checking the accuracy, the legality, and the support for federal vouchers. As the needs of the Congress for audits, program evaluations, and policy analyses have grown and shifted over the past four decades, GAO has changed to meet those needs.

Today, most of GAO's staff resources are spent either auditing federal financial activities or evaluating the efficiency, the economy, and the effectiveness of federal programs in the executive branch pursuant to statutory requirements or at the request of congressional committees and members. In addition to laws modifying or expanding GAO's overall mission, numerous provisions in other laws have directed GAO to undertake specific audits or reviews or have given GAO new authority to examine agency activities previously off limits, such as those of the Federal Bureau of Investigation (FBI), the Internal Revenue Service (IRS), and the Federal Reserve System. Moreover, numerous other GAO studies have also been directed over the years as a result of congressional committee reports or have been requested by committee chairs, ranking minority members, or individual Senators and Representatives.

The continued congressional reliance on GAO for accurate, objective analyses in support of its deliberations on important decisions facing the nation has corresponded proportionally, over the years, to the actual increase in direct assistance provided by GAO to the Congress. Today, as in recent years, more than 80 percent of GAO's work is done at the specific request of the Congress, compared with 57 percent in fiscal year 1985. During fiscal year 1993, 1,483 Congressional assignments were completed. To meet its congressional workload, GAO is constantly redirecting resources and seeking ways to increase productivity. An example is GAO's efforts to use total quality management to improve its operations and make the work environment more rewarding and productive for its employees.

Measurable and Nonmeasurable Financial
Benefits Reported in Fiscal Year 1993 Resulting

From GAO Work and Products Issued

Much of GAO's work results in recommendations to the Congress and federal agencies on needed improvements in the management and the efficiency of government operations and programs. In fiscal year 1993, GAO made 1,649 such recommendations.

Each year, the Congress's and the federal agencies' response to GAO's recommendations result in billions of dollars in financial benefits. In 1993, GAO contributed to legislative and executive branch actions that resulted in $14.5 billion in measurable benefits. These benefits, summarized in table 1, range from budget reductions by the Congress and the executive branch to more effective use of funds for more pressing needs.

Table 1: Measurable Financial Benefits Reported in Fiscal Year 1993

Table 2: Financial Benefits Attributable to the Work of GAO in Fiscal Year 1993 by Issue Area/Area of

Considering the critical fiscal problems facing the government, GAO's work contributed to legislative branch and executive branch actions that result in budgetary reductions and greater efficiency. Sources of these benefits were diverse including inventory reductions from the Department of Defense's budget (almost $3 billion), establishing a fund for decommissioning nuclear plants ($792 million), and the Health Care Financing Administration's recovery of mistaken payments ($378 million).

In addition to these measurable benefits, GAO contributed to other significant improvements in government operations. These benefits are not easily measurable in terms of dollars. Examples include improving the Internal Revenue Service's strategic management processes, protecting investors from security fraud, improving the Resolution Trust Corporation's asset management systems, and improving financial management at a number of agencies.

Includes measurable accomplishments of approximately $988 million involving inventory management which are also attributable to the Military Operations Capability issue area.

Totals may not add due to rounding.

Fiscal Year 1993 Accomplishments and Agency
Plans and Objectives

Planning GAO Issue Area Work

GAO's primary goal is to serve the Congress's need for accurate, objective, and timely information. Issue area plans, each covering from 2 to 4 years, help ensure that individual assignments focus on congressional needs and that resources are well allocated. These plans are reviewed annually and revised if needed.

Highlights of GAO work accomplished this past year, as well as planned GAO work in 35 issue areas and areas of interest, are discussed in detail below, as well as agency plans to emphasize certain work. Attachments A and B of this overview summarize the resources planned for use in each issue area during fiscal years 1994 and 1995.

Financial Institutions and Markets

GAO's work this past year influenced corrective action in the laws, the regulations, and the practices of banks, thrifts, securities firms, insurance companies, and other financial market participants. GAO reported on such diverse areas as

• the financial condition of various segments of the industry;

• vulnerabilities in the financial services system, such as risks involved in automated systems;

• defects in the effectiveness of regulatory programs;

• implications of federal policies that prescribe the legal authorities for various segments of the financial services industry; and

GAO provided information, objective analysis, recommendations, and options on aspects of modernizing or reforming current market structures. GAO continued to address safety, consumer protection, and regulatory burden issues. GAO worked to preserve past improvements in regulatory authority and capital and accounting rules that reduce taxpayer exposure to losses from failed banks. GAO bolstered its involvement with the issues of state insurance regulation and worked to improve this industry's regulation and policyholders' protection. GAO's work helped to reduce investor exposure to fraudulent activities by expanding data available to investors about broker-dealers' past disciplinary actions and arbitration award records. GAO's work also resulted in adopting formal standards for examining branch offices of penny stock broker-dealers in all districts, thereby improving the ability of regulators to detect fraudulent sales practices.

GAO will, during the next few years, continue to focus on changes in the financial services industry. Banks, savings and loan institutions, investment banking firms, and insurance companies previously offered different sets of products and services. Financial institutions are rapidly evolving into a single industry in which all sectors compete with each other. In turn, this industry must compete in an international market. Integration, consolidation, and internationalization trends in the industry resulting from competition, technological change, and deregulation have raised serious questions about the continuing soundness of our nation's financial institutions and markets as well as the adequacy of the regulatory structure to deal with this industry. Throughout the next few years, GAO will continue the work required to provide the Congress with the information it needs to make decisions for the rapidly changing financial services industry.

International Trade, Finance, and Competitiveness

GAO provided information that helped the Congress assess such critical issues as:

• the progress on agricultural trade;

• the implementation of the United States-Canada Free Trade Agreement;

• issues affecting investment in the petroleum sector;

• intellectual property rights;

• the developments in United States-Chilean trade;

• the prospects for East European energy;

• the business environment in the United States, Japan, and Germany;

• export promotion;

• funding foreign bank examinations;

• advertising and promoting U.S. cigarettes in Asian countries;

• the role of the U.S. Export-Import Bank;

• the costs of export credit programs;

• U.S.-Mexico trade; and

• the recent developments in foreign exchange markets.

The collapse of the Soviet bloc has shifted national priorities from defense to economic concerns. Economic performance will establish Amenca's place in the world as it moves into the 21st century. The focus of GAO's work in the next few years will be on America's competitiveness - the nation's ability to sustain a rising standard of living for its citizens in a complex world economy. America's competitiveness will determine how successful this nation will be in the new global economy. International trade and finance policy will be important determinants of America's success. Trade regimes, access to and development of foreign resources and markets, and competitiveness of U.S. goods and services in the integrated world marketplace are key to our long-term economical health. GAO has reviewed and reported on several of these issues over the past year to help gauge the impact of events and the need for policy and management changes.

Tax Policy and Administration

GAO's work in this area this past fiscal year has provided information and analysis to increase compliance with the country's tax laws, improve the Internal Revenue Service's (IRS) collection of delinquent taxes, promote more effective and equitable tax policies and incentives, simplify the tax laws to ease taxpayer burden, and improve IRS' ability to manage its tax administration activities.

GAO recommended various ways the IRS could improve voluntary compliance by rethinking its enforcement approach, thereby ensuring more reliable data with which to effectively target compliance efforts. IRS audits indicate that individuals overstated their real estate tax deductions by an estimated $1.5 billion in 1988, resulting in nearly $700 million in federal income tax loss for 1988 and 1989. GAO recommended several