GAO. GOVERNMENT EFFICIENCY AND EFFECTIVENESS Opportunities to Reduce Fragmentation, Overlap, and Duplication and Achieve Other Financial Benefits

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1 GAO For Relese on Delivery Expected t 2:00 p.m. EDT Tuesdy, April 9, 2013 United Sttes Government Accountbility Office Testimony Before the Committee on Oversight nd Government Reform, House of Representtives GOVERNMENT EFFICIENCY AND EFFECTIVENESS Opportunities to Reduce Frgmenttion, Overlp, nd Dupliction nd Achieve Other Finncil Benefits Sttement of Gene L. Dodro Comptroller Generl of the United Sttes

2 Chirmn Iss, Rnking Member Cummings, nd Members of the Committee: Thnk you for the opportunity to discuss our 2013 nnul report, which presents 31 new opportunities to reduce frgmenttion, overlp, nd dupliction s well s chieve other finncil benefits. It lso presents the results of our efforts to follow up on progress mde by executive brnch gencies nd Congress in ddressing the res we identified in our 2011 nd 2012 nnul reports. 1 Through these three nnul reports, we hve completed systemtic exmintion to identify mjor instnces of frgmenttion, overlp, or dupliction cross the federl government. In light of tody s chllenging fiscl environment, we hve lso identified dditionl opportunities to chieve greter efficiency nd effectiveness by mens of cost svings or enhnced revenue collection. My testimony tody describes the (1) new res identified in our 2013 nnul report where frgmenttion, overlp, or dupliction exists mong federl progrms or ctivities, s well s other opportunities to chieve cost svings or enhnced revenue; (2) sttus of ctions tken by executive brnch gencies nd Congress in ddressing the 131 res identified in our 2011 nd 2012 nnul reports; nd (3) the summry results of our 3-yer systemtic exmintion cross the federl government to identify mjor instnces of frgmenttion, overlp, or dupliction. My comments re bsed upon our 2013 nnul report, which is being relesed tody. Tht report is bsed upon work GAO previously conducted in ccordnce with generlly ccepted government uditing stndrds. In summry, our 2013 nnul report identifies 31 new res where gencies my be ble to chieve greter efficiency or effectiveness. Within these 31 res, we identify 81 ctions tht the executive brnch or Congress could tke to ddress the issues we identified. Although it my be pproprite for multiple gencies or entities to be involved in the sme progrmmtic or policy re due to the nture or mgnitude of the federl effort, our report includes 17 res of frgmenttion, overlp, or 1 GAO, Opportunities to Reduce Potentil Dupliction in Government Progrms, Sve Tx Dollrs, nd Enhnce Revenue, GAO SP (Wshington, D.C.: Mr. 1, 2011); nd 2012 Annul Report: Opportunities to Reduce Dupliction, Overlp nd Frgmenttion, Achieve Svings, nd Enhnce Revenue, GAO SP (Wshington D.C.: Feb. 28, 2012). Pge 1

3 dupliction where multiple progrms nd ctivities my be creting inefficiencies. Figure 1 illustrtes the definitions we use for frgmenttion, overlp, nd dupliction for this work. The report lso identifies 14 dditionl res where opportunities exist to chieve cost svings or enhnce revenue collections. Figure 1: Definitions of Frgmenttion, Overlp, nd Dupliction The executive brnch nd Congress hve mde some progress in ddressing the res tht we previously identified. In our 2011 nd 2012 nnul reports, we identified pproximtely 300 ctions mong 131 overll res tht the executive brnch nd Congress could tke to reduce or eliminte frgmenttion, overlp, or dupliction or chieve other potentil finncil benefits. As of Mrch 6, 2013, the dte we completed our progress updte udit work, 16 of the 131 overll res were Pge 2

4 ddressed; 87 were prtilly ddressed; nd 27 were not ddressed. 2 Within these res, 65 of the pproximtely 300 individul ctions were ddressed. 3 However, 149 ctions were prtilly ddressed nd 85 ctions remin not ddressed, highlighting the need for sustined ttention nd ledership. 4 Through our three nnul reports, we hve identified 162 res in which there re opportunities to reduce frgmenttion, overlp, or dupliction or to chieve cost svings or enhnce revenue. (Appendix I presents summry of the res we identified in our three nnul reports.) Within these 162 res, we identify pproximtely 380 ctions tht the executive brnch or Congress could tke to ddress the issues we identified. These res spn wide rnge of government missions, covering ctivities within ll 15 cbinet-level executive deprtments nd 17 other federl entities. Collectively, if the ctions we suggest re implemented, the government could potentilly sve tens of billions of dollrs nnully. 2 In ssessing progress on the 81 res we identified in our 2011 nnul report for this yer s report, we combined two res relted to the Deprtment of Homelnd Security s mngement of cquisitions (Ares 75 nd 76) into one re. Therefore, we re evluting progress for 80 res identified in our 2011 nnul report nd 51 res identified in our 2012 nnul report. In ssessing overll progress for n re, we determined tht n re ws ddressed if ll ctions in tht re were ddressed; prtilly ddressed if t lest one ction needed in tht re showed some progress towrd implementtion but not ll ctions were ddressed; nd not ddressed if none of the ctions needed in tht re ws ddressed or prtilly ddressed. 3 For congressionl ctions, we pplied the following criteri: ddressed mens relevnt legisltion hs been encted; prtilly ddressed mens relevnt bill hs pssed committee, the House of Representtives, or the Sente, or relevnt legisltion only ddressed prt of the ction needed; nd not ddressed mens bill my hve been introduced but did not pss out of committee, or no relevnt legisltion hs been introduced. For executive brnch ctions, ddressed mens implementtion of the ction needed hs been completed; prtilly ddressed mens response to the ction needed is in development, but not yet completed; nd not ddressed mens tht miniml or no progress hs been mde towrd implementing the ction needed. 4 We re not ssessing 9 ctions this yer tht were previously included in our 2011 nd 2012 reports. Bsed on subsequent udit work tht we conducted, these ctions hve been consolidted, redirected from congressionl to n executive brnch ction, or revised to reflect updted informtion or dt tht we obtined. Further, 16 ctions reported in 2011 nd 2012 were revised this yer due to dditionl udit work or other informtion we considered. Pge 3

5 2013 Annul Report Identifies 31 New Ares Where Opportunities Exist to Achieve Greter Efficiency or Effectiveness In 17 of the 31 new res where gencies my be ble to chieve greter efficiency or effectiveness, we found evidence of frgmenttion, overlp, or dupliction mong federl progrms or ctivities. As described in tble 1, these progrms or ctivities cover wide rnge of federl functions nd missions. Tble 1: Frgmenttion, Overlp, nd Dupliction Ares Identified in Our 2013 Annul Report, by Mission Mission Ares Identified Agriculture 1. Ctfish Inspection: Repeling provisions of the 2008 Frm Bill tht ssigned U.S. Deprtment of Agriculture s Food Sfety nd Inspection Service responsibility for exmining nd inspecting ctfish nd for creting ctfish inspection progrm would void dupliction of lredy existing federl progrms nd could sve txpyers millions of dollrs nnully without ffecting the sfety of ctfish intended for humn consumption. Defense 2. Combt Uniforms: The Deprtment of Defense s frgmented pproch to developing nd cquiring uniforms could be more efficient, better protect service members, nd result in up to $82 million in development nd cquisition cost svings through incresed collbortion mong the militry services. 3. Defense Foreign Lnguge Support Contrcts: The Deprtment of Defense should ddress frgmenttion in the deprtment s cquisition pproch for foreign lnguge support contrcts, which re estimted to cost more thn $1 billion nnully, by exploring opportunities to gin dditionl efficiencies. Energy 4. Renewble Energy Inititives: Federl support for wind nd solr energy, biofuels, nd other renewble energy sources, which hs been estimted t severl billion dollrs per yer, is frgmented becuse 23 gencies implemented hundreds of renewble energy inititives in fiscl yer 2010 the ltest yer for which GAO developed these originl dt. Further, the Deprtments of Energy nd Agriculture could tke dditionl ctions to the extent possible within their sttutory uthority to help ensure effective use of finncil support from severl wind inititives, which GAO found provided duplictive support tht my not hve been needed in ll cses for projects to be built. Helth 5. Joint Veterns nd Defense Helth Cre Services: The Deprtments of Veterns Affirs nd Defense should enhnce their collbortion to reduce costs, overlp, nd potentil dupliction in the delivery of helth cre services between two of the ntion s lrgest helth cre systems tht together provide helth cre to nerly 16 million veterns, service members, militry retirees, nd other beneficiries. 6. Medicid Progrm Integrity: The Centers for Medicre & Medicid Services needs to tke steps to eliminte dupliction nd increse efficiency in two Medicid Integrity Progrm ctivities provider udits nd the collection of stte progrm integrity dt. Homelnd security/lw enforcement 7. Deprtment of Homelnd Security Reserch nd Development: Better policies nd guidnce for defining, overseeing, nd coordinting reserch nd development investments nd ctivities would help the Deprtment of Homelnd Security ddress frgmenttion, overlp, nd potentil unnecessry dupliction. Pge 4

6 Mission Informtion technology Interntionl ffirs Science nd the environment Socil services Trining, employment, nd eduction Ares Identified 8. Field-Bsed Informtion Shring: To help reduce inefficiencies resulting from overlp in nlyticl nd investigtive support ctivities, the Deprtments of Justice nd Homelnd Security nd the Office of Ntionl Drug Control Policy could improve coordintion mong five types of field-bsed informtion shring entities tht my collect, process, nlyze, or disseminte informtion in support of lw-enforcement nd counterterrorism-relted efforts Joint Terrorism Tsk Forces, Field Intelligence Groups, Regionl Informtion Shring Systems centers, stte nd mjor urbn re fusion centers, nd High Intensity Drug Trfficking Ares Investigtive Support Centers. 9. Justice nd Tresury Asset Forfeiture: Conducting study to evlute the fesibility of consolidting the Deprtments of Justice s nd Tresury s multimillion dollr sset forfeiture ctivities could help the deprtments identify the extent to which consolidtion of potentilly duplictive ctivities would help increse the efficiency nd effectiveness of the progrms nd chieve cost svings. 10. Dissemintion of Technicl Reserch Reports: Congress my wish to consider whether the fee-bsed model under which the Ntionl Technicl Informtion Service currently opertes for disseminting technicl informtion is still vible or pproprite, given tht mny of the reports overlp with similr informtion vilble from the issuing orgniztions or other sources for free. 11. Geosptil Investments: Better coordintion mong federl gencies tht collect, mintin, nd use geosptil informtion could help reduce dupliction of geosptil investments nd provide the opportunity for potentil svings of millions of dollrs. 12. Export Promotion: Enhnced collbortion between the Smll Business Administrtion nd two other gencies could help to limit overlpping export-relted services for smll businesses. 13. Interntionl Brodcsting: The Brodcsting Bord of Governors with budget of $752 million in fiscl yer 2012 hs recognized the need to reduce overlp nd rellocte limited resources to brodcsts tht will hve the gretest impct, but the gency could do more to chieve this gol, such s systemticlly considering overlp of lnguge services in its nnul lnguge services review. 14. Rurl Wter Infrstructure: Additionl coordintion by the Environmentl Protection Agency nd the Deprtment of Agriculture could help three wter nd wstewter infrstructure progrms with combined funding of bout $4.3 billion void potentilly duplictive ppliction requirements, s well s ssocited costs nd time developing engineering reports nd environmentl nlyses. 15. Drug Abuse Prevention nd Tretment Progrms: More fully ssessing the extent of overlp nd potentil dupliction cross the frgmented 76 federl drug buse prevention nd tretment progrms nd identifying opportunities for incresed coordintion, including those progrms where no coordintion hs occurred, would better position the Office of Ntionl Drug Control Policy to better leverge resources nd increse efficiencies. 16. Higher Eduction Assistnce: Federl gencies providing ssistnce for higher eduction should better coordinte to improve progrm dministrtion nd help reduce frgmenttion. 17. Veterns Employment nd Trining: The Deprtments of Lbor, Veterns Affirs, nd Defense need to better coordinte the employment services ech provides to veterns, nd Lbor needs to better trget the Disbled Veterns Outrech Progrm so tht it does not overlp with other progrms. Source: GAO. We consider progrms or ctivities to be frgmented when more thn one federl gency (or more thn one orgniztion within n gency) is involved in the sme brod re of ntionl need nd opportunities my exist to improve how the government delivers services. We identified frgmenttion in multiple progrms we reviewed, including the following: Combt Uniforms: We found tht the Deprtment of Defense s (DOD) frgmented pproch to developing nd cquiring uniforms could be Pge 5

7 more efficient. Since 2002, the militry services hve shifted from using two cmouflge ptterns to seven service-specific cmouflge uniforms with vrying ptterns nd colors. Although DOD estblished bord to help ensure collbortion nd DOD-wide integrtion of clothing nd textile ctivities, we continue to identify inefficiencies in DOD s uniform cquisition pproch. For exmple, we found tht none of the services hd tken dvntge of opportunities to reduce costs through prtnering on inventory mngement or by collborting to chieve greter stndrdiztion mong their vrious cmouflge uniforms. We hve identified severl ctions DOD should tke to relize potentil efficiencies nd up to $82 million in development nd cquisition cost svings through incresed collbortion mong the militry services. These ctions include directing the Secretries of the militry deprtments to ctively pursue prtnerships for the joint development nd use of uniforms. Defense Foreign Lnguge Support Contrcts: DOD obligted over $6.8 billion from fiscl yers 2008 through 2012 on contrcts to cquire rnge of foreign lnguge services nd products, such s trnsltion nd interprettion services. Although the deprtment hs gined some efficiencies by centrlizing contrcting for certin services under n executive gent, it hs not tken steps to comprehensively ssess whether dditionl opportunities exist to gin efficiencies in the deprtment s frgmented cquisition pproch for foreign lnguge support contrcts. For exmple, we found tht 159 contrcting orgniztions in 10 different DOD components obligted pproximtely $1.2 billion on contrcts outside of those mnged by the executive gent, resulting in n uncoordinted nd frgmented pproch. Our prior work hs found tht gencies, including DOD, reported svings rnging between 5 nd 20 percent by implementing more coordinted cquisition pproches rther thn frgmented contrcting. Given the deprtment s level of obligtions for foreign lnguge support services, DOD could chieve significnt cost svings by ssessing nd ddressing the frgmenttion in its current pproch for mnging these contrcts. Renewble Energy Inititives: Federl support for wind nd solr energy, biofuels, nd other renewble energy sources hs incresed significntly in recent yers. Specificlly, third-prty estimtes indicte tht federl spending over the 7-yer period from 2002 through 2008 verged bout $4 billion per yer nd incresed to lmost $15 billion in fiscl yer 2010, in prt becuse of dditionl spending through the Americn Recovery nd Reinvestment Act of We found tht federl support for renewble energy is frgmented, s 23 gencies Pge 6

8 nd their 130 subgencies implemented hundreds of inititives in fiscl yer We could not comprehensively ssess the potentil for overlp or dupliction mong these nerly 700 renewble energy inititives, becuse existing gency informtion ws not sufficiently complete to llow for such n ssessment. However, frgmenttion cn be hrbinger of potentil overlp or dupliction. For exmple, we ssessed federl wind energy inititives nd found tht 82 windrelted inititives tht we exmined hd overlpping chrcteristics, nd severl of them hve provided duplictive finncil support to deploy wind energy projects. Such duplictive federl finncil support my not hve been needed in ll cses for the projects to be built. To help ensure effective use of finncil support, we suggested tht the Deprtment of Energy (Energy) nd the Deprtment of Agriculture (USDA), to the extent possible within their sttutory uthority, ssess nd document whether the finncil support of their inititives is needed when considering pplictions. In some res where frgmenttion exists, we lso found evidence of overlp, which occurs when multiple gencies or progrms hve similr gols, engge in similr ctivities or strtegies to chieve them, or trget similr beneficiries. We found overlp mong federl progrms or inititives in vriety of res such s joint veterns nd defense helth cre services, export promotion ctivities, nd veterns employment nd trining progrms, s well s the following: Deprtment of Homelnd Security Reserch nd Development: Within the Deprtment of Homelnd Security (DHS), we found six deprtment components involved in reserch nd development (R&D) ctivities. We exmined 47 R&D contrcts wrded by these components nd found 35 instnces mong 29 contrcts in which the contrcts overlpped with ctivities conducted elsewhere in the deprtment. Tken together, these 29 contrcts were worth bout $66 million. In one exmple of the overlp, we found tht two DHS components wrded five seprte contrcts tht ech ddressed detection of the sme chemicl. While we did not identify instnces of 5 We defined renewble energy-relted inititive s progrm, tx expenditure, or group of ctivities serving similr purpose or function tht ws relted to renewble energy through specific emphsis or focus, even if renewble energy ws prt of broder effort. There is no comprehensive dtbse tht trcks federl renewble energy spending cross gencies for ll types of ctivities. Fiscl yer 2010 is the ltest yer for which we developed originl dt on the renewble energy inititives. Pge 7

9 unnecessry dupliction mong these contrcts, DHS hs not developed policy defining who is responsible for coordinting R&D nd wht processes should be used to coordinte it, nd does not hve mechnisms to trck ll R&D ctivities t DHS tht could help prevent overlp, frgmenttion, or unnecessry dupliction. We suggested tht developing policy defining the roles nd responsibilities for coordinting R&D, nd estblishing coordintion processes nd mechnism to trck ll R&D projects could help DHS mitigte existing frgmenttion nd overlp, nd reduce the risk of unnecessry dupliction. Drug Abuse Prevention nd Tretment Progrms: In fiscl yer 2012, bout $4.5 billion ws llocted to 15 federl gencies tht dminister 76 frgmented progrms intended to prevent or tret illicit drug use or buse. Of the 76 drug buse prevention nd tretment progrms we reviewed, we lso found evidence of overlp cross 59 progrms (nerly 80 percent). The Office of Ntionl Drug Control Policy (ONDCP) is responsible for overseeing nd coordinting the implementtion of drug buse prevention nd tretment progrm ctivities cross the federl government. Although ONDCP hs tken some steps to coordinte these ctivities, it hs not systemticlly ssessed drug buse prevention nd tretment progrms to exmine the extent of overlp nd potentil for dupliction or to identify opportunities for greter coordintion. Such n ssessment would better position ONDCP to help ensure tht federl gencies undertking similr prevention nd tretment efforts identify opportunities for incresed efficiencies. Overlp nd frgmenttion mong government progrms or ctivities cn led to dupliction, which occurs when two or more gencies or progrms re engged in the sme ctivities or provide the sme services to the sme beneficiries. Our 2013 report includes severl res where we identified potentilly duplictive federl efforts, including the following: Ctfish Inspection: We found tht when USDA s Food Sfety nd Inspection Service (FSIS) begins the ctfish inspection progrm s mndted in the Food, Conservtion, nd Energy Act of 2008, the progrm will duplicte work lredy conducted by the Food nd Drug Administrtion (FDA) nd by the Ntionl Mrine Fisheries Service. For exmple, s mny s three gencies FDA, FSIS, nd the Ntionl Mrine Fisheries Service could inspect fcilities tht process both ctfish nd other types of sefood. To void this dupliction, we suggest tht Congress repel the provisions of the ct Pge 8

10 tht ssigned USDA responsibilities for exmining nd inspecting ctfish nd estblishing ctfish inspection progrm. Tking this ction could sve txpyers millions nnully, ccording to FSIS estimtes of the progrm s cost. 6 Medicid Progrm Integrity: We lso identified dupliction in the Medicid Integrity Progrm, which provides federl support nd oversight of stte progrms. 7 Specificlly, we identified dupliction in two integrity progrm ctivities: (1) the Ntionl Medicid Audit Progrm, which consists of udits of stte Medicid clims dt to identify overpyments; nd (2) stte progrm integrity ssessments, one of severl tools through which the Centers for Medicre & Medicid Services (CMS) collects dt on stte progrm integrity ctivities. For exmple, we found tht the dt collected through stte progrm integrity ssessments duplicte dt collected through triennil comprehensive reviews nd other reports, which provide more timely nd useful informtion. We suggested tht CMS merge certin functions of the federl review nd udit contrctors nd discontinue the nnul stte progrm integrity ssessment to eliminte or void duplictive ctivities. Geosptil Investments: According to the Deprtment of the Interior, the federl government invests billions of dollrs nnully to collect, mintin, nd use geosptil informtion informtion linked to specific geogrphic loctions tht supports mny government functions, such s mintining rods nd responding to nturl dissters. We found tht federl gencies hd not effectively 6 To crete this potentil svings, Congress would need to repel the provision in the Food, Conservtion, nd Energy Act of 2008, or direct in the Food Sfety nd Inspection Service s pproprition tht no funds my be spent on the progrm. If Congress encts legisltive restriction, there my be some opportunity to rescind pproprited mounts. Becuse the inspection progrm is funded from lump sum pproprition to USDA, funds tht would hve been used for the progrm could be vilble for new obligtions within the ppropritions ccount. USDA could identify the mount of funds currently vilble for obligtion tht would hve been used for the ctfish inspection progrm nd Congress could rescind those mounts. 7 Medicid is the joint federl-stte helth cre finncing progrm for certin low-income individuls nd is one of the lrgest socil progrms in federl nd stte budgets. We hve hd long-stnding concerns bout Medicid s progrm integrity becuse of problems with the sufficiency of federl nd stte oversight. For exmple, the Centers for Medicre & Medicid Services estimted tht in fiscl yer 2012, $19.2 billion (7.1 percent) of Medicid s federl expenditures involved improper pyments. Pge 9

11 implemented policies nd procedures tht would help them to identify nd coordinte geosptil dt cquisitions cross the government. For exmple, lthough the Office of Mngement nd Budget (OMB) hs oversight responsibilities for investments in geosptil dt, OMB stff members cknowledged tht OMB does not hve complete nd relible informtion to identify potentilly duplictive geosptil investments. According to these officils, this lck of informtion is lrgely becuse gencies do not ppropritely nd consistently clssify geosptil investments in their budget documents submitted to OMB. As result, the gencies mke duplictive investments nd risk missing opportunities to jointly cquire dt. Better coordintion by gencies nd better oversight by OMB could help to reduce dupliction of geosptil investments, providing the opportunity for potentil svings of millions of dollrs on geosptil informtion technology. In ddition to res of frgmenttion, overlp, nd dupliction, our 2013 nnul report identified 14 res where opportunities exist either to reduce the cost of government opertions or enhnce revenue collections for the Tresury. These opportunities for executive brnch or congressionl ction exist in wide rnge of federl government missions (see tble 2). Tble 2: Cost Svings nd Revenue Enhncement Opportunities Identified in Our 2013 Annul Report, by Mission Mission Agriculture Defense Energy Generl government Ares Identified 18. Agriculturl Qurntine Inspection Fees: The United Sttes Deprtment of Agriculture s Animl nd Plnt Helth Inspection Service could hve chieved s much s $325 million in svings (bsed on fiscl yer 2011 dt, s reported in GAO s Mrch 2013 report) by more fully ligning fees with progrm costs; lthough the svings would be recurring, the mount would depend on the cost-collections gp in given fiscl yer nd would result in reduced relince on U.S. Customs nd Border Protection s nnul Slries nd Expenses ppropritions used for griculturl inspection services. 19. Crop Insurnce: To chieve up to $1.2 billion per yer in cost svings in the federl crop insurnce progrm, Congress could consider limiting the subsidy for premiums tht n individul frmer cn receive ech yer, reducing the subsidy for ll or high-income frmers prticipting in the progrm, or some combintion of limiting nd reducing these subsidies. 20. Joint Bsing: The Deprtment of Defense needs n implementtion pln to guide joint bses to chieve millions of dollrs in cost svings nd efficiencies nticipted from combining support services t 26 instlltions locted close to one nother. 21. Deprtment of Energy s Isotope Progrm: Assessing the vlue of isotopes to customers, nd other fctors such s prices of lterntives, my show tht the Deprtment of Energy could increse prices for isotopes tht it sells to commercil customers to crete cost svings by generting dditionl revenue. 22. Additionl Opportunities to Improve Internl Revenue Service Enforcement of Tx Lws: The Internl Revenue Service cn relize cost svings nd increse revenue collections by billions of dollrs by, mong other things, using more rigorous nlyses to better llocte enforcement nd other resources. Pge 10

12 Mission Helth Homelnd security/lw enforcement Informtion technology Interntionl ffirs Ares Identified 23. Agencies Use of Strtegic Sourcing: Selected gencies could better leverge their buying power nd chieve dditionl svings by directing more procurement spending to existing strtegiclly sourced contrcts nd further expnding strtegic sourcing prctices to their highest spending procurement ctegories svings of one percent from selected gencies procurement spending lone would equte to over $4 billion. 24. Opportunities to Help Reduce Government Stellite Progrm Costs: Government gencies could chieve considerble cost svings on some missions by leverging commercil spcecrft through innovtive mechnisms such s hosted pylod rrngements nd shring lunch vehicle costs. Selected gencies hve reported sving hundreds of millions of dollrs to dte from using these innovtive mechnisms. 25. Medicre Prepyment Controls: More widespred use of prepyment edits could reduce improper pyments nd chieve other cost svings for the Medicre progrm, s well s provide more consistent coverge ntionwide. 26. Medicid Supplementl Pyments: To improve the trnsprency of nd ccountbility for certin high-risk Medicid pyments tht nnully totl tens of billions of dollrs, Congress should consider requiring the Centers for Medicre & Medicid Services to tke steps tht would fcilitte the gency s bility to oversee these pyments, including identifying pyments tht re not used for Medicid purposes or re otherwise inconsistent with Medicid pyment principles, which could led to cost svings. GAO s nlysis for providers for which dt re vilble suggests tht svings could be in the hundreds of millions, or billions, of dollrs. 27. Medicre Advntge Qulity Bonus Pyment Demonstrtion: Rther thn implementing the Medicre Advntge qulity bonus pyment progrm specificlly estblished by lw, the Centers for Medicre & Medicid Services is testing n lterntive bonus pyment structure under brod demonstrtion uthority through 3-yer demonstrtion tht hs design flws, rises legl concerns, nd is estimted to cost over $8 billion; bout $2 billion could be sved if it were cnceled for its lst yer, Checked Bggge Screening: By reviewing the ppropriteness of the federl cost shre the Trnsporttion Security Administrtion pplies to greements finncing irport fcility modifiction projects relted to the instlltion of checked bggge screening systems, the Trnsporttion Security Administrtion could, if reduced cost shre ws deemed pproprite, chieve cost efficiencies nd be positioned to instll greter number of optiml bggge screening systems thn it currently nticiptes. 29. Cloud computing: Better plnning of cloud-bsed computing solutions provides n opportunity for potentil svings of millions of dollrs. 30. Informtion Technology Opertions nd Mintennce: Strengthening oversight of key federl gencies mjor informtion technology investments in opertions nd mintennce provides opportunity for svings on billions in informtion technology investments. 31. Tobcco Txes: Federl revenue losses were s much s $615 million to $1.1 billion between April 2009 nd 2011 becuse mnufcturers nd consumers substituted higher-txed smoking tobcco products with similr lower-txed products. To ddress future revenue losses, Congress should consider modifying tobcco tx rtes to eliminte significnt tx differentils between similr products. Source: GAO. Among the 14 res of opportunity to reduce costs or enhnce revenue identified in our 2013 nnul report re the following exmples of opportunities for executive brnch gencies or Congress to tke ction to ddress the issues we reported: Medicre Advntge Qulity Bonus Pyment Demonstrtion: We report concerns bout CMS s Medicre Advntge Qulity Bonus Pyment Demonstrtion, which ws estimted to cost $8.35 billion over 10 yers, most of which will be pid to plns with verge performnce. Medicre Advntge provides helth cre coverge Pge 11

13 through privte helth plns offered by orgniztions under contrct with CMS. The gency s stted reserch gol for the demonstrtion is to test whether modified bonus structure leds to lrger nd fster nnul qulity improvement for Medicre Advntge plns. We found tht the demonstrtion s design precludes credible evlution of its effectiveness becuse it lcks n pproprite comprison group needed to isolte the demonstrtion s effects, nd becuse the demonstrtion s bonus pyments re bsed lrgely on pln performnce tht predtes the demonstrtion. Bsed on these concerns, we suggest tht Deprtment of Helth nd Humn Services (HHS) cncel the Medicre Advntge Qulity Bonus Pyment Demonstrtion. In ddition, the demonstrtion s design rises legl concerns bout whether it flls within HHS s demonstrtion uthority. Although the demonstrtion is now in its second yer, HHS still hs n opportunity to chieve significnt cost svings bout $2 billion, bsed on our nlysis of CMS cturies estimtes if it cncels the demonstrtion for Crop Insurnce: The federl government s crop insurnce costs hve incresed in recent yers rising from n verge of $3.1 billion per yer from fiscl yers 2000 through 2006 to n verge of $7.6 billion per yer from fiscl yers 2007 through 2012 nd re expected to increse further. These costs include subsidies to py for prt of frmer s crop insurnce premiums, which frmers cn purchse to insure ginst certin losses for insurble crops they produce. Unlike mny frm progrms, the federl crop insurnce progrm does not hve sttutory income nd pyment limits tht pply to individul frmers nd legl entities, including corportions. Congress could chieve up to $1.2 billion per yer in cost svings by limiting the subsidy for premiums tht n individul frmer cn receive ech yer, reducing the subsidy for ll or high-income frmers prticipting in the progrm, or some combintion of both. Informtion Technology Opertions nd Mintennce: Of the $79 billion federl gencies budgeted for informtion technology (IT) in fiscl yer 2011, $54 billion (bout 69 percent) ws reported to hve been spent on the opertions nd mintennce of existing legcy IT systems commonly referred to s stedy stte investments. However, mny federl gencies re not performing nlyses to determine whether or not their stedy stte systems re continuing to meet business nd customer needs nd re contributing to meeting the gencies strtegic gols, s clled for by OMB guidnce. We found tht gencies did not conduct such n nlysis on 52 of the 75 mjor existing informtion technology investments we reviewed. As Pge 12

14 result, there is incresed potentil for these IT investments in opertions nd mintennce to result in wste nd dupliction. We suggest tht gencies nlyze ll IT investments nnully nd report the results of their nlyses to OMB. These ctions could help gencies chieve cost svings by strengthening the oversight of their existing IT investments in opertions nd mintennce, resulting in the potentil for billions of dollrs in svings. Opportunities to Help Reduce Government Stellite Progrm Costs: In recent yers, Congress hs pproprited more thn $25 billion yer to gencies for developing spce systems. 8 To sve money, severl federl gencies re ctively using or exploring nontrditionl pproches to mnging their spce-bsed progrms, such s hosting government instruments on commercil spcecrft nd hving multiple stellites shre the sme lunch vehicle. 9 For exmple, DOD hs two ongoing hosted pylod pilot missions nd hs tken preliminry steps to develop follow-on effort. According to DOD estimtes, the commercil prtnership hs sved the deprtment over $200 million. While these pproches hold promise for providing lower-cost ccess to spce in the future, we identified vriety of technicl, culturl, logisticl, nd legl nd policy chllenges. We identify ctions tht Congress my wish to consider to ddress these chllenges nd better tke dvntge of nontrditionl pproches, such s uthorizing gencies enhnced flexibility to cquire certin stellite services relted to hosted pylod nd ride shring rrngements, when ppropritely plnned nd justified. Medicid Supplementl Pyments: Medicid the joint federl-stte progrm tht finnces helth cre for certin low-income individuls cost the federl government nd sttes n estimted $410 billion in Sttes py qulified helth cre providers for covered services delivered to Medicid beneficiries nd obtin federl mtching funds 8 A spce system cn include multiple components such s stellites, ground control sttions, terminls, nd user equipment. 9 Severl federl gencies, including DOD, the Ntionl Aeronutics nd Spce Administrtion, the Federl Avition Administrtion, the Ntionl Ocenic nd Atmospheric Administrtion, nd the U.S. Cost Gurd, re ctively using or beginning to look t these pproches in order to sve costs. 10 The 2011 cost figure represents combined federl nd stte Medicid expenditures for provider services in fiscl yer 2011 nd does not include expenditures for dministrtion. Pge 13

15 for the federl shre of these pyments. We found tht mny sttes re mking Medicid pyments to mny providers tht re fr in excess of those providers costs of providing Medicid services. Specificlly, in 2007, the most recent yer for which these dt were vilble, 39 sttes mde pyments to certin providers in excess of Medicid costs by totl of bout $2.7 billion. To improve the trnsprency of nd ccountbility for certin high-risk Medicid pyments, we suggest tht Congress consider requiring CMS to tke steps tht would fcilitte the gency s bility to oversee these pyments, including identifying pyments tht re not used for Medicid purposes or re otherwise inconsistent with Medicid pyment principles. Such ction could led to cost svings in the hundreds of millions, or even billions, of dollrs. Agencies Use of Strtegic Sourcing: Federl gencies could chieve significnt cost svings nnully by expnding nd improving their use of strtegic sourcing n cquisition process tht moves wy from numerous individul procurement ctions to broder ggregted pproch. For exmple, reduction of 1 percent from selected gencies procurement spending would equte to over $4 billion in svings. 11 To help control spending, OMB estblished government-wide strtegic sourcing progrm to ddress opportunities to strtegiclly source commonly purchsed products nd services nd eliminte dupliction of efforts cross gencies. However, the progrm hs not yet trgeted the products nd services on which the government spends the most. Moreover, lck of cler guidnce on metrics for mesuring success hs hindered the mngement of ongoing strtegic sourcing efforts cross the federl government. Thus, we suggested tht OMB issue updted government-wide guidnce on clculting svings nd estblish metrics to mesure progress towrd gols. Doing so would position OMB to help federl gencies better implement strtegic sourcing prctices nd mximize their bility to relize billions of dollrs in potentil svings nnully. In December 2012, OMB provided new direction to gencies to improve strtegic sourcing, but it is too erly to tell how effectively those ctions will be implemented. 11 These selected gencies include DOD, DHS, Energy, nd the Deprtment of Veterns Affirs, which ccounted for 80 percent of the $537 billion in federl procurement spending in fiscl yer Pge 14

16 Deprtment of Energy s Isotope Progrm: Opportunities my lso exist for Energy to generte dditionl revenue by incresing the price for isotopes tht it sells to commercil customers. 12 Energy s Isotope Development nd Production for Reserch nd Applictions progrm (Isotope Progrm) sells isotopes to commercil customers for vriety of uses, such s medicl procedures nd rdition detection equipment. To chieve its mission, the Isotope Progrm relies on nnul ppropritions lmost $20 million in fiscl yer 2012 nd revenues from isotope sles. Although revenues from sles of isotopes lone totled over $25 million in fiscl yer 2012, we found tht Energy my be forgoing revenue becuse it is not using thorough ssessments to set prices for commercil isotopes. To improve the progrm s trnsprency in setting isotope prices nd determine if opportunities exist to generte dditionl revenue, we suggest tht Energy ssess the prices it sets for commercil isotopes to determine if prices cn be incresed. The Executive Brnch nd Congress Hve Mde Some Progress in Addressing the Ares Tht We Previously Identified In ddition to the new ctions identified in our 2013 nnul report, we hve continued to monitor the progress tht the executive brnch gencies nd Congress hve mde in ddressing issues we identified in our 2011 nd 2012 nnul reports. In these reports, we identified pproximtely 300 ctions tht the executive brnch nd Congress could tke to reduce or eliminte frgmenttion, overlp, or dupliction or chieve other potentil finncil benefits. 13 We evluted progress by determining n overll ssessment rting for ech re nd n individul rting for ech ction within n re (see figs. 2 nd 3). We found tht executive brnch gencies nd Congress hve mde progress in ddressing mny of the 131 res we identified in 2011 nd As of Mrch 6, 2013, the dte we completed our udit work, 16 of the 131 res were ddressed; 87 were prtilly ddressed; nd Isotopes re vrieties of given chemicl element with the sme number of protons but different numbers of neutrons. For exmple, the helium-3 isotope, which is used in reserch nd to detect neutrons in rdition detection equipment, hs one less neutron thn the helium-4 isotope, which is the helium isotope commonly used in prty blloons. 13 We re not ssessing 9 ctions this yer tht were previously included in our 2011 nd 2012 reports. Bsed on subsequent udit work tht we conducted, these ctions hve been consolidted, redirected from congressionl to n executive brnch ction, or revised to reflect updted informtion or dt tht we obtined. Further, 16 ctions reported in 2011 nd 2012 were revised this yer due to dditionl udit work or other informtion we considered. Pge 15

17 were not ddressed. We lso found tht of the pproximtely 300 ctions needed within these res, 65 were ddressed; 149 were prtilly ddressed; nd 85 were not ddressed. Figure 2: Assessment of 2011 nd 2012 Ares, s of Mrch 6, 2013 Note: In ssessing overll progress for n re, we determined tht n re ws ddressed if ll ctions in tht re were ddressed; prtilly ddressed if t lest one ction needed in tht re showed some progress towrd implementtion but not ll ctions were ddressed; nd not ddressed if none of the ctions needed in tht re ws ddressed or prtilly ddressed. The consolidted re ws not ssessed in 2013 due to dditionl work or other informtion we considered. Figure 3: Assessment of 2011 nd 2012 Actions, s of Mrch 6, 2013 Note: In ssessing ctions suggested for Congress, we pplied the following criteri: ddressed mens relevnt legisltion hs been encted nd ddresses ll spects of the ction needed; prtilly ddressed mens relevnt bill hs pssed committee, the House of Representtives, or Pge 16

18 the Sente, or relevnt legisltion hs been encted but only ddressed prt of the ction needed; nd not ddressed mens bill my hve been introduced but did not pss out of committee, or no relevnt legisltion hs been introduced. In ssessing ctions suggested for the executive brnch, we pplied the following criteri: ddressed mens implementtion of the ction needed hs been completed; prtilly ddressed mens response to the ction needed is in development, or strted but not yet completed; nd not ddressed mens the dministrtion, the gencies, or both hve mde miniml or no progress towrd implementing the ction needed. Consolidted ctions were not ssessed in 2013 due to dditionl work or other informtion we considered. According to our nlysis, 198 of the 249 ctions (lmost 80 percent) identified in 2011 nd 2012 tht were directed to executive brnch gencies re either prtilly ddressed or ddressed. An exmple of the progress mde is DOD s efforts to implement our suggested ction relted to the re of overses defense posture. Specificlly, in our 2012 nnul report, we suggested the Secretry of Defense should direct pproprite orgniztions within DOD to complete business cse nlysis, including n evlution of lterntive courses of ction, for the strtegic objectives tht hve to this point driven the decision to implement tour normliztion in South Kore. 14 Bsed on the resulting business cse nlysis, DOD officils stted tht United Sttes Forces Kore determined tht the tour normliztion inititive ws not ffordble. This decision not to move forwrd with the tour normliztion inititive resulted in cost voidnce of $3.1 billion from fiscl yers 2012 through Congress hs lso ddressed some of our suggested ctions 16 of the 50 ctions directed to Congress in our 2011 nd 2012 nnul reports re either prtilly ddressed or ddressed (32 percent). For exmple, in our 2011 nnul report, we stted tht Congress could reduce revenue losses by more thn $5.7 billion nnully by ddressing duplictive federl efforts directed t incresing domestic ethnol production. To reduce these revenue losses, we suggested tht Congress consider whether revisions to the ethnol tx credit were needed, nd we suggested options to consider, including llowing the volumetric ethnol excise tx credit to expire t the end of Congress ddressed this suggested ction by llowing the tx credit to expire t the end of 2011, which ended the ethnol tx credit for fuel blenders tht purchse nd blend ethnol with gsoline. 14 Tour normliztion refers to the inititive to extend the tour length of militry service members nd move thousnds of dependents to South Kore. Pge 17

19 Although the executive brnch nd Congress hve mde some progress in ddressing the issues tht we hve previously identified, dditionl steps re needed to ddress the remining res to chieve ssocited benefits. A number of the issues re difficult to ddress, nd implementing mny of the ctions identified will tke time nd sustined ledership. Nevertheless, implementing the ctions could potentilly sve the government tens of billions of dollrs nnully. Appendix II highlights opportunities for potentil finncil benefits from our body of work. To help mintin ttention on these issues, we re concurrently relesing GAO s Action Trcker, publicly ccessible website of the 162 res nd pproximtely 380 suggested ctions presented in our 2011, 2012, nd 2013 reports. GAO s Action Trcker includes progress updtes nd ssessments of legisltive nd executive brnch ctions needed. We will dd res nd suggested ctions identified in future reports to GAO s Action Trcker nd periodiclly updte the sttus of ll identified res nd ctivities. Over 3 Yers, GAO Hs Identified 162 Ares Where Federl Progrms Could Achieve Greter Efficiency or Increse Effectiveness Through our three nnul reports, we hve identified totl of 162 res with ctions tht the executive brnch nd Congress could tke to ddress frgmenttion, overlp, nd dupliction or chieve cost svings. These three reports touch on res in virtully ll mjor federl deprtments nd gencies. Specificlly, the reports collectively identify opportunities to reduce frgmenttion, overlp, nd dupliction or chieve other finncil benefits within ll 15 cbinet-level executive deprtments nd t lest 17 other federl entities. Figure 4 illustrtes ctions needed tht we directed to federl deprtments nd gencies in our three nnul reports. As the figure shows, we hve directed numerous ctions to lrge federl deprtments nd gencies tht represent the mjority of federl obligtions, including 90 ctions directed to DOD, 51 to Tresury, nd 44 to HHS. These three gencies lone represented 56 percent of fiscl yer 2011 obligtions. Pge 18

20 Figure 4: Actions Needed Directed to Federl Deprtments nd Agencies in Annul Reports U.S. Postl Service (USPS) obligtions re primrily funded by postl revenues, lthough USPS receives miniml ppropritions for overses voting nd mil for the blind. Additionlly, USPS hs mximum $15 billion in borrowing uthority, which it reched in fiscl yer b Tresury s percentge of fiscl yer 2011 obligtions includes interest on the ntionl debt. Note: Individul ctions needed re counted multiple times when they re directed to more thn one federl deprtment or gency. Our 2013 nnul report completes our 3-yer systemtic exmintion cross the federl government to identify mjor instnces of frgmenttion, overlp, or dupliction. Our systemtic exmintion required multiphsed pproch. First, we reviewed the budget functions Pge 19

21 of the federl government representing nerly ll of the overll federl funds obligted in fiscl yer Federl budget functions clssify budget resources by ntionl need (such s Ntionl Defense, Energy, or Agriculture), nd instnces in which multiple federl gencies obligte funds within prticulr budget function my indicte potentil dupliction or cost svings opportunities. Although this type of nlysis cnnot nswer the question of whether overlp or dupliction exists, it cn help in the selection of res for further investigtion. Using this informtion, we identified ech instnce in which n executive brnch or independent gency obligted more thn $10 million within these 18 budget functions for further considertion. Second, we reviewed key gency documents, such s strtegic plns, performnce nd ccountbility reports, nd budget justifictions, s we hve found tht when multiple executive brnch gencies hve similr missions, gols, or progrms, the potentil for frgmenttion, overlp, or dupliction exists. Third, we reviewed key externl published sources of informtion. In prticulr, we reviewed reports published by the Congressionl Budget Office, Inspectors Generl, nd the Congressionl Reserch Service, s well s the President s budgets, to identify potentil overlp nd dupliction mong gency missions, gols, nd progrms. We relied on our previous work nd professionl judgment to trget res for further review by considering vriety of fctors, including the extent of potentil cost svings; opportunities for enhnced progrm efficiency or effectiveness; the degree to which multiple progrms my be frgmented, overlpping, or duplictive; whether issues hd been identified by GAO or externl sources; nd the level of coordintion mong gency progrms. Bsed on our multiphsed pproch, we hve identified, to dte, 162 res in which there re opportunities to reduce frgmenttion, overlp, or dupliction or to chieve cost svings or revenue enhncement. Our three nnul reports provide extensive coverge of mjor instnces of frgmenttion, overlp, or dupliction cross the federl government. Moving forwrd, we pln to perform further nlysis to identify ny other potentil or emerging instnces tht my result in frgmenttion, overlp, nd dupliction. 15 Our exmintion did not include two budget functions: Allownces, becuse there were no ctul obligtions, nd Undistributed Offsetting Receipts, becuse no obligtions re chrged to gencies. Pge 20

22 In closing, s the fiscl pressures fcing the ntion continue, so too does the need for executive brnch gencies nd Congress to improve the efficiency nd effectiveness of government progrms nd ctivities. Opportunities exist to improve the efficiency nd effectiveness of government opertions in the 162 res we hve included in our nnul reports. Identifying, preventing, nd ddressing frgmenttion, overlp, nd dupliction within the federl government is chllenging. These re difficult issues to ddress becuse they my require gencies nd Congress to re-exmine within nd cross vrious mission res the fundmentl structure, opertion, funding, nd performnce of number of long-stnding federl progrms or ctivities with entrenched constituencies. Compounding these chllenges is the lck of comprehensive list of federl progrms, relible funding informtion, nd regulr performnce informtion. Without knowing the full rnge of progrms involved or the cost of implementing them, guging the mgnitude of the federl commitment to prticulr re of ctivity or the extent to which ssocited federl progrms re duplictive is difficult. Effective implementtion of the Government Performnce nd Results Act of 1993 (GPRA) nd the GPRA Moderniztion Act of 2010 could help ddress these chllenges, s well s improve informtion shring nd coordintion mong federl gencies both of which re needed to help ddress issues of frgmenttion, overlp, nd dupliction. 16 The GPRA Moderniztion Act gve us number of importnt reporting responsibilities, nd through these responsibilities we will monitor the implementtion of the ct for Congress. Furthermore, we pln to conduct further nlysis to look for dditionl or emerging instnces of frgmenttion, overlp, nd dupliction nd opportunities for cost svings or revenue enhncement. Likewise, we will continue to monitor developments in the res we hve lredy identified in this series. We stnd redy to ssist this nd other committees in further nlyzing the issues we hve identified nd evluting potentil solutions. 16 Pub. L. No , 107 Stt. 285 (1993); Pub. L. No , 124 Stt (2011). Pge 21

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