	High-Risk Designations Removed

For this 2005 high-risk update, we determined that three high-risk areas  warranted removal from the list because of progress made. Thus, while FSA needs to continue its progress and  take additional steps to fully address some of our recommendations, we  are removing the high-risk designation from student financial aid programs. While the cost accounting system is still under development, progress has  been made. Based on our criteria for removing a high-risk  designation, which includes a demonstrated strong commitment,  corrective action plan, and progress in addressing deficiencies, we believe  the Forest Service’s overall improvement in financial management since  our January 2003 high-risk update has been sufficient for us to remove  Forest Service financial management from the high-risk list at this time. New High-Risk Areas

Our use of the high-risk designation to draw attention to the challenges  associated with the economy, efficiency, and effectiveness of government  programs and operations in need of broad-based transformation has led to  important progress. We will also continue to identify high-risk areas based  on the more traditional focus on fraud, waste, abuse, and mismanagement. For 2005, we have designated  the following four new areas as high risk: Establishing Appropriate and  Effective Information-Sharing Mechanisms to Improve Homeland Security,  Department of Defense (DOD) Approach to Business Transformation, DOD  Personnel Security Clearance Program, and Management of Interagency  Contracting. The ability to  share security-related information can unify the efforts of federal, state,  and local government agencies, as well as the private sector as appropriate,  in preventing or minimizing terrorist attacks. Accordingly, we are designating information sharing for  homeland security as a governmentwide high-risk area because this area,  while receiving increased attention, still faces significant challenges. For years, we have reported on inefficiencies and the lack of adequate  transparency and appropriate accountability across DOD’s major business  areas, resulting in billions of dollars of wasted resources annually. Although the Secretary of Defense and senior leaders have shown  commitment to business transformation, as evidenced by individual key  initiatives related to acquisition reform, business modernization, and  financial management, among others, little tangible evidence of actual  improvement has been seen in DOD’s business operations to date. However, DOD has not taken the steps it needs to take to  achieve and sustain business reform on a broad, strategic, departmentwide,  and integrated basis. Problems with DOD’s personnel security  clearance process can have repercussions throughout the government  because DOD conducts personnel security investigations and adjudications  for industry personnel from 22 other federal agencies, in addition to  performing such functions for its own service members, federal civilian  employees, and industry personnel. These contracts are designed to leverage the government’s  aggregate buying power and provide a much-needed simplified method for  procuring commonly used goods and services. However, the challenges  associated with these contracts, recent problems related to their  management, and the need to ensure that the government effectively  implements measures to bolster oversight and control so that it is well  positioned to realize the value of these contracts, warrants designation of  interagency contracting as a new high-risk area. There are several causes of the deficiencies we and others have found in  the use of interagency contracts, including the increasing demands on the  acquisition workforce, insufficient training, and in some cases inadequate  guidance. The Congress and the administration have taken several steps to address  the challenges of interagency contracting. Internal controls and appropriate performance measures help ensure that  policies and processes are implemented and have the desired outcomes. Making these investments has the potential to improve the  government’s ability to acquire high-quality goods and services in an  efficient and effective manner, resulting in reduced costs, improved service  delivery, and strengthened public trust.
Why GAO Did This Study

GAO's audits and evaluations identify federal programs and operations that, in some cases, are high risk due to their greater vulnerabilities to fraud, waste, abuse, and mismanagement. Increasingly, GAO also is identifying high-risk areas to focus on the need for broad-based transformations to address major economy, efficiency, or effectiveness challenges. Since 1990, GAO has periodically reported on government operations that it has designated as high risk. In this 2005 update for the 109th Congress, GAO presents the status of high-risk areas identified in 2003 and new high-risk areas warranting attention by the Congress and the administration. Lasting solutions to high-risk problems offer the potential to save billions of dollars, dramatically improve service to the American public, strengthen public confidence and trust in the performance and accountability of the federal government, and ensure the ability of government to deliver on its promises.

What GAO Found

In January 2003, GAO identified 25 high-risk areas; in July 2003, a 26th highrisk area was added to the list. Since then, progress has been made in all areas, although the nature and significance of progress varies by area. Federal departments and agencies, as well as the Congress, have shown a continuing commitment to addressing high-risk challenges and have taken various steps to help correct several of the problems' root causes. GAO has determined that sufficient progress has been made to remove the high-risk designation from three areas: student financial aid programs, FAA financial management, and Forest Service financial management. Also, four areas related to IRS have been consolidated into two areas. This year, GAO is designating four new high-risk areas. The first new area is establishing appropriate and effective information-sharing mechanisms to improve homeland security. Federal policy creates specific requirements for information-sharing efforts, including the development of processes and procedures for collaboration between federal, state, and local governments and the private sector. This area has received increased attention but the federal government still faces formidable challenges sharing information among stakeholders in an appropriate and timely manner to reduce risk. The second and third new areas are, respectively, DOD's approach to business transformation and its personnel security clearance program. GAO has reported on inefficiencies and inadequate transparency and accountability across DOD's major business areas, resulting in billions of dollars of wasted resources. Senior leaders have shown commitment to business transformation through individual initiatives in acquisition reform, business modernization, and financial management, among others, but little tangible evidence of actual improvement has been seen in DOD's business operations to date. DOD needs to take stronger steps to achieve and sustain business reform on a departmentwide basis. Further, delays by DOD in completing background investigations and adjudications can affect the entire government because DOD performs this function for hundreds of thousands of industry personnel from 22 federal agencies, as well as its own service members, federal civilian employees, and industry personnel. OPM is to assume DOD's personnel security investigative function, but this change alone will not reduce the shortages of investigative personnel. The fourth area is management of interagency contracting. Interagency contracts can leverage the government's buying power and provide a simplified and expedited method of procurement. But several factors can pose risks, including the rapid growth of dollars involved combined with the limited expertise of some of agencies in using these contracts and recent problems related to their management. Various improvement efforts have been initiated to address this area, but improved policies and processes, and their effective implementation, are needed to ensure that interagency contracting achieves its full potential in the most effective and efficient manner.