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United States General Accounting Office
GAO
Transition Series
December 1992
Natural Resources
Management Issues
UNITED STATES
ACCOUNTING GENERAL OFFICE
GAO/OCG-93-17TR
GAO
United States
General Accounting Office
Washington, D.C. 20548
Comptroller General
of the United States
December 1992
The Speaker of the House of Representatives
The Majority Leader of the Senate
In response to your request, this transition series report discusses
major policy, management, and program issues facing the Congress
and the new administration in natural resources management. These
issues include (1) maintaining facilities and lands and staffing
programs under increasing budgetary constraints, (2) seeking a
better return for the sale or use of natural resources, and (3)
establishing national policies for natural resources in the 1990s.
The GAO products upon which this report is based are listed at the
end of the report.
We are also sending copies of this report to the President-elect, the
Republican leadership of the Congress, the appropriate congressional
committees, and the designated heads of the appropriate agencies.
A.
Charles A. Bowsher
Contents
Natural
4
Resources
Management
Issues
Setting Priorities
7
Under Budgetary
Constraints
Ensuring a Better
13
Return for
Natural
Resources
Balancing the
23
Conservation and
Use of Natural
Resources
Related GAO
30
Products
Transition Series
33
Page 2
GAO/OCG-93-17TR Natural Resources Management
Page 3
GAO/OCG-93-17TR Natural Resources Management
Natural Resources Management Issues
Vital for economic, ecological, and cultural
reasons, natural resources on federal lands
comprise vast reserves of fuels and other
minerals, timber, rangeland, water, habitat
for fish and wildlife, recreation areas, areas
of scenic beauty, historic and cultural sites,
and artifacts. Managing and protecting these
resources, as well as managing the vast
infrastructure-including buildings, roads,
trails, bridges, developed sites, water and
sewer systems, dams, and other facilities on
federal lands-associated with them, are
primarily the responsibility of the
Department of the Interior, the Department
of Agriculture's Forest Service, and the U.S.
Army Corps of Engineers. Together, these
agencies hold and are responsible for almost
30 percent of the country's land surface,
rights to minerals beneath even more of the
country and beneath 1.4 billion acres of
ocean floor, and 12,000 miles of commercial
navigation channels. For fiscal year 1993,
budget authorities for managing natural
resources total about $16.6 billion. In fiscal
year 1992, these resources generated an
estimated $6.9 billion in receipts to the
federal government.
In our 1988 transition report, we concluded
that the most pressing overall need at that
time was for the Department of the Interior
Page 4
GAO/OCG-93-17TR Natural Resources Management
Natural Resources Management Issues
to become a more effective steward by
better balancing competing demands on the
natural and cultural resources it is
legislatively mandated to foster, protect, and
preserve. We pointed out that billions of
dollars would be needed to stop the
continued deterioration of, and prevent
possibly irreversible damage to, the nation's
natural and cultural resources. Though the
Department of the Interior and other
responsible agencies have not always agreed
with our positions, a number of changes
have been made. Budgetary constraints,
however, will slow the pace of change and
will require difficult trade-offs among
important yet competing priorities.
Our 1988 report also concluded that the
Department of the Interior had not always
fulfilled its fiduciary responsibility of
collecting the revenues due the government
or taken advantage of opportunities to
increase revenues. Since then, various
amendments have been proposed and bills
introduced to ensure a better return for the
sale or use of natural resources on federal
lands. With few exceptions, however, these
reforms have not been enacted. According to
estimates prepared by the Congressional
Budget Office, legislation to ensure a better
return could generate an additional $4.5
Page 5
GAO/OCG-93-17TR Natural Resources Management
Natural Resources Management Issues
billion in revenues and savings in fiscal years
1993 to 1997.
Finally, a number of key decisions about the
management of the nation's natural
resources have been left to the 103rd
Congress. Resolving the issues involved will
go a long way in establishing national
policies for natural resources in the 1990s.
Page 6
GAO/OCG-93-17TR Natural Resources Management
Setting Priorities Under Budgetary
Constraints
The management of the nation's natural
resources is at a crossroads. While the
infrastructure on federal lands that is
associated with natural resources is
expanding yearly, the existing infrastructure
and lands, approaching $200 billion in value,
are in a growing state of disrepair. At the
same time, agency staff are being asked to
assume increasing responsibilities and to
perform more duties. As a result, existing
maintenance and reconstruction standards
are being compromised and trade-offs are
being made among important yet competing
work priorities.
Although annual appropriations for
managing natural resources have increased
in recent years, these increases have not
been large enough to make a dent in the
needs for the infrastructure and staffing.
Moreover, in fiscal year 1993, appropriations
for managing natural resources dropped by
1.3 percent from the previous fiscal year, and
the Budget Enforcement Act of 1990 will
require substantial cuts to discretionary
spending in fiscal years 1994 and 1995 with
no allowance for new or deferred needs. As
a result, the new administration now faces a
difficult choice: It must find new sources of
funding for the agencies responsible for
managing natural resources and/or find ways
Page 7
GAO/OCG-93-17TR Natural Resources Management
Setting Priorities Under Budgetary
Constraints
for these agencies to operate more
efficiently, or it must make further cutbacks
in the services they provide and/or their
standards for maintaining facilities and
lands.
Cumulative
In 1988, we reported a $1.9 billion
Shortfall at the
cumulative shortfall in funds for park
Department of
maintenance. In its fiscal year 1993 budget
the Interior
request, the Department of the Interior
reported that the deferred maintenance of
parks will now cost over $2.1 billion. In
addition, the Department identified a
growing backlog in the maintenance and
reconstruction of the Bureau of Land
Management's (BLM) $400 million
infrastructure of facilities. Additional
funding requirements include
an unquantified need for improvements to
the 337 dams built by the Bureau of
Reclamation since 1902;
an estimated $27 billion shortfall between
(1) the estimated costs to reclaim lands
around surface coal mines abandoned before
1977 and (2) the fees collected for this
Page 8
GAO/OCG-93-17TR Natural Resources Management
Setting Priorities Under Budgetary
Constraints
purpose when the authority to collect such
fees expires in 2004; and
an estimated $283 million to reclaim about
280,000 acres of abandoned, suspended, or
unauthorized hardrock mining operations on
federal lands.
Forest Service's
As we reported from September 1989
Assets Continue
through January 1991, the Forest Service will
to Deteriorate
require
at least $644 million to eliminate the backlog
of maintenance and reconstruction of trails
and developed recreation sites and
millions of dollars more to develop and
maintain special recreation and wilderness
areas in accordance with current standards.
Corps' Water
By the turn of the century, many of the
Resources
structures in the Corps of Engineers' vital,
Projects Are a
but aging, $125 billion inventory of water
Vital, but Aging,
resources projects will have reached their
National
design life, according to the Corps. The
Resource
major structures have an average age of 33
years, and 12 percent of the projects are over
50 years old. As a result, major rehabilitation
projects will become increasingly important
and costly in the near future.
Page 9
GAO/OCG-93-17TR Natural Resources Management
Setting Priorities Under Budgetary
Constraints
Significant
We, as well as others, have identified
Staffing and
significant shortfalls in the staffing and
Funding
funding for natural resources management,
Shortfalls Have
including the following:
Been Reported
In 1987, 267 National Park Service unit
managers reported needing a 35-percent
increase in maintenance staff to eliminate
the growing backlog of deferred
maintenance.
In 1990, BLM reported needing a 50-percent
increase in its range management budget to
restore riparian areas damaged by
overgrazing, detect and deter unauthorized
grazing, and collect and analyze data to
determine appropriate grazing levels. BLM
also has reported needing additional staff
and/or resources to (1) verify oil and gas
production, (2) complete and implement
legislatively mandated land-use plans and
related environmental impact statements
used to guide the management of the public
lands, and (3) implement the objectives
envisioned for wildlife in the land-use plans
that have been completed.
In recent years, the Fish and Wildlife Service
(FWS) has pointed to insufficient staffing or
resource constraints as a primary reason for
its inability to (1) list, in a timely manner,
Page 10 GAO/OCG-93-17TR Natural Resources Management
Setting Priorities Under Budgetary
Constraints
about 600 domestic species for which it has
adequate information to support their
protection under the Endangered Species
Act and (2) even minimally deter crimes
against wildlife. Moreover, many of FWS'
special agents are deskbound for months at
a time because of insufficient operating
funds.
In 1991, we reported that despite recent
increases in the Forest Service's
appropriations, funding and/or staffing levels
were not sufficient to (1) bring recreational
sites up to the condition called for by the
Service's development plans and
maintenance standards, (2) conduct the
monitoring necessary to identify improper
grazing and devise remedies, or (3)
implement wildlife-beneficial actions
included in approved land-use plans.
Funding and staffing shortfalls have
adversely affected the federal government's
efforts to control the use of wetlands. The
shortfalls have inhibited enforcement
activities, impeded the Corps' ability to
establish wetlands' boundaries, and often
precluded the Corps from meeting
established goals for timely processing
permits for projects that may alter wetlands.
Budgetary constraints have also hampered
Page 11 GAO/OCG-93-17TR Natural Resources Management
Setting Priorities Under Budgetary
Constraints
the ability of the Environmental Protection
Agency, FWS, and the Department of
Commerce's National Marine Fisheries
Service to visit proposed project sites,
comment on permit applications, and follow
up on the Corps' decisions about permits to
see if their recommendations were adopted.
Page 12 GAO/OCG-93-17TR Natural Resources Management
Ensuring a Better Return for Natural
Resources
For the agencies managing natural
resources, one alternative for addressing the
declining condition of the nation's natural
resources and related infrastructure is to
obtain new sources of funding. It seems
reasonable to expect that in these times of
budgetary constraints, the federal
government should (1) seek a better return
for the sale or use of the mineral, renewable,
and other natural resources on its lands;
(2) cover programs' costs to the extent
reasonable and make some programs
revenue producers rather than contributors
to the national debt, as they are now; and
(3) provide a revenue base that can be used
to better manage and improve federal lands
so that they will remain a viable public
resource in the future.
According to estimates prepared by the
Congressional Budget Office (cBo),
legislation to ensure a better return for the
sale or use of natural resources on federal
lands could generate an additional $4.5
billion in revenues and savings in fiscal years
1993 to 1997. Legislative precedent exists for
returning revenues to the managing agencies
or units to supplement, rather than supplant,
yearly appropriations. This could help
reduce the need for further cutbacks in the
services provided and/or the standards to
Page 13 GAO/OCG-93-17TR Natural Resources Management
Ensuring a Better Return for Natural
Resources
which the facilities and lands are
maintained.
We believe that the Congress and new
administration should consider a number of
situations in which it appears that the
government could receive a better return,
including the following:
Hardrock
Valuable federal lands continue to pass into
Minerals
private ownership for a fraction of their
value. Over the last 120 years, the federal
government has sold about 3.2 million acres
of public lands, or an area about the size of
Connecticut, under the patent provision of
the Mining Law of 1872. This provision
allows holders of economically minable
claims to obtain all rights and interests to
both the land and the minerals by patenting
them for $2.50 or $5.00 an acre-an amount
that approximated the fair market value for
western grazing land and farmland in 1872.
As a result, some patent holders have reaped
huge profits at the government's expense.
For example, between 1970 and 1983 the
government received less than $4,500 for 20
patents that in 1988 were estimated to be
worth between $13.8 million and
$47.9 million.
Page 14 GAO/OCG-93-17TR Natural Resources Management
Ensuring a Better Return for Natural
Resources
The government receives no financial
compensation for hardrock minerals
extracted from federal lands. In 1990,
hardrock minerals worth at least $1.2 billion
were extracted from federal lands, while the
known, economically recoverable reserves
of hardrock minerals that remained on
federal lands were valued at $64.9 billion.
Federal Water
Some farmers have taken advantage of a
loophole in the Reclamation Reform Act of
1982, as amended, by reorganizing their large
farming operations into multiple, smaller
landholdings to be eligible to receive
additional federally subsidized irrigation
water. The act limits to 960 the maximum
number of owned or leased acres that
individuals or legal entities, such as
partnerships or corporations, can irrigate
with federal water at rates that exclude any
interest on the government's investment in
the irrigation component of its water
resources projects. The act has not,
however, stopped the flow of federally
subsidized water to land above the 960-acre
limit that is being operated as one large
farming operation. Consequently, the federal
government is not collecting the revenues to
which it would be entitled if the multiple
landholdings were considered collectively as
Page 15 GAO/OCG-93-17TR Natural Resources Management
Ensuring a Better Return for Natural
Resources
large farms subject to the act's 960-acre
limit. The foregone revenues from one large
farming operation alone are about $2 million
a year. Such revenues are likely to remain
uncollected unless the act is amended.
By the end of fiscal year 1990, after receiving
water from the Central Valley Project (CVP)
in California's Central Valley Basin for over
40 years, irrigators had repaid only
$10 million, or 1 percent, of the over
$1 billion in construction costs that they owe
the federal government. Amendments to the
CVP'S purposes in 1986 require irrigators and
other users to pay their share of the federal
investment in the CVP by 2030. Under the
terms of the long-term water contracts
currently being renewed by the Secretary of
the Interior, the Bureau of Reclamation can
adjust each water district's rates annually to
meet the deadline. While the Bureau may
ultimately recover its construction costs by
2030, the dollars that eventually flow to the
U.S. Treasury could be worth much less than
if they had been repaid sooner-as inflation
decreases the money's value and as
opportunities to use the money for other,
productive purposes, such as reducing the
federal debt, are lost.
Page 16 GAO/OCG-93-17TR Natural Resources Management
Ensuring a Better Return for Natural
Resources
Estimates of the current cost of federal
water subsidies are substantial. For
example, the Department of the Interior
reported that irrigation subsidies throughout
the 17 western states totaled $534 million in
1986, while the Bureau of Reclamation
placed the cost at $2.2 billion. (Estimates
differ because of different definitions of an
irrigation subsidy, different interest rates
used to calculate the subsidies, and different
methods for compounding unpaid interest.)
Much has changed in the West since the
subsidies were established in 1902, and it is
not known whether the subsidies are still
warranted or whether irrigators could pay
more of the cost of the water delivered.
The use of federally subsidized water to
produce federally subsidized crops results in
the federal government's paying double
subsidies. According to the Department of
the Interior, between 1976 and 1985, an
average of 38 percent of the acreage served
by the Bureau of Reclamation nationwide
was used to produce crops that are also
eligible for subsidies through the
Department of Agriculture's commodity
programs. The Department of the Interior
estimated that irrigation subsidies used to
produce subsidized crops throughout the 17
western states totaled $203 million in 1986.
Page 17 GAO/OCG-93-17TR Natural Resources Management
Ensuring a Better Return for Natural
Resources
Other estimates are higher. For example, the
Bureau of Reclamation placed the figure at
$830 million.
Recreation
In 1989, according to available financial
Lands
information (which was complete for about
60 percent of the 9,000 concession
agreements identified by six federal
agencies), the federal government received
about $35 million in concession fees from
gross concession revenues of about
$1.4 billion. This amount represents an
average return to the government of about
2 percent.
Under land-use agreements with nonfederal
public entities, the Bureau of Reclamation
has agreed to the long-term use of some of
its lands with no compensation to the federal
government. The nonfederal public entities,
in turn, develop and lease the lands to
private commercial operators in exchange
for a percentage of their gross revenues. For
example, the Bureau agreed that the city of
Scottsdale, Arizona, could use about 760
acres of its land for 75 years for recreation
development. The city developed two major
recreation facilities on the land and
subsequently leased them to private
commercial operators. The operators of
Page 18 GAO/OCG-93-17TR Natural Resources Management
Ensuring a Better Return for Natural
Resources
these facilities generated about $24 million
in gross revenues from 1988 through 1990,
and the city was entitled to receive about
$1.5 million in compensation. Although
Bureau headquarters officials were unable to
tell us the extent to which the agency has
used these agreements, we identified three
other similar agreements in Arizona that the
Bureau had approved.
Improved pricing of user fees at recreational
sites could help defray direct costs to the
government, shift the cost burden from the
taxpayers in general to the beneficiaries of
the services, and alleviate overcrowding at
many sites. Entrance and user fees are
charged at some sites, but the fees generally
cover only a small portion of the costs for
the services provided to visitors. For
example, in 1992, the National Park Service
spent an estimated $220 million on services
for visitors but recovered only an estimated
$60 million in fees. According to CBO,
requiring federal land managing agencies to
charge fees to cover the costs for services
would generate $170 million in fiscal year
1993 and $950 million over 5 years.
Public
The fees charged ranchers to graze livestock
Rangelands
on public lands do not cover either the
Page 19 GAO/OCG-93-17TR Natural Resources Management
Ensuring a Better Return for Natural
Resources
government's cost to manage the grazing
program or the cost to better manage and
improve the lands so that they will remain a
productive public resource in the future.
Thus, the fees may represent a subsidy for
many of the ranchers who graze livestock on
about 268 million acres of public lands. CBO
estimates that an annual increase in grazing
fees not to exceed 33.3 percent a year, with
the fees reaching fair market value in
4 years, would increase federal receipts by
approximately $120 million over fiscal years
1993 to 1997.
Timber
The government does not always recover its
expenses for preparing and administering
sales of timber, resulting in below-cost sales.
For example, in fiscal year 1990, under our
most conservative definition of costs,
$35.6 million in such expenses went
unrecovered. These expenses range as high
as $112.2 million when all costs are
considered. While the Forest Service has
acted to reduce losses from below-cost
timber sales, many such sales are still not
subject to review. CBO estimates that the net
savings in federal budget outlays over fiscal
years 1993 to 1997 would be about
$230 million if all future timber sales were
eliminated in three of the Forest Service's
Page 20 GAO/OCG-93-17TR Natural Resources Management
Ensuring a Better Return for Natural
Resources
nine regions where, on average over the last
decade, cash expenditures have exceeded
cash receipts by a 3:1 ratio.
Inland
The government does not impose user fees
Waterways
that are high enough to recover the cost of
operating and maintaining the nation's
system of inland waterways. CBO estimates
that taxpayers, not users, paid $700 million
of the about $800 million that the Corps of
Engineers spent to construct, operate, and
maintain the nation's system of inland
waterways in fiscal year 1991. According to
cBo, imposing user fees high enough to
recover the cost of operating and
maintaining the system would reduce the
federal deficit by $350 million in fiscal year
1993 and by $1.9 billion through fiscal year
1997. CBO also notes that higher fees would
increase efficiency. Reducing subsidies to
water transportation should (1) improve the
allocation of resources by leading shippers
to choose the most efficient transportation
route rather than the most heavily subsidized
one and (2) encourage more efficient use of
existing waterways, reducing the need for
new construction to alleviate congestion.
Page 21 GAO/OCG-93-17TR Natural Resources Management
Ensuring a Better Return for Natural
Resources
Sharing
Federal land-managing agencies typically do
Revenues
not deduct the full costs of their programs
With States and
from the gross receipts that the programs
Counties
generate before the agencies share the
receipts with states and counties. Sharing
federal receipts on a gross, rather than a net,
basis sometimes causes the costs of the
programs to exceed the federal
government's share of the revenues.
According to CBO, changing revenue-sharing
from a gross-receipt basis to a net-receipt
basis would reduce net federal outlays by
$1.05 billion over fiscal years 1993 to 1997.
Page 22 GAO/OCG-93-17TR Natural Resources Management
Balancing the Conservation and Use of
Natural Resources
The most difficult challenge concerning
natural resources that faces this or any other
Congress and administration is fulfilling the
federal government's responsibilities as a
steward of the nation's natural resources by
providing the proper balance between their
use and conservation for future generations.
Achieving this balance has been likened to
steadying a pendulum that could swing
between two extremes-irresponsible
consumptive use and preservation to the
exclusion of all other uses.
Where this pendulum rests at any given time
depends, to a large degree, on policy
decisions. The 102nd Congress has left some
thorny legislative issues for the next
Congress, among them the Endangered
Species Act, the Clean Water Act, and
various proposals to designate additional
areas as wilderness. Resolving these issues
will go a long way in establishing national
policies for natural resources in the 1990s.
The Endangered
Since 1966, when the first act was passed to
Species Act
protect species threatened with extinction,
the pendulum has periodically swung
between increased protection and the need
to soften the law's economic impact. Under
the Endangered Species Act of 1973,
Page 23 GAO/OCG-93-17TR Natural Resources Management
Balancing the Conservation and Use of
Natural Resources
economic factors may not be considered in
listing a species as endangered or threatened
or in consultations with federal agencies
proposing activities that may affect listed
species; these actions must be based solely
on biological data. Economic and other
nonbiological factors, however, may be
considered when making other decisions,
including designating habitat critical to the
species' protection and granting exemptions
from the act's protective provisions.
The June 1990 listing of the Northern spotted
owl and the listing's current and potential
impact on commercial logging in the
old-growth forests of the Pacific Northwest
and the listing of three species of Columbia
River Basin salmon in fiscal year 1992 and
the potential economic costs associated with
their protection have again riveted national
attention on the act's reauthorization.
Spending authorization for the Endangered
Species Act expired at the end of fiscal year
1992. Rather than reauthorize the act for 5
years, as it has often done in the past, the
Congress authorized spending for 1 more
year under the Department of the Interior's
fiscal year 1993 appropriations bill and
appropriated money for the National
Academy of Sciences to study the act.
Ultimately, the new Congress will have to
Page 24 GAO/OCG-93-17TR Natural Resources Management
Balancing the Conservation and Use of
Natural Resources
decide the extent to which economic and
other nonbiological factors, including the
need to compensate owners whose property
loses value because of the act, should be
considered in making decisions about
endangered and threatened species.
The Clean Water
Controversy over proposals to amend
Act
section 404 of the Clean Water Act of
1977-to better balance the need to protect
wetlands with the rights of private property
owners-delayed the reauthorization of the
act. Although section 404 is just 1 of at least
25 federal laws that affect wetlands, it
provides the primary legislative authority
behind federal efforts to control their use
and has become a major regulatory and
environmental issue in recent years.
Wetlands provide vital habitat for fish and
wildlife and offer numerous other benefits.
However, according to the Fish and Wildlife
Service (FWS), the contiguous 48 states lost
an estimated 53 percent of their original 221
million acres of wetlands over the 200 years
from the 1780s to the 1980s. FWS' most recent
estimates suggest that these states continue
to lose about 290,000 acres of wetlands each
year.
Page 25 GAO/OCG-93-17TR Natural Resources Management
Balancing the Conservation and Use of
Natural Resources
The section 404 program requires
landowners and developers to obtain
permits issued by the Corps of Engineers to
dredge or fill navigable waters, including
wetlands. The program has become the
target of farmers, developers, oil companies,
and other private landowners who believe
that the program has intruded too far into
their decisions about how to use their land
and that the process for obtaining permits is
time-consuming, costly, and inconsistently
administered by the Corps.
Environmentalists and some state officials,
on the other hand, are concerned that
current proposals for defining wetlands
would result in the loss of millions of acres
previously regulated as wetlands.
During the 102nd Congress, major revisions
to section 404 were proposed that seek to
stem the loss of remaining wetlands without
creating severe economic hardship for
private developers and property owners. In
the appropriations bills for both fiscal year
1992 and fiscal year 1993, the Congress
banned the Corps from using its more
expansive 1989 definition of wetlands in
favor of a more narrow 1987 one, and the
latter bill appropriated funds for the National
Academy of Sciences to study how to define
wetlands and how to categorize them
Page 26 GAO/OCG-93-17TR Natural Resources Management
Balancing the Conservation and Use of
Natural Resources
according to their function and value. As
with the Endangered Species Act, the 103rd
Congress will ultimately have to decide how
best to balance the protection, restoration,
and creation of wetlands with the need for
sustained economic growth and
development.
Wildernesses
Economics will also play a key role in
congressional deliberations on designating
additional areas as wilderness. Because the
Wilderness Act of 1964 generally prohibits
such things as motorized equipment,
buildings, roads, commercial enterprises,
and aircraft landings in wilderness, some
believe that designating areas as wilderness
is detrimental to the economy. Others
believe that doing so is a necessary step for
preserving federal lands in an undisturbed
condition for present and future generations.
Nowhere has this use-versus-conservation
debate been more visible than in the
conflicting efforts to open the Arctic
National Wildlife Refuge's 1.5-million-acre
"coastal plain" to exploration for oil or to
designate it as wilderness. After 2 years of
work, the 102nd Congress sent to the
President, and he signed, major energy
legislation that did not include the opening
Page 27 GAO/OCG-93-17TR Natural Resources Management
Balancing the Conservation and Use of
Natural Resources
of the refuge to development, despite
arguments that (1) drilling there could create
200,000 jobs and provide $125 billion in
revenues for the federal government and the
state of Alaska and (2) the 800-mile-long
Trans-Alaska Pipeline System that is the
primary means for delivering nearly
25 percent of the nation's domestically
produced oil could shut down within the
next 10 to 30 years unless a new oil field is
developed in the refuge. Meanwhile, efforts
to have the refuge's coastal plain designated
as wilderness were also unsuccessful.
Bills that would have designated the Arctic
National Wildlife Refuge's coastal plain as
wilderness were not the only such bills not
to make it through the 102nd Congress. Left
unfinished was work on at least five
additional bills to designate wilderness areas
in Montana, Colorado, Utah, and the
California Desert, as well as additional areas
in Alaska. Also unresolved was the
accompanying issue of state water rights in
wilderness areas. Our review of studies on
the effects of designating additional areas in
Utah as wilderness led us to conclude that
the likely effect on Utah's economy has not
been adequately quantified. As a result,
policy decisions on this issue in Utah, and
possibly in other states, will have to be
Page 28 GAO/OCG-93-17TR Natural Resources Management
Balancing the Conservation and Use of
Natural Resources
based primarily on subjective judgment
rather than on objective economic data.
Page 29 GAO/OCG-93-17TR Natural Resources Management
Related GAO Products
Setting Priorities
Rangeland Management: Interior's
Under Budgetary
Monitoring Has Fallen Short of Agency
Constraints
Requirements (GAO/RCED-92-51, Feb. 24, 1992).
Wildlife Protection: Enforcement of Federal
Laws Could Be Strengthened (GAO/RCED-91-44,
Apr. 26, 1991).
Forest Service: Difficult Choices Face the
Future of the Recreation Program
(GAO/RCED-91-115, Apr. 15, 1991).
Federal Land Management: An Assessment
of Hardrock Mining Damage
(GAO/RCED-88-123BR, Apr. 19, 1988).
Parks and Recreation: Park Service
Managers Report Shortfalls in Maintenance
Funding (GAO/RCED-88-91BR, Mar. 21, 1988).
Ensuring a Better
Mineral Resources: Value of Hardrock
Return for
Minerals Extracted From and Remaining on
Natural
Federal Lands (GAO/RCED-92-192, Aug. 24,
Resources
1992).
Reclamation Law: Changes Needed Before
Water Service Contracts Are Renewed
(GAO/RCED-91-175, Aug. 22, 1991).
Page 30 GAO/OCG-93-17TR Natural Resources Management
Related GAO Products
Bureau of Reclamation: Federal Interests
Not Adequately Protected in Land-Use
Agreements (GAO/RCED-91-174, July 11, 1991).
Federal Lands: Improvements Needed in
Managing Concessioners (GAO/RCED-91-163,
June 11, 1991).
Rangeland Management: Current Formula
Keeps Grazing Fees Low (GAO/RCED-91-185BR,
June 11, 1991).
Forest Service Needs to Improve Efforts to
Reduce Below-Cost Timber Sales
(GAO/T-RCED-91-43, Apr. 25, 1991).
Water Subsidies: Basic Changes Needed to
Avoid Abuse of the 960-Acre Limit
(GAO/RCED-90-6, Oct. 12, 1989).
Federal Land Management: The Mining Law
of 1872 Needs Revision (GAO/RCED-89-72,
Mar. 10, 1989).
Balancing the
Endangered Species: Past Actions Taken to
Conservation and
Assist Columbia River Salmon
Use of Natural
(GAO/RCED-92-173BR, July 13, 1992).
Resources
Page 31 GAO/OCG-93-17TR Natural Resources Management
Related GAO Products
Endangered Species Act: Types and Number
of Implementing Actions (GAO/RCED-92-131BR,
May 8, 1992).
Wetlands Overview: Federal and State
Policies, Legislation, and Programs
(GAO/RCED-92-79FS, Nov. 22, 1991).
Interior Issues (GAO/OCG-89-24TR, Nov. 1988).
Page 32 GAO/OCG-93-17TR Natural Resources Management
Transition Series
Economics
Budget Issues (GAO/OCG-93-1TR).
Investment (GAO/OCG-93-2TR).
Management
Government Management Issues
(GAO/OCG-93-3TR).
Financial Management Issues
(GAO/OCG-93-4TR).
Information Management and Technology
Issues (GAO/OCG-93-5TR).
Program Evaluation Issues (GAO/OCG-93-6TR).
The Public Service (GAO/OCG-93-7TR).
Program Areas
Health Care Reform (GAO/OCG-93-8TR).
National Security Issues (GAO/OCG-93-9TR).
Financial Services Industry Issues
(GAO/OCG-93-10TR).
International Trade Issues (GAO/OCG-93-11TR).
Commerce Issues (GAO/OCG-93-12TR).
Energy Issues (GAO/OCG-93-13TR).
Page 33 GAO/OCG-93-17TR Natural Resources Management
Transition Series
Transportation Issues (GAO/OCG-93-14TR).
Food and Agriculture Issues
(GAO/OCG-93-15TR).
Environmental Protection Issues
(GAO/OCG-93-16TR).
Natural Resources Management Issues
(GAO/OCG-93-17TR).
Education Issues (GAO/OCG-93-18TR).
Labor Issues (GAO/OCG-93-19TR).
Health and Human Services Issues
(GAO/OCG-93-20TR).
Veterans Affairs Issues (GAO/OCG-93-21TR).
Housing and Community Development
Issues (GAO/OCG-93-22TR).
Justice Issues (GAO/OCG-93-23TR).
Internal Revenue Service Issues
(GAO/OCG-93-24TR).
Foreign Economic Assistance Issues
(GAO/OCG-93-25TR).
Page 34 GAO/OCG-93-17TR Natural Resources Management
*U.S.G.P.0.:1993-336-740
Transition Series
Foreign Affairs Issues (GAO/OCG-93-26TR).
NASA Issues (GAO/OCG-93-27TR).
General Services Issues (GAO/OCG-93-28TR).
U.S. G.P.O. 1992-336-740
Page 35 GAO/OCG-93-17TR Natural Resources Management
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United States General Accounting Office
GAO
Transition Series
December 1992
Education Issues
UNITED STATES
INTERNATIONAL GENERAL OFFICE
GAO/OCG-93-18TR
GAO
United States
General Accounting Office
Washington, D.C. 20548
Comptroller General
of the United States
December 1992
The Speaker of the House of Representatives
The Majority Leader of the Senate
In response to your request, this transition series report discusses
major policy, management, and program issues facing the Congress
and the new administration in the area of education. The issues
include the need to (1) enhance federal efforts to meet the National
Education Goals, (2) reduce the cost and preserve the integrity of the
student loan program, and (3) strengthen departmental management.
As part of our high-risk series on program areas vulnerable to waste,
fraud, abuse, and mismanagement, we are issuing a related report,
Guaranteed Student Loans (GAO/HR-93-2, Dec. 1992).
The GAO products upon which this transition series report is based
are listed at the end of the report.
We are also sending copies of this report to the President-elect, the
Republican leadership of the Congress, the appropriate congressional
committees, and the Secretaries-designate of Education, Health and
Human Services, and Labor.
Chacks A. Bousher
Charles A. Bowsher
Contents
Education Issues
4
Enhancing
7
Federal Efforts to
Meet National
Education Goals
Reducing the
25
Cost and
Preserving the
Integrity of the
Student Loan
Program
Strengthening
30
Departmental
Management
Related GAO
33
Products
Transition Series
36
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GAO/OCG-93-18TR Education Issues
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GAO/OCG-93-18TR Education Issues
Education Issues
Our educational system is not keeping pace
with the demands of a changing economy.
International competition is transforming the
American workplace, increasing the demand
for highly skilled workers across
manufacturing and service industries.
Employers want employees who can solve
problems, share management
responsibilities, and work in teams. Yet the
nation's schools are not educating many
students to meet these demands.
In the United States, public elementary and
secondary education is a $221 billion
cooperative enterprise of local, state, and
federal governments. This enterprise faces
great challenges. Only a small percentage of
the nation's students can perform tasks
requiring complex reasoning and problem
solving, and their achievement in
mathematics and science lags behind that of
their peers in other industrialized nations.
We estimate that about one in three youths
aged 16 to 24 will not have the skills needed
for even entry-level, semiskilled, high-wage
occupations. Over 1,900 teenagers drop out
of school every day. While the federal
government contributes less than 6 percent
of what is spent on elementary and
secondary education, the Department of
Education has a strong leadership role to
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GAO/OCG-93-18TR Education Issues
Education Issues
play in working with states and localities to
improve the nation's education system as a
whole and in ensuring that all children will
benefit from the improvements.
Among the challenges that the Department
faces in school reform are helping schools to
adjust to a higher proportion of poor,
minority, and immigrant children; continuing
to support the development of high national
standards for all children; and moving
thoughtfully in backing the development of
new forms of student assessment. The
Department will also need to consider how
to use existing categorical programs in the
context of broad reform and how the
discrete services provided by its programs
complement one another and those of other
agencies. For example, to help ensure that
young children are ready for and succeed in
school, the Department should continue
efforts to link its programs with others, such
as the Department of Health and Human
Services' Head Start program. The
Department will also need to work closely
with the Department of Labor to develop an
effective national strategy for our youth's
transition from school to work. Most
importantly, the federal government will
need to determine how to maximize its
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GAO/OCG-93-18TR Education Issues
Education Issues
resources to promote widespread school
reform efforts among states and localities.
However, the Department has long-standing
managerial problems that may hamper its
taking a strong leadership role in reforming
the nation's educational system. In our 1988
transition report, we noted many
deficiencies in the Department's
management, particularly in student
assistance programs; loan defaults cost the
federal government $3.6 billion in 1991. The
Congress has enacted changes that could
significantly improve the operation of these
programs, but serious problems remain in
overall departmental management, financial
and management information systems, and
human resource management. If not
addressed, these problems could undermine
not only student loan reforms but also
reform of the nation's educational system.
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Enhancing Federal Efforts to Meet
National Education Goals
Concerns about the quality of our nation's
education system have increased
dramatically in the decade since A Nation at
Risk documented the system's inadequacies.
1
Even though changes were implemented
during the 1980s, many experts agree that
major improvements are still needed to
prepare the nation's youth for the economic
realities of the next century. A critical
component of our nation's competitiveness
is the capacity of the nation's students to
meet the demands of a changing workplace.
Members of the business community have
been particularly alarmed about the lack of
skills among entry-level youth.
The Department of Education is in a unique
position to provide leadership, even though
its financial contribution is small. For
example, the federal contribution to U.S.
spending on elementary and secondary
education has never exceeded 10 percent; in
fiscal year 1990, it was less than 6 percent.
But the federal role in education has been
important in ways these figures do not
convey.
The Department and the Congress have
traditionally developed programs to address
¹A Nation at Risk: The Imperative of Educational Reform, National
Commission on Excellence in Education (Washington, D.C.: U.S.
Government Printing Office, 1983).
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Enhancing Federal Efforts to Meet
National Education Goals
specific national needs. The cornerstones of
federal efforts have been programs to assist
specific groups of students: disadvantaged
students, those with disabilities, and those
whose proficiency in English is limited. New
concerns about the quality of education for
all students, however, are broadening the
focus of the federal role in education.
Early in 1990, the President and the nation's
governors agreed to National Education
Goals for the year 2000, which have become
a framework for education reform efforts.
These goals address the need to ensure all
children's readiness for school and improved
grasp of challenging subject matter, ensure
school environments conducive to learning,
and enhance the knowledge and skills of
those entering and competing in the work
force. Moving the nation toward meeting
these goals will be a key task of this
administration and the Congress.
As the nation moves toward higher
standards for all children, it faces a growing
number of disadvantaged children who, as a
whole, are becoming more diverse and
increasingly poor. The Department of
Education faces dual challenges: exercising
leadership to improve the nation's education
system as a whole and ensuring that all
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GAO/OCG-93-18TR Education Issues
Enhancing Federal Efforts to Meet
National Education Goals
children, especially those who have been
less successful in the nation's schools, will
benefit from these improvements.
Promoting
Many children are unprepared for school. Of
Readiness for
the 22.8 million children in the United States
School
under the age of 6 in 1991, over 5 million
lived in poverty, an increase of almost
50 percent from 1975. Many of these children
experience disadvantages, including
problems with language development,
nutritional deficiencies, and health
problems. Poor children have the lowest
participation rates in preschool programs,
despite evidence that high-quality preschool
programs can substantially increase chances
for success in school.
The Head Start program, operated by the
Department of Health and Human Services,
is the largest federal effort to provide
comprehensive early childhood services to
disadvantaged children, with a fiscal year
1992 budget of $2.2 billion. The Department
of Education, however, also supports
services for young children through
Chapter 1 of the Elementary and Secondary
Education Act, Even Start, and parts of the
Individuals With Disabilities Education Act.
These programs had combined fiscal year
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Enhancing Federal Efforts to Meet
National Education Goals
1992 budgets for young children totaling
over $1 billion.
As the nation seeks to ensure that all
children are prepared to enter school,
coordinated efforts from all levels of
government will be needed to guarantee
access to quality preschool services and
attention to the needs of young children
after they enter school. The Department of
Education should continue to work closely
with other agencies to promote these efforts.
The Department of Education should
consider how the discrete services provided
by each of its programs complement one
another and those of other agencies. In
addition to examining relationships to
federal preschool programs, such as Head
Start, the Department will need to consider
how its programs relate to those of states
and localities that fund preschool programs.
Furthermore, many federal and state
programs fund child care services that could
complement preschool programs. All of
these programs form an unconnected
patchwork of services. In examining
strategies to integrate services provided by
different agencies, we found that efforts
linking clients to services-by using case
managers or developing agreements among
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GAO/OCG-93-18TR Education Issues
Enhancing Federal Efforts to Meet
National Education Goals
service providers-are more successful than
state-led approaches that attempt to
reorganize entire agencies or create new
services. Still, the incoming administration
and the Congress will need to identify the
best ways to link together the many
programs that serve young children and their
families.
In preparation for the reauthorization of
Head Start, we are conducting several
studies that should also help to illuminate
issues for the Department of Education's
early childhood efforts: an analysis of census
data to determine preschool participation
rates among the nation's children, whatever
the funding source; an in-depth study in
several states to identify the federal, state,
and local programs that deliver services to
young children, as well as how they relate to
one another; and a study of the
arrangements that other nations have made
to provide preschool services to young
children.
Leading School
Leadership by the Department and the
Reform Efforts
Congress is needed in promoting widespread
school reform. This leadership must address
a number of issues: how to foster national
efforts, without a prescriptive federal role, to
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Enhancing Federal Efforts to Meet
National Education Goals
develop high standards related to the
national education goals; how to use major
federal categorical programs in the context
of broad reform; and how to maximize the
federal government's limited resources to
promote state and local school reform
efforts.
Developing National
In 1992, the National Council on Education
Standards and
Standards and Testing issued proposals to
Assessments
set high national standards for five core
subjects-English, mathematics, science,
history, and geography-and to develop a
system of national assessments using those
standards. A variety of groups-funded by
the Department of Education, other
government entities, and foundations-have
begun to develop these national standards
and new forms of assessments.
To meet the National Education Goals, the
Congress and the Department will need to
work together to ensure that progress
continues in developing high standards for
what students should know. The Congress
and the Department also need to proceed
thoughtfully as new forms of student
assessments are developed. We are studying
the role of assessments in national school
reform efforts, including the likely cost of a
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GAO/OCG-93-18TR Education Issues
Enhancing Federal Efforts to Meet
National Education Goals
national assessment for the United States
and the experience of some Canadian
provinces with student assessment. The
Department and the Congress will also need
to consider how to avoid misuse of these
assessments, which could be used to deny
opportunities to some students. A key point
of debate has been the fairness of assessing
students, especially when their schools have
not afforded them adequate materials,
curricula, or instruction.
Federal leadership-using the knowledge of
technical experts and educators-is also
necessary in developing indicators to track
progress toward meeting all of the goals. In
measuring progress toward improving
student competency in challenging subjects,
we found problems with the way
performance standards were set and how
achievement tests, specifically for
mathematics, were interpreted.
Changing Context
The context for federal categorical programs
for Categorical
is changing. The Congress and the
Programs
Department will need to consider how
categorical programs will help
disadvantaged students achieve the high
standards implied by the National Education
Goals. Research and an expanding
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Enhancing Federal Efforts to Meet
National Education Goals
knowledge base-about how children learn
and the most effective teaching
practices-have led to a greater focus on
higher order thinking skills and advanced
skills instruction, rather than an emphasis on
basic skills and remediation. The Congress
and the Department need to consider
different ways of serving children with
special needs-whether the children are
disadvantaged because of poverty, have
disabilities, or lack proficiency in English. A
key issue is how to ensure that these
students, who are the traditional targets of
federal categorical programs, also benefit
from broader school reform efforts.
Our ongoing work will explore the operation
of categorical programs in the context of
current reform efforts. In one study under
way, we are examining the accountability
system established for the Chapter 1
categorical program during its last
reauthorization in 1988.
Facilitating
Federal leadership will be needed to
Widespread Reform
promote extensive school reform. The
critical issue that has continually faced the
Department is how to enable its programs to
play a role in widespread innovation. Efforts
of various kinds are under way at the state
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Enhancing Federal Efforts to Meet
National Education Goals
and local levels. Different reform models
have been adopted by individual schools, but
these have not been used extensively. Some
experts believe that implementing reforms
across an entire school district may hold
more promise for widespread school reform.
We are studying how school-based and
districtwide reform models are identified,
adopted, and implemented at the district and
school levels, and with what effects. We also
have studies under way to examine state and
district efforts to (1) reform school system
regulations and (2) give schools more
control over their budgets.
Another issue the Department will need to
consider is how to enhance, as part of
reform efforts, the training and preparation
of teachers. Current programs may be
inadequate. For example, we found that the
Eisenhower math and science state grant
program, while flexible and popular, funds
mostly short-term teacher training. Most
experts believe that this training will not
contribute significantly to achieving the
National Education Goal of making U.S.
students number one in the world in math
and science achievement by the year 2000.
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Enhancing Federal Efforts to Meet
National Education Goals
Helping Schools
Growth in the number of poor children
Adjust to
places greater demands on school resources.
Demographic
In 1991, over 14 million children lived in
Changes
families with incomes below the poverty
level, an increase of 40 percent from 1975.
Given this growth in child poverty, any
public commitment to meeting the National
Education Goals will require examining the
distribution of resources devoted to
education, new institutional strategies to
improve educational services, and ways to
ensure equal educational opportunities.
School districts that have high proportions
of poor children will face greater challenges
in providing educational services, especially
those districts with limited capabilities to
finance those services. Better targeting of
existing federal resources to the nation's
neediest schools could provide a partial
solution. For example, we found that the
Chapter 1 formula, which allocates federal
funds for educational services for
disadvantaged students, could be revised to
reflect the greater need of counties with high
concentrations of poor children and the
reduced capability of some counties to fund
needed services. Currently, the Department
collects little systematic data on schools'
physical condition and the relative need for
resources. For example, national data are
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GAO/OCG-93-18TR Education Issues
Enhancing Federal Efforts to Meet
National Education Goals
unavailable to determine whether those
schools with more students at the poverty
level also face greater burdens of inadequate
facilities.
As of 1991, over 25 percent of American
children were black, Hispanic, or members
of other minority groups. Heavy immigration
from Latin America and Asia has contributed
to this trend, swelling the number of children
with limited proficiency in English. Although
our work exploring the implications of these
and other demographic trends is ongoing,
other researchers have already come to
some conclusions. For example, because
immigration from non-English-speaking
nations is rising, many urban school districts
face students speaking many different
languages and having limited proficiency in
English. The concentration of these students
in some school districts will require new
approaches to provide these children with a
quality education. We are examining the
magnitude of this problem and are assessing
district strategies to provide services to
students speaking many different languages.
To meet the needs of children from
high-poverty and immigrant backgrounds,
schools may also have to house services that
other agencies have traditionally provided.
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Enhancing Federal Efforts to Meet
National Education Goals
We are examining various approaches to
providing comprehensive services, such as
health or child care, at the school.
New strategies to meet the needs of growing
numbers of poor and immigrant children
cannot ignore discrimination issues. In some
districts, we found that the use of ability
grouping has resulted in disproportionate
numbers of minority students' being
assigned to lower ability classes for all
subjects. These assignments are made
without considering students' potentially
greater abilities in some subjects than in
others. The Department needs to improve its
enforcement efforts related to
discriminatory ability grouping and to revise
title VI regulations to identify practices that
schools should use in assigning students on
the basis of ability.
Helping Students
Only 30 percent of our graduates go on to a
in the Transition
4-year college. Those not heading for college
From School
often are carried along in undemanding or
to Work
poor-quality programs that frequently do not
give the students skills that employers need.
We estimate that about one in three youths
aged 16 to 24 will not have the skills needed
to meet employers' requirements for
entry-level, semiskilled, high-wage
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Enhancing Federal Efforts to Meet
National Education Goals
occupations-5.5 million high school
dropouts and 3.8 million graduates who lack
high school competencies.
Clearly, many of America's youth have been
leaving high school poorly prepared for the
world of work. Given the profound changes
taking place in workplaces in the United
States and abroad, these youth may be even
less prepared for the workplaces of the
future. The challenge facing the Congress
and the incoming administration is how to
adapt the nation's education and training
systems to more effectively prepare youth
for the world of work.
We found that the United States does not
have a coherent strategy for preparing our
youth for work, while other nations do. Our
principal foreign competitors emphasize that
all youth be prepared for work and be ready
to adapt to workplace changes. We are
studying key components of comprehensive
approaches for the transition from school to
work; that study will help focus efforts to
ensure that youth are prepared for jobs of
the 21st century.
While the Department of Education is
responsible for elementary and secondary
education, it shares responsibility with the
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GAO/OCG-93-18TR Education Issues
Enhancing Federal Efforts to Meet
National Education Goals
Department of Labor for secondary and
postsecondary skill training. (For a
discussion of issues relating to the
Department of Labor, see our transition
series report, Labor Issues, GAO/OCG-93-19TR,
Dec. 1992.) The magnitude of the problems
facing youth in transition from school to
work requires strong federal leadership in
many areas, with an emphasis on combined
efforts among the Education and Labor
Departments and the Congress.
Improving
The Carl D. Perkins Vocational and Applied
Work-Related and
Technology Education Act Amendments of
Academic Skills
1990 provide the framework for federal
efforts geared to improving high school
graduates' occupational and academic skills
through vocational education. The
amendments encourage expanded use of
instructional approaches, such as linking
high school programs with community and
technical college programs, and integrating
academic and vocational instruction so that
students can learn to apply academic skills
in a work-related setting. In ensuring that the
amendments are fully implemented, the
Department should consider how vocational
education reform can be an integral part of
school reform and not be seen as a separate
effort for some students.
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National Education Goals
On the basis of our studies of foreign
approaches for improving the
school-to-work transition, we have
suggested general expansion of
school-employer linkages, particularly
apprenticeship-type programs. Modifying our
nation's apprenticeship system to serve large
numbers of youth could be difficult, yet
adding apprenticeship-type programs to our
educational system shows promise.
Our studies of apprenticeship-type
programs, which have strong links to
employers, have identified three basic types
of programs. For example, high-quality
cooperative education gives high school
juniors and seniors work experience and
on-the-job training, together with job-related
classroom instruction. Students learn about
the working world, acquire job skills, and
often are offered permanent employment
with their co-op employer. Similarly,
school-to-apprenticeship programs offer
high school seniors structured skill training,
but have the additional benefit of being tied
into the formal apprenticeship system. High
school academy programs operate as
schools-within-schools and provide training
in a series of occupations related to a single
industry. For example, the Academy of
Applied Electrical Science, housed in
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GAO/OCG-93-18TR Education Issues
Enhancing Federal Efforts to Meet
National Education Goals
Philadelphia's Thomas Edison High School,
trains youth for careers in the electrical
trades. Programs are developed with
extensive input from employers and often
involve practical, hands-on experience.
Many districts and schools are developing
new instructional approaches that foster
school-employer linkages. The nation faces a
significant challenge in expanding promising
approaches and developing others, so that
all students can be prepared for a changing
world of work. The Department of
Education is a focal point for federal
leadership to encourage this reform.
Developing Skill
As part of the move to national education
Standards and
standards and closer school-employer
Assessments
linkages, education and business leaders are
struggling to define what skills graduates
need to be prepared for work. Some of our
foreign competitors, notably Germany,
maintain quality occupational training by
using competency testing and certifying that
trainees meet national standards. Employers
view certificates as evidence that trainees
have achieved particular skill levels. In the
United States, certificates often certify
course completion and not necessarily the
attainment of skills. It is now recognized that
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GAO/OCG-93-18TR Education Issues
Enhancing Federal Efforts to Meet
National Education Goals
the United States needs to move toward the
use of competency-based skill standards and
certification. The Departments of Education
and Labor have started such efforts.
We are studying the development and use of
occupational skill standards and certification
systems. We are looking at what barriers
existing systems have had to overcome, how
federal efforts could facilitate the
development and adoption of new systems,
and how the two Departments are working
together to foster the development and use
of skill standards. In the meantime, many
schools across the nation are developing and
using their own competency-based curricula.
The Department of Education should
determine how to ensure that schools
develop curricula that are consistent with
the broader efforts under way to define
needed skills.
Developing Program
School officials across the nation are also
Information
working independently to develop
congressionally mandated performance
measures for vocational-technical programs,
conduct yearly assessments, and improve
programs as needed. But it may be difficult
to develop a national picture from these
independent efforts. The 1990 Perkins
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GAO/OCG-93-18TR Education Issues
Enhancing Federal Efforts to Meet
National Education Goals
amendments require the Department of
Education to develop a national data system
to help policymakers and educators assess
vocational education efforts. The
Department should make development and
implementation of this system, which the act
required to be in place by March 1991, a
priority.
Many students, their parents, and employers
are unaware of the potential benefits of
alternative approaches to the transition to
work. Because high school cooperative
education, like vocational education, has a
reputation as a dumping ground for
academically weak students, parents,
students, and teachers often avoid these
programs. Yet, we found high-quality
programs in 15 sites in eight states. The
actual extent of high-quality programs is
unknown, partly because the Department of
Education no longer collects information on
them. The challenge is to find ways to
evaluate existing programs, disseminate
information on promising approaches, and,
through technical assistance or other means,
facilitate their adoption.
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GAO/OCG-93-18TR Education Issues
Reducing the Cost and Preserving the
Integrity of the Student Loan Program
Guaranteed student loans have
helped millions of students receive an
education they might not have received
otherwise, and most borrowers have repaid
or are repaying their loan obligations. The
Federal Family Education Loan Program
(formerly known as the Guaranteed Student
Loan Program) provides access to a
postsecondary education for those who
cannot otherwise afford it. The program
operates on the premise that once educated,
the borrowers will earn income sufficient to
repay their loans. In 1991, the program
generated about 4.8 million new loans,
totaling over $13 billion for students
attending over 7,500 schools. These loans
were provided by 7,800 lenders and
administered by 46 state or private nonprofit
guaranty agencies.
Despite its success in providing federal
assistance to an ever-increasing pool of
eligible students, the program has been
plagued by many problems. It is inordinately
complex and cumbersome, lacks sufficient
oversight, and places most of the financial
risk on the federal government; controls to
minimize that risk are inadequate. Loan
defaults have skyrocketed-totaling
$3.6 billion in 1991-as students assume
debt burdens they are often unable or
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GAO/OCG-93-18TR Education Issues
Reducing the Cost and Preserving the
Integrity of the Student Loan Program
unwilling to repay, especially when schools
fail to provide a quality education and
thereby lessen the opportunity for gainful
employment.
The Department's Office of Inspector
General, the Office of Management and
Budget, and our own reports have
documented accountability problems that
have contributed to defaults, fraud, and
mismanagement. The Congress and the
Department, recognizing the need to
strengthen program integrity, have made
substantial legislative and regulatory reforms
to fix the existing program. For example, the
Congress established a direct loan
demonstration project that could ultimately
save billions of dollars and simplify program
administration. In addition, the new
administration favors changes that may
provide students with additional access to
postsecondary education while also reducing
their debt burden. This would be
accomplished by forgiving some or all loan
repayments through voluntary national
service or by easing the burden through
income-contingent repayments.
Regardless of the program's structure, there
are serious problems in the Department's
financial and management systems. The
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GAO/OCG-93-18TR Education Issues
Reducing the Cost and Preserving the
Integrity of the Student Loan Program
Department lacks proper systems and
controls to adequately manage its
multibillion-dollar student assistance
programs, and problems erupting from these
programs could eventually overwhelm any
potential reform measures. For example, the
Department's student loan information
systems contain data that are not always
useful, timely, or accurate, thereby limiting
their use for compliance and evaluation
purposes. As a result, millions of dollars
have been loaned to borrowers for amounts
exceeding statutory limits or to borrowers
who are already in default and, therefore,
ineligible for additional loans.
The Department must continue to improve
program management and reduce the
government's risk. Potential improvements
are covered in greater detail in our high-risk
series report on guaranteed student loans.
The Department must also move cautiously
toward implementing the direct student loan
demonstration program that could simplify
program administration and save federal
money.
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GAO/OCG-93-18TR Education Issues
Reducing the Cost and Preserving the
Integrity of the Student Loan Program
Implementing
The Higher Education Amendments of 1992
Direct Loans
authorized a direct loan demonstration
Successfully
program to determine if the current
Rests on
guaranteed student loan delivery
Achieving
structure-with lenders and guaranty
Improvements
agencies making and servicing loans-could
be simplified and program costs reduced.
Under the demonstration, the Department
becomes the lender and schools are
responsible for loan origination.
We believe that a direct student loan
demonstration has merit because of the
potential savings it could achieve. We
estimate that switching from guaranteed to
direct student loans could save the federal
government about $4.8 billion-in present
value terms-within the first 5 years of
implementation. Direct lending would
achieve these savings by (1) enabling the
government to partially offset program costs
with borrowers' interest payments, (2)
reducing the cost of subsidizing students'
interest charges, and (3) eliminating interest
subsidies to commercial lenders.
We found that schools have mixed views
about their ability to administer a direct loan
program. But they share severe reservations
concerning the Department's ability to
manage the program. For direct lending to
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GAO/OCG-93-18TR Education Issues
Reducing the Cost and Preserving the
Integrity of the Student Loan Program
succeed, the Department needs to forge an
effective partnership with postsecondary
educational institutions and others who may
originate loans and to provide strong
program leadership. Poor management by
the Department could trigger more loan
defaults, for example, which would
substantially erode potential cost savings.
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GAO/OCG-93-18TR Education Issues
Strengthening Departmental
Management
Long-standing management problems and
deficiencies could undermine the ability of
the Secretary to successfully implement
education reforms. The Department of
Education has lacked a clear management
vision and effective management systems.
Without well-defined management goals and
the Secretary's focus on management, the
Department cannot effectively align its
activities to support major policy initiatives,
carry out its programs, or correct identified
problems. Past Secretaries have not built an
organization that could implement major
policy initiatives. Moreover, the
Department's management problems have
erupted periodically, becoming the focus of
congressional and media attention, and
diverting previous Secretaries from their
goals. Significant changes to the
Department's management systems should
be a top priority.
In our 1988 transition report, we
recommended establishing a
Secretarial-level strategic management
system. This has not been done. As a result,
there are no systematic, Department-wide
processes for planning, organizing, or
monitoring for results and quality
improvement. Although the outgoing
Secretary and Deputy Secretary took initial
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GAO/OCG-93-18TR Education Issues
Strengthening Departmental
Management
steps to improve operations, much more
needs to be accomplished.
The Department's management support
systems need attention because they do not
provide key information to gauge the
success of departmental programs. For
example, the Department cannot say
whether and to what degree those with
disabilities receive federally funded
rehabilitation services; nor can the
Department identify students who, after
defaulting on loans, receive new ones.
Attempts to correct deficiencies in financial
management-including those in student
financial assistance programs-have been
short-lived. The Department must have
information and financial management
systems that provide needed data and
protect the federal government's financial
interests from waste, fraud, and
mismanagement. Corrective actions will
require new systems and revised regulations,
or legislation, or both. Thus, these actions
may extend over several years.
The Department has a full slate of ongoing
responsibilities and may not be poised to
implement new ones. Between 1981 and
1991, the Department's work force declined
by 33 percent; yet the number of programs
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GAO/OCG-93-18TR Education Issues
Strengthening Departmental
Management
that the Department manages has increased
from 150 to 220. Furthermore, the
Department inadequately recruits, trains,
and manages its staff. It cannot ensure it has
the work force needed to implement
Secretarial initiatives and to monitor
ongoing programs and policies. For example,
the shortage of qualified staff has
contributed to problems in information and
financial management, program monitoring,
and technical assistance. The ability of the
Department to do its job is diminished by its
long-standing practice of filling key positions
with managers who lack technical
qualifications.
The Department's effectiveness has been
further weakened by overly centralized
decision-making and by excluding career
employees from management problem
solving. The Department's 1:37 ratio of
political appointees to career employees is
the highest among cabinet-level
departments. Former administrations'
attempts to abolish the Department and
reductions-in-force have weakened the
morale of many employees. Without
adequate attention to human resource
problems, the Department will be unable to
achieve its goals effectively.
Page 32
GAO/OCG-93-18TR Education Issues
Related GAO Products
Guaranteed Student Loans (GAO/HR-93-2,
Dec. 1992).
Student Loans: Direct Loans Could Save
Billions in First 5 Years With Proper
Implementation (GAO/HRD-93-27,
Nov. 24, 1992).
Department of Education: The Eisenhower
Math and Science State Grant Program
(GAO/HRD-93-25, Nov. 10, 1992).
Compensatory Education: Chapter 1 Funds
in Eight Districts Used for Classroom
Services (GAO/HRD-92-136FS, Sept. 30, 1992).
Integrating Human Services: Linking At-Risk
Families With Services More Successful
Than System Reform Efforts (GAO/HRD-92-108,
Sept. 24, 1992).
Remedial Education: Modifying Chapter 1
Formula Would Target More Funds to Those
Most in Need (GAO/HRD-92-16, July 28, 1992).
Guaranteed Student Loans: Prompt Payment
of Origination Fees Could Reduce Costs
(GAO/HRD-92-61, July 24, 1992).
Page 33
GAO/OCG-93-18TR Education Issues
Related GAO Products
Department of Education: Management
Commitment Needed to Improve
Information Resources Management
(GAO/IMTEC-92-17, Apr. 20, 1992).
National Assessment Technical Quality
(GAO/PEMD-92-22R, Mar. 11, 1992).
Vocational Rehabilitation: Clearer Guidance
Could Help Focus Services on Those With
Severe Disabilities (GAO/HRD-92-12,
Nov. 26, 1991).
Student Loans: Direct Loans Could Save
Money and Simplify Program Administration
(GAO/HRD-91-144BR, Sept. 27, 1991).
Student Financial Aid: Education Can Do
More to Screen Schools Before Students
Receive Aid (GAO/HRD-91-145, Sept. 27, 1991).
Transition From School to Work: Linking
Education and Worksite Training
(GAO/HRD-91-105, Aug. 2, 1991).
Within-School Discrimination: Inadequate
Title VI Enforcement by the Office for Civil
Rights (GAO/HRD-91-85, July 22, 1991).
Page 34
GAO/OCG-93-18TR Education Issues
Related GAO Products
Department of Education: Monitoring of
State Formula Grants by Office of Special
Education Programs (GAO/HRD-91-91FS, Apr. 15,
1991).
Education Grants Management: Management
Actions Initiated to Correct Material
Weaknesses (GAO/HRD-91-72, Feb. 26, 1991).
Training Strategies: Preparing Noncollege
Youth for Employment in the U.S. and
Foreign Countries (GAO/HRD-90-88,
May 11, 1990).
Early Childhood Education: What Are the
Costs of High-Quality Programs?
(GAO/HRD-90-43BR, Jan. 24, 1990).
Education Issues (GAO/OCG-89-18TR, Nov.
1988).
Page 35
GAO/OCG-93-18TR Education Issues
Transition Series
Economics
Budget Issues (GAO/OCG-93-1TR).
Investment (GAO/OCG-93-2TR).
Management
Government Management Issues
(GAO/OCG-93-3TR).
Financial Management Issues
(GAO/OCG-93-4TR).
Information Management and Technology
Issues (GAO/OCG-93-5TR).
Program Evaluation Issues (GAO/OCG-93-6TR).
The Public Service (GAO/OCG-93-7TR).
Program Areas
Health Care Reform (GAO/OCG-93-8TR).
National Security Issues (GAO/OCG-93-9TR).
Financial Services Industry Issues
(GAO/OCG-93-10TR).
International Trade Issues (GAO/OCG-93-11TR).
Commerce Issues (GAO/OCG-93-12TR).
Energy Issues (GAO/OCG-93-13TR).
Page 36
GAO/OCG-93-18TR Education Issues
*U.S.G.P.O. : 1993-336-740
Transition Series
Transportation Issues (GAO/OCG-93-14TR).
Food and Agriculture Issues
(GAO/OCG-93-15TR).
Environmental Protection Issues
(GAO/OCG-93-16TR).
Natural Resources Management Issues
(GAO/OCG-93-17TR).
Education Issues (GAO/OCG-93-18TR).
Labor Issues (GAO/OCG-93-19TR).
Health and Human Services Issues
(GAO/OCG-93-20TR).
Veterans Affairs Issues (GAO/OCG-93-21TR).
Housing and Community Development
Issues (GAO/OCG-93-22TR).
Justice Issues (GAO/OCG-93-23TR).
Internal Revenue Service Issues
(GAO/OCG-93-24TR).
Foreign Economic Assistance Issues
(GAO/OCG-93-25TR).
Page 37
GAO/OCG-93-18TR Education Issues
Transition Series
Foreign Affairs Issues (GAO/OCG-93-26TR).
NASA Issues (GAO/OCG-93-27TR).
General Services Issues (GAO/OCG-93-28TR).
Page 38
GAO/OCG-93-18TR Education Issues
Ordering Information
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United States General Accounting Office
GAO
Transition Series
December 1992
Labor Issues
UNITED STATES
GENERN ACCOUNTING OFFICE
GAO/OCG-93-19TR
GAO
United States
General Accounting Office
Washington, D.C. 20548
Comptroller General
of the United States
December 1992
The Speaker of the House of Representatives
The Majority Leader of the Senate
In response to your request, this transition series report discusses
major policy, management, and program issues facing the Congress
and the new administration in the area of labor. These issues include
(1) improving the skills of America's workers by addressing the
school-to-work transition of youth, helping the economically
disadvantaged obtain training, and facilitating the reemployment of
dislocated workers; (2) assessing the ability of the unemployment
insurance system to meet its objectives; (3) improving the
Occupational Safety and Health Administration's enforcement
efforts; and (4) addressing financial and management concerns
relating to the Pension Benefit Guaranty Corporation.
As part of our high-risk series on program areas vulnerable to waste,
fraud, abuse, and mismanagement, we are issuing a related report,
Pension Benefit Guaranty Corporation (GAO/HR-93-5).
The GAO products upon which this transition series report is based
are listed at the end of the report.
We are also sending copies of this report to the President-elect, the
Republican leadership of the Congress, the appropriate congressional
committees, and the Secretaries-designate of Labor and Education.
Chades A. Boweher
Charles A. Bowsher
Contents
Labor Issues
4
Improving the
7
Skills of
American
Workers
Assessing the
24
Adequacy of the
Unemployment
Insurance System
Improving the
27
Occupational
Safety and Health
Administration's
(OSHA)
Enforcement
Efforts
Addressing
31
Financial
Concerns
Relating to the
Pension Benefit
Guaranty
Corporation
(PBGC)
Page 2
GAO/OCG-93-19TR Labor Issues
Contents
Related GAO
33
Products
Transition Series
36
Page 3
GAO/OCG-93-19TR Labor Issues
Labor Issues
The American workplace is changing in
response to international competition.
Economic change, coupled with the
adoption of new technologies and the
restructuring of work, is resulting in worker
dislocation and shifts in the skill demands
for new workers. Increasingly, companies
are looking for workers with greater
technical skills and workers who are
versatile and able to adapt to changing
conditions-by learning new skills, changing
their roles in the workplace, working in
teams, sharing management responsibilities,
and solving problems. Labor needs to help
current and future workers adapt to this
changing workplace to foster the United
States' competitive position in world
markets.
The challenges facing Labor are great. First,
many of the nation's youth are leaving
school poorly prepared for this new work
world. We estimate that about one in three
youth aged 16 to 24 will not have the skills
needed to meet employer requirements for
entry-level, semiskilled, high-wage
occupations. Second, the nation already has
a large group of the economically
disadvantaged-between 10 and 39
million-who lack necessary skills. Third,
900,000 or more workers annually are at
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GAO/OCG-93-19TR Labor Issues
Labor Issues
least temporarily dislocated and often need
retraining or help finding a new job.
To address these needs, the Congress and
the new Secretary must deal with an
uncoordinated system of 125 employment
training programs spread across 14
departments and agencies with over $16
billion in annual funding. Many of these
programs tend to suffer from inadequate
federal and state oversight, inefficient
service to those in need, improper program
expenditures and, in some programs,
questionable effectiveness.
In addition, Labor needs to ensure that
workers have access to unemployment
insurance benefits when they need them and
to the pensions due them when they retire.
The ability of the Unemployment Insurance
system to provide income assistance to the
unemployed and help stabilize the economy
during recessions has eroded. The aggregate
liability in the 85,000 plans PBGC insures is
over $900 billion. Collectively, these insured
plans have over $1.3 trillion in assets.
However, about $40 billion of the liabilities
do not have matching assets, and at least
$13 billion of this amount is in plans of
financially troubled companies. PBGC has a
current deficit of $2.3 billion, and PBGC'S
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GAO/OCG-93-19TR Labor Issues
Labor Issues
most pessimistic projection is that the deficit
could reach $17.9 billion by 2001.
In addressing these issues, the Congress and
Labor need to make sure that employers do
not take shortcuts on workers' health and
safety in misguided efforts to save money.
Annually, about 1.7 million workers are
disabled by on-the-job injuries, and about
110,000 die from work-related causes. A total
of 2,000 inspectors safeguard 88 million
workers in the nation's 6 million worksites.
OSHA, together with its state counterparts,
must find innovative solutions to ensure safe
and healthful workplaces.
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GAO/OCG-93-19TR Labor Issues
Improving the Skills of American
Workers
The United States' ability to compete in the
international marketplace depends to a great
extent on the skills of its workers. Federal
programs for preparing the nation's youth
for the workplace and for upgrading the
skills of economically disadvantaged
workers and dislocated workers are
fragmented. The 125 federal employment
training programs for adults and
out-of-school youth-with funding of
$16.3 billion in fiscal year 1991-often
operate in isolation and create a difficult
maze for service providers and the
unemployed. Many of these programs also
tend to suffer from inadequate federal and
state oversight, inefficient service delivery,
improper program expenditures and, in
some programs, questionable effectiveness.
The Congress and the new administration
need to focus on creating a more coherent,
effective, and accountable employment
training system. Department of Labor
programs that are important to this effort
cover at least three areas:
improving the school-to-work transition for
youth,
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GAO/OCG-93-19TR Labor Issues
Improving the Skills of American
Workers
helping the economically disadvantaged get
the necessary skills to enter the mainstream
work force, and
facilitating the reemployment of workers
dislocated by economic adjustments and
policy changes.
Helping Students
Many of America's youth have been leaving
Transition From
high school poorly prepared for the world of
School to Work
work. Given the profound changes taking
place in workplaces in the United States and
abroad, they may be even less prepared for
the workplace of the future. In contrast to
the United States' lack of policy on youth,
this nation's principal foreign competitors
emphasize that all youth be prepared for
work and be ready to adapt to workplace
changes.
U.S. school systems have a curriculum
geared to serving college-bound youth; yet
only 30 percent of U.S. graduates go on to a
4-year college. Those not heading for college
often are carried along in undemanding or
poor quality programs that frequently do not
give the students skills employers need. In
addition, many students drop out of school
and do not graduate.
Page 8
GAO/OCG-93-19TR Labor Issues
Improving the Skills of American
Workers
We estimate that about one in three youth
aged 16 to 24 will not have the skills needed
to meet employer requirements for
entry-level, semiskilled, high-wage
occupations-5.5 million high school
dropouts and 3.8 million youth who lack high
school competencies. In the past, these
youth-even though they had few skills and
limited language and computation
skills-could eventually get entry-level
positions in semiskilled, higher-wage
occupations. Now, these kinds of jobs are
increasingly being phased out; getting jobs
with high-wage potential requires high skills.
In addition, employers want employees who
are versatile and able to adapt to changing
conditions not only by learning new skills,
but also by changing their roles in the
workplace-by working in teams, sharing
management responsibilities, and solving
problems.
The challenge facing the Congress and the
incoming administration is how to adapt the
nation's education and training systems to
more effectively prepare youth for the world
of work. While the Department of Education
is responsible for elementary and secondary
education, overlap exists with the
Department of Labor in secondary and
postsecondary skill training. (For issues
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GAO/OCG-93-19TR Labor Issues
Improving the Skills of American
Workers
relating to the Department of Education, see
the transition series report, Education Issues
GAO/OCG-93-18TR, Dec. 1992.) The magnitude of
the problem requires strong federal
leadership in many areas, but we see a need
for Labor efforts, combined with those of
Education and the Congress, to focus, in
particular, on
fostering the development of closer
school-employer linkages to provide youth
with structured work experience,
instructional programs that meet employer
needs, and preparation for occupations in
demand and
developing national data and conducting
evaluations to identify and promote effective
transition strategies.
On the basis of our studies of foreign
approaches for improving the
school-to-work transition, we suggested
expansion of school-employer linkages,
particularly apprenticeship-type programs.
However, specific foreign approaches may
not be readily transferable because they
have evolved in different contexts. For
example, about two-thirds of German youth
are served by the German apprenticeship
system, while apprenticeships in the United
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GAO/OCG-93-19TR Labor Issues
Improving the Skills of American
Workers
States are primarily programs for those
already working-the average age of U.S.
apprentices is 29. In addition, the U.S.
apprenticeship system is primarily limited to
the building trades and some metal trades
occupations, while the German system
involves 380 occupational areas covering
essentially all nonprofessional career
options.
Modifying the nation's apprenticeship
system to serve large numbers of youth
likely could be difficult, yet adding
apprenticeship-type programs to the
educational system shows promise. Our
studies of apprenticeship-type programs,
which have strong links to employers, have
identified three basic types of programs. For
example, high-quality cooperative education
is one such program that provides high
school juniors and seniors with work
experience and on-the-job training, together
with job-related classroom instruction.
Students learn about the working world,
acquire job skills, and often are offered
permanent employment with their co-op
employer. Similarly, school-to-
apprenticeship programs offer high school
seniors structured skill training, but they
have the additional benefit of being tied into
the formal apprenticeship system. High
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GAO/OCG-93-19TR Labor Issues
Improving the Skills of American
Workers
school academy programs operate as
schools-within-schools and provide training
in a series of occupations related to a single
industry. For example, the Academy of
Applied Electrical Science, housed in
Philadelphia's Thomas Edison High School,
trains youth for careers in the electrical
trades. Programs are developed with
extensive input from employers and often
involve practical "hands on" experience.
The Congress together with the new
administration from both the Departments of
Labor and Education could build on
promising approaches that already exist in
the United States-such as cooperative
education, youth apprenticeship, and high
school academies-rather than create a
totally new program or attempt to impose a
single, foreign-derived solution.
Apprenticeship-type training is, however,
only one part of the strategy. The Congress
and the new administration need to address
other elements, such as career education
and competency-based skill standards, to
develop an integrated, comprehensive youth
school-to-work transition strategy. To that
end, we are conducting a study that will
describe model comprehensive
school-to-work transition strategies.
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GAO/OCG-93-19TR Labor Issues
Improving the Skills of American
Workers
Some of America's foreign competitors,
notably Germany, maintain quality
occupational training by using competency
testing and certifying that trainees meet
national standards. Employers view
certificates as evidence that trainees have
achieved particular skill levels. In the United
States, certificates often certify course
completion and not necessarily the
attainment of skills. It is now recognized that
the United States needs to move toward the
use of competency-based skill standards and
certification. The Departments of Labor and
Education have started such efforts. We are
currently studying the development and use
of occupational skill standards and
certification systems. We are looking at the
barriers that existing systems have had to
overcome, how federal efforts could
facilitate the development and adoption of
new systems, and how the two Departments
are working together in their efforts to foster
the development and use of skill standards.
Finally, many students, their parents, and
employers are unaware of the potential
benefits of alternative approaches to the
transition to work. Because high school
cooperative education, like vocational
education, has a reputation as a "dumping
ground" for academically weak students,
Page 13
GAO/OCG-93-19TR Labor Issues
Improving the Skills of American
Workers
parents, students, and teachers often avoid
these programs. Yet we found high-quality
programs at 15 sites in eight states. The
actual extent of high-quality programs is
unknown because, in part, the Department
of Education no longer collects information
on them. The challenge is to find ways to
evaluate existing programs, disseminate
information on promising approaches, and,
through technical assistance or other means,
facilitate their adoption.
Providing
A total of 65 programs provide employment
Employment and
training assistance to the economically
Training
disadvantaged. The Job Training Partnership
Assistance to
Act (JTPA), enacted in 1982 and amended in
Economically
1992, is the federal government's principal
Disadvantaged
employment training program. JTPA,
administered by the Department of Labor, is
Workers
a highly decentralized program that has a
$4 billion annual budget and encompasses
many programs, including the Job Corps,
dislocated worker programs, and summer
youth programs. Most JTPA participants
receive job training services through
programs run by the 56 states and territories
and over 600 local programs. In addition to
Labor, other departments are major players
in providing employment training
opportunities. The Job Opportunities and
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GAO/OCG-93-19TR Labor Issues
Improving the Skills of American
Workers
Basic Skills program, which is administered
by the Department of Health and Human
Services, funds $1 billion in employment
training programs, while Education's Pell
grant program makes available over
$2 billion in funding for postsecondary
training.
The Congress and the new administration
can make these programs work better to
improve the delivery of employment and
training services by ensuring the effective
implementation of the 1992 amendments to
JTPA, integrating services provided by
numerous programs, evaluating intervention
strategies, and seeking more effective
approaches.
Our work on JTPA has revealed many
shortcomings in program operations that we
noted in our 1988 transition report; many
were addressed by amendments to the
program that were signed into law in
September 1992. The issues addressed by the
legislation include the lack of targeting of
the program's limited resources, abuses in
on-the-job training contracts, weak program
evaluation and oversight, limited data
collection, and disparities in the services
provided to minorities and women. For the
most part, the amendments take effect
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GAO/OCG-93-19TR Labor Issues
Improving the Skills of American
Workers
July 1, 1993. The new Secretary of Labor will
need to oversee the initiation of these
changes and ensure that they are fully
implemented and adequately monitored.
Federal efforts to upgrade the skills of
economically disadvantaged workers are
carried out through 65 different programs. In
addition to JTPA, other programs targeted on
the economically disadvantaged are
administered by 12 federal departments and
independent agencies. These myriad
programs do not function as a
comprehensive, cohesive system, but often
operate in isolation. It is time to look at how
the federal programs could work together as
a system to more effectively provide
employment training assistance to the
economically disadvantaged. A key
institution is the Employment Service,
whose performance we have found to be
uneven, but whose 1,700 offices nationwide
could play a central role in making the
programs operate as a system. Our ongoing
work will provide options for the new
administration and the Congress to consider
as they look across the federal training
programs and search for ways to enhance
their coordination, cooperation, and
integration to ensure that their services more
Page 16
GAO/OCG-93-19TR Labor Issues
Improving the Skills of American
Workers
fully benefit the economically
disadvantaged.
JTPA is viewed as a relatively successful
program because most of those who enroll
in the program get jobs. However, we do not
know how well these individuals would have
done without JTPA assistance, or the
long-term benefits of such training. Initial
results from a study of JTPA'S effectiveness
suggest that, on a short-term basis, the
program may not be effective for youth and
may be only marginally effective for adults. 1
As long-term results from the evaluation are
reported and as the recent legislative
changes to JTPA are implemented, the
Congress and the new administration should
(1) monitor their results, (2) examine the
appropriateness of current training
interventions, and (3) consider pursuing
alternative approaches to achieving more
effective outcomes. These actions do not
necessarily mean designing new programs,
but rather analyzing the reasons for the
results so that corrective actions can be
taken. As we have recommended in the past,
Labor has recently made extensive changes
to its data collection on program
¹The National JTPA Study: Title IIA Impacts on Earnings and
Employment at 18 Months, Executive Summary, Abt Associates
Inc., May 1992.
Page 17
GAO/OCG-93-19TR Labor Issues
Improving the Skills of American
Workers
participants, services provided, and
outcomes achieved. These changes will
enhance Labor's ability to evaluate the
program's effectiveness and identify ways to
improve it.
Assisting
As the American economy continually
Dislocated
adjusts to changing product demand and
Workers
competitive conditions, different sectors of
the economy grow while others decline,
resulting in the dislocation of an average of
900,000 workers annually over the last 10
years. Progress on the North America Free
Trade Agreement, the recession, and the
restructuring that many companies are
undertaking to streamline their organizations
have heightened concerns about the
adequacy of dislocated worker programs.
Two programs have been established
specifically to assist dislocated workers in
their transition to reemployment-the Trade
Adjustment Assistance and the Economic
Dislocation and Worker Adjustment
Assistance programs. The Trade Adjustment
Assistance (TAA) program is an entitlement
that assists workers who lose their jobs
because of increased imports. The Economic
Dislocation and Worker Adjustment
Assistance program (EDWAA) provides
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GAO/OCG-93-19TR Labor Issues
Improving the Skills of American
Workers
assistance to all workers regardless of the
reason for the dislocation. Together the
programs served about 325,000 workers at a
cost of $540 million in 1990. The two
programs provide similar reemployment
services-skill training and job search
assistance-except that the program for
import-impacted workers has an extended
income support feature.
Helping dislocated workers who need
assistance to upgrade their skills so that they
can find new jobs should be a key part of any
strategy considered by the Congress and the
new administration for strengthening the
competitive position of American business in
the international marketplace. On the basis
of our work on the two primary assistance
programs for dislocated workers, we believe
that the Congress and the new
administration need to
streamline the process for determining
eligibility for the Trade Adjustment
Assistance program to ensure access to
benefits;
ensure that projects provide a
comprehensive mix of services to meet the
varied needs of individual dislocated
workers, coordinate the services provided by
Page 19
GAO/OCG-93-19TR Labor Issues
Improving the Skills of American
Workers
the programs, and provide the assistance in a
timely manner; and
develop adequate data-gathering systems
that track participant progress and monitor
program performance, and to ensure that
programs are effective, conduct evaluations
that determine how well the affected
individuals would have done without the
programs.
Our assessment of the Trade Adjustment
Assistance certification process showed that
most of Labor's investigations to determine
if imports had contributed to the loss of
employment were flawed, thus jeopardizing
workers' access to benefits. To be eligible
for the TAA program, a worker must be a
member of a group of workers that Labor
certifies as import impacted. We found that
63 percent of the investigations for petitions
filed in 1990 and 1991 had (1) incomplete,
inaccurate, or unsubstantiated data collected
from the company; (2) incorrect or omitted
analyses of trade statistics; or (3) inadequate
or omitted customer surveys. Many of the
flaws were the result of the pressure to
complete the investigations in 60 days,
pressing investigators to take shortcuts in
collecting and analyzing data. We have
suggested that the Congress consider
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GAO/OCG-93-19TR Labor Issues
Improving the Skills of American
Workers
alternatives for streamlining the process or
changing some of the requirements that
workers need to satisfy to be certified as
import impacted.
We noted in our 1988 transition report that
successful dislocated worker assistance
projects had certain similar characteristics,
such as tailoring assistance and reaching
workers at or near the time of layoff. Our
recent work has raised questions about the
assistance efforts provided under the Trade
Adjustment Assistance and the Economic
Dislocation and Worker Adjustment
Assistance programs that the Congress and
the new administration need to address:
The mix of services offered by the two
dislocated worker assistance programs has
been limited in some instances; as a result,
the services participants received may not
have been tailored to their specific needs.
For example, the Trade Adjustment
Assistance program offers participants
classroom training in a variety of
occupations, but generally it does not offer
the option of on-the-job training. In contrast,
in some EDWAA projects, participants may be
offered on-the-job training positions, but
nothing in the way of basic skills training.
Page 21
GAO/OCG-93-19TR Labor Issues
Improving the Skills of American
Workers
The two programs generally are slow in
reaching workers. For example, in two of the
three states we studied, less than 10 percent
of workers received assistance from TAA
within 15 weeks of their layoff; in each of the
three states, EDWAA reached less than
60 percent of workers within 15 weeks.
In addition, improved coordination has the
potential to make services more widely
available. Improved coordination between
the programs could mean that workers
awaiting Labor's certification as
trade-impacted could begin receiving
assistance from EDWAA.
We found that neither the Trade Adjustment
Assistance nor the Economic Dislocation
and Worker Adjustment Assistance program
gather sufficient information to adequately
track participant progress, monitor program
performance, or evaluate their effect. Labor
recently adopted new reporting
requirements for the EDWAA program, but
these have not been extended to TAA. For the
Congress and the new administration to
effectively evaluate the performance of both
these programs, data on TAA participants,
services, and outcomes will also be needed.
In addition, an evaluation of what would
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GAO/OCG-93-19TR Labor Issues
Improving the Skills of American
Workers
have happened to participants in the absence
of these programs needs to be conducted.
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GAO/OCG-93-19TR Labor Issues
Assessing the Adequacy of the
Unemployment Insurance System
The Unemployment Insurance (UI) system is
this country's primary means of providing
income assistance to unemployed workers.
Through a combined federal-state
partnership, the system provides benefits to
unemployed workers who are ready, willing,
and able to work and who meet their state's
eligibility requirements. Ninety-seven
percent of the wage and salary workers in
the United States are covered under this
program. Its principal objectives are to
(1) temporarily replace a portion of the lost
wages of workers who are unemployed and
(2) help stabilize the economy during
recessions by providing the unemployed
with a portion of their former purchasing
power.
During fiscal year 1991, over $24 billion in
benefits was paid to over 10 million
unemployed workers. Some workers
received extended benefits for 13 weeks
more than the usual 26 weeks, because of
the long period of high unemployment in
their states. In addition, because the
extended benefits program was not activated
in many states, a temporary, federally funded
emergency program was enacted.
The ability of the Unemployment Insurance
program to meet its objectives of temporary
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GAO/OCG-93-19TR Labor Issues
Assessing the Adequacy of the
Unemployment Insurance System
and partial wage replacement and economic
stabilization has been eroding. In 1952,
nearly 55 percent of the unemployed
received UI benefits, but that percentage
decreased to 29 percent in 1984 and
remained at historically low levels through
the 1980s. The percentage of the
unemployed receiving benefits, which
usually rises during recessions, reached
40 percent in 1991, still some 10 percentage
points lower than in most recent recessions.
Also, if the UI recipiency rate and benefit
payments were at the same level as during
the 1974-75 period, about $20 billion more in
UI benefits would have been available to help
stabilize the economy and maintain a portion
of the incomes of the unemployed. We are
conducting a study to determine factors
associated with the declining proportion of
the unemployed receiving benefits and the
effects of this decline on the system's ability
to meet its objectives.
As the economy begins to pull out of
recession, the states will need to rebuild
their reserves to levels adequate to
withstand future recessions. This is an
appropriate time for the Congress and the
new administration to carefully assess the
Unemployment Insurance system's ability to
meet its objectives of stabilizing the
Page 25
GAO/OCG-93-19TR Labor Issues
Assessing the Adequacy of the
Unemployment Insurance System
economy and providing the unemployed
with partial wage replacement and to
evaluate whether system modification is
needed to improve its ability to meet these
objectives.
Page 26
GAO/OCG-93-19TR Labor Issues
Improving the Occupational Safety and
Health Administration's (OSHA)
Enforcement Efforts
The Occupational Safety and Health
Administration (OSHA) and states that
operate workplace safety and health
programs under its approval cover about
6 million worksites and 88 million
employees. OSHA and the state agencies,
armed with a total of 2,000 inspectors, must
find innovative solutions to ensure that
employees' workplaces are safe and
healthful. Improvement is clearly
needed-an estimated 1.7 million disabling
on-the-job injuries occur each year and
390,000 new cases of occupational diseases
are identified annually. In addition, an
estimated 10,500 workers die each year from
on-the-job injuries, and another 100,000
workers lose their lives to work-related
diseases.
The Congress has considered legislative
solutions to some of OSHA'S difficulties.
Although the Comprehensive Occupational
Safety and Health Reform Act failed to
become law in 1992, OSHA reform legislation
remains a priority item for the next
congressional session. The Congress and the
new administration need to ensure that OSHA
finds ways to expedite the setting of safety
and health standards and improve the
effectiveness of its inspection and hazard
abatement programs. In addition, OSHA must
Page 27
GAO/OCG-93-19TR Labor Issues
Improving the Occupational Safety and
Health Administration's (OSHA)
Enforcement Efforts
explore innovative enforcement strategies,
such as encouraging employers to identify
and correct workplace hazards even without
an OSHA inspection, given its limited
capability to conduct inspections.
Employees continue to be exposed to many
hazardous work practices, conditions, and
substances because of delays by OSHA in
meeting its statutory responsibility to issue
safety and health standards. Since 1971, OSHA
has promulgated fewer than 30 health and 40
safety standards, and it routinely takes up to
10 years from the time it recognizes the need
to regulate until the regulation is finalized.
One attempt to speed up the process was
recently rejected in judicial review. OSHA had
updated the permissible exposure limits for
over 400 substances in one rulemaking
effort, taking less than 2 years. However, the
court ruled that OSHA could not change
multiple exposure levels without providing
support for each change.
We identified this issue in our 1988 transition
report as an area in which OSHA should take
action, although Labor has made little
improvement since then. The Congress and
the new administration need to explore
other options to expedite the standard-
Page 28
GAO/OCG-93-19TR Labor Issues
Improving the Occupational Safety and
Health Administration's (OSHA)
Enforcement Efforts
setting process, such as those contained in
legislation considered in the 102nd Congress.
Over the past 4 years, we have identified
changes that could make OSHA'S enforcement
efforts more productive by
using more accurate data on injuries and
illnesses and data about specific worksites,
not just about which industries are most
hazardous, to better target employers for
inspection;
requiring employers to confirm that they
have corrected the identified hazards after
being cited for violations of safety and health
standards; and
assessing penalties that could reasonably be
expected to deter employers from violating
safety and health standards.
With a ratio of one inspector to 3,000
worksites, OSHA and the state agencies must
find ways to extend their impact far beyond
the limited number of worksites they can
directly inspect. OSHA and the states need to
encourage employers to voluntarily identify
and correct workplace hazards without an
OSHA inspection. One way to do this is
through the formation of comprehensive
Page 29
GAO/OCG-93-19TR Labor Issues
Improving the Occupational Safety and
Health Administration's (OSHA)
Enforcement Efforts
worksite safety and health programs. After
reviewing the experience in states that
require employers to have such programs,
which sometimes include required joint
labor-management safety and health
committees, we (1) suggested that high-risk
employers be required to have
comprehensive safety and health programs
and (2) recommended that OSHA use
evaluation studies to determine whether
other groups of employers should be
required to have these programs.
If OSHA is going to identify ways to increase
its effectiveness, it will have to increase its
emphasis on evaluation. Again, little
progress has been made in recent years as
OSHA continues to devote few resources to
collecting information on the impact of its
policies and program activities or those of
the state-operated safety and health
programs. Thus, its managers are limited in
their ability to make informed decisions,
plan effectively, and identify program
activities that need to be improved to
increase program effectiveness. The new
administration needs to develop an
information and evaluation strategy to
improve program effectiveness.
Page 30
GAO/OCG-93-19TR Labor Issues
Addressing Financial Concerns
Relating to the Pension Benefit
Guaranty Corporation (PBGC)
The Pension Benefit Guaranty Corporation
(PBGC) was established by the Employee
Retirement Income Security Act of 1974 to
insure retirement benefits promised by
private defined-benefit pension plans. The
aggregate liability in the 85,000 plans PBGC
insures is over $900 billion. Collectively,
these insured plans have over $1.3 trillion in
assets. However, about $40 billion of the
liabilities do not have matching assets, and
at least $13 billion of this amount is in plans
of financially troubled companies. PBGC has a
current deficit of $2.3 billion, and PBGC'S
most pessimistic projection is that the deficit
could reach $17.9 billion by 2001. The
financial issues facing PBGC are covered in
more detail in our high-risk report.
The major threat to the Pension Benefit
Guaranty Corporation is from seriously
underfunded pension plans that could
terminate in the near future. A sudden
sequence of terminations of large
underfunded plans would burden PBGC
administratively and might impair its ability
to meet its financial obligations without
spending down its asset base. The current
deficit will be a burden on future taxpayers if
available assets are insufficient to pay
insured benefits.
Page 31
GAO/OCG-93-19TR Labor Issues
Addressing Financial Concerns
Relating to the Pension Benefit
Guaranty Corporation (PBGC)
Premiums paid by covered plans do not
reflect the insurance risk to PBGC. The fixed
premium probably overcharges well-funded
plans for the risk PBGC assumes in insuring
them; the capped variable premium
undercharges underfunded plans.
In recent years the agency has taken strong
actions to manage some of the larger
liabilities, such as the LTV Corporation, to
reduce PBGC'S exposure. On the other hand,
PBGC has never produced auditable financial
statements, the premium collection system
has not operated properly, and the computer
systems have been designed in a haphazard
fashion.
The new administration needs to (1) ensure
that PBGC continues to monitor financially
troubled companies as in the cases of the
TWA bankruptcy and the financial
negotiations between Chrysler and its
creditors and (2) address PBGC'S
long-standing management problems. In
addition, the Congress needs to strengthen
the funding standards for underfunded
pension plans and adjust premiums to better
reflect risks.
Page 32
GAO/OCG-93-19TR Labor Issues
Related GAO Products
Improving the
Dislocated Workers: Improvements Needed
Skills of
in Trade Adjustment Assistance Certification
American
Process (GAO/HRD-93-36, Oct. 19, 1992).
Workers
Dislocated Workers: Comparison of
Assistance Programs (GAO/HRD-92-153BR,
Sept. 10, 1992).
Job Training Partnership Act: Actions
Needed to Improve Participant Support
Services (GAO/HRD-92-124, June 12, 1992).
Apprenticeship Training: Administration,
Use, and Equal Opportunity (GAO/HRD-92-43,
Mar. 4, 1992).
Job Training Partnership Act: Racial and
Gender Disparities in Services (GAO/HRD-91-148,
Sept. 20, 1991).
Transition From School to Work: Linking
Education and Worksite Training
(GAO/HRD-91-105, Aug. 2, 1991).
Job Training Partnership Act: Inadequate
Oversight Leaves Program Vulnerable to
Waste, Abuse, and Mismanagement
(GAO/HRD-91-97, July 30, 1991).
Training Strategies: Preparing Noncollege
Youth for Employment in the U.S. and
Page 33
GAO/OCG-93-19TR Labor Issues
Related GAO Products
Foreign Countries (GAO/HRD-90-88, May 11,
1990).
Job Training Partnership Act: Services and
Outcomes for Participants With Differing
Needs (GAO/HRD-89-52, June 9, 1989).
Assessing the
Unemployment Insurance: Adequacy of State
Adequacy of the
Trust Fund Reserves (GAO/T-HRD-91-7, Feb. 20,
Unemployment
1991).
Insurance System
Unemployment Insurance: Trust Fund
Reserves Inadequate (GAO/HRD-88-55, Sept. 26,
1988).
Improving OSHA's
Occupational Safety and Health: Worksite
Enforcement
Safety and Health Programs Show Promise
Efforts
(GAO/HRD-92-68, May 19, 1992).
Occupational Safety and Health: Penalties
for Violations Are Well Below Maximum
Allowable Penalties (GAO/HRD-92-48, Apr. 6,
1992).
Occupational Safety and Health: OSHA Action
Needed to Improve Compliance With Hazard
Communication Standard (GAO/HRD-92-8, Nov.
26, 1991).
Page 34
GAO/OCG-93-19TR Labor Issues
Related GAO Products
Occupational Safety and Health: OSHA Policy
Changes Needed to Confirm That Employers
Abate Serious Hazards (GAO/HRD-91-35, May 8,
1991).
Occupational Safety and Health: Options for
Improving Safety and Health in the
Workplace (GAO/HRD-90-66BR, Aug. 24, 1990).
Occupational Safety and Health: Assuring
Accuracy in Employer Injury and Illness
Records (GAO/HRD-89-23, Dec. 30, 1988).
Addressing
Pension Benefit Guaranty Corporation
Financial
(GAO/HR-93-5, Dec. 1992).
Concerns
Relating to the
Pension Benefit
Guaranty
Corporation
(PBGC)
General Labor
Department of Labor Issues (GAO/OCG-89-21TR,
Issues
Nov. 1988).
Page 35
GAO/OCG-93-19TR Labor Issues
Transition Series
Economics
Budget Issues (GAO/OCG-93-1TR).
Investment (GAO/OCG-93-2TR).
Management
Government Management Issues
(GAO/OCG-93-3TR).
Financial Management Issues
(GAO/OCG-93-4TR).
Information Management and Technology
Issues (GAO/OCG-93-5TR).
Program Evaluation Issues (GAO/OCG-93-6TR).
The Public Service (GAO/OCG-93-7TR).
Program Areas
Health Care Reform (GAO/OCG-93-8TR).
National Security Issues (GAO/OCG-93-9TR).
Financial Services Industry Issues
(GAO/OCG-93-10TR).
International Trade Issues (GAO/OCG-93-11TR).
Commerce Issues (GAO/OCG-93-12TR).
Energy Issues (GAO/OCG-93-13TR).
Page 36
GAO/OCG-93-19TR Labor Issues
*U.S.G.P.O. 1993-336-740
Transition Series
Transportation Issues (GAO/OCG-93-14TR).
Food and Agriculture Issues
(GAO/OCG-93-15TR).
Environmental Protection Issues
(GAO/OCG-93-16TR).
Natural Resources Management Issues
(GAO/OCG-93-17TR).
Education Issues (GAO/OCG-93-18TR).
Labor Issues (GAO/OCG-93-19TR).
Health and Human Services Issues
(GAO/OCG-93-20TR).
Veterans Affairs Issues (GAO/OCG-93-21TR).
Housing and Community Development
Issues (GAO/OCG-93-22TR).
Justice Issues (GAO/OCG-93-23TR).
Internal Revenue Service Issues
(GAO/OCG-93-24TR).
Foreign Economic Assistance Issues
(GAO/OCG-93-25TR).
Page 37
GAO/OCG-93-19TR Labor Issues
Transition Series
Foreign Affairs Issues (GAO/OCG-93-26TR).
NASA Issues (GAO/OCG-93-27TR).
General Services Issues (GAO/OCG-93-28TR).
U.S. * G.P.O. 1992-336-740
Page 38
GAO/OCG-93-19TR Labor Issues
Ordering Information
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GAO
Transition Series
December 1992
Health and Human
Services Issues
UNITED STATES
INTERNATIONAL GENERAL OFFICE
GAO/OCG-93-20TR
GAO
United States
General Accounting Office
Washington, D.C. 20548
Comptroller General
of the United States
December 1992
The Speaker of the House of Representatives
The Majority Leader of the Senate
In response to your request, this transition series report discusses
major policy, management, and program issues facing the Congress
and the new administration in the areas of health and human
services. The issues include (1) strengthening the social security
system, (2) reforming the nation's welfare system, (3) keeping
families intact and protecting children from abuse and neglect, and
(4) adequately safeguarding the nation's food and drug supply.
Another report in this transition series, Health Care Reform
(GAO/OCG-93-8TR, Dec. 1992), discusses shaping an effective approach
to national health care reform. Also, as part of our high-risk series on
program areas vulnerable to fraud, waste, abuse, and
mismanagement, we are issuing a related report, Medicare Claims
(GAO/HR-93-6, Dec. 1992).
The GAO products upon which this transition series report is based
are listed at the end of this report.
We are also sending copies of this report to the President-elect, the
Republican leadership of the Congress, the appropriate congressional
committees, and the Secretary-designate of Health and Human
Services.
Chades A. Boweher
Charles A. Bowsher
Contents
Health and
4
Human Services
Issues
Bolstering the
8
Public's
Confidence in
Social Security
and Ensuring
High-Quality
Services
Exercising
17
Stronger
Leadership to
Achieve Welfare
Reform
Expanding States'
22
Use of Child
Welfare Funds
Allocating FDA's
25
Resources
Efficiently and
Establishing a
Regulation
Tracking System
Page 2
GAO/OCG-93-20TR Health and Human Services
Contents
Related GAO
28
Products
Transition Series
31
Page 3
GAO/OCG-93-20TR Health and Human Services
Health and Human Services Issues
The Department of Health and Human
Services (HHS) oversees hundreds of federal
programs that are vital to the health and
welfare of virtually every American. Its
programs help ensure adequate health care;
provide income security for the aged, poor,
and disabled; help the disadvantaged
become productive citizens; protect children
and other vulnerable populations; and
safeguard the nation's food and drug supply.
HHS'S fiscal year 1992 budget was about
$550 billion, or nearly 37 percent of the
federal government's total budget. About
86 percent of these funds were for social
security, Medicare, and Medicaid.
The new administration and the 103rd
Congress will have to deal with several
significant social policy issues. We discussed
some of these issues in our 1988 transition
series report; others appear for the first time
in this report. Among the more important
issues demanding attention are the
following.
Health care is one of the greatest current
domestic challenges. Issues include ensuring
adequate access to health care; controlling
health care costs; and curbing Medicare
funds lost through fraud, waste, and abuse.
Because of the importance of these issues,
Page 4
GAO/OCG-93-20TR Health and Human Services
Health and Human Services Issues
we discuss them in a separate transition
series report on health care reform and in a
high-risk series report on Medicare.
Second, public confidence in social security
programs has eroded and must be restored.
To bolster the public's confidence, the trust
funds need to continue growing to a level
sufficient to withstand economic downturns.
In addition, workers need to know what
their benefits will be and have assurance
that those benefits will be there when they
need them. Social security services must be
delivered more efficiently and effectively,
particularly in view of the unprecedented
number of "baby boomers" whose retirement
will impose a great demand on the system.
Service for the disabled has already
deteriorated to the point that claimants must
wait up to 4 months for a disability decision,
and the situation is worsening. Also, the
disability program is rapidly running out of
money and may need major reforms.
Third, without closer attention to states'
implementation efforts, the major welfare
reform effort of the late 1980s may fail.
Legislation enacted then was designed to
help dependent families achieve
self-sufficiency through work. Its
implementation, however, has been slowed
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Health and Human Services Issues
by skyrocketing caseloads and state budget
constraints. The new administration and the
Congress will need to ensure that fledgling
programs associated with welfare reform are
properly implemented. As states' welfare
reform efforts are evaluated and their
outcomes and impacts analyzed, changes
based on successful experiments should be
instituted to reshape the program.
Finally, child welfare programs, designed for
a different era, need to be changed. More
children live in poverty-one in five-than
ever before, reported cases of child abuse
and neglect are at record levels, and the
foster care system is struggling to
accommodate increasing caseloads. The new
administration and the Congress need to
focus on prevention and early intervention
programs to help keep families intact. Also,
an active federal strategy for collecting data,
disseminating information about best
practices, and evaluating child welfare
programs is needed. Local governments need
this information to support their efforts to
provide the most appropriate services at the
right time and in the right place.
These and other issues will demand strong
leadership from the Congress and HHS. With
resources limited, HHS and state and local
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Health and Human Services Issues
governments will need to work smarter and
work together to effectively manage and
operate health and human services
programs.
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GAO/OCG-93-20TR Health and Human Services
Bolstering the Public's Confidence in
Social Security and Ensuring
High-Quality Services
Sooner or later in their lives, nearly all
citizens will be touched by the social
security system. For most aged and disabled
Americans, social security is a key source of
income support. In 1991, about $263 billion
in social security benefits was paid to more
than 40 million beneficiaries. In recent years,
however, the public's confidence in the
social security system has eroded. Many are
concerned that monies will not be there to
pay their benefits in the future.
To help build the public's confidence in the
social security system, the Social Security
Administration (SSA) should take steps to
ensure an adequate contingency reserve and
provide workers with a tangible sense of
what their benefits will be. In addition, to
ensure high-quality services, SSA must
modernize its computer systems and
strategically manage its resources. SSA'S
computer modernization could cost billions
of dollars over the next 10 years. SSA also
needs to expand its research information
about the disability and supplemental
security income programs in order to
strengthen program evaluation and
management and enable it to consider
alternative program designs.
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GAO/OCG-93-20TR Health and Human Services
Bolstering the Public's Confidence in
Social Security and Ensuring
High-Quality Services
Gaining the
After SSA'S well-publicized financial
Public's
difficulties in the early 1980s, many people
Confidence
believe that social security funds will not be
sufficient to pay their benefits when they
retire. In recent years, actions have been
taken to build the public's confidence in the
social security system. These actions include
changing the methods of financing the trust
fund, requiring that annual statements of
personal earnings and benefits be provided
to individuals, and making financial
management improvements, such as
preparing annual audited financial
statements of SSA.
To further build public confidence, the social
security trust fund needs to grow to a level
sufficient to withstand economic downturns.
Current financing plans for the social
security trust fund, which envision
accumulating a $5.5 trillion reserve by 2025,
set contribution rates higher than necessary
to pay current benefits. This plan has been
controversial. Some believe that if the
reserves add to national savings or are used
for government activities that enhance
future economic growth, the burden of
financing future retirement costs can be
reduced. Others, however, doubt that the
reserves will be used for these purposes and
believe that the system should be financed
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GAO/OCG-93-20TR Health and Human Services
Bolstering the Public's Confidence in
Social Security and Ensuring
High-Quality Services
on a pay-as-you-go basis, in which annual
revenues closely match annual benefit
payments and the trust funds provide
protection against economic downturns. 1 If a
decision is made to return to a pay-as-you-go
system, we believe that the trust funds
should be maintained at a level adequate to
pay benefits for 1 to 1-1/2 years. This level
would be sufficient to offset the reduction in
tax revenues that accompanies economic
downturns, thus assuring the public that the
system is sound.
In 1990, the Congress mandated that SSA
provide an annual statement of personal
earnings and benefits to individuals on
request. Beginning in 1995, SSA will have to
provide statements to all individuals aged 60
and over and, by October 1999, annually to
all workers covered under social security.
This latter requirement will add very
substantially to SSA'S work load. It is
important that SSA meet this challenge in
order to enhance the public's confidence in
the social security system. These statements
will provide workers with a tangible sense of
the benefits they will receive in the future.
Given other anticipated work load increases
discussed below, SSA needs to develop and
¹Our transition series report Budget Issues (GAO/OCG-93-1TR,
Dec. 1992) discusses the relationship between the social security
trust fund surplus and the federal deficit.
Page 10
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Bolstering the Public's Confidence in
Social Security and Ensuring
High-Quality Services
implement a workable strategy for sending
these statements to all workers.
Ensuring
Another factor that will dramatically
High-Quality
increase SSA'S work load is the impending
Services
baby-boom generation retirement. SSA is also
experiencing significant increases in
disability cases, and major delays in
processing already exist. At the same time,
given the budgetary constraints faced by all
federal agencies, funding for program
administration will be limited, placing
greater pressure on SSA'S management to
provide high-quality public service at
minimum cost. To meet this challenge, SSA
must (1) gain a greater understanding of the
public's expectations, (2) logically sequence
its implementation of critical agency plans,
(3) reengineer its work processes to enhance
service delivery, (4) identify and train the
staff it needs to provide high-quality
services, and (5) enhance its research
information to better understand current
trends and consider alternative program
designs.
Understanding the
Since 1989, SSA has made progress in using
Public's
strategic management to set agencywide
Expectations
goals, establish priorities, guide budget
Page 11
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Bolstering the Public's Confidence in
Social Security and Ensuring
High-Quality Services
decisions, and measure performance.
However, in developing its service objectives
and priorities, SSA ignored a fundamental
tenet of effective planning: that meeting the
public's expectations-not internal
needs-is the measure of service quality. SSA
proceeded without involving the public,
interest groups, or congressional
committees, leaving the agency without
assurance that its objectives and priorities
corresponded with the public's expectations.
As a result, SSA may spend its scarce
resources on service objectives that it thinks
are important but the public does not.
Sequencing
SSA'S strategic management also does not
Implementation of
provide a framework for the completion or
Agency Plans
correct sequencing of critical agencywide
plans-such as plans for operations service
delivery, human resources, facilities, and
information systems. Correct sequencing is
necessary to ensure that plans for new
computer systems and facilities, for
example, are based on an operations service
delivery plan that sets forth how SSA will
conduct business in the future.
Reengineering Work
To economically and efficiently meet its
Processes
future service demands, SSA will need to
Page 12
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Bolstering the Public's Confidence in
Social Security and Ensuring
High-Quality Services
modernize its information systems. If these
systems are not enhanced, SSA believes it will
need about 17,000 additional staff. SSA has
taken a number of steps essential to
developing automated information systems.
However, much remains to be done to fully
justify SSA'S systems modernization plans,
which could cost from $5 billion to
$10 billion over the next 10 years.
Specifically, SSA has not completed its
operations service delivery plan on how it
will conduct work in the future, including
the identification of alternative work
processes. In addition, SSA has not fully
justified the costs and benefits of proposed
systems enhancements. Until it takes these
actions, SSA could be acquiring new
technologies to automate old processes,
rather than developing new, cost-effective
information systems based on more efficient
work processes.
Training Staff to
SSA has taken a number of steps to improve
Deliver Quality
its work force. However, it does not have a
Services
human resource plan identifying the type
and number of personnel needed to
accomplish its service objectives given the
anticipated work-load increase and use of
automation. SSA needs a well-trained work
force and a positive work environment to
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Bolstering the Public's Confidence in
Social Security and Ensuring
High-Quality Services
effectively prepare for and handle its future
challenges. But, management has not placed
priority on training newly promoted
supervisors and managers for leadership
positions. Also, SSA may not be devoting
sufficient training funds to certain
operational areas. For example, field office
employees say they lack the training needed
to apply agency policy and use computer
systems fully. SSA will be challenged to
develop these critically important training
programs in an environment of general
budget constraints, including reductions in
its training budget. A human resource plan
covering long- and short-term initiatives for
training, improvements to the work
environment, and planning for management
succession could ensure the coordination
and continuity of initiatives and the
achievement of desired improvements.
Developing
Since 1984, caseloads and costs have risen
Research
rapidly in SSA'S Disability Insurance and
Information on
Supplemental Security Income programs.
Disabilities
The agency is having trouble (1) processing
disability claims in a timely manner and (2)
performing legally required reviews of the
beneficiary rolls to ensure that beneficiaries
continue to be eligible. Furthermore, SSA
lacks adequate research information to
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Bolstering the Public's Confidence in
Social Security and Ensuring
High-Quality Services
understand current trends and consider
alternative designs for these programs. In
addition, the Americans with Disabilities Act
places a much greater emphasis on enabling
disabled persons to work than SSA'S current
programs do. To succeed in meeting the act's
challenge, the agency will need a focused
research program to direct its rehabilitation
efforts.
Improving SSA's
In these times of tight budgets, the Congress
Operations
has been looking for opportunities to
restrain the growth in federal agencies'
administrative costs. Thus, SSA should not
expect any increase in funding and should
take steps to operate more efficiently with
the resources it has. The actions it takes
should contribute both to improving the
quality of its services and reducing future
administrative costs. To move in this
direction, SSA needs to
implement comprehensive strategic
management that involves the public and the
Congress in establishing the agency's
priorities and direction, and ensures
successful implementation of agencywide
initiatives;
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Bolstering the Public's Confidence in
Social Security and Ensuring
High-Quality Services
ensure that its plans for modernizing
information systems adequately consider
their costs and benefits as well as
alternative, more efficient work processes;
develop a human resource plan to guide the
hiring and training of the personnel needed
to accomplish the agency's long-range
objectives and coordinate current
work-force initiatives; and
acquire the information necessary to support
program evaluation and consideration of
policy alternatives for its disability and
supplemental security income programs.
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GAO/OCG-93-20TR Health and Human Services
Exercising Stronger Leadership to
Achieve Welfare Reform
With the passage of the Family Support Act
of 1988 (FSA), the nation adopted a new
approach to taking care of its poor. The act
reflects a new political consensus on the
goal of means-tested, family-focused
programs. It emphasizes greater parental
responsibility by encouraging work efforts
and increased cooperation with child
support enforcement, instead of primarily
providing cash assistance. In fiscal year
1991, the federal and state governments
provided over $20 billion in cash assistance
to needy families with children through the
Aid to Families with Dependent Children
(AFDC) program.
This welfare reform effort, however, has
gotten off to a rocky start. While progress
has been made, it has been uneven as
economic conditions have worsened in many
states since FSA'S enactment. States have
experienced unprecedented growth in AFDC
caseloads, high unemployment rates, and
increased child support caseloads and
Medicaid costs amid revenue shortfalls,
creating serious and possibly long-term
budget problems.
Implementation of FSA is still in its early
stages, and care must be taken to fully
establish the programs, develop information
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Exercising Stronger Leadership to
Achieve Welfare Reform
systems, assess performance, and evaluate
results. Without stronger leadership,
direction, and oversight from HHS, current
welfare reform efforts may falter or fail. To
help states keep welfare reform on track and
increase the number of welfare-dependent
families that become self-sufficient, HHS
needs to
intensify its efforts to ensure that states
develop the automated data systems needed
to provide high-quality and timely services to
welfare clients, effectively manage
increasing caseloads, and provide the
information that management needs to
measure progress and set effective policies;
establish program performance standards
based on outcome in addition to
process-oriented measures to achieve
desired program results; and
work with states to identify practices that
help families achieve self-sufficiency and
disseminate information about them.
Intensifying
Several federal programs essential to helping
Efforts to
children and families achieve economic
Improve Data and
self-sufficiency lack national data and
Data Systems
automated data systems. Data collected on a
Page 18
GAO/OCG-93-20TR Health and Human Services
Exercising Stronger Leadership to
Achieve Welfare Reform
nationwide basis are needed to evaluate
these programs and provide a basis for
making policy changes. However, inaccurate
and incomplete data are being collected in
several programs, including the child
support enforcement, Job Opportunities and
Basic Skills Training (JOBS), and transitional
child care and medical benefits programs.
For example, data are lacking to determine
the outcomes of the transitional benefit
programs that are focused on helping
families move from welfare dependency to
self-sufficiency. Unless HHS renews its data
collection and evaluation efforts, the
Congress will have insufficient information
with which to judge the effectiveness of
these programs.
HHS'S Administration for Children and
Families (ACF) also needs to work more
closely with states to develop automated
data systems. These systems could help
states provide high-quality services to
welfare clients, better manage increasing
caseloads, and provide information needed
to assess policies. However, ACF'S inadequate
oversight of and assistance to states have
resulted in wasted federal and state moneys.
For example, ACF allowed several states to
develop severely flawed child support
enforcement systems at a cost of millions of
Page 19
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Exercising Stronger Leadership to
Achieve Welfare Reform
dollars in federal funds before these efforts
were redirected. Federal funding for
development of state systems expires in
1995, and it is unlikely that all states will
have developed effective systems by then. In
addition, ACF has not been effectively
monitoring states' efforts to develop
automated eligibility systems for AFDC and
Medicaid programs, allowing millions of
dollars to be spent on systems that either do
not work or do not meet functional
requirements.
Developing
Process-oriented measures, such as how
Goal-Oriented
many people participated or the percentage
Program
of cases completed within a given time, are
Performance
used to assess states' performance and
Standards
reward them in the JOBS and child support
enforcement programs. These measures,
however, do not always bring about desired
program outcomes like obtaining support for
children or helping families achieve
self-sufficiency. States need
outcome-oriented performance standards to
achieve program goals and improve their
operations.
The Family Support Act mandates that, by
October 1993, the Secretary of HHS submit
recommendations for JOBS performance
Page 20
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Exercising Stronger Leadership to
Achieve Welfare Reform
standards to the Congress. Also, although
not legislatively required to do so, HHS is
beginning to work with states to develop
similar performance standards for the child
support enforcement program. To date,
however, progress has been slow. ACF needs
to move expeditiously to develop
outcome-oriented performance standards if
it is to meet the October 1993 deadline.
Identifying and
In keeping with the flexibility afforded them,
Sharing Effective
states have been experimenting with
Initiatives
different approaches to operating their AFDC,
child support enforcement, and JOBS
programs. Welfare reform initiatives have
proliferated as most states confront
economic difficulties. States need a way to
share and capitalize on each other's
experiences. To further the federal and state
partnership inherent in most federally
funded human services programs, HHS should
play a much more active role in identifying
the more effective practices, disseminating
information about them, and helping states
implement them.
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GAO/OCG-93-20TR Health and Human Services
Expanding States' Use of Child Welfare
Funds
Among its responsibilities for child welfare
services, HHS provides states with funding to
ensure the welfare of children that a state
determines are at-risk of being removed
from their homes. In recent years, reported
cases of child abuse and neglect and foster
care caseloads and expenditures have grown
against a backdrop of state fiscal crises. This
foster care growth is expected to continue
because of the increased number of very
young, drug-exposed children who may stay
longer and need more expensive treatment.
Some states have tried prevention and early
intervention services, such as intensive
in-home skill training in parenting and crisis
management for at-risk families. These
services show promise and could slow
caseload growth, but states are finding it
increasingly difficult to finance them.
Current legislation provides limited funding
for prevention and early intervention efforts.
Titles IV-B and XX of the Social Security Act
provide modest funding that states can use
for these activities; foster care funds
available under Title IV-E of the act cannot
be used in this way. Providing states with
greater flexibility to use Title IV-E funds for
prevention and early intervention efforts
could encourage them to select the most
appropriate child welfare services. ACF and
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Expanding States' Use of Child Welfare
Funds
states should place greater emphasis on
prevention and early intervention activities
in an attempt to keep families intact and
hold down future federal and state child
welfare costs.
HHS should also move aggressively to issue
regulations establishing a national foster
care information system to provide
outcome-oriented data on child welfare
services in general and on foster care in
particular, so that informed decisions can be
made about the most appropriate care for
individual children. Such a system was
legislatively mandated in 1986 and was to be
completed by October 1991. However, as a
result of HHS'S delays in issuing final
regulations, little progress has been made in
developing the system.
Other actions that HHS could take to help
reduce the growing number of children in
foster care and keep families intact include
establishing outcome-oriented performance
standards for the child welfare program to
help identify what does and does not work
and encourage states to adopt more effective
practices, and
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Expanding States' Use of Child Welfare
Funds
serving as a clearinghouse on better
practices for states to use in operating their
programs, including disseminating
information on effective caseworker and
foster parent recruitment, training, and
retention and on adoption outreach.
Page 24
GAO/OCG-93-20TR Health and Human Services
Allocating FDA's Resources Efficiently
and Establishing a Regulation Tracking
System
The Food and Drug Administration
undertakes a wide range of
responsibilities-such as protecting the
nation against impure and unsafe foods,
drugs, cosmetics, and medical devices-with
a modest amount of resources. From 1980
through 1989, FDA'S staff decreased by 587, or
almost 8 percent, while the Congress
enacted 13 new laws expanding the agency's
responsibilities. FDA estimates that it will
need a budget of $1.4 billion in 1994 to meet
its responsibilities-a substantial increase
over its $800 million 1993 budget. While
recent legislation permitting FDA to collect
user fees to support review of new drug
applications should provide some relief, no
additional funding is available to meet other
responsibilities, such as medical device
regulation despite a growing backlog of
applications for approval of new devices.
As part of its increased responsibilities, FDA
was required to issue numerous new
regulations to implement legislation. We
found, however, long delays and a lack of
overall direction in the agency's process for
developing regulations. FDA agreed in
principle with our recommendation that it
create an agencywide system for tracking
regulation development, but it has not yet
Page 25
GAO/OCG-93-20TR Health and Human Services
Allocating FDA's Resources Efficiently
and Establishing a Regulation Tracking
System
done so. FDA needs to establish this system
to efficiently manage its regulatory process.
In the past, FDA has had trouble assessing its
needs and assigning priorities to its
activities. Recently, however, the agency
completed a detailed needs assessment,
looking 5 years into the future, that could
enable it to allocate its resources efficiently.
This assessment describes the resources FDA
needs to reach specific goals by 1997. To
help FDA fulfill its many responsibilities with
existing staff, the Congress should ensure
that FDA uses the goals of this needs
assessment as the basis for setting priorities
agencywide and allocating the resources the
Congress provides.
Structural flaws in the federal government's
food safety system have been widely
reported. Such flaws can affect the public's
health and erode consumers' confidence in
the federal government's ability to ensure
food safety and quality. Many of these flaws
can be attributed to the fragmentation of
responsibility for food safety and quality
among several federal agencies. The recent
controversy between the Department of
Agriculture and FDA over nutrition labeling
for food products illustrates the
jurisdictional problems associated with this
Page 26
GAO/OCG-93-20TR Health and Human Services
Allocating FDA's Resources Efficiently
and Establishing a Regulation Tracking
System
fragmentation. The need for a uniform,
risk-based inspection system to ensure a safe
food supply is discussed in another report in
this transition series, Food and Agriculture
Issues (GAO/OCG-93-15TR, Dec. 1992).
Page 27
GAO/OCG-93-20TR Health and Human Services
Related GAO Products
Departmental
Management of HHS: Using the Office of the
Issues
Secretary to Enhance Departmental
Effectiveness (GAO/HRD-90-54, Feb. 9, 1990).
Health and Human Services Issues
(GAO/OCG-89-10TR, Nov. 1988).
Health Care
Medicare Claims (GAO/HR-93-6, Dec. 1992).
Financing
Social Security
Social Security Disability: Growing Funding
and Administrative Problems (GAO/T-HRD-92-28,
Apr. 27, 1992).
ADP Planning: SSA'S February 1989 Report on
Computer Modernization Is Incomplete
(GAO/IMTEC-89-76, Sept. 25, 1989).
Social Security: Status and Evaluation of
Agency Management Improvement
Initiatives (GAO/HRD-89-42, July 24, 1989).
GAO'S Views on an Independent Social
Security Administration and the Personal
Earnings and Benefit Statement
(GAO/T-HRD-89-23, June 2, 1989).
Social Security: The Trust Fund Reserve
Accumulation, the Economy, and the
Federal Budget (GAO/HRD-89-44, Jan. 19, 1989).
Page 28
GAO/OCG-93-20TR Health and Human Services
Related GAO Products
Welfare Reform
Welfare to Work: States Serve Least
Job-Ready While Meeting JOBS Participation
Rates (GAO/HRD-93-2, Nov. 12, 1992).
Welfare to Work: Implementation and
Evaluation of Transitional Benefits Need HHS
Action (GAO/HRD-92-118, Sept. 29, 1992).
Child Support Enforcement: Timely Action
Needed to Correct System Development
Problems (GAO/MTEC-92-46, Aug. 13, 1992).
Welfare Programs: Ineffective Federal
Oversight Permits Costly Automated System
Problems (GAO/MTEC-92-29, May 27, 1992).
Welfare to Work: Effectiveness of Tribal JOBS
Program Unknown (GAO/HRD-92-67BR, Mar. 19,
1992).
Interstate Child Support: Wage Withholding
Not Fulfilling Expectations (GAO/HRD-92-65BR,
Feb. 25, 1992).
Interstate Child Support Enforcement:
Computer Network Contract Not Ready to
Be Awarded (GAO/IMTEC-92-8, Oct. 23, 1991).
Welfare to Work: States Begin JOBS, but
Fiscal and Other Problems May Impede
Page 29
GAO/OCG-93-20TR Health and Human Services
Related GAO Products
Their Progress (GAO/HRD-91-106, Sept. 27,
1991).
Child Welfare
Child Abuse: Prevention Programs Need
Services
Greater Emphasis (GAO/HRD-92-99, Aug. 3,
1992).
Foster Care: Children's Experiences Linked
to Various Factors; Better Data Needed
(GAO/HRD-91-64, Sept. 11, 1991).
Food and Drug
Food Safety and Quality: Uniform,
Administration
Risk-Based Inspection System Needed to
Ensure Safe Food Supply (GAO/RCED-92-152,
June 26, 1992).
FDA Regulations: Sustained Management
Attention Needed to Improve Timely
Issuance (GAO/HRD-92-35, Feb. 21, 1992).
Food Safety and Quality: FDA Needs Stronger
Controls Over the Approval Process for New
Animal Drugs (RCED-92-63, Jan. 17, 1992).
FDA Resources: Comprehensive Assessment
of Staffing, Facilities, and Equipment
Needed (GAO/HRD-89-142, Sept. 15, 1989).
Page 30
GAO/OCG-93-20TR Health and Human Services
Transition Series
Economics
Budget Issues (GAO/OCG-93-1TR).
Investment (GAO/OCG-93-2TR).
Management
Government Management Issues
(GAO/OCG-93-3TR).
Financial Management Issues
(GAO/OCG-93-4TR).
Information Management and Technology
Issues (GAO/OCG-93-5TR).
Program Evaluation Issues (GAO/OCG-93-6TR).
The Public Service (GAO/OCG-93-7TR).
Program Areas
Health Care Reform (GAO/OCG-93-8TR).
National Security Issues (GAO/OCG-93-9TR).
Financial Services Industry Issues
(GAO/OCG-93-10TR).
International Trade Issues (GAO/OCG-93-11TR).
Commerce Issues (GAO/OCG-93-12TR).
Energy Issues (GAO/OCG-93-13TR).
Page 31
GAO/OCG-93-20TR Health and Human Services
Transition Series
Transportation Issues (GAO/OCG-93-14TR).
Food and Agriculture Issues
(GAO/OCG-93-15TR).
Environmental Protection Issues
(GAO/OCG-93-16TR).
Natural Resources Management Issues
(GAO/OCG-93-17TR).
Education Issues (GAO/OCG-93-18TR).
Labor Issues (GAO/OCG-93-19TR).
Health and Human Services Issues
(GAO/OCG-93-20TR).
Veterans Affairs Issues (GAO/OCG-93-21TR).
Housing and Community Development
Issues (GAO/OCG-93-22TR).
Justice Issues (GAO/OCG-93-23TR).
Internal Revenue Service Issues
(GAO/OCG-93-24TR).
Foreign Economic Assistance Issues
(GAO/OCG-93-25TR).
Page 32
GAO/OCG-93-20TR Health and Human Services
Transition Series
Foreign Affairs Issues (GAO/OCG-93-26TR).
NASA Issues (GAO/OCG-93-27TR).
General Services Issues (GAO/OCG-93-28TR).
*U.S.G.P.0.:1993-336-740 Page 33
GAO/OCG-93-20TR Health and Human Services
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(202) 512-6000 or by using FAX number
(301) 258-4066.
United States
First-Class Mail
General Accounting Office
Washington, D.C. 20548
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