GAO-13-283, High-Risk Series: An Update
GAOFebruary 2013United States Government Accountability OfficeReport to Congressional CommitteesHIGH-RISK SERIESAn UpdateTo access this reportelectronically, scan thisQR Code.Don't have a QR codereader? Several areavailable for free online.GAO-13-283
February 2013HIGH-RISK SERIESAn UpdateHighlights of GAO-13-283, a report tocongressional committeesWhy GAO Did This StudyWhat GAO FoundThe federal government is the world’slargest and most complex entity, withabout 3.5 trillion in outlays in fiscalyear 2012 funding a broad array ofprograms and operations. GAOmaintains a program to focus attentionon government operations that itidentifies as high risk due to theirgreater vulnerabilities to fraud, waste,abuse, and mismanagement or theneed for transformation to addresseconomy, efficiency, or effectivenesschallenges. Since 1990, more thanone-third of the areas previouslydesignated as high risk have beenremoved from the list becausesufficient progress was made toaddress the problems identified.In February 2011, GAO detailed 30 high-risk areas. Sufficient progress has beenmade to remove the high-risk designation from two areas.This biennial update describes thestatus of high-risk areas listed in 2011and identifies any new high-risk areaneeding attention by Congress and theexecutive branch. Solutions to high-riskproblems offer the potential to savebillions of dollars, improve service tothe public, and strengthen theperformance and accountability of theU.S. government. Management of Interagency Contracting. Improvements include (1)continued progress made by agencies in addressing identified deficiencies,(2) establishment of additional management controls, (3) creation of a policyframework for establishing new interagency contracts, and (4) steps taken toaddress the need for better data on these contracts. Internal Revenue Service Business Systems Modernization. The InternalRevenue Service (IRS) made progress in addressing significant weaknessesin information technology and financial management capabilities. IRSdelivered the initial phase of its cornerstone tax processing project andbegan the daily processing and posting of individual taxpayer accounts inJanuary 2012. This enhanced tax administration and improved service byenabling faster refunds for more taxpayers, allowing more timely accountupdates, and faster issuance of taxpayer notices. In addition, IRS has put inplace close to 80 percent of the practices needed for an effective investmentmanagement process, including all of the processes needed for effectiveproject oversight.While these two areas have been removed from the High Risk List, GAO willcontinue to monitor them.This year, GAO has added two areas. Limiting the Federal Government’s Fiscal Exposure by Better ManagingClimate Change Risks. Climate change creates significant financial risks forthe federal government, which owns extensive infrastructure, such asdefense installations; insures property through the National Flood InsuranceProgram; and provides emergency aid in response to natural disasters. Thefederal government is not well positioned to address the fiscal exposurepresented by climate change, and needs a government wide strategicapproach with strong leadership to manage related risks. Mitigating Gaps in Weather Satellite Data. Potential gaps in environmentalsatellite data beginning as early as 2014 and lasting as long as 53 monthshave led to concerns that future weather forecasts and warnings—includingwarnings of extreme events such as hurricanes, storm surges, and floods—will be less accurate and timely. A number of decisions are needed to ensurecontingency and continuity plans can be implemented effectively.What GAO RecommendsThis report contains GAO’s views onprogress made and what remains to bedone to bring about lasting solutionsfor each high-risk area. Perseveranceby the executive branch inimplementing GAO’s recommendedsolutions and continued oversight andaction by Congress are essential toachieving progress. GAO is dedicatedto continue working with Congress andthe executive branch to help ensureadditional progress is made.View GAO-13-283. For more information,contact J. Christopher Mihm at (202) 512-6806or mihmj@gao.govIn the past 2 years notable progress has been made in the vast majority of areasthat remain on GAO’s High Risk List. This progress is due to the combinedefforts of the Congress through oversight and legislation, the Office ofManagement and Budget through its leadership and coordination, and theagencies through their efforts to take corrective actions to address longstandingproblems and implement related GAO recommendations.United States Government Accountability Office
GAO’s 2013 High Risk ListStrengthening the Foundation for Efficiency and Effectiveness Limiting the Federal Government’s Fiscal Exposure by Better Managing Climate Change Risks (new)Management of Federal Oil and Gas ResourcesModernizing the U.S. Financial Regulatory System and Federal Role in Housing FinanceRestructuring the U.S. Postal Service to Achieve Sustainable Financial Viability Funding the Nation’s Surface Transportation SystemStrategic Human Capital Management Managing Federal Real Property Transforming DOD Program Management DOD Approach to Business TransformationDOD Business Systems ModernizationDOD Support Infrastructure ManagementDOD Financial ManagementDOD Supply Chain ManagementDOD Weapon Systems AcquisitionEnsuring Public Safety and Security Mitigating Gaps in Weather Satellite Data (new)Strengthening Department of Homeland Security Management FunctionsEstablishing Effective Mechanisms for Sharing and Managing Terrorism-Related Information to Protect the HomelandProtecting the Federal Government’s Information Systems and the Nation’s Cyber Critical InfrastructuresEnsuring the Effective Protection of Technologies Critical to U.S. National Security InterestsRevamping Federal Oversight of Food SafetyProtecting Public Health through Enhanced Oversight of Medical ProductsTransforming EPA’s Processes for Assessing and Controlling Toxic ChemicalsManaging Federal Contracting More Effectively DOD Contract ManagementDOE’s Contract Management for the National Nuclear Security Administration and Office of Environmental Management NASA Acquisition Management Assessing the Efficiency and Effectiveness of Tax Law Administration Enforcement of Tax LawsModernizing and Safeguarding Insurance and Benefit Programs Improving and Modernizing Federal Disability Programs Pension Benefit Guaranty Corporation Insurance ProgramsMedicare Program Medicaid ProgramNational Flood Insurance ProgramSource: GAO.
ContentsLetterHigh-Risk Designation RemovedNew High-Risk AreasEvolving High-Risk AreasNarrowing High-Risk AreasProgress Being Made in Remaining High-Risk AreasModifying High-Risk AreaOverviews for Each High-Risk Area60Limiting the Federal Government’s Fiscal Exposure by BetterManaging Climate Change RisksManagement of Federal Oil and Gas ResourcesModernizing the U.S. Financial Regulatory System andFederal Role in Housing FinanceRestructuring the U.S. Postal Service to Achieve SustainableFinancial ViabilityFunding the Nation’s Surface Transportation SystemStrategic Human Capital ManagementManaging Federal Real PropertyDOD Approach to Business TransformationDOD Business Systems ModernizationDOD Support Infrastructure ManagementDOD Financial ManagementDOD Supply Chain ManagementDOD Weapon Systems AcquisitionMitigating Gaps in Weather Satellite DataStrengthening Department of Homeland SecurityManagement FunctionsEstablishing Effective Mechanisms for Sharing and ManagingTerrorism-Related Information to Protect the HomelandProtecting the Federal Government’s Information Systemsand the Nation’s Cyber Critical InfrastructuresEnsuring the Effective Protection of Technologies Criticalto U.S. National Security InterestsRevamping Federal Oversight of Food SafetyProtecting Public Health through Enhanced Oversight ofMedical ProductsTransforming EPA’s Processes for Assessing and ControllingToxic ChemicalsDOD Contract ManagementPage 61173184192196202209213GAO-13-283 High-Risk Series
Appendix IDOE’s Contract Management for the National NuclearSecurity Administration and Office of EnvironmentalManagementNASA Acquisition ManagementEnforcement of Tax LawsImproving and Modernizing Federal Disability ProgramsPension Benefit Guaranty Corporation Insurance ProgramsMedicare ProgramMedicaid ProgramNational Flood Insurance Program218225230235241246255261High Risk Program History266TablesTable 1: Criteria for Removal from High Risk List and Examples ofActions by Congress, the Administration, and AgenciesLeading to ProgressTable 2: GAO’s Assessment of DHS’s Progress in Addressing KeyActions and OutcomesTable 3: Examples of Congressional Actions and AdministrationInitiatives Leading to Progress on High-Risk AreasTable 4: USPS Financial Results, Fiscal Years 2006 through 2012Table 5: GAO’s Assessment of DHS’s Progress in Addressing KeyActions and OutcomesTable 6: Status of Action ItemsTable 7: Descriptions of Priority AreasTable 8: Changes to High Risk List, 1990-2013Table 9: Areas Removed from High Risk List, 1990-2013Table 10: Year That Area’s on GAO’s 2013 High Risk List WereDesignated High Risk28353989166174188266267268FiguresFigure 1: A Potential Gap in the Afternoon OrbitFigure 2: Agencies are Facing a Retirement WaveFigure 3: Percentage of Programs Meeting Total Acquisition CostGrowth TargetsFigure 4: Incidents Reported to US-CERT, Fiscal Years 2006-2012Figure 5: Information Security Weaknesses at Major FederalAgencies for Fiscal Year 2012Figure 6: PBGC’s Net Financial Position, Single-Employer andMultiemployer Programs CombinedPage ii23100150185186242GAO-13-283 High-Risk Series
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Comptroller Generalof the United StatesUnited States Government Accountability OfficeWashington, DC 20548February 2013The Honorable Thomas R. CarperChairmanThe Honorable Tom Coburn, M.D.Ranking MemberCommittee on Homeland Security and Governmental AffairsUnited States SenateThe Honorable Darrel E. IssaChairmanThe Honorable Elijah E. CummingsRanking MemberCommittee on Oversight and Government ReformHouse of RepresentativesGAO regularly reports on government operations that it identifies as highrisk. This effort, supported by the Senate Committee on HomelandSecurity and Governmental Affairs and the House of RepresentativesCommittee on Oversight and Government Reform, has brought muchneeded focus to problems impeding effective government and costingbillions of dollars each year. To help improve these high-risk operations,GAO has made hundreds of recommendations, and the administrationand agencies have addressed, or are addressing, many of them.Congress also continues to take actions that are important to helpingresolve high-risk issues.This year GAO is removing the high-risk designation from two areas—Management of Interagency Contracting and IRS Business SystemsModernization—and designating two new high-risk areas— Limiting theFederal Government’s Fiscal Exposure by Better Managing ClimateChange Risks and Mitigating Gaps in Weather Satellite Data. Thesechanges bring GAO’s 2013 High Risk List to a total of 30 areas.Throughout the past two decades, attention to high-risk areas hasbrought results. More than one-third of the areas previously designatedas high risk have been removed from the list because sufficient progresswas made to address the problems identified. 1 Further, progress has1For more information on the history of the high risk program, see appendix I.Page 1GAO-13-283 High-Risk Series
been made in nearly all of the areas that remain on GAO’s High Risk Listas a result of congressional oversight and action, high-leveladministration attention, efforts of the responsible agencies, and supportfrom GAO through its many recommendations and consistent follow-upon the implementation of recommended actions. In three areas—Management of Federal Oil and Gas Resources, StrengtheningDepartment of Homeland Security Management Functions, and DOE’sContract Management for the National Nuclear Security Administrationand Office of Environmental Management—progress has been sufficientfor GAO to narrow the scope of the high-risk issue.Additional progress is both possible and needed in all 30 high-risk areas.Continued perseverance will ultimately yield significant benefits. Lastingsolutions to high-risk problems offer the potential to save billions ofdollars, dramatically improve service to the American public, strengthenpublic confidence and trust in the performance and accountability of thefederal government, and ensure the ability of government to deliver on itspromises.The high risk effort continues to be a top priority and GAO will maintain itsemphasis on identifying high-risk issues across government and providinginsights and sustained attention to help address them, workingcollaboratively with Congress, agency leaders, and the Office ofManagement and Budget. As part of this effort, GAO continues toparticipate in regular meetings with the Office of Management of Budget’sDeputy Director for Management and top agency officials to discuss plansfor addressing high-risk areas. Such efforts are critical for progress tocontinue.Page 2GAO-13-283 High-Risk Series
This high risk update is intended to help inform the oversight agenda forthe 113th Congress and guide efforts of the administration and agenciesto improve government performance and reduce waste and risks. GAO isproviding this update to the President and Vice President, congressionalleadership, other Members of Congress, the Office of Management andBudget, and the heads of major departments and agencies.Gene L. DodaroComptroller Generalof the United StatesPage 3GAO-13-283 High-Risk Series
High-Risk Designation RemovedHigh-Risk Designation RemovedWhen legislative, administration, and agency actions, including those inresponse to our recommendations, result in significant progress towardresolving a high-risk area, we remove the high-risk designation. Key todetermining if the high-risk designation can be removed are the followingfive elements: (1) a demonstrated strong commitment to, and topleadership support for, addressing problems; (2) the capacity to addressproblems; (3) a corrective action plan; (4) a program to monitor correctivemeasures; and (5) demonstrated progress in implementing correctivemeasures.For our 2013 high risk update, we determined that two areas warrantedremoval from the High Risk List: Management of Interagency Contractingand IRS Business Systems Modernization. As we have with areaspreviously removed from the High Risk List, we will continue to monitorthese areas, as appropriate, to ensure that the improvements we havenoted are sustained. If significant problems again arise, we will considerreapplying the high-risk designation.Management ofInteragency ContractingWe are removing the management of interagency contracting from theHigh Risk List based on (1) continued progress made by agencies inaddressing previously identified deficiencies, (2) establishment ofadditional management controls, (3) creation of a policy framework forestablishing new interagency contracts, and (4) steps taken to addressthe need for better data on these contracts. Congressional oversight andthe leadership of the Office of Management and Budget’s (OMB) Office ofFederal Procurement Policy (OFPP)—which provides direction ongovernment-wide procurement policies—have been vital in addressingthe issues that led this area to be designated high risk.Interagency contracting—where one agency either places an order usinganother agency’s contract or obtains contracting support services fromanother agency—can help streamline the procurement process, takeadvantage of unique expertise in a particular type of procurement, andachieve savings. Interagency contracts are designed to leverage thegovernment’s buying power and allow for agencies to meet the demandsfor goods and services at a time when the federal government is focusedon achieving efficiencies in the acquisition process. While this method ofcontracting can save the government money and effort when properlymanaged, it also poses a variety of risks.In 2005, we designated the management of interagency contracting ashigh risk due in part to unclear lines of accountability between customerPage 4GAO-13-283 High-Risk Series
High-Risk Designation Removedand assisting agencies and the potential for improper use, including outof-scope work and noncompliance with competition requirements. 2 In our2007 high risk update, we identified the continuing need for (1) additionalmanagement controls and guidance and (2) clearer definitions of rolesand responsibilities as the keys to addressing these issues. 3 In our 2011high risk update, we highlighted additional challenges agencies faced infully realizing the benefits of interagency contracts, including the lack ofdata and the risk of potential duplication when new contracting vehiclesare created. 4 Duplication among interagency contracts can result inmissed opportunities to leverage the government’s buying power and mayadversely affect the administrative efficiencies and cost savings expectedwith their use. To address these issues, our prior work identified the needfor (1) a policy framework and business case analysis requirements tosupport the creation of certain new contracts and (2) improved data onexisting interagency contracts.The federal government has made significant progress in reducing theinteragency contracting risks that led to our high-risk designation. In our2009 and 2011 high risk updates we noted improvements in proceduresused in making purchases on behalf of the Department of Defense(DOD)—the largest user of interagency contracts. These included betterdefined roles and responsibilities and enhanced controls over fundingprocedures. Additionally, the DOD Inspector General has reported asignificant decrease in problems with DOD procurements through otherfederal agencies in congressionally mandated reviews of interagencyacquisitions. We also noted that the General Services Administration(GSA) and OMB have established corrective action plans to implementour prior recommendations. Since our last update, as discussed in thefollowing sections, federal agencies have continued to addressweaknesses related to the use, creation, and oversight of interagencycontracting vehicles.2GAO, High-Risk Series: An Update, GAO-05-207 (Washington, D.C.: January 2005).3GAO, High-Risk Series: An Update, GAO-07-310 (Washington, D.C.: January 2007).4GAO, High-Risk Series: An Update, GAO-11-278 (Washington, D.C.: February 2011).Page 5GAO-13-283 High-Risk Series
High-Risk Designation RemovedStrengthened management controls for the use of interagencycontracts. Most agencies have taken steps to implement and reinforceinteragency contracting policies to address prior concerns about theimproper use of these contracts. In response to congressional direction, 5Federal Acquisition Regulation (FAR) provisions on interagencyacquisitions were revised to require that agencies make a bestprocurement approach determination to justify the use of an interagencycontract and prepare written interagency agreements outlining the rolesand responsibilities of customer and assisting organizations. 6 The bestprocurement approach determination ensures that the requesting agencyconsiders factors such as the suitability of the contract vehicle andcompliance with laws
Security and Governmental Affairs and the House of Representatives Committee on Oversight and Government Reform, has brought much- . changes bring GAO’s 2013 High Risk List to a total of 30 areas. Throughout the past two decades, attention to highrisk areas has - . for GAO to narrow the scope of the high-risk issue.
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