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Serious policy and management problems : transition recommendations and high risk reports : hearing before the Committee on Governmental Affairs, United States Senate, One Hundred Third Congress, first session, January 8, 1993 online

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\\ ^ S. Hrg. 103-177

SERIOUS POLICY AND MANAGEMENT PROBLEMS:
TRANSITION RECOMMENDATIONS AND HIGH
RISK REPORTS

Y 4. G 74/9; S. HRG. 103-177

Serious Policu and Hanagenent Probl...



HEARING

BEFORE THE

COMMITTEE ON
GOVERNMENTAL AEFAIES
UNITED STATES SENATE

ONE HUNDRED THIRD CONGRESS

FIRST SESSION



JANUARY 8, 1993



Printed for the use of the Committee on Governmental Affairs



mid

U.S. GOVERNMENT PRINTING OFFICE ^^fmilHIC^fT

64-143 fcf WASHINGTON : 1993




F(ir sale by the U.S. Government Printing Office
Superintendent of Documents. Congressional Sales Office. Washington, DC 20402
ISBN 0-16-041425-3



\\ ^ S. Hrg. 103-177

^ SERIOUS POLICY AND MANAGEMENT PROBLEMS:
TRANSITION RECOMMENDATIONS AND HIGH
RISK REPORTS



Y 4. G 74/9; S. HRG. 103-177

Serious Policy and Flanagenent ProW. .



HEARING

BEFORE THE

COMMITTEE ON
GOVERNMENTAL AFFAIRS
UNITED STATES SENATE

ONE HUNDRED THIRD CONGRESS

FIRST SESSION



JANUARY 8, 1993



Printed for the use of the Committee on Governmental Affairs







^*^^H^V^'



NOV 1



1993



•^^O/Vi



U.S. GOVERNMENT PRINTING OFFICE ^flw^ICi??'

64-143 ±5 WASHINGTON : 1993



For sale by the U.S. Government Printing OtTice
Superintendent of Documents. Congressional Sales Office. Washington. DC 2()4()2
ISBN 0-16-041425-3



COMMITTEE ON GOVERNMENTAL AFFAIRS
JOHN GLENN, Ohio, Chairman



SAM NUNN, Georgia

CARL LEVIN, Michigan

JIM SASSER, Tennessee

DAVID PRYOR, Arkansas

JOSEPH I. LIEBERMAN, Connecticut

DANIEL K. AKAKA, Hawaii

BYRON L. DORGAN, North Dakota



WILLIAM V. ROTH, Jr., Delaware
TED STEVENS, Alaska
WILLIAM S. COHEN, Maine
THAD COCHRAN, Mississippi
JOHN McCAIN, Arizona



Leonard Weiss, Staff Director

Mark Goldstein, Professional Staff Member

David F. Plocher, Counsel

Franklin G. Polk, Minority Staff Director and Chief Counsel

Michal Sue Prosser, Chief Clerk



(II)



CONTENTS



Opening statements: Page

Senator Glenn 1

Senator Roth 4

Senator Levin 6

Senator Sasser 20

Senator Lieberman 22

WITNESSES

Friday, January 8, 1993

Charles A. Bowsher, Comptroller General, U.S. General Accounting Office,
accompanied by Milton J. Socolar, Special Assistant to the Comptroller
General; Richard Fogel, Assistant Comptroller General for General Govern-
ment Programs, and Donald Wurtz, Director for High Risk Issues, Finan-
cial Accounting and Management Division 7

APPENDIX

Responses to questions from Senator McCain for GAO Comptroller General

Bowsher 55

Follow-up responses to questions from Senator McCain for GAO Comptroller

General Bowsher 56

Prepared statements of Charles A. Bowsher:

Major Issues Facing a New Congress and a New Administration 61

Government Management — Report on 17 High Risk Areas 92

(III)



SERIOUS POLICY AND MANAGEMENT PROB-
LEMS: TRANSITION RECOMMENDATIONS AND
HIGH RISK REPORTS



FRIDAY, JANUARY 8, 1993

U.S. Senate,
Committee on Governmental Affairs,

Washington, DC.

The Committee met, pursuant to notice, at 9:32 a.m., in room
SD-342, Dirksen Senate Office Building, Hon. John Glenn, Chair-
man of the Committee, presiding.

Present: Senators Glenn, Sasser, Lieberman, and Roth.

OPENING STATEMENT OF SENATOR GLENN

Chairman Glenn. The hearing will be in order.

This is the first of our hearings of 1993, and we have one new
member on our Committee on the Democratic side. Senator Dorgan
of North Dakota. We want to welcome him to the Committee. Also,
I know that Senator Cochran of Mississippi is coming on the Re-
publican side, and I am not sure who the other new member is
going to be on the Republican side yet, but we want to welcome
them to our Committee and the activities of this new year.

Over the next 4 days, the Governmental Affairs Committee will,
through today's hearing and the upcoming confirmation hearings,
be taking a look at the whole panoply of economic and governmen-
tal management problems America now confronts, and we hope to
hear next week how the incoming Clinton administration plans to
handle these problems.

Basically, fat, fraud, waste and abuse — that summarizes what
most of this is about today; how do we get efficiency into Govern-
ment. It is a subject of debate in every, single election campaign
that I have heard of for years and years and years. But defining
and quantifying and doing something about it has proven to be
very, very difficult. That is the basic subject that we address today.

We begin our hearing this morning with testimony by Comptrol-
ler General Charles Bowsher and his associates, who will discuss
the content of a set of transition recommendations and high risk
reports. The transition reports follow up on a similar series done
by the General Accounting Office (GAO) 4 years ago, and the Gov-
ernment's high risk problems is an area where this Committee has
done a great deal of work along with GAO.

On Monday and Tuesday, the 11th and 12th of January, we will
hold a confirmation hearing on the nomination of Congressman
Leon Panetta to be Director of the Office of Management and

(1)



Budget. On Wednesday, January 13th, we will hold a hearing on
the nomination of Alice Rivlin to be 0MB Deputy Director. These
are not officially Cabinet posts, but I can tell you my own opinion
is that 0MB is the second most powerful spot in Government,
second only to the President himself, because it is where all the
policies and all the budget decisions are made, where the rubber
meets the road in effect, and where we put Government operation
into swing for the people of this country.

Many of the budget, economic and management issues to be
raised in the hearings next week are discussed in the transition
and high risk reports we will talk about today, and I do hope the
administration reads them and acts on them; in fact, I intend to
press President-elect Clinton to make sure that members of his
Cabinet receive these reports and develop plans to solve the prob-
lems that GAO describes.

As the Comptroller General knows, this is not the first time we
have gathered here to discuss the Government's serious manage-
ment problems. For the past 15 years, this Committee has taken
the lead in attempting to solve these issues, and our oversight led
us to push for the enactment of several important laws which have
strengthened Federal management.

The Committee was responsible for the Inspectors General Act
and its followup amendments, which have placed 60 IGs in Federal
agencies to ferret out the waste, fat, fraud and abuse. I would add
the year before last, I think it was, through the IGs, there were
6,177 successful prosecutions over at Justice pursuant to actions
brought by the IGs and close to $800 million recovered. And that is
only the beginning.

Then we saw the need for the Chief Financial Officers Act, which
in 1990 created CFOs in 23 agencies and in OMB, to finally im-
prove the Government's financial management capabilities. I know
that the Comptroller General was supportive of that, helped us
work on that legislation, and said in public testimony here, I be-
lieve, that he thought that was the best step forward in financial
management in the Government in the last 40 years — I believe
that is an accurate quote of the Comptroller General's statement.

Mr. BowsHER. It is.

Chairman Glenn. So we intend to see that these things get fol-
lowed through.

We now have CFOs in 23 agencies and in OMB, and we were also
responsible for the Financial Managers Financial Integrity Act.
That is an effort that since 1982 has produced more than 3,000
identifications of agency management weaknesses. Indeed, the
framework for management improvement is in place and has been
for a while; it just needs the Clinton administration's commitment
for effective change to finally work the way that we had intended
it to.

We will hear from Mr. Bowsher in a few minutes, but let me
first say just a word about these reports and their contents.

I think anyone who has read through these reports — they are not
too lengthy; it is easy to do, and I would commend them to the
press and to anyone else who is concerned about efficiencies of Gov-
ernment — anyone who reads the reports can only conclude that



this country, great as it is, the greatest Nation in the world, great
as it is, its Government is in trouble.

Serious problems continue to hurt virtually every area of public
policy, from the disastrous budget deficit to the quality of the
public work force, from the inadequate investment in our economy
and infrastructure, to the management of billions of dollars in Fed-
eral programs and services.

It is frustrating to me, personally, and to all of us on this Com-
mittee, that GAO's transition reports 4 years ago outlined what
today remain some of the Nation's most critical unresolved issues.

Perhaps more troublesome, in many of these areas we are in
worse shape now than we were at the last Presidential inaugura-
tion. The budget deficit is a typical but not unique example of the
country's worsening condition. Four years ago, the unified Federal
budget deficit was $155 billion, or 3.2 percent of the Nation's gross
domestic product. Since then, the deficit has grown to $310 billion
in fiscal 1992, or 4.9 percent of gross domestic product. And if you
subtract the $96 billion Social Security Trust Fund behind which
we hide this massive hole we've dug for ourselves, the true Federal
deficit for fiscal 1992 is closer to $400 billion.

Another example we have long been concerned about, but done
little to solve, is our dwindling rate of national capital investment.
And for this country to be internationally competitive, we must
boost our national savings rate and, most importantly, our invest-
ment for capital expenditures.

The numbers unfortunately continue to drop, and the Nation's
capital investment rate now stands at an historic low of 16 percent
of gross domestic product — less than one-half the comparable in-
vestment rate of Japan, lower than Germany, Canada, and most of
our major trading partners.

This gap in investment spending has steadily widened since 1985
and its continued neglect will undermine further this country's
competitive future.

Let me also express my concern with the unsatisfactory state of
Government management in general. If there is one thing I get in
reading through all these reports — and I haven't read every one of
them completely yet, but I have been through a number of them —
and if there is one thing that strikes me, it is that we have a low
state of management capability almost across every branch of Gov-
ernment.

This Committee and others in the Congress have held numerous
hearings on the fraud, waste, and abuse, and the general misman-
agement in too many Federal agencies. The transition and high
risk reports document the poor state of Federal management. Ne-
glect, indifference, and turnover among top leadership — I think it
is still a valid figure that we have on average a 21-month turnover
in top leadership across the departments of Government. People
come in to get their tickets punched, get something in their
resume, their dossier, or whatever, and off they go to something
else. And 21 months is not enough time for a person, either in busi-
ness or in Government, to get hold of something as big as a Gov-
ernment department, turn it around, get it going, and put it on an
efficient basis. And then we're onto somebody new coming in. You
couldn't do that in private business with organizations of this size.



and you can't do it in Government, either. This just perpetuates
problems that, with proper attention, could be solved.

Thus, the Government's extensive problems in financial manage-
ment, in computers and information management, in contract
management, in personnel and program performance, largely could
be solved if top managers would focus on management as a neces-
sary part of their job and view their responsibilities in terms of
stewardship and capacity building for their departments or agen-
cies.

Our challenge and our responsibility is to make America ready
for the 21st century. We will be inaugurating a new President in a
few days who I believe has the vision to do that. We must rebuild
our economy and focus on investment and our future; we must
ensure that basic services such as health care are available for all
our citizens, and we must also insist on a more productive public
sector in which Government agencies are given the capacity to ac-
complish their mission in return for delivering services that more
effectively meet public needs.

We have just come through the holiday seasons, and I guess in a
way, GAO's transition reports remind me a little of Dickens'
Christmas Carol, in which you will remember Scrooge asks near
the end whether the nasty visions of Christmas Future are visions
that must be, or simply might be — depending on changes in his
conduct.

We could almost say we are in the same situation here as far as
Government goes. Likewise, the problems that GAO depicts do not
have to be — do not have to be — part of our future. We can change.
In fact, I don't think anjrthing less than the quality of our whole
future depends on our changing, and I hope that a new administra-
tion and a new Congress can break the gridlock we have had and
take us into the next century prepared to meet those challenges.

So as always, we are pleased to have the Comptroller General
here this morning, and we look forward to his testimony.

Senator Roth, do you have any comments this morning? I com-
mented in starting out this morning, Bill, that Thad Cochran, as I
understood, was coming on the Committee, and I think there is still
another vacancy; Byron Dorgan is coming on our side. I welcomed
them to the Committee, and I don't know whether you have any
new information to tell us in that regard this morning.

Senator Roth. No, Mr. Chairman, I have no specific information
beyond Thad Cochran.

OPENING STATEMENT OF SENATOR ROTH

Mr. Chairman, there appears to be a new phrase which has re-
cently entered the lexicon of public policy discourse — that of "Rein-
venting Government." It is more than just the title of a best-selling
book acclaimed by the new President-elect. It is a phrase that has
come to encapsulate a new thinking about how Government can
best deliver services to the public.

The principles espoused are neither partisan nor ideological.
They are simply a way to change fundamentally how Government
does business so that it is more efficient, effective, and responsive.



Most of these principles require the kinds of major, broad-scope
reforms of the executive branch over which this Committee has ju-
risdiction. They begin first with a notion that when Government
spends money, it ought to be held accountable for achieving speci-
fied levels of services. That is, Government programs should have
measurable goals and report actual results. And out of that funda-
mental principle, a principle rarely honored at present within the
Federal Government, flow a variety of other ideas, such as per-
formance-based budgeting, greater managerial discretion in admin-
istering programs, pay for performance and other personnel system
reforms, as well as a major reorganization of the executive branch.

Now, in reviewing the GAO transition reports which deal most
directly with matters under the legislative jurisdiction of this Com-
mittee, I see that they, too, call for a number of these same re-
forms. Four of these reports, for example, each emphasize the need
for good information on the measurable results of program activi-
ties — the reports on Government management, financial manage-
ment, program evaluation, and information management and tech-
nology.

Clearly, program performance measurement is central to good
Government. That is the reason I introduced legislation on this 2
years ago.

The transition report on the public service also addresses the
need for a more systematic focus on Government performance. It
recommends that pay for performance be made an effective part of
our Federal personnel system. It is time we give serious consider-
ation to establishing a stronger link between individual perform-
ance and personal compensation, particularly for managers, that
this be related to program performance.

Just as it is fundamental that an organization ought to have
goals, it is also fundamental that individuals ought to be compen-
sated based on how well they meet the goals of the organization.

The report on budget issues makes the point that in our effort to
eliminate the deficit, we need to find ways to achieve program
goals at less cost. Again, this presupposes that Federal programs
have goals, which few now do. And when they do, we can begin to
move forward toward another important Government reform — per-
formance-based budgeting. Then we will be able to see what specif-
ic effects each proposed increase or decrease in program funding
should have on program performance, and we will likely also find
that in being held accountable for meeting performance goals, Fed-
eral programs will indeed begin to do more with less, especially if
managers are given the freedom to innovate.

The budget report highlights a number of problems — the present
budget process and format, including the poor anticipation and pro-
jection of long-term financial obligations; the reform of the budget
process; civil service and personnel system reforms; program per-
formance measurements. These are all issues squarely within the
jurisdiction of our Committee, and they ought to be among our pri-
orities in the new Congress; so, too, should be the reorganization of
the executive branch. As the transition report on Government per-
formance states, "Efforts to restructure the executive branch will
need to be rejuvenated in order to better focus resources of Govern-
ment on accomplishing specific missions."



I have introduced in the past and will be introducing legislation
to accomplish such a restructuring, and I hope the Committee will
agree that this is central to helping Government increase perform-
ance while reducing cost.

In that regard, I am pleased to see that two transition reports —
those on commerce issues and international trade — urge restruc-
turing of our executive branch trade functions. As you know, I
have been a strong proponent of trade reorganization for many
years and intend to reintroduce my act in the coming weeks.

I agree with GAO's conclusion that there is a need to develop
and implement a comprehensive Government strategy for export
promotion programs which are currently spread among several
agencies.

I am also interested to note that GAO characterized the Depart-
ment of Commerce as, "likely facing the most complex web of di-
vided authorities" within our Government. They concluded that
the current components of Commerce need to be carefully exam-
ined with an eye toward spinning off or eliminating those compo-
nents that do not fit.

I agree whole-heartedly and would urge the Committee on Gov-
ernmental Affairs to take up the issue of trade reorganization in
the coming months. Many of the transition reports, however, deal
with problems in specific Government programs not within this
Committee's legislative jurisdiction. Those problems, we can spot-
light, but not address individually.

But the real issues in making Government work better — and
these, we can address on a Government-wide basis — we can reorga-
nize Government agencies; we can reform their personnel systems,
their budget systems, their performance systems. For example, I
have introduced defense acquisition reform legislation which em-
bodies the principles of setting program performance goals, stream-
lining a set of 840 standard operating procedures to focus on goals
and giving managers more administrative flexibility to meet those
goals, rewarding them under a pay-for-performance system, and
right-sizing a layer of bureaucracy through a major reorganization.

This proposal addresses the kinds of problems that GAO consid-
ers high risk and illustrate the reforms we ought to be making
Government-wide. In other words, if we think in terms of the
whole forest, not just individual trees, this Committee can truly
reinvent the way the Federal Government does business. And in
doing so, we can begin to fix many of the problems we hear about
today that might otherwise be beyond our direct reach.

Mr. Chairman, I have some additional comments, but I would
ask they be included as if read.

Chairman Glenn. They will be included in the record. I also
want to enter into the record a statement by Senator Carl Levin,
who asked that it be included in the record. We'll do that without
objection.

Prepared Statement of Senator Levin

I would like to thank Chairman Glenn for holding a hearing on the General Ac-
counting Office (GAO) transition recommendations and high-risk reports as he has
done in the past. It gives us an opportunity to draw on the knowledge and expertise
of the GAO as we consider ways to "reinvent" our government to more effectively



serve the American people. It is especially relevant as we start off this new year
with a new Administration and a new Congress with so many freshmen members.

We can all identify with the challenging task of making sound, workable recom-
mendations in such "simple" areas as health care reform, education, trade policy
and the U.S. role in a post-cold war world. I want to commend Comptroller General
Bowsher and his staff for their work in putting together these comprehensive and
useful reports to assist us in this effort.

There is a growing consensus here in Washington and certainly across the nation
that we can not go on the way we have been. That government has become less and
less about long-term, effective service and more and more about short-term, quick
fixes and borrowing from Peter to pay Paul. We can no longer afford to stick with
the status quo.

Government reform is an on-going process as we confront new problems and
greater demands. This Committee plays an important role in that process. In the
past we have addressed such issues as management of the defense inventory system
and passed the Chief Financial Officers Act.

However, it's somewhat like that storeroom that we organize and then as time
goes by and changes happen, we need to organize again. We've started the task but
it's going to take a sustained, coordinated effort to complete it. It is not enough to
recognize and study the problems — we need to act to bring about real change.

It's time again for us to roll up our sleeves and get to it. These reports and this
hearing provide a good jumping off point for that process.

Chairman Glenn. We are happy to have with us today not only
Charles Bowsher, Comptroller General, but he is accompanied by
Milton Socolar, Special Assistant to the Comptroller General; Rich-
ard Fogel, Assistant Comptroller General for Government Pro-
grams; and Donald Wurtz, Director for High Risk Issues that we
are going to be discussing today, in the Financial Accounting and
Management Division of GAO.

We welcome you all this morning.

Mr. Bowsher, as always, we look forward to your testimony. You
may proceed, please.

TESTIMONY OF THE HON. CHARLES A. BOWSHER, COMPTROL-
LER GENERAL, U.S. GENERAL ACCOUNTING OFFICE, WASHING-
TON, D.C., ACCOMPANIED BY MILTON J. SOCOLAR, SPECIAL AS-
SISTANT TO THE COMPTROLLER GENERAL; RICHARD FOGEL,
ASSISTANT COMPTROLLER GENERAL FOR GENERAL GOVERN-
MENT PROGRAMS; AND DONALD WURTZ, DIRECTOR FOR HIGH
RISK ISSUES, FINANCIAL ACCOUNTING AND MANAGEMENT DI-
VISION

Mr. Bowsher. Thank you very much, Mr. Chairman.

I am pleased that you introduced my team because Dick Fogel on
my right is the one who headed up this really big project of doing
the transition reports, and Don Wurtz on my extreme left is the
one who headed up our high risk effort. The GAO organization has
put a great deal of work into trying to summarize the work that we
have done over the last 4 or 5 years into these reports.

Chairman Glenn. Just before you start, if you could hold up, just
so people have an idea of what we are talking about here — high
risk areas are in these reports here — I think there are 17 of
those — and then 28 reports in the transition series.^ I just want
people to know this is quite a body of work here, and it is going to
require a great deal of analysis.



• The reports are retained in the files of the Committee.



8

Before you started, I just wanted people to see what this thing
looks like that we are talking about here today.


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Online LibraryUnited States. Congress. Senate. Committee on GoveSerious policy and management problems : transition recommendations and high risk reports : hearing before the Committee on Governmental Affairs, United States Senate, One Hundred Third Congress, first session, January 8, 1993 → online text (page 1 of 13)