MEMORANDUM SUBJECT: Review of the General Accounting Office Overview: The Republican Conference voted to reduce the 1996 funding for the General Accounting Office by 25% over the current budget of $443 million. This translates to improving the efficiency and effectiveness of GAO work processes to save $78,600 per job. We have been looking at improvements in efficiency and effectiveness, as well as reductions in overhead costs, to enable the 25% cut, plus a 5% buffer for transition. Our review used the business process improvement techniques that we will apply to all Federal agencies. In particular, we have targeted issues which drive organizational effectiveness. This includes GAO's strategic planning process, utilization of resources to perform audits and evaluations, non-value added layers of management and overhead spending. Results: Our review confirmed many of the key findings and recommendations of the National Academy of Public Administration. As with industry restructuring efforts, our review showed that a major change in the way GAO does its work will yield both effectiveness and efficiency. We found that GAO's average cost per job of $396,000 could be reduced by $194,000, by improving GAO's use of modern analytic methods and computers. This alone yields $147 million in savings, or 33% of the budget. We also found that overhead costs could be reduced significantly from the current 30% of the GAO budget. Issues: Poor Job Management: GAO has not adapted it old audit process to the variety of product types and work it now performs. This situation affects both quality and cost. Their work process is labor intensive and often DUPLICATIVE. Consequently, GAO's work efforts are expensive. The GAO data shows an average cost of $400,000. For example, we were given all of GAO's reviews and cost summaries of the Tax System Modernization for the past three years. The costs ranged from $10,000 to $150,000, but most were simply displays of the agency's own data in a chart format. These costs are driven by the vast number of people brought into each job, generally 10 to 20 staff and supervisors. This in turn was caused by GAO's lack of key labor skills (e.g., certified cost analysts), computer-based analytic tools, and databases. GAO's Job Management Problems can be seen by the fact that GAO's laborforce spends only 72% of their time on actual work, or one in four staff are not needed. The professional services industry benchmark is that staff spend 85% to 90% on actual work. These problems affects the usefulness of GAO's work in terms of: Timeliness (GAO is late 80% of the time for reports, 60% for all products); poor quality recommendations which many staff consider biased or watered down; and the percent of key recommendations High Overhead Costs: In 1994, GAO devoted $128 million to overhead, representing 29.6% of its budget. There are 23 staff offices headed by five Assistant Comptrollers General and 18 Senior Executive Service officials, but only six operating divisions (also headed by Assistant Comptrollers General). The National Performance Review stated the ratio should be one supervisor to 14 employees. There are so many managers that one in six employees are senior managers (Senior Executive Service and GS-15 employees) at GAO. In the field offices, there is one supervisor to 19 evaluators. Despite consisting of less than 0.2% of the total federal workforce, GAO employs 2% of the federal Senior Executive Service workforce. In the arena Defense work, there are 11 layers of management between a line auditor/evaluator and the Comptroller. In the non-defense arena, there are 9 layers of management. As a result, GAO charges to jobs an average cost per day of $664 ($83 per hour) per staff working on that job. Inability to Cut Wasteful Expenditures: Over the past two years, GAO has been downsizing its workforce. Rather than shedding non-value added expenditures and overhead, GAO has reduced its core resource line workers. For example, Senior Executive level employees increased 5% from 138 to 145 over the last five years. Senior managers, at the GS-15 level increased 12% over the last five years. Line workers, in the GS-7 to GS-12, range were cut 34%. Senior management grew, even though there were fewer workers to manage. GAO spends over $100,000 for executive parking spaces outside the headquarters, and increased 11 spaces in 1994. They also spent $92,000 in publications (mostly popular newspapers and magazines) for executives. Moreover, GAO's Total Quality Management Program has been very ineffective. While costing about $1 million, GAO generated recurring savings of $820,000 (less than 0.25% of its budget) and only 9 staff were shifted to higher priority work. Examples included: taking advantage of airline fare wars, using fourth class postage, and "cutting award costs by not providing unneeded frames for award photos and letters." However, rework of products increased. Lack of Customer Responsiveness in Strategic Planning and use of Resources: The General Accounting Office's workload has declined and changed over the past 20 years. |