget cut will stop the area from its critical assistance in shaping the congressional management and statistical agendas and, in turn, improving the quality and effectiveness of the services that government delivers to the American people.

GAO'S DOMESTIC AND INTERNATIONAL FINANCIAL AND ECONOMIC ISSUE AREAS GAO has two areas focusing on domestic and international financial and economic issues. Its Financial Institutions and Markets Issue Area (FIMI) assesses the ability of financial regulators to adequately oversee the safety and soundness of financial institutions and markets and to protect American investors and consumers. GAO's International Trade, Finance and Competitiveness Issue Area (ITFC) focuses on assuring that U.S. economic interests are well served through international accords and organizations, promoting the efficiency and effectiveness of international trade and finance programs, and assisting Congress on issues to enhance U.S. competitiveness.

FIMI's work has led to many improvements in financial legislation and regulation. For example, through its reports and recommendations, the area has assisted the Congress in deliberations on financial derivatives, interstate banking, reform of the

Federal Home Loan Bank System, and insider lending. ITFC's reports assisted the Congress, for example, on the 1994 Uruguay Round trade agreement, NAFTA, U.S. government export programs, and agricultural trade strategy. During fiscal years 1992 to 1994 alone these areas testified 67 times.

An immediate 25 percent reduction would mean that GAO would lose specialized expertise, namely in economics, financial and statistical analysis, computer science, information technology, data base management and analysis, banking, and securities law. The reduction would adversely affect GAO's ability to provide early warnings of financial system problems, comprehensive analysis and information on issues relating to financial system safety and soundness, a quick and timely response in the event of a financial crisis, and in-depth analysis of legislative proposals. Committees that would be impacted the most include House Commerce, House Banking and Financial Services, and Senate Banking, Housing, and Urban Affairs, which together accounted for nearly 80 percent of FIMI's work in 1994; and House Agriculture which accounted for one-fifth of the work in ITFC in 1994.

Examples of types of work that would be severely curtailed or could not be done because of loss of GAO talent include work on -financial derivatives, where GAO

currently moving beyond its groundbreaking work on risk to look at sales practices for derivative product, -crosscutting issues such as financial clearance and settlement systems that are a major risk factor for financial safety and soundness, and risk-based capital standards that are a key to global competitiveness of the U.S. financial services industry,

consumer/investor protection in mutual funds where the money invested now rivals that of insured deposits, and

—international financial crises that impact the U.S., such as ongoing work on the Mexican peso; work on international accords such as implementation of NAFTA; and analysis of the new World Trade Organization.

An immediate 25 percent cut could adversely affect 75 percent of the work in these two vital areas and jeopardize GAO's ability to forewarn Congress of impending financial crises, as it was able to forewarn Congress of the impending S&L disaster in the late 1980's.

GAO'S INCOME SECURITY ISSUE AREA

In total, the Income Security Issue Area oversees programs that account for over one-third of all federal spending. The area focuses both on assisting the Congress evaluate the government's income security programs and on identifying fraud, waste, and program mismanagement. In the disability program, the area is focusing on ways to ensure that people are returning to work rather than languishing on the disability rolls. In the welfare area, it is examining major reform measures, notably involving prevention, return-to-work, and block grants. The area's work in Social Security is assisting Congress consider alternatives to ensure the viability of long-term financing for Social Security retirement. Over 40 million persons currently receive income from Social Security, and this number will increase enormously into the next century as the baby boom generation retires. Other important work in this area focuses on assessing whether private pension systems are adequately funded and secure, and assessing implications to Aid to Families with Dependent Children, Disability Insurance, and Supplemental Security Income programs as a result of the rapid increase in recent years in the number of recipients.

Work in this area has contributed significantly to legislative and executive actions resulting in financial benefits and improvements to program operations, including programs of the Department of Health and Human Services, Social Security Administration, and Pension Benefit Guaranty Corporation. For example, during fiscal years 1992 to 1994, the area testified twenty-nine times and saved taxpayers over one billion dollars in measurable financial benefits. Major financial benefits have resulted from implementation of area recommendations leading to improvements in the Social Security Administration's monitoring of its beneficiary rolls, strengthened internal controls over assisted housing programs through computer matching, and improved Pension Benefit Guaranty Corporation collections of premiums and other

income.

A 25 percent budget reduction would severely impact on the area's ability to serve the numerous committees actively interested in income security issues. In particular, Senate Finance, House Ways and Means, and Senate Special Committee on Aging, would be adversely affected, as they account for much of the area's assignments. A severe cut in staff would eliminate much subject matter expertise and substantial bodies of work would have to be severely curtailed or could not be done. This includes work on: the sky-rocketing cost of the Supplemental Security Income

program, whose costs having grown at about 20 percent annually over the past 4 years, now run at $25 billion a year; welfare overpayment problems (AFDC, Food Stamps, and Medicaid), which could run as high as $5 billion a year; ways to encourage disabled persons to return to work; solvency of Social Security program and private retirement systems; and improving efficiency and quality of service at the Social Security Administration.

An immediate 25 percent budget cut would jeopardize the work the area addresses that is at the heart of the current congressional debates on disability program revisions and welfare reform.

Senator BENNETT. Could I ask a few brief questions?
Senator MACK. Sure.

Senator BENNETT. I served on the Governmental Affairs Committee when the Senator was its Chair. I have enormous respect for him. With the rules changes, I did not get a third A committee, so I had to drop that.

Senator GLENN. Well, we miss you.

Senator BENNETT. I would love to be back on that committee.

I do not quarrel with anything you said in your testimony, and the only reason I am taking advantage of you being here is that you are a key figure, since you are on Governmental Affairs.

As I have investigated this issue, I found turf battles going on in these same areas between GAO and the inspectors general with both claiming credit, if you will, for the same savings, and GAO saying in some circumstances, "Well, we represent the Congress. And in order to get the efficiency that our audit arm can produce, we need to take over the examination of this," and the inspector general saying, "My job is to see that these kinds of things do not happen and that the management practices at the department cleanup."

And the reason I am leaning toward some cutting of the GAO is not because I do not believe what you are saying, but because my own experience in trying to downsize the business is that one of the most vicious circumstances you can get into is to have two groups have the same assignment and begin to battle over turf for that assignment, and then go to the decisionmaker to claim credit two and three times for the same accomplishment.

Given your background on governmental affairs and your involvement in getting the inspectors general into place properly and the CFO's into place, I agree with you that that is a major, major step forward.

Would you just comment briefly on this issue of overlapping jurisdiction and turf battles?

Senator GLENN. I would be glad to, and maybe we need to straighten out some of the overlap. I do not claim that there is no overlap. There may be some, and maybe we have to straighten it

out.

The inspectors general are more they concentrate more on the fraud and abuse-I think the year before last we had 2,900-andsome cases that they had successfully prosecuted to the Justice Department.

We got back, I think, a little over $2 billion, something like that, that we actually got back from inspector general filings-suits that were filed through Justice. That is the type of thing that the inspectors general normally get involved with.

As far as the comments on-as far as the GAO studies, like some of the things that I mentioned here, where they have done studies on-and they are following up on all the CFO requirements and checking the audits, some of the audits, that the inspectors general do, but going more completely into a whole audit program for each agency and department.

They only have people right now to do, I think, is four departments on a pilot basis and are expanding that out, just because GAO did not have the people to go beyond that. I wish we had enough people over there to do an audit of every single department and agency of Government.

The inspectors general are charged with looking at their own internal books and reporting to us, too. But the GAO takes a much broader look at this thing and goes into such things as the different accounting systems that we have. They have identified over 200 different accounting systems in Government.

They are trying to put standards out that will get us down to better accounting standards so that one computer system can talk to another.

The Department of the Army has 43 different accounting systems. No wonder we sometimes do not know what is going on. GÃO works in those areas.

Now, under that, the inspector general then, at DOD, would be doing work on trying to get specific suits filed against contractors for overpayment or whatever and get money back from that. So I think there may be some areas we want to straighten out.

But I think to cut back on the funding that GAO has when they are already in the middle of a one-fourth reduction right now-a 5-year, one-fourth reduction on a very orderly basis, and if we cut further into that, we really are going to cut the muscle, I think. Senator BENNETT. Thank you, Mr. Chairman.

Senator MACK. Thank you again, Senator Glenn.
Senator GLENN. Thank you.

OFFICE OF TECHNOLOGY ASSESSMENT

STATEMENT OF DR. ROGER C. HERDMAN, DIRECTOR

ACCOMPANIED BY:

PETER BLAIR, ASSISTANT DIRECTOR FOR INDUSTRY, COMMERCE, AND INTERNATIONAL SECURITY

CLYDE BEHNEY, ASSISTANT DIRECTOR FOR HEALTH, LIFE SCIENCES, AND THE ENVIRONMENT

JAMES JENSEN, DIRECTOR, CONGRESSIONAL AFFAIRS

JACK BOERTLEIN, BUDGET AND FINANCE OFFICER

ISSUES ADDRESSED BY OTA AND OTHERS

Senator MACK. We will now turn to the OTA.

Did you have a statement that you wanted to make with respect to the OTA?

Senator BENNETT. No.

Senator MACK. OK. Fine.

I have a few more comments, Dr. Herdman, to make before I turn to you for your statement.

Dr. HERDMAN. Yes, sir.

Senator MACK. In reviewing OTA reports completed in the last few years, it has become clear to me that nearly all the issues addressed at OTA in these studies have been covered in reports published by other organizations.

These organizations would include the National Academy of Science and Engineering, the Institutes of Medicine, Congressional Research Service, Congressional Budget Office, General Accounting Office, executive branch agencies, and scores of academic groups.

In addition, a number of private think tanks, such as the Mitre Corp., Rand, The Brookings Institute, and the American Enterprise Institute, have completed studies on these same issues. And I have several examples of reports done by OTA and by some of these other organizations.

I want to make a statement with respect to the work that OTA does, so that we at least start on the same basis. I am not engaged in saying that your reports are inadequate or not high quality or not comprehensive.

So let us start from that premise, that I am not here attacking the quality of the work or the people that you have in your organization. That is not where I am coming from.

EXAMPLES OF TOPICS ADDRESSED BY OTA AND OTHERS

With respect to the first example I would give would be the national health expenditures, 1994. This first example also reinforces a concern I voiced at last year's hearings about OTA embarking on studies that are outside its core mission, to provide technology assessments.