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Transition: Role of Think Tanks in 2000

Monday, March 24th, 2008 - 16:43
Here’s where this becomes a true blog.  I know only part of the story and hope that you can add what you know to what happened, or correct what I remember! . . . . the full story is more complex than what I know without doing a lot more research, so this is a work-in-progress. . . .

Make No Small Plans

Thursday, December 27th, 2007 - 17:02
GAO’s released another timely report this past week that helps frame some of the management challenges facing the next President.  What a Christmas present!

Filling Empty Boxes

Tuesday, December 18th, 2007 - 15:36

Forum Introduction: Key Ingredients for Successful Performance Management

Wednesday, April 12th, 2006 - 16:50
It has been 13 years since the passage of the Government Performance and Results Act of 1993.This law requires agencies to develop multi-year strategic plans, annual performance plans,measures of performance, and annual reports that publicly assess agency progress toward the goalsset in their plans. A key purpose of this law was to create new sources of performance informationthat would “improve federal program effectiveness and public accountability by promoting a

Building a Performance-Based Organization from the Ground Up

Wednesday, April 12th, 2006 - 16:40
Posted by: 
Before he was selected as the first chief operating officer (COO)of the Federal Aviation Administration (FAA), Russell Chewmanaged operations at American Airlines’ central controlcenter. Yet unlike most executives who make the transition togovernment from the private sector, Chew was able to takeover a new type of government organization with “customers”and “owners” and a “performance-based” culture.

A Conversation with David M. Walker

Wednesday, April 12th, 2006 - 16:34
Posted by: 
The IBM Center for The Business of Government hosted a“Perspectives on Management” luncheon late last winter withDavid M. Walker, comptroller general of the United States.Mark Abramson, executive director of the IBM Center forThe Business of Government, and Jonathan Walters, journalistand co-author of the Center report “The Transformation of theGovernment Accountability Office,” moderated the session.

Phyllis Scheinberg interview

Friday, November 4th, 2005 - 20:00
Phrase: 
Phyllis Scheinberg
Radio show date: 
Sat, 11/05/2005
Intro text: 
Scheinberg discusses how her office works with DOT's 12 operating components, including the Federal Aviation and Federal Highway Administrations, on budget and program issues. In her four and a half years at DOT, Scheinberg has helped appoint a CFO in...
Scheinberg discusses how her office works with DOT's 12 operating components, including the Federal Aviation and Federal Highway Administrations, on budget and program issues. In her four and a half years at DOT, Scheinberg has helped appoint a CFO in each of the operating components. Scheinberg talks about how her input on the selection, performance evaluation, and budget of the DOT CFOs is essential to maintaining a "dotted line" relationship with DOT's 12 operating units.
Complete transcript: 

Wednesday, October 26, 2005

Arlington, Virginia

Mr. Morales: Good morning and welcome to The Business of Government Hour. I'm Albert Morales, your host and managing partner of The IBM Center for The Business of Government. We created the center 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 www.businessofgovernment.org.

The Business of Government Hour features a conversation about management with a government executive who is changing the way government does business. Our special guest this morning is Phyllis Scheinberg, assistant secretary for budget and programs, and chief financial officer for the Department of Transportation. Good morning, Phyllis.

Ms. Scheinberg: Good morning, Al.

Mr. Morales: And joining us in our conversation, also from IBM, is Debra Cammer. Good morning, Debra.

Ms. Cammer: Good morning, Al.

Mr. Morales: Phyllis, as I look at the Department of Transportation organizational structure, it looks a lot like a holding company. Can you give us a little insight into the activities of its 12 operating components?

Ms. Scheinberg: Certainly, and you're absolutely right, it is like a holding company. It's a very diverse department. We range from activities like the 24/7 air traffic control operation in FAA to pipeline safety inspectors and to $38 billion a year in the highway grant program. When people ask what the largest organization in the Department is, I have to ask, "What do you mean; what is your context," because FAA has most of our employees -- 47,000 out of the Department's total of 57, 000, but the Federal Highway Administration has the majority of the funding, $38 billion out of about $60 billion a year.

We also have several regulatory programs in NHTSA, FAA, motor carriers -- I don't know if you've heard of the Hours of Service Regulation -- this is for truck drivers and how long they can be on the road in any one week, and that's been very controversial, and FRA with the railroad regulation. So we get into a lot of regulations that affect the public, the traveling public and the working public. We also do a lot of inspections or control a lot of inspections: railroads, pipelines, motor carriers, aviation, airline inspections, and number one mission of the Department is safety. But this has always been the case, and this is really why we exist. Just another example is that we have four credit programs. Most people don't think of the Department of Transportation as a loan or a lending agency, but we do have four loan and loan guarantee programs. So when you look at that as a portfolio, clearly we have quite a diverse department.

Mr. Morales: Phyllis, I'd like to probe the four credit programs, because I wasn't aware of that, but before we do that, can you tell us about specifically the mission of your office, the Office of the Assistant Secretary for Budget and Programs and CFO within the Department of Transportation?

Ms. Scheinberg: Well, I work for the Secretary, Secretary Mineta, and my responsibility is to oversee the flow of all the funds in the Department, $66 billion this year. I'm responsible for the budget preparation and execution of our funds. Also responsible for the preparation of the consolidated financial statements and the coordination of the financial audit, which is going on right now, also the oversight of the Department's program performance. And it's my role to interact with OMB and the appropriations committees in the Congress.

Mr. Morales: Tell us a little bit more about your own specific role as assistant secretary.

Ms. Scheinberg: Well, I think of myself as a problem solver. One of the things that really is important to me is to help the staff, my staff and the financial staff throughout the Department, be able to do their job and help them get their job done. So I take on the role of solving the problems that are standing in the way and impeding the progress.

Another part of my job is to implement the President's agenda. Certainly, the President's Management Agenda and other policies that come out of the White House, and to support the Secretary; everything has a budget and finance component to it, so every time he testifies, speeches he gives, interactions with the White House when he goes to a cabinet meeting, and help him prepare and certainly any policy proposals that come up through the Department and go to the Secretary come through me for comment.

I consider my strongest role in the Department that of building a strong team of financial professionals throughout DOT; it's very important to me that we have a strong team and that the financial professionals see themselves as a component, not just that they're -- the individual operating administrations don't feel connected to each other.

Mr. Morales: And approximately how many professionals do you have in your organization?

Ms. Scheinberg: The office of the assistant secretary is about 55 people, but I have a dotted line relationship to the financial folks in each of the 12 operating administrations.

Ms. Cammer: Now, we understand that you came from or have some experience working with DOT programs when you were at GAO.

Ms. Scheinberg: Uh-huh.

Ms. Cammer: And that you evaluated transportation programs. How has that helped to prepare you for your current assignment?

Ms. Scheinberg: It was excellent preparation. I was at GAO for 11 years, working almost the whole time on transportation programs. My responsibility was, most of the time, surface transportation, and I became one of the directors of transportation issues at GAO. So in that capacity I managed program reviews that GAO did. These were not financial audits; they were program audits. And I was responsible for testifying before the Congress on those reports and on the subject areas, and I also did quite a bit of a speaking to conferences and interest groups.

What this did is gave me a level of knowledge of DOT programs, transportation programs, that I would never have been able to acquire just through a financial job or working on the budget. And so when I came to the Department, I was able to help people in the operating administrations in the program side of things, and I saw the connection -- I knew how their programs worked and I knew what they were trying to do and I could help them with the budget and the financing and put it together with the program knowledge.

My other experience was nine years -- before I went to GAO, I had spent nine years at OMB as a transportation budget examiner, and that experience was invaluable. I use that experience all the time. Knowing what goes on inside OMB and how OMB thinks is just really important when you work in a department CFO.

Ms. Cammer: And now I'd imagine in particular with those 12 operating units, the people who have dotted line responsibility, that that's particularly helpful when you work with them. Could you talk a little bit about what that's like to have a dotted line responsibility into those places?

Ms. Scheinberg: Yes, I'd like to very much, because that was not the case when I first went to DOT. I've been at DOT for 4-1/2 years, but I've been the assistant secretary for about five months. Before that I was the deputy assistant secretary, and when I first was there, we did not have this dotted line relationship. And in fact the capabilities in some of the modes were not what they are now.

One of the things that we have done is set up a CFO, a chief financial officer, in each of those 12 operating administrations. When we first went there, 4-1/2 years ago, the only operation that had a CFO position was the FAA, the Federal Aviation Administration. And it's only been recently that the Federal Highway Administration, with $38 billion in grants, has a chief financial officer.

So that was one of the goals that I and my predecessors have been able to implement, is to develop the caliber of staff and the professionalism of the staff in each of these operations. And in doing that, it was very important to me that these people have a connection to me, in addition to their connection to their administrator, and part of this is done through the selection process that I have approval and input into the selection of these folks. I have input into their performance ratings and I have input into their bonuses. These are the senior level financial folks in each of the operating administrations.

And I don't see this as a negative thing, I think this shows the connection, that these people want to work with me and I want to work with them and not just that there's some kind of a remote connection. They're really a part of my family and my team. So that's how we've been able to do that and all this has been accomplished in the last four years. So I'm very proud of that.

Ms. Cammer: It sounds like it's done wonders to strengthen the financial management at DOT. Now, you've mentioned how you were at GAO and at OMB in a career position, and now you're a political appointee. Could you talk about the significant differences between those two roles?

Ms. Scheinberg: If you don't mind, I'd like to tell you how this happened.

Ms. Cammer: That would be great.

Mr. Morales: Sure.

Ms. Scheinberg: It's kind of personal, but I'd like to share it with you, because it's something that's been very meaningful to me. I never had intended or had even any interest in becoming a presidential appointee. As I said, I worked at OMB as a budget examiner for nine years. I worked at GAO for 11 years. And while I was at GAO, and the beginning of this administration, the nominees for my current position, the assistant secretary for budget and the deputy secretary nominee, called me and asked me to come talk to them, and I assumed that they wanted to talk to me about what I knew about the Department, given my role at GAO, because I knew them and I knew people who -- we had friends in common and so the fact that they would call me would be logical. I had talked to the transition team and others.

And when I came for the meeting at DOT, I was immediately approached and they said, "We know that you know what our problems are, and we want you to come and help us solve them." And that was a very meaningful moment for me, because it made me realize that I could stay at GAO and audit these folks and review them and continue to throw arrows at them, or I could go and sort of put the money where my mouth was and actually address these issues.

So I made it a quick decision and made a quick move, but I did say I had one condition: That the position had been a political position, deputy assistant secretary. And I said I did not want to have a political position, I wanted to continue my long federal civil service career, and so they changed the position for me and made it a career. It was an optional kind of position and so I came to DOT 4-1/2 years ago as a career deputy assistant secretary, which is quite unusual, and worked in that capacity for four years.

I always felt part of the circle on the Secretary's team, so much so that last January, when Linda Combs was nominated to be the controller of the United States, Secretary Mineta asked me if I would consider replacing Linda. That's a quite a thrill when a cabinet secretary says, "I want you to do this." And, of course, I had been doing -- I'd been Linda's deputy and before her Donna McLean's deputy, and so I felt it was -- the Secretary knew what he was getting, and he asked me to this. He clearly knew who I was and what I would do and I said, "yes." And so I went through the White House process, was nominated and had a Senate hearing, a Senate Commerce Committee, and was confirmed by the end of April. So that was quite a thrill after 26 years of federal service to go through all that. It's been pretty exciting to have the top job for the last five months or so. And because I was in the office before -- it's the same, but different than it was before. It's always kind of a -- it's a neat experience for me.

Ms. Cammer: What things do you notice about the difference between being a presidential appointee and civil servant?

Ms. Scheinberg: Well, clearly, I'm involved in more issues, beyond the issues that I was involved in before, that I'm involved in issues that would not just be financial issues, and that's true for the White House and the President's priorities and the Secretary's priorities and how he fulfills his job, vis-a-vis the White House.

So I have a heightened awareness of what's going on in the White House and how the Secretary is interacting with that. And I also, as the assistant secretary and CFO, have a greater accountability for the work that we do in the office. I would say that I definitely feel that the buck stops at my desk. If, God forbid, we shouldn't get a clean audit, it would be my -- I would be the one who would have to go to the Secretary and explain what happened, whereas before I might have gone with the assistant secretary.

Mr. Morales: That's great. What is the Transportation Center for Excellence and how does it impact financial operations? We will ask Transportation Assistant Secretary Phyllis Scheinberg to share with us when the conversation about management continues on The Business of Government Hour.

(Intermission)

Mr. Morales: Welcome back to The Business of Government Hour. I'm your host, Albert Morales, and this morning's conversation is with Transportation Assistant Secretary Phyllis Scheinberg. Also joining us in our conversation is Debra Cammer.

Phyllis, now that you have been completing the financial statement audits by OMB's accelerated due date, can you tell us what you believe the keys to success are in getting a timely and clean opinion?

Ms. Scheinberg: Well, Al, as you know, OMB moved the due date for the financial audit from January 30th to November 15th. Last year was the first time we had to meet the November 15th date, and we were able to do that, but it used to take us four or five months to do this after the close of the fiscal year, and now we have to complete this whole process in 45 days.

In order to do this, we have four auditors at DOT and they focus the main part of their audits on our third quarter financial statements, which come out after June 30th. And they do just a rollup testing for the fourth quarter, in order to be able to finish the audit in time in this 45 days. So it is quite a compressed schedule and quite an intensive process.

One of the things that we developed in order to be able to do this, is that we developed through our Oracle financial system, a way to produce financial statements overnight at the end of each month and at the end of the fiscal year. So we were able -- when the fiscal year closed Friday, September 30th, Saturday morning we had all our financial statements except for FAA, and that FAA we had Sunday morning. This was just phenomenal compared to a couple years ago. So this helped us in meeting this accelerated schedule because we were able to turn our financial statements over to the auditors in less than a week.

The reality of all this is that now that one financial audit starts right after the next, that this is a year-round activity, not a seasonal surge. So on top of everything else we do, we do financial audits all year-round.

Mr. Morales: We understand that the Department of Transportation was the first cabinet level agency to have a single financial system for all of its operating units. How is DOT's new financial management system doing?

Ms. Scheinberg: It's doing great. Two years ago, that -- exactly, November 2003 was when DOT finished converting the last of the organizations within the Department to our new financial system, which we call Delphi.

DOT was the first cabinet level agency to finish converting to a state-of-the-art financial system using a commercial off-the-shelf software. In other words, we have a single production and it's very cost effective. The biggest advance is when -- one of the things I just mentioned is that we are able to develop our financial statements overnight every month. So we now have monthly financial statements and then also at the end of the year, able to produce financial statements quite quickly.

You wouldn't be able to do that if you had multiple systems, because we have to do a consolidated audit where all of the 12 components have to be combined into one financial statement. This past year, Congress reorganized part of DOT, and we have two new organizations. One is the Pipeline and Hazardous Materials Safety Administration and the other is the Research and Innovative Technology Administration.

When we had to set up the books for these two new administrations, we took a step back and looked at our chart of accounts and decided to update them to reflect all the lessons learned that we have accumulated during the last 5-1/2 years of implementing our new system. And we developed what we now call a model organization, and we set the new agencies up under that model organization, and we'll be gradually migrating all the other organizations to this new chart of accounts over the next couple years.

Again, we wouldn't be able to do that unless we were all on the same financial system. And we're planning to upgrade this software again in February '06. And we've successfully upgraded the software four times already, but it's important, we feel, to keep up with the new releases from the vendor.

Ms. Cammer: Now, all this talk about financial systems makes me think about internal controls. So could you talk about what DOT is doing to address the government's Sarbanes-Oxley requirements or A-123?

Ms. Scheinberg: Last spring we set up an internal controls working group to develop our plan for implementing OMB's updated circular A-123. And we have established a senior advisory team for internal controls this summer. What we're trying to do is use a centralized process and build on work that's already underway, not to duplicate what we've already done. We've hired a consultant to help us identify any gaps in our process, help us assess risks, and ensure that we have complete documentation for all of our controls.

As you probably know, we have a deadline, June 2006, that OMB has set for assurance statements. And so we have less than a year, it's about six months now, to reach that deadline, and the key here is upfront planning and identify the actions required, and we're going to use probably a three-year schedule to complete all the work and not try to do everything in one year, but it is quite an undertaking.

Ms. Cammer: Do you have any advice for any federal agencies just getting underway to address it?

Ms. Scheinberg: Well, I would say it makes sense to me for a large department to use a centralized process rather than have, in our case what would be 12 different agencies going their own way. And also to avoid duplication and try to do things in a way that you're building on what you've already done.

Ms. Cammer: Could you talk about what it means for DOT to be named as one of OMB's four Centers of Excellence for the federal government?

Ms. Scheinberg: DOT is very pleased to have been designated this last year as one of the four financial management Centers of Excellence. We call our center the enterprise service center, and it's located in Oklahoma City at the Mike Monroney Aeronautical Center. Being designated as a center of excellence recognizes that DOT is out in the front on financial management and has a great deal of experience and expertise to offer other federal agencies.

First new external customer was the National Endowment for the Arts, which started working with DOT in October 2004, so that was about a year ago, and just this September we've added two new customers who have selected to use our system and they are the Commodity Futures Trading Commission and the Institute for Museum and Library Services. And they'll start using our financial system in mid fiscal year 2006.

Ms. Cammer: Now, what are you doing to go out and market for customers and then how do you provide customer service to keep the ones you have.

Ms. Scheinberg: The way we're working on the marketing -- because clearly, there's several issues in this whole process, is that we cannot afford to take people away from working on our financial system to do the marketing. So we have awarded a contract to a private sector business partner who is helping us market to new customers, but is not costing us anything, because they will be paid by the customers that they bring on. So we're getting assistance without a cost, so we feel like that's a pretty innovative way to do the marketing. And as you can tell from the folks who have joined us, we're starting with smaller agencies. And part of that is because these agencies will be easier to absorb and work into our system before we would -- we are in discussion with some larger agencies, but I think this is the right way to go, to start with small agencies.

Ms. Cammer: Sounds like a good plan.

Mr. Morales: Well, certainly assistance without paying for it sounds like a best practice to me, also.

Ms. Cammer: Absolutely. Now, we understand that all the agencies under the transportation umbrella have recently migrated or are migrating to the new federal personnel and payroll system. Could you describe why the switch was made and how it's been going?

Ms. Scheinberg: A few years ago OMB looked around in the government and saw about 20 legacy payroll systems, and saw that they were mostly pretty getting old and needed to be rewritten into modern systems and the thought was instead of wasting money or spending money to rewrite basically the same payroll system 20 times, the thought was to consolidate to four centers. Again, this is like the center of excellence that we have for financial systems; this is a consolidated center for payroll. And OMB assigned DOT to the Department of the Interior's Federal Personnel and Payroll System, what we call FPPS. And last April DOT successfully migrated all of our organizations, except for the FAA, which as I have mentioned is most of our people, but we did successfully migrate 11 of our organizations to FPPS. And the transition was so smooth that most of our employees didn't even realize that it had happened.

This past month, we're finishing the job by migrating the Federal Aviation Administration's 45,000 employees to FPPS. We did two parallel tests before we migrated, and the whole process has gone exceptionally well. As part of this migration, DOT upgraded our time and attendance and labor distribution system to a modern web-based system that is interfaced with the FPPS payroll system and with DOT's financial system. We call our new system CASTLE. But what it does is let employees enter on a single screen both their time and what projects they've worked on. This supports our efforts to expand cost accounting throughout DOT.

Mr. Morales: How is Transportation staying green on the President's management agenda? We will ask Transportation Assistant Secretary Phyllis Scheinberg to share her secrets with us when the conversation about management continues on The Business of Government Hour.

(Intermission)

Mr. Morales: Welcome back to The Business of Government Hour. I'm your host, Albert Morales, and this morning's conversation is with Transportation Assistant Secretary Phyllis Scheinberg. Also joining us in our conversation is Debra Cammer.

Phyllis, over the past several years George Mason University's Mercatus Center rated the Department of Transportation's performance and accountability report to be one of the best in government. Our listeners should note that these reports are required by the Government Performance and Results Act. What contributes to the success at DOT, and what advice would you give to agencies whose reports were not scored as well?

Ms. Scheinberg: Well, DOT tries to use some of these same criteria that Mercatus values in producing our PAR, the Performance and Accountability Report: transparency, the benefit to the public, and forward-looking leadership. Mercatus' criteria focused on the usefulness of the PAR to the public. That is, how well does it explain to the citizens of the country the outcome of the Agency's programs and activities. And DOT's PAR goes beyond the Mercatus expectations to reflect the Agency's fundamental commitment to improving organizational performance, which is a very strong goal of Secretary Mineta's. DOT leaders use a variety of performance metrics to support business decision-making, and we're constantly looking for opportunities to innovate and improve performance. Excellent data collection and analysis over time adds to our successful PAR, I believe.

We used the Mercatus ranking factors as the basis for creating and improving DOT's PAR every year. And agencies that are dedicated to using performance metrics to support their management processes have traditionally rated well with Mercatus.

Mr. Morales: How is DOT using financial and performance data to make decisions about programs and projects?

Ms. Scheinberg: The primary reason we have strong financial systems is to provide information to support business decisions about DOT's programs; that's really the reason we go through all this financial work, is to help our program managers make good decisions. Over the last year we've prototyped, piloted, and implemented the first phase of a dashboard that presents both financial and performance data on a single screen to help managers make better business decisions.

The first phase includes status of funds reports, and information on DOT's performance on OMB's metrics. These are for things like financial systems such as the percent of payments made on time each month and our travel card delinquency rate. And just for an example, we've lowered our travel card delinquency rate from double-digit several years ago, to less than one half of one percent in the last several months. And most of that was done because people became aware of it, and this is part of what a dashboard does as you become aware of these things and you can focus on it.

Now that phase one is in production, we're evaluating how well it's doing and planning how to grow and expand the dashboard by adding a variety of other information, including program performance information, human resource information, and information on contracts. When the budget is first being formulated, the Secretary considers many factors when he makes budget allocation decisions for each of the department's operating administrations.

Included in his decision making is program performance. That is how well programs are performing against pre-established targets. He looks at the results of performance measures that are tracked at the department level as well as program evaluation results from OMB's PART process. Following the President's lead, DOT wants to fund programs that are providing the greatest results for the taxpayers. And using performance information is an important factor in making those financial decisions.

Ms. Cammer: What are some of the challenges you've faced in linking the budget and the performance and the financial data together?

Ms. Scheinberg: Well, when we go and look and discuss linking budget performance and financial data, we first look to the Department's strategic plan, which highlights the Secretary's vision and priorities for the Department. And everything we do from a budget and performance perspective should link back to the strategic plan. Once the linkage is established, the Department's budget is where all of the budget performance and financial information come together.

In the budget in brief, the Department allocates its budget requests in two ways: It shows the amount of funding that is allocated to each of the strategic objectives as well as by the traditional appropriations accounts. At a more detailed level, each operating administration prepares an integrated performance budget that displays not only the resources being requested for each program, but also the performance goals and measures that will be used to track the progress. This combination of budget performance and financial information gives both OMB and the decision makers in the Congress the information they need to allocate and oversee DOT's use of taxpayer dollars.

DOT has faced several challenges in creating performance-based budget. Initially, we had to overcome the culture that was resistant to performance measurement. Most people's first reaction to being measured is to resist it, but once we demonstrated that the data being collected from performance measures was being used to help manage and improve our programs, and not being used to punish employees, people became more comfortable in using performance measures.

We also found that we could better justify our budget requests to OMB and the Congress when we presented program data and results to support our requests.

Ms. Cammer: What are some of the performance metrics that DOT uses to measure the progress of its programs?

Ms. Scheinberg: There's several tiers of performance measures that we use, some at the Department level, some at the operating administrations, and some at the program level. At the Department level, we track 40 performance measures to gauge progress. Performance measure results are published annually in our performance and accountability reports. I'll just name a few just to give you an example: One is on time performance of commercial air carriers, another is the fatality rate on our nation's highways, a third would be the pavement performance standards, and another is the number of rail stations and the number of bus fleets that are compliant with the Americans With Disabilities Act. This is just to give you a sense of the range of what we're looking at and how different they can be.

Department level measures are reviewed at quarterly PMA meetings and at other times of the year as appropriate. Each of our operating administrations track what we call supplemental measures to manage their own internal operations. Several of these publish these measures on their individual websites, and FAA posts performance results on a monthly basis. Program managers within each area of the Department also track costs, schedule financial and performance measures for their individual programs, and these are often reviewed on a daily or weekly basis.

Ms. Cammer: Phyllis, a lot of our guests have talked about the challenges of not only getting to green, but maintaining green on the President's Management Agenda. Could you talk about some of those challenges in staying green, and what steps that you're taking to ensure continuous improvement?

Ms. Scheinberg: Well, first I'd like to brag a little bit that we were the first agency to earn four greens on the status ratings for the President's management agenda. A lot of effort goes into meeting these OMB requirements, and to making sure that we keep our green scores as you mentioned. The one area that we're not yet green on is financial performance, which is one of my problems. Financial performance has a very high standard; it requires that you have no material weaknesses in our financial audit.

And even though DOT has received a clean audit opinion for the last four years, and hopefully for this past year well, and we have fully implemented a new state-of-the-art financial system, and we have improved our business processes, and we have been named a financial management center of excellence, we still have not been rated as green, and that's because we have the last couple of material weaknesses on our financial audit that have still some work to be done before we can clear them out.

Mr. Morales: Phyllis, could you tell us about the marginal cost of performance initiative at DOT?

Ms. Scheinberg: We started with a pilot program involving four agencies to launch a marginal cost of -- initiative. This was spring of '04 and that was when we were building our FY06 Budget and OMB liked our model and so this past spring we made it a requirement for all of the DOT agencies for inclusion in the President's '07 budget. Some agencies have found it a challenge to think in terms of marginal costs, especially since we don't have a fully mature cost accounting system with a lot of historic data.

But we feel that attributing costs to a particular goal is only half of the equation. In order to use marginal costs effectively, you have to understand how your agency's daily activities contribute to your program goals, and how those goals in turn contribute to the Department's goals. One thing that made DOT agencies more comfortable with marginal costs was the recognition that in this time of static budgets, marginal cost has to be about increases and decreases, and when they submitted marginal cost scenarios showing what would happen to program performance if they received less money, then they saw the value in doing this.

We feel that our understanding and use of marginal costs will evolve over time, just as the federal government's understanding and use of performance management has evolved. We're proud to note that OMB has asked DOT to share its marginal costs model with the rest of the federal government at a best practices seminar this past spring.

Mr. Morales: What does the future hold for the Department of Transportation? We will ask Assistant Secretary Phyllis Scheinberg to peer into her crystal ball when the conversation about management continues on The Business of Government Hour.

(Intermission)

Mr. Morales: Welcome back to The Business of Government Hour. I'm your host, Albert Morales, and this morning's conversation is with Phyllis Scheinberg, assistant secretary of the Department of Transportation. Also joining us in our conversation is Debra Cammer.

Phyllis, in our first segment, as you were describing the 12 organizations under the Department of Transportation, you had mentioned four credit programs. Can you tell us a little bit more about that?

Ms. Scheinberg: Sure. DOT has a couple of relatively new credit programs, and a couple of that we have had for years. The oldest one in the Department is called Title 11. This is a maritime loan guarantee program for shipbuilding, and that has been in place for many years.

A more recent program is called TIFIA; this has to do with intermodal surface transportation, and it is operated out of the Federal Highway Administration, but it's really an intermodal program that emphasizes public-private partnerships and places for projects that don't quite fit in the normal transportation funding program, so it's very interesting. We also have a relatively new program call in the railroad area, that came out of legislation just a couple years ago, and this was to help private railroads in capital investment. And the fourth program is a small and disadvantaged business program for making smaller loans and loan guarantees for small and disadvantaged businesses.

Mr. Morales: Great. Let me transition now to the future. What in your opinion are some of the key issues that will affect CFO and budget offices government-wide over the next year?

Ms. Scheinberg: I think meeting the requirements of OMB's updated circular 123 on management responsibility for internal controls is going to get a lot of attention over the next year, it's going to require a fair amount of work from all of us, and there's going to be a lot of attention. This is in response to the Sarbanes-Oxley legislation that the Congress passed and it's the government's response. So this is very important and it's very important for credibility in the government, and I believe that we all need to do a really good job on this.

One of the issues that some other agencies, maybe not DOT, is going to face is how to replace their outdated legacy financial systems. As we talked about, as a financial management center of excellence, DOT is ready and able to help out other agencies. And I think we will be hearing from some of those folks in the next few years.

Mr. Morales: Phyllis, on a broader basis, what do you see as some of the transportation-related challenges you foresee in the future for DOT, and how do you plan on overcoming them?

Ms. Scheinberg: In the larger transportation area we have quite a few challenges. I mean, certainly in the aviation community, the airlines in particular are facing major problems. We have three major airlines in bankruptcy, we have a merger going on, have rising fuel prices. Congestion is -- the aviation sector is faced with a lot of challenges.

On the safety issues, which are very important to us, especially the highway safety, where most of the fatalities occur -- while we've been able to make great successes in safety belt usage, it's that last 20 percent -- we've increased safety belt usage nationwide to 80 percent, but how to get that last 20 percent, and that is directly correlated to saving lives. And rebuilding the Gulf is a transportation issue. There are major roads that need to be rebuilt, and also the ports involved. I see those as some major transportation challenges.

Ms. Cammer: You mentioned the Gulf as something that is a transportation challenge, but could you talk more about how the events of 9/11 and the recent hurricanes overall have affected your office and how you plan to carry out the functions related to those?

Ms. Scheinberg: Yeah, they've had major impact on us as they have for many people in the government. I would say for my office, one of the most important things is the importance of internal controls, and this has folded right in with our attention to A-123, but we have to keep extra vigilance on keeping everything up-to-date, making sure that when we have these influxes of money and the speed at which we have to respond in some of these situations, that we are following all the internal controls and at the same time that we're responding quickly.

After 9/11, as you probably know, the Transportation Security Agency was established within DOT, and what not everybody understands is how that was done. It was basically established in the Office of the Secretary. We went from having no TSA to having a 60,000 employee TSA in just a few months, and that was all done within the Office of the Secretary, and that means it was done using my office, using the Secretary's procurement office, and just the folks on the 10th floor basically creating this from ground up. And we again tried to take advantage of the best practices in doing it the right way instead of having to fix a lot of, and update a lot of systems and processes of the older agencies. We said, "Let's do it right the first time." So we had very little time, but I think we really made an effort to set up the accounting practices, the procurement practices, in TSA in the very short time that we had; we tried to do it the right way the first time.

Ms. Cammer: Now, during this show you've talked a lot about the increased internal controls requirements around A-123 and the increased pressures around generating financial statements more quickly. Can you talk about the human resources aspect of how you're managing your financial organization?

Ms. Scheinberg: One of the biggest challenges in what we're trying to do is in the human resource area. I would say the biggest challenge is attracting and keeping quality staff. The staff need technical skills, and the workload is very demanding as we talked about with the year-round financial audit.

Good staff get burned out, they just get tired and they get stolen; that's really the basic truth. There are two key skill mixes that I deal with closely, and that's the budget analyst and the financial management folks and accountants in particular.

And on the budget side, it's just really hard to find a lot of people who are interested and trained to be federal budget analysts. We work hard, and you have to be a certain kind of person to want to do that. On the financial side, especially for accountants, we're competing with the private sector, who pay a lot of money for accountants, and we need different skill sets than we have in the past. We really do need CPAs and accountants, whereas in the past we might not have needed too many folks with that level of expertise.

I try to deal with these issues by creating a team environment, just to reinforce the fact that we're supporting the President's and the Secretary's priorities; we're not just doing backroom work that is invisible. I do this through recognizing achievements and contributions to the DOT's missions. And Secretary Mineta has been wonderful, and really shown his appreciation to the staff who make these contributions on the budget and financial side and how important it is to him and to the Department's goals.

Mr. Morales: Phyllis, you've had a wonderful career in the public service. In summary, what advice could you give a person who's interested in a career in public service?

Ms. Scheinberg: Well, I have enjoyed every minute of it; I just think the public services is a fantastic way of giving back to the government and learning -- it's a continuous learning process. I think that I would tell folks, you need to build your skill technical skills and your expertise, that is the key to getting ahead, is having strong technical skills. Also to be a team player, which means be reliable, be dependable, be ready and willing to pitch in. People need sometimes to, you know, volunteer to do the Xeroxing. It's just a matter of getting whatever it has to get done. If the budget is due and you have to get it over to OMB, you know. Yeah, we have to all chip in and roll up our sleeves. But it's a lot of hard work, but I think it's tremendously rewarding.

Mr. Morales: That's fantastic, and that's great advice.

We've reached the end of our time, and that will have to be our last question. First, I want to thank you for fitting us into your busy schedule today. Second, Debra and I would like to thank you for your dedicated service to the public and our country in the various roles you've had at the Treasury Department and now as assistant secretary for budget and programs and chief financial officer for the Department of Transportation.

Ms. Scheinberg: Thank you very much for inviting me, and I've enjoyed our conversation.

Mr. Morales: This has been The Business of Government Hour, featuring a conversation with Phyllis Scheinberg, assistant secretary for budget and programs, and chief financial officer, at the Department of Transportation. Be sure to visit us on the web at www.businessofgovernment.org. There you can learn more about our programs, and get a transcript of today's fascinating conversation. Once again, that's www.businessofgovernment.org. As you enjoy the rest of your day, please take time to remember the men and women of our armed and civil services abroad, who can't hear this morning's show on how we're improving their government, but who deserve our unconditional respect and support.

For The Business of Government Hour, I'm Albert Morales, thank you for listening.

Gene L. Dodaro interview

Monday, November 29th, 1999 - 20:00
Phrase: 
Gene L. Dodaro
Radio show date: 
Wed, 05/24/2000
Guest: 
Intro text: 
Strategic Thinking; Missions and Programs; managing for performance and results...
Strategic Thinking; Missions and Programs; managing for performance and results
Magazine profile: 
Complete transcript: 

Arlington, Virginia

Wednesday, May 24, 2000

Mr. Lawrence: Welcome to The Business of Government Hour, conversation with government leaders. I'm Paul Lawrence, a partner of PricewaterhouseCoopers and the co-chair of the PricewaterhouseCoopers Endowment for the Business of Government. The Endowment was created in 1998 to encourage discussion and research into new approaches to improving government effectiveness. Find out more about the Endowment by visiting us on the Web at endowment.pwcglobal.com.

The Business of Government Hour focuses on outstanding government executives who are changing the way government does business. Our special guest tonight is Gene Dodaro, Chief Operating Officer of the U.S. General Accounting Office. Welcome, Gene.

Mr. Dodaro: Welcome, Paul. Thank you very much. I'm pleased to be here.

Mr. Lawrence: And joining me in our conversation is Pat McNamee. Pat's also a PwC partner. Welcome, Pat.

Mr. McNamee: Thank you, Paul.

Mr. Lawrence: Well, Gene, let's begin this first segment by talking about GAO. How would you describe the various activities that take place at GAO?

Mr. Dodaro: Well, GAO exists to support the Congress in carrying out its constitutional responsibilities and to help improve the performance and accountability of the federal government for the benefit of the American people and there are various facets of that broad mission of the GAO, and I'll mention four categories briefly.

First, we help evaluate federal programs and activities in order to determine how well they're working and whether or not they should be modified or improved, and this really runs the gamut of the federal government's activities. For example, in health care we would look at the safety of the nursing homes in terms of whether the federal government's providing adequate oversight to ensure that the elderly are being properly taken care of.

In the national security area, we'll look at counterterrorism measures that are being put in place by law enforcement agencies. We'd look at the recruiting and retention policies and strategies to ensure ready military. We'd look at the weapon systems modernization of the Department of Defense.

We also would look at the management of federal lands in the natural resources area. Many people don't realize that the federal government still owns 30 percent of the landmass in the United States and several billion dollars of the outer continental shelf.

And we look at whether or not federal assistance to foreign countries is being spent as intended. We look at the execution of trade agreements of which the United States is now party to over three hundred and growing. And the list goes on and on to include the safety of the air traffic control system and our national highway structure.

The second major category is basically auditing the nation's finances to make sure that the taxpayers' funds are being appropriately accounted for and that the public's money is being spent efficiently and effectively in accordance with federal law. And in this category we do various financial audits of government entities, including the financial statements of the entire federal government. We help set accounting, auditing, management control standards for the conduct of public officials. We also produce a high-risk series which includes areas that are particularly susceptible to fraud, waste, and mismanagement in the federal government. For example, in the Medicare area, we've had an ongoing struggle to combat fraud and abuse in that particular fast-growing health care area. In fact, health care expenditures in the federal government are growing twice the rate of any other federal expenditure.

We would also conduct specific investigations of alleged illegal activities or improper conduct on the part of federal officials and issue various legal decisions and opinions concerning compliance with appropriation law, for example, in the direction of the Congress.

The third major category would be identifying for the Congress emerging issues that they need to focus on. And some recent examples here are, in the 1990s, we surfaced early on the need to address the year 2000 computing challenge and also the vulnerabilities of the federal government to computer security intrusions. And we've seen recent events prove us right in highlighting that for the Congress in protecting our critical infrastructures, both in the public sector and in the private sector. We've also focused on the long-term financial condition of the federal government and the need to deal with the changes that will ensue as a result of changing demographics to the Social Security and the Medicare trust funds with the advent of the Baby Boom generation in a couple of decades.

And lastly, in the fourth category I would mention, is where we're helping the Congress respond to particular events that have occurred. Two recent examples would be the fire situation in Los Alamos. We've been asked to take a look at that issue, which is typical of when we have particular disasters, and the Congress wants to know why did it occur, how can we prevent these situations from occurring again. We've also been asked to testify recently on the "I Love You" virus and what the federal government can do and what kind of responsiveness did the federal government enact to protect its assets during that event.

So the bottom line is that GAO is a very diverse, professional services organization. The scope of our responsibilities is as vast as the federal government being one of the world's largest enterprises. And our basic governing principle is to do work to support the Congress, to help them make informed decisions on behalf of the American people, and to advance constructive recommendations for improving government.

Mr. McNamee: You mentioned supporting the Congress, and I'm not sure how many people actually realize that GAO is part of the legislative branch of the government. Can you describe a little more about GAO's relationship with the Congress?

Mr. Dodaro: Yes, Pat. The GAO is part of the legislative branch of the Congress and that is to ensure its independence from the Executive Branch to help the Congress carry out the checks and balances envisioned in the Constitution and in our system of government. That independence is further assured by the fact that the Comptroller General -- in this case, the current Comptroller General David M. Walker -- has a fifteen-year, nonrenewable term, like his six predecessors before him.

Basically, the vast majority of our work is in direct response to requests from chairmen and ranking minority members of various committees and individual members who are also on particular committees of jurisdiction, and that runs into the oversight of federal government programs, as I mentioned earlier.

We work with the Congress in helping them make appropriation decisions. For example, it's typical for the Congress to ask for our advice before making major investments in information technology systems, given the past problems with many federal expenditures that haven't actually produced the improvements that were intended through multibillion-dollar purchases. And basically, we provide a lot of assistance to the Congress, working very closely with them.

We've recently issued and are testing a set of congressional protocols now which explain our commitments to the Congress in clear, transparent terms that are consistently applied, and that Congress can hold us accountable for delivering. And we deal with, you know, basically 535 members of the Congress, as well as the delegates from the various federal territories. And we want to have a commitment to each and every one of those clients -- Congress is our primary client -- and also produce work that can help them effectively represent the American people who elect them to come and act on their behalf.

Mr. Lawrence: Well, tell us about your career and the various positions you've held at GAO?

Mr. Dodaro: I've been with the General Accounting Office since 1973. I came to GAO directly from college. I graduated with an accounting degree. And then my early years at the GAO had a wide variety of experiences in different areas, for example, looking at the problems of illegal immigration and smuggling of aliens into the country; licensing of radioactive materials for medical, educational, research, and industrial purposes; I was involved in a major study evaluating the implications of changing Puerto Rico's political status to a state or revised commonwealth status or even independence; I also was involved in a major nationwide study looking at the impact of countercyclical revenue-sharing that occurred in the mid-1970s, following the high inflation and recessionary period during that period of time. And the idea of that program was to provide assistance to state and local governments to help compensate them for losses of revenue during recessionary periods, and also, basically, increases in certain expenditures that would increase as a result of unemployment during that period of time.

In the early 1980s, I was involved in a major GAO project for two years looking at the initiatives -- at that point labeled "new federalism" -- to take over a hundred federal programs and consolidate them into block grant programs and give more discretion to the state and local government.

Mr. Lawrence: Let me ask you to hold the rest of your answer. It's time for a break. We'll be right back with more of The Business of Government Hour. (Intermission)

Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence, a partner at PricewaterhouseCoopers, and tonight's guest is Gene Dodaro, Chief Operating Officer of the U.S. General Accounting Office. And joining me in our conversation is Pat McNamee, also a PwC partner.

Well, Gene, let me continue with your career, because before we went to a break you were in the middle of describing the positions you've held and your various experiences.

Mr. Dodaro: Basically, in the early 1980s, this major block grant study was an experiment in new federalism really on behalf of the federal government. And there was a lot of interest on behalf of the Congress as to the recipients of federal assistance under these 100 categorical programs that were folded into eight block grant programs in the health care arena, social services, community services, low-income energy assistance, et cetera.

We had received multiple requests, so we created an interdisciplinary team in GAO and looked nationally at many states across the nation and local governments on how they were carrying out their new responsibilities, and found them to be handling their responsibilities very responsibly. And we had made some recommendations from some increased reporting requirements, but that was a major turning point in the federal relations with state and local government.

Following that, I was involved in another pioneering effort at GAO to begin looking at the entire management operations of individual departments and agencies. At this point in time, in the 1980s, we began seeing recurring problems in our audits of individual departments and agencies, and felt we weren't getting to the root causes of the problems. So we launched this new type of work, where we would work with the top leadership team of individual departments and agencies, look at their planning structures, their strategic focus on the agencies, look at performance management, their personnel approaches to carrying out the work, and found a lot of serious deficiencies at the departments and agencies.

For example, I led studies at the Internal Revenue Service. We did actual management studies of the Office of Management and Budget and the executive office of the President, the Office of Personnel Management, Labor Department, Social Security Administration, et cetera. And really, the common findings of these management reviews helped lead to the creation of the Government Performance and Results Act because we found an absence of strategic planning, performance measures in the individual agencies, and it added to the discussion and the genesis of that legislation later on.

Following that experience, which lasted several years, I was asked to go to the Accounting and Financial Management Division in GAO and there, at that point in time, the Chief Financial Officer's Act was being passed in 1990, and that led to increased responsibilities for the GAO. So I helped, at that time, change GAO's work force around to accept these new responsibilities.

And then I became the assistant comptroller general in charge of our accounting and information management work at GAO. And in that capacity, I led the first ever audit of the federal government's consolidated financial statements, which began in fiscal year 1997 and 1998, and they continue today.

This was a major achievement. The federal government was the last major segment of our economy to really impose on itself the management discipline of a financial audit. And so this was a big effort to mobilize and work with inspector generals across the government to help them carry out their responsibilities and GAO's to do these audits. We worked very closely with chief financial officers across the government, as well. And in that capacity also, I was responsible for GAO's work within the year 2000 computing challenge and also looking at major IT investments and working with the Congress and the Administration to help shape the Clinger-Cohen Act, which put in place chief information officers across the government, as well.

I've been in my current position now as chief operating officer for GAO for the last year, and I've led efforts to put in place a strategic planning process for GAO. We've just issued a strategic plan and our first annual performance plan and accountability reports, so we're trying to lead by example in that we evaluate how other agencies are implementing the Government Performance and Results Act. So we're going forward and producing and complying with the Act even though we're not covered by the Act.

Mr. McNamee: I know one of your areas of responsibility in GAO, Gene, is meeting visitors from foreign countries and working with your counterparts in other governments. Can you tell us a little bit about GAO's international role and the recent international conference you attended?

Mr. Dodaro: Few people know about the longstanding involvement of GAO in the international arena, and this dates back to Comptroller General Elmer Staats, who started a training program whereby developing countries in particular would send representatives to GAO for a four- or five-month study course to learn the basics of auditing. And in fact, in the 20 years since that program's been in existence, we've graduated about 300 people and more than a dozen have gone on to actually become the auditor general in their particular country.

There's also an organized effort of close to 180 countries around the world where we work with counterpart agencies who are, in effect, the GAO of their particular country, to share experiences, to develop common standards. And basically, there's a commitment on the part of this international organization to help developing countries, and it's particularly useful now in working with Eastern European countries who are beginning to establish democratic forms of government.

So we provide a lot of technical assistance, support, and help. And with the globalization of economies, enterprises, and government processes now across the country, we foresee that this good investment we've made in working with our counterparts across the globe will become even more important as we have to work to look at issues that transcend boundaries and government borders, particularly in the financial markets and institutions area. Health care is now becoming a global issue, as well. And so this has been a good investment and GAO is very well known and looked to as a source of leadership in the international auditing arena.

Mr. Lawrence: One of your recent activities has been the reorganization of GAO. Could you tell us about that reorganization and how GAO is now organized?

Mr. Dodaro: Yes. This is a major change for us. We've made many changes and improvements over the years, but this is a fundamental realignment of GAO. It's being done to provide us more alignment with our strategic plan that we've worked very closely with the Congress in shaping.

GAO also has had a significant downsizing during the late 1990s, going from an organization of roughly 5,500 people to an organization now of almost 3,300 people. So we've looked at our field structure, we've streamlined the field offices and are in the process of closing some now.

At headquarters, we've also moved to flatten the organization. We've eliminated divisions, which were the major operating units of GAO structure, and have reduced the number of areas from 31 issue areas of the government to 11, in effect, flattening the organization considerably.

Mr. Lawrence: Okay, great. It's time for a break. We'll be right back with more of The Business of Government Hour. (Intermission)

Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence, a partner at PricewaterhouseCoopers, and tonight's conversation is with Gene Dodaro, Chief Operating Officer of the U.S. General Accounting Office. And joining me is Pat McNamee, also a partner at PwC. Pat?

Mr. McNamee: Thanks, Paul. Gene, can you describe for us a little bit your role as Chief Operating Officer of the GAO?

Mr. Dodaro: My responsibilities as Chief Operating Officer is to work closely with David Walker, the Comptroller General, to carry out the leadership of the GAO. One of my primary tasks right now, in addition to completing our strategic plan, will be to implement our realignment, which will be fully effective by the beginning of the next fiscal year.

There are a number of transition issues that need to be dealt with. We're moving to a major effort to push accountability down in the organization and build quality into the products, to continue to make improvements in our ability to serve the Congress, and to have a more flexible, nimble organization moving into the next century.

I spend a lot of my time reviewing the requests from the Congress to help set priorities on staffing, looking to make sure that we are being responsive to our clients' needs, and monitoring the more sensitive and difficult and complex assignments throughout the course of their development, implementation, and reporting to the Congress. Also working a lot on building institutional capacity within GAO. That's particularly challenging now given our downsizing environment, our efforts to replenish our pipeline in the human capital area. And I work very closely with GAO's Chief Mission Support Officer SallyAnn Harper and our General Counsel Bob Murphy, who, along with Dave Walker and myself, make up GAO's executive team.

Mr. McNamee: We know that human capital is a major issue of the Comptroller General David Walker. Can you tell us about the changes GAO has made or is considering making in terms of is own human resource management?

Mr. Dodaro: Human capital has been one of the preeminent issues that Dave Walker's focused on in the year and a half that he's been comptroller general. And it's particularly apropos given his experience in the private sector and the fact that he has been a human capital expert.

We started with doing an exhaustive human capital profile of the GAO. I mentioned our downsizing efforts before by 40 percent over a period of time. Basically, we had a hiring freeze in place for about five years. As a result, we have more people at the mid-level and the upper levels at the GAO than we do at the entry level.

So a big effort is underway to reinstitute and reinvigorate our recruiting efforts to get people into the organization. And it's particularly important because, like a lot of other federal entities, we're facing the potential loss of a lot of our senior managers over the next five years. In fact, one-third of GAO's entire work force is eligible to retire by 2004, 55 percent of our senior executives. So it's very important -- particularly because the Congress looks to us as continuity and institutional memory of government -- that we'd be able to replenish our work force and have a steady succession planning effort so that we can be responsive to the Congress in a timely fashion.

We're looking at our performance appraisal systems. We've established an employee advisory council broadly representative of GAO to work with us. We've instituted very detailed surveys of our employees to learn their interests and concerns, and we are opening up two-way communications throughout the organization to solicit ideas. We've instituted an employee suggestion program.

And so we have a wide range of activities going on. We're also going to be conducting a skill inventory across the organization to be able to look at our strategic plan and what kind of skills that we're going to need in the next five to six years, evaluate what we have in-house already, and that will help dictate what type of training activities we need to provide, as well as what areas we need to target to recruit.

We know we're going to have to have more people with information technology experiences, but we're also moving and adapting to changes in the federal government, which now, after 30 years, is spending more on health care than on defense. And so, there have been some profound changes in the nature and composition of federal spending, and there will be more as the federal government responds to changes in society and the world at large, and we need to be ready to be able to help the Congress in a most effective manner.

Mr. McNamee: Gene, one of the interesting parts of your job at GAO is getting to work on a lot of the major issues that face the government today. One thing I'd like to start off talking about was responding to the Y2K threat for the government. Can you tell us a little bit about GAO's activities in the Y2K area and through what the lessons learned were from the government's successful response to the Y2K challenge?

Mr. Dodaro: I think the Y2K experience has several profound lessons. Number one, it demonstrates that when the federal government applies its talent, resources, and has effective leadership, it can get a problem solved. And the successful transition into the year 2000 and the very few disruptions that were held was very much a testimonial to the dedicated efforts of federal employees throughout the federal government. GAO played a unique role in this in that we were one of the earlier people raising this, along with several members of the Congress, as a problem, alerting the federal government to the need to address this issue directly.

We actually created a set of four guides: One on how to do the conversion planning, one on business continuity and contingency planning, one on how to do testing, and one on day one planning for this activity. And those guides were adopted by the Executive Branch and the President's Council on Y2K Conversion as the official policy for the federal government. So this is a case where an audit organization helps preventing problems, being a constructive force in addressing these issues directly.

We worked very closely with the Congress. And this is also a case where the Congress was actively involved in helping craft solutions, providing effective oversight. Both the House and the Senate were very actively involved in this endeavor and we worked very closely with the President's Council on Y2K Conversion and John Koskinen is the chair of that council. People who have been in the auditing business for a while know that usually you do not have a hundred percent adoption of your recommendations. In this case, for the three or four years we were engaged in this, we issued well over a hundred and fifty reports and dozens and dozens of recommendations. All were adopted and effectively implemented quickly by the agencies.

We also worked, in this case, internationally with our counterparts and with our counterparts at the state and local level. We had conferences with state auditors. I was also asked to be part of, as an observer, the U.S. delegation to the United Nations when John Koskinen helped orchestrate a meeting up there and effectively mobilized the world.

And so, it provides a good lesson in not only how the federal government can operate and carry out its activities, but there were successful engagement at the state and local level, the international level, and, in particular, with the private sector. I think this provides effective lessons learned going into computer security and critical infrastructure protection, where the federal government needs to have an effective partnership with the private sector, which owns most of the computer assets in the country.

Mr. McNamee: What's your impression of the impact of the Chief Financial Officers Act?

Mr. Dodaro: The Chief Financial Officers Act has had a very important cultural effect on the federal government. Basically, it's moving the federal government to instituting effective fiscal discipline. It's a major change and it's very difficult, if you can imagine a large corporation that operated for 50 or 60 years and spending billions of dollars and not having financial reporting, statement reporting and auditing in place, and the federal government also has a very decentralized accounting structure. And the CFO Act is helping the federal government impose the discipline to get on top of that and to provide the type of accountability over federal funds that the public really expects and demands. And I think if the Act is effectively implemented it will go a long way to restoring public trust in the federal government.

Steady progress is being made. In 1996, we had about 6 of 24 major departments and agencies get clean opinions. That number has almost doubled now in the last fiscal year, so individual agencies are beginning to come on board. The challenge now is to go beyond just clean opinions and improve the underlying financial management systems so that agencies have timely data on a day-to-day basis that's reliable, and to effectively manage and oversee the federal government's operations.

So a good start, tremendously needed discipline imposed in the federal government, but a long way to go to effectively change and transform the reforms contemplated under the Act into a day-to-day management reality at the federal agency level.

Mr. McNamee: GAO's also been involved heavily in the oversight of the Government Performance and Results Act, or GPRA. Can you give us your impression on the impact the GPRA's had so far?

Mr. Dodaro: I think the GPRA, again, is introducing another very important paradigm shift in the federal government to focus more on results, away from process and inputs to outcomes. I think it's important to note, even though the Act was passed in 1993, just this past spring, we've completed, across the federal government, the first full cycle of the Act, having strategic plans developed in 1997 for fiscal year 1999. And now the first reports against those performance plans are being produced.

So we're still somewhat in the early stages of government-wide implementation. Progress is being made. More agencies are taking it seriously. More committees on the Hill are legislating with this in mind, but there's a number of additional things that need to be done, again, to make this a day-to-day management reality and integrate with the budget process.

Mr. Lawrence: Okay, with that we've got to take a break. We'll be right back with more of The Business of Government Hour. (Intermission)

Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence, a partner at PricewaterhouseCoopers, and tonight's conversation is with Gene Dodaro, Chief Operating Officer of the U.S. General Accounting Office. And joining me is Pat McNamee. Pat's also a partner at PwC.

Well, Gene, let's spend this last segment looking ahead to the future. And I know the Comptroller General and you recently testified before Congress on managing in the new millennium, shaping a more efficient and effective government for the 21st century. Can you tell us about that testimony?

Mr. Dodaro: This was a very important opportunity provided by the Senate Committee on Governmental Affairs to take a look ahead at the federal government and also it was a venue for us to talk about our strategic plan and support to Congress in carrying out its responsibilities.

The basic message of that testimony was that dynamics have changed markedly as we transition into the new environment and provide a lot of opportunities. For example, the Cold War has ended. We're also transitioning into the new millennium with a much different fiscal position. Thanks to hard decisions by the Congress and the Administration and a burgeoning economy we're now in an era of budget surpluses rather than deficits. So we've slain the deficit dragon temporarily, although there are looming fiscal pressures as with the advent of the Baby Boom generation and changing demographics.

But for the time being, we've got a window of opportunity here, and it's an opportunity to look at the dynamics that are changing the shape of the federal government and the environment which it operates in. Globalization, changing demographics, changing security threats, quality of life considerations, are all changing the federal government's expectations for government and requiring it to be more responsive, results- oriented, bottom-line driven, and also more effectively managed and implemented.

And also, there's a huge opportunity now with the budget surpluses to look ahead in a more long-term fiscal posture to look at what the federal government does and how it conducts business. And there's really an opportunity and an obligation to look forward now, and to really scrutinize the federal government's basic programs. A lot of programs were started many years ago for well-intended purposes. Times have changed, the environment has changed, and now's a good time to sort of take a look at that.

And this testimony puts forth a couple of points along the management lines. Number one, it talks about the need to implement effectively the management reforms that were put in place in the 1990s -- the Chief Financial Officers Act, the Government Performance and Results Act, the Clinger-Cohen Act -- and basically says this was a very good set of management reforms that were put in place, but we really have to implement them effectively to reap the benefits of those reforms.

And we also point out the missing element in management reforms, which is human capital in the federal government, and that the people side of government has not been attended to effectively and really needs attention and reform to make all these other management reforms work effectively and to help the federal government be responsive to the American people and to be more flexible as we enter into this new millennium and face new challenges facing the federal government.

In that testimony, we also talked about the opportunities for the Congress to look at different ways it can enhance oversight and work in a partnership manner with the GAO and with the Executive Branch in bringing about the type of federal government that we need to operate effectively in the 21st century.

Mr. McNamee: Gene, as we talked about a little earlier, you've been very involved in technology issues for the government. What do you see is the impact of technology on the government in the years ahead?

Mr. Dodaro: I think technology holds tremendous promise for improving the responsiveness of the government; restoring confidence in government with citizens; and the ability to interact directly with the citizens, both in terms of answering their questions, helping them find information they need about their government; and also providing information to the public to increase public confidence and safety.

There are a number of real issues, though, that are really important. Number one, the gap between the private sector investment and reaping the benefits of technology in the federal government is growing. About 40 percent of all capital investment by the year 2003 in the private sector will be for information technology investments. And really, as the Chairman of the Federal Reserve Board Alan Greenspan points out, a large part of the economic growth and development in the United States has been fueled now by productivity increases because of investments in information technology over a number of years. So that needs to be a contributing factor in improving government.

Now the key to government improving its performance is really effectively implementing the Clinger-Cohen Act of 1996. That Act put in place a chief information officer structure across government, required modern investment management practices, required federal agencies to develop architectures so they could have interoperability and effective security systems put in place, and it really put in place a modern set of best practices that were being employed by the private sector. And this was based on research done by GAO and, working with the Congress and the Executive Branch, is to put that into effect.

I also think these reforms have been tempered a little bit in terms of being implemented by the focus necessarily on Y2K preparations, but the benefit of Y2K was that it also got managers' attention about the important role of information technology and the dependency on it for improving their operations. So technology holds the key to really reforming dramatically the federal government.

Reforms are in place, but they need to be effectively implemented and this will be a major challenge for the federal government going forward to improve its operations and also deal with important computer security concerns about protecting the information that the federal government receives from private citizens in an appropriate manner.

Mr. Lawrence: What other major changes do you envision in the government of the future?

Mr. Dodaro: The government of the future is going to have to be much more responsive and flexible to be able to change to the dynamics that are unfolding. Take globalization. We now, in the United States, are a party to over 300 trade agreements, with the potential increases in world trade. World exports have doubled almost as a percent of gross domestic product over the past 10 years. Foreign investment in the United States has increased, which helps our economic development, but it also makes us vulnerable to changes in other economies. And so, the federal government is becoming much more intertwined as the global interdependence increases and it's transcending a number of different areas in the federal government. That is a challenge to the structures and institutions of government because it requires working across agency boundaries, across departments, and the federal government needs to create new structures and processes in order to implement that effectively.

Also, the changing demographics are going to profoundly change this country. By the year 2020, about 20 percent of the United States population will be 65 or older, up from about the current 13 or 14 percent. We could have as many people in this country 65 or older as we have 20 or younger. That will change the service requirements for the federal government in not only entitlement reform areas in Social Security and Medicare, but also transportation requirements and other attendant housing concerns.

Also, the labor force in the United States is becoming more diverse and not growing at an exceedingly fast pace, calling into question whether or not we'll have the necessary skills in the labor force to move as information technology and other demands call for a more highly skilled work force, and that has attendant issues associated with it in regard to immigration and other issues.

So a lot of dynamics are at play right now, and the rapid pace of changes in technology combined with these other factors of globalization, changing demographics, really call for a federal government to be more responsive, more focused on results and outcomes, and one that can operate across departments and agencies and not just within the traditional government structures of individual departments and agencies -- a major challenge. I believe the federal government's up to it and I think, with a lot of partnership between the Congress and the Executive Branch, that the federal government can be prepared to meet all these challenges very effectively.

Mr. Lawrence: Well, I'm afraid we're out of time, so we'll end there. I want to thank you very much, Gene, for spending time with us tonight. Pat and I have enjoyed the conversation very much.

Mr. Dodaro: I've enjoyed it, as well. Thank you very much, Paul, Pat.

Mr. Lawrence: This has been The Business of Government Hour, conversation with government leaders. I'm Paul Lawrence, a partner at PricewaterhouseCoopers and the co-chair of the PricewaterhouseCoopers endowment for the business of government. To learn more about the endowment's programs and research, visit us on the Web at endowment.pwcglobal.com. See you next week.

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