Originally broadcast on April 23, 2012
Host: Welcome to The Business of Government Hour, a conversation about management with a government executive who is changing the way government does business. The Business of Government Hour is produced by the IBM Center for The Business of Government, which was created in 1998 to encourage discussion and research into new approaches to improving government effectiveness. You can find out more about the center by visiting us on the web at BusinessofGovernment.org. And now, The Business of Government Hour.
Michael Keegan: Welcome to The Business of Government Hour. I’m Michael Keegan, your host and Managing Editor of The Business of Government Magazine. Faced with seemingly intractable issues the ever-growing deficit, economic uncertainty, unemployment and aging infrastructure, today’s government leaders face unique challenges that present many difficult choices that go to the core of effective public management. At this critically historical juncture citizen expectation remains constant to have a government that is more responsive, coordinated, transparent and accountable.
To that end the U.S. Government Accountability Office works with Congress to better manage resources for a more sustainable future, while mitigating risks that can compromise the nation’s security, health, and solvency.
How is GAO working to put the country back on a sustainable fiscal path? What is GAO doing to assist Congress in support of its oversight of decision making responsibilities? And how is GAO overseeing federal programs and operations to ensure accountability to the American people? We will explore these questions and so much more with our very special guest, Gene Dodaro, Comptroller General of the United States and Head of the U.S. Government Accountability Office. Welcome, Gene.
Gene Dodaro: Thank you. Michael. It’s a pleasure to be here.
Michael Keegan: Before we delve into specific initiatives perhaps you could give us an overview of the history and continual evolution of the U.S. Government Accountability Office marking its ninetieth year?
Gene Dodaro: Yes. GAO was founded in 1921 as part of a package of budgetary and accounting reforms that were put in place following the large debt that accumulated after World War I.
In the beginning, GAO’s role was to examine vouchers on government payments and purchases. Then following World War II as the government grew and expanded those functions were transferred to the Executive Branch, and GAO began more comprehensive financial auditing. And then as government continued to evolve on the war on poverty and the Great Society programs in the ‘60s, GAO began doing program evaluations, which are what we are famous for today, looking at how programs operate, and whether they’re operating as intended, and whether they can be made more efficient and effective.
And our evolution has continued. Now we provide a full range of management of evaluations of functions necessary to carry out the government’s large departments and agencies. And we also do quite a bit looking at new technologies that the government is putting in place. And so we have a very multi-disciplinary workforce right now and our evolution continues, based upon the needs of the government and the needs of our primary clients, the Congress.
Michael Keegan: Great, wonderful. So it’s such a critical mission, I’d like to understand the operational footprint of GAO, what’s the size of its budget? How was it organized, and what’s its geographical footprint?
Gene Dodaro: GAO is organized along subject area lines, covering the full range of the Federal Government’s responsibilities. We have a team focused on national defense issues, for example, healthcare, transportation, natural resources and the environment, et cetera. We also have teams focused on technical disciplines, financial management, auditing and accounting, and information technology. We have a Division focused with the Center for Economics, Science and Engineering. And so we have a full range of issues set-up both for subject areas and technical disciplines.
Our work is carried out in multi-disciplinary teams. It’s very important to ensure the quality and the sophistication of our work. Our budget is over $500 million a year. We have about 3,000 people in the organization, and we carry out a number of functions and types of audits. We produce hundreds of reports and testimonies every year.
Michael Keegan: So what about your role as the Comptroller General and leader of GAO? Could you tell us a little bit about your duties and responsibilities?
Gene Dodaro: Yes, the Comptroller General, and I provide a strategic direction and leadership for the GAO. As its Chief Executive it’s my job to make sure we carry out our mission effectively, which is to support the Congress in carrying out its constitutional responsibilities and to help improve the performance and ensure the accountability of the federal government for the benefit of the American people. And we do that through the production of hundreds of reports and testimonies each year to the Congress, that are made also available to the public. And it’s very important that we have good quality assurance systems around those reports, so my job is to ensure that that happens and that we have the skilled workforce necessary to carry out these responsibilities. And so I also provide testimony to the Congress before various Congressional committees, particularly on GAO’s more important broad-based work that we issue during the year.
The Comptroller General also sets government auditing standards and internal control standards for the federal government, and also I have very important representational responsibilities both for domestic accountability purposes, such as Chairman of the National Intergovernmental Audit Forum and also internationally as the U.S. representative to the organization internationally of National Audit Offices, which is comprised of approximately 189 countries around the world.
Michael Keegan: So with that important duty and mission and responsibility what would you say are your three top challenges? And how have you sought to address those challenges?
Gene Dodaro: Yeah, it’s very important for us always to work on the areas of highest priority for the Congress and key national important issues. Our workload is a very important challenge, you know, we’re asked to do anywhere from 900 to 1,000 requests per year from the Congress, so we obviously have to set priorities appropriately. That’s the number one challenge.
I do that by meeting with chair and ranking members of all the standing committees of the Congress to understand their priorities and work on issues. It’s very important that while I provide leadership, our teams continually to work through and to continually set priorities in working with the Congress to make sure that we meet their needs.
Second, like a lot of federal agencies right now, there are budgetary challenges that we’re all going to be facing across federal government. GAO is no exception to that. We’re working through those issues very carefully to make sure that we maintain the quality of our work to the Congress, work on items of highest priority, and also to make sure that we’re minimizing any adverse effects on the very dedicated and talented GAO workforce.
Thirdly, Michael, I would say a big challenge is succession planning, like lot of organizations the Baby Boom generation is beginning its retirement. We’ve been working very hard on this over the last decade, and we’ll continue to be able to do that because we need to have the right skilled workforce and we need to have the people in the right job. That’s about 75% of success, and so I spend a lot of time dealing with that challenge.
Michael Keegan: Speaking of having the right person in the right job, I’d like to know a little bit more about yourself. Could you tell us about your career path and how you got to where you are now?
Gene Dodaro: Yes, I came to the GAO in 1973 as an entry level auditor, right out of college. And I was intrigued with the mission of the organization. I worked in various capacities throughout the early stages of my career, taking on issues like many in the immigration area, licensing radioactive materials for commercial uses, looking at the anti-recession assistance program formed in the 1974-’75 recession, and Reagan’s new federalism initiatives of block grants in the early ‘80s.
I became a Senior Executive in 1985, and was given the responsibility of doing a portfolio of management reviews, which were sort of top to bottom reviews of various departments and agencies. And then I took on responsibilities later to head-up all of our accounting and information technology work at the GAO. I led the first ever audit of the federal government’s consolidated financial statements for the fiscal year 1997, I led our Y2K efforts to help the government successfully deal with that challenge, and dealt with a number of other technology issues, including computer security.
Following Dave Walker’s appointment as Comptroller General in 1998, I became the Chief Operating Officer for GAO, which is the number two position, and really held that position throughout Dave’s nine-and-a-half year tenure at GAO. And then when Dave resigned in March 2008 I became the Acting Comptroller General and led in that capacity until I was confirmed by the Senate last December.
Michael Keegan: Actually, could you tell us a little bit more about the actual tenure of the Comptroller General? It’s a little bit longer than most places, correct?
Gene Dodaro: It’s one of the longest tenures in government, Michael. It’s very important to maintain our independence. The Comptroller General has a 15-year term, non-renewable, of course. And the selection process is quite unique, as well, in part because of the long tenure. The selection process begins when there is a vacancy. There’s a creation of a 10-member Congressional commission that’s bicameral, bipartisan, there’s leadership in both the House and Senate, as well as our two oversight committees in the Senate and House. And those 10 members carry out a search, and they do interviews, and they go through a process. And then the commission recommends three or more names to the President. The President selects from the list, can ask for more names, and then the person nominated by the President from that list has to receive Senate confirmation. So it’s a very unique involved process, but befitting the term and the importance of the position.
Michael Keegan: You have a tremendous amount of experience. Yyou discussed your role at GAO as it evolved – I’d like to understand what you believe or you’ve seen as the most effective characteristics of a real leader? Could you give us a sense of what are those characteristics?
Gene Dodaro: Yeah, well, you have to be able to motivate your organization. I mean the motivation at the GAO is facilitated because we do such interesting work for the Congress, but it’s very important for our organization to be viewed as independent, nonpartisan, professional, objective, fact based, and providing a full range of professional services to the Congress that are respected by both parties, by both chambers of Congress.
So by being able to have important credibility to be able to lead the organization with integrity and to make sure our work is professional, but also constructive. It’s very important that we not only identify problems but bring solutions to those problems to help policymakers, and leaders in the Executive Branch, as well as Congress to take the necessary actions to improve government for the benefit of the public.
Michael Keegan: How does the GAO working to put the country back on a sustainable fiscal path? We will ask Gene Dodaro, Controller General of the United States, when our conversation continues on The Business of Government Hour.
Welcome back to The Business of Government Hour. I’m Michael Keegan, your host, and our guest today is Gene Dodaro, Comptroller General of the United States.
Gene, as you mentioned in the last segment, GAO is a Legislative Branch Agency and exempt from many of the laws that apply to the Executive Branch Agencies. However, you do have a strategic plan that outlines division of the organization and the direction you want to take it in. Would you outline the plan for us, highlighting the overarching goals and strategies you are using to support your moves?
Gene Dodaro: Yeah, sure, Mike. An important point I want to make upfront is that while we are exempt from many of these management reforms and legislative requirements, we voluntarily comply with them, whether it’s a government performance and results act, a financial management legislation, or an information technology legislation, you know, we believe we need to hold ourselves accountable for the same way that we’ve advised Congress on how the agencies ought to be held accountable.
So as part of that we do develop a strategic plan, and our strategic plan is for serving the Congress and the nation. So it’s very important, it starts with consultation with the Congress and ends with consultation with the Congress and then commenting on our draft strategic plan. It sets out our vision for a five-year period of time on what type of issues we’re going to pursue to support the Congress in carrying out its responsibilities to help provide leadership for the country.
We’ve set broad goals, and the goals are rooted in some of the constitutional responsibilities of the Congress. For example, we want to provide timely and quality service to the Congress and the federal government to address current and emerging challenges to the wellbeing and the financial security of the American people, and this includes everything from healthcare to education, to transportation, et cetera, across the full breadth of the full government’s responsibilities to help achieve this broad goal.
Also, the second goal is to address the challenges to changing security threats and the challenges of global interdependence, and this includes areas of national defense, homeland security, international affairs, for example.
The third broad goal is to help the government transform itself to improve its programs and activities to meet 21st Century challenges. Here we provide a lot of help in terms of implementation of the government performance and results act, many other management reforms across government, the application of new technologies to improve government services and operations, and to develop government’s management capacities to be commensurate with the challenges that the federal government faces right now and going forward.
Our last and final goal is to improve ourselves on a continuous basis and to make sure that we are an organization that has the capacity to deliver on its mission but to continuously improve ourselves in doing so.
Michael Keegan: That’s wonderful. When I was doing the research for our interview, I came across the eight trends you identify, that by the context around a strategic plan, and I found them very helpful for the IBM Center for the Business of Government, which produces the show. As you may know, we put out research announcements and we collect third-party research and we support third-party research. These eight trends really helped us clarify the direction we’re going in, and I found it very interesting. Could you identify these eight trends for our audience?
Gene Dodaro: Yes, the trends are very, very important, as you point out. I’m glad that you found them helpful. And we spend a lot of time making sure that we understand the trends because we believe they will shape the types of challenges the federal government will face and the decisions that policymakers might have.
For example, first are national security threats, they’ve become more diffuse and evolving – these are areas ranging from regional instability to extremism, terrorism, proliferation of nuclear weapons, cyber terrorism. These are all things that are very important, and there are also emerging challenges and threats that can be caused by changing economic conditions, even climate change, energy interdependence issues. So it’s very important for the work that we do. So that’s sort of trend number one are these broad trends and changing security threats.
So the second are the fiscal sustainability challenges, and the federal government faces enormous challenges in this regard to make sure that we can put the federal government on a more sustainable, long-term fiscal path. This is dominating a lot of the discussion now in the Congress. We also look at the state and local sector as well and they face many of the same challenges.
Third are economic recovery and growth. Obviously, we’re dealing still with the aftermath of the last recession. Unemployment is high. Housing market is still weak. We monitor the banking sector and other sectors of the economy, as well, and look at the federal government’s activities to provide training assistance and others.
Global interdependence is the fourth trend, and this is very important, not only for flows of capital, which receives a lot of attention, but also other areas of trade and products that are really changing how the federal government needs to protect the public and food safety, for example, and medical devices and drugs.
The next trend, science and technology, obviously a lot of changes – nanotechnology, cloud computing, a lot of areas that are potential solutions to help both from an economic growth standpoint in our country but also the effective productivity of the government in the private sector, but they have a lot of issues that need to be dealt with. For example, cloud computing can be very helpful in driving down cost, but there are also security issues that need to be dealt with the federal government.
Another trend is networks and virtualization. Obviously, how we learn, communicate and deal with one another is changing dramatically across the world, and it’s from mobile devices, wireless technologies, and et cetera. And this involves looking and shaping how the federal government is adapting to those changes both from a regulatory standpoint and a broadband technologies allocation, spectrum, for example, but so also how the federal government is using these devices to improve its own performance in dealing with the public.
Shifting roles of government, this focuses a lot on the use of contractors. There’s been a lot of discussion and debate about this, even using contractors to carry out our conflicts abroad, and how the federal government should be using the contractors, and what their role should be is very important.
And also the last trend is demographics and social changes. Obviously, with the advent of the Baby Boom generation there’s far fewer workers now per retiree than there was when we started out these systems before, and so that’s changing not only the financial status of our entitlement programs but also bringing about other important changes in how we provide housing, transportation, immigration issues, to make sure we have a workforce that can sustain economic growth in the future. And so those demographic and sidal changes are very important to understand because they have important policy ramifications for the government.
Michael Keegan: Yeah, I really do believe GAO did a service and I believe folks should take the time to look at these trends to understand what they entail because they’re in the strategic plan, they do a wonderful job of doing that.
So what I’d like to do is focus in on a few of these trends, and you mentioned trend number two, fiscal sustainability. Central among the significant challenges we face is the whole national government finding, if you will, a path towards long-term sustainability. Would you elaborate on the challenges affecting the federal budget both near and long term?
Gene Dodaro: Yes, this is a very important issue. For years GAO has done long-range simulations of the federal government’s fiscal path in order to illustrate what the long-term affects may be of policy decisions, but also changes, such as demographics and others. And even before this last recession we warned that the federal government was increasingly coming along an unsustainable fiscal path, that deficits and debt were accumulating over time. And, obviously, with the last recession, the recession itself, affected both the government’s finances and the government’s policy response to the recession as well as added to the government’s debt burden. While necessary to deal with the short-term issues, it created other long-term issues that need to be dealt with.
Now the long-term fiscal position of the federal government is really being driven by changing demographics, as I mentioned the aging of our society and more people going on the Social Security roles and also the Medicare, Medicaid roles. The first of the Baby Boomers became eligible for Social Security in 2008. This year 2011 was the first year for eligibility for the Medicare program, so this demographic wave will hit these entitlement programs over the next few years, and rising healthcare costs. Those are the two primary drivers.
Now the Budget Control Act of 2011, earlier this year, has improved the federal government’s situation. It calls for $2.1 trillion of cuts between 2013 and 2021, and this will help improve the situation in the short term, but even with these changes in the longer term there’s still a serious issue that needs to be dealt with.
Michael Keegan: Yeah, I was wondering as a follow-up, about implication. Are the implications of the failure of the so-called Super Committee to identify a path forward? And how, if at all, does it impact your efforts at GAO?
Gene Dodaro: Well, the Budget Control Act provided a backup should the Super Committee not reach consensus and move the legislative package to the Congress, that’s a $1.2 trillion sequestration or changes in the caps over the next 10 years. So that part will go forward, but obviously there are many implementation issues associated with that, and Congress always has the flexibility to deal with these matters in ways that they believe should be the fiscal policies going forward.
So we will continue to do our long-range simulations and continue to do the work that GAO does to help support the Congress in making difficult resource tradeoff decisions, try to identify ways to save money, to enhance revenues, and to help them evaluate policy options for dealing with this long-term fiscal issue.
Michael Keegan: Gene, you mentioned global interdependence as a trend that GAO identified. Would you describe the changing dynamic of global interdependence? What are the implications of this trend, and how does your work act as a catalyst for greater congressional and public awareness, as well as contribute to addressing some of the problems?
Gene Dodaro: Yeah, this is a very important trend that has a lot of ramifications for the federal government. A prime example is in the financial institutions and financial markets sector. We saw where the federal government needed to change its federal regulatory regime in order to deal with these problems, and the failure to do so led to some of the issues that caused the turmoil in the financial markets.
But going forward, there are new capital requirements in BASO3 that are international standards that we have to implement that. There has to be stronger coordination on financial regulatory situations. But the implications go even further than global financial markets and flows of capital.
They go to how we deal with ensuring food safety for our public. Most of the seafood and fruits and vegetables now come from foreign sources. In the medical device area it’s been estimated by the FDA that 80% of the ingredients for prescription drugs come from foreign manufacturers. And our systems that were set-up to provide assurance and oversight over these areas were set-up initially for domestic production, and now that we have international production and flows we have to be able to do this.
And what we’ve done is we’ve put oversight of food safety and oversight of medical devices on our high risk list that we give to the Congress to show and feature these areas as important areas where there needs to be changes made in the federal regulatory scheme and implementation for dealing with these issues.
We also have put changing the modernizing of the financial regulatory system on our risk list, as well. So we’ve used the high risk list as a prime vehicle, and then our normal work as appropriate.
There’s also and the last area I’d mention in terms of this global interdependence, obviously had implications for homeland security, as well. And we’ve done a lot of work on visa issues and dealing with these things, and there’s a need to really continue to improve our process in these areas.
Michael Keegan: That’s interesting because I want to focus on, say, the food safety example that you gave, and then the work you’re doing at GAO to facilitate a more holistic way of governing, if you will. And where I’m going with that is the fragmentation that’s associated with the food safety system in the country. But what are you doing at GAO to sort of address overlap, duplication and fragmentation of government programs, given the fact that the budgets are tightening?
Gene Dodaro: We have a statutory requirement to produce an annual report on overlap and duplication in the federal government that was implemented about a year-and-a-half ago. We issued the first report on that last March, and we pointed out 34 different areas across the federal government where there was fragmentation, overlap or duplication. And we identified fragmentation and overlap as harbingers of potential duplications to try to get ahead of the curve on some of these issues.
For example, we identified that within the military services, each one had their own military command, and that there had been options explored by the Pentagon to try to streamline this process that could have led to savings of anywhere from $200 million to $400 million a year. And so it’s important to reassess this and take another look at it.
We’ve found overlap and duplication in dozens of programs that focused on teacher quality, economic development, and surface transportation. There were close to 100 different programs. So there are opportunities to try to consolidate these programs, but it requires careful decisions to be made by the Congress to make sure there aren’t unintended consequences.
And the report also identified 47 other areas where there are opportunities for cost savings or revenue enhancements to deal, for example, with our yawning tax gap where there’s about a difference of about $200 billion between what’s owed and collected.
So we have this requirement, we’re working right now on our second report, which will be issued early next year following the President’s submission of the budget for 2013.
Michael Keegan: And one of the things I find about the reports you folks publish and the work your interdisciplinary teams do is they’re chockfull of practicable, actionable recommendations that really do inform both the public and the policymakers, so I find them very helpful. And what I want to get at is you’re doing a lot of work and yet budgets are tight. And my question is how do you plan and manage the demand increases that you’re seeing, given the environment we’re in now, without additional resources?
Gene Dodaro: It’s very important to be able to set priorities in doing our work, and that’s why this congressional outreach effort that I’ve been pursuing and will continue to pursue is so critical, Michael. I mean it’s very important to deal with committee leaders, chairpersons and ranking members of the committees and to understand their priorities and to make sure that we’re focused on those efforts going forward. And so that’s the main thing.
Now we’re also, you know, making sure that we are operating our own work as efficiently and as effectively as possible, so we’ve undertaken a number of internal efforts to try to look at our business processes to look for streamlining and efficiency opportunities. But really my approach to identifying this is to really make sure we’re working on the most important issues facing the country and where the Congress needs help to be able to carry out their responsibilities.
Michael Keegan: How is GAO overseeing federal programs and operations to ensure accountability to the American people? We will ask Gene Dodaro, Comptroller General of the United States, when our conversation continues on The Business of Government Hour.
Welcome back to The Business of Government Hour. I’m Michael Keegan, your host, and our guest today is Gene Dodaro, Comptroller General of the United States.
Gene, the GPRA Modernization Act of 2010 offers promise because it encourages a more coordinated, cross-cutting approach to achieving common goals. Would you elaborate on those goals? And how does it enhance the requirements for agencies to consult with Congress?
Gene Dodaro: Yes, the Modernization Act of 2010 brings about really important changes in the government performance and results act scheme. The original act that was passed in 1993 required strategic planning in the setting of goals and measures by individual departments and agencies. But more and more they really need to have partnerships and multiple agencies involved in dealing with issues and bringing about changes in this interconnected world.
And so the setting of goals by ONB on cross-cutting issues is very important to dealing with some of these issues and holding government accountable for achieving and resolving some of these problems and improving the performance of the government, whether you’re talking about pandemic, food safety, homeland security issues, and other issues that multiple agencies need to be involved.
It also has a requirement, though, for agencies to identify who they need to coordinate with in their programs and activities, which will bring about another feature that can help identify overlap and duplication but, importantly, the need for greater coordination among departments and agencies. We find this consistently across the work that we do, there’s a lack of a well-structured mechanism in many areas to bring about coordination across the government.
Now, importantly, there’s also requirements for quarterly reviews of performance and a requirement that the performance measures be posted on a public website so that it will increase transparency of the government’s ability to achieve its performance goals that it set for itself. Agencies also have to attest to the reliability of the information that they’re posting, and this will bring about important reforms, as well.
So I think that collectively the Act brings about and offers the opportunity for very important reforms to be put in place to improve the performance of the federal government, but implementation will be the key.
Now part of the original Act required consultation with the Congress, but that hasn’t happened as much as people believe and it needs to happen over time. So there’s a requirement now that the executive agencies consult with Congress and to reflect in their plans what feedback they received from the Congress and how they dealt with that, so there’s more accountability for ensuring the consultation and the use of it in developing their plans.
I also, in testifying on this legislation, have encouraged the Congress to be proactive as well as reach out to the agencies and provide their views on how they should be measuring their performance. So hopefully this legislation will provide an important catalyst for improving government’s performance.
Michael Keegan: Now does GAO have a role in evaluating the implementation of the Act?
Gene Dodaro: Yes, we have set requirements to evaluate the planning requirements, is consultation being made, for example, how are they setting the goals and measures, and looking at also then implementation of the issue down the road, and whether or not it’s actually improving the performance of the government and how these measures are being used to bring about important changes. We have set requirements over the next decade really to produce regular reports.
Michael Keegan: Now in the last segment you mentioned the high risk list that you folks do, and GAO has been putting together and highlighting longstanding managerial and operational challenges facing federal government and the federal agencies. Would you tell us a little bit more about this program and what is specific key high risk areas of late and, more importantly, how do agencies learn to work with GAO to get off the list and to excel in these areas?
Gene Dodaro: Yes, we’ve been creating the high risk list since 1990, and it was to identify problems before they reach crisis proportions. Initially we started out identifying areas subject to waste, fraud, and abuse, and mismanagement in the federal government. And the program has evolved now to also include areas in need of broad-based transformation.
There are currently 30 areas on the list. They include in the classic areas of potential fraud and abuse, for example, the Medicare program and the Medicaid program where there are large amounts of improper payments that the federal government has to deal with, as well as the states dealing with the Medicaid program.
In the transformation area, there’s the need to modernize the financial regulatory system, and transformation and implementation of the Department of Homeland Security is on the list as well. There are sets of issues that are on the list that are dealing with agencies or issues that are in sort of precarious financial situations, the financial condition of the United States Postal Service, for example, the National Flood Insurance Program, the Pension Benefit Guarantee Corporation are all on the high risk list because of their challenges in the financial area.
Now we work very carefully with each of the agencies that are on the list, to identify what progress is being made. In order to come off the list eventually there needs to be leadership commitment, there needs to be a good plan that’s resourced properly. And then, importantly, there needs to be demonstration of progress in actually fixing the items.
We are also engaged in regular meetings between the agencies on the high risk list, ONB, and GAO. And we meet on a regular basis, and very high level officials from the agency in ONB are involved, Deputy Director for Management, Jeff Zions (ph), and the Deputy or head of the Agency is involved in discussions. And I personally participate in those meetings in order to make sure that we’re bringing all the resources to bear and identifying what needs to be done to ensure progress in these areas.
So it’s a very important initiative, and I believe that I discuss some of these issues with the Congress, as well, and our teams do make sure that in those areas where there’s legislative need for reform to fix the high risk area that the Congress has benefit of our insights, as well.
Michael Keegan: Well, Gene, I’d like to turn our attention to one particular function that the government does and does a lot of. I believe the fiscal year 2010 the federal government spent about $535 billion acquiring goods and services. The GAO has raised concerns about the contracting practices of federal agencies. I would like you to give an overview, if you would, of the weaknesses that seem to be affecting government contract management, and perhaps you could describe the four changes that GAO has identified that could actually yield cost savings in this area?
Gene Dodaro: Yes, contracting problems have been problematic across the federal government. In fact, many areas on our high risk list are contracting areas, contracting issues, the DoD, the Department of Energy, NASA, and interagency contracting issues. Typically what we find are problems in well defining the requirements as a root cause of many of these issues, and there needs to be more attention to contract oversight once contracts are let, as well. We’ve reported on this issue many times over the years.
Now important progress is being made in a number of these areas, but there are things in particular that could be done. For example, there needs to be greater competition in the contracts. Over the last several years about 30% to 32% of all government contracts are let without competition, and that’s not even counting the contracts where there’s only one bid in place. There also needs to be important use of award fees and incentives that are in place with in some cases. In the past we’ve found they have paid contractors irrespective of their performance, and so there needs to be wise use. There’s an important role for incentive fees, but they have to be used for positive performance, not mediocre or subpar performance.
There’s a need for the federal government, thirdly, to recognize the strategic sourcing uses and use its purchasing power collectively in order to drive down prices and get better deals on its contracts. The Administration is pursuing some initiatives in this area, as well.
And so those are some of the ways that the federal government can really improve its opportunities to improve contract management. And given the vast amount of money that’s used and the important role of contracts in helping the government, this is a real important opportunity for improving performance.
Michael Keegan: So improving performance in contract management yields some cost savings in the four items that you mentioned, I’d like to turn to something that you mentioned earlier regarding the Medicaid program, and that is improper payments. Can you first tell us what is an improper payment? And then the other thing I wanted to talk about is what recommendations or solutions has GAO explored or offered that could yield in mitigating this risk and actually realizing some savings?
Gene Dodaro: Right. An improper payment is any payment that should not have been made. It could have been for an ineligible recipient, not for approved service, it might have been for an item that was never received, it could be an overpayment or an underpayment. And so it’s an area where there is a lot of activity.
The volume of the federal government’s payments in many of these areas, whether it’s Medicare or Medicaid or in other large programs is very high. So the likelihood of errors can occur. The total rate that’s been identified is a little under 5% of payments in this area, and so there are billions of dollars that occur in this area.
What we’ve done is, first, have recommendations that help quantify improper payments. Before the requirements for implementing financial audits in the federal government, there was not a systematic quantification of improper payments. So we helped, along with the inspector generals and others of implementing the financial audit requirements in the 1990s, in preparing financial statements and having them audited and we began surfacing this issue to make sure that the improper payments were being quantified. So that was step number one.
Then we worked with the Congress and got legislation passed in 2002 to require the quantification across government and the reporting of these issues. And then we advised the Congress, and they strengthened the laws and requirements for reporting on this area, made sure the reporting occurred at the proper levels, and that agencies had actions plans going forward. The Administration has been active in this area, as well, helping set goals that need to be pursued to drive down the payments. It’s not enough to just measure them; it’s then using that information in order to deal with them in both recoveries of payments that have been made but, importantly, to prevent them from occurring in the first place.
And the application of new technologies is really critical to that, so we’ve made some other suggestions in that regard and have looked at agencies areas. So this is an area, it’s a lot of money, you know, $100 billion or more, and it is an area where both the Congress and the Administration have been focused on it. And so I expect to see improvements and better results going forward.
Michael Keegan: You mentioned audited financial statements, and I want to talk about the 21 of the 26 CFO Act agencies have received an unqualified opinion, yet there are major impediments still remaining for the federal government as a whole, being able to receive a clean opinion. Would you tell us more about these impediments and what you can do to achieve this clean opinion?
Gene Dodaro: Yes, now this is a very important area. I’ve been working on this for many years. It’s very good that there’s progress at individual departments and agencies, 21 out of 24, as you mentioned, now have unqualified audit opinions. When we first started this, implementing it across government in 1996 only six of 24 were able to get a clean opinion. So there’s been great progress, but there are very important large agencies that are yet unable to get clean opinions – the Department of Defense, and the Department of Homeland Security are two examples of that area.
Now there’s been progress in both of those areas, but really the three main impediments to getting an opinion on the government wide consolidated statements are focused on making improvements in the Department of Defense. They own so much property and their budget and their expenditures, and operations are so large that they’re a very material item to the consolidated financial statements of the federal government.
The second impediment is eliminating inter-governmental transactions among departments and agencies and reconciling their fund balance with the Treasury. This has been an issue that’s been very meddlesome and difficult to deal with.
And, thirdly, is the process of preparing the financial statements and Treasury’s compilation process to make sure that it is consistent with the underlying financial statements at departments and agencies. This hasn’t yet been able to be done without material changes to the financial statements or adjustments in the numbers.
And so those are the main three areas. In all three I’m pleased that there’s activity underway to make necessary improvements. The Congress has levied some tough requirements on DoD to improve its financial statements and to be auditable by 2017. The Secretary of Defense has said they want to be auditable in their statement of budgetary resources by 2014, and they have a plan underway to be able to do this that is focused on improving their budgetary numbers in existence and completeness of their records on military equipment.
Both of these things are critical to their operations. And Treasury has a number of activities underway with ONB to deal with inter-governmental eliminations and preparing the financial statements, so I’m hopeful that we’ll see continued progress on these items, particularly before my tenure ends.
Michael Keegan: Well, you had mentioned in our last segment the term tax gap, billions of flow to the Treasury by closing the difference between taxes owed and taxes paid. Would you explain what is tax gap? And would you outline some of the strategies GAO has offered to eliminate it or mitigate it?
Gene Dodaro: Yes, tax gap is basically the difference between the taxes that people voluntarily comply with and what’s owed. And the latest estimate that was made, and it’s somewhat dated now, is there was a net tax gap of $290 billion. And one of the things that we’ve suggested, for example, is the IRS periodically update that estimate, and they’re in the process of doing that now, so we should have a new estimate soon.
We’ve looked at a number of areas that are really important to us. First, there’s a number of things that could be done. The first is to simplify the tax code. I mean it’s very difficult for people to figure out, and they spend a lot of time and energy on it, so that’s something the Congress needs to do, working with the Administration. Secondly is to get additional information from third parties that the IRS could use to corroborate the information it’s getting from taxpayers, there could be more information requested from financial institutions and others that the IRS could use. There could be more compliance checks before refunds are given going forward.
So we’ve had a number of recommendations in this area, and there’s important progress, for example, there’s been legislation, the IRS is implementing new programs to require continuing education and requirements for paid tax preparers. Now this is very important because a lot of people use paid tax preparers to make sure that they’re giving proper advice and that the government is benefitting from that, as well. And so this is an area we have continual work underway on and we hope to offer additional suggestions in the future.
Michael Keegan: Okay, in an era of fiscal constraint, it’s critical that agency leaders act with strategic intent and keep their workforce motivated to meet mission. Reflecting on your leadership at GAO would you tell us how you have kept your employees and staff focused and motivated in the face of dramatic, sometimes painful changes?
Gene Dodaro: Yes, I mean, first and foremost, we need to continue to be doing the most important work necessary for the country. People in GAO come to GAO and stay because of the interesting nature of the work that we do and the ability to make a difference on key national issues, so that is very important and it goes back to my earlier discussions about prioritizing our work and working with the Congress to make sure that we’re working on the most important issues.
Beyond that, however, that’s not enough. And today’s environment you need to keep your employees engaged. For example, in dealing with our budget situation we have worked with our union very closely, and our employee advisory groups to get ideas from them on how we can deal with our budgetary challenges. Every employee in GAO had the opportunity to post their suggestions. We received well over 500 suggestions from individual employees of what we could do to streamline our operations and save operations.
So, also, we communicate very effectively with our employees, what our situation is, how we’re planning to handle it. For example, I visited every one of our 11 field offices this summer to make sure that they understood the situation and that they had the opportunity to ask me questions. And so we have regular communications.
We do our decisions on a fact based basis, and I had an address for all GAO employees in October outlining how we were going to handle our budgetary challenges this past year, and provided a lot of details to them.
So keeping them engaged keeps them motivated and it benefits the organization. We have an organization filled with people who give advice to the rest of the federal government on how to improve their operations, and we can benefit from that at GAO, as well.
Michael Keegan: What does the future hold for the U.S. Accountability Office? We will ask Gene Dodaro, Comptroller General of the United States, when our conversation continues on The Business of Government Hour.
Welcome back to The Business of Government Hour. I’m Michael Keegan, your host, and our guest today is Gene Dodaro, Comptroller General of the United States.
Gene, I have the pleasure to talk to most of my guests about the use of collaboration and partnerships among agencies, branches of the government and the private sector to achieve mission results. How are you folks at GAO leveraging partnerships and improving management operations?
Gene Dodaro: We’re using partnerships in a number of areas. This is very important to make sure we have the brightest perspectives as possible and are leveraging our resources through the use of those partnerships. For example, we work very closely with the Inspectors General throughout the government on the regular annual audits of financial statements in department and agencies. They do many of these audits or arrange for them to be done by CPA firms, but we’ve worked out a joint methodology that’s used so that we can use the results of that work in order to help us in determining our audit opinion on the consolidated financial statements of the federal government.
We have a similar methodology with the IGs we’ve worked out in looking at security issues across federal government. Our partnerships with the IGs are very important, and we do that consistently. We also have partnerships with the state and local audit community. We work with them very closely in a number of areas. We’re contemplating doing some increased work in infrastructure issues, for example, that many of them feel are important at their level.
We work, as I mentioned earlier, with ONB in looking at the high risk areas, and that’s a very important partnership and both GAO and ONB are working on these issues together with the agencies, you can create a lot more synergies to bring about positive changes in the government.
I also work in partnerships with my counterparts around the world, heads of national auditor offices in other countries. For example, I’m leading a task force on the global financial crisis, and we have 25 countries involved, including China, countries in Europe, and other areas to look at past crises, what has led to the current situation, what needs to be done going forward, what role can the National Audit Office play in ensuring the prevention of any future crisis that might occur later.
We’ve also been working with the international community. I was heading up the international organization, audit offices, coordination with donor communities. And we’ve established a partnership. There are about 16 donors around the world that have signed this agreement with us. The purpose is to strengthen the capacity of national audit offices in developing countries, areas where a lot of foreign aid goes in there, but there’s not always the strongest accountability mechanisms to ensuring that the aid goes to poverty reduction and to improve the economic and social conditions in these countries.
So we have the World Bank, the International Monetary Fund, European Union, United States AID have signed on to this agreement, along with a lot of the regional banks around the world, including the Islamic Development Bank, the African Development Bank, et cetera. So those are just some sampling of the partnerships. We also use a lot of advisory groups to help us in GAO identify issues that are important.
Michael Keegan: I’d like to talk about major policy decisions about fiscal policy. The shape and the role of federal government will and should be made by elected officials, as you pointed out. But you also have an interesting insight, if you will, on the role that public managers can play in helping elected officials manage through these challenges. Would you elaborate?
Gene Dodaro: Yes, federal managers really can step-up during these periods of times and really help officials in a number of ways. First, is pay attention to the people; pay attention to the workforce. When there are difficult challenges a workforce can feel devalued and dispirited and you need to engage the people in the process to help them to manage the changes, and not let the changes manage them going forward and so trying to work with the workforce.
Secondly, is to step-up efforts to fix these high risk or longstanding problems in the agencies that drain resources unnecessarily away from productive means. There are a lot of problems in the management and infrastructure of government and there are opportunities to provide strengthened roles to be more efficient, a better use of technology, and to deal with these improving the capacity of the governments to meet these challenges and eliminate wasteful activities and unnecessary departures from what would be productive use of resources.
So public managers can do a lot in this process, and they can also offer up suggestions and alternative ways of dealing with these issues that can minimize any adverse or unintended consequences because of their deep knowledge of the programs and activities.
Michael Keegan: Well, Gene, what advice would you give someone who is thinking about a career in public service?
Gene Dodaro: Public service is a tremendous way to give back to your country. It’s the reason that I was drawn to the federal government many years ago. That’s why I’ve stayed in the federal government. It’s a very rewarding career, and people should think about pursuing a career in public service at any point in their career, you know, whether they start out as an entry level person or they come in as a mid-career manager or senior manager in government, it’s very important to be able to do that and to have the perspective to help your country.
We’re only going to be as good as our public service in going forward to help government carry out whatever missions are given it by our legislatures and by our policymakers. But we need to do the best we can to make sure we have the strongest country possible and that we remain economically strong and can deliver to all of our democratic institutions in a way that well serves the American public, not only now but well into the future.
Michael Keegan: Wonderful. Gene, I want to thank you for joining me. It’s been a wonderful conversation but, more importantly, I want to thank you for your 30 plus years of service to the country.
Gene Dodaro: Thank you very much, Michael. I’ve enjoyed being here today. I enjoy public service, and look forward to continuing to do my part and to make sure that GAO does its part to help serve the Congress and the country. Thank you very much.
Michael Keegan: Thanks, again. This has been The Business of Government Hour featuring a conversation with Gene Dodaro, Comptroller General of the United States and head of the U.S. Government Accountability Office.
Be sure to join us next week for another informative, insightful, and in-depth conversation on improving government effectiveness. For The Business of Government Hour, I’m Michael Keegan, and thanks for joining us.
Host: This has been The Business of Government Hour. Be sure to visit us on the web at BusinessofGovernment.org. There you can learn more about our programs and get a transcript of today’s conversation. Until next week it’s BusinessofGovernment.org.