In Process

In Process

In Process

In Process

In Process

In Process

In Process

In Process

In Process

The Small Business Administration's (SBA) Historically Underutilized Business Zone (HUBZone) program provides federal contracting assistance to small firms located in economically distressed areas, with the intent of stimulating economic development. In July 2008 and March 2009, GAO reported on substantial vulnerabilities to fraud and abuse in the HUBZone application and monitoring process. GAO also found 10 HUBZone firms in the Washington, D.C., area and 19 firms in four other metropolitan areas in Alabama, California, and Texas that made fraudulent or inaccurate representations to get into or remain in the HUBZone program. Given the Committee's continued concern over fraud and abuse in the HUBZone program, GAO (1) performed additional proactive testing of SBA's HUBZone certification process, and (2) determined whether SBA has taken any actions against the 29 case study firms GAO identified in its prior work. Using publicly available resources to fabricate documents, GAO proactively tested SBA's application process by applying for HUBZone certification for four bogus businesses with fictitious owners and employees. GAO also interviewed SBA officials and reviewed SBA data about the 29 case study firms. GAO did not attempt to project the extent of fraud and abuse in the program nor systematically assess HUBZone program controls. The HUBZone program remains vulnerable to fraud and abuse. Using falsified documents and employee information, GAO obtained HUBZone certification for three bogus firms using the addresses of the Alamo in Texas, a public storage facility in Florida, and a city hall in Texas as principle office locations. A simple Internet search by SBA could have revealed these as phony applications. While the agency has required more documentation in its application process since GAO's July 2008 report, GAO's testing shows that SBA does not adequately authenticate self-reported information and, for these cases, did not perform site visits to validate the addresses. Further, the changes have significantly increased the time it takes SBA to process applications. Specifically, SBA took 7 or more months to process each of the bogus applications--at least 6 months longer than for GAO's previous investigations. SBA continually lost documentation for GAO's fourth application, and eventually withdrew it after GAO failed to resubmit the same materials for the fourth time. On its Web site, SBA reported that applicants are experiencing delays during the application process. SBA has taken some action on most of the 29 firms that GAO previously reported did not meet HUBZone program requirements. The SBA decertified 16 firms from the HUBZone program, and another 8 firms voluntarily withdrew. While GAO maintains all 29 firms did not meet requirements at the time of its review, SBA stated that the other 5 firms were in compliance at the time of its own review and so remain certified. Since GAO's March 2009 report, 17 of the 29 companies have received more than $66 million in federal obligations for new contracts. GAO recently reported that one firm has also defrauded the SBA 8(a) program. Because the SBA did not promptly debar the firm from federal contracts, it was able to fraudulently receive an additional $600,000 in noncompetitive 8(a) federal contracts since GAO's last report. SBA recently proposed debarring this firm. National Historic Landmark Address (The Alamo) Used by GAO as Principle

The Department of Defense's (DOD) management of its supply chain network is critical to supporting military forces in Iraq, Afghanistan, and elsewhere and also represents a substantial investment of resources. As a result of weaknesses in DOD's management of supply inventories and responsiveness to warfighter requirements, supply chain management is on GAO's list of high-risk federal government programs and operations. In July 2010, DOD issued a new Logistics Strategic Plan that represents the department's current vision and direction for supply chain management and other logistics areas. Today's testimony draws from GAO's prior related work and observations from an ongoing review of DOD supply chain management, and, as requested, will (1) describe DOD's prior strategic planning efforts in the area of logistics, (2) highlight key elements in the new Logistics Strategic Plan, and (3) discuss opportunities for improvement in future iterations of this plan. In conducting its ongoing audit work, GAO reviewed the Logistics Strategic Plan, compared elements in the plan with effective strategic planning practices, and met with cognizant officials from DOD, the military services, and other DOD components as appropriate. Prior to the publication of its new Logistics Strategic Plan, DOD issued a series of strategic planning documents for logistics over a period of several years. In 2008, DOD released its Logistics Roadmap to provide a more coherent and authoritative framework for logistics improvement efforts, including supply chain management. While the roadmap discussed numerous ongoing initiatives and programs that were organized around goals and joint capabilities, it fell short of providing a comprehensive, integrated strategy for logistics. GAO found, for example, that the roadmap did not identify gaps in logistics capabilities and that DOD had not clearly stated how the roadmap was integrated into DOD's logistics decision-making processes. GAO's prior work has shown that strategic planning is the foundation for defining what an agency seeks to accomplish, identifying the strategies it will use to achieve desired results, and then determining how well it succeeds in reaching results-oriented goals and achieving objectives. DOD said that it would remedy some of the weaknesses GAO identified in the roadmap. The July 2010 Logistics Strategic Plan, which updates the roadmap, is DOD's most recent effort to provide high-level strategic direction for future logistics improvement efforts, including those in the area of supply chain management. The plan provides unifying themes for improvement efforts, for example, by including a logistics mission statement and vision for the department, and it presents four goals for improvement efforts with supporting success indicators, key initiatives, and general performance measures. One goal focuses specifically on supply chain processes. The plan is aligned to and reiterates high-level departmentwide goals drawn from both the 2010 Quadrennial Defense Review and the 2009 Strategic Management Plan for business operations. Key initiatives in the plan appear to focus on issues that GAO has identified as needing management attention. While the Logistics Strategic Plan contains some of the elements necessary for strategic planning, it lacks some detailed information that would benefit decision makers and guide DOD's logistics and supply chain improvement efforts. The plan lacks specific and clear performance measurement information (such as baseline or trend data for past performance, measurable target-level information, or time frames for the achievement of goals or completion of initiatives), definition of key concepts, identification of problems and capability gaps, and discussion of resources needed to achieve goals. Further, linkages to other plans and some key related activities under way within logistics are unclear, and it is similarly unclear how the plan will be used within the existing governance framework for logistics. Without more specific information in the Logistics Strategic Plan, it will be difficult for DOD to demonstrate progress in addressing supply chain management problems and provide Congress with assurance that the DOD supply chain is fulfilling the department's goal of providing cost-effective joint logistics support for the warfighter.

The Deepwater Program includes efforts to build or modernize ships and aircraft and to procure other capabilities. After a series of project failures, the Coast Guard announced in 2007 that it was taking over the systems integrator role from Integrated Coast Guard Systems (ICGS). At the same time, a $24.2 billion program baseline was established which included schedule and performance parameters at an overall system level. GAO has previously reported on the Coast Guard's progress in establishing individual baselines for Deepwater assets and has made a number of recommendations, which have largely been addressed. In response to the conference report accompanying the Department of Homeland Security (DHS) Appropriations Act, 2010, GAO assessed (1) DHS and Coast Guard acquisition policies and approach to managing the program, (2) whether the program is meeting the 2007 baseline, and (3) Coast Guard efforts to manage and build its acquisition workforce. GAO reviewed Coast Guard and DHS policies and program documents, and interviewed officials. DHS has revised its approach to managing and overseeing Deepwater by making the program subject to its recently finalized acquisition directive, which establishes a number of review points to provide insight into such key documents as baselines and test reports. DHS has also increased the number of its reviews of individual Deepwater assets. The Coast Guard's own management policies are generally aligned with DHS directives, although operational testing policies are still being revised, and it has developed additional guidance on completion of key requirements documents. In taking on the systems integrator role, the Coast Guard is also decreasing its dependence on ICGS by planning for alternate vendors on some of the assets already in production, as well as awarding and managing work outside of the ICGS contract for other assets. Currently, the Deepwater Program exceeds the 2007 cost and schedule baselines, and given revisions to performance parameters for certain assets, it is unlikely to meet system-level performance baselines. The asset-specific baselines that have been approved to date, while providing greater insight into asset-level capabilities, place the total cost of Deepwater at roughly $28 billion, or $3.8 billion over the $24.2 billion 2007 baseline. The revised baselines also present life-cycle costs, which encompass the acquisition cost as well as costs for operations and maintenance. While the revised baselines show a significant decrease in life-cycle costs, due to changes to assumptions like shorter service lives for assets, the Coast Guard's understanding of them continues to evolve as the agency revisits its assumptions and produces new cost estimates. Costs could continue to grow as four assets currently lack revised cost baselines; among them is the largest cost driver in the Deepwater Program, the Offshore Patrol Cutter. The asset-level baselines also indicate that schedules for some assets are expected to be delayed by several years. Regarding system-level performance, the 2007 baseline may not be achievable, as the Coast Guard has redefined or eliminated key performance indicators for many individual assets, while significant uncertainties surround other assets. Further, a planned analysis to reassess the overall fleet mix for Deepwater was not completed as planned, and a new analysis will include surface assets only. In the meantime, the Coast Guard and DHS are proceeding with acquisition decisions on individual assets. The Coast Guard continues to take steps to address its acquisition workforce needs as it assumes the role of system integrator. For example, it is using a workforce planning model to estimate current and future needs for key acquisition personnel. The Coast Guard has also begun to implement initiatives such as promoting career growth for acquisition professionals. External limitations on the availability of acquisition personnel, coupled with 100 new positions authorized in fiscal year 2010, place the Coast Guard's acquisition directorate vacancy rate at about 20 percent. While it is using contractors in support roles, the Coast Guard has released guidance regarding the roles of government staff in overseeing contractors. GAO recommends that the Coast Guard complete an overall assessment that clarifies the quantities, mix, and cost of assets needed to meet requirements, given that the current Deepwater baseline is no longer feasible, and that the results be reported to Congress. DHS concurred with the recommendation.

To prepare for forecasted air traffic growth, the Federal Aviation Administration (FAA), in partnership with other federal agencies and the aviation industry, is planning and implementing the Next Generation Air Transportation System (NextGen), a new satellite-based air traffic management system that will replace the current radar-based system and is expected to enhance the safety and capacity of the air transport system. GAO was asked to review FAA's metrics for (1) tracking the status of NextGen programs and the implementation of NextGen capabilities, the reliability of those metrics, and any limitations or gaps and (2) measuring the performance and outcomes of NextGen capabilities that are implemented and any limitations. GAO analyzed FAA program progress reports and associated metrics for monitoring. GAO also reviewed agency performance and accountability reports and discussed internal performance reporting methods with FAA officials. FAA has metrics that allow it to monitor the progress of its programs for acquiring software and hardware. These metrics include Earned Value Management (EVM) measurements that show how well a program is meeting its planned cost and schedule targets for system development. Previous GAO reports have identified issues with FAA's implementation of EVM, which continue to affect the accuracy and reliability of some of FAA's program status reports. For example, for one acquisition program, FAA implemented EVM metrics only for the contractor's performance and not for the government's. As a result, the EVM data did not pick up delays that occurred after the contractor delivered the system and the EVM system did not provide early warnings of delays and potential cost overruns. In addition, GAO's previous work has shown that FAA is not able to report on how slippage in one program's schedule or budget will ultimately affect the implementation of other NextGen acquisition programs or operational capabilities whose progress depends on the completion of the first program. GAO has made recommendations to address these issues, which FAA and the Department of Transportation have begun to implement. FAA has also designated specific positions within the NextGen Integration and Implementation Office-known as solution set coordinators-to monitor and track progress toward implementing a portfolio of operational improvements into the national airspace system. However, the role of the coordinators and the process for resolving any disputes across FAA lines of business have not been clearly defined or delineated and it is uncertain whether the processes in place in this portfolio management structure will strengthen oversight and create a greater likelihood that required activities are completed on time. FAA has broad goals for NextGen as a whole, such as increasing capacity and reducing noise and emissions, but has not yet developed specific goals and outcome-based performance metrics to track the impact of and benefits realized from the entire NextGen endeavor. The agency has multiple efforts underway to develop such metrics: FAA's Air Traffic Organization (ATO), which manages the air traffic control system, has started to compile and review a set of metrics for measuring outcomes and performance associated with NextGen improvements. These metrics are likely to measure such things as the extent to which improvements increase throughput at airports, reduce emissions, and reduce flight times, but they are in the early stages of development. Recently, FAA also committed to developing performance metrics with industry, but it has no timeline or action plan for completing this effort. Separately, the Joint Planning and Development Office (JPDO), which is responsible for the long-term planning for NextGen and partnering with other federal agencies, has been working to develop a list of potential metrics, which range from fuel consumed per distance flown to curb-to-curb travel time. Without specific goals and metrics for the performance of NextGen as a whole, together with a timeline and action plan for implementation, it is not clear whether NextGen technologies, systems, and capabilities will achieve desired outcomes and be completed within the planned time frames. The FAA Administrator should clarify dispute resolution processes within FAA's portfolio management structure, and develop a timeline and action plan to agree with stakeholders on a list of specific goals and outcome-based performance metrics for NextGen. DOT agreed to consider GAO's recommendations and provided technical comments that GAO incorporated as appropriate.

Major defense acquisition programs (MDAP) are used to acquire, modernize, or extend the service life of the Department of Defense's (DOD) most expensive assets, primarily military equipment. The Weapon Systems Acquisition Reform Act of 2009 (P.L. 111-23), section 304(b), directed us to perform a review of weaknesses in DOD's operations that affect the reliability of financial information for assets acquired through MDAP. To do so, GAO identified and reviewed previously reported weaknesses that impair DOD's ability to provide reliable cost information for military equipment acquired through MDAPs, and determined what actions DOD has taken to address them. GAO searched databases of audit reports issued during calendar years 2005 through 2009 to identify previously reported weaknesses. Using applicable criteria, GAO assessed whether the actions taken by DOD adequately addressed these weaknesses. GAO found that weaknesses that impaired the department's ability to identify, aggregate, and account for the full cost of military equipment it acquires comprised seven major categories. Specifically, DOD had not (1) maintained support for the existence, completeness, and cost of recorded assets; (2) structured its contracts at the level of detail needed to allocate costs to contract deliverables; (3) provided guidance to help ensure consistency for asset accounting; (4) implemented monitoring controls to help ensure compliance with department policies; (5) defined departmentwide cost accounting requirements; (6) developed departmentwide cost accounting capabilities; and (7) integrated its systems. Although the department has acknowledged that it is primarily focused on verifying the reliability of information, other than cost, recorded in its property accountability systems, DOD has begun actions to address these weaknesses and improve its capability to identify, aggregate, and account for the full cost of its military equipment. For example, DOD is requiring that acquisition contracts be structured in a manner that facilitates application of the appropriate accounting treatment for contract costs, including the identification of costs that should be captured as part of the full cost of a deliverable. In addition, it has also begun to require that all contract deliverables that meet defined criteria be assigned a unique item identifier to facilitate asset tracking and aggregation of costs, and that electronic contract-related documentation, such as the invoice and receipt/acceptance documents, be maintained in a central data repository to ensure the availability of supporting documentation. Moreover, the department has begun to identify cost accounting data elements within its Standard Financial Information Structure (SFIS) and requires that its business-related Enterprise Resource Planning (ERP) systems support this structure. These efforts are intended to improve data sharing and integration between business areas. DOD acknowledged that the actions taken to date do not yet provide the department with the capabilities it needs to identify, aggregate, and account for the full cost of its military equipment. For example, DOD has begun to develop ERPs but has not yet defined the cost accounting requirements to be used to evaluate if these ERPs will provide the functionality needed to support cost accounting and management. DOD stated that additional actions, sustained management focus, and the involvement of many functional groups across DOD are needed before weaknesses that impair its ability to account for the full cost of the military equipment it acquires are addressed. Until DOD defines its cost accounting requirements and completes the other actions it has taken (e.g., defining data elements in SFIS) to support cost accounting and management, DOD is at risk of not meeting its financial management objective to report the full cost of its military equipment. DOD has stated that until these actions are completed it will continue to rely on its military equipment valuation (MEV) methodology to estimate the cost of its military equipment for financial reporting purposes. GAO is making 11 recommendations intended to strengthen actions DOD has taken to begin improving its ability to identify, aggregate, and account for the cost of military equipment acquired through MDAPs. Specifically, our recommendations focused on the need to define departmentwide cost accounting requirements and develop the process and system capabilities needed to support cost accounting and management. DOD concurred with our recommendations.

As fiscal constraints increasingly shape Navy shipbuilding plans, the pressure to increase efficiency mounts. Modernizing facilities and equipment at shipyards that build Navy ships can lead to improved efficiency, ultimately reducing the cost of constructing ships. In response to a request from the House Appropriations Subcommittee on Defense, GAO (1) identified investments in facilities and equipment at privately-owned shipyards over the last 10 years; (2) determined the Navy's role in financing facilities and equipment investments at these shipyards; and (3) evaluated how the Navy ensures investments result in expected outcomes. To address these objectives, GAO analyzed shipyard investment data over the past 10 years; interviewed shipyard, corporate, and Navy officials; and reviewed contracts, investment business cases, and other Navy and contractor documents. Over the past 10 years, large shipyards that build Navy ships used public and corporate funds to invest over $1.9 billion in facilities and equipment to improve efficiency, develop new shipbuilding capabilities, and maintain existing capabilities. Examples of each category include the following: (1) Improving efficiency--General Dynamics Bath Iron Works built a new facility--the Ultra Hall--that improves efficiency by allowing shipbuilders to access work space more easily in a climate-controlled environment. (2) Developing capabilities--Northrop Grumman Shipbuilding-Newport News built a replacement pier that allowed shipbuilders to work on two aircraft carriers simultaneously due to a Navy scheduling conflict. (3) Maintaining capabilities--General Dynamics Electric Boat invested to repair docks in order to maintain the shipyard's ability to launch and repair submarines. Investments at two smaller shipyards, Austal USA and Marinette Marine shipyard, were primarily to maintain and develop new capabilities as both are competing for new Navy contracts. Over the last 10 years, the Navy expanded its use of investment incentives and has recently provided some form of investment support at all large shipyards. To incentivize facility and equipment investments, the Navy has (1) released money early from the reserve of contract funds normally held back to ensure ships are delivered according to specifications, (2) accelerated asset depreciation schedules, (3) tied a portion of the contractor's fee to investing in new facilities and equipment, and (4) adjusted the contract share-line to give the contractor more of the savings if costs decrease. The Navy also manages funds appropriated by Congress for Hurricane Katrina relief at shipyards in the Gulf Coast. Outside of Hurricane Katrina funding, the Navy has not supported investments at the two smaller shipyards. Navy officials stated that the Navy has to negotiate investment incentives with large shipyards because limited competition and instability of Navy work does not foster an environment for shipyards to invest without incentives. Shipyard officials argued that instability in Navy shipbuilding plans makes it difficult to invest without guaranteed work from the Navy and incentives are necessary to help meet corporate minimum rates of return needed to justify an investment, especially given the large dollar amounts involved with some investments. The Navy lacks policy to help ensure it achieves goals and objectives from providing facility and equipment investment incentives at private shipyards. Absent this policy, individual program offices and contracting officers make decisions about what type of incentive to use, desired return on investments, and what kinds of investments to support. Without policy, program officers and contracting officers use different methods to validate expected outcomes and safeguard the Navy's financial support. GAO recommends that the Navy develop a policy that identifies the intended goals and objectives of investment incentives, criteria for using incentives, and methods for validating outcomes. The Department of Defense concurred with this recommendation.

In connection with the Omnibus Appropriations Act, 2009, GAO was required to study the What Works Clearinghouse (WWC), a federal source of evidence about effective education practices. Operating through a 5-year contract awarded by the U.S. Department of Education's Institute of Education Sciences (IES), the WWC reviews education research and disseminates its findings. GAO examined: (1) the extent to which the WWC review process meets accepted standards for research evaluation and how the WWC has responded to recommendations and criticism, (2) how WWC output and costs have changed over time and how its performance is measured, and (3) how WWC products are disseminated and how useful educators find them to be. To conduct its work, GAO reviewed WWC-related documents, analyzed cost and performance data, surveyed all states and a nationally representative sample of school districts, and interviewed IES officials, WWC contractors, researchers, and others. GAO as well as a congressionallymandated panel of experts, found that the WWC's review process, which includes screening studies to determine if they meet WWC criteria, follows accepted standards for evaluating research on the effectiveness of education interventions. WWC is responding to recommendations made by the expert panel to further improve its review and reporting processes. For example, the panel recommended improvements in the way the WWC presents information to readers on the reasons why studies do not qualify for review. The WWC is revising a report template to include a table summarizing which studies met or did not meet WWC criteria for evaluating research. The WWC has also responded to researchers who have criticized the WWC for presenting limited information because its screening criteria exclude some rigorous research designs that may be appropriate for evaluating certain education programs, such as special education. The WWC responded to this criticism by creating new standards that include two additional study designs and by creating a new product, called a practice guide, which includes a wider range of research. WWC's report output and scope increased under the current contract. For example, the WWC increased its production of various reports, introduced new products, and developed new processes for evaluating research. However, IES had a substantial backlog in its product review process from January 2009 to May 2010. The backlog generally decreased the timeliness of WWC reports, with 20 reports being delayed by up to 6 months. To support the increases in output and scope, WWC's costs doubled from the previous contract to the current one. Both contracts designated about 60 percent of costs to production, while the other 40 percent of costs support other tasks, such as communications, dissemination, and process development. IES' performance goals for the WWC primarily relate to the number of reports produced. However, IES has not developed performance measures related to the cost or usefulness of WWC products. Education uses WWC contractors, Regional Educational Laboratories (RELS) and the Doing What Works (DWW) Web site to disseminate information about WWC products; however, awareness and use of the WWC varies among states, districts, teachers, and principals. WWC contractors disseminate product information in various ways including email alerts and presentations. The RELs host events featuring WWC products for state, district, and school officials and DWW provides resources to educators based on WWC products. Based on our survey, officials from 33 of 38 state education agencies that responded to our survey and an estimated 42 percent of school districts have heard of the WWC. Those states and school districts generally used the WWC to a small or moderate extent to inform decisions on effective practices. Based on our survey, states and school districts reported that they would likely increase their use of the WWC if it included a broader array of information or more timely information. GAO recommends that IES: develop and implement strategies to avoid backlogs in WWC product reviews; establish performance measures related to costs and usefulness; and improve dissemination efforts to promote awareness and use of the WWC. Education generally agreed with GAO's recommendations.

On March 1, 2010, we issued our report expressing our opinion on the American Battle Monuments Commission's (the Commission) fiscal years 2009 and 2008 financial statements and our opinion on the Commission's internal control as of September 30, 2009. We also reported on the results of our tests of the Commission's compliance with selected provisions of laws and regulations during fiscal year 2009. We reported that although certain internal controls should be improved, the Commission maintained, in all material respects, effective internal control over financial reporting as of September 30, 2009. However, we also reported on a significant deficiency in the Commission's governance structure related to vacant Commissioner positions and one instance of noncompliance with the Antideficiency Act related to a Commission contract with a commercial employment services firm to provide temporary employees. During our fiscal year 2009 audit, we also identified other internal control deficiencies that, while not material, individually or in the aggregate, to the Commission's financial statements, nevertheless warrant management's attention. The purpose of this report is to present these deficiencies, provide additional detailed information on the significant deficiency and compliance issue identified in our fiscal year 2009 audit report, provide recommendations to address these matters, and provide an update on the status of our prior year recommendations. During our fiscal year 2009 financial statement audit, we identified a total of 18 control deficiencies in the Commission's internal controls and accounting procedures at Commission headquarters, its European Regional (ER) and Mediterranean Regional (MR) Offices, and at the Manila American Cemetery. At the Commission's headquarters, we identified the following internal control and accounting procedure deficiencies: (1) No written delegation of governance authority from Commissioners. (2) Inadequate controls to prevent Antideficiency Act violations. (3) Internal control reviews were completed, but were not fully validated. (4) Procurements did not follow required procedures. (5) Not all trust fund receipts were reported in the trial balance. (6) No support for calculating and reporting of full-time equivalent employees. (7) Documentation of personnel actions was not current. (8) Guidelines for donated services were not followed. (9) Engineering project lists had inaccuracies. At the Commission's ER Office, we identified the following internal control and accounting procedure deficiencies: (1) Imprest cash counts were not timely and reports had inaccuracies. (2) Miscellaneous receipt activity was not included in budgetary accounts. (3) Not all expenditure transactions were adequately documented. (4) Not all payroll transactions were properly processed. (5) Funds were commingled in the Commission's Aged Vendor Liability Report. (6) Not all year-end liabilities were identified for accrual. (7) Undelivered orders report was not reconciled with the general ledger. At the Commission's MR Office, we identified a control deficiency concerning the calculation of holiday pay and the processing of current pay authorizations. At the Commission's Manila American Cemetery, we identified a control deficiency regarding the lack of support for certain expenditure transactions. To assist Commission management in addressing these findings, this report contains 45 detailed recommendations. In its July 15, 2010, letter, the Commission agreed with the issues raised in our draft report.

"Web 2.0" technologies--such as Web logs ("blogs"), social networking Web sites, video- and multimedia-sharing sites, and "wikis"--are increasingly being utilized by federal agencies to communicate with the public. These tools have the potential to, among other things, better include the public in the governing process. However, agency use of these technologies can present risks associated with properly managing and protecting government records and sensitive information, including personally identifiable information. In light of the rapidly increasing popularity of Web 2.0 technologies, GAO was asked to identify and describe current uses of Web 2.0 technologies by federal agencies and key challenges associated with their use. To accomplish this, GAO analyzed federal policies, reports, and guidance related to the use of Web 2.0 technologies and interviewed officials at selected federal agencies, including the Department of Homeland Security, the General Services Administration, and the National Archives and Records Administration. Federal agencies are using Web 2.0 technologies to enhance services and support their individual missions. Federal Web managers use these applications to connect to people in new ways. As of July 2010, we identified that 22 of 24 major federal agencies had a presence on Facebook, Twitter, and YouTube. Several challenges in federal agencies' use of Web 2.0 technologies have been identified: (1) Privacy and security. Agencies are faced with the challenges of determining how the Privacy Act of 1974, which provides certain protections to personally identifiable information, applies to information exchanged in the use of Web 2.0 technologies, such as social networking sites. Further, the federal government may face challenges in determining how to appropriately limit collection and use of personal information as agencies utilize these technologies and how and when to extend privacy protections to information collected and used by third-party providers of Web 2.0 services. In addition, personal information needs to be safeguarded from security threats, and guidance may be needed for employees on how to use social media Web sites properly and how to handle personal information in the context of social media. (2) Records management and freedom of information. Web 2.0 technologies raise issues in the government's ability to identify and preserve federal records. Agencies may face challenges in assessing whether the information they generate and receive by means of these technologies constitutes federal records and establish mechanisms for preserving such records, which involves, among other things, determining the appropriate intervals at which to capture constantly changing Web content. The use of Web 2.0 technologies can also present challenges in appropriately responding to Freedom of Information Act (FOIA) requests because there are significant complexities in determining whether agencies control Web 2.0-generated content, as understood within the context of FOIA. Federal agencies have begun to identify some of the issues associated with Web 2.0 technologies and have taken steps to start addressing them. For example, the Office of Management and Budget recently issued guidance intended to (1) clarify when and how the Paperwork Reduction Act of 1995 applies to federal agency use of social media and Web-based interactive technologies; and (2) help federal agencies protect privacy when using third-party Web sites and applications.

Since the late 1990s, life settlements have offered consumers benefits but also exposed them to risks, giving rise to regulatory concerns. A policy owner with unneeded life insurance can surrender the policy to the insurer for its cash surrender value. Or, the owner may receive more by selling the policy to a third-party investor through a life settlement. These transactions have involved high-dollar-amount policies covering older persons. Despite their potential benefits, life settlements can have unintended consequences for policy owners, such as unexpected tax liabilities. Also, policy owners commonly rely on intermediaries to help them, and some intermediaries may engage in abusive practices. As requested, this report addresses how the life settlement market is organized and regulated, and what challenges policy owners, investors, and others face in connection with life settlements. GAO reviewed and analyzed studies on life settlements and applicable state and federal laws; surveyed insurance regulators and life settlement providers; and interviewed relevant market participants, state and federal regulators, trade associations, and market observers. The life settlement market is organized largely as an informal network of intermediaries facilitating the sale of life insurance policies by owners to third-party investors. Policy owners may sell policies directly to investors in some cases, but owners and investors commonly use intermediaries. Life settlement brokers represent policy owners for a fee or commission and may solicit bids for policies from multiple life settlement providers with the goal of obtaining the best price. Life settlement providers buy life insurance policies for investors or for their own accounts. No comprehensive data exist on market size, but estimates indicate it grew rapidly from its inception around 1998 until the recent financial crisis. Estimates of the total face value of policies settled in 2008 ranged from around $9 billion to $12 billion. State and federal regulators oversee various aspects of the life settlement market. Life settlements typically comprise two transactions: the sale of a policy by its owner to a provider, and the sale of a policy by the provider to an investor. As of February 2010, 38 states had insurance laws specifically to regulate life settlements. State insurance regulators focus on regulating life settlements to protect policy owners by imposing licensing, disclosure, and other requirements on brokers and providers. The Securities and Exchange Commission (SEC), where its jurisdiction permits, and state securities regulators regulate investments in life settlements to protect investors. One type of policy (variable life) is considered a security; thus, settlements involving these policies are under SEC jurisdiction. SEC also asserted jurisdiction over certain investments in life settlements involving nonvariable, or traditional, life insurance policies, but their status as securities is unclear because of conflicting circuit court decisions. All but two states regulate investments in life settlements as securities under their securities laws. Inconsistencies in the regulation of life settlements may pose challenges. Policy owners in some states may be afforded less protection than owners in other states and face greater challenges obtaining information to protect their interests. Twelve states and the District of Columbia do not have laws specifically governing life settlements, and disclosure requirements can differ among the other states. Policy owners also could complete a life settlement without knowing how much they paid brokers or whether they received a fair price, unless such information was provided voluntarily. Some investors may face challenges obtaining adequate information about life settlement investments. Because of conflicting court decisions and differences in state laws, individuals in different states with the same investments may be afforded different regulatory protections. Some life settlement brokers and providers may face challenges because of inconsistencies in laws across states. GAO developed a framework for assessing proposals for modernizing the financial regulatory system, two elements of which are consistent consumer and investor protection and consistent financial oversight for similar institutions and products. These two elements have not been fully achieved under the current regulatory structure of the life settlement market. Congress may wish to consider taking steps to help ensure that policy owners involved in life settlements are provided a consistent and minimum level of protection. SEC agreed with our matter for congressional consideration, and the National Association of Insurance Commissioners did not agree or disagree with it but raised related concerns.

This testimony discusses federal efforts to address alien smuggling along the southwest border. Alien smuggling along the southwest border is an increasing threat to the security of the United States and Mexico as well as to the safety of both law enforcement and smuggled aliens. One reason for this increased threat is the involvement of drug trafficking organizations in alien smuggling. According to the National Drug Intelligence Center's (NDIC) 2008 National Drug Threat Assessment, the southwest border region is the principal entry point for smuggled aliens from Mexico, Central America, and South America. Aliens from countries of special interest to the United States such as Afghanistan, Iran, Iraq, and Pakistan (known as special-interest aliens) also illegally enter the United States through the region. According to the NDIC assessment, Mexican drug trafficking organizations have become increasingly involved in alien smuggling. These organizations collect fees from alien smuggling organizations for the use of specific smuggling routes, and available reporting indicates that some Mexican drug trafficking organizations specialize in smuggling special-interest aliens into the United States. As a result, these organizations now have alien smuggling as an additional source of funding to counter U.S. and Mexican government law enforcement efforts against them. Violence associated with alien smuggling has also increased in recent years, particularly in Arizona. According to the NDIC assessment, expanding border security initiatives and additional U.S. Border Patrol resources are likely obstructing regularly used smuggling routes and fueling this increase in violence, particularly violence directed at law enforcement officers. Alien smugglers and guides are more likely than in past years to use violence against U.S. law enforcement officers in order to smuggle groups of aliens across the southwest border. In July 2009, a border patrol agent was killed while patrolling the border by aliens illegally crossing the border, the first shooting death of an agent in more than 10 years. Conflicts are also emerging among rival alien smuggling organizations. Assaults, kidnappings, and hostage situations attributed to this conflict are increasing, particularly in Tucson and Phoenix, Arizona. Communities across the country are at risk since among those individuals illegally crossing the border are criminal aliens and gang members who pose public safety concerns for communities throughout the country. Within the Department of Homeland Security (DHS), the Immigration and Customs Enforcement's Office of Investigations (OI) is responsible for investigating alien smuggling. In addition, DHS's Customs and Border Protection (CBP) and ICE's Office of Detention and Removal Operations (DRO) have alien smuggling-related programs. This testimony is based on a May 2010 report we are releasing publicly today on alien smuggling along the southwest border. As requested, like the report, this testimony will discuss the following key issues: (1) the amount of investigative effort OI has devoted to alien smuggling along the southwest border since fiscal year 2005 and an opportunity for ICE to use its investigative resources more effectively; (2) DHS progress in seizing assets related to alien smuggling since fiscal year 2005 and financial investigative techniques that could be applied along the southwest border to target and seize the monetary assets of smuggling organizations; and (3) the extent to which ICE/OI and CBP measure progress toward achieving alien smuggling-related program objectives. Our May 2010 report also provides a discussion of the extent to which ICE/OI and CBP have program objectives related to alien smuggling. We found the following: (1) OI work years devoted to investigating alien smuggling along the southwest border increased from about 190 work years in fiscal year 2005 to about 197 work years in fiscal year 2009, an overall increase of 4 percent, with hundreds of arrests, indictments, and convictions resulting. The overall number of work years decreased from about 190 work years in fiscal year 2005 to 174 in fiscal year 2008, but increased 23 work years from fiscal years 2008 to 2009 primarily due to an increase in one office. The percentage of time OI investigators spend on alien smuggling investigations, versus other investigative areas, such as drugs, has remained steady during this time period at 16-17 percent. (2) The value of OI alien smuggling asset seizures has decreased since fiscal year 2005, and two promising opportunities exist that could be applied to target and seize the monetary assets of smuggling organizations. According to OI data, the value of alien smuggling seizures nationwide increased from about $11.2 million in fiscal year 2005 to about $17.4 million in fiscal year 2007, but declined to $12.1 million in fiscal year 2008 and to about $7.6 million in fiscal year 2009. (3) OI and CBP have not fully evaluated progress toward achieving alien smuggling-related program objectives. Federal standards for internal control call for agencies to establish performance measures and indicators in order to evaluate the effectiveness of their efforts. One of the major objectives of OI's alien smuggling investigations is to seize smugglers' assets, but OI does not have performance measures for asset seizures related to alien smuggling cases. Tracking the use of asset seizures in alien smuggling investigations as a performance measure could help OI monitor its progress toward its goal of denying smuggling organizations the profit from criminal acts. Thus, in our May 2010 report, we recommended that ICE develop performance measures for asset seizures related to alien smuggling investigations. ICE concurred with the recommendation and stated that ICE is in the process of assessing all of its performance measures and creating a performance plan.