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= Government Acc Washington, DC 20548, June 24, 2000

‘The Honorable Robert C Byrd Chairman The Honorable George Votnovich Ranking Member

Subcommittee on Homeland Security Committee on Appropriations

United States Senate

The Honorable David E Price Chairman The Honorable arold Rogers Ranking Member Subconunittee on Homeland Security Comunittee on Appropriations House of Representatives ‘Subjects Coast Guard: Observations on the Genesis and Progress of the Service's Modernization Program

The U.S, Coast Guard is currently undertaking structure, support systems, and business practices This effort, referred 10 as the a niaor effort to update its conenand modernization program, is intended {o better position the service to full not only ‘raditional missions—such as ensuring the safety and security of commercial shipping, safexnarding U-S fisheries, interdicting the snougeling of ilcit drugs, and conducting search and rescue operations—but also homeland security

responsibilities that expanded after Sepieraber 11, 2001 (9/11) The modernization program is specifically focused on modifying the Coast Guard's command and contral structure'— including the establishment of four new organizational entities—as well as updating mission Support systems, such as maintenance, logisties, financial management, human resources, aequisitions, and information technology The proposed changes will have a major impact on a variety of functions servicewide,

7 Within te Const Guard, command and control reer to the exer of suo a drcton propery denignatedcominander over assigned forces the sccomplhiment of the sion, Coa "mui con inctions are perfomied through sn sreangement of etsonne,eaunment

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including management of Deepwater—the long-term, multibillionlollar program £0 parade the Coast Guards aging Meet of water vessels and airerall

‘The conceptual framework for the modernization program is reflected in 10 Conunazidant Intent Action Orders, which were issued by the Conntuandanf of the Coast Guard in 2006 Subsequently, congressional direction accompanying the Coast Guard's fiscal year 2008 appropriations required the Coast Guard to submit a report describing and assessing each of the 10 action orders.” Further, the congressional direction required that following submaission of the Coast Guard's report, we were to review the data and analysis supporting the report and, where appropriate, the status of implementation In August 2008, the Coast Guard subrulited its report on the ‘modemization program to the Senate and House Appropriations Committees hn accordance with the congressional ditection and as discussed with your offices, this report assesses the Coast Guard's modernization progeam Specifically this report answers the following primary research questions + What isthe genesis forthe Coust Guar’ modernization prograna?

+ Towhat extent has the Coast Guard conducted efforts to monitor the progress of its modemization program and evaluate the results? Asan additional component, the Explanatory Statement in the Committee Print ‘accompanying the Consolidated Appropriations Act of 2008 also directed us to evaluate the benefits and drawbacks of including all funding for Coast Guard personnel within the Operating Expenses (OE) appropriation.’ Our review of this Assue is contained within this report as enclosure IL

To address the primary research questions, we reviewed the August 2008 report sabimitled hy the Coast Guard to the Senate and Hose Appropriations Coramittees To obtain additional perspectives an the genesis of the Coast Guard's modemization

‘Our reports an etimonios ovr the pase LI yeanshaye inched detain the Despite program Conse Improves Deepwater Management, bul Outcome Stl Uncertain, GAOSR45 (Washington [Ce une St, 2) Coat Gund: Obseroitions on the Fiseat Vor 2000 Ledge, Herod

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efforts and other factors it considered, we reviewed intemal studies condueted by the Coast Guard, as well as relevant external studies—particularly studies conducted by either the Department of Homeland Security's (DHS) Office of Inspector General or GAO,’ At Coast Guard headquarters, we interviewed members of the Strategic ‘Transformation Team, whose primary responsibility is to oversee the planning and execution of the service's overall modemization and transformation efforts We also tvaluated how these efforts aligned with key practices identified in previous GAO ‘work related to organizational transformation and development of performance measures.” Further, we interviewed merubers of the National Academy of Public

Administration's (NAPA) projeet team — which, in April 2008, began reviewing the Coast Guard’s modernization prograrn.” We also reviewed an interim progress report (ated Decernher 2008) prepared by NAPA as well as the final report on the

modernization program provided 10 the Coast Guard on April 30, 2000," To address the Issue of personnel account funding, we reviewed pertinent legislative history of the Acquisition, Construction, and Improvements (ACAI) and the OB appropriation accounts, as well as Coast Guard position papers and other docutentation regarding possible consolidation of the Coast Guard's ACAT personnel funding into the OF account We conducted this performance audit front November 2008 to June 2009 in accordance with generally accepted government auditing standards, Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives We believe that the evidence obtained provides a reasonable basis for our findings and conclusions hased on our ant objectives More details about the seope and methodology of our work are presented in enclosure IIL

Results in Brief

“The Coast Guard's modernization program —while inherently reflecting nd prerogatives ofthe service's leadership—derives from multiple sources that, the judgment collectively encompass a tinte frame from the mid-1080s to the present These

sources include internal and extemal studies or reports that identified deficiencies in the Coast Guard’s command and control structure, the acquisition and logistics systems, and other aspects of the serviee’s operations and eapabilites, inchuding the financial management system Coast Guard officials also cited lessons leamed from emergencies, such as the terrorist attacks of 9/11, and major natural disasters, such as Hurricane Katrina, According to officials, these events highlighted the need for ‘greater standardization of policies and procedures, which the new conmesand

Structure is intended to address, As an overarching cause for action, Coast Guard

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officitls also stressed a need for positioning the service {0 he more responsive to 21" ‘century demands and challenges by eliminating existing geographic command boundaries and establishing a more functionally based organizational structure ‘The Coast Guard has several efforts wer way or planned for monitoring progress of the modernization program and identifying needed improvements; the however, development of applicable performance measures to evaluate results remains in the early stages, Consistent with project management principles and our previous work on organizational transformation, the Coast Guard has established nplementation tines to help guide the overall modernization program, which

(clude key actions and milestones." The Coast Guard has reported that all interim key actions have been completed on schedule, including the implementation of several new organizational components, However, the Coast Guard has requested additional statutory authorities designed {o fully establish the new command structure and associated senior leadership positions, currently envisioned {0 be in place in June 2009 For some of the organizational components established to date, the Coast Guard has also developed business pkans that further identity key goals, activities, and specific milestones In addition, the Coast Guard has initiated efforts to ‘conduct external ane! internal assessments of various aspects of the modernization program For example, the Coast Guard engaged NAPA (o conduct a third-party, ilepenclent review of the Coast Guard's overall modernization efforts This review— \hich began in April 2008 aud was completed in April 2009—was conducted to

Identify the strengths, weaknesses, opportunities, and risks involved in the current ‘modernization approach and make recommendations for improvernents and risk rnitigation Internally, the Coast Guard is conducting a series of process reviews intended (o identify the key intemal setivties aad oulpaits required for mission execution within the new structure.’ These process reviews—currently scheduled {or completion during the summer of 2009.—are also intended to generate inputs for a Tonger-term effort to identify and develop applicable performance metrics for

assess the results ofthe modernization program AS the new organizational ‘components and command elements are further implemented, the development of relevant performance metrics will become increasingly imporiant to help ensure that the purported benefis from modernization are realized Background

‘The Coast Guard isa multimission military service comprising approxineately 49,100 fulltime personnel—about 42,000 eullitary and 7,100 civilians The Coast Guard's responsibilities include a range of both homeland security mission-programs and non homeland security mission programs (See table 1 for additional details on these

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ikxiotprogirts and the associated budget request for fiseal year 2010).” Following, te terrorist attacks of 9/11, the Coast Guard's homeland secusity mission-

programs—such as conducting harbor patrols and participating in global military ‘operations—took on increased significance ane! demands

Table: Overvaw of Const Guard lesions and Progrems and the Fecal Yer 2010 Budget Raquast

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Shortly after taking office in May 2006, the Commandant issued 10 action orders (Commandant Intent Action Orders) that—as reported by the Coast Guard—form the framework for the modernization and strategie transformation the Coast Guard is undergoing to ultinately be best organized for optimal ndssion execution.” The 10 action omdets constitute interrelated initiatives that encompass efforts ranging, for ‘example, from improving the service's financial accounting system to developing a more effective command and control structure, Subsequently, in August 2008, the Const Guard reported that the 19 initiatives were combined into five coordinated efforts that make up the Coast Guard's current modernization prograr, The purpose of these efforts isto establish enhance the Coast Guard's business processes Four of the five modernization efforts a more responsive organizational structure and

focus on changes to the Coast Guard's organizational command structure Specifically, the Coast Guard has proposed establishing four new organizational entities—the Deputy Commandant for Mission Support (DCMS), the Deputy Commandant for Operations (DCO), Operations Command (OPCOM, and Force Readiness Command (FORCECOND The frst two entities, DCMS and DCO, are to be located in headquarters whereas OPCOM and FORCECOM are field-based

command To facilitate implementation of the modemization program, the Coast Guard created a Strategic Transformation Team, which consists of one fag officer nd 16 fulltime staff representing various components of the service.” The tearm is seat of the Coas Guard's modernization efforts, See enclosure [for additional information regarding the Coast Guards original action omens and the four new organizational entities

‘The Coast Guard's Modernization Program Derives from Multiple Sources ‘Through our discussions with Coast Guard officials and review ofthe service's planning and implementation documents, we determined that the Coast Guard's modernization programa is derived from multiple sources that collectively encompass atime frame of more than two decades In addition to addressing documented Ueficiencies, ran’ of the modernization progran's various initiatives largely reflect tho judgment and preeogatives ofthe service's leadership Generally, asa starting point for discussing the genesis of the modemuization program, service officials cited ‘an internal study (the Gilbert study that led toa major organizational realignment in 1987." Specitically, among other results, this study led to a reduction in the mamber of Coast Guard districts and ereated two new regional Maintenance and Logistics Cornmands—one at Governors Islan (New York harbor) and another at Coast Guard Island (Alameda, California)" According co the Coast Guard, the current

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todlernjzation program addresses some ofthe changes initially proposed by the Gilbert study that were never fully implemented For example, the proposed transiian toa more centralized command siructure is intended to reditce work ‘duplication and enhance standardization across the agency

Coast Guard officials also noted that additional catalysts for improvements have been studies conducted by DHS's Office of Inspector General," GAO," and others Such extemal studies have addressed not only the Coast Guant's acquisition organization and processes but also various other aspects ofthe service's operations sad

capabilities, including the financial management system, Regarding the latter, for ‘example, external audits have documented longstanding financial management deficiencies In 2008, the independent auditor reported that for the filth year, it was ‘mable to provide an opinion on DHS's balance sheet, largely because of the Coast Guard's material weaknesses in internal control."

Other contributors tothe impetus for modemization cited by Coast Guard officials ‘were lessons leamed from the events of /L1 and from preparing for and responding, {o major natural disisters, such as Hurricane Katrina, which made lanlall in August 2005 As discussed in onr 2006 report, the Coast Guard played a key roe in the planning, espouse, and recovery efforts for Hurricane Katrina in three mission areas—seareh and rescue, marine pollution response, and management of mari commerce.” According to Coast Guatd officials, these operations highlighted the ‘need for enhanced standardization across the service andl more centralized logistics an asset management Under dhe new command streture, the Coast Guard ias

established five new logistics and service centers that are intended 10 ensure

consistent delivery of support services and full fe cycle management for applicable product lines, = 7 nan an Management Conceras Remain, GAO-05161 (Wadi

"A maori weakness ea significant defen, ora combination of sgiicant detconces, that emul in ore than remote ikeliood tata metal mistatemnt ofthe finan tatements wl hott prevented or deter A siniicant deficiency contol diene, or cominaon of conto hắc he tel sven iu cty sbihg lim se salhuvrc, nen| praca oF po anil aa tay atone wh geal ace scouting pon ae ha hee [onset wou be prevented or detected Departmeat uf Hoteland Seen Ole of Inspector Genel Ztepentonssaitors Report om DHS FY 3008 Pimanrimiaeszaie CN 0A (Wvtshingon D6, November 2008)

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Further, Coast Guard officials stressed thai, a8 an overarching or holistic cause for action to modemize, the service must be positioned to respond to a wide array of 21° century demands and challenges, The Coast Guard cites, for example, everincreasing ‘groveth int maritime trade and tourism (more and larger vessels, inereased waterborne transport of qnefied natural gas, expanded activity in the Arete region, ee.) and the persistence of ferrorisin and other transnational threats, such as drug cradsicking andl znass migration By eliminating existing geographical conumand barriers and

establishing a more centralized and functionally based organizational structure, the Const Guard believes it can better mieet these challenges

‘The Coast Guard Has Ongoing Efforts to Monitor Progress of the Modernization Program, but Work Remains to Develop Performance Metries ‘The Coast Guard has several efforts under way or planned that are intended £0 monitor the implementation progress of the modernization program and identify needed improvements; however, more work remains to develop applicable

performance metrics fo evaluate the results, Asan overarching planning effort, the Coast Guard has established timelines that identify the sequencing and target dates for key actions related to the modernization program consistent with project

management principles.” Our prior work has shown that such aetion-oriented goals along with associated timelines and milestones are eritical to sucessful

‘organizational transformation efforts and are necessary to track an organization's progress toward ils goals.” As of March 2009, (he Coast Guard reported that it has met all ofthe key interim milestones for the phased implementation of the

‘modernization program Some of the interim actions that have been completed include the establishinent of new organizational components such as the Acquisition Directorate, the Deployable Operations Group, and the Oflice of Financial

Transformation and Compliance, a8 well as several logisties centers dedicated to specific Coast Guard assets (see fig, 1) However, as further noted in figure 1, the Coast Guard has requested additional statutory authorities to reorganize the Service's senior management structure and leadership positions According to the Coast

Guard, enactinent ofits legislative change proposal will enable the service 10

establish four new organizational entities DCO, DCMS, OPCOM, and FORCECOM— currently scheduled to be in place in June 2008." Projet Manoaement hss,

eat 208) ide to the Projet Management Boy of Know, Forth GAO, Hightguts of w GAO Buran: Mergers and Transformation: Lessons Learned fora

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For some of the new organizational components established to date, additional Implementation plans are also in place These plans, whether referred to as business plans orstrategic plans, represent a range of efforts to further identify key goals, activities, and in some cases, speciiic milestones For example, a business plan for FORCECOM documents the commands primary mission and goals, and outlines potential metries for evaluating effectiveness.” Sinilarly, strategie plan for the Command, Control, Communication, Computers, and Information Technology component identifies key goals and objectives, as well as milestones and applicable performance indicators for fiscal year 2009.” While we did not evaluate the specific content ofthese plans, they generally include a description of the mission and core ‘values for the organizational element, as well as goals and objectives with which to assess progress as these elements continue to mare.” US Cons Guard, FORCBCOM Fis! Year 2000-2010 Business Plan, Pst Bion (Version LO) (Geter 208,

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Furthermore, the Coast Guard also has more detailed implementation plans i that address targeted issue areas encompassed within the modernization program Specifically, the Coast Guard has developed plans related to acquisition and financial management reforms, which DAS's Office of Inspector General and we have assessed in greater depth

+ Acquisition reforms To address acquisition-related challenges, including those identified by our prior work, the Coasl Guard developed the Blueprint for

Acpisition Reform Blueprint) Since July 2007, the Blueprint has served as the Capstone strategie document for reshaping acquisition and coutracting

capabilites under the newly established Acquisition Dizeetorate Curgently in its third version, the Blueprint is planned to be updated anmmully and is to undergo a comprehensive review and revalidation in ode-numbered years.” Contained within the Blueprint are specific objectives and milestones for the upeoning year, as well as detailed action itenss addressing the four sulycomponents ofthe reform plan: organizational alignment and leadership, policies and processes, human capital, and information management and stewardship Our recent work has assessed Coast Guard acquisition efforts included within the Blueprint.”

+ Financial management reforms, To address financial management deficiencies, the Coast Guard developed the Financial Strategy for Transformation and Audit Readiness (Version 2)” To implement this overal strategy, the Coast Guard developed 17 Mission Action Plans to address individual weaknesses identified within the service's financial management system.” Aecording to Coast Guard officials, some of the Mission Action Plans correspond to individal line tems and others address more general processes and information systems Collectively, the 17 Mission Action Plans represent 2 combination of efforts that can be addressed either in the near tem (by the end of fiscal year 2010) or will, require long-term systemic changes Officials noted that the Financial Sores

for Transformation and Audit Rendiness and Une underlying Mission Action ‘Plans will continue to be revisited on a anal basis.” mm n1" 4, 2008, “Gan, or st Gud: tptate on Derpuate Program Manage Vĩ (Nasdington TC Ap 22,2 00) mui GALDE

‘The Coast eakaesecs in intra cars ones Gall Gan development of Mission Acton Plans spat of lange font hy DS to adres reper Bening 2005, DMS net 9 neton pla to emis theme deficiencies, whichis iecutnentedin he ator Contos te i ring hone OF Mado Mn Acton Pana key ca i he the Dis component levels

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Ina supplemental effort intended to evaluate aspects of the modernization program and identify potential improvements, the Coast Guard engaged NAPA to conduct a third-party, independent review of the Coast Guard's overall realignment and riodemization program According to NAPA, this study—which formally began in April 2008 and was completed in April 2009—-consisted of two primary research objectives"

+ Review of modernization program Under this objective, NAPA assessed the Coast Guard's modernization efforts to determine how they will fanetion to bridge the gap between the current state and the desired funure slate of the organization, the extent to which the organizational structure aligns with the Coramandant’s ‘operational vision, and the progress to date toward implementation NAPA ‘worked with the Coast Guard leadership team and NAPA panel members to Identify the strengths, weaknesses, opportunities, and risks involved in the current modernization approach and make recommendations for improvements nd suggest mitigation steps for key risks identified

+ Financial management and resource planning analysis To address this objective, NAPA advised and assisted Const Guard leadership in undertaking an analysis of financial management and resource planning functions based on data nd knowledge of best practices According to NAPA, this work included a review lf the functions of the Coast Guard's Chief Financial Officer to evaluate the potential impacts of financial management reforms on the averall modernization progam,

[NAPA completed its review and provided two fal reports tothe Coast Guard on April 30, 2009—one report addressing the service’s overall modernization efforts and another report addressing financial management.” Regarding overall modernization efforts, NAPA recognized thatthe Coast Guard's planed organizational realignment “makes logical sense" and that the Service's leadership “s collectively engaged to Improve mission execution and support related business processes NAPA cautioned, however, that the Coast Guan! remains in the early stages of its organizational

transformation, and that “materially enhanced efforts in strategic communications, entexprise-wide malysis and performance measurement, change management, and financial management will be needed to ensure that ultimate outcomes are achieved and sustained.” As a framework for analysis, the NAPA study team identified efght key success indicators, which the study team determined reflected common best

Acconting ta NAMA officials, he acain's work encompassed 4 brad seope an inched over 150 interiows eth wate sets of Cat Gra iil nein cans and malar persone ae

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practices for organizational transformation.” As a result ofits review, NAPA made {our conchiding recommendations intended vo help mitigate potential implementation risks and facilitate a successful maclernization process, Specifically,

NAPA recommended that the Coast Guard

‘+ establish.a Moderization Implementation Guidance Team before the expiration of the Strategic Transformation Teara chatter, ‘© develop a clear quantifiable business ease for modernization, measurement tools and a process of metrics assessment to track modemization progress and the

effects on mission execution;

+ conduct an assessment of the service's communications processes in an effort to Detter realign the communications functions and their accountabilities; and ‘© Duild and expand imovation capacities for continuous improvement, employee ‘ownership, and best practices,

As NAPA's second recommendation highlights, one ofthe key challenges faced by the Coast Guard is the development of adequate measures to assess the progress and ‘outcomes of the modernization program As the NAPA report indicated, such

:meastires are important to ensure that the impacts of modemization are aligned with intended objectives; also, such measures provide an opportunity to "course-comrect’ asnecessary NAPA further noted that the development of appropriate measurement {ools will help to provide quantifiable support for the modernization business case and facilitate stakeholder bay in,

According o the Coast Guard, several efforts are currently under way to develop and Uutlize performance metsies to assess the results of the modernization program

According to officials, the strategic intent of the modernization program is to enhance the overall performance of the service, In this respect, affcils noted that the 25, primary performance measures currently used to report on Coast Guard mission

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performance are to remain the principal indicators (o ensure that modemization does not adversely alfect the delivery of services to the American public.” However, officials acknowledged that it will likely be dificult to directly evaluate the effectiveness of the modernization program using these high-level mission

performance indicators For this reason, Coast Guard officials are planning to adapt Or utilize an alternate set of existing business metrics to assess the impacts of the modertization program The Coast Guard reported that over 1,000 mets ae cumently available to evaluate various aspects of the service's operations and business processes.”

While the Coast Guard is currently taking steps to further identify and develop applicable performance metres, this effort remains in the early stages According to the Coast Guard, identification and development of applicable business metrics will take place in (wo steps The frst step includes identification of key intemal activities and outputs required 1o enable mission execution within the realigned organizational structure The Coast Guard reported that this step was under way in February 2009 and is scheduled for completion during the sununer of 2009 Once this framework of keey activities and outputs is established, the Coast Guard plans to identify the

specific business metrics available that retate to these core services ancl products However, Coast Guard officials were unable to provide a specific time frame for the estimated completion of this secondary step According to the Coast Guard, once applicable motrics are identified and adequate data are colleeted—in approximately 6

‘months to 1 year—these metzies will enable evaluation of the perfomance and effectiveness of the modemizett Coast Guard processes and facilitate continued improvements

As outlined in the Gavemnment Performance and Results Act of 1003" and Standards {for Internal Control in the Federal Government,” performance measures are ‘important to reinforce the connection between long,term strategic goals and the day to-day activities of naanagement and staff Moreover, the Coss Guard noted that the proposed organizational constmiet—based on the finetional components of poliey nd resources, support, readiness, and mission execution represents a substantial change from the service's exiting business practices, For this reason, the Coast Guard's efforts to develop adequate performance metries to help validate existing organizational designs and processes and make adjustments as needed issn

important step According to officials, they plan fo include a range of indieators that represent multiple goals and priorities, such as quantity, timeliness, cost, and

Improvement Exist, GAO G15 (Washinton, DAC! Ava 15, 2000)

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‘outcomes, consistent with our prior work." Such action would help ensure that the Coast Guard's overall measurement of performance does not become biased by metrics that assess some priorities but neglect others

Agency Comments and Our Evaluation

(On May 4, 2000, we provided draft of this report for review and comment to DHS and the Coast Guard On May 19,2009, the departments audit liaison office

responded by e-mail that the Coast Guard, after reviewing the report on behalf of DIS, provided no formal commenis but offered one technical clarification We incorporated the technical clarification into this report where appropriate

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Enelosure 1

Overview of the Coast Guard's Modernization Report (August 2008) Submitted to the Senate and House Appropriations Committees Daring the summer of 2006, the Commandant of the U8 Coast Guard issued 10 CCommanclant Intent Action Orders intended to address elements of the Coast Guard's ccomnsand snd control structure, mission support system, and business processes that were identified as detracting from mission execution In August 2008, the Coast Guard reported to the Senate and House Appropriations Commultiees that the 10 action orders have been “combined into five coordinated efforis that comprise Coast Guard Mocemnization,"* Table 2 shows the relationship between the 10/action orders and the five efforts that make up the Coast Guard's modemization program Table 2: fake Up the Meerniatlon Program londhip netweon Commansant Intent Action Orde end the Coast Guots Five tort “Commandant intent Aelion Gres (10 aston orders) | Nedensaion progam — ‘js orparantorl alent acon ordar #4) Renan Coat

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As table 2 indicates, the modemization program largely focuses on establishing four ‘new organizational entities—two headquarters entities (DCMS and DCO) and two field-based commands (OPCOM and FORCECOM), Unđer the modernization, program, the Coast Guard Vice Commandant isto assume responsibility for ‘verseeing the new organizational entities (see fig 2)

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Figure 2 U.S, Const Guara-Cnvsloned Organizational Structure alter Modernization

“The overarching mission of DCMS is to enhance the Coast Guard's business

processes and systems related to logistics and mission support and human resources The four major ditectorates under DCMS, each led by an assistant commandant, are as follows:

‘Acquisition Directorate, This directorate is intended to streamline five headquarters offices and the Coast Guard Research and Development Center into single headquarters organizational entity

‘Engineering ‘Standardization of maintenance processes and will provide single-point and Logisties Directorate This directorate is to focus on greater accountability for life eyele management of all assets

‘© Command, Control, Directorate Among other responsibilities, this directorate is intended to enhance Communication, Computers, and Information Technology policies and processes related to information sharing, technology standards, and security awareness and compliance,

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‘Human Resources Directorate This directorate is intended to develop resources system that is flexible aud responsive to dynamafe personnel a hung requirements,

DCO isto integrate policy development for all operating programs of the service under a single deputy commandant at headquarters DCO is also intended to develop capability requirements for new assets and will serve to maintain relations with the Departnient of Defense and other interagency partners

OPCOM—which isto be responsible for mission execution domestically and intemationally—shifts dhe Coast Guard's current organization from two area

commands 1 a centralized structure ander one conumander OPCOM is to aversee all, Coast Guard districts anil sectors and the deployment of major assets in executing the 11 statutory missions af the servic

FORCECOM is to he responsible for preparing forces to perform missions and execute them properly Among other responsibilities, FORCECOM is to promulgate ‘operational doctrine (Lacties, fechniqes, und procedures) and establish a standard nieasurement system Co evaluate the readiness of Coast Guard forces FORCECOM is, also to oversee the Deployable Operations Group, the service's adaptive Force group for responding to all threats and hazards

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Enelosure I

Benefits and Drawbacks of Consolidating the Coast Guard's Aequi ‘Personnel Funding into the Operating Expenses Account

‘The Coast Guard currently receives personnel fing pray through two appropriation accounts: (1) the Operating Expenses (OF) account, which provides corapensation sich as salaries and enefits for over 90 percent ofthe service's personnel, and (2) the Acquisition, Construction, and Improvements (ACAI) account, ‘which provides compensation forthe service's acquisition related personnel and assets (See table 3 for further information on the Coast Guard's budget for fiscal year 2000.) The Explanatory Statement in die Cornrgflee Pin accpmrpanving the

Consolidated Appropriations Act of 2008 direeted us to evaluate the benefit and drawbacks ofitcuding all funding for Coast Guard personnel within the OF, appropriation “le Coaet Guard Fiscal Year 2009 Funding Summary “Appropriation accounts 7 7 7 ——- AmeuMinmsusaads Pweegeelul —- .Ï Tgưnanh Desamableasuivaaim TT T8 5z Rang Pa B78 1g

[In our previous work, we conchuded that consideration of consolidating appropriation accounts involves potential trade-offs between, for example,

‘management flexibility and program cost transparency For instance, a budget structure in which all of the acininistrative costs fora numberof distinet programs are contained within ne account may increase the focus for docision making and oversight on the cost of administering programis but make it difficult to see the “full

H Common Appropsaions 110° Cong Commitee Pit on E 270i La 3104101 (Lopsaiv Text and Explanatory Sater) at 1DS0 2H), accompany the Consolsated

‘Appropriations Act of 208 Funher clang dance ae pew Wy toợnhnt ongrseionalsgMf that our eeauaton shouldbe nite othe incase of ACEI personnel fndna doth O com

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cost” of the underlying programs." While there may be operational advantages and disadvantages associated with consolidation of personnel-elated appropriations accounts, a key determinant is what budget structure Congress considers most useful {or its appropriations anil oversight objectives In reference to a broader o

governmentwvide perspective, in February 2005, we reported that “budget

res{nieturing involves significant tradeoffs between the type of information provided ‘and accountability frauneworks used and has implications for the balance between managerial flexibility and congressional control.”

According to Coast Guard officials, consolidation of ACALI personnel funding into the OE appropriation account would allow for more flexible management of aequisition personnel The officials explained that the consolidation would enhance the service's ability to shift personnel to respond fo changes in projeet priorities ana mdi In general, the transfer of funds between appropriation accounts i prohibited without Siajulory authoriy.” Coast Guard officials noted that under provisions of federal appropriations legislation before fiscal year 2009, the service's acquisition personnel funded by the ACEI account generally were not pernitted to work on projects funded hough the OF account However, dhe Coast Guard's fiseal year 2009 appropriations proviied the service with limited (wo-way transfer authority —that is, authority fo transfer a inited amount of acquisition personnel funding from the OB account 10 the ACT account and vice versa,” The Coast Guard's appropriations for fiseal years 2007 and 2008 provided the service with limited one-way transfer authority only-—that is, authority to tamsfer limited amount of acquisition personnel funding from the (OF account to the ACRT accom

Const Guaed officials told ts that neither of dhese authorities —the two-way transfer Authority or the one-way transfer authority—has ever been used because of the Administrative and other constraints associated with implententation For example, officials explained that the Coast Guard has not used it partly because the transfer authority is authorized for I year only—and thus using the authority would at best create only a temporary acquisition position Further, officials noted that the Coast Guard may not be able to fll temporary position during the year ofthe transfer

authority, given that the service las already experienced difficulties in filling Acquisition positions, The Coast Guard officials stressed that the segregation of acquisition personnel funding from the OE appropriation has restricted the service's Pesormees, GAO 11S (Washington, D.C: ebay 205),

“hát

“Tide SLU, #1882 proves, for example, that an amount avalble unr lw may be wit frome appropriation scorn ad erie over orto working urd oy he stored hy ‘125 (Wasttington, D.C: Ape 35, 109)

‘This tp of ited rater author s provided to some extent, to various cher agencies nthe respecte appropratiats provisos For searpl, ial fear 208 appa proved versions of file transfer uory-wah an accompanying ceneneasnal potietson o advance appre feta agencies av offices within te rperinen of Arial, Department Cf

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ability to respond to surges in demand for acquisition personnel and address persistent critical staffing shortfalls To illustrate the rationale for consolidating acquisition personnel funding into the OF account, the Coast Gusrd provided us an 'esainple comparing two scenarios —(1) the transfer process wilhout consolidated OE and ACAI personnel aecounts and (2) the transfer process with consolidated OF and ACAI personnel accounts (see table 4) According to the Coast Guard's estinuted timelines, completing a transfer of fuids and personnel positions could require 17

\weeks under the fist scenario, whereas de transfer coukl be accomplished in 5 ‘weeks under the second scenato,

Tobl 4: Exarpla Provided bythe Coast Guard ust Peteonnel Funding nt the OF Account personnel ascounte Process sto Forest kon andy esa Tn ve (Gaeta) candied : —— overran sna OMe ot Conese a ty Sones tanta) 57 eelaa test DN5 che Totatine mei) a + pensrnel teen 9 Rnlonnl for Consolidating ACE personne account Process steps tin weeks) Forse no snd ry raed +

Revie of ACS pete pastons

(BeBe) cana evsarsgurevanb tơ s2mndee : : Invent Boar th ug ae

An additional benefit of consolidation cited by Coast Guan officials involves stafl ‘dovelopnaent, The officials tated that consolidation of aequisition personnel related

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appropriations into the OF aecount would facilitate the service's ability to provide professional development opportunities, including cross-training in acquisition related tasks, The officials stressed the importance of training junior staff to help, ensure the availablity ofa well qualified cadre of acquisition personnel, While officials did not to cite any’ specitie examples of training and development

‘opportunities that were hampered because of the separation of ccomnts, dhey noted that a consolidated account would allow forthe utilization of training billets located within the OE account.” Coast Guard officials further noted that consolidation of acquisition personnel funding into one account (the OE aceount for the Coast Guiard) ‘would increase the Coast Guard's budget consistency with two other component agencies of DHS tat have large aequisition projects under waiy—U'S Immigration ‘and Customs Enforcement and US Customs and Eowler Protection

On the other hand, a potential drawback of consolidating personnelelated AC&L appropriations into the OF account is less transparency ofthe total costs of Coast Guard acquisition projects Oficials recognize that reduced Lransparency of

Acquisition costs is an issue of concem to congressional appropriators According to Coast Guard official, however, any reduction in transparency resulting from

consolidation of the acquisition personnel accounts is ruitigated by am alternative reporting mechanism Specifically, the officials noted that the Coast Guard is directed (0 submit quarterly reports on aeqhisition projects t0 congressional approprialors, \hich include details on personnel costs associated with each project.” The Coast Guard also noted that in accontance with congressional direction, the level of detail in the quarterly reports—heginning with the second quarter of fiscal year 2008—was expanded to inelude outyear funding estimates by asset as well as metries for

assessing the performance ofall major acquisition projects.” Another perspective, as presented in our April 209 congressional testimony, is tat (1) dve quarterly

Acquisition reports age provided only to the appropriations committees and (2) the information is restricted because of acquisition sensitive material—to factors tha necessarily alfect transparency.”

‘ot ie designated specifically for tang which ean be ured to spert ewelopinestel activ iten for

“The quately acquisition reports ‘iiston peje, sich fon st sappor for financial management service ngs not include some peje ener

cevfean Perfil ear 209 Cos coats for maior

The Coast Gas Asc sour 200 appropriations set se forth the ini quarter epodine sequen for al nao Coast Guar acusion projets (Secien 80 [Da băn et Me Fiscal ‘Year 2 Deparement TP Sạc 1 cn) Congtessnna reson in varios sfseqient Appropriations Commitee pts of Traneonation svt Relate Agence Appropnatons Act (Pye No 1087, ‘Cont eat and BA eatoB Seman) st 1051 2008), accompa on Avprcprations 110" Come, Comite Ping on He 264 Pus Lae 410164 (Lege Oe Consoles Apropos Ae (2005, and H.R Noi 11018 ar7071 C077

GAO, Const Guan: Undote on Deepwater Prooram Management, Cost ant Anqsition Workfon GAD AIT Washington, D.C = Ap 93 90M0)

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Enelosure HT

Objectives, Scope, and Methodology Objectives

Congressional direction accompanying the Coast Guan's fiscal year 2008

appropriations requited the Coast Gua to submit a report describing and assessing the service's reorganization intiatives—specifically, initiatives reflected in 10|

Commandant Intent Action Orders.” ln August 2008, the Coast Guard submitted its report to the Senate and House Appropriations Committees,” The congressional direction further requited that following subnuission of the Coast Guard's report, GAO 1was to (1) review the data and analysis supporting the report and, where appropriate, the status of inplementation and (2) subuaia report no later than 120 days after the Coast Guard submitted its report To meet the mandated date, we offered to provide

a briefing in December 2008—surumatizing the preliminary results to date of our ‘ongoing study.—to the offices ofthe Chairmen and Ranking Members ofthe Senate and House Appropriations Conuittees Accordingly, dnring that month, we briefed interested congressional sta

Going forward, in accordance with the congressional direction and as agreed with the offices ofthe Chairmen and Ranking Members Appropriations Committees, this report addresses the following questions: of the Senate ane House

‘© What is the genesis for the Coast Guard's modemization program?

+ Towhat extent has the Coast Guard conducted efforts to monitor the progress of its modernization program and evaluate results? 4s an additional component, the Explanatory Statement in the Committee Print accompanying the Consolidated Appropriations Act of 2008 also directed GAO 10

evaluate the benefits and drawbacks of including all funding for Coast Guard personnel within the Operating Expenses (OE) appropriation."

(Legislative Text and Explunatory Statement) at 1059 2008) accompanying the Consolstated ‘Appropitions Ato 2H and © Rep No ISH, t 70 (200),

nt, Congressiona! Report to FY 2008 Aypropriatous Committe Coast Guar 80m tC ad ta he Sordid ellos that comps Cut Guset Nodcenzation" Poets overview of We Coss Guns Agus! 2008 report see ene Ho repo

Con on Appropeations I Cong Commitee Print on HR 2700/0 Law 110168 (Usgislative Test and Explanatory Satrnet) ot 10 (MN), nocompanging te Conseils

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Scope and Methodology

‘To address the modemization program questions, we reviewed (1) the August 2008 report submitted by the Coast Guard to the Senate and House Appropriations Committees; (2) briefing materials, implementation plans, and other documentation prepared by the Coast Guard that provided additional perspectives on the service's modemization and strategic transformation initiatives; and (3) modernization related information available on the Coast Guard's Web site (hitp/usce,milémodemization’) ‘Also, we reviewed internal and extemal studies and reports that Coast Guard

‘headquarters officials cited modemize Relevant external studies included those conducted by the DHS Office of as having collectively contributed to a cause for action 10 Inspector General as well as our previous reports that have addressed Coast Guard issues, At Coast Guard headquarters, we interviewed members ofthe Strategic

‘Transformation Team, whose primary responsibility is to oversee the planning and execution of the service's overall modemization and transformation efforts Further, ‘ve interviewed members ofthe National Academy of Public Administration's (NAPA) project team—which, in April 2008, began reviewing the Coast Guard's modernization program.” Also, we reviewed an interim progress report (dated December 2008) and the final reports that NAPA submitted to the Coast Guard on April 30, 2008."

Inference to monitoring the progress ofthe Coast Guard's moderation program And evaluating results, we determined whether the service timelines and milestones for key actions, consistent wit project management has established overall principles and our prior work on organizational transformation efforts." We focused particularly on realignment actions involving establishnent of four major Organizational elements—(1) Deputy Commandant for Operations, @) Deputy Commandant for Mission Suppor, (8) Operations Command, and (1) Force Readiness Command—realignments that are intended to enhance organizational effectiveness by establishing a command structure based on functions rather than geographie regions For example, eganting Force Readiness Command

(FORCECON, we reviewed the Coast Guard's business plan, which describes the actions needed to create the new command by the scheduled standup date of June 1, 2009," We noted that the plan includes milestones and readiness measures However, the scope of our work did not include independently evaluating the adequacy ofthe nilestones and measures presented inthis or other planning documents, such as the

PA an independent, nonprofit onganiaation chartered by Congres oan Fera, tte, at local povcrtncns (Coase Gard to cont ae par, independent review of the service's modernization prog in proving het elfectormcan clic ard soccuntabaig was tee

“ NAPA's study aressing the Coast Guards mostomization program includes an assessment of the sorcice's current approach, an evaluation of the approach alignment tothe Contmandan' sated transformation objeives,ientieation of sks an weaknesses and recommendations for progr

Project Management Inti, A Guide ty the Project Management Bay af Kuoelg, Fourth Euition (2008) and GAD, Revue Oreutad Cultures: Iuplementalton Spa te Aust Mergers and (rganteatinal Transformations, GNO-05-060 (Washington, D.C: July 2 3008)

“US Coast Guan, FORCECOM Fis! Yoar 2000-2010 Business Plan, Fst Elton (Version 10) (Octo 28,

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Blueprint for Acquisition Reform,® whieh the Coast Guard cites as the “capstone strategie document” for reshaping the service's acquisition and contracting

capabilities, One reason for this limitation is that we have a separate effort underway’ to evaluate aspects of the Coast Guard's acquisition program,

Similarly, given existing work underway by DHS's Office of Inspector General, we did not evaluate the Coast Guard’s Financial Strategy for Transformation aid Audit Readiness (Version 2.0)" which isa 2-year plan to be updated annually to specify tasks and milestones necessary to achieve financial statement audit readiness by addressing internal control material weaknesses in the service's Financial

inanagement processes In Jannary 2009, DHS's Office of Inspector General reported as follows regarding its review of the remediation plan

‘Wo aid not conduct an sai ofthe plan, bt analyzed hs pan comparing ito previo plans and ase phnned ations ad mlestones for remelting material weakenaes Overall, the plan

‘weaknesses aad linprovine the nancial mansgewent process with the Comat Guse However, det

The inhoseng imitadons of sortcse, we cannot offer an opin ato the crtinyof crs

Moreover, we interviewed the senior Coast Guard official responsible for leading the Strategie Transformation ‘Team to obiain an overview of the service's plans for

conducting “process reviews,” which are intended to help facilitate implementation of the new functionally based commands.” Also, we discussed with Coast Guard

headquarters officials the extent to which the service has established (or has plans to establish) performace mneasures for specifically evaluating impacts resulting from, the modemization program, To assess the service's efforts, we used our pator work and related guidance on the development and implementation of successful

performance measures.” To obtain a general overview and contextual perspectives ‘on some of the Coast Guard's existing performance measures, we also reviewed the DHS Office of Inspector General's most recent annual report on the Service's mission

US Coast Guard, apr int for Aogusiton Reform (Posten 2 (Uy, 2008,

S00, US, Coast Guard, Coast Guard Revert to Congress; Financial Management Imprenon lon teh west on Newembor 22008 thn Charme ae Ranking Memes othe

Department of Homan Secuty, Oil of lspector Gera ter dates Jan 7, 2010) othe (Chatan, Sabcomnitecon Homeland Secunty, Committee on Appropriaions, Uk Sense

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ẨÔÔÔÔÔÔÔÔ To address the issue regarding the Coast Guards personnel-related appropriations, We reviewed the pertinent legislative history of the ACR! and OE appropriation accounts, as well as pertinent statutory provisions that ether prohibit or authorize the transfer of acquisition personnel funding from one account to the other We also reviewed Coast Guard position papers and other documentation regarding possible consolidation of the Coast Guards AC&I personnel funding into the OF account In addition, we interviewed Coast Guard headquarters officials to diseuss the benefits ‘and drawbacks of such consolidation, To obtain additional perspectives, we reviewed the quarterly acquisition reports (for fiscal years 2007 and 2008) submitted by’ the Coast Guard to the Senate and House Appropriations Committees’ Subcommittees on Homeland Security Among other things, the quarterly reports provide personnel expenditure details (by program, project, and activity) regarding the use of ACSI Aapproptiations

We conducted this performance audit from November 2008 to June 2009 in

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Enelosure 1V GAO Contact and Staff Acknowledgments GAO Contact Stephen L- Caldwell, @ 12) 512.9610 or caldwellscegao.gou Acknowledgments

Invaddition to the contact named above, Danny Burton, Assistant Director, and Ryan Lambert, Analyst in-Charge, managed this assignment Catherine Bombico

contributed to all aspects of the work Michele Fejfar assisted with methodology and data reliability Geof? Hamilton provided legal support Katherine Davis assisted in report development

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Related GAO Products

Coast Guard: Observations on Changes to Management and Oversight of the Deepwater Program GAO-09-162T Washington, D.C March 24, 2000

Maritime Security: Vessel Trucking Systems Provide Key Information, but the Need for Duplicate Data Should Be Reviewed GAO-00-337 Washington, D.C March 17, 2009,

Coast Guard: Change in Course Improves Deepwater Management and Oversight, ‘nut Outcome Stil Uncertain, GA0-08-745 Washington, D.C June 24, 2008,

Coast Guard: Strategies for Mitigating the Loss of Patrol Boats Are Ackieving Results in the Near Term, but They Come at a Cost and Longer Term Sustainability Js Caknown GAO-08-660 Washington, D.C June 23, 208

Status of Selected Aspects of the Coast Guard's Deepwater Program GAO (82708 Washington, D.C: March 11, 2008 Coast Guard: Observations on the Fiseal Year 2009 Budget, Recent Performance, and Related Challenges GAO-08-494 Washington, D.C.: March 6, 2008

Coast Guard: Deepwater Program Management Initiatives and Key Homeland Security Missions GAO-085317 Washington, D.C.: March 5, 2008,

Maritime Security: Coast Guard Inspections Identify and Correct Facility

Deficiencies, but More Analysis Needed of Program's Staffing, Practices, and Data, GA008-12, Washington, D.C: February 14, 2008 Maritime Security: Federal Efforts Needed to Address Challenges in Preventing and Responding to Terrorist Attacks on Energy Commodity Tankers GAO-08-141, Washington, D.C: December 10, 2007,

Coast Guard: Challenges Affecting Deepwater Asset Deployment and Management and Eiforts to Address Them GAO-7-S74 Washington, D.C June 18, 2007

Coast Guard: Observations on the Fiseal Year 2008 Budget, Performance,

Reorganization, and Related Challenges, GAO.07-188T Washington, D.C: April 18, 207

Port Risk Management: Additional Federal Guidance Would Aid Ports in Disaster Planning and Recovery GAO-07-412 Washington, D.C: March 28, 2007,

Trang 29

Coast Guard: Status of Efforts to Improve Deepwater Program Management and Address Operational Challenges GAOAT-S75T, Washington, D.C March 8, 2007,

Maritime Security: Public Safety Consequences of a Terrorist Attack on a Tanker Carrying Liquefied Natural Gas Neod Clarification GAO-07-816 Washington, D.C February 22, 2007

Coast Guard: Preliminary Observations on Deepwater Program Assets and Manogement Challenges GAO-U7 AGT Washinglon, D.C February 15, 2007,

Coast Guard: Coast Guard EYorts to Improve Management and Address

Operational Challenges in the Deepwater Program GAO.07-460, Washington, D.C February 1, 2007

Homeland Security: Observations on the Department of Homeland Socwrity’s \egnisition Organization and on the Coast Guard's Deepwater Program, GAOT 4537 Washington, D.C: February 8, 2007

Coast Guard: Condition of Some Alds-to-Navigation and Domestie Ieebreaking Vessels Has Declined; Eject on Mission Performance Appears Mtxetl GA0-06-979 Washington, D.C September 22,2006,

Coast Guard: Non-Homeland Security Performance Measures Are Generally Sound, but Opportunities for inprovement Exist GAO-N-816, Washington, D.C August 16, 2006

Coast Guard: Observations on the Preparation, Response, and Recovery Missions Related to Hurricane Katrina, GAO-06-003, Washington, D.C July 31, 2006,

Maritime Security: Infirmation-Sharing Eigorts Ave Duproving GAO-06-985T Washington, D.C July 10, 2006 United States Const Guard: Improvements Needed in Management and Oversight of Resewe System Acquisition GAO.06623, Washington, D.C: May 31, 2006,

Coast Guard: Changes to Deepwater Plan Appear Sond, and Program

Management Has Dnproved, but Continucd Monitoring fs Warranted GAO-06 516 Washingion, D.C April 28, 2006

Coast Guard: Progress Being Maile on Addressing Deepwater Legacy Asset Condition Issues anal Program Management, but Acquisition Challenges Remain GA005-757 Washington, D.C July 22, 2005,

Trang 30

Coast Guard: Station Readiness Improving, but Resource Challenges and Management Concerns Remain, GAO.05-161, Washington, D.C January 31, 2005,

Maritime Security: Better Planning Needed to Help Ensure an Eijective Port Sectnrity Assessment Program, GAO-D1-1062 Washington, D.C.: September 30, 2004

Maritime Security: Partnering Could Reduce Federal Costs and Facilitate Implementation of Automatic Vessel Mentification System GAOAM-SE, Washington, D.C July 23, 2004

Maritime Security: Substantial Work Remains fo Trunstate New Planning

Requirements into Effective 20, Port Security GAO-4-838 Washington, D.C.: June 80, Coast Guard: Relationship betwoon Resources Used and Results Achieved Needs to Be Clearer GAO-O4432 Washington, D.C: March 22, 2004

Contract Management: Coast Guari’s Deepwater Program Needs Incronsed Attention to Management and Contrnetor Oversight, GADAH-380, Washington, D.C March 8, 2004,

Coast Guard: Comprehensive Blueprint Neeed (0 Balance and Monitor Resource Use and Measure Performance for AU Missions GAO-03-54T Washington, D.C March 12, 2008

(40736)

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“This a wok ah US, govern ar nal aubjot io capri preteen re Une Sates The pubtchd presuet may be epreaiced and dtbutes ine ret ‘bout iter persion tơi OAS However oases ne won ay coal ‘Spied mage tebe maar pees rn the copra alr may bo ecteser you wah optics ie mato eepxrte

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