This is the accessible text file for GAO report number GAO-07-740CG entitled '21st Century Transformation Challenges' which was released on April 10, 2007. This text file was formatted by the U.S. Government Accountability Office (GAO) to be accessible to users with visual impairments, as part of a longer term project to improve GAO products' accessibility. Every attempt has been made to maintain the structural and data integrity of the original printed product. Accessibility features, such as text descriptions of tables, consecutively numbered footnotes placed at the end of the file, and the text of agency comment letters, are provided but may not exactly duplicate the presentation or format of the printed version. The portable document format (PDF) file is an exact electronic replica of the printed version. We welcome your feedback. Please E-mail your comments regarding the contents or accessibility features of this document to Webmaster@gao.gov. This is a work of the U.S. government and is not subject to copyright protection in the United States. It may be reproduced and distributed in its entirety without further permission from GAO. Because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately. States Government Accountability Office: 21st Century Transformation Challenges: The Honorable David M. Walker: Comptroller General of the United States: Excellence in Government Conference: April 5, 2007: Three Key Change Concepts: Candor: To state the facts and speak the truth about the need for change and possible ways forward: Courage: To act and do the right thing even though it my be unpopular and counter-cultural: Commitment: To persist with the needed change effort until you prevail: The Case for Change: The federal government is on a "burning platform," and the status quo way of doing business is unacceptable for a variety of reasons, including: Numerous government performance/accountability and high risk challenges: Past fiscal trends and significant long-range challenges: Selected trends and challenges having no boundaries: Rising public expectations for demonstrable results and enhanced responsiveness: Additional resource demands due to Iraq, Afghanistan, incremental homeland security needs, and recent natural disasters in the United States: Outdated federal organizational structures, policies, and practices: Major Reported Long-Term Fiscal Exposures ($ trillions): Explicit liabilities (Publicly held debt, military & civilian pensions & retiree, health, other); 2000: $6.9; 2006: $10.4; Percent Increase: 52%. Commitments & Contingencies: e.g., PBGC, undelivered orders; 2000: $0.5; 2006: $1.3; Percent Increase: 140%. Implicit exposures; 2000: $13.0; 2006: $38.8; Percent Increase: 197%. Implicit exposures: Future Social Security benefits; 2000: $3.8; 2006: $6.4; Percent Increase: [Empty]. Implicit exposures: Future Medicare Part A benefits; 2000: $2.7; 2006: $11.3; Percent Increase: [Empty]. Implicit exposures: Medicare Part B benefits; 2000: $6.5; 2006: $13.1; Percent Increase: [Empty]. Implicit exposures: Medicare Part D benefits; 2006: $8.0; Percent Increase: [Empty]. Total; 2000: $20.4; 2006: $50.5; Percent Increase: 147%. Sources: 2000 and 2006 Financial Reports of the United States Government. Note: Estimates for Social Security and Medicare are at present value as of January 1 of each year, and all other data are as of September 30. Totals may not add due to rounding. Percentage increases are based on actual data and may differ from increases calculated from rounded data shown in table. [End of table] Potential Fiscal Outcomes Alternative Simulation-Discretionary Spending Grows with GDP and Expiring Tax Provisions Extended (January 2007) Revenues and Composition of Spending as a Share of GDP: [See PDF for image] - graphic text: Line/Stacked Bar combo chart with 4 groups, 1 line (Revenue) and 4 bars per group. 2006; Net interest: 1.7%; Social Security: 4.2%; Medicare & Medicaid: 3.9%; All other spending: 10.5%; Revenue: 18.4%. 2015; Net interest: 2.1%; Social Security: 4.6%; Medicare & Medicaid: 4.9%; All other spending: 9.6%; Revenue: 17.6%. 2030; Net interest: 5.9%; Social Security: 6.8%; Medicare & Medicaid: 8.3%; All other spending: 9.5%; Revenue: 17.8%. 2040; Net interest: 12.1%; Social Security: 7.6%; Medicare & Medicaid: 10.3%; All other spending: 9.5%; Revenue: 17.8%. Source: GAO's January 2007 analysis. Notes: AMT exemption amount is retained at the 2006 level through 2017 and expiring tax provisions are extended. After 2017, revenue as a share of GDP is held constant-implicitly assuming that action is taken to offset increased revenue from real bracket creep, the AMT, and tax- deferred retirement accounts. [End of figure] GAO's High Risk List: High Risk Areas: Addressing Challenges in Broad-based Transformations: Strategic Human Capital Management[A]; Designated High Risk: 2001. High Risk Areas: Addressing Challenges in Broad-based Transformations: Managing Federal real Property[A]; Designated High Risk: 2003. High Risk Areas: Addressing Challenges in Broad-based Transformations: Protecting the federal government's Information Systems and the Nation's Critical Infrastructures; Designated High Risk: 1997. High Risk Areas: Addressing Challenges in Broad-based Transformations: Implementing an transforming the Department of Homeland Security; Designated High Risk: 2003. High Risk Areas: Addressing Challenges in Broad-based Transformations: Establishing appropriate and effective information-sharing mechanisms to improve Homeland Security; Designated High Risk: 2005. High Risk Areas: Addressing Challenges in Broad-based Transformations: DOD approach to business transformation[A]; Designated High Risk: 2005. High Risk Areas: Addressing Challenges in Broad-based Transformations: DOD approach to business transformation[A]: DOD Business Systems Modernization; Designated High Risk: 1995. High Risk Areas: Addressing Challenges in Broad-based Transformations: DOD approach to business transformation[A]: DOD Personnel Security Clearance Program; Designated High Risk: 2005. High Risk Areas: Addressing Challenges in Broad-based Transformations: DOD approach to business transformation[A]: DOD Support Infrastructure Management; Designated High Risk: 1997. High Risk Areas: Addressing Challenges in Broad-based Transformations: DOD approach to business transformation[A]: DOD Financial Management; Designated High Risk: 1995. High Risk Areas: Addressing Challenges in Broad-based Transformations: DOD approach to business transformation[A]: DOD Supply Chain Management(formerly Inventory Management); Designated High Risk: 1990. High Risk Areas: Addressing Challenges in Broad-based Transformations: DOD approach to business transformation[A]: DOD Weapon Systems Acquisition; Designated High Risk: 1990. High Risk Areas: Addressing Challenges in Broad-based Transformations: FAA Air Traffic Control Modernization; Designated High Risk: 1995. High Risk Areas: Addressing Challenges in Broad-based Transformations: Financing the Nation's Transportation System[A] New; Designated High Risk: 2007. High Risk Areas: Addressing Challenges in Broad-based Transformations: Ensuring the Effective Protection of Technologies Critical to U.S. National Security Interests[A] New; Designated High Risk: 2007. High Risk Areas: Addressing Challenges in Broad-based Transformations: Transforming Federal Oversight of Food Safety[A] New; Designated High Risk: 2007. High Risk Areas: Managing Federal Contracting More effectively: DOD Contract Management; Designated High Risk: 1992. High Risk Areas: Managing Federal Contracting More effectively: DOE Contract Management; Designated High Risk: 1990. High Risk Areas: Managing Federal Contracting More effectively: NASA Contract Management; Designated High Risk: 1990. High Risk Areas: Managing Federal Contracting More effectively: Management of Interagency Contracting; Designated High Risk: 2005. High Risk Areas: Assessing the Efficiency and Effectiveness of Tax Law Administration: Enforcement of Tax Laws[A]; Designated High Risk: 1990. High Risk Areas: Assessing the Efficiency and Effectiveness of Tax Law Administration: IRS Business Systems Modernization; Designated High Risk: 1995. High Risk Areas: Modernizing and Safeguarding Insurance and Benefit Programs: Modernizing Federal Disability Program[A]; Designated High Risk: 2003. High Risk Areas: Modernizing and Safeguarding Insurance and Benefit Programs: Pension Benefit Guaranty Corporation Single-Employer Insurance Program; Designated High Risk: 2003. High Risk Areas: Modernizing and Safeguarding Insurance and Benefit Programs: Medicare program[A]; Designated High Risk: 1990. High Risk Areas: Modernizing and Safeguarding Insurance and Benefit Programs: Medicaid program[A]; Designated High Risk: 2003. High Risk Areas: Modernizing and Safeguarding Insurance and Benefit Programs: National Flood Insurance Program[A]; Designated High Risk: 2006. Source: GAO. [A] Legislation is likely to be necessary, as a supplement to actions by the executive branch, in order to effectively address this high-risk area. [End of table] Serving The Congress And The Nation GAO'S Strategic Plan Framework: Mission: GAO exists to support the Congress in meeting its constitutional responsibilities and to help improve the performance and ensure the accountability of the federal government for the benefit of the American people. Themes: * Changing Security Threats; * Sustainability Concerns; * Economic Growth and competitiveness; * Global interdependency; * Societal Change; * Quality of Life; * Science and Technology; Goals and Objectives: Provide Timely, Quality Service to the Congress and the Federal Government to. Address Current and Emerging Challenges to the Well-Being and Financial Security of the American People related to. * Health care needs and financing; * Education and protection of children; * Work opportunities and worker protection; * Retirement income security; * Effective system of justice; * Viable communities; * Natural resources use and environmental protection; * Physical infrastructure; Provide Timely, Quality Service to the Congress and the Federal Government to. Respond to Changing Security Threats and the Challenges of Global Interdependence involving. * Emerging threats; * Military capabilities and readiness; * Advancement of U.S. interests; * Global market forces; Help Transform the Federal Government Government's Role and How It Does Business to Meet 21st Century Challenges by assessing. * Roles in achieving federal objectives; * Government transformation; * Key management challenges and program risks; * Fiscal position and financing of the government: Maximize the Value of GAO by Being a Model Federal Agency and a World- Class Professional Services Organization in the areas of. * Client and customer satisfaction; * Strategic leadership; * Institutional knowledge and experience; * Process improvement; * Employer of choice: Core Values: * Accountability; * Integrity; * Reliability; Source: GAO. GAO Strategic Plan 2007-2012: [End of figure] Selected Sustainability Challenges: Fiscal: Foreign Policy: Education: Energy: Environment: Health Care: Immigration: Iraq: The Way Forward: A Three-Pronged Approach: 1. Improve Financial Reporting, Public Education, and Performance Metrics: 2. Strengthen Budget and Legislative Processes and Controls: 3. Fundamentally Reexamine & Transform for the 21St Century (i.e., entitlement programs, other spending, and tax policy): Solutions Require Active Involvement from both the Executive and Legislative Branches: Transformation: Webster's definition: An act, process, or instance of change in structure appearance, or character. A conversion, revolution, makeover, alteration, or renovation. The Objective of Transformation: To create a more positive future by maximizing value and mitigating risk within current and expected resource levels: Transformation: A New Model for Government Organizations: Government organizations will need to: Become less hierarchical, process-oriented, stovepiped, and inwardly focused: Become more partnership-based, results-oriented, integrated, an externally focused: Achieve a better balance between results, customer, and employee focus: Work better with other governmental organizations, non-governmental organizations, and the private sector, both domestically and internationally fly, to achieve results: Focus on maximizing value, managing risk and enhancing responsiveness within current and expected resource levels: Key Performance Measures: Dimensions: Results: Clients/customers: People: Partnerships: Context: Absolute: Trend: Compared to Peers: The Need For Key National Indicators in the U.S. Federal spending exceeds $2.7 trillion annually: Federal revenues reduced by more than $800 billion in tax preferences: Agencies produce reams of regulations: Most federal government policies and programs were created years ago: The Need For Key National Indicators in the U.S. What: A portfolio of economic, social, and environmental outcome-based measures that could be used to help assess the nation's and other governmental jurisdictions' position and progress: Who: Many countries and several states, regions, and localities have already undertaken related initiatives (e.g., Australia; New Zealand; Canada; United Kingdom; Oregon; Silicon Valley (California); Jacksonville (Florida); Boston (Massachusetts): Why: Development of such a portfolio of indicators could have a number of possible benefits, including: * Serving as a framework for related strategic planning efforts: * Enhancing performance and accountability reporting: * Informing public policy decisions, including much needed baseline reviews of existing government policies, programs, functions, and activities: * Facilitating public education and debate as well as an informed electorate: Way Forward: Key players working through a consortium within a nonprofit organization receiving technical assistance from the National Academies domestically and OECD and others providing assistance internationally on related efforts: Key National Indicators: Where the United States Ranks: The United States may be the only superpower, but compared to most other OECD countries on selected key economic, social, and environmental indicators, on average, the U.S. ranks: 16 0ut Of 28: OECD Categories for Key Indicators (2006 OECD Factbook): * Population/Migration; * Energy; * Environment; * Quality of Life; * Macroeconomic Trends; * Labor Market; * Education; * Economic Globalization; * Prices; * Science & Tech; * Public Finance. Source: 2006 OECD Factbook. [End of table] 21St Century Challenges Report: Provides background, framework, and questions to assist in reexamining the base: Covers entitlements and other mandatory spending, discretionary spending, and tax policies and programs: Based on GAO's work for the Congress: Source: GAO. Twelve Reexamination Areas: Mission Areas: * Defense; * International Affairs: * Education & Employment; * Natural Resources, Energy & Environment: * Financial Regulation & Housing; * Retirement & Disability: * Health Care; * Science & Technology: * Homeland Security; * Transportation: Crosscutting Areas: * Improving Governance; * Reexamining the Tax System: Generic Reexamination Criteria and Sample Questions: Relevance of purpose and the federal role: Why did the federal government initiate this program and what was the government trying to accomplish? Have there been significant changes in the country or the world that relate to the reason for initiating it? Measuring success: Are there outcome-based measures? If not, why? If there are outcome-based measures, how successful is it based on these measures? Targeting benefits: Is it well targeted to those with the greatest needs and the least capacity to meet those needs? Affordability and cost effectiveness: Is it using the most cost-effective or net beneficial approaches when compared to other tools and program designs? Best practices: Is the responsible entity employing prevailing best practices to discharge its responsibilities and achieve its mission? Classification and Compensation System: Key Guiding Principles: Enables GAO to attract and retain top talent: Is reflective of the roles and responsibilities that we expect GAO staff to perform: Is market-based, as well as skills, knowledge, and performance- oriented: Conforms with applicable statutory limits: Considers absolute and relative performance: Tries to assure reasonable consistency in both ratings and related compensation results within and between teams: Results in equal pay for work of equal value over time: Helps to better target a finite amount of resources: Is affordable today and sustainable in the future: GAO's Classification and Compensation Changes 1989 vs. 2006: Strategy: Guaranteed that no one would lose; 1989: Yes; 2006: No. Strategy: Automatically promoted some staff (e.g., from GS-13 to GS- 14); 1989: Yes; 2006: No. Strategy: Guaranteed across the board raises, even for unacceptable performers; 1989: Yes; 2006: No. Strategy: Gave some people the opportunity to earn more than the prior system; 1989: No; 2006: Yes. Strategy: Considered relative performance to a much greater extent; 1989: No; 2006: Yes. Strategy: Used "roles and responsibilities" studies for comparison; 1989: No; 2006: Yes. Strategy: Used market-based pay compensation studies to ensure competitiveness in markets where GAO has personnel; 1989: No; 2006: Yes. Strategy: Positively correlates pay with performance-within applicable pay caps; 1989: No; 2006: Yes. Strategy: Results in equal pay for work of equal value over time; 1989: No; 2006: Yes. Strategy: Is affordable and sustainable based on current and expected resource levels; 1989: No; 2006: Yes. [End of table] GAO's Band II Restructuring Effort: Lessons To Be Shared: Study the relative roles and responsibilities of the employees affected before determining the number of bands: Conduct an independent market-based compensation study instead of relying on GS-pay ranges: Design and implement a modern, effective, and credible performance management system that makes meaningful distinctions in performance: Keys to Making Change Happen: Commitment and sustained leadership: Demonstrated need for change (i.e., burning platform): Start at the top and with the new people (transformation takes 7+ years): Process matters (e.g., employee involvement) Don't fight a two-front war: 15-percent rule: Identifiable and measurable progress over time: Communication, communication, communication: Figure out what's right versus what's popular: Patience, persistence, perseverance to pain before you prevail: Key Leadership Attributes Needed for These Challenging and Changing Times: Courage: Integrity: Creativity: Partnership: Stewardship: On the Web: Web site: [Hyperlink, http://www.gao.gov/cghome.htm]: Contact: Paul Anderson, Managing Director, Public Affairs AndersonP1@gao.gov (202) 512-4800: U.S. Government Accountability Office 441 G Street NW, Room 7149 Washington, D.C. 20548: Copyright: This is a work of the U.S. government and is not subject to copyright protection in the United States. 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