Opportunities To Reduce Potential Duplication in Government Programs, Save Tax Dollars, and Enhance Revenue (GAO)

Report to Congressional Addressees
March 2011

GAO-11-318SP

United States Government Accountability Office
GAO
Opportunities to
Reduce Potential
Duplication in
Government
Programs, Save Tax
Dollars, and Enhance
Revenue
1
Contents
Letter
SectionI GAOIdentifiedAreasofPotentialDuplication,
Overlap,andFragmentation,Which,ifEffectively
Addressed,CouldProvideFinancialand
OtherBenefits 5
SectionII OtherGAO-IdentifiedCost-Savingand
Revenue-EnhancingAreas 155
AppendixI ListofCongressionalAddressees 334
AppendixII Objectives,Scope,andMethodology 336
Pagei GAO-11-318SP
Abbreviations
AC BureauofArmsControl
AFR AgencyFinancialReport
AFV alternativefuelvehicle
AHLTA ArmedForcesHealthLongitudinalTechnology
Application
ARS AgriculturalResearchService
ATF BureauofAlcohol,Tobacco,FirearmsandExplosives
AUR AutomatedUnderreporterProgram
BEA businessenterprisearchitecture
BEST BorderEnforcementSecurityTaskForce
BLM BureauofLandManagement
BOEMRE BureauofOceanEnergyManagement,Regulationand
Enforcement
BPA blanketpurchaseagreement
BRAC baserealignmentandclosure
CBP CustomsandBorderProtection
CDE CommunityDevelopmentEntities
CFDA CatalogofFederalDomesticAssistance
CDFI CommunityDevelopmentFinancialInstitution
CERP CommandersEmergencyResponseProgram
CIO ChiefInformationOfficer
CMS CentersforMedicare&MedicaidServices
COBRA ConsolidatedOmnibusBudgetReconciliationActof
1985
Commerce DepartmentofCommerce
CorrosionOffice OfficeofCorrosionPolicyandOversight
DHS DepartmentofHomelandSecurity
DLA DefenseLogisticsAgency
DNDO DomesticNuclearDetectionOffice
DOD DepartmentofDefense
DOT DepartmentofTransportation
DSH DisproportionateShareHospital
EAS EssentialAirService
Education DepartmentofEducation
EDA EconomicDevelopmentAdministration
EHR ElectronicHealthRecord
Energy DepartmentofEnergy
EPA EnvironmentalProtectionAgency
EPAct EnergyPolicyAct
FAM ForeignAffairsManual
Pageii GAO-11-318SP
FBI FederalBureauofInvestigation
FCC FederalCommunicationsCommission
FDA FoodandDrugAdministration
FEMA FederalEmergencyManagementAgency
FFS fee-for-service
FMCSA FederalMotorCarrierSafetyAdministration
FPDS-NG FederalProcurementDataSystem-NextGeneration
FSIS FoodSafetyandInspectionService
FSSI FederalStrategicSourcingInitiative
FTA FederalTransitAdministration
FTHBC First-TimeHomebuyerCredit
Fund UniversalServiceFund
GAGAS generallyacceptedgovernmentauditingstandards
GHG greenhousegas
GPO GovernmentPensionOffset
GPRA GovernmentPerformanceandResultsAct
GSA GeneralServicesAdministration
HHA homehealthagency
HHS DepartmentofHealthandHumanServices
HUBZone HistoricallyUnderutilizedBusinessZone
HUD DepartmentofHousingandUrbanDevelopment
IBET IntegratedBorderEnforcementTeam
IED improvisedexplosivedevice
IG InspectorGeneral
Interior DepartmentoftheInterior
IPERA ImproperPaymentsEliminationandRecoveryAct
IRS InternalRevenueService
ISN BureauofInternationalSecurityandNonproliferation
ISR intelligence,surveillance,andreconnaissance
IT informationtechnology
JIEDDO JointIEDDefeatOrganization
Justice DepartmentofJustice
Labor DepartmentofLabor
MAS MultipleAwardSchedule
MEA matherrorauthority
MHS MilitaryHealthSystem
MPPR multipleprocedurepaymentreduction
NAFTA NorthAmericanFreeTradeAgreement
NASA NationalAeronauticsandSpaceAdministration
NMTC NewMarketsTaxCredit
NP BureauofNonproliferation
NSLP NationalSchoolLunchProgram
Pageiii GAO-11-318SP
OFPP OfficeofFederalProcurementPolicy
OMB OfficeofManagementandBudget
ONRR OfficeofNaturalResourcesandRevenue
O&S operatingandsupport
PAR PerformanceandAccountabilityReport
PBL performance-basedlogistics
PMS PaymentManagementSystem
RAC recoveryauditcontractor
RFS renewablefuelstandard
ROI returnoninvestment
S&T ScienceandTechnologyDirectorate
SBA SmallBusinessAdministration
SNAP SupplementalNutritionAssistanceProgram
SPOT ScreeningofPassengersbyObservationTechniques
SSA SocialSecurityAdministration
State DepartmentofState
STEM science,technology,engineering,andmathematics
TANF TemporaryAssistanceforNeedyFamilies
Treasury DepartmentoftheTreasury
TSA TransportationSecurityAdministration
USAC UniversalServiceAdministrativeCompany
USAID U.S.AgencyforInternationalDevelopment
USDA DepartmentofAgriculture
USICH U.S.InteragencyCouncilonHomelessness
VA DepartmentofVeteransAffairs
VC BureauofVerificationandCompliance
VCI BureauofVerification,Complianceand
Implementation
VEETC VolumetricEthanolExciseTaxCredit
VistA VeteransHealthInformationSystemsandTechnology
Architecture
WEP WindfallEliminationProvision
WIA WorkforceInvestmentAct
WIC SpecialSupplementalNutritionProgramforWomen,
Infants,andChildren
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Pageiv GAO-11-318SP

Page 1 GAO-11-318SP
United States Government Accountability Office
Washington, DC 20548
March 1, 2011
Congressional Addressees:
This is GAOs first annual report to Congress in response to a new
statutory requirement that GAO identify federal programs, agencies,
offices, and initiatives, either within departments or governmentwide,
which have duplicative goals or activities. Congress asked GAO to conduct
this work and to report annually on our findings.
1
This work will inform
government policymakers as they address the rapidly building fiscal
pressures facing our national government. GAOs most recent update of its
annual simulations of the federal governments fiscal outlook underscores
the need to address the long-term sustainability of the federal
governments fiscal policies.
2
Since the end of the recent recession, the
gross domestic product has grown slowly and unemployment has
remained at a high level. While the economy is still recovering and in need
of careful attention, there is widespread agreement on the need to look not
only at the near term but also at steps that begin to change the long-term
fiscal path as soon as possible without slowing the recovery. With the
passage of time, the window to address the challenge narrows and the
magnitude of the required changes grows. GAOs simulations show
continually increasing levels of debt that are unsustainable over time
absent changes in current fiscal policies.
The objectives of this report are to (1) identify federal programs or
functional areas where unnecessary duplication, overlap, or fragmentation
exists, the actions needed to address such conditions, and the potential
financial and other benefits of doing so; and (2) highlight other
opportunities for potential cost savings or enhanced revenues. To meet
these objectives, we are including 81 areas for consideration based on
related GAO work. This report is divided into two sections. Section I
presents 34 areas where agencies, offices, or initiatives have similar or
overlapping objectives or provide similar services to the same populations;
or where government missions are fragmented across multiple agencies or

1
Pub. L. No. 111-139, 21, 124 Stat. 29 (2010), 31 U.S.C. 712 Note.
2
GAO, The Federal Governments Long-Term Fiscal Outlook: Fall 2010 Update,
GAO-11-201SP (Washington, D.C.: Nov. 15, 2010). Additional information on the federal
fiscal outlook, federal debt, and the outlook for the state and local government sector is
available at: www.gao.gov/special.pubs/longterm/.

Comptroller General
of the United States
programs.Theseareasspanarangeofgovernmentmissions:agriculture,
defense,economicdevelopment,energy,generalgovernment,health,
homelandsecurity,internationalaffairs,andsocialservices.Withinand
acrossthesemissions,thisreporttouchesonhundredsoffederal
programs,affectingvirtuallyallmajorfederaldepartmentsandagencies.
Overlapandfragmentationamonggovernmentprogramsoractivitiescan
beharbingersofunnecessaryduplication.Reducingoreliminating
duplication,overlap,orfragmentationcouldpotentiallysavebillionsoftax
dollarsannuallyandhelpagenciesprovidemoreefficientandeffective
services.Theareasidentifiedinthisreportarenotintendedtorepresent
thefulluniverseofduplication,overlap,orfragmentationwithinthe
federalgovernment.Wewillcontinuetoidentifyadditionalissuesinfuture
reports.
Giventodaysfiscalenvironment,SectionIIofthisreportsummarizes47
additionalareasbeyondthosedirectlyrelatedtoduplication,overlap,or
fragmentationdescribingotheropportunitiesforagenciesorCongressto
considertakingactionthatcouldeitherreducethecostofgovernment
operationsorenhancerevenuecollectionsfortheTreasury.Thesecost-
savingsandrevenueopportunitiesalsospanawiderangeoffederal
governmentagenciesandmissionareas.Theissuesraisedinbothsections
weredrawnfromGAOspriorandongoingwork.
Manyoftheissuesincludedinthisreportarefocusedonactivitiesthatare
containedwithinsingledepartmentsoragencies.Inthosecases,agency
officialscangenerallyachievecostsavingsorotherbenefitsby
implementingexistingGAOrecommendationsorbyundertakingnew
actionssuggestedinthisreport.However,anumberofissueswehave
identified,particularlyintheduplicationarea,spanmultipleorganizations
andthereforemayrequirehigher-levelattentionbytheexecutivebranch
orenhancedcongressionaloversightorlegislativeaction.
Insomecases,thereissufficientinformationavailabletodaytoshowthat
ifactionsaretakentoaddressindividualissuessummarizedinthisreport,
financialbenefitsrangingfromthetensofmillionstoseveralbillion
dollarsannuallymayberealizedbyaddressingthatsingleissue.For
example,whiletheDepartmentofDefenseismakinglimitedchangesto
thegovernanceofitsmilitaryhealthcaresystem,broaderrestructuring
couldresultinannualsavingsofupto$460million.Similarly,we
developedarangeofoptionsthatcouldreducefederalrevenuelossesby
upto$5.7billionannuallybyaddressingpotentiallyduplicativepolicies
designedtoboostdomesticethanolproduction.Likewise,weidentifieda
numberofotheropportunitiesforcostsavingsorenhancedrevenuessuch
Page2 GAO-11-318SP
asreducingimproperfederalpaymentstotalingbillionsofdollars,or
addressingthegapbetweentaxesowedandpaid,potentiallyinvolving
billionsofdollars.Collectively,thesesavingsandrevenuescouldresultin
tensofbillionsofdollarsinannualsavings,dependingontheextentof
actionstaken.
Inothercases,preciseestimatesoftheextentofunnecessaryduplication
amongcertainprograms,andthecostsavingsthatcanbeachievedby
eliminatinganysuchduplication,aredifficulttospecifyinadvanceof
congressionalandexecutivebranchdecisionmaking.Insomeinstances,
neededinformationonprogramperformanceisnotreadilyavailable;the
leveloffundinginagencybudgetsdevotedtooverlappingorfragmented
programsisnotclear;andtheimplementationcoststhatmightbe
associatedwithprogramconsolidationsorterminations,amongother
variables,aredifficulttopredict.Forexample,weidentified44federal
employmentandtrainingprogramsthatoverlapwithatleastoneother
programinthattheyprovideatleastonesimilarservicetoasimilar
population.However,ourreviewofthreeofthelargestprogramsshowed
thattheextenttowhichindividualsreceivethesameservicesfromthese
programsisunknownduetoprogramdatalimitations.Inaddition,
Congressdeterminationsinmakingpolicydecisionsandactionsthat
agenciesmaytakewouldaffectthepotentialsavingsassociatedwithany
givenoption.
3
Nevertheless,consideringtheamountofprogramdollars
involvedintheissueswehaveidentified,evenlimitedadjustmentscould
resultinsignificantsavings.
Giventhechallengesnotedabove,careful,thoughtfulactionswillbe
neededtoaddressmanyoftheissuesdiscussedinthisreport,particularly
thoseinvolvingpotentialduplication.Additionally,inJanuary2011,the
PresidentsignedtheGPRAModernizationActof2010,
4
updatingthe
almosttwo-decades-oldGovernmentPerformanceandResultsAct
(GPRA).
5
Implementingprovisionsofthenewactsuchasitsemphasis
onestablishingoutcome-orientedgoalscoveringalimitednumberof
crosscuttingpolicyareascouldplayanimportantroleinclarifying
3
ThemandatecallingforthisreportalsoaskedGAOtoidentifyspecificareaswhere
Congressmaywishtocancelbudgetauthorityithaspreviouslyprovidedaprocess
knownasrescission.Todate,GAOsworkhasnotidentifiedabasisforproposingspecific
fundingrescissions.
4
Pub.L.No.111-352,124Stat.3866(2011).
5
Pub.L.No.103-62,107Stat.285(1993).
Page3 GAO-11-318SP
desiredoutcomes,addressingprogramperformancespanningmultiple
organizations,andfacilitatingfutureactionstoreduceunnecessary
duplication,overlap,andfragmentation.
Asthenationrisestomeetthecurrentfiscalchallenges,GAOwill
continuetoassistCongressandfederalagenciesinreducingduplication,
overlap,orfragmentation;achievingcostsavings;andenhancingrevenues.
InGAOsfutureannualreports,wewilllookatadditionalfederal
programstoidentifyfurtherinstancesofduplication,overlap,or
fragmentation,aswellasotheropportunitiestoreducethecostof
governmentoperationsorincreaserevenuestothegovernment.Likewise,
wewillcontinuetomonitordevelopmentsintheareaswehavealready
identified.Issuesofduplication,overlap,andfragmentationwillbe
addressedinourroutineauditworkduringtheyearasappropriateand
summarizedinourannualreports.
Thisreportisbasedsubstantiallyuponworkconductedforongoingaudits
andpreviouslycompletedGAOproducts,whichwereconductedin
accordancewithgenerallyacceptedgovernmentauditingstandardsor
withGAOsqualityassuranceframework,asappropriate.Weconducted
theworkfortheoverallreportfromFebruary2010throughFebruary2011.
Forissuesbeingreportedonforthefirsttime,GAOsoughtcomments
fromtheagenciesinvolvedandincorporatedthosecommentsas
appropriate.AppendixIIcontainsadditionaldetailsofourscopeand
methodology.
ThisreportwaspreparedunderthecoordinationofPatriciaDalton,Chief
OperatingOfficer,whomaybereachedat(202)512-5600,or
DaltonP@gao.gov;andJanetSt.Laurent,ManagingDirector,Defense
CapabilitiesandManagement,whomaybereachedat(202)512-4300,or
StLaurentJ@gao.gov.Specificquestionsaboutindividualissuesmaybe
directedtotheareacontactlistedattheendofeachsummary.
GeneL.Dodaro
ComptrollerGeneral
oftheUnitedStates
Page4 GAO-11-318SP
SectionI:GAOIdentifiedAreasofPotential
Duplication,Overlap,andFragmentation,
Which,ifEffectivelyAddressed,Could
ProvideFinancialandOtherBenefits
Duplication,Overlap,andFragmentation,Which,if
EffectivelyAddressed,CouldProvideFinancialand
OtherBenefits
Table1presents34areasforconsiderationrelatedtoduplication,overlap,
orfragmentationfromGAOsrecentlycompletedandongoingwork.In
somecases,thereissufficientinformationtoestimatepotentialsavingsor
otherbenefitsifactionsaretakentoaddressindividualissues.Inthose
cases,asnotedbelow,financialbenefitsrangingfromhundredsofmillions
toseveralbilliondollarsannuallymayberealized.Inothercases,
estimatesofcostsavingsorotherbenefitswoulddependuponwhat
congressionalandexecutivebranchdecisionsweremade,includinghow
certainGAOrecommendationsareimplemented.Additionally,information
onprogramperformance,theleveloffundinginagencybudgetsdevoted
tooverlappingorfragmentedprograms,andtheimplementationcoststhat
mightbeassociatedwithprogramconsolidationsorterminations,are
factorsthatcouldimpactactionstobetakenaswellaspotentialsavings.
Followingthetablearesummariesforeachofthe34areaslisted.In
additiontosummarizingwhatGAOhasfound,eachareapresentsactions
fortheexecutivebranchorCongresstoconsider.Eachofthesummaries
containsaFrameworkforAnalysisprovidingthemethodologyusedto
conducttheworkandalistofrelatedGAOproductsforfurther
information.
Table1:Duplication,Overlap,orFragmentationAreasIdentifiedinThisReport
Missions
Agriculture
Defense
Areasidentified
1. Fragmentedfoodsafetysystemhascausedinconsistent
oversight,ineffectivecoordination,andinefficientuseof
resources
2. RealigningDODsmilitarymedicalcommandstructures
andconsolidatingcommonfunctionscouldincreaseefficiency
andresultinprojectedsavingsrangingfrom$281millionto
$460millionannually
3. Opportunitiesexistforconsolidationandincreased
efficienciestomaximizeresponsetowarfighterurgent
needs
Federalagenciesandprogramswhere
duplication,overlap,orfragmentation
mayoccur
TheDepartmentofAgricultures(USDA)
FoodSafetyandInspectionServiceand
theFoodandDrugAdministrationarethe
primaryfoodsafetyagencies,but15
agenciesareinvolvedinsomeway
DepartmentofDefense(DOD),including
theOfficeoftheAssistantSecretaryfor
HealthAffairs,theArmy,theNavy,and
theAirForce
Atleast31entitieswithinDOD
Page
8
13
18
4. Opportunitiesexisttoavoidunnecessaryredundanciesand
improvethecoordinationofcounter-improvisedexplosive
deviceefforts
Theservicesandothercomponents
withinDOD 23
5. Opportunitiesexisttoavoidunnecessaryredundanciesand
maximizetheefficientuseofintelligence,surveillance,and
reconnaissancecapabilities
6. AdepartmentwideacquisitionstrategycouldreduceDODs
riskofcostlyduplicationinpurchasingTacticalWheeled
Vehicles
Multipleintelligenceorganizationswithin
DOD
DOD,includingArmyandMarineCorps
26
31
Page5 GAO-11-318SP SectionI:Duplication,Overlap,orFragmentation
7. ImprovedjointoversightofDODsprepositioningprograms
forequipmentandsuppliesmayreduceunnecessary
duplication
DODincludingAirForce,Army,and
MarineCorps 34
8. DODbusinesssystemsmodernization:opportunitiesexist
foroptimizingbusinessoperationsandsystems
About2,300investmentsacrossDOD
38
Economic
development
9. Theefficiencyandeffectivenessoffragmentedeconomic
developmentprogramsareunclear
USDA,DepartmentofCommerce
(Commerce),HousingandUrban
Development(HUD),andtheSmall
BusinessAdministration(SBA);80
programsinvolved
42
10. Thefederalapproachtosurfacetransportationis
fragmented,lackscleargoals,andisnotaccountablefor
FiveagencieswithintheDepartmentof
Transportation(DOT);over100programs
48
results involved
11. FragmentedfederaleffortstomeetwaterneedsintheU.S.- USDA,CommercesEconomic
Mexicoborderregionhaveresultedinanadministrative DevelopmentAdministration,
burden,redundantactivities,andanoverallinefficientuseof EnvironmentalProtectionAgency(EPA),
resources DepartmentofHealthandHuman
Services(HHS)IndianHealthService,
52
DepartmentoftheInteriors(Interior)
BureauofReclamation,HUD,andthe
U.S.ArmyCorpsofEngineers
Energy 12. Resolvingconflictingrequirementscouldmoreeffectively Anumberofagencies,includingthe
achievefederalfleetenergygoals DepartmentofEnergy(Energy)andthe
GeneralServicesAdministration(GSA) 55
playaroleoverseeingthe
governmentwiderequirements
13. Addressingduplicativefederaleffortsdirectedatincreasing EPAandtheDepartmentoftheTreasury
domesticethanolproductioncouldreducerevenuelosses 59
byupto$5.7billionannually
General
government
14. Enterprisearchitectures:keymechanismsforidentifying
potentialoverlapandduplication
Governmentwide
62
15. Consolidatingfederaldatacentersprovidesopportunityto Twenty-fourfederalagencies
improvegovernmentefficiencyandachievesignificantcost 66
savings
16. Collectingimproveddataoninteragencycontractingto Governmentwide
minimizeduplicationcouldhelpthegovernmentleverageits
70
vastbuyingpower
17. Periodicreviewscouldhelpidentifyineffectivetax Governmentwide
expendituresandredundanciesinrelatedtaxandspending
programs,potentiallyreducingrevenuelossesbybillionsof
75
dollars
Health 18. OpportunitiesexistforDODandVAtojointlymodernizetheir
electronichealthrecordsystems
DODandtheDepartmentofVeterans
Affairs(VA)
79
19. VAandDODneedtocontroldrugcostsandincreasejoint
contractingwheneveritiscost-effective
DODandVA
82
20. HHSneedsanoverallstrategytobetterintegratenationwide
publichealthinformationsystems
Multipleagencies,ledbyHHS
88
Homeland 21. Strategicoversightmechanismscouldhelpintegrate USDA,DOD,DepartmentofHomeland
security/Law fragmentedinteragencyeffortstodefendagainstbiological Security(DHS),HHS,Interior,andothers;
enforcement threats morethantwodozenpresidentially 92
appointedindividualswithresponsibilityfor
biodefense

22. DHSoversightcouldhelpeliminatepotentialduplicating DHSandotherfederallawenforcement
effortsofinteragencyforumsinsecuringthenorthern partners 96
border
23. TheDepartmentofJusticeplansactionstoreduceoverlapin DepartmentofJusticesFederalBureau
explosivesinvestigations,butmonitoringisneededto ofInvestigationandBureauofAlcohol,
101
ensuresuccessfulimplementation Tobacco,FirearmsandExplosives
24. TSAssecurityassessmentsoncommercialtrucking DHSsTransportationSecurity
companiesoverlapwiththoseofanotheragency,buteffortsare Administration(TSA)andDOT 105
underwaytoaddresstheoverlap
25. DHScouldstreamlinemechanismsforsharingsecurity- Threeinformation-sharingmechanisms
relatedinformationwithpublictransitagenciestohelp fundedbyDHSandTSA 111
addressoverlappinginformation
26. FEMAneedstoimproveitsoversightofgrantsandestablish DHSsFederalEmergencyManagement
aframeworkforassessingcapabilitiestoidentifygapsand Agency(FEMA);17programsinvolved
116
prioritizeinvestments
International 27. Lackofinformationsharingcouldcreatethepotentialfor PrincipallyDODandtheU.S.Agencyfor
affairs duplicationofeffortsbetweenU.S.agenciesinvolvedin InternationalDevelopment 120
developmenteffortsinAfghanistan
28. Despiterestructuring,overlappingrolesandfunctionsstill
existatStatesArmsControlandNonproliferationBureaus
TwobureauswithintheDepartmentof
State(State)
123
Social 29. Actionsneededtoreduceadministrativeoverlapamong USDA,DHS,andHHS;18programs
services domesticfoodassistanceprograms involved 125
30. Bettercoordinationoffederalhomelessnessprogramsmay Sevenfederalagencies,including
minimizefragmentationandoverlap DepartmentofEducation(Education),
HHS,andHUD;over20programs
129
involved
31. Furtherstepsneededtoimprovecost-effectivenessand USDA,DOT,Education,Interior,HHS,
enhanceservicesfortransportation-disadvantagedpersons HUD,DepartmentofLabor(Labor),and
134
VA;80programsinvolved
Training, 32. Multipleemploymentandtrainingprograms:providing Education,HHS,andLabor,among
employment,
and
informationoncolocatingservicesandconsolidating
administrativestructurescouldpromoteefficiencies
others;44programsinvolved
140
education
33. Teacherquality:proliferationofprogramscomplicates TenagenciesincludingDOD,Education,
federaleffortstoinvestdollarseffectively Energy,NationalAeronauticsandSpace
Administration,andtheNationalScience
144
Foundation;82programsinvolved
34. Fragmentationoffinancialliteracyeffortsmakes
coordinationessential
Morethan20differentagencies;about56
programsinvolved
151
Source:GAOanalysisbasedonareasaddressedinSectionIofthisreport.
FragmentedFoodSafetySystemHasCaused
InconsistentOversight,Ineffective
Coordination,andInefficientUseof
Resources
InconsistentOversight,IneffectiveCoordination,and
InefficientUseofResources
WhyGAOIsFocusing
onThisArea
Thefragmentedfederaloversightoffoodsafetyhascausedinconsistent
oversight,ineffectivecoordination,andinefficientuseofresources.
Fifteenfederalagenciescollectivelyadministeratleast30foodrelated
laws.Budgetobligationsforthetwoprimaryfoodsafetyagenciesthe
FoodandDrugAdministration(FDA)andtheU.S.Departmentof
Agricultures(USDA)FoodSafetyandInspectionService(FSIS)totaled
over$1.6billioninfiscalyear2009.USDAisresponsibleforthesafetyof
meat,poultry,processedeggproducts,andcatfishandFDAisresponsible
forvirtuallyallotherfood,includingseafood.Threemajortrendsalso
createfoodsafetychallenges:(1)asubstantialandincreasingportionof
theU.S.foodsupplyisimported,(2)consumersareeatingmorerawand
minimallyprocessedfoods,and(3)segmentsofthepopulationthatare
particularlysusceptibletofood-borneillnesses,suchasolderadultsand
immune-compromisedindividuals,aregrowing.
WhatGAOHasFound
toIndicate
Duplication,Overlap,
orFragmentation
Formorethanadecade,GAOhasreportedonthefragmentednatureof
federalfoodsafetyoversight.The2010nationwiderecallofmorethan500
millioneggsduetoSalmonellacontaminationhighlightsthis
fragmentation.FDAisgenerallyresponsibleforensuringthatshelleggs,
includingeggsatfarmssuchasthosewheretheoutbreakoccurred,are
safe,wholesome,andproperlylabeledandFSISisresponsibleforthe
safetyofeggsprocessedintoeggproducts.Inaddition,whileUSDAs
AgriculturalMarketingServicesetsqualityandgradestandardsforthe
eggs,suchasGradeA,itdoesnottesttheeggsformicrobessuchas
Salmonella.Further,USDAsAnimalandPlantHealthInspectionService
helpsensurethehealthoftheyoungchicksthataresuppliedtoeggfarms,
butFDAoverseesthesafetyofthefeedtheyeat.
Oversightisalsofragmentedinotherareasofthefoodsafetysystem.For
example,the2008FarmBillassignedUSDAresponsibilityforcatfish,thus
splittingseafoodoversightbetweenUSDAandFDA.InSeptember2009,
GAOalsoidentifiedgapsinfoodsafetyagenciesenforcementand
collaborationonimportedfood.Specifically,theimportscreeningsystem
usedbytheDepartmentofHomelandSecuritysCustomsandBorder
Protection(CBP)doesnotnotifyFDAsorFSISssystemswhenimported
foodshipmentsarriveatU.S.ports.Withoutaccesstotime-of-arrival
information,FDAandFSISmaynotknowwhenshipmentsthatrequire
examinationsarriveattheport,whichcouldincreasetheriskthatunsafe
foodcouldenterU.S.commerce.GAOrecommendedthattheCBP
CommissionerensurethatCBPsnewscreeningsystemcommunicates
time-of-arrivalinformationtoFDAsandFSISsscreeningsystemsand
GAOcontinuestomonitortheiractions.
Resources
ActionsNeededand
PotentialFinancialor
OtherBenefits
GAOhasmadenumerousrecommendationsintendedtoaddressthe
fragmentedfederaloversightofthenationsfoodsupply.Onekey
recommendationinOctober2001wastoreconvenethePresidents
CouncilonFoodSafety,whichdisbandedearlierthatyear.Inresponse,
thePresidentcreatedtheFoodSafetyWorkingGroupin2009to
coordinatefederaleffortsanddevelopgoalstomakefoodsafer.Through
theworkinggroup,whichisco-chairedbytheSecretariesofHealthand
HumanServicesandAgriculture,federalagencieshavebegun
collaboratingincertainareasthatcrossregulatoryjurisdictions
improvingproducesafety,reducingSalmonellacontamination,and
developingfoodsafetyperformancemeasures.However,asa
presidentiallyappointedworkinggroupitsfutureisuncertain,andthe
experienceoftheCouncilonFoodSafety,whichdisbandedlessthan3
yearsafteritwascreated,illustratesthatthistypeofapproachcanbe
shortlived.Inaddition,developingaresults-orientedgovernmentwide
performanceplanforfoodsafety,commissioningadetailedanalysisof
alternativeorganizationalstructures,andenactingcomprehensiverisk-
basedfoodsafetylegislationcouldhelpaddressfragmentation.InJanuary
2007,GAOsaidthatwhatremainstobedoneistodevelopa
governmentwideperformanceplanthatismissionbased,hasaresults
orientation,andprovidesacross-agencyperspective.InJuly2009,the
FoodSafetyWorkingGroupissueditskeyfindingsasetofgoalsand
actionsforimprovingfoodsafety.Whilethekeyfindingsaremission
basedandofferacross-agencyperspective,theyarenotfullyresults
oriented.Further,theworkinggrouphasnotprovidedinformationabout
theresourcesthatareneededtoachieveitsgoals.Asanextstep,the
DirectoroftheOfficeofManagementandBudget,inconsultationwiththe
federalagenciesthathavefoodsafetyresponsibilities,shoulddevelopa
governmentwideperformanceplanforfoodsafetythatincludesresults-
orientedgoalsandperformancemeasuresandadiscussionofstrategies
andresources.Withoutagovernmentwideperformanceplanforfood
safety,decisionmakersdonothaveacomprehensivepictureofthefederal
governmentsperformanceonthiscrosscuttingissue.Inaddition,the
federalgovernmentdoesnotformulateanoverallbudgetforfoodsafety,
makingitdifficultforCongresstomonitorthefederalresourcesallocated
tofederalfoodsafetyoversight.
GAO,inOctober2001,suggestedthatCongressconsidercommissioning
theNationalAcademyofSciencesorablueribbonpaneltoconducta
detailedanalysisofalternativefoodsafetyorganizationalstructures.A
detailedanalysishasyettobecommissionedandGAOreiteratedits
suggestiontoCongressinFebruary2011.GAOandotherorganizations
Resources
haveidentifiedalternativeorganizationalstructuresthatcouldbeanalyzed
inmoredetail,including:
asinglefoodsafetyagency,eitherhousedwithinanexistingagencyor
establishedasanindependententity,thatassumesresponsibilityforall
aspectsoffoodsafetyatthefederallevel;
asinglefoodsafetyinspectionagencythatassumesresponsibilityfor
foodsafetyinspectionactivities,butnototheractivities,underan
existingdepartment,suchasUSDAorFDA;
adatacollectionandriskanalysiscenterforfoodsafetythat
consolidatesdatacollectedfromavarietyofsourcesandanalyzesitat
thenationalleveltosupportrisk-baseddecisionmaking;and
acoordinationmechanismthatprovidescentralized,executive
leadershipfortheexistingorganizationalstructure,ledbyacentral
chairwhowouldbeappointedbythepresidentandhavecontrolover
resources.
GAO,theNationalAcademyofSciences,andothershavealsosuggested
thatCongressenactcomprehensiverisk-basedfoodsafetylegislation.In
May2004,GAOreportedthatsuchlegislationcanprovidethefoundation
forfocusingfederaloversightandresourcesonthemostimportantfood
safetyproblemsfromapublichealthperspective.Newfoodsafety
legislationthatwassignedintolawinJanuary2011strengthensamajor
partofthefoodsafetysystemandexpandsFDAsoversightauthority.
However,thelawdoesnotapplytothefederalfoodsafetysystemasa
wholeandGAOreiterateditssuggestionforcomprehensive,risk-based
foodsafetylegislationinFebruary2011.TheEuropeanUnionadopted
comprehensivefoodsafetylegislationin2004intendedtocreateasingle,
transparentsetoffoodsafetyrules.
Althoughreducingfragmentationinfederalfoodsafetyoversightisnot
expectedtoresultinsignificantcostsavings,newcostsmaybeavoidedby
preventingfurtherfragmentation,asillustratedbytheapproximately$30
millionforfiscalyears2011and2012thatUSDAofficialshadsaidthey
wouldhavetospenddevelopingandimplementingtheagencysnew
congressionallymandatedcatfishinspectionprogram.Subsequently,no
fundingwasproposedfortheprograminthePresidentsfiscalyear2012
budgetbecauseoftheneedforconsiderablestakeholderengagementand
regulatorydevelopmentbeforeitsadoptionandimplementation.In
addition,GAOhasreportedthatuserfeesaremeansoffinancingfederal
Resources
servicesthatcanbedesignedtoreducetheburdenontaxpayersand
promoteeconomicefficiencyandequity.TheCongressionalBudgetOffice
hasestimatedthatifFSISchargeduserfees,federalrevenueswould
increaseby$902millioninfiscalyear2011andcouldoffsetinspection
costs.FDAhasproposeduserfeesinitsfiscalyear2011congressional
budgetrequestthatitestimatescouldincreaserevenuesbyalmost$194
millionandcouldenabletheagencytoexpanditsfoodsafetyefforts.
GAOrecognizesthatreorganizingfederalfoodsafetyresponsibilitiesisa
complexprocess.Further,GAOsworkonotheragencymergersand
transformationsindicatesthatreorganizingfoodsafetycouldhaveshort-
termdisruptionsandtransitioncosts.However,reducingfragmentation
andoverlapcouldresultinanumberofnonfinancialbenefits.GAO
reportedinMarch2004thatintegratingfoodsafetyoversightcancreate
synergyandeconomiesofscaleandcanprovidemorefocusedand
efficienteffortstoprotectthenationsfoodsupply.InJune2008,GAOalso
reportedthatothercountriesthatreorganizedtheirfoodsafetysystems
haveexperiencedadditionalbenefits,suchasimprovedpublicconfidence
inthesystems.Forexample,GAOreportedthatindustryandconsumer
stakeholdersgenerallyhadpositiveviewsofthereorganizedfoodsafety
systemsandsaidthattransparencyhadimproved.
Frameworkfor
Analysis
TheinformationcontainedinthisanalysisisbasedontherelatedGAO
productslistedbelow.Inaddition,GAOreviewedrelevantfoodsafety
reportsandlegislation,andinterviewedofficialsfromUSDA,FDA,andthe
OfficeofManagementandBudget.GAOalsocollectedandanalyzed
informationabouttheFoodSafetyWorkingGroup,itsactivities,andits
planforfoodsafety,aswellasalternativeorganizationalstructuresfor
foodsafetyoversight.
RelatedGAO
Products
High-RiskSeries:AnUpdate.GAO-11-278.Washington,D.C.:
February16,2011.
LiveAnimalImports:AgenciesNeedBetterCollaborationtoReducethe
RiskofAnimal-RelatedDiseases.GAO-11-9.Washington,D.C.:
November8,2010.
FoodSafety:AgenciesNeedtoAddressGapsinEnforcementand
CollaborationtoEnhanceSafetyofImportedFood.GAO-09-873.
Washington,D.C.:September15,2009.
Resources
SeafoodFraud:FDAProgramChangesandBetterCollaborationamong
KeyFederalAgenciesCouldImproveDetectionandPrevention.
GAO-09-258.Washington,D.C.:February19,2009.
FoodSafety:SelectedCountriesSystemsCanOfferInsightsinto
EnsuringImportSafetyandRespondingtoFoodborneIllness.
GAO-08-794.Washington,D.C.:June10,2008.
OversightofFoodSafetyActivities:FederalAgenciesShouldPursue
OpportunitiestoReduceOverlapandBetterLeverageResources.
GAO-05-213.Washington,D.C.:March30,2005.
FoodSafetyandSecurity:FundamentalChangesNeededtoEnsureSafe
Food.GAO-02-47T.Washington,D.C.:October10,2001.
Foradditionalinformationaboutthisarea,contactLisaShamesat
AreaContact
(202)512-3841orshamesl@gao.gov.
RealigningDODsMilitaryMedicalCommand
StructuresandConsolidatingCommon
FunctionsCouldIncreaseEfficiencyand
ReduceCosts
RealigningDODsMilitaryMedicalCommandStructures
andConsolidatingCommonFunctionsCouldIncrease
EfficiencyandReduceCosts
WhyGAOIsFocusing
onThisArea
DepartmentofDefense(DOD)componentsprovidehealthcaretoover
9.6millioneligiblebeneficiaries,includingU.S.militarypersonnel,
retirees,andtheirfamilymembers.Withmorethan130,000militaryand
governmentmedicalprofessionals,alargenetworkofprivatehealthcare
providers,59DODhospitals,andhundredsofclinicsworldwide,DODs
collectiveMilitaryHealthSystem(MHS)managesmorethan200,000
medicalvisitsandfillsmorethan300,000prescriptionsperday.
Additionally,theMHSisanimportantsourceforeducation,military
medicaltraining,andresearchanddevelopment.However,MHScosts
havemorethandoubledfrom$19billioninfiscalyear2001to$49billion
in2010andareexpectedtoincreasetoover$62billionby2015.Studiesby
GAOandothersovermanyyearshaveidentifiedopportunitiestogain
efficienciesandsavecostsbyconsolidatingadministrative,management,
andclinicalfunctions.
WhatGAOHasFound
toIndicate
orFragmentation
TheresponsibilitiesandauthoritiesforDODsmilitaryhealthsystemare
distributedamongseveralorganizationswithinDODwithnocentral
commandauthorityorsingleentityaccountableforminimizingcostsand
achievingefficiencies.UndertheMHSscurrentcommandstructure,the
OfficeoftheAssistantSecretaryofDefenseforHealthAffairs,theArmy,
theNavy,andtheAirForceeachhasitsownheadquartersandassociated
supportfunctions,suchasinformationtechnology,humancapital
management,financialactivities,andcontracting.Additionally,thethree
serviceseachhaveSurgeonsGeneraltooverseetheirdeployablemedical
forcesandoperatetheirownhealthcaresystems.Moreover,whilethe
AssistantSecretaryofDefenseforHealthAffairscontrolstheDefense
HealthProgrambudget,thisofficedoesnotdirectlysupervisetheservices
medicalpersonnel.
In2005,GAOidentifiedDODshealthcaresystemasanexampleofakey
challengefacingtheU.S.governmentinthe21stcenturyaswellasanarea
inwhichDODcouldachieveeconomiesofscaleandimprovedeliveryby
combining,realigning,orotherwisechangingselectedsupportfunctions.
In2001,aRANDCorporationstudyonreorganizingtheMHSuncoveredat
least13studiessincethe1940sthathadaddressedmilitaryhealthcare
organization.Allbutthreeofthosestudieshadeitherfavoredaunified
systemorrecommendedastrongercentralauthoritytoimprove
coordinationamongtheservices.However,DODhastakenlimitedactions
todatetoconsolidatecommonadministrative,management,andclinical
functionswithinitsMHS.
ReduceCosts
In2005,DODformedaworkinggrouptodevelopanimplementationplan
forajointmedicalcommand.Thisgroupin2006developedandevaluated
severalreorganizationalternativestopromoteeffectivenessandefficiency
initsmedicalcommandstructurebyincreasedsharingofresources,useof
commonoperatingprocesses,andreductioninduplicativefunctionsand
organizations.Onealternativewouldhaveestablishedaunifiedmedical
commandsimilartoDODsunifiedtransportationcommand;thesecond
alternativewouldhaveestablishedtwoseparatecommandsoneto
provideoperational/deployablemedicineandanothertoprovide
beneficiarycarethroughmilitaryhospitalsandcontractedproviders;anda
thirdalternativewouldhavedesignatedoneofthemilitaryservicesto
provideallhealthcareservicesacrossDOD.
Becauseofaninabilitytoobtainaconsensusamongtheservicesonwhich
alternativetoimplement,theUnderSecretaryofDefenseforPersonneland
ReadinessandtheAssistantSecretaryofDefenseforHealthAffairs
presentedanewconceptwhich,inNovember2006,theDeputySecretaryof
Defenseapproved.Thischosenconceptdirectedsevensmallerscale,
incrementalreorganizationeffortsdesignedtominimizeduplicativelayers
ofcommandandcontrolwherepossible;reduceredundantefforts,
personnel,andexpenses;andleverageefficienciesthroughcombining
commonservicesupportfunctionsbeingperformedwithineachofthe
services,suchasfinance,informationmanagementandtechnology,human
capitalmanagement,support,andlogistics.However,theconceptleftthe
existingcommandstructuresofthethreeservicesmedicaldepartments
overallmilitarytreatmentfacilitiesessentiallyunchanged.Inupdatingits
previousreviews,GAOfoundthatDODofficialshavemadevaryinglevelsof
progressinimplementingfourofthesevenincrementalsteps.
Morespecifically,DODistakingactionsto(1)createacommand,control,
andmanagementstructureinDODsbaserealignmentandclosure(BRAC)
markets(NationalCapitalAreaandSanAntonio);(2)realigncommand
andcontroloftheJointMedicalEducationTrainingCenterinSan
Antonio;(3)colocatetheMilitaryHealthSystemandservicemedical
headquarters;and(4)consolidateallmedicalresearchanddevelopment
undertheArmyMedicalResearchandMaterialCommand.Progresson
theseactionshasbeenfacilitatedbythefactthatthreeofthemarerelated
toBRACrecommendationsmadein2005thatDODmustcompletebythe
BRACstatutorydeadlineofSeptember2011.Accordingtoofficials,DOD
hasnotimplementedactionsto(1)establishaJointMilitaryHealth
ServiceDirectorateunderAssistantSecretaryofDefenseforHealth
Affairs;(2)consolidatecommandandcontrolinotherlocationswithmore
thanoneDODcomponentprovidingmilitaryhealthcareservices;and
ReduceCosts
(3)realigncurrentTRICAREManagementActivitytofocusonhealthplan
management.TheOfficeoftheAssistantSecretaryofDefenseforHealth
Affairshasnotprovidedguidanceonhowandwhentoaccomplishthe
threeremainingsteps,andofficialsindicatedthatfurtheractionisnot
likelytooccuruntiltheresultsofabroader,ongoingDOD-wide
organizationalandefficiencyassessmentiscompleted.
ForthethreeBRAC-relatedstepsunderway,DODsBRACbudget
reporting
1
indicatesanetannualsavingsof$275millionafterfull
implementation.However,DODmedicalofficialshaveexpressed
uncertaintyastowhetherthesesavingswillbeachievedbecauseof
changesthatoccurredwithintheMHSsincetheBRACdecisionwasmade.
Forexample,theypointoutthatthecareofcasualtiesfromoperationsin
IraqandAfghanistanandthecongressionaldirectiontoprovideworld
classhealthcareintheNationalCapitalRegionhaveallsignificantly
increasedMHScosts.
Finally,GAOreportedinJuly2010thatDODwouldbenefitfromenhanced
collaborationamongtheservicesintheirmedicalpersonnelrequirements
determinationprocessesandrecommendedthatDODidentify,develop,
andimplementcross-servicemedicalpersonnelstandardsforcommon
capabilities.Thereportmaderecommendationstoeachoftheservicesto
improvetheirmedicalpersonnelrequirementsdeterminationprocesses.
Thatreportalsorecognizedthatwhileeachoftheserviceshasunique
operationalmedicalcapabilities,theday-to-dayoperationsatmilitary
treatmentfacilitiesareverysimilaracrosstheservicesandcouldbemore
collaborativelymanaged,andthatDODshouldidentifythecommon
medicalcapabilitiesthataresharedacrosstheservicesintheirmilitary
treatmentfacilitiesthatwouldbenefitfromthedevelopmentofcross-
servicemedicalpersonnelstandards.DODrepliedthatdevelopingcross-
servicestandardsinspecificmedicalfunctionalareaswherethereis
measurablebenefitmakesgoodsense,andtheservicesgenerallyagreed
withtheneedforimprovementstotheirrespectiverequirements
determinationprocesses.
1
DODisrequiredbysection2907oftheDefenseBaseClosureandRealignmentActof1990,
Pub.L.No.101-510(asamendedbysection2831(b)ofPub.L.No.109-163(2006)and
section2711ofPub.L.No.110-417(2008))to,amongotherreportingrequirements,
estimatethetotalexpendituresrequiredandcostsavingstobeachievedbyeachclosure
andrealignment.TocalculateDODsexpectedBRACannualsavings,GAOuseddollar
amountsobtainedfromDODsbudgetsubmissionforfiscalyear2011.
ReduceCosts
ActionsNeededand
PotentialFinancial
andOtherBenefits
Toreduceduplicationinitscommandstructureandeliminateredundant
processesthataddtogrowingdefensehealthcarecosts,DODcouldtake
actiontofurtherassessalternativesforrestructuringthegovernance
structureofthemilitaryhealthcaresystem.In2007,GAOrecommended
thatDODneededtodemonstrateasoundbusinesscaseforproceeding
withitschosenconcept,includingananalysisofbenefits,costs,andrisks
ofimplementingthatchoice.Althoughnotexplicitlystated,suchan
analysis,tobecomplete,wouldrequireanalyzingotheralternativessuch
asaunifiedmedicalcommand.Theseanalyseshavenotbeenconducted,
andGAOsongoingreviewwillseektodeterminetheextenttowhichDOD
hasdevelopedanapproachforimplementingtheremainingactionsinits
chosenconcept.Withoutsuchactions,DODisnotinasoundpositionto
assuretheSecretaryofDefenseandCongressthatitmadeaninformed
decisioninimplementingitschosenconceptoverotheralternativesor
whetheritwillhavethedesiredimpactonDODsMHSorachieve
anticipatedresults.
In2006,ifDODandtheserviceshadchosentoimplementoneofthethree
otheralternativesstudiedbytheDODworkinggroup,aMay2006report
bytheCenterforNavalAnalysesshowedDODcouldhaveachieved
significantsavings.GAOsadjustmentofthoseprojectedsavingsfrom2005
into2010dollarsindicatesthosesavingscouldrangefrom$281millionto
$460millionannuallydependingonthealternativechosenandnumbersof
military,civilian,andcontractorpositionseliminated.Thereportlargely
focusedonpersonnelastheprimarysourceofpotentialsavingsorcosts.
2
However,thereportindicatedthatthesesavingswouldrequirealongand
potentiallycostlytransitionperiodtoberealized.Additionally,thereport
statedthatDODsabilitytorealizethepotentialsavingsdepended
cruciallyonclearcommandandcontroltomakethenecessarychanges.
Inhisselectionofthechosenoptionin2006,theDeputySecretaryof
Defenseacknowledgedthatimplementingthechosenconceptmaynot
achievetheestimatedlevelofsavingsofimplementingaunifiedmedical
structurebutbelievedminimumannualsavingsofabout$200million
($221millionin2010dollars)wasarealisticgoal.Additionally,significant
costavoidancefromimprovedperformanceoncechangeshadbeen
2
TheCenterforNavalAnalysescategorizedthepotentialsavingsintothefollowing10
areas:healthcareoperations;comptrolleroperations;informationmanagementand
informationtechnologies;educationandtraining;researchanddevelopment;logistics;
strategicplanning;humancapitalmanagement;forcehealthprotectionandenvironmental
health;andgeneralheadquarters.
ReduceCosts
implementedwasanticipated.Forexample,inSeptember2010,DOD
officialstoldGAOthattheyhadidentifiedabout$30millioninannual
savingsfromthereductionincontractmedicalstaffamongthenewly
establishedjointhospitalsintheNationalCapitalRegiononeoftheseven
incrementalstepsofthechosenconcept.Additionally,officialsbelievethe
colocationofthemedicalheadquarterswillprovideimprovedcollaboration
andopportunitiesforconsolidatingtheiroperationswherepossible.
Frameworkfor
Analysis
TheinformationcontainedinthisanalysisisbasedontheGAOreports
listedbelowaswellasworkupdatingtheextenttowhichDODhas
(1)conductedacostbenefitanalysisofitschosenconceptand
(2)implementedits2006chosenconcept.Todothis,GAOobtained,
reviewed,anddiscussedwithDODofficialsanyanalysesperformed
relatedtothechosenconceptorotheralternativessubsequently
considered.Additionally,GAOreviewedDODdocuments,policies,
directives,briefings,andconceptpapersrelatedtoDODs2006chosen
concept,aswellasGAOspriorfindingsandrecommendationsassociated
withthiseffort.InmeetingswithofficialsfromOSD,theservicesmedical
departments,andotherrelevantoffices,GAOobtained,analyzed,and
discusseddocumentsrelatedtothestatus,costs,andresultsoftheseven
stepsinthechosenconcept.Inobtainingoralcomments,DODofficials
saidthattheygenerallyagreedwiththefactsandfindingsinthisanalysis.
RelatedGAO
Products
MilitaryPersonnel:EnhancedCollaborationandProcessImprovements
NeededforDeterminingMilitaryTreatmentFacilityMedicalPersonnel
Requirements.GAO-10-696.Washington,D.C.:July29,2010.
DefenseHealthCare:DODNeedstoAddresstheExpectedBenefits,Costs,
andRisksforItsNewlyApprovedMedicalCommandStructure.
GAO-08-122.Washington,D.C.:October12,2007.
DefenseHealthCare:Tri-ServiceStrategyNeededtoJustifyMedical
ResourcesforReadinessandPeacetimeCare.GAO/HEHS-00-10.
Washington,D.C.:November3,1999.
Foradditionalinformationaboutthisarea,contactBrendaS.Farrellat
AreaContact
(202)512-3604orfarrellb@gao.gov.
OpportunitiesExistforConsolidationand
IncreasedEfficienciestoMaximizeResponse
toWarfighter
UrgentNeeds
OpportunitiesExistforConsolidationandIncreased
EfficienciestoMaximizeResponsetoWarfighter
UrgentNeeds
WhyGAOIsFocusing
onThisArea
ForcesinIraqandAfghanistanhavefacedsignificantrisksofmission
failureandlossoflifeduetorapidlychangingenemythreats.Inresponse,
theDepartmentofDefense(DOD)establishedurgentneedsprocessesto
rapidlydevelop,modify,andfieldnewcapabilities,suchasintelligence,
surveillance,andreconnaissance(ISR)technology,andcounter-
improvisedexplosivedevices(IED)systems.GAOidentifiedatleast31
entitiesthatplayaroleinDODsurgentneedsprocessesandhas
estimatedfundingforaddressingurgentneedsthroughthoseentitiestobe
atleast$76.9billion,since2005.
GAOhasidentifiedchallengeswiththedepartmentsfragmentedguidance
andGAOandothershaveraisedconcernsaboutthenumbersandrolesof
thevariousentitiesandprocessesinvolvedandthepotentialofoverlap
andduplication.WiththeshiftinpriorityforoverseasoperationsfromIraq
toAfghanistanatheaterthatmayposemorecomplexlong-term
challengesdeployedorsoon-to-deployunitswilllikelycontinueto
requestcriticalcapabilitiestohelpthemaccomplishtheirmissions.
WhatGAOHasFound
toIndicate
orFragmentation
Overthepasttwodecades,thefulfillmentofurgentneedshasevolvedasa
setofcomplexprocesseswithintheJointStaff,theOfficeoftheSecretary
ofDefense,eachofthemilitaryservices,andthecombatantcommandsto
rapidlydevelop,equip,andfieldsolutionsandcriticalcapabilitiestothe
warfighter.DODsexperiencewiththerapidlyevolvingthreatsinIraqand
Afghanistanhasledtotheexpandeduseofexistingurgentneeds
processes,thecreationofnewpolicies,andestablishmentofnew
organizationstomanageurgentneedsandtoexpeditethedevelopmentof
solutionstoaddressthem.However,DODhasnotcomprehensively
evaluatedopportunitiesforconsolidationacrossthedepartment,even
thoughconcernshavebeenraisedbytheDefenseScienceBoard,GAO,
andothersaboutthenumbersandrolesofthevariousentitiesand
processesinvolvedandthepotentialofoverlapandduplication.For
example,theDefenseScienceBoard,inJulyandSeptember2009reports,
foundthatDODhasdonelittletoadopturgentneedsasacritical,ongoing
DODinstitutionalcapabilityessentialtoaddressingfuturethreats,andhas
providedrecommendationstothedepartmentaboutpotential
consolidations.ManyDODandmilitaryserviceofficialsstatedthathigher-
levelseniorleadershipneedstotakedecisiveactiontoevaluatethe
breadthofDODsurgentneedsactivitiestodeterminewhatopportunities
mayexistforreducingunnecessaryduplicationinstaff,information
technology,support,andfunding.
toWarfighter
UrgentNeeds
Additionally,GAOfoundthatoverlapexistsamongurgentneedsentitiesin
therolestheyplayaswellasthecapabilitiesforwhichtheyare
responsible.Forexample:
Therearenumerousplacesforthewarfightertosubmitarequestforan
urgentlyneededcapability.Warfightersmaysubmiturgentneeds,
dependingontheirmilitaryserviceandthetypeofneed,tooneofthe
followingdifferententities:JointStaffJ/8,ArmyDeputyChiefofStaff
G/3/5/7,ArmyRapidEquippingForce,NavyFleetForcesCommandor
CommanderPacificFleet,MarineCorpsDeputyCommandantfor
CombatDevelopmentandIntegration,AirForceMajorCommands,
SpecialOperationsRequirementsandResources,ortheJointIED
DefeatOrganization.Theseentitiesthenvalidatethesubmittedurgent
needrequestandthusallowittoproceedthroughtheirspecific
process.
Multipleentitiesreportedaroleinrespondingtosimilartypesof
urgentlyneededcapabilities.GAOidentifiedeightentitiesfocusedon
respondingtoISRcapabilities,fiveentitiesfocusedonrespondingto
counter-IEDcapabilities,andsixentitiesfocusedonrespondingto
communications,commandandcontrol,andcomputertechnology.In
somecases,duplicationofeffortsmayhaveoccurredseerelated
summariesinthisreportonthesubjectsofintelligence,surveillance,
andreconnaissancesystemsandcounter-improvisedexplosivedevices.
Thedepartmentishinderedinitsabilitytoidentifykeyimprovements,
includingconsolidationtoreduceanyoverlap,duplication,or
fragmentationbecauseitlacksacomprehensiveapproachtomanageand
overseethebreadthofitsurgentneedsefforts.Specifically,DODdoesnot
haveacomprehensive,DOD-widepolicythatestablishesabaselineand
providesacommonapproachforhowalljointandmilitaryserviceurgent
needsaretobeaddressedincludingkeyactivitiesoftheprocesssuchas
validation,execution,ortracking.Forexample,theJointStaff,theJoint
IEDDefeatOrganization,themilitaryservices,andtheSpecialOperations
Commandhaveissuedtheirownguidancethatvariesintermsofthekey
activitiesassociatedwithprocessingandmeetingurgentneedsincluding
howanurgentneedsstatementisgeneratedbythewarfighter,validatedas
anurgentrequirement,andtrackedafterasolutionisprovided.
Furthermore,DODdoesnothavevisibilityoverthefullrangeofitsurgent
needsefforts.Forexample,DODcannotreadilyidentifythecostofits
toWarfighter
UrgentNeeds
departmentwideurgentneedsefforts,whichisatleast$76.9billion
1
since
2005basedonGAOsanalysis.Additionally,DODdoesnothavea
comprehensivetrackingsystem,asetofuniversalmetrics,andasenior-
levelfocalpointtoleadthedepartmentseffortstofulfillvalidatedurgent
needsrequirements.WithoutDOD-wideguidanceandafocalpointtolead
itsefforts,DODriskshavingduplicative,overlapping,andfragmented
efforts,whichcanresultinavoidablecosts.
ActionsNeededand
OtherBenefits
IntheabsenceofacomprehensiveDODevaluation,GAOsMarch2011
reportidentifiedandanalyzedseveraloptions,aimedatpotential
consolidationsandincreasedefficienciesinaneffortintendedtoprovide
ideasforthedepartmenttoconsiderinstreamliningitsurgentneeds
entitiesandprocesses.Theseoptionsincludethefollowing:
Consolidateintooneentity,withintheOfficeoftheSecretaryof
Defense,alltheurgentneedsprocessesoftheservicesandDOD,while
keepingattheservicesprogramofficesthedevelopmentofsolutions.
Consolidateentitiesthathaveoverlappingmissionorcapability
portfoliosregardingurgentneedssolutions.
Establishagatekeeperwithineachservicetooverseeallkeyactivities
tofulfillavalidatedurgentneedsrequirement.
Consolidatewithineachserviceanyoverlappingactivitiesintheurgent
needsprocess.
TheoptionsGAOidentifiedarenotmeanttobeexhaustiveormutually
exclusive.Rather,DODwouldneedtoperformitsownanalysis,carefully
weighingtheadvantagesanddisadvantagesofoptionsitidentifiesto
determinetheoptimalcourseofaction.Additionally,itmustberecognized
thatmanyentitiesinvolvedinthefulfillmentofurgentneedshaveother
rolesaswell.However,untilDODperformssuchanevaluation,itwill
remainunawareofopportunitiesforconsolidationandincreased
efficienciesinthefulfillmentofurgentneeds.
1
Estimateisbasedonfundingdataprovidedbyurgentneeds-relatedentitiesrespondingto
ourdatacollectioninstrumentandincludesfundingforprocessingofurgentneedsaswell
asdevelopmentofsolutionsandsomeacquisitioncosts.
toWarfighter
UrgentNeeds
GAOsMarch2011reportrecommendedthatthedepartmentdevelop
comprehensiveguidancethat,amongotherthings,createsafocalpointto
leaditsurgentneedsefforts.Additionally,GAOrecommendedthatDODs
ChiefManagementOfficerevaluatepotentialoptionsforconsolidationto
reduceoverlap,duplication,andfragmentationandtakeappropriate
action.DODconcurredwiththeserecommendations.Thisisanissuethat
maywarrantcontinuingcongressionaloversight.Timelyandeffective
actionsontheserecommendationsshouldimproveDODsabilityto
addressurgentwarfighterneedsinthemostefficientandcost-effective
mannerbyminimizingtherisksofduplication,overlap,andfragmentation.
Frameworkfor
productsbelow.
Analysis
RelatedGAO
Products
WarfighterSupport:DODsUrgentNeedsProcessesNeedaMore
ComprehensiveApproachandEvaluationforPotentialConsolidation.
WarfighterSupport:ImprovementstoDODsUrgentNeedsProcesses
WouldEnhanceOversightandExpediteEffortstoMeetCritical
WarfighterNeeds.GAO-10-460.Washington,D.C.:April30,2010.
WarfighterSupport:ActionsNeededtoImproveVisibilityand
CoordinationofDODsCounter-ImprovisedExplosiveDeviceEfforts.
WarfighterSupport:ChallengesConfrontingDODsAbilitytoCoordinate
andOverseeItsCounter-ImprovisedExplosiveDevicesEfforts.
GAO-10-186T.Washington,D.C.:October29,2009.
DefenseManagement:MoreTransparencyNeededovertheFinancial
andHumanCapitalOperationsoftheJointImprovisedExplosive
DeviceDefeatOrganization.GAO-08-342.Washington,D.C.:March6,
2008.
DefenseLogistics:LackofaSynchronizedApproachbetweentheMarine
CorpsandArmyAffectedtheTimelyProductionandInstallationof
MarineCorpsTruckArmor.GAO-06-274.Washington,D.C.:June22,2006.
toWarfighter
UrgentNeeds
DefenseLogistics:SeveralFactorsLimitedtheProductionand
InstallationofArmyTruckArmorduringCurrentWartimeOperations.
DefenseLogistics:ActionsNeededtoImprovetheAvailabilityofCritical
ItemsduringCurrentandFutureOperations.GAO-05-275.Washington,
D.C.:April8,2005.
DefenseLogistics:PreliminaryObservationsontheEffectivenessof
LogisticsActivitiesduringOperationIraqiFreedom.GAO-04-305R.
Washington,D.C.:December18,2003.
Foradditionalinformationaboutthisarea,contactWilliamM.Solisat
AreaContact
(202)512-8365orsolisw@gao.gov.
OpportunitiesExisttoAvoidUnnecessary
RedundanciesandImprovetheCoordination
ofCounter-ImprovisedExplosiveDevice
Efforts
RedundanciesandImprovetheCoordinationof
Counter-ImprovisedExplosiveDeviceEfforts
WhyGAOIsFocusing
onThisArea
Improvisedexplosivedevices(IED)continuetobethenumberonethreat
toU.S.troops.IEDincidentsinAfghanistannumbered1,128inthemonth
ofMay2010a120percentincreaseovertheprioryear.Inadditionto
Afghanistanincidents,theIEDthreatisincreasinglyexpandingthroughout
theglobewithover300IEDeventspermonthworldwide,accordingtothe
JointIEDDefeatOrganization(JIEDDO).TheDepartmentofDefense
(DOD)createdthisorganizationin2006,reportingdirectlytotheDeputy
SecretaryofDefense,toleadandcoordinateallofDODscounter-IED
efforts.WhileCongresshasappropriatedover$17billiontoJIEDDO
throughfiscalyear2010toaddresstheIEDthreat,otherDOD
components,includingtheArmedServices,havedevotedatleast
$1.5billiontodeveloptheirowncounter-IEDsolutions.
WhatGAOHasFound
toIndicate
orFragmentation
DODcreatedJIEDDOtoleadandcoordinateallofDODscounter-IED
efforts,butmanyoftheorganizationsengagedinthecounter-IED-defeat
effortpriortothecreationofJIEDDOhavecontinuedtodevelop,
maintain,andexpandtheirownIED-defeatcapabilities.GAOhas
preliminarilyidentifiedseveralinstancesinwhichDODentitiesoperate
independentlyandmayhavedevelopedduplicatecounter-IEDcapabilities.
Forexample,boththeArmyandtheMarineCorpscontinuetodevelop
theirowncounter-IEDminerollerswithfullorpartialJIEDDOfunding.
TheMarineCorpsminerollerperunitcostisabout$85,000versusacost
rangeof$77,000to$225,000perunitfortheArmymineroller.However
officialsdisagreeaboutwhichsystemismosteffective,andDODhasnot
conductedcomparativetestingandevaluationofthetwosystems.
Additionally,JIEDDOdoesnotadequatelyinvolvetheServicesinits
processtoselectinitiatives.Forexample,theNavydevelopedadirected
energytechnologytofillacriticaltheatercapabilitygap,yetJIEDDOlater
underwrotetheAirForcesdevelopmentofthesametechnologyforusein
adifferentsystem.However,theAirForcehasnowdeterminedthatits
systemwillnotmeetrequirementsandhasdeferredfieldingitpending
furtherstudy.Thismayhaveanegativeimpactonthecontinued
developmentofthistechnologybytheNavyorothersforuseintheater.
Forexample,accordingtoDODofficials,duringtherecenttestingofthe
AirForcessystem,safetyconcernswerenoteduniquetothatsystemthat
maylimitwarfighterswillingnesstoacceptthetechnology.
Eliminatingunnecessaryduplicationandenablingeffectivecoordinationin
counter-IEDeffortsishindered,inpart,becauseneitherJIEDDOnorany
otherDODorganizationhasfullvisibilityoverallofDODscounter-IED
efforts.GAOhasrecommendedthatDODestablishaDOD-widedatabase
forallcounter-IEDinitiativestoestablishcomprehensivevisibility,
Efforts
however,DODhasyettodevelopsuchatool.AccordingtoDODofficials,
DODhadinitiatedadatabasetheTechnologyMatrixtoestablisha
comprehensivelistofcounter-IEDeffortsandtheorganizationssponsoring
theseefforts;however,DODhasnotrequireditsvariousorganizations
involvedindevelopingcounter-IEDsolutionstousethisdatabasenor
otherwisetakenactiontoensuretheseorganizationsprovideinformationto
JIEDDOontheirrespectivecounter-IEDefforts.Therefore,thedatabase
hasnotbeenascomprehensiveasintended.Todate,DODssenior
leadershiphasnottakenadequateactiontofacilitateimprovedvisibility,
coordination,andauthorityforJIEDDOtoaddresstheseshortcomings.This
lackofleadershipattentionmaybeanotherkeyfactorcontributingtothe
lackoffullvisibilityandeffectivecoordinationofthewiderangeofcounter-
IEDmeasuresconductedthroughoutDOD.Consequently,DODcomponents
andtheServicescontinuetopursuecounter-IEDeffortsindependentofone
anotherthatmayberedundantoroverlapping.
ActionsNeededand
OtherBenefits
DODhastakenstepstoaddressseveralofGAOspriorrecommendations
regardingtheimprovementofitscounter-IEDprograms,suchasrevising
JIEDDOsprocessforevaluatingandimplementingcounter-IEDsolutions.
However,5yearsafteritscoordinationeffortsbeganthroughJIEDDO,
DODhasstillnotachievedfullvisibilityoverallofitscounter-IED
investmentsandresourcesnorhasitrequiredcomprehensivedatafromall
DODcomponentsandtheServicestoenableeffectivecoordination.
JIEDDOhasencountereddifficultyobtaininginformationonallcounter-
IEDefforts,inpart,becauseaccordingtoJIEDDOofficials,theServices
andcomponentsarenotinclinedtosharethisinformation.Therefore,
DODsseniorleadership,toincludetheDeputySecretaryofDefense,
shouldconsiderwhatactionsthedepartmentcantaketoassurethat
JIEDDOcancentrallycollectinformationandcoordinateeffortsand
whetheritshouldenhanceJIEDDOstoolstoensureallinformationon
DOD-widecounter-IEDprogramsiscentrallycollectedandevaluatedto
limitunnecessaryduplication,overlap,andfragmentation.DODleadership
shouldalsotakeamoreactiveroletoensureinvestmentdecisionsofeach
oftheindividualcounter-IEDactivitiesareconsistentwithDODs
overarchingcounter-IEDgoalsandobjectivesandthattheyarepursuedin
acoordinatedandefficientmanner.
TheinformationcontainedinthisanalysisisbasedonpriorGAOproducts
Frameworkfor
below,aswellasGAOsongoingworkonDODscounter-IEDefforts.Aspart
Analysis ofthisongoingworkGAOwillcomprehensivelyidentify,totheextent
possible,allcounter-IEDorganizationsandeffortswithinDOD,andcollect
Efforts
quantitativedataontheseeffortssuchasthefundsinvestedandthenumber
ofpersonsengagedintheseefforts.Usingthesedata,GAOwillevaluatethe
natureandextentofanyoverlaporduplication,aswellasthepotentialfor
consolidation,improvedcoordination,orotherefficiencies.GAOisalso
evaluatingDODsprogressinimprovingvisibilityoverallcounter-IEDefforts.
RelatedGAO
Products
WarfighterSupport:DODsUrgentNeedsProcessesNeedaMore
ComprehensiveApproachandEvaluationforPotentialConsolidation.
WarfighterSupport:ActionsNeededtoImproveVisibilityand
CoordinationofDODsCounter-ImprovisedExplosiveDeviceEfforts.
WarfighterSupport:ChallengesConfrontingDOD'sAbilitytoCoordinate
andOverseeItsCounter-ImprovisedExplosiveDevicesEfforts.
GAO-10-186T.Washington,D.C.:October29,2009.
DefenseManagement:MoreTransparencyNeededovertheFinancial
andHumanCapitalOperationsoftheJointImprovisedExplosive
DeviceDefeatOrganization.GAO-08-342.Washington,D.C.:
March6,2008.
DefenseLogistics:LackofaSynchronizedApproachbetweentheMarine
CorpsandArmyAffectedtheTimelyProductionandInstallationof
MarineCorpsTruckArmor.GAO-06-274.Washington,D.C.:June22,2006.
DefenseLogistics:SeveralFactorsLimitedtheProductionand
InstallationofArmyTruckArmorduringCurrentWartimeOperations.
DefenseLogistics:ActionsNeededtoImprovetheAvailabilityofCritical
ItemsduringCurrentandFutureOperations.GAO-05-275.Washington,
D.C.:April8,2005.
DefenseLogistics:PreliminaryObservationsontheEffectivenessof
LogisticsActivitiesduringOperationIraqiFreedom.GAO-04-305R.
Foradditionalinformationaboutthisarea,contactWilliamM.Solisat
AreaContact
RedundanciesandMaximizetheEfficientUse
ofIntelligence,Surveillance,and
ReconnaissanceCapabilities
RedundanciesandMaximizetheEfficientUseof
Intelligence,Surveillance,andReconnaissance
Capabilities
WhyGAOIsFocusing
onThisArea
ToplanandexecutemilitaryoperationsinIraqandAfghanistan,military
commandersdependonintelligence,surveillance,andreconnaissance
(ISR)systemstocollect,process,anddisseminatetimelyandaccurate
informationonadversariescapabilitiesandvulnerabilities.The
DepartmentofDefenses(DOD)ISRenterpriseconsistsofmultiple
intelligenceorganizationsthatindividuallyplanfor,acquire,andoperate
mannedandunmannedairborne,space-borne,maritime,andground-
basedISRsystems.ThesuccessofISRsystemsatprovidingkey
informationhasledtoincreaseddemand,andDODcontinuestoinvestin
ISRprograms.Forexample,DODrequestedabout$6.1billioninfiscal
year2010forunmannedaircraftprogramsalone.DODisfurther
examiningitsairborneISRbudgetneedsforfiscalyear2012andbeyond.
Further,GAOhasreportedsince2005thatISRactivitiesarenotintegrated
andefficient;effectivenessmaybecompromisedbylackofvisibilityinto
operationaluseofISRassets;andagenciescouldbettercollaborateinthe
acquisitionofnewcapabilities.
WhatGAOHasFound
toIndicate
orFragmentation
ISRactivitiescutacrossservicesanddefenseagencies,andnosingleentity
atthedepartmentallevelhasresponsibility,authority,andcontrolover
investmentstoprioritizeresourcestomeetjointpriorityrequirements.The
ISRenterpriseexhibitsextensive,structuralfragmentationwithahigh
numberofseparateorganizationssharingthesameroles.Forexample,
multipleISRorganizationsconductstrategicplanning,budgeting,anddata
analysisacrossintelligencedisciplines.AlthoughDODhasdesignatedthe
UnderSecretaryofDefenseforIntelligencetomanageISRinvestmentsasa
departmentwideportfolio,theUnderSecretaryofDefenseforAcquisition,
Technology,andLogisticshasbeendesignatedtoleadthetaskforce
responsibleforoversightofissuesrelatedtothemanagementand
acquisitionofunmannedaircraftsystemsthatcollectISRdata.Inaddition,
astheISRportfoliomanager,theUnderSecretaryofDefensefor
Intelligencehasonlyadvisoryauthorityandcannotdirecttheservicesor
agenciestomakechangesintheirinvestmentplans.
Further,twokeyfactorsmaketrackingDODsISRspendingdifficult.First,
fundingforDODsISRcapabilitiescancomefromseveralsources,
includingtheMilitaryIntelligenceProgram,theNationalIntelligence
Program,andservicebudgets.Second,eachservicemaintainsordevelops
itsownrequirementsprocess,budget,andstrategicplans.Forexample,
eachserviceidentifiesitsrequirementsandprioritizesspendingforits
equipmentandpersonnelneeds,andtracksandaccountsforISRfunding
differently.
TheSecretaryofDefensehasidentifiedISRasanareaofscrutinyfor
potentialcostsavingsinthemilitaryintelligenceprogrambudget,which
totals$27billioninspendingforfiscalyear2010includingISRcapabilities
andpersonnel.Inaddition,theNationalIntelligenceProgrambudgetof
$53.1billionincludessomeresourcesforDODISRactivities.Since1988,
GAOhasreportedonthepotentialforduplicationandfragmentationin
DODsunmannedISRsystems.Service-drivenrequirementsandfunding
processescontinuetohinderintegrationandefficiencyandcontributeto
unnecessaryduplicationinaddressingwarfighterneeds.Althoughseveral
unmannedaircraftsystemshaveachievedsomecommonalityamongthe
airframestheyuse,mostarepursuingservice-uniquesubsystemsand
components.Thelackofcollaborationandcommonalityamongthe
serviceshasledtoduplicativecostsfordesigningandmanufacturingISR
systems,andhasresultedininefficienciesinthecontractingand
acquisitionprocesses.Forexamplein2005,theArmyinitiateda
developmentprogramwiththesamecontractorforavariantoftheAir
ForcePredatorestimatedtocostnearly$570million,althoughthe
Predatorwasalreadysuccessfullyprovidingcapabilitiestothewarfighter.
Similarly,in2009GAOreportedthat,althoughtheNavyexpectedtosave
timeandmoneybyusingtheAirForcesexistingGlobalHawkairframe,
theNavyalsoplannedtospendover$3billiontodevelopmaritime
surveillancecapabilities.Conversely,theMarineCorpsavoidedthecostof
initialsystemdevelopmentandwasabletoquicklydeliverauseful
capabilitytothewarfighterbychoosingtoprocureexistingArmyShadow
systemsratherthandevelopingitsownunmannedaircraft.
DODhasestablishednumerousorganizationsandinitiativesintendedto
integratethedeterminationofrequirements,development,acquisition,and
operationofISRsystemstoaddressjointandservice-specificneeds,but
theseeffortshavenothadthedesiredeffectofminimizingfragmentation
andoverlapinitsISRenterprise.Forexample,althoughtheUnder
SecretaryofDefenseforIntelligence,ascapabilityportfoliomanager,
updatedthecongressionallydirectedISRIntegrationRoadmap,the
RoadmapdoesnotrepresentacomprehensiveISRarchitecturetoguide
serviceinvestmentstomeetjointneeds.Forexample,theRoadmapdoes
notenablecomparisonandtradeoffsbetweenintelligenceplatformsand
capabilities.Inaddition,theJointRequirementsOversightCouncil,which
ischargedwithvalidatingrequirementsandapprovingproposalsfornew
capabilitiestomeetjointcapabilitygaps,hasbeengenerallyineffectivein
ensuringthattheservicescollaborateindevelopingcapabilitiesforjoint
requirements.

In2010,theJointStafflaunchedadecisionsupporttoolintendedto
catalogexistingairborneISRcapabilitiesandvalidatenewrequirements.
ThistoolcouldhelpDODprioritizeinvestmentsinnewprogramsand
maketradeoffsamongcapabilitiesthatcouldresultincostsavings,butit
isuncertainwhethertheeffortwillreceivefundingforexpandingthe
databasetoincludeotherISRassetsandimprovefunctionality.
Meanwhile,DODcontinuestoinvestinISRcapabilitiesthatmaynotbe
themostefficientoreffectiveuseofresources.Further,althoughDODhas
investedheavilyincapabilitiestocollectISRdata,ithasnotinvested
proportionallyinthecapabilitiesthatwouldenableittoprocessanduse
theinformation.Weaknessesinthemilitaryservicesabilitytoprocessand
securelyshareISRdatahaveledtogapsinorduplicativecollectionefforts
andcontributedtocontinuingwarfighterdemandsforISRassetsto
supporttheirmissions.
ActionsNeededand
OtherBenefits
DODhastakenstepstoimproveISRmanagement,buttheseactionshave
nothadthedesiredeffect.Todevelopamorefullyintegratedapproachto
minimizingfragmentation,overlap,andduplicationinitsISRenterprise,
DODcouldalignDOD-widestrategicgoals,identifyperformance
measures,andestablishlinkagesbetweenISRacquisitionplansand
strategicgoalstoinforminvestmentdecisions.
Since2005,GAOhasidentifiedchallengeswithDODsISRenterpriseand
madeanumberofrecommendationstoassistDODinimprovingitsISR
managementandreducingunnecessaryduplicationandoverlap.DODhas
takensomepositivestepstoaddressGAOsrecommendations,suchas
recentmilitaryserviceeffortstoacquiresomecommonunmannedaircraft
andsensorsanddevelopperformancemeasures,butitseffortsarelimited
andhavenotyetimproveditsabilitytointegrateISRrequirements
generation,developmentandacquisition,orutilization.Inkeepingwith
GAOspreviousrecommendations,DODcouldtakeseveralactionsto
developamorefullyintegratedapproachtominimizefragmentation,
overlap,andduplicationinitsISRenterprise.Specifically,DODcoulddo
thefollowing:
DevelopanintegratedISRarchitecture,includingmannedand
unmannedsystems,toalignDOD-widestrategicgoals.
ContinuetodeveloptoolssuchastheJointStaffsdecisionsupport
toolandperformancemeasurestoinforminvestmentdecisions.
EstablishlinkagesbetweenISRacquisitionplansandstrategicgoalsto
betterinforminvestmentdecisions.
Developandenforcecommonalityandinteroperabilitystandardsfor
sharingofISRdataandestablishtimelinesforimplementation.
IncreasedintegrationofDODsISRenterprisecouldimproveefficiencies,
reduceredundanciesandavoidduplicationofsimilardevelopment
initiatives,possiblysavingproductionandlife-cyclecostsandimprovethe
interoperabilityamongsystems.Althoughthedepartmenthasbegunto
takesomeinitialstepsinthisarea,untilallparticipantsinthedefense
enterprisesuccessfullyshareISRinformation,inefficiencieswillhamper
theeffectivenessofeffortstosupportthewarfighter,andISRdata
collectioneffortsmaybeunnecessarilyduplicative.Inaddition,
comprehensivedataonitsISRenterprise,includingresourcesand
performancemeasurestoassesstheeffectivenessofISRassets,could
betterpositionDODtomaketrade-offsamongISRcapabilities.
Frameworkfor
Analysis
Inadditiontoobtaininginformationfromthereportslistedbelow,GAO
revieweddocumentationrelatedtoDODsfundingforISRthroughthe
MilitaryIntelligenceProgramandanalyzedplannedISRinvestmentsin
DODsFutureYearsDefenseProgramFiscalYears2012-2015.GAOalso
assessedtheISRIntegrationRoadmapagainststrategicplanningand
legislativecriteria,andreviewedtheJointStaffsISRassessmenttool.In
addition,GAOconductedinterviewswithofficialsfromtheofficesof
DODsUnderSecretaryofDefenseforIntelligence,theJointStaff,the
militaryservices,theDefenseIntelligenceAgency,theNationalGeospatial
IntelligenceAgency,andtheNationalSecurityAgency.
RelatedGAO
Products
DefenseAcquisitions:DODCouldAchieveGreaterCommonalityand
EfficienciesamongItsUnmannedAircraftSystems.GAO-10-508T.
Washington,D.C.:March23,2010.
Intelligence,Surveillance,andReconnaissance:EstablishingGuidance,
Timelines,andAccountabilityforIntegratingIntelligenceDataWould
ImproveInformationSharing.GAO-10-265NI.Washington,D.C.:
January22,2010.
DefenseAcquisitions:OpportunitiesExisttoAchieveGreater
CommonalityandEfficienciesamongUnmannedAircraftSystems.
GAO-09-520.Washington,D.C.:July30,2009.
UnmannedAircraftSystems:AdditionalActionsNeededtoImprove
ManagementandIntegrationofDODEffortstoSupportWarfighter
Needs.GAO-09-175.Washington,D.C.:November14,2008.
Intelligence,Surveillance,andReconnaissance:DODCanBetterAssess
andIntegrateISRCapabilitiesandOverseeDevelopmentofFutureISR
Requirements.GAO-08-374.Washington,D.C.:March24,2008.
UnmannedAircraftSystems:AdvanceCoordinationandIncreased
VisibilityNeededtoOptimizeCapabilities.GAO-07-836.Washington,
D.C.:July11,2007.
UnmannedAircraftSystems:NewDODProgramsCanLearnfromPast
EffortstoCraftBetterandLessRiskyAcquisitionStrategies.
Foradditionalinformationaboutthisarea,contactDaviM.DAgostinoat
AreaContact
(202)512-5431ordagostinod@gao.gov.
ADepartmentwideAcquisitionStrategy
CouldReduceDODsRiskofCostly
DuplicationinPurchasingTacticalWheeled
Vehicles
ADepartmentwideAcquisitionStrategyCouldReduce
DODsRiskofCostlyDuplicationinPurchasingTactical
WheeledVehicles
WhyGAOIsFocusing
onThisArea
TheDepartmentofDefense(DOD)spendsbillionsofdollarseachyearto
procuretacticalwheeledvehicles,suchasseveraltypesofMineResistant
AmbushProtectedvehicles.Tacticalwheeledvehiclesareusedto
transportpeople,weapons,andcargo.Theadventofimprovisedexplosive
deviceshashadasignificanteffectondesigningtacticalwheeledvehicles
forsurvivability.DODisintheprocessofacquiringtwonewarmored
designstheMineResistantAmbushProtectedAllTerrainVehicle,and
theJointLightTacticalVehicle.Theestimatedtotalacquisitioncostforthe
MineResistantAmbushProtectedAllTerrainVehicleisabout$12.5
billion.Themilitaryservicesexpecttohaveavarietyoftacticalwheeled
vehiclesinuseatanygiventime.Since2008,GAOhasidentifiedtactical
wheeledvehicleprocurementasbeingatriskforduplication,andin2009
GAOrecommendedthatDODdevelopaunifiedacquisitionstrategy.
WhatGAOHasFound
toIndicate
orFragmentation
DODsacquisitionoftwosimilartacticalwheeledvehiclestheMine
ResistantAmbushProtectedvehicle,includinganAllTerrainvariant,and
eventuallytheJointLightTacticalVehiclecreatesariskofunplanned
overlapincapabilitiesthatcouldincreaseacquisitioncostssignificantly.
TheMineResistantAmbushProtectedAllTerrainvehiclecontractorwas
expectedtocompletedeliveriesinNovember2010.Accordingtoprogram
officials,thevehiclesfieldedsofarappeartobeperformingwell.
DevelopmenteffortsfortheJointLightTacticalVehicle,withanexpected
initialacquisitionofover60,000vehicles,arestillongoing.While
acquisitioncostsfortheJointLightTacticalVehicleareyettobe
determined,alow-endestimateis$18.5billion.Thecostperunit,including
missionequipment,couldbeover$800,000each.
Todate,theserviceshavenotconsideredusingthevehiclesintheMine
ResistantAmbushProtectedfamilywiththeexceptionofsomevehicles
plannedforusebyrouteclearance,explosivesordinancedisposal,and
medicalevacuationunitstooffsettheneedfororreplaceothertactical
wheeledvehicles.Currently,theservicesconsiderMineResistantAmbush
Protectedvehiclestobemainlyadditivetotheirfleets.Giventhehigh
potentialcostoftheJointLightTacticalVehicle,reducingthenumberof
unitsacquiredcouldoffersubstantialsavings,albeitwithpotential
performancetradeoffs.Toillustrate,a5percentreductioninJointLight
TacticalVehiclequantitiescouldsavenearly$2.5billion,assumingaunit
costof$800,000.
DODdoesnothaveaunifiedtacticalwheeledvehiclestrategythat
considerstiming,capabilities,affordability,andsustainability.DODstated
in2009thatitwouldcreateaunifiedplanfortacticalwheeledvehicle
Vehicles
investmentdecisions.Theplanwouldbeacomprehensivestrategy
compatiblewithArmyandMarineCorpsequippingstrategies.Asof
January2011,theArmyhadcompletedandreleaseditsupdatedtactical
wheeledvehiclestrategy,theMarineCorpshadnotyetcompletedits
updatedstrategy,andDODhadnotyetissuedatimetableforcompletinga
unified,departmentwidestrategy.
WiththeArmyandMarineCorpsfacingdecisionsaboutwhethertorepair,
upgrade,orreplaceoldertacticalvehicles,itisimportanttofullyassess
therequirementsandcostforbuyingandmaintainingallclassesoftactical
wheeledvehiclesfromthedualperspectivesofmissionneedand
affordability.TheservicesneedtoknowwhatcapabilitiestheJointLight
TacticalVehiclewillhave,thescopeandcostofanyrecapitalizationof
othervehiclesorproductioneffort,andthesustainmentcostofplacing
theMineResistantAmbushProtectedfamilyofvehiclesintheirforce
structures.Theserviceshaveexpressedconcernabouttheirabilitytofund
operationsandsupportcostsfortacticalwheeledvehiclesinthefuture.
ActionsNeededand
OtherBenefits
DODcouldsavebothacquisitionandsupportcoststhrougha
departmentwidetacticalwheeledvehiclestrategythatconsiderscostsand
benefitsoftheJointLightTacticalVehiclecomparedtoothertactical
wheeledvehicleoptions.
Tohelptheagencyassesstheaffordabilityoftheseacquisitionsandtheir
implicationsforcompetingdemandswithinthedepartment,DODneedsto
completeitsplannedDOD-widetacticalwheeledvehiclestrategyto
determine
whatcapabilitiesJointLightTacticalVehiclewillhave,
thescopeandcostofanyrecapitalizationofothervehiclesor
productioneffort,and
thesustainmentcostofplacingtheMineResistantAmbushProtected
familyofvehiclesintheirforcestructures.
Inaddition,asGAOrecommendedinNovember2010,DODshouldinclude
inthestrategyacost-benefitanalysisthatcouldminimizethecollective
acquisitionandsupportcostsofthevarioustacticalwheeledvehicle
programsandreducetheriskofunplannedoverlaporduplication.Sucha
cost-benefitanalysisshouldprovideanestimateofdollarsavingsfor
Vehicles
variousoptionsforoffsettingJointLightTacticalVehiclequantitiesin
favorofrecapitalizingexistingvehicles.
AnypotentialoffsetsbetweenMineResistantAmbushProtectedvehicles
andJointLightTacticalVehicles,totheextentthattheyaresupportedby
cost-benefitanalyses,couldsavebothacquisitionandsupportcosts.
SimplyreducingthenumberofJointLightTacticalVehiclesDODprocures
couldresultinbillionsofdollarsincostsavings.Forinstance,areduction
ofjust5percentwouldsave$2.5billion,assumingaunitcostof$800,000.
Inadditiontosavinginitialprocurementcosts,reducingtacticalwheeled
vehicleacquisitionquantitieshasthepotentialtoreducefuture
operationalandmaintenancecosts.
DODconcurredwithGAOsrecommendationsandsaidthattheJointLight
TacticalVehicleprogramwillconductananalysisofalternativesthat
explorespotentialoffsetstoplannedacquisitionquantities,including
thoserelatedtothereplacementofMineResistantAmbushProtected
vehicles.Inaddition,asapartofDODsplannedanalysisofalternativesto
theJointLightTacticalVehicle,theArmyandMarineCorpshavestated
theywillexploretheimplications,includingmaintenanceandlifecycle
costbenefits,ofacquiringaJointLightTacticalVehiclefamilyofvehicles
asapartofamixedvehiclefleet.
Frameworkfor
productslistedbelow.
Analysis
RelatedGAO
Products
DefenseAcquisitions:IssuestoBeConsideredasDODModernizesIts
FleetofTacticalWheeledVehicles.GAO-11-83.Washington,D.C.:
November5,2010.
DefenseAcquisitions:DepartmentofDefenseNeedsaUnifiedStrategy
forBalancingInvestmentsinTacticalWheeledVehicles.GAO-09-968R.
RapidAcquisitionofMineResistantAmbushProtectedVehicles.
GAO-08-884R.Washington,D.C.:July15,2008.
Foradditionalinformationaboutthisarea,contactMikeSullivanat(202)
AreaContact
512-4841orsullivanm@gao.gov.
ImprovedJointOversightofDODs
PrepositioningProgramsMayReduce
UnnecessaryDuplication
ImprovedJointOversightofDODsPrepositioning
ProgramsMayReduceUnnecessaryDuplication
WhyGAOIsFocusing
onThisArea
TheDepartmentofDefense(DOD)prepositionsequipmentandsupplies
worthbillionsofdollars,includingmajoritemssuchascombatvehicles,
rations,medicalsupplies,andrepairpartsatstrategiclocationsaroundthe
world.Bothafloatandashore,prepositioningenablesDODtofield
combat-readyforcesindays,ratherthantheweeksitwouldtakeif
equipmenthadtobemovedfromtheUnitedStatestothelocationsof
conflicts.Prepositionedequipmentcanalsobeusedtosupportsecurity
cooperation,deterrence,multilateraltrainingexercises,andhumanitarian
assistanceordisasterrelief.
TheAirForce,Army,andMarineCorpshavedrawnontheirprepositioned
stockstosupportmilitaryoperationsinIraqandAfghanistan,increasing
theopportunitiestogainefficienciesinrebuildingthesestocks.Since
2005,GAOhasidentifiedchallengesregardingDODsprepositionedstocks
andmadenumerousrecommendationsrelatedtostrategicplanning,
requirementsdetermination,inventorymanagement,andotherissues.
WhatGAOHasFound
toIndicate
orFragmentation
Althoughtheservicesareexpectedtooperateinajointenvironment,
someprepositioningactivitiesarefragmentedamongtheservices,withthe
potentialforunnecessaryduplication.Forexample,theArmysandAir
Forcestransportablebaseequipment,includingmobilehousingand
diningfacilities,illustratesaninstanceinwhichtheservicesseparately
fundandmanageprepositionedequipmentthathasbeenused
interchangeablyamongtheservices.Since2005,GAOhasreportedthat
thelackofadepartmentwideapproachtoprepositioningpotentially
missesopportunitiestoachievegreaterefficienciesbyreducing
unnecessaryduplication.Greatereffortstowardadepartmentwide
approachtoprepositioningthatensurestheservicesplanstospend
billionsofdollarstorebuildprepositionedstocksaccuratelyreflectDODs
currentandfutureneedscouldhelppreventunnecessaryduplicationand
expenditures.
WhilepriorGAOrecommendationsandDODsowninstructionindicate
theneedforadepartmentwideapproachtoprepositioning,the
departmentstilldoesnothavesuchanapproach.In2008DODpublished
aninstructiononprepositionedstocksdirectingthedevelopmentof
overarchingstrategicguidanceonprepositioning.However,asof
September2010DODsguidancecontainedlittleinformationrelatedto
prepositionedstocks.Asaresult,theservicesindividualplansand
prioritiesforrebuildingtheirprepositionedstocksmaycontinuetobe
implementedwithoutaclearunderstandingofhowtheseplansfittogether
tomeetevolvingdefensegoals.DODhasestimatedthatasoftheendof

fiscalyear2009,suchreplenishmentwilltakeabout8yearsandcostan
estimated$6.1billion.GAOhasreportedthat,astherebuildingprogresses,
withoutthedevelopmentandimplementationofdepartmentwideguidance
thatincludesplanningandfundingprioritieslinkingcurrentandfuture
needsanddesiredresponsivenessofDODsprepositionedstocks,the
servicesmaynotbeabletomakefullyinformeddecisionsthatwould
supporttheeffectiveandefficientachievementofnationalmilitary
objectives.
OrganizationalchallengesthathavehinderedDODsjointoversightofits
prepositionedstocksfurtherillustratethelackofadepartmentwide
approachtoprepositioning.DODs2008instructiononprepositioned
stocksformalizedtheestablishmentofajointprepositioningworking
group.Accordingtothefederalstandardsforinternalcontrol,federal
agenciesaretoemployinternalcontrolactivities,suchasreviewsby
managers,tohelpensurethatanorganizationsdirectivesarecarriedout
andresourcesareeffectivelyandefficientlyused.However,asGAO
recentlyreported,theworkinggrouphashadalimitedfocus,suchas
informationsharing,andhasnotconductedthewiderrangeoftasksthe
workinggroupwasdirectedtoperform,suchasaddressingjointissues
concerningrequirementsforprepositionedstocks,developing
recommendationsforimprovedprocesses,andmakingrecommendations
thatbalancelimitedresourcesagainstoperationalriskduringbudgetand
programreviews.Ifperformed,thesetaskscouldproducecostsavings.
ActionsNeededand
OtherBenefits
Joint,departmental,andservicecomponentswithinDODareinthe
processofundertakingorhavecompletedfivemajorreviews,whichmay
havethepotentialtoidentifyareasofneededenhancementstothe
managementofprepositioningactivities.Nevertheless,without
overarchingguidanceandtheorganizationalmeanstoinstitutionalizethe
resultsoftheseefforts,theirimpactmaybelimited.Therefore,asGAO
recentlyrecommended,theSecretaryofDefenseshouldtakethefollowing
actionstoenhancejointoversightofDODsprepositioningprograms:
DirecttheOfficeoftheUndersecretaryofDefenseforPolicyto
developstrategicguidancethatincludesplanningandresource
priorities,linkingthedepartmentscurrentandfutureneedsfor
prepositionedstockstoevolvingnationaldefenseobjectives.
DirecttheUndersecretaryofDefenseforAcquisition,Technology,and
Logistics,incoordinationwiththeChairmanoftheJointChiefsof
Staff,tostrengthenDODsjointoversightofitsprepositionedstocks
throughsuchactionsasclarifyinglinesofauthorityandreporting
betweenthejointprepositioningworkinggroupandothercomponents
withinDOD.
DirecttheChairmanoftheJointChiefsofStaffandtheSecretariesof
themilitaryservicestosynchronizeataDOD-widelevel,as
appropriate,theservicesprepositioningprogramssothattheyinclude
updatedrequirementsandmaximizeefficiencyinmanaging
prepositionedassetsandactivitiesacrossthedepartmenttoreduce
unnecessaryduplication.
InNovember2010DODconcurredwithGAOsrecommendations,but
insufficienttimehaspassedtoassessprogressinimplementingthem.
Also,informationisnotavailableontheextentofpotentialsavingsthat
mayresultfromtheintegrationofelementsoftheservicesprepositioning
programs.Anyactualsavingswouldbedependentuponspecificsteps
taken.However,implementingjointmanagementforthestagingand
maintenanceofprepositionedequipmentstoredonships;consolidating
elementscommonamongtheservicesprograms,suchasexpeditionary
baseandfueltransferequipment;andleveragingtheDefenseLogistics
Agencytomanagesomeprepositionedrepairpartsaresomestepsthat
serviceofficialsbelievemayreducecosts.
Frameworkfor
Analysis
ThisanalysisdrawsoninformationcontainedintheGAOproductslisted
belowandinaclassifiedreportthatGAOissuedinFebruary2011.Forthis
analysis,GAOexcludedallinformationassociatedwithcertaindetailsthat
DODidentifiedasbeingclassifiedorsensitiveinnature,whichmustbe
protectedfrompublicdisclosure.Althoughtheinformationcontainedin
thisanalysisomitsclassifiedandsensitiveinformation,theseomissions
addressedotherissuesandhavenobearingonthefindings,conclusions,
andrecommendationsstatedabove.GAOplanstoissueafullunclassified
versionofitsreportandconductfutureworkonDODsprepositioned
stocksinresponsetoitsannualreportingmandate.
DefenseLogistics:DepartmentofDefensesAnnualReportontheStatus
RelatedGAO
ofPrepositionedMaterielandEquipmentCanBeFurtherEnhancedto
Products BetterInformCongress.GAO-10-172R.Washington,D.C.:
November4,2009.
DefenseLogistics:DepartmentofDefensesAnnualReportontheStatus
ofPrepositionedMaterielandEquipmentCanBeEnhancedtoBetter
InformCongress.GAO-09-147R.Washington,D.C.:December15,2008.
ForceStructure:RestructuringandRebuildingtheArmyWillCost
BillionsofDollarsforEquipmentbuttheTotalCostIsUncertain.
GAO-08-669T.Washington,D.C.:April10,2008.
MilitaryReadiness:ImpactofCurrentOperationsandActionsNeeded
toRebuildReadinessofU.S.GroundForces.GAO-08-497T.Washington,
D.C.:February14,2008.
DefenseLogistics:ArmyHasNotFullyPlannedorBudgetedforthe
ReconstitutionofItsAfloatPrepositionedStocks.GAO-08-257R.
WashingtonD.C.:February8,2008.
DefenseLogistics:ArmyandMarineCorpsCannotBeAssuredThat
EquipmentResetStrategiesWillSustainEquipmentAvailabilityWhile
MeetingOngoingOperationalRequirements.GAO-07-814.Washington
D.C.:September19,2007.
DefenseLogistics:ImprovedOversightandIncreasedCoordination
NeededtoEnsureViabilityoftheArmysPrepositioningStrategy.
DefenseLogistics:BetterManagementandOversightofPrepositioning
ProgramsNeededtoReduceRiskandImproveFuturePrograms.
GAO-05-427.Washington,D.C.:September6,2005.
Foradditionalinformationaboutthisarea,contactWilliamSolisat
AreaContact
DODBusinessSystemsModernization:
OpportunitiesExistforOptimizingBusiness
OperationsandSystems
DODBusinessSystemsModernization:Opportunities
ExistforOptimizingBusinessOperationsandSystems
WhyGAOIsFocusing
onThisArea
DeliveringmodernizedbusinesssystemsisattheheartoftheDepartment
ofDefense(DOD)effortstotransformitsbusinessoperations.These
systemsincludetimewornandduplicativesystemsthatsupportDOD
businessoperationssuchascivilianpersonnel,finance,health,logistics,
militarypersonnel,procurement,andtransportation.Since1995,GAOhas
designatedthedepartmentsbusinesssystemsmodernizationeffortsas
highrisk.OnekeytoeffectivelymodernizingDODsmultibilliondollar
systemsenvironmentisensuringthatbusinesssysteminvestmentscomply
withanenterprisewidestrategicblueprint,commonlycalledanenterprise
architecture.ForDODsbusinesssystemsmodernization,itisdeveloping
andusingafederatedbusinessenterprisearchitecture(BEA),whichisa
coherentfamilyofparentandsubsidiaryarchitectures,tohelpmodernize
itsnonintegratedandduplicativebusinessoperationsandthesystemsthat
supportthem.
WhatGAOHasFound
toIndicate
orFragmentation
DODreportsthatitsbusinesssystemsenvironmentincludesabout2,300
investments,whicharesupportedbybillionsofdollarsinannual
expendituresandareintendedtosupportbusinessfunctionsand
operations.AsGAOhaspreviouslyreported,DODsbusinesssystems
environmenthasbeencharacterizedby(1)littlestandardization,(2)
multiplesystemsperformingthesametasks,(3)thesamedatastoredin
multiplesystems,and(4)manualdataentryintomultiplesystems.
AccordingtoDOD,onepurposeofthefederatedBEAistoidentifyand
provideforsharingcommonapplicationsandsystemsacrossthe
departmentandthecomponentsandpromoteinteroperabilityanddata
sharingamongrelatedprograms.BecauseDODspendsover$10billion
eachyearonitsbusinesssystemsandrelatedinformationtechnology
infrastructure,thepotentialforidentifyingandavoidingthecosts
associatedwithduplicativefunctionalityacrossitsbusinesssystem
investmentsissignificant.
Toaccomplishthis,DODhasdevelopedanautomatedtooltomapeach
systemsfunctionalitytotheBEAoperationalactivitiesandbusiness
functionsthatthesystemsupports.Usinganenterprisearchitectureinthis
wayofferssignificantdollarsavingspotential,asitprovidesan
authoritativeframeofreferenceagainstwhichtoanalyzeproposed
investmentsandcollecttheinformationneededtoidentifywhereagiven
investmentmayoverlapwithotherinvestmentsandthusunnecessary
duplicationofeffortcanbeavoided.However,GAOhaspreviouslyfound
thatmuchremainstobedoneinextendinganddevelopingDODsBEA
andensuringthatdisciplinedmanagementcontrolsareappliedatthe
institutionalandprogram-specificlevels.Withoutsufficientrigorinits
businesssystemsmodernization,GAOfoundthatDODprogramswereat
increasedriskofbeingdefinedandimplementedinawaythatdoesnot
sufficientlyensureinteroperabilityandavoidduplicationandoverlap.To
adequatelyensurethatDODbusinesssysteminvestmentsaredefinedand
implementedwithinthecontextofthefederatedBEA,GAOrecommended
inAugust2008thatDODusetheprogram-specificdatainitsarchitecture
compliancetooltoidentifyandanalyzepotentialoverlapandduplication
andthustakeadvantageofopportunitiesforreuseandconsolidation
amongprograms.DODagreedandstatedthatitplanstoupdateits
investmentreviewboardprocessguidancetorequireuseofprogram-
specificdataforcertificationdecisionsonbusinesssystemscompliance
withtheBEA.However,ithasyettoestablishadatefordoingso.
Morebroadly,GAOhasrecommendedstepsDODneedstotaketofurther
improveitsbusinesssystemsmodernizationefforts.Attheinstitutionallevel
thesupportingcomponentarchitecturesneedtobedevelopedand
alignedwiththecorporatearchitecturetocompletethefederated
businessenterprisearchitecture,
DODbusinesssysteminvestmentsneedtobedefinedandimplemented
withinthecontextofitsfederatedbusinessenterprisearchitecture,and
theinvestmentprocessneedstoevolveandbeinstitutionalizedatall
levelsoftheorganization.
Furthermore,DODneedstoensurethatitsbusinesssystemprogramsand
projectsaremanagedwithintegratedinstitutionalcontrolsandthatthey
consistentlydeliverbenefitsandcapabilitiesontimeandwithinbudget.
Between2005and2008,GAOreportedthatDODmadeprogress
implementingkeyinstitutionalmodernizationmanagementcontrolsin
responsetoGAOrecommendationsaswellastostatutoryrequirements.
Forexample,thedepartmenthadcontinuedtodevelopupdatestoitsBEA
thataddressedimportantelementsrelatedtostatutoryrequirementsand
bestpracticesthatGAOpreviouslyidentifiedasmissing.Inaddition,DOD
definedandbeganimplementinginvestmentcontrols,suchastheBusiness
CapabilityLifecycle,whichisintendedtostreamlinebusinesssystem
capabilitydefinition,acquisition,andinvestmentoversightprocesses,to
guideandconstrainitsdepartmentwidesystemsmodernizations.However,
notwithstandingthisprogress,additionalactionsarestillneeded.
ActionsNeededand
OtherBenefits
InMay2009,GAOreportedthatthepaceofDODseffortsindefiningand
consistentlyimplementingfundamentalbusinesssystemsmodernization
managementcontrols(bothinstitutionalandprogramspecific)had
slowedcomparedwithprogressmadeinpreviousyears,leavingmuchto
beaccomplished.Tothisend,GAOsworkhashighlightedchallengesthat
DODstillfacesinaligningitscorporatearchitectureanditscomponent
organizationarchitectures,leveragingthefederatedarchitecturetoavoid
investmentsthatprovidesimilarbutduplicativefunctionalityinsupportof
commonDODactivities,andinstitutionalizingthebusinesssystems
investmentprocessatalllevelsoftheorganization.Inaddition,ensuring
thateffectivesystemacquisitionmanagementcontrolsareimplemented
oneachbusinesssysteminvestmentalsoremainsaformidablechallenge,
asGAOsrecentreportsonmanagementweaknessesassociatedwith
individualprogramshavedisclosed.
Becauseoftheselimitations,DODprogramscontinuetobeatincreased
riskofbeingdefinedandimplementedinawaythatdoesnotsufficiently
ensureinteroperabilityandavoidduplicationandoverlap,whichareboth
goalsoftheBEAandthedepartmentsrelatedinvestmentmanagement
approach.Iftheselimitationsareaddressed,DODanditscomponents
couldhaveasufficientbasisforknowingifitsbusinesssystemprograms
havebeendefinedtoeffectivelyandefficientlysupportcorporatebusiness
operations.Congresscanplayacriticalrolebycontinuingtoprovide
focusandoversight.
AttherequestoftheSenateArmedServicesCommittee,GAOisinitiating
twoengagementsfocusingon(1)thestatusandprogressofthemilitary
departmentsenterprisearchitectureprogramsand(2)priorGAO
recommendationspertainingtothedepartmentsandthemilitary
departmentsinvestmentmanagementprocesses,andtheeffectivenessof
thedepartmentsinvestmentreviewboardsinapprovingandcertifying
businesssysteminvestmentsinaccordancewithapplicablecriteria.
Frameworkfor
reportslistedbelow.
Analysis
RelatedGAO
Products
BusinessSystemsModernization:ScopeandContentofDODs
CongressionalReportandExecutiveOversightofInvestmentsNeedto
Improve.GAO-10-663.Washington,D.C.:May24,2010.
DODBusinessSystemsModernization:NavyImplementingaNumberof
KeyManagementControlsonEnterpriseResourcePlanningSystem,but
ImprovementsStillNeeded.GAO-09-841.Washington,D.C.:September15,
2009.
DODBusinessSystemsModernization:RecentSlowdownin
InstitutionalizingKeyManagementControlsNeedstoBeAddressed.
GAO-09-586.Washington,D.C.:May18,2009.
DODBusinessSystemsModernization:ImportantManagementControls
BeingImplementedonMajorNavyProgram,butImprovementsNeeded
inKeyAreas.GAO-08-896.Washington,D.C.:September8,2008.
DODSystemsModernization:MaintainingEffectiveCommunicationIs
NeededtoHelpEnsuretheArmysSuccessfulDeploymentoftheDefense
IntegratedMilitaryHumanResourcesSystem.GAO-08-927R.
DODBusinessSystemsModernization:PlannedInvestmentinNavy
ProgramtoCreateCashlessShipboardEnvironmentNeedstoBe
JustifiedandBetterManaged.GAO-08-922.Washington,D.C.:September
8,2008.
DODBusinessSystemsModernization:KeyNavyProgramsCompliance
withDODsFederatedBusinessEnterpriseArchitectureNeedstoBe
AdequatelyDemonstrated.GAO-08-972.Washington,D.C.:August7,2008.
Foradditionalinformationaboutthisarea,contactValerieC.Melvinat
AreaContact
(202)512-6304ormelvinv@gao.gov.
EfficiencyandEffectivenessofFragmented
EconomicDevelopmentProgramsAreUnclear
EfficiencyandEffectivenessofFragmentedEconomic
DevelopmentProgramsAreUnclear
WhyGAOIsFocusing
onThisArea
Economicdevelopmentprogramsthatareadministeredefficientlyand
effectivelycancontributetothewell-beingofthenationseconomyatthe
leastcosttotaxpayers.Absentacommondefinitionforeconomic
development,GAOhaspreviouslydevelopedalistofnineactivitiesmost
oftenassociatedwitheconomicdevelopment.Theseactivitiesinclude:
planninganddevelopingstrategiesforjobcreationandretention,
developingnewmarketsforexistingproducts,buildinginfrastructureby
constructingroadsandsewersystemstoattractindustrytoundeveloped
areas,andestablishingbusinessincubatorstoprovidefacilitiesfornew
businessesoperations.
GAOiscurrentlyexamining80economicdevelopmentprogramsatfour
agenciestheDepartmentsofCommerce(Commerce),Housingand
UrbanDevelopment(HUD),andAgriculture(USDA);andtheSmall
BusinessAdministration(SBA)toassesspotentialforoverlapinthe
designoftheprograms,theextenttowhichthefouragenciescollaborate
toachievecommongoals,andtheextenttowhichtheagencieshave
developedmeasurestodeterminetheprogramseffectiveness.Funding
providedforthese80programsinfiscalyear2010amountedto$6.5
billion,ofwhichabout$3.2billionwasforeconomicdevelopmentefforts,
largelyintheformofgrants,loanguarantees,anddirectloans.Someof
these80programscanfundavarietyofactivities,includingthosefocused
onnoneconomicdevelopmentactivities,suchasrehabilitatinghousing
andbuildingcommunityparks.Thisanalysispresentsthepreliminary
findingsofGAOsongoingworkinconjunctionwithfindingsfromitsprior
work.
WhatGAOHasFound
toIndicate
orFragmentation
PreliminaryresultsofGAOsongoingworkinvolving80economic
developmentprogramsatfouragenciesCommerce,HUD,SBA,and
USDAindicatethatthedesignofeachofthesefragmentedprograms
appearstooverlapwiththatofatleastoneotherprogramintermsofthe
economicdevelopmentactivitiesthattheyareauthorizedtofund.For
example,asshowninthetablebelow,thefouragenciesadministeratotal
of52programsthatcanfundentrepreneurialefforts,whichincludes
helpingbusinessestodevelopbusinessplansandidentifyfundingsources.
OverlapandFragmentationAmongSelectedAgenciesAuthorizedtoFund
EconomicDevelopmentActivities
Programsbyagency
Activity Commerce HUD SBA USDA Total
Entrepreneurialefforts 9 12 19 12 52
Infrastructure 4 12 1 18 35
Plansandstrategies 7 13 13 6 39
Commercialbuildings 4 12 4 7 27
Newmarkets 6 10 6 6 28
Telecommunications 3 11 2 10 26
Businessincubators 5 12 3 20
Industrialparks 5 11 3 19
Tourism 5 10 4 19
Source:GAO
Note:Numbersofprogramsbyagencydonottotalto80sinceanindividualprogrammayfund
severalactivities.
GAOspriorworkgoingbackmorethan10yearsalsoidentifiedpotential
overlapandfragmentationineconomicdevelopmentprogramsandfound
thatmanyoftheprogramsweredifferentiatedbylegislativeorregulatory
restrictionsthattargetedfundingonthebasisofcharacteristicssuchas
geography,incomelevels,andpopulationdensity(ruralorurban).
Whilesomeofthe80programsGAOiscurrentlyassessingfundseveralof
thenineeconomicdevelopmentactivities,almost60percentofthe
programs(46of80)fundonlyoneortwoactivities.Thesesmaller,
narrowlyscopedprogramsappeartobethemostlikelytooverlapbecause
manyofthemcanonlyfundthesamelimitedtypesofactivities.For
example,narrowlyscopedprogramscomprise21ofthe52programsthat
fundentrepreneurialefforts.Moreover,mostofthese21programstarget
similargeographicareas.
Toaddressissuesarisingfrompotentialoverlapandfragmentationin
economicdevelopmentprograms,GAOhaspreviouslyidentified
collaborativepracticesagenciesshouldconsiderimplementinginorderto
maximizetheperformanceandresultsoffederalprogramsthatshare
commonoutcomes.Thesepracticesincludeleveragingphysicaland
administrativeresources,establishingcompatiblepoliciesandprocedures,
monitoringcollaboration,andreinforcingagencyaccountabilityfor
collaborativeeffortsthroughstrategicorannualperformanceplans.
PreliminaryfindingsfromGAOsongoingworkshowthatCommerce,
HUD,SBA,andUSDAappeartohavetakenactionstoimplementsomeof
thecollaborativepractices,suchasdefiningandarticulatingcommon
outcomes,forsomeoftheirrelatedprograms.However,thefouragencies
haveofferedlittleevidencesofarthattheyhavetakenstepstodevelop
compatiblepoliciesorprocedureswithotherfederalagenciesorsearch
foropportunitiestoleveragephysicalandadministrativeresourceswith
theirfederalpartners.Moreover,GAOisfindingthatmostofthe
collaborativeeffortsperformedbyprogramstaffonthefrontlinethat
GAOhasbeenabletoassesstodatehaveoccurredonlyonacase-by-case
basis.Asaresult,itappearsthattheagenciesdonotconsistentlymonitor
orevaluatethesecollaborativeeffortsinawaythatallowsthemtoidentify
areasforimprovement.GAOreportedinSeptember2008thatthemain
causesforlimitedagencycollaborationincludefewincentivesto
collaborateandnoguideforagenciestorelyonforconsistentand
effectivecollaboration.InGAOsongoingwork,USDAandSBAofficials
alsostatedthatcertainstatutoryauthoritiesmayimpedetheirabilityto
collaborate.Infailingtofindwaystocollaboratemore,agenciesmaymiss
opportunitiestoleverageeachothersuniquestrengthstomoreeffectively
promoteeconomicdevelopment,inadditiontoinefficientlyusingthe
taxpayerdollarssetasideforthatpurpose.
Inaddition,alackofinformationonprogramoutcomesisacurrentand
long-standingconcern.Thisinformationisneededtodeterminewhether
thispotentialoverlapandfragmentationisresultinginineffectiveor
inefficientprograms.Morespecifically:
CommercesEconomicDevelopmentAdministration(EDA),which
administerseightoftheprogramsGAOiscurrentlyreviewing,
continuestorelyonapotentiallyincompletesetofvariablesandself-
reporteddatatoassesstheeffectivenessofitsgrants.Theincomplete
setofvariablesthattheagencyreliesontoestimatetheeffectiveness
ofEDAprogramgrantsmayleadtoinaccurateclaimsaboutprogram
results,suchasthenumberofjobscreated.Moreover,EDAstaff
requestdocumentationorconductsitevisitstovalidatetheself-
reporteddataprovidedbygranteesonlyinlimitedinstances.GAOfirst
reportedonthisissueinMarch1999andissuedasubsequentreportin
October2005.InresponsetoarecommendationGAOmadein2005,
EDAissuedrevisedoperationalguidanceinDecember2006that
includedanewmethodologythatregionalofficesaretouseto
calculateestimatedjobsandprivatesectorinvestmentattributableto
EDAprojects.However,GAOsongoingworkfoundthattheagency
stillprimarilyreliesongranteeself-reporteddataandconductsa
limitednumberofsitevisitstoassesstheaccuracyofthedata.While

acknowledgingthesefindings,EDAofficialsstatedthattheydoemploy
otherverificationandvalidationmethodsinlieuofsitevisits.These
methodsincludereviewstoensurethedataareconsistentwith
regionaltrendsandstatisticalteststoidentifyoutliersandanomalies.
GAOplanstoassessthequalityandadequacyofthesemethodsaspart
ofitsongoingwork.
TheUSDAsOfficeofRuralDevelopment,whichadministers31ofthe
programsGAOisreviewing,hasyettoimplementtheUSDAInspector
Generals(IG)2003recommendationrelatedtoensuringthatdataexist
tomeasuretheaccomplishmentsofoneofitslargestruralbusiness
programstheBusinessandIndustryloanprogram,whichcost
approximately$53milliontoadministerinfiscalyear2010.USDA
officialsstatedthattheyhaverecentlytakenstepstoaddresstheopen
recommendation,includingrequiringstafftorecordactualjobscreated
ratherthanestimatedjobscreated,butaccordingtoanIGofficialitis
tooearlytotellwhethertheiractionswillfullyaddressthe
recommendation.
HUDdoesnottracklong-termperformanceoutcomemeasuresforits
Section108programbecausetheagencycontinuestolackareporting
mechanismtocapturehowprogramfundsareused,anissuetheOffice
ofManagementandBudget(OMB)reportedonin2007.Moreover,
OMBalsofoundin2007thattheprogramsimpactandeffectivenessin
neighborhoodsremainedunknown.
SBAhasnotyetdevelopedoutcomemeasuresthatdirectlylinktothe
missionofitsHistoricallyUnderutilizedBusinessZones (HUBZone)
program,norhastheagencyimplementeditsplanstoconductan
evaluationoftheprogrambasedonvariablestiedtoitsgoals.GAO
reportedinJune2008thatwhileSBAtracksafewperformance
measures,suchasthenumberofsmallbusinessesapprovedto
participateintheprogram,themeasuresdonotdirectlylinktothe
programsmission.WhileSBAcontinuestoagreethatevaluating
programoutcomesisimportant,todatetheagencyhasnotyet
committedresourcesforsuchanevaluation.
Withoutqualitydataonprogramoutcomes,theseagencieslackkey
informationthatcouldhelpthembettermanagetheirprograms.In
addition,suchinformationwouldenablecongressionaldecisionmakers
andotherstomakedecisionstobetterrealignresources,ifnecessary,and
toidentifyopportunitiesforconsolidatingoreliminatingsomeprograms.
ActionsNeededand
OtherBenefits
PreliminaryfindingsofongoingGAOworkhaveidentifiedseveralareas
thatcouldbenefitfromcontinuedattention.
Agenciesneedtofurtherutilizepromisingpracticesforenhanced
collaboration.GAOfirstmadethisrecommendationtoSBAandUSDA
inSeptember2008,buttheseagencieshavetakenonlylimitedstepsto
fullyaddressGAOsconcerns.Theactionsthatthefouragencies
shouldconsiderincludeseekingmoreopportunitiesforresource-
sharingacrosseconomicdevelopmentprogramswithshared
outcomes,andidentifyingwaystoleverageeachprogramsstrengthsto
improvetheirexistingcollaborativeefforts.Continuingtoexplorethe
extenttowhichtheseagenciescollaboratecouldhelpidentify
promisingpracticesthatmayresultinmoreeffectiveandefficient
deliveryofeconomicdevelopmentprogramstodistressedareas.
Agenciesneedtocollectaccurateandcompletedataonprogram
outcomesandusetheinformationtoassesseachprograms
effectiveness.InJune2008GAOmadeasimilarrecommendationto
SBAaboutitsHUBZoneprogram,buttheagencyhastakenlimited
actionthusfar.
Additionalworktoassessprogressincollaborationandevaluationcould
identifyareasforimprovement,consolidation,orelimination.Further,
programsthataredesignedtotargetsimilareconomicdevelopment
activities,locations,andapplicantsmaynotbeaddinguniquevalue,and
moreanalysisisneededbytheagenciesandOMBtodeterminetheactual
amountofduplicativespending.
Theaboveareactionsthatcouldbetakenbyagenciestoaddress
fragmentationandoverlap,andincreaseprogramefficienciesacrossthe
multipleagencies,whichsupporteconomicdevelopmentefforts.
However,giventhelong-standingnatureoftheseissues,GAOalsobelieves
thatincreasedattentionandoversightbyOMBandCongressare
warrantedtoensureneededactionsaretaken.
Frameworkfor
Analysis
TheinformationcontainedinthisanalysisisbasedontheGAOproducts
listedbelow,aswellasGAOsongoingworkfollowinguponthe
recommendationsfromthoseproducts,andthepreliminaryresultsof
GAOsongoingevaluationofeconomicdevelopmentprogramsatfour
federalagencies.Forthemostrecentwork,GAOgatherednew
informationrelatedto,forexample,programmissions,targeted
populations,andfundingprovidedfortheprograms.Thedataonprogram
fundswereself-reportedbyagencyofficials.Thedataweredeterminedto
besufficientlyreliableforthepurposesofthisreview.Forthisreview,
GAOfocusedonUSDA,Commerce,HUD,andSBA.GAOmetwith
officialsfromeachoftheagenciestodiscusseachoftheprogramsandthe
programmissions.BecauseSBAofficialsviewalloftheirprogramsas
beingrelatedtoeconomicdevelopment,GAOincludedallSBAprograms
inthisreview.UsingtheCatalogofFederalDomesticAssistanceandother
agencydocuments,GAOidentified80federalprogramsadministeredby
thefouragenciesthatcouldfundeconomicdevelopmentactivities.GAO
didnotincludetaxcreditprogramsaimedateconomicdevelopmentin
thisreview.Forinformationonhowtaxprogramscancontributeto
duplication,seethesectionofthisreportentitledPeriodicReviewsCould
HelpIdentifyIneffectiveTaxExpendituresandRedundanciesinRelated
TaxandSpendingPrograms.
RelatedGAO
Products
RuralEconomicDevelopment:CollaborationbetweenSBAandUSDA
CouldBeImproved.GAO-08-1123.Washington,D.C.:September18,2008.
SmallBusinessAdministration:AdditionalActionsAreNeededto
CertifyandMonitorHUBZoneBusinessesandAssessProgramResults.
RuralEconomicDevelopment:MoreAssuranceIsNeededThatGrant
FundingInformationIsAccuratelyReported.GAO-06-294.Washington,
EconomicDevelopmentAdministration:RemediationActivitiesAccount
foraSmallPercentageofTotalBrownfieldGrantFunding.GAO-06-7.
Washington,D.C.:October27,2005.
EconomicDevelopment:MultipleFederalProgramsFundSimilar
EconomicDevelopmentActivities.GAO/RCED/GGD-00-220.Washington,
EconomicDevelopment:ObservationsRegardingtheEconomic
DevelopmentAgencysMay1998FinalReportonItsPublicWorks
Program.GAO/RCED-99-11R.Washington,D.C.:March23,1999.
Foradditionalinformationaboutthisarea,contactWilliamB.Shearat
AreaContact
(202)512-4325orshearw@gao.gov.
TheFederalApproachtoSurface
TransportationIsFragmented,LacksClear
Goals,andIsNotAccountableforResults
TheFederalApproachtoSurfaceTransportationIs
Fragmented,LacksClearGoals,andIsNotAccountable
forResults
WhyGAOIsFocusing
onThisArea
Thenationssurfacetransportationsystemiscriticaltotheeconomyand
affectsthedailylifeofmostAmericans.TheDepartmentofTransportation
(DOT)currentlyadministersscoresofsurfacetransportationprograms
costingover$58billionannually.Thecosttorepairandupgraderoads,
bridges,andotherinfrastructuresotheycansafelyandreliablymeet
currentandfuturedemandsisestimatedinthehundredsofbillionsof
dollars.However,largeincreasesinfederalexpendituresfortransportation
inrecentyearshavenotcommensuratelyimprovedsystemperformance.
Proposalstoreauthorizethesurfacetransportationprogramwhich
expiredinSeptember2009andhasbeenextendeduntilMarch2011have
recommendedconsolidatingoreliminatingsomeoftheseprograms.
WhatGAOHasFound
toIndicate
orFragmentation
Thecurrentfederalapproachtosurfacetransportationwasestablishedin
1956tobuildtheInterstateHighwaySystem,buthasnotevolvedtoreflect
currentnationalprioritiesandconcerns.Overtheyears,inresponseto
changingtransportation,environmental,andsocietalgoals,federalsurface
transportationprogramsgrewinnumberandcomplexitytoencompass
broadergoals,moreprograms,andavarietyofprogramapproachesand
grantstructures.Thisvarietyofapproachesandstructuresdidnotresult
fromaspecificrationaleorplan,butratheranagglomerationofpolicies
andprogramsestablishedoverhalfacenturywithoutawell-defined
overallvisionofthenationalinterestandfederalroleinoursurface
transportationsystem.Thishasresultedinafragmentedapproachasfive
DOTagencieswith6,000employeesadministerover100separate
programswithseparatefundingstreamsforhighways,transit,rail,and
safetyfunctions.Thisfragmentedapproachimpedeseffectivedecision
makingandlimitstheabilityofdecisionmakerstodevisecomprehensive
solutionstocomplexchallenges.Forexample,thefederalgovernment
largelylacksmechanismsforaidingprojectsthatspanmultiple
jurisdictionsandimplementingprojectsthatinvolvemorethanonestate
orlocalsponsorormultipletransportationmodes.
Atthecoreofthisfragmentationisthefactthatfederalgoalsandrolesfor
theprogramareunclearormayconflictwithotherfederalpriorities,
programslacklinkstotheperformanceofthetransportationsystemorof
thegrantees,andprogramsdonotusethebesttoolstotargetinvestments
intransportationtotheareasofgreatestbenefit.Forexample,thefederal
governmentlacksacomprehensivenationalstrategythatdefinesitsrolein
freighttransportationprojects,eventhoughenhancingfreightmobilityis
viewedasatoptransportationpriority.Furthermore,effortstospur
economicdevelopmentthroughhighwayconstructionmayconflictwith
effortstoimproveairquality,andmotorfueltaxesthatencouragefuel
consumptiontofinancehighwaysmayconflictwithreducingcarbon
emissions.Thelargesthighway,transit,andsafetygrantprograms
distributefundsthroughformulasthataretypicallynotlinkedto
performanceand,inmanycases,haveonlyanindirectrelationshipto
needs.Asaresult,itisdifficulttoassesstheimpactoffundingon
achievingtransportationgoals.Thefederalaidhighwayprogram,in
particular,distributesabout$40billionayeartothestatesthrough
complicatedformulasthatareultimatelyoverriddenbyprovisionsthat
returnfederalfuelexcisetaxrevenuestotheirstateoforigin.OnceDOT
apportionsfunds,stateshavewidelatitudetoselecttheirownprojects
andconsiderableflexibilitytoreallocatetheirfundsamonghighwayand
transitprograms.Whiletheseprovisionsgivestatesthediscretionto
pursuetheirownpriorities,theprovisionsmayimpedethetargetingof
federalfundstowardspecificnationalgoalsandobjectives.Tosome
extent,thefederalaidhighwayprogramfunctionsasacash-transfer
general-purposegrantprogram,ratherthanasatoolforpursuinga
cohesivenationaltransportationpolicy.
ActionsNeededand
OtherBenefits
Afundamentalre-examinationandreformofthenationssurface
transportationpoliciesisneeded.Since2004,GAOhasmadeseveral
recommendationsandmattersforcongressionalconsiderationtoaddress
theneedforamoregoal-orientedapproachtosurfacetransportation,
introducegreaterperformanceandaccountabilityforresults,andbreak
downmodalstovepipes.Also,GAOhasidentifiedanumberofprinciples
thatcanhelpguideafundamentalre-examinationandreformofthe
nationssurfacetransportationpoliciesthatrecognizesemergingnational
andglobalimperativessuchasreducingthenationsdependenceon
foreignfuelsourcesandminimizingtheeffectoftransportationsystems
onglobalclimate.Theseprinciplesincludeensuringthefederalroleis
definedbasedonidentifiedareasofnationalinterestandgoals,
incorporatingaccountabilityforresultsbyentitiesreceivingfederalfunds,
employingthebesttoolsandapproachestoemphasizereturnontargeted
federalinvestment,andensuringfiscalsustainability.
Applyingtheseprinciplestoare-examinationandreformofsurface
transportationprogramswouldpotentiallyresultinamoreclearlydefined
federalroleinrelationtootherlevelsofgovernmentandthusamore
targetedfederalrolefocusedaroundevidentnationalinterests.Where
nationalinterestsarelessevidentforexample,wheretheeconomic
benefitsaremorelocallyfocusedortherearevaryingregional
preferencesotherstakeholderscouldassumemoreresponsibility,and
somefunctionscouldpotentiallybeassumedbythestatesorotherlevelsof
government.Thiswouldthenresultinamorestreamlinedfederalprogram
approachandenhancetheefficientdeliveryofprogramsandservices.
Fromthestandpointofstateandlocalgovernments,re-examinationand
reformofthefederalapproachcouldreducetheadministrativeexpenses
statesfacecomplyingwithmyriadfederalstatutoryandregulatory
requirements.Forexample,inMay2009,GAOreportedthatconsolidating
theapplicationprocessesforthreefederaltransitprogramsthatprovide
fundingfortransportation-disadvantagedpopulationscouldreducethe
administrativeburdenforstatesandtransitagenciesapplyingforthese
funds.However,GAOhasreportedthatestimatesfromthestatesonthe
costsofcomplyingwithsomefederalrequirementsarenotavailable.
Congressionalreauthorizationofsurfacetransportationprogramspresents
anopportunitytoaddressGAOrecommendationsandmattersfor
congressionalconsiderationthathavenotbeenimplementedinlargepart
becausethecurrentmultiyearauthorizationforsurfacetransportation
programsexpiredin2009,andexistingprogramshavebeenfundedsince
thenthroughtemporaryextensions.Severalreformproposalshavebeen
introduced,whichindicatethatsomeofGAOsmorerecent
recommendationsandmattersforcongressionalconsiderationaregaining
traction.Inits2008report,theNationalSurfaceTransportationPolicyand
RevenueStudyCommission,establishedbyCongress,recommendedthat
federalsurfacetransportationinvestmentsbecarefullyalignedwith
definednationalintereststhroughacomprehensiveperformance-based
approach.Inabipartisanblueprintforreauthorization,theleadershipof
theHouseTransportationandInfrastructureCommitteeproposed
redefiningthefederalroleandrestructuringprogramsbyconsolidatingor
eliminatingmorethan75programs.TheAmericanRecoveryand
ReinvestmentActof2009helpedbreakdownmodalbarriersby
establishinga$1.5billiondiscretionarygrantprogramthatplaced
increasedemphasisonintegratedsolutionstotransportationchallenges
andprovidedanunprecedentedabilityforproposedprojectsthatcut
acrossmodesoftransportationtocompeteforfederalfunding.
Theinformationcontainedinthisanalysisisbasedonpreviouslyissued
Frameworkfor
worklistedinthefollowingrelatedGAOproducts.
Analysis
RelatedGAO
Products
SurfaceTransportationPlanning:OpportunitiesExisttoTransitionto
Performance-BasedPlanningandFederalOversight.GAO-11-77.
FederalTransitPrograms:FederalTransitAdministrationHas
OpportunitiestoImprovePerformanceAccountability.GAO-11-54.
HighwayTrustFund:NearlyAllStatesReceivedMoreFundingThan
TheyContributedinHighwayTaxesSince2005.GAO-10-780.
Washington,D.C.:June30,2010.
FederalTransitAdministration:ProgressandChallengesin
ImplementingandEvaluatingtheJobAccessandReverseCommute
Program.GAO-09-496.Washington,D.C.:May21,2009.
SurfaceTransportation:ClearFederalRoleandCriteria-BasedSelection
ProcessCouldImproveThreeNationalandRegionalInfrastructure
Programs.GAO-09-219.Washington,D.C.:Feb.6,2009.
Federal-AidHighways:FederalRequirementsforHighwaysMay
InfluenceFundingDecisionsandCreateChallenges,butBenefitsand
CostsAreNotTracked.GAO-09-36.Washington,D.C.:December12,2008.
SurfaceTransportationPrograms:ProposalsHighlightKeyIssuesand
ChallengesinRestructuringthePrograms.GAO-08-843R.Washington,
D.C.:July29,2008.
SurfaceTransportation:RestructuredFederalApproachNeededforMore
Focused,Performance-Based,andSustainablePrograms.GAO-08-400.
FreightTransportation:NationalPolicyandStrategiesCanHelp
ImproveFreightMobility.GAO-08-287.Washington,D.C.:January7,2008.
IntermodalTransportation:DOTCouldTakeFurtherActionstoAddress
IntermodalBarriers.GAO-07-718.Washington,D.C.:June20,2007.
IntercityPassengerRail:NationalPolicyandStrategiesNeededto
MaximizePublicBenefitsfromFederalExpenditures.GAO-07-15.
Foradditionalinformationaboutthisarea,contactPhillipHerrat(202)
AreaContact
512-2834,orherrp@gao.gov.
FragmentedFederalEffortstoMeetWater
NeedsintheU.S.-MexicoBorderRegionHave
ResultedinanAdministrativeBurden,
RedundantActivities,andanOverall
FragmentedFederalEffortstoMeetWaterNeedsinthe
U.S.-MexicoBorderRegionHaveResultedinan
AdministrativeBurden,RedundantActivities,andan
OverallInefficientUseofResources
WhyGAOIsFocusing
onThisArea
Meetingthedrinkingwaterandwastewaterneedsofruralareas,
particularlyareassuchastheU.S.-Mexicoborderregion,canbedifficult.
Morethan90percentofpublicwatersupplysystemsand70percentof
wastewatersystemsthroughouttheUnitedStatesservecommunitieswith
populationsfewerthan10,000,usuallyinruralareas.Thelackofaccessto
safedrinkingwaterandsanitationsystemscanposeriskstohumanhealth
andtheenvironment,includingtheriskofwaterborneillnesses.In2009,
GAOfoundthatsevenfederalagenciesactiveintheborderregionthe
EnvironmentalProtectionAgency(EPA),theU.S.Departmentof
Agriculture(USDA),theDepartmentofHousingandUrbanDevelopment
(HUD),theU.S.ArmyCorpsofEngineers,theIndianHealthService,the
EconomicDevelopmentAdministration(EDA),andtheDepartmentofthe
InteriorsBureauofReclamationobligatedatleast$1.4billionfromfiscal
years2000through2008tofundnumerousprojectsintheregion.
WhatGAOHasFound
toIndicate
orFragmentation
Keyfederalagenciesrecognizedmorethanadecadeagothatcoordinated
policiesandprocedureswouldimprovefederaleffortstodeliverwater
andwastewatersystemstoruralareas,includingthoseintheU.S.-Mexico
borderregion;however,overalltheseprogramsremainuncoordinatedand
fragmented,andtheirdeliverycontinuestobeinefficientandineffective.
TheU.S.-Mexicoborderregionispredominatelyruralinnature,and
federalagenciescanfinditdifficulttomeettheneedsofresidentsinthis
region.Specifically,theremotenessofsomecommunitiescanmakeit
challengingtoidentifyresidentsinneedofwaterandwastewaterservices,
communitiesmaynothavetheinstitutionalcapacitytoidentifysolutions
toaddresstheirwaterandwastewaterneeds,andruralareastypicallylack
adequatefundsforconstructingandupgradingwatersupplyand
wastewatertreatmentfacilities.Overcomingdifferencesinagency
missionsandcultures,aswellasprogramdifferencesresultingfrom
separatemandatesandprojecteligibilityrequirements,addtothe
complexityofmeetingthesecommunitieswaterandwastewaterneeds.
InDecember2009,GAOfoundthatfederaleffortstomeetdrinkingwater
andwastewaterneedsintheborderregionhavebeenineffective,inpart,
becausemostofthesevenfederalagenciesthatprovideassistancehave
notcomprehensivelyassessedtheneedsoftheregion.Federalagencies
haveassembledsomedataandconductedlimitedstudiesofdrinking
waterandwastewaterconditionsintheborderregion,buttheresulting
patchworkofdatadoesnotprovideacomprehensiveassessmentofthe
regionsneeds.Withoutacomprehensiveneedsassessment,federal
agenciescannottargetresourcestowardthemosturgentneedsorprovide
assistancetocommunitiesthatdonothavethetechnicalorfinancial
resourcestoinitiateaproposalforassistance.Instead,GAOfoundthat
mostfederalprogramsgenerallyprovidefundstothosecommunitieswith
theabilitytoinitiateprojectsandseekassistance,whichmaynotbethe
oneswiththegreatestneed.OnlyoneagencytheIndianHealth
Servicehadcollecteddataonwaterandwastewaterconditionsforeach
tribalreservationintheregion,enablingittoselectprojectsthattargetthe
greatestneed.
Inaddition,GAOfoundthatthekeyagencieshavenotdeveloped
coordinatedpoliciesandproceduresforselectingwaterandwastewater
projects,resultinginanadministrativeburden,duplicationofefforts,and
inefficientuseofresources.Specifically,mostprogramshavedifferent
applicationsandapplicationprocessesforwaterorwastewaterprojects,
differentrequirementsforengineeringandenvironmentalreports,and
differentdeadlinesforsubmittingapplications.Becausemostfederal
programsrequireseparatedocumentationtomeetsimilarrequirements
andtheagenciesdonotconsistentlycoordinateinselectingprojects,
applicantscanexperienceincreasedcostsanddelaysinproject
completion.Forexample,apublicutilityengineerinTexassaidthatone
applicanttryingtoexpandwaterservicetoaparticularareapaid$30,000
moreinfeesbecausetheengineerhadtocompletetwoseparatesetsof
engineeringdocumentationforEPAandUSDA.Also,becausemostfederal
programshavenoprocessbywhichtocoordinateandshareinformation
onprojectstheyhaveselectedforfunding,GAOfoundexampleswhere
agenciesmadeinefficientuseoflimitedresources.Forexample,GAO
foundacasewhereHUDprovidedautilityinHudspethCounty,Texas,
over$860,000ingrantfundsfrom2004to2006toextendwater
distributionandwastecollectionlinesforresidentsofacommunity.
However,throughSeptember2009,thedistributionlinesremainedunused
becausetheutilitydidnothaveenoughwatertoservetheadditional
households.TheutilityintendedtousefundingfromUSDAtoconstructa
newwell,butthefundingobligatedbytheagencywasnotenoughtocover
projectcosts.ThreeyearsaftertheHUDfundswereprovidedtoconstruct
thedistributionlines,theutilityhadnotbeenabletoobtainadditional
assistancefromfederalagenciestoconstructthewell.
ActionsNeededand
OtherBenefits
Toimproveprogramcoordinationforruralwaterandwastewater
infrastructureintheU.S.-Mexicoborderregion,GAOsuggestedin
December2009thatCongressmaywishtoconsiderrequiringfederal
agenciestoestablishaninteragencymechanismorprocess,suchasatask
forceonwaterandwastewaterinfrastructure,intheborderregion.GAO
alsosuggestedthatCongresscoulddirectagrouportaskforcetoconduct
certainactivities.Specifically,GAOsuggestedthatataskforce,in
partnershipwithstateandlocalofficials,shouldleveragecollective
resourcestoidentifyneedswithintheborderregionandestablish
compatibleandcoordinatedpolicesacrossrelevantagencies,suchasa
coordinatedprocessfortheselectionofprojects,andstandardize
applications,environmentalreviewrequirements,andengineering
requirementstotheextentpossible.Suchactivitieswouldhelptoensure
thatacomprehensiveneedsassessmentfortheregioniscompletedand
thatcoordinationinotherareasoccurs.Althoughsuchcoordinationand
uniformitywillnotlikelyresultinsignificantcostsavingsforthefederal
government,theseactivities,ifimplemented,couldimprovethe
effectivenessoffederalwaterandwastewaterprogramsandresultinmore
efficientuseoffundsprovidedtotheborderregion.Mostofthecost
savingswouldlikelyberealizedbythecommunitiesandutilitiesthat
wouldbenefitfromfederalagenciesestablishingauniformapplicationand
coordinatedfundingcycles.Whiletheseactionshavenotyetbeentaken,a
billintroducedintheHouseofRepresentativesinMarch2010wouldhave
establishedaSouthwestBorderRegionWaterTaskForcewithspecific
responsibilitiessuchasassessingthewaterneedsofcommunitiesinthe
regionandreportingtoCongressevery6monthsonitsprogress.
Frameworkfor
productlistedbelow.
Analysis
RuralWaterInfrastructure:ImprovedCoordinationandFunding
RelatedGAOProduct
ProcessesCouldEnhanceFederalEffortstoMeetNeedsintheU.S.-
MexicoBorderRegion.GAO-10-126.Washington,D.C.:December18,2009.
Foradditionalinformationaboutthisarea,contactDaveTrimbleat(202)
AreaContact
512-3991ortrimbled@gao.gov.
ResolvingConflictingRequirementsCould
MoreEffectivelyAchieveFederalFleet
EnergyGoals
ResolvingConflictingRequirementsCouldMore
EffectivelyAchieveFederalFleetEnergyGoals
WhyGAOIsFocusing
onThisArea
Thefederalgovernmentsvehiclefleethasover600,000civilianand
nontacticalmilitaryvehiclesandconsumesover963,000gallonsof
petroleum-basedfuelperday.Infiscalyear2009,thefederalgovernment
spentapproximately$1.9billiononprocuringnewvehicles.Accordingto
GeneralServicesAdministration(GSA)officials,thegovernmentwidefleet
isusedtosupportofavarietyofmissionsandconsistsofapproximately
60percenttrucks,buses,andambulances;fewerthan40percentare
passengervehiclesincludingpassengervansandsportutilityvehicles.
Thefederalgovernmentsgoalstoreducerelianceonpetroleumfueland
thenegativeimpactsofgreenhousegas(GHG)emissionshaveled
CongressandtheAdministrationtoprioritizetheacquisitionofalternative
fuelvehicles(AFV)byfederalagencies.Thefollowingfederallawsand
executiveordershavesetrequirementsandgoalsforacquiringalternative-
fuelandplug-inhybridelectricvehicles,increasinguseofalternativefuels
andreducingpetroleumconsumption:EnergyPolicyAct(EPAct)of1992,
EPActof2005,theEnergyIndependenceandSecurityActof2007,
ExecutiveOrder13423,andExecutiveOrder13514.Theselawsand
executiveordersaffectover20agencies.Anumberoffederalagencies
playaroleinoverseeingandimplementingtheserequirementsincluding,
theDepartmentofEnergy(DOE)andGSA.
WhatGAOHasFound
toIndicate
orFragmentation
Inlightofmultipleandsometimesconflictingstatutesandalackof
performancemeasures,fleetmanagersoftenlacktheflexibilityandtools
tomeetthegoalofreducingthefederalfleetsuseofpetroleumandits
GHGemissions.CongressandtheAdministrationhavedefinedasetof
energyrequirementsforthefederalfleetthroughstatutesandexecutive
orders.However,thesestatutesandorderswereenactedandissuedina
piecemealfashionandrepresentafragmentedratherthanintegrated
approachtomeetingkeynationalgoals.Specifically,therequirementsand
prioritiestoincreaseuseofalternativefuels,reducepetroleumuse,and
reduceGHGemissions,compelfleetmanagerstoresolvethefollowing
conflicts:
Increasetheuseofalternativefuelsvs.theunavailabilityof
alternativefuels.Agenciesarerequiredtoincreasealternativefueluse,
althoughmostalternativefuelsarenotyetwidelyavailable.Thus,
agencieshavebeenpurchasingprimarilyflex-fueledAFVs,thosethat
canoperateonE85ablendofupto85percentethanoland
petroleumorpetroleum.However,sinceE85wasonlyavailableat1
percentofU.S.fuelingstationsin2009,agenciesarerequestingwaivers
fromtherequirementtousealternativefuels.AccordingtoDOE,in
EnergyGoals
2010,approximately55percentofflex-fueledAFVsreceivedawaiver.
Further,somefleetoperatorsindicatedtheyusepetroleumwithouta
waiverwhenalternativefuelsareavailablebecauseitiseithermore
convenient,lessexpensive,orboth.
AcquireAFVsvs.reducepetroleumconsumption.Agenciesare
requiredtopurchaseAFVs,butthisrequirementmay,insomecases,
underminetherequirementtoreducepetroleumconsumption.Virtually
everyagencyhassucceededinacquiringmoreAFVs,buttherehave
beenonlymodestreductionsinpetroleumuseandmodestincreasesin
alternativefueluse,duetothelackofavailablealternativefuels.As
previouslystated,thelackofavailablealternativefuelsresultsin
agenciesusingpetroleumtofuelAFVs.Inareaswherealternativefuels
arenotavailable,purchasingmorefuelefficientnon-AFVscould
reducepetroleumconsumptionmorethanpurchasingAFVs.
1
ReduceGHGemissionsvs.acquireAFVs.Underexistinglaw,
accordingtoDOE,somevehicleswiththelowestGHGemissionsdo
notqualifyasAFVs;andaccordingtoGSA,someAFVsemitmoreGHG
emissionsthansomepetroleum-fueledvehicles.Thus,byprocuringa
newvehiclewithlowGHGemissionstheagencymaymeetthe
requirementtoreduceGHGemissions,butnottherequirementto
purchaseAFVsforitsfleet.
Useplug-inhybridvehiclesvs.reduceelectricityconsumptionin
federalfacilities.Otherconflictsexistbetweenfleetenergygoalsand
thefederalgovernmentenergygoals.Agenciesareencouragedto
acquireplug-inhybridsfortheirfleetswhentheybecomepublicly
available;however,thiscouldconflictwithotherrequirementsthat
encourageagenciestoreduceelectricityconsumptioninfederal
facilities.Thus,ifanagencyacquiresplug-invehiclestheymaymeet
therequirement,butthismayleadtoincreasedelectricity
consumption.
2
1
AccordingtoDOE,agenciesmayacquirelow-GHG-emittingvehiclesandconsiderthem
AFVswhenalternativefuelsarenotavailable.However,agencieshavefoundveryfewlow-
GHGoptionsexistthatmeetmissionrequirements.
2
DOEhasidentifiedareportingapproachthatwouldallowfleetelectricityusetobe
subtractedfromfacilityelectricityuse.
EnergyGoals
Becausefleetmanagershavetofollowtheseconflictingandnarrowly
definedrequirements,theydonotalwayshavetheflexibilitytomake
procurementdecisionsthatwouldmaximizethereductioninpetroleum
useandGHGemissions.
GAOhaspreviouslyrecommendedthatfederalagenciespropose
legislativechangestoresolveconflictsandsetprioritiesforthe
requirements.DOEandGSAareworkingwithstakeholderstodevelop
proposedlegislationthatwouldcreatebroaderrequirementstargetedat
fleetefficiency.Thesechangescouldstreamlinethefederalfleet
requirementstofocusbroadlyonthereductionofpetroleumuseandGHG
emissions.DOEhasprovidedtheresultsoftheseeffortstotheOfficeof
ManagementandBudgettoinformtheirwork.
Abroader,performance-basedapproach,asDOEandGSApropose,would
providefederalagenciessubjecttotheselawsandexecutiveorders
greaterflexibilitytomakeprocurementdecisionsthatwouldmaximizethe
reductioninpetroleumuseandGHGemissions.GAOhasfoundthat
results-orientedorganizationsstrivetoensurethattheirday-to-day
activitiesmovethemclosertoaccomplishingtheirgoals.Further,GAOhas
reportedthatperformance-basedmeasuresshouldcovermultiple
priorities,supportdecisionmakingbyprovidingusefulinformation,and
belimitedtoafewvitalmeasures.InterviewsandmeetingswithDOE,
GSAofficialsandotherfleetmanagersindicatethatsuchbroadgoalsand
relatedperformancemeasureswouldprovideagenciesgreaterflexibility
toachievetherequirementsofreducedpetroleumuse,decreasedGHG
emissions,oranyotherrequirementdefinedinstatute.Forexample,GSA
officialsindicatedthatasimplemandatetoreducepetroleum
consumptionandGHGemissionsbyincreasingfleetefficiencyrather
thanbynarrowlydefiningthevehicleorfueltypewouldprovideagency
fleetmanagerswitharationaltargetandallowthemtouseavarietyof
availableoptionstoattainit.
ActionsNeededand
OtherBenefits
Changesinexistinglawscouldstreamlinetherequirementsandprovide
fleetmanagerswithmoreflexibilityinmeetinggoals.DOE,inconsultation
withGSAandotherappropriateagenciesandorganizations,hastaken
stepstoimplementGAOspriorrecommendationtoproposelegislative
changesthatresolveconflictsandsetprioritiesforagenciesbyproviding
proposedlegislativechangestoOMB.Thisisanimportantstepin
addressingtheissueofconflictingandnarrowlydefinedrequirements.In
additiontohelpingagenciessetpriorities,theseproposalscouldinform
Congressandagenciesonhowtopotentiallyresolveconflicting
EnergyGoals
requirementsbydevelopingperformance-basedgoalsandrelated
measureswhichcouldprovideagencieswithgreaterflexibilityallowing
themtooptimizestrategiesandmeetbroadergoals.Ifproperlydeveloped,
performance-basedgoalsandmeasureswouldsupportfleetmanagers
decisionmakingbyprovidingafewkeymeasuresthathelpmanagers
balancetheprioritiesofthefleetrequirements.
Theinformationcontainedinthisanalysisisbasedprimarilyonpreviously
Frameworkfor
issuedworklistedintherelatedGAOproductsbelow.Interviewswithand
Analysis documentationfromGSAandDOE,aswellasattendanceatand
discussionsduringfleetoperatorsmeetings,togetherprovidedupdated
information.
RelatedGAO
Products
FederalEnergyandFleetManagement:Plug-inVehiclesOfferPotential
Benefits,butHighCostsandLimitedInformationCouldHinder
IntegrationintotheFederalFleet.GAO-09-493.Washington,D.C.:June9,
2009.
FederalEnergyManagement:AgenciesAreAcquiringAlternativeFuel
VehiclesbutFaceChallengesinMeetingOtherFleetObjectives.
GAO-09-75R.Washington,D.C.:October22,2008.
U.S.PostalService:VulnerabilitytoFluctuatingFuelPricesRequires
ImprovedTrackingandMonitoringofConsumptionInformation.
Foradditionalinformationaboutthisarea,contactSusanFlemingat
AreaContact
(202)512-2834orflemings@gao.gov.
DuplicativeFederalEffortsDirectedat
IncreasingDomesticEthanolProductionCost
BillionsAnnually
DuplicativeFederalEffortsDirectedatIncreasing
DomesticEthanolProductionCostBillionsAnnually
WhyGAOIsFocusing
onThisArea
Congresssupporteddomesticethanolproductionthrougha$5.4billion
taxcreditprogramin2010.TheVolumetricEthanolExciseTaxCredit
(VEETCortheethanoltaxcredit),a45-cent-per-gallonfederaltaxcredit,
isprovidedtofuelblendersthatpurchaseandblendethanolwithgasoline.
Congressalsosupporteddomesticethanolproductionthrougha
renewablefuelstandard(RFSorthefuelstandard)thatappliesto
transportationfuelsusedintheUnitedStates.Firstenactedin2005and
expandedin2007,thefuelstandardgenerallyrequiresoverall
transportationfuelsintheUnitedStatestocontaincertainvolumesof
biofuels,suchasethanolandbiodiesel.Thefuelstandardgenerally
requiresrisinguseofethanolandotherbiofuels,from12.95billiongallons
in2010to36billiongallonsin2022.Atpresent,thefuelstandardislargely
metfromconventionalbiofuelsdefinedasethanolderivedfromcorn
starchwhichmadeup12billiongallonsofthe12.95billiongallonfuel
standardfor2010.Ofthe36billiongallontotalrequiredfor2022,15billion
gallonscancomefromconventionalbiofuels.Theother21billiongallons
aretocomefromadvancedbiofuelssuchasethanolmadefromthe
celluloseofplants.TomeettheRFS,theDepartmentsofAgricultureand
Energyaredevelopingadvancedbiofuelsthatusecellulosicfeedstocks,
suchascornstoverandswitchgrass.TheEnvironmentalProtection
AgencyadministerstheRFS.
WhatGAOHasFound
toIndicate
orFragmentation
Theethanoltaxcreditandtherenewablefuelstandardcanbeduplicative
instimulatingdomesticproductionanduseofethanol,andcanresultin
substantiallossofrevenuetotheTreasury.Ifreauthorizedandleft
unchanged,theVEETCsannualcosttotheTreasuryinforgonerevenues
couldgrowfrom$5.4billionin2010to$6.75billionin2015,theyearthe
fuelstandardrequires15billiongallonsofconventionalbiofuels.The
ethanoltaxcreditwasrecentlyextendedat45-cents-per-gallonthrough
December31,2011,intheTaxRelief,UnemploymentInsurance
Reauthorization,andJobCreationActof2010(Pub.L.No.111-312).
However,asGAOreportedinAugust2009,giventherequirementsofthe
fuelstandard,theethanoltaxcreditislargelyunneededtodaytoensure
demandfordomesticethanolproduction.
Sincethe1970sthefederalgovernmenthasprovidedincreasinglevelsof
supporttothedomesticethanolindustry.TheEnergyTaxActof1978,
amongotherthings,providedtaxincentivesdesignedtostimulatethe
productionofethanolforblendingwithgasoline.Thesetaxincentives
wererestructuredin2005astheVolumetricEthanolExciseTaxCredit.In
addition,theEnergyPolicyActof2005createdtheRFS,whichestablished
increasingannualfloorsfortheamountofrenewablefuelstobeblended
BillionsAnnually
intoU.S.transportationfuels.Theactgenerallyrequiredtransportation
fuelsintheUnitedStatestocontain4billiongallonsofrenewablefuels,
suchasethanolandbiodiesel,in2006and7.5billiongallonsin2012.The
EnergyIndependenceandSecurityActof2007expandedtheRFSby
substantiallyincreasingitsannualbiofuelvolumerequirements,including
upto9billiongallonsofconventionalcornstarchethanolin2008andup
to15billiongallonsofconventionalcornstarchethanolin2015.Tooffset
theadvantageforeignethanolproducersmaygainfromtheethanoltax
credit,a54-cent-per-gallontariffisplacedonimportedethanol.
Boththeethanoltaxcreditandthefuelstandardcreatedemandfor
domesticethanolproduction.Fuelblendersreceivetheethanoltaxcredit
foreachgallonofethanoltheycombinewithgasolineandsell,yettheyare
alsorequiredunderthefuelstandardtoacquireandblendspecified
volumesofethanolwithgasoline.AsGAOreportedinAugust2009,the
ethanoltaxcreditwasimportantinhelpingtocreateaprofitablecorn
starchethanolindustrywhentheindustryhadtofundinvestmentinnew
facilities,butitislessimportantnowforsustainingtheindustrybecause
mostofthecapitalinvestmentincornstarchethanolrefinerieshasalready
beenmade.AsofJanuary2010,thedomesticcornstarchethanolindustry
had13billiongallonsofrefiningcapacitywithanadditional1.4billion
gallonsunderconstruction,accordingtotheRenewableFuelsAssociation.
Thisdomesticrefiningcapacityisnearingtheeffectivefuelstandardlimit
of15billiongallonsperyearforconventionalethanolbeginningin2015.
Importantly,thefuelstandardisnowatalevelhighenoughtoensurethat
amarketfordomesticethanolproductionexistsintheabsenceofthe
ethanoltaxcreditandmaysoonitselfbeatalevelbeyondwhatcanbe
consumedbythenationsexistingvehicleinfrastructure.Theethanol
contentingasolineavailableformostvehiclesis10percent.This10
percentlimitationresultsinanupperboundofabout15billiongallonsof
ethanolthatcanbeblendedintothenationsfuelpool.WhileEPArecently
allowednewervehiclestousegasolinethatcontainsupto15percent
ethanolthisfuelisnotyetreadilyavailable.
ActionsNeededand
OtherBenefits
TheVEETCwillcost$5.7billioninforgonerevenuesin2011.Becausethe
fuelstandardallowsincreasingannualamountsofconventionalbiofuels
through2015,whichensuresamarketforaconventionalcornstarch
ethanolindustrythatisalreadymature,Congressmaywishtoconsider
whetherrevisionstotheethanoltaxcreditareneeded.Optionscould
includethefollowing:
BillionsAnnually
MaintaintheVEETCatcurrentlevels.
AllowtheVEETCtoexpireattheendof2011.
ReducetheVEETCasCongressdidinthe2008FarmBill,whenthe
ethanoltaxcreditwasreducedfrom51centsto45centspergallon.
PhaseouttheVEETCoveranumberofyears.
ModifytheVEETCtocounteractfluctuationsinothercommodities
thatcaninfluenceethanolproduction,suchaschangesincrudeoil
prices.Forinstance,theethanoltaxcreditcouldincreasewhencrude
oilpricesarelowanddecreasewhencrudeoilpricesarehigh.
Frameworkfor
productlistedbelow.Inaddition,informationontheTaxRelief,
Analysis UnemploymentInsuranceReauthorization,andJobCreationActof2010
andinformationontaxexpenditureestimatesanddomesticethanol
refiningcapacitywereupdatedfrommorerecentsources.
Biofuels:PotentialEffectsandChallengesofRequiredIncreasesin
RelatedGAOProduct
ProductionandUse.GAO-09-446.Washington,D.C.:August25,2009.
Foradditionalinformationaboutthisarea,contactFrankRuscoat
AreaContact
(202)512-3841orruscof@gao.gov.
EnterpriseArchitectures:KeyMechanismsfor
IdentifyingPotentialOverlapandDuplication
WhyGAOIsFocusing
onThisArea
Anenterprisearchitectureisamodernizationblueprintthatisusedby
organizationstodescribetheircurrentstateandadesiredfuturestateand
toleverageinformationtechnology(IT)totransformbusinessandmission
operations.Inlightoftheimportanceofdevelopingwell-defined
enterprisearchitectures,GAOrecentlyissuedaseven-stageenterprise
architecturemanagementmaturityframeworkthatdefinesactionsneeded
toeffectivelymanageanarchitectureprogram.Thealternative,asGAOs
workhasshown,istheperpetuationofthekindsofoperational
environmentsthatburdenmostagenciestoday,wherealackofintegration
amongbusinessoperationsandtheITresourcessupportingthemleadsto
systemsthatareduplicative,poorlyintegrated,andunnecessarilycostlyto
maintain.
WhatGAOHasFound
toIndicate
orFragmentation
Historically,federalagencieshavestruggledwithoperational
environmentscharacterizedbyalackofintegrationamongbusiness
operationsandITresourcessupportingthem.Akeytosuccessfully
leveragingITfororganizationaltransformationishavingandusingan
enterprisearchitectureormodernizationblueprintasanauthoritative
frameofreferenceagainstwhichtoassessanddecidehowindividual
systeminvestmentsaredefined,designed,acquired,anddeveloped.The
development,implementation,andmaintenanceofarchitecturesare
widelyrecognizedashallmarksofsuccessfulpublicandprivate
organizations,andtheiruseisrequiredbytheClinger-CohenActof1996
andtheOfficeofManagementandBudget.
GAOsexperiencehasshownthatattemptingtomodernize(andmaintain)
ITenvironmentswithoutanarchitecturetoguideandconstrain
investmentsresultsinorganizationaloperationsandsupporting
technologyinfrastructuresandsystemsthatareduplicative,poorly
integrated,unnecessarilycostlytomaintainandinterface,andunableto
respondquicklytoshiftingenvironmentalfactors.Forexample,GAOs
reviewsofenterprisearchitecturemanagementatfederalagencies,such
astheDepartmentofHomelandSecurityandtheFederalBureauof
Investigation,aswellasreviewsofcriticalagencyfunctionalareas,such
asDepartmentofDefensefinancialmanagement,logisticsmanagement,
combatidentification,andbusinesssystemsmodernizationhave
continuedtoidentifytheabsenceofcompleteandenforcedenterprise
architectures,whichinturnhasledtoagencybusinessoperations,
systems,anddatathatareduplicative,incompatible,andnotintegrated;
theseconditionshaveeitherpreventedagenciesfromsharingdataor
forcedthemtodependonexpensive,custom-developedsysteminterfaces
todoso.
GAOsframeworkprovidesastandardyetflexiblebenchmarkagainst
whichtodeterminewheretheenterprisestandsinitsprogresstowardthe
ultimategoal:havingacontinuouslyimprovingenterprisearchitecture
programthatcanserveasafeatureddecisionsupporttoolwhen
consideringandplanninglarge-scaleorganizationalrestructuringor
transformationinitiatives.Inaddition,italsoprovidesabasisfor
developingarchitecturemanagementimprovementplans,aswellasfor
measuring,reporting,andoverseeingprogressinimplementingthese
plans.
InAugust2006,GAOreportedonitsworkinapplyingitspriorframework
across27majorfederaldepartmentsandagencies.Thisworkshowedthat
thestateofenterprisearchitecturedevelopmentandimplementation
variedconsiderablyacrossdepartmentsandagencies,withsomehaving
morematurearchitectureprogramsthanothers.However,overall,most
departmentsandagencieswerenotwheretheyneededtobe,particularly
withregardtotheirapproachestoassessingeachinvestmentsalignment
withtheenterprisearchitectureandmeasuringandreportingon
enterprisearchitectureresultsandoutcomes.
Accordingly,GAOmaderecommendationstodepartmentsandagencies
thatareaimedatimprovingthecontentanduseoftheirrespective
architectures.Nonetheless,whilesomeprogresshasbeenmade,more
timeisneededforagenciestofullyrealizethevalueofhavingwell-defined
andimplementedarchitectures.Suchvaluecanbederivedfromrealizing
costsavingsthroughconsolidationandreuseofsharedservicesand
eliminationofantiquatedandredundantmissionoperations,enhancing
informationsharingthroughdatastandardizationandsystemintegration,
andoptimizingservicedeliverythroughstreamliningandnormalizationof
businessprocessesandmissionoperations.
ActionsNeededand
OtherBenefits
Ifmanagedeffectively,enterprisearchitecturescanbeausefulchange
managementandorganizationaltransformationtool.Theconditionsfor
effectivelymanagingenterprisearchitectureprogramsarecontainedin
GAOsenterprisearchitecturemanagementmaturityframework.To
advancethestateofenterprisearchitecturedevelopmentanduseinthe
federalgovernment,seniorleadershipinthedepartmentsandagencies
needtodemonstratetheircommitmenttothisorganizational
transformationtool,aswellasensurethatthekindofmanagement
controlsembodiedinGAOsframeworkareinplaceandfunctioning.
Collectively,themajorityofthedepartmentsandagenciesarchitecture
effortscanstillbeviewedasaworkinprogresswithmuchremainingto
beaccomplishedbeforethefederalgovernmentasawholefullyrealizes
theirtransformationalvalue.Movingbeyondthisstatuswillrequiremost
departmentsandagenciestoovercomesignificantobstaclesand
challenges,suchasorganizationalparochialismandculturalresistance,
inadequatefunding,andthelackoftopmanagementunderstandingand
skilledstaff.Onekeytodoingsocontinuestobesustainedorganizational
leadership.AsGAOsworkhasdemonstrated,withoutsuchorganizational
leadership,thebenefitsofenterprisearchitecturewillnotbefullyrealized.
InGAOspriorwork,mostdepartmentsandagenciesreportedtheyexpect
torealizethebenefitsfromtheirrespectiveenterprisearchitecture
programs,suchasimprovedalignmentbetweentheirbusinessoperations
andtheITthatsupportstheseoperationsandconsolidationoftheirIT
infrastructureenvironments,whichcanreducethecostsofoperatingand
maintainingduplicativecapabilities,sometimeinthefuture.Whatthis
suggestsisthattherealvalueinthefederalgovernmentfromdeveloping
andusingenterprisearchitecturesremainslargelyunrealized.GAOs
frameworkrecognizesthatakeytorealizingthispotentialiseffectively
managingdepartmentandagencyenterprisearchitectureprograms.
However,knowingwhetherbenefitsandresultsareinfactbeingachieved
requireshavingassociatedmeasuresandmetrics.Inthisregard,itis
importantforagenciestosatisfythecoreelementassociatedwith
measuringandreportingenterprisearchitectureresultsandoutcomes.
Examplesofresultsandoutcomestobemeasuredincludecostsavoided
througheliminatingduplicativeinvestmentsorbyreusingcommon
servicesandapplicationsandimprovedmissionperformancethroughre-
engineeredbusinessprocessesandmodernizedsupportingsystems.GAOs
workhasshownthatover50percentofthedepartmentsandagencies
assessedhadyettofullysatisfythiselement.Ontheotherhand,some
havereportedtheyareaddressingthiselementandhaverealized
significantfinancialbenefits.Forexample,theDepartmentoftheInterior
hasdemonstratedthatitisusingitsenterprisearchitecturetomodernize
agencyIToperationsandavoidcoststhroughenterprisesoftwarelicense
agreementsandhardwareprocurementconsolidation.Thesearchitecture-
baseddecisionshaveresultedinfinancialbenefitsofatleast$80million.
Thismeansthatthedepartmentsandagenciescandemonstrate
achievementofexpectedbenefits,toincludecostsavoidedthrough
eliminatingduplicativeinvestments,ifenterprisearchitectureresultsand
outcomesaremeasuredandreported.TheOfficeofManagementand
Budgetcanplayacriticalrolebycontinuingtooverseethedevelopment
anduseofenterprisearchitectureefforts,toincludethemeasurementand
reportingofenterprisearchitectureresultsandoutcomesacrossthe
federalgovernment.
GAOplanstofollowupwiththosedepartmentsandagenciesthatreported
havingsatisfiedtheelementassociatedwithmeasuringandreporting
returnonenterprisearchitectureresultsandoutcomestoidentify
associateddollarsavingsresultingfromeliminationofduplicative
investments.
Frameworkfor
reportslistedbelow.
Analysis
RelatedGAO
Products
OrganizationalTransformation:AFrameworkforAssessingand
ImprovingEnterpriseArchitectureManagement(Version2.0).
GAO-10-846G.Washington,D.C.:August2010.
EnterpriseArchitecture:LeadershipRemainsKeytoEstablishingand
LeveragingArchitecturesforOrganizationalTransformation.
GAO-06-831.Washington,D.C.:August14,2006.
InformationTechnology:AFrameworkforAssessingandImproving
EnterpriseArchitectureManagement,version1.1.GAO-03-584G.
Washington,D.C.:April2003.
AreaContact
ConsolidatingFederalDataCentersProvides
OpportunitytoImproveGovernment
Efficiency
OpportunitytoImproveGovernmentEfficiency
WhyGAOIsFocusing
onThisArea
Thefederalgovernmentsdemandforinformationtechnology(IT)isever-
increasing.Overtime,thisincreasingdemandhasledtoadramaticrisein
thenumberoffederaldatacenters(definedasdataprocessingandstorage
facilitiesover500squarefeetwithstrictavailabilityrequirements)anda
correspondingincreaseinoperationalcosts.Thegrowthinthenumberof
federaldatacenters,manyofferingsimilarservicesandresources,has
resultedinoverlapandduplicationamongthecenters.
InFebruary2010,theOfficeofManagementandBudget(OMB)launched
theFederalDataCenterConsolidationInitiativetoguidefederalagencies
indevelopingandimplementingdatacenterconsolidationplans.OMB
planstooverseetheagenciesplansandmeasuretheirprogress.
WhatGAOHasFound
toIndicate
orFragmentation
Inrecentyears,asfederalagenciesmodernizedtheiroperations,putmore
oftheirservicesonline,andincreasedtheirinformationsecurityprofiles,
theyhavedemandedmorecomputingpoweranddatastorageresources.
AccordingtoOMB,thenumberoffederaldatacentersgrewfrom432in
1998tomorethan2,000in2010.Thesedatacentersoftenhousesimilar
typesofequipmentandprovidesimilarprocessingandstorage
capabilities.Thesefactorshaveledtoconcernsassociatedwiththe
provisionofredundantcapabilities,theunderutilizationofresources,and
thesignificantconsumptionofenergy.
Operatingsuchalargenumberofcentersplacescostlydemandsonthe
government.In2010,theFederalChiefInformationOfficer(CIO)reported
thatoperatingandmaintainingsuchredundantinfrastructureinvestments
wascostly,inefficient,andunsustainable,andhadasignificantimpacton
energyconsumption.Whilethetotalannualfederalspendingassociated
withdatacentershasnotyetbeendetermined,theFederalCIOhasfound
thatoperatingdatacentersisasignificantcosttothefederalgovernment,
includinghardware,software,realestate,andcoolingcosts.Forexample,
accordingtotheEnvironmentalProtectionAgency,theelectricitycostto
operatefederalserversanddatacentersacrossthegovernmentisabout
$450millionannually.AccordingtotheDepartmentofEnergy,datacenter
spacescanconsume100to200timesasmuchelectricityasstandard
officespaces.Reportedserverutilizationratesaslowas5percentand
limitedreuseofthesedatacenterswithinoracrossagencieslendsfurther
credencetotheneedtorestructurefederaldatacenteroperationsto
improveefficiencyandreducecosts.
InFebruary2010,OMBandtheFederalCIOannouncedtheFederalData
CenterConsolidationInitiativeandoutlinedfourhigh-levelgoals:
Efficiency
PromotetheuseofGreenITbyreducingtheoverallenergyandreal
estatefootprintofgovernmentdatacenters.
Reducethecostofdatacenterhardware,software,andoperations.
IncreasetheoverallITsecuritypostureofthegovernment.
ShiftITinvestmentstomoreefficientcomputingplatformsand
technologies.
Aspartofthisinitiative,OMBdirectedfederalagenciestopreparean
inventoryoftheirdatacenterassetsandaplanforconsolidatingthese
assetsbyAugust30,2010,andtobeginimplementingtheminfiscalyear
2011.InOctober2010,OMBreportedthatalloftheagenciessubmitted
theirplans.OMBplanstomonitoragenciesprogressthroughannual
reportsandhasestablishedagoalofclosing800oftheover2,100federal
datacentersby2015.
Datacenterconsolidationmakessenseeconomicallyandasawayto
achievemoreefficientIToperations,butchallengesexist.Forexample,
agenciesfacechallengesinensuringtheaccuracyoftheirinventoriesand
plans,providingupfrontfundingfortheconsolidationeffortlongbefore
anycostsavingsaccrue,integratingconsolidationplansintofiscalyear
2012agencybudgetsubmissions(asrequiredbyOMB),establishingand
implementingsharedstandards(forstorage,systems,security,etc.),
establishingreimbursementmechanismstofundthecentralized
operations,overcomingculturalresistancetosuchmajororganizational
changes,andmaintainingcurrentoperationsduringthetransitionto
consolidatedoperations.Mitigatingtheseandotherchallengeswillrequire
commitmentfromtheagenciesandcontinuedoversightbyOMBandthe
FederalCIO.
ActionsNeededand
OtherBenefits
Movingforward,itwillbeimportantforindividualagenciestomove
quicklytocorrectanymissingitemsintheirplans,establishsound
baselinessothatprogressandefficienciescanbemeasured,begintheir
consolidationefforts,tracktheirprogress,andreporttoOMBontheir
progressovertime.ItwillalsobeimportantforOMBtoworkwith
agenciestoestablishgoalsandtargetsforconsolidation(bothintermsof
costsavingsandreduceddatacenters),maintainstrongoversightofthe
agenciesefforts,andlookforconsolidationopportunitiesacrossagencies.
Doingsowillmorefullyaddressunnecessaryoverlapandduplication,and
Efficiency
couldachievefurtheroperationalimprovements,efficiencies,and
financialbenefits.
Aspartoftheirindividualconsolidationplans,eachfederaldepartment
andagencywasexpectedtoestimatecostsavingsovertime.Inongoing
work,GAOreviewed15ofthe24agenciesconsolidationplans.Inthese
plans,agenciesprovidedthefollowinginformationonestimatedsavings:
Sevenagenciesestimatedsavingstotalingover$369millionbetween
fiscalyears2011and2015;however,actualsavingsmaybeevenhigher
becausethreeoftheseagenciesestimateswereonlypartialestimates.
Theyincludedexpectedenergysavingsbutnotsavingsfromother
sources,suchasfacilitiesorequipmentreductions.
Twoagenciesreportedthatnetsavingswouldnotaccrueuntilfiscal
years2017and2018,respectively.
Sixagenciesdidnotprovideestimatedcostsavings;however,twoof
theseagenciessuggestedthattheyplantodevelopcost-benefit
analysesinthefuture.
Althoughsomeagenciesreportedthatitwastoosoontoestimatecost
savingsbecausetheyarejustbeginningtoplantoconsolidateandother
agenciesnotedthatnear-termsavingswereoffsetbyconsolidationcosts,
theopportunityforlong-termsavingsissignificant.InOctober2010,a
councilofchiefexecutiveofficersrepresentingtechnicalindustry
companiesestimatedthatthefederalgovernmentcouldsave$150billion
to$200billionoverthenextdecade,primarilythroughdatacenterand
serverconsolidation.
GAOhasongoingworkreviewingtheFederalDataCenterConsolidation
Initiativeaswellasfederalagencieseffortstodevelopandimplement
consolidationplans.
Frameworkfor
Analysis
AspartofanongoingreviewoftheFederalDataCenterConsolidation
Initiative,GAOanalyzed15of24federalagenciesdatacenter
consolidationplansandinventoriestoidentifyplansandanticipatedcost
savings,anddiscussedchallengestotheconsolidationinitiativewiththose
agencies.GAOalsometwithagencyofficialstodiscussdatacenter
consolidationinitiativesatOMB,theAgencyforInternational
Development,theDepartmentofAgriculture,theDepartmentofDefense,
theDepartmentofEnergy,theDepartmentofHomelandSecurity,the
Efficiency
DepartmentoftheInterior,theDepartmentofLabor,theDepartmentof
State,theDepartmentoftheTreasury,theEnvironmentalProtection
Agency,theNationalAeronauticsandSpaceAdministration,theNuclear
RegulatoryCommission,theSmallBusinessAdministration,the
DepartmentofCommerce,theDepartmentofEducation,theDepartment
ofHealthandHumanServices,theDepartmentofHousingandUrban
Development,theDepartmentofJustice,theDepartmentof
Transportation,theDepartmentofVeteransAffairs,theGeneralServices
Administration,theNationalScienceFoundation,theOfficeofPersonnel
Management,andtheSocialSecurityAdministration.
RelatedGAO
Products
InformationSecurity:GovernmentwideGuidanceNeededtoAssist
AgenciesinImplementingCloudComputing.GAO-10-855T.Washington,
D.C.:July1,2010.
InformationSecurity:FederalGuidanceNeededtoAddressControl
IssueswithImplementingCloudComputing.GAO-10-513.Washington,
D.C.:May27,2010.
SocialSecurityAdministration:EffectiveInformationTechnology
ManagementEssentialforDataCenterInitiative.GAO-09-662T.
Washington,D.C.:April28,2009.
Foradditionalinformationaboutthisarea,contactDavidPownerat(202)
AreaContact
512-9286orpownerd@gao.gov.
ImprovedDataonInteragencyContracting
NeededtoMinimizeDuplicationandBetter
LeveragetheGovernmentsBuyingPower
ImprovedDataonInteragencyContractingNeededto
MinimizeDuplicationandBetterLeveragethe
GovernmentsBuyingPower
WhyGAOIsFocusing
onThisArea
Interagencyandagencywidecontractingwasresponsibleforatleast$54
billionoftheapproximately$540billionthatwasobligated
governmentwideforgoodsandservicesinfiscalyear2009.Interagency
contractingisaprocessbywhichoneagencyeitherusesanotheragencys
contractdirectlyorobtainscontractingsupportservicesfromanother
agency.Inagencywidecontracting,sometimescalledenterprisewide
contracting,acomponentwithinanagencyawardsacontractforuseby
allcomponentsofthatagency.Bothcontractingmethodsareintendedto
leveragethegovernmentsbuyingpowerandprovidecostsavings.By
providingasimplified,expedited,andlowercostmethodofprocurement,
theycanhelpagenciessavebothtimeandadministrationcosts.However,
unjustifiedduplicationamongavailablecontractscanresultinincreased
coststothegovernment.
WhatGAOHasFound
toIndicate
orFragmentation
Agencieshavecreatednumerousinteragencyandagencywidecontracts
usingexistingstatutes,theFederalAcquisitionRegulation,andagency-
specificpolicies.Thecreationofthesecontractsisbasedonanumberof
rationales,includingavoidinguserfeesthatwouldbepaidforusing
anotheragencyscontract,allowingforcost-reimbursementcontracts,and
gainingmorecontroloverprocurementactionswithintheagencies.With
theproliferationofthesecontracts,however,thereisariskofunintended
duplicationandinefficiency.Billionsoftaxpayerdollarsflowthrough
interagencyandagencywidecontracts,butthefederalgovernmentdoes
nothaveaclear,comprehensiveviewofwhichagenciesusethese
contractsandiftheyarebeingutilizedinanefficientandeffectivemanner.
Withoutthisinformation,agenciesmaybeunawareofexistingcontract
optionsthatcouldmeettheirneedsandmaybeawardingnewcontracts
whenuseofanexitingcontractwouldsuffice.Thegovernment,therefore,
mightbemissingopportunitiestobetterleverageitsvastbuyingpower.
Governmentcontractingofficialsandrepresentativesofvendorshave
expressedconcernsaboutpotentialduplicationamongtheinteragency
andagencywidecontractsacrossgovernment,whichtheysaidcanresult
inincreasedprocurementcosts,redundantbuyingcapacity,andan
increasedworkloadfortheacquisitionworkforce.Somevendorsstated
theyoffersimilarproductsandservicesonmultiplecontractsandthatthe
effortrequiredtobeonmultiplecontractsresultsinextracoststothe
vendor,whichtheypasstothegovernmentthroughincreasedprices.
Somevendorsstatedthattheadditionalcostofbeingonmultiple
contractsrangedfrom$10,000to$1,000,000percontractduetoincreased
bidandproposalandadministrativecosts.OnevendorstatedthatGeneral
ServicesAdministrationcontractscompetewithagencywidecontracts,
andfromindustrysperspective,thishasintroducedredundantbuying
capacity.
ForseveralyearstheGeneralServiceAdministrationsFederalAcquisition
ServiceanditsInspectorGeneralhavereportedthatunnecessary
duplicationexistswithintheMultipleAwardSchedule(MAS)program.
Similarly,theJanuary2007ReportoftheAcquisitionAdvisoryPanel
identifiedseveralproblemsregardinginteragencycontracting.In
particular,thereportnotedthattoomanychoiceswithoutinformation
relatedtotheperformanceandmanagementofthesecontractsmakethe
cost-benefitanalysisandmarketresearchneededtoselectanappropriate
acquisitioncontractimpossible.Suchproblemspersist,asGAOreported
inApril2010.
GAOhasidentifiedtwooverridingfactorsthathamperthegovernments
abilitytorealizethestrategicvalueofusinginteragencyandagencywide
contracts:(1)thelackofconsistentgovernmentwidepolicyonthe
creation,use,andcostsofawardingandadministeringsomecontracts;
and(2)long-standingproblemswiththequalityofinformationon
interagencyandagencywidecontractsinthefederalprocurementdata
system.Bothfactorsmayhavecontributedtounnecessaryduplication.
InApril2010,GAOrecommendedthattheOfficeofManagementand
Budget(OMB),whichhasgovernmentwideprocurementpolicy
responsibilities,establishapolicyframeworkforestablishingsometypes
ofinteragencycontractsandagencywidecontracts,includinga
requirementtoconductasoundbusinesscase.GAOalsorecommended
thatOMBtakestepstoimprovethedataoninteragencycontracts
includingupdatingexistingdataoninteragencyandagencywidecontracts,
ensuringthatdepartmentsandagenciesaccuratelyrecordthisdata,and
assessingthefeasibilityofcreatingandmaintainingacentralizeddatabase
ofinteragencyandagencywidecontracts.Thisdatabasewouldallow
contractingofficerstoidentifyandmakeinformeddecisionsonavailable
contracts.GAOsrecommendationswereconsistentwithprovisionsinthe
2009NationalDefenseAuthorizationAct,whichdirectedthattheFederal
AcquisitionRegulationbeamendedtorequirethatcertaininteragency
contractsenteredintobyanexecutiveagencybesupportedbyabusiness
caseanalysisandallinteragencycontractingbesupportedbyawritten
determinationthattheapproachisthebestprocurementalternative.An
interimregulationaddressingthelegislationwasissuedinDecember2010.
OMBhastakensomestepstoimproveinteragencycontractingandrelated
data.ItreportedinAugust2010thatagenciesareworkingtoimprovetheir
internalmanagementcontrols,suchasmakingdeterminationsthatusing
anotheragencyscontractisinthebestinterestofthegovernment.In
additiontotherecentinterimregulation,OMBreportedthatitplannedto
issueoverarchingguidancethatwouldaddresstheneedforagenciesto
preparebusinesscasesdescribingtheneedforanewmultiagencyor
agencywidecontract,thevalueaddedbyitscreation,andtheagencys
suitabilitytoserveasanexecutiveagent.AccordingtoOMB,the
upcomingguidancewillrequireagenciestoaddresstheanticipatedimpact
thataproposedmultiagencycontractwillhaveonthegovernmentsability
toleverageitsbuyingpowersuchashowitdiffersfromanexisting
contractandthebasisforconcludingthatitwilloffergreatervaluethan
anexistingcontract.Thisbusinesscaseanalysisalsowillrequirethe
agencytoevaluatethecostofawardingandmanagingthecontractand
comparethiscosttothelikelyfeesthatwouldbeincurrediftheagency
usedanexistingcontractorsoughtoutacquisitionassistance.
WhiletheinterimregulationandOMBsplansconcerningarequirement
foragenciestosubmitbusinesscasesfornewmultiagencyoragencywide
contractsconstitutestepsforward,intheabsenceofbetterdataregarding
theuniverseofsuchcontracts,agenciesmayfacechallengesinevaluating
thevalueofexistingcontracts.GAOhasreportednumeroustimesoverthe
yearsonissuesrelatedtothequalityofthegovernmentsdataon
contracts.Inthatregard,OMBreportsthatithasaneweffortunderway
toimprovecontractinformationintheFederalProcurementDataSystem-
NextGeneration(FPDS-NG),thecurrentfederalgovernmentdatabasefor
informationanddataonallfederalcontracts.OMBalsoisdiscussing
optionsforcreatingaclearinghouseofexistinginteragencyand
agencywidecontracts.
InOMBsannouncementofitsplannedguidance,itnotedthatprogress
hasbeeninsufficientontheissueofcontractduplicationandconcerns
remainthatagenciesareduplicatingeachotherscontractingeffortsand
creatingredundantcontractingcapacity.Untilcontrolstoaddressthe
issueofduplicationarefullyimplemented,thegovernmentwillcontinue
tomissopportunitiestotakeadvantageofthegovernmentsbuyingpower
throughmoreefficientandmorestrategiccontracting.Atthesametime,
theaddedworkloadfortheacquisitionworkforceandprocurementcosts
forvendors,whichresultinhigherpricesforthegovernment,will
continueuntilthisproblemisaddressed.
ActionsNeededand
OtherBenefits
Torealizethebenefitsofusinginteragencyandagencywidecontracts,
OMBandtheGeneralServicesAdministrationwillneedtofullyimplement
thestepstheyaretakingtoaddressidentifiedshortcomingsinthe
managementofinteragencycontracting.Theprocuringagencieswillhave
toplaytheirpartsaswell.Inparticular,despitenumerousGAO
recommendationsovertheyears,improvementsarestillneededregarding
theaccuracyofthefederalcontractsdatabaseinordertodetermine
whetherthecontractsarebeingusedinanefficientandeffectivemanner.
Continuedcongressionaloversightofthisissueiswarranted.
Requiringbusinesscaseanalysesfornewmultiagencyandagencywide
contractsandensuringagencieshaveaccesstoup-to-dateandaccurate
dataontheavailablecontractswillpromotetheefficientuseof
interagencyandagencywidecontractingand,byreducingthecosts
associatedwithduplicatecontracts,helpthegovernmentbetterleverage
itspurchasingpowerwhenbuyingcommercialgoodsandservices.
Theinformationcontainedinthisanalysishasbeenbasedontherelated
Frameworkfor
productslistbelow,withupdatesprovidedthroughtheOMBReportto
Analysis CongressfromAugust2010andaninterviewwithOMBofficials.GAO
determinedthatthedataitusedweresufficientlyreliableforitspurposes.
RelatedGAO
Products
ContractingStrategies:BetterDataandManagementNeededtoLeverage
ValueofInteragencyandEnterprisewiseContracts.GAO-10-862T.
ContractingStrategies:DataandOversightProblemsHamper
OpportunitiestoLeverageValueofInteragencyandEnterprisewide
Contracts.GAO-10-367.Washington,D.C.:April29,2010.
FederalContracting:ObservationsontheGovernmentsContracting
DataSystems.GAO-09-1032T.Washington,D.C.:September29,2009.
High-RiskSeries:AnUpdate.GAO-09-271Washington,D.C.:January
2009.
InteragencyContracting:NeedforImprovedInformationandPolicy
ImplementationattheDepartmentofState.GAO-08-578.Washington,
D.C.:May8,2008.
DepartmentofHomelandSecurity:BetterPlanningandAssessment
NeededtoImproveOutcomesforComplexServiceAcquisitions.
GAO-08-263.Washington,D.C.:April22,2008.
FederalAcquisition:OversightPlanNeededtoHelpImplement
AcquisitionAdvisoryPanelRecommendations.GAO-08-160.Washington,
D.C.:December20,2007.
ACallForStewardship:EnhancingtheFederalGovernmentsAbilityto
AddressKeyFiscalandOther21stCenturyChallenges.GAO-08-93SP.
Washington,D.C.:December2007.
ImprovementsNeededtotheFederalProcurementDataSystem-Next
Generation.GAO-05-960R.Washington,D.C.:September27,2005.
ContractManagement:OpportunitiestoImprovePricingofGSA
MultipleAwardSchedulesContracts.GAO-05-229.Washington,D.C.:
February11,2005.
High-RiskSeries:AnUpdate.GAO-05-207.Washington,D.C.:January
2005.
ContractManagement:GuidanceNeededtoPromoteCompetitionfor
DefenseTaskOrders.GAO-04-874.WashingtonD.C.:July30,2004.
Foradditionalinformationaboutthisarea,contactJohnNeedhamat
AreaContact
(202)512-4841orneedhamjk1@gao.gov.
PeriodicReviewsCouldHelpIdentify
IneffectiveTaxExpendituresand
RedundanciesinRelatedTaxandSpending
Programs
PeriodicReviewsCouldHelpIdentifyIneffectiveTax
ExpendituresandRedundanciesinRelatedTaxand
SpendingPrograms
WhyGAOIsFocusing
onThisArea
AccordingtothesumofU.S.DepartmentoftheTreasuryestimatesfor
fiscalyear2009,almost$1trillioninfederalrevenuewasforgonedueto
taxexclusions,credits,deductions,deferrals,andpreferentialtaxrates
legallyknownastaxexpenditures.Therevenuethatthegovernment
forgoesisviewedbymanyanalystsasspendingchanneledthroughthetax
system.Similartospendingprograms,taxexpendituresrepresenta
substantialfederalcommitmentinawiderangeofmissionareas.For
fiscalyear2009,theU.S.DepartmentoftheTreasurylistedatotalof173
taxexpenditures,someofwhichwereofthesamemagnitudeorlarger
thanrelatedfederalspendingforsomemissionareas.Likemandatory
spendingprogramssuchasMedicare,manytaxexpendituresaregoverned
byeligibilityrulesandformulasthatprovidebenefitstothosewhoare
eligibleandwishtoparticipate.Since1994,GAOhasrecommended
greaterscrutinyoftaxexpenditures.
WhatGAOHasFound
toIndicate
orFragmentation
Taxexpenditures,ifwelldesignedandeffectivelyimplemented,canbean
effectivetooltofurtherfederalgoals,suchasencouragingeconomic
developmentindisadvantagedareas,financinghighereducation,and
stimulatingresearchanddevelopment.However,taxexpenditurescan
contributetomissionfragmentationandprogramoverlap,thuscreating
thepotentialforduplication.Moreover,sometaxexpendituresmaybe
ineffectiveatachievingtheirsocialoreconomicpurposes.Tax
expendituresdonotcompeteovertlywithotherprioritiesintheannual
budget,andspendingembeddedinthetaxcodeiseffectivelyfunded
beforediscretionaryspendingisconsidered.Manytaxexpendituresare
notsubjecttocongressionalreauthorization.Therefore,Congresslacks
theopportunitytoregularlyreviewtheireffectiveness.Periodicreviews
couldhelpidentifyredundancyinrelatedtaxandspendingprogramsand
determinehowwellspecifictaxexpendituresworktoachievetheirgoals
andhowtheirbenefitsandcostscomparetothoseofprogramswith
similargoals.
Inthecaseofhighereducation,thefederalgovernmentoffersseventax
expendituresandninespendingprogramsgrantandloanprograms
authorizedbyTitleIVoftheHigherEducationActof1965tohelp
studentsandtheirfamiliespayforpostsecondaryeducation.In2005,the
numberoftaxfilersclaimingahighereducationtaxcreditortuition
deductionsurpassedthenumberofTitleIVaidrecipients.Perhapsdueto
themultiple,complextaxprovisions,hundredsofthousandsoftaxpayers
in2005failedtoclaimtaxincentivesordidnotclaimthemost
advantageoustaxbenefit.Simplifyingthetax,grant,andloanprograms
mayreducecomplexitiesinhighereducationfinancing,includingreducing

Programs
thenumberofeligibletaxpayersthatdonotclaimtaxbenefits.However,
GAOreportedin2008thatCongresshadreceivedlittleinformationabout
therolesandeffectivenessofthetaxandTitleIVprograms.
Todate,theOfficeofManagementandBudget(OMB)hasnotusedits
budgetandperformancereviewprocessestosystematicallyreviewtax
expendituresandpromoteintegratedreviewsofrelatedtaxandspending
programs.
PastGAOreviewsofspecifictaxexpenditureshaveidentifiedoptionsto
improvetheirdesignandbettertargetresources.Forexample,in2010,
GAOsuggestedthatCongressmodifytheResearchTaxCredittoreduce
windfallstotaxpayersforresearchspendingtheywouldhavedone
anyway.GAOalsosuggestedthatCongressconvertatleastpartofthe
NewMarketsTaxCredittoagrantprogramtoincreasetheamountof
federalsubsidyreachingbusinessesinimpoverished,low-income
communities.
Dataavailabilityhasbeenachallengeinassessingtaxexpenditure
performance.InthecaseoftheEmpowermentZone,Enterprise
Community,andRenewalCommunityprograms,thelackoftaxbenefit
datalimitstheabilityoftheDepartmentofHousingandUrban
Development(HUD)andtheDepartmentofAgriculturetoevaluatethe
overallmixofgrantandtaxprogramstorevitalizeselectedurbanand
ruralcommunities.InresponsetoGAOrecommendations,HUDandthe
InternalRevenueService(IRS)collaboratedtosharedataonsome
programtaxcredits.However,theIRSdatadonottietheprogramtax
incentivestospecificdesignatedcommunities,makingitdifficulttoassess
theimpactofthetaxbenefits.
ActionsNeededand
OtherBenefits
Coordinatedreviewsoftaxexpenditureswithrelatedfederalspending
programscouldhelppolicymakersreduceoverlapandinconsistenciesand
directscarceresourcestothemosteffectiveorleastcostlymethodsto
deliverfederalsupport.
In2005,GAOrecommendedthattheDirectoroftheOfficeofManagement
andBudgetinconsultationwiththeSecretaryoftheTreasurytakespecific
actionstoensurethatpolicymakershavenecessaryinformationto
exercisescrutinyoftaxexpenditures:
Presenttaxexpendituresinthebudgettogetherwithrelatedoutlay
programs.
Programs
Developandimplementaframeworkforconductingperformance
reviewsoftaxexpenditures.Thisincludes(1)outliningleadership
responsibilitiesandcoordinationamongagencieswithrelated
responsibilities;(2)settingareviewschedule;(3)identifyingreview
methodsandwaystoaddressthelackofcredibletaxexpenditure
performanceinformation;and(4)identifyingresourcesneededfortax
expenditurereviews.
Developguidanceonincorporatingtaxexpendituresinagencies
strategicplansandperformancereports.
RequirethattaxexpendituresbeincludedinExecutiveBranchbudget
andperformancereviewprocesses.
TheExecutiveBranchhadmadelittleprogressinimplementingsimilar
recommendationsthatGAOmadein1994,and,OMB,citing
methodologicalandconceptualissues,disagreedwithGAOs2005
recommendations.However,initsfiscalyear2012budgetguidance,OMB
instructedagencies,whereappropriate,toanalyzehowtobetterintegrate
taxandspendingpoliciesthathavesimilarobjectivesandgoals.Such
analysiscouldbeusefulinidentifyingredundancies.
Improvingtaxexpenditureperformanceoreliminatingtaxexpenditures
couldreducerevenuelosses,potentiallybybillionsofdollars.For
example,improveddesignsmayenableindividualtaxexpendituresto
achievebetterresultsforthesamerevenuelossorthesameresultswith
lessrevenueloss.Also,reductionsinrevenuelossesfromeliminating
ineffectiveorredundanttaxexpenditurescouldbesubstantialdepending
onthesizeoftheeliminatedprovisions.Whetherandhowmuchfederal
revenueswouldincreasefromimprovingtaxexpendituresperformance
oreliminatingthemalsowoulddependonwhetherandhowmuch
Congressmightadjustoveralltaxratesastaxexpenditureinefficiencies
areaddressed.GAObelievesthattaxexpenditureperformanceisanarea
thatwouldbenefitfromenhancedcongressionalscrutinyasCongress
considerswaystoaddressthenationslong-termfiscalimbalance.
Frameworkfor
productslistedbelowandGAOsworkfollowinguponthe
Analysis recommendationsfromthoseproducts.
Programs
RelatedGAO
Products
RevitalizationPrograms:EmpowermentZones,Enterprise
Communities,andRenewalCommunities.GAO-10-464R.Washington,
D.C.:March12,2010.
NewMarketsTaxCredit:TheCreditHelpsFundaVarietyofProjectsin
Low-IncomeCommunities,butCouldBeSimplified.GAO-10-334.
Washington,D.C.:January29,2010.
TaxPolicy:TheResearchTaxCreditsDesignandAdministrationCan
BeImproved.GAO-10-136.Washington,D.C:November6,2009.
HigherEducation:MultipleHigherEducationTaxIncentivesCreate
OpportunitiesforTaxpayerstoMakeCostlyMistakes.GAO-08-717T.
Washington,D.C.:May1,2008.
21stCenturyChallenges:HowPerformanceBudgetingCanHelp.
GAO-07-1194T.Washington,D.C.:September20,2007.
EmpowermentZoneandEnterpriseCommunityProgram:
ImprovementsOccurredinCommunities,buttheEffectoftheProgram
isUnclear.GAO-06-727.Washington,D.C.:September22,2006.
GovernmentPerformanceandAccountability:TaxExpenditures
RepresentaSubstantialFederalCommitmentandNeedtoBe
Reexamined.GAO-05-690.Washington,D.C.:September23,2005.
StudentAidandPostsecondaryTaxPreferences:LimitedResearch
ExistsonEffectivenessofToolstoAssistStudentsandFamiliesthrough
TitleIVStudentAidandTaxPreferences.GAO-05-684.Washington,D.C.:
July29,2005.
CommunityDevelopment:FederalRevitalizationProgramsAreBeing
Implemented,butDataontheUseofTaxBenefitsAreLimited.
TaxPolicy:TaxExpendituresDeserveMoreScrutiny.
GAO/GGD/AIMD-94-122.Washington,D.C.:June3,1994.
Foradditionalinformationaboutthisarea,contactMichaelBrostekat
AreaContact
(202)512-9110orbrostekm@gao.gov.
OpportunitiesExistforDODandVAto
JointlyModernizeTheirElectronicHealth
RecordSystems
OpportunitiesExistforDODandVAtoJointly
ModernizeTheirElectronicHealthRecordSystems
WhyGAOIsFocusing
onThisArea
TheDepartmentsofDefense(DOD)andVeteransAffairs(VA)operatetwo
ofthenationslargesthealthcaresystems,providinghealthcareto9.6
millionactivedutyservicemembersandtheirbeneficiariesand6million
veteransatestimatedannualcostsofabout$49billionand$48billion,
respectively.Althoughtheyhaveidentifiedmanycommonhealthcare
businessneeds,bothdepartmentshavespentlargesumsofmoneyto
developandoperateelectronichealthrecordsystemsthattheyrelyonto
createandmanagepatienthealthinformation.Furthermore,the
departmentshaveeachbegunmultimilliondollarmodernizationsoftheir
electronichealthrecordsystems.Specifically,DODhasobligated
approximately$2billionoverthe13-yearlifeofitsArmedForcesHealth
LongitudinalTechnologyApplication(AHLTA)andrequested$302million
infiscal2011yearfundsforanewsystem.Foritspart,VAreported
spendingalmost$600millionfrom2001to2007oneightprojectsaspartof
itsVeteransHealthInformationSystemsandTechnologyArchitecture
(VistA)modernization.InApril2008,VAestimatedan$11billiontotalcost
tocompletethemodernizationby2018.
WhatGAOHasFound
toIndicate
orFragmentation
AlthoughDODandVAhavemanycommonhealthcarebusinessneeds,the
departmentshavebegunseparatemodernizationsoftheirelectronic
healthrecordsystems.Reducedduplicationinthisareacouldsavesystem
developmentandoperationcostswhilesupportinghigher-qualityhealth
careforservicemembersandveterans.
InMay2010,thedepartmentsidentified10areasinpatient
documentation,outpatientdocumentation,pharmacy,laboratory,order
entryandmanagement,scheduling,imagingandradiology,third-party
billing,registration,anddatasharinginwhichtheyhavecommon
businessneeds.Moreover,theresultsofa2008studyconductedforthe
departmentsfoundthatover97percentoffunctionalrequirementsforan
inpatientelectronichealthrecordsystemarecommontoboth
departments.Nevertheless,DODhasinitiatedaneffortcalledtheEHR
(ElectronicHealthRecord)WayAheadtomodernizeAHLTA.Atthesame
time,VAhasbegunaseparateefforttomodernizeVistA.
Thedepartmentsdistinctmodernizationeffortsaredueinparttobarriers
theyfacetojointlyaddressingtheircommonhealthcaresystemneeds.
Thesebarriersstemfromweaknessesinthreekeyinformationtechnology
(IT)managementareas:strategicplanning,enterprisearchitecture,and
investmentmanagement.First,thedepartmentshavenotarticulated
explicitplans,goals,andtimeframesforjointlyaddressingthehealthIT
requirementscommontotheirelectronichealthrecordsystems.For

RecordSystems
example,DODsandVAsjointstrategicplan,whichisintendedto
describethedepartmentscoordinationandsharingefforts,doesnot
discusshoworwhenthedepartmentsproposetoidentifyanddevelop
jointhealthITsolutions,anddepartmentofficialshavenotyetdetermined
whethertheITcapabilitiesdevelopedforthenewFederalHealthCare
CentercanorwillbeimplementedatotherDODandVAmedicalfacilities.
Second,althoughDODandVAhavetakenstepstowarddevelopingand
maintainingelementsofajointhealtharchitecture,suchasadescription
ofbusinessprocessesandsupportingtechnologies,itisnotbeingusedto
guidethedepartmentshealthITmodernizationefforts.Forexample,the
departmentshavenotdefinedhowtheyintendtotransitionfromtheir
currentarchitecturetoaplannedfuturestate.Third,DODandVAhavenot
establishedajointprocessforselectingITinvestmentsbasedoncriteria
thatconsidercost,benefit,schedule,andriskelements,whichwouldhelp
toensurethatthechosensolutionmeetstheircommonhealthITneeds
andprovidesbettervalueandbenefitstothegovernmentasawhole.
Withoutthesekeymanagementcapabilitiesinplace,DODandVAare
impededinidentifyingandimplementingefficientandeffectiveIT
solutionstojointlyaddresstheircommonneedsandachievingthe
seamless,comprehensiveaccesstoinformationthatisnecessaryto
optimallytreatpatientsastheytransitionfromservicemembertoveteran
status.
ActionsNeededand
OtherBenefits
GAOsrecentworkidentifiedseveralactionsthattheSecretariesof
DefenseandVeteransAffairscouldtaketoovercomebarriersthatDOD
andVAfaceinmodernizingtheirelectronichealthrecordsystemsto
jointlyaddresstheircommonhealthcarebusinessneeds,includingthe
following:
Revisethedepartmentsjointstrategicplantoincludeinformation
discussingtheirelectronichealthrecordsystemmodernizationefforts
andhowthoseeffortswilladdressthedepartmentscommonhealth
carebusinessneeds.
Furtherdevelopthedepartmentsjointhealtharchitecturetoinclude
theirplannedfuturestateandtransitionplanfromtheircurrentstateto
thenextgenerationofelectronichealthrecordcapabilities.
Defineandimplementaprocess,includingcriteriathatconsiderscosts,
benefits,schedule,andrisks,foridentifyingandselectingjointIT
investmentstomeetthedepartmentscommonhealthcarebusiness
needs.
RecordSystems
OfficialsfrombothDODandVAagreedwiththeserecommendations.
GAOwillcontinuetomonitortheirprogressonthisimportantissue.
EffortsbythedepartmentstojointlyidentifyanddevelopcommonIT
solutionstoaddresstheirmutualhealthcareneedscouldresultinsystem
developmentandoperationcostsavingswhilesupportinghigher-quality
healthcareforservicemembersandveterans.Althoughthefinancial
benefitofreducingduplicationinthisareaistobedetermined,ajoint
approachtoelectronichealthrecordmodernizationshouldnotonlyresult
incostsavings,itshouldalsoimprovethedepartmentsabilitytoshare
healthinformation,whichinturncanoptimizethequalityofhealthcare
thedepartmentsprovidetoservicemembersandveterans.
TheinformationcontainedinthisanalysisisbasedonfindingsfromGAOs
Frameworkfor
recentreportonDODandVAelectronichealthrecordsystem
Analysis modernizationsandtheotherproductslistedbelow.
RelatedGAO
Products
ElectronicHealthRecords:DODandVAShouldRemoveBarriersand
ImproveEffortstoMeetTheirCommonSystemNeeds.GAO-11-265.
Washington,D.C.:February2,2011.
InformationTechnology:OpportunitiesExisttoImproveManagementof
DODsElectronicHealthRecordInitiative.GAO-11-50.Washington,D.C.:
October6,2010.
InformationTechnology:ManagementImprovementsAreEssentialto
VAsSecondEfforttoReplaceItsOutpatientSchedulingSystem.
ElectronicHealthRecords:DODandVAInteroperabilityEffortsAre
Ongoing;ProgramOfficeNeedstoImplementRecommended
Improvements.GAO-10-332.WashingtonD.C.:January28,2010.
VeteransAffairs:HealthInformationSystemModernizationFarfrom
Complete;ImprovedProjectPlanningandOversightNeeded.
AreaContact
VAandDODNeedtoControlDrugCostsand
IncreaseJointContractingWheneveritis
CostEffective
VAandDODNeedtoControlDrugCostsandIncrease
JointContractingWheneveritisCostEffective
WhyGAOIsFocusing
onThisArea
TheDepartmentofVeteransAffairs(VA)andtheDepartmentofDefense
(DOD)spentabout$11.4billiononprescriptiondrugsforbeneficiariesin
fiscalyear2009.Reflectingnationaltrends,VAandDODdrug
expenditureshaverisensignificantly.Sincetheearly1980s,Congresshas
urgedthedepartmentstoachievegreaterefficienciesthroughincreased
collaboration.Therefore,VAandDODhaveattemptedtorestrain
pharmacycostsbyjointlycontractingforsomedrugstoobtaindiscounts
fromdrugmanufacturers.In2001,GAOrecommendedthatVAandDOD
jointlyprocureallbrandnameandgenericdrugsforwhichsuch
procurementwasclinicallyappropriateandcost-effectiveandreportto
Congressannuallyontheirjointdrugprocurementefforts.VAandDOD
agreedwithGAOsrecommendations.Also,GAOtestifiedthataddressing
differencesintheirhealthcaresystemscouldincreasejointcontracting
forbrandnamedrugs,whichmakeupasmallershareofthedepartments
drugvolumethangenericdrugsbutaccountforafarhighershareof
expenditures.
WhatGAOHasFound
toIndicate
orFragmentation
AsGAOpreviouslyrecommended,fromfiscalyear2002through2005,VA
andDODincreasedjointprocurementofbrandnameandgenericdrugs.
However,GAOfoundthatbyfiscalyear2009,jointnationalcontracts
1
for
prescriptiondrugsaccountedforonlyasmallproportionofVAandDOD
spendingonprescriptiondrugs.Specifically,infiscalyear2009,VAspent
about$3.7billionandDODspentabout$7.7billiononprescriptiondrugs,
whilespendingunderjointnationalcontractsrepresentedabout5percent
andlessthan1percentofthosetotals,respectively.Asthefollowingbar
chartshows,althoughVAandDODspendingonjointnationalcontracts
increasedfrom$183millionon76contractsinfiscalyear2002to$560
millionon84contractsinfiscalyear2005,itdecreasedbyfiscalyear2009
to$214millionon67contracts.
2
1
JointnationalcontractsareoneofthestrategiesusedbyVAandDODtoobtaindiscounts
ondrugsfrommanufacturersbeyondthosethatmightotherwisebeavailabletofederal
purchasers.
2
TheVeteransBenefitsandHealthCareImprovementActof2000includedaprovision
encouragingVAandDODtoincreasetheirlevelofcooperationintheprocurementand
managementofprescriptiondrugs.Pub.L.No.106-419,223,114Stat.1822,1845(2000).
VA
CostEffective
VAandDODJointNationalContractsandSpending
SpendingonJointNationalContracts (dollarsinmillions)
2002 2003 2004 2005 2006 2007 2008 2009
0
100
200
300
400
500
600
193 187
308 301
422
367
207
116
21 37
82
163
138
140
104
67
214
224
390
464
560
507
311
183
Year
76 85 81 84 78 65 59 67
Total Joint National Contracts by year
DOD
VA
Sources:VAandDOD.
Withregardtobrandnamedrugswhichaccountformorethan80
percentofVAsandDODstotaldrugspendingVAandDODhadnojoint
nationalcontractsforbrandnamedrugsin2002,hadthreein2003,fourin
2004and2005,threein2006,twoin2007,andnonein2008or2009.VAand
DODhaveattributedsignificantcostavoidance
3
totheirjointcontracting
efforts;forexample,VAestimatedabout$666millionincostavoidancein
fiscalyear2005alone.Thesecostavoidanceestimateshavedeclined
significantlyasjointcontractspendinghasdecreased.
VAandDODofficialsattributedthedeclineinjointcontractingsince2005
primarilytotheeliminationofjointcontractingforbrandnamedrugsdue
toachangetoDODsdrugprocurementprocesswhichoccurredasa
3
VAandDODgenerallycalculatethecostavoidanceattributabletojointcontractingefforts
bydeterminingthedifferencebetweenactualcostsunderthejointcontractpricingand
estimatedcoststheywouldhaveincurredhadthejointcontractpricingnotbeeninplace.
CostEffective
resultofitsimplementationofitsuniformformulary.
4
,
5
PriortoDODs
implementationofitsuniformformularyprocess,aVAcontractingofficer
offeredformularyplacementtoadrugmanufacturerinconnectionwith
theawardofabrandnamedrugjointcontract,takingintoaccountclinical
reviewsconductedbytherelevantVAandDODcommittees.
6
Bystatute,
responsibilityforDODsuniformformularyisvestedundertheSecretary
ofDefense,andbyDODregulationtheDirectorofDODsTRICARE
ManagementActivityisresponsibleforformularyplacementdecisions.
7
VAandDODofficialstoldusthatDODsuniformformularyprocess
thereforeprecludesDODfromparticipatinginaVA-ledjointcontractthat
offersformularyplacementaspartofthecontractingprocess.According
toVAandDOD,theycanstilljointlycontractforgenericdrugsbecause
thesecontractsdonotusuallyrequireformularyaddition.
8
In2001,GAO
reportedthataDODuniformformularycouldincreasejointcontracting
opportunitiesbecausethelargerthedepartmentsformularies,thegreater
thechancetheywouldoverlapandprovideopportunitiestojointly
procurebrandnamedrugs.However,DODsformularyprocessappearsto
havelimitedratherthanincreasedjointcontractingopportunities.VAdata
confirmthatthedeclineinspendingunderjointnationalcontractssince
4
Formulariesarelistsofmedicationsthathealthcareorganizationsencourageorrequire
providerstoprescribeforpatients.Byconcentratingtheirpurchasesonparticulardrugs,
organizationscannegotiatewithmanufacturerstosecurebetterprices.Likewise,
manufacturershaveastronginterestinhavingtheirdrugslistedonformulariesinorderto
capturegreatermarketsharesfortheirdrugs.VAandDODeachhashadcentralized
formulariessince1997,butDODimplementeditscurrentuniformformularyinfiscalyear
2005.
5
DODwasrequiredbytheNationalDefenseAuthorizationActforFiscalYear2000to
establishauniformformulary.Pub.L.No.106-65,701,113Stat.512,677-80(1999).
NeithertheactnortheaccompanyingreportsaddressedjointcontractingwithVA,anditis
notclearwhetherornotCongressconsideredthematterwhenpassingtheuniform
formularyrequirement.
6
ForVAthesecommitteesaretheVAPharmacyBenefitsManagementStrategicHealthcare
Group,MedicalAdvisoryPanel,andVeteransIntegratedServiceNetworkFormulary
LeadersCommittee.ForDOD,thiscommitteeisthePharmacy&TherapeuticsCommittee.
7
TRICAREisDODsregionallystructuredhealthcareprogramforactivedutypersonnel
andtheirdependents,eligibleNationalGuardandReserveservicemembersandtheir
dependents,andretireesandtheirdependentsandsurvivors.
8
Typically,agenericdrugbeingconsideredforajointnationalcontractwouldalreadybe
includedonVAsandDODsformularies.Forgenericdrugjointcontracts,one
manufacturerisselectedfromagroupofmanufacturerswhomakethesamegenericdrug.
Incontrast,ajointcontractforabrandnamedrugwouldtypicallyinvolveselectionofone
brandnamedrugfromagroupofdrugsthatweredeterminedtobetherapeutic
alternatives,withtheselecteddrugbeingplacedontheformularies.
CostEffective
2005canbelargelyattributedtotheeliminationofjointcontractingfor
costlybrandnamedrugs.VAdatashowthatspendingunderjointnational
contractsforgenericdrugshasremainedrelativelyconstantbetween
fiscalyears2005and2009,fluctuatingbetween$175millionand$196
million,whileVAspendingunderjointnationalcontractsforbrandname
drugsdeclinedoverthisperiod,from$232millionin2005to$0in2008and
2009.
Inaddition,officialstoldusthatjointcontractingisnotavailablefora
largesegmentofdrugspending.Specifically,DODdoesnotcontract,
jointlyoronitsown,fordrugsdispensedthroughretailpharmacies.In
fiscalyear2009,DODofficialsreported$5.8billioninretailpharmacydrug
spending,noneofwhichcurrentlypresentsajointcontracting
opportunity.
Despitethelimitstojointcontracting,VAandDODofficialssaidtheyare
independentlyachievingcostsavingsinotherways.VAofficialstoldus
thatVAobtainsequallygoodpricesworkingindependentlyasitdoes
whenitjointlycontractswithDOD,andconsequentlyVAofficialsbelieve
VAisnotmissinganysavingsopportunitiesbynotjointlycontractingwith
DODforbrandnamedrugs.VAofficialstoldustheydonotthink
additionaljointcontractingcouldleadtoincreasedcostsavingsforVA.
Additionally,DODofficialssaidthatwhilejointcontractinghasdeclined,
theiruniformformularyprocesshasbeenmoreeffectiveatproducing
savings,citing$926millionincostavoidanceinfiscalyear2007.
9
ActionsNeededand
OtherBenefits
WhileVAandDODofficialsasserttheyareindependentlyachieving
significantdrugcostsavings,thedepartmentsspendingonbrand-name
drugshasbeenincreasing,totalingalmost$10billiondollarsinfiscalyear
2009,orabout85percentoftheapproximately$11.4billionintotaldrug
spendingthatyear.Sinceitisunclearwhethersubstantialcostsavings
couldberealizedifthedepartmentsresumedjointcontractingforbrand
namedrugs,VAandDODshouldanalyzewhethergreatercostsavings
couldbeachievedthroughjointcontractingforbrandnamedrugsthanare
currentlyachievedthroughtheirindependentstrategies,anddetermine
whetheritwouldbecost-effectivetotakestepstoresumejoint
9
Formoreinformationaboutuniformformularycostsavings,seeGAO,DODPharmacy
BenefitsProgram:ReducedPharmacyCostsResultingfromtheUniformFormularyand
ManufacturerRebates,GAO-08-172R(Washington,D.C.:Oct.31,2007).

CostEffective
contractingforbrandnamedrugs.Regardlessofwhetherjointcontracting
forbrandnamedrugsispracticable,thedepartmentsfacecontinued
challengesincontrollingincreasingdrugcosts,andshouldmakefinding
drugsavingsapriority.Forexample,GAOpreviouslyrecommendedthat
DODidentify,implement,andmonitoreffortstocontrolretailpharmacy
spending,anareaforwhichdrugspendingisincreasingandcannotbe
controlledthroughjointcontractingefforts.
10
DODagreedwiththis
recommendation.Thedepartmentsshouldalsocontinuetheireffortsto
jointlycontractforgenericdrugs,andlookforopportunitiestoincrease
jointcontractingeffortsasgenericversionsofexistingbrandnamedrugs
becomeavailable.Officialsnoted,forexample,thatgenericversionsof
drugsforreducingcholesterolandcontrollingasthmamaybecome
availablewithinafewyears.
VAandDODprovidedcommentsonGAOsdraftanalysisofthisissue.VA
statedthatitwouldexplorewhethercostsavingsmightbepossibleifit
resumedjointcontractingforbrandnamedrugs,andagreedthatthe
departmentsshouldcontinueandpotentiallyincreasejointcontractingfor
genericdrugs.DODconcurredwiththedraftandofferedadditional
contextualinformation.Forexample,DODnotedthatwhileitsretail
pharmacynetworkremainsthelargestandmostcostlycomponentofits
pharmacybenefit,theagencyhasreceivedatotalofover$960millionin
federalpricingdiscounts
11
onpurchasesmadethroughretailpharmaciesin
fiscalyears2009and2010.
12
Frameworkfor
Analysis
Theinformationcontainedinthisanalysisisbasedinpartontherelated
GAOproductslistedbelow.Inaddition,todeterminethefactorsthat
contributedtothedeclineinjointcontractingsince2005,GAOinterviewed
VAandDODpharmacyandprocurementofficialsandobtainedand
reviewedrelevantdocuments,includingarticlesandreportstoCongress
relatedtoVAsandDODspharmacymanagementsystems.GAOalso
reviewedVAandDODdrugspendingandjointcontractingdatafrom2002
10
SeeGAO,DODPharmacyProgram:ContinuedEffortsNeededtoReduceGrowthin
SpendingatRetailPharmacies,GAO-08-327(Washington,D.C.:Apr.4,2008).
11
TheNationalDefenseAuthorizationActforFiscalYear2008requiredthatfederalpricing
arrangementsbeappliedtodrugsdispensedatretailpharmaciesasofJanuary28,2008.See
Pub.L.No.110-181,703,122Stat.3,188(codifiedat10U.S.C.1074g(f)).
12
DODreportedfederalpricingdiscountsreceivedthroughJuly31,2010.
CostEffective
through2009anddeterminedthatthedataweresufficientlyreliablefor
useinthisreport.
RelatedGAO
Products
PrescriptionDrugs:OverviewofApproachestoControlPrescription
DrugSpendinginFederalPrograms.GAO-09-819T.Washington,D.C.:
June24,2009.
DODPharmacyProgram:ContinuedEffortsNeededtoReduceGrowth
inSpendingatRetailPharmacies.GAO-08-327.Washington,D.C.:April4,
2008.
DODPharmacyBenefitsProgram:ReducedPharmacyCostsResulting
fromtheUniformFormularyandManufacturerRebates.GAO-08-172R.
MailOrderPharmacies:DODsUseofVAsMailPharmacyCould
ProduceSavingsandOtherBenefits.GAO-05-555.Washington,D.C.:June
22,2005.
DODandVAPharmacy:ProgressandRemainingChallengesinJointly
BuyingandMailingOutDrugs.GAO-01-588.Washington,D.C.:May25,
2001.
DODandVAHealthCare:JointlyBuyingandMailingOut
PharmaceuticalsCouldSaveMillionsofDollars.T-HEHS-00-121.
Foradditionalinformationaboutthisarea,contactRandallB.Williamson
AreaContact
at(202)512-7114orwilliamsonr@gao.gov.
HHSNeedsanOverallStrategytoBetter
IntegrateNationwidePublicHealth
InformationSystems
HHSNeedsanOverallStrategytoBetterIntegrate
NationwidePublicHealthInformationSystems
WhyGAOIsFocusing
onThisArea
PublichealthfunctionsintheUnitedStatessuchasdiseasesurveillance
andemergencydetectionandresponseareconductedbypublichealth
officialsfrom59stateandterritorialhealthdepartments;morethan3,000
localhealthdepartments;over180,000clinicallaboratories;andmultiple
federalagencies.Asthefederalpointofcontactforpublichealth
initiatives,theDepartmentofHealthandHumanServices(HHS)is
responsibleforcoordinatingnationwideeffortstodetectandrespondto
diseaseoutbreaksandotherpublichealthemergencies.Becauseofthe
manyparticipantsinvolved,theidentificationandmanagementofpublic
healthemergenciescallforeffectivecommunicationandcollaboration
acrossalllevelsofgovernmentandtheprivatesector.Inaddition,officials
atHHSandotherfederal,state,andlocalagenciesrecognizetheneedto
improvetheuseofinformationtechnologytocollect,analyze,andshare
datathatcanbeusedtoenhancenationwidepublichealthsituational
awarenessthatis,publicknowledgeofkeyhealth-relatedeventsandthe
availabilityofmedicalandemergencyresponseresources.
WhatGAOHasFound
toIndicate
orFragmentation
HHShastakenstepsoverthepastdecadetoimprovetheabilityofpublic
healthentitiestoelectronicallycollect,analyze,andshareinformationthat
supportsearlyeventdetectionandemergencyresponseoperations,but
thedepartmentsinitiativeshavebeenundertakenwithoutthestrategic
planningneededtocoordinateandintegratethepriorities,goals,and
objectivesofvariousrelatedinitiatives.HHSofficialshaveidentifiedat
least25informationtechnologysystemsthatarekeytothedepartments
effortstosupportpublichealthsituationalawareness.Infiscalyear2009,
reportedcostsfordevelopingandimplementingthesesystemswere
approximately$40million.Additionally,otherfederal,state,local,and
tribalpublichealthentitiesthroughoutthecountryhaveexpendedscarce
resourcestodevelopandimplementnumerousothersystemsfor
conductingpublichealthfunctionswithintheirownjurisdictions.
HHShasalsodefineddataandothertechnicalstandardsintendedto
betterenablepublichealthentitiesthroughoutthenationtodevelopand
implementinteroperablesystemsforcollecting,analyzing,andsharing
data.However,thedepartmenthasnotdevelopedandimplementedan
overallstrategythatdefinesgoals,objectives,andprioritiesandthat
integratesrelatedstrategiestoachievetheunifiedelectronicnationwide
situationalawarenesscapabilityrequiredbythePandemicandAll-Hazards
PreparednessAct.
1
Rather,HHSandthepublichealthcommunityhave
1
Pub.L.No.109-417(Dec.19,2006).
InformationSystems
developedandimplementedinformationsystemstoenhancepublichealth
situationalawarenessinanoftenstove-pipedfashion,focusingonspecific
publichealthfunctions.Therefore,publichealthentitiesarelimitedin
theirabilitytoelectronicallycollect,analyze,andshareinformation
neededtoenhancepublichealthsituationalawarenessandimprovethe
effectivenessoftheireffortstoprepareforandrespondtopublichealth
emergencies.
InDecember2006,thePandemicandAll-HazardsPreparednessAct
mandatedthattheSecretaryofHHS,incollaborationwithstate,local,and
tribalpublichealthentities,developandimplementastrategicplanforthe
establishmentofanelectronicnetworkofinteroperablesystemsto
enhancenationwidepublichealthsituationalawareness.GAOsDecember
2010reportonHHSseffortstoestablishanelectronicnetworkfor
enhancingnationwidesituationalawarenessofpublichealthemergencies
foundthattheSecretaryofHHShadnotdevelopedanddelivereda
strategicplanwithin180daysofthemandateasrequired(i.e.,byJune16,
2007).Withoutanoverallstrategicplanthatdefinesrequirementsfor
establishingandevaluatingthecapabilitiesofexistingandplanned
informationsystemsimplementedthroughoutthepublichealth
community,HHScannotbeassuredthatitsresourcesarebeingeffectively
usedtoprovideaunifiedelectronicnationwidepublichealthsituational
awarenesscapability.Further,absentmoreeffectiveplanning,HHSruns
theriskofexpendingadditionalfundsforcontinuedfragmentedefforts
withoutrealizingthemandatedgoal.
ActionsNeededand
OtherBenefits
GAOsDecember2010reportrecommendedthattheSecretaryofHHS
developandimplementastrategicplanthatdefinesgoals,objectives,and
prioritiesforestablishinganelectronicpublichealthsituationalawareness
network.Suchaplanshouldincludeperformancemeasuresforevaluating
capabilitiesofexistingandplannedinformationsystems.Additionally,the
strategicplanshouldintegraterelatedstrategiesandinformation
technologyinitiativeswithinHHSforsharinginformationamongfederal,
state,local,andtribalentities.Inrespondingtothereport,HHSstatedthat
acompletestrategyforhealthandpublichealthsituationalawarenesswill
bedevelopedandincorporatedintotheBiennialImplementationPlanfor
theNationalHealthSecurityStrategy,whichwillidentifyactionstobe
accomplishedinthenext2years.Thedepartmentaddedthatitintendsto
releasethisfirstbiennialplaninearly2011.AsdiscussedinGAOsreport,
developingastrategicplanthatintegratesthegoals,objectives,and
prioritiesofrelatedstrategieswillbeessentialtoestablishing
cohesivenessofHHSsrelatedinformationtechnologyinitiatives,therefore
InformationSystems
betterensuringthesuccessofthedepartmentseffortstosupportand
enhancenationwidepublichealthsituationalawareness.Towhatextent
futuresavingsmaybeexpectedfromthiseffortareunclear,butmore
effectiveplanninghasthepotentialtoensuremorecost-effectiveeffortsin
thefuture.
GAOexpectstocompleteadditionalworkinthefutureassessingHHSs
progresstowarddevelopingandimplementinganoverallstrategicplanfor
establishingandevaluatinganelectronicnetworkofsystemsthatmeets
theinformation-sharingrequirementsforenhancednationwidepublic
healthsituationalawarenessdefinedbylaw.
TheinformationcontainedinthisanalysisisbasedontheGAOproducts
Frameworkfor
listedbelow.
Analysis
RelatedGAO
Products
PublicHealthInformationTechnology:AdditionalStrategicPlanning
NeededtoGuideHHSsEffortstoEstablishElectronicSituational
AwarenessCapabilities.GAO-11-99.Washington,D.C.:December17,
2010.
Biosurveillance:EffortstoDevelopaNationalBiosurveillance
CapabilityNeedaNationalStrategyandaDesignatedLeader.
Biosurveillance:DevelopingaCollaborationStrategyIsEssentialto
FosteringInteragencyDataandResourceSharing.GAO-10-171.
HealthInformationTechnology:MoreDetailedPlansNeededforthe
CentersforDiseaseControlandPreventionsRedesignedBioSense
Program.GAO-09-100.Washington,D.C.:November20,2008.
InformationTechnology:FederalAgenciesFaceChallengesin
ImplementingInitiativestoImprovePublicHealthInfrastructure.
CombatingTerrorism:EvaluationofSelectedCharacteristicsin
NationalStrategiesRelatedtoTerrorism.GAO-04-408T.Washington,
InformationSystems
Bioterrorism:InformationTechnologyStrategyCouldStrengthen
FederalAgenciesAbilitiestoRespondtoPublicHealthEmergencies.
AreaContact
StrategicOversightMechanismsCouldHelp
IntegrateFragmentedInteragencyEffortsto
DefendagainstBiologicalThreats
StrategicOversightMechanismsCouldHelpIntegrate
FragmentedInteragencyEffortstoDefendagainst
BiologicalThreats
WhyGAOIsFocusing
onThisArea
Acatastrophicbiologicalevent,suchasaterroristattackwithaweaponof
massdestructionoranaturallyoccurringpandemic,couldcausemass
casualties,weakentheeconomy,damagepublicmorale,andthreaten
nationalsecurity.Biodefenseincludesmeasurestoprevent,detect,
respondto,andrecoverfromharmordamagecausedbymicroorganisms
orbiologicaltoxinstohumans,animals,orthefoodsupply.InJanuary
2010,thebipartisanCommissiononthePreventionofWeaponsofMass
DestructionProliferationandTerrorism(nowknownastheWMDCenter),
whichwasestablishedbytheImplementingRecommendationsofthe9/11
CommissionAct(Pub.L.No.110-53,1851),gavethenationafailing
gradeinitseffortstoenhancecapabilitiesforrapidresponsetoprevent
biologicalattacksfrominflictingmasscasualties.
WhatGAOHasFound
toIndicate
orFragmentation
AccordingtotheheadoftheWMDCenter,therearemorethantwodozen
presidentiallyappointedindividualswithsomeresponsibilityfor
biodefense.Inaddition,numerousfederalagencies,encompassingmuch
ofthefederalgovernment,havesomemissionresponsibilitiesfor
supportingbiodefenseactivities.However,thereisnoindividualorentity
withresponsibility,authority,andaccountabilityforoverseeingtheentire
biodefenseenterprise.
AccordingtoHomelandSecurityPresidentialDirective10,publishedin
April2004,successfulimplementationofthenationsbiodefense
enterpriserequiresoptimizingcriticalcross-cuttingfunctionssuchas
informationmanagementandcommunications,researchand
development,andacquisition.In2004,GAOreportedthatinteragencyand
intergovernmentalactivitiescanbenefitfromtheleadershipofasingle
entitywithsufficienttime,responsibility,authority,andresourcesneeded
toprovideassurancethatthefederalprogramsarewellcoordinated,and
thatgapsandduplicationincapabilitiesareavoided.GAOalsoreportedin
2001thatcomplexinteragencyandintergovernmentaleffortscanbenefit
fromdevelopinganationalstrategy.
Biodefenseisorganizedintofourpillarsthreatawareness,prevention
andprotection,surveillanceanddetection,andresponseandrecovery
andmultiplefederalagencieshavesomebiodefenseresponsibilitieswithin
them,asshowninthefigurebelow.Eachofthesepillarscomprise
numerousactivitiessuchascontrollingaccesstodangerousbiological
agentsusedinresearchthatgenerallyrequirecoordinationacross
federaldepartmentsaswellaswithstate,local,andinternational
governments,andtheprivatesector.Deterrenceofbioterrorismrests
upontheabilityofthenationtomitigatetheeffectsofanattack.
AccordingtotheWMDCentersJanuary2010report,PreventionofWMD
ProliferationandTerrorismReportCard,thereisnonationalplanto
coordinatefederal,state,andlocaleffortsfollowingabioterrorattack,and
theUnitedStateslacksthetechnicalandoperationalcapabilitiesrequired
foranadequateresponse.Thereportgoesontosaythatthesetechnical
andoperationalcapabilitiesareeachlinksinachain,criticaltothe
strengthoftheattackresponse,andthatweaknessinanycapabilityleads
toadiminishedresponse,anddiminishedeffectivenessindeterringan
attack.
PillarsofBiodefenseandExamplesofAssociatedFederalDepartments
Threat
awareness
Prevention
andprotection
Surveillance
anddetection
Response
andrecovery
Departmentof
HomelandSecurity
FederalBureau
ofInvestigation
DepartmentofDefense
IntelligenceCommunity
DepartmentofHealth
andHumanServices
DepartmentofHealth
andHumanServices
DepartmentofAgriculture
DepartmentofHealth
andHumanServices
DepartmentofDefense
DepartmentofHealth
andHumanServices
DepartmentoftheInterior
Departmentof
HomelandSecurity
Departmentof
HomelandSecurity
DepartmentofHealth
andHumanServices
DepartmentofDefense
Source:GAOanalysisofHomelandSecurityPresidentialDirective10.
GAOspastworkhashighlightedfragmentationinthesurveillanceand
detectionpillar,whichindicatestheneedforstrategicoversight
mechanismssuchasanationalstrategyandafocalpointacrossthe
entirebiodefenseenterprise.InJune2010,GAOreportedthatanactivityin
thesurveillanceanddetectionpillarknownasbiosurveillanceis
fragmentedandthatthedecisionmakersresponsiblefordevelopinga
nationalbiosurveillancecapabilityarespreadacrossmultipleagenciesand
departments,asitiswiththerestofthebiodefenseenterprise.Yet,
strategicoversightmechanisms,suchasafocalpointornationalstrategy,
hadnotbeenestablishedtocoordinateandleadeffortsacrossthemultiple
federaldepartmentswithbiosurveillanceresponsibilities.GAO
recommendedthattheHomelandSecurityCouncil,whichwasestablished
toserveasamechanismforensuringcoordinationoffederalhomeland
security-relatedactivitiesanddevelopmentofhomelandsecuritypolicies,
shoulddirecttheNationalSecurityStafftoestablishafocalpointand
chargethisfocalpointwiththeresponsibilityfordevelopinganational
biosurveillancestrategy.TheNationalSecurityStaffdidnotcommenton
theserecommendations.
Whilesomehigh-levelbiodefensestrategieshavebeendeveloped,thereis
nobroad,integratednationalstrategythatencompassesallstakeholders
withbiodefenseresponsibilitiesthatcanbeusedtoguidethesystematic
identificationofrisk,assessmentofresourcesneededtoaddressthose
risks,andtheprioritizationandallocationofinvestmentacrosstheentire
biodefenseenterprise.Further,neithertheOfficeofManagementand
Budgetnorthefederalagenciesaccountforbiodefensespendingacross
theentirefederalgovernment.Asaresult,thefederalgovernmentdoes
notknowhowmuchisbeingspentonthiscriticalnationalsecurity
priority.However,aprivatesectoranalysisofthefiscalyear2011federal
budgetforcivilianbiodefenseestimatesthattheU.S.biodefenseeffortwill
total$6.48billionacross8ofthemorethan12federalagencieswith
biodefenseresponsibilities.GAOsworknotedthathavingastrategyin
placetoguidedevelopmentofanationalbiosurveillancecapabilitycould
potentiallyhelpagenciesaddresschallengesthatarecomplex,inherentto
buildingcapabilitiesthatcrossmissionareasandagencies,andnoteasily
resolvedchallengesthatarealsopresentinthelargerbiodefense
enterprise.Anationalstrategycoulddefinethescopeoftheproblemsto
beaddressed,andinturncouldleadtospecificobjectivesandactivities
fortacklingthoseproblems,betterallocationandmanagementof
resources,clarificationofrolesandresponsibilities,and,finally,to
integrationofabiodefensestrategywithotherrelatedpreparednessand
responsestrategies.Inaddition,becauseresponsibilitiesandresourcesare
dispersedacrossanumberoffederalagencies,thenationsbiodefense
enterprisecouldbenefitfromdesignatedleadershipafocalpointthat
providesleadershipfortheinteragencycommunity.
ActionsNeededand
OtherBenefits
Becausenoneofthedepartmentshasauthorityovertheentirebiodefense
enterprise,theHomelandSecurityCouncilshouldconsiderestablishinga
focalpointtocoordinatefederalbiodefenseactivities,including
biosurveillance,consistentwithGAOspreviousrecommendationforthe
Counciltoestablishafocalpointforbiosurveillance.Theoverarching
biodefenseenterprisewouldbenefitfromstrategicoversightmechanisms,
includingafocalpointsuchasanationalbiodefensecoordinatoranda
nationalstrategy,toensureefficient,effective,andaccountableresults.
Reducedfragmentationinthebiodefenseenterprisecouldenhance
assurancethatthenationispreparedtoprevent,detect,andrespondto
biologicalattackswithpotentiallydevastatingconsequencesintermsof
lossoflife,economicdamage,anddecreasednationalsecurity.
Frameworkfor
productslistedbelow.GAOalsohasworkunderwayonthreatandrisk
Analysis assessmentsandcountermeasuredevelopment,whichfocusesonissues
ofintegrationandcoordinationacrossmultipleagenciesandexpectsto
reportonitsresultsinspring2011.
RelatedGAO
Products
Biosurveillance:EffortstoDevelopaNationalBiosurveillance
CapabilityNeedaNationalStrategyandDesignatedLeader.
CombatingTerrorism:EvaluationofSelectedCharacteristicsin
NationalStrategiesRelatedtoTerrorism.GAO-04-408T.Washington,
CombatingTerrorism:SelectedChallengesandRecommendations.
GAO-01-822.WashingtonD.C.:September20,2001.
Foradditionalinformationaboutthisarea,contactWilliamO.Jenkinsat
AreaContact
(202)512-8777orjenkinswo@gao.gov.
DHSOversightCouldHelpEliminate
PotentialDuplicatingEffortsofInteragency
ForumsinSecuringtheNorthernBorder
DHSOversightCouldHelpEliminatePotential
DuplicatingEffortsofInteragencyForumsinSecuring
theNorthernBorder
WhyGAOIsFocusing
onThisArea
TheDepartmentofHomelandSecurity(DHS)hasprimaryresponsibility
forsecuringthenearly4,000milesthatcomprisetheU.S.-Canadianborder
fromWashingtonstatetoMaine.DHScomponents,incollaborationwith
otherfederal,state,local,tribal,andCanadianlawenforcementpartners,
areresponsibleforsecuringthisborder,whichinvolvescoordinationand
theleveragingofscarceresourcesthroughinteragencyforums.In
December2010,GAOreportedonoverlapandpotentialduplicationamong
twooftheseforumstheIntegratedBorderEnforcementTeam(IBET)
andtheBorderEnforcementSecurityTaskForce(BEST).Theseforum
membersmeettoshareinformationoncoordinationofcross-borderlaw
enforcementefforts,amongotheractivities,toenhancebi-nationalborder
security.IBETmembersfocusonnationalsecurity,organizedcrime,and
othercriminalactivitybetweenportsofentry;BESTmembersworkto
identify,disrupt,anddismantleorganizationsseekingtoexploitborder
vulnerabilities.DHScomponents,suchasU.S.CustomsandBorder
Protection,U.S.ImmigrationandCustomsEnforcement,andtheU.S.
CoastGuard,alongwithCanadianlawenforcementpartnersparticipatein
24IBETs(whicharepartof15regionsacrossthenorthernborder)and3
BESTs(ledbyImmigrationandCustomsEnforcement)thathavebeen
establishedacrossthenorthernborder.
WhatGAOHasFound
toIndicate
orFragmentation
InDecember2010,GAOreportedonnorthernborderinteragency
coordinationandhighlightedconcernsaboutmissionoverlapand
potentialduplicationofeffortbetweentheBESTandIBETinteragency
forums.Forexample,ofthe13partnersGAOinterviewedthatoperate
withintwojurisdictionswheretwoBESTandfourIBETinteragency
forumsarelocated,morethanhalfofthesepartnerscitedconcernsabout
missionoverlapbetweenthesetwoforumsthatcouldresultinduplication
ofeffort.Specifically,thesepartnersexpressedconcernthatsomeBEST
activitiestoinvestigateandinterdictcross-borderillegalactivity
duplicatedIBETeffortstoconductthesameactivitiesbecause,among
otherfactors,smugglingringsandothercriminalorganizationsdonot
limittheiractivitiesbygeographicarea.
OverlapandpotentialduplicationofeffortbetweentheBESTandIBET
mayalsoexistwhentheseinteragencyforumsareestablishedinthesame
location,ashasbeendoneinatleasttwojurisdictionswhereBESTand
IBETforumsarelocated.DHSofficialsstatedthatdecisionstoestablish
interagencyforumsaremade,inpart,byDHScomponentsparticipatingin
theforumsbasedontheirworkrequirements.Specifically,the
ImmigrationandCustomsEnforcementheadquartersprogrammanager
statedthattheagencysponsoredtheestablishmentofBESTinteragency
forumsalongthenorthernborderbecauseoftheneedforadditional
ImmigrationandCustomsEnforcementinvestigativeresources,andthat
thelocationswereidentifiedonthebasisoftheagencysinvestigative
workloadrequirements,butthatanalysesofwhethertheexistingIBETs
establishedintheseareascouldbeusedfortheseinvestigativepurposes
werenotafactor.
Moreover,inanApril2007report,theDHSInspectorGeneralreported
thatitwasnotclearhowaBESTwouldoperatedifferentlyfromIBETs
andthatcareshouldbetakentoavoidduplicationofeffortswithIBETson
thenorthernborder.In2009,IBETmembersconvenedaninteragency
workinggrouptostudytheinteractionbetweentheIBETandBEST.
1
This
groupraisedconcernsaboutmissionoverlapandduplicationofeffort
betweenthetwointeragencyforumsandidentifiedtheneedforavision
thatclearlydefinesIBET-BESTrolesandresponsibilities,aswellthe
frameworkfortheirroutineinteractionandcollaboration.Accordingto
DHSofficials,inNovember2010,DHS,theDepartmentofJustice,and
Canadianofficialsestablishedanotherworkinggrouptoevaluatebest
practicesofexistinginteragencyforums,includingtheIBETandBEST,to
improveU.S.-Canadianborderenforcementefforts.
2
However,asof
December2010itistoosoontotellwhetherthiseffortwilladdressthe
recommendationmadebythepreviousworkinggroup.
InDecember2010,GAOreportedthatDHSdoesnotprovideguidanceor
oversighttoitscomponentstoestablishorassesstheresultsof
interagencyforumsacrossnorthernborderlocations.GAOhaspreviously
reportedthatfederalagenciescanenhanceandsustaintheircollaborative
effortsby,inpart,developingmechanismstomonitortheirresults.DHS
officialsstatedthatDHSisdevelopingprocessestoprovidedepartment-
leveloversightofthoseforums;however,DHShasnotprovided
documentationtosupportitsplans,andthusthescopeandthetime
framesforfinalizingthiseffortareunclear.Completingsuchguidanceand
1
EightagencieswererepresentedontheIBET/BESTworkinggroup,includingCanadas
RoyalCanadianMountedPoliceandtheCanadaBorderServicesAgencyandU.S.agencies
includingCustomsandBorderProtection,ImmigrationandCustomsEnforcement,the
CoastGuard,andtheDepartmentofJustice.Thefindingsofthisworkinggroupwere
publishedinafinalreport.DHS,IBET/BESTInteractionFinalReport(Washington,D.C.,
April2009).
2
Thisworkinggroupconsistsoftherepresentativesfromthesameagenciesthatservedon
the2009interagencyworkinggroup,whichincludeDHS,DepartmentofJustice,and
Canadianlawenforcementagencies,accordingtoDHSofficials.
processesforoversightcouldbetterpositionDHStoidentifyareasof
duplicationanddetermineifexistingforumscouldbemodifiedor
consolidatedtoleverageitsresourcesmoreefficientlyinconducting
bordersecurityoperations.
DHSintendstooutlineavisionforinteragencycoordinationwithan
emphasisonpartnerships,includingtheCanadiangovernment,throughits
northernborderstrategyscheduledtobeissuedincalendaryear2011.
3
In
addition,inNovember2010,theSecretaryofHomelandSecuritydirected
DHScomponentstodevelopanewapproachtobetterintegratenorthern
borderenforcementefforts.UntilDHSclearlydefinesIBET-BESTroles
andresponsibilities,alignsitsresources,andensuresaccountability
throughoversight,DHSriskshinderingcollaborativerelationshipswithits
partnersandlacksreasonableassurancethatresourcesaredeployed
efficientlyandeffectivelytosecurethenorthernborder.
DHSisalsoworkingtoestablishamechanismtoidentifyandreportonthe
benefitsachievedthroughitsparticipationintheIBET-BESTinteragency
forums,buthasnotmaintainedcomprehensivedataonthecostsofthese
forumstohelpitascertainwhetherthebenefitsobtainedoutweighthe
costs.Forexample,ImmigrationandCustomsEnforcementofficials
maintainedinformationonthatagencysparticipationintwoofthree
northernborderBESTlocationsandestimateditscostsforIBET
locations.
4
However,DHScouldnotprovideinformationonthecosts
incurredbyotherfederal,state,local,tribal,andinternationalagencies
thatparticipateinBESTorIBET.Theinteragencygroupstudyingthese
forumsraisedconcernsaboutlawenforcementagenciesgatheringthe
resourcesnecessarytoparticipateintheincreasingnumberofthese
forums.Byleadingeffortstodevelopaframeworkforidentifyingbothits
3
AccordingtoDHSofficials,inadditiontoemphasizingtheimportanceofitspartners,this
strategyistoguideeffortstodeterandpreventillicitsmugglingandtraffickingalongthe
northernborder.
4
Specifically,in2010,ImmigrationandCustomsEnforcementscostsrangedfrom
approximately$1.5millionto$6.3millionperBESTlocationandfromalmost$480,000to
about$2millionperIBETlocation(dedicatedpersonnel,facilities,andequipment).Since
IBETpositionsarecreatedoutoftheresponsibleImmigrationandCustomsEnforcement
officesbasefunding,allcostsassociatedwiththeseprogramsareestimatedsinceeach
responsibleImmigrationandCustomsEnforcementofficehastoshiftresourcesfromone
programtoanother.CustomsandBorderProtectiondoesnottrackitscostsof
participatingineitherforum,butaCustomsandBorderProtectionofficialresponsiblefor
patrollingtheborderestimatedthatitsfiscalyear2010costaveraged$100,000forone
BESTlocationand$182,000forIBET.
anditspartnerscostsforparticipatingineachforum,DHSwouldbe
betterpositionedtoevaluatetheneedforandsuccessofbothforums.
ActionsNeededand
OtherBenefits
OngoingDHSoversightoftheinteragencyforumscouldhelpprevent
duplicationofefforts.DHSheadquartersofficialsreportthatpolicies
governingDHScoordinationeffortsareunderdevelopmentandthat
ImmigrationandCustomsEnforcementandCustomsandBorder
Protectionhavedeployedpersonneltokeynorthernborderlocationsto
improvecollaborationandfacilitatetimelyinformationsharing.However,
DHSdoesnotcurrentlyprovideguidanceoroversighttoitscomponents
toestablishorassesstheresultsofinteragencyforumswhichinclude
bothIBETandBESTinteragencyforumsacrossnorthernborder
locationstohelpensurethatforumsestablishedinthesamelocationsdo
notduplicateactivities.Accordingly,GAOrecommendedinDecember
2010thatDHSprovideguidanceandoversightforinteragencyforumsto
helppreventduplicationofeffortandhelpefficientlyutilizepersonnel
resourcestostrengthenDHSscoordinationeffortsalongthenorthern
border.Byimplementingthisrecommendation,DHScouldhelpprevent
duplicationandidentifywhetherexistingforumscanbemodifiedor
consolidatedtobetterleveragescarceresourcesandmoreefficiently
conductbordersecurityoperations.Moreover,asDHSestablishesa
mechanismfordeterminingthebenefitsofparticipatingintheIBETand
BESTinteragencyforums,DHScouldleadeffortstodevelopaframework
foridentifyingthecostsincurredbyallpartnersparticipatingineach
forum.DoingsocouldhelpDHSevaluatethesuccessoftheseforumsand
theneedforboththeIBETsandBESTs.
Frameworkfor
Analysis
TheinformationcontainedinthisanalysiswasbasedonGAOsDecember
2010reportaswellasselectedupdatesobtainedfromSeptember2010
throughFebruary2011,includingcostdatarelatedtoImmigrationand
CustomsEnforcementandCustomsandBorderProtectionsparticipation
inIBETandBESTforfiscalyear2010.GAOinterviewedrelevantagency
officialsresponsibleforoverseeingtheaccuracyofthesedataand
determinedtheyweresufficientlyreliableforpurposesofthisreport.
BorderSecurity:EnhancedDHSOversightandAssessmentof
RelatedGAO
InteragencyCoordinationIsNeedfortheNorthernBorder.GAO-11-97.
Products Washington,D.C.:December17,2010.
BorderSecurity:AdditionalActionsNeededtoBetterEnsurea
CoordinatedFederalResponsetoIllegalActivityonFederalLands.
GAO-11-177.Washington,D.C.:November18,2010.
Foradditionalinformationaboutthisarea,contactRichardM.Stanaat
AreaContact
(202)512-8777orstanar@gao.gov.
TheDepartmentofJusticePlansActionsto
ReduceOverlapinExplosivesInvestigations,
butMonitoringIsNeededtoEnsure
SuccessfulImplementation

TheDepartmentofJusticePlansActionstoReduce
OverlapinExplosivesInvestigations,butMonitoringIs
NeededtoEnsureSuccessfulImplementation
WhyGAOIsFocusing
onThisArea
Infiscalyear2009,theBureauofAlcohol,Tobacco,Firearmsand
Explosives(ATF)andtheFederalBureauofInvestigation(FBI),both
componentsoftheDepartmentofJustice(Justice),initiatedover1,600
casesinvolvingexplosivesincidentssuchasactualorattemptedbombings
withimprovisedexplosivedevices.Since2004,Justicehastakenactions
intendedtoaddressduplicationandoverlapintheareasofexplosives
investigationsjurisdiction,training,informationsharinganduseof
databases,andlaboratoryforensicanalysis.However,a2009reportfrom
JusticesInspectorGeneralfoundtherehasbeenlittleprogresssince2004
inaddressingoverlapandduplication.InresponsetotheInspector
Generalsreport,inAugust2010,theActingDeputyAttorneyGeneral
issuedaprotocolforassigningleadagencyjurisdictioninexplosives
investigations.Thememorandumaccompanyingtheprotocoldirectedthe
ATFandFBItotakeactionstoconductassessmentsofitsexplosives
operationsandmakerecommendationsbyNovember1,2010,for
consolidatingandeliminatingredundancies,whereappropriate.
WhatGAOHasFound
toIndicate
orFragmentation
GAOhasreviewedactionsplannedbyJusticetoreduceoverlapand
duplicationandimproveexplosivesinvestigationcoordinationbetween
theATFandFBI.GAOfoundthattheactionsJusticeisproposingshould
addressmostoftheseissues,butadditionalmonitoringbyCongressand
agencypersonnelcouldhelpensurethatplanstoaddresstheselong-
standingchallengesarefullyimplementedandsuccessfulsinceJusticedid
notfollowthroughonpasteffortstoachievethesesameobjectives.GAO
hasreportedthatfederalagenciescanenhanceandsustaintheir
collaborativeeffortsbycreatingthemeanstomonitorandevaluatetheir
effortstoidentifyareasforimprovement.InhisAugust2010memorandum
directedtoATFandFBI,theDeputyAttorneyGeneralhighlightedfour
areasofexplosivesinvestigationswhereduplicationandredundantefforts
neededtobeaddressed:jurisdiction,explosivestraining,shared
explosivesdatabases,andlaboratories.
Jurisdiction.TheDeputyAttorneyGeneralnotedthatdefininglead
agencyjurisdictionoverexplosivesinvestigationshasbeenapersistent
problemforJustice;ledtoconfusionamongfederal,state,andlocallaw
enforcement;andresultedinduplicationofeffortbetweenATFandFBI.
GAOsongoingworkonlawenforcementcoordinationfoundthatdisputes
haveoccurredoverthepast5yearsbetweentheagenciesregarding
jurisdictionofexplosivesinvestigationsandthereispotentialoverlap.For
example,JusticehaddesignatedFBIastheleadagencyforincidents
relatedtodomesticterrorismbuthadnotdefinedtheterm,soATFand
FBIhavehaddisputesaboutwhenanincidentwouldberelatedto
terrorism,and,therefore,underFBIsjurisdiction.A2009Inspector
Generalreportfoundthat,despiteJusticesattemptstocoordinate
explosivesinvestigationsandactivities,thecomponentshavedeveloped
separateandconflictingapproachestotheseinvestigations.TheAugust
2010directiveattemptedtoresolvethedisputeregardingjurisdictionby
citingadefinitionforbothInternationalTerrorismandDomestic
Terrorism,andoutliningfactorsassociatedwithanexplosiveincident
thatindicateapresumptivenexustoterrorism.Thedirectivealsointended
toclarifyrolesandresponsibilitiesinallotherexplosivesjurisdiction
matters.However,itistoosoontoknowtowhatextentthedirectivewill
resolvethedispute.
Explosivestraining.ATFandFBIcontinuetoseparatelyoperatetheir
ownexplosives-trainingfacilitiesandprograms,bothofwhicharelocated
attheRedstoneArsenalinHuntsville,Alabama,resultinginpotential
duplication.
1
Regardingfacilities,forexample,theFBIsHazardous
DevicesSchooltrainsandcertifiesfederal,state,andlocalbomb
techniciansandbombsquads.Similarly,ATFsNationalCenterfor
ExplosivesTrainingandResearchoffersexplosivescoursestoATFand
stateandlocallawenforcementpersonnel.Regardingprograms,both
componentsofferpost-blastexplosivestraining.
2
AccordingtoATFand
FBIdata,thecostofthetrainingfacilitiesinfiscalyear2010totaled$11.0
millionand$7.5million,respectively.
3
InAugust2010,theDeputyAttorney
Generaldirectedthecomponentstoprovideajointplantoconsolidate
trainingprogramswithrecommendationsforconsolidatingand
eliminatingredundancies.Justiceofficialssaidthecomponentssubmitted
aplaninNovember2010thatproposedconsolidatingpost-blasttraining
programsandcurriculabeginninginthespringof2011,whichis
consistentwiththeDeputyAttorneyGeneralsdirective.Justiceofficials
alsostatedthatbothcomponentsconcludedtheyshouldcontinueto
operateseparateexplosives-trainingfacilitiesbecauseofthehighdemand
andwaitlistsforexplosivescoursesofferedateachfacility.Bycontinually
monitoringtheneedtosupportbothfacilities,Justicesabilityto
determinethatitsresourcesarebeingusedeffectivelycouldbe
strengthened.
1
FBIalsooperatestheSecureTrainingFacilityandVehicle-BorneImprovisedExplosives
DeviceTrainingFacilityaspartoftheHazardousDevicesSchoolinAlabama.
2
Post-blastexplosivestrainingteachesmethodsandprocessesforinvestigatingexplosives
scenes.
3
$7.4millionofATFscostwereforconstruction.
Sharedexplosivesdatabase.In2009,JusticesInspectorGeneralreported
thatATFandFBIhavenoteffectivelyconsolidatedandmaintainedone
distinctexplosivesincidentreportingdatabase,asdirectedbytheAttorney
General.Also,theInspectorGeneralfoundthatalthoughFBIhad
discontinueduseofitsdatabasethatcompilesinformationonexplosives
incidentsandtransferreditshistoricaldataintoATFsBombandArson
TrackingSystem,
4
FBIhadnotsubsequentlyinputanyadditionalexplosives
incidentinformation.Inaddition,ATFhadnotconsistentlyreportedallits
explosivesincidentstotheBombandArsonTrackingSystem.Taken
together,theseomissionsunderminedthecomponentsabilitytoaccurately
determinetrendsinexplosivesincidents.InresponsetotheAugust2010
protocol,accordingtoJusticeofficials,thecomponentshavedevelopedand
plantoimplementinformation-sharingproceduresinearly2011toensure
thatFBIbombtechniciansandstateandlocalbombsquadshaveaccessto
andreportexplosivesincidentstothereportingsystem.Bymonitoring
implementationofthisplan,Justicewouldbebetterpositionedtoobtain
feedbackforimprovingbothpolicyandoperationaleffectiveness.
Explosiveslaboratories.BothATFandFBIhavelaboratoriesthatperform
forensicanalysisofexplosivesevidence.Specifically,ATFoperates
laboratoriesinMaryland,Georgia,andCalifornia,whileFBIusesits
Virginialaboratoryforforensicanalysis.Forfiscalyear2010,ATFreported
thecosttooperateitsthreelaboratorieswas$11.2million,
5
andFBI
reportedthecosttoconductanalysisatitslaboratorywas$6.6million.
6
In
2004,theAttorneyGeneralrequiredJusticetoestablishaLabBoardto
examineitsavailablelaboratoryresourcesandworkloads,analyze
demands,andmakerecommendationstotheDeputyAttorneyGeneralon
themostproductiveallocationofresources.WhileJusticeestablishedthe
LabBoard,itsInspectorGeneralfoundnorecordofareportor
recommendations.InAugust2010,theDeputyAttorneyGeneraldirected
theLabBoardtoreconvenetodeveloprecommendationsbyNovember1,
2010,forfurtherintegrationofJusticeslaboratorycapabilities,among
otherthings.AccordingtoJusticeofficials,thecomponentssubmitteda
4
TheBombandArsonTrackingSystemisintendedtobeJusticessinglesourcefor
reportingandsharingexplosivesincidentinformation.
5
AccordingtoATF,thelaboratorycostsincludeexplosives,arson,andfirearmsforensic
analysis.
6
AccordingtoFBI,thecostsforexplosivesforensicanalysisdoesnotincludeLaboratory
Divisionemployeeswhoperformforensicanalysisonimprovised-explosive-device-related
submissions.
progressreportinNovember2010thatoutlinesareastheybelievedcould
produceoperationalefficienciesandbettercoordination.Theseareas
includetheadoptionofacommonlaboratoryinformationmanagement
systemandcoordinatedtrainingoflaboratorypersonnel.Bycontinually
monitoringtheseactions,Justicesabilitytoensurethatthecomponents
followthroughontheseareastobettercoordinateandintegrate
laboratoryresourcescouldbeenhanced.
ActionsNeededand
OtherBenefits
Continuallymonitoringtheseeffortscanhelpkeydecisionmakerswithin
theagencies,aswellasclientsandstakeholders,obtainfeedbackfor
improvingpolicyandoperationaleffectiveness.Justice,ATF,andFBI
officialshaveplannedorbegunactionstoreduceduplicationandoverlap,
andachieveefficiencies,whichJusticeofficialsstatedareresponsiveto
theDeputyAttorneyGeneralsdirectives.Theseactionsrepresentpositive
stepsthat,ifimplementedeffectively,shouldleadtomoreefficient
approachestoexplosivesinvestigationsandrelatedactivitiessuchas
training,informationsharing,andforensicanalysis.However,giventhat
thecomponentsdidnotfullyfollowthroughonpasteffortstoachieve
thesesameobjectives,bycontinuallymonitoringthecomponentsactions,
CongressandJusticewouldbebetterpositionedtoensurethattheplans
havetheirintendedeffectandareenforced.
Frameworkfor
Analysis
TheinformationcontainedinthisanalysisisbasedonGAOsongoing
workfortheChairmanoftheHouseJudiciaryCommitteeonlaw
enforcementcoordinationandrecentInspectorGeneralreportsand
internaleffortsatJusticetoaddresstheInspectorGenerals
recommendationstoimproveexplosives-relatedcoordinationbetween
ATFandFBI.GAOinterviewedrepresentativesfromtheDeputyAttorney
GeneralsOffice,FBI,andATFtodiscussactionsplannedorunderwayto
remedyduplicationandoverlapinexplosives-relatedoperations.GAOalso
obtainedandanalyzedfiscalyear2010costdatafromthecomponents,and
assessedthedatasources.GAOfoundthecomponentscostdatareliable
forthepurposesofthisreport.
NoGAOproductsrelatedtothisissuehavepreviouslybeenpublished.
RelatedGAOProduct
Foradditionalinformationaboutthisarea,contactEileenR.Larenceat
AreaContact
(202)512-8777orlarencee@gao.gov.
TransportationSecurityAdministrations
SecurityAssessmentsonCommercial
TruckingCompaniesOverlapwithThoseof
AnotherAgency,butEffortsAreUnderWay
toAddressOverlap
TransportationSecurityAdministrationsSecurity
AssessmentsonCommercialTruckingCompanies
OverlapwithThoseofAnotherAgency,butEffortsAre
UnderWaytoAddressOverlap
WhyGAOIsFocusing
onThisArea
TerroristattacksontransportationsystemsinMoscowandMumbai
causedsignificantlossoflifeandhighlightedthevulnerabilityofsurface
transportationsystemstoterroristattacks.TheTransportationSecurity
Administration(TSA),withintheDepartmentofHomelandSecurity
(DHS),istheprimaryfederalagencyresponsibleforsecuringthenations
transportationsystem.GAOhaspreviouslyreportedthatTSAhastaken
actionstoimprovetransportationsecurity,butadditionalactionscould
enhanceitsefforts,suchasconsistentlycoordinatingsecurity
assessments.GAOmaderecommendationstoimproveTSAscoordination
withstakeholders,includingotherDHSentitiesandfederalagencies.
Likewise,theAdministrationsSurfaceTransportationSecurityPriority
Assessmenthighlightedtheneedforfederalentitiestocoordinatetheir
securityassessmentactivitiesgiventhatTSAssecurityassessment
responsibilitiesoverlapwiththoseofotherfederalagencies,suchasthe
DepartmentofTransportation(DOT).Thereportrecommended,among
otherthings,anintegratedfederalapproachforconductingsecurity
assessmentstoproducemorethoroughrisk-basedevaluations.
WhatGAOHasFound
toIndicate
orFragmentation
GAOhasfoundthatTSAandDOTdonothaveaprocessinplacetoshare
informationontheresultsoftheirsecurityprograms,andstakeholdersin
thecommercialtruckingindustryhaveexpressedconcernsaboutalackof
coordinationbetweenthetwoagencies.Specifically,TSAssecurity
assessmentsforhazardousmaterialtruckingcompaniesoverlappedwith
effortsconductedbyDOTsFederalMotorCarrierSafetyAdministration
(FMCSA),andasaresult,governmentresourceswerenotbeingused
effectively.AfterGAOdiscussedthisoverlapwithTSAinJanuary2011,
TSAofficialsstatedthat,movingforward,theyintendtoonlyconduct
reviewsontruckingcompaniesthatarenotcoveredbyFMCSAsprogram,
which,ifimplementedasintended,GAOprojectscouldsavemorethan$1
millionoverthenext5years.However,itwillbeimportantforTSAand
FMCSAtocontinueeffortstoimprovedatasharingandcoordinationto
helppreventfutureoverlapinsecurityreviews,aswellascontinueefforts
towardthelong-termgoalofTSAassumingfullregulatoryresponsibility
fromFMCSAforcommercialtruckingsecurity,therebyreducing
fragmentation.
InFebruary2009,GAOreportedthatTSAandFMCSAhavesimilar
securityreviewprogramsforhazardousmaterialtruckingcompanies.TSA
conductscorporatesecurityreviews(TSAreview)voluntaryin-person
toAddressOverlap
reviewsofatruckingcompanyssecuritypracticesandplans.
1
FMCSA,
whichhasprimaryresponsibilityforcommercialtruckingsafety,conducts
securitycontactreviews(FMCSAreview)mandatoryin-personreviews
thatenforcethePipelineandHazardousMaterialsSafetyAdministrations
regulationsonhazardousmaterialtruckingcompaniessecurityplans.In
2010,GAOcontinuedtoidentifyconsiderableoverlapbetweenTSAsand
FMCSAssecurityreviews.Forexample,nearlyhalf(43percent)ofthe95
questionsinaTSAreviewwereeithersomewhatsimilarorsubstantially
orentirelysimilartooneormoreofthequestionsinanFMCSAreview,
andalmostall(92percent)ofthe48questionsthatcompriseanFMCSA
reviewwereeithersomewhatsimilarorsubstantiallyorentirely
similartooneormoreofthequestionsinaTSAreview.
2
Inaddition,
officialsfrombothagenciesagreedthattherearesimilaritiesbetweenthe
tworeviews.Furthermore,71ofthe200TSAreviewsperformedfrom
fiscalyears2006through2010byTSAstaffonhazardousmaterialtrucking
companieswereconductedoncompaniesthathadreceivedanFMCSA
reviewduringthesameperiod;ofthese,31wereconductedlessthan2
yearsaftertheFMCSAreview.
3
TheImplementingRecommendationsof
the9/11CommissionActof2007requiresthatDOTconsultwithDHSto
limit,totheextentpracticable,duplicativereviewsofhazardousmaterial
securityplans.
4
InFebruary2009,GAOrecommendedthatTSAestablishaprocessto
strengthencoordinationwiththecommercialvehicleindustry,including
ensuringthattherolesandresponsibilitiesofindustryandgovernmentare
fullydefinedandclearlycommunicated.DHSconcurredwiththis
recommendationandhastakenstepstoaddressit.However,inAugust
andSeptember2010,officialsfromthreeindustryassociationsGAO
interviewedcontinuedtoexpressconcernsaboutoverlapbetweenTSAs
1
TSAalsoconductscorporatesecurityreviewsonnonhazardousmaterialtrucking
companies,aswellasentitiesinothertransportationmodes.GAOexcludedtheseother
reviewsfromitsanalysis.
2
Forthepurposesofthisanalysis,thetermsubstantiallyorentirelysimilarrefersto
questionsforwhichatruckingcompanywouldlikelyprovidethesameormostlythesame
information.Thetermsomewhatsimilarreferstoquestionsforwhichatrucking
companywouldlikelyprovidesomeofthesameinformation,butwouldlikelyalsoprovide
additionalordifferentinformationforoneofthequestions.
3
TSAreviewswerealsoconductedbystateinspectorsinfivestates,primarilyMissouri.
However,TSAwasunabletoprovidecomprehensivedataforthesereviews,andasaresult
GAOexcludedthemfromitsanalysis.
4
Pub.L.No.110-53,1555,121Stat.266,475(2007)(codifiedat6U.S.C.1205).
toAddressOverlap
andFMCSAssecurityreviewsandalackofcoordinationbetweenthetwo
agencies.Moreover,inJuly2010,theOfficeofManagementandBudget
advisedTSAtoworkwithDOTtoimplementanintegratedfederal
approachforsecurityassessmentsandtakeadvantageofexisting
informationtoavoidredundancy.
ActionsNeededand
OtherBenefits
Bytakingactiontoreduceoreliminateoverlapinhazardousmaterial
securityreviewsandimprovedatasharingandcoordination,TSAand
FMCSAcouldusetheirresourcesmoreeffectivelyandimprovethe
relationshipbetweenthefederalgovernmentandindustrystakeholders.
TSAandFMCSAofficialshavestatedthatTSAslong-termplanisto
developsecurityregulationsforhazardousmaterialtruckingcompaniesto
replacetheexistingsecurityregulationsFMCSAenforces,whichthey
believewouldaddresstheoverlapbetweenthetwoagenciessecurity
reviews.TheseofficialsaddedthatonceTSAdevelopsregulations,the
agenciesplantoworktogethertoeliminateFMCSAssecurity-related
regulatoryresponsibilitiessothatitcanfocussolelyonsafetyissueswhile
TSAfocusesonsecurityissues.However,TSAisintheearlystagesofthe
rulemakingprocess,whichTSAofficialsbelievemaytakeupto3years.
UntiltherulemakingiscompletedandTSAisabletoassumefull
responsibilityforcommercialtruckingsecurity,itwillbeimportantfor
TSAandFMCSAtocontinueeffortstodelineatetheirrespectivesecurity
rolesandreducefragmentation.
UntilTSAissuessecurityregulationstoreplacetheexistingregulations
enforcedbyFMCSA,GAOhasidentifiedtwopotentialoptionsfor
improvingdatasharingandcoordinationtoaddresstheoverlapofTSAs
andFMCSAssecurityreviewsintheshortterm;inaddition,TSAproposed
athirdoptionthatGAObelieves,ifimplementedasintended,shouldalso
addressexistingoverlapintheshortterm:
(1) Improveinteragencycoordinationbysharingeachothersschedules
forconductingfuturesecurityreviews,andavoidschedulingreviews
onhazardousmaterialtruckingcompaniesthathaverecently
received,orarescheduledtoreceive,areviewfromtheotheragency.
TSAandFMCSAconsideredthisoptionworthyofpursuit,andin
October2010theysignedaninteragencyagreementtocoordinate
witheachotherwhenschedulingtheirrespectivesecurityreviews.
Theagreementisintendedtoeliminateduplicatevisitstothesame
truckingcompanythatoccurwithin2yearsofeachother.However,
itistooearlytoassesstheresultsfromthiseffort.
toAddressOverlap
(2) EnableTSAtoaccessthefullresultsofpastFMCSAreviewsthrough
anexistingDOTWebportal.ThisincreasedaccesscouldenableTSA
toleveragesecurityinformationonthethousandsofhazardous
materialtruckingcompaniesthathavereceivedFMCSAreviews
withouthavingtoconductaTSAreviewonthem,therebyefficiently
increasingtheagencysknowledgeofindustrysecurity.TSAhas
spent$400,000sinceFebruary2010toaccesstheWebportal,and
accordingtoFMCSA,TSAalreadyhasaccesstodataonFMCSA
reviewsthroughtheportal.However,althoughtheportaldoes
includesomedatarelatedtoFMCSAreviews(suchasthedatesand
recipientsofpastreviews),itdoesnotcontainthefullresultsofthese
reviews,whichTSAofficialsagreedwouldbebeneficial.DOT
officialswhoadministertheportalstatedthataddingthisinformation
totheportalandgrantingTSAaccesstoitmostlikelywouldbe
relativelystraightforward,butdoingsowouldrequirearequestand
cooperationfrombothTSAandFMCSA.TSAofficialsaddedthatthey
wereunsurewhetherfuturebudgetconstraintswouldallow
continuedfundingforTSAaccesstotheportal.
(3) DiscontinueconductingthevoluntaryTSAreviewsonhazardous
materialtruckingcompanies,therebyenablingTSAtoincreaseits
securityeffortsinotherareas.Forexample,TSAcouldseekto
improvesecuritypracticesamongnonhazardousmaterialtrucking
companies,astheseentitiesarenotsubjecttotheFMCSAsecurity
reviews.TSAofficialsstatedinJanuary2011thattheyintendto
pursuethisoption,which,ifimplementedasintended,should
eliminatetheshort-termoverlapbetweenFMCSAandTSA
commercialtruckingsecurityassessments.However,asstated
previously,GAObelievesitwillbeimportantforTSAandFMCSAto
continueeffortstoimprovedatasharingandcoordinationtohelp
preventfutureoverlapinsecurityreviews,aswellascontinueefforts
towardthelong-termgoalofTSAassumingfullregulatory
responsibilityfromFMCSAforcommercialtruckingsecurity,thereby
reducingfragmentation.
ReducingoverlapbetweenTSAsandFMCSAssecurityreviewscould
resultincostsavings.TSAstotalspendingonthe71reviewsitconducted
fromfiscalyears2006through2010oncompaniesthathadalsoreceived
anFMCSAreviewduringthesameperiodwasabout$268,000.TSAs
spendingonthe31reviewsthatoccurredlessthan2yearsafteranFMCSA
reviewatthesamecompanywasabout$120,000.Extrapolatingfromdata
fromprioryears,GAOestimatedthat,overthenext5years,avoidingTSA
reviewsconductedoncompanieslessthan2yearsafteranFMCSAreview
toAddressOverlap
couldsaveapproximately$164,000;avoidingTSAreviewsoncompanies
thatreceiveanFMCSAreviewduringthesame5-yearperiodcouldsave
approximately$373,000;andeliminatingallTSAreviewsonhazardous
materialtruckingcompaniescouldsaveover$1million.
5
Reducingoverlap
betweenthetwoagenciessecurityreviewscouldalsoimprovetheir
relationshipwiththecommercialtruckingindustry.Asindustryobserves
morecoordinationamongfederalagencies,truckingcompaniesmaybe
morewillingtoparticipateinvoluntarysecurityinitiativesandshare
informationwithfederalstakeholders.
Frameworkfor
Analysis
Theinformationcontainedinthisanalysisisbasedonapreviouslyissued
report,notedbelow,andrecenteffortstoupdatethatwork.Toupdatethat
informationandidentifycontinuingissuesrelatedtooverlapin
commercialtruckingsecurityassessments,GAOinterviewedofficialsfrom
TSA,FMCSA,andotheragencies,aswellasofficialsfromthreekey
industrygroupsthatrepresentalargeportionofthetruckingindustry.
6
GAOalsoreviewedpriorreportsandrelevantdocumentation,including
DHS/DOTinteragencyagreementsandexamplesofcompletedTSAand
FMCSAsecurityreviews.Toestimatetheamountofoverlapintrucking
companysecurityassessments,GAOcomparedthe95questionsinTSAs
hazardousmaterialcorporatesecurityreviewprotocolwiththe48
questionsinFMCSAssecuritycontactreviewprotocolandassessedtheir
similarityusingthreecategories:substantiallyorentirelysimilar,
5
Allestimatedcostsarereportedin2010dollarsandbasedonTSAestimatesofthestaff
time,staffsalaries,andtravelcostsassociatedwithconductingTSAreviews.While
eliminatingsomeorallTSAreviewscouldresultincostsavings,itmayalsoresultinthe
lossofsomesecurityinformation,sinceTSAreviewsdonotcompletelyduplicateFMCSA
reviews.Additionally,GAOidentified84FMCSAreviewsfromfiscalyears2006through
2010ontruckingcompaniesthathadalsoreceivedaTSAreviewduringthesametime
period.OftheseFMCSAreviews,21wereconductedlessthan2yearsafteraTSAreview.
However,FMCSAwasunabletoprovidecostestimatesforitssecurityreviews,soGAO
couldnotcalculatethecostassociatedwiththisoverlap.Moreover,FMCSAconducted
morethan9,000reviewsduringthesameperiod,andlessthan1percentofthesereviews
overlappedwithaTSAreview.
6
ThesethreestakeholdergroupsweretheAmericanTruckingAssociations,the
CommercialVehicleSafetyAlliance,andtheOwner-OperatorIndependentDrivers
Association.
toAddressOverlap
somewhatsimilar,andnotatallorslightlysimilar.
7
Todeterminethe
extenttowhichTSAsandFMCSAssecurityreviewswereconductedon
thesamecompanies,GAOanalyzedTSAandFMCSAdataonreviews
conductedfromfiscalyears2006through2010.GAOreviewedthedatafor
obviouserrorsandspokewithknowledgeableofficialstodeterminethat
thedataweresufficientlyreliableforthepurposesofitsreview.GAO
estimatedthecostofoverlappingsecurityreviewsonhazardousmaterial
truckingcompaniesbyusingTSAdataon(1)thenumberofTSAreviews
conductedfromfiscalyears2006through2010and(2)thestafftime,
estimatedstaffsalaries,andestimatedtravelcostsassociatedwith
conductingthesereviews.Costestimatesdonotincludeindirectcosts,
suchasgeneraladministrativecosts.GAOestimatedthepotentialfinancial
savingsassociatedwitheliminatingoverlappingsecurityreviewsby(1)
estimatingtheaverageannualnumberofreviews,and(2)multiplyingby
theestimatedcostofconductingareview.GAOreviewedthedatafor
obviouserrorsandspokewithknowledgeableTSAofficialstodetermine
thatthedataweresufficientlyreliabletoprovideageneralindicationof
costsandpotentialsavings.
CommercialVehicleSecurity:Risk-BasedApproachNeededtoSecurethe
RelatedGAOProduct
CommercialVehicleSector.GAO-09-85.Washington,D.C.:February27,
2009.
Foradditionalinformationaboutthisarea,contactSteveLordat(202)
AreaContact
512-4379orlords@gao.gov.
7
GAOcategorizedeachquestionbasedonitsassessmentofthesimilarityofthe
informationthattruckingcompanieswouldlikelyprovideinresponsetothatquestion.
Specifically,ifGAOdeterminedthat,inresponsetoaTSAreviewquestion,acompany
wouldlikelyprovidethesameormostlythesameinformationasitwouldinresponsetoan
FMCSAreviewquestion(andviceversa),thosequestionswereconsideredsubstantiallyor
entirelysimilar.IfGAOdeterminedthatacompanywouldlikelyprovidesomeofthesame
informationinresponsetoaTSAreviewquestionasitwouldinresponsetoanFMCSA
reviewquestion(andviceversa)butwouldlikelyalsoprovideadditionalordifferent
informationforoneofthequestionsthatlikelywouldnotbeprovidedfortheotherthose
questionswereconsideredsomewhatsimilar.IfGAOdeterminedthatacompanywould
likelyprovidemostlyorcompletelydifferentinformationinrespondingtoaTSAreview
questionrelativetoanFMCSAreviewquestion(andviceversa),thosequestionswere
considerednotatallorslightlysimilar.
DHSCouldStreamlineMechanismsfor
SharingSecurity-RelatedInformationwith
PublicTransitAgenciestoHelpAddress
OverlappingInformation

DHSCouldStreamlineMechanismsforSharing
Security-RelatedInformationwithPublicTransit
AgenciestoHelpAddressOverlappingInformation
WhyGAOIsFocusing
onThisArea
SinceJanuary2005,GAOhasidentifiedsharingterrorism-related
informationasahigh-riskareabecausethefederalgovernmentcontinues
tofacechallengeswithitsinformation-sharingefforts.Tofacilitate
informationsharingwiththepublictransitindustry,theDepartmentof
HomelandSecurity(DHS)andtheTransportationSecurityAdministration
(TSA)createdandfundedvariousmechanisms.Forexample,thepublicly
fundedbutprivatelyoperatedpublictransitanalysiscenterandthepublic
transitsubportalonDHSsinformationnetworkwereestablishedtoserve
astheprimarymechanismsforsharingsecuritythreatsandothertypesof
security-relatedinformationwithpublictransitagencies.InMarch2010,
TSAalsointroduceditsportalonDHSsinformationnetworktoshare
informationwiththetransportationindustry.However,inSeptember2010,
GAOreportedthatpublictransitagenciesreceivesimilarsecurity-related
informationfrommultiplesourcesandrecommendedthatDHSestablish
timeframesforitsworkinggrouptoassessopportunitiestostreamline
information-sharingmechanismstoreduceanyunneededoverlap.DHS
concurredandhasbeguntakingstepstoaddressthisrecommendation,
buthasnotprovidedspecificsontheextenttowhichitsactionswill
reduceoverlap.
WhatGAOHasFound
toIndicate
orFragmentation
GAOidentifiedthepotentialforoverlapbetweenthreeinformation-
sharingmechanismsthatDHSfundsandusestocommunicatesecurity-
relatedinformationwithpublictransitagencies,whichcould
unnecessarilycomplicatethoseagencieseffortstodiscernrelevant
informationandtakeappropriateactionstoenhancetransportation
security.Whileacertainamountofredundancyisunderstandableandcan
bebeneficialifitoccursaspartofamanagementstrategytoprovide
bettercustomerservicedelivery,GAOfoundthatthispotentialforoverlap
couldoverwhelmpublictransitagencieswithsimilarinformation.
AccordingtoakeyTSAtransportationstrategydocument,astreamlined
andeffectivesystemtosharetransitandpassengerrailinformationis
neededtofacilitateinformationsharingamongthefederalgovernment
andpublicandprivatestakeholders.
InSeptember2010,GAOreportedthatpublictransitagenciesreceived
similarsecurity-relatedinformationfromavarietyofsources,including
thethreediscussedbelow.Specifically,GAOreportedthat:
AccordingtotheAmericanPublicTransportationAssociation,which
co-sponsorsthepublictransitanalysiscenter,thismechanismis
intendedtobeaonestopshopforpublictransitagenciesinformation

needs.Thismechanismreceivedatotalof$1.2millionduringfiscal
years2009and2010fromTSA.
TSAofficialsstatedthattheagencyintendsforthepublictransitportal
onDHSsinformationnetworktobetheprimarymechanismfor
sharingsuchinformationwithpublictransitagencies.DHScouldnot
providecostdatafortheoperationofthisspecificportalbecause,
accordingtoDHSofficials,thedepartmentdoesnotbreakoutthecosts
associatedwithmaintainingindividualportalsonitsinformation
network.However,DHSreportedthatforfiscalyears2009and2010,
thedepartmentexpended$62milliononitsinformationnetwork
whichincludesthepublictransitportalanditsestimatedlifecycle
costsare$451million.
AccordingtoTSAofficials,TSAsportalonDHSsinformationnetwork
wasestablishedtoserveasacollaborativeinformation-sharing
platformforalltransportationmodes,includingpublictransit.
1
In
September2010,TSAtoldGAOthatforfiscalyears2009and2010,it
applied$2.5milliontoitsportalonDHSsinformationnetwork,
primarilyondevelopingandorganizingdataforalltransportation
modes.
GAOssurveyof96U.S.publictransitagencies,representingabout91
percentoftotal2008publictransitridership,highlightedthevarietyof
mechanismsusedbypublictransitagenciestoobtainsecurity-related
information.Twenty-fourofthe80transitagenciesthatrespondedtothe
surveyprovidedcommentsinfavorofconsolidatingexistinginformation-
sharingmechanismstoreducethevolumeofsimilarinformationthey
receive.
GAOreportedin2007and2009thateffectiveinformationsharing
continuestobeachallengeforthefederalgovernment.Similarly,the
AdministrationsMarch2010SurfaceTransportationSecurityPriority
AssessmentrecommendedthatTSAtakestepstoimprovethe
effectivenessofinformationflow.InAugust2010,theOfficeof
ManagementandBudget(OMB)addedDHSsinformationnetworktoits
listofhigh-priorityinformationtechnologyprojects,indicatingthatthis
mechanismisatriskoffailureandrequiresadditionaloversight.
AccordingtotheFederalChiefInformationOfficer,inordertojustify
1
Thesixtransportationmodesincludeaviation,maritime,publictransit,highway,freight
rail,andpipeline.
futurefundingforthesetechnologyprojects,agencieswillneedto,among
otherthings,definedeliverablesandoutcomesandputinplaceastrong
governancestructure.Projectsthatdonotmeetsuchcriteriawillnotbe
continued.DHSofficialshaveindicatedthattheyareworkingwithOMBto
addressOMBsconcerns,buthavenotprovidedGAOwithinformation
relatedtothespecificactionsthatDHShastaken.
ActionsNeededand
OtherBenefits
Takingstepstostreamlineinformationsharingwithpublictransitagencies
couldreducethevolumeofsimilarinformationpublictransitagencies
receive,makingiteasierforthemtodiscernrelevantinformationandtake
appropriateactionstoenhancesecurity.Governmentandprivatesector
stakeholdersareparticipatinginaninformation-sharingworkinggroupto
reviewhowinformation-sharingmechanismsmightbestreamlinedto
reducethevolumeofoverlappinginformationpublictransitagencies
receive.InSeptember2010,GAOrecommendedthatTSAestablishtime
framesforthisworkinggrouptodevelopoptionsforimprovingits
information-sharingeffortswithpublictransitagencies.InOctober2010,
TSAreportedthattheworkinggrouphadagreeduponaconsolidated
productforsharingsecurity-relatedinformationwithpublictransit
agencies.InJanuary2011,TSAreportedthattheworkinggrouphad
establishedaproposedtimeframeforpilotingandimplementingthis
product.However,TSAdidnotprovidespecificsontheextenttowhich
thisproductwillreduceoverlapamongexistinginformation-sharing
mechanisms.Thus,itistooearlytotellwhetherGAOsrecommendation
hasbeenfullyaddressed.
GAOsreviewofthecostsassociatedwithmaintainingthepublictransit
analysiscenter,thepublictransitportalonDHSsinformationnetwork,
andtheTSAportalonDHSsinformationnetworkfoundthatthe
departmentcontinuestofacechallengescollectingandreportinguseful
financialmanagementinformation.AccordingtoDHSofficials,the
departmentdoesnotbreakoutthecostsassociatedwithmaintaining
individualportalsonitsinformationnetworkincludingthepublictransit
portalandTSAsportalandthereforecouldnotprovideGAOwitha
reliableestimateofthepotentialcostsavingsresultingfromconsolidating
thepublictransitportalonDHSsinformationnetworkwiththepublic
transitanalysiscenterortheTSAportalonDHSsinformationnetwork.
Developingsuchcostdatacouldassistthedepartmentindetermininghow
tobestallocateitslimitedresourcestoprovidepublictransitagencies
withqualitysecurity-relatedinformation.
Moreover,byassessingthevariousmechanismsavailabletopublictransit
agenciesandtheinformationtheyprovide,andidentifyingopportunities
tostreamlinethesemechanisms,DHScouldidentifyandimplementways
tomoreefficientlysharesecurity-relatedinformation,whichwouldallow
publictransitofficialstomorequicklyobtainsecurity-relatedinformation
andtherebyenhancetransitagencieseffortstosecuretheirtransportation
systems.Indoingso,DHScoulddevelopandtrackverifiablecostdata
specifictoeachofitsinformation-sharingmechanismsaspartofTSAs
streamliningandfinancialmanagementefforts.Developingsuchbaseline
costdatacouldassistTSAinidentifyingpotentialcostsavingsresulting
fromtheconsolidationofthesemechanismsandprovideopportunitiesfor
theagencytobetterallocateitsinformation-sharingresources.
DHSofficialsstatedthatconductingacostcomparisonofthepublic
transitportalonDHSsinformationnetwork,TSAsportalonthisnetwork,
andthepublictransitanalysiscenterwouldnotresultinameaningful
comparisonbecauseDHSsinformation-sharingmechanismcostsare
distributedacrossseveraltransportationsectors,includingpublictransit,
whilethecostsforthepublictransitanalysiscenterareappliedtoa
specificsector.Additionally,TSAofficialsstatedthatTSAsportalon
DHSsinformationnetworkwasnotdesignedtocompetewiththepublic
transitanalysiscenterorthepublictransitsubportalonDHSsinformation
networksinceTSAsportalsharesinformationwithalltransportation
modes.GAOrecognizesthatTSAsportalwasdesignedtoshare
informationwithalltransportationmodes,includingpublictransit.
However,GAObelievesthattotheextentpossible,TSAshouldconsider
waystoreduceanyunneededoverlapofinformationsharingforthepublic
transitindustryregardlessofthemechanismsusedtosharesuch
information.Furthermore,GAOcontinuestobelievethatdevelopingand
trackingverifiablecostdataspecifictoeachinformation-sharing
mechanismasitrelatestoservicesprovidedtothepublictransitsector
couldassistTSAinidentifyingpotentialcostsavingsresultingfrom
consolidatingsuchmechanisms.
Frameworkfor
Analysis
TheinformationcontainedinthisanalysisisbasedonGAOsSeptember
2010reportonfederaleffortstosharesecurity-relatedinformationwith
publictransitagencies.Inaddition,thisanalysiscontainsupdated
informationobtainedfromSeptember2010throughJanuary2011.GAO
reviewedDHSscostdataforcompletenessandaccuracyanddetermined
thedatawerereliableforthepurposesofthisanalysis.
RelatedGAO
Products
PublicTransitSecurityInformationSharing:DHSCouldImprove
InformationSharingthroughStreamliningandIncreasedOutreach.
InteragencyCollaboration:KeyIssuesforCongressionalOversightof
NationalSecurityStrategies,Organizations,Workforce,and
InformationSharing.GAO-09-904SP.Washington,D.C.:September25,
2009.
High-RiskSeries:AnUpdate.GAO-09-271.Washington,D.C.:January22,
2009.
InformationTechnology:ManagementImprovementsNeededonthe
DepartmentofHomelandSecuritysNextGenerationInformation
SharingSystem.GAO-09-40.Washington,D.C.:October8,2008.
HomelandSecurity:DepartmentwideIntegratedFinancialSystems
RemainaChallenge.GAO-07-536.Washington,D.C.:June21,2007.
InformationTechnology:NumerousFederalNetworksUsedtoSupport
HomelandSecurityNeedtoBeBetterCoordinatedwithKeyStateand
LocalInformation-SharingInitiatives.GAO-07-455.Washington,D.C.:
April16,2007.
Foradditionalinformationaboutthisarea,contactSteveLordat
AreaContact
(202)512-4379orlords@gao.gov.
FEMANeedstoImproveItsOversightof
GrantsandEstablishaFrameworkfor
AssessingCapabilitiestoIdentifyGapsand
PrioritizeInvestments
FEMANeedstoImproveItsOversightofGrantsand
EstablishaFrameworkforAssessingCapabilitiesto
IdentifyGapsandPrioritizeInvestments
WhyGAOIsFocusing
onThisArea
Fromfiscalyear2002through2010,Congressappropriatedover$34
billionforhomelandsecuritypreparednessgrantprogramstoenhancethe
abilityofstate,territory,local,andtribalgovernmentstoprevent,protect
against,respondto,andrecoverfromterroristattacksandotherdisasters,
accordingtotheCongressionalResearchService.Thenumberof
preparednessgrantprogramsFederalEmergencyManagementAgency
(FEMA)administershasgrownfrom8in2002to17in2010astheresultof
congressionalandexecutivebranchactions.AnumberofFEMAs
preparednessgrantprogramsfundcommoneligiblerecipients(suchas
statehomelandsecurityagencies)forsimilar-broadpurposes.
WhatGAOHasFound
toIndicate
orFragmentation
FEMAdoesnotcompareandcoordinategrantapplicationsacrossits
preparednessprogramstoidentifypotentialduplication.Inaddition,
FEMAhasnotestablishedmeasurablegoalsorperformancemeasuresfor
preparednesscapabilitiestoidentifygapstoassistineffectively
prioritizingnationalinvestmentsthroughpreparednessgrantprograms.
TheDepartmentofHomelandSecurity(DHS)InspectorGeneralreported
inMarch2010thatFEMAsapplicationprocessforitspreparednessgrant
programsdidnotpromoteeffectivenessandefficiencybecauseFEMAdid
notcompareandcoordinategrantapplicationsacrosspreparedness
programstoidentifyandmitigatepotentialduplications(forexample,
planningandinteroperablecommunicationsaretwoactivitiesthatcanbe
fundedbyalmostalloftheprogramsreviewedbytheInspectorGeneral);
thereportrecommendedFEMAdoso.
1
Thereportalsocitedbarriersat
thelegislative,departmental,andstatelevelsthatimpedeFEMAsability
tocoordinatetheseprograms,suchasannualappropriationlawsthatmay
containcongressionalearmarksdedicatingfundstowardspecificgrant
projects.Thereportmadetwootherrecommendationsforimproving
grantmanagement,andFEMAconcurred,sayingtheagencyhadefforts
underwaythatwillhelptoaddressthereportsfindings.UntilFEMA
evaluatesgrantapplicationsacrossgrantprograms,FEMAcannot
ascertainwhetherortowhatextentmultiplefundingrequestsarebeing
submittedforsimilarpurposes.
1
TheInspectorGeneralreviewed13preparednessgrantprograms;seeDepartmentof
HomelandSecurityOfficeofInspectorGeneral,EfficacyofDHSGrantPrograms,OIG-10-
69(Washington,D.C.,Mar.22,2010).
InOctober2006,thePost-KatrinaEmergencyManagementReformAct
chargedFEMAwithleadingthenationindevelopinganational
preparednesssystem.
2
TheactrequiresFEMAtodevelopanational
preparednesssystemandassesspreparednesscapabilitiescapabilities
neededtorespondeffectivelytodisasterstodeterminethenations
preparednesscapabilitylevelsandtheresourcesneededtoachieve
desiredcapabilitylevels.
3
InareporttoCongressinMarch2009,FEMA
identified,amongotherthings,theneedforfederalagenciestowork
jointlytodevelopnationalstandardsfordescribingthefunctionalityand
performancecharacteristicsofpreparednessresourcesandcapabilities
forusebyrelevanthomelandsecuritygrantprogramstoenablecross-
programcoordinationandassessment.
4
InOctober2010,GAOreportedthatFEMAhadnotdevelopedmeasurable
nationalpreparednesscapabilityrequirementstoprovideaframeworkfor
theseassessments.InJanuary2011,FEMAreportedthattheAdministrator
hadestablishedastrategicpriority,referredtoasWholeofCommunity
thatidentifiedaseriesofrequirementsorcorecapabilities,toensure
responseandrecoveryactionsaredrivenbytheneedsoftheaffected
communityintheeventofacatastrophicdisaster.Asaresult,FEMAis
planningtogeneratemeasurablenationalpreparednesscapability
requirements,andevaluationcriteria(e.g.,intermsofspeed,effectiveness,
andefficiency,amongotherfactors)thataretoprovideacomprehensive
frameworkforguidinginvestmentsandassessingreadiness.UntilFEMA
hasdoneso,itcannotoperationalizeandimplementitsapproachfor
assessinglocal,state,andfederalpreparednesscapabilitiestoidentifygaps
forprioritizinginvestmentsinnationalpreparedness.Accordingtoprogram
officials,FEMAseffortstodefineaframeworkwithinwhichitscapability
assessmentscanbeeffectivelyappliedrelyontheresultsoftwokeyefforts:
therecommendationsoftheOctober2010reportofthecongressionally
mandatedLocal,State,TribalandFederalPreparednessTaskForce,and
2
Pub.L.No.109-295,644,120Stat.1355,1425(2006)(codifiedat6U.S.C.744).TheAct
definescapabilityastheabilitytoprovidethemeanstoaccomplishoneormoretasks
underspecificconditionsandtospecificperformancestandards.Id.at641,120Stat.at
1424(codifiedat6U.S.C.741).
3
Pub.L.No.109-295,649,120Stat.1355,1428(2006)(codifiedat6U.S.C.749).
4
FEMA,GrantProgramsDirectorate,InteragencyReportonPreparednessGrant
Programs,ReporttoCongress(Washington,D.C.,May2009).
plannedrevisionstoHomelandSecurityPresidentialDirective-8.
5
Ifthe
problemsregardingpreparednessgrantapplicationsandcapabilitiesarenot
addressed,FEMAcouldspendbillionsofdollarswithouttheabilityto
identifyduplicationofeffortandprioritizethedevelopmentand
maintenanceofthemostimportantpreparednesscapabilities.
OnOctober12,2010,CongressenactedtheRedundancyEliminationand
EnhancedPerformanceforPreparednessGrantsAct.
6
Theactcallsforthe
FEMAadministratortoidentifyredundantreportingrequirementsfor
recipientsofcertaingrantsandregularlyreporttoCongressoneffortsto
eliminateidentifiedredundancies;submitaplanfordeveloping
performancemetricsforthegrants;andconductanassessmentofthe
grantprograms.InJanuary2011,FEMAreportedthatitisreviewingits
grantprogramsandapplicationprocessestoidentifyoperational
redundanciesandisworkingwithDHStoconsolidategrantprograms
whereactivitiesareallowableundermultiplegrants.FEMAalsostated
thattheagencyisworkingwiththeNationalAcademyofPublic
AdministrationtodevelopaplanbyDecember2011,fordeveloping
quantifiableperformancemeasuresandmetricstoassesstheeffectiveness
ofpreparednessgrantprograms.Whilethesearepositivesteps,itistoo
earlytodeterminetheireffectivenessineliminatingredundancies,
increasingefficiencyinadministeringFEMAsgrantprograms,and
assessingtheeffectivenessofpreparednessgrantprograms.
ActionsNeededand
OtherBenefits
GAOhasnotpreviouslymaderecommendationsinthisarea,buttoidentify
andaddressanyunnecessaryoverlapandduplication,aswellastoachieve
operationalimprovements,efficiencies,andassociatedfinancialbenefits,
FEMAcouldbenefitfromexaminingitsgrantprogramsandcoordinatingits
applicationprocesstoeliminateorreduceredundancyamonggrant
recipientsandprogrampurposes.FEMAsactionsinresponsetothe
RedundancyEliminationandEnhancedPerformanceforPreparedness
GrantsActmayhelpFEMAmeasureandassesstheperformanceofits
grantsprogramsandachieveefficienciesandsavingsinadministeringthese
5
TheLocal,State,TribalandFederalPreparednessTaskForceisagroupofexperts
chargedwithassessingthestateofthenationsdisasterpreparednessandmaking
recommendationstotheSecretaryofHomelandSecurityaboutwaystobuildpreparedness
incommunitiesacrossAmerica.TheTaskForceiscomposedof35membersoffederal,
state,localandtribalgovernments.
6
Pub.L.No.111-271,124Stat.2852(2010).
programs.However,FEMAsactionsinresponsetothisactarestillongoing,
thusitistooearlytoassesstheireffectiveness.
Inaddition,Congressmaywishtoconsiderlimitingpreparednessgrant
fundingtomaintainingexistingcapabilities(asdeterminedbyFEMA)until
FEMAcompletesanationalpreparednessassessmentofcapabilitygapsat
eachlevelbasedontiered,capability-specificperformanceobjectivesto
enableprioritizationofgrantfunding.AccordingtoFEMAofficials,the
administrationisplanningtoissuearevisionofHomelandSecurity
PresidentialDirective-8(noissuedatehasbeenset);therevisionwill
significantlyaffectFEMAsnationalpreparednesspoliciesandplans.
OnceFEMAhascompletedacomprehensive,measurable,national
preparednessassessmentofcapabilitygaps,asdescribedabove,FEMA
couldidentifythepotentialcostsforestablishingandmaintainingthose
capabilitiesateachlevel,anddeterminewhatcapabilitiesfederalagencies
shouldprovide.Accordingly,Congressmaywishtoconsiderlimitingthe
useoffederalpreparednessgrantprogramstofundonlyprojectsthat
supportthedevelopmentofidentified,validated,anddocumented
capabilitygaps.
Frameworkfor
Analysis
TheinformationcontainedinthisanalysisisbasedonGAOsreviewof
agencyreportsandothersourceswellastherelatedGAOproductslisted
below.GAOdeterminedthatthedataitusedweresufficientlyreliablefor
itspurposes.
AttherequestoftheHouseHomelandSecurityCommittee,GAOhasareview
underwayexaminingFEMAsmanagementofselectedhomelandsecurity
grantsandpotentialduplicationandexpectstoissueareportin2011.
RelatedGAO
Products
FEMAHasMadeLimitedProgressinEffortstoDevelopandImplement
aSystemtoAssessNationalPreparednessCapabilities.GAO-11-51R.
Washington,D.C.,October29,2010.
NationalPreparedness:FEMAHasMadeProgress,butNeedsto
CompleteandIntegratePlanning,Exercise,andAssessmentEfforts.
Foradditionalinformationaboutthisarea,contactWilliamO.JenkinsJr.
AreaContact
at(202)512-8757orjenkinswo@gao.gov.
LackofInformationSharingCouldCreatethe
PotentialforDuplicationofEffortsbetween
U.S.AgenciesInvolvedinDevelopment
EffortsinAfghanistan
LackofInformationSharingCouldCreatethePotential
forDuplicationofEffortsbetweenU.S.Agencies
InvolvedinDevelopmentEffortsinAfghanistan
WhyGAOIsFocusing
onThisArea
TheUnitedStateshasappropriatedover$16billionsincefiscalyear2002
fordevelopmenteffortsinAfghanistan,implementedbytheU.S.Agency
forInternationalDevelopment(USAID)andtheDepartmentofDefense
(DOD).USAID,throughitsassistanceprogram,andDOD,throughits
CommandersEmergencyResponseProgram(CERP),haveimplemented
developmentprojectsfocusingonsimilarinitiatives,suchasimproving
Afghanistansroad,water,andotherinfrastructuresectors.Thislineof
effortisanintegralpartoftheU.S.integratedcivilian-militarycampaign
planfocusedoncounteringinsurgentsinAfghanistanandrequires
extensiveinteragencycoordinationandinformationsharing.Thereisa
potentialforduplicationofagenciesefforts.
WhatGAOHasFound
toIndicate
orFragmentation
Agenciesinvolvedintheimplementationofdevelopmentprojectsin
AfghanistanprincipallyUSAIDandDODhavenotadoptedacentralized
datasystemthattracksallU.S.government-fundedAfghandevelopment
effortsandisaccessiblebyallrelevantagencies.GAOhasmade
recommendationsforsuchactionandagencieshaveconcurredwiththose
recommendations.Withoutacentralizeddatasystemtoimprovevisibilityof
individualdevelopmentprojects,theU.S.governmentmaynotbeableto
fullyleverageavailableresourcesandrisksduplicatingeffortsandwasting
taxpayerdollars,asaresultoffragmentedoroverlappingefforts.
Maintaininganaccessibledatasystemthatpromotesinteragency
informationsharingisparticularlyimportantinanenvironmentsuchas
Afghanistan,whereseveralagenciesareinvolvedinsimilardevelopment
effortsthataredispersedthroughoutthecountry.InareviewofU.S.-
fundedroadprojectsinAfghanistan,GAOreportedinJuly2008that,
despiteCERPguidancerequiringDODtoprovideCERP-fundedproject
informationtoaUSAID-maintaineddatabase,DODhadnotdoneso.Asa
result,acomprehensivedatabaseofallU.S.-fundedroadprojectsin
Afghanistandidnotexist.Moreover,DODofficialssaidthatbecauseof
missingdocumentationandfrequentstaffrotation,theydidnotknow
wheresomeCERP-fundedroadswerebuilt.GAOrecommendedthat
informationonDODsCERP-fundedroadprojectsbeincludedinaUSAID-
maintaineddatabase,andDODconcurred.
However,inaMay2009reportthatreviewedDODscoordinationof
CERP-fundedprojectsinAfghanistanwithUSAID,GAOfoundthat,while
thetwoagencieshadmechanismsinplacetofacilitatecoordination,they
lackedacommondatabaseaccessibletoallpartiesinvolvedin
developmenteffortsinAfghanistan.GAOnotedthatDODusedaclassified
databaseCombinedInformationDataNetworkExchangetotrack
CERP-fundedprojects,whileUSAIDusedadatabasecalledGeoBaseto
trackitsdevelopmentprojects.GAOfurthernotedthatinearly2009,
USAIDofficialsweregrantedaccesstotheunclassifiedportionofDODs
database,butDODofficialsdidnothaveaccesstoUSAIDsGeoBase
databaseatthetime.
Subsequently,inlate2009USAIDinitiatedanewdatabasesystem,known
asAfghanInfo,toreplaceGeoBase.AccordingtoUSAID,AfghanInfois
intendedtoprovideacomprehensiveandtransparentinteragencypicture
ofhowprojectimplementersuseforeignassistanceresourcestosupport
U.S.objectivesinAfghanistan.USAIDofficialssaidtheywouldlikethe
AfghanInfosystemdesignatedastheofficialsystemfordataonU.S.
assistanceactivitiesinAfghanistan,subjecttoAmbassador-levelapproval.
However,GAOsreviewofU.S.developmenteffortsinAfghanistanswater
sectorcompletedinNovember2010foundthatacentralizeddatabasethat
containsinformationonallU.S.-fundeddevelopmentprojects,including
informationonwatersectorprojects,stilldidnotexist.Eachagency
continuestomaintainitsownprojecttrackingsystemthatidentifies
agency-specificinformationonwaterprojectsinAfghanistan.
AUSAIDofficialresponsiblefordevelopingtheAfghanInfodatabase
notedthatAfghanInfodidnotincludedatafromanyotheragency,aside
fromunclassifiedquarterlyCERPdatathatDODbeganprovidingto
USAIDinFebruary2010.Thisofficialalsodidnotknowwhetherthe
systemwasbeingusedtocoordinatewatersectordevelopmentin
Afghanistan.Moreover,seniorDODofficialstoldGAOtheywerenot
familiarwiththeAfghanInfosystemorthedataitcontained.Forits
CERP-relateddata,DODcontinuestousetheCombinedInformationData
NetworkExchange,whichwasnotintendedasaplatformforinteragency
coordination.Agencyofficialshaveacknowledgedthathavingaccessto
projectdatafromotheragencieswouldcontributetobetterproject
planning,eliminatepotentialoverlap,andallowagenciestoleverageeach
othersresourcesmoreeffectively.
ActionsNeededand
OtherBenefits
Toenhanceinteragencycoordinationandtohelpensurethereisno
overlaporduplicationandtoincreaseaccountabilityforuseofagency
funds,USAID,inconsultationwithDODandotherrelevantU.S.agencies,
shouldconsiderdesignatingAfghanInfoorsomeotherdatabaseasthe
centralizedU.S.governmentdatabaseforU.S.developmenteffortsin
Afghanistan.Thisdatabaseshould,amongotherthings,ensurethatthe
informationinthedatabase(1)capturesallagencydevelopmentefforts
and(2)isaccessibletoallU.S.governmentagenciesinvolvedinU.S.-
fundeddevelopmentprojectsinAfghanistan.
Theinformationcontainedinthisanalysisisbasedontherelatedproducts
Frameworkfor
identifiedbelow.
Analysis
RelatedGAO
Products
AfghanistanDevelopment:U.S.EffortstoSupportAfghanWaterSector
IncreasingbutImprovementsNeededinProjectPlanning,Coordination,
andManagement.GAO-11-138.Washington,D.C.:November15,2010.
MilitaryOperations:ActionsNeededtoImproveOversightand
InteragencyCoordinationfortheCommandersEmergencyResponse
PrograminAfghanistan.GAO-09-615.Washington,D.C.:May18,2009.
AfghanistanReconstruction:ProgressMadeinConstructingRoads,but
AssessmentsforDeterminingImpactandaSustainableMaintenance
ProgramAreNeeded.GAO-08-689.Washington,D.C.:July8,2008.
Foradditionalinformationaboutthisarea,contactCharlesMichael
AreaContact
Johnsonat(202)512-7331orjohnsoncm@gao.gov.
DespiteRestructuring,OverlappingRolesand
FunctionsStillExistatStatesArmsControl
andNonproliferationBureaus
FunctionsStillExistatStatesArmsControland
NonproliferationBureaus
WhyGAOIsFocusing
onThisArea
Stateassumeddirectresponsibilityforarmscontrol,nonproliferation,and
disarmamentissuesin1999andestablishedthreebureaustoperformthese
missions.In2004,theDepartmentofState(State)InspectorGeneral(IG)
concludedthatStatesthree-bureaustructureforconductingarmscontrol
andnonproliferationpolicythebureausforArmsControl(AC),
Nonproliferation(NP),andVerificationandCompliance(VC)didnot
adequatelyaddresspost-September11challenges,includingpossible
terroristuseofweaponsofmassdestruction.TheIGalsonotedthatState
hadyettoformalizetheresponsibilitiesofthethreebureausinitsForeign
AffairsManual(FAM),whichsetsoutagencyorganizationandfunctions.
Betweenlate2005andearly2006,Statecreatedanewtwo-bureau
structurethebureausforInternationalSecurityandNonproliferation
(ISN)andVerification,ComplianceandImplementation(VCI)tobetter
addresstheseissuesandimproveefficiency.InJuly2009,GAOdocumented
continuingproblemswiththedepartmentsreorganizationofthesebureaus.
WhatGAOHasFound
toIndicate
orFragmentation
GAOs2009reviewofthereorganizationofStatebureausresponsiblefor
nonproliferationactivitiesfoundthatthelackofclearguidanceintheFAM
contributedtopastandcurrentoverlapproblemsamongtheAC,NP,and
VCbureaus(referredtoasTbureaus).Despitepreviousreorganization
efforts,thefragmentation,overlap,andredundanciescontinuetoexist
amongtheTbureaus.Thismaybeduesomewhattothelackofclear
guidanceinthedepartmentsFAM.
In2004,theStateIGidentifiedanumberofareasofoverlapamongtheT
bureaus.Theoverlapincludedmultiplebureaureportingchannelsforsome
U.S.internationalconferencerepresentativesandtreatynegotiators,and
unclearandconflictingdemarcationofresponsibilitiesbetweenACandNP
fortheirSouthAsiaandNorthKoreaissues.Statesobjectivesofthe2006
reorganizationweretoeliminateoverlapamongthebureaus,missions,and
issues;reducebureaucraticinefficienciesandtop-heavymanagement;and
enablethedepartmenttobetterfocusonpost-September11challenges.
Stateofficialsnotedthatthereorganizationundertakenin2006addressed
someorganizationalredundancies.Specifically,Statereducedthenumber
ofoffices,functions,andstaffslotswhenitmergeditsthree-bureau
structureforconductingarmscontrolandnonproliferationpolicyintoa
two-bureaustructure.However,aMay2006Statestudyonworkforce
allocationconductedafterthereorganizationfoundthatmission
redundanciespersistedforchemicalweapons,missiledefenseandspace
policy,nuclearnonproliferation,andbioterrorismissuesamong14offices
andfunctionsofthenewISNandVCIbureaus.
FunctionsStillExistatStatesArmsControl
andNonproliferationBureaus
GAOs2009reviewofthereorganizationfoundthatthelackofclear
guidanceintheFAMcontributedtopastandcurrentoverlapproblems
amongtheTbureaus.Asaresult,concernsaboutmissionoverlapspersist;
Stateemployeesstatedthatsomeofficesremainoverworkedwhileothers
areunderworked.Thesectionofthemanualdetailingtherolesand
responsibilitiesofthesebureaushadneverbeendraftedandapproved
sincethe1999incorporationoftheArmsControlandDisarmament
AgencyintoStateandthecreationoftheAC,NP,andVCbureaus.AState
officialonthepanelresponsibleforassigningrolesandmissionsunderthe
newtwo-bureaustructurestatedthattheirdeliberationswerehinderedby
thelackofanup-to-dateFAM.ThedepartmentagreedwithGAOs2009
recommendationthatitdelineatetherolesandresponsibilitiesfortheISN
andVCIbureausandaddthemtotheFAM.OnOctober1,2010,State
announcedanewreorganizationofitsarmscontrolandnonproliferation
functions,withthegoalofimprovingandrevitalizingeffortstoenhance
U.S.nationalsecuritybyeffectivelyaddressingglobalnuclear,chemical,
biological,andconventionalweaponsthreats.However,asofJanuary
2011,StatehasnotmodifiedtheFAM.
ActionsNeededand
OtherBenefits
StateshouldimplementGAOsrecommendationsto(1)formallydelineate
intheFAMtherolesofthetwonewbureaus,and(2)directthatkey
transformationpracticesandstepsbeincorporatedintotheFAM.
Implementingtheserecommendationscouldreducepersonnelandother
overheadcostsbyhelpingtheTbureausaddressthemultiplemission
redundanciesidentifiedamongtheofficesandfunctionsofthenewISN
andVCIbureaus.Thefiscalyear2010appropriationsfortheISNandVCI
bureauswere$48.9millionand$31.0million,respectively.
Theinformationcontainedinthisanalysisisbasedontherelatedproduct
Frameworkfor
identifiedbelow.
Analysis
StateDepartment:KeyTransformationPracticesCouldHaveHelpedin
RelatedGAOProduct
RestructuringArmsControlandNonproliferationBureaus.GAO-09-738.
Washington,D.C.:July15,2009.
Foradditionalinformationaboutthisarea,contactJosephChristoffat
AreaContact
(202)512-8979orchristoffj@gao.gov.
ActionsNeededtoReduceAdministrative
OverlapamongDomesticFoodAssistance
Programs
ActionsNeededtoReduceAdministrativeOverlap
amongDomesticFoodAssistancePrograms
WhyGAOIsFocusing
onThisArea
Thefederalgovernmentspentmorethan$62.5billionon18domesticfood
andnutritionassistanceprogramsinfiscalyear2008.Programsspending
rangedfrom$4millionforthesmallestprogramtomorethan$37billion
forthelargest.Theseprogramshelpensurethatmillionsoflow-income
individualshaveconsistent,dependableaccesstoenoughfoodforan
active,healthylife.Programsprovidenutritionassistanceinavarietyof
forms,rangingfromagriculturalcommoditiestopreparedmealsto
vouchersorothertargetedbenefitsusedincommercialfoodretail
locations.TheU.S.DepartmentofAgricultures(USDA)Foodand
NutritionServiceoverseesmostoftheseprogramsincludingthefive
largest.TheDepartmentofHomelandSecurity(DHS)andtheDepartment
ofHealthandHumanServices(HHS)alsofundfoodassistanceprograms.
WhatGAOHasFound
toIndicate
orFragmentation
Domesticfoodandnutritionassistanceisprovidedthrougha
decentralizedsystemofprimarily18differentfederalprogramsthatshows
signsofoverlapandinefficientuseofresources.InadditiontoUSDA,
HHS,DHS,andmultiplestateandlocalgovernmentandnonprofit
organizationsworktogethertoadministeracomplexnetworkofprograms
andproviders.GAOhasfoundthatsomeoftheseprogramsprovide
comparablebenefitstosimilaroroverlappingpopulations.Forexample,
individualseligibleforgroceriesthroughtheCommoditySupplemental
FoodProgramarealsogenerallyeligibleforgroceriesthroughthe
EmergencyFoodAssistanceProgramandfortargetedbenefitsthatare
redeemedinauthorizedstoresthroughthelargestprogram,the
SupplementalNutritionAssistanceProgram(SNAPformerlytheFood
StampProgram).Theavailabilityofmultipleprogramswithsimilar
benefitshelpsensurethatthoseinneedhaveaccesstonutritiousfood,but
canalsoincreaseadministrativecosts,whichaccountforapproximatelya
tenthtomorethanaquarteroftotalcostsamongthelargestofthese
programs.Inaddition,GAOspreviousworkhasshownthatoverlap
amongprogramscanleadtoinefficientuseoffederalfunds,duplicationof
effort,andconfusionamongthoseseekingservices.
These18programswerecreatedindividuallybyCongressoverthepast
severaldecadestoaddressavarietyofemergingneeds,suchastargeting
benefitstogroupsathighriskofmalnutritionorhunger.Agencyofficials
andlocalprovidershaveindicatedthatthemultiplefoodassistance
programsworktogetherandprovidevariouspointsofentrytothesystem
tohelpincreaseaccesstofoodforvulnerableortargetpopulations.Those
officialsandproviderstoldusthat,sincenooneprogramaloneisintended
tomeetahouseholdsfullnutritionalneeds,thevarietyoffoodassistance
Programs
programscanhelphouseholdsfillgapsandaddressthespecificneedsof
individualmembers.
Despitethepotentialbenefitsofvariedpointsofentry,programrulesrelated
todeterminingeligibilityoftenrequirethecollectionofsimilarinformationby
multipleentities.Forexample,sixprogramstheNationalSchoolLunch
Program,theSchoolBreakfastProgram,theFreshFruitandVegetable
Program,theSummerFoodServiceProgram,theSpecialMilkProgram,and
theChildandAdultCareFoodProgramallprovidefoodtoeligiblechildren
insettingsoutsidethehome,suchasatschool,daycare,orsummerday
camps.Mostofthe18programshavespecificandoftencomplexlegal
requirementsandadministrativeproceduresthatfederal,state,andlocal
organizationsfollowtohelpmanageeachprogramsresources.Accordingto
previousGAOworkandstateandlocalofficials,rulesthatgoverntheseand
othernutritionassistanceprogramsoftenrequireapplicantswhoseek
assistancefrommultipleprogramstosubmitseparateapplicationsforeach
programandprovidesimilarinformationverifying,forexample,household
income.Thiscancreateunnecessaryworkforbothprovidersandapplicants
andmayresultintheuseofmoreadministrativeresourcesthanneeded.
Moreover,notenoughisknownabouttheeffectivenessofmanyofthese
programs.Researchsuggeststhatparticipationin7ofthe18programs
includingtheSpecialSupplementalNutritionProgramforWomen,Infants,
andChildren(WIC),theNationalSchoolLunchProgram,theSchool
BreakfastProgram,andSNAPisassociatedwithpositivehealthand
nutritionoutcomesconsistentwithprogramsgoals,suchasraisingthe
levelofnutritionamonglow-incomehouseholds,safeguardingthehealth
andwell-beingofthenationschildren,andstrengtheningtheagricultural
economy.Yetlittleisknownabouttheeffectivenessoftheremaining11
programsbecausetheyhavenotbeenwellstudied.Aspartofitsbroader
recommendationGAOsuggestedthatUSDAconsiderwhichofthelesser-
studiedprogramsneedfurtherresearch,andUSDAagreedtoconsiderthe
valueofexaminingpotentialinefficienciesandoverlapamongsmaller
programs
ActionsNeededand
OtherBenefits
Actionstoaddressfoodassistanceprogramsoverlapandinefficiencies
areneededtobetterleveragegovernmentresources.Providedsuch
actionsarebalancedwiththeprogramgoalsofservingeligiblevulnerable
andlow-incomeindividualsandtheneedtomaintainprogramintegrity,
creatingefficienciescouldputtheseagenciesinapositiontobetterassist
programparticipantswhiledecreasingadministrativeburdens.InApril
2010,GAOrecommendedthatUSDAidentifyanddevelopmethodsfor
Programs
addressingpotentialinefficienciesandreducingunnecessaryoverlap
amongitssmallerfoodassistanceprogramswhileensuringthatthosewho
areeligiblereceivetheassistancetheyneed.Thesemethodscouldinclude
conductingastudyasafirststep;conveningagroupofexperts;
identifyingwhichofthelesser-studiedprogramsneedfurtherresearchand
takingstepstofilltheresearchgap;oridentifyingandpilotingproposed
changes.Todate,USDAhasnottakenactiononthisrecommendation.
Oneofthepossiblemethodsforreducingprograminefficiencieswould
entailUSDAbroadeningitseffortstosimplify,streamline,orbetteralign
eligibilityproceduresandcriteriaacrossprogramstotheextentthatitis
permittedbylaw.Forexample,theChildNutritionandWIC
ReauthorizationActof2004requiressharingofdatabetweenSNAPand
theNationalSchoolLunchProgram(NSLP)toallowautomaticeligibility
forNSLPwithoutfurtherapplication.AccordingtoUSDAofficials,bythe
2008-2009schoolyear,78percentoflocaleducationalagenciesdirectly
certifiedSNAP-participantchildrenforfreeschoolmeals,whichincreased
administrativeefficiencyandreducedimproperpayments.Whileprivacy
concernsandincompatibledatasystemsposechallenges,expandingthese
effortsacrossprogramscouldfurtherimproveefficiency.Becausethe
legislativeandregulatoryeligibilitycriteriaforthevariousentitlement
programsarenotidentical,withsomemorestringentthanothers,changes
tobetteraligneligibilitycriteriacouldresultineitherfewerormore
eligibleindividuals.Nevertheless,sucheffortscouldresultinsizable
administrativecostsavingssince,asnotedearlier,theyarealargepartof
programcosts.
Optionssuchasconsolidatingoreliminatingoverlappingprogramsalso
havethepotentialtoreduceadministrativecostsbutmaynotreduce
spendingonbenefitsunlessfewerindividualsareservedasaresult.For
example,infiscalyears2007,2008,and2009,USDAproposedeliminating
theCommoditySupplementalFoodProgram,whichtargetslow-income
pregnantwomen,children,andpersonsage60orover,butCongress
continuedtofundtheprogram.USDAviewedthisprogramasduplicative
ofotherprograms,andeliminatingtheprogramwouldhaveyieldedclose
to$140millionsavingsinfiscalyear2008.However,accordingtoagency
officials,becausetheprogramistargetedtoparticularlyvulnerable
groups,eliminationoftheprogramwouldlikelyincreaseenrollmentin
programssuchasWIC,reducingoverallsavings.Aspartofanyeffortto
significantlychangethenutritionassistancebenefitdeliverysystem,care
mustbetakentounderstandthelikelyeffectsontargetpopulations.
Nevertheless,GAObelievesopportunitiesexistforreducingcostsand
improvingtheefficiencyofnutritionassistanceprograms.
Programs
TheinformationcontainedinthisanalysisbuildsuponpriorGAOwork,
Frameworkfor
whichiscitedbelow.
Analysis
RelatedGAO
Products
DomesticFoodAssistance:ComplexSystemBenefitsMillions,but
AdditionalEffortsCouldAddressPotentialInefficiencyandOverlap
amongSmallerPrograms.GAO-10-346.Washington,D.C.:April15,2010.
SchoolMealPrograms:ExperiencesoftheStatesandDistrictsThat
EliminatedReduced-priceFees.GAO-09-584.Washington,D.C.:July17,
2009.
FoodStampProgram:OptionsforDeliveringFinancialIncentivesto
ParticipantsforPurchasingTargetedFoods.GAO-08-415.Washington,
D.C.:July30,2008.
DepartmentofAgriculture,FoodandNutritionService:Special
SupplementalNutritionProgramforWomen,InfantsandChildren
(WIC):RevisionsintheWICFoodPackages.GAO-08-358R.Washington,
NutritionEducation:USDAProvidesServicesthroughMultiple
Programs,butStrongerLinkagesamongEffortsAreNeeded.
FederalFoodSafetyandSecuritySystem:FundamentalRestructuringIs
NeededtoAddressFragmentationandOverlap.GAO-04-588T.
FoodStampProgram:StepsHaveBeenTakentoIncreaseParticipation
ofWorkingFamilies,butBetterTrackingofEffortsIsNeeded.
Foradditionalinformationaboutthisarea,contactKayBrown(202)512-
AreaContact
7215orbrownke@gao.gov.
BetterCoordinationofFederalHomelessness
ProgramsMayMinimizeFragmentationand
Overlap
BetterCoordinationofFederalHomelessnessPrograms
MayMinimizeFragmentationandOverlap
WhyGAOIsFocusing
onThisArea
AccordingtotheDepartmentofHousingandUrbanDevelopment(HUD),
approximately643,000individualsandpersonsinfamiliesexperienced
homelessnessonasinglenightinJanuary2009.Multiplefederalprograms
provideassistancetargetedtothoseexperiencinghomelessnessormore
broadlyassistlow-incomepopulations.GAOreportedthatin2009federal
agenciesspentabout$2.9billiononover20programstargetedtoaddress
thevariousneedsofpersonsexperiencinghomelessness.Somefederal
programsmayoffersimilartypesofservicesandservesimilar
populations,potentiallyleadingtooverlaporfragmentation.
InJune2010,GAOrecommendedthattheDepartmentsofEducation,
HealthandHumanServices(HHS),andHUDdevelopacommon
vocabularytobettercoordinatehomelessservices.GAOalso
recommendedinJuly2010thatHUDandHHSconsidermoreformally
linkingtheirhousingandsupportiveservicesprograms.Theagencies
concurredwiththeserecommendationsandtodatehavetakensome
actionstoaddressthem.
WhatGAOHasFound
toIndicate
orFragmentation
Severalfederalagenciesprovidearangeofprogramsthatoffernotonly
housingassistancebutalsosupportiveservicestothoseexperiencing
homelessnessandtothoseatriskofbecominghomeless,butcoordination
oftheseprogramsvariesbyprogramandagency.Anumberoffederal
programsarespecificallytargetedtoaddressissuesrelatedto
homelessnesswhileothermainstreamprogramsthataregenerally
designedtohelplow-incomeindividualsbyprovidinghousingassistance
andservicessuchashealthcare,jobtraining,andfoodassistancemay
alsoservethoseexperiencinghomelessnessoratriskofbecoming
homeless.Insomecases,differentagenciesmaybeofferingsimilartypes
ofservicestosimilarpopulations.Forexample,GAOreportedinJuly2010
thatatleastsevenfederalagenciesadministeredmorethan20programs
thatprovidesometypeofshelterorhousingassistance.Similarly,five
agenciesadministeredprogramsthatdeliverfoodandnutritionservices,
andfouragenciesadministeredprogramsthatprovidehealthservices
includingmentalhealthservicesandsubstanceabusetreatment.This
rangeofprogramshasresultedinafragmentedservicesystem.
Fragmentationandoverlapinsomeoftheseprogramsmaybedueinpart
totheirlegislativecreationasseparateprogramsunderthejurisdictionof
Overlap
severalagencies.
1
Moreover,additionalprogramshavesincedeveloped
incrementallyovertimetoaddressthespecificneedsofcertainsegments
ofthepopulation.Nevertheless,thisfragmentationcancreatedifficulties
forpeopleinaccessingservicesaswellasadministrativeburdensfor
providerswhomustnavigatevariousapplicationrequirements,selection
criteria,andreportingrequirements.Fragmentationofprogramsacross
federalagencieshasalsoresultedindifferingmethodsforcollectingdata
onthoseexperiencinghomelessness.Inpartbecauseofthelackof
comprehensivedatacollectionrequirements,thedatahavelimited
usefulness.Completeandaccuratedataareessentialforunderstanding
andmeetingtheneedsofthosewhoareexperiencinghomelessnessandto
preventhomelessnessfromoccurring.
Coordinationamongtargetedhomelessnessprogramsandwithother
mainstreamprogramsthatsupportindividualsorfamiliesexperiencing
homelessnessincludesagenciesworkingtogetheronprogramguidance
andpreventionstrategies.InJuly2010,GAOreportedthatagencieshad
takensomestepstowardimprovedcoordinationandthattheU.S.
InteragencyCouncilonHomelessness(USICH)hasprovidedarenewed
focusonsuchcoordination.However,thelackoffederalcoordinationwas
stillviewedbysomelocalserviceprovidersasanimportantbarriertothe
effectivedeliveryofservicestothoseexperiencinghomelessness.Without
moreformalcoordinationoffederalprogramstospecificallyincludethe
linkingofsupportiveservicesandhousing,federaleffortstoaddress
homelessnessmayremainfragmentedandnotbeaseffectiveasthey
couldbe.
ActionsNeededand
OtherBenefits
Federalagencieshavetakensomepositivestepstoimprovecoordination
ofprogramsthatbenefitthoseexperiencinghomelessnessandreduce
overlapandfragmentationbutmoreneedstobedone.In2010,the19
membersandstaffofUSICH,includingtheDepartmentsofEducation,
HUD,andHHS,workedcollaborativelytodevelopaplantheFederal
StrategicPlantoPreventandEndHomelessness.Theplanisanimportant
1
Manyfederalprogramsprovidingservicestopersonsexperiencinghomelessnesswere
createdbytheMcKinney-VentoHomelessAssistanceAct,Pub.L.No.100-77(1987).The
act,enactedoriginallyastheStewartB.McKinneyHomelessAssistanceAct,wasrenamed
in2000.Pub.L.No.106-400.Theactoriginallyconsistedof15programsprovidingarange
ofservicestopersonsexperiencinghomelessness,includingemergencyshelter,
transitionalhousing,jobtraining,primaryhealthcare,education,andsomepermanent
housing.

Overlap
firststepthatrecognizesthattopreventandendhomelessness,targeted
andmainstreamprogramsincludinghousing,health,education,and
humanservicesmustbecoordinated.ConsistentwithrecentGAO
recommendations,akeyplanobjectiveistoincreasecollaborative
planningandbettertargetinitiativestopopulationsthatneedsupport
acrossmultiplesystems.
InkeepingwithGAOspreviousrecommendationsandtheplansobjective
toincreasecoordination,itwillbeimportantforthefederalagenciesthat
haveadoptedtheplantodevelopimplementationplansthatincludebut
arenotlimitedtoaprojectschedule,resourceallocation,outreach
measures,andaperformancemeasurementstrategytoevaluatetheir
progress.Theplanrecognizesthatcollection,analysis,andreportingof
quality,timelydataonhomelessnessareessentialfortargeting
interventions,trackingresults,strategicplanning,andresourceallocation.
Asnotedabove,currentlyeachfederalprogramgenerallyhasdistinctdata
requirements.Theplanacknowledgesthatacommondatastandardand
uniformperformancemeasuresacrossallfederalprogramsthatare
targetedathomelessnesswouldfacilitategreaterunderstandingand
simplifylocaldatamanagement.Consistentwiththeplan,representatives
withUSICHnotedthatagenciesaretakingstepstoimproveand
coordinatedata,specificallycitingtheDecember2010announcementby
theDepartmentofVeteransAffairstoparticipateinHomelessInformation
ManagementSystemsoverthenext12months.
2
Theformalcoordination
amongagenciesoutlinedinthisplanmayminimizefragmentationof
federalprogramsandhelpaddressgapsinsupportiveserviceswhile
linkinghousingandsupportiveservices.Thelinkingoftheseservicesis
consideredtobeimportantforeffectivelydeliveringassistancetothose
experiencinghomelessness.
Implementationchallengescouldhampereffortstoincreaseagency
coordinationasoutlinedintheplan.Forexample,accordingto
representativeswithUSICH,agenciesmayfacechallengesincoordinating
plans,programs,andactivitiesbecauseofindividualagencyregulations
2
TheHomelessManagementInformationSystem(HMIS)isasoftwareapplicationdesigned
torecordandstoreinformationonthecharacteristicsandserviceneedsofthose
experiencinghomelessness.HUDandotherplannersandpolicymakersatthefederal,
state,andlocallevelscanuseaggregateHMISdatatoobtaininformationabouttheextent
andnatureofhomelessnessovertime.Specifically,HMIScanbeusedtoproducean
unduplicatedcountofhomelesspersons,understandpatternsofserviceuse,andmeasure
theeffectivenessofhomelessprograms.

Overlap
thatcouldprohibitsharingbudgetaryorotherpredecisionalprogram
information.Nevertheless,tofacilitateinteragencycoordination,theplan
encouragesidentifyingandremovingbarrierstoworkingtogetherand
seekingopportunitiestoconductdatamatchesandsharedataonthose
experiencinghomelessness.Italsoindicatesagenciesatthestateandlocal
levelscouldreviewbudgetprocessestodetermineifavenuesexistfor
recognizingsavingsacrosspartnersandseekopportunitiesforengaging
congressionalcommitteesjointlyonissuesrelatedtopreventingand
endinghomelessness.Despitethesepotentialchallenges,itisimportant
foragenciestoimprovecollaborativeeffortsasoutlinedintheplan.Given
theimportanceoftheseissues,GAObelievesthatcoordinationoftargeted
andmainstreamfederalprogramscouldbenefitfromincreasedOfficeof
ManagementandBudgetandcongressionaloversight.
GAOplanstoexaminefurthertheextenttowhichtheseprogramshave
beenevaluatedontheirefficiencyandeffectivenessandthepotential
benefitsofconsolidatingoreliminatingfederalprogramsthatdeliver
servicestothoseexperiencinghomelessness.GAOalsoplanstoevaluate
whatotheroptionsmaymorefullyaddressfragmentationandoverlapand
achieveoperationalimprovements,efficiencies,orfinancialsavings.
GAOreviewedpriorreports,listedbelow,aboutfederalagenciesthat
Frameworkfor
providehomelessnessassistance.GAOalsoobtainedinformationfrom
Analysis representativesoftheU.S.InteragencyCouncilonHomelessnessaswell
asnationalpolicyandadvocacyorganizationsthatdealwithissuesof
homelessness.
RelatedGAO
Products
RuralHomelessness:BetterCollaborationbyHHSandHUDCould
ImproveDeliveryofServicesinRuralAreas.GAO-10-724.Washington,
D.C.:July20,2010.
Homelessness:ACommonVocabularyCouldHelpAgenciesCollaborate
andCollectMoreConsistentData.GAO-10-702.Washington,D.C.:June
30,2010.
Homelessness:ImprovingCoordinationandClientAccesstoPrograms.
GAO-02-485T.Washington,D.C.:March6,2002.
Homelessness:BarrierstoUsingMainstreamPrograms.
GAO/RCED-00-184.Washington,D.C.:July6,2000.
Overlap
Homelessness:CoordinationandEvaluationofProgramsAreEssential.
GAO/RCED-99-49.Washington,D.C.:February26,1999.
Foradditionalinformationaboutthisarea,contactAliciaPuenteCackley
AreaContact
at(202)512-8678orcackleya@gao.gov.
FurtherStepsNeededtoImproveCost-
EffectivenessandEnhanceServicesfor
Transportation-DisadvantagedPersons
FurtherStepsNeededtoImproveCost-Effectiveness
andEnhanceServicesforTransportation-
DisadvantagedPersons
WhyGAOIsFocusing
onThisArea
MillionsofAmericansareunabletoprovidetheirowntransportationor
havedifficultyaccessingpublictransportation.Individualswhoare
transportationdisadvantagedmayincludepeoplewhoareelderly,have
disabilities,orlowincomes.In2003,GAOreportedthateightfederal
departmentshad62programsprovidingtransportationservicestothis
population.Atthattime,GAOwasunabletoidentifyspendingon
transportationservicesformorethanhalfoftheseprograms.However,
spendingfor29programstotaledmorethan$2billioninfiscalyear2001.
FollowingGAOsrecommendationtoincreasefederalagencyparticipation,
a2004ExecutiveOrderexpandedtheexistingInteragencyTransportation
CoordinatingCouncilonAccessandMobilitytoinclude10federalagencies
andchargeditwithpromotinginteragencycooperationandestablishing
mechanismstominimizeprogramduplicationandoverlap.A2004GAO
reportfoundthatsomefederalagenciesweredevelopingguidanceand
technicalassistancefortransportationcoordinationasrecommendedby
GAO,andtheCoordinatingCouncilhadlaunchedtheUnitedWeRide
transportationcoordinationinitiative.Theseactionsnotwithstanding,
programoverlapandfragmentationcontinuetoday.
WhatGAOHasFound
toIndicate
orFragmentation
Agenciesprovidingtransportationservicestotransportation-disadvantaged
personsoftenprovidesimilarservicestosimilarclientgroups,leadingto
potentialduplicationandserviceinefficiencieswhencoordinationdoesnot
occur.Interagencyforumsforcoordinationatthefederal,state,andlocal
levelshaveexpandedinrecentyears,butparticipationhasvariedamong
federaldepartmentsandprogramrequirementshavenotbeenalignedto
facilitatecoordination.Toimprovecost-effectivenessandtransportation
services,federaldepartmentsshouldfacilitatecoordinationbyidentifying
andassessingprograms,collectinginformationonexpenditures,and
developingordisseminatingguidanceandpolicies.
GAOandothershavereportedthatthevarietyoffederalprograms
providingtransportationservicestothetransportationdisadvantagedhas
resultedinfragmentedservicesthatcanbedifficultforclientstonavigate
andnarrowlyfocusedprogramsthatmayresultinservicegaps.Further,
servicescanbecostlybecauseofinconsistent,duplicative,andoften
restrictiveprogramrulesandregulations.
GAOidentified80existingfederalprogramsineightdepartmentsthat
providedfundingfortransportationservicesforthetransportation
disadvantagedinfiscalyear2010(seetable).
1
Programsmayprovidebustokens,transitpasses,taxivouchers,or
mileagereimbursement,forexample,totransportation-disadvantaged
personsfortripstoaccessgovernmentservices(suchasjob-training
programs),thegrocerystore,medicalappointments,orforother
purposes.
Asinpriorwork,GAOcouldnotdeterminethetotalamountspent,
becauseagenciesoftendonotseparatelytracktransportationcostsfrom
otherprogramcosts.However,GAOobtainedfiscalyear2009funding
informationfor23programs,whichspentanestimatedtotalof$1.7billion
ontransportationservicesthatyear.Further,theMedicaidprograminthe
DepartmentofHealthandHumanServicesspent$704millioninfiscalyear
2010thefirstyearforwhichsuchinformationwasavailable.
NumberofProgramsGAOIdentifiedThatProvideTransportationServicesto
Transportation-disadvantagedPersons,byFederalDepartment,asofOctober2010
Federaldepartment Numberofprogramsidentified
Agriculture 2
Education
HealthandHumanServices
HousingandUrbanDevelopment
Interior
Labor
Transportation
VeteransAffairs
Total
a
80
Source:FederaldepartmentsandGAOanalysisoftheCatalogofFederalDomesticAssistance(October2010).
a
TheCorporationforNationalandCommunityServiceanindependentfederalagencyalsofunds
threeprogramsthatprovidetransportationservices.
TheInteragencyTransportationCoordinatingCouncilonAccessand
Mobilitythevenuechargedwithpromotinginteragencycoordination
1
TwonewprogramsintheDepartmentsofAgricultureandHousingandUrban
Developmenthavenotyetawardedgrants,butwillhavetransportationasaneligibleuseof
funds.Thesehavenotbeenincludedinthecountofprograms.
11
30
11
7
9
7
3
hasdevelopedanactionplanandapolicystatementtoencourageand
facilitatecoordination,butactionbyfederaldepartmentsindividually
andinconcertwillbenecessarytobettercoordinateprogramsand
eliminateduplicationandfragmentationatthefederallevel.Forexample,
becauseneithertheCoordinatingCouncilnormostfederaldepartments
haveaninventoryofexistingprogramsprovidingtransportationservices
ortheirexpenditures,theylacktheinformationtoidentifyopportunities
toimprovetheefficiencyandserviceoftheirprogramsthrough
coordination.Availableinformationisoutdatedandincomplete.
Additionally,departmentshavenotalignedprogramrequirements.For
instance,a2009reportbytheNationalResourceCenterforHuman
ServiceTransportationCoordinationfoundthatthreefederaldepartments
providingtransportationservicesthedepartmentsofHealthandHuman
Services,Labor,andEducationhadyettocoordinatetheirplanning
processesorrequirementswiththeDepartmentofTransportation.
2
GAO
foundthatthesestepsstillhadnotoccurredasoftheendof2010.These
departmentsaccountfor50ofthe80existingprogramsidentified.
Withlimitedinteragencycoordinationanddirectionatthefederallevel,
theUnitedWeRideinitiativeandtheFederalTransitAdministration
(FTA)haveencouragedstateandlocalcoordination.Forexample,certain
FTAtransitprogramsrequirethatprojectsselectedforgrantfundingbe
derivedfromlocallydeveloped,coordinatedpublictransit-humanservice
transportationplans.
3
TheNationalConferenceofStateLegislatures
reportedin2010that25stateshadcreatedcouncilstoimprove
coordinationamongstateandlocalgrantees.
4
Somestatesalsohave
regionalorlocalcouncils.Thesecouncilsaregenerallyresponsiblefor
identifyingavailabletransportationservices,conductingneeds
assessments,anddetermininghowgapsshouldbefilled.However,
participationbynon-FTAgranteeswhichisoptionalhasvaried,
limitingtheseefforts.
2
SeeReporttotheSecretaryofTransportation,NationalResourceCenterforHuman
ServiceTransportationCoordination(March2009).
3
SeeFormulagrantsforspecialneedsofelderlyindividualsandindividualswith
disabilities,49U.S.C.5310(d)(2)(B);JobAccessandReverseCommuteformulagrants,49
U.S.C.5316(g)(3);NewFreedomProgram,49U.S.C.5317(f)(3).
4
NationalConferenceofStateLegislatures,StateHumanServiceTransportation
CoordinatingCouncils:AnOverviewandStateProfiles(Denver,Colo.,February2010).
ActionsNeededand
OtherBenefits
Federalcoordinationoftransportationservicescanleadtoeconomic
benefits,suchasfundingflexibility,reducedcostsorgreatefficiency,and
increasedproductivity,aswellasimprovedcustomerserviceand
enhancedmobility,asGAOandothershavereported.Torealizethese
benefits,GAOnowsuggestsdepartmentsundertakeactionsintwokey
areastohelpidentifyopportunitiestoeliminateduplicationand
fragmentationandimprovecoordination:
Programinformation.Toreducefragmentation,overlap,and
duplication,federaldepartmentsontheCoordinatingCouncilshould
identifyandassesstheirtransportationprogramsandrelated
expendituresandworkwithotherdepartmentstoidentifypotential
opportunitiesforadditionalcoordinationsuchastheuseofone-call
centers,transportationbrokerages,orsharedresources,amongother
options.TheCoordinatingCouncilshoulddevelopthemeansfor
collectingandsharingthisinformationbyestablishingagencyrolesand
responsibilitiesanddevelopingastrategytoreinforcecooperation.
Policiesandguidance.Federaldepartmentsalsohavemoreworkto
doindevelopinganddisseminatingpoliciesandgranteeguidancefor
coordinatingtransportationservices.Thisisimportantbecausestate
andlocalgranteestypicallylooktotheiradministratingdepartments
forguidanceonissuessuchascoordination.Somestakeholders
indicatedthatpoliciesforcostsharingamongprogramsstillneedtobe
developed.Anothernotedthatsomecoordinationpolicies,suchas
vehiclesharingamongserviceproviders,couldbebetterdisseminated.
In2003,GAOdiscussedthreepotentialoptionstoovercomeobstaclesto
thecoordinationoftransportationforthetransportationdisadvantaged,
twoofwhichwouldrequiresubstantialstatutoryorregulatorychanges
andincludepotentialcosts:makingfederalprogramstandardsmore
uniformorcreatingsometypeofrequirementorfinancialincentivefor
coordination.Asaresult,atthattimeGAOrecommendedexpandingthe
CoordinatingCouncilandbetterdisseminatingguidance.Subsequently,
theCoordinatingCouncilwasexpandedandseveralcoordination
initiativeswerelaunched,andprogresshasbeenmadeincoordination
efforts,particularlyatthestateandlocallevel.However,toassurethat
coordinationbenefitsarerealized,Congressmaywanttoconsider
requiringkeyprogramstoparticipateincoordinatedplanning.

Frameworkfor
Analysis
GAOreviewedpriorworklistedbelowonthecoordinationof
transportationservicesandtheJobAccessandReverseCommute
program.GAOintervieweddepartmentofficialswiththeFTAandUnited
WeRideandcontactedtheDepartmentsofAgriculture,Education,Health
andHumanServices,HousingandUrbanDevelopment,theInterior,
Justice,Labor,andVeteransAffairs.GAOalsospokewiththeNational
ResourceCenterforHumanServiceTransportationCoordination,the
NationalCouncilonDisability,AmericanAssociationofRetiredPersons,
AmericanAssociationofStateHighwayandTransportationOfficials,and
ProjectACTION,andreviewedrelevantreports.Finally,GAOsearchedthe
CatalogofFederalDomesticAssistancefor2010toconfirmthatprograms
identifiedin2003stillexistandoffertransportationservicesandto
identifynewprogramsfundingtheseservices.Programinformationwas
verifiedwithdepartmentofficials,whoprovidedspendingdata.
RelatedGAO
Products
FederalTransitAdministration:ProgressandChallengesin
ImplementingandEvaluatingtheJobAccessandReverseCommute
Program.GAO-09-496.Washington,D.C.:May21,2009.
TransportationDisadvantaged:ProgressinImplementingtheNew
FreedomProgramHasBeenLimited,andBetterMonitoringProcedures
WouldHelpEnsureProgramFundsAreUsedasIntended.GAO-07-999R.
Transportation-DisadvantagedPopulations:ActionsNeededtoClarify
ResponsibilitiesandIncreasePreparednessforEvacuations.GAO-07-44.
FederalTransitAdministration:ProgressMadeinImplementing
ChangestotheJobAccessProgram,butEvaluationandOversight
ProcessesNeedImprovement.GAO-07-43.Washington,D.C.:November17,
2006.
DisasterPreparedness:PreliminaryObservationsontheEvacuationof
VulnerablePopulationsduetoHurricanesandOtherDisasters.
GAO-06-790T.Washington,D.C.:May18,2006.
Transportation-DisadvantagedSeniors:EffortstoEnhanceSenior
MobilityCouldBenefitfromAdditionalGuidanceandInformation.
Transportation-DisadvantagedPopulations:FederalAgenciesAreTaking
StepstoAssistStatesandLocalAgenciesinCoordinatingTransportation
Services.GAO-04-420R.Washington,D.C.:February24,2004.
Transportation-DisadvantagedPopulations:SomeCoordinationEfforts
AmongProgramsProvidingTransportationServices,butObstacles
Persist.GAO-03-697.Washington,D.C.:June30,2003.
Transportation-DisadvantagedPopulations:ManyFederalPrograms
FundTransportationServices,butObstaclestoCoordinationPersist.
Foradditionalinformationaboutthisarea,contactDavidWiseat
AreaContact
(202)512-2834orwised@gao.gov.
MultipleEmploymentandTrainingPrograms:
ProvidingInformationonColocatingServices
andConsolidatingAdministrativeStructures
CouldPromoteEfficiencies
MultipleEmploymentandTrainingPrograms:Providing
InformationonColocatingServicesandConsolidating
AdministrativeStructuresCouldPromoteEfficiencies
WhyGAOIsFocusing
onThisArea
Federallyfundedemploymentandtrainingprogramsplayanimportant
roleinhelpingjobseekersobtainemployment.Infiscalyear2009,47
programsspentabout$18billiontoprovideservices,suchasjobsearch
andjobcounseling,toprogramparticipants.Mostoftheseprogramsare
administeredbytheDepartmentsofLabor,Education,andHealthand
HumanServices(HHS).
GAOhaspreviouslyissuedreportsonthenumberofprogramsthat
provideemploymentandtrainingservicesandoverlapamongthem.Inthe
1990s,GAOissuedaseriesofreportsthatidentifiedprogramoverlapand
possibleareasofresultinginefficiencies.In2000and2003,GAOidentified
programsforwhichakeyprogramgoalwasprovidingemploymentand
trainingassistanceandtrackedtheincreasingnumberofprograms.GAO
recentlyupdatedinformationontheseprograms,foundoverlapamong
them,andexaminedpotentialduplicationamongthreeselectedlarge
programsHHSsTemporaryAssistanceforNeedyFamilies(TANF)and
theDepartmentofLaborsEmploymentServiceandWorkforceInvestment
Act(WIA)Adultprograms.
WhatGAOHasFound
toIndicate
orFragmentation
Forty-fourofthe47federalemploymentandtrainingprogramsGAO
identified,includingthosewithbroadermissionssuchasmultipurpose
blockgrants,overlapwithatleastoneotherprograminthattheyprovide
atleastonesimilarservicetoasimilarpopulation.Someofthese
overlappingprogramsservemultiplepopulationgroups.Otherstarget
specificpopulations,mostcommonlyNativeAmericans,veterans,and
youth.Evenwhenprogramsoverlap,theymayhavemeaningful
differencesintheireligibilitycriteriaorobjectives,ortheymayprovide
similartypesofservicesindifferentways.
GAOexaminedtheTANF,EmploymentService,andWIAAdultprograms
forpotentialduplicationandfoundtheyprovidesomeofthesameservices
tothesamepopulationthroughseparateadministrativestructures.
Althoughtheextenttowhichindividualsreceivethesameservicesfrom
theseprogramsisunknownduetolimiteddata,GAOfoundthese
programsmaintainparalleladministrativestructurestoprovidesomeof
thesameservices,suchasjobsearchassistance,tolow-income
individuals(seefollowingtable).Itshouldbenotedthatemploymentis
onlyoneaspectoftheTANFprogram,whichalsoprovidesawiderangeof
otherservices,includingcashassistance.Atthestatelevel,theTANF
programistypicallyadministeredbythestatehumanservicesorwelfare
agency,whiletheEmploymentServiceandWIAAdultprogramsare
typicallyadministeredbythestateworkforceagencyandprovided

throughone-stopcenters.Agencyofficialsacknowledgedthatgreater
efficienciescouldbeachievedindeliveringservicesthroughthese
programs,butsaidfactorssuchasthenumberofclientsthatanyone-stop
centercanserveandone-stopcentersproximitytoclients,particularlyin
ruralareas,couldwarranthavingmultipleentitiesprovidethesame
services.
SelectedEmploymentandTrainingServicesProvidedbytheEmploymentService,
TANF,andWIAAdultPrograms,FiscalYear2009
Programname
Employment
counselingand
assessment
Development
ofjob
opportunities
Jobreadiness
skillstraining
Job
referrals
Jobsearchor
jobplacement
activities
EmploymentService/Wagner-
PeyserFundedActivities(DOL)
TemporaryAssistancefor
NeedyFamilies(HHS)
WIAAdultProgram(DOL)
Primaryservices Secondaryservices
Source:GAOsurveyofagencyofficials.
Note:DOL=DepartmentofLabor
Colocatingservicesandconsolidatingadministrativestructuresmay
increaseefficienciesandreducecosts,butimplementationcanbe
challenging.SomestateshavecolocatedTANFemploymentandtraining
servicesinone-stopcenterswhereEmploymentServiceandWIAAdult
servicesareprovided.ThreestatesFlorida,Texas,andUtahhavegone
astepfurtherbyconsolidatingtheagenciesthatadministerthese
programs,andstateofficialssaidthisreducedcostsandimproved
services,buttheycouldnotprovideadollarfigureforcostsavings.States
andlocalitiesmayfacechallengestocolocatingservices,suchaslimited
officespace.Inaddition,consolidatingadministrativestructuresmaybe
timeconsumingandanycostsavingsmaynotbeimmediatelyrealized.
Anobstacletofurtherprogressinachievinggreateradministrative
efficienciesisthatlittleinformationisavailableaboutthestrategiesand
resultsofsuchinitiatives.Inaddition,littleisknownabouttheincentives
thatstatesandlocalitieshavetoundertakesuchinitiativesandwhether
additionalincentivesareneeded.
ActionsNeededand
OtherBenefits
Tofacilitatefurtherprogressbystatesandlocalitiesinincreasing
administrativeefficienciesinemploymentandtrainingprograms,GAO
recommendedin2011thattheSecretariesofLaborandHHSwork
togethertodevelopanddisseminateinformationthatcouldinformsuch
efforts.Thisshouldincludeinformationaboutstateinitiativesto
consolidateprogramadministrativestructuresandstateandlocalefforts
tocolocatenewpartners,suchasTANF,atone-stopcenters.Information
onthesetopicscouldaddresschallengesfaced,strategiesemployed,
resultsachieved,andremainingissues.Aspartofthiseffort,Laborand
HHSshouldexaminetheincentivesforstatesandlocalitiestoundertake
suchinitiatives,and,aswarranted,identifyoptionsforincreasingsuch
incentives.LaborandHHSagreedthattheyshoulddevelopand
disseminatethisinformation.HHSnotedthatitlackslegalauthorityto
mandateincreasedTANF-WIAcoordinationorcreateincentivesforsuch
efforts.
Totheextentthatcolocatingservicesandconsolidatingadministrative
structuresreduceadministrativecosts,fundscouldpotentiallybe
availabletoservemoreclientsorforotherpurposes.FortheTANF
programalone,GAOestimatedthatstatesspentabout$160millionto
administeremploymentandtrainingservicesinfiscalyear2009.According
toaDepartmentofLaborofficial,theadministrativecostsfortheWIA
Adultprogramwereatleast$56millioninprogramyear2009.Officials
toldGAOtheydonotcollectdataontheadministrativecostsassociated
withtheEmploymentServiceprogram,astheyarenotaseparately
identifiablecostinthelegislation.Laborofficialssaidthat,onaverage,the
agencyspendsabout$4,000foreachWIAAdultparticipantwhoreceives
trainingservices.Inperiodsofbudgetaryconstraints,itisallthemore
importantthatresourcesareusedeffectively.Dependingonthereduction
inadministrativecostsassociatedwithcolocationandconsolidation,these
fundscouldbeusedtotrainpotentiallyhundredsorthousandsof
additionalindividuals.
TheinformationcontainedinthisanalysisisbasedonGAOproductslisted
Frameworkfor
below.GAOdidnotconductalegalreviewinordertodeterminethe
Analysis programs,theirrequirements,orgoals.
RelatedGAO
Products
MultipleEmploymentandTrainingPrograms:ProvidingInformation
onColocatingServicesandConsolidatingAdministrativeStructures
CouldPromoteEfficiencies.GAO-11-92.Washington,D.C.:January13,
2011.
MultipleEmploymentandTrainingPrograms:Fundingand
PerformanceMeasuresforMajorPrograms.GAO-03-589.Washington,
D.C.:April18,2003.
MultipleEmploymentandTrainingPrograms:OverlappingPrograms
IndicateNeedforCloserExaminationofStructure.GAO-01-71.
Foradditionalinformationaboutthisarea,contactAndrewSherrillat
AreaContact
(202)512-7215orsherrilla@gao.gov.
TeacherQuality:ProliferationofPrograms
ComplicatesFederalEffortstoInvestDollars
Effectively
TeacherQuality:ProliferationofProgramsComplicates
FederalEffortstoInvestDollarsEffectively
WhyGAOIsFocusing
onThisArea
Infiscalyear2009,thefederalgovernmentspentover$4billion
specificallytoimprovethequalityofournations3millionteachers
throughnumerousprogramsacrossthegovernment.Teacherqualitycan
beenhancedthroughavarietyofactivities,includingtraining,recruitment,
andcurriculumandassessmenttools.Inturn,theseactivitiescan
influencestudentlearningandultimatelyimprovetheglobal
competitivenessoftheAmericanworkforceinaknowledge-based
economy.PriorGAOreportshavenotedthatsustainedcoordination
amongkeyfederaleducationprogramscouldenhancestateeffortsto
improveteacherquality.
WhatGAOHasFound
toIndicate
orFragmentation
Federaleffortstoimproveteacherqualityhaveledtothecreationand
expansionofavarietyofprogramsacrossthefederalgovernment;
however,thereisnogovernmentwidestrategytominimizefragmentation,
overlap,orduplicationamongthesemanyprograms.Specifically,GAO
identified82distinctprogramsdesignedtohelpimproveteacherquality,
eitherasaprimarypurposeorasanallowableactivity,administered
across10federalagencies.Manyoftheseprogramssharesimilargoals.
Forexample,9ofthe82programssupportimprovingthequalityof
teachinginscience,technology,engineering,andmathematics(STEM
subjects)andtheseprogramsaloneareadministeredacrossthe
DepartmentsofEducation,Defense,andEnergy;theNationalAeronautics
andSpaceAdministration;andtheNationalScienceFoundation.Further,
infiscalyear2010,themajority(53)oftheprogramsGAOidentified
supportingteacherqualityimprovementsreceived$50millionorlessin
fundingandmanyhavetheirownseparateadministrativeprocesses.
Theproliferationofprogramshasresultedinfragmentationthatcan
frustrateagencyeffortstoadministerprogramsinacomprehensive
manner,limittheabilitytodeterminewhichprogramsaremostcost-
effective,andultimatelyincreasesprogramcosts.Forexampleinthe
DepartmentofEducation(Education),eightdifferentofficesadminister
over60ofthefederalprogramssupportingteacherqualityimprovements,
primarilyintheformofcompetitivegrants.Educationofficialsbelievethat
federalprogramshavefailedtomakesignificantprogressinhelpingstates
closeachievementgapsbetweenschoolsservingstudentsfromdifferent
socioeconomicbackgrounds,because,inpart,federalprogramsthatfocus
onteachingandlearningofspecificsubjectsaretoofragmentedtohelp
stateanddistrictofficialsstrengtheninstructionandincreasestudent
achievementinacomprehensivemanner.WhileEducationofficialsnoted,
andGAOconcurs,thatamixtureofprogramscantargetservicesto
underservedpopulationsandyieldstrategicinnovations,thecurrent

Effectively
programsarenotstructuredinawaythatenableseducatorsand
policymakerstoidentifythemosteffectivepracticestoreplicate.
AccordingtoEducationofficials,itistypicallynotcost-effectiveto
allocatethefundsnecessarytoconductrigorousevaluationsofsmall
programs;therefore,smallprogramsareunlikelytobeevaluated.Finally,
itismorecostlytoadministermanyseparatelyauthorizedfederal
programsbecauseeachprogramhasitsownpolicies,applications,award
competitions,reportingrequirements,and,insomecases,federal
evaluations.
Whileallofthe82federalprogramsGAOidentifiedsupportteacherquality
improvementefforts,severaloverlapinthattheysharemorethanonekey
programcharacteristic.Forexample,teacherqualityprogramsmay
overlapiftheysharesimilarobjectives,servesimilartargetgroups,orfund
similaractivities.GAOpreviouslyreportedthat23oftheprograms
administeredbyEducationinfiscalyear2009hadimprovingteacher
qualityasaspecificfocus,whichsuggestedthattheremaybeoverlap
amongtheseandotherprogramsthathaveteacherqualityimprovements
asanallowableactivity.Whenlookingacrossabroadersetofcriteria,
GAOfoundthat14oftheprogramsadministeredbyEducationoverlapped
withanotherprogramwithregardtoallowableactivitiesaswellasshared
objectivesandtargetgroups(seetable).Forexample,theTransitionto
TeachingprogramandTeacherQualityPartnershipGrantprogramcan
bothbeusedtofundsimilarteacherpreparationactivitiesthrough
institutionsofhighereducationforthepurposeofhelpingindividualsfrom
non-teachingfieldsbecomequalifiedtoteach.
Effectively
AreasofOverlapamongSelectedProgramsAdministeredbyEducationThatSupportTeacherQualityImprovement
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SpecificSubjects
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inGeneral
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SpecialPopulations
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ProspectiveTeachers
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Professionals
Activity
b
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Professional
Development
Recruitmentor
Retention
Certificationor
Licensure
InductionorMentoring
Source:GAOanalysisofDepartmentofEducationdocuments andinterviews.
Note:The14programsshowninthetableareasubsetofover60Educationprogramssupporting
teacherqualityimprovementeitherspecificallyorasanallowableactivity.Specifically,althoughTitle
I,PartA,SchoolImprovementGrants,andEvenStartallowprogramfundstobeusedforteacher
qualityactivities,thisisnottheirprimaryfocus.The14programspresentedaboveoverlappedwithat
least1otherprogramacrossobjective,targetgroup,andactivity.
a
Educationhasproposedconsolidatingthisprogramunderabroaderprograminitsproposalforthe
reauthorizationoftheElementaryandSecondaryEducationActof1965.
b
Thisisnotanexhaustivelistofactivitiesallowedundertheseprograms,butrathertheactivitiesGAO
determinedweremostrelevantforthepurposesofthisanalysis.
Althoughthereisoverlapamongtheseprograms,severalfactorsmakeit
difficulttodeterminewhetherthereisunnecessaryduplication.First,
whensimilarteacherqualityactivitiesarefundedthroughdifferent
programsanddeliveredbydifferententities,someoverlapcanoccur
Effectively
unintentionally,butisnotnecessarilywasteful.Forexample,alocal
schooldistrictcouldusefundsfromtheForeignLanguageAssistance
programtopayforprofessionaldevelopmentforateacherwhowillbe
implementinganewforeignlanguagecourse,andthisteachercouldalso
attendasummerseminaronbestpracticesforteachingtheforeign
languageataLanguageResourceCenter.Second,bydesign,individual
teachersmaybenefitfromfederallyfundedtrainingorfinancialsupportat
differentpointsintheircareers.Specifically,theteacherfromthis
examplecouldalsoreceiveteachercertificationthroughaprogramfunded
bytheTeachersforaCompetitiveTomorrowprogram.Further,both
broadandnarrowlytargetedprogramsexistsimultaneously,meaningthat
thesameteacherwhoreceivesprofessionaldevelopmentfundedfromany
oneormoreoftheabovethreeprogramsmightalsoreceiveprofessional
developmentthatisfundedthroughTitleI,PartA.Theactualcontentof
theseprofessionaldevelopmentactivitiesmaydifferthough,sincethe
primarygoalofeachprogramisdifferent.Inthisexample,itwouldbe
difficulttoknowwhethertheabsenceofanyoneoftheseprogramswould
makeadifferenceintermsoftheteachersabilitytoteachthenew
languageeffectively.
Inpastwork,GAOandEducationsInspectorGeneralhaveconcludedthat
improvedplanningandcoordinationcouldhelpEducationbetterleverage
expertiseandlimitedresources,andtoanticipateanddevelopoptionsfor
addressingpotentialproblemsamongthemultitudeofprogramsit
administers.Generally,GAOhasreportedthatuncoordinatedprogram
effortscanwastescarcefunds,confuseandfrustrateprogramcustomers,
andlimittheoveralleffectivenessofthefederaleffort.However,giventhe
largenumberofteacherqualityprogramsandtheextentofoverlap,itis
unlikelythatimprovedcoordinationalonecanfullymitigatetheeffectsof
thefragmentedandoverlappingfederaleffort.
ActionsNeededand
OtherBenefits
In2009,GAOrecommendedthattheSecretaryofEducationworkwith
otheragenciesasappropriatetodevelopacoordinatedapproachfor
routinelyandsystematicallysharinginformationthatcanassistfederal
programs,states,andlocalprovidersinachievingefficientservice
delivery.Coordinationisessentialtoensurethatprogramsdonotworkat
cross-purposes,donotrepeatmistakes,anddonotengageinwasteful
duplicationofservices.Educationhasestablishedworkinggroupstohelp
developmoreeffectivecollaborationacrossEducationoffices,andhas
reachedouttootheragenciestodevelopaframeworkforsharing
informationonsometeacherqualityactivities,butithasnotedthat
coordinationeffortsdonotalwaysproveusefulandcannotfullyeliminate
Effectively
barrierstoprogramalignment,suchasprogramswithdifferingdefinitions
forsimilarpopulationsofgrantees,whichcreateanimpedimentto
coordination.
Congresscouldhelpeliminatesomeofthesebarriersthroughlegislation,
particularlythroughthependingreauthorizationoftheElementaryand
SecondaryEducationActof1965andotherkeyeducationbills.
Specifically,tominimizeanywastefulfragmentationandoverlapamong
teacherqualityprograms,Congressmaychooseeithertoeliminate
programsthataretoosmalltoevaluatecost-effectivelyorcombine
programsservingsimilartargetgroupsintoalargerprogram.Education
hasalreadyproposedcombining38programsinto11programsinits
reauthorizationproposal,whichcouldallowtheagencytodedicatea
higherportionofitsadministrativeresourcestomonitoringprogramsfor
resultsandprovidingtechnicalassistance.Congressmightalsoinclude
legislativeprovisionstohelpEducationreducefragmentation,suchasby
givingbroaderdiscretiontotheagencytomoveresourcesawayfrom
certainprograms.CongresscouldprovideEducationguidelinesfor
selectingtheseprograms.Forexample,CongresscouldallowEducation
discretiontoconsolidateprogramswithadministrativecostsexceedinga
certainthresholdorfailingtomeetperformancegoals,intolargerormore
successfulprograms.Finally,totheextentthatoverlappingprograms
continuetobeauthorized,theycouldbebetteralignedwitheachotherin
awaythatallowsforcomparisonandevaluationtoensuretheyare
complementaryratherthanduplicative.
Frameworkfor
Analysis
TheinformationcontainedinthisanalysisisbasedinpartonissuedGAO
productslistedbelow.Additionally,itisbasedonrecentGAOanalysisof
overlapamongteacherqualityprogramsamongabroadrangeof82
federalprogramsthatsupportteacherqualityeffortsdirectlyasaprimary
purpose,orasanallowableactivity.GAOreviewedprogramsthatithad
previouslyidentifiedasteacherqualityprogramsandrefinedtheinitiallist
ofprogramsbasedonakeywordsearchoftheCatalogofFederal
DomesticAssistance(CFDA)forprogramsthatincludedteacherquality,
teachertraining,orprofessionaldevelopmentintheirdescriptions.
GAOthenreviewedagencyWebsites,budgetdocuments,andother
informationtoverifythattheseprogramssupportteacherquality
improvementsdirectlyorallowedfundstobeusedtosupportteacher
qualityimprovements.Educationverifiedthatthe63programsthatthey
administerandthatGAOidentifiedassupportingteacherquality
improvementdidsoeitherdirectlyorasanallowableactivity;GAOdidnot
askotheragenciestoverifyotherprogramsonthelist.
Effectively
Tospecificallyidentifypotentialfragmentationandoverlapamongthese
programs,GAOreviewedtheCFDAdescriptionsandotherdocumentation
todetermineifprogramshadsimilarobjectives,servedsimilartarget
groups,andprovidedsimilartypesofassistance.Forpurposesofthis
report,GAOfocusedonEducationprograms,whichfurthernarrowedthe
listofpotentiallyoverlappingprogramsto14.GAOtheninterviewed
responsibleprogramofficialstoobtainmoredetailedinformationabout
eachoftheseprograms.GAOalsointerviewedEducationofficialsto
determineifprogresshadbeenmadeinaddressingprevious
recommendationsaimedatimprovingcoordinationamongagencies
administeringteacherqualityprograms,andtoobtaininformationabout
thepotentialimpactofconsolidatingoreliminatingprogramsthatGAO
identifiedasbeingpotentiallyduplicative.
RelatedGAO
Products
EnglishLanguageLearning:DiverseFederalandStateEffortsto
SupportAdultEnglishLanguageLearningCouldBenefitfromMore
Coordination.GAO-09-575.Washington,D.C.:July29,2009.
TeacherPreparation:MultipleFederalEducationOfficesSupport
TeacherPreparationforInstructingStudentswithDisabilitiesand
EnglishLanguageLearners,butSystematicDepartmentwide
CoordinationCouldEnhanceThisAssistance.GAO-09-573.Washington,
D.C.:July20,2009.
TeacherQuality:SustainedCoordinationamongKeyFederalEducation
ProgramsCouldEnhanceStateEffortstoImproveTeacherQuality.
NoChildLeftBehindAct:EducationActionsCouldImprovethe
TargetingofSchoolImprovementFundstoSchoolsMostinNeedof
Assistance.GAO-08-380.Washington,D.C.:February29,2008.
TeacherQuality:Approaches,Implementation,andEvaluationofKey
FederalEfforts.GAO-07-861T.Washington,D.C.:May17,2007.
NoChildLeftBehindAct:StatesFaceChallengesinMeasuring
AcademicGrowththatEducationsInitiativesMayHelpAddress.
Troops-to-Teachers:ProgramBringsMoreMenandMinoritiestothe
TeachingWorkforce,butEducationCouldImproveManagementto
EnhanceResults.GAO-06-265.Washington,D.C.:March1,2006.
Effectively
NoChildLeftBehindAct:ImprovedAccessibilitytoEducations
InformationCouldHelpStatesFurtherImplementTeacherQualification
Requirements.GAO-06-25.Washington,D.C.:November21,2005.
HigherEducation:ActivitiesUnderwaytoImproveTeacherTraining,
butReportingonTheseActivitiesCouldBeEnhanced.GAO-03-6.
EarlyEducationandCare:OverlapIndicatesNeedtoAssess
CrosscuttingPrograms.GAO/HEHS-00-78.Washington,D.C.:April28,
2000.
FederalEducationFunding:MultipleProgramsandLackofDataRaise
EfficiencyandEffectivenessConcerns.GAO/T-HEHS-98-46.Washington,
D.C.:November6,1997.
Foradditionalinformationaboutthisarea,contactGeorgeScottat
AreaContact
(202)512-7215orscottg@gao.gov.
FragmentationofFinancialLiteracyEfforts
MakesCoordinationEssential
FragmentationofFinancialLiteracyEffortsMakes
CoordinationEssential
WhyGAOIsFocusing
onThisArea
Improvingfinancialliteracyisessentialtoensuringconsumerseconomic
well-beingandsecurity.Poormoneymanagementandfinancialdecision
makingcanlowerafamilysstandardoflivingandinterferewithcrucial
long-termgoals,suchasbuyingahomeandfinancingretirement.
Financialliteracyhasbroaderpublicpolicyimplicationsaswell.For
example,financialmarketsworkbestwhenconsumersunderstandhow
financialservicesprovidersandproductsworkandknowhowtochoose
amongthem.Federalfinancialliteracyprogramsandresourcesarespread
widelyamongmanydifferentfederalagencies,raisingconcernsof
potentialduplicationorfragmentation.
WhatGAOHasFound
toIndicate
orFragmentation
Federalfinancialliteracyactivitiesarefragmentedacrossmultiple
agencies,withmorethan20differentfederalagenciesprovidingabout56
programsrelatedtofinancialliteracy.Thisincreasestheriskof
inefficiencyandhighlightstheneedforstrongcoordinationofthese
efforts.Federallyfundedfinancialliteracyprogramscoveranumberof
topics(suchassavingforretirementandavoidingfraudulentpractices),
targetarangeofaudiences(suchasschoolchildren,prospective
homeowners,andinvestors),andincludeavarietyofdeliverymechanisms
(suchasclassroomcurricula,printmaterials,Websites,broadcastmedia,
andindividualcounseling).Tostreamlinefederaleffortsinthisareaand
improvecoordination,CongresscreatedthemultiagencyFinancial
LiteracyandEducationCommission(theCommission)in2003.Itcharged
theCommissionwith,amongotherthings,developinganationalstrategy
topromotefinancialliteracyandeducation,coordinatingfederalefforts,
andidentifyingandproposingmeansofeliminatingareasofoverlap
andduplication.
GAOrecommendedin2006thattheCommissionuseanunbiased,third-
partyevaluatortoexaminetheextentofoverlapandduplicationamong
federalfinancialliteracyactivities.Inresponse,theTreasuryDepartment,
whichstaffsandchairstheCommissionandcoordinatesitsactivities,
contractedfortwostudies,bothofwhichfoundlimitedevidenceof
overlapandduplication.Staffatfourfederalagenciesandtworesearch
institutionsthatGAOspokewithnotedthatevenwhendifferentagencies
programsappearedsimilar,closerinspectioncanrevealimportant
differencesinsuchelementsasthetargetaudienceorthespecificcontent.
However,with20differentagenciesplayingaroleinfinancialeducation,
federalfinancialliteracyeffortsclearlyarefragmented.Therearesome
advantagestohavingmultiplefederalagenciesinvolvedinfinancial
literacyforexample,agenciescanfocustheireffortsontheparticular

subjectmatterortargetaudiencesforwhichtheyhaveexpertise.Atthe
sametime,fragmentationacrossagenciescanalsomakeitdifficultto
developacoherentglobalapproachforidentifyinggapsandneedsandfor
rationallyallocatingoverallresources.Inparttoencourageamore
coordinatedapproachtofederalfinancialliteracyresources,Congress
mandatedtheCommissiontodevelopanationalstrategy.However,as
GAOhasreported,the2006NationalStrategyforFinancialLiteracylargely
wasdescriptiveratherthanstrategic;generallydidnotincludeaplanfor
implementation;andonlypartiallyaddressedordefinedelementssuchas
performancemeasures,resourceneeds,androlesandresponsibilities.In
December2010,theCommissionreleasedanewnationalstrategy,which
identifiesfiveactionareaspolicy,education,practice,research,and
coordinationaswellasaseriesofgoalsandrelatedobjectivesintended
tohelpguidefinancialliteracyeffortsoverthenext3to5years.The
Commissionstatedthatin2011itwillreleaseanimplementationplanfor
howtheCommission,itsmembers,andotherorganizationscanbest
incorporatethenewstrategyintotheiractivitiesandinitiatives.Asthat
implementationplanisdeveloped,GAObelievesthatoneofitsgoals
shouldbetoaddressthefragmentationoffederalfinancialliteracyefforts.
Fragmentationacrossfederalagencieshasthepotentialtoresultin
inefficient,uncoordinated,orredundantuseofresources.Inthecaseof
financialliteracyprograms,therearenumerousfundingstreamsandlittle
gooddataontheamountoffederalfundsdevotedtofinancialliteracy.
Financialliteracyeffortsarenotnecessarilyorganizedasseparatebudget
lineitemsorcostcenterswithinfederalagenciesandthereisnoestimate
ofoverallfederalspendingforfinancialliteracyandeducation,according
totheDepartmentoftheTreasury.TheCommissionwaschargedwith
coordinatingfederalresources,butGAOhasnotedinthepastthatthe
Commissionfacessignificantchallengesinitsroleasacentralizedfocal
point:itiscomposedofmanyagencies,butithasnoindependentbudget
andnolegalauthoritytocompelmemberagenciestotakeanyaction.
ActionsNeededand
OtherBenefits
GAOhasidentifiedseveralpossiblestepsthatcouldbetakentoaddress
fragmentationinfederalfinancialliteracyefforts:
Improvecoordinationamongfederalagencies.Becauseofthe
crosscuttingnatureoffinancialliteracy,itwouldbedifficult,ifnot
impossible,foroneagencyalonetoaddresstheissue,butcoordination
amongagenciesisclearlyessential.Inpriorwork,GAOhasidentified
barrierstocoordinatingprogramsandinitiativesacrossthefederal
government,whichcanincludecompetingmissions,concernsabout
protectingresources,andalackofclearlyarticulatedrolesand
responsibilities.TheCommissionshouldenhanceitseffortsto
coordinatefederalactivities,suchasbyexploringfurtheropportunities
tostrengthenitsroleasacentralclearinghouseforfederalfinancial
literacyresources.
Delineaterolesfortwokeyfinancialeducationoffices.In2010,
CongressenactedlegislationcreatinganOfficeofFinancialEducation
withinthenewBureauofConsumerFinancialProtection.Thisofficeis
chargedwithdutiesthatareinsomewayssimilartothoseofthe
separateOfficeofFinancialEducationandFinancialAccesswithinthe
DepartmentoftheTreasury.Therespectiveofficeswillneedto
coordinatetheirrolesandactivitiescloselytoavoidunnecessary
overlapandmakethemostproductiveuseoftheirrespective
resources.
Fosterpublic-privatepartnerships.Giventhewidearrayofstate,
local,nonprofit,andprivateorganizationsprovidingfinancialliteracy
programs,itisessentialtoleverageprivatesectorresourcesand
coordinatefederalactivitieswithresourcesatthecommunitylevel.
TheCommissionshouldbuildonprogressithasmadeinrecentyears
inpromotingsuchpartnerships.Federalcollaborationwithstateand
localgovernmentsmaybeparticularlyimportantgiventhecriticalrole
thatschooldistrictscanplayinimprovingfinancialliteracyamong
youngpeople.
Measureoutcomesandfocusresourcesaccordingly.Federalfinancial
literacyresourcesshouldbefocusedonthoseagenciesandprograms
withthemostexpertiseandbesttrackrecords.TheCommissionand
theBureauofConsumerFinancialProtectioncouldpotentiallyplaya
roleindevelopingordisseminatingastandardsetofevaluationtoolsor
benchmarksthatwouldhelpassesswhichfederalinitiativeshavethe
mosteffectiveoutcomes.
Thepotentialmonetarysavingstocoordinatingorconsolidatingfinancial
literacyeffortsisunknown.Asnotedearlier,thereisnoestimateofoverall
federalspendingforfinancialliteracyandeducation,andmostfederal
agenciesdonothaveanestimateforspendingonfinancialliteracyper
se.However,streamliningfederalfinancialliteracyresourceswouldhave
otherbenefitsitwouldmakethebestuseofscarceresourcesandfocus
effortsonprogramsandinitiativesthathavebeenshowntobemost
effectiveinimprovingthefinancialliteracyoftheAmericanpeople.
Frameworkfor
Analysis
TheinformationcontainedinthisanalysisbuildsuponpriorGAOwork,
whichiscitedbelow.Tosupplementthatwork,GAOreviewedtwostudies
onfederalfinancialliteracyresourcesthatwereconductedbyprivate
entitiesandcommissionedbytheDepartmentoftheTreasury.GAOalso
conductedinterviewswithstaffatfourfederalagenciesandtworesearch
organizations.
RelatedGAO
Products
FinancialLiteracyandEducationCommission:ProgressMadein
FosteringPartnerships,butNationalStrategyRemainsLargely
DescriptiveRatherThanStrategic.GAO-09-638T.Washington,D.C.:April
29,2009.
FinancialLiteracyandEducationCommission:FurtherProgress
NeededtoEnsureanEffectiveNationalStrategy.GAO-07-100.
HighlightsofaGAOForum:TheFederalGovernmentsRolein
ImprovingFinancialLiteracy.GAO-05-93SP.Washington,D.C.:
November15,2004.
Foradditionalinformationaboutthisarea,contactAliciaPuenteCackley
AreaContact
at(202)512-8678orcackleya@gao.gov.
SectionII:OtherGAO-IdentifiedCost-Saving
andRevenue-EnhancingAreas
SectionII:OtherGAO-IdentifiedCost-Savingand
Revenue-EnhancingAreas
Table2provides47areasforconsiderationwherethegovernmentcan
achievecostsavingsorenhancerevenuecollections.Thetableincludes
theestimatedcostsavingsoradditionalrevenues,ifavailable.Inmany
cases,thereissufficientinformationtoshowthatifactionsaretakento
addressindividualissuessummarizedinTable2,financialbenefitsranging
fromtensofmillionstotensofbillionsofdollarsannuallymayberealized.
Inothercases,however,estimatesforsavingsorrevenueswoulddepend
uponthenatureandscopeofcongressionalandexecutivebranch
decisions,oradditionalprogrammaticdatamaybeneeded.Followingthe
tablearesummariesforeachoftheareaslisted.Eachofthesummaries
containsaFrameworkforAnalysisprovidingthemethodologyusedto
conducttheworkandalistofrelatedGAOproductsforfurther
information.
Table2:Federalagenciesandprogramswherecostsavingorrevenueenhancementopportunitiesmayexist
Missions
Agriculture
Defense
Economic
development
Areasidentified
35. Reducingsomefarmprogrampaymentscouldresultin
savingsfrom$800millionover10yearstoupto$5billion
annually
36. DODshouldassesscostsandbenefitsofoverseas
militarypresenceoptionsbeforecommittingtocostly
personnelrealignmentsandconstructionplans,thereby
possiblysavingbillionsofdollars
37. Totalcompensationapproachisneededtomanage
significantgrowthinmilitarypersonnelcosts
38. EmployingbestmanagementpracticescouldhelpDOD
savemoneyonitsweaponsystemsacquisition
programs
39. Moreefficientmanagementcouldlimitfuturecostsof
DODssparepartsinventory
40. Morecomprehensiveandcompletecostdatacanhelp
DODimprovethecost-effectivenessofsustaining
weaponsystems
41. Improvedcorrosionpreventionandcontrolpractices
couldhelpDODavoidbillionsinunnecessarycostsover
time
42. Revisingtheessentialairserviceprogramcouldimprove
efficiencyandsaveover$20millionannually
cost-savingorrevenue-enhancement
optionsmayexist
DepartmentofDefense(DOD)
DOD
DOD
DOD,includingthemilitaryservicesand
DefenseLogisticsAgency
DOD
DODsOfficeofCorrosionPolicyand
Oversight
DepartmentofTransportation
Page
159
164
169
173
178
182
186
190
43. Improveddesignandmanagementoftheuniversal
servicefundasitexpandstosupportbroadbandcould
helpavoidcostincreasesforconsumers
FederalCommunicationsCommission;four
programsinvolved 194
Page155 GAO-11-318SP SectionII:OtherCostSavingsandRevenueEnhancements
Missions Areasidentified
optionsmayexist Page
44. TheCorpsofEngineersshouldprovideCongresswith
project-levelinformationonunobligatedbalances
U.S.ArmyCorpsofEngineers
198
Energy 45. Improvedmanagementoffederaloilandgasresources
couldresultinapproximately$1.75billionover10years
DepartmentoftheInteriorsBureauofLand
Management,BureauofOceanEnergy
Management,RegulationandEnforcement,
andOfficeofNaturalResourcesRevenue
200
General
government
46. Effortstoaddressgovernmentwideimproperpayments
couldresultinsignificantcostsavings
About20federalagencies;over70
programsinvolved
205
47. Promotingcompetitionfortheover$500billioninfederal
contractscanpotentiallysavebillionsofdollarsovertime
Governmentwide
211
48. Applyingstrategicsourcingbestpracticesthroughoutthe
federalprocurementsystemcouldsavebillionsofdollars
annually
Governmentwide
215
49. Adherencetonewguidanceonawardfeecontractscould
improveagenciesuseofawardfeesandproducesavings
Severalagencies,includingDODandthe
NationalAeronauticsandSpace
Administration
219
50. Agenciescouldrealizecostsavingsofatleast$3billionby
continueddisposalofunneededfederalrealproperty
Governmentwide,includingDOD,General
ServicesAdministration(GSA),and
DepartmentofVeteransAffairs
222
51. Improvedcostanalysesusedformakingfederalfacility
ownershipandleasingdecisionscouldsavetensof
millionsofdollars
PrimarilyGSA,thecentralleasingagentfor
mostagencies 226
52. TheOfficeofManagementandBudgetsITDashboard
reportedlyhasalreadyresultedin$3billioninsavingsand
canfurtherhelpidentifyopportunitiestoinvestmore
efficientlyininformationtechnology
Governmentwide
230
53. Increasingelectronicfilingofindividualincometax
returnscouldreduceIRSsprocessingcostsandincrease
revenuesbyhundredsofmillionsofdollars
DepartmentoftheTreasurys(Treasury)
InternalRevenueService(IRS) 234
54. Usingreturnoninvestmentinformationtobettertarget
IRSenforcementcouldreducethetaxgap;forexample,a
1percentreductionwouldincreasetaxrevenuesby$3
billion
IRS
238
55. Bettermanagementoftaxdebtcollectionmayresolve
casesfasterwithlowerIRScostsandincreasedebt
IRS
241
collected
56. BroadeningIRSsauthoritytocorrectsimpletaxreturn
errorscouldfacilitatecorrecttaxpaymentsandhelpIRS
avoidcostly,burdensomeaudits
IRS
244
57. Enhancingmortgageinterestinformationreportingcould
improvetaxcompliance
IRS
248
58. Moreinformationonthetypesandusesofcanceleddebt
couldhelpIRSlimitrevenuelossesonforgivenmortgage
debt
IRS
251

59. Betterinformationandoutreachcouldhelpincrease
revenuesbytensorhundredsofmillionsofdollars
annuallybyaddressingoverstatedrealestatetax
deductions
IRS
254
60. RevisionstocontentanduseofForm1098-Tcouldhelp
IRSenforcehighereducationrequirementsandincrease
IRS
258
revenues
61. Manyoptionscouldimprovethetaxcomplianceofsole
proprietorsandbegintoreducetheir$68billionportionof
thetaxgap
IRS
260
62. IRScouldfindadditionalbusinessesnotfilingtax
returnsbyusingthird-partydata,whichshowsuch
businesseshavebillionsofdollarsinsales
IRS
264
63. CongressandIRScanhelpScorporationsandtheir
shareholdersbemoretaxcompliant,potentiallyincreasing
taxrevenuesbyhundredsofmillionsofdollarseachyear
IRS
267
64. IRSneedsanagencywideapproachforaddressingtax
evasionamongtheatleast1millionnetworksof
businessesandrelatedentities
IRS
270
65. Opportunitiesexisttoimprovethetargetingofthe$6billion
researchtaxcreditandreduceforgonerevenue
TreasuryandIRS
273
66. Convertingthenewmarketstaxcredittoagrantprogram
mayincreaseprogramefficiencyandsignificantlyreduce
the$3.8billion5-yearrevenuecostoftheprogram
Treasury
276
67. Limitingthetax-exemptstatusofcertaingovernmental
bondscouldyieldrevenue
Treasury
279
68. Adjustingciviltaxpenaltiesforinflationpotentiallycould
increaserevenuesbytensofmillionsofdollarsperyear,
notcountinganyrevenuesthatmayresultfrom
maintainingthepenaltiesdeterrenteffect
IRS
281
69. IRSmaybeabletosystematicallyidentifynonresident
aliensreportingunallowedtaxdeductionsorcredits
IRS
284
70. Trackingundisbursedbalancesinexpiredgrant
accountscouldfacilitatethereallocationofscarce
Governmentwide
286
resourcesorthereturnoffundingtotheTreasury
Health 71. PreventingbillionsinMedicaidimproperpayments
requiressustainedattentionandactionbyCMS
DepartmentofHealthandHumanServices
CentersforMedicare&MedicaidServices
(CMS)
289
72. FederaloversightoverMedicaidsupplementalpayments
needsimprovement,whichcouldleadtosubstantialcost
savings
CMS
293
73. BettertargetingofMedicaresclaimsreviewcouldreduce
improperpayments
CMS
296
74. PotentialsavingsinMedicarespaymentsforhealthcare CMS 300
Homeland
security/Law
enforcement
75. DHSsmanagementofacquisitionscouldbe
strengthenedtoreducecostoverrunsandscheduleand
performanceshortfalls
DepartmentofHomelandSecurity(DHS)
306
76. Improvementsinmanagingresearchanddevelopment
couldhelpreduceinefficienciesandcostsforhomeland
security
DHS
311
77. ValidationofTSAsbehavior-basedscreeningprogram
isneededtojustifyfundingorexpansion
TransportationSecurityAdministration
(TSA)
316
78. Moreefficientbaggagescreeningsystemscouldresultin
about$470millioninreducedTSApersonnelcostsover
thenext5years
TSA
320
79. Clarifyingavailabilityofcertaincustomsfeecollections
couldproduceaone-timesavingsof$640million
DHSsCustomsandBorderProtection
(CBP)
324
Income
security
80. SocialSecurityneedsdataonpensionsfromnoncovered
earningstobetterenforceoffsetsandensurebenefit
fairness,resultinginestimated$2.4-$2.9billionsavings
over10years
SocialSecurityAdministration
326
International
affairs
81. Congresscouldpursueseveraloptionstoimprove
collectionofantidumpingandcountervailingduties
CBP
330
Source:GAOanalysisbasedonareasaddressedinSectionIIofthisreport.
ReducingSomeFarmProgramPayments
CouldResultinSubstantialSavings
ReducingSomeFarmProgramPaymentsCouldResult
inSubstantialSavings
WhyGAOIsFocusing
onThisArea
Between2005and2009,theU.S.DepartmentofAgriculture(USDA)spent
anaverageofabout$15billionannuallyonprogramstosupportfarm
income,assistfarmersafterdisasters,andconservenaturalresources.
Underoneofthesefederalfarmprograms,USDAprovidesfixedannual
paymentscalleddirectpaymentstofarmersbasedonafarmshistory
ofcropproduction.Directpaymentsweremostrecentlyreauthorizedin
theFood,Conservation,andEnergyActof2008,whichwillexpirein2012
withoutfutureaction.
GAOhasshownthattaxpayerdollarscanbesavedwithstrengthened
oversightoffarmprogrampayments,includingdirectpayments.For
example,GAOreportedinOctober2008thatUSDAprovidedfarm
programpaymentstothousandsofindividualswithincomesexceeding
incomeeligibilitycaps.GAOhasalsoshownthatUSDAsoversightand
enforcementofprogramrulesisnotalwayseffective.Forexample,inJuly
2007,GAOreportedthatUSDApaid$1.1billioninsuchpaymentstomore
than170,000deceasedindividuals,andinApril2004GAOreportedthat
USDAprovidedsuchpaymentstopeoplewhomayhavehadonlylimited
involvementinfarmingbecausetheagencylackssufficientmanagement
controls.Sincethen,USDAhastakensomeactionsinresponsetoGAOs
recommendations.
WhatGAOHasFound
IndicatingPotential
forCostSaving
Reducingoreliminatingdirectpaymentstofarmersparticularlythoseto
largefarmingoperationscouldachievecostsavingsofasmuchas$5
billionannually.Incontrasttoothermajorfarmprograms,which
compensatefarmersfordeclinesinpriceorlostcrops,directpaymentsgo
tofarmersregardlessofriskfactors.Directpaymentsarecalculatedusing
aformulathatconsidersthecropandproductionhistoryandthenumber
ofacresplantedduringcertainyearsinthepastonafarm.Generally,a
percentageoftheacresthatwereplantedismultipliedbyasetpayment
rateforthecropthatwasplanted.
1
For2009through2011,thispercentage
is83.3percent,andfor2012,itwillbe85percent.Althoughafarmers
directpaymentsarebasedonthehistoricalproductionofaparticular
crop,thefarmerhasalmostcompleteflexibilityindecidingwhichcropsto
plantandwhethertoplantanycropsatall.Tobeeligibleforsucha
payment,afarmersaveragenonfarmincome(overthepreceding3tax
1
Specifically,theformulausesapercentageoftheaveragenumberofacresplantedduring
1998through2001andmultipliesitbyasetpaymentrateandthehistoricalcropyieldfora
farm.Thepercentageandpaymentratesforeachcroparespecifiedinlegislation
commonlyreferredtoasfarmbillspassedbyCongressroughlyevery5years.

years)canbenomorethan$500,000,oraveragefarmincomenomore
than$750,000.Directpaymentsarelimitedto$40,000perpersonperyear;
however,afarmcanreceivemultiplepaymentsdependingonits
ownershipstructure.Forexample,ahusbandandwifeoperatingafarm
togethercancollectupto$80,000annually,andapartnershipwith10
partnerscancollectupto$400,000annually.
InlightofthefollowingobservationsmadebyGAOandothers,theneed
fordirectpaymentsshouldbereconsidered:
Farmersreceivedirectpaymentseveninyearsofrecordfarm
income.Althoughdirectpaymentswereestablishedafteraperiodof
relativelylowerfarmincomeintheearly1990s,USDAreportedthatthe
top5earningsyearssincethepaymentsbeganhaveoccurredafter
2004,attestingtotheprofitabilityoffarminginthisdecade.
Furthermore,USDAestimatedfarmincomewasabout$82billionin
2010upby$19billion,or31percent,from2009whichwouldbethe
third-highestleveleverrecordedforU.S.farming.
Directpaymentsareconcentratedamongthelargestrecipients
becausetheyaretiedtolandandpaidonaper-acrebasis.About62
percentoffarmprogrampaymentsincludingdirectpaymentswent
tothelargest12percentoffarmsin2008,accordingtoUSDA.
Similarly,GAOfoundthatin2009,305farmoperationseachreceived
$200,000ormoreindirectpayments,inpartbecausetheywere
structuredsothatfiveormorepartnersormembersofafarmbusiness
wereeligibletoreceivethepayments.Notingthisconcentrationof
payments,theOfficeofManagementandBudget(OMB)andothers
haveciteddirectpaymentsforfailingtotargetthepaymentstothose
whoneedthemthemost,includingsmallfarmers.
Recipientsoffarmprogrampaymentshavehigherincomes,on
average,thanothertaxfilers.Whenfarmprogramswerefirst
established,farmershadlowerincomesonaveragethanother
Americans,butnowtheoppositemaybetrueparticularlyforthose
receivingprogrampayments.In2008,GAOreportedthatindividuals
whoreceiveprogrampayments,includingdirectpayments,aremore
thantwiceaslikelytohavehigherincomesasothertaxfilers.For
example,inexaminingthemorethan138millionfederaltaxreturns
filedfor2006,GAOfoundthat4.6percentofindividualsreceiving
programpaymentsreportedadjustedgrossincomeofbetween
$200,000and$500,000,whereas2.3percentofothertaxfilersreported
incomeatthislevel.
Directpaymentsmaycompoundchallengesforbeginningfarmers.
GAOreportedinSeptember2007thatbeginningfarmersfacemultiple
challenges,includinganeedforfundstopurchasefarmland.Withan
agingfarmerpopulationintheUnitedStates,USDAsetagoalof
increasingassistancetobeginningfarmers,butdirectpaymentsmay
insteadcompoundthechallengesbeginningfarmersface.Accordingto
USDAstudies,thesepaymentsresultinhigherpricestobuyorrent
landbecauseinsomecasesthepaymentsgodirectlytolandowners
resultinginincreasedlandvalueandinothercasesthepaymentsgo
totenants,promptinglandlordstoincreaserentalrates.Furthermore,
becausedirectpaymentsarelinkedtoafarmsnumberofacres,large
farmscanusethesepaymentstoexpandtheiroperations,buthigher
landvaluesmakeitdifficultforbeginningfarmerstodoso,asOMB
andothershavenoted.
Directpaymentswereexpectedtobetransitional.Accordingtothe
ConferenceReporttothe1996farmbill,directpaymentswere
establishedtohelpfarmersmakeatransitiontoplantingdecisionson
thebasisofmarketsignalsratherthangovernmentprograms.
Accordingly,thepaymentswerescheduledtodecreaseovertimeand
expirein2002.However,subsequentfarmbillshavecontinuedthese
payments.
Directpaymentsmaynolongerbeneededtocomplywithtrade
agreements.ProponentsofdirectpaymentssaytheyhelptheUnited
Statesmeetitscommitmentsunderinternationaltradeagreements,
whichsetceilingsongovernmentpaymentsclassifiedastrade-
distorting.Unlikeotherfarmprogrampayments,directpaymentsdo
notdependoncurrentmarketprices,sotheWorldTradeOrganization
generallyconsidersthemtobenon-tradedistortingandtheUnited
Statesdoesnotcountthemagainsttheinternationalrestrictions.Asa
result,otherfarmprogrampaymentscanbeprovidedwithareduced
riskofexceedingtheceilings.However,accordingtoeconomists,this
advantagehasbecomelessrelevantrecentlybecausehighcropprices,
whichareexpectedtocontinuethroughtheforeseeablefuture,have
keptfarmprogrampaymentswellbelowtheceilingontrade-distorting
payments.
ActionsNeededand
PotentialSavings
Recognizingcurrentbudgetconstraints,theNationalCommissionon
FiscalResponsibilityandReform,
2
theDebtReductionTaskforce,
3
the
administration,MembersofCongress,GAO,andsomefarminggroups
haveproposedoptionstoreduceoreliminatedirectpayments.For
example,Congressmaywishtoconsiderthefollowingthree.Toreduce
directpayments,theadministrationandothershaveproposedlowering
paymentorincomeeligibilitylimits.Theyarguethatlowerlimitsleave
paymentsintactforrecipientsofsmallerpaymentsorwithsmaller
incomesandcouldthereforestillhelpsmallerandbeginningfarmers.On
theotherhand,criticssay,focusingonpaymentlimitsmaybeineffective
becausefarmersmaydevelopmethodstoavoidbeingrestrictedbythe
limits.GAOpreviouslyreportedthatmanyfarmersstructuretheir
operationstoavoidpaymentlimitsandthatUSDAhasnotconsistently
enforcedeligibilityrequirements,bringingintoquestiontheeffectiveness
ofbothtypesoflimits.
Congressmayalsowishtoconsiderreducingtheportionofafarmsacres
eligiblefordirectpayments.In2009,GAOreportedthatreducingthe
portionofeligibleacresto80percentfrom83.3percentmightsave
millionsofdollarsannually.
4
Furtherreducingtheportionofeligibleacres
to75percentcouldsavemillionsmoreeachyear.Suchanacross-the-
boardreductionwouldaffectallrecipients.Moreover,Congressmaywish
toconsiderterminatingthepayments.Someagricultureorganizations,
includingtheNationalFarmersUnionandtheIowaFarmBureau,have
recommendedphasingoutorterminatingthepaymentsaltogetherand
usingthesavingstobolsterotherfarmprograms.
2
TheNationalCommissiononFiscalResponsibilityandReformwasestablishedunder
ExecutiveOrder13531(Feb.18,2010).ItissuedTheMomentofTruth:Reportofthe
NationalCommissiononFiscalResponsibilityandReform(Washington,D.C.,December
2010).
3
LedbyformerSenateBudgetCommitteeChairmanPeteDomeniciandformerWhite
HouseBudgetDirectorAliceRivlin,theDebtReductionTaskForceissuedRestoring
AmericasFuture:RevivingtheEconomy,CuttingSpendingandDebt,andCreatinga
Simple,Pro-GrowthTaxSystem(Washington,D.C.,Nov.17,2010).
4
Seehttp://www.gao.gov/highrisk/opportunities/natural_resources/
strengthening-integrity-and-efficiency-of-federal-farm-programs.php.
GAOhasidentifiedthefollowingpotentialforcostsavings:
about$800millionover10yearsbyreducingpaymentandincome
eligibilitylimitsforaverysmallportionofrecipients,accordingtothe
administrationsestimateinitsbudgetforfiscalyear2011;
about$600millionannuallybyreducingtheportionofacresusedto
calculatepaymentsto75percent,accordingtoGAOsestimate;or
about$5billionannuallybyterminatingorphasingoutthepayments.
Frameworkfor
Analysis
Toupdateinformationonthenumberoffarmsreceivingdirectpayments
of$200,000ormore,GAOuseddatafromUSDAsProducerPayment
ReportingSystemanddeterminedthatthedataweresufficientlyreliable
foritspurposes.Toestimatethepotentialsavingsfromreducingthe
portionofacresusedtocalculatedirectpaymentsandfromterminating
thepayments,GAOusedthemostrecentbudgetfiguresfromthe
CongressionalBudgetOffice.Otherinformationinthisanalysisis
primarilybasedontherelatedGAOproductslistedbelow.
RelatedGAO
Products
FederalFarmPrograms:USDANeedstoStrengthenControlstoPrevent
PaymentstoIndividualsWhoExceedIncomeEligibilityLimits.
BeginningFarmers:AdditionalStepsNeededtoDemonstratethe
EffectivenessofUSDAAssistance.GAO-07-1130.Washington,D.C.:
September18,2007.
FederalFarmPrograms:USDANeedstoStrengthenControlstoPrevent
ImproperPaymentstoEstatesandDeceasedIndividuals.GAO-07-818.
FarmProgramPayments:USDANeedstoStrengthenRegulationsand
OversighttoBetterEnsureRecipientsDoNotCircumventPayment
Limitations.GAO-04-407.Washington,D.C.:April30,2004.
Foradditionalinformationaboutthisarea,contactLisaShamesat
AreaContact
(202)512-3841orshamesl@gao.gov.
DODShouldAssessCostsandBenefitsof
OverseasMilitaryPresenceOptionsBefore
CommittingtoCostlyPersonnelRealignments
andConstructionPlans
DODShouldAssessCostsandBenefitsofOverseas
MilitaryPresenceOptionsBeforeCommittingtoCostly
PersonnelRealignmentsandConstructionPlans
WhyGAOIsFocusing
onThisArea
Overseaspresenceprovidesoperationalcapabilitiesanddemonstratesa
commitmenttoourallies.Inadditiontothecostsofsupportingongoing
combatoperations,theDepartmentofDefense(DOD)spendsbillionsof
dollarsannuallyonitsnetworkofinstallationsaroundtheworld.For
example,accordingtodataprovidedbythemilitaryservices,between
fiscalyears2006and2009themilitaryservicesobligated$17.2billionfor
theinstallationstheymanageinEurope.Theseobligationsdonotinclude
fundsobligatedbyotherDODorganizationsthatusethosefacilities,
overseascontingencyfunding,orpersonnelcosts.Further,themilitary
servicesestimatedarequirementof$24billionthroughfiscalyear2015to
build,operate,andmaintaintheseinstallations.Inlightofcurrentfiscal
challengesfacingthecountry,questionshavearisenaboutthemagnitude
ofoverseasbasingprojectsandcosts,andwhetherDODsplanned
investmentssupportacoherentandaffordablestrategy.GAOspriorwork
hasshownthatDODhastakenpositivestepstoimproveitsplanningfor
overseasinfrastructure,butcontinuestodevoteinsufficientattentionto
costsoranalysisofalternatives.
WhatGAOHasFound
IndicatingPotential
forCostSaving
HavingU.S.troopsstationedoverseasprovidesbenefits,suchasdeterring
aggressionagainstU.S.allies,butpermanentstationingmaycomeat
significantlyhighercoststhanotheralternativeapproachessuchas
deployingdomesticallystationedforceswhenneeded.GAOsworksince
2006hasfoundasystemiclackofcostinformationusedtoinformDODs
planningforitsoverseasinfrastructure.Asaconsequence,DODand
Congresslackreasonableassurancethatoverseaspresenceisbeing
plannedandimplementedinacost-effectiveandfinanciallysustainable
way.Reliableandcompletecostestimatesarecriticaltoallowanalysesof
alternativesandoversightbydecisionmakers.
Since2008,DODhastakenstepstodevelopregionalplansforitsoverseas
infrastructure,butdepartmentguidanceregardingthesepostureplanshas
notrequiredcomprehensivecostinformationtosupportthisemerging
process.Recognizingtheconsiderablecostsinvolvedwithstationing
forcesoverseas,inAugust2010theSecretaryofDefenseidentifiedDODs
overseaspresenceasanareaforreview.Amongotherconcerns,the
SecretaryofDefensequestionedthegrowthinthenumberofgeneraland
flagofficersacrossthedepartment,highlightingthattheU.S.European
Commandmaintainsfour-starservicecomponentheadquartersmorethan
20yearsaftertheendoftheColdWarandthevastmajorityoftheir
fightingforceshavedepartedfromtheregion.RecentGAOreportshave
identifiedseveralevolvingelementsofDODsglobalinfrastructure,which
havethepotentialtocostorpossiblysavethedepartmentbillionsof
dollarsdependingondecisionsDODandCongressmake.Foreachof
thesedecisions,reliable,completecostdatawillbeinvaluabletothe
abilityofdecisionmakerstochooseamongavailableoptions.For
example:
PlanstoreduceforcesinEuropearebeingreconsidered.DOD
recentlyhelduptheplannedreturnoftwoArmybrigadesfrom
GermanypendinganannouncementoftheNorthAtlanticTreaty
OrganizationsstrategicconceptaswellastheresultsofongoingU.S.
assessmentsoftheglobaldefenseposture.GAOsworkhasshownthat
leavingthesetwobrigadesinEuropecouldcostDODbetween$1
billionand$2billionover10yearscomparedtobringingtheforces
backtotheUnitedStates.Inaddition,theArmyplanstocontinueto
investinanewArmyheadquartersinGermanyeventhoughthe
SecretaryofDefensehasquestionedthesizeofU.S.European
Commandanditsassociatedservicecomponentcommands,andDOD
mayultimatelyreturnsomeforcestotheUnitedStates.U.S.European
Commandandserviceofficialsnotedthatforwardmilitarypresencein
Europeprovidesimportantbutdifficult-to-quantifybenefits,including
commitmenttotheNorthAtlanticTreatyOrganization.Recognizing
this,inSeptember2010,GAOrecommendedthatDODreassessits
alternativesforEurope,weighingthecostsofthepresenceagainstits
perceivedbenefitstoensureDODtakesacost-effectivecourseof
action.DODofficialsagreedwiththisrecommendationandnotedthat
certainactionshavealreadybeenundertaken,andDODiscurrently
conductingabroadreviewoftheEuropeantheater.
EffortstoestablishmilitarypresenceinAfricahavemetwith
concerns.DODhasfewfacilitiesinAfrica,butCampLemonnierin
Djiboutihousesa2,000-personjointtaskforceaswellassupports
otherU.S.andmultinationalmissionssuchasbuildingthesecurity
capacityofpartnerstates,atacostofabout$238millionin2010.
However,asGAOreportedinApril2010,thetaskforcesfutureis
uncertainbecauseitreliesonoverseascontingencyoperations
appropriations.Moreover,thetaskforcesoriginalwar-fightingmission
hasevolvedtocivilaffairsmissionslikedrillingwaterwellsand
buildingschools,andneedstobereassessed.Effortstodatehavenot
alwaysyieldedtheintendedresultsorweresometimespoorly
coordinatedwithotherU.S.agencies.ItisuncertainwhereDODwill
ultimatelyplaceaheadquartersforU.S.AfricaCommand,whichit
designatedasbeingfullyoperationalin2008.DODhadplannedto
locatetheheadquartersinAfricabutsteppedbackfromthoseplans
aftersomeAfricannationsraisedconcerns.Thecommandcurrently
occupiestemporaryfacilitiesinStuttgart,Germany,andhaspostponed
itsdecisiononapermanentheadquartersuntil2012.
SubstantialcostsareanticipatedforenduringlocationsinIraq,
Afghanistan,andotherlocationsinsouthwestAsia.Supportingthe
continuingoperationsinIraqandAfghanistanisDODspriority,andits
regionalpresenceincludesinstallationsinKuwait,Bahrain,andQatar,
amongothernations.WhileDODhasmadeprogressexecutingthe
drawdown,challengesremainthatcouldimpactDODsabilitytoclose
basesinIraqasplanned.GAOhasbegunworktoexaminehowmuch
DODspresenceintheregionwillcostmovingforwardrelativetothe
potentialbenefitsandwhatotheralternativestocurrentplansmay
exist.
LargeandcostlyrealignmentisbeingundertakeninAsia.DODhas
severalmajorinitiativesunderwayinthePacificregionthatrepresent
asignificantrestructuringandtransformationoftheU.S.military
presenceinAsia.Forexample,DODplanstoincreasetheU.S.military
presenceonGuamfromabout15,000in2009tomorethan39,000by
2020,whichwillincreasethecurrentislandpopulationbyabout14
percentoverthoseyears.GAOhaspreviouslyreportedthatthe
reportedcostsfortheseandotherpostureinitiativesmaybe
significantlyunderstated.GAOisexaminingthescope,magnitude,
management,andcostsassociatedwithDODpostureinitiativesin
Asia,aswellastheextenttowhichDODhasincorporatedcostand
benefitanalysisintoitsdecision-makingprocess.GAOplanstoreport
theresultsofitsanalysisinearly2011.
GAOhasmaderecommendationssince2006thatDODgathermore
comprehensivecostdataandreportittoCongress;ingeneral,DODhas
generallyagreedwiththeserecommendationsbuthasyettoimplement
theminfull.Asaresult,initiativesareproceedingwithoutassurancethat
theeffortsarebeingundertakeninacost-effectiveway.
ActionsNeededand
PotentialSavings
Giventhesignificantresourcesbeingdedicatedtobuildingand
maintainingDODsglobalpresence,DODneedstoensureitisroutinely
assessingthebenefitsofitsoverseaspresencerelativetothecostof
maintainingthatpresence.Specifically,DODshouldconducta
comprehensivereassessmentofitsoverseaspresence,includingthecosts
andbenefitsofvariousalternatives.
ToaddressthespecificregionalissuesinEuropeandAfrica,GAOhas
issuedanumberofrecommendationsthatDODgenerallyagreedwith
includingreassessing:
plansinEurope,includingthecostsandbenefitsofkeepingArmy
brigadesinGermanyandtheappropriatenessofbuildinganewArmy
headquartersgiventhepotentialchangesinforcestructure;and
missionsofthecombinedjointtaskforceinDjiboutiaswellas
identifyingtheprojectedcostsforthetaskforceand,inconcertwith
DODortheNavy,developingarealisticfundingplanforthetask
forcessustainability.
ThefinancialstakesarehighforDOD,sinceaccordingtoDODdatathe
departmenthasobligatedbillionsofdollarsannuallytobuildandmaintain
itsglobalnetworkofinstallations.Athoroughconsiderationof
alternativesandanassessmentoftheircostsandbenefitscouldhelpDOD
shapeitsfutureoverseasinvestmentsandensurelong-termaffordability.
Savingsorcostavoidanceswouldbedependentuponthenatureof
changesmadetoDODsplansandhowDODimplementsitschosen
options.
Frameworkfor
Analysis
RelatedGAO
Products
DefenseManagement:AdditionalCostInformationandStakeholder
InputNeededtoAssessMilitaryPostureinEurope.GAO-11-131.
DefensePlanning:DODNeedstoReviewtheCostsandBenefitsof
BasingAlternativesforArmyForcesinEurope.GAO-10-745R.
DefenseManagement:ImprovedPlanning,Training,andInteragency
CollaborationCouldStrengthenDODsEffortsinAfrica.GAO-10-794.
OperationIraqiFreedom:ActionsNeededtoFacilitatetheEfficient
DrawdownofU.S.ForcesandEquipmentfromIraq.GAO-10-376.
DefenseManagement:DODNeedstoDeterminetheFutureofItsHornof
AfricaTaskForce.GAO-10-504.Washington,D.C.:April15,2010.
DefenseInfrastructure:GuamNeedsTimelyInformationfromDODto
MeetChallengesinPlanningandFinancingOff-BaseProjectsand
ProgramstoSupportalargerMilitaryPresence.GAO-10-90R.
ForceStructure:ActionsNeededtoImproveDODsAbilitytoManage,
Assess,andReportonGlobalDefensePostureInitiatives.GAO-09-706R.
DefenseManagement:ActionsNeededtoAddressStakeholderConcerns,
ImproveInteragencyCollaboration,andDetermineFullCosts
AssociatedwiththeU.S.AfricaCommand.GAO-09-181.Washington,
DefenseManagement:ComprehensiveStrategyandAnnualReporting
AreNeededtoMeasureProgressandCostsofDODsGlobalPosture
Restructuring.GAO-06-852.Washington,D.C.:September13,2006.
Foradditionalinformationaboutthisarea,contactJohnPendletonat
AreaContact
(404)679-1816orpendletonj@gao.govorBrianLeporeat(202)512-4523or
leporeb@gao.gov.
TotalCompensationApproachIsNeededto
ManageSignificantGrowthinMilitary
PersonnelCosts
TotalCompensationApproachIsNeededtoManage
SignificantGrowthinMilitaryPersonnelCosts
WhyGAOIsFocusing
onThisArea
Overtheyears,theDepartmentofDefenses(DOD)militarycompensation
systemhasbecomeanincreasinglycomplexandpiecemealadditionof
pays,allowances,andbenefitscostingover$200billioneachyear.Payand
benefitsareimportanttoolsusedbyDODtorecruit,retain,andmotivate
sufficientnumbersapproximately1.4millionactivedutyand1.2million
reservistsofqualifiedpeople.Inrecentyears,Congresshastakensteps
tofundenhancedcompensationandbenefitprogramsforactivedutyand
reservepersonnelatatimewhenmanymilitarypersonnelarespending
monthsoryearsawayfromhome,ofteninharmsway.DODleadershave
expressedconcernaboutgrowingpersonnelcostsandtheireffecton
otherimportantinvestments,suchasrecapitalizingequipmentand
infrastructure.
In2005andin2007,GAOfoundthatthecostformilitarycompensation
wassignificantlyincreasing,andthetotalcostforcompensationwasnot
transparentbecauseitwasspreadacrossdifferentbudgetswithinDOD.
GAOrecommendedthatDODimprovethetransparencyofcompensation
costsandassesstheappropriatenessofitscompensationsystem.
WhatGAOHasFound
IndicatingPotential
forCostSaving
DODandCongresshaveexpandedmilitarypayandbenefitsusinga
piecemealapproachratherthanatotalcompensationapproachthatcould
helptobalancetheappropriateness,affordability,andsustainabilityof
personnel-relatedcosts.GAOhasestimatedthatthefederalgovernments
totalcompensationcostsforactivedutyservicemembersincreasedabout
32percent,usingfiscalyear2008constantdollars,from$143.8billionin
fiscalyear2000to$189.4billioninfiscalyear2008.Also,GAOfoundthat
usingfiscalyear2008constantdollars,thefederalgovernmentstotal
estimatedcompensationforreserveandnationalguardmembersgrew
over31percentfromabout$17.8billioninfiscalyear2001tonearly$23.5
billioninfiscalyear2008.Basicpayalone,thelargestcomponentofactive
dutymilitarycompensation,hasincreasedfrom$45billionto$50.1billion
betweenfiscalyears2000and2008.Inadditiontobasicpay,DODexpends
billionsofdollarseachyeartorecruit,retain,andmotivateitspersonnel
usingotherpaysandbenefits.Forinstance,infiscalyear2008,foractive
dutyservicemembers,DODspent$17.1billiononnon-taxablehousing
allowances;$6.4billiononspecialandincentivepays,suchasenlistment
andre-enlistmentbonuses;$10.9billiononhealthcareforactiveduty
PersonnelCosts
servicemembersandtheirdependents
1
;and$31.4billiononretirementpay
andretireehealthcare.
Muchoftheincreaseinbasicpayinrecentyearshasbeendrivenby
concernsthatmilitarybasicpaywasnotequivalenttocivilian(orprivate
sector)pay,withouttakingintoconsiderationothertypesof
compensationbeyondbasicpay.GAOreportedinApril2010thatstudies
donebytheCongressionalBudgetOfficeandtheCenterforNaval
Analysesconcludedthatwhenpayandsomebenefitsaretakeninto
account,militarycompensationcomparesfavorablytocivilian
compensationwhenconsideringpersonnelofsimilarageandeducation
level.GAOalsoreportedthatwhencomparingmilitaryandcivilian
compensation,itisreasonabletotakeintoaccountothertypesof
compensationthanbasicpay.Forexample,accordingtoDOD,in2010the
basicallowanceforhousingforanO-5(i.e.,alieutenantcolonel)with
dependentslivingintheWashington,D.C.,metroareaisapproximately
$2,900amonth.Inaddition,recentgrowthoftotalcompensationhasbeen
drivenbythecostsfordeferredcompensation,primarilyattributedto
enhancedhealthcarebenefits,andDODofficialsanticipatesignificant
continuedgrowthinhealthcarecostsbecauseoftheseexpansionsin
coverage.
DODhassponsoredsomeeffortstoassessitsmilitarypersonnel
compensationstrategy,suchasthe10thQuadrennialReviewofMilitary
Compensation,whichwasreleasedin2008,butthesereviewshavenot
beencomprehensive,andthedepartmentdoesnotknowtheextentto
whichthecurrentmixofpaysandbenefitsisbestsuitedtomeetits
humancapitalgoals.Further,GAOsworkhasshownthatDODisunable
todemonstratetheefficiencyandeffectivenessofthesechangesin
meetingitsrecruitingandretentiongoalsbecauseitdoesnothave
performancemeasuresforitscompensationsystem.Withoutperformance
measures,DODcannotdeterminethereturnonitscompensation
investmentormakefact-basedchoicesonhowitscompensation
resourcesshouldbeallocated.
1
Thisisanestimatedcostsforprovidingactivedutyservicemembersandtheirdependents
healthcare.Itdoesnotincludecostssuchasmedicalpersonnelsalariesorconstruction
costsofmedicalfacilities.However,amorecomprehensivemedicalcostforDODisthe
UnifiedMedicalBudget,whichforfiscalyear2010wasabout$50billion.Thiscostincludes
militarymedicalpersonnelcosts,constructioncostofanymedicalfacilities,operationand
maintenancefunds,procurementfunds,andresearchanddevelopmentfunds.
PersonnelCosts
ActionsNeededand
PotentialSavings
Usingatotalcompensationapproachinmakingdecisionsaboutmilitary
payandbenefitswouldprovideDODwithanimportanttoolformore
efficientlyandeffectivelymanagingitshuman-capital-relatedcosts.
Assessingthemixofpayandbenefitsanddevelopingacomprehensive
compensationstrategycouldenableDODtomoreeffectivelyrecruitand
retainahighlyqualifiedforcewiththerightskillsinsufficientnumbersto
carryoutitsmissionwhileminimizingunnecessarycostincreases.GAO
hasrecommendedinthepastthatDOD(1)assesstheaffordabilityand
sustainabilityofitsmilitarycompensationsystem,aswellasthe
reasonablenessandappropriatenessoftheallocationtocashandbenefits,
andwhetherchangesintheallocationareneededtomoreefficiently
achieverecruitingandretentiongoals;and(2)establishaclear
compensationstrategythatincludesperformancemeasurestoevaluate
theefficiencyofcompensationinmeetingrecruitingandretentiongoals
anduseofdatafromtheperformancemeasurestomonitorthe
effectivenessofcompensationandassesswhatmixofcompensationwill
bemostefficientinthefuture.
DODconcurredwithGAOsrecommendationtoassesstheaffordability
andsustainabilityofitsmilitarycompensationsystemandstatedthatitis
engagedinmultiplesimultaneouseffortstoassesstheoverarching
strategy.GAOacknowledgesthatDODhassponsoredandengagedina
numberofstudieslookingataspectsofcompensation,suchasthe
QuadrennialReviewofMilitaryCompensation,butthedepartmenthasnot
takenatotalcompensationapproachtoassessingcompensation.
DODpartiallyconcurredwithGAOsrecommendationtoestablishaclear
compensationstrategynotingthatithasconsistentlycommunicatedits
approachtoCongressincongressionaltestimony.GAOcontinuestoassert
thatwithatotalcompensationstrategythedepartmentwouldbeina
betterpositiontomakebusinesscaseargumentsfororagainstchangesto
itscompensationsystem,andprovidefact-basedevidenceregardingthe
efficiencyoftheallocationofcash,noncash,ordeferredcompensation.
GAOspriorworkhasindicatedthatcompensationareasshouldhave
closerscrutinyintermsofcontinuedneedandthepotentialtoreduce
unnecessarycosts.Forexample,GAOreportedin2006and2009instances
ofexcessivepaymentsofenlistmentandre-enlistmentbonuses(typesof
specialandincentivepays)toservicemembersinoccupationsthat
exceededtheirauthorizedlevelswhileotheroccupationswereunderfilled.
GAOrecommendedthatDOD,amongotherthings,assessreasons
occupationsareover-orunderfilledandjustifyuseoffinancialincentives
foroverfilledoccupations.AsaresultofGAOsfindingsand
PersonnelCosts
recommendations,DODdevelopedamorerigorousapproachtomanaging
andoverseeingitsrecruitingandretentionbonusesleadingtosavings
totaling$947.3million.Morebroadly,DODcouldrecognizelong-termcost
avoidancebyaddressinginacompensationstrategywhattypesof
compensationareeffectiveandnotincurringcostsforcompensationthat
maynotbeeffectiveinhelpingthedepartmentachieveitsrecruitingand
retentiongoals.
Frameworkfor
listedbelow.
Analysis
RelatedGAO
Products
QuestionsfortheRecordRelatedtoMilitaryCompensation.
GAO-10-803R.Washington,D.C.:June3,2010.
MilitaryPersonnel:MilitaryandCivilianPayComparisonsPresent
ChallengesandAreOneofManyToolsinAssessingCompensation.
GAO-10-561R.Washington,D.C.:April1,2010.
MilitaryPersonnel:ReserveComponentServicemembersonAverage
EarnMoreIncomeWhileActivated.GAO-09-688R.Washington,D.C.:June
23,2009.
MilitaryPersonnel:ArmyNeedstoFocusonCost-EffectiveUseof
FinancialIncentivesandQualityStandardsinManagingForceGrowth.
MilitaryPersonnel:DODNeedstoEstablishaStrategyandImprove
TransparencyoverReserveandNationalGuardCompensationto
ManageSignificantGrowthinCost.GAO-07-828.Washington,D.C.:June
20,2007.
MilitaryPersonnel:DODNeedstoImprovetheTransparencyand
ReassesstheReasonableness,Appropriateness,Affordability,and
SustainabilityofItsMilitaryCompensationSystem.GAO-05-798.
Foradditionalinformationaboutthisarea,contactBrendaFarrellat
AreaContact
(202)512-3604orfarrellb@gao.gov.
EmployingBestManagementPracticesCould
HelpDODSaveMoneyonItsWeaponSystems
Acquisitions
EmployingBestManagementPracticesCouldHelp
DODSaveMoneyonItsWeaponSystemsAcquisitions
WhyGAOIsFocusing
onThisArea
Overthenext5years,theDepartmentofDefense(DOD)expectstoinvest
almost$343billion(infiscalyear2011dollars)onthedevelopmentand
procurementofmajordefenseacquisitionprograms.Defenseacquisition
programsusuallytakelonger,costmore,anddeliverfewerquantitiesand
capabilitiesthanDODoriginallyplanned.Forseveraldecades,Congress
andDODhavetakenstepstoimprovetheacquisitionofmajorweapon
systems,yetsomeprogramoutcomescontinuetofallshortofwhatwas
agreedtowhentheprogramsstarted.Withtheprospectofslowlygrowing
orflatdefensebudgetsfortheforeseeablefuture,DODmustgetbetter
valueforitsweaponsystemspendingandfindwaystodeliverneeded
capabilitytothewarfighterforlessthanithasspentinthepast.
WhatGAOHasFound
IndicatingPotential
forCostSaving
IncreasingcombatdemandsandfiscalconstraintsmakeitcriticalforDOD
toensurethatitsweaponsystemsinvestmentsnotonlymeettheneedsof
thewarfighterbutmakethemostefficientuseofavailableresources.Over
thelastseveralyears,GAOsworkhashighlightedanumberofunderlying
systemiccausesforcostgrowthandscheduledelaysinweaponprograms.
Atthestrategiclevel,DODsprocessesforidentifyingwarfighterneeds,
allocatingresources,andmanagingacquisitions,whichtogetherdefineits
weaponsysteminvestmentstrategy,areoftennotfullyaligned.For
example,thedepartmentoftenfailstobalancethecompetingneedsofthe
warfighterandcommitstomoreprogramsthanavailableresourcescan
support.Attheprogramlevel,GAOsworkhasshownthatDODsculture
andenvironmentoftenallowprogramstostartwithtoomanyunknowns,
suchasenteringtheacquisitionprocesswithoutafullunderstandingof
requirements;costandscheduleestimatesbasedonoverlyoptimistic
assumptions;andinsufficientknowledgeaboutthematurityoftechnology,
thecompletenessandtheperformanceofthedesign,andpredictabilityof
manufacturingprocesseswhendecisionsaremadetomoveforwardinto
thenextphaseoftheacquisitionprocess.PooroutcomesinDODs
weaponsystemprogramsreverberateacrosstheentirefederal
governmentaseveryadditionaldollarspentonacquiringweaponsystems
islessmoneyavailableforotherpriorities.
Sincefiscalyear2000,DODhassignificantlyincreasedthenumberof
majordefenseacquisitionprogramsanditsoverallinvestmentinthem.
Fromthattimetothepresent,acquisitionoutcomesinsomecases
continuedtofallshortofwhatwasagreedtowhentheprogramsstarted.
Inmostcases,theprogramsGAOassessedfailedtodelivercapabilities
whenpromisedoftenforcingthedepartmenttospendadditionalfunds
onmaintaininglegacysystems.InMarch2009,GAOreportedthat
programsexperienced,onaverage,a22-monthdelayindeliveringinitial
Acquisitions
capabilitiestothewarfighter.Continuedcostgrowthinsuchacquisitions
resultsinlessfundingbeingavailableforotherDODprioritiesand
programs.Scheduledelayspreventtimelydeliveryofcriticalcapabilities
tothewarfighter.
GAOhasreportedthatgreateradherencetoprovenmanagementpractices
atkeyphasesoftheacquisitionprocesscanreduceweaponsystemcosts,
helpcontainpressuresforincreasedfunding,andbetteraddresscritical
warfighterneeds.Earlysystemsengineering,ideallybeginningbeforea
programisinitiatedandabusinesscaseisset,iscriticaltodesigninga
systemthatmeetsrequirementswithinavailableresources.Inaddition,an
analysisofalternativescanhelpensurethatnewprogramshaveasound,
executablebusinesscaseandrepresentacost-effectivesolutionto
meetingwarfightersneeds.Anotherkeystepintheprocessinvolves
managingrequirementschanges,whichifminimized,coulddecreasethe
amountofcostgrowthexperiencedbyacquisitionprograms.Finally,more
prototypingearlyinprogramscouldhelpDODensurethatasystems
proposeddesigncanmeetperformancerequirements.
Additionally,DODrequirementscontinuetobedrivenprimarilybythe
individualserviceswithlittleinvolvementfromthecombatantcommands,
whicharelargelyresponsibleforplanningandcarryingoutmilitary
operations.Bycontinuingtorelyoncapabilityproposalsthatlackajoint
perspective,DODmaybelosingopportunitiestoimprovejointwarfighting
capabilitiesandreducetheduplicationofcapabilitiesinsomeareas.
DODhasdemonstratedastrongcommitment,atthehighestlevels,to
addressthemanagementofitsweaponsystemacquisitions,andhas
startedtoreprioritizeandrebalanceitsweaponsysteminvestments.In
2009and2010,theSecretaryofDefenseproposedcancelingor
significantlycurtailingcertainweaponprograms,suchastheArmys
FutureCombatSystemMannedGroundVehicleandtheNavysDDG-1000
Destroyerwhichhecharacterizedastoocostlyornolongerrelevantfor
currentoperations.DODplanstoreplaceseveralofthecanceledprograms
andthereforehasanopportunitytopursueknowledge-basedacquisition
strategiesonthenewprograms.Inaddition,DODplanstoeliminate
redundantprogramswithincapabilityportfoliosandmakeaffordabilitya
keyrequirementforweaponprograms.Theseactionsareconsistentwith
pastGAOfindingsandrecommendations.However,iftheseinitiativesare
goingtohavealasting,positiveeffect,theyneedtobetranslatedinto
betterday-to-daymanagementanddecisionmaking.
Acquisitions
GAOsrecentobservationspresentamixedpictureofDODsadherenceto
aknowledge-basedacquisitionapproach,whichiskeyforimproving
acquisitionoutcomes.For42programsGAOassessedindepthin2010,
therewascontinuedimprovementinthetechnology,design,and
manufacturingknowledgetheprogramshadatkeypointsinthe
acquisitionprocess.However,mostprogramswerestillproceedingwith
lessknowledgethanbestpracticessuggest,puttingthemathigherriskfor
costgrowthandscheduledelays.
CongresspassedanumberofacquisitionreformsintheWeaponSystems
AcquisitionReformActof2009toemphasizeandincreaseoversightand
reportingoncostestimating,earlysystemsengineering,developmental
testing,andtechnologymaturityformajorweaponsystemprograms.
Sincethen,DODhasbeguntoimplementarevisedacquisitionpolicy
basedonthesecongressionalreformstoaddresstheseandotherareasof
acquisitionrisk.IfDODconsistentlyimplementsthesereforms,the
numberofprogramsadheringtoaknowledge-basedacquisitionapproach
shouldincreaseandtheoutcomesforDODprogramsshouldimprove.
ActionsNeededand
PotentialSavings
DODcantakestepstomaximizeitsuseoftaxpayerdollarsbyimproving
itsbusinessoperations,includingtheacquisitionprocess.Byemploying
bestmanagementpracticesatallphasesofitsweaponsystemacquisition
processincludingearlysystemsengineering,analyzingalternatives,
managingchangesinsystemrequirements,andmoreprototypingearlyin
programsdevelopmenttestingDODcouldachievesignificantcost
savings.Whileactivities,suchasearlyprototyping,requireupfront
investments,theknowledgegainedcanhelpproductsproceedmore
quicklyandsmoothlythroughdevelopmentintoproduction,thereby
loweringthecoststodevelopthem.
WhileDODsacquisitionpoliciesandprocessmaybeimproving,fiscal
pressurescontinuetobuild.Inadditiontothefederalgovernmentslong-
termfiscalchallenges,DODfacesitsownnear-andlong-termfiscal
pressuresasitattemptstobalancecompetingdemands,includingongoing
operationsinAfghanistanandIraq,initiativestogrowandmodernizethe
force,andincreasingpersonnelandhealthcarecosts.DODsfiscalyear
2010budgetrequeststartedtheprocessofreprioritizingacquisitiondollars
tomeetwarfightersmostpressingneeds,butthedepartmentmuststill
addresstheoverallaffordabilityofitsweaponsysteminvestments.
AsDODcompetesforresourcesinaconstrainedfiscalenvironment,itcan
notaffordtomissopportunitiestoachievegreaterefficienciesandfreeup
Acquisitions
resourcesforhigher-priorityneeds.Becauseofthecomplexityand
magnitudeofthechallengesfacingDODintransformingitsbusiness
operations,itwillneedstrongandsustainedleadership,aswellassound
strategicplanningtoguideandintegrateitsefforts.Ultimately,DODstill
needstodoabetterjobplanningandexecutingprogramsonaday-to-day
basistoachievebetteroutcomes.Criticaltoachievingsuccessful
outcomesisestablishingandsustainingknowledge-based,realistic
programbaselines.Withoutrealisticbaselines,thereisnofoundationfor
accuratelymeasuringtheknowledgeandhealthofprograms.
Frameworkfor
Analysis
RelatedGAO
Products
DefenseAcquisitions:ObservationsonWeaponProgramPerformance
andAcquisitionReforms.GAO-10-706T.Washington,D.C.:May19,2010.
DefenseAcquisitions:StrongLeadershipIsKeytoPlanningand
ExecutingStableWeaponPrograms.GAO-10-522.Washington,D.C.:May
6,2010.
DefenseAcquisitions:AssessmentsofSelectedWeaponPrograms.GAO-
10-388SP.Washington,D.C.:March30,2010.
DefenseAcquisitions:ManagingRisktoAchieveBetterOutcomes.GAO-
10-374T.Washington,D.C.:January20,2010.
MaximizingDODsPotentialtoFaceNewFiscalChallengesand
StrengthenInteragencyPartnerships.GAO-10-359CG.Washington,D.C.:
January6,2010.
DefenseAcquisitions:ManyAnalysesofAlternativesHaveNotProvided
aRobustAssessmentofWeaponSystemOptions.GAO-09-665.
DefenseAcquisitions:MeasuringtheValueofDODsWeaponPrograms
RequiresStartingwithRealisticBaselines.GAO-09-543T.Washington,
D.C.:April1,2009.
Acquisitions
DefenseAcquisitions:DODMustPrioritizeItsWeaponSystem
AcquisitionsandBalanceThemwithAvailableResources.GAO-09-501T.
DODsHighRiskAreas:ActionsNeededtoReduceVulnerabilitiesand
ImproveBusinessOutcomes.GAO-09-460T.Washington,D.C.:March12,
2009.
DefenseAcquisitions:FundamentalChangesAreNeededtoImprove
WeaponProgramOutcomes.GAO-08-1159T.Washington,D.C.:September
25,2008.
DefenseAcquisitions:DODsRequirementsDeterminationProcessHas
NotBeenEffectiveinPrioritizingJointCapabilities.GAO-08-1060.
DefenseAcquisitions:BetterWeaponProgramOutcomesRequire
Discipline,Accountability,andFundamentalChangesinthe
AcquisitionEnvironment.GAO-08-782T.Washington,D.C.:June3,2008.
BestPractices:SuccessfulApplicationtoWeaponAcquisitionsRequires
ChangesinDODsEnvironment.GAO/NSIAD-98-56.Washington,D.C.:
February24,1998.
Foradditionalinformationaboutthisarea,contactMikeSullivanat
AreaContact
(202)512-4841orsullivanm@gao.gov.
MoreEfficientManagementCouldLimit
FutureCostsofDODsSparePartsInventory

MoreEfficientManagementCouldLimitFutureCosts
ofDODsSparePartsInventory
WhyGAOIsFocusing
onThisArea
ThemilitaryservicesandtheDefenseLogisticsAgency(DLA)purchase
sparepartstokeepmilitaryequipmentreadyandoperating.Attheendof
fiscalyear2009,theDepartmentofDefense(DOD)reportedthatthetotal
valueofitsinventoryofover4millionsparepartsandothersupport
itemsnotincludingweaponssystemsandotherprimaryequipment
wasmorethan$90billion.GAOhasidentifiedweaknessesinDODs
inventorymanagementpractices,includingproblemsinaccurately
forecastingdemandforspareparts.AtatimewhenU.S.militaryforces
andmaterielareinhighdemandandthenationandmilitaryfacelong-term
fiscalchallenges,itiscriticalthatDODdemonstrategoodstewardship
overthebillionsofdollarsinvestedinitssparepartsinventorywhile
continuingtosupplywarfighterswiththerightitemsattherighttime.
WhatGAOHasFound
IndicatingPotential
forCostSaving
DODcanenhanceefficienciesinthemanagementofitsspareparts
inventoryandpotentiallyachievesignificantcostavoidanceinthefuture
byaligninginventorylevelsmorecloselywithcurrentneedsandprojected
demand.DODhasmadesomeimprovementinrecentyearsbutcontinues
toconsistentlyhavehigherlevelsofinventorythanneededtomeetcurrent
needs(calledtherequirementsobjective)plusprojecteddemandsoverthe
next2years.DODinventorydatashowthatmuchoftheinventorythatis
beyondcurrentneedsandprojecteddemandiseitherretentionstock
(stockthatisconsideredinactivebutisbeingheldforpossiblefutureuse
orforotherreasons)orpotentialreutilizationstock(stockthathasbeen
identifiedasexcessandmaybedisposedof).Thesedataincludeboth
on-handinventoryandon-orderinventorythatisnotyetinDODs
possession.Someinventoryitemsmaybeinsuchlowdemandthatcurrent
suppliescouldlastfordecades.Acquiringlargeamountsofinventoryfor
whichactualdemandismuchlowerthanexpectedreducestheamountof
fundingavailableforothercurrentmilitaryneeds.
Inaseriesofreportsissuedfrom2007to2010,GAOanalyzedspareparts
inventorymanagedbytheAirForce,theNavy,theArmy,andDLAand
identifiedfactorscontributingtohigher-than-neededinventorylevels.
Mostrecently,GAOreviewedDLAinventorylevelsandreportedin2010
thatDLA,overaperiodof3fiscalyears,averaged$1billionofinventory
annuallyinpotentialreutilizationstock.DODpolicyrequiresthatits
componentsminimizeinvestmentininventorywhilealsoproviding
inventoryneededtosupportrequirements,butseveralfactorswere
causingDLAtoorderandstockpartsthatdidnotalignwithcurrentneeds
andprojecteddemand.Thesefactorsoftenoccurintheinitialstagesofthe
inventoryprocesswhenacquisitiondecisionsarebeingmade.
First,DLAsabilitytodeterminehowmanypartstobuyishinderedby
inaccurateestimatesofcustomersfuturedemandforpartsknownas
demandforecastingaswellasbyotherchallengessuchasunresolved
problemswithaccuratelyestimatingleadtimesneededtoacquire
parts.
Second,DLAhasinitiativesthatshowpromiseforreducingthe
acquisitionandretentionofunneededparts,buttheseinitiativesdonot
appeartobeachievingtheirfullpotential.DLAcontinuestoface
difficultiesclosinggapsinprovidingaccurate,timelydatatoinventory
managerstobetterinformpurchasedecisions,aswellasmodifyingor
cancelingplannedpurchasesthatmaynolongerbeneeded.
Finally,DLAisnottrackingtheoverallcostefficiencyofitsinventory
managementprocesses.
GAOidentifiedsimilarissuesinitspriorreviewsofsparepartsinventory
managedbytheAirForce,theNavy,andtheArmy.Inallthreeofthose
reviews,thepredominantreasonformismatchesbetweeninventorylevels
andneedswaschangesindemand.Inaddition,Armydatarevealed
substantialamountsofinventorydeficits,wherequantitiesofon-handand
on-ordersparepartswerenotsufficienttomeetcurrentrequirements.In
priorreports,GAOalsohasaddressedotheraspectsofinventory
management,includingproblemswithassetvisibility,leadtimesfor
acquiringparts,andmanagingretentionstocks.
ActionsNeededand
PotentialSavings
GAOhasidentifiedanumberofareaswhereDODcouldimprovethe
efficiencyofitsinventorymanagement,whilemaintainingeffectivesupply
supportforwarfighterrequirements.SinceGAOsworkhasconsistently
shownthatthegreatestopportunitiestominimizeinvestmentinunneeded
inventoryareattheinitialstagesoftheinventorymanagementprocess
whenacquisitiondecisionsarebeingmade,DODcouldlimitfuturecosts
byfocusingitseffortsonbettermanagingon-orderinventory,withaview
towardreducingon-orderinventorylevelsthatarenotneededforcurrent
needsorprojecteddemand.Forexample,GAOfoundinitsreviewofDLA
inventorythattheagencycouldbenefitfromeffortsto(1)identifyand
evaluateplannedpurchasesofsparepartsthat,ifcarriedout,mightresult
inthepotentialprocurementofunneededparts,and(2)takeactionto
modifyorcanceltheseplannedpurchases.Also,GAOhasrecommended
thatDODaddresssystemicweaknessesindemandforecasting,revise
managementpracticestoincorporateflexibilityneededtominimizethe
impactofdemandfluctuations,andtrackthecostefficiencyofits
inventorymanagementprocesses.DODhasgenerallyconcurredwith
theserecommendations.
RecentlegislativeactionunderscorestheneedforDODtoaddress
inventorymanagementweaknesses.Specifically,Section328oftheNational
DefenseAuthorizationActforFiscalYear2010requiredtheSecretaryof
Defensetosubmitacomprehensiveplanforimprovingtheinventory
managementsystemsofthemilitarydepartmentsandDLA,withthe
objectiveofreducingtheacquisitionandstorageofinventorythatisexcess
torequirements.TheactdirectedDODtoaddresseightareasofinventory
management.DODsubmitteditsplantoCongressinNovember2010.
DODstatesinitsplanthatithasalreadyreducedunneededinventoryand
thatfurtherreductionsarepossible.DODhasreported,forexample,that
$10.3billion(11percent)ofitssecondaryinventoryhasbeendesignated
asexcessandcategorizedforpotentialreuseordisposal.Theplancitesa
numberofimprovementeffortsandestablishestwobroadgoalsfor
reducing(1)thevalueofon-orderpotentialreutilizationstockasa
percentageoftotalobligatedon-orderdollarsand(2)thevalueofon-hand
potentialreutilizationstockasapercentageoftotalinventoryvalue.
DODsplanisanimportantstepinimprovinginventorymanagement
practices;however,successfulimplementationwillbechallengingandwill
requiresustainedoversightbyDODaswellascollaborationamongthe
servicesandDLA.
ToassessthepotentialforDODtoachievecostsavingsbybetteraligning
Frameworkfor
inventorylevelswithrequirements,GAOreliedonitspriorwork.
Analysis
RelatedGAO
Products
DODs2010ComprehensiveInventoryManagementImprovementPlan
AddressedStatutoryRequirements,butFacesImplementation
Challenges.GAO-11-240R.Washington,D.C.:January7,2011.
DefenseInventory:DefenseLogisticsAgencyNeedstoExpandonEfforts
toMoreEffectivelyManageSpareParts.GAO-10-469.Washington,D.C.:
May11,2010.
DefenseInventory:ArmyNeedstoEvaluateImpactofRecentActionsto
ImproveDemandForecastsforSpareParts.GAO-09-199.Washington,
D.C.:January12,2009.
DefenseInventory:ManagementActionsNeededtoImprovetheCost
EfficiencyoftheNavysSparePartsInventory.GAO-09-103.Washington,
DefenseInventory:OpportunitiesExisttoSaveBillionsbyReducingAir
ForcesUnneededSparePartsInventory.GAO-07-232.Washington,D.C.:
April27,2007.
DefenseInventory:OpportunitiesExisttoImprovetheManagementof
DODsAcquisitionLeadTimesforSpareParts.GAO-07-281.Washington,
D.C.:March2,2007.
Foradditionalinformationaboutthisarea,contactJackE.Edwardsat
AreaContact
(202)512-8246oredwardsj@gao.gov.
MoreComprehensiveandCompleteCostData
CanHelpDODImprovetheCost
EffectivenessofSustainingWeaponSystems
- MoreComprehensiveandCompleteCostDataCanHelp
DODImprovetheCost-EffectivenessofSustaining
WeaponSystems
WhyGAOIsFocusing
onThisArea
TheDepartmentofDefense(DOD)spendsbillionsofdollarseachyearto
sustainitsweaponsystems.Afteraweaponsystemisdeveloped,tested,
andproduced,itenterstheoperatingandsupport(O&S)phaseofitslife
cycle.O&Scostscanaccountfor70percentormoreofthetotal
ownershipcostsoverasystemslifetimeandincludethedirectand
indirectcostsforspareparts,fuel,maintenance,personnel,support
facilities,andtraining.GAOsworkhasshownthatweaponsystemsmay
experienceO&Scostgrowthaftertheyareacquiredduetovariousfactors
suchaslowerthanexpectedreliability,obsoletereplacementparts,and
increasedusage.Ifagencybudgetstighten,thecontinuedburdenofO&S
costgrowthcouldaffectDODsabilitytoaffordotherpriorities.
Inanefforttoimproveweaponsystemsupportandreducecostsinthe
late1990s,DODbegantouseasupportstrategyknownasperformance-
basedlogistics(PBL).Unlikemoretraditionalsupportarrangements,
whichinvolvethepurchaseofindividualsupportelements(suchasparts),
PBLarrangementsinvolvethepurchaseofperformanceoutcomessuchas
weaponsystemavailability.
WhatGAOHasFound
IndicatingPotential
forCostSaving
DODcanimprovethecost-effectivenessofsustainingindividualweapon
systems,potentiallysavingbillionsofdollars,byenhancingitseffortto
collect,retain,andanalyzemorecomprehensiveandaccurateO&Scost
data,includingcostdataforPBLarrangements.Intheabsenceofkey
informationonO&Scostsforitsmajorweaponsystems,DODmaynotbe
wellequippedtoanalyze,manage,andreducethesecosts.DODestimated
thatcostsforsupportingitsweaponsystemsamountedtoatleast$132
billioninfiscalyear2008,butthedepartmentdoesnotknowtotalO&S
costsassociatedwithitssystems.
GAOreviewedsevenaviationweaponsystemsandreportedin2010that
DODlackedlife-cycleO&Scostestimatesandcompletehistoricaldataon
actualO&Scosts,whichareneededtoeffectivelytrackandanalyzethe
growthofthesecosts.Life-cyclecostestimatesaredevelopedtosupport
decisionsatkeyacquisitionmilestonesand,underGAOsguidanceforcost-
estimatingbestpractices,thethoroughdocumentationandretentionof
theseestimatesarealsoessentialforuseinpreparingfuturecostestimates.
However,currentDODacquisitionandcost-estimatingguidancedoesnot
specificallyaddressrequirementsfortheretentionoflife-cycleO&Scost
estimatesandsupportingdocumentation.
Additionally,GAOfoundproblemswithincompleteandinaccuratedatain
theservicescostvisibilitydatasystemsdesignatedastheauthoritative
CanHelpDODImprovetheCost-
sourcesforhistoricaldataonactualO&Scosts.DODhasissuedguidance
thatincludesarecommendationregardingthetypesofhistoricaldataon
actualO&Scoststhattheservicescouldcollectfortheirweaponsystems,
butthissuggestionisnotmandatory.AlthoughO&Scostsfortheseven
systemsGAOreviewedhadgrown,itwasunclearhowmuchofthegrowth
wasunexpectedwithoutmorecompletecostinformation.
WhileDODhasmovedtowardPBLasitspreferredstrategytosupport
weaponsystems,GAOreviewedPBLarrangementsforselectedweapon
systemsin2008andfoundthattheabilityofthesearrangementstoreduce
costsremainedunclear.Accordingtoadepartmentassessmentin2009,
about20percentofweaponsystemswerebeingsupportedunderPBL
arrangements.GAOfoundthatmanyDODprogramofficesthat
implementedPBLarrangementslackdetailedsupportcostdata.
Additionally,variousotherfactorssuchasthelackofbusinesscase
analysestocomparethecostsandbenefitsofPBLagainstotherweapon
systemsupportoptionsfurtherlimitedanevaluationofthecostsofthis
supportstrategy.AtthetimeGAOconducteditsreview,itfoundthat
neitherDODnortheservicesrequireddetailedcostreportingforPBL
arrangements.Also,GAOreportedthatbusinesscaseanalyseswere
inconsistentlyusedforPBLdecisionmakingbecauseDODdidnotrequire
thattheanalysesbeconductedandupdatedorprovidespecificcriteriato
guidetheirdevelopment.
ActionsNeededand
PotentialSavings
DODcurrentlyhasanumberofinitiativestoimproveweaponsystem
supportandbettermanageandreduceweaponsystemO&Scosts.For
example,DODhasindicateditsintenttofocusmoreattentiononO&S
costrequirementsandweaponsystemreliabilityduringtheacquisition
process.DODisalsoworkingtoimplementtherecommendationsmadein
aninternalNovember2009assessmentofweaponsystemproductsupport.
TheassessmentidentifiedweaknessesinO&Scostmanagementand
recommendedanumberofcorrectiveactions,suchas(1)establishingan
O&Saffordabilityrequirement,includinglinkingO&Sbudgetsto
readiness;(2)developingandimplementinganaffordabilityprocesswith
allDODstakeholders(suchasthefinancialandprogrammanagement
communities);and(3)increasingthevisibilityofO&Scostsandtheir
driversacrossthesupplychain.RegardingPBL,theAirForcenow
requiresprogrammanagerstoconductbusinesscaseanalyses,thereby
comparingthecostsandbenefitsofPBLagainstothersupportoptions,
andAirForceinterimguidance,issuedin2009,alsodirectsdetailedcost
reportingforcontractorlogisticssupportarrangements,whichoften
includePBLarrangements.DODalsoincludedabroadcostreporting
requirementforcertainprogramsinacquisitionguidanceandis
developingadditionalguidanceforthecollectionofmorecomprehensive
costdatafromPBLsupportproviders.However,thisguidanceandDODs
otherinitiativesareeithernotyetimplementedortoorecentforGAOto
evaluatetheirimpact.
WhileDODhastakensomepositivesteps,moreremainstobedoneto
improvethecollection,retention,andanalysisofO&Scostdatasteps
thatwouldsignificantlyenhanceDODsabilitytomanageandpotentially
reduceO&Scosts.GAOrecommendedinJuly2010thatthedepartment
takethefollowingactions:
Reviseguidancetospecificallyrequiretheretentionoflife-cycleO&S
costestimatesformajorweaponsystems,aswellasthesupporting
documentationusedtodeveloptheseestimates.Theseestimatesand
supportingdocumentation,ifretained,couldprovideabenchmarkfor
subsequentcostanalysisoftheweaponsystems,enableidentificationof
majorcostdrivers,andaidinimprovingcostestimatesforfuture
systems.
IdentifythecostelementsneededtotrackandassessactualO&Scosts
foreffectivecostanalysisandprogrammanagementformajorweapon
systems,andrequirethecollectionoftheseelementsintheservices
O&Scostvisibilitydatasystems.Collectingcompletedatawouldput
theservicesinagoodpositiontotrackcostsovertime,comparecosts
withpreviousestimates,anddeterminewhetherandwhycostgrowth
isoccurring.
Requiretheservicestoperiodicallyupdatelife-cycleO&Scost
estimatesformajorweaponsystemsafterthesesystemsareacquired,
whichwouldenhanceDODsabilitytocompareactualperformanceto
plannedorexpectedresults.
DODconcurredorpartiallyconcurredwiththeseandotherrelated
recommendations,notingthatthedepartmentiscommittedto
strengtheningitsO&SdataavailabilityaswellasitsuseofO&Sestimates
inthegovernanceprocessformajordefenseacquisitionprograms.
WithregardtoPBL,GAOrecommendedinDecember2008thatthe
department(1)requireprogramofficestocollectandreportdetailed
supportcostdatafortheirPBLarrangements;(2)reviseguidanceto
requirethedevelopmentofPBLbusinesscaseanalysestobettersupport
thedecision-makingprocessontheuseofthesearrangements;and(3)
definetheelementstobeincludedintheseanalysessotheyare
comprehensiveandsound.
Theseactionswouldgeneratemoredetailedcostdataandimprovethe
analysesofPBLarrangementstodetermineiftheyarethemostcost-
effectiveapproachtosupportingweaponsystems.DODconcurredor
partiallyconcurredwiththeseandotherrelatedrecommendationsbuthas
notyetimplementedallcorrectiveactions.
ThelackofcompleteandreliableO&Scostdatamakesitdifficultto
determinethefullextentofpotentialsavingsonweaponsystemO&S
costs.However,basedonDODsestimatethatitspentatleast$132billion
infiscalyear2008onweaponsystemsupportalone,forevery1percent
reductionincosts,therewouldbeanannualcostsavingsof$1.3billion.
Asanillustrationofthepotentialforsignificantcost-savings,agoalof
reducingsupportcostsby5percentoveraperiodoftimewouldtranslate
toannualcostsavingsofapproximately$6.6billion.MoreambitiousO&S
costreductiongoalswouldpotentiallyresultingreatercostsavings.
ToassessthepotentialforDODtoachievesavingsbyreducingitsO&S
Frameworkfor
costs,GAOreliedonthepriorworkbelow.
Analysis
RelatedGAO
Products
DefenseManagement:DODNeedsBetterInformationandGuidanceto
MoreEffectivelyManageandReduceOperatingandSupportCostsof
MajorWeaponSystems.GAO-10-717.Washington,D.C.:July20,2010.
DefenseLogistics:ImprovedAnalysisandCostDataNeededtoEvaluate
theCost-effectivenessofPerformanceBasedLogistics.GAO-09-41.
DefenseManagement:DODNeedstoDemonstrateThatPerformance-
BasedLogisticsContractsAreAchievingExpectedBenefits.GAO-05-966.
BestPractices:SettingRequirementsDifferentlyCouldReduceWeapon
SystemsTotalOwnershipCosts.GAO-03-57.Washington,D.C.:February
11,2003.
AreaContact
ImprovedCorrosionPreventionandControl
PracticesCouldHelpDODAvoidBillionsin
UnnecessaryCosts
ImprovedCorrosionPreventionandControlPractices
CouldHelpDODAvoidBillionsinUnnecessaryCosts
WhyGAOIsFocusing
onThisArea
TheDepartmentofDefense(DOD)estimatesthatcorrosioncoststhe
departmentover$23billioneachyear.Corrosiontheunintended
destructionordeteriorationofamaterialduetointeractionwiththe
environmentaffectsmilitaryreadiness.Accordingtoa2009study,
corrosionwasresponsiblefortakingupto16percentofmilitaryassets,
mostnotablyaircraft,outofaction.Corrosionalsocreatessafetyhazards.
GAOreportedin2007thattheArmyattributedover50aircraftaccidents
and12fatalitiestocorrosionsince1985.Corrosiontakessuchvaried
formsasrusting;pitting;calciumorothermineralbuildup;degradation
fromexposuretoultravioletlight;andmold,mildew,andotherorganic
decay.Itnegativelyaffectsallmilitaryassets,includingequipmentand
infrastructure.In2003,DODcreatedtheOfficeofCorrosionPolicyand
Oversight(CorrosionOffice),whichisresponsibleforthepreventionand
mitigationofcorrosion.Since2008,theDirectoroftheCorrosionOffice
reportsdirectlytotheUnderSecretaryofDefenseforAcquisition,
TechnologyandLogistics.
WhatGAOHasFound
IndicatingPotential
forCostSaving
Corrosion,ifleftunchecked,candegradethereadinessandsafetyof
equipmentandfacilitiesandcanresultinsubstantial,sometimes
avoidable,costs.TheDefenseScienceBoardTaskForceestimatedina
2004reportthat30percentofcorrosioncostscouldbeavoidedthrough
properinvestmentinpreventionandmitigationofcorrosionduringdesign,
manufacture,andsustainment.Usingfiscalyear2006data,DODs
CorrosionOfficeestimatedthatapproximatelyaquarterofthe$80billion
inannualexpensestomaintainitsships,aircraft,strategicmissiles,and
groundcombatandtacticalvehiclesisspentforcorrosion-related
concerns.DODalsospendsabout$10billionannuallytomaintainabout
577,000buildingsandstructures,withabout$1.9billionofthatamount
spentforcorrosion-relatedconcerns.AccordingtoDOD,increased
corrosionpreventionandcontroleffortsareneededtoadequatelyaddress
thewide-rangingandexpensiveeffectsofcorrosiononequipmentand
infrastructure.However,DODdidnotfundaboutone-thirdofacceptable
corrosionprojectsforfiscalyears2005through2010.Also,military
departmentshavenotvalidatedthecost-effectivenessofmanyofthe
previouslyfundedcorrosionprojects.
Totargetfundingtowardcorrosionpreventionandcontrol,DOD
establishedaseparateprogramelementandlineitemwithinitsbudget.
Amongotherthings,theCorrosionOfficeusesmuchofthatbudgettofund
projectsdesignedtodevelopandtestnewtechnologies.Toreceive
CorrosionOfficefunding,themilitarydepartmentssubmitproject
proposalsthatareevaluatedbyapanelofexpertsassembledbythe
UnnecessaryCosts
DirectoroftheCorrosionOffice.TheCorrosionOfficecurrentlyfundsup
to$500,000perproject,andthemilitarydepartmentspledge
complementaryfundingforeachprojecttheypropose.Thelevelof
militarydepartmentfundingandtheestimatedreturnoninvestmentare
twoofthecriteriausedtoevaluatetheprojectsproposals.Forfiscalyears
2005through2010,theCorrosionOfficejudged271corrosionprevention
andcontrolprojectstobeacceptableforfunding.However,DODfunded
$129million(63percent)ofthe$206millionthatwasneededtofundthose
271projects.
Duringthe6yearsthattheCorrosionOfficehasbeenfundingcorrosion
projects,theaverageestimatedreturnoninvestmentforthoseprojects
hasbeen50:1.DODiscurrentlyaskingthemilitarydepartmentstovalidate
theactualreturnoninvestmentfortheprojectsfundedinfiscalyear2005
comparedtotheoriginalestimates.Todate,validationshavebeen
completedfor10ofthe28corrosionprojectsfundedinthatfiscalyear.
Nineofthe10projectswerefacilitiesprojectswithavalidatedreturnon
investmentof11:1.Weaponsprojectshavebeenestimatedtohavehigher
returnsoninvestment(67:1average),buttheseestimateshavenotbeen
validatedbythemilitarydepartments.Also,noneofthoseestimateshave
beenindependentlyvalidated.
ActionsNeededand
PotentialSavings
Ifthecorrosionpreventionandcontrolprojectsacceptedfromfiscalyears
2005through2010hadbeenfullyfunded,DODpotentiallycouldhave
avoided$3.6billionincorrosion-relatedcostsassumingthoseprojects
achievedthesamelevelofcost-effectivenessaswasestimatedforall
acceptedprojectsinthoseyears.InApril2010,GAOreportedthatthe
corrosionrequirementsforthefiscalyear2011budgetidentified$12
millionforprojects,leavinganunfundedrequirementofabout$35million.
Iffullyfunded,that$35millioncouldresultinapotentialcostavoidance
of$418million.Similarly,byunderfundingallofitsestimatedcorrosion
preventionandcontrolrequirements,DODmaybemissinganopportunity
foradditionalcostavoidancetotaling$1.4billion.
However,thesecalculationsarehighlycontingentontheaccuracyof
estimatedreturnoninvestmentdataprovidedbytheCorrosionOffice,
muchofwhichhavenotbeenvalidatedbythemilitarydepartmentsoran
independententity.GAOhasrecommendedthattheCorrosionOffice
ensurethatreturnoninvestmentestimatesforfundedcorrosion
preventionandcontrolprojectsarevalidated.IftheCorrosionOffice
wishestoconvinceDODandcongressionaldecisionmakersthatmore
fullyfundingitscorrosionpreventionprogramscouldprovidesucha

Improved Corrosion Prevention and Control
Practices Could Help DOD Avoid Billions in
Unnecessary Costs

Page 188 GAO-11-318SP Section II: Other Cost Savings and Revenue Enhancements
significant return on investment, the Corrosion Office needs to complete
the validation of return on investment estimates in order to demonstrate
the costs and benefits of its corrosion prevention and control projects.

GAO is required by law to report annually on DODs corrosion prevention
and control budget submission and on the corrosion report that
accompanies defense budget materials. GAO has also done other work on
corrosion issues. This analysis is based on GAOs previously published
work in that area from 2003 through 2010.

Defense Management: DOD Has a Rigorous Process to Select Corrosion
Prevention Projects, but Would Benefit from Clearer Guidance and
Validation of Returns on Investment. GAO-11-84. Washington, D.C.:
December 8, 2010.
Defense Management: Observations on Department of Defense and
Military Service Fiscal Year 2011 Requirements for Corrosion
Prevention and Control. GAO-10-608R. Washington, D.C.: April 15, 2010.
Defense Management: Observations on the Department of Defenses
Fiscal Year 2011 Budget Request for Corrosion Prevention and Control.
GAO-10-607R. Washington, D.C.: April 15, 2010.
Defense Management: Observations on DODs Fiscal Year 2010 Budget
Request for Corrosion Prevention and Control. GAO-09-732R.
Washington, D.C.: June 1, 2009.
Defense Management: Observations on DODs Analysis of Options for
Improving Corrosion Prevention and Control through Earlier Planning
in the Requirements and Acquisition Processes. GAO-09-694R.
Washington, D.C.: May 29, 2009.
Defense Management: Observations on DODs FY 2009 Budget Request
for Corrosion Prevention and Control. GAO-08-663R. Washington, D.C.:
April 15, 2008.
Defense Management: High-Level Leadership Commitment and Actions
Are Needed to Address Corrosion Issues. GAO-07-618. Washington, D.C.:
April 30, 2007.
Framework for
Analysis
Related GAO
Products
UnnecessaryCosts
DefenseManagement:AdditionalMeasurestoReduceCorrosionof
PrepositionedMilitaryAssetsCouldAchieveCostSavings.GAO-06-709.
DefenseManagement:OpportunitiesExisttoImproveImplementation
ofDODsLong-TermCorrosionStrategy.GAO-04-640.Washington,D.C.:
June23,2004.
DefenseManagement:OpportunitiestoReduceCorrosionCostsand
IncreaseReadiness.GAO-03-753.Washington,D.C.:July7,2003.
DefenseInfrastructure:ChangesinFundingPrioritiesandStrategic
PlanningNeededtoImprovetheConditionofMilitaryFacilities.
AreaContact
RevisingtheEssentialAirServiceProgram
CouldImproveEfficiencyandReduceCosts
RevisingtheEssentialAirServiceProgramCould
ImproveEfficiencyandReduceCosts
WhyGAOIsFocusing
onThisArea
Since1978,theEssentialAirService(EAS)program,administeredbythe
DepartmentofTransportation,hassubsidizedairservicetoeligible
communities.In2010,theprogramsupportedairservicetoabout150
communitiesnationally.TheEASprogramwasoriginallyestablishedasa
10-yeartransitionalprogramtoeasecommunitiesintoaderegulated
aviationenvironment.Thecostofthisprogramhasrisenassubsidiesto
aircarriersandthenumberofcommunitiesbeingservedhaveincreased.
OvertheyearsGAOhasexpressedconcernsthatrisingcostsmay
jeopardizetheEASprogramslong-termviability.
WhatGAOHasFound
IndicatingPotential
forCostSaving
RevisingtheEASprogramandre-examiningtheneedforairserviceacross
thecountrycouldincreaseprogramefficiencyandreducecosts.Infiscal
year2009,Congressappropriated$136.2millionfortheEASprogram,and
in2010increasedthisamountto$200million.
1
Costscouldcontinueto
increaseforanumberofreasons;forexample,someeligiblecommunities
mayloseexistingunsubsidizedairserviceandobtainEASsubsidies.GAO
haspreviouslyreportedonissuesrelatedtotheEASprogram,including
thefollowing:
Eligibilitycriteriaaredatedandnotwelltargeted.Eligibilityforthe
programwassetin1978andlargelybasedoncommunitiesthathador
couldhavescheduledairserviceatthattime;thuseligibilitymaybearlittle
relationtocurrentdemandforairservice.Communitieshavebeenadded
andremovedfromEASfunding,buttheapproachtodeterminingEAS
eligibilityhasremainedthesameandaffectsthecostoftheprogram.For
example,EAScurrentlyusesdistancetomedium-andlarge-hubairports
asabasisforeligibility.PastGAOanalyseshaveshownthatifeligibility
criteriaconsideredthedistancetosmall-hubairports,inadditiontothe
currentcriteriaofdistancetomedium-andlarge-hubairports,anduseda
125miledistanceinsteadofthecurrent70miles,fewercommunities
wouldbeeligibleforEAS.Inaddition,becausecommunitieslocatednear
eachotherareeligibleforEASflights,insomeregionsduplicatefederal
subsidiesarepaidtoaircarrierswhenasinglesubsidycouldprovideair
service.Communitiesandstateshavebeenreticenttoselectoneregional
airporttoserveneedsforagreaterregionbecausetheydonotwantto
giveuptheserviceforwhichtheyareeligible.
1
Theseamountsincludethe$50millionEASreceiveseachyearthroughapermanent,
indefiniteappropriation.
Operatingrequirementsareinefficient.Theprogramhasoperating
requirementsthatareinefficientandincreasecosts.Forexample,
legislationmandatesthatairlinesuselargeraircraftwhensmaller,less
expensivetooperate,aircraftcouldinsomeinstancesmeetpassenger
demand.
2
Inaddition,theprogramrequiresacertainnumberofflights,
regardlessofpassengerdemand.PastGAOanalyseshaveshownthatmost
EASflightsoperatewithaircraftthatarelargelyemptysomeEAS
airportsoperatewithfewerthanfivepassengersperday.Infiscalyear
2008,thepercentageofavailableseatsfilledbypassengerswas37percent
onEASflights.
Alternativetransportationoptionscouldbemorecost-effectiveinsome
cases.Somecommunitieshavenotbeenabletogeneratesufficient
demandtojustifycostlyairservice,resultinginrisingper-passenger
subsidies.Becausepotentiallycost-effectivealternatives,suchasbus
servicetootherairports,arenotused,subsidiesmaybehigherthan
necessarytolinkthesecommunitiestothenationspassengeraviation
system.
ActionsNeededand
PotentialSavings
Congressmaywishtoconsiderfundamentallyre-examiningthedesignand
efficiencyoftheEASprogram.GAOhasreportedonseveralpotential
solutionstotheseissuesfacingtheEASprogramthatCongressandthe
DepartmentofTransportationmaywishtoconsider.Allhavedrawbacks,
buttheypresenttheopportunityforthegovernmenttotargetanduse
fundsmoreefficiently.
Updatingeligibilitycriteriaandtargetingservice.Changingthe
programcriteriatotargetmoreremotecommunitieswouldresultin
savings.In2006GAOfoundthatabout$24millioncouldbesaved
annuallyifservicewereterminatedatairportsthatwerewithin125
highwaymilesofamedium-orlarge-hubairport.Underthisapproach,
moreremotecommunitieswouldhaveremainedeligibleforEAS,but
lessremotecommunitiesreceivingsubsidizedservicewouldhavebeen
ineligible.Inaddition,changingprogramcriteriatoconsolidate
subsidizedairservicetooneregionalairportcouldhelpreducethe
numberofEASlocationsservedwhilemaintainingregional
connectionstothenationsairtransportationsystem.However,this
potentialsolutioniscontroversialatthelocallevel,inpartbecause
2
Communitiescurrentlymaywaivetheirguaranteeoflargeraircraft.

regionalizingservicewouldrequiresomecommunitiestogiveuptheir
ownserviceforpotentiallyimprovedserviceatalessconvenient
regionalfacility
Revisingoperatingrequirementstoimproveefficiency.Revising
operatingrequirementstobettermatchcapacitywithcommunityuse
couldimproveefficiencyandsavefederalsubsidies.Aircarrierscould
reduceunusedcapacitybyusingsmalleraircraft,forexample,byusing
9-seataircraftinplaceofthe19-seataircrafttypicallyused,orreducing
thenumberofflights.Thiswouldimprovetheefficiencyofthe
program,butitwouldalsocreatechallenges,sincesmalleraircraftmay
notbesuitableforcertainroutes,suchasthoseinmountainousareas
thatrequirepressurizedcabins.Similarly,reducingthenumberof
flightswouldmeanpassengershavefeweroptionsfromwhichto
choose.However,asdiscussedbelow,passengerscouldpotentially
haveadditionaltransportationoptionsifgivenothermeansof
transportationtoalternativeairports.
Assessingmultimodalsolutionstoprovidecommunitiesalternatives
toEAS.Othermeansoftransportationmightbemorecost-effective
andpracticalthanEASsubsidiesforintercitytransportationforsmall
communitiesthatmayhavelimiteddemandforairserviceduetothe
proximityofotherairportsorlimitedpopulation.Thiscouldinclude
potentiallymorecost-effectivebusservicetohubairportsoron-
demandairserviceonsmallaircraft,usuallycalledairtaxiservice.
Whilecommunitiesmaybeconcernedaboutlosingexistingscheduled
airservice,assessingmultimodalalternativescouldmaintainaccessto
theaviationsystematalowercost.
Frameworkfor
below.
Analysis
NationalTransportationSystem:OptionsandAnalyticalToolsto
RelatedGAO
StrengthenDOTsApproachtoSupportingCommunitiesAccesstothe
Products System.GAO-09-753.Washington,D.C.:July17,2009.
CommercialAviation:ProgramsandOptionsforProvidingAirService
toSmallCommunities.GAO-07-793T.Washington,D.C.:April25,2007.
CommercialAviation:ProgramsandOptionsfortheFederalApproach
toProvidingandImprovingAirServicetoSmallCommunities.
FederalAviationAdministration:ReauthorizationProvides
OpportunitiestoAddressKeyAgencyChallenges.GAO-03-653T.
CommercialAviation:IssuesRegardingFederalAssistancefor
EnhancingAirServicetoSmallCommunities.GAO-03-540T.
CommercialAviation:FactorsAffectingEffortstoImproveAirService
atSmallCommunityAirports.GAO-03-330.Washington,D.C.:January17,
2003.
OptionstoEnhancetheLong-TermViabilityoftheEssentialAirService
Program.GAO-02-997R.Washington,D.C.August30,2002.
Foradditionalinformationaboutthisarea,contactGeraldDillinghamat
AreaContact
(202)512-2834ordillinghamg@gao.gov.
ImprovedDesignandManagementofthe
UniversalServiceFundAsItExpandsto
SupportBroadbandCouldHelpAvoidCost
IncreasesforConsumers
ImprovedDesignandManagementoftheUniversal
ServiceFundAsItExpandstoSupportBroadband
CouldHelpAvoidCostIncreasesforConsumers
WhyGAOIsFocusing
onThisArea
ThepolicythatAmericansshouldenjoyuniversalaccesstoaffordable
communicationsserviceshasexistedsincethe1930s.In2009,thenations
UniversalServiceFund(Fund),managedbytheFederalCommunications
Commission(FCC),disbursedroughly$7.3billiontosubsidizetelephone
andothercommunicationsservicesthroughfourprograms.TheHighCost
programsubsidizescompaniesservingruralandhigh-costareas.TheLow-
Income,E-rate,andRuralHealthCareprogramssubsidizetelephonebills
andcommunicationsservicesforlow-incomeconsumers,schoolsand
libraries,andruralhealthcareproviders,respectively.TheNational
BroadbandPlan,releasedinMarch2010byanFCCtaskforce,callsfor
modifyingtheFundtosupportgreaterdeploymentofmoreexpensive
broadbandtechnologies.UniversalServiceFundprogramsarefunded
throughmandatorypaymentsfromcompaniesproviding
telecommunicationsservicespaymentsusuallypassedalongto
consumersasalineitemfeeontheirtelephonebill.Funddisbursements
havemorethantripledsincebeginningin1998.GAOhasreportedtheneed
forimprovedmanagementpracticesineachofthefourprograms.
WhatGAOHasFound
IndicatingPotential
forCostSaving
GAOhasexaminedeachoftheFundsprogramsandconcludedthat
proposalstomodifythemtosupportgreaterdeploymentofmore
expensivebroadbandtechnologieswithoutre-examiningthepurpose,
design,andmanagementoftheprogramscouldincreasedisbursements
fromtheFundandthecostsbornebyconsumers.FCCsdesignofFund
programs,includingtheHighCostandLow-Incomeprogramshavingno
limitsondisbursements,havealloweddisbursementstogrowsignificantly
overtime.Forexample,duetoincreasedprogramparticipation,Low-
Incomesupportpaymentsfor2010areestimatedtoreachapproximately
$1.4billiona36percentsingle-yearincreaseover2009.InSeptember
2010,FCCindexedtheE-rateprograms$2.25billionannualfundingcapto
inflation,whichwillleadtoincreasesinthatprogramsexpenditures.
Usingeachprogramtosupportgreaterbroadbanddeploymentwillfurther
increasetheupwardpressureonspending.
TotalFiscalYearDisbursementsfromtheFourUniversalServiceFundPrograms
Dollarsinbillions
8
7.4
7.3
2009 1998 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999
7.0
6.8
7
6.3
6 5.7
5.6
5.1
4.9
5
4.0
4
3.3
3
2.3
2
1
0
Fiscalyear
Source:GAOpresentationofFCCdata.
InFebruary2005,GAOraisedconcernswiththeunusualstructurethat
FCCestablishedfortheFundthathascausedFCCtostruggleoverthe
yearswithidentifyingthefiscalandaccountabilityrequirementsthatapply
totheFund.TheseconcernsincludedtheextenttowhichFCChas
delegatedsomefunctionstotheUniversalServiceAdministrative
Company(USAC)thenot-for-profitcorporationthatFCCappointedas
thepermanentadministratoroftheFund.InresponsetoGAOsconcerns
thatUSACwasoperatinganddisbursingfundsunderlessexplicitfederal
tiesthanmanyotherfederalprograms,FCCestablishedamemorandumof
understandingwithUSACin2007.However,concernsaboutFCCsdesign
andstructureoftheFundremain,includingtheFundbeingoutsideof
Congressannualappropriationsoversightprocess.
InitsmanagementoftheFund,FCChasnotundertakenadata-driven
approachtooverseeingthefourprograms.Forexample,GAOfoundinits
November2010reportontheRuralHealthCareprogramthatFCCnever
conductedacomprehensiveneedsassessmenttolearnhowtheprogram
canbesttargetthetelecommunicationsneedsofruralhealthcare
providers.Properneedsassessmentsarecrucialtotheeffectivedesign
andassessmentofprograms.IfFCChadobtaineddatathroughaneeds
assessment,itmayhavebeenabletoarticulateaclearervisionforthe
program,moreaccuratelyascertainwhysomeruralhealthcareproviders
donotparticipateintheprogram,andbetterensurethatFCCs
programmaticchangesachievedtheintendedresults.Usingdata-based
assessmentswouldsupplementtheinformationgainedthroughFCCs
regulatoryproceduresandenhanceFCCsabilitytomanageFund
programs.
Finally,GAOhasfoundthatFCClacksperformancegoalsandmeasures
forallfourFundprograms.Results-orientedorganizationsestablisha
strongfoundationforsuccessfulprogrammanagementthroughsetting
performancegoalstoclearlydefinedesiredoutcomesanddeveloping
performancemeasuresthatarelinkedtotheprogramgoals.GAOhas
recommendedovertheyearsthatFCCestablishperformancegoalsand
measuresforalloftheUniversalServiceFundprogramsandFCChas
generallyagreedwiththeserecommendations.However,FCChasmade
onlypartialprogresstowardimplementingperformancegoalsand
measuresineachofthefourprograms.
ActionsNeededand
PotentialSavings
TheNationalBroadbandPlanrecommendsshiftingUniversalService
Fundsupportfromlegacyvoicetechnologiestosupportingabroadband
platformthatenablesmanyapplications,includingvoice.However,twoof
theprogramsremainuncappedandFCChasnotadequatelyaddressedthe
Fundscontinuedgrowth.GAOsworkillustratestheneedforabroader
rethinkingofthevision,size,structure,andgoalsoftheUniversalService
Fund,coupledwithmanagementimprovementsbyFCCthatwilladdress
GAOsrecommendations.Forexample,FCCconductingcomprehensive
needsassessmentswouldbeagoodfirststeptowarddesigningprograms
thatproperlytargetbroadbandneeds.Establishingclearperformance
goalsandmeasuresfortheprogramswillallowFCCtobetterdetermine
theproperamountoffundingforeachprogram,targetthefundingtomeet
theneedsoftheintendedbeneficiaries,andconductneededprogram
evaluations.FCCandUSAChavenotedtheywillworktogethertorespond
torecentGAOrecommendationsregardingimprovinginternalcontrols
andotheroversightmechanisms.BeyondGAOsprevious
recommendations,CongressmayalsowishtogivetheFundincreased
attentionsinceitfallsoutsideoftheannualappropriationsprocess.These
actionswouldhelpensurestrongergovernmentalaccountabilityoverthe
Fundinthefutureandhelpavoidcontinuedcostincreasesforratepayers.
Thisanalysisisbasedontheworkconductedfortheproductslisted
Frameworkfor
below,aswellasareviewoftheMarch2010NationalBroadbandPlanand
Analysis FCCsrecentproposedrulemakingsandordersrelatedtoimplementation
ofUniversalServiceFundreform.
RelatedGAO
Products
Telecommunications:FCCsPerformanceManagementWeaknesses
CouldJeopardizeProposedReformsoftheRuralHealthCareProgram.
Telecommunications:ImprovedManagementCanEnhanceFCC
DecisionMakingfortheUniversalServiceFundLow-IncomeProgram.
Telecommunications:FCCShouldAssesstheDesignoftheE-rate
ProgramsInternalControlStructure.GAO-10-908.Washington,D.C.:
September29,2010.
Telecommunications:Long-TermStrategicVisionWouldHelpEnsure
TargetingofE-rateFundstoHighest-PriorityUses.GAO-09-253.
Telecommunications:FCCNeedstoImprovePerformanceManagement
andStrengthenOversightoftheHigh-CostProgram.GAO-08-633.
Telecommunications:GreaterInvolvementNeededbyFCCinthe
ManagementandOversightoftheE-RateProgram.GAO-05-151.
Telecommunications:FederalandStateUniversalServiceProgramsand
ChallengestoFunding.GAO-02-187.Washington,D.C.:February4,2002.
SchoolsandLibrariesProgram:ActionsTakentoImproveOperational
ProceduresPriortoCommittingFunds.GAO/RCED-99-51.Washington,
D.C.:March5,1999.
Telecommunications:FCCLackedAuthoritytoCreateCorporationsto
AdministerUniversalServicePrograms.GAO/T-RCED/OGC-98-84.
Foradditionalinformationaboutthisarea,contactMarkGoldsteinat
AreaContact
(202)512-2834orgoldsteinm@gao.gov.
TheCorpsofEngineersShouldProvide
CongressWithProject-LevelInformationon
UnobligatedBalances
TheCorpsofEngineersShouldProvideCongressWith
Project-LevelInformationonUnobligatedBalances
WhyGAOIsFocusing
onThisArea
TheU.S.ArmyCorpsofEngineers(Corps)istheworldslargestpublic
engineering,design,andconstructionmanagementagency.TheCorps
providesvitalpublicengineeringservicesinpeaceandwartostrengthen
thenationssecurity,energizetheeconomy,andreducerisksfrom
disasters.
CongressprovidestheCorpswithno-yearappropriationsthatis,funds
thatareavailableforobligationuntilexpendedsofundingmaybe
carriedovertosubsequentfiscalyears.Forexample,iftheCorpsobligates
$40millionofa$50millionappropriation,the$10millionthatwasnot
obligatedisavailableforuseinsubsequentyears.
Infiscalyear2010theCorpscivilworksprogramreceivedabout$5.7
billiontoplan,construct,operate,andmaintainhundredsofwater
resourceprojects.However,thebudgetpresentationdoesnotprovide
informationontheamountofunobligatedbalancesthatremainavailable
foreachproject.Suchproject-levelinformationwouldhelpcongressional
decisionmakersmakeappropriationsandoversightdecisionsinformedby
theavailabilityofexistingresources.
WhatGAOHasFound
IndicatingPotential
forCostSaving
ThebudgetpresentationfortheCorpslackstransparencyonkeyelements
ofthePresidentsbudgetrequest.Specifically,itdoesnotinclude
informationonhowmuchremainsavailableforspecificprojectsthat
couldpotentiallyoffsetnewfundingrequestsforprojects.Forexample,a
Sabine-NechesWaterwayprojectinTexashadabout$31millionin
unobligatedbalancesfromitsfiscalyear2009allocationthatremained
availabletooffsetitsfiscalyear2010request.Consequently,Congresshas
notbeenabletoconsiderthefulllevelofresourcesavailableforprojects
whenmakingitsappropriationsdecisions.Corpsreviewboardsroutinely
reviewwhetherprojectsaremeetingfinancialmilestones,sounobligated
balanceinformationisavailable.AlthoughaseniorCorpsbudgetofficial
toldGAOthatdetailedproject-levelinformationsuchasremaining
balanceswouldnotbeavailableuntilafterbudgetmaterialsare
submittedtoCongress,theCorpswouldbeabletoprovidetimely
informationbeforefinalappropriationsdecisionsaremade.
ActionsNeededand
PotentialSavings
Toensurethatallrelevantinformationisconsideredduringcongressional
deliberations,GAOrecommendedinApril2010andtheDepartmentof
DefenseagreedthattheCorpsprovideCongresswithinformationon
estimatedproject-levelunobligatedbalancesasasupplementtoitsbudget
presentation.GAOexpectstofollowupatalaterdatetoassessthe
TheCorpsofEngineersShouldProvide
CongressWithProject-LevelInformationon
UnobligatedBalances
implementationofthisrecommendation.AlthoughGAOcannotquantify
thepotentialsavings,thisinformationwouldenableCongresstoconsider
howmuchofthepreviousyearsfundingremainsavailabletooffsetnew
fundingrequests.
Theinformationcontainedinthisanalysisisbasedonthepreviously
Frameworkfor
issuedreportcitedbelow.
Analysis
ArmyCorpsofEngineers:BudgetFormulationProcessEmphasizes
RelatedGAOProduct
AgencywidePriorities,butTransparencyofBudgetPresentationCould
BeImproved.GAO-10-453.Washington,D.C.:April2,2010.
Foradditionalinformationaboutthisarea,contactDeniseFantoneat
AreaContact
(202)512-4997orfantoned@gao.govorAnuK.Mittalat(202)512-3841or
mittala@gao.gov.
EnsuringtheFederalGovernmentReceives
FairMarketValueforItsOilandGas
ResourcesCouldEnhanceFederalRevenues
EnsuringtheFederalGovernmentReceivesFairMarket
ValueforItsOilandGasResourcesCouldEnhance
FederalRevenues
WhyGAOIsFocusing
onThisArea
TheDepartmentoftheInterior(Interior)collectedapproximately$40
billioninoilandgasrevenuesfromcompanybidsfornewoilandgas
leases,annualrentsonexistingleases,androyaltiespaidonoilandgas
soldfromfederalleasesinfiscalyears2008through2010.Interiors
BureauofLandManagement(BLM)managesonshoreoilandgasleases,
anditsBureauofOceanEnergyManagement,Regulationand
Enforcement(BOEMRE)managesoffshoreleases.InteriorsOfficeof
NaturalResourcesandRevenue(ONRR)isresponsibleforcollecting
revenuesassociatedwithoilandgasproducedfromonshoreandoffshore
leases.
GAOhasreviewedInteriorsoilandgasmanagementandrevenue
collectionandfoundinSeptember2008thatInteriorhasnotroutinely
evaluateditsfederaloilandgasrevenuecollectionsystem.Bynot
evaluatingthissystem,Interiorisunabletostatewhethercurrentrevenue
policiesensurethatthefederalgovernmentisreceivingafairreturnonthe
productionandsaleofoilandgasproducedfromfederalleases.
WhatGAOHasFound
IndicatingPotential
forEnhancing
Revenue
RevisingInteriorsfederaloilandgasrevenuecollectionsystemrepresentsan
opportunitytocollectsubstantialadditionalrevenuesfromthedevelopment
offederaloilandgasresources.Infiscalyear2010,Interiorestimatedthat
increasingbothrentalratesfornon-producingoilandgasleasesandonshore
oilandgasroyaltyrateswouldgenerateover$1.7billionover10years.
AconsiderablebodyoflegislationgovernsInteriorsauthorityand
obligationstomanageresourcesonfederallandsandwithinfederal
waters.Forexample,undertheOuterContinentalShelfLandsAct
1
andthe
FederalLandPolicyandManagementAct,
2
InteriormustensuretheUnited
Statesreceivesfairmarketvalueonthedevelopmentofitsoilandgas
resources.Thefederalgovernmentreceivespaymentforthedevelopment
ofoilandgasresourcesonfederallandsandwatersinpotentiallythree
ways.First,toobtainfederalleases,companiesgenerallymustpaythe
federalgovernmentanamountcalledabonusbiddeterminedthrough
acompetitiveauction.Second,aftertheleaseisawarded,companiesmust
payrenttoholdtheland.Onshore,forexample,therentalrateisgenerally
between$1.50and$2peracreperyear.Third,afterproductionbegins,the
companiesmustaccuratelymeasuretheoilandgasvolumesandpay
1
Pub.L.No.83-212,67Stat.462(1953)(codifiedasamendedat43U.S.C.1331-1356a).
2
Pub.L.No.94-579,90Stat.2743(1976)(codifiedasamendedat43U.S.C.1701-1784).
royaltiestoInteriorbasedonapercentageofthecashvalueofoilandgas
producedandsold.Theroyaltyratesforonshoreleasesaregenerally12.5
percent,whileroyaltyratesforoffshoreleasesintheGulfofMexico
generallyrangefrom12.5percentto18.75percent.
InOctober2008,GAOreportedthatInteriordoeslesstoencourage
developmentofoilandgasonfederalleasesthansomestatesandprivate
landowners.Moreover,someofthetoolsthatstatesandprivatelandowners
usemayalsoresultinincreasedrevenues.Forexample,fouroftheeight
statesGAOreviewedincreaserentalratesovertimeonnonproducingoil
andgasleasesto(1)encouragefasterdevelopmentofoilandgas
resourcesonwhichroyaltiesaredue,and(2)increaserevenuesfrom
nonproducingleases.WhileInteriorofficialsstatedthatrentalratesfora10-
yearonshorefederalleaseincreasedfrom$1.50peracreperyearforthe
first5yearsto$2peracreperyearforyears6through10,statesGAO
reviewedtypicallyincreasedrentalratestoagreaterextent.Forexample,
onestateincreasestherentalratefrom$5peracreperyearto$25peracre
peryeariftheleaseisnotdevelopedbytheendofthethirdyear.
InSeptember2008,GAOreportedthatInteriorhadnotconducteda
comprehensiveevaluationoftheoilandgasrevenuesysteminover25
yearsandthatitdidnothaveasysteminplacetoevaluatewhetherthe
federalsystemisinneedofreassessment.Atthetime,GAOalsoreported
thatInteriorcollectedlowerlevelsofrevenuesforoilandgasproduction
thandosomeresourceowners,includingothercountriesandsomeU.S.
states.Forexample,GAOreportedthatfederalrevenuesforoilandgas
producedintheGulfofMexicowerelowerthan93outof104resource
owners.Inaddition,thelackofpriceflexibilityinroyaltyratesautomatic
adjustmentoftheseratestochangesinoilandgaspricesorothermarket
conditionsandtheinabilitytochangefiscaltermsonexistingleasesput
pressureonInteriorandCongresstochangeroyaltyratesinthepastonan
adhocbasiswithconsequencesthatcouldamounttobillionsofdollarsof
foregonerevenue.Forexample,speciallowerroyaltyratesreferredtoas
royaltyreliefgrantedonleasesissuedinthedeepwaterareasoftheGulf
ofMexicofrom1996to2000(aperiodwhenoilandgaspricesand
industryprofitsweremuchlowerthantheyaretoday)couldresultin$21
billionto$53billioninlostrevenuetothefederalgovernment,compared
withwhatitwouldhavereceivedwithouttheseprovisions.GAOs2008
UserFeeDesignGuidealsonotestheimportanceofregularfeereviewsto
determinewhetherafeeneedstobeadjusted.Userfeesrepresenta
chargetoreadilyidentifiableusersofagovernmentserviceorbenefit
aboveandbeyondwhatisnormallyavailabletothegeneralpublic.
Further,feereviewscanfacilitateeffectivecommunicationandprovide
opportunityforstakeholderinput.GAOhaspreviouslyreportedthatsuch
communicationwithstakeholderscanprovidefeedbackthatcouldaffect
theoutcomeofchangesinfeesandprogramimplementation.
In2010,GAOissuedtworeportsthatfoundInteriorsverificationofthe
volumeofoilandgasproducedfromfederalleasesonwhichroyalties
areduetothefederalgovernmentdoesnotprovidereasonable
assurancethatoperatorsareaccuratelymeasuringandreportingthese
volumes.InMarch2010,GAOreportedthatInteriorsmeasurement
regulationsandproceduresforoilandgasmeasurementwereinsufficient
forprovidingreasonableassurancethatoilandgaswerebeingmeasured
accurately.Asaresult,thereisariskthatthegovernmentisnotreceiving
alltheoilandgasroyaltiesitisdue.Additionally,GAOreportedinOctober
2010thatInteriorsdatalikelyunderestimatedtheamountofnaturalgas
producedonfederalleasesthatisreleaseddirectlytotheatmosphere
(vented)orisburned(flared).Thisventedandflaredgascontributesto
greenhousegasesandrepresentslostroyalties.Itisalsoimportantto
considerthecostsofverificationandvalidationinthecontextofthe
benefitslikelytoberealized.GAOsUserFeeDesignGuidediscussesthe
importanceofstrikingabalancebetweenensuringcomplianceand
minimizingtheadministrativecostsofcollection.
Interiorhasbeguntoaddresstheseissues.Forexample,inJanuary2007,
Interiorannouncedthatitwasraisingtheroyaltyratefornewdeepwater
leasesintheGulfofMexicofrom12.5percentto16.7percent.Atthattime,
Interiorestimatedthattheincreasedroyaltyrateof16.7percentfornew
deepwateroffshoreGulfofMexicoleaseswouldincreaserevenuefrom
royaltypaymentsby$4.5billionover20years.Interioralsoestimatedthat
theincreaseinroyaltyrateswoulddecreasetheamountcompanieswould
bidfortherightstoexploreforanddevelopoilandgasonaffectedleases
aswellasreducetheamountofoilandgasultimatelyproducedinaffected
areas,butthatinnet,theincreaseinrevenuewouldbegreaterthanthe
reductionsassociatedwithlowerbidsandproduction.Furthermore,in
responsetoGAOsOctober2008report,Interiorstatedin2010thatthe
administrationwouldproposelegislationtoimposeafeeonnew
nonproducingoilandgasleasestoencourageenergydevelopmentonboth
onshoreandoffshoreleases.Todate,suchafeehasnotcomeintoeffect.
However,inanApril12,2010,pressrelease,Interiorstatedthatitis
undertakingastudyinresponsetoGAOsSeptember2008report,whichit
expectstocompletein2011.Thepurposeofthestudyistoinform
decisionsaboutfederalleaseterms,suchasroyalties,byconsistently
comparingthefederaloilandgasfiscalsystemswithsuchsystemsof
othercountries.Specifically,Interiorstatedthattheresultsofthisstudy
willenableittoensurethatitsleasingpoliciesgivethepublicafairreturn
onfederallyownedoilandgasresources,whilebalancingother
objectives,includingproductionandenvironmentalquality.Theresultsof
thestudymayrevealthepotentialforgreaterrevenuestothefederal
government.Giventhesignificantfinancialstakes,theremaybe
oppositionfromtheoilandgasindustry.Interiormayalsofacesignificant
difficultiesdesigningandimplementinganentirelynewrevenuecollection
system,givenitsrecentstrugglestosuccessfullyoverseeoilandgas
production.Finally,whileInterioragreedwiththerecommendationsfrom
bothreportsissuedin2010addressingimprovementstoitsoversightof
themeasurementofoilandgasproducedfromfederalleases,ithasnot
yetimplementedtheserecommendations.
ActionsNeededand
PotentialRevenue
Toencouragecompaniestodiligentlydevelopoilandgasleases,ensure
thatthegovernmentobtainsafairreturnonoilandgasproducedfrom
federalleases,andforInteriortohavereasonableassurancethatoiland
gasproducedfromfederaloilandgasleasesisbeingmeasuredaccurately:
CongressmayneedtotakeactiontoauthorizeorencourageInteriorto
reviseitsrentalfeestructurefornonproducingleases.
Interiorshouldcompleteitsstudyexamininghowotheroilandgas
resourceownersselectfiscalparametersforleasingandadjustingoil
andgasroyaltyratesandusethatinformationtoadjust,asappropriate,
itsroyaltyratestoalevelthatensuresthegovernmentafairreturn.In
doingsoitshouldensureopportunitiesforsubstantive,two-way
communicationwithprogramstakeholders.
Dependingontheresultsofthestudy,Congressmaywishtoprovide
additionalguidanceortakeadditionalactionstoenableInteriorto
changehowitoverseesfederallandsandwatersandtherevenues
derivedfromproductionofoilandgasthere.
InteriorshouldimplementGAOsrecommendationsfrompriorreports
addressingavarietyofoilandgasmeasurementfactors.
AccordingtoInterior,increasingtherentalfeeforonshorenonproducing
leasesto$4peracreperyearwouldgenerate$760millionover10years.
Whilethetotaladditionalrevenuegeneratedbyadjustingbothonshore
andoffshoreroyaltyratesisuncertain,a2010Interiorestimateof
increasingonshoreroyaltyratesprojectsadditionalfederalrevenuesof$1
billionover10years.
Frameworkfor
Analysis
RelatedGAO
Products
FederalOilandGasLeases:OpportunitiesExisttoCaptureVentedand
FlaredNaturalGas,WhichWouldIncreaseRoyaltyPaymentsandReduce
GreenhouseGases.GAO-11-34.Washington,D.C.:October29,2010.
OilandGasManagement:InteriorsOilandGasProduction
VerificationEffortsDoNotProvideReasonableAssuranceofAccurate
MeasurementofProductionVolumes.GAO-10-313.Washington,D.C.:
March15,2010.
OilandGasLeasing:InteriorCouldDoMoretoEncourageDiligent
Development.GAO-09-74.Washington,D.C.:October3,2008.
OilandGasRoyalties:TheFederalSystemforCollectingOilandGas
RevenuesNeedsComprehensiveReassessment.GAO-08-691.Washington,
OilandGasRoyalties:LitigationoverRoyaltyReliefCouldCostthe
FederalGovernmentBillionsofDollars.GAO-08-792R.Washington,D.C.:
June5,2008.
FederalUserFees:ADesignGuide.GAO-08-386SP.Washington,D.C.:
May29,2008.
OilandGasRoyalties:AComparisonoftheShareofRevenueReceived
fromOilandGasProductionbytheFederalGovernmentandOther
ResourceOwners.GAO-07-676R.Washington,D.C.:May1,2007.
OilandGasRoyalties:RoyaltyReliefWillCosttheGovernmentBillions
ofDollarsbutUncertaintyOverFutureEnergyPricesandProduction
LevelsMakePreciseEstimatesImpossibleatthisTime.GAO-07-590R.
Foradditionalinformationaboutthisarea,contactFrankRuscoat
AreaContact
(202)512-3841orruscof@gao.gov.
RecentEffortstoAddressGovernmentwide
ImproperPaymentsCouldResultin
SignificantCostSavings

RecentEffortstoAddressGovernmentwideImproper
PaymentsCouldResultinSignificantCostSavings
WhyGAOIsFocusing
onThisArea
Reportedestimatedimproperpaymentsgovernmentwidehavesteadily
increasedoverthepastdecadefromanestimated$20billionin2000to
approximately$125billionin2010.Animproperpaymentisdefinedasany
paymentthatshouldnothavebeenmadeorthatwasmadeinanincorrect
amount(includingoverpaymentsandunderpayments)understatutory,
contractual,administrative,orotherlegallyapplicablerequirements.
Reportedimproperpaymentsalsoincludepaymentsforwhichinsufficient
ornodocumentationwasfound.GAOsworkhasdemonstratedthat
improperpaymentscontinuetobealong-standing,widespread,and
significantprobleminthefederalgovernment.
WhatGAOHasFound
IndicatingPotential
forCostSaving
Forfiscalyear2010,about20federalagenciesreportedestimated
improperpaymentsforover70programstotalingabout$125.4billion,for
agovernmentwideerrorrateofabout5.5percent.AccordingtoGAOs
analysisofthoseagenciesfiscalyear2010Performanceand
AccountabilityReports(PAR)orAgencyFinancialReports(AFR),the
majorityofreportedestimatedimproperpaymentsforfiscalyear2010is
accountedforbythefollowing10programs:
Program Agency
FY2010estimated
improperpayments Primarycause(s)
a
MedicareFee-for-
Service
HealthandHuman
Services
$34.3billion Medicallyunnecessaryservicesandinsufficient
documentation
Medicaid HealthandHuman
Services
$22.5billion Insufficientornodocumentationprovidedforconducting
medicalreviewandcasesthatwereeitherineligibleor
theireligibilitystatuscouldnotbedetermined
Unemployment
Insurance
Labor $17.5billion Eligibilityerrors,errorsinhandlingseparationissues,and
claimantswhohavereturnedtoworkandcontinueto
claimbenefits
EarnedIncomeTax
Credit
Treasury $16.9billion Highturnoverofeligibleclaimants,confusionamong
eligibleclaimants,complexityofthelaw,structureofthe
program,unscrupulousreturnpreparers,andfraud
MedicareAdvantage HealthandHuman
Services
$13.6billion Insufficientsupportingdocumentation,anderrorsinthe
transferofdataandpaymentcalculations
SupplementalSecurity
Income
SocialSecurity
Administration
$4.8billion Incorrectcomputations,misapplicationofanincomeor
resourceexclusion,andinadequateverificationof
accountsandwages
OldAgeSurvivors
andDisability
Insurance
SocialSecurity
Administration
$3.2billion Computationerrors;nonverificationofearnings,income
orworkstatus;andincorrectprocessingofapplicationsor
payments
SupplementalNutrition
Assistance
Agriculture $2.2billion Incompleteorinaccuratereportingofincomeby
participantsandincorrecteligibilitydeterminationby
caseworkers
Program Agency
FY2010estimated
improperpayments Primarycause(s)
a
NationalSchoolLunch Agriculture $1.5billion Verificationandauthenticationerrorsincluding
inadequatedocumentationandfraudor
misrepresentationbyparticipants
PellGrants Education $1billion Verificationerrors
b
Source:GAO
a
Asreportedbytheagencies.
b
PrimarycauseswereprovidedbytheDepartmentofEducationandwerenotreportedintheAFR.
Agencieshavemadeprogressinreducingimproperpayments,and,in
someprograms,theyhavereportedreducingtherateofimproper
payments.Forexample,theDepartmentofHealthandHumanServices
(HHS)reportedthatthefiscalyear2010HeadStartprogramsestimated
improperpaymentsdecreasedby$90millionor1.3percentoftotal
programoutlaysfromtheestimatedamountreportedforfiscalyear
2009.HHSreportedthatitreducedimproperpaymentserrorsbyissuing
additionalguidanceforemployeesonverifyingincomeeligibilityand
developingastandardtemplateformtohelpguidegranteesinthe
enrollmentprocess.Inanotherexample,theDepartmentofAgriculture
reportedreductionsfromfiscalyear2009tofiscalyear2010forsevenof
itsprograms,includingtheMarketingAssistanceLoanProgramwhichhad
areductioninimproperpaymentsofabout$50millionor1.75percentof
totalprogramoutlays.Theagencyreportedactionstakentoreduce
improperpayments,whichincludeprovidingadditionaltrainingand
instructiononimproperpaymentcontrolprocedures,andintegratingthe
employeesindividualperformanceresultsrelatedtoreducingimproper
paymentsintoannualperformanceratings.
Nonetheless,thefederalgovernmentstillfaceschallengesindetermining
thefullextenttowhichimproperpaymentsoccur,andinensuring
appropriateactionsarebeingtakentoreducethem.Forexample,three
agencieshavenotreportedontheextentofimproperpaymentsforseven
risk-susceptibleprogramswithsignificantamountsofoutlays.Most
notably,HHShasyettoreportacomprehensiveimproperpayment
estimateamountfortheMedicarePrescriptionDrugBenefitprogram,
whichhadabout$59billioninoutlaysinfiscalyear2010.However,HHS
expectstoreportacomprehensiveestimateforthisprograminfiscalyear
2011.Inaddition,itisnotalwaysclearwhetheragenciesareidentifying
therootcauseortheunderlyinginternalcontrolweaknessesthatcaused
thepaymenterrorinordertodeterminetheappropriatecorrectiveaction.
Tohelpreduceimproperpayments,thePresidentissued(1)Executive
Order13520,ReducingImproperPayments,inNovember2009,focused
onincreasingtransparencyandaccountabilityforreducingimproper
payments,andcreatingincentivestoreduceimproperpayments;(2)a
PresidentialMemoranduminMarch2010thatexpandsagencyeffortsto
recaptureimproperoverpayments;
1
and(3)aPresidentialMemorandumin
June2010,directingthataDoNotPayListbeestablishedtoprevent
improperpaymentsfrombeingmadetoineligiblerecipients.Moreover,in
July2010,CongresspassedtheImproperPaymentsEliminationand
RecoveryAct(IPERA)toenhancereportingandrecoupingofimproper
payments.Theseactionsfurtherheightenedawarenessoftheneedto
reduceimproperpaymentsandeliminatewaste,fraud,andabusein
federalprograms.Inaddition,thePresidenthassetgoals,aspartofthe
AccountableGovernmentInitiative,forfederalagenciestoreduceoverall
improperpaymentsby$50billionandrecaptureatleast$2billionin
impropercontractpaymentsandoverpaymentstohealthproviders,bythe
endof2012.
UndertheExecutiveOrder,theOfficeofManagementandBudget
establishedaWebsite(www.paymentaccuracy.gov)toenhance
transparencyandaccountability,anddesignated14high-errorprogramsto
focusattentionontheprogramsthatsignificantlycontributetothefederal
governmentsimproperpayments.
2
TheWebsitecontainsimportant
informationontheprogramssenioraccountableofficialsresponsiblefor
effortstoreduceimproperpayments;current,targeted,andhistorical
estimatedratesofimproperpayments;whytheyoccur;andwhatagencies
aredoingtoreduceandrecoverthem.Forexample,theWebsitereported
acurrentimproperpaymentrateforHHSsMedicareFee-for-Service
programof10.5percentforfiscalyear2010andareductiontargetfor
fiscalyear2013of5.8percent.
1
Paymentrecaptureaudits,alsocalledrecoveryaudits,areconductedtoidentifyand
reclaimpaymentsmadeinerror.
2
The14high-errorprogramsdesignatedbytheOfficeofManagementandBudgetforfiscal
year2010include:MedicareFee-for-Service;Medicaid;UnemploymentInsurance;Medicare
Advantage;SupplementalSecurityIncome;Retirement,Survivors,andDisabilityInsurance;
SupplementalNutritionAssistanceProgram;NationalSchoolLunchProgram;Rental
HousingAssistancePrograms;Federal-AidHighwayProgram,HighwayPlanningand
Construction;ChildrensHealthInsuranceProgram;EarnedIncomeTaxCredit;HighCost
ProgramoftheUniversalServiceFund;andMedicarePrescriptionDrugBenefit.The
ChildrensHealthInsuranceProgram,HighCostProgramoftheUniversalServiceFund,
andMedicarePrescriptionDrugBenefitprogramsdidnotreportimproperpaymenterror
ratesandamountsforfiscalyear2010.
IPERAestablishedadditionalrequirementsrelatedtomanager
accountability,recoveryauditing,complianceandnoncompliance
determinationsandreporting,andanopiniononinternalcontrolsover
improperpayments.Forexample,IPERArepealedapreviousrecovery
auditrequirementandenactedanew,broaderrequirementforagenciesto
conductrecoveryauditsforthoseprogramswithatleast$1millionintotal
programoutlays,wherecost-effective.Finalguidanceonexpanding
paymentrecaptureauditsisexpectedtobeissuedunderIPERA
implementingguidance,inearly2011.
ActionsNeededand
PotentialSavings
GAOviewstheseeffortsaspositivestepstowardimprovingtransparency
over,andreducing,improperpayments;however,itistoosoonto
determinewhethertheactivitiescalledforinExecutiveOrder13520,the
PresidentialMemoranda,andIPERAwillachievetheirgoalsofreducing
improperpaymentswhilecontinuingtoensurethatfederalprogramsserve
andprovideaccesstointendedbeneficiaries.Identifyingthenature,extent
andunderlyingcausesofimproperpaymentsisanessentialprerequisiteto
takingactiontoreducethem.Moreover,correctiveactionsneededto
reduceimproperpaymentsvaryacrossspecificentitiesandprograms.
Untilthefederalgovernmenthasimplementedeffectiveprocessesto
determinethefullextenttowhichimproperpaymentsoccurandto
reasonablyassurethatappropriateactionsaretakenacrossentitiesand
programstoeffectivelyrecoverandreduceimproperpayments,the
federalgovernmentwillnothavereasonableassurancethattheuseof
taxpayerfundsisadequatelysafeguarded.
Inaddition,thelevelofimportancetheagenciesandtheadministration
placeontheeffortstoimplementtherequirementsestablishedbyIPERA,
theExecutiveOrder,andotherguidancewillbeakeyfactorin
determiningtheiroveralleffectivenessinreducingimproperpaymentsand
ensuringthatfederalfundsareusedefficientlyandfortheirintended
purposes.Iffullyandsuccessfullyimplemented,therequirementswill
provideadditionaltransparency,improveoversightandaccountability,
andshouldhelptoreducethefederalgovernmentsvulnerabilityto
improperpaymentsinthefuture.Continuouscongressionaloversightis
keytodeterminingwhethertheserecenteffortsareeffectiveinreducing
improperpayments.Congressionaleffortstomonitoragencieswillbe
essentialtoensuretheyaretakingactiontofullyimplementthese
legislativerequirementstoimproveaccountability,achievetargetedgoals,
andreduceoverallimproperpayments.
Thisanalysisisbasedonagency-reportedinformationintheirfiscalyear
Frameworkfor
2010PerformanceAccountabilityandAgencyFinancialReports,aswellas
Analysis previousGAOreports.
RelatedGAO
Products
MedicareRecoveryAuditContracting:LessonsLearnedtoAddress
ImproperPaymentsandImproveContractorCoordinationand
Oversight.GAO-10-864T.Washington,D.C.:July15,2010.
MedicareFraud,Waste,andAbuse:ChallengesandStrategiesfor
PreventingImproperPayments.GAO-10-844T.Washington,D.C.:June15,
2010.
U.S.GovernmentFinancialStatements:FiscalYear2009Audit
HighlightsFinancialManagementChallengesandUnsustainableLong-
TermFiscalPath.GAO-10-483T.Washington,D.C.:April14,2010.
MedicareRecoveryAuditContracting:WeaknessesRemainin
AddressingVulnerabilitiestoImproperPayments,Although
ImprovementsMadetoContractorOversight.GAO-10-143.Washington,
D.C.:March31,2010.
ImproperPayments:SignificantImprovementsNeededinDODsEfforts
toAddressImproperPaymentandRecoveryAuditingRequirements.
ImproperPayments:ResponsestoPosthearingQuestionsRelatedto
EliminatingWasteandFraudinMedicareandMedicaid.GAO-09-838R.
ImproperPayments:ProgressMadebutChallengesRemainin
EstimatingandReducingImproperPayments.GAO-09-628T.
StatusofAgenciesEffortstoAddressImproperPaymentandRecovery
AuditingRequirements.GAO-08-819R.Washington,D.C.:June20,2008.
ImproperPayments:StatusofAgenciesEffortstoAddressImproper
PaymentandRecoveryAuditingRequirements.GAO-08-438T.
ImproperPayments:FederalExecutiveBranchAgenciesFiscalYear
2007ImproperPaymentEstimateReporting.GAO-08-377R.Washington,
AgenciesProgressinAddressingImproperPaymentandRecovery
AuditingRequirements.GAO-07-834R.Washington,D.C.:May30,2007.
ImproperPayments:AgenciesEffortstoAddressImproperPaymentand
RecoveryAuditingRequirementsContinue.GAO-07-635T.Washington,
D.C.:March29,2007.
ImproperPayments:PosthearingResponsesonaDecember5,2006,
HearingtoAssesstheImproperPaymentsInformationActof2002.
GAO-07-533R.Washington,D.C.:February27,2007.
Foradditionalinformationaboutthisarea,contactKayDalyat
AreaContact
(202)512-9312ordalykl@gao.gov.
PromotingCompetitionforFederalContracts
CanProduceSavings
PromotingCompetitionforFederalContractsCan
ProduceSavings
WhyGAOIsFocusing
onThisArea
Competitionisacornerstoneofthefederalacquisitionsystemanda
criticaltoolforachievingthebestpossiblereturnonwhathasgrownto
becomeanannualinvestmentofabout$540billion.Thebenefitsof
competitioninacquiringgoodsandservicesfromtheprivatesectorare
wellestablished.Competitivecontractscansavemoney,improve
contractorperformance,andpromoteaccountabilityforresults.
Federalagenciesgenerallyarerequiredtoawardcontractscompetitively,
butasubstantialamountoffederalmoneyisbeingobligatedon
noncompetitivecontractsannually.Fullandopencompetition,definedas
allowingallresponsiblesourcestosubmitproposals,istherequired
methodforfederalagenciestoawardcontracts,unlessanexception
applies.Forexample,fullandopencompetitionisnotrequiredunder
urgentcircumstances,orwhentherequiredgoodsorservicesareavailable
fromonlyonesource.Fullandopencompetitionalsomaynotberequired
forcontractsbelowcertaindollarvaluesorsomecontractsawardedunder
smallbusinessprograms,suchasthe8(a)smallbusinessdevelopment
programoftheSmallBusinessAdministration(SBA).
WhatGAOHasFound
IndicatingPotential
forCostSaving
Althoughsomeagencydecisionstoforegocompetitionmaybejustified,
GAOhasfoundthatwhenfederalagenciesdecidetoopentheircontracts
tocompetition,theyfrequentlyrealizesavings.Forexample,the
DepartmentofState(State)awardedanoncompetitivecontractfor
installationandmaintenanceoftechnicalsecurityequipmentatU.S.
embassiesin2003.InresponsetoaGAOrecommendation,State
subsequentlycompetedthisrequirement,andin2007itawardedcontracts
tofoursmallbusinessesforatotalsavingsofover$218million.Inanother
case,GAOfoundin2006thattheArmyhadawardednoncompetitive
contractsforsecurityguards,butlaterspent25percentlessforthesame
serviceswhenthecontractswerecompeted.
Federalagenciesobligatedapproximately$170billiononnoncompetitive
contractsinfiscalyear2009alone.Whiletherehasbeensomefluctuation
overtheyears,thepercentageofobligationsundernoncompetitive
contractsrecentlyhasbeenintherangeof31percenttoover35percent.
GAOreportedinJuly2010thatcircumstancesprecludingcompetition
includedthegovernmentslackofaccesstoacontractorsproprietary
data,whichmaybeneededbyothercontractorsinordertocompete,orin
somecasesitsrelianceonaparticularcontractorsexpertise.Inother
instances,agencieshaveusedthecompetitionexceptionallowedforthe
SBAssection8(a)businessdevelopmentprogram,whichprovides
agencieswithaneasyandfastmethodtoawardcontractswithoutusing
CanProduceSavings
fullandopencompetition.Congresscreatedthe8(a)programtohelp
smalldisadvantagedbusinessesaccessthefederalprocurementmarket
andeventuallycompetesuccessfullyintheU.S.economy.Buttherehave
beenconcernsaboutthelackofcompetitionintheprogram,suchaslarge,
sole-sourcecontractsawardedto8(a)firmsownedbyAlaskaNative
Corporations,whichhavespecialadvantagesinthe8(a)program.In
responsetothoseconcerns,legislationnowrequiresagenciestoprovide
morescrutinyofnoncompetitivecontractsover$20millionawarded
underSBAs8(a)program.
Anotherissueinvolvestheextentofcompetitionactuallyachieved.
Specifically,thegovernmentobligatesbillionsofdollarseveryyearon
procurementscategorizedascompetitiveeventhoughonlyoneofferwas
received.Thereiscurrentlynorequirementforagenciestoassessthe
reasonswhyonlyoneofferwasreceived.GAOreportedthatthe
governmentsrequirementscaninfluencethenumberofoffersreceived
undercompetitivesolicitations.Forexample,whenexistingcontracts
expireandareopenedtocompetition,thenewcontractsrequirements
maybewrittensorestrictivelythattheyaregearedtowardtheholderof
thecurrentcontract.GAOhasrecommendedthattheOfficeofFederal
ProcurementPolicy(OFPP)determinewhethertheregulationsshouldbe
amendedtorequireagenciestoevaluatethecircumstancesleadingtoonly
oneofferbeingreceivedandtoidentifyadditionalstepsthatcanbetaken
toincreasethelikelihoodthatmultipleofferswillbesubmittedinthe
future.TheOFPPAdministratoragreedwithGAOsrecommendation.
GAOworkalsoshowsthatagenciesdonotalwaysuseacompetitive
processwhenestablishingorusingblanketpurchaseagreements(BPA)
undertheGeneralServicesAdministrationsschedulesprogram.Theseare
agreementsagenciesputinplaceinadvanceofknownrequirements,
whichthenmaybeusedtoordergoodsorservicesquicklywhenspecific
needsarise.AgencieshavefrequentlyenteredintoBPAswithjustone
vendor,eventhoughmultiplevendorscouldsatisfyagencyneeds.And
evenwhenagenciesenteredintoBPAswithmultiplevendors,GAOhas
foundthatagencieshavenotalwaysheldsubsequentcompetitionsamong
thosevendorsforordersundertheBPAs,eventhoughsuchcompetitions
attheorderinglevelarerequired.GAOrecommendedthatOFPPconsider
amendingtheregulationstoclarifythisrequirement,andOFPPagreed.By
notconsistentlypromotingcompetition,federalgovernmentagencieshave
nottakenadvantageofopportunitiesforsignificantcostsavings.
CanProduceSavings
ActionsNeededand
PotentialSavings
TheOfficeofManagementandBudget(OMB),theexecutiveagencythat
overseesthefederalprocurementprocess,hasprovidedadditional
guidanceforagenciestopromotecompetitionincontracting,andimprove
theeffectivenessoftheircompetitionpractices.InJuly2009,OMBcalled
foragenciestoreduceobligationsundernewcontractactionsthatare
awardedusinghigh-riskcontractingauthoritiesby10percentinfiscalyear
2010.Thesehigh-riskcontractsinclude,amongotherconsiderations,those
thatareawardednoncompetitivelyandthosethatarestructuredas
competitivebutforwhichonlyoneofferisreceived.Whilesufficientdata
arenotyetavailabletodeterminewhetherthisgoalwasmet,GAOis
currentlyreviewingtheagenciessavingsplanstoidentifystepstaken
towardthatgoal,andwillcontinuetomonitortheprogressagenciesmake
towardachievingthisandanysubsequentgoalssetbyOMB.Further,OMB
haschallengedagenciestotakeimmediateactiontoaggressivelyseek
deeperdiscountsonBPAs.
Inadditiontolegislationandguidance,promotingcompetitionin
contractingtothegreatestextentpossiblerequiresovercoming
conventionalthinking.Forexample,becauseprogramofficialshavean
essentialroleintheacquisitionprocess,itisimportantthattheseofficials,
notjustcontractingofficers,activelypromotecompetition.Thismeansnot
insistingonretainingincumbentcontractorsevenwhencompetitionis
possible.Keepinganincumbentcontractorinplacewithoutcompetition
simplybecausethecontractorisdoingagoodjob,orresistinglegitimate
suggestionsthatcompetitionbeusedeventhoughitmaytakelonger,
couldresultinmissedopportunitiesforsavings.
Bymoreconsistentlypromotingcompetitionincontracts,federalagencies
wouldhavegreateropportunitiestotakeadvantageoftheeffectivenessof
themarketplaceandpotentiallyachievebillionsofdollarsincostsavings.
Frameworkfor
listedbelow.
Analysis
RelatedGAO
Products
FederalContracting:OpportunitiesExisttoIncreaseCompetitionand
AssessReasonsWhenOnlyOneOfferIsReceived.GAO-10-833.
RecoveryAct:ContractingApproachesandOversightUsedbySelected
FederalAgenciesandStates.GAO-10-809.Washington,D.C.:July10,2010.
CanProduceSavings
ContractManagement:AgenciesAreNotMaximizingOpportunitiesfor
CompetitionorSavingsunderBlanketPurchaseAgreementsdespite
SignificantIncreaseinUsage.GAO-09-792.Washington,D.C.:September
9,2009.
High-RiskSeries:AnUpdate.GAO-09-271.Washington,D.C.:January22,
2009.
DepartmentofStateContractforSecurityInstallationatEmbassies.
GAO-07-34R.Washington,D.C.:November8,2006.
ContractManagement:IncreasedUseofAlaskaNativeCorporations
Special8(a)ProvisionsCallsforTailoredOversight.GAO-06-399.
ContractSecurityGuards:ArmysGuardProgramRequiresGreater
OversightandReassessmentofAcquisitionApproach.GAO-06-284.
Foradditionalinformationaboutthisarea,contactJohnHuttonat
AreaContact
(202)512-4841orhuttonj@gao.gov.
ApplyingStrategicSourcingBestPractices
throughouttheFederalProcurementSystem
CouldProduceSignificantSavings
ApplyingStrategicSourcingBestPracticesthroughout
theFederalProcurementSystemCouldProduce
SignificantSavings
WhyGAOIsFocusing
onThisArea
Since2002,spendingonfederalcontractshasmorethandoubledtoabout
$540billionin2009,consumingasignificantshareofagencies
discretionarybudgets.Becauseprocurementatfederaldepartmentsand
agenciesgenerallyisdecentralized,thefederalgovernmentisnotfully
leveragingitsaggregatebuyingpowertoobtainthemostadvantageous
termsandconditionsforitsprocurements.
Intheprivatesector,however,anapproachcalledstrategicsourcinghas
beenusedsincethe1980storeduceprocurementcostsatcompanieswith
largesupplierbasesandhighprocurementcosts.Strategicsourcingisa
processsometimesledbyacentralprocurementorganizationthatimproves
purchasingactivitiesbymovingacompanyawayfromnumerousindividual
procurementstoabroaderaggregateapproach.LeadingcompaniesGAO
reviewedin2002foundtheycouldsavebillionsofdollarsandimprovethe
qualityoftheproductsandservicesreceivedbyusingstrategicsourcing.
Bringingaboutsuchchangeswasnoteasy,butthestrategicsourcingbest
practicesofleadingcompaniesGAOstudiedcanserveasaframeworkto
guidefederalstrategicsourcingefforts.
WhatGAOHasFound
IndicatingPotential
forCostSaving
Thefederalgovernmentcouldsavebillionsofdollarsannuallyby
leveragingitsenormousbuyingpower.Likethefederalgovernment,major
companiesintheprivatesectorrelyonproductsandservicesfrom
numeroussuppliers,andmanyhavestruggledwithmethodstobetter
managetheirpurchasing.GAOhasreportedthattoreducecosts,improve
productivity,andmoreeffectivelyprocureproductsandservices,many
companieshaveadoptedastrategicsourcingapproachcentralizingand
reorganizingtheirprocurementoperationstogetthebestvalueforthe
companyasawhole.Thefederalgovernmentcoulddothesameand
realizesignificantsavingsasaresult.
TheleadingcompaniesGAOstudiedin2002madeanumberofdramatic
changestothewaytheymanagedprocurementandfoundthatthese
changes,inturn,resultedinsignificantcostsavingsandother
improvements.Thesechangesgenerallybeganwithacorporatedecision
bytopleaderstopursueastrategicprocurementapproach.Thisapproach
involvedarangeofactivitiesfromdevelopingabetterpictureofwhat
thecompanywasspendingonvarioustypesofsuppliesandservices,to
takinganenterprisewideapproachtoprocurement,todevelopingnew
waysofdoingbusiness.Specifically,oncetopleaderscommittedtotaking
astrategicapproach,thecompaniestookahardlookathowmuchthey
werespendingonproductsandservicesandfromwhom.Byusingthis
spendanalysistoarmthemselveswithknowledge,thecompanies
identifiedopportunitiestoleveragetheirbuyingpower,reducecosts,and
bettermanagetheirsuppliers.Thecompaniesalsoinstitutedaseriesof
structural,process,androlechangesaimedatmovingawayfroma
fragmentedprocurementprocesstoamoreefficientandeffective
enterprisewideprocess.
Applyingastrategicsourcingapproachintheprivatesectorclearlyhaspaid
dividends.Studieshavereportedsignificantcostsavingsforsome
companiesof10percentto20percentoftheirtotalprocurementcosts.For
example,GAOidentifiedone2002surveyof147companiesin22industries
thatindicatedastrategicsourcingapproachproducedsavingsofmorethan
$13billionintheyear2000alone.Savingeven10percentoftotalfederal
procurementspendingwouldproducemorethan$50billioninsavings
annually.
Since2005,theOfficeofManagementandBudget(OMB)hasencouraged
agenciestocoordinatetheirbuysthroughFederalStrategicSourcing
Initiative(FSSI)interagencyprocurementvehicles
1
awardedbythe
GeneralServicesAdministration.Inaddition,someagencieshaveawarded
agencywide(alsoreferredtoasenterprisewide)contractsawardedunder
strategicsourcingprogramswithinanindividualfederaldepartmentor
agency.InJuly2010,OMBscongressionaltestimonyonthestatusof
improvementstofederalacquisitioncitedexamplesofwhatprogressis
beingachievedunderagencystrategicsourcingefforts.UndertheFSSI
effortforexample,ateamofagenciesselectedofficeproductsinlate2009
asapromisingstrategicsourcingopportunitytocombinebuyingpower
forabout$250millioninrequirements.Thisofficeproductsinitiativeis
expectedtoreducecostsattheseagenciesbyasmuchas20percent,fora
totalsavingsofalmost$200millionoverthenext4years.Further,an
agencywideinitiativeattheDepartmentofHomelandSecuritywhich
accountedfor$14.3billionincontractspendingin2009isexpectedto
save$87millionduringthenext6yearsforastandardizedsuiteof
discounteddesktopoperatingsystems,e-mail,andofficeautomation
products.
1
TheFSSIwaslaunchedin2005tostrategicallysourceacrossfederalagenciesandcreatea
strategicsourcingcommunityofpractice.TheFSSIisledbytheGeneralServices
Administration,inpartnershipwiththeDepartmentofTreasury,withactiveparticipation
bymorethan20federalagencies.FSSIcontractshavebeenmadeforofficeproducts,
domesticdeliveryservices,andwirelessdeviceorderingandexpensemanagement
services.
Theseresultsdemonstratethepotentialtoachievesignificantsavings
throughtheuseofstrategicsourcingapproaches.Thestartingpointfor
suchefforts,however,ishavinggooddataoncurrentspending.But
accordingtoanApril2010GAOreport,OMBandagenciescannotbesure
thegovernmentisfullyleveragingitsbuyingpowerbecauseofthelackof
comprehensive,reliabledatatoeffectivelymanageandoverseean
importantsegmentoftotalprocurementspending:interagencyand
agencywidecontracts.Thatis,thetotalnumberofandsalesvolumeofthese
contractsareunknownbecausethefederalgovernmentsofficial
procurementdatabasedoesnotfullycapturethisinformation.Toprovide
bettertransparencyandacoordinatedapproach,GAOhasrecommended
thatOMBensurethatdepartmentsandagenciesaccuratelyrecordthese
contractsintheprocurementdatasystem.ThePresidenthascalledonOMB
toissuegovernmentwideguidanceonimprovingtheeffectivenessof
governmentacquisition.Inresponse,OMBs2009guidancecallsonagenciesto
increasetheirparticipationinstrategicsourcinginitiativesthatwillleverage
federalbuyingpower.Becausethesetypesofcontractsarenowbeingused
aspartofthegovernmentwidestrategicsourcinginitiative,improved
knowledgewillhelpidentifyadditionalopportunitiesforsavingsandensure
thatthesecontractsarebeingusedinanefficientandeffectivemanner.
ActionsNeededand
PotentialSavings
Acquisitionleadersacrossthegovernmentneedtomorefullyembracethe
strategicsourcinginitiativebeginningwithcollecting,maintaining,and
analyzingdataoncurrentprocurementspending.Then,agencieshaveto
conductassessmentsofacquisitionandsupplychainfunctionstoinitiate
enterprisewidetransformations.Onlythenwilltheybeabletofully
implementstrategicsourcingprogramsthatdriveimmediateandlong-
termefficiencies.
Frameworkfor
listedbelowwithupdatesprovidedbymorerecentOMBtestimony.GAO
Analysis determinedthatthedataitusedweresufficientlyreliableforitspurposes.
RelatedGAO
Products
StreamliningGovernment:OpportunitiesExisttoStrengthenOMBs
ApproachtoImprovingEfficiency.GAO-10-394.Washington,D.C.:
May7,2010.
ContractingStrategies:DataandOversightProblemsHamper
OpportunitiestoLeverageValueofInteragencyandEnterprisewide
Contracts.GAO-10-367.Washington,D.C.:April29,2010.
U.S.PostalService:PurchasingChangesSeemPromising,but
OmbudsmanRevisionsandContinuedOversightAreNeeded.
GAO-06-190.Washington,D.C.:December15,2005.
AmtrakManagement:SystemicProblemsRequireActionstoImprove
Efficiency,Effectiveness,andAccountability.GAO-06-145.Washington,
D.C.:October4,2005.
HomelandSecurity:SuccessesandChallengesinDHSsEffortstoCreate
anEffectiveAcquisitionOrganization.GAO-05-179.Washington,D.C.:
March29,2005.
BestPractices:UsingSpendAnalysistoHelpAgenciesTakeaMore
StrategicApproachtoProcurement.GAO-04-870.Washington,D.C.:
September16,2004.
OpportunitiesforCongressionalOversightandImprovedUseof
TaxpayerFunds:BudgetaryImplicationsofSelectedGAOWork.
ContractManagement:High-LevelAttentionNeededtoTransformDOD
ServicesAcquisition.GAO-03-935.Washington,D.C.:September10,2003.
OpportunitiesforOversightandImprovedUseofTaxpayerFunds:
ExamplesfromSelectedGAOWork.GAO-03-1006. Washington,D.C.:
August1,2003.
BestPractices:ImprovedKnowledgeofDODServiceContractsCould
RevealSignificantSavings.GAO-03-661.Washington,D.C.:June9,2003.
BestPractices:TakingaStrategicApproachCouldImproveDODs
AcquisitionofServices.GAO-02-230.Washington,D.C.:January18,2002.
Foradditionalinformationaboutthisarea,contactJohnNeedhamat
AreaContact
(202)512-4841orneedhamjk1@gao.gov.
AdherencetoNewGuidanceonAwardFee
ContractsCouldImproveAgenciesUseof
AwardFeesandProduceSavings
AdherencetoNewGuidanceonAwardFeeContracts
CouldImproveAgenciesUseofAwardFeesand
ProduceSavings
WhyGAOIsFocusing
onThisArea
GAOhasreportedthatseveralmajoragenciesspentover$300billionfrom
fiscalyear2004throughfiscalyear2008oncontractsthatincluded
monetaryincentivesknownasawardfees.Thepurposeoftheseincentives
istomotivateenhancedcontractorperformance.In2005,however,GAO
foundthattheDepartmentofDefense(DOD)paidbillionsofdollarsin
awardfeesregardlessofacquisitionoutcomes.In2007,GAOfound
significantdisconnectsbetweenprogramresultsandfeespaidatthe
NationalAeronauticsandSpaceAdministration.In2009,GAOreported
thatfiveagencieshadpaidmorethan$6billioninawardfees,butwere
notconsistentlyfollowingawardfeeguidanceanddidnothavemethods
forevaluatingtheeffectivenessofanawardfeeasatoolforimproving
contractorperformance.
WhatGAOHasFound
IndicatingPotential
forCostSaving
GAOhasidentifiedthreeprimaryissuesrelatedtotheuseofawardfees
that,ifaddressed,couldimprovetheuseoftheseincentivesandproduce
savings.Specifically,(1)awardfeesarenotalwayslinkedtoacquisition
outcomes,(2)awardfeepaymentsaremadedespiteunsatisfactory
contractperformance,and(3)contractorshavebeenpermittedtoearn
previouslyunearnedawardfeesinsubsequentevaluationperiods,a
practiceknownasrollover,whereunearnedawardfeesaretransferred
fromoneevaluationperiodtoasubsequentperiod,thusallowing
contractorsadditionalopportunitiestoearnpreviouslyunearnedfees.
GAOhasmaderecommendationstoaddresstheseissues,severalofwhich
havebeenreflectedinrevisedOfficeofManagementandBudget(OMB)
guidanceandinamendmentstotheFederalAcquisitionRegulation,
effectiveOctober2010.Thekeytoimprovingtheuseofthesefees,
however,willbewhetheragencieschangetheirpracticestoconformto
therevisedpolicies.
AlthoughrequiredbyOMBguidancesince2007,GAOreportedin2009that
awardfeeswerenotalwayslinkedtoacquisitionoutcomes.Butwhen
effortsaremadetodoso,savingscanbeachieved.Forexample,theJoint
StrikeFighterprogramcreatedmetricsforareassuchassoftware
performance,warfightercapability,andcostcontrolthatwerepreviously
assessedusingless-definedcriteria.Byusingmetricstoassess
performance,theJointStrikeFighterprogrampaidanestimated$29
millionlessinfeesinthe2yearssincethepolicychangedthanitmight
havewhenapplyingtheformercriteria.
AsGAOpreviouslyreported,OMBguidancedirectedagenciestoensure
thatnoawardfeeshouldbepaidforperformancethatdoesnotmeet
contractrequirementsorisjudgedtobeunsatisfactory.GAOfoundin
practicetheguidancewasnotalwaysfollowed.Specifically,GAOreported

in2009thatprogramsacrosstheagenciesreviewedusedevaluationtools
thatcouldallowcontractorstoearnawardfeeswithoutperformingata
levelthatisacceptabletothegovernmentunderthetermsofthecontract.
Forexample,aDepartmentofEnergyresearchcontractallowedthe
contractortoearnupto84percentoftheawardfeeforperformancethat
wasdefinedasnotmeetingexpectations.Inaddition,GAOfoundtwo
DepartmentofHealthandHumanServicescontracts,includingacontract
forMedicareclaimsprocessing,inwhichitwaspossibleforthecontractor
toreceiveatleast49percentoftheawardfeeforunsatisfactory
performance.SomeprogramswithinDOD,bycontrast,haveprohibited
awardfeepaymentsforunsatisfactoryperformance.Forexample,GAO
foundthattheAirForcesaved$10milliononacontractforasatellite
programbynotpayinganawardfeetoacontractorwithunsatisfactory
performance.
DODguidanceonawardfeessince2006hasbeenthatthepracticeof
rollovershouldbelimitedtoexceptionalcircumstancestoavoid
compromisingtheintegrityoftheawardfeeprocess.GAOfoundthat
basedoncontractsreviewedin2005,DODrolledoveranaverageof51
percentofthetotalunearnedfees.Forexample,thecontractorfortheF-
22Raptorreceivedover90percentoftheawardfee,includingfeepaidin
subsequentevaluationperiods,eventhoughtheprogramscostand
scheduletargetshadtoberevised14times.Bylaterlimitingrollover,GAO
estimatedin2009thatDODwouldsaveover$450millionon8programs
fromApril2006throughOctober2010.ADODInspectorGeneralreportin
2010,however,indicatesthatrolloverisstillbeingused.Therecent
amendmentstotheFederalAcquisitionRegulationnowprohibitrollover
ofunearnedawardfees.
ActionsNeededand
PotentialSavings
RecentchangestotheFederalAcquisitionRegulationandpracticeson
awardfeesareencouraging:
AmendmentstotheFederalAcquisitionRegulationin2010have
prohibitedthepracticesofrolloverofunearnedawardfeesand
awardingfeestocontractorsthathaveperformedunsatisfactorily.
Someagenciesareupdatinganddisseminatingguidancethatcould
increasethepaceandsuccessrateofimplementingthesenew
regulations.
Further,agenciessuchasDODareincreasingthelikelihoodthataward
feeswouldbebetterlinkedtoacquisitionoutcomesbyimplementing
keypractices.Forexample,DODisimplementingapeerreview
processforcontractsoveracertaindollarthresholdthatincludes
examiningtheplanforadministeringawardfees.
However,sustainedprogressintheuseofawardfeeswillrequirethat
contractingagenciesadheretotherecentchangestotheFederal
AcquisitionRegulation.EnhancedoversightbyOMBandCongressmay
beusefulaswell.
Frameworkfor
Analysis
RelatedGAO
Products
DefenseAcquisitions:StatusofDOD'sImplementationofIndependent
ManagementReviewsforServicesAcquisitions.GAO-10-284.
FederalContracting:ApplicationofOMBGuidanceCanImproveUseof
AwardFeeContracts.GAO-09-839T.Washington,D.C.:August3,2009.
FederalContracting:GuidanceonAwardFeesHasLedtoBetter
PracticesbutIsNotConsistentlyApplied.GAO-09-630.Washington,D.C.:
May29,2009.
DefenseContractManagement:DODsLackofAdherencetoKey
ContractingPrinciplesonIraqiOilContractPutGovernmentInterests
atRisk.GAO-07-839.Washington,D.C.:July31,2007.
NASAProcurement:UseofAwardFeesforAchievingProgramOutcomes
ShouldBeImproved.GAO-07-58.Washington,D.C.:January17,2007.
DefenseAcquisitions:DODWastesBillionsofDollarsthroughPoorly
StructuredIncentives.GAO-06-409T.Washington,D.C.:April5,2006.
DefenseAcquisitions:DODHasPaidBillionsinAwardandIncentive
FeesRegardlessofAcquisitionOutcomes.GAO-06-66.Washington,D.C.:
December19,2005.
Foradditionalinformationaboutthisarea,contactJohnHuttonat
AreaContact
(202)512-4841orhuttonj@gao.gov.
AgenciesCouldRealizeCostSavingsby
DisposalofUnneededFederalRealProperty
AgenciesCouldRealizeCostSavingsbyDisposalof
UnneededFederalRealProperty
WhyGAOIsFocusing
onThisArea
Thefederalrealpropertyportfolioisvastanddiverse.Infiscalyear2009,
thefederalinventoryincludedover3billionsquarefeetofbuildingspace
andover900,000assets.TheDepartmentsofDefenseandVeteransAffairs,
theU.S.PostalService,andGeneralServicesAdministration(GSA)hold
themajorityoffederallyownedandleasedspace.
TheOfficeofManagementandBudget(OMB)isresponsibleforreviewing
agenciesprogressonfederalrealpropertymanagementandchairsthe
FederalRealPropertyCouncil,whichincludesrepresentativesfromthe
majorproperty-holdingagencies.Congressionalcommitteesthatprovide
oversightofthisareaincludetheSenateEnvironmentandPublicWorks,
SenateHomelandSecurityandGovernmentalAffairs,House
TransportationandInfrastructure,HouseOversightandGovernment
Reform,andappropriationscommittees.
GAOdesignatedmanagementoffederalrealpropertyasahigh-riskareain
2003duetoproblemswithexcessandunderutilizedproperty,amongother
things.
WhatGAOHasFound
IndicatingPotential
forCostSaving
Manyfederalagenciesholdrealpropertytheydonotneed,including
propertythatisexcessorunderutilized.
1
Disposingoftheseproperties
presentspotentialgovernmentwidecostsavingsbygeneratingsales
proceeds,reducingmaintenanceandoperatingcosts,andavoidingrent
costsbyendingleases.AccordingtodatafromtheFederalRealProperty
Profile,acentraldatabase,infiscalyear2009,agenciesreported45,190
underutilizedbuildings,anincreaseof1,830suchbuildingsfromthe
previousfiscalyear.Thesefiguresareconservative,astheydonotinclude
theU.S.PostalService,amajorpropertyholderthatdoesnotreporttothe
FederalRealPropertyProfile.Excessandunderutilizedpropertiespresent
significantpotentialriskstofederalagenciesbecausetheyarecostlyto
maintain.Forexample,infiscalyear2009,agenciesreportedunderutilized
buildingsaccountedfor$1.66billioninannualoperatingcosts.Excess
propertiesalsorepresentalostopportunitytogeneratesalesrevenuefor
thefederalgovernment.Manyassetsarenolongereffectivelyalignedwith,
orresponsiveto,agencieschangingmissions.InApril2007GAOreported
1
Excesspropertyhasbeendeterminedbythecontrollingfederalagencyasnotrequired
tomeettheagencysneeds.Notutilizedpropertyispropertynotoccupiedforthe
agencyscurrentpurposes.Underutilizedpropertyispropertythatisusedonlyat
irregularperiodsorisusedforpurposesthatcanbesatisfiedwithonlyaportionofthe
property.
thattechnologicaladvanceshavechangedthewaythepublicinteracts
withthefederalgovernment,andthischangewillhavesignificant
implicationsforthetypeandlocationofpropertyneededinthe21st
century.
In2004,ExecutiveOrder13327establishedtheFederalRealProperty
Councilandrequiredseniorrealpropertyofficersto,amongotherthings,
developandimplementanagencyassetmanagementplan,identifyand
categorizeallrealpropertyownedandleasedbytheiragency,and
prioritizeactionsneededtoimprovetheoperationalandfinancial
managementoftheagencysrealpropertyinventory.
2
AccordingtoOMB
officials,agovernmentwideinitiativestartedundertheexecutiveorder
focusedondisposingofunneededassets.InaJune2010Presidential
Memorandumtofederalagencies,theadministrationestablishedanew
targetofsaving$3billionthroughdisposalsandothermethodsbytheend
offiscalyear2012.However,federalagenciescontinuetofaceobstaclesto
disposingofunneededproperty,suchascompetingstakeholderinterests.
Forexample,theU.S.PostalServicehasfacedresistancetofacility
closuresandconsolidationsbecauseofconcernsofhowtheseactions
mightaffectjobs,service,andcommunitiesasGAOreportedinApril2010.
Legalandbudgetarylimitationsalsohaveimplicationsforrealproperty
decisions.Forexample,asGAOreportedinApril2007,federalagencies
arerequiredbylawtoassessandpayforanyenvironmentalcleanupthat
maybeneededbeforedisposingofapropertyaprocessthatmayrequire
yearsofstudyandresultinsignificantcosts,andinsomecases,may
exceedthecostsofcontinuingtomaintaintheexcesspropertyinashut-
downstatus.Ifthegovernmentdoesnotaddresstheissueofexcessand
underutilizedproperty,thecoststomaintainthesepropertieswill
continuetorise,puttingthegovernmentatriskforlostdollarsandmissed
opportunities.
ActionsNeededand
PotentialSavings
TherecentPresidentialMemorandumstargeted$3billioninsavings
relatedtopropertydisposalsandothermethodsrepresentsanotherstepin
realigningthefederalportfoliotoagenciesmissionsandneeds.However,
OMBcouldassistagenciesinmeetingthistargetbyimplementingGAOs
April2007recommendationofdevelopinganactionplantoaddresskey
problemsassociatedwithdisposingofunneededrealproperty,including
2
ExecutiveOrder13327appliesto24executivebranchdepartmentsandagenciesbutnotto
theU.S.PostalService,whichisanindependentestablishmentintheexecutivebranch.

reducingtheeffectofcompetingstakeholderinterestsonrealproperty
decisions.OMBagreedwiththerecommendationbuthasyettofully
implementit.
Thecostsavingsforrealpropertydisposalsarenotlimitedtoaone-time
savingsorincome.Oncealeaseisended,thegovernmentcontinuesto
savetherentpaymentsfromthatpropertyindefinitely.AsGAOreportedin
June2010,operationsandmaintenancecoststypicallyrepresentfrom60
percentto85percentofthecostsofafacilityoveritslifetime,while
designandconstructioncostsrepresentabout5percentto10percentof
thesecosts.Thus,oncethegovernmentdisposesofanownedproperty,it
avoidscostsrelatedtooperationsandmaintenancethatwouldhave
otherwisecontinuetoaccrue,eventuallyrepresentingapproximately10
timesthedesignandconstructioncostsoftheproperty.
Frameworkfor
Analysis
productslistedbelow.Inaddition,toupdateexistinginformationonthis
topic,GAOstaffinterviewedfederalgovernmentofficialsfromOMBand
realproperty-holdingagencies(DepartmentsofDefense,Homeland
Security,Energy,theInterior,State,andVeteransAffairs;U.S.Postal
Service;andGSA),andanalyzedgovernmentwideandagency-levelreal
propertyplansandreports.
RelatedGAO
Products
FederalRealProperty:TheGovernmentFacesChallengestoDisposingof
UnneededBuildings.GAO-11-370T.Washington,D.C.:February10,2011.
FederalCourthouseConstruction:BetterPlanning,Oversight,and
CourtroomSharingNeededtoAddressFutureCosts.GAO-10-417.
U.S.PostalService:StrategiesandOptionstoFacilitateProgresstoward
FinancialViability.GAO-10-455.Washington,D.C.:April12,2010.
VARealProperty:VAEmphasizesEnhanced-UseLeasestoManageIts
RealPropertyPortfolio.GAO-09-776T.Washington,D.C.:June10,2009.
FederalRealProperty:AuthoritiesandActionsRegardingEnhancedUse
LeasesandSaleofUnneededRealProperty.GAO-09-283R.Washington,
U.S.PostalServiceFacilities:ImprovementsinDataWouldStrengthen
MaintenanceandAlignmentofAccesstoRetailServices.GAO-08-41.
FederalRealProperty:DHSHasMadeProgress,butAdditionalActions
AreNeededtoAddressRealPropertyManagementandSecurity
Challenges.GAO-07-658.Washington,D.C.:June22,2007.
U.S.PostalService:MailProcessingRealignmentEffortsUnderWay
NeedBetterIntegrationandExplanation.GAO-07-717.Washington,D.C.:
June21,2007.
FederalRealProperty:ProgressMadeTowardAddressingProblems,but
UnderlyingObstaclesContinuetoHamperReform.GAO-07-349.
FederalRealProperty:MostPublicBenefitConveyancesUsedas
Intended,butOpportunitiesExisttoEnhanceFederalOversight.
FederalRealProperty:FurtherActionsNeededtoAddressLong-standing
andComplexProblems.GAO-05-848T.Washington,D.C.:June22,2005.
FederalRealProperty:VacantandUnderutilizedPropertiesatGSA,VA,
andUSPS.GAO-03-747.Washington,D.C.:August19,2003.
VAHealthCare:ImprovedPlanningNeededforManagementofExcess
RealProperty.GAO-03-326.Washington,D.C.:January29,2003.
AreaContact
ImprovedCostAnalysesUsedforMaking
FederalFacilityOwnershipandLeasing
DecisionsCouldLeadtoCostSavings
Governmentwide

ImprovedCostAnalysesUsedforMakingFederal
FacilityOwnershipandLeasingDecisionsCouldLead
toCostSavingsGovernmentwide
WhyGAOIsFocusing
onThisArea
Federalbuildingownershipisoftenmorecost-effectivethanleasingtomeet
long-termspaceneeds,anditsincreasedusecouldsavemillionsofdollars
overtheperiodused.Federalagenciesrelyextensivelyonleasing,and
leasedabout289millionsquarefeetofbuildingsin2008.TheGeneral
ServicesAdministration(GSA),thecentralleasingagentformostagencies,
leasesmorethan8,000assetsandnowleasesmorespacethanitowns.
TheOfficeofManagementandBudget(OMB)isresponsibleforreviewing
agenciesprogressonrealpropertymanagementandchairstheFederal
RealPropertyCouncil,whichincludesrepresentativesfrommajor
property-holdingagencies.Congressionalcommitteesthatprovide
oversightofthisareaincludetheSenateCommitteeonEnvironmentand
PublicWorks,SenateHomelandSecurityandGovernmentalAffairs,
HouseTransportationandInfrastructure,HouseOversightand
GovernmentReform,andappropriationscommittees.
GAOaddedmanagingfederalrealpropertytoitshigh-risklistin2003due
inparttocostlyleasing.
WhatGAOHasFound
IndicatingPotential
forCostSaving
GAOsworkovertheyearshasrepeatedlyshownthatbuildingownership
oftencostslessthanoperatingleases,especiallyforlong-termspaceneeds.
InDecember1989,GAOfoundthatGSAcouldhavesaved$12billion
over30yearsbyconstructinginsteadofleasingrealpropertyin43
projects.
InJuly1995,GAOfoundthat55of73GSAproposedoperatingleases
cost$700millionmorethanconstructionover30years.
InJanuary2008,GAOfoundthatdecisionstoleaseselectedfederal
propertieswerenotalwaysdrivenbycost-effectivenessconsiderations.
FourofsevenGSAleasesGAOanalyzedweremorecostlythan
constructionby$83.3millionbasedon30-yearnetpresentvalue
calculations.Forexample,thedecisiontoleasetheFederalBureauof
InvestigationsfieldofficeinChicago,Illinois,insteadofconstructinga
buildingthegovernmentwouldown,wasestimatedtocostabout$40
millionmoreover30years.GSAofficialsstatedthatlimitedavailability
ofupfrontcapitalandsecurityconsiderations,amongotherreasons,
preventedownershipatthattime.
Whilefederalownershipislessexpensivethanleasinginmanycases,in
certainsituationsitisnot.Forexample,in2008,GAOfoundthatforthree
Governmentwide
ofsevenGSAleasesitanalyzed,leasingwaslesscostlythanconstruction
by$35millionover30years.Agencyoperationalrequirementssuchas
immediatespaceneeds,securityrequirements,ordesireforflexibilityas
wellasshort-termorsmallspaceneedsarealsosituationswhereleasingis
oftenpreferredbyagenciesandmaybeeconomicallyadvantageousover
ownership.
Federalbudgetscorekeepingrulesrequirethefullcostofconstructionto
berecordedupfrontinthebudget,whereasonlytheannuallease
paymentspluscancellationcostsneedtoberecordedforoperatingleases.
Asaresult,leasesappearlessexpensiveinanysingleyearwhencompared
tonewconstructioneventhoughtheygenerallyaremorecostlyovertime.
GAOhasraisedthescorekeepingissueasachallengethatneedstobe
addressedinseveralreportsandtestimoniesoverthepast20years.
AccordingtoGSAofficials,constraintsoncapitalfundinginfluencetheir
abilitytopursueownershipasarealisticoptioninmanycases.Ifnot
addressed,GAOexpectscontinuedrelianceonleasingatapotentiallyhigh
costoverthelongterm.
TheFederalRealPropertyProfile,arealpropertyinventory,isan
importanttoolavailabletotrackgovernmentwidetrendsonrealproperty
management,includingleasing.Updatedannually,itincludesinformation
helpfultomeasuringoverallvolumeaswellasannualoperatingcostsof
leasedversusownedproperties,amongotherfactors.
ActionsNeededand
PotentialSavings
OMBhasnotyetimplementedGAOsrecommendation,madeinApril2007
andJanuary2008,todevelopastrategytoreduceagenciesrelianceon
costlyleasingwhereownershipwouldresultinlong-termsavings.Sucha
strategycouldidentifytheconditionsunderwhichleasingisanacceptable
alternative,includeananalysisofrealpropertybudgetscoringissues,and
provideanassessmentofviablealternatives.Thisstrategywouldinform
futuredecisionmakingonthisdifficultissue.AsGAOreportedinJanuary
2008,implementationchallengessuchasobtainingconsensusonspecific
changestoscoringrulesareexpected.Effortstoresolvetheleasing
challengecouldbenefitfrominputfromFederalRealPropertyCouncil
andstakeholders,includingCongress.
Frameworkfor
productslistedbelow,interviewswithfederalgovernmentofficialsat
Analysis OMBandmajorpropertyholdingagenciesincludingGSA,andanalysisof
governmentwideandagency-levelrealpropertyplansandreports.
Governmentwide
RelatedGAO
Products
BuildingSecurity:NewFederalStandardsHoldPromise,ButCouldBe
StrengthenedtoBetterProtectLeasedSpace.GAO-10-873.Washington,
FederalRealProperty:AnUpdateonHighRiskIssues.GAO-09-801T.
GovernmentPrintingOffice:IssuesFacedinObtainingaNewFacility.
GAO-09-392R.Washington,D.C.:February20,2009.
FederalRealProperty:StrategyNeededtoAddressAgenciesLong-
standingRelianceonCostlyLeasing.GAO-08-197.Washington,D.C.:
January24,2008.
GeneralServicesAdministration:ImprovementsNeededinManaging
DelegatedAuthorityofRealPropertyActivities.GAO-07-1000.
FederalRealProperty:ProgressMadeTowardAddressingProblems,but
UnderlyingObstaclesContinuetoHamperReform.GAO-07-349.
GSALeasing:InitialImplementationoftheNationalBrokerServices
ContractsDemonstratesNeedforImprovements.GAO-07-17.Washington,
FederalRealProperty:NIHHasImprovedItsLeasingProcess,butNeeds
toProvideCongresswithInformationonSomeLeases.GAO-06-918.
FederalRealProperty:FurtherActionsNeededtoAddressLong-standing
andComplexProblems.GAO-05-848T.Washington,D.C.:June22,2005.
GeneralServicesAdministration:FactorsAffectingtheConstruction
andOperatingCostsofFederalBuildings.GAO-03-609T.Washington,
D.C.:April2,2003.
GeneralServicesAdministration:OpportunitiesforCostSavingsinthe
PublicBuildingsArea.GAO/T-GGD-95-149.Washington,D.C.:July13,
1995.
PublicBuildings:BudgetScorekeepingPromptsDifficultDecisions.
GAO/T-AIMD/GGD-94-43.Washington,D.C.:October28,1993.
Governmentwide
FederalOfficeSpace:IncreasedOwnershipWouldResultinSignificant
Savings.GAO/GGD-90-11.Washington,D.C.:December22,1989.
AreaContact
OMBsITDashboardCanFurtherHelp
IdentifyOpportunitiestoInvestMore
EfficientlyinInformationTechnology
OMBsITDashboardCanFurtherHelpIdentify
OpportunitiestoInvestMoreEfficientlyinInformation
Technology
WhyGAOIsFocusing
onThisArea
Eachyearthefederalgovernmentspendsbillionsofdollarson
informationtechnology(IT)investments;federalspendingonIThasrisen
toanestimated$79billionforfiscalyear2011.Overthepastseveralyears,
GAOhasreportedandtestifiedontheOfficeofManagementandBudgets
(OMB)initiativestohighlighttroubledITprojects,justifyinvestments,and
useprojectmanagementtools.Giventheimportanceoftransparency,
oversight,andmanagementofthegovernmentsITinvestments,inJune
2009OMBestablishedapublicWebsite,referredtoastheITDashboard,
thatprovidesdetailedinformationonabout800investmentsat27federal
agencies,includingratingsoftheirperformanceagainstcostandschedule
targets.Thepublicdisseminationofthisinformationisintendedtoallow
OMB;otheroversightbodies,includingCongress;andthegeneralpublicto
holdagenciesaccountableforresultsandperformance.
WhatGAOHasFound
IndicatingPotential
forCostSaving
InJuly2010,GAOreportedthatOMBsDashboardhadincreased
transparencyandoversight,butthatimprovementswereneededforthe
Dashboardtomorefullyrealizeitspotentialasamanagementandcost-
savingstool.Specifically,thecostandscheduleratingsontheDashboard
werenotalwaysaccuratefortheinvestmentsthatGAOreviewed.GAO
foundthatfouroftheeightselectedinvestmentshadnotable
discrepanciesineithercostorscheduleratings.Forexample,the
Dashboardindicatedthatoneinvestmenthadaless-than-5-percentcost
varianceforeverymonthfromJuly2009throughJanuary2010.However,
GAOsanalysisshowedthatthisinvestmenthadacostperformance
variancefrom10percenttolessthan15percentinDecember2009
throughJanuary2010.Inanothercase,aninvestmentontheDashboard
reportedthatithasbeenlessthan30daysbehindschedulesinceJuly
2009.InvestmentdatathatGAOexamined,however,showedthatthe
investmentwasbehindscheduleby30daystoalmost90daysfrom
SeptembertoDecember2009.
AprimaryreasonforthedatainaccuracieswasthatwhiletheDashboard
wasintendedtorepresentnearreal-timeperformanceinformation,the
costandscheduleratingsdidnottakeintoconsiderationcurrent
performance.Asaresult,theratingswerebasedonoutdatedinformation.
Forexample,costratingsforeachoftheinvestmentswerebasedondata
from2monthstoalmost2yearsold.Anotherissuewiththeratings
stemmedfromthewidevariationinthenumberofmilestonesagencies
reported,whichwaspartlybecauseOMBsguidancewastoogeneral.
Havingtoomanymilestonescanmaskperformanceproblemsbecausethe
performanceofeachmilestone(datedandrecent)wasequallyaveraged
intotheratings.Thismeansthatinvestmentsthatperformedwellduring

previouslycompletedmilestonescanmaintainratingsthatreflectgood
performance,eveniftheybegintoperformpoorly.Conversely,havingtoo
fewmilestoneslimitstheamountofinformationavailabletorate
performance,allowingagenciestopotentiallydistorttheirratings.
GAOalsoassessedwhetherthedataontheDashboardwerebeingusedas
atooltoimprovethemanagementofITinvestments.Officialsatthreeof
thefiveagenciesinGAOsreviewstatedtheywerenotusingthe
Dashboardtomanagetheirinvestmentsbecausetheyalreadyhadexisting
meanstodoso;officialsattheothertwoagenciesindicatedtheywere
usingtheDashboardtosupplementtheirexistingmanagementprocesses.
TheFederalChiefInformationOfficerstatedthattheDashboardgreatly
improvedoversightcapabilitiescomparedtopreviouslyusedmechanisms
andthatithasincreasedtheaccountabilityofagencieschiefinformation
officersandestablishedmuch-neededvisibility.OMBofficialsindicated
theyhadreliedontheDashboardasamanagementtool,includingusing
investmenttrenddatatoidentifyandaddressperformanceissuesandto
selectinvestmentsforaTechStatsessionareviewofselectedIT
investmentsbetweenOMBandagencyleadershipthatisledbythe
FederalChiefInformationOfficer.AccordingtoOMB,asofDecember
2010,58TechStatsessionshavebeenheldwithfederalagencies.
Additionally,OMBofficialsstatedthat,asaresultofthesesessions,11
investmentshavebeenreducedinscopeand4havebeencancelled.For
example,TechStatson
theDepartmentofHousingandUrbanDevelopmentsTransformation
Initiativeinvestmentresultedinthereductionofprojectsfrom29to7
andthelimitoffiscalyear2010fundsforthese7priorityprojectsto
$85.7million(from$138million);and
theNationalArchivesandRecordsAdministrationsElectronic
RecordsArchivesinvestmentresultedinsixcorrectiveactionsteps,
includinghaltingfiscalyear2012developmentfundingpendingthe
completionofastrategicplan.
TobetterensurethattheDashboardprovidesmeaningfulratingsand
accurateinvestmentdata,GAOrecommendedthatOMBreportonthe
effectofplannedchangestotheDashboardtoimprovetheaccuracyof
ratingsandtoprovideguidancetoagenciestostandardizemilestone
reporting.OMBagreedwiththeserecommendationsandinitiatedworkto
updatetheDashboardtofactortheperformanceofongoingmilestones
intocostandscheduleratings.
Finally,GAOhasworkunderwaytoevaluatethedataprovidedbythe
Dashboardinordertodeterminetheextenttowhichagenciesmaybe
investinginprojectsinthesamelineofbusiness.GAOisalsoreviewing
OMBscurrentapproachtoidentifyingandactingonsuchduplicative
investments.
ActionsNeededand
PotentialSavings
AccordingtotheFederalChiefInformationOfficer,useoftheDashboard
asamanagementandoversighttoolhasalreadyresultedina$3billion
budgetreduction.OMBsplannedimprovementstotheDashboard,along
withfullimplementationofGAOsrecommendations(asdiscussedabove)
andthepossibleidentificationofduplicativeinvestments,havethe
potentialtoresultinfurthersignificantsavings.Additionalopportunities
forpotentialcostsavingsexistwiththeuseoftheDashboardbyexecutive
branchagenciestoidentifyandmakedecisionsaboutpoorlyperforming
investments,aswellasitscontinuedusebycongressionalcommitteesto
supportcriticaloversightefforts.
TheinformationaboveisbasedonongoingworkontheDashboardand
Frameworkfor
relatedGAOproductslistedbelow.
Analysis
RelatedGAO
Products
InformationTechnology:OMBsDashboardHasIncreasedTransparency
andOversight,butImprovementsNeeded.GAO-10-701.Washington,D.C.:
July16,2010.
InformationTechnology:ManagementandOversightofProjects
TotalingBillionsofDollarsNeedAttention.GAO-09-624T.Washington,
D.C.:April28,2009.
InformationTechnology:OMBandAgenciesNeedtoImprovePlanning,
Management,andOversightofProjectsTotalingBillionsofDollars.
GAO-08-1051T.Washington,D.C.:July31,2008.
InformationTechnology:FurtherImprovementsNeededtoIdentifyand
OverseePoorlyPlannedandPerformingProjects.GAO-07-1211T.
InformationTechnology:ImprovementsNeededtoMoreAccurately
IdentifyandBetterOverseeRiskyProjectsTotalingBillionsofDollars.
InformationTechnology:AgenciesandOMBShouldStrengthen
ProcessesforIdentifyingandOverseeingHighRiskProjects.
InformationTechnology:OMBCanMakeMoreEffectiveUseofIts
InvestmentReviews.GAO-05-276.Washington,D.C.:April15,2005.
Foradditionalinformationaboutthisarea,contactDavidA.Pownerat
AreaContact
(202)512-9286orpownerd@gao.gov.
IncreasingElectronicFilingofIndividual
IncomeTaxReturnsCouldReduceIRSs
ProcessingCostsandUltimatelyIncrease
EnforcementRevenue
IncreasingElectronicFilingofIndividualIncomeTax
ReturnsCouldReduceIRSsProcessingCostsand
UltimatelyIncreaseEnforcementRevenue
WhyGAOIsFocusing
onThisArea
TheInternalRevenueService(IRS)receivedmorethan130million
individualincometaxreturnsduringthe2010filingseason.The
percentageofreturnsfiledelectronicallyhasincreasedfrom52percentin
2005to71percentin2010.However,in2010,IRSstillprocessed40million
taxreturnsfiledonpapersomeofwhichmustbefiledonpaperdueto
theircomplexityorrequiredsupplementaldocumentation.Electronic
filingbenefitstaxpayersbyreducingprocessingerrorsandexpediting
theirrefunds.ItalsobenefitsIRSbecausenotranscriptionoftaxdatais
necessary,unlikeforreturnsfiledonpaper.
WhatGAOHasFound
IndicatingPotential
forEnhancing
Revenue
IncreasingelectronicfilingwouldreduceIRSsreturnprocessingcostsand
increaserevenuebyfacilitatingenforcement.AsnotedinGAOsDecember
2010report,IRSestimatedsavingsof$3.10perreturnforreturnsfiled
electronicallyversuspaperinfiscalyear2009.Millionsofdollarsin
processingcostscouldthereforebeavoidedbyencouragingelectronic
filing.BasedonGAOspriorreportsfrom2007to2010,IRShasthree
opportunitiestoincreaseelectronicfilingofindividualincometaxreturns:
Requiretaxsoftwareidentificationnumbers:AsnotedinGAOs
February2009report,havingamorecompletesoftwareidentification
numberwouldallowIRStobettertargetitsresearchofwaystopromote
electronicfiling.IRSnowrequiressoftwareidentificationnumbersfor
returnspreparedusingsoftwareandthenprintedandsubmittedonpaper,
butdoesnothaveplanstotranscribethisinformation.More
comprehensiveinformationabouttaxsoftwareversionsusedtoprepare
bothelectronically-filedandpaperreturnswouldhelpinformresearch
intohowthepricingandattributesofdifferentsoftwareproductsaffect
taxpayerswillingnesstousesoftwareandfileelectronically.
Preventrejectsofelectronicallyfiledreturns:AsnotedinGAOs
September2009report,IRScouldalsoincreaseelectronicfilingby
workingwithtaxpayersandtheirrepresentativestoreducethenumberof
rejectedreturns.Astaxreturnsarereceivedelectronically,IRSbeginsa
seriesofautomatedcheckstoverifybasicinformation(suchasSocial
Securitynumbers)andthenrejectsreturnscontainingerrors.Ifareturnis
rejected,IRSsendsanelectronicnoticewithoneormoreerrorcodes
explainingwhythereturnwasrejected,andhowtheerrorcanbe
correctedandthereturnresubmitted.However,somecodesarevery
generalandcovermultipleissues,whileothersaresonarrowthattheyare
rarelyused.Frustratedtaxpayersmaysimplyprintandmailtheirreturns
toIRSwithoutmakingcorrectionsleavingIRStoidentifyandcorrectthe
EnforcementRevenue
errorsandprocessthepaperreturns,therebylosingthebenefitsof
electronicfiling.
Requirebarcoding:AsnotedinGAOsNovember2007report,IRScould
requirethattaxsoftwarevendorsencoderelevantinformationinabar
codethatwouldbeembeddedonallpaperreturnsprintedfromtax
softwareandmailed,asseveralstatesalreadydo.IRScouldthenscanthe
barcodetoobtainelectronicinformationsuchasataxpayersSocial
Securitynumberandaddressfromthereturn.Whilenotasbeneficialas
electronicfiling,barcodingwouldstillprovideefficienciesoverdata
transcriptionandenablemoreinformationtobeavailableelectronically.
InDecember2010,IRSreportedthatitisreviewingoptionstoenhance
currentsystemswithbarcodecapabilitiesanddevelopingdetailed
requirementsandtimetables.
Inkeepingwitheffortstoincreasetheavailabilityofelectronictaxdatafor
enforcementpurposes,IRScouldalsoincreasetheamountoftaxdata
availableelectronicallybyincreasingtheamountofdatafrompapertax
returnsittranscribesintoitscomputerdatabases.Currently,tocontrol
data-entrycosts,IRSdoesnottranscribealldatafrompapertaxreturns
intoitscomputerdatabases,thuslimitinginformationavailable
electronicallyforenforcementpurposes.AsnotedinGAOsNovember
2007report,transcribingmoreorallreturninformation,thushavingit
availableelectronically,couldhelpIRStargetauditsonnoncompliant
taxpayers,avoidburdeningcomplianttaxpayerswithunnecessaryaudits,
andmakemoreproductiveuseofIRSsauditresources.Forexample,in
2007officialsfromoneofIRSsenforcementprograms(Automated
Underreporter)estimatedthathavingalltaxreturninformationavailable
electronicallywouldincreasetaxrevenueannuallyby$175million.
ActionsNeededand
PotentialRevenue
IRSgenerallyagreedwithGAOspriorrecommendationtorequireamore
completesoftwareidentificationnumber,andsaidthatitwoulddosoby
the2010filingseason.IRShastakensomeactionssuchasrequiringa
softwareidentificationnumberonprintedreturnsbutdoesnotplanto
transcribethisinformation.GAOcontinuestobelievethatifIRSwereto
collectmoreinformationviaexpandedsoftwareidentificationnumberson
taxreturns,suchinformationcouldsupportresearchintohowsoftware
affectselectronicfiling.GAOrecognizesthattherewouldbesome
offsettingcosts.However,increasingelectronicfilingcouldlowertotaltax
returnprocessingcostsbyswitchingcostlypaperfilingtomore
economicalelectronicfiling.
EnforcementRevenue
IRSagreedwithGAOspriorrecommendationstodevelopareject
preventionstrategy,includeexternalstakeholdersinitsrejectworking
group,developanactionplanforthatgroup,andprovideclearer
descriptionsofwhyreturnsarebeingrejected.IRShastakensignificant
actiontoaddresstheserecommendationsinconjunctionwithitsongoing
researchintoadvancingelectronicfiling.
IRSagreedwithGAOspriorrecommendationsthatitshoulddetermine
actionsneededtorequiresoftwarevendorstoincludebarcodeson
printedindividualincometaxreturnsandthecostofthoseactions.While
barcodedpaperreturnsarestillmoreexpensivetoprocessthan
electronicallyfiledreturns,statesthatrequirebarcodingofreturnsreport
thatgreaterelectronicaccesstoreturndatahasallowedthemtomore
easilyverifyinformationandimproveenforcement.GAOcontinuesto
believethatbarcodingofprintedreturnshasthepotentialtoreduce
processingcosts,facilitateaccesstotaxpayerinformation,andimprove
compliance.IRShasconductedfurtherresearchontheburdentoIRSand
softwareprovidersofrequiringbarcodesonprintedreturnsaspartofits
ongoingstudiestopromoteelectronicfiling.
Finally,IRSagreedwithGAOspriorrecommendationthatmore
comprehensiveandeasilyaccessibleelectronicreturninformationwould
facilitateenforcementeffortsandthusincreaserevenuecollectedfrom
noncomplianttaxpayers,andIRSistakingstepstostudytheissue.For
example,IRSrecentlyidentifiedoptionstoincreaseelectronicfiling,but
hasyettodefineanoverallstrategyfordoingso.Asnotedabove,having
moretaxreturninformationavailableelectronicallycouldincrease
revenuesbyatleasthundredsofmillionsofdollars.
GAOexpectstocontinueassessingIRSsprogressinaddressingthese
issues.
Frameworkfor
productslistedbelowandGAOsworkfollowinguponthe
2010TaxFilingSeason:IRSsPerformanceImprovedinSomeKey
RelatedGAO
Areas,butEfficiencyGainsArePossibleinOthers.GAO-11-111.
Products Washington,D.C.:December16,2010.
EnforcementRevenue
TaxAdministration:OpportunitiesExistforIRStoEnhanceTaxpayer
ServiceandEnforcementforthe2010FilingSeason.GAO-09-1026.
TaxAdministration:ManyTaxpayersRelyonTaxSoftwareandIRS
NeedstoAssessAssociatedRisks.GAO-09-297.Washington,D.C.:
February25,2009.
TaxAdministration:2007FilingSeasonContinuesTrendof
Improvement,butOpportunitiestoReduceCostsandIncreaseTax
ComplianceShouldbeEvaluated.GAO-08-38.Washington,D.C.:
November15,2007.
Foradditionalinformationaboutthisarea,contactJamesWhiteat
AreaContact
(202)512-9110orwhitej@gao.gov.
UsingReturnonInvestmentInformationto
BetterFocusIRSEnforcementCouldIncrease
TaxComplianceandRevenues
UsingReturnonInvestmentInformationtoBetter
FocusIRSEnforcementCouldIncreaseTax
ComplianceandRevenues
WhyGAOIsFocusing
onThisArea
Taxpayerspaidmorethan$2.3trillioninfederaltaxesinfiscalyear2009.
However,theInternalRevenueService(IRS)estimatesthattaxpayers
failedtopayanadditional$290billion(basedona2001estimatethe
mostrecentavailable).Expertsbelievethecurrenttaxgap,orthe
differencebetweentheamountoftaxesowedandtheamountpaid
voluntarilyandtimely,maybelarger.IRSseekstoallocateits
approximately$12billionbudgetoverseveralserviceandenforcement
programstomaximizetaxpayercompliance.IRStaxpayerservicesrange
fromtelephone,Website,andin-personassistancetocollaborationwith
paidtaxpreparersandtaxsoftwarecompanies.Enforcementincludes
audits,avarietyofcomputerizedchecks,aswellaseffortstargeting
specificindustriesortypesoftaxpayers,suchasthosewithoffshorebank
accounts.However,IRShaslittleinformationabouteithertherelative
effectivenessorcostsofitsserviceandenforcementprograms.IRShas
beguntoestimatereturnoninvestment(ROI),whichcomparesrevenues
collectedasaresultofsuchenforcementactionswiththecostof
collectingthem,butuseofROIhasbeenlimited.
WhatGAOHasFound
IndicatingPotential
forEnhancing
Revenue
IncreasingIRSsuseofROIandsimilarinformation,includingdeveloping
actualROIinformationafteranenforcementprogramisimplementedand
comparingittoIRSsinitialrevenueprojections,wouldprovideapowerful
toolforCongressandotherbudgetdecisionmakers,byidentifyingboth
costsavingswithinIRSandopportunitiestocost-effectivelyreallocate
resourcestoimprovecomplianceandtherebybringinadditionalrevenue
forthefederalgovernment.
Beginninginfiscalyear2008,IRShasprovidedROIinformationaboutthe
projectedcostsandpotentialrevenuesofnewenforcementinitiativesin
itsbudgetjustification.Forexample,initsfiscalyear2011justification,
IRSreportedthatitsproposednewinitiativeswouldcost$237millionand
increaserevenuecollectedfromnoncomplianttaxpayersbyaprojected$2
billion.However,IRSprovidesprojectedROIinformationforonlyitsnew
enforcementinitiativesaccountingforlessthan2percentoftheIRSs
fiscalyear2011budgetrequest.Further,althoughguidancefromtheOffice
ofManagementandBudget(OMB),GAO,andtheGovernment
PerformanceandResultsActof1993suggesttheuseofROIinformation,
IRSdoesnotprovideprojectedROIinformationforanyofitsexisting
enforcementorserviceprogramsthatwouldcontinuetobefundedunder
thebudgetrequest.IRSalsodoesnotestimatetheROIactuallyrealizedby
itsprograms.
CitingGAOsJune2009ROIrecommendationinitsfiscalyear2011
committeereport,theSenateCommitteeonAppropriationsdirectedIRS
toprovidedetailedinformationaboutactualcosts,revenues,andROIfor
itsnewenforcementinitiatives.IRSofficialshavebeenconsidering
optionstocollectactualROIdatatocomparewithprojections,however,
actualROIdatahaveasyettobeproduced.ROIinformationischallenging
todevelopandshouldbesupplementedwithinformationoncompliance
costsfortaxpayersandothers.Further,itisdifficulttoisolatetheeffects
ofaparticularprogramontaxpayercomplianceandIRSlackssomedata
neededtomakecompleteROIestimates.However,evenlimitedROI
informationcouldhelpidentifyprogramsthatarenotjustifyingtheircost
oropportunitiestoreallocateresourcestoprogramsthathavelargertax
complianceandrevenueimpactperdollarspent.
Similarly,IRSsfiscalyear2011budgetjustificationincluded24legislative
proposalsfromtheDepartmentoftheTreasuryaimedatreducingthetax
gapandgeneratingnearly$26billioninadditionalrevenueoverthenext
10years.Forexample,twolegislativeproposalssuggestincreased
informationreportingrequirements,whichareestimatedtoresultinmore
than$12millioninrevenues,buttherewerenoestimatesoftheupfront
costsoftheseproposals,suchasthecostofpurchasingormodernizing
informationtechnologyortrainingstafforincreasedcoststotheprivate
sector.OMBguidancesuggestthatagenciesshouldprovideestimatesof
theimplementationcostsassociatedwithanyproposedlegislationintheir
budgetjustifications,butIRShasprovidednosuchestimatesforits
proposals.Asaresult,itisdifficulttodeterminewhetherthepotential
benefitsofIRSslegislativeproposalsareworththecosts,orhowlongit
willtakefortheagencytorecoupanyinitialinvestments.
ActionsNeededand
PotentialRevenue
TohelpCongressandotherbudgetdecisionmakersbetterdetermine
whetherIRSsresourcescouldbereallocatedtocollectmorerevenueand
identifypossiblecostsavings,andbuildingonearlierrecommendations,
GAObelievesthatIRSshouldcontinuetoincreaseitsuseofROI
information.IRSrecognizesthatthiswillrequireadditionalresearchto
identifytheimpactsofspecificprogramsincludingtheeffectonvoluntary
compliancebytaxpayers.OnceactualROIstatisticsaredevelopedfor
programs,andsupplementedwithcompliancecostinformation,IRScould
thencompareresultsacrossprograms.ActualROIinformationcouldalso
becomparedtoinitialROIprojectionsforaprogramtodeterminewhether
theanticipatedresultswereactuallyachieved.Thepotentialforcost
savingsandincreasedrevenuethatcouldresultfrommoreuseofROI
informationissignificant.Forexample,ifmoreeffectiveutilizationof
IRSsexistingresourcesreducedthetaxgapby1percent,theadditional
taxrevenuewouldbeabout$3billion.
Also,asGAOhaspreviouslyrecommended,IRSshouldalsocoordinate
withtheDepartmentoftheTreasurytoprovideCongresswithpreliminary
costestimatesordescriptionsofresourceneedsforlegislativeproposals
infuturebudgetjustifications.Eventhoughmanyofthe24legislative
proposalsIRSsubmittedtoCongressinitsfiscalyear2011budget
justificationareconceptualandthereforedevelopingprecisecost
estimatesforthemmaybedifficultprovidingapproximatecostsorother
informationsuchaswhethertheproposalwouldinvolvesignificant
systems,staff,ortrainingexpensescouldhelpCongressevaluatethe
proposals.Withoutsuchinformation,Congressisleftatadisadvantage
whenweighingthecostsandbenefitsofcompetingproposalsaimedat
increasingtheamountoffederaltaxrevenuecollected.
Frameworkfor
productslistedbelowandadditionalworkfollowinguponthe
RelatedGAO
Products
InternalRevenueService:AssessmentofBudgetJustificationforFiscal
Year2011IdentifiedOpportunitiestoEnhanceTransparency.
GAO-10-687R.Washington,D.C.:May26,2010.
InternalRevenueService:ReviewoftheFiscalYear2010Budget
Request.GAO-09-754.Washington,D.C.:June3,2009.
InternalRevenueService:FiscalYear2009BudgetRequestandInterim
PerformanceResultsofIRSs2008TaxFilingSeason.GAO-08-567.
AreaContact
BetterManagementofIRSDebtCollection
MayReduceCostsandIncreasetheAmount
ofTaxRevenueCollectedfromIndividuals
BetterManagementofIRSDebtCollectionMayReduce
CostsandIncreasetheAmountofTaxRevenue
CollectedfromIndividuals
WhyGAOIsFocusing
onThisArea
TheInternalRevenueService(IRS)hasrecognizedthateachyear
individualsdonotpaybillionsofdollarsoftheiracknowledgedtaxdebts,
whichincludetaxassessmentsaswellasrelatedpenaltyandinterest
chargesthatbuildupovertheyears.ItisimportantfortheIRStopursue
collectionofunpaidtaxdebttohelpensurecomplianceandconfidencein
thetaxsystemaswellastoprovideneededrevenueforgovernment
operations.
IRShasathree-phasestrategyforresolvingbillionsofdollarsof
individualsunpaidtaxdebt.Thefirstphasereferredtoasthenotice
phaseinvolvesmailingtaxduenoticestothetaxpayers.Thesecondand
thirdphasesthetelephoneandin-personcontactphasesaremore
laborintensiveandexpensive.
Usedwell,noticescanhelpIRScollectorotherwiseresolvemanytax
debtsatrelativelylowcostwhilegeneratingsignificantrevenue.IRS
generallysendsuptofournoticestosolicitpaymentbeforetakingother
collectionsteps.
WhatGAOHasFound
IndicatingPotential
forEnhancing
Revenue
ThenoticephaseofIRSsthree-phasetaxcollectionapproachistheleast
costly,andachievesbillionsinresultsannuallybutmanybillionsmore
remainuncollectedattheendofthephase.Duringfiscalyear2008,IRS
sentapproximately22millionnoticestoindividualstotrytocollect
around$129billionintaxdebtsthathadaccumulatedovertheyears.
Throughtheuseofnotices,IRSobtainedfullorpartialpaymentsofclose
to$6billionandmovedabout$41billionofunpaiddebtstotheother,
morecostlycollectionphasesduringfiscalyear2008.
Havingclearprogramobjectiveslinkedwithperformancemeasurescan
helpagenciesidentifyriskstoachievingaprogramspurposeand,if
possible,improveprogramperformance.GiventhatIRSrelieson
individualtaxpayerstorespondtoitsnotices,beingclearaboutwhatIRS
expectsandwhatoutcomesarebeingachievedisespeciallyimportantin
ordertogaininsightsonhowtomaximizeperformance.
However,whetherthenoticephaseisachievingoptimumresultsis
unclearbecauseofthelackofobjectivesandperformancemeasuresfor
gaugingitseffectiveness.IRShasnotdocumenteditsobjectivesor
developedrelatedmeasurestoindicatehowwellthenoticephaseis
performing.NorhasIRSdocumentedclearresponsibilityforreviewing
thisperformancecomparedtotargets.IRSalsolacksinformationonthe
fullcostsofcollectionnotices.
Tomakethebestuseofcollectionresources,IRShasdevelopedbusiness
rulestodictateactionstobetakenonindividualtaxdebts.Basedon
certaindollarthresholdsandothercharacteristicsofindividualtaxdebt
cases,thebusinessrulescanvarythenumberandtypesofnoticessentto
taxpayersanddeterminewhetherunresolvedcaseswillbesentforfurther
collectionactionorfurtheractionwillbedeferred.However,IRShasnot
documentedthebusinessrulesthatgovernnoticessenttoindividuals.For
itsmajorrules,IRSlacksbasicinformationontherationalewhentherules
wereestablished,howtherulesaretowork,andwhethertheruleswork
asintended.
Withoutsuchinformation,IRSdoesnotknowwhetheritsbusinessrules
areworkingasoriginallydesignedorachieveIRSsdesiredcollection
resultsattheleastcost.Withsuchcontrolsoverthenoticessentto
individualsthathavefederaltaxdebts,IRSwouldbebetterabletoassure
Congressandthetaxpayersthatitisusingthiscollectionphasetothe
greatestbenefit.
ActionsNeededand
PotentialRevenue
AsGAOrecommendedinSeptember2009,IRSneedstoestablish
objectivesandperformancemeasuresforthenoticephaseofitscollection
processforindividualtaxpayersaswellasmanagementresponsibilityfor
reviewingtheperformanceofthenoticephase.Inaddition,IRSneedsto
betterdocumentthebusinessrulesandtheirrationales,andperiodically
evaluatehowwelltheyareworking.
IRShasstartedtoimplementalloftheseactions.IRShasmadethemost
progressinassigningresponsibilityforreviewingperformanceand
documentingrationalesforthebusinessrulesforsomeofthefrequently
issuedcollectionnotices.However,IRSmustensurethatthosewiththe
responsibilityforreviewingperformanceofthecollectionnoticephase
useoutcome-focusedperformancemeasuresthatareclearlylinkedto
documentedobjectives.Further,asGAOpreviouslyrecommended,IRS
mustensurethatthebusinessrulesarenotonlybetterdocumentedbut
arealsoperiodicallyevaluatedonhowwelltheyaredoingwhattheywere
intendedtodo.GAOexpectstoevaluateIRSsprogressinimplementing
alltheseactions.
Betterdataandamorejustifiablebasisforsendingnoticesordecidingto
implementotherenforcementactionswillproducebetterdecisionsthat
avoidwasteandpossiblycollectmoretaxdebtssooner.Althoughdataare
notnowreadilyavailabletoestimatetherevenuetobegainedfromtaking
thesesteps,improvedperformanceincollectingmoretaxdebtssooner
couldhelpreducethetensofbillionsofdollarsthatareannuallysentto
thetwomoreexpensivetaxdebtcollectionphases;thisamountwasabout
$41billionforfiscalyear2008.
Frameworkfor
Analysis
TaxDebtCollection:IRSNeedstoBetterManagetheCollectionNotices
RelatedGAO
SenttoIndividuals.GAO-09-976.Washington,D.C.:September30,2009.
Products
TaxDebtCollection:IRSHasaComplexProcesstoAttempttoCollect
BillionsofDollarsinUnpaidTaxDebts.GAO-08-728.Washington,D.C.:
June13,2008.
Foradditionalinformationaboutthisarea,contactMichaelBrostek
AreaContact
BroadeningIRSsAuthoritytoCorrectSimple
TaxReturnErrorsCouldFacilitateCorrect
TaxPaymentsandHelpIRSAvoidCostly,
BurdensomeAudits
BroadeningIRSsAuthoritytoCorrectSimpleTax
ReturnErrorsCouldFacilitateCorrectTaxPayments
andHelpIRSAvoidCostly,BurdensomeAudits
WhyGAOIsFocusing
onThisArea
In2009,IRSsentoutmorethan12millionmatherrornotices.Matherror
noticesresultfromcasesofmathematicalorothersimpletaxreturnerrors
whereCongresshasgrantedtheInternalRevenueService(IRS)math
errorauthority(MEA),ortheabilitytoassesstaxortakeotheractionsto
correctsucherrorsinlimitedcircumstances.Forexample,whena
taxpayerclaimsacreditamountexceedingastatutorylimit,IRSusesMEA
tofixtheerrorduringreturnprocessing.
Foralmostacentury,CongresshasbeenexpandingIRSsMEAonacase-
by-casebasis.However,becauseIRScanuseMEAonlyinspecifically
authorizedsituations,ithasbeenunabletotimelyuseMEAinseveral
notableinstanceswheresubstantialnumbersoftaxpayersmadesimilar
easilycorrectableerrors.
WhatGAOHasFound
IndicatingPotential
forEnhancing
Revenue
IRSsuseofrecentadditionstoMEAhaveefficientlycorrectedhundreds
ofthousandsoftaxpayererrorsandensuredproperpaymentsoftax.For
example,inSeptember2009,GAOsuggestedthatCongressconsider
providingIRSwithadditionalMEAtohelpIRSenforcecompliancewith
theFirst-TimeHomebuyerCredit(FTHBC).InNovember2009,after
learningaboutcomplianceproblemswiththistaxcreditthatfrozerefunds
andpromptedcivilandcriminalinvestigations,CongressextendedMEAto
covercertaineligibilityrequirementsfortheFTHBC.AsofJuly2010,more
than3milliontaxpayershavemademorethan$23billioninFTHBC
claims.BroaderMEAhasgivenIRStheabilitytoautomaticallyverify
thoseclaims,correcterrorswherenecessary,anddenyapproximately
350,000erroneousclaimsin2010alone,thussavingtaxrevenueand
enablingIRStouseresourceselsewhere.
Similarly,in2009,afterfindingmorethan$600millionofinappropriately
claimedHopecreditsforhighereducation(currentlycalledtheAmerican
Opportunitytaxcredit),bothGAOandtheTreasuryInspectorGeneralfor
TaxAdministrationsuggestedthatCongressgiveIRSbroaderMEA.
Specifically,GAOsuggestedthatbroaderMEAbeprovidedsoIRScould
useprioryearstaxreturninformationtoautomaticallyverifytaxpayers
compliancewiththelimitonthenumberofyearstheHopecreditcanbe
claimed.Intheabsenceofthisauthority,IRSreliesonauditstoensure
compliance.However,auditsmaynotbeeffectivebecausetheyarelabor-
intensive,costly,andoftendonotyieldhighrevenues.Consequently,IRS
doesrelativelyfewauditsonthemillionsofcreditsclaimed.
WhenusingMEA,IRSneednotfollowitsstandarddeficiencyprocedures,
whichallowtaxpayersanappealandpetitiontotheTaxCourt.Instead,
BurdensomeAudits
IRSmustonlynotifythetaxpayerthatithasidentifiedtheerrorandhas
madeachange.WhileMEAhelpsIRSavoidcostlyaudits,whichare
burdensometotaxpayers,theNationalTaxpayerAdvocateandsomein
Congressareconcernedthatnotfollowingstandarddeficiencyprocedures
mightunderminetaxpayerrightsbecauseIRSmightusebroadauthorityin
situationswhereitdoesnotknowwithahighdegreeofcertaintythatthe
taxpayermadeanerror.However,asdiscussedbelow,otherstepscould
betakentoaddressthisconcern.
ActionsNeededand
PotentialRevenue
ToensuretheproperamountoftaxesarepaidandhelpIRSavoidcostly,
burdensomeaudits,CongressmanywanttoconsidergrantingIRSbroader
matherrorauthority,withappropriatesafeguardsagainstmisuseofthat
authority,tocorrecterrorsduringtaxreturnprocessing.Withbroader
MEAgrantedbyCongress,IRScouldtakethestepsnecessarytoensure
properpaymentoftaxesinmanysituations.Althoughtheamountof
increasedrevenueswoulddependonthenatureoffutureMEAuse,
revenueincreasescouldbesubstantialbasedonpastuses.Suchauthority
couldalsoreducetaxpayersburdensbygivingIRSanalternativetomore
intrusiveenforcementactions.Broaderauthoritycouldtakeseveralforms.
Forinstance,itcouldbegrantedfornewlycreatedorrevisedrefundable
credits.Refundablecredits,whichprovidecashpaymentstotaxpayers
irrespectiveoftheamountoftheirtaxliabilities,aregrowinginpopularity,
andautomaticauthoritycouldenableIRStomonitorlow-dollaramounts
onindividualreturnsthatwouldbetoolaborintensiveandcostlytoaudit.
Or,authoritycouldbegrantedforanysituationwhereIRScouldcheckfor
obviousnoncompliance.Hadsuchauthorityexisted,IRScouldhave
addressedFTHBCcomplianceissuesmorequickly.
ControlsmaybeneededtoensureMEAisproperlyused.Forexample,as
GAOhaspreviouslyreported,CongresscouldrequireIRStosubmita
reportoneachproposednewuseofMEA.Thereportcouldincludehow
suchusewouldmeetCongresssstandardsorcriteriaforMEAuse.The
reportcouldalsodescribeIRSsortheNationalTaxpayerAdvocates
assessmentofanypotentialeffectontaxpayerrights.Or,Congresscould
requireamoreinformalprocedurewherebyIRSsimplynotifiesa
committee,suchastheJointCommitteeonTaxation,ofitsproposedMEA
useandsubmitsareportaftersuchuseisunderway.
AuthorizingtheuseofMEAonabroaderbasiscouldhaveseveralbenefits
forIRSandtaxpayers.Itcould
BurdensomeAudits
enableIRStocorrectallornearlyallreturnswithtypesof
noncomplianceforwhichIRSidentifieswithvirtualcertaintythe
noncomplianceandtheneededcorrection,notjustthoseitcanaddress
throughotherenforcementmeans;
belowcostandlessintrusiveandburdensometotaxpayersthan
audits;
ensurethattaxpayerswhoarenoncompliantonaparticularissueare
moreoftentreatedalike,thatis,thatagreaterportionofthemare
broughtintocompliance,notjustthosethatIRScouldotherwise
address;
provideataxpayerserviceasitwouldgenerallyallownoncompliant
taxpayerstoreceivetheirrefundsfasterthanifIRShadtoaddressthe
errorthroughsomeothercompliancemechanism,havetheirreturns
correctedwithoutpenaltyandbeforeinterestisaccrued,andavoid
time-consuminginteractionwithIRSunderitsotherprogramsfor
resolvingnoncompliance;
helpensuretaxpayersreceivethetaxbenefitsforwhichtheyare
eligiblebyidentifyingtaxpayersunderclaimingataxbenefit;
freeupIRSresourcestopursueotherformsofnoncompliance;and
allowIRStoquicklyaddressprovisionsarisingfromnewandquickly
movinginitiatives,suchastheAmericanRecoveryandReinvestment
Actof2009,withoutwaitingfornewMEAtogothroughthelegislative
process.
Frameworkfor
listedbelowandadditionalworkfollowingupontherecommendations
Analysis fromthoseproducts.
TaxAdministration:UsageandSelectedAnalysesoftheFirst-Time
RelatedGAO
HomebuyerCredit.GAO-10-1025R.Washington,D.C.:September2,2010.
Products
RecoveryAct:IRSQuicklyImplementedTaxProvisions,butReporting
andEnforcementImprovementsAreNeeded.GAO-10-349.Washington,
BurdensomeAudits
2009TaxFilingSeason:IRSMetMany2009Goals,butTelephoneAccess
RemainedLowandTaxpayerServiceandEnforcementCouldBe
Improved.GAO-10-225.Washington,D.C.:December10,2009.
First-TimeHomebuyerTaxCredit:TaxpayersUseoftheCreditand
ImplementationandComplianceChallenges.GAO-10-166T.Washington,
D.C.:October22,2009.
TaxAdministration:IRSs2008FilingSeasonGenerallySuccessful
DespiteChallenges,althoughIRSCouldExpandEnforcementduring
ReturnsProcessing.GAO-09-146.Washington,D.C.:December12,2008.
Foradditionalinformationaboutthisarea,contactMichaelBrostekor
AreaContact
JamesWhiteat(202)512-9110orbrostekm@gao.govorwhitej@gao.gov.
EnhancingMortgageInterestInformation
ReportingCouldImproveTaxCompliance
EnhancingMortgageInterestInformationReporting
CouldImproveTaxCompliance
WhyGAOIsFocusing
onThisArea
TheJointCommitteeonTaxationestimatedthatindividualtaxpayers
deductionsofhomemortgageinterestreducedfederalrevenuebyabout
$80billionin2009.Also,initsmostrecentlycompletedcomprehensive
studyofindividualtaxpayercompliancefor2001,theInternalRevenue
Service(IRS)foundthat12percentto14percentofindividualtaxpayers
deductingmortgageinterestmisreporteddeductedamounts.Abouthalfof
taxpayersunderreportedthedeductionwhileabouthalfoverreported.
Subjecttovariouslimitations,taxpayersmaydeductinterestonhome
mortgagesormortgagerefinancings.Additionally,taxpayerswithrental
realestateareordinarilyallowedtodeductmortgageinterestexpensesfor
theirrentalpropertiesfromtheirrentalincome.
Lendinginstitutionsandotherthirdpartiesarerequiredtoreportto
taxpayersandIRSonaForm1098MortgageInterestStatementtheamount
ofmortgageinteresttaxpayerspaidduringtheyear,ifmorethan$600.
WhatGAOHasFound
IndicatingPotential
forEnhancing
Revenue
IRShastheopportunitytocollectadditionalinformationabouttaxpayers
mortgagestohelpitdeterminewhethertaxpayersaredeductingcorrect
amountsofmortgageinterestandidentifythemostproductivecasesto
examine.Requiringexpandedinformationonmortgageinterestcouldalso
improvevoluntarycompliance,astaxpayerstendtomoreaccuratelyreport
itemsthatthirdpartiesreportoninformationreturns,suchasForm1098.
LendinginstitutionsaregenerallyrequiredtoreportonForm1098the
amountsofmortgageinteresttaxpayerspaidduringtheyear,buttheform
doesnotincludeotheritems,suchas(1)theaddressoftheproperty
securedbythemortgagetowhichtheinterestontheformrelates,(2)
outstandingmortgagedebtbalancesontheproperty,and(3)anindicator
ofwhetherthemortgageinterestisforaloanthatwasrefinancedduring
thecurrentyear.
BecauseapropertyaddressisnotcurrentlyrequiredonForm1098,IRS
cannotuseanautomatedprocesstodeterminewhetherataxpayers
deductedmortgageinterestcorrespondstoaresidencethatiseligiblefor
thededuction.Forexample,IRScannotautomaticallydetermineif
addressesreportedonForm1098matchtheaddressesthattaxpayerslist
ontheirtaxreturns.Also,IRSislessabletodetermineiftheinterest
reportedonForm1098isforapropertyusedforrentalorpersonal
purposes.
BecauseForm1098showsthedollaramountofinterestataxpayerpaidin
ayearbutnotthemortgagebalance,IRSscomputer-matchingprogram
comparingForm1098totaxreturnscannotbeusedbyitselftodetermine
whethertaxpayersclaimedinterestonmortgagesinexcessofthelegal
limitations.Forexample,taxpayersgenerallycannotdeductintereston
mortgagedebtexceeding$1.1million.Also,becauseForm1098doesnot
showwhetherinterestpaidisfromarefinancedmortgage,IRScannot
readilytellwhethertaxpayersarecomplyingwithrulesspecificto
refinancing,suchastheruletoamortizecertaintypesofprepaidinterest,
orpoints.
ActionsNeededand
PotentialRevenue
ToprovideadditionalinformationthatcouldfurtherIRSeffortstoidentify
taxpayersimproperlydeductingmortgageinterest,GAOrecommendedin
July2009thatIRSreviseForm1098toincludeinformationontheaddress
ofapropertysecuringamortgage,mortgagebalances,andanindicatorof
whetherthemortgageisforacurrentyearrefinancing.GAOalso
recommended,inAugust2010,requiringmortgage-securedproperty
addressestobereportedonotherformstohelpIRSdetecttaxpayerswho
failtopaytaxesoncertainforgivenmortgagedebt.Withthisadditional
information,IRScouldcheckfornoncompliancethroughitsautomated
document-matchingprocess,whichisgenerallyalessexpensive
enforcementactionthanconductingexaminations.Additionalinformation
wouldalsohelpIRSbetterselectreturnstoexamine.IRSagreedtostudy
collectingadditionalinformationonForm1098,statingitcurrentlydoes
nothaveenoughdatatosupportrevisions.BecauseIRShasacknowledged
itdoesnothaveinformationabouttaxpayersmortgagedebtstoeasily
detectnoncompliance,GAObelievesthattherecommendedrevisionsto
Form1098wouldbecost-effectivewaystoprovideIRSwithadditional
usefulinformationtohelpitdetectnoncompliance.
Frameworkfor
Analysis
TaxAdministration:ExpandedInformationReportingCouldHelpIRS
RelatedGAO
AddressComplianceChallengeswithForgivenMortgageDebt.
Products GAO-10-997.Washington,D.C.:August31,2010.
HomeMortgageInterestDeduction:DespiteChallengesPresentedby
ComplexTaxRules,IRSCouldEnhanceEnforcementandGuidance.
TaxGap:ActionsThatCouldImproveRentalRealEstateReporting
Compliance.GAO-08-956.Washington,D.C.:August28,2008.
AreaContact
MoreInformationontheTypesandUsesof
CanceledDebtCouldHelpIRSLimitRevenue
LossesonForgivenMortgageDebt

MoreInformationontheTypesandUsesofCanceled
DebtCouldHelpIRSLimitRevenueLossesonForgiven
MortgageDebt
WhyGAOIsFocusing
onThisArea
Thehousingmarketdownturnisresultinginbillionsofdollarsofforgiven
mortgagedebt.Intaxyear2008(themostcurrentdataavailable),the
InternalRevenueService(IRS)estimatesthatindividualtaxpayers
excluded$6.4billionto$11.8billioninforgivenmortgagedebtson
principalresidences.Whilemostforgivendebtistreatedasafinancialgain
andincludedintaxableincome,forgivenmortgagedebtis,accordingto
complexrules,sometimesexcludedfromtaxableincome.
Through2012,taxpayersmayexcludeforgivenmortgagedebtsfrom
taxableincomeifthemortgageproceedswereusedtobuy,build,or
substantiallyimproveaprincipalresidence.Forgivenmortgageamounts
usedforotherpurposes,includingpurchasesofvacationorinvestment
properties,wouldgenerallystillbeconsideredtaxableincomeunlessthe
taxpayerisbankruptorinsolvent.
WhatGAOHasFound
IndicatingPotential
forEnhancing
Revenue
Housingmarketdatashowthepotentialforsignificantrevenuelossesfrom
failuretopaytaxesoncertainforgivenmortgagedebt,butIRSisnot
collectingenoughinformationtoassesscompliance.Complexrules
governingforgivenmortgagedebtmayleadindividualtaxpayerstoexclude
suchdebterroneouslyfromtaxableincome.Forexample,onlyforgiven
mortgagedebtsthatwereusedtobuy,build,orsubstantiallyimprovea
principalresidencemaybeexcludedfromtaxableincome.However,in
recentyearsmanytaxpayerscashedoutequityfromtheirprimary
residencesandusedtheproceedsforpersonalconsumptionorto
consolidateotherdebtsnottobuy,build,orimprovethehome.In
addition,taxpayerslosinginvestmentorvacationhomesthrough
foreclosurearestillliablefortaxesonforgivenmortgagessecuredbythese
properties.Vacationhomeandinvestmentpropertypurchasesareestimated
tobewelloveraquarterofallhousepurchasesinrecentyears.Despitethe
financialhardshipthatleadstoforgivendebt,recenthousingmarket
analysessuggestthatthousandsoftaxpayerswithforgivenmortgagedebt
noteligibleforexclusion(debtforgivenonsecondhomesorinvestment
property)maybeabletopaythetaxeslegallydueonsuchdebt.
Currentformsusedtocollectinformationfromlendersandtaxpayerson
forgivendebtsdonotprovideadequateinformationforIRStoassess
compliancewiththemortgagedebtforgivenessprovision.Forexample,
neitherlendersnortaxpayersarerequiredtodisclosetheaddressofthe
securedpropertypotentiallyakeysourceofinformationfordetermining
whetherthepropertyisthetaxpayersprincipalresidence.Also,taxpayers
withmultipleforgivendebtsonlyneedtoindicatethetypesofforgiven
debtsandthetotalamounttobeexcludedfromincome,butnotthe
individualamountsofeachforgivendebt.Withoutthisinformation,itis
difficultfortheIRStoestimatetheextentofnoncomplianceand
determinewhetheradditionalresourcesforcomplianceareneeded.
ActionsNeededand
PotentialRevenue
GAO,initsAugust2010reportcitedtheneedtoobtainbetterinformation
todeterminetherevenuelossesduetoincorrectlyexcludedmortgage
debts,andrecommendedthatIRSmodifyexistingformstocapturemore
informationfromtaxpayersandlendersaboutforgivendebtandany
securingproperty.IRSinitiallyagreedwithmostofGAOs
recommendationsbut,afterfurtheranalysis,indicatedthatmaking
changestotheformswouldnotgeneratebenefitsthatexceedthecostsof
doingso.However,GAOcontinuestobelievethatwithoutfirstrevising
theassociatedforms,anyreviewofasampleoftaxreturnsusingonly
currentlyavailabledatarisksunderstatingthebenefitsofadditional
informationreporting.GAOcontinuestorecommendthatbytakingsome
relativelylow-coststeps,includingrevisingtheassociatedforms,
collectingmoreinformationfromtaxpayersandlenders,andusingthird-
partydatatodeterminewhethertaxpayersarecorrectlyexcluding
mortgagedebtfromtaxableincome,IRScoulddeterminehowmuch
additionalrevenuecouldbegainedfromrefocusingitsenforcement
efforts.Sincelendersalreadymaintainpropertyaddressrecords,reporting
thisadditionalinformationtoIRSisnotexpectedtoimposesignificant
burdensonlenders.Further,asGAOpreviouslyrecommended,IRSshould
alsodetermineifotheravailabledatawouldallowittoidentifytaxpayers
withmultiplehomes.
ThepotentialforincreasedrevenuefromincreasedIRSenforcement
relatedtoforgivenmortgagedebtisuncertainbecauseIRSdoesnotknow
theextentofnoncompliancewiththecomplexrules.Nonetheless,given
thebillionsinforgivenmortgagedebtannually,ifonlyasmallportionof
theexcludedamountisimproperlyavoidingtaxation,theimpacton
revenuecouldbesignificant.
Frameworkfor
Analysis
RelatedGAO
Products
TaxAdministration:ExpandedInformationReportingCouldHelpIRS
AddressComplianceChallengeswithForgivenMortgageDebt.
HomeMortgageInterestDeduction:DespiteChallengesPresentedby
ComplexTaxRules,IRSCouldEnhanceEnforcementandGuidance.
TaxGap:ActionsThatCouldImproveRentalRealEstateReporting
Compliance.GAO-08-956.Washington,D.C.:August28,2008.
AreaContact
BetterInformationandOutreachCouldHelp
ReduceRevenueLossesDuetoOverstated
RealEstateTaxDeductions
BetterInformationandOutreachCouldHelpReduce
RevenueLossesDuetoOverstatedRealEstateTax
Deductions
WhyGAOIsFocusing
onThisArea
TheInternalRevenueService(IRS)estimatedmostrecentlyfortaxyear
2001that9milliontaxpayersmisreportedtheirfederaldeductionsfor
localrealestatetaxespaid.Averageoverstatedrealestatetaxdeductions
aresmall$85peroverstatementin2001butthenetoverstatement,
whichgenerallywouldreducetaxesowed,wasabout$2.5billion.IRShas
notestimatedhowmuchtheseoverstateddeductionsimproperlyreduced
taxliabilities,buttheannualtotallosscouldbesubstantial.
GAOfirstreported17yearsagothattaxpayersoverstatedtherealestate
taxdeductionbecauserealestatetaxbillsdidnotdistinguishbetween
deductibletaxesandnondeductibleuserfees,andIRSeducationand
enforcementactivitieswereinadequate.GAOconductedafollow-upstudy
in2009todeterminewhethertaxpayerswerecontinuingtooverstatethe
deduction.
IRScantakeseveralstepstohelpimproveindividualtaxpayercompliance
WhatGAOHasFound
withtheitemizeddeductionforrealestatetaxesandthusreduce
IndicatingPotential associatedrevenuelosses.Individualswhowishtocomplyinclaiminga
realestatetaxdeductionfacechallenges.Therulesfordeductibilitycan
forEnhancing
becomplexasillustratedbelow.
Revenue
DeterminingWhatQualifiesAsDeductibleIsComplex
Deductible
Nondeductible
Yes
No
No
Yes
General
publicwelfare
Localbenefitsthattendto
increasethevalueofthe
property
a
Isthetax
leviedbya
state,local,
orforeign
government?
Isthetax
imposedonan
interestinreal
property?
Forwhat
purposeisthe
taxlevied?
Increasinglevelofeffortandknowledgemaybe
requiredtodeterminedeductibilityofcharges
Source:GAOanalysisofInternalRevenueCodeprovisions.
a
Chargesfortherepairormaintenanceoflocalbenefitsandassociatedinterestaredeductible.
GAOestimatedin2009thatalmosthalfoflocalgovernmentsnationwide
includedchargesin2007ontheirrealestatetaxbillsthatweregenerally
nondeductible(e.g.,feesfortrashandgarbagepickup).About78percent
ofthoselocalgovernmentsdidnotlabelsuchchargesinawaythatwould
alertindividualsthattheirrealestatetaxbillmighthavenondeductible
charges.GAOalsoestimatedthattaxpayersinAlameda,California,and

Hennepin,Minnesota,counties
1
collectivelyoverstatedtheir2006real
estatetaxdeductionsbetween$23millionand$46milliondependingon
theassumptionsusedintheestimationmethodology.
Localgovernmentsgenerallydonotidentifyfortaxpayerswhichcharges
onrealestatetaxbillsaredeductiblebecauselocalcollectorslackthe
expertisetoidentifywhichchargesarefederallydeductible.Further,
taxpayerswithmortgagesmayreceiveinformationonrealestatetax
paymentsmadeontheirbehalfbymortgageservicers,butitdoesnot
identifydeductibleamounts.
Taxpreparationsoftwareandassistancefrompaidreturnpreparersmay
notbesufficienttohelptaxpayersdeductqualifiedrealestatetaxes.Two
ofthethreemostfrequentlyusedtaxpreparationsoftwareprogramsfor
2008didnotalerttaxpayersthatsomechargesonrealestatetaxbillsmay
notbedeductible.
2
Paidtaxreturnpreparersinvestedlimitedtime
ensuringthattaxpayersdeductedqualifiedrealestatetaxes.
IRSinstructionsandguidancefortaxpayersonclaimingtherealestatetax
deductionhadexplainedthetypesofchargesthatcanbededucted.
However,theyhadnotadequatelyinformedtaxpayersthattheyshould
checkbothrealestatetaxbillsandlocalgovernmentresourcestocollect
informationaboutspecificbillcharges,whichisneededtodetermine
deductibility.
WhenIRSexaminersdoaudittherealestatetaxdeductiontheyusuallydo
notfocusondeductibilitybecausetheybelievetheeffortrequireddoes
notjustifythelikelysmallchangestotaxesthatmaybedue.Rather,they
focusonwhethertheamountsdeductedwereactuallypaid.IRSs
guidancetoexaminersdoesnotrequirethemtoverifythattheentirereal
estatetaxdeductionamountisdeductible.Examinersareauthorizedto
reviewmanydocuments,butmostofthesedocumentsverifywhether
paymentwasmaderatherthanwhetherallofapaymentisdeductible.
1
GAOinitiallyselected5ofthe41countieswiththelargestpropertyrevenueforitsreview
basedoncriteriasuchasthepresenceofgenerallynondeductibleitemsontheirtaxbills.
However,GAOlimiteditsanalysisto2ofthe5countiesduetopracticallimitationswith
thedatafromthecounties.
2
Thesesoftwarefirmsdidmakechangestotheirprogramstobetterinformtaxpayerswhat
qualifiesasdeductiblerealestatetaxesinresponsetodiscussionswithGAOforitsMay
2009report.

Finally,IRSdoesnotknowwhichlocalgovernmentshavelarge
nondeductiblechargesontheirrealestatetaxbills.
ActionsNeededand
PotentialRevenue
Tohelpindividualtaxpayerscomplyinclaimingtherealestatetax
deduction,GAOrecommendedinMay2009thatIRSinstructionsand
guidanceneedtobestrengthenedandspotlightfortaxpayersthatthereal
estatetaxbillmayincludenondeductiblechargesandthattaxpayersneed
tocheckforsuchcharges.GAOalsorecommendedthatIRSprovide
guidanceonhowtogetinformationaboutwhichchargesare
nondeductible.IRStookstepsin2009toimproveitsguidanceinresponse
totherecommendations,buttheeffectsofthechangesremaintobeseen.
Tohelpindividualtaxpayersgetthebestinformationandassistancefrom
thirdparties,GAOrecommendedthatIRSreachouttolocalgovernments,
mortgageservicers,andthetaxpreparationindustryaboutclarifying
informationtheyprovidetoindividualtaxpayersonwhatisdeductible,
and/orprovidingalertsanddisclaimersaboutnondeductiblechargesthat
areormaybeontheirrealestatetaxbill.InresponsetoGAOs
recommendations,IRScreatedabrochurein2010fordistributiontosuch
thirdpartieswithinformationonwhattheycandotohelpclarifyfor
taxpayerswhatisandisnotdeductible.
AsofDecember2010,IRSstillneedstotakeactionsonother
recommendationsincludedinGAOsMay2009report.Forexample:
ToimproveIRSexaminationsoftherealestatetaxdeduction,
examinationguidanceneedstoclarifythetypeofevidenceforverifying
deductibilityandtorequireexaminerstoasktaxpayerstosubstantiate
deductionsthatappeartoincludenondeductiblechargesthatarelarge,
unusual,orquestionable.
Tosupporttargetedeffortstoimprovecompliance,IRSneedsto
developacost-effectivemeansofidentifyinglocalgovernmentswith
potentiallylargenondeductiblechargesontheirrealestatetaxbills.
IRSthenshouldworkwiththeselocalgovernmentstoidentifycharges
thatarenondeductibleandworkwiththelocalitiesandotherthird
partiestohelptaxpayerscorrectlyclaimthededuction.IRSshouldalso
usetheinformationtotargetexaminationscoveringtherealestatetax
deduction.
Althoughnopreciseestimateisavailableofthepotentialincreased
revenuestheseactionsmightgenerate,arelativelymodestreductionin
totaloverstateddeductionscouldgeneratetensorhundredsofmillionsof
dollarsannually.
3
Frameworkfor
Analysis
RealEstateTaxDeduction:TaxpayersFaceChallengesinDetermining
RelatedGAO
WhatQualifies;BetterInformationCouldImproveCompliance.
Products GAO-09-521.Washington,D.C.:May13,2009.
TaxAdministration:OverstatedRealEstateTaxDeductionsNeedtoBe
Reduced.GAO/GGD-93-43.Washington,D.C.:January19,1993.
AreaContact
3
Forexample,IRSsmostrecentestimatefor2001indicatedthat5.5milliontaxpayers
overstatedtheirdeductionscollectivelyby$5billion.A1-percentto10-percentreductionin
thisamountwouldhavereducedoverstatementsby$50millionto$500million.The
resultingactualtaxrevenuesavingswouldbemuchlessdependingonfactorssuchasthe
taxrateforthesenoncomplianttaxpayers.
RevisionstoContentandUseofForm1098-T
CouldHelpIRSEnforceHigherEducation
RequirementsandIncreaseRevenues
RevisionstoContentandUseofForm1098-TCould
HelpIRSEnforceHigherEducationRequirementsand
IncreaseRevenues
WhyGAOIsFocusing
onThisArea
TheInternalRevenueService(IRS)faceschallengesensuringcompliance
withtheeligibilityrequirementsoftheHopeandLifetimeLearningtax
credits.Millionsoftaxpayersclaimthecreditstooffsetqualified
postsecondaryeducationexpenses.Forfiscalyears2009through2013,
taxpayersareestimatedtoclaimHopeandLifetimeLearningcredits
totaling$27billionand$13billionrespectively.Thesetaxprovisionsare
complicatedandmayleadtaxpayerstoclaimeithermoreorfewer
benefitsthantheyareentitled.
IRSrequireseducationalinstitutionstoreportonForm1098-Tinformation
aboutqualifyingeducationalexpensestotaxpayersandIRS.However,the
informationreportedbyeducationalinstitutionsandsenttotheIRSand
taxpayers(onForm1098-T)isnoteasilycomprehensibletotaxpayers,nor
isthisinformationfullyusedbyIRSinitscomplianceprograms.
WhatGAOHasFound
IndicatingPotential
forEnhancing
Revenue
IRSdoesnotmakefulluseofinformationreportedbyeducational
institutionstotaxpayersandIRSonForm1098-Ttoidentifyandcorrect
noncompliancewithhighereducationtaxbenefits.Inaddition,revising
theformtoprovidemorecompleteinformationonqualifiedexpenses
couldmakeiteasierfortaxpayerstouse,whichcouldalsoreduce
noncompliance.IRSrequiresinstitutionstoreportonForm1098-Teither
(1)theamountofpaymentsreceivedor(2)theamountbilledforqualified
expenses.Manyinstitutionsreporttheamountbilledanddonotreport
payments,buttheamountbilledmaynotequaltheamountthatcanbe
claimedasacredit.Forexample,theamountbilledmaynotaccountfor
allscholarshipsorgrantsthestudentreceived.Insuchcases,theForm
1098-Tmayoverstatetheamountthatcanbeclaimedasacredit,
confusingtaxpayers.Conversely,ifinstitutionsarenotproviding
informationonothereligibleitems,suchasbooksorequipment,taxpayers
mightbeunderstatingtheirclaims.
Becausetheamountbilledmaynotbetheamounttaxpayersareeligibleto
claimasacredit,IRSdoesnotcomparetuitionstatementinformationto
informationreportedonataxreturn.However,IRSismissing
opportunitiestousesomeofthemorebasicinformation(forexample,a
studentsSocialSecuritynumberandaschoolslocation)toverify
eligibilityforthecredit.UsingIRSscompliancecomputer-matching
systemstoautomaticallycompareinformationonstatementstotaxpayers
claimscouldbealow-costenforcementtoolforIRStoverifycertain
aspectsoftaxpayerseligibilityforhighereducationcredits.While
changingtherequirementsforhowhighereducationalinstitutionsreport
qualifiedexpensesontuitionstatementswouldlikelyimposesomeburden
RevisionstoContentandUseofForm1098-T
CouldHelpIRSEnforceHigherEducation
RequirementsandIncreaseRevenues
onthoseinstitutions,theadditionalburdencouldbelowbecausethe
institutionsarealreadyrequiredtocompleteForm1098-T.
ActionsNeededand
PotentialRevenue
Giventhateveryyearmillionsoftaxpayersclaimbillionsofdollarsof
creditsforpost-secondaryeducationtuitionexpenses,evenasmall
increaseincompliancecouldincreaserevenue.Toreducetaxpayer
confusionandenhancecompliancewiththeeligibilityrequirementsfor
highereducationbenefits,GAOrecommendedinDecember2009thatIRS
(1)determinethefeasibilityofusingcurrentinformationreportedon
Form1098-Tinitscompliancecomputermatchingsystems;and(2)revise
Form1098-Ttoimprovetheusefulnessofinformationonqualifying
educationexpenses.IRSagreedtoconsiderthefeasibilityofusingcurrent
informationonForm1098-Tinitscomplianceprograms,anddevelopa
plantoaddresspossiblechangestothatformbuttheseactionshaveyetto
becompleted.GAOcontinuestobelievetheseactionsareneededsince
automaticallymatchingreadilyavailableinformationhasbeenaproven,
low-costwaytoimprovecompliance.
Frameworkfor
productlistedbelowandGAOsworkfollowinguponthe
Analysis recommendationsfromthatproduct.
2009TaxFilingSeason:IRSMetMany2009Goals,butTelephoneAccess
RelatedGAOProduct
RemainedLow,andTaxpayerServiceandEnforcementCouldBe
Improved.GAO-10-225.Washington,D.C.:December10,2009.
AreaContact
ManyOptionsCouldImprovetheTax
ComplianceofSoleProprietorsandIncrease
Revenues
ManyOptionsCouldImprovetheTaxComplianceof
SoleProprietorsandIncreaseRevenues
WhyGAOIsFocusing
onThisArea
TheInternalRevenueService(IRS)estimatesthat$68billionofthe$345
billiongrosstaxgapfor2001wasduetounderreportingoffederalincome
taxliabilitiesbyself-employedownersofunincorporatedbusinessesalso
knownassoleproprietors.Anadditionalpartofthetaxgapwasduetothe
noncomplianceofsomesoleproprietorswithemploymenttaxlaws.The
federaltaxgapisthedifferencebetweentheamountofincomeandother
federaltaxesowedandtheamountthatisvoluntarilyandtimelypaid.The
gaparisesfromtaxpayersunderreportingtaxableincome,underpaying
knowntaxliabilities,andnotfilingrequiredtaxreturns.
Unlikewageandsomeinvestmentincome,soleproprietorsincomeisnot
subjecttotaxwithholdingandonlyaportionissubjecttoindependent
verificationthroughthird-partyinformationreporting,suchasthosewho
paysoleproprietorsforservicesrendered.
WhatGAOHasFound
IndicatingPotential
forEnhancing
Revenue
Becausethesoleproprietortaxgapissolarge,successfuleffortsto
reduceitcouldresultinsignificantrevenueincreases.Keyreasonsforthe
soleproprietortaxgaparewellknown.Theirincomeisnotsubjectto
withholding,andonlyaportionofitissubjecttothird-partyinformation
reporting.Whenused,third-partyreportsonpaymentsmadegiveIRSa
powerfultoolforverifyingthetaxcomplianceofpaymentrecipients.
AprincipalIRScomplianceprogramtheAutomatedUnderreporter
Program(AUR)haslimitedreachoversoleproprietors.UnderAUR,IRS
computersmatchthesethird-partyreportsonpaymentsmadetotaxpayers
withthetaxpayerstaxreturninordertoverifytaxpayercompliancein
reportingthosepaymentsasincome.Currently,informationreporting
coversonlyaboutaquarterofsoleproprietorsbusinessgrossreceipts
andverylittleoftheirexpensesbecauseoflimitedinformationreporting
bythirdparties.Expandinginformationreturnscoveragewouldrequire
IRStoidentifyothertypesofthirdpartieswhocouldfileinformation
reportsaboutpaymentsmadetosoleproprietorswithoutimposing
unacceptableburdens.
IRSsothercomplianceprogramforasoleproprietortheexamination
(audit)programalsohaslimitedreach.Becausemostofsoleproprietors
understatedtaxwasinsmallamountshalfoftheunderstatementswere
forabout$900orlessIRSexaminationsoftheirtaxreturnsgenerally
haveyieldedlessrevenueperIRSstaffhourthanthosecoveringother
categoriesoftaxpayers,suchaslargerbusinesses.IRSspentsubstantial
timeonsoleproprietorexaminationsin2008,butexaminedaboutonly1
percentoftheestimatednoncompliantpopulation.

Revenues
WithouteitherexaminationsorAUR,IRScannoteasilytellwhethersole
proprietorsarereportinglegitimatebusinesslossesthatcanbeusedto
offsetothertaxableincome.Inastudyfortaxyear2001only,IRS
estimatedthat25percentofallsoleproprietorsreportedlosseswithan
estimated70percentofthoselossesbeingfullyorpartiallynoncompliant
withtaxlaws.Sinceexaminationsofsoleproprietortaxreturnsarecostly
forIRS,requireexperiencedIRSexaminerstoconduct,andare
burdensomeforthebusinesses,additionaloptionsneedtobeconsidered
toimprovesoleproprietortaxcompliance.
ActionsNeededand
PotentialRevenue
Becauseofthevarietyofchallengestoaddressingthesoleproprietortax
gap,thereisnosinglesolution.However,avarietyofactionsarelikelyto
helpreducethattaxgap.
GAOrecommendedinJuly2007thattheDepartmentoftheTreasurystax
gapstrategycoversoleproprietorcomplianceindetailwhilecoordinating
itwithbroadertaxgapreductionefforts.Suchastrategycouldincludea
mixofnumerousoptions.Theseoptionsrecognizethatsomesolutions,
suchasalargeincreaseinaudits,arenotlikelytobecost-effectivegiven
thelargenumberofsoleproprietorsandtherelativelysmallamountsof
noncomplianceonaverage.Also,manyoftheoptionsinvolvetradeoffs,
bothforsoleproprietorsandforIRS.Thelistofoptionsincludeshelping:
soleproprietorskeepbetterrecordsoftheirincomeandexpensesby,
forexample,requiringbusinessbankaccountstobeseparatedfrom
personalaccountsortargetingtaxassistanceonnewbusinesses;
thirdpartiescomplywithcurrentinformationreturnfiling
requirementsby,forexample,providinganonlineportalfor
submissionsorexemptingfirst-timefilersfrompenaltiesforbeinglate;
IRSidentifymoreunreportedincomeandmoreoverstatedexpense
deductionsthroughmoredetailedreportingofgrossreceiptsontax
returnsormatchingofexpensedeductionsclaimedbyabusinesswith
theinformationreturnsfiledbythesamebusiness;
IRScollectunpaidtaxesfromsoleproprietorsthroughexpanded
withholdingordenialoffederalbenefitstodelinquentsoleproprietors;
and
IRSmoreefficientlymanageitslimitedresourcesthroughmore
automatedauditselectionprocesses,assessingadditionaldatasharing
Revenues
withstates,moretargeteduseofnoticestotaxpayersabout
complianceissues,andclearerpoliciesonwhentoapplypenalties.
Furthermore,asGAOalsorecommendedinSeptember2009,IRSshould
useitsongoingresearcheffortstodevelopabetterunderstandingofthe
natureofsoleproprietornoncompliance,includingsoleproprietors
improperlyclaimingbusinesslosses.Thehighrateofnoncompliance
associatedwithclaimsofsoleproprietorbusinesslossessuggeststhat
limitingtheabilityofsoleproprietorstouselossestooffsettaxonother
incomecouldpresentanotheroptionforreducingthesoleproprietortax
gap.However,anindicatortotargetnoncompliantlosseswithout
includingcompliantlosseshasnotbeenidentified.Absentsuchtargeting,
anypolicychangetolimitallbusinesslosseswouldinevitablylimitsome
legitimatebusinesseslosses.
IRShastakenactionstoimplementsomeoftheseoptions.AsofJanuary
2011,IRShasinitiated,butnotcompleted,studieson:compliancewith
third-partyinformationreportingrequirements,additionaldatasharing
withthestates,andidentifyingtheextentofnoncompliantsoleproprietor
losses.Thesestudiesarescheduledforcompletionthrough2015.
Followingcompletion,IRSwillassessthestudyresultsandidentify
whetherchangesshouldberecommendedandmade.GAOexpectsto
assessIRSsprogressincompletingtheseactions.
Becausesoleproprietorsareresponsibleforalmostone-fifthofthetax
gap,thepotentialforraisingsubstantialamountsofrevenuebytaking
suchincrementalactionstoimprovesoleproprietortaxcomplianceis
significant.However,therevenuepotentialrelatedtoanyoftheseactions
hasnotbeenestimated.
Frameworkfor
Analysis
TaxGap:LimitingSoleProprietorLossDeductionsCouldImprove
RelatedGAO
CompliancebutWouldAlsoLimitSomeLegitimateLosses.GAO-09-815.
Products Washington,D.C.:September10,2009.
TaxCompliance:OpportunitiesExisttoImproveTaxComplianceof
ApplicantsforStateBusinessLicenses.GAO-09-569.Washington,D.C.:
June15,2009.
Revenues
TaxGap:IRSCouldDoMoretoPromoteCompliancebyThirdParties
withMiscellaneousIncomeReportingRequirements.GAO-09-238.
TaxGap:AStrategyforReducingtheGapShouldIncludeOptionsfor
AddressingSoleProprietorNoncompliance.GAO-07-1014.Washington,
D.C.:July13,2007.
AreaContact
IRSShouldDoMoreEvaluationandUseMore
Third-PartyDatatoFindBusinessesNot
FilingTaxReturns
IRSShouldDoMoreEvaluationandUseMoreThird-
PartyDatatoFindBusinessesNotFilingTaxReturns
WhyGAOIsFocusing
onThisArea
Historically,theInternalRevenueService(IRS)hasidentifiedseveral
millionbusinesseseachyearthatmayhavefailedtofiletaxreturnsmore
thanitcanthoroughlyinvestigate.IRShashaddifficultydeterminingif
thesebusinessesthatIRSidentifiedarestillactiveandthusrequiredtofile
ataxreturn.Asaresult,IRShaspursuedmanyinactivebusinesses,which
hasnotbeenaproductiveuseofitsresources.Inaddition,IRShashadno
estimateofthenonfilerpopulation.Giventhelackofdata,IRShasneither
aclearestimateoftherevenuelossfrombusinessesnotfilingrequiredtax
returnsnoraclearbasisforallocatingresourcestoaddressingthistypeof
noncompliance.
Recently,IRShasbeguntousethird-partyinformationaboutpayments
betweenbusinessesandotheravailabledataasindicatorsofbusiness
activity.Theintentistoprioritizecaseswiththemostrevenuepotential,
usingjustthethird-partyinformationthatIRSalreadypossesses.
WhatGAOHasFound
IndicatingPotential
forEnhancing
Revenue
IRShasthepotentialtoincreasetherevenueitcollectsfromnoncompliant
taxpayersbyincreasingtheeffectivenessofitsbusinessnonfilerprogram,
buttheefficiencyandproductivityofIRSseffortstoensurecompliance
bybusinessnonfilershavebeenhamperedbyalackofdata.IRScannot
developacomprehensiveestimateofthebusinessnonfilingrateand
associatedrevenuelossbecauseitlackssufficientdataonthepopulation
ofbusinesses.Absentsuchanestimate,IRSwillhavenobasistoknow
whatprioritytogiveitsbusinessnonfilerprogramandwhetherresources
shouldbereallocatedfromotherenforcementefforts.
IRShasnotusedprivatesectordatathatitcouldobtaintoverifytaxpayer
statementsaboutwhetherabusinessisactiveandataxreturnshouldhave
beenfiled.Anumberofprivatecompaniesmaintainbusinessactivitydata,
suchasdataonabusinesssgrosssalesandnumberofemployees,which
couldaidIRSinmakingthesedeterminations.DunandBradstreetisone
providerofsuchdata.Itsdatabasesincludeinformationonbusinessname,
address,amountofsales,andnumberofemployees.GAOsanalysisof
DunandBradstreetdatashowedtheycouldbeusedtoidentifybusiness
activitythatIRSwasnotawareof.Fortwostates,GAOanalyzed2007data
onthebusinessesthatIRSinitiallyidentifiedaspotentialnonfilersbut
laterdeterminedwerenotliabletofilereturns.Ofthese,GAOfound7,688
businesseswhereIRSdataindicatedlittleornobusinessactivity,butDun
andBradstreetdatashowedbusinessactivityasmeasuredbysales
totaling$4.1billion.

FilingTaxReturns
GAOalsoperformedasimilaranalysisusingdataonfederalcontractors.
GAOfound13,852businesseslistedonthefederalcontractorregistry
indicatinglikelybusinessactivityeventhoughIRShaddeterminedthey
hadnofilingobligation.GAOdidnotdeterminewhichnon-IRSdatawould
bemostusefulnordiditexaminethecapacityofIRSssystemstousesuch
dataonalargescale.
UntilrecentlyIRSalsohasnothadawaytoprioritizecasesinits
inventory.IRSmodernizeditsbusinessnonfilerprogramin2009by
incorporatingincomeandotherdatainitsrecordsindicatingbusiness
activity.Activebusinesses,forexamplethosewithsalesoremployees,
generallyhaveanobligationtofileareturn.IRSsBusinessMasterFile
CaseCreationNonfilerIdentificationProcessnowassignseachcasea
codebasedonthesedata.IRSusesthecodetoselectcasestoworkwith
thegoalofsecuringtaxreturnsfromnonfilersandcollectingadditional
revenue.Thisisasignificantmodernization,butIRSlacksaformalplanto
evaluatehowwellthecodesareworking.Absentevaluation,IRSwillnot
knowtowhatextenttheinitiativeissuccessfulandwhetherithasresulted
inabetterallocationofenforcementresources.
ActionsNeededand
PotentialRevenue
Whilepotentiallysignificant,therevenuegainsthatmaybeavailable
throughIRSactionstoidentifyandpursuemorebusinessnonfilerscannot
bequantifiedduetothelackofdataonthesizeofthebusinessnonfiler
problemandtheeffectivenessofIRSsnewprocess.AsGAO
recommendedinitsAugust2010report,tobetterallocateanduseits
enforcementresources,IRSshoulddevelopatleastapartialestimatefor
thebusinessnonfilerratebasedonitsexistinginventoryofcases.In
addition,IRSshould
setadeadlinefordevelopingperformancedataonitsbusinessnonfiler
efforts;
developaplanforevaluatingitsnewinitiativeincludingcodesfor
selectingnonfilercasestopursue;
betteruseincomedataandselectioncodesinverifyingtaxpayer
statementsabouttheirfilingrequirements;and
studythefeasibilityandcost-effectivenessofusingnon-IRS,private
datatoverifytaxpayerstatements.
FilingTaxReturns
IRShasagreedtostartreviewingorimplementingtheseactions.Asof
December2010,IRShaslaidoutplannedimplementationstepsupthrough
January2013.ThescopeofGAOsrecentworkdidnotextendtoanalyzing
IRSscapabilitytomeettheseimplementationplans.Thepotentialrevenue
significancemeritsGAOtrackingofIRSsprogressoverthenextfew
years.
Frameworkfor
productbelow.
Analysis
TaxGap:IRSHasModernizedItsBusinessNonfilerProgrambutCould
RelatedGAOProduct
BenefitfromMoreEvaluationandUseofThird-PartyData.GAO-10-950.
Washington,D.C.:August31,2010.
AreaContact
CongressandIRSCanHelpSCorporations
andTheirShareholdersBeMoreTax
Compliant
CongressandIRSCanHelpSCorporationsandTheir
ShareholdersBeMoreTaxCompliant
WhyGAOIsFocusing
onThisArea
ThenumberofScorporationscorporationswithnomorethan100
shareholdersthatmeetcertainotherrequirementshasgrownsteadilyin
recentyears,reachingaround4millionwithover$400billionintotalnet
income.Scorporationstatusprovidesliabilityprotectiontoshareholders.
Scorporationsincomegainsandlossespassthroughtoshareholders
whoaretoreportthesepassed-throughamountsontheirindividual
incometaxreturns.ShareholdersareallowedtoclaimScorporationpass-
throughlossesuptotheamountoftheirbasisinanScorporation(value
oftheirinvestment).Shareholdersaretotrackbasischanges,whichcan
arisefromtheiractions,likenewinvestmentsinthecorporation,orS
corporationactions,likereinvestingprofits.
Scorporationscanpayshareholderswagesandmakenonwage
distributions,likedividends,butemploymenttaxationonlyappliestothe
wages.TheInternalRevenueService(IRS)requiresScorporationstopay
reasonablewagestoshareholderswhoperformservices,andiftheydo
not,employmenttaxescanbeimproperlyavoided.
WhatGAOHasFound
IndicatingPotential
forEnhancing
Revenue
AccordingtoIRSsmostrecentresearch,fortaxyears2003and2004,68
percentofScorporationreturnsmisreportednetincome.Asaresult,S
corporationspassedthroughanestimated$85billionlesstaxableincome
totheirshareholdersthanshouldhaveoccurred.IRSsresearchdidnot
coverhowtheshareholderstreatedthismisreportedScorporationincome
ontheirindividualtaxreturns.However,applyingthelowestindividual
incometaxrateof10percenttothisScorporationmisreportedamount
suggeststhatScorporationshareholderscouldhaveunderpaidtheir
incometaxesby$8.5billionoverthose2years.IRSdoesnotknowthe
reasonsforthismisreporting,whichcouldbeintentionalattemptsto
improperlylowertaxliabilityforindividualshareholdersorunintentional
errorsduetoconfusionoverwhattoreport.
ShareholdersofScorporationsarerequiredtotracktheirbasis,buthave
mademistakesinthatarea.Forfiscalyears2006through2008,IRS
examinersfoundthatshareholders,onaverage,claimedabout$21,600in
lossesthatexceededtheirbasisintheScorporation.Theseoverclaimed
lossescouldreducetaxesonthetaxpayersotherincome.IRSviewsbasis
asacommonissueonshareholderreturns.Inparticular,shareholdersof
newScorporationsarelesslikelytounderstandtherequirementtotrack
andcalculatebasis.Onefactorcontributingtobasisnoncomplianceisthat
Scorporationsarenotrequiredtocalculateshareholderbasisandreportit
toshareholdersandIRS,eventhoughScorporationshaveinformationthat
Compliant
shareholderscouldusetocalculatebasis.Inaddition,IRSdoesnotsend
newScorporationsandtheirshareholdersinformationalertingthemto
thenecessaryrecord-keepingrequirements
Unlikeotherbusinesses,Scorporationscanimproperlyloweremployment
taxliabilitiesbypayingshareholderswhoperformserviceslessinwages
andmorethroughothermeans,likeprofitdistributions.Fortaxyears2003
and2004,IRSestimatedthat13percentofScorporationsunderpaidanet
of$23.6billioninwages.Toillustratethepotentiallossofrevenuetothe
government,applyingthemaximumFederalInsuranceContributionsAct
taxrateof15.3percenttothenetunderpaymentamountroughlyequates
to$3billioninemploymenttaxlosses.Thevaguenessoffederaltaxlawas
wellasIRSandDepartmentoftheTreasuryguidanceondetermining
adequateshareholderwagesmakeemploymenttaxevasiondifficultto
control.NearlyallofthestakeholderrepresentativesGAOinterviewed
indicatedthathavingclearandspecificIRSguidancewouldbehelpfulfor
taxpayersandpreparers.IRShassometrainingmaterialsforitsexaminers
thatgobeyondpublishedguidance,butthosematerialsarenotavailable
forScorporations.
IRSexaminationsofScorporationswagepaymentscouldbemore
effective.InthesamplethatGAOreviewed,whenIRSexaminersused
toolslikeBureauofLaborStatisticsdataoncompensation,theytendedto
morefrequentlyidentifyunderpaymentofwageincome.IRSdoesnot
requireuseofsuchtoolsnordoesIRSrequireitsexaminerstodocument
theanalysisdonetosupporttheircompensationdeterminationsorwhyan
analysiswasnotdone.
PaidpreparershadlittleimpactonScorporationcomplianceasthe
overallmisreportingratewasaboutthesamewhetherornotanS
corporationusedapaidpreparer.SomestakeholdersGAOinterviewed
thoughtsomepreparerslackedtheexpertiseneededtoaddressS
corporationtaxissues.IRShasbegunregulatingallpaidtaxreturn
preparersandcouldbeginrequiringpreparerstopasscompetency
examinations.Thismaybeawaytoimprovepreparersabilityto
adequatelyhandleScorporationreturns.
AsGAOreportedinDecember2009,toimprovebasiscompliance,
ActionsNeededand
CongresscouldrequireScorporationstouseinformationalreadyavailable
PotentialRevenue tothemtocalculateshareholdersbasisascompletelyaspossibleand
reportittoshareholdersandIRS.
Compliant
Furthermore,GAOrecommendedinDecember2009thatIRSrequire
examinerstodocumenttheircompensationanalysesandtheiruseof
comparablesalarydatawhendeterminingadequateshareholder
compensation.IRStookstepsbypublishinganarticleinAugust2010
remindingexaminersoftheimportanceofaddressingadequate
shareholdercompensationandtheneedtodocumentsuchanalysis.
AsofDecember2010,IRSisconsideringortakingactiononother
recommendationsincludedinGAOsDecember2009report,butnoneof
themhavebeenimplemented.GAOrecommendedthatIRSshould
evaluateoptionsforimprovingpaidtaxreturnpreparerperformance,send
additionalguidanceonScorporationrequirementssuchasonbasis
calculationsandadequatewagedeterminationstonewScorporations,
andprovidemoreguidancetoshareholdersandtaxpreparerson
determiningadequateshareholdercompensation.Theeffectof
implementationsshouldbeimprovedtaxcompliancebyScorporations
andtheirshareholders.Althoughanestimateofpotentialrevenue
increasesfromimprovedcomplianceisnotavailable,asmalldecreasein
thebillionsofdollarsofincomeandwageunderreportingcouldincrease
taxrevenuesbyhundredsofmillionsofdollarseachyear.
Frameworkfor
productlistedbelow.
Analysis
TaxGap:ActionsNeededtoAddressNoncompliancewithSCorporation
RelatedGAOProduct
TaxRules.GAO-10-195.Washington,D.C.:December15,2009.
Foradditionalinformationaboutthisarea,contactMikeBrostekat
AreaContact
IRSNeedsanAgencywideApproachfor
AddressingTaxEvasionbyNetworksof
BusinessesandRelatedEntities
IRSNeedsanAgencywideApproachforAddressingTax
EvasionbyNetworksofBusinessesandRelated
Entities
WhyGAOIsFocusing
onThisArea
Atleast1millionnetworksinvolvingpartnerships,trusts,corporations,
andsimilarentitiesexistedintheUnitedStatesintaxyear2008.These
networkscanserveavarietyoflegitimatebusinesspurposes.However,
transactionsmadeamongrelatedentitieswithinnetworksalsocanbe
usedintaxevasionschemestohidetaxableincomeorshiftexpenses.
Suchschemessuchastheonedescribedinthetextboxbelowresultin
losttaxrevenueandaredifficultfortheInternalRevenueService(IRS)to
identify,duetodatalimitations.
IRSrecognizestheriskfromnetwork-relatedtaxevasionandis
developingnewtoolsandprogramstobetteridentifysuchevasion.These
IRSeffortsareinvariousstagesofdevelopment,buttheirpotential
effectivenessintermsofcostsavingsoraddedrevenue,isnotknown.
However,GAOhasidentifiedtheneedforadditionaleffortstostrengthen
enforcementinthenetworksareaandtoassessprogress.
WhatGAOHasFound
IndicatingPotential
forEnhancing
Revenue
IRSknowsthatmanyquestionabletaxsheltersandabusivetransactions
relyonthelinksamongcommonlyownedentitiesinanetwork,butitdoes
nothaveestimatesoftheassociatedrevenuelossinpartbecausedatado
notexistonthepopulationofnetworks.IRSgenerallyaddressesnetwork-
relatedtaxevasionthroughitsexamination(audit)programs.These
programstraditionallyinvolveidentifyingasinglereturnfromasingletax
yearandroutingthereturntotheIRSdivisionthatspecializesinauditing
thattypeofreturn.Fromasinglereturn,examinersmaybranchoutto
reviewotherentitiesifinformationontheoriginalreturnappears
suspicious.However,thistraditionalapproachdoesnotalignwellwith
hownetworktaxevasionschemeswork.Suchschemescancrossmultiple
IRSdivisionsorrequiretimeandexpertisethatIRSmaynothave
allocatedatthestartofanexamination.Acaseofnetworktaxevasion
alsomaynotbeevidentwithoutlookingatmultipletaxyears.
NetworkSchemeExample:InstallmentSaleBogusOptionalBasis
Transaction(iBOB)
AniBOBisanexampleofanetwork-relatedtaxevasionschemethatshows
hownetworksposeenforcementchallengesforIRS.InaniBOB,ataxpayer
usesmultipleentities,allownedorcontrolledbythetaxpayer,toartificially
adjustthebasisofanassettoevadecapitalgainstaxes.Theschemecan
involvemultipletransactionsandtakeplaceovermanytaxyears,makingit
difficultforIRStodetect.AshortvideoillustratingtheiBOBisavailableat
http://www.gao.gov/products/GAO-10-968.
IRSisdevelopingprogramsandtoolsthatmoredirectlyaddressnetwork
taxevasion.One,calledGlobalHighWealthIndustry,selectscertainhigh-
incomeindividualsandexaminestheirnetworkofentitiesasawholeto
lookfortaxevasion.Another,yK-1,isacomputerizedvisualizationtool
thatshowsthelinksbetweenentitiesinanetwork.Theseeffortsshow
promise.Theyrepresentnewanalyticalapproaches,haveupper-
managementsupport,andcutacrossdivisionsanddatabaseboundaries.
However,thereareopportunitiesformoreprogress.Forexample,IRShas
noagencywidestrategyorgoalsforcoordinatingitsnetworkefforts.A
strategywouldincludeassessingofIRSsnetworktoolsanddetermining
thevalueofincorporatingmoredataintoitsnetworkprogramsand
toolsneitherofwhichIRShasdone.Withoutastrategyandassessments,
IRSrisksduplicatingeffortsandmanagerswillnothaveinformationabout
theeffectivenessofthenewprogramsandtoolsthatcouldinform
resourceallocationdecisions.
ActionsNeededand
PotentialRevenue
GAOrecommendedinitsSeptember2010reportthatIRScreatean
agencywidestrategywithgoalstocoordinateandplanitsenforcement
effortsonnetworktaxevasion.Thestrategyshouldincludeassessingthe
effectivenessofnetworkanalysistoolstoensurethatresourcesarebeing
devotedtothosethatprovidethelargestreturnoninvestment;
determiningwhethertoincreaseaccesstoIRSdataorcollectnewdatafor
networkanalysis;developingnetworkanalysistoolsonaspecifictime
schedule;anddecidinghowtomanagenetworkeffortsacrossIRS.IRS
shouldensurethatitsstaffunderstandthenetworktoolsandestablish
formalwaysforuserstointeractwithtoolprogrammersandanalyststo
ensurethatthenetworktoolsareeasytouseandachievegoals.IRS
agreedwithGAOsrecommendationsandsaiditwouldmakeplanstotake
actionsonthembutitistooearlytodetermineIRSsprogress.
Estimatesarenotavailableonthepotentialforincreasedtaxrevenues
becauseIRShasnotmeasuredthepotentialimpactofitsnetworkefforts
onreducingtaxnoncomplianceduetodatalimitations,buttheseefforts
havesignificantpotential,basedonthenumberofnetworksthatexist.
Frameworkfor
productlistedbelow.
Analysis
TaxGap:IRSCouldImproveEffortstoAddressTaxEvasionby
RelatedGAOProduct
NetworksofBusinessandRelatedEntities.GAO-10-968.Washington,
AreaContact
OpportunitiesExisttoImprovetheTargeting
oftheResearchTaxCreditandMakeItMore
Cost-Effective

OpportunitiesExisttoImprovetheTargetingofthe
ResearchTaxCreditandMakeItMoreCost-Effective
WhyGAOIsFocusing
onThisArea
Since1981,theresearchtaxcredithasprovidedsignificantsubsidies(an
estimated$6billionforfiscalyear2011)toencouragebusinesstoinvestin
researchanddevelopment.Thecredit,whichhasbeenatemporary
provisionsinceitsinception,wasmostrecentlyrenewedattheendof
2010andisscheduledtoexpireafterDecember31,2011.TheDepartment
oftheTreasuryandtheInternalRevenueServiceplaykeyrolesinissuing
guidancetoclarifywhattypesofspendingqualifyandensuringthat
taxpayersadequatelysupporttheircreditclaims.
Twofactorsthedefinitionofresearchexpensesthatqualifyforthecredit
andthecreditsdesignareimportantintargetingthesubsidyinamanner
thatincreasesthesocialbenefitsstimulatedperdollaroftaxrevenue
foregone.(Thisratioofbenefitstoforgonerevenueisakeymeasureof
creditscost-effectiveness.)Theresearchcredithasalwaysbeenan
incrementalsubsidy,meaningthattaxpayersearnthecreditonlyfor
qualifiedspendingthatexceedsadefinedthreshold,knownasthebase
spendingamount.Thecreditsdesignismostcost-effectivewhenthebase
spendingamountaccuratelyreflectstheamountofspendingthata
taxpayerwouldhavedoneanyway(intheabsenceofthecredit).
Thefigurebelowcomparestheeffectsofahypotheticalincrementalcredit
withaperfectlyaccuratebasetoaflatcredit,whichhasnobasespending
amount.Theflatcreditgivesthetaxpayer20centsforeveryresearch
dollarspent,whiletheincrementalcreditgives20percentforonlythe
amountofspendingabovewhatthetaxpayerwouldhavedoneanyway.
AComparisonofanIncrementalCreditwithaFlatCredit
Qualifiedresearchspending
A20%flatcredit(withnobase)
Taxpayersmarginal
spending
Spendingonresearch
thattaxpayerwould
havedoneanyway
Revenuecost:$220 Revenuecost:$20
$100
$1,000
$100
$1,000
$
2
0
$
2
0
Marginal
incentive
(20%of$100)
Marginal
incentive
(20%of$100)
Windfall
credit
(20%of$1,000)
$
2
0
0
Windfall
credit
Anincremental20%credit
witha$1,000base
$100
$1,000
Source:GAO.
Cost-Effective
Bothtypesoftaxcreditprovidethesame20percentrewardforeach
additionaldollarofqualifiedspending(referredtoasmarginal
incentive).Ineachcasethatincentiveencouragesthetaxpayerto
increasespendingforresearchby$100.However,theflatcreditisless
cost-effectiveforthegovernmentbecauseitalsogivesthetaxpayera$200
windfallforconductingresearchthatwouldhavebeendoneanyway.
Thedifficultyindesigninganincrementalcredittobeascost-effectiveas
theoneinthefigureistodeveloprulesforcomputingthebasespending
amountsothatthebaseaccuratelyrepresentswhatthetaxpayerwould
havespentanyway.GAOtestifiedasearlyas1995thatthecomputation
methodinplaceatthattimehadgrowninaccurateandshouldbeupdated.
Analternativeapproachforcomputingbasespending(thealternative
simplifiedcredit)hasbeenaddedbut,theoldercomputationoption
commonlyknownastheregularcreditstillhasnotbeenupdated.
WhatGAOHasFound
IndicatingPotential
CostSaving
Theresearchtaxcredit,ascurrentlydesigned,distributesincentives
unevenlyacrosstaxpayersandprovidesmanyrecipientswithwindfall
benefits,earnedforspendingthattheywouldhavedoneanyway.The
disparitiesinincentivescanleadtoaninefficientallocationofinvestment
resourcesacrossbusinessesandthewindfallbenefitsrepresentforegone
taxrevenuethatdoesnotcontributetothecreditsobjective.
InNovember2009GAOestimatedthat,duetoshortcomingsinthe
computationofbasespending,theresearchtaxcredithasprovidedsome
taxpayerswithmorethana10percentreductioninthecostofadditional
research,whileprovidingotherresearch-performingtaxpayerswitha
disincentivetoincreasetheirresearchinthecurrentyear.Moreover,some
taxpayersearnedcreditsonasmuchas50percentoftheirtotalresearch
spending,eventhoughthemostfavorableempiricalestimatesofthe
creditsstimulativeeffectssuggestthatlessthan15percentofthat
spendingwasactuallynewspendingthattheywouldnothavedoneinthe
absenceofthecredit.
Animportantcauseoftheseproblemsisthat,asGAOhaspreviously
reported,thebasespendingamountfortheregularversionofthecreditis
extrapolatedfromtheamountofresearchspendingthattaxpayersdidas
longagoastheearly1980s.Thatbaseisapoormeasureofthespending
thatataxpayerwouldbedoingnowintheabsenceofthecredit.The
alternativecreditoptionusesamorecurrentspendinghistoryfor
computingtheincrementalcredit,butitprovideslowerincentivesfornew
Cost-Effective
research,evenassometaxpayerscanreceivelargerwindfallsthanthey
wouldgetfromtheregularcredit.
1
ActionsNeededand
PotentialSavings
Basedonanalysesofnumerousdesignalternativesinits2009study,GAO
foundthatthetargetingoftheresearchtaxcreditcouldbeimprovedby
eliminatingtheregularcreditandaddingaminimumbaseamount(equal
to50percentofataxpayerscurrentspending)tothemethodfor
computingthealternativecredit.GAOfoundthatanalternativesimplified
creditwiththismodificationcouldprovidethesameaverageincentiveto
taxpayersasthecurrentversionofthatcredit,butatalowerrevenuecost
byreducingwindfalls.Costreductionsexceeded3percentundermostof
thealternativeassumptionsGAOusedinits2009analysesandexceeded
1.4percentunderallassumptionsthatGAOconsideredlikely.
Theeliminationoftheregularcreditnotonlywouldimprovetargeting,it
wouldalsosignificantlyreducecomplianceandadministrativecostsby
eliminatingtheneedfortaxpayerstokeep(andforIRStoreview)records
datingbacktothe1980s.
Frameworkfor
below.
Analysis
TaxPolicy:TheResearchTaxCreditsDesignandAdministrationCan
RelatedGAO
BeImproved.GAO-10-136.Washington,D.C.:November6,2009.
Products
TaxPolicy:AdditionalInformationontheResearchTaxCredit.
GAO/T-GGD-95-161.Washington,D.C.:May10,1995.
AreaContact
1
Asthefigurecomparingbasichypotheticalcreditdesignsaboveillustrates,therateof
incentiveandtheamountofwindfallacreditprovidesareindependentofeachother.
ConvertingtheNewMarketsTaxCredittoa
GrantProgramMayIncreaseProgram
EfficiencyandReducetheOverallCostofthe
Program
ConvertingtheNewMarketsTaxCredittoaGrant
ProgramMayIncreaseProgramEfficiencyandReduce
theOverallCostoftheProgram
WhyGAOIsFocusing
onThisArea
FederaltaxrevenuelossesfortheNewMarketsTaxCredit(NMTC)were
over$700millionfor2010accordingtotheDepartmentoftheTreasury.
CongressenactedtheNMTCin2000aspartofanongoingeffortto
revitalizeimpoverished,low-incomecommunities.TheTreasury
DepartmentsCommunityDevelopmentFinancialInstitutions(CDFI)
FundawardstaxcreditstoCommunityDevelopmentEntities(CDE),who
sellthecreditstoinvestorstoraisefunds.Investorscanclaimataxcredit
over7yearstotaling39percentoftheirinvestmentinaCDE.Through
fiscalyear2008,CDEreportedinvestingabout$12billionin2,111projects
locatedinall50states,theDistrictofColumbia,andPuertoRico.In
December2010,CongressextendedtheNMTCfortaxyear2010and2011.
However,thecomplexityofNMTCtransactionstructuresappearstomake
itdifficulttocompletesmallerprojectsandoftenresultsinlessequity
endingupinlow-incomecommunitybusinessesthebeneficiariesof
NMTCfinancingthanwouldbethecaseiftheprogramweresimplified.
AnalternativetotheNMTCcouldbetheuseofagrantprogram,
recognizingthatCongresshasturnedtograntprogramsinsimilarcases.
Suchgrantswouldeliminatetheprogramsdependenceonthemarketfor
taxcreditsandcouldreducetransactioncosts.
WhatGAOHasFound
IndicatingPotential
forCostSavingand
IncreasingRevenue
Replacingthetaxcreditwithagrantlikelywouldincreasetheequitythat
couldbeplacedinlow-incomebusinessesandmakethefederalsubsidy
morecost-effective.WhenCDEsellcreditstoinvestorstoraiseadditional
funds,thepriceinvestorspayforthecreditsreflectsmarketconditions
andtheinvestorsattitudestowardrisk.AccordingtoCDErepresentatives
GAOinterviewedin2009,whenthedemandforNMTCswashighest,
beforethehousingmarketcollapseand2008creditcrisis,thetaxcredits
soldfor$0.75to$0.80perdollar.Therefore,thefederalsubsidyintended
toassistlow-incomebusinesseswasreducedby20percentto25percent
beforeanyfundsweremadeavailabletoCDE.RepresentativesfromCDE
GAOinterviewedalsonotedthatwithlowdemandforthetaxcredits,as
wasthecasewhenGAOconducteditsworkduring2009,thecredits
generallysoldforabout$0.65to$0.70andhavesoldforaslittleas$0.50or
less.AfteraccountingforCDEandotherthird-partyfees,suchasasset
managementandlegalfees,about50percentto65percentofthefederal
subsidygenerallyreacheslow-incomebusinesses.
Inagrantprogram,theseup-frontreductionsinthefederalsubsidycould
belargelyavoided.Ifthegrantprogramiswelldesignedandatleastas
effectiveasthecreditinattractingprivateinvestment,itcouldsavea
Program
significantportionoftheestimated$3.8billionfive-yearrevenuecostof
thecurrentprogram.
Congresshasturnedtograntprogramsinothercaseswheretaxcredits
hadformerlybeenused.Forexample,tofillfundinggapsinLow-Income
HousingTaxCreditprojects,undertheAmericanRecoveryand
ReinvestmentActof2009,Congressofferedtheoptionofallowingstate
housingfinanceagenciestoexchangeLow-IncomeHousingTaxCredits
forfederalgrantstosubsidizelow-incomerentalhousing.
However,CDFIofficialswereconcernedthatagrantmaynotchannela
greaterportionofthefederalsubsidytointendedrecipientsthanthetax
creditandagrantprogramcouldhaveadministrativecostsorothereffects
thatwouldreduceitsdesirability.
ActionsNeededand
PotentialSavingsand
Revenue
AsstatedinitsJanuary2010report,GAOcontinuestobelievethat
CongressshouldconsiderofferinggrantsinlieuofcreditstoCDEifit
extendstheprogramagain.Doingsowouldhelpensurethatthemaximum
amountofcapitalendsupinlow-incomecommunitybusinesses.Ifitdoes
so,CongressshouldrequireTreasurytogatherappropriatedatatoassess
whetherandtowhatextentthegrantprogramincreasestheamountof
federalsubsidyprovidedtolow-incomecommunitybusinessescompared
totheNMTC;howcostsforadministeringtheprogramincurredbythe
CDFIFund,CDE,andinvestorswouldchange;andwhetherthegrant
programotherwiseaffectsthesuccessofeffortstoassistlow-income
communities.OneoptionwouldbeforCongresstosetasideaportionof
fundstobeusedasgrantsandaportiontobeusedastaxcreditallocation
authorityunderthecurrentstructureoftheprogramtofacilitate
comparisonofthetwoprogramstructures.Suchastudycouldhelp
resolveuncertaintiesabouttherelativeeffectivenessofgrantsandthetax
creditinpromotingeconomicdevelopment.Althougheliminatingthetax
creditwouldincreasefederalrevenues,replacingtheNMTCwithagrant
wouldintroduceoutlaycosts.However,giventhatthefederalsubsidyto
low-incomecommunitybusinesseswasreducedby20percentto25
percentupfrontevenwhenthepricepaidbyinvestorstoclaimNMTCwas
atitshighestandtransactioncostsduetothecreditsstructurecanbe
substantial,thegrantcouldresultinasimilaramountofinvestmentin
low-incomecommunitiesataloweroverallcosttothefederal
government.
Program
Frameworkfor
productlistedbelow.
Analysis
NewMarketsTaxCredit:TheCreditHelpsFundaVarietyofProjectsin
RelatedGAOProduct
Low-IncomeCommunities,butCouldbeSimplified.GAO-10-334.
AreaContact
LimitingtheTax-ExemptStatusofCertain
GovernmentalBondsCouldYieldRevenue
WhyGAOIsFocusing
onThisArea
Federaltaxrevenuelossesforstateandlocaltax-exemptbondswere
about$28billionin2010,accordingtoGAOsanalysisoftheDepartment
oftheTreasurysestimates.Thelossoccursbecausetaxpayerscan
excludethebondinterestfromtheirfederaltaxableincome.
Forfederaltaxpurposes,tax-exemptbondsareclassifiedaseither
governmentalbondsorprivateactivitybonds.Ingeneral,governmental
bondsareusedtobuildpubliccapitalfacilitieslikeroadsandservethe
generalpublicinterest.Privateactivitybonds,whichcanbeeithertaxable
ornontaxabledependingontheirpurpose,providefinancingtoprivate
businessesandaresubjecttorestrictionsthatdonotapplyto
governmentalbonds.Stateandlocalgovernmentshaveissued
governmentalbondsforfacilities,suchassportsstadiums,thatare
generallyconsideredtobeforprivateusebutmayservesomebroader
publicpurpose.
WhatGAOHasFound
IndicatingPotential
forEnhancing
Revenue
Tax-exemptbondsaresometimesusedtofundfacilitiesoractivitiesthat
areprivateinnature,costingthefederalgovernmentrevenuelossesfor
purposesthatmaynotmeritfederalsubsidies.Stateandlocal
governmentshavebroaddiscretionindecidingwhichactivitiesand
facilitiestofinanceusingtax-exemptbonds.Whentheyissue
governmentalbondsforfacilitiesandactivitiesthatareessentiallyprivate,
suchasforhotelsandgolfcourses,theymayindicatethatthebondsserve
abroaderpublicpurpose.Forexample,theymayindicatethereare
benefitstothecommunitythatextendbeyondthepurposeofthefacility
beingfinancedbythebondsorthatthefacilitiesprovidecertainservices
tothosewhowouldnototherwisebeabletousethem.GAOwasaskedto
identifyhotelsandmunicipalgolfcoursesfundedwithtax-exemptbonds
andfound18hotelsfinancedfrom2002through2006andsixgolfcourses
thatopenedin2005thatGAOcouldconfirmhadsometax-exemptbond
financing.However,itisnotclearwhetherfacilitieslikehotelsandgolf
coursesalwaysprovidepublicbenefitstofederaltaxpayersthatextend
beyondthepurposesofthefacilities.SinceGAOs2008report,applicable
lawsthatwouldlimittheuseoftax-exemptbondfinancinghavenotbeen
changed.
MembersofCongresshaverecentlyshowninterestinwhethercertain
facilitiesprovidingbenefitsthatareessentiallyprivateinnature,suchas
stadiums,shouldbefinancedwithtax-exemptgovernmentalbonds.
However,similarattentionhasnotbeengiventoothertypesoffacilities.
ActionsNeededand
PotentialRevenue
GAOcontinuestobelieve,asindicatedinitsFebruary2008report,thatas
Congressconsiderswhethertax-exemptgovernmentalbondsshouldbe
usedforprofessionalsportsstadiumsthataregenerallyprivatelyused,it
alsoshouldconsiderwhetherotherprivatelyusedfacilities,including
hotelsandgolfcourses,shouldcontinuetobefinancedwithsuchbonds.
Howmuchadditionalfederalrevenuewouldbegainedwoulddependon
howbroadlyCongressappliesnewlimitations.Forinstance,because
wider-ranginglimitationsongovernmentalbondswouldreducethe
purposesforwhichsuchbondsmaybeissued,limitationsthatapplied
onlytosportsstadiumswouldraiselessrevenuethanlimitationsthat
appliedmorebroadlytoincludeadditionaltypesoffacilities,suchas
hotelsandgolfcourses.
Frameworkfor
productlistedbelowandupdateddataontheamountoflostfederal
Analysis revenueeachyear.
TaxPolicy:Tax-ExemptStatusofCertainBondsMerits
RelatedGAOProduct
Reconsideration,andApparentNoncompliancewithIssuanceCost
LimitationsShouldBeAddressed.GAO-08-364.Washington,D.C.:
February15,2008.
AreaContact
AdjustingCivilTaxPenaltiesforInflation
CouldHelpIncreaseCollectionsandDeter
Noncompliance

AdjustingCivilTaxPenaltiesforInflationCouldHelp
IncreaseCollectionsandDeterNoncompliance
WhyGAOIsFocusing
onThisArea
TheInternalRevenueCodehasover150civilpenaltiesthatpotentially
detertaxpayernoncompliance.Anumberofciviltaxpenaltieshavefixed
dollaramountseitheraspecificdollaramount,oraminimumor
maximumamountthatarenotindexedforinflation.Overtime,thelack
ofindexingcandecreasetherealvalueofInternalRevenueService(IRS)
assessmentsandcollectionssignificantly.Further,notadjustingthefixed
penaltiesalsomeanstheyarenotmaintainedatthelevelCongressinitially
believedwasappropriatetodeternoncompliance.Finally,notadjusting
thesepenaltiesforinflationmayleadtoinconsistenttreatmentof
otherwiseequaltaxpayersovertimebecausetaxpayerswhowere
penalizedwhentheamountswereoriginallysetcouldeffectivelypaya
higherpenaltythantaxpayerswhowerepenalizedmanyyearslater.
WhatGAOHasFound
IndicatingPotential
forEnhancing
Revenue
GAOhaslongrecommendedtheperiodicadjustmentofciviltaxpenalties
forinflationandpreviouslyidentifiedthatalmostalloftheincreased
revenuesfrominflation-adjustingpenaltieswouldhavecomefrom4ofthe
22penaltiesitreviewed.InrecentyearsCongresshasadjustedsome
penalties,buthasnotinflation-adjustedthemajorityofpenaltiesGAO
studiedandhasrarelyrequiredIRStoinflation-adjustpenaltiesgoing
forward.InresettingpenaltiessinceGAOsreport,Congresshasgenerally
fullyrestoredtheirvaluebutonefellwellbelowafulladjustment.GAO
continuestobelievethatadjustingcivilpenaltiesforinflationcouldincrease
collections,helpdeternoncompliance,andbetterensureconsistent
treatmentoftaxpayersovertime.
GAOfoundinAugust2007thatadjustingciviltaxpenaltyfixed-dollar
amountsforinflationfrom2000to2005wouldhaveincreasedIRS
collectionsbyanestimated$38millionto$61millionperyearbasedona
limitednumberofpenaltiesGAOreviewed(seetablebelow).Almostallof
theestimatedincreaseincollectionswouldhavebeengeneratedbyfour
penalties:
failuretofiletaxreturns,
failuretofilecorrectinformationreturns,
variouspenaltiesonreturnsbyexemptorganizationsandbycertain
trusts,and
failuretofilepartnershipreturns.
Noncompliance
EstimatedIncreaseinIRSCollectionsfromInflation-AdjustingofPenalties
Assessed,2000-2005
Dollarsinmillions
Increasedcollectionsafter
Assessmentyear penaltyadjustment
2000 $38.2
2001 42.1
2002 47.9
2003 53.2
2004 61.0
2005 60.3
Source:GAOanalysisofIRSdata.
Theseincreaseswouldhaveresultedbecausesomeofthepenaltieswere
setdecadesearlierandhaddecreasedsignificantlyinrealvalueinsome
casesbyoverone-half.Forexample,by2007,thefailure-to-file-tax-returns
penaltydecreasedinrealvalueby53percentsinceithadbeensetin1982,
andthefailure-to-file-partnership-returnspenaltydecreasedinrealvalue
by64percentsinceithadbeensetin1979.
SinceAugust2007,Congresshasincreasedtheamountoffivefixed
penalties,threeofwhichfailuretofilecorrectinformationreturns,failure
tofilepartnershipreturns,andfailuretofiletaxreturnswereamongthe
fourpenaltiesGAOhadpreviouslyfoundwouldincreaseIRScollectionsthe
mostiftheywereinflation-adjusted.Theadjustmenttooneofthefive
failuretofiletaxreturnswasabouttwo-thirdsshortofthelevelneededto
fullyadjustforinflationsincethepenaltywassetin1982.The2008
adjustmenttothefailure-to-file-tax-returnspenaltymoveditfrom$100to
$135whereasafulladjustmentwouldhavebeento$225.Recently,in2010,
CongressdidacttorequireIRStoperiodicallyinflation-adjusttwo
penaltiesoneofwhichthefailuretofilecorrectinformationreturns
Congresshadincreasedsince2007andoneintentionalfailuretofilea
certaininformationreturnformithadnot.Thosemorerecent
requirementsforinflation-adjustingwereconsistentwiththeintentof
GAOspreviouslystatedpositionthatCongressshouldconsiderrequiring
IRStoperiodicallyadjustfixed-penaltyamountsforinflation.However,
manyfixedpenaltieshavenotbeenadjustedatallandonlythetwowillbe
periodicallyinflation-adjustedinthefuture.
AccordingtoGAOinterviewswithofficialsintheIRSofficesthatwould
beinvolved,thelikelyadministrativeburdenassociatedwithadjustingthe
Noncompliance
fixed-dollaramountsofciviltaxpenaltiesforinflationonaregularbasis
wouldnotbesignificantforIRS.OfficialsfromtheOfficeofPenalties,
whichhasonlyafewstaff,thoughtsomeadditionalstaffmightbeneeded
tocoordinatethenecessarychangestoforms,trainingmaterials,
computersystems,andguidance,butnotasignificantincrease.According
tointerviewswith28taxpractitionersassociatedwithfourprofessional
organizations,periodicinflationadjustmentstocivilpenaltieslikelywould
notplaceasignificantburdenonpractitioners.
ActionsNeededand
PotentialRevenue
InitsAugust2007report,GAOsaidthatCongressmaywanttoconsider
requiringIRStoperiodicallyadjustforinflation,androundappropriately,
thefixed-dollaramountsofthecivilpenaltiestoaccountforthedecrease
inrealvalueovertimeandsothatpenaltiesforthesameinfractionare
consistentovertime.AlthoughCongresshasincreasedtheamountof
somefixedpenaltiessinceGAOsreport,onlytwopenaltiesaretobe
adjustedforinflationonaperiodicbasis.Consequently,GAOcontinuesto
believeCongressshouldconsiderrequiringIRStoperiodicallyadjustall
fixedpenaltiesforinflation.Increasedrevenuespotentiallycouldbeinthe
tensofmillionsofdollarsperyear,notcountinganyrevenuesthatmay
resultfrommaintainingthepenaltiesdeterrenteffect.
Frameworkfor
productlistedbelowandadditionalGAOworkfromJanuary2008through
Analysis January2011tofollowuponanyactionstakenpursuanttothatreport.
TaxCompliance:InflationHasSignificantlyDecreasedtheRealValueof
RelatedGAOProduct
SomePenalties.GAO-07-1062.Washington,D.C.:August23,2007.
Foradditionalinformationaboutthisarea,contactMichaelBrostekor
AreaContact
JamesWhiteat(202)512-9110orbrostekm@gao.govorwhitej@gao.gov.
IRSMayBeAbletoSystematicallyIdentify
NonresidentAliensReportingUnallowed
DeductionsorCredits
IRSMayBeAbletoSystematicallyIdentifyNonresident
AliensReportingUnallowedDeductionsorCredits
WhyGAOIsFocusing
onThisArea
Everyyear,theUnitedStatesreceivesmillionsoflegalvisitsbyforeign
individuals,someofwhomhaveincomefromaU.S.sourceorareengaged
inaU.S.tradeorbusiness.IndividualswhoareneitherU.S.citizensnor
residentsareknownasnonresidentaliensfortaxpurposesandmaybe
requiredtofilefederalincometaxreturnstoreporttheirU.S.-source
income.For2007,individualsfiledabout634,000nonresidentalienincome
taxreturns,reportingabout$12.8billioninincomeand$2.5billionintax.
Nonresidentaliensfailuretocomplywiththeirtaxrequirementscan
contributetothetaxgap,whichisthedifferencebetweentheamountof
taxesowedandtheamountpaidvoluntarilyandtimelyandwaslast
estimatedtobe$345billion.AsitisforU.S.citizensandresidents,the
InternalRevenueService(IRS)isresponsibleforensuringthat
nonresidentalienscomplywiththeirtaxobligations.IRShasnot
developedestimatesfortheextentofnonresidentalientaxnoncompliance
becauseitoftenlacksinformationtodistinguishbetweennonresident
aliensandotherfilers.
WhatGAOHasFound
IndicatingPotential
forEnhancing
Revenue
IRSmaybemissinganopportunitytoidentifymorepotentially
noncompliantnonresidentalientaxpayersbecauseitdoesnot
systematicallyidentifynonresidentsfilingtheincorrecttypeoftaxreturn.
NonresidentswhofiletheindividualtaxreturnforU.S.citizensand
residents(Form1040)insteadofthereturnfornonresidents(Form
1040NR)mayclaimcreditsortakedeductionstowhichtheyarenot
entitled,suchastheearnedincomecredit,whichmayleadtoreducedtax
revenue.IRShasgenerallyconductedface-to-faceexaminationsof
nonresidentaliensthroughspecialprojectsthatfocusonparticulartypes
oftaxpayers,suchasindividualsemployedbyforeignembassiesor
consulatesandinternationalorganizationsintheUnitedStates.Through
itsexaminations,IRShasfoundthatsomenonresidentsimproperlyfile
Form1040insteadofForm1040NR.However,IRSdoesnothavea
programtoautomaticallyidentifytaxpayerswhomayhavemadethistype
oferror.
IRSmaybeabletosystematicallyidentifynonresidentswhoimproperly
fileForm1040insteadof1040NR.AswithU.S.citizensandresidents,
nonresidentsmusthaveataxpayeridentificationnumberinordertofilea
taxreturn.NonresidentswhodonotqualifyforaSocialSecuritynumber
buthaveavalidfilingrequirementmayapplytoIRSfora9-digitindividual
taxidentificationnumbertouseinlieuofaSocialSecuritynumberin
filingataxreturnandaretoindicateiftheyareresidentornonresident
aliens,oraspouseordependentofeither,ontheirapplications.
IRSMayBeAbletoSystematicallyIdentify
NonresidentAliensReportingUnallowed
DeductionsorCredits
IfIRSwereabletoidentifytaxpayerswhoshouldhavefiledForm1040NR
insteadofForm1040byidentifyingtaxreturnsfiledwithanindividualtax
identificationnumberandusinginformationfromindividualtax
identificationnumberapplications,itmaybeabletocost-effectively
addressthisformofnoncomplianceforsometaxpayersandincreasetax
revenue.Forexample,IRSmaybeabletoexaminepotentially
noncomplianttaxpayersthroughcorrespondence,whichwouldbeless
timeconsuming,complex,andcostlythantheface-to-faceexaminations
IRShastraditionallyconductedfornonresidentaliens.Withoutfurther
study,IRScannotknowifsystematicallyidentifyingandaddressing
nonresidentswhofiledanincorrecttypeoftaxreturnwouldbecost-
effective.
ActionsNeededand
PotentialRevenue
GAOrecommendedinApril2010thatIRSdetermineifcreatingan
automatedprogramtoidentifynonresidentalienswhomayhave
improperlyfiledForm1040insteadofForm1040NRwouldbeacost-
effectivemeanstoimprovecompliance.IRShasformedateamtostudy
thefeasibilityofsuchaprogram,whichitplanstocompletebyDecember
2011.GAOplanstofollowuponthisissuetoassessprogressin
completingthestudyaswellastoidentifypotentialrevenueincreases.
Frameworkfor
productlistedbelow.
Analysis
TaxCompliance:IRSMayBeAbletoImproveCompliancefor
RelatedGAOProduct
NonresidentAliensandUpdatingRequirementsCouldReduceTheir
ComplianceBurden.GAO-10-429.Washington,D.C.:April14,2010.
AreaContact
TrackingUndisbursedBalancesinExpired
GrantAccountsCouldFacilitatethe
ReallocationofScarceResourcesorthe
ReturnofFundingtotheTreasury
TrackingUndisbursedBalancesinExpiredGrant
AccountsCouldFacilitatetheReallocationofScarce
ResourcesortheReturnofFundingtotheTreasury
WhyGAOIsFocusing
onThisArea
AccordingtoOfficeofManagementandBudget(OMB)estimates,federal
grantawardstononfederalentities,suchasstatesandnonprofit
organizations,increasedfrom$300billionin2000toover$500billionin
2009.Ifevenasmallfractionofthefederalgovernmentstotalgrant
fundingisnotspentinaprudentandtimelyfashion,itcanpreventthe
reallocationofscarceresourcesorthereturnoffundingtotheUnited
StatesTreasury.
Undisbursedfundingisfundingthefederalgovernmenthasobligated
throughagrantagreement,butwhichthegranteehasnotentirelyspent.
Anexpiredgrantaccountisanagency-levelaccountforwhichtheperiod
ofavailabilitytothegranteehasended.
WhatGAOHasFound
IndicatingPotential
forCostSaving
Theexistenceofunspentfundscanhindertheachievementofnational
objectivesinvariousways,suchasleavingprojectsincompleteormaking
federalfundsmoresusceptibletoimproperspendingoraccountingas
monitoringdiminishesovertime.Closeoutprocedureshelpensure
granteeshavemetallfinancialrequirements,providedfinalreports,and
thatunusedfundsarede-obligated.However,pastauditsoffederal
agenciesbyGAOandInspectorsGeneral,andagenciesannual
performancereportshavesuggestedgrantmanagementchallenges,
includingfailuretoconductgrantcloseoutsandundisbursedbalances,are
along-standingproblem.Theauditsgenerallyattributedtheproblemsto
inadequaciesinawardingagenciesgrantmanagementprocesses,
includingregardingcloseoutsasalowmanagementpriority,inconsistent
closeoutprocedures,poorlytimedcommunicationswithgrantees,or
insufficientcomplianceorenforcement.
GAOfoundthatwhenfederalagenciestookcorrectiveactions,therewere
improvementsingrantcloseoutsandresolutionofundisbursedfunding.
Usingfederalpaymentsystemstotrackundisbursedfundinginexpired
grantaccountsandincludingthestatusofgrantcloseoutsinannual
performancereportscouldraisethevisibilityoftheproblembothwithin
theagencyandgovernmentwide,andleadtoimprovementsingrant
closeoutsandreduceundisbursedbalances.
InAugust2008,GAOreportedthatduringcalendaryear2006,about$1
billioninundisbursedfundingremainedinexpiredgrantaccountsinthe
DepartmentofHealthandHumanServicesPaymentManagementSystem
(PMS)thelargestciviliangrantpaymentsystem.In2006,PMSmade
paymentsforabout70percentofallfederalgrantsawardedbynine
federaldepartmentsandthreeotherfederalentities.Theexpiredbutstill
opengrantaccountsfoundinPMSwereassociatedwiththousandsof
granteesandover325differentfederalprograms.WhileGAOhasnot
updatedthisfigure,itillustratesthepotentialfinancialbenefitstobe
gainedbyimprovingoversightofundisbursedgrantfunding.Better
trackingofgrantaccountsmaintainedinallfederalpaymentsystems
couldidentifytheexpiredgrantswithundisbursedbalancesandmake
fundsavailableforotherassistanceprojectsorfacilitatethereturnof
thesefundstotheTreasury.GAOrecommendedthattheDirectorofOMB
instructexecutivedepartmentsandindependentagenciestoannually
tracktheamountofundisbursedgrantfundingremaininginexpiredgrant
accountsandreportonthestatusandresolutionofsuchfundingintheir
annualperformanceplansandPerformanceandAccountabilityReports
(PAR).AsofJanuary13,2011,OMBhadnotissuedgovernmentwide
guidanceregardingundisbursedbalancesinexpiredgrantaccounts.
Asanexampleofhowagenciescouldbeinstructedtoprovidethis
information,section537oftheConsolidatedAppropriationsActof2010
(PublicLaw111-117),signedintolawonDecember16,2009,requiredthat
theDirectorofOMBinstructdepartments,agencies,andotherentities
receivingfundsundertheCommerce,Justice,ScienceandRelatedAgencies
Actof2010totrackundisbursedbalancesinexpiredgrantaccountsand
includeinitsannualPARsdetailsonthe(1)actionsthedepartment,agency,
orinstrumentalitywilltaketoresolvesuchbalances;(2)methodsusedto
tracksuchbalances;(3)identificationofbalancesthatmaybereturnedto
theU.S.Treasury;and(4)thenumberofsuchaccountsforthepreceding3
years.InOctober2010,OMBissuedtheinstructionstothefederalentities
fundedbythisappropriationsact,asrequired.GAOreviewedavailable
fiscalyear2010PARsandfoundthreeentitiesreportedtheyhad
undisbursedand/orunobligatedbalancesremaininginexpiredgrant
accountsoverthelast3or4years.Themostrecentbalancesthatthese
agenciesreportedwereasfollows:DepartmentofJustice,fiscalyear2010
$2.9million;NationalAeronauticsandSpaceAdministration(NASA),fiscal
year2009$58million;andNationalScienceFoundation,fiscalyear2010
$1.7billion.Ofthesethreeagencies,onlyNASAgrantaccountswere
includedinthetotalundisbursedbalancesGAOreportedin2008.
Inarecentexampleofhowtoidentify,resolve,andquantifythesavings
resultingfromresolvingundisbursedfundinginexpiredgrantaccounts,
theU.S.DepartmentofAgriculturesOfficeofInspectorGeneralreported
in2009thattheAgriculturalResearchService(ARS)didnottimelyde-
obligateunusedfundsfrom32of121cooperativeagreementsthatexpired
infiscalyears2005and2006.TheinspectorgeneralcitedGAOin
recommendingthattheARSde-obligatethe$2.75millionremainingonthe
32expiredagreementstomakethefundsavailableforotherresearch
projectsandpreventthepotentialmisuseoffunds.TheARSreportedto
theinspectorgeneral,inApril2009,thatithadde-obligatedthe$2.75
million,asrecommended.
ActionsNeededand
PotentialSavings
Bettertrackingofgrantaccountsmaintainedinallfederalpayment
systemscouldidentifytheexpiredgrantswithundisbursedbalances.
Ongoing,systematicresolutionoftheseundisbursedgrantbalancescould
potentiallymakethesefundsavailableforotherassistanceprogramsor
facilitatethereturnofthesefundstotheTreasury.InAugust2008,GAO
recommendedthatOMBinstructallexecutivedepartmentsand
independentagenciestotrackundisbursedbalancesinexpiredgrant
accountsandreportontheresolutionofthisfundingintheirannual
performanceplanandPARs.WhileOMBhasnotissuedgovernmentwide
guidanceregardingundisbursedbalancesinexpiredgrantaccounts,GAO
continuestobelieveitsrecommendationsshouldbeimplemented.
TheanalysisabovewasbasedonapriorGAOproduct,GAO-08-432,listed
Frameworkfor
below.
Analysis
Telecommunications:Long-TermStrategicVisionWouldHelpEnsure
RelatedGAO
TargetingofE-rateFundstoHighest-PriorityUses.GAO-09-253.
Products Washington,D.C.:March27,2009.
GrantsManagement:AttentionNeededtoAddressUndisbursedBalances
inExpiredGrantAccounts.GAO-08-432.Washington,D.C.:August29,
2008.
Foradditionalinformationaboutthisarea,contactStanleyJ.Czerwinski
AreaContact
at(202)512-6520orczerwinskis@gao.gov.
PreventingBillionsinMedicaidImproper
PaymentsRequiresSustainedAttentionand
ActionbytheCentersforMedicare&
MedicaidServices
PreventingBillionsinMedicaidImproperPayments
RequiresSustainedAttentionandActionbytheCenters
forMedicare&MedicaidServices
WhyGAOIsFocusing
onThisArea
Infiscalyear2009,theMedicaidprogramcoveredover65millionpeopleat
acosttothefederalgovernmentandstates,whichsharethecostofthe
program,ofanestimated$381billion.Medicaidisafederal-stateprogram
thatconsistsofmorethan50distinctstate-basedprogramsthatcoveracute
healthcareandlong-termcareservicesforcertainlow-incomeindividuals,
includingchildrenandpersonswhoareagedordisabled.TheCongressional
BudgetOfficehasestimatedthat,underthePatientProtectionand
AffordableCareAct,enactedin2010,thecostoftheMedicaidexpansion
willexceed$430billionfrom2010to2019,withthefederalgovernment
responsibleforpayingover90percentoftheseincreasedcosts.
TheCentersforMedicare&MedicaidServices(CMS)intheDepartmentof
HealthandHumanServices(HHS)isresponsibleforoverseeingthe
programatthefederallevel.Statesadministertheirrespectiveprograms
day-to-dayoperations,includingprocessingandpayingclaimssubmitted
byhealthcareprovidersforservicesprovidedtoMedicaidbeneficiaries.
Duetothesize,growth,anddiversityoftheMedicaidprogram,rigorous
fiscaloversightisnecessarytopreventimproperpayments.
WhatGAOHasFound
IndicatingPotential
forCostSaving
ImproperpaymentstoMedicaidprovidersthatsubmitinappropriateclaims
canresultinsubstantialfinanciallossestostatesandthefederal
government.TheamountofimproperpaymentsintheMedicaidprogramis
amongthelargestofallgovernmentprograms.Forfiscalyear2010,HHS
estimatedthat9.4percentofMedicaidpaymentswereimproper,
representing$22.5billioninfederalexpenditures.Medicaidpaymentscan
beimproperforvariousreasons,includingpaymentsmadeforwhich
requireddocumentationismissingorinadequateorpaymentsonclaims
witherrors.Improperpaymentsalsoincludepaymentsforpeoplewhoare
noteligibleforMedicaidortoproviderswhoarebarredfromparticipating
intheprogram.Forexample,in2009,GAOfoundthatMedicaid
beneficiariesandproviderswereinvolvedinpotentiallywastefulorabusive
purchasesofcontrolledsubstancesinfiveselectedstates.Forexample,
GAOfoundthatMedicaidpaidover$2millionincontrolledsubstance
prescriptionsduringfiscalyears2006and2007thatwerewrittenorfilledby
65medicalpractitionersandpharmaciesthatwerebarred,excluded,or
bothfromfederalhealthcareprograms,includingMedicaid.
Stateeffortstomaximizefederalreimbursementalsocanincreasetherisk
ofimproperfederalpaymentstostates,totheextentstateseffortsmay
inappropriatelyshiftstatecoststothefederalgovernment.In2005,GAO
reportedthatagrowingnumberofstateswereusingcontingency-fee
consultantsconsultantsemployedundercontractswherebypayments
MedicaidServices
werecontingentupontheconsultantsperformancetomaximizefederal
Medicaidreimbursement.Statesmayemployconsultantstoservevalid
Medicaid-relatedroles,suchasaddingneededstafforaparticular
expertise.However,intwostatesreviewed,GAOidentifiedcertainclaims
forfederalfundingfromcontingency-feeprojectsinfivecategoriesof
Medicaidservicesthatwereproblematicbecausetheyappearedtobe
inconsistentwithCMSpolicy,wereinconsistentwithfederallaw,or
underminedMedicaidfiscalintegrity.GAOalsofoundthatCMSandstate
oversightofclaimsassociatedwithcontingency-feeprojectswaslimited
andrecommendedthatCMSroutinelyrequirestatestoidentifyclaimsor
projectsdevelopedbycontingency-feeconsultants.CMSrecognizesthat
claimsresultingfromconsultantrevenuemaximizationprojectsareat
higherriskofbeinginconsistentwithcertainfederalMedicaid
requirements,butasoftheendof2010ithadnotestablishedprocessesto
routinelycollectinformationenablingittoidentifyclaimsorprojects
developedbycontingency-feeconsultantstomaximizefederal
reimbursement.Withoutadequatecontrolsoverimproperpaymentsand
statemaximizationefforts,tensofbillionsofadditionalfederaldollarsare
atriskasprogramexpendituresgrow.
ActionsNeededand
PotentialSavings
Sustainedagencyattentionisneededtoimplementandoverseeprocesses
toprevent,identify,andrecoverimproperpaymentsandtoreducethe
billionsofdollarsthatareannuallylosttoimproperMedicaidpayments.
BoththeexecutivebranchandCongresshaveactedtocurtailimproper
Medicaidpayments,butchallengesinpreventingsuchpaymentsremain.
TheissuanceofPresidentialMemorandaanda2009ExecutiveOrder,
ReducingImproperPayments,alongwithenactmentoftheImproper
PaymentsEliminationandRecoveryActof2010(IPERA),arepositive
stepstowardimprovingtransparencyandreducingimproperpayments.
However,itistoosoontodeterminewhethertheactivitiescalledforinthe
PresidentialMemoranda,ExecutiveOrder,andIPERAwillachievetheir
goalsofreducingimproperpayments.Further,themagnitudeofthe
programspaymenterrorsindicatesthatCMSandthestatesface
significantchallengestoaddresstheprogramsvulnerabilities.Inits2009
reportontopmanagementandperformancechallengesfacingHHS,the
HHSOfficeofInspectorGeneralreportedmultipleprioritiesrelatedto
Medicaid,includingtheneedtoensuretheintegrityofpaymentsto
providersbyensuringtheyareappropriatelyenrolledandeligibleto
receivepayments.CMShastakenstepstostrengthenitsfinancial
oversightofMedicaid,buttheagencycandomoretoaddressgapsinits
oversightandfinancialmanagement.
MedicaidServices
GAOrecommendedin2009thatCMSissueguidancetostatesto
implementprocessesthatbetterpreventpaymentofimproperclaimsfor
controlledsubstancesinMedicaid.CMSgenerallyagreedwithGAOs
recommendations;however,guidancehadnotbeenissuedasoftheendof
2010.WithregardtoMedicaidclaimsrelatedtostateeffortstomaximize
federalreimbursements,GAOrecommendedthatCMSimproveits
oversightofprojectsdevelopedbyconsultantsonacontingency-feebasis,
inpartbyroutinelyrequestinginformationontheseprojectsand
associatedclaims.CMSstatedin2010thatitwascommittedtofully
assessingthebasisforallclaims,butindicateditdidnotplantoroutinely
requestthisinformation.GAOmaintainsthatthehigh-risknatureof
consultant-ledmaximizationprojectstoshiftstatecoststothefederal
governmentbysubmittingclaimsforfederalmatchingfundsthatare
inconsistentwithfederallaworCMSpolicy,warrantstheiridentification
andcloseoversight.
TheinformationcontainedinthisanalysisisbasedonworkGAOhas
Frameworkfor
conductedoverthepast5years,ongoingworkexaminingthefederal
Analysis governmenteffortstocurtailimproperpayments,andrecentworkto
updatethestatusofrecommendations.
RelatedGAO
Products
Medicaid:FraudandAbuseRelatedtoControlledSubstancesIdentified
inSelectedStates.GAO-09-957.Washington,D.C.:September9,2009.
ImproperPayments:StatusofAgenciesEffortstoAddressImproper
PaymentandRecoveryAuditingRequirements.GAO-08-438T.
ImproperPayments:FederalExecutiveBranchAgenciesFiscalYear
2007ImproperPaymentEstimateReporting.GAO-08-377R.Washington,
MedicaidFinancialManagement:StepsTakentoImproveFederal
OversightbutOtherActionsNeededtoSustainEfforts.GAO-06-705.
MedicaidServices
MedicaidFinancing:StatesUseofContingency-FeeConsultantsto
MaximizeFederalReimbursementsHighlightsNeedforImproved
FederalOversight.GAO-05-748.Washington,D.C.:June28,2005.
Foradditionalinformationaboutthisarea,contactKatherineIritaniat
AreaContact
(202)512-7114oriritanik@gao.gov.
FederalOversightoverMedicaid
SupplementalPaymentsNeedsImprovement
FederalOversightoverMedicaidSupplemental
PaymentsNeedsImprovement
WhyGAOIsFocusing
onThisArea
StrongfederaloversightofMedicaidiswarrantedastheprogram
continuestogrowinsizeandcost,andGAOhashadlong-standing
concernwiththeadequacyoffederaloversightofstateMedicaid
supplementalpayments.EachstateadministersaMedicaidprogramand
coversavarietyofhealthcareservicesforlow-incomeindividuals.The
federalgovernmentoverseesstatesMedicaidprogramsand,byaformula
establishedinlaw,paysfromhalftomorethanthree-fourthsofeach
statesMedicaidexpenditures.Subjecttocertainrequirements,states
establishMedicaidpaymentratesforprovidersandmaymake
supplementalpaymentstoproviders,whichareseparatefromandin
additiontostandardstateMedicaidpaymentrates.Statesmaketwo
generaltypesofsupplementalpayments.First,DisproportionateShare
Hospital(DSH)paymentsarerequiredunderfederallawtobemadeto
hospitalsthatservealargenumberoflow-incomeindividualsandare
designedtohelpoffsethospitalsuncompensatedcostsforserving
Medicaidanduninsuredlow-incomeindividuals.Second,statesoften
makenon-DSHMedicaidsupplementalpayments,whicharealsofundedin
partwithfederaldollars,forexampletohelpoffsetthecostsofcare
providedtoindividualscoveredbyMedicaid.
WhatGAOHasFound
IndicatingPotential
forCostSaving
VariedfinancingarrangementsthatstatesusetomakeMedicaid
supplementalpaymentscaninappropriatelyincreasefederalMedicaid
matchingpayments.GAOfoundthat,undercertainfinancing
arrangements,somestatespaidstateorlocalgovernmentproviders
supplementalpaymentsthatgreatlyexceededstandardMedicaidrates,
resultinginlargematchingpaymentsfromthefederalgovernment.Some
statesrequiredproviderstoreturnmost,orall,ofthelargesupplemental
paymentstothestate,whichthestatesthenusedforotherpurposes.Such
financingarrangementsthreatenthefiscalintegrityofMedicaidsfederal
andstatepartnershipbecausetheyeffectivelyincreasethefederal
Medicaidshareabovewhatisestablishedbylaw,andthereisno
assurancethatfederalMedicaidfundsareusedforMedicaidpurposes.
TheCentersforMedicare&MedicaidServices(CMS)withinthe
DepartmentofHealthandHumanServicestheagencythatoversees
Medicaidatthefederallevelhastakenactiontocurbinappropriate
payments,butgapsinoversightremain.Forexample,in2003,CMSbegan
aninitiativetocloselyreviewsupplementalpaymentarrangementsand
requiredstatestoendthoseitfoundinappropriate;however,in2008,GAO
reportedthatCMShadnotreviewedallarrangementstoensurethat
paymentswereappropriateandusedforMedicaidpurposes.In2009,GAO
foundthatongoingfederaloversightofsupplementalpaymentswas
warranted,inpartbecauseintwoofthefourstatesreviewedthestatesdid
notcomplywithfederalrequirementstoaccountforallMedicaid
paymentswhencalculatingDSHpaymentlimitsforuncompensated
hospitalcare.StatescalculatetheselimitstoprovideassurancesthatDSH
paymentstohospitalsdonotexceedindividualhospitalsactualcostsof
providingservices.Forasmallnumberofhospitals,thestatecalculation
errorsresultedinpaymentsinexcessofhospitallimits.Intwostates,a
state-operatedhospitalreceivedcombinedMedicaidsupplementaland
standardMedicaidpaymentsthatexceededthehospitalstotaloperating
costsby3percentinonecaseand6percentinanother.
In2011,underfederalregulations,improvedtransparencyand
accountabilityrequirementswillbecomeeffectiveforstateDSHpayments,
includingstandardsforstatecalculationsofDSHpaymentlimits.Also,
stateswillberequiredtoreportDSHpaymentsonafacilitybasisandto
obtainindependentauditsfortheirDSHpaymentreportsandcalculations.
UnderthePatientProtectionandAffordableCareAct,reductionsin
federalDSHexpenditureswilloccurinfutureyears.Atthesametime,
similarrequirementsarenotinplacefornon-DSHpayments,whichappear
tobeincreasing.In2006statesreportedmaking$6.3billioninnon-DSH
supplementalMedicaidpayments,ofwhichthefederalsharewas$3.7
billion,butnotallstateswerereportingtheirpayments.By2010,this
amounthadgrownto$14billion,withafederalshare$9.6billion,
however,accordingtoCMSofficialsreportingwaslikelyincomplete.
RequirementsforDSHsupplementalpayments,suchasstandardsfor
calculatingtheamountofthepaymentsandreportingofpaymentsona
facilityspecificbasis,donotapplytonon-DSHsupplementalpayments.
Further,processeshavenotbeenimplementedtoensurethatall
supplementalpaymentarrangementsarereviewed.
ActionsNeededand
PotentialSavings
InlightofthemagnitudeofMedicaidsupplementalpaymentsandrecent
reportedgrowthofnon-DSHsupplementalpayments,alongwithpast
concernsabouttheinappropriatenessofsomesupplementalpayments,
furtheractionbyCMSiswarrantedtoensurethatthesepaymentsare
appropriateandusedforMedicaidpurposes.SomekeypriorGAO
recommendationsaimedatimprovingfederaloversightofsupplemental
paymentshavenotbeenimplemented.Inparticular,GAOhas
recommendedthatCMSestablishuniformguidanceforstatesthatsets
acceptablemethodsforcalculatingnon-DSHpaymentamounts,require
facilityspecificreportingofnon-DSHsupplementalpayments,anddevelop
astrategytoensureallstatesupplementalpaymentarrangementshave
beenreviewedbyCMS.
GivenconcernsassociatedwithMedicaidsupplementalpayments,strong
andsustainedCMSoversightisnecessary.Ensuringthatthefederal
governmentprovidesmatchingfundsonlyforappropriatesupplemental
paymentscouldresultinsubstantialcostssavings.
TheinformationcontainedinthisanalysisisbasedonworkGAOhas
Frameworkfor
conductedoverthepast15yearsandrecentworktoupdatethestatusof
Analysis priorrecommendationsandpaymentamounts.
RelatedGAO
Products
Medicaid:OngoingFederalOversightofPaymentstoOffset
UncompensatedHospitalCareCostsIsWarranted.GAO-10-69.
WashingtonD.C.:November20,2009.
Medicaid:CMSNeedsMoreInformationontheBillionsofDollarsSpent
onSupplementalPayments.GAO-08-614.Washington,D.C.:May30,2008.
MedicaidFinancing:Long-standingConcernsaboutInappropriateState
ArrangementsSupportNeedforImprovedFederalOversight.
GAO-08-650T.WashingtonD.C.:April3,2008.
MedicaidFinancing:Long-standingConcernsaboutInappropriateState
ArrangementsSupportNeedforImprovedFederalOversight.
GAO-08-255T.WashingtonD.C.:November1,2007.
MedicaidFinancing:FederalOversightInitiativeIsConsistentwith
MedicaidPaymentPrinciplesbutNeedsGreaterTransparency.
Medicaid:StateFinancingSchemesAgainDriveUpFederalPayments.
GAO/T-HEHS-00-193.WashingtonD.C.:September6,2000.
Medicaid:StatesUseIllusoryApproachestoShiftProgramCoststo
FederalGovernment.GAO/HEHS-94-133.WashingtonD.C.:August1,1994.
Foradditionalinformationaboutthisarea,contactKatherineIritaniat
AreaContact
(202)512-7114oriritanik@gao.gov.
BetterTargetingofMedicaresClaimsReview
CouldReduceImproperPayments
BetterTargetingofMedicaresClaimsReviewCould
ReduceImproperPayments
WhyGAOIsFocusing
onThisArea
TheCentersforMedicare&MedicaidServices(CMS)theagencythat
administersMedicarehasestimatedthatimproperpaymentsfor
Medicarefee-for-service(FFS)were$34.3billioninfiscalyear2010.
Becausetheprogramscomplexityandsizemakeitvulnerabletobillions
ofdollarsinimproperpaymentsover-andunderpaymentsthatshould
nothavebeenmadeGAOhasdesignateditasahigh-riskprogram.CMS
anditscontractorsconductactivitiestoidentifyimproperpayments,
includingreviewingclaimsbeforeandafterpayment.CMScontractorsare
alsoresponsibleforprocessingandpayingapproximately4.5million
claimsperworkday,whichmakesthevolumeandcosttoreviewthe
claimschallenging.
WhatGAOHasFound
IndicatingPotential
forCostSaving
AspectsoftheMedicareprogramsdesignmakeitsusceptibletoimproper
paymentsandeffectiveuseofpaymentcontrolscanhelpensurethatthese
improperpaymentsareminimized.GAOfoundthatimprovingautomated
reviewandbettertargetingofclaimstoreviewmanuallycouldhelp
preventimproperpayments.
Medicareisdesignedtopayclaimspromptlyandthenumberofclaimsit
receiveslimitstheamountofpossiblereview.CMSisgenerallyrequiredto
payelectronicclaimsbetween14and30daysfromthedateofreceiptand
theprogramnowpays4.5millionclaimseachworkday.Theamountof
programpaymentsthataremadewithminimalreviewhasmadeMedicare
atargetforfraud,waste,andabusethatcanresultinimproperpayments.
Medicarerequiresthatcoveredservicesbereasonableandmedically
necessaryandofcourse,beprovidedasclaimed.Sinceitwasfirst
estimatedin1996,Medicaresimproperpaymentratehasbeeninthe
billionsofdollarseachyear,althougheffortstoimprovethemethodology
usedfortheestimatehavemadecurrentyearestimatesnoncomparableto
anymadebefore2009.Priorto1996,CMShadcontrolsinplacetotryto
minimizeimproperpaymentsandbeginninginfiscalyear1997,Congress
providedfundsspecificallyforCMSactivitiesdesignedtoensurethat
claimsarepaidcorrectly.CMSallocatesthesefundstocontractorsthat
conductanumberofactivities,includingalimitedamountofclaims
review,tohelppreventoridentifyandaddressimproperpayments.
Despiteagencyefforts,CMSstillfaceschallengesindesigningand
implementinginternalcontrolstoeffectivelypreventorrecoupimproper
paymentsandtopreventfraud,waste,andabuse.PreviousGAOproducts
identifiedsomespecificweaknessesintheareaofclaimsreviewandmade
recommendationstoimplementkeystrategiesrelatedtoautomatingand
targetingclaimsreviewthatareparticularlyimportanttohelpingprevent
fraud,waste,andabuse,andultimately,toreducingimproperpayments.
Theclaimsreviewweaknessesidentifiedinclude:
Prepaymentreviewofclaimsdidnotidentifyatypicalbillingassociated
withfraud.Overall,lessthan1percentofMedicaresclaimsaresubjecttoa
medicalrecordreviewbytrainedpersonnelsohavingrobustautomated
paymentcontrolsinplacethatcandenyinappropriateclaimsorflagthem
forfurtherreviewiscritical.However,GAOhasfoundweaknessesinthis
area.Specifically,in2007,GAOfoundthatcontractorsresponsiblefor
reviewingclaimsfromsuppliersofdurablemedicalequipment,prosthetics,
orthotics,andsuppliesdidnothaveautomatedprepaymentcontrolsin
placetoidentifyquestionableclaimsthatmightsuggestfraud,suchasthose
associatedwithatypicallyrapidincreasesinbillingorforitemsunlikelyto
beprescribedinthecourseofroutinequalitymedicalcare.
Postpaymentclaimsreviewwasnotfocusedonmostvulnerableareas.
Postpaymentreviewsarecriticaltoidentifyingpaymenterrors,recouping
overpayments,orrepayingunderpayments.CMSscontractorshave
conductedlimitedpostpaymentreviewsforexample,GAOreportedin
2009thatthecontractorspayingclaimsforhomehealthcareconducted
postpaymentreviewsonfewerthan700ofthemorethan8.7million
claimsthattheypaidinfiscalyear2007.Further,GAOfoundtheywerenot
usingevidence,suchasfindingsfromprepaymentreview,totargettheir
postpaymentreviewresourcesonproviderswithademonstratedhighrisk
ofimproperpayments.
Regularcross-checkingofclaimsforhomehealthserviceswiththe
physicianslistedasprescribingthemwasnotalwaysdone.CMSdoes
notroutinelyprovidephysiciansresponsibleforauthorizinghomehealth
carewithinformationthatwouldenablethemtodeterminewhethera
homehealthagency(HHA)wasbillingforunauthorizedcare.Inone
instance,aCMScontractoridentifiedoverpaymentsinexcessof$9million
afterinterviewingphysicianswhosenamesandsignaturesappearedon
referralsforbeneficiarieswithhighhomehealthcosts.Somephysicians
indicatedtheirsignatureshadbeenforgedortheyhadnotrealizedthe
amountofcaretheyhadauthorized.
CMSsnewnationalrecoveryauditcontractingprogram,begunin
March2009,addedtopostpaymentefforts;butnotforfraud-prone
claims.Recoveryauditcontractors(RAC)reviewclaimsafterpayment,
withreimbursementtothemcontingentontheimproperover-and
underpaymentsidentified.AccordingtoCMS,becauseRACsarepaidfees
contingentonthedollarvalueoftheimproperpaymentsidentified,RACs
havefocusedonhigh-dollarclaimsfrominpatienthospitalstays,notother
servicespronetoimproperpayment,suchashomehealthservices.
ActionsNeededand
PotentialSavings
Moretargetedclaimsreviewcouldhelpreduceimproperpayments.While
thepotentialforsavingsexists,theextentofsavingsrealizedwould
dependontheeffortstakentoaddressweaknessesinthereviewprocess.
GAOcontinuestobelievethatCMSshouldaddressthesepreviouslymade
recommendations:
In2007,GAOrecommendedthatCMSrequireitscontractorsto
developthresholdsforunexplainedincreasesinbillingandusethemto
developautomatedprepaymentcontrols.CMSagreedwiththis
recommendationinitscommentsonthereport,buthasnot
implementedit.Theagencyhasaddedotherprepaymentcontrolsto
flagclaimsforservicesthatwereunlikelytobeprovidedinthenormal
courseofmedicalcare.However,implementingGAOs
recommendationandaddingadditionalprepaymentcontrolscould
enhanceidentificationofimproperclaimsbeforetheyarepaid.
In2009,GAOsreportonhomehealthservicesrecommendedthat
postpaymentreviewsbeconductedonclaimssubmittedbyHHAswith
highratesofimproperbillingidentifiedthroughprepaymentreview.
CMSdidnotindicatethatitagreedordisagreedwiththis
recommendationandhasnotimplementedit.Theagencystatedthatits
contractorsconductpre-andpostpaymentreviewsforHHAswithhigh
utilizationasresourcesallow.However,thismightnotleadto
postpaymentreviewofclaimsbyHHAswithhighratesofimproper
prepaymentbillingandGAOcontinuestobelievethatsuchreviews
wouldbevaluable.
The2009homehealthreportalsorecommendedthatCMSrequirethat
physiciansreceiveastatementofhomehealthservicesbeneficiaries
receivedbasedonthephysicianscertification.Theagencyagreedto
considerthisrecommendation,buthasnottakenaction.Suchaction
couldalsobebeneficialforotheritemsandservicessusceptibletofraud
andabusethatareoftennotdirectlybilledbyphysicians,suchashigh-
costdurablemedicalequipment,prosthetics,orthotics,andsupplies.
CMSindicatedin2010thattheAffordableCareActincludedasection
requiringaphysician(ornonphysicianworkingfororincollaboration
withaphysician)todocumentthataface-to-faceencounterwiththe
physicianoccurredbeforehomehealthservicescanbeimplemented.
However,theactualservicesprovidedcoulddifferfromwhattheinitial
orderingphysicianintended,andtheinitialdocumentationofaface-to-
faceencounterwouldnotaddressthatissue.
Inaddition,asGAOpointedoutin2010testimonyonMedicarefraud,
waste,andabuse,becausetheRACsarefocusingonreviewofhospitals,
othercontractorspostpaymentreviewactivitiescouldbemorevaluableif
CMSdirectedthesecontractorstofocusonserviceswhereRACsarenot
expectedtofocustheirreviews,andwhereimproperpaymentsareknown
tobehigh,specificallyhomehealthservices.
Theamountthatcouldbesavedfromtakingtheseactionshasnotbeen
estimatedandwoulddependonhowtheywereimplemented.
Theinformationcontainedinthisanalysisisbasedonfindingsfromthe
Frameworkfor
GAOreportslistedbelow.
Analysis
RelatedGAO
Products
MedicareFraud,Waste,andAbuse:ChallengesandStrategiesfor
PreventingImproperPayments.GAO-10-844T.Washington,D.C.:
June15,2010.
MedicareRecoveryAuditContracting:WeaknessesRemainin
AddressingVulnerabilitiestoImproperPayments,Although
ImprovementsMadetoContractorOversight.GAO-10-143.Washington,
D.C.:March31,2010.
Medicare:ImprovementsNeededtoAddressImproperPaymentsin
HomeHealth.GAO-09-185.Washington,D.C.:February27,2009.
Medicare:ImprovementsNeededtoAddressImproperPaymentsfor
MedicalEquipmentandSupplies.GAO-07-59.Washington,D.C.:
January31,2007.
Foradditionalinformationaboutthisarea,contactKathleenKingat
AreaContact
(202)512-7114orkingk@gao.gov.
PotentialSavingsinMedicare sPaymentsfor
HealthCare
PotentialSavingsinMedicaresPaymentsfor
HealthCare
WhyGAOIsFocusing
onThisArea
Medicareexpendituresaregrowingfasterthantheoveralleconomyand
areexpectedtocontinuetodoso,leadingtoconcernsabouttheprograms
long-termsustainability.Furthermore,itiswidelyrecognizedthat
Medicarescontributiontothenationslong-termfiscalshortfallis
considerable.
TheprimarydriversofincreasedMedicarespendingaregrowthinthe
volumeofservices(thenumberofservicesprovidedperbeneficiary)and
theintensityofservices(servicescomplexityandcostliness).The
behaviorofphysiciansisparticularlycriticaltoattemptstocontrolthese
increases,becausephysiciansnotonlyprovideservices,butalsoorder
servicessuchasimagingstudiesandhomeoxygen.
Medicare,whichisadministeredbytheCentersforMedicare&Medicaid
Services(CMS),anagencyoftheDepartmentofHealthandHuman
Services(HHS),helpspayforhospital,physician,andotherinpatientand
outpatientservicesforabout38.7millionagedand7.6milliondisabled
beneficiaries.Accordingtothe2010MedicareTrusteesReport,about$336
billionwasspentonhealthcare(excludingMedicaresmanagedcareand
prescriptiondrugspendingforbeneficiariesinthoseprograms)in2009.
Medicareisfundedprimarilybytaxrevenuesandbeneficiariespremiums.
WhatGAOHasFound
IndicatingPotential
forCostSaving
SomeMedicarespendingforservicesprovidedandorderedbyphysicians
maynotbewarranted,andMedicaresreviewofclaimsisnotalways
sufficientlytargetedandsystematic.Forexample,thewidegeographic
variationinMedicarespendingperbeneficiaryunrelatedtohealthstatus
oroutcomessuggeststhathealthneedsalonedonotdetermine
spending.Inothercases,suchashomeoxygen,Medicaresimplyoverpays.
Additionally,Medicarepaysforportionsofsomeservicestwicebecauseit
failstotakeintoaccounttheextenttowhichservicesthatarecommonly
furnishedtogetheroverlap.
GAOhasreviewedfourspecificareasinwhichapotentialforsavings
exists:
Physicianpracticepatterns.Someprivateandpublichealthcare
purchasershaveinitiatedprogramstoidentifyinefficientphysicians
thatis,physicianswhoprovideandorderalevelofservicesthatis
excessive,giventhepatientshealthstatusandtoencouragepatients
toreceivetheircarefromother,moreefficientphysicians.GAO
profiledMedicaregeneralistphysiciansandidentifiedthosewhose
practicesincludedahigherproportionofoverlyexpensivepatients
HealthCare
(afteradjustingforhealthstatus)thanwouldoccurbychance.GAO
concludedthatthesephysicianswerelikelytopracticemedicine
inefficiently.GAOalsoprofiledMedicarephysiciansinfour
specialtiescardiology,diagnosticradiology,internalmedicine,and
orthopedicsurgeryandshowedthatexpendituresforinstitutional
servicesgrewasthelevelofresourceuseincreased.
Imagingservices.From2000through2006,expendituresforimaging
servicespaidundertheMedicarephysicianfeeschedulemorethan
doubledinnominalterms,increasingtoabout$14billion.Spendingon
advancedimagingservicessuchasCTscans,MRIs,andnuclear
medicine,rosefaster17percentperyearthanspendingonless
complexservices,suchasultrasoundorX-ray.Althoughoverall
spendingonimagingdeclinedto$12.1billionin2007primarilydueto
acapimposedoncertainimagingfeesbytheDeficitReductionActof
2005utilizationcontinuedtoincrease.Whilemuchofthisgrowthmay
beappropriate,severalothertrendsincludingashifttoward
provisionofimagingservicesinphysiciansofficeswherethereisless
oversight,broaderuseofimagingbynonradiologists,andanalmost
eight-foldgeographicvariationinspendingonin-officeimagingin
2006raiseconcernsthatimagingservicesmaybeoverutilized.
Homeoxygen.In2009,Medicarespent$2.15billiontoprovidehome
oxygenforbeneficiarieswithconditionssuchaschronicpulmonary
disease.GAOreportedmorethanadecadeagothatMedicarepayment
ratesforhomeoxygenweresignificantlyhigherthanthoseofthe
DepartmentofVeteransAffairs,andtheHHSOfficeofInspector
Generalhasreportedseveraltimesthatoxygenpaymentrateswere
excessive.Congresshasreducedorlimitedpaymentsseveraltimes
mostrecentlyin2009.However,accordingtoGAOsanalysis,payment
ratesremainhigherthanthoseofsomeothernationalpayers.
Additionally,theaveragemonthlyMedicarepaymentforhomeoxygen
perbeneficiaryin2009wasupto44percenthigherthansuppliers
overallcosts.Nearlyallbeneficiarieswhoreceivehomeoxygenusea
stationaryoxygenconcentratorandabouttwo-thirdsalsouseportable
oxygenequipment.Althoughportableoxygenequipmenttypically
requiresrefills,stationaryconcentratorsdonot.
1
However,Medicares
bundledpaymentforstationaryconcentratorsincludesapaymentfor
1
Stationaryoxygenconcentratorsareelectricallypoweredmachinesthatextractoxygen
fromtheair.
HealthCare
oxygenrefills.Consequently,in2008,inaboutone-thirdofinstancesin
whichMedicarepaidforastationaryconcentrator,itwasalsopaying
foroxygenrefillsthatwerenotprovided.
Physicianpayments.Medicaresphysicianfeesmaynotalwaysreflect
efficienciesthatoccurwhenservicesarecommonlyfurnishedtogether.
Forexample,certainportionsofpracticeexpensessuchasanurses
timepreparingapatientforamedicalprocedureoratechnicianstime
settinguptherequiredequipmentareincurredonlyoncewhenservices
areprovidedtogether;andcertainportionsofphysicianwork
activitiessuchasreviewingthepatientsmedicalrecordoccuronly
oncewhenservicesareprovidedtogether,yetpaymentforthese
overlappingportionsisgenerallyincludedinthefeeforeachservice,
resultinginexcessivepaymentsbyMedicare.CMShasimplementeda
multipleprocedurepaymentreduction(MPPR)forcertainimagingand
surgicalserviceswhentwoormorerelatedservicesarefurnished
together.UndertheMPPR,thefullfeeispaidforthehighest-price
serviceandareducedfeeispaidforeachsubsequentservice,butthe
policyhasnotbeensystematicallyappliedtoservicescommonly
furnishedtogether.Lookingonlyatthoseservicesthathadthegreatest
impactonMedicareexpenditures,GAOidentifiedareas,suchas
physicaltherapy,inwhichefficienciesforservicescommonly
furnishedtogetherwerenottakenintoaccount.
ActionsNeededand
PotentialSavings
GAOhasreportedthatsignificantpotentialforsavingsexistsbyprofiling
physicianpracticepatternstoencouragemoreefficientprovisionofhealth
careservices,introducingpriorapprovalrequirementsandotherfront-end
approachestobettermanagetheuseofimagingservices,reducingand
restructuringpaymentsforhomeoxygen,andreformingpaymentsfor
physicianservicessothatwhentwoservicesoverlap,onlyonepaymentis
madefortheoverlappingportion.
Profilingphysicianspracticepatterns.GAOrecommendedinApril
2007thatCMSdevelopaprofilingsystemtoidentifyindividual
physicianswithinefficientpracticepatternsandusetheresultsto
improvetheefficiencyofcarefinancedbyMedicare.Physiciansplaya
centralroleinthegenerationofhealthcareexpenditures.About20
percentofservicesareprovidedbyphysicians.However,they
influenceupto90percentofspendingby,forinstance,referring
patientstootherphysicians;admittingpatientstohospitals,skilled
nursingfacilities,andhospices;andorderingservicesdeliveredby
otherhealthcareproviders,suchasimagingstudies,laboratorytests,
HealthCare
andhomehealthservices.GAOfoundthatprovidingfeedbackto
physiciansontheirpracticepatternsisapromisingsteptoward
encouragingefficiencyinMedicare.However,GAOnotedthatCMS
wouldlikelyhavetoseeklegislativechangestomaximizethe
usefulnessofprofilingforexample,changesthatwouldallowCMSto
incentivizebeneficiariestoselectefficientproviders.TheMedicare
ImprovementsforPatientsandProvidersActof2008directedthe
SecretaryofHHStoestablishaconfidentialphysicianfeedback
program.ThePatientProtectionandAffordableCareAct
2
expanded
theprogramandalsorequirestheSecretaryofHHStoadjustpayments
tothosephysicianswhosepracticepatternspromotebothhigh-quality
andtheefficientuseofhealthcareservices.Thefeedbackprogramis
initsearlystagesandpotentialsavingstothe$336billionMedicare
programwilldependonimplementationdetails.
Bettermanagementofimagingservices.GAOrecommendedinJune
2008thatCMSexaminethefeasibilityofaddingmorefront-end
managementapproaches,suchaspriorauthorization,forimaging
services.Inthisway,CMSmightbeabletoimproveitseffortstobea
prudentpurchaserofimagingservices,whichcostMedicareover$12
billionin2008.However,theSecretaryofHHShasnotimplementedor
examinedthefeasibilityofthesepractices,sayingin2008thatitis
concernedaboutadministrativeburdenaswellastheadvisabilityof
priorauthorizationfortheMedicareprogram.Italsoquestionedhow
priorauthorizationwouldfitwithinitscurrentpostpaymentreview
program.Specificsavingsestimatesarenotavailableandwould
dependonthenumberofMedicareimagingservicesdeemed
inappropriatebyadditionalfront-endapproaches.However,GAO
continuestobelievethatadditionalfront-endmanagementwouldhelp
Medicarebecomeamoreprudentpurchaserofimagingservicesand
couldgeneratesavings.
Reducingpaymentsforhomeoxygen.GAOsuggestedinJanuary2011
thatCongressconsiderreducingMedicarehomeoxygenratestoalign
themmorecloselywiththecostsofsupplyinghomeoxygen.Congress
hasrequiredtheSecretaryofHHStoinstitutecompetitivebiddingfor
homeoxygenandotherdurablemedicalequipment.Pricesfromthe
firstroundofcompetitivebiddingtookeffectinninegeographicareas
2
ThePatientProtectionandAffordableCareActwassignedbythePresidentin
March2010.
HealthCare
inJanuary2011.AccordingtoCMS,thebidpricesforhomeoxygenand
otherdurablemedicalequipmentfor2011are32percentlessthan
Medicarepaidin2010.However,thispaymentreductionwillresultina
paymentreductiononlyintheninegeographicareas.In2011,the
processtoexpandcompetitivebiddingtoanadditional91areasis
expectedtobegin.Eventuallycompetitivebiddingisexpectedto
expandbeyondthesefirst100areas.Certaingeographicareas,suchas
ruralareas,areexemptfromcompetitivebiddinguntil2015.Itwillbe
severalyearsbeforecompetitivebidsaffectMedicarepaymentsfor
homeoxygennationwide.Therefore,GAOcontinuestobelieveit
wouldbeappropriateforCongresstoconsiderreducingMedicare
homeoxygenpaymentrates.
Reducingpaymentsforoverlappingphysicianservices.InaJuly2009
report,GAOrecommendedthatCMSsystematicallyreviewservices
commonlyfurnishedtogetherandimplementaMPPRtocapture
efficiencies,whereappropriate,fortheseservices,focusingonthose
servicesthathavethegreatestimpactonMedicarespending.GAO
identifiedseveralareas,includingphysicaltherapy,whereanMPPR
couldbeappliedtoreflectefficienciesinoverlappingservices.GAO
alsorecommendedinthisreportthatCMSexpandthescopeofits
MPPRbyapplyingittononsurgicalandnonimagingservices,suchas
physicaltherapy,therebysavinganestimated$500million.Further,
GAOrecommendedthattheMPPRbeappliedtothepartofthe
paymentthatcoversaphysicianswork;accordingtoGAOsestimates,
ifthatweredoneonlyforimagingitwouldresultinsavingsof$175
million.CMShastakensomestepstoimplementGAOs
recommendations,butGAOcannotestimatethefullextentofsavingsif
CMSweretosystematicallyreviewservicescommonlyfurnished
togetherandeliminateduplicatepayments.UnderaMedicarebudget
neutralityprovision,savingsobtainedfromanysignificantchangein
physicianpaymentsforaparticularserviceorsetofservicesareadded
tothetotalamountavailableforpayingphysiciansandare
redistributed.Therefore,GAOalsosuggestedinthisreportthat
Congressexemptsavingsattributabletotheimplementationofpolicies
thatreflectefficienciesoccurringwhenservicesarefurnishedtogether
fromthebudgetneutralityrequirement.
Insummary,GAOhasidentifiednumerousopportunitiesforsavingsin
Medicare,andCMShastakenactionstoaddressseveralofthem.
However,manyactionsremaintobetaken,whichcouldincrease
efficienciesandreduceMedicaresspending.Increasedcongressional
attentionmaybewarrantedintheseareas.
HealthCare
Theinformationcontainedinthisanalysisisbasedprimarilyonthe
Frameworkfor
followingrelatedGAOproducts,supplementedbythe2010Medicare
Analysis TrusteesReport,the2011ProposedRuleforMedicarePhysicianPayment,
thePatientProtectionandAffordableCareAct,anddatafromCMSsWeb
site.
RelatedGAO
Products
MedicareHomeOxygen:RefiningPaymentMethodologyHasPotential
toLowerProgramandBeneficiarySpending.GAO-11-56.Washington,
Medicare:PerCapitaMethodCanBeUsedtoProfilePhysiciansand
ProvideFeedbackonResourceUse.GAO-09-802.Washington,D.C.:
September25,2009.
MedicarePhysicianPayments:FeesCouldBetterReflectEfficiencies
AchievedWhenServicesAreProvidedTogether.GAO-09-647.Washington,
D.C.:July31,2009.
Medicare:TrendsinFees,Utilization,andExpendituresforImaging
ServicesbeforeandafterImplementationoftheDeficitReductionActof
2005.GAO-08-1102R.Washington,D.C.:September26,2008.
MedicarePartBImagingServices:RapidSpendingGrowthandShiftto
PhysicianOfficesIndicateNeedforCMStoConsiderAdditional
ManagementPractices.GAO-08-452.Washington,D.C.:June13,2008.
Medicare:ProvidingSystematicFeedbacktoPhysiciansontheir
PracticePatternsisaPromisingStepTowardEncouragingProgram
Efficiency.GAO-07-862T.Washington,D.C.:May10,2007.
Medicare:FocusonPhysicianPracticePatternsCanLeadtoGreater
ProgramEfficiency.GAO-07-307.Washington,D.C.:April30,2007.
Foradditionalinformationaboutthisarea,contactJamesC.Cosgroveat
AreaContact
(202)512-7114orcosgrovej@gao.gov.
DepartmentofHomelandSecuritys
ManagementofAcquisitionsCouldBe
StrengthenedtoReduceCostOverrunsand
ScheduleandPerformanceShortfalls
DepartmentofHomelandSecuritysManagementof
AcquisitionsCouldBeStrengthenedtoReduceCost
OverrunsandScheduleandPerformanceShortfalls
WhyGAOIsFocusing
onThisArea
TheDepartmentofHomelandSecurity(DHS),establishedin2003through
theconsolidationof22agencieswithdisparatemissions,hasobligated
billionsofdollarsannuallytomeetitsexpansivehomelandsecurity
mission.DHSacquisitionsrepresenthundredsofbillionsofdollarsin
lifecyclecostsandsupportawiderangeofmissionsandinvestments
includingCoastGuardshipsandaircraft,bordersurveillanceand
screeningequipment,nucleardetectionequipment,andsystemstotrack
thedepartmentsfinancialandhumanresources.DHShasnoteffectively
developed,acquired,andprovidedoversightofitscomplexinvestments,
suchasprogramsforsecuringtheborderandthenationstransportation
systems,withmanyprogramsexperiencingcostoverrunsandschedule
andperformanceshortfalls.
WhatGAOHasFound
IndicatingPotential
forCostSaving
DHSfacessignificantchallengesinmanagingitsacquisitions,including
programsnotmeetingtheircost,schedule,andperformanceexpectations.
StrengtheningitsacquisitionmanagementprocesswouldhelpDHSto
delivercriticalmissioncapabilitiesthatmeetidentifiedneedsontimeand
withinbudget,includinghelpingtoreducethecostoverrunsandschedule
delaysthatDHScontinuestoexperienceinmanyofthemajoracquisition
programsGAOhasreviewed.
DHSacquisitionspendinghasincreasedby66percentsincefiscalyear
2004from$8.5billioninfiscalyear2004to$14.2billioninfiscalyear
2009andDHSsportfolioofcomplexacquisitionscontinuestoexpand.
DHShasmadeprogressinstrengtheningitsacquisitionmanagementby,
forexample,implementingarevisedacquisitionmanagementdirective
thatincludesmoredetailedguidanceforprogramstouseininforming
componentanddepartmentaldecisionmaking.However,mostacquisition
programsGAOhasreviewedatthedepartmenthavenotmetcost,
schedule,andperformanceexpectations.
1
Inparticular,mostDHS
acquisitionprogramsreportedcostgrowthfrominitialestimates.Further,
mostprogramsGAOreviewedexperiencedestimatedoractualschedule
delaysindeliveryofinitialoperatingcapabilityofanaverageof12months.
AsGAOreportedinJune2010,weaknessesinthedepartmentsacquisition
managementprocesscontinuetohinderthedepartmentsabilityto
provideneededcapabilitiesontimeandwithinbudget.Forexample:
1
GAOreviewed15DHSmajoracquisitionprogramsforwhichcost,schedule,and
performancedatawereavailable.

DHSssenior-levelAcquisitionReviewBoardhadnotreviewedmostof
itsmajoracquisitionprogramsbytheendoffiscalyear2009and
programsthathadbeenreviewedhadnotconsistentlyimplemented
actionitemsidentifiedaspartofthereviewbyestablisheddeadlines.
GAOspriorworkhasshownthatwhenthesetypesofreviewsare
skippedornotfullyimplemented,programsmoveforwardwithlittle,if
any,earlydepartment-levelassessmentoftheprogramscostsand
feasibility,whichcontributestopoorcost,schedule,andperformance
outcomes.DHSacquisitionoversightofficialssaidthatfundingand
staffinglevelshavelimitedthenumberofprogramstheycanreview.
GAOrecommendedthatDHSidentifyandalignsufficientmanagement
resourcestoimplementoversightreviewsinatimelymanner.DHS
generallyconcurredwiththerecommendation,and,asofJanuary2011,
hasreportedtakingactiontoaddressit.Forexample,DHSreported
thatithasincreaseditsacquisitionmanagementstaffing,andplansto
hiremorestafftodevelopcostestimates.DHSalsoreportedthatit
held35AcquisitionReviewBoardmeetingsinfiscalyear2010and
planstoholdbetween36and40infiscalyear2011.Inaddition,DHS
reportedmakingprogressintrackingandclosingactionitems.These
plannedactionsarepositivestepsand,ifimplementedeffectively,
couldhelpstrengthenDHSsacquisitionreviewprocess.However,itis
tooearlytotellwhatimpacttheseplannedactionswillhaveonthe
departmentsreviewprocess.
DHSsacquisitionreviewprocesshasnotinformedDHSsannual
budgetprocessforfundingmajorprograms,andmanymajorprograms
receivedfundingwithoutvalidationofmissionneedsandrequirements,
largelybecausedepartment-levelreviewswereseldomconducted.
DHSsJointRequirementsCouncil,whichwasresponsiblefor
validatingprogramrequirements,stoppedmeetingin2006.GAO
recommendedthatthedepartmentensurethatbudgetdecisionsare
informedbytheresultsofinvestmentreviewsincludingapproved
acquisitioninformationandcostestimatesandreinstatetheJoint
RequirementsCouncilorestablishanotherdepartmentaloversight
boardtoperformthisfunction.DHSconcurredwiththis
recommendationand,asofJanuary2011,wasplanningtoestablisha
counciltoanalyzeDHSmissionandstrategicrequirements.DHSalso
reporteditplanstobetterlinkthedevelopmentofrequirementsto
resourceallocationandprogrammanagement.Untiltheseeffortsare
fullyandeffectivelyimplemented,DHSmaycontinuetoexperience
difficultiesinensuringthatresourcesareallocatedtoacquisition
programscommensuratewiththeirrequirements.
DHShasnotdevelopedaccuratecostestimatesformostofitsmajor
acquisitionprograms.Forexample,theCoastGuardsRescue21
searchandrescuesystemhasexperiencedsignificantcostgrowthby
131percentsincethedepartmentsinitialcostestimatein2003due
to,amongotherthings,underestimationofcostsforprogram
management,deployment,andoperationsandmaintenance.GAOs
workhasshownthataccuratecostestimatesarecriticaltomaking
fundingdecisions,evaluatingresourcerequirements,anddeveloping
performancemeasurementbaselines.DHShasreportedthatthe
departmentisworkingtoaddressthisconcernbyassistingprogramsin
developingcostestimatesandobtainingindependentcostestimatesfor
somehigh-riskprograms.Whilethesearepositivesteps,untilaccurate
costestimatesareinplace,DHSwillbechallengedinmakinginformed
fundingdecisionsandassessingprogramperformance.
Overhalfofthe15programsGAOreviewedawardedcontractsto
initiateacquisitionactivitieswithoutcomponentordepartment
approvalofdocumentsessentialtoplanningacquisitions,setting
operationalrequirements,andestablishingacquisitionprogram
baselines.Forexample,theSecureFlightprogramforcomparingair
passengersinformationtoterroristwatchlistsdidnothavean
approvedprogrambaselineuntilover4yearsafterinitiationofthe
acquisition,andU.S.CustomsandBorderProtectionsprogramto
modernizeitscomputerapplicationfordisseminatingdatatosupport
port-of-entryinspectionsdidnothaveacomponentordepartment-
approvedbaselineaftermorethan6years.Further,theFederal
EmergencyManagementAgencyhasnotyetapprovedanacquisition
programbaselineorotherkeyprogramdocumentsforitsIntegrated
PublicAlertandWarningSystem,whichwasinitiatedin2004,andDHS
didnotdevelopitslifecyclecostestimatesuntil2009.GAOspriorwork
hasnotedthatwithoutthedevelopment,review,andapprovalofthese
keydocuments,agenciesareatriskofhavingpoorlydefined
requirementsthatcannegativelyaffectprogramperformanceand
contributetoincreasedcosts.InJanuary2011,DHSreportedthatithas
beguntoimplementaninitiativetoassistprogramswithcompleting
departmentalapprovalofacquisitionprogrambaselines.However,itis
tooearlytofullyassesstheimpactofthisplannedinitiative.
GAOsworkhashighlightedtheneedforthedepartmenttoimproveits
ActionsNeededand
acquisitionportfoliomanagementandadheretokeyacquisition
PotentialSavings managementprocessestohelpimprovethedepartmentsabilitytodeliver
majoracquisitionprogramstomeetcriticalmissionneedsontimeand
withinbudget.Ensuringthatrequirementsandcostestimatesarewell
definedupfrontcouldhelpDHSmakesurethereisamoreaccurate
pictureofthetotalcostsandneedsforaprogram.Further,establishing
andmeasuringperformanceagainstdepartment-approvedbaselinesand
indicatorswouldhelpensurethattheacquisitionprogramisontrackwith
regardtoperformance,schedule,andcost.AsGAOhasrecommended,
DHSneedstoensurethatitsinvestmentdecisionsaretransparentand
documented;ensurethatbudgetdecisionsareinformedbytheresultsof
acquisitioninvestmentreviews,includingacquisitioninformationandcost
estimates;identifyandalignsufficientmanagementresources,suchas
acquisitionstaff,toimplementoversightreviewsinatimelymanner;and
reviewandvalidateacquisitionprogramsrequirements.Theseactions,if
implementedeffectively,shouldhelpDHSidentifyandavoidthecost
overrunsandscheduledelaysthatDHSacquisitionprogramshave
experienced.
DHSisplanningtoaddressthesechallengesby,amongotherthings,
establishinganInvestmentReviewBoardtooverseeactivitiesofthe
AcquisitionReviewBoardandthestatusofallacquisitioninvestments;
expandingitsAcquisitionCorpstoprovidetrainedprocurementand
programmanagementprofessionalstomanageDHSsmostcritical
acquisitionprograms;anddevelopingatooltotrackprogramscost,
schedule,andperformanceindicators.However,itistooearlytotellwhat
effecttheseplannedchangeswillhaveonDHSsacquisitionmanagement.
Inaddition,duetopreviouslymentionedconcernsabouttheaccuracyof
currentcostestimatesandDHSchallengesinmeasuringagainstcost,
schedule,andperformancebaselines,GAOisunabletoquantifyfuture
savingsatthistime.Successinreducingacquisitioncostoverrunswill
dependonDHSsfurtherimplementationofkeyactionsGAOhas
recommendedforstrengtheningthedepartmentsacquisition
management.
Frameworkfor
Analysis
DepartmentofHomelandSecurity:AssessmentsofSelectedComplex
RelatedGAO
Acquisitions.GAO-10-588SP.Washington,D.C.:June30,2010.
Products
AviationSecurity:TSAIsIncreasingProcurementandDeploymentof
theAdvancedImagingTechnology,butChallengestoThisEffortand
OtherAreasofAviationSecurityRemain.GAO-10-484T.Washington,
D.C.:March17,2010.
HomelandSecurity:DespiteProgress,DHSContinuestoBeChallenged
inManagingItsMulti-BillionDollarAnnualInvestmentinLarge-Scale
InformationTechnologySystems.GAO-09-1002T.Washington,D.C.:
September15,2009.
DepartmentofHomelandSecurity:AStrategicApproachIsNeededto
BetterEnsuretheAcquisitionWorkforceCanMeetMissionNeeds.
DepartmentofHomelandSecurity:BillionsInvestedinMajorPrograms
LackAppropriateOversight.GAO-09-29.Washington,D.C.:November18,
2008.
Foradditionalinformationaboutthisarea,contactDavidMaurerat
AreaContact
(202)512-9627ormaurerd@gao.gov;JohnHuttonat(202)512-7773or
huttonj@gao.gov;orDavidPownerat(202)512-9286orpownerd@gao.gov.
ImprovementsinManagingResearchand
DevelopmentCouldHelpReduce
InefficienciesandCostsforHomeland
Security
ImprovementsinManagingResearchandDevelopment
CouldHelpReduceInefficienciesandCostsfor
HomelandSecurity
WhyGAOIsFocusing
onThisArea
Thefederalgovernmentallocatesbillionsofdollarsforresearching,
developing,andtestingtechnologiesandothercountermeasuresto
addresschemical,biological,radiological,nuclear,andotherthreats
facingthenation.TheDepartmentofHomelandSecuritys(DHS)Science
andTechnologyDirectorate(S&T)conductsresearchanddevelopment
effortstoimprovehomelandsecurityby,amongotherthings,providingits
federal,state,local,tribal,andterritorialemergencyrespondercustomers
withtechnologytohelpthemachievetheirmissions.DHSsDomestic
NuclearDetectionOffice(DNDO)ischargedwithdeveloping,acquiring,
anddeployingequipmenttodetectnuclearandradiologicalmaterials,
supportingtheeffortsofDHSandotherfederalagencies.Accordingto
DHSdocuments,thetotalbudgetauthorityforS&TandDNDOwasover
$5.8billionforfiscalyears2007through2010.
1
DHShasexperienced
challengesinmanagingitsmultibilliondollarresearchanddevelopment
efforts,andGAOhasidentifiedproblemswithitstestingandcost-benefit
analyseseffortsinthisarea.
WhatGAOHasFound
IndicatingPotential
forCostSaving
Inmanagingitsmultibilliondollarresearchanddevelopmentefforts,DHS
hasexperiencedcostoverrunsanddelaysintheprocurementand
deploymentoftechnologiesandsystemsneededtomeetcriticalhomeland
securityneeds.DHScouldhelpreduceinefficienciesandcostsinits
researchanddevelopmentprogrambycompletingtestingeffortsbefore
makingacquisitiondecisionsandincludingcost-benefitanalysesinits
researchanddevelopmentefforts.
DHShasmadeacquisitiondecisionswithoutcompletingtestingeffortsto
ensurethatthesystemspurchasedmetprogramrequirements.GAOsprior
workhasshownthatfailuretoresolveproblemsdiscoveredduringtesting
cansometimesleadtocostlyredesignandreworkatalaterdate.
Addressingsuchproblemsduringthetestingphasebeforemovingtothe
acquisitionphasecanhelpagenciesavoidfuturecostoverruns.
InSeptember2010,GAOreportedthatDNDOwassimultaneously
engagedintheresearchanddevelopmentphasewhileplanningforthe
acquisitionphaseofitscargoadvancedautomatedradiographysystem
todetectcertainnuclearmaterialsinvehiclesandcontainersatports.
1
GAOdeterminedtotalbudgetauthorityforS&TandDNDObasedonDHSsMonthly
BudgetExecutionReportsforfiscalyears2007through2010.GAOhasnotindependently
verifiedamountsinthereports.

Security
DNDOpursuedthedeploymentofthecargoadvancedautomated
radiographysystemwithoutfullyunderstandingthatitwouldnotfit
withinexistinginspectionlanesatportsofentryandwouldslowdown
theflowofcommercethroughtheselanes,causingsignificantdelays.
DHSspent$113millionontheprogramsince2005.DHScancelledthe
acquisitionphaseoftheprogramin2007.
InJune2010,GAOreportedthatthreeCoastGuardprogramsthe
MaritimePatrolAircraft,ResponseBoat-Medium,andSentinelClass
PatrolBoatplacedordersfororreceivedsignificantnumbersofunits
priortocompletingtesting,placingtheCoastGuardatriskforneeding
tomakeexpensivechangestothedesignofthesevesselsafter
productionhadbegunifsignificantproblemswereidentifiedduring
testing.Acquisitioncostestimatesforthesethreeprogramstogether
totaledabout$6.8billion,accordingtoCoastGuarddata.
InOctober2009,GAOreportedthattheTransportationSecurity
Administration(TSA),withinDHS,deployedexplosivestraceportals,a
technologyfordetectingtracesofexplosivesonpassengersatairport
checkpoints,eventhoughTSAofficialswereawarethattests
conductedduring2004and2005onearliermodelsoftheportals
suggestedtheportalsdidnotdemonstratereliableperformanceinan
airportenvironment.TSAalsolackedassurancethattheportalswould
meetfunctionalrequirementsinairportswithinestimatedcosts.In
June2006,TSAhalteddeploymentoftheexplosivestraceportals
becauseofperformanceproblems,andthemachinesweremore
expensivetoinstallandmaintainthanexpected.GAOrecommended
thatTSAensurethattestsarecompletedbeforedeployingcheckpoint
screeningtechnologiestoairports.Theagencyconcurredwiththe
recommendationandhastakenactiontoaddressit.Forexample,TSA
hasrequiredmorerecentpassengercheckpointtechnologiesto
completebothlaboratorytestsandoperationaltestspriortotheir
deployment.
Inaddition,GAOspriorworkhasshownthatcost-benefitanalyseshelp
congressionalandagencydecisionmakersassessandprioritizeresource
investmentsandconsiderpotentiallymorecost-effectivealternatives.
However,DHShasnotincludedcost-benefitanalysesinitstestingefforts
andacquisitiondecisionmaking.
In2006,GAOrecommendedthatDHSsdecisiontodeploynext
generationradiationdetectionequipment,oradvancedspectroscopic
portals,usedtodetectsmugglednuclearorradiologicalmaterials,be
Security
basedonananalysisofboththebenefitsandcostswhichGAOlater
estimatedatover$2billionandadeterminationofwhetherany
additionaldetectioncapabilityprovidedbytheportalswasworththeir
additionalcost.DHSsubsequentlyissuedacost-benefitanalysis,but
GAOreportedthatthisanalysisdidnotprovideasoundanalyticalbasis
forDHSsdecisiontodeploytheportals.InJune2009GAOreported
thatanupdatedcost-benefitanalysismightshowthatDNDOsplanto
replaceexistingequipmentwithadvancedspectroscopicportalswas
notjustified,particularlygiventhemarginalimprovementindetection
ofcertainnuclearmaterialsrequiredofadvancedspectroscopicportals
andthepotentialtoimprovethecurrent-generationportalmonitors
sensitivitytonuclearmaterials,mostlikelyatalowercost.After
spendingmorethan$200millionontheprogram,inFebruary2010DHS
announcedthatitwasscalingbackitsplansfordevelopmentanduse
oftheportalstechnology.
InOctober2009GAOreportedthatTSAhadnotyetcompletedacost-
benefitanalysistoprioritizeandfunditstechnologyinvestmentsfor
screeningpassengersatairportcheckpoints.OnereasonthatTSAhad
difficultydevelopingacost-benefitanalysiswasthatithadnotyet
developedlifecyclecostestimatesforitsvariousscreening
technologies.GAOreportedthatthisinformationwasimportant
becauseitwouldhelpdecisionmakersdetermine,giventhecostof
varioustechnologies,whichtechnologyprovidedthegreatest
mitigationofriskfortheresourcesthatwereavailable.GAO
recommendedthatTSAdevelopacost-benefitanalysis.Theagencyhas
completedalifecyclecostestimateandcollectedinformationforits
checkpointtechnologies,buthasnotyetcompletedanycost-benefit
analysis.
InJanuary2011,DHSreportedthatitplanstotakeadditionalactionsto
strengthenitsresearchanddevelopmentefforts.Forexample,DHS
reportedthatitplanstoestablishanewmodelformanaging
departmentwideinvestmentsacrosstheirlifecycles.DHSreportedthat
S&Twillbeinvolvedineachphaseoftheinvestmentlifecycleandwill
participateinnewentitiesDHSisplanningtocreatetohelpensurethat
testandevaluationmethodsareappropriatelyconsideredaspartofDHSs
overallresearchanddevelopmentinvestmentstrategies.Accordingto
DHS,S&Twillhelpensurethatnewtechnologiesareproperlyscoped,
developed,andtestedbeforebeingimplemented.Inaddition,DHS
reportedthatthenewentitiesitisplanningtoestablishtostrengthen
managementofthedepartmentsacquisitionandinvestmentreview
processwillberesponsiblefor,amongotherthings,makingdecisionson
Security
researchanddevelopmentinitiativesbasedonfactorssuchasviabilityand
affordability,andoverseeingkeyacquisitiondecisionsformajorprograms
usingbaselineandactualdata.
ActionsNeededand
PotentialSavings
GAOsworkhashighlightedtheneedforthedepartmenttostrengthenits
researchanddevelopmenteffortsbyensuringthat(1)testingeffortsare
completedbeforemakingacquisitiondecisionsand(2)cost-benefit
analysesareconductedtoreduceresearchanddevelopmentinefficiencies
andcosts.TheplannedactionsDHSreportsitistakingorhasunderway
toaddressmanagementofitsresearchanddevelopmentprogramsare
positivestepsand,ifimplementedeffectively,couldhelpthedepartment
addressmanyofthesechallenges.However,itistooearlytofullyassess
theimpactoftheseactions.
GAOhasreportedthatDHScouldtakefurtheractionstoimproveits
managementofresearchanddevelopmenteffortsandreducecostsin
procuringanddeployingprogramsthathavenotbeenfullytested.For
example,rigorouslytestingdevicesusingactualagencyoperationaltactics
beforemakingdecisionsonacquisitionwouldhelpDHSreduce
inefficienciesandcosts.Further,conductingcost-benefitanalysesaspart
ofresearch,development,andtestingeffortswouldhelpDHSand
congressionaldecisionmakersbetterassessandprioritizeinvestment
decisions,includingassessingpossibleprogramalternativesthatcouldbe
morecost-effective.
Frameworkfor
productslistedbelow.GAOhasongoingworkfortheSenateCommittee
Analysis onHomelandSecurityandGovernmentalAffairsreviewingtherolethat
S&Thasinconductingtestingandevaluationofmajoracquisitions
programspriortoimplementation.
RelatedGAO
Products
CombatingNuclearSmuggling:InadequateCommunicationand
OversightHamperedDHSEffortstoDevelopanAdvancedRadiography
SystemtoDetectNuclearMaterials.GAO-10-1041T.WashingtonD.C.:
September15,2010.
CombatingNuclearSmuggling:DHSHasMadeSomeProgressbutNot
YetCompletedaStrategicPlanforItsGlobalNuclearDetectionEffortsor
ClosedIdentifiedGaps.GAO-10-883T.WashingtonD.C.:June30,2010.
Security
AviationSecurity:DHSandTSAHaveResearched,Developed,and
BegunDeployingPassengerCheckpointScreeningTechnologies,but
ContinuetoFaceChallenges.GAO-10-128.Washington,D.C.:October7,
2009.
CombatingNuclearSmuggling:LessonsLearnedfromDHSTestingof
AdvancedRadiationDetectionPortalMonitors.GAO-09-804T.
CombatingNuclearSmuggling:DHSImprovedTestingofAdvanced
RadiationDetectionPortalMonitors,butPreliminaryResultsShow
LimitsoftheNewTechnology.GAO-09-655.WashingtonD.C.:May21,
2009.
Foradditionalinformationaboutthisarea,contactDavidMaurerat
AreaContact
(202)512-9627ormaurerd@gao.gov.
ValidationofTSAsBehavior-BasedScreening
ProgramIsNeededtoJustifyFundingor
Expansion
ValidationofTSAsBehavior-BasedScreeningProgram
IsNeededtoJustifyFundingorExpansion
WhyGAOIsFocusing
onthisArea
TheterroristattacksofSeptember11,2001,highlightedtheneedto
improvesecuritywithinthenationscivilaviationsystemtodeterpersons
seekingtorepeatsimilarattacksonthenationscriticalinfrastructure.To
enhanceaviationsecurity,theDepartmentofHomelandSecuritys(DHS)
TransportationSecurityAdministration(TSA)begantestinginOctober
2003ofitsScreeningofPassengersbyObservationTechniques(SPOT)
programtoidentifypersonswhomayposearisktoaviationsecurity.In
fiscalyear2010,about3,000BehaviorDetectionOfficersweredeployedto
161airportsatanannualcostofover$200million.AshighlightedinGAOs
May2010report,TSAdidnotvalidatethesciencesupportingtheprogram
ordetermineifbehaviordetectiontechniquescouldbesuccessfullyused
acrosstheaviationsystemtodetectthreatsbeforedeployingtheSPOT
program.
WhatGAOHasFound
IndicatingPotential
forCostSaving
TSAhasimplementedandnowseekstoexpandabehaviorscreening
program,whichhasnotyetbeenvalidated.Avalidationstudyis
underway,butquestionsexistregardingwhetherthestudysmethodology
issufficientlycomprehensivetovalidatetheSPOTprogram.Theresultsof
anindependentassessmentareneededtodeterminewhethercurrent
validationeffortsaresufficientlycomprehensivetovalidatetheprogram.
Afteroperationallytestingbehavioraldetectionscreeningstartedin
October2003,TSAcreatedseparateBehaviorDetectionOfficerpositions
aspartoftheSPOTprogrambeginninginfiscalyear2007.TSAdesigned
SPOTtoprovidetheseofficerswithameansofidentifyingpersonswho
mayposeapotentialsecurityriskatTSA-regulatedairportsbyfocusingon
behaviorsandappearancesthatdeviatefromanestablishedbaseline,and
thatmaybeindicativeofstress,fear,ordeception.BehaviorDetection
Officershavebeenselectivelydeployedto161ofthe462TSA-regulated
airportsintheUnitedStates.Theconferencereportaccompanyingthe
fiscalyear2010DHSappropriationsactprovidedthat$211.9millionwas
fortheSPOTprogram.
1
Theadministrationhasrequested$232millionfor
SPOTforfiscalyear2011,a$20.2million(9.5percent)increaseoverthe
currentfundinglevel.Thisincreasewouldsupportaworkforceincrease
fromabout3,000to3,350BehaviorDetectionOfficers.
AsdiscussedinGAOsMay2010report,TSAdeployedSPOTnationwide
beforefirstdeterminingwhethertherewasascientificallyvalidbasisfor
1
H.R.Rep.111-298,at77(2009)(Conf.Rep.).

Expansion
usingbehaviorandappearanceindicatorsasameansforreliably
identifyingpassengerswhomayposearisktotheU.S.aviationsystem.
AccordingtoTSA,SPOTwasdeployedbeforeascientificvalidationofthe
programwascompletedinresponsetotheneedtoaddresspotential
threats,butwasbaseduponscientificresearchavailableatthetime
regardinghumanbehaviors.TSAofficialsalsostatedthatnootherlarge-
scaleU.S.orinternationalscreeningprogramincorporatingbehavior-and
appearance-basedindicatorshaseverbeenrigorouslyscientifically
validated.
However,a2008reportissuedbytheNationalResearchCouncilofthe
NationalAcademyofSciencesnotedthataninformation-basedprogram,
suchasabehaviordetectionprogram,shouldfirstdetermineifascientific
foundationexistsandusescientificallyvalidcriteriatoevaluateits
effectivenessbeforegoingforward.Thereportaddedthatprograms
shouldhaveasoundexperimentalbasisandthatthedocumentationon
theprogramseffectivenessshouldbereviewedbyanindependententity
capableofevaluatingthesupportingscientificevidence.
2
Thus,andas
recommendedinGAOsMay2010report,anindependentpanelofexperts
couldhelpDHSdevelopacomprehensivemethodologytodetermineifthe
SPOTprogramisbasedonvalidscientificprinciplesthatcanbeeffectively
appliedinanairportenvironmentforcounterterrorismpurposes.
Specifically,GAOsMay2010reportrecommendedthattheSecretaryof
HomelandSecurityconveneanindependentpanelofexpertstoreviewthe
methodologyofavalidationstudyontheSPOTprogrambeingconducted
byDHSsScienceandTechnologyDirectoratetodeterminewhetherthe
studysmethodologyissufficientlycomprehensivetovalidatetheSPOT
program.GAOrecommendedthatthisassessmentincludeappropriate
inputfromotherfederalagencieswithexpertiseinbehaviordetectionand
relevantsubjectmatterexperts.DHSconcurredandstatedthatitscurrent
validationstudyincludesanindependentreviewoftheprogramthatwill
includeinputfromotherfederalagenciesandrelevantexperts.According
toDHS,thisindependentreviewisexpectedtobecompletedinFebruary
2011.
2
AstudyperformedbytheJASONprogramofficeraisedsimilarconcerns.TheJASON
programofficeisanindependentscientificadvisorygroupthatprovidesconsulting
servicestotheU.S.governmentonmattersofdefensescienceandtechnology.
Expansion
ActionsNeededand
PotentialSavings
AsdiscussedinGAOsMay2010report,DHShascontractedwiththe
AmericanInstitutesforResearchtoconductitsvalidationstudy.However,
DHSsresponsetoGAOsreportdidnotdescribehowthereviewcurrently
plannedisdesignedtodeterminewhetherthestudysmethodologyis
sufficientlycomprehensivetovalidatetheSPOTprogram.AsGAOnoted
initsreport,researchonotherissues,suchasdeterminingthenumberof
individualsneededtoobserveagivennumberofpassengersmovingata
givenrateperdayinanairportenvironmentorthedurationthatsuch
observationcanbeconductedbyBehaviorDetectionOfficersbefore
observationfatigueaffectseffectiveness,couldprovideadditional
informationontheextenttowhichSPOTcanbeeffectivelyimplemented
inairports.Additionalresearchcouldalsohelpdeterminetheneedfor
periodicrefreshertrainingsinceresearchhasnotyetdeterminedwhether
behaviordetectioniseasilyforgottenorcanbepotentiallydegradedwith
timeorlackofuse.Becausesuchquestionsexist,usinganindependent
panelofexpertstoassessthemethodologyofthestudycouldprovide
DHSwithadditionalassuranceregardingwhetherthestudysmethodology
issufficientlycomprehensivetovalidatetheSPOTprogram. DHSstated
thattheongoingindependentreviewisbeingconductedbyan
independentpanelofexpertsthatincludesabroadrangeofoperational
agenciesandacademiaandwillinclude,amongotherthings,
recommendedadditionalstudiesthatshouldbeundertakentomorefully
validatethescienceunderlyingtheSPOTscreeningprocess.Moreover,
DHSstatedthatitscurrentefforttovalidatethescienceunderlyingSPOT
includesthreeyearsofoperationalSPOTreferraldataandpreliminary
resultsindicatethatitissupportiveofSPOT.However,inMay2010,GAO
reportedweaknessesinTSAsprocessformaintainingoperationaldata
fromtheSPOTprogramdatabase.Becauseofthesedata-relatedissues,
GAOreportedthatmeaningfulanalysescouldnotbeconductedto
determineifthereisanassociationbetweencertainbehaviorsandthe
likelihoodthatapersondisplayingcertainbehaviorswouldbereferredto
alawenforcementofficerorwhetheranybehaviororcombinationof
behaviorscouldbeusedtodistinguishdeceptivefromnondeceptive
individuals.
Congressmaywishtoconsiderlimitingprogramfundingpendingreceipt
ofanindependentassessmentofTSAsSPOTprogram.GAOidentified
potentialbudgetsavingsofabout$20millionperyeariffundingwere
frozenatcurrentlevelsuntilvalidationeffortsarecomplete.Specifically,
inthenearterm,Congresscouldconsiderfreezingappropriationlevelsfor
theSPOTprogramatthe2010leveluntilthevalidationeffortiscompleted.
AssumingthatTSAisplanningtoexpandtheprogramatasimilarrate
eachyear,thisactioncouldresultinpossiblesavingsofabout$20million
Expansion
peryear,sinceTSAisseekingabouta$20millionincreaseforSPOTin
fiscalyear2011.Uponcompletionofthevalidationeffort,Congressmay
alsowishtoconsiderthestudysresultsincludingtheprograms
effectivenessinusingbehavior-basedscreeningtechniquestodetect
terroristsintheaviationenvironmentinmakingfuturefundingdecisions
regardingtheprogram.
Frameworkfor
productlistedbelow.
Analysis
AviationSecurity:EffortstoValidateTSAsPassengerScreening
RelatedGAOProduct
BehaviorDetectionProgramUnderway,butOpportunitiesExistto
StrengthenValidationandAddressesOperationalChallenges.
GAO-10-763.Washington,D.C.:May2010.
AreaContact
MoreEfficientBaggageScreeningSystems
CouldResultinSubstantialReductionin
PersonnelCosts
MoreEfficientBaggageScreeningSystemsCould
ResultinSubstantialReductioninPersonnelCosts
WhyGAOIsFocusing
onThisArea
TheTransportationSecurityAdministrations(TSA)ElectronicBaggage
ScreeningProgramwhichfacilitatesthedevelopmentanddeploymentof
checkedbaggagescreeningsystemsisoneofthelargestacquisition
programsintheDepartmentofHomelandSecurity.AccordingtoTSA,
over$8billionhasbeenmadeavailableforenhancingthescreeningof
checkedbaggagetransportedonpassengeraircraftsincefiscalyear2001.
Infiscalyear2010,over$1billionwasmadeavailabletoprocureand
installscreeningequipment.TheDepartmentofHomelandSecuritysfiscal
year2011requestamountsto$624millionforprocurementand
installationinfiscalyear2011.
1
ThroughtheElectronicBaggageScreeningProgram,TSAdeploysbaggage
screeningsystemstobestfitsecurityneedsandinfrastructureatthe462
airportsatwhichTSAperformsoroverseesscreeningactivities.TSA
generallydeploysequipmentforscreeningcheckedbaggageinoneoftwo
ways:(1)in-linebaggagescreeningsystems,whichareintegratedintothe
conveyorsystemsthatsortandtransportbaggageforloadingontoanaircraft
and(2)stand-alonemachinesthataretypicallysituatedinairportlobbies.
WhatGAOHasFound
IndicatingPotential
forCostSaving
GAOestimatesthatTSAcouldachieveupto$470millioninnetsavings
basedonreducedTSAstaffingcoststhroughthereplacementor
modificationofexistingsystemswithmoreefficientbaggagescreening
systemsatairportsoverthenext5years,assumingthatfundingfor
procurementandinstallationundertheElectronicBaggageScreening
ProgramcontinuesatTSA-projectedlevels.
2
InMarch2005,GAOreportedthatairportsbenefitfromtheinstallationof
moreefficientsystems,suchasin-linebaggagescreeningsystems,because
thesesystemsreducethetimeneededforbaggagescreeningandallow
airportsandTSAtostreamlinetheiroperations.Moreover,a2006Aviation
SecurityAdvisoryCommitteestudyreportedthatmodifyingorreplacing
existingsystemswithmoreefficientsystemscouldreducethenumberof
1
Fromthisamount,TSAalsoplanstosupportitsSecurityTechnologyIntegratedProgram,
AdvancedSurveillanceProgram,andotherprogramsrelatedtotheoperationand
integrationofsecuritytechnologies.
2
Netsavingsaccountfordifferencesinacquisition,modification,installation,andoperation
andmaintenancecostsbetweenexistingsystemsreplacedwithmoreefficientsystemsat
airports.
PersonnelCosts
screenerpersonnelrequiredtooperatethesesystems.
3
In2005,GAOalso
reportedthatTSAhadnotconductedasystematic,prospectiveanalysisto
determineatwhichairportsitcouldachievelong-termsavingsand
enhanceefficienciesandsecuritybyinstallingmoreefficientin-line
systems.GAOrecommended,amongotherthings,thatTSAidentifyand
prioritizetheairportswherethecost-savingsbenefitsofoptimizing
baggagescreeningoperationsbyreplacingexistingbaggagescreening
systemswithmoreefficientin-linesystemsarelikelytoexceedthe
estimatedup-frontinvestmentcostsofinstallingthesystems,orwherethe
systemsareneededtoaddresssecurityrisks.TSAconcurredwiththis
recommendationandpublishedaplantodeploymoreefficientsystems
for250airports.AsofJanuary2011,TSAplanstocompleteitseffortsto
replaceormodifysystemsattheseairportsby2024.TSAofficialshavenot
providedGAOwithinformationonitsplansattheremainingairports.
Replacingormodifyingexistingsystemswithmoreefficientsystems
resultsinnetpersonnelcostsavingstotheextentallothercosts,except
forpersonnelacquisition,installation,modification,andoperationsand
maintenancecostsarerelativelyequalovertime.UsingTSAdataonits
plannedaverageannualprogrambudgetrateof$448millionandestimated
screenerpersonnelcosts,GAOestimatesthatifTSAcontinuestoreplace
ormodifyoldersystemswithmoreefficientsystems,includingin-line
screeningsystems,itcouldreducefull-timeequivalentbaggagescreener
positionsasaresultofinvestmentsmadeinfiscalyears2011through2015.
Thisreductioninpersonnelcouldresultinupto$470millioninestimated
3
Thecommittee,comprisedofgovernmentandprivatesectorrepresentatives,examines
areasofcivilaviationsecuritytodeveloprecommendationsforimprovingaviationsecurity
methods,equipment,andprocedures.
PersonnelCosts
netcostsavings.
4
Theseestimatesarebasedonairportplanningand
acquisitioncostsfor250airportsprovidedbyTSAthataresubjectto
changebutareillustrativeofthepotentialmagnitudeoffederalcost
savingsthatcouldbeachieved.Morepreciseestimatescouldbedeveloped
astheseplansarefurtherdevelopedandrefined.
ActionsNeededand
PotentialSavings
Bycontinuingtoreplaceormodifyoldersystemswithmoreefficient
solutions,includingin-linescreeningsystems,atitsplannedaverageannual
programbudgetrateof$448million,
5
TSAcouldcontinuetoeliminate
baggagescreenerpositionsachievingupto$470millioninestimatednet
costssavingsoverthenext5years.
6
TSAagreedthatthedeploymentof
moreefficientsystemsofferspotentialcostsavingstothefederal
government.GAOwillcontinuetoassesstheseissuesaspartofitsongoing
workexaminingmoreefficientcheckedbaggagescreeningsystemsforthe
4
GAOestimatesthatthesecostsavingsareequivalenttouptoapproximately10,400
cumulativefull-timeequivalentscreenerpositionsresultingfrominvestmentsforfiscalyears
2011through2015.Tocalculatetheseestimatedcostsavings,GAOcomputedanaverage
returnoninvestmentbydeterminingtheprojected5-yearsavingsTSAcouldrealizeby
replacingormodifyingbaggagesystemsatindividualairportsin2009andcomparingthe
savingstofundingmadeavailabletoTSAinfiscalyear2009forprocurementandinstallation
ofthesystems.First,GAOcalculatedthepresentvalueofestimatedfull-timeequivalent
savingsacrossa5-yearperiod(i.e.,fiscalyears2009through2013)whichtotaledabout$117
millioninfiscalyear2009.The$117millionassumesdifferencesinacquisition,modification,
installation,andoperationandmaintenancecostsbetweenexistingsystems,andmore
efficientsystemsatairportscontinuetoberelativelyequal.Thisassumptionisbasedon
TSAsanalysisconductedin2004and2005,whichwasthemostrecentanalysisavailable.
GAOreviewedandreportedonthisanalysisinitsMarch2005report.Second,GAOdivided
thecostsavingsbythe$544millioninfundingmadeavailableforprocurementand
installationinfiscalyear2009(excludinganycarry-overbalancesfrompriorfiscalyearsand
fundsappropriatedthroughtheAmericanRecoveryandReinvestmentAct).Thus,theaverage
returnonTSAsinvestmentortheratioofcostsavingsasashareofinvestmentis$117/$544
million,orabout0.21.GAOmultipliedthisratio(0.21)byTSAsplannedfutureprogram
budgetforreplacingormodifyingbaggagesystemsforfiscalyear2011throughfiscalyear
2015(assumingTSAreceivesfundingatanticipatedlevels)toestimatetheresultingnetcost
savings.However,the0.21ratiomaynotnecessarilycontinueintothefuturedependingon
changingcostsandcircumstances.Tocalculatetheaverageannualprogrambudget,GAO
usedinformationTSAprovidedonitsplannedannualprogrambudgetonacquisitionand
planningcostsforfiscalyears2011through2014.GAOdidnothaveinformationonTSAs
plannedannualprogrambudgetforfiscalyear2015.
5
TSAsOfficeofSecurityTechnology,AcquisitionReviewBoardpresentation,
November5,2009.
6
AnticipatedcostsavingsmaybereducedasTSAdivertsfundingto,forexample,
recapitalizeexistingbaggagescreeningsystemsforsustainedoperations.
PersonnelCosts
SenateCommitteeonCommerce,ScienceandTransportation.GAOplansto
reportonthefinalresultsofthisreviewin2011.
Frameworkfor
Analysis
ThisanalysisisbasedonGAOspreliminaryobservationsfromitsongoing
workaswellasinformationcontainedintherelatedGAOproductslisted
below.TodevelopGAOspreliminaryobservations,GAOreviewedavailable
documentationonTSAscheckedbaggagescreeningprogram,including
TSAsestimatedcostdataforfull-timeequivalentscreenersfromfiscalyear
2009tofiscalyear2013;TSAsplannedprogrambudgetdataforcontinued
installationofmoreefficientsystems;andmodificationcostsfromfiscal
years2009tofiscalyears2010.GAOcouldnotindependentlyverifythe
reliabilityofallofthisinformation,butitcomparedthisinformationwith
othersupportingdocuments,whenavailable,todeterminedataconsistency
andreasonableness.Onthebasisoftheseefforts,GAOconcludedthatthe
dataweresufficientlyreliableforitspurposes.
RelatedGAO
Products
AirportFinance:ObservationsonPlannedAirportDevelopmentCosts
andFundingLevelsandtheAdministrationsProposedChangesinthe
AirportImprovementProgram.GAO-07-885.Washington,D.C.:
June29,2007.
AviationSecurity:CostEstimatesRelatedtoTSAFundingofChecked
BaggageScreeningSystemsatLosAngelesandOntarioAirports.
AviationSecurity:TSAHasStrengthenedEffortstoPlanfortheOptimal
DeploymentofCheckedBaggageScreeningSystems,butFunding
UncertaintiesRemain.GAO-06-875T.Washington,D.C.:June29,2006.
AviationSecurity:EnhancementsMadeinPassengerandChecked
BaggageScreening,butChallengesRemain.GAO-06-371T.Washington,
D.C.:April4,2006.
AviationSecurity:SystematicPlanningNeededtoOptimizethe
DeploymentofCheckedBaggageScreeningSystems.GAO-05-365.
AreaContact
ClarifyingAvailabilityofCertainCustoms
FeeCollectionsCouldProduceSavings
ClarifyingAvailabilityofCertainCustomsFee
CollectionsCouldProduceSavings
WhyGAOIsFocusing
onThisArea
TheU.S.CustomsandBorderProtection(CBP)collectsuserfeesto
recovercertaincostsincurredforprocessing,amongotherthings,airand
seapassengers;andvariousprivateandcommercialland,sea,air,andrail
carriersandshipments.ThesefeeswerecreatedbytheConsolidated
OmnibusBudgetReconciliationActof1985(COBRA)andaredeposited
intotheCustomsUserFeeAccount.CBPalsoreceivesappropriations,
includingaSalariesandExpensesappropriation.Topayforcertain
expenses,itreimbursesitssalariesandexpensesappropriationfromits
COBRAcollections.
GAOdiscoveredthatCBPhasa$639.4millionunobligatedbalanceinits
CustomsUserFeeAccountasaresultofexcesscollectionsfroma
temporaryfeeincreaseandeliminationofNorthAmericanFreeTrade
Agreement(NAFTA)countryexemptionsfromJanuary1,1994,to
September30,1997.
WhatGAOHasFound
IndicatingPotential
forEnhancing
Revenue
ClarifyingtheavailabilityofunobligatedbalancesinCBPsCustomsUser
FeeAccountcouldenableCongresstorevisetheagencysfuture
appropriations,therebyproducingaone-timesavingsofupto$640
million.WhentheNAFTAImplementationActwasamendedin1993,in
additiontoauthorizingatemporaryincreaseintheCOBRAuserfees
chargedtopassengersarrivingintheUnitedStatesfromabroadon
commercialvesselsoraircraftfrom$5to$6.50,theamendmentalso
temporarilyliftedtheexemptionforpassengersarrivingfromMexico,
Canadaandadjacentislands,andU.S.territories(otherthanPuertoRico).
Theadditionalamountscollectedduetothesetemporaryadjustments,
whichexpiredin1997,weredepositedintheCustomsUserFeeAccount
andwereavailableforreimbursementofinspectioncosts,includingthose
relatedtopassengerprocessing.Thesefunds,whichaccumulatedfrom
January1,1994,toSeptember30,1997,remainunobligatedintheaccount.
GAOfirstidentifiedtheseunobligatedbalancesin2008.CBPofficials
statedatthattimethatalthoughtheyformerlybelievedtheyneeded
additionalauthorizationtospendthesebalances,itlaterappearedthatthe
fundsmaybeusedasauthorizedbylaw.However,whenGAOdiscussed
theseunobligatedbalancesagainin2009and2010,CBPofficialssaidthey
providedinformationontheexcesscollectionstotheOfficeof
ManagementandBudget(OMB)andrequestedOMBsassistancemultiple
timestoclarifytheavailabilityofthesefunds.TheysaidOMBhasnot
respondedtotheirrequest.
ClarifyingAvailabilityofCertainCustoms
FeeCollectionsCouldProduceSavings
GAObelievesthisisanissuethatCongressmaywishtoaddresssince
ActionsNeededand
theseunobligatedbalanceshaveremainedinCBPsCustomsUserFee
PotentialRevenue accountformorethan10years.Congresscouldclarifythepurposesfor
whichthe$640millioninunobligatedbalancesisavailableandtakeaction
asappropriate.
Frameworkfor
Analysis
ThisanalysisisbasedonreviewsofCBPsuserfeeaccounts,whichwere
providedtoCongressastechnicaladviceinaBudgetJustificationReview
inthecontextofGAOsannualreviewofthePresidentsannualbudget
request.GAOconductedthatworkinaccordancewithallsectionsof
GAOsQualityAssuranceFrameworkthatwererelevanttoitsobjectives.
TheframeworkrequiresthatGAOplanandperformtheengagementto
obtainsufficientandappropriateevidencetomeetitsstatedobjectives
andtodiscussanylimitationsinitswork.GAObelievesthatthe
informationanddataobtained,andtheanalysisconducted,providea
reasonablebasisforanyfindingsandconclusions.
Therearenopubliclyavailableproductsrelatedtothisanalysis.
RelatedGAO
Products
Foradditionalinformationaboutthisarea,contactSusanIrvingat
AreaContact
(202)512-8288orirvings@gao.gov.
SocialSecurityNeedsDataonPensionsfrom
NoncoveredEarningstoBetterEnforce
OffsetsandEnsureBenefitFairness
NoncoveredEarningstoBetterEnforceOffsetsand
EnsureBenefitFairness
WhyGAOIsFocusing
onThisArea
TheSocialSecurityAdministration(SSA)needsaccurateinformationfrom
stateandlocalgovernmentsonretireeswhoreceivepensionsfrom
employmentnotcoveredunderSocialSecurity.SSAneedsthis
informationtofairlyandaccuratelyapplytheGovernmentPensionOffset
(GPO),whichgenerallyappliestospouseandsurvivorbenefits,andthe
WindfallEliminationProvision(WEP),whichappliestoretiredworker
benefits.Informationonreceiptofpensionsfromnoncoveredemployment
isnotavailabletoSSAformanystateandlocalpensionbenefits,even
thoughitisforfederalpensionbenefitsfromthefederalOfficeof
PersonnelManagement.Theresultingdisparityintheapplicationofthe
provisionsisacontinuingsourceofconfusionandfrustrationforaffected
workers.Providinginformationonthereceiptofstateandlocal
noncoveredpensionbenefitstoSSAviataxdatacouldhelptheagency
moreaccuratelyandfairlyadministertheGPOandWEPandcouldsave
nearly$3billionover10years,accordingtoestimatesbytheOfficeof
ManagementandBudget.
SocialSecuritycoversabout96percentofallU.S.workers;thevast
majorityoftheremaining4percentarepublicemployeeswhoworkfor
federal,state,andlocalgovernment.Inthecaseofstateandlocal
governmentemployees,aboutone-fourth,orabout7million,havejobs
thatarenotcoveredbySocialSecurity.Althoughtheseworkersdonotpay
SocialSecuritytaxesontheirnoncoveredgovernmentearnings,theymay
stillbeeligibleforSocialSecuritybenefitsthroughtheirspousesortheir
ownearningsfromotherjobsthatSocialSecuritydoescover.Social
SecuritysGPOandWEPprovisionsattempttotakenoncovered
employmentintoaccountwhencalculatingtheSocialSecuritybenefits.
However,theseprovisionshavebeendifficulttoadministerbecauseSSA
doesnothavethepensiondataitneedstoperformthesecalculations
accurately.
OneofSocialSecuritysmostfundamentalprinciplesisthatbenefits
reflecttheearningsonwhichworkershavepaidSocialSecuritytaxes.At
thesametime,SocialSecurityhelpsensurethatitsbeneficiarieshave
adequateincomes.SocialSecuritysbenefitprovisionsredistributeincome
inavarietyofwaysfromthosewithhigherlifetimeearningstothose
withloweronesandfromthosewithoutdependentstothosewith
dependents.Suchdistributionaleffectsdepend,toagreatextent,onthe
universalandcompulsorynatureoftheprogram.Noncoveredemployment
hasunintendedeffectsonthesedistributionaloutcomes.Accordingly,
SocialSecurityusestheGPOandWEPtotakenoncoveredemployment
intoaccount.
TheGPOprovidesanoffsetforspouseswithnoncoveredearningsthatis
similartoanoffsetthatapplies,ineffect,tospouseswithcovered
earnings.UnderSocialSecuritysbenefitprovisions,workersmaybe
entitledto(1)retiredworkerbenefitsbasedontheirowncoveredearnings
orto(2)spouseorsurvivorbenefitsbasedontheirspousescovered
earnings.However,theyarenotentitledtoreceiveboth,onlythehigherof
thetwo.Ineffect,spouseswithcoveredearningsaresubjecttoanoffset
equalto100percentoftheirspouseorsurvivorbenefitsiftheirretired
workerbenefitsarehigher.Similarly,theGPOreducestheSocialSecurity
spousalbenefitforworkerswhoalsoreceiveaworkerspensionfrom
noncoveredemployment.
TheWEPprovidesanoffsettoretiredworkerbenefitsandaccountsfor
thefactthatworkerswithnoncoveredpensionshavehigherlifetime
earningsthanthecoveredearningsonwhichtheirbenefitsarecalculated.
SocialSecuritysbenefitformulareplacesarelativelyhigherproportionof
wagesforlowearnersthanforhighearners,whichhelpsensureadequate
retirementincomes.Workerswithlengthycareersinnoncovered
employmentappearonSSAsrecordsaslowearnersevenwhentheyare
notbecausethoserecordsdonotreflectnoncoveredearnings.Withoutthe
WEP,CongresswasconcernedthatthedesignoftheSocialSecurity
benefitformulaprovidedunintendedwindfallbenefitstoworkerswhohad
spentmostoftheircareersinnoncoveredemployment.
WhatGAOHasFound
IndicatingPotential
forCostSaving
InanApril1998report,GAOfoundthatSSAdidnothavetheinformation
itneededonbeneficiariesreceiptofstateandlocalnoncoveredpensions,
eventhoughitdidhavesuchinformationforfederalpensionbenefits.Asa
result,adisparityintheapplicationoftheprovisionsexisted.GAO
recommendedthatSSAworkwiththeInternalRevenueService(IRS)to
revisethereportingofpensioninformationonIRSForm1099R,sothat
SSAwouldbeabletoidentifypeoplereceivingapensionfromnoncovered
employment,especiallyinstateandlocalgovernments.However,IRSdid
notbelieveitcouldmaketherecommendedchangewithoutnew
legislativeauthority.InMay2003,June2005,andNovember2007,GAO
suggestedthatCongressconsidergivingIRStheauthoritytocollectthe
informationthatSSAneedsongovernmentpensionincome.TheSenate
FinanceCommitteeproposedaversionoftheSocialSecurityProtection
Actof2004thatcontainedsuchaprovision,butthisprovisionwasnot
includedwhenthefinalversionofthebillwaspassedandsignedintolaw.
CriticsoftheGPOandWEPcontendthattheprovisionsareinaccurate
andoftenunfair.Forexample,criticsoftheGPOcontendthatthe
reductionisimpreciseandcouldbebasedonamorerigorousformula.
AccordingtoananalysisconductedbytheCongressionalResearch
Service,theGPOformulaslightlyoverestimatesthebenefitreductionthat
someindividuals(particularlyhigherearners)wouldotherwisereceiveif
theyworkedinSocialSecurity-coveredemployment,andgreatly
underestimatesthereductionthatothers(particularlylowerearners)
wouldreceive.InthecaseoftheWEP,opponentsarguethattheformula
adjustmentisanarbitraryandinaccuratewaytoestimatethevalueofthe
windfallandcausesarelativelylargerbenefitreductionforlower-paid
workers.However,accountingforsucheffectsofdifferencesinlifetime
earningswouldinvolvehavingcompleterecordsofnoncoveredearnings,
whichSSAdoesnothave.Incontrast,toimplementthecurrent
provisions,SSAonlyneedstodeterminewhetherabeneficiaryisreceiving
apensionbasedonnoncoveredearnings.
Extendingmandatorycoverageforallstateandlocalworkershasbeen
proposedamongotheroptionsforaddressingSocialSecurityslong-term
financialdeficit.WhilethiswouldeventuallymaketheGPOandWEP
offsetsobsolete,theywouldstillbeneededformanyyearstocomefor
existingemployeesandbeneficiaries.
ActionsNeededand
PotentialSavings
GAOcontinuestobelievethatitisimportanttoapplytheselaws
consistentlyandequitably.Specifically,GAOcontinuestosuggestthat
CongressconsidergivingIRStheauthoritytocollecttheinformationthat
SSAneedsongovernmentpensionincometoadministertheGPOand
WEPprovisionsaccuratelyandfairly.
ThePresidents2011budgetsproposalsforterminations,reductions,and
savingscontainsaprovisionthatwouldaddresstheneedformore
completeandaccurateinformationonnoncoveredstateandlocal
pensions,anditestimatessavingsof$2.9billionover10years.The
CongressionalBudgetOffices2009BudgetOptions,Volume2,hasa
similarprovisionandestimatessavingsof$2.4billionover10years.
Frameworkfor
Analysis
RelatedGAO
Products
SocialSecurityAdministration:ManagementOversightNeededto
EnsureAccurateTreatmentofStateandLocalGovernmentEmployees.
SocialSecurity:IssuesRegardingtheCoverageofPublicEmployees.
GAO-08-248T.Washington,D.C.:November6,2007.
SocialSecurity:CoverageofPublicEmployeesandImplicationsfor
Reform.GAO-05-786T.Washington,D.C.:June9,2005.
SocialSecurityReform:AnswerstoKeyQuestions.GAO-05-193SP.
SocialSecurity:IssuesRelatingtoNoncoverageofPublicEmployees.
SocialSecurity:CongressShouldConsiderRevisingtheGovernment
PensionOffsetLoophole.GAO-03-498T.Washington,D.C.:February27,
2003.
SocialSecurity:ImplicationsofExtendingMandatoryCoveragetoState
andLocalEmployees.GAO/HEHS-98-196.Washington,D.C.:August18,
1998.
SocialSecurity:BetterPaymentControlsforBenefitReduction
ProvisionsCouldSaveMillions.GAO/HEHS-98-76.Washington,D.C.:
April30,1998.
FederalWorkforce:EffectsofPublicPensionOffsetonSocialSecurity
BenefitsofFederalRetirees.GAO/GGD-88-73.Washington,D.C.:April27,
1988.
Foradditionalinformationaboutthisarea,contactCharlesJeszeckat
AreaContact
(202)512-7215orjeszeckc@gao.gov.
CongressCouldPursueSeveralOptionsto
ImproveCollectionofAntidumpingand
CountervailingDuties
CongressCouldPursueSeveralOptionstoImprove
CollectionofAntidumpingandCountervailingDuties
WhyGAOIsFocusing
onThisArea
InMarch2008GAOreportedthat,asofSeptember2007,U.S.Customsand
BorderProtection(CBP)hasbeenunabletocollectmorethan$600
millionowedinantidumpingandcountervailingdutiesimposedtoremedy
injuriousunfairforeigntradepractices.Theseincludedutiesimposedon
productsexportedtotheUnitedStatesatunfairlylowprices(i.e.,
dumped)anddutiesonproductsexportedtotheUnitedStatesthatwere
subsidizedbyforeigngovernments.Inadditiontothesubstantialamount
oflostrevenue,theuncollecteddutiescauseconcernthattheU.S.
governmenthasnotfullyremediedtheunfairtradepractices.
WhatGAOHasFound
IndicatingPotential
forEnhancing
Revenue
Since2005GAOhasreportedseveraltimesontheU.S.governments
inabilitytocollectsubstantialamountsofantidumpingandcountervailing
dutiesandin2008proposedavarietyofoptionsforimprovingthesystem
forcollectingtheseduties.Twokeycomponentsoftheantidumpingand
countervailingdutysystemhavereceivedparticularattention.Onekey
componentofthesystemisitsretrospectivenature,whichmeansthat
thoughimporterspayestimateddutiesatthetimeofimportationfinal
dutiesarenotassesseduntilafterproductsenterthecountry.Another
componentisthenewshipperreviewprocessthatallowsnew
manufacturersorexporterstopetitionfortheirownseparateantidumping
andcountervailingdutyrate.DespiteothereffortsbyCongressandCBP,
thesecomponentsofthesystemhavenotbeenaddressedandthe
collectionofantidumpingandcountervailingdutiesremainsaproblem.
Whilethereareavarietyoffactorsthataffecttheamountofantidumping
andcountervailingdutiesassessed,in2008GAOcomprehensively
reviewedthe$613millioninuncollectedantidumpingandcountervailing
dutiesandidentifiedthekeyfactorscontributingtothecollections
problems,including:
Retrospectivecomponentoftheantidumpingandcountervailing
dutysystem.Underthecurrentretrospectivesystem,importerspay
theestimatedamountofantidumpingandcountervailingdutieswhen
productsentertheUnitedStates,butthefinalamountofdutiesowedis
notdetermineduntillater.Thiscreatesariskthatthegovernmentwill
beunabletocollectthefullamountowed,whichcanbesubstantially
morethantheoriginalestimate.In2008GAOreportedthatwhenthey
increasedbecauseofsomelargeincreasesdutyratesrosean
averageof62percentagepoints,andsomeincreasesexceeded200
percentagepoints.Thelongtimelagsbetweentheinitialentryofa
productandthefinalassessmentofdutiesheightenstheriskthatthe
governmentwillbeunabletocollectthefullamountowed.In2008
GAOfoundthat,onaverage,thisprocesstookmorethan3years,

thoughinoneinstanceittookmorethan18years.Duringthistime,
importersmaydisappear,ceasebusinessoperations,ordeclare
bankruptcy,whichcreateschallengestothegovernmentsabilityto
collectantidumpingandcountervailingdutiesowed.
Newshipperreviews.Undercurrentlaw,newshippers
(manufacturers/exporterswhosecostswerenotpreviouslyreviewed)
canrequestthatthegovernmentconductareviewtoestablishan
individualantidumpingandcountervailingdutyrate.However,U.S.law
doesnotspecifyaminimumamountofexportsornumberof
transactionsthatacompanymustmaketobeeligibleforanewshipper
review,andaccordingtoDepartmentofCommerce(Commerce)
officials,theydonothavethelegislativeauthoritytocreateanysuch
requirement.Asaresult,ashippercanbeassignedanindividualduty
ratebasedonaveryminimalamountofexports,andcanintentionally
setahighpriceforthissmallamountofinitialexports.Thiscreatesthe
possibilitythatcompaniesmaybeabletogetalow(or0percent)
initialantidumpingdutyrate,whichwillsubsequentlyrisewhenthe
exporterlowersitsprice,andputsthegovernmentinthepositionof
havingtocollectadditionalduties.In2008GAOfoundthatimporters
purchasingfromcompaniesundergoingnewshipperreviews
accountedforapproximately40percentoftheuncollected
antidumpingandcountervailingdutiesasoffiscalyear2007.
ActionsNeededand
PotentialRevenue
InMarch2008GAOidentifiedseveraloptionsforCongresstoconsiderfor
improvingthecollectionofantidumpingandcountervailingduties.GAO
alsoindicatedthattheseoptionshavebothpotentialadvantagesand
disadvantages.Byadjustingfeaturesoftheantidumpingorcountervailing
dutysystemthatcreatetheriskthatcompaniescanevadepayingduties,
Congresscouldfurtherprotectgovernmentrevenue,whilealsominimizing
incentivesforcompaniestopursueunfairtradepractices.Forexample,
Congresscould:
EliminatetheretrospectivecomponentoftheU.S.antidumpingand
countervailingdutysystem.U.S.lawcouldbechangedtoeliminate
theretrospectivecomponentoftheU.S.antidumpingand
countervailingdutysystemand,instead,treattheantidumpingand
countervailingdutiesassessedatthetimetheproductentersthe
countryasfinal.Iftheantidumpingorcountervailingdutyrateis
changed,itisappliedonlytofutureimportsandhasnoeffectonthe
amountofdutiesowedforpreviousimports.OthercountriesGAO
revieweddidnotdeterminetheirfinalantidumpingandcountervailing
dutiesbycalculatingactualamountofdutiesowedafterproductsenter
thecountry.In2008GAOfoundthatwhileeachcountrysantidumping
andcountervailingdutysystemoperatesdifferently,majorU.S.trading
partnerssuchasCanada,Australia,andtheEuropeanUnionhave
antidumpingandcountervailingdutysystemsthatarenot
retrospective.
Adjustrequirementsfornewshipperreviews.Congresscouldchoose
toprovideCommercethediscretiontorequirecompaniesapplyingfor
anewshipperreviewtohaveagreatervolumeofimportsbefore
establishinganindividualantidumpingandcountervailingdutyrate.
AccordingtoCommerceofficials,thiscouldhelpmitigatetherisks
posedbyestablishinganantidumpingandcountervailingdutyrate
basedononeshipment.
FollowingGAOs2008report,CongressmandatedthattheDepartmentof
Commercereviewtherelativeadvantagesanddisadvantagesof
prospectiveandretrospectiveantidumpingandcountervailingduty
systems.InNovember2010Commercereleaseditsreportwhich,in
additiontodiscussingthelikelyeffectsofeachtypeofsystemonduty
collection,alsohighlightedtheadministrativeburdenthecurrent
retrospectivesystemplacesonbothCommerceandCBP.Thissuggests
thecontinuingneedforactiontoreformthesystemforthecollectionof
antidumpingandcountervailingduties.
Theinformationcontainedinthisanalysisisbasedonfindingsfromthe
Frameworkfor
GAOreportslistedbelow.
Analysis
RelatedGAO
Products
AgenciesBelieveStrengtheningInternationalAgreementstoImprove
CollectionofAntidumpingandCountervailingDutiesWouldBe
DifficultandIneffective.GAO-08-876R.Washington,D.C.:July24,2008.
AntidumpingandCountervailingDuties:CongressandAgenciesShould
TakeAdditionalStepstoReduceSubstantialShortfallsinDuty
Collection.GAO-08-391.Washington,D.C.:March26,2008.
InternationalTrade:CustomsRevisedBondingPolicyReducesRiskof
UncollectedDuties,butConcernsaboutUnevenImplementationand
EffectsRemain.GAO-07-50.Washington,D.C.:Oct.18,2006.
InternationalTrade:IssuesandEffectsofImplementingtheContinued
DumpingandSubsidyOffsetAct.GAO-05-979.Washington,D.C.:Sept.26,
2005.
Foradditionalinformationaboutthisarea,contactLorenYagerat
AreaContact
(202)512-4347orYagerL@gao.gov.
AppendixI:ListofCongressionalAddressees
TheHonorableDanielK.Inouye
Chairman
TheHonorableThadCochran
ViceChairman
CommitteeonAppropriations
UnitedStatesSenate
TheHonorableKentConrad
Chairman
TheHonorableJeffSessions
RankingMember
CommitteeontheBudget
UnitedStatesSenate
TheHonorableJosephI.Lieberman
Chairman
TheHonorableSusanM.Collins
RankingMember
CommitteeonHomelandSecurity
andGovernmentalAffairs
UnitedStatesSenate
TheHonorableHaroldRogers
Chairman
TheHonorableNormanD.Dicks
RankingMember
CommitteeonAppropriations
HouseofRepresentatives
TheHonorablePaulRyan
Chairman
TheHonorableChrisVanHollen
RankingMember
CommitteeontheBudget
TheHonorableDarrellIssa
Chairman
TheHonorableElijahE.Cummings
RankingMember
CommitteeonOversight
andGovernmentReform
Page334 GAO-11-318SP AppendixI:ListofCongressionalAddressees
TheHonorableScottBrown
UnitedStatesSenate
TheHonorableTomCoburn
UnitedStatesSenate
TheHonorableClaireMcCaskill
UnitedStatesSenate
TheHonorableMarkR.Warner
UnitedStatesSenate
Page335 GAO-11-318SP AppendixI:ListofCongressionalAddressees
AppendixII:Objectives,Scope,and
Methodology

AppendixII:Objectives,Scope,andMethodology
Section21ofPublicLaw111-139,enactedinFebruary2010,requiresGAO
toconductroutineinvestigationstoidentifyfederalprograms,agencies,
offices,andinitiativeswithduplicativegoalsandactivitieswithin
departmentsandgovernmentwide.ThisprovisionalsorequiresGAOto
reportannuallytoCongressonitsfindings,includingthecostofsuch
duplication,andrecommendationsforconsolidationandeliminationto
reduceduplicationandspecificrescissions(legislationcanceling
previouslyenactedbudgetauthority)thatCongressmaywishtoconsider.
Asagreedwiththekeycongressionalcommittees,ourobjectivesinthis
reportareto(1)identifyfederalprogramsorfunctionalareaswhere
unnecessaryduplication,overlap,orfragmentationexists,theactions
neededtoaddresssuchconditions,andthepotentialfinancialandother
benefitsofdoingso;and(2)highlightopportunitiesforadditional
potentialsavingsorincreasedrevenues.
1
Forthepurposesofouranalysis,weconsideredduplicationtooccur
whentwoormoreagenciesorprogramsareengagedinthesameactivities
orprovidethesameservicestothesamebeneficiaries.Weusedtheterm
overlapwhenmultipleagenciesorprogramshavesimilargoals,engage
insimilaractivitiesorstrategiestoachievethem,ortargetsimilar
beneficiaries.Weusedthetermfragmentationtorefertothose
circumstancesinwhichmorethanonefederalagency(ormorethanone
organizationwithinanagency)isinvolvedinthesamebroadareaof
nationalneed.Thepresenceoffragmentationandoverlapcansuggestthe
needtolookcloseratthepotentialforunnecessaryduplication.However,
determiningwhetherandtowhatextentprogramsareactuallyduplicative
requiresprogrammaticinformationthatisoftennotreadilyavailable.In
certaininstancesinthisreport,weusethetermpotentialduplicationto
includeduplication,overlap,orfragmentation.
Toidentifyfederalprogramsorfunctionalareaswhereunnecessary
duplication,overlap,orfragmentationexists,wereviewedGAOsongoing
andpreviouslycompletedwork.Insomeinstances,issuesrelatedto
potentialforduplication,overlap,orfragmentationwereidentifiedfrom
GAOsbodyofwork
2
specificallyexaminingtheseissuesacross
1
Todate,thisworkhasnotidentifiedabasisforproposingspecificfundingrescissions.
2
Forexample,seeGAO,ManagingforResults:UsingtheResultsActtoAddressMission
FragmentationandProgramOverlap,GAO-AIMD-97-146(Washington,D.C.:Aug.29,
1997);ManagingforResults:BarrierstoInteragencyCoordination,GAO/GGD-00-106
(Washington,D.C.:Mar.29,2000);and21
st
CenturyChallenges:ReexaminingtheBaseof
theFederalGovernment,GAO-05-325SP(Washington,D.C.:February2005).
Page336 GAO-11-318SP AppendixII:Objectives,Scope,andMethodology
Methodology
government.ThisbodyofworkincludedGAOsreviewsofavarietyof
federalprograms,suchasthoserelatedtotraining,employment,and
educationandsocialservices.Inotherinstances,wedrewexamplesof
potentialduplication,overlap,orfragmentationfromourongoingaudits
andevaluationsnotspecificallyfocusedontheseissuesbutwherethey
wereidentifiedaschallengestotheefficientandeffectiveoperationof
certainfederalprogramsoractivitieswereviewed.Whileourreport
includesexampleswhereduplication,overlap,orfragmentationcan
hinderprogramperformanceandcauseinefficiencies,werecognizethat
therecouldbeinstanceswheresomedegreeofprogramduplication,
overlap,orfragmentationmaybewarrantedduetothenatureor
magnitudeofthefederaleffort.
WealsoconsideredtheworkofotheragenciessuchastheOfficeof
ManagementandBudgetandtheCongressionalBudgetOffice.Whilethe
workofotheragenciesinformedourselectionofspecificareasforthis
yearsreport,weonlyincludedissueswherewehadcurrentworkorcould
updatepriorworkwithinourreportingtimeframes.Therefore,thisreport
isnotacomprehensivesurveyofallgovernmentprogramswhere
unnecessaryduplication,overlap,orfragmentationmayexist.Rather,this
reporthighlightsanumberoffederalprogramsandactivitieswhereGAOs
workindicatestheseissuesexist.EachissueareacontainedinSectionsI
andIIofthisreportliststherelevantGAOreportsandpublicationsupon
whichitisbased.Thosepriorreportscontainadditionalinformationon
GAOssupportingworkandmethodologies.ForissuesbasedonGAO
workthathasnotyetbeenpublishedorthosethatupdatepriorGAO
work,weprovideadditionalinformationonthemethodologiesusedin
thatongoingworkorupdateintheFrameworkforAnalysissectionofthe
issuearea.
Toidentifytheactionsneededtoaddressunnecessaryduplication,
overlap,orfragmentation,wereviewedandupdatedpriorGAOworkand
recommendationsandinsomecasescompletedongoingworkor
conductednewworktoidentifywhatadditionalactionsagenciesmay
needtotakeandCongressmaywishtoconsider.Insomeinstances,the
long-standingnatureorsignificanceofcertainissues,especiallythosethat
transcendedmorethanoneagency,ledustosuggestthepotentialneedfor
heightenedcongressionaloversight.Toidentifythepotentialfinancialand
otherbenefitsthatmightresultfromactionsaddressingduplication,
overlap,orfragmentation,wereviewedandupdatedpriorGAOworkand
conductedongoingworkwithaspecificfocusonthepotentialforcost
savings.Insomecases,wehadsufficientinformationtoshowthatif
actionsaretakentoaddresstheindividualissuessummarizedinthis
Methodology
report,opportunitiesforfinancialbenefitsrangingfromthetensof
millionstoseveralbilliondollarsannuallymightberealized.Estimating
thebenefitsthatcouldresultfromeliminatingunnecessaryduplication,
overlap,orfragmentationwasnotpossibleinsomecasesbecause
informationabouttheextentofunnecessaryduplicationamongcertain
programsisnotavailable.Further,thefinancialbenefitsthatcanbe
achievedfromeliminatingduplication,overlap,orfragmentationwerenot
alwaysquantifiableinadvanceofcongressionalandexecutivebranch
decisionmaking,andinformationwasnotreadilyavailableonprogram
performance,theleveloffundingdevotedtooverlappingprograms,orthe
implementationcostsandtimeframesthatmightbeassociatedwith
programconsolidationsorterminations.
Inlightofthelong-termfiscalimbalancesthatthefederalgovernment
faces,wehighlightedotheropportunitiesforpotentialcostsavingor
revenueenhancementsinadditiontothoseassociatedwithduplication,
overlap,orfragmentation.Specifically,wereviewedandupdatedthe
existinggroupingsofmajorcost-savingopportunitiesthathadpreviously
beenidentifiedandsummarizedonGAOsWebsite,
3
drawnfromourpast
reviewsofgovernmentprogramsathighriskoffraud,waste,abuse,and
mismanagementorinneedofrestructuring.Similartotheduplication,
overlap,andfragmentationwork,wealsoreviewedourongoingand
recentlycompletedworktodeterminewhethertheexistingareascouldbe
updatedwithinthereportingtimeframesforthisreport,andweidentified
additionalopportunitiesforconsiderationinareaswherewehadupdated
informationavailable.Weprovidedestimatesofthecostsavingsor
revenueenhancements,whereavailable.Atthebeginningofeachsection,
weincludetableslistingtheareasforconsideration,includinginformation
ontheagenciesandprograms
4
involvedandcostsavingsorrevenue
enhancements,ifavailable.
Wewillcontinuetoexamineissuesrelatedtoduplication,overlap,and
fragmentationinourongoingwork.Inourfuturemandatedannual
reports,wewilllookatadditionalfederalprogramstoidentifyfurther
instancesofduplication,overlap,orfragmentationaswellashighlight
additionalopportunitiestoreducethecostofgovernmentoperationsor
increaserevenuestothegovernment.Likewise,wewillcontinueto
3
Seehttp://www.gao.gov/highrisk/opportunities/.
4
Toprovidethemostcurrentinformation,wecitedonlythoseprogramsthatwere
identifiedinGAOreportspublishedin2008orlater.
Methodology
monitordevelopmentsintheareaswehavealreadyidentified.Issuesof
duplication,overlap,orfragmentationalsomaybeaddressedinour
routineauditworkduringtheyearandwillbesummarizedinour
mandatedannualreportsasappropriate.
Thisreportisbasedsubstantiallyuponongoingauditsandpreviously
completedGAOproducts,whichwereconductedinaccordancewith
generallyacceptedgovernmentauditingstandards(GAGAS),orwith
GAOsQualityAssuranceFramework,asappropriate.Thosestandards
requirethatweplanandperformtheaudittoobtainsufficient,appropriate
evidencetoprovideareasonablebasisforourfindingsandconclusions
basedonourauditobjectives.Webelievethattheevidenceobtained
providesareasonablebasisforourfindingsandconclusionsbasedonour
auditobjectives.InoneinstanceGAGASdidnotapplytotheworkwedid
toidentifytherevenueenhancementopportunitypertainingtounobligated
balancesintheU.S.CustomsandBorderProtectionsCustomsUserFee
Account.Thisworkreviewedtheagencysjustificationforcertain
estimatesinthePresidentsannualbudgetrequesttoCongressratherthan
anauditandwasperformedinaccordancewithallrelevantsectionsof
GAOsQualityAssuranceFramework.Theframeworkrequiresthatwe
planandperformtheengagementtoobtainsufficientandappropriate
evidencetomeetourstatedobjectivesandtodiscussanylimitationsin
ourwork.Webelievethattheinformationanddataobtained,andthe
analysisconducted,provideareasonablebasisforanyfindingsand
conclusionsinthisproduct.Forissuesbeingreportedonforthefirsttime,
GAOsoughtcommentsfromtheagenciesinvolvedandincorporatedtheir
comments,asappropriate.WebriefedtheOfficeofManagementand
Budgetonadraftofthisreport.Weconductedtheworkfortheoverall
reportfromFebruary2010throughFebruary2011.
GAOsMission
TheGovernmentAccountabilityOffice,theaudit,evaluation,and
investigativearmofCongress,existstosupportCongressinmeetingits
constitutionalresponsibilitiesandtohelpimprovetheperformanceand
accountabilityofthefederalgovernmentfortheAmericanpeople.GAO
examinestheuseofpublicfunds;evaluatesfederalprogramsandpolicies;
andprovidesanalyses,recommendations,andotherassistancetohelp
Congressmakeinformedoversight,policy,andfundingdecisions.GAOs
commitmenttogoodgovernmentisreflectedinitscorevaluesof
accountability,integrity,andreliability.
ThefastestandeasiestwaytoobtaincopiesofGAOdocumentsatnocost
ObtainingCopiesof
isthroughGAOsWebsite(www.gao.gov).Eachweekdayafternoon,GAO
GAOReportsand postsonitsWebsitenewlyreleasedreports,testimony,and
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Testimony
gotowww.gao.govandselectE-mailUpdates.
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RalphDawn,ManagingDirector,dawnr@gao.gov,(202)512-4400
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