Index


Information Security: Serious Weaknesses Place Critical Federal
Operations and Assets at Risk (Chapter Report, 09/23/98, GAO/AIMD-98-92).

Recent audit evidence indicates that serious and widespread weaknesses
in information security are jeopardizing the government's ability to
adequately protect (1) federal assets from fraud and misuse; (2)
sensitive information from inappropriate disclosure; and (3) critical
operations, including some affecting public safety, from disruption.
Significant information security weaknesses were reported in each of the
24 largest federal agencies, with inadequately restricted access to
sensitive data being the most commonly cited problem. These weaknesses
place critical government operations, such as national defense, tax
collection, law enforcement, and benefits payments, as well as the
assets associated with these operations, at great risk for fraud,
disruption, and inappropriate disclosures. Also, many intrusions or
other potentially malicious acts could be occurring but going undetected
because agencies have not introduced effective controls to identify
suspicious activity in their networks and computer systems. Individual
agencies have not done enough to effectively address these problems.
Similarly, agency performance in this area is not being adequately
managed from a governmentwide perspective, although some important steps
have been taken. In GAO's view, what is needed is a coordinated and
comprehensive strategy that incorporates the worthwhile efforts already
under way and takes advantage of the expanded amount of evidence that
has become available in recent years. GAO summarized this report in
testimony before Congress; see: Information Security: Strengthened
Management Needed to Protect Critical Federal Operations and Assets, by
Gene L. Dodaro, Assistant Comptroller General for Accounting and
Information Management Issues, before the Senate Committee on
Governmental Affairs. GAO/T-AIMD-98-312, Sept. 23 (19 pages).

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  AIMD-98-92
     TITLE:  Information Security: Serious Weaknesses Place Critical 
             Federal Operations and Assets at Risk
      DATE:  09/23/98
   SUBJECT:  Computer security
             Confidential communication
             Data integrity
             Internal controls
             Information leaking
             Classified information
             Computer crimes
             Hackers
             Information resources management
IDENTIFIER:  NIST Federal Computer Incident Response Capability Program
             
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Cover
================================================================ COVER


Report to the Committee on Governmental Affairs, U.S.  Senate

September 1998

INFORMATION SECURITY - SERIOUS
WEAKNESSES PLACE CRITICAL FEDERAL
OPERATIONS AND ASSETS AT RISK

GAO/AIMD-98-92

Federal Information Security

(919161)


Abbreviations
=============================================================== ABBREV

  CFO - Chief Financial Officer
  CIO - Chief Information Officer
  DOD - Department of Defense
  FAA - Federal Aviation Administration
  FedCIRC - Federal Computer Incident Response Capability
  FMFIA - Federal Managers' Financial Integrity Act
  IG - Inspector General
  GAO - General Accounting Office
  HCFA - Health Care Financing Administration
  HHS - Department of Health and Human Services
  NIST - National Institute of Standards and Technology
  OMB - Office of Management and Budget
  PDD - Presidential Decision Directive
  SSA - Social Security Administration
  VA - Department of Veterans Affairs

Letter
=============================================================== LETTER


B-278910

September 23, 1998

The Honorable Fred Thompson
Chairman
The Honorable John Glenn
Ranking Minority Member
Committee on Governmental Affairs
United States Senate

In response to your request, this report describes (1) the overall
state of federal information security based on recently issued audit
reports and (2) executive branch efforts over the last 2 years to
improve the federal government's performance in this important area. 
These efforts include actions by individual agencies, the Office of
Management and Budget, and the Chief Information Officers Council, as
well as initiatives outlined in the recently issued Presidential
Decision Directive 63 on critical infrastructure protection.  Many of
these improvement efforts respond to recommendations made in our
September 1996 report Information Security:  Opportunities for
Improved OMB Oversight of Agency Practices (GAO/AIMD-96-110), which
was also developed at your request. 

If you have any questions, please call me at (202) 512-2600.  This
report was developed under the direction of Robert F.  Dacey,
Director, Consolidated Audit and Computer Security Issues, and Jack
L.  Brock, Jr., Director, Governmentwide and Defense Information
Systems.  Major contributors to this report are listed in appendix
IV. 

Gene L.  Dodaro
Assistant Comptroller General


EXECUTIVE SUMMARY
============================================================ Chapter 0


   PURPOSE
---------------------------------------------------------- Chapter 0:1

Due to growing concerns about our government's reliance on
inadequately protected information systems to support critical and
sensitive operations, the Chairman and Ranking Minority Member of the
Senate Committee on Governmental Affairs asked GAO to (1) evaluate
the effectiveness of federal information security practices based on
the results of recent audits and (2) review efforts to centrally
oversee and manage federal information security.  This report
describes the results of that analysis and outlines management
practices that could improve the effectiveness of federal agency
security programs. 


   BACKGROUND
---------------------------------------------------------- Chapter 0:2

Federal agencies rely on computers and electronic data to perform
functions that are essential to the national welfare and directly
affect the lives of millions of individuals.  More and more, these
functions, which include national defense, tax collection, benefits
payments, and law enforcement, depend on automated, often
interconnected, systems and on electronic data rather than on manual
processing and paper records.  This shift has resulted in a number of
benefits so that information can now be processed quickly and
communicated almost instantaneously among federal offices,
departments, and outside organizations and individuals.  In addition,
vast amounts of useful data are at the disposal of anyone with access
to a personal computer, a modem, and telephone. 

However, the government's increasing reliance on interconnected
systems and electronic data also increases the risks of fraud,
inappropriate disclosure of sensitive data, and disruption of
critical operations and services.  The same factors that benefit
federal operations--speed and accessibility--also make it possible
for individuals and organizations to inexpensively interfere with or
eavesdrop on these operations from remote locations for purposes of
fraud or sabotage, or other malicious or mischievous purposes. 

Threats of such actions are increasing, in part, because the number
of individuals with computer skills is increasing and because
intrusion, or "hacking," techniques have become readily accessible
through media such as magazines and computer bulletin boards.  In
addition, natural disasters and inadvertent errors by authorized
computer users can have negative consequences if information
resources are poorly protected. 

Gauging the level of risk is difficult because summary data on
computer security incidents and related damage are incomplete. 
However, break-ins and damage of varying levels of significance have
been acknowledged in both the public and private sectors, and media
reports on intrusions, fraud, and sabotage abound.  In a recent
survey conducted by the Computer Security Institute in cooperation
with the Federal Bureau of Investigation, 64 percent of the 520
respondents, which were from both the private and public sectors,
reported computer security breaches within the last 12 months--a 16
percent increase in security breaches over those reported in a
similar survey in 1997.  While many of the survey respondents did not
quantify their losses, those that did cited losses totaling $136
million.\1 In an October 1997 report entitled Critical Foundations: 
Protecting America's Infrastructures, the President's Commission on
Critical Infrastructure Protection described the potentially damaging
implications of poor information security from a national
perspective, noting that computerized interaction within and among
infrastructures has become so complex that it may be possible to do
harm in ways that cannot yet be fully conceived. 

To guard against such problems, federal agencies must take steps to
understand their information security risks and implement policies
and controls to reduce these risks, but previous reports indicate
that agencies have not adequately met this responsibility.  In
September 1996, GAO reported that a broad array of federal operations
were at risk due to information security weaknesses and that a common
underlying cause was inadequate security program management.  In that
report, GAO recommended that the Office of Management and Budget
(OMB) play a more proactive role in leading federal improvement
efforts, in part through its role as chair of the Chief Information
Officers (CIO) Council.  Subsequently, in a February 1997 series of
reports to the Congress, GAO designated information security as a new
governmentwide high-risk area.\2 More recently, in its March 31,
1998, report on the federal government's consolidated financial
statements, GAO reported that widespread computer control
deficiencies also contribute to problems in federal financial
management because they diminish confidence in the reliability of
financial management data.\3


--------------------
\1 "Issues and Trends:  1998 CSI/FBI Computer Crime and Security
Survey," March 4, 1998. 

\2 High Risk Series:  Information Management and Technology
(GAO/HR-97-9, February 1997). 

\3 Financial Audit:  1997 Consolidated Financial Statements of the
United States Government (GAO/AIMD-98-127, March 31, 1998). 


   RESULTS IN BRIEF
---------------------------------------------------------- Chapter 0:3

The expanded amount of audit evidence that has become available since
mid-1996 describes widespread and serious weaknesses in the federal
government's ability to adequately protect (1) federal assets from
fraud and misuse, (2) sensitive information from inappropriate
disclosure, and (3) critical operations, including some affecting
public safety, from disruption.  Significant information security
weaknesses were reported in each of the 24 largest federal agencies,
with inadequately restricted access to sensitive data being the most
widely reported problem.  This and the other types of weaknesses
identified place critical government operations, such as national
defense, tax collection, law enforcement, and benefit payments, as
well as the assets associated with these operations, at great risk of
fraud, disruption, and inappropriate disclosures.  In addition, many
intrusions or other potentially malicious acts could be occurring but
going undetected because agencies have not implemented effective
controls to identify suspicious activity on their networks and
computer systems. 

Individual agencies have not yet done enough to effectively address
these problems.  Specifically, agency officials have not instituted
procedures for ensuring that risks are fully understood and that
controls implemented to mitigate risks are effective.  Implementing
such procedures as part of a proactive, organization-wide security
management program is essential in today's interconnected computing
environments. 

Similarly, agency performance in this area is not yet being
adequately managed from a governmentwide perspective, although some
important steps have been taken.  The CIO Council, under OMB's
leadership, designated information security as a priority area in
late 1997 and, since then, has taken some steps to develop a
preliminary strategy, promote awareness, and identify ways to improve
a federal incident response program developed by the National
Institute of Standards and Technology (NIST).  In May 1998,
Presidential Decision Directive (PDD) 63 on critical infrastructure
protection was issued.  PDD 63 acknowledged computer security as a
national security risk and established several entities within the
National Security Council, the Department of Commerce, and the
Federal Bureau of Investigation to address critical infrastructure
protection, including federal agency information infrastructures.  At
the close of GAO's review in August 1998, it was too early to
determine how the Directive's provisions would be implemented and how
they would relate to other ongoing efforts, such as those initiated
by the CIO Council. 

What needs to emerge is a coordinated and comprehensive strategy that
incorporates the worthwhile efforts already underway and takes
advantage of the expanded amount of evidence that has become
available in recent years.  The objectives of such a strategy should
be to encourage agency improvement efforts and measure their
effectiveness through an appropriate level of oversight.  This will
require a more structured approach for (1) ensuring that risks are
fully understood, (2) promoting use of the most cost-effective
control techniques, (3) testing and evaluating the effectiveness of
agency programs, and (4) acting to address identified deficiencies. 
This approach needs to be applied at individual departments and
agencies and in a coordinated fashion across government. 


   PRINCIPAL FINDINGS
---------------------------------------------------------- Chapter 0:4


      SIGNIFICANT WEAKNESSES AT 24
      MAJOR AGENCIES PLACE
      CRITICAL OPERATIONS AT RISK
-------------------------------------------------------- Chapter 0:4.1

Audit reports issued from March 1996 through August 1998 identified
significant information security weaknesses in each of the 24
agencies covered by the analysis.  The most widely reported type of
weakness was poor control over access to sensitive data and systems. 
This type of weakness makes it possible for an individual or group to
inappropriately modify or destroy sensitive data or computer programs
or inappropriately obtain or disclose confidential information for
malicious purposes, such as personal gain or sabotage.  In today's
increasingly interconnected computing environment, poor access
controls can expose an agency's information and operations to attacks
from remote locations all over the world by individuals with minimal
computer and telecommunications resources and expertise. 

These weaknesses place a broad range of critical operations and
assets at great risk of fraud, misuse, and disruption.  For example,
weaknesses at the Department of Defense increase the vulnerability of
various military operations that support the Department's warfighting
capability, and weaknesses at the Department of the Treasury increase
the risk of fraud associated with billions of dollars of federal
payments and collections. 

In addition, information security weaknesses place an enormous amount
of highly sensitive data at risk of inappropriate disclosure.  For
example, weaknesses at agencies such as the Internal Revenue Service,
the Health Care Financing Administration, the Social Security
Administration, and the Department of Veterans Affairs place
sensitive tax, medical, and other personal records at risk of
disclosure. 

As significant as these reported weaknesses are, it is likely that
the full extent of control problems at individual agencies has not
yet surfaced because key areas of controls at many agencies have not
been assessed.  In particular, agency managers, who are primarily
responsible for ensuring adequate security, have not fully evaluated
the adequacy of their computer-based controls.  In addition, audits
at most agencies have not yet fully covered controls associated with
operating system software, which are critical to the security of all
of the applications the systems support.  In agencies where this
control area was reviewed, weaknesses were always identified. 


      IMPROVED SECURITY PROGRAM
      PLANNING AND MANAGEMENT
      NEEDED AT INDIVIDUAL
      AGENCIES
-------------------------------------------------------- Chapter 0:4.2

Poor security program planning and management continue to be
fundamental problems.  Agencies have not yet developed effective
procedures for assessing computer security risks, determining which
risks are significant, assigning responsibility for taking steps to
reduce risks, and ensuring that these steps remain effective. 
Security planning and management deficiencies were reported for 17 of
the 24 agencies included in GAO's analysis and numerous
recommendations have been made to address specific agency
deficiencies. 

To identify potential solutions to this problem, GAO studied the
security management practices of eight organizations known for their
superior security programs.  These organizations included two
financial institutions, a retailer, an equipment manufacturing
company, a state university, a state agency, a regional electric
utility, and a computer vendor.  GAO found that these organizations
managed their information security risks through a cycle of risk
management activities, and it identified 16 specific practices that
supported these risk management principles. 

These practices involve (1) establishing a central security
management focal point, (2) assessing risk, (3) selecting and
implementing cost-effective policies and controls, (4) promoting
awareness, and (5) continually evaluating and improving control
effectiveness.  They also emphasize the importance of viewing
information security program management as an integral component of
managing agency operations and of involving both program managers and
technical experts in the process. 

GAO published the findings from this study in the May 1998 executive
guide Information Security Management:  Learning From Leading
Organizations (GAO/AIMD-98-68), which has been endorsed by the
Federal CIO Council.  The guide's findings are summarized in chapter
3 of this report. 

The security management practices described in GAO's executive guide
are most likely to be successful if they are implemented as part of
broader improvements to information technology management.  Such
improvements are underway across government due to specific
information technology management reforms mandated by the Paperwork
Reduction Act amendments of 1995 and the Clinger-Cohen Act of 1996. 


      INITIATIVES TO IMPROVE
      CENTRAL COORDINATION AND
      MANAGEMENT NEED TO PROVIDE A
      COMPREHENSIVE STRATEGY
-------------------------------------------------------- Chapter 0:4.3

Individual agencies are primarily responsible for the security of
their information resources, but central management also is important
to (1) ensure that federal executives understand risks to their
operations, (2) monitor agency performance in mitigating these risks,
(3) facilitate implementation of any needed improvements, and (4)
address issues that affect multiple agencies.  Under the Paperwork
Reduction Act, this oversight responsibility lies with OMB. 

Since September 1996 when GAO reported that OMB needed to strengthen
its oversight of agency practices, the CIO Council, under OMB's
leadership, has become a component of the administration's efforts to
address federal information security problems and has taken some
actions in this regard.  Specifically, during 1997, the Council
designated information security as one of six priority areas and,
late in the year, established a Security Committee.  Since then, the
Committee has (1) developed a preliminary plan for addressing various
aspects of the problem, (2) established links with other federal
entities involved in security issues, (3) held a security awareness
day for federal CIOs, deputy CIOs, and security officers, and (4)
developed plans for reorienting the Federal Computer Incident
Response Capability (FedCIRC), a program initiated by NIST to assist
agencies in improving their security incident response capabilities
and other aspects of their security programs. 

In addition, OMB has continued to monitor selected agency
system-related projects, many of which have significant security
implications.  However, neither OMB nor the CIO Council has yet
developed a program for comprehensively overseeing and managing the
security of critical federal operations by ensuring that agency
programs are adequately evaluated and that the results are used to
measure and prompt improvements, as recommended in GAO's September
1996 report. 

Concurrent with OMB and CIO Council efforts during late 1997 and
early 1998, the administration developed and issued PDD 63 in
response to recommendations made by the President's Commission on
Critical Infrastructure Protection.  The Directive acknowledges
computer security risk as a national security risk, addresses a range
of national infrastructure protection issues, and includes several
provisions intended to ensure that critical federal computer, or
"cyber-based," systems are protected from attacks by our nation's
enemies.  Also, it establishes a National Coordinator for Security,
Infrastructure Protection, and Counter-Terrorism, who reports to the
President through the Assistant to the President for National
Security Affairs; a Critical Infrastructure Coordination Group; and a
Critical Infrastructure Assurance Office within the Department of
Commerce.  The Directive outlines planned actions pertaining to
federal information security, which include: 

  -- requiring each federal department and agency to develop a plan
     for protecting its own critical infrastructure, including its
     cyber-based systems;

  -- reviewing existing federal, state, and local entities charged
     with information assurance tasks;

  -- enhancing collection and analysis of information on the foreign
     information warfare threat to our critical infrastructures;

  -- establishing a National Infrastructure Protection Center within
     the Federal Bureau of Investigation to facilitate and coordinate
     the federal government's investigation and response to attacks
     on its critical infrastructures;

  -- assessing U.S.  Government systems' vulnerability to
     interception and exploitation; and

  -- incorporating agency infrastructure assurance functions in
     agency strategic planning and performance measurement
     frameworks. 

Though some of these efforts have begun, at this early stage of
implementation, it is unclear how the provisions outlined in the
Directive will be implemented and how they will be coordinated with
other related efforts, such as those of the CIO Council. 


   CONCLUSION
---------------------------------------------------------- Chapter 0:5

Since September 1996, the need for improved federal information
security has received increased visibility and attention.  Important
efforts have been initiated to address this issue, but more effective
actions are needed both at the individual agency level and at the
governmentwide level.  Many aspects of the recommendations GAO made
in September 1996 are still applicable.  In particular, a
comprehensive governmentwide strategy needs to be produced.  The CIO
Council's efforts during late 1997 and the first half of 1998, as
well as issuance of PDD 63 in May 1998, indicate that senior federal
officials are increasingly concerned about information security
risks, both to federal operations as well as to privately controlled
national infrastructures, and are now moving to address these
concerns.  Coordinated efforts throughout the federal community, as
envisioned by PDD 63, will be needed to successfully accomplish the
objectives of these efforts and substantively improve federal
information security.  It is especially important that a
governmentwide strategy be developed that clearly defines and
coordinates the roles of new and existing federal entities in order
to avoid inappropriate duplication of effort and ensure
governmentwide cooperation and support. 


   RECOMMENDATION
---------------------------------------------------------- Chapter 0:6

GAO recommends that the Director of OMB and the Assistant to the
President for National Security Affairs ensure that the various
existing and newly initiated efforts to improve federal information
security are coordinated under a comprehensive strategy.  Such a
strategy should

  -- ensure that executive agencies are carrying out the
     responsibilities outlined in laws and regulations requiring them
     to protect the security of their information resources;

  -- clearly delineate the roles of the various federal organizations
     with responsibilities related to information security;

  -- identify and rank the most significant information security
     issues facing federal agencies;

  -- promote information security risk awareness among senior agency
     officials whose critical operations rely on automated systems;

  -- identify and promote proven security tools, techniques, and
     management best practices;

  -- ensure the adequacy of information technology workforce skills;

  -- ensure that the security of both financial and nonfinancial
     systems is adequately evaluated on a regular basis;

  -- include long-term goals and objectives, including time frames,
     priorities, and annual performance goals; and

  -- provide for periodically evaluating agency performance from a
     governmentwide perspective and acting to address shortfalls. 


   AGENCY COMMENTS AND OUR
   EVALUATION
---------------------------------------------------------- Chapter 0:7

In commenting on a draft of this report, OMB's Acting Deputy Director
for Management stated that OMB and the CIO Council, working with the
National Security Council, have developed a plan to address the PDD
63 provision that the federal government serve as a model for
critical infrastructure protection and to coordinate the new
requirements of the PDD with the existing requirements of the various
laws pertaining to federal information security.  The comments
further stated that the plan is to develop and promote a process by
which government agencies can (1) identify and assess their existing
security posture, (2) implement security best practices, and (3) set
in motion a process of continued maintenance.  Also described are
plans for a CIO Council-sponsored interagency security assist team
that will review agency security programs.  Regarding our conclusion
that many aspects of the recommendations in our September 1996 report
are still applicable, OMB reiterated its concern that the 1996
report's "overemphasis on OMB's role could distract program managers
in the Federal agencies from their primary responsibility for
assuring information security." The full text of OMB's comments is
reprinted in appendix III. 

OMB's comments indicate that it, the CIO Council, and the National
Security Council are moving to coordinate their responsibilities and
beginning to develop the comprehensive strategy that is needed. 
Based on the description provided, the plans being developed include
several key elements, most notably a means of evaluating agency
performance.  These plans were still being finalized at the close of
our work and were not yet available for our review.  Accordingly, we
are not able to comment on their content, scope, and detail, or
whether they will be effective in improving federal information
security. 

Regarding OMB's concern that we have overemphasized its role, we
agree that agency managers are primarily responsible for the security
of their operations.  Increased attention and support from central
oversight, if done effectively, should not distract agencies from
their responsibilities in this area.  On the contrary, active
oversight of agency performance is more likely to have the effect of
emphasizing the agency managers' accountability and providing more
visibility for agencies that are achieving their information
assurance goals as well as those that are falling short. 


INTRODUCTION
============================================================ Chapter 1

This report provides a summary analysis of recently reported
information security weaknesses at federal agencies and describes
management practices that federal agencies can adopt to help improve
their security programs.  It also describes centralized efforts to
oversee and manage federal information security from a governmentwide
perspective. 

The vulnerabilities associated with our nation's reliance on
interconnected computer systems are a growing concern.  At the
federal level, such systems process, store, and transmit enormous
amounts of sensitive data and are indispensable to many federal
agency operations.  Because of the importance of establishing and
maintaining adequate security over federal operations, Senators Fred
Thompson and John Glenn, Chairman and Ranking Minority Member,
respectively, of the Senate Committee on Governmental Affairs, have
undertaken an effort to address the various management, technical,
and operational aspects of this problem.  As part of that effort,
they requested that we (1) summarize the effectiveness of federal
information security, based on recently issued audit reports, (2)
describe actions agencies can take to improve their security
programs, and (3) evaluate actions taken by the Office of Management
and Budget (OMB) and the federal Chief Information Officers (CIO)
Council to address federal information security problems.  This
resulting report is one of several reviews that Chairman Thompson and
Senator Glenn have requested as part of their ongoing oversight of
federal information security and other aspects of information
technology management.  Related GAO reports are listed in appendix I. 


   COMPUTERS AND ELECTRONIC DATA
   ARE INDISPENSABLE TO FEDERAL
   OPERATIONS
---------------------------------------------------------- Chapter 1:1

Federal agencies perform important functions that are essential to
the national welfare and directly affect the lives of millions of
individuals everyday.  More and more, these functions, which include
national defense, tax collection, import control, benefits payments,
and law enforcement, depend on automated, often interconnected,
systems and on electronic data rather than on manual processing and
paper records.  The benefits of this shift are increasingly
obvious--information can be processed quickly and communicated almost
instantaneously among federal offices, departments, and outside
organizations and individuals.  In addition, vast amounts of data are
at the disposal of anyone with access to a personal computer, a
modem, and telephone. 

However, the government's increasing reliance on interconnected
systems and electronic data also increases the risks of fraud,
inappropriate disclosure of sensitive data, and disruption of
critical operations and services.  The same factors that benefit
federal operations--speed and accessibility--also make it possible
for individuals and organizations to inexpensively interfere with or
eavesdrop on these operations from remote locations for purposes of
fraud or sabotage, or other malicious or mischievous purposes. 
Threats of such actions are increasing, in part, because the number
of individuals with computer skills is increasing and because
intrusion, or "hacking," techniques have become readily accessible
through magazines and on computer bulletin boards.  In addition,
natural disasters and inadvertent errors by authorized computer users
can have devastating consequences if information resources are poorly
protected. 

Gauging the risk is difficult because summary data on computer
security incidents and related damage are incomplete.  However, in an
October 1997 report entitled Critical Foundations:  Protecting
America's Infrastructures, the President's Commission on Critical
Infrastructure Protection described the potentially devastating
implications of poor information security from a national
perspective, noting that computerized interaction within and among
infrastructures has become so complex that it may be possible to do
harm in ways we cannot yet conceive.  According to a recent statement
by the Director of the National Security Agency, attacks on public
and private systems occur everyday.  For example, in February 1998,
hackers used tools and techniques readily available on Internet
bulletin boards to attack systems at the Department of Defense. 
Media reports on intrusions, fraud, and sabotage abound, and, in a
recent survey conducted by the Computer Security Institute in
cooperation with the Federal Bureau of Investigation, 64 percent of
the 520 respondents from the private and public sector reported
computer security breaches within the last 12 months.  This is a
16-percent increase in security breaches over those reported in a
similar survey in 1997 and a 22-percent increase over those reported
in 1996.\1

To guard against such problems, federal agencies, like other
computer-dependent organizations, must take steps to understand their
information security risks and implement policies and controls to
reduce these risks.  Specifically, federal agencies must protect the
integrity and, in some cases, the confidentiality of the enormous
amounts of sensitive data they maintain, such as personal information
on individuals, financial transactions, defense inventories,
operational plans, and regulatory inspection records.  In addition,
they must take steps to ensure that computerized operations
supporting critical government functions are not severely disrupted. 


--------------------
\1 "Issues and Trends:  1998 CSI/FBI Computer Crime and Security
Survey," March 4, 1998. 


   PREVIOUS REPORTS HAVE
   IDENTIFIED SIGNIFICANT SECURITY
   PROBLEMS
---------------------------------------------------------- Chapter 1:2

Although the government's reliance on computers and
telecommunications has been rapidly growing, reports over the last
few years indicate that federal operations and data are inadequately
protected and that these problems are serious and pervasive.  In
September 1996, we reported that, since September 1994, serious
weaknesses had been reported for 10 of the largest 15 federal
agencies.\2 In that report we concluded that poor information
security was a widespread federal problem with potentially
devastating consequences, and we recommended that OMB play a more
proactive role in overseeing agency practices and managing
improvements, in part through its role as chair of the CIO Council. 
Subsequently, in February 1997, in a series of reports to the
Congress, we designated information security as a new governmentwide
high-risk area.\3 Most recently, in our March 31, 1998, report on the
federal government's consolidated financial statements, we reported
that widespread and serious computer control weaknesses affect
virtually all federal agencies and significantly contribute to many
material deficiencies in federal financial management.\4 In that
report, we also noted that these weaknesses place enormous amounts of
federal assets at risk of fraud and misuse, financial data at risk of
unauthorized modification or destruction, sensitive information at
risk of inappropriate disclosure, and critical operations at risk of
disruption. 

During 1996 and 1997, federal information security was also addressed
by the President's Commission on Critical Infrastructure Protection,
which had been established to investigate our nation's vulnerability
to both "cyber" and physical threats.  In its October 1997 report,
Critical Foundations:  Protecting America's Infrastructures, the
Commission described the potentially devastating implications of poor
information security from a national perspective.  The report also
recognized that the federal government must "lead by example," and
included recommendations for improving government systems security,
expediting efforts to facilitate the use of encryption, developing
risk assessment methods, measuring performance, and elevating threat
assessments as a foreign intelligence priority. 

A number of factors contribute to poor federal information security
including insufficient awareness and understanding of risks, a
shortage of staff with needed technical expertise, a lack of systems
and security architectures to facilitate implementation and
management of security controls, and various problems associated with
the availability and use of specific technical controls and
monitoring tools.  All of these are important; however, an underlying
theme that was identified in our September 1996 report is a lack of
security program management and oversight to ensure that risks are
identified and addressed and that controls are working as intended. 


--------------------
\2 Information Security:  Opportunities for Improved OMB Oversight of
Agency Practices (GAO/AIMD-96-110, September 24, 1996). 

\3 High Risk Series:  Information Management and Technology
(GAO/HR-97-9, February 1997). 

\4 Financial Audit:  1997 Consolidated Financial Statements of the
United States Government (GAO/AIMD-98-127, March 31, 1998). 


   RESPONSIBILITIES OUTLINED IN
   LAWS AND GUIDANCE
---------------------------------------------------------- Chapter 1:3

The need to protect sensitive federal data maintained on automated
systems has been recognized for years in various laws and in federal
guidance.  The Privacy Act of 1974, as amended; the Paperwork
Reduction Act of 1980, as amended; and the Computer Security Act of
1987 all contain provisions requiring agencies to protect the
confidentiality and integrity of the sensitive information that they
maintain.  The Computer Security Act (Public Law 100-235) defines
sensitive information as "any information, the loss, misuse, or
unauthorized access to or modification of which could adversely
affect the national interest or the conduct of Federal programs, or
the privacy to which individuals are entitled under the Privacy Act,
but which has not been specifically authorized under criteria
established by an Executive Order or an Act of Congress to be kept
secret in the interest of national defense or foreign policy."

In accordance with the Paperwork Reduction Act of 1980 (Public Law
96-511), OMB is responsible for developing information security
policies and overseeing agency practices.  In this regard, OMB has
provided guidance for agencies in OMB Circular A-130, Appendix III,
"Security of Federal Automated Information Resources." Since 1985,
this circular has directed agencies to implement an adequate level of
security for all automated information systems that ensures (1)
effective and accurate operations and (2) continuity of operations
for systems that support critical agency functions.  The circular
establishes a minimum set of controls to be included in federal
agency information system security programs and requires agencies to
periodically review system security.  Responsibility for developing
technical standards and providing related guidance for sensitive data
belongs primarily to the National Institute of Standards and
Technology (NIST), under the Computer Security Act. 

The Clinger-Cohen Act of 1996 recently reemphasized OMB, NIST, and
agency responsibilities regarding information security under a
broader set of requirements aimed at improving information technology
management in general.  In particular, the act stipulated that agency
heads are directly responsible for information technology management,
including ensuring that the information security policies,
procedures, and practices of their agencies are adequate.  The act
also required the appointment of a CIO for each of the 24 largest
federal agencies to provide the expertise needed to implement needed
reforms.  Subsequently, in July 1996, the President established the
CIO Council, chaired by OMB, to address governmentwide technology
issues and advise OMB on policies and standards needed to implement
legislative reforms.  Council members include CIOs and Deputy CIOs
from each of the major agencies. 

The adequacy of controls over computerized data and the management of
these controls are also addressed indirectly by the following
additional laws: 

  -- The Federal Managers' Financial Integrity Act (FMFIA) of 1982
     requires agency managers to annually evaluate their internal
     control systems and report to the President and the Congress any
     material weaknesses that could lead to fraud, waste, and abuse
     in government operations. 

  -- The Chief Financial Officers (CFO) Act of 1990, as expanded by
     the Government Management Reform Act of 1994, requires agency
     CFOs to develop and maintain financial management systems that
     provide complete, reliable, consistent, and timely information. 
     Under the act, major federal agencies prepare annual financial
     statements and have them audited by their respective inspectors
     general.  In practice, such audits generally include evaluating
     and testing controls over the security of automated financial
     management systems. 

  -- The Federal Financial Management Improvement Act of 1996
     requires auditors to report whether agency financial management
     systems comply with certain established financial management
     systems requirements.  OMB guidance to agency CFOs and IGs lists
     these systems requirements, which include security over
     financial systems provided in accordance with OMB Circular
     A-130, Appendix III, "Security of Federal Automated Information
     Resources." Agency managers are responsible for developing
     remediation plans to address the problems noted by the auditors. 

  -- The Government Performance and Results Act of 1993 requires
     agencies to establish goals for program performance, measure
     results, and report annually on program performance to the
     President and the Congress. 

In May 1998, Presidential Decision Directives 62 and 63 established
additional requirements for ensuring protection of our nation's
critical infrastructures from both physical and "cyber," or
computer-based, threats.  At the close of our fieldwork in August
1998, it was too early to determine how these directives would be
implemented.  However, the provisions pertaining to federal agency
information security that are specified in Directive 63 are
summarized in chapter 4.  Presidential Decision Directive 62, which
pertains to counter-terrorism responsibilities, is classified and,
therefore, is not discussed in this report. 


   OBJECTIVES, SCOPE, AND
   METHODOLOGY
---------------------------------------------------------- Chapter 1:4

The objectives of this report are to

  -- describe the extent of federal information security problems and
     the associated risks based on reports issued since March 1996,

  -- identify management actions that could effect significant and
     long-term improvements in information security at the individual
     agency level, and

  -- evaluate governmentwide efforts to improve information security,
     especially actions taken since September 1996 by OMB and the CIO
     Council, and identify needed additional actions. 

To describe the extent of information security problems and
associated risks, we analyzed findings from over 80 GAO and agency
reports, including inspector general (IG) reports, issued from March
1996 through September 1998.  These included some reports for which
distribution has been restricted because they discuss sensitive
aspects of agency operations.  Although we considered the results of
these restricted reports when developing summary data on agency
weaknesses, the related findings are not discussed in detail nor the
agency identified.  The reports we considered pertained to the 24
federal departments and agencies covered by the CFO Act.  Together
these departments and agencies accounted for about 99 percent of the
total reported federal net outlays in fiscal year 1997.  The reports
we analyzed, excluding those that are restricted, are listed in
appendixes I and II. 

In analyzing reported findings, we categorized them into six basic
areas of general control:  security program planning and management,
access control, application program change control, segregation of
duties, operating systems security, and service continuity.  These
six areas of general controls provide a framework for comprehensively
evaluating information security.  The six categories are defined and
described in chapter 2. 

To identify management actions that could effect fundamental
improvements in security at individual agencies, we summarized the
results of our recent study of information security program
management practices at leading organizations.  We performed this
study because previous audits had shown that poor security program
management was an underlying cause of information security control
weaknesses.  In May 1998, we published the results of this study as
an executive guide entitled Information Security Management: 
Learning From Leading Organizations (GAO/AIMD-98-68). 

To assess OMB's leadership and coordination of federal information
security efforts, we met with officials from OMB's Office of
Information and Regulatory Affairs to discuss their activities
related to information security and progress on recommendations made
in our report Information Security:  Opportunities for Improved OMB
Oversight of Agency Practices (GAO/AIMD-96-110, September 24, 1996). 
We also discussed the information security-related activities of the
federal CIO Council with members of the Council's Security Committee
and reviewed related documentation, such as meeting minutes and the
CIO Council's January 1998 governmentwide strategic plan for
information resources management. 

We also obtained and reviewed Presidential Decision Directive 63,
which was issued May 22, 1998, late in our review.  This directive
specifies requirements for protecting our nation's critical
infrastructures and includes provisions pertaining to federal agency
information security. 

Our review was conducted from December 1997 through August 1998 in
accordance with generally accepted government auditing standards. 
One of the reports we relied on, VA Information Systems:  Computer
Control Weaknesses Increase Risk of Fraud, Misuse, and Improper
Disclosure (GAO/AIMD-98-175), is being issued in September 1998. 
However, a complete draft was available at the close of our review in
August.  OMB provided written comments on a draft of this report,
which are discussed in the "Agency Comments and Our Evaluation"
section in chapter 4 and reprinted in appendix III. 


   RELATED GAO EFFORTS
---------------------------------------------------------- Chapter 1:5

In addition to this report, we have worked with the Congress,
primarily the Senate Committee on Governmental Affairs, to pursue a
comprehensive strategy for addressing the federal information
security problems.  This strategy involves supplementing our audit
work with research projects and other actions to promote and provide
support for federal efforts in this area.  This strategy comprises
the following activities: 

  -- To assess the effectiveness of federal information security and
     assist the Congress in its oversight role, we are continuing to
     perform audits at selected individual agencies and develop
     specific recommendations for improvement.  Some of these
     evaluations are performed as part of our financial statement
     audits at individual agencies and some pertain to nonfinancial
     mission-critical systems. 

  -- To assist agency inspectors general in conducting or arranging
     for information security audits, we began an extensive effort
     during 1997 to evaluate such audit efforts at each of 24 major
     federal agencies.  We performed, and will continue to perform,
     this work in conjunction with our annual audits of the
     consolidated financial statements of the federal government,
     which are required under the CFO Act as expanded by the
     Government Management Reform Act.  At many of these agencies, we
     have provided extensive on-site guidance to the inspector
     general staff to ensure that we could rely on their audit
     conclusions. 

  -- To promote more comprehensive audits of federal information
     security, in August 1997, we issued an exposure draft of our
     Federal Information System Controls Audit Manual
     (GAO/AIMD-12.19.6), which describes a methodology for evaluating
     federal agency information security programs.  This methodology
     has guided our own audit work for several years and has recently
     been adopted by many agency inspectors general. 

  -- To assist in improving the expertise of federal audit staff, we
     have engaged contractors and partnered with organizations, such
     as the Information Systems Audit and Control Association, to
     offer technical training sessions for GAO and IG staff involved
     in evaluating computer-based controls. 

  -- To promote a broader understanding among federal managers of the
     practices that make an information security program successful,
     during 1997, we studied the practices of eight nonfederal
     organizations and developed an executive guide that summarizes
     the results.  This guide, entitled Information Security
     Management:  Learning From Leading Organizations
     (GAO/AIMD-98-68) was published in May 1998.  We are now working
     with agencies, including OMB, and the CIO Council to encourage
     agencies to implement these practices. 

  -- To promote more effective central leadership, oversight, and
     coordination, we are continuing to monitor and work with OMB,
     the CIO Council, NIST, and others with a governmentwide role
     regarding information security, including entities established
     under Presidential Decision Directive 63 to protect our nation's
     critical infrastructures. 

  -- To assist the Congress, we are continuing to provide status
     reports on information security as a high-risk issue and
     information on related topics, as requested. 


SIGNIFICANT WEAKNESSES IDENTIFIED
AT ALL MAJOR AGENCIES
============================================================ Chapter 2

Evaluations of computer security published since March 1996 present a
disturbing picture of the federal government's lack of success in
protecting its assets from fraud and misuse, sensitive information
from inappropriate disclosure, and critical operations from
disruption.  Significant information security weakness were
identified in each of the 24 agencies covered by our
analysis--agencies that in fiscal year 1997 accounted for 99 percent
of reported federal net outlays.  These weaknesses place a broad
range of critical operations and assets at risk for fraud, misuse,
and disruption.  In addition, they place an enormous amount of highly
sensitive data, much of it on individual taxpayers and beneficiaries,
at risk of inappropriate disclosure. 

Weaknesses were reported in a variety of areas that we have
categorized into six areas of "general controls." General controls
are the policies, procedures, and technical controls that apply to
all or a large segment of an entity's information systems and help
ensure their proper operation.  The most widely reported weakness was
poor control over access to sensitive data and systems.  This type of
weakness makes it possible for an individual or group to
inappropriately modify, destroy, or disclose sensitive data or
computer programs for purposes such as personal gain or sabotage.  In
today's increasingly interconnected computing environment, poor
access controls can expose an agency's information and operations to
attacks from remote locations all over the world by individuals with
minimal computer and telecommunications resources and expertise. 

The full extent of control problems is not known because all six of
the general control areas were reviewed at only 9 of the 24 agencies. 
In particular, most audits have not yet covered controls associated
with system software, which are critical to the security of all
applications supported by a system.  In agencies where this control
area was reviewed, weaknesses were always found, as shown in table 1. 

Table 1 provides an overview of the types of weaknesses reported
throughout the government, as well as the gaps in audit coverage. 
The pages following Table 1 describe (1) the risks these weaknesses
pose to major federal operations and (2) common types of deficiencies
identified in each of the six general control categories. 



                               Table 2.1
                
                 Areas of Information Security Weakness
                  Reported for the 24 Largest Agencies

                                            Number of agencies
                                    ----------------------------------
                                                        No
                                    Significan  significan
                                    t weakness  t weakness    Area not
General control area                identified  identified    reviewed
----------------------------------  ----------  ----------  ----------
Entitywide security program                 17           0           7
 planning and management
Access controls                             23           0           1
Application software development            14           4           6
 and change controls
Segregation of duties                       16           1           7
System software controls                     9           0          15
Service continuity controls                 20           0           4
----------------------------------------------------------------------
Note:  Most of the audits used to develop this table were performed
as part of financial statement audits.  At some agencies with
primarily financial-related missions, such as the Department of the
Treasury and the Social Security Administration, these audits covered
the bulk of mission-related operations.  However, at other agencies
whose missions are primarily nonfinancial, such as the Departments of
Defense and Justice, the audits used to develop this table may
provide a less complete picture of the agency's overall security
posture because the audit objectives focused on the financial
statements and did not include evaluating systems supporting
nonfinancial operations.  Nevertheless, at agencies where
computer-based controls over nonfinancial operations have been
audited, similar weaknesses have been identified. 


   EXAMPLES OF WEAKNESSES AT
   INDIVIDUAL AGENCIES HIGHLIGHT
   RISKS
---------------------------------------------------------- Chapter 2:1

To understand the significance of the weaknesses summarized in table
1, it is necessary to link them to the risks they present to federal
operations and assets.  Virtually all federal operations are
supported by automated systems and electronic data, and agencies
would find it difficult, if not impossible, to carry out their
missions and account for their resources without these information
assets.  Descriptions of reported weaknesses and related risks to
selected major federal operations follow. 


      DEPARTMENT OF THE TREASURY
-------------------------------------------------------- Chapter 2:1.1

The Department of the Treasury, which includes the Internal Revenue
Service; U.S.  Customs Service; Bureau of the Public Debt; Financial
Management Service; and Bureau of Alcohol, Tobacco, and Firearms;
relies on computer systems to process, collect or disburse, and
account for over a trillion dollars in federal receipts and payments
annually.  In addition, the department's computers handle enormous
amounts of highly sensitive data associated with taxpayer records and
law enforcement operations and support operations critical to
financing the federal government, maintaining the flow of benefits to
individuals and organizations, and controlling imports and exports. 

Protecting these operations and assets is essential to the welfare of
our nation.  However, weaknesses have been reported for several of
Treasury's major bureaus, and, in some cases, these weaknesses have
been outstanding for years.  For example: 

  -- In March 1998, the Treasury IG reported that deficiencies in the
     effectiveness of computer-based controls in multiple bureaus
     constituted a material weakness in the department's internal
     control structure and increased the risk that unauthorized
     individuals could intentionally or inadvertently add, alter, or
     delete sensitive data and programs.\1

  -- In three 1997 reports,\2 we identified a wide range of
     continuing serious weaknesses in IRS systems, including
     inadequate controls over employee browsing of taxpayer records,
     an area that has received considerable attention for several
     years and was recently addressed by legislation specifying
     penalties for such browsing.\3

  -- In March 1998, the Treasury IG reported Customs Service
     weaknesses associated with systems supporting trade, financial
     management, and law enforcement functions.  Many of these
     weaknesses had been reported annually since 1994.\4

Numerous recommendations have been made to Treasury bureaus over the
years to correct these weaknesses, and many corrective actions are
underway.  In particular, IRS recently began a broad effort to
strengthen its overall security program by centralizing
responsibility for security issues within a newly created
executive-level office and increasing investments in physical
security.  Further, the Financial Management Service concurred with
our recommendations and is developing corrective action plans. 


--------------------
\1 Report on the Department of the Treasury's Fiscal Year 1997
Custodial Schedules and Administrative Statements (OIG-98-066, March
30, 1998), as included in the Department of the Treasury's
Accountability Report for Fiscal Year 1997. 

\2 IRS Systems Security:  Tax Processing Operations and Data Still at
Risk Due to Serious Weaknesses (GAO/AIMD-97-49, April 8, 1997);
Financial Audit:  Examination of IRS' Fiscal Year 1996 Administrative
Financial Statements (GAO/AIMD-97-89, August 29, 1997); Financial
Audit:  Examination of IRS' Fiscal Year 1996 Custodial Financial
Statements (GAO/AIMD-98-18, December 24, 1997). 

\3 Taxpayer Browsing Protection Act (Public Law 105-35). 

\4 Department of the Treasury's Inspector General Report:  Report on
the U.S.  Customs Service's Fiscal Years 1997 and 1996 Financial
Statements (OIG-98-050, March 5, 1998). 


      DEPARTMENT OF DEFENSE
-------------------------------------------------------- Chapter 2:1.2

The Department of Defense (DOD) relies on a vast and complex
information infrastructure to support critical operations such as
designing weapons, identifying and tracking enemy targets, paying
soldiers, mobilizing reservists, and managing supplies.  Indeed, its
very warfighting capability is dependent on computer-based
telecommunications networks and information systems.  Defense's
computer systems are particularly susceptible to attack through
connections on the Internet, which Defense uses to enhance
communication and information sharing. 

In May 1996, we reported that attacks on Defense computer systems
were a serious and growing threat.\5 The exact number of attacks
could not be readily determined because tests showed that only a
small portion were actually detected and reported.  However, the
Defense Information Systems Agency estimated that attacks numbered in
the hundreds of thousands per year, were successful 65 percent of the
time, and that the number of attacks was doubling each year.  At a
minimum, these attacks are a multimillion dollar nuisance to Defense. 
At worst, they are a serious threat to national security.  According
to Defense officials, attackers have obtained and corrupted sensitive
information--they have stolen, modified, and destroyed both data and
software.  They have installed unwanted files and "back doors" which
circumvent normal system protection and allow attackers unauthorized
access in the future.  They have shut down and crashed entire systems
and networks, denying service to users who depend on automated
systems to help meet critical missions.  Numerous Defense functions
have been adversely affected, including weapons and supercomputer
research, logistics, finance, procurement, personnel management,
military health, and payroll.  In March 1998, DOD announced that it
had recently identified a series of organized intrusions, indicating
that such events continue to be a problem. 

The same weaknesses that allow attacks from outsiders could also be
exploited by authorized users to commit fraud or other improper or
malicious acts.  In fact, a knowledgeable insider with malicious
intentions can be a more serious threat to many operations since he
or she is more likely to know of system weaknesses and how to
disguise inappropriate actions. 

Subsequent reports have identified a broad array of specific control
weaknesses that increase the risks of damage from such attacks, as
well as from malicious acts and inadvertent mistakes by authorized
users.  For example, in September 1997, we reported that Defense had
not adequately (1) controlled the ability of computer programmers to
make changes to systems supporting the Military Retirement Trust
Fund, (2) controlled access to sensitive information on pension fund
participants, or (3) developed or tested a comprehensive disaster
recovery plan for the sites that process Fund data.  These weaknesses
expose sensitive data maintained by these systems to unnecessary risk
of disclosure and, should a disaster occur, there is no assurance
that the operations supported by these facilities could be restored
in a timely manner.\6 Similarly, In October 1997, the Defense IG
reported serious authentication and access control weaknesses
associated with a system that, in fiscal year 1996, maintained
contract administration and payment data associated with a reported
387,000 contracts for which the reported value was over $810
billion.\7 Weaknesses in other areas, too sensitive to be reported
publicly, pose risks of more serious consequences. 

Reports to DOD have included numerous recommendations related to
specific control weaknesses as well as the need for improved security
program management.  DOD is taking a variety of steps to address
these problems and is establishing the Departmentwide Information
Assurance Program to improve and better coordinate the information
security-related activities of the military services and other DOD
components. 


--------------------
\5 Information Security:  Computer Attacks at Department of Defense
Pose Increasing Risks (GAO/AIMD-96-84, May 22, 1996). 

\6 Financial Management:  Review of the Military Retirement Trust
Fund's Actuarial Model and Related Computer Controls
(GAO/AIMD-97-128, September 9, 1997). 

\7 General and Application Controls Over the Mechanization of
Contract Administration Services System, DODIG, Report Number 98-007,
October 9, 1997. 


      DEPARTMENT OF HEALTH AND
      HUMAN SERVICES
-------------------------------------------------------- Chapter 2:1.3

In August 1997 and April 1998, the Health and Human Services (HHS) IG
reported serious control weaknesses affecting the reliability,
confidentiality, and availability of data throughout the
department.\8 Most significant were weaknesses associated with the
Department's Health Care Financing Administration (HCFA), which,
according to its reports, was responsible for processing health care
claims for over 38 million beneficiaries and expending 84 percent of
HHS' $340 billion fiscal year 1997 budget.  HCFA relies on extensive
data processing operations at its central office and about 60
contractors using multiple shared systems to collect, analyze and
process personal health, financial, and medical data associated with
about 853 million Medicare claims, annually. 

In the 1997 report, the IG reported that Medicare contractors were
not adequately protecting confidential personal and medical
information associated with claims submitted.  As a result,
contractor employees could potentially browse data on individuals,
search out information on acquaintances or others, and, possibly,
sell or otherwise use this information for personal gain or malicious
purposes.  Similar conditions were reported in 1998. 

In the 1998 report, the IG reported that data security remained a
major concern at HCFA's central office.  Auditor's tests showed that
although HCFA corrected weaknesses found in the prior year, it was
possible to gain access to the mainframe database and modify managed
care production files.  In addition, the IG found that users without
specific authorization could potentially gain update access to those
same files.  Further, as reported in 1997 and 1998, because controls
over operating system software were ineffective, knowledgeable
individuals could surreptitiously modify or disable security controls
without detection. 

In both its 1997 and 1998 reports, the IG recommended that (1)
systems access be properly controlled, passwords be granted
consistent with assigned responsibilities, and passwords be
periodically changed, (2) application development and program change
control procedures be in place to protect against unauthorized
changes, (3) computer-related duties be properly segregated, and (4)
service continuity plans be kept current and periodically tested. 
HHS has recognized the need to protect the security of information
technology systems and the data contained in them.  Starting in 1997,
HHS began to revise security policies and guidance and required each
major operating division to develop and implement corrective action
plans to address each major weakness identified in the August 1997
report. 


--------------------
\8 Report on the Financial Statement Audit of the Department of
Health and Human Services for Fiscal Year 1996 (A-17-96-0001, August
29, 1997) and Report on the Financial Statement Audit of the
Department of Health and Human Services for Fiscal Year 1997
(A-17-98-0001, April 1, 1998). 


      SOCIAL SECURITY
      ADMINISTRATION
-------------------------------------------------------- Chapter 2:1.4

The Social Security Administration (SSA) relies on extensive
information processing resources to carry out its operations, which,
for 1997, included payments that totaled $390 billion to 50 million
beneficiaries.  This represents about 25 percent of the $1.6 trillion
in that year's federal expenditures.  The administration also issues
social security numbers and maintains earnings records and other
personal information on virtually all U.  S.  citizens.  According to
SSA, no other public program or public-service entity directly
touches the lives of so many people. 

The public depends on SSA to protect trust fund revenues and assets
from fraud and to protect sensitive information on individuals from
inappropriate disclosure.  In addition, many current beneficiaries
rely on the uninterrupted flow of monthly payments to meet their
basic needs.  However, in November 1997, the Social Security
Administration IG reported widespread weaknesses in controls over
access, continuity of service, and software program changes that
unnecessarily place these assets and operations at risk.\9

Access control weaknesses exposed the agency and its computer systems
to external and internal intrusion, thus subjecting sensitive SSA
information to potential unauthorized access, modification, or
disclosure.  Other weaknesses increased risks of introducing errors
or irregularities into data processing operations and allowed some
individuals to bypass critical controls, such as authorization and
supervisory review. 

Such weaknesses increase the risk that an individual or group could
fraudulently obtain payments by creating fictitious beneficiaries or
increasing payment amounts.  Similarly, such individuals could
secretly obtain sensitive information and sell or otherwise use it
for personal gain.  The recent growth in "identity theft," where
personal information is stolen and used fraudulently by impersonators
for purposes such as obtaining and using credit cards, has created a
market for such information.  According to the SSA IG's September 30,
1997, report to the Congress (included in the SSA's fiscal year 1997
Accountability Report), 29 criminal convictions involving SSA
employees were obtained during fiscal year 1997, most of which
involved creating fictitious identities, fraudulently selling SSA
cards, misappropriating refunds, or abusing access to confidential
information. 

In two separate letters issued to SSA management, the IG and its
contractor made recommendations to address the weaknesses reported in
November 1997.  SSA agreed with the majority of the recommendations
in the first letter and has developed related corrective action
plans.  The Administration is still reviewing the second set of
recommendations and planning related corrective actions. 


--------------------
\9 Social Security Accountability Report for Fiscal Year 1997, SSA
Pub.  No.  31-231, November 1997. 


      DEPARTMENT OF VETERANS
      AFFAIRS
-------------------------------------------------------- Chapter 2:1.5

The Department of Veterans Affairs (VA) relies on a vast array of
computer systems and telecommunications networks to support its
operations and store the sensitive information the department
collects in carrying out its mission.  In September 1998, we reported
that general computer control weaknesses placed critical VA
operations, such as financial management, healthcare delivery,
benefit payments and life insurance services at risk of misuse and
disruption.\10 In addition, sensitive information contained in VA's
systems, including financial transaction data and personal
information on veteran medical records and benefit payments, was
vulnerable to inadvertent or deliberate misuse, fraudulent use,
improper disclosure, or destruction--possibly occurring without
detection. 

VA operates the largest healthcare delivery system in the United
States and guarantees loans on about 20 percent of the homes in the
country.  In fiscal year 1997, VA spent over $17 billion on medical
care and processed over 40 million benefit payments totaling over $20
billion.  The department also provided insurance protection through
more than 2.5 million policies that represented about $24 billion in
coverage at the end of fiscal year 1997.  In addition, the VA systems
support the department's centralized accounting and payroll
functions.  In fiscal year 1997, VA's payroll was almost $11 billion,
and the centralized accounting system generated over $7 billion in
additional payments. 

In our report, we noted significant problems related to the
department's control and oversight of access to its systems.  VA did
not adequately limit the access of authorized users or effectively
manage user identifications and passwords.  The department also had
not established effective controls to prevent individuals, both
internal and external, from gaining unauthorized access to VA
systems.  VA's access control weaknesses were further compounded by
ineffective procedures for overseeing and monitoring systems for
unusual or suspicious access activities. 

In addition, the department was not providing adequate physical
security for its computer facilities, by not assigning duties in such
a way as to segregate incompatible functions, controlling changes to
powerful operating system software, or updating and testing disaster
recovery plans to prepare its computer operations to maintain or
regain critical functions in emergencies.  Many of these access and
other general computer control weaknesses were similar to weaknesses
that had been previously identified by VA's Office of Inspector
General and consultant evaluations. 

A primary reason for VA's continuing general computer control
problems is that the department does not have a comprehensive
computer security planning and management program.  An effective
program would include guidance and procedures for assessing risks and
mitigating controls, and monitoring and evaluating the effectiveness
of established controls. 

In our report to VA, we recommended that the Secretary direct the CIO
to (1) work with the other VA CIOs to address all identified computer
control weaknesses, (2) develop and implement a comprehensive
departmentwide computer security planning and management program, and
(3) monitor and periodically report on the status of improvements to
computer security throughout the department.  In commenting on this
report, VA agreed with these recommendations and stated that the
department would immediately correct the identified computer control
weaknesses and was developing plans to correct deficiencies
previously identified by the VA IG and by internal evaluations. 


--------------------
\10 VA Information Systems:  Computer Control Weaknesses Increase
Risk of Fraud, Misuse and Improper Disclosure (GAO/AIMD-98-175,
September 23, 1998). 


      DEPARTMENT OF STATE
-------------------------------------------------------- Chapter 2:1.6

In May 1998, we reported that the Department of State did not have a
program for comprehensively managing the information security risks
associated with its many sensitive operations.\11 State relies on
numerous decentralized information systems and networks to carry out
its worldwide responsibilities and support business functions. 
Unclassified data stored in these systems are sensitive and make an
attractive target for individuals and organizations desiring to learn
about and damage State operations.  For example, computerized
information on Americans and Foreign Service Nationals, such as
personnel records, pay data, private health records, and background
investigation information about employees being considered for
national security clearances could be useful to foreign governments
wishing to build personnel profiles, and its disclosure might
unnecessarily endanger State employees. 

Despite its reliance on computers, State (1) lacked a central
security management group to oversee and coordinate security
activities, (2) did not routinely perform risk assessments so that
its sensitive information could be protected based on its
sensitivity, criticality, and value, (3) relied on a primary
information security policy document that was outdated and
incomplete, (4) did not adequately ensure that computer users were
fully aware of risks and of their responsibilities for protecting
sensitive information, and (5) lacked key controls for monitoring and
evaluating the effectiveness of its security program, including
procedures for responding to security incidents. 

We also noted that State's information systems and the information
contained within them were vulnerable to access, change, disclosure,
disruption or even denial of service by unauthorized individuals. 
Our penetration tests, which were designed to determine how
susceptible State's systems were to unauthorized access, revealed
that it was possible to access sensitive information.  Further, these
tests went largely undetected, further underscoring the department's
serious vulnerability.  As a result, individuals or organizations
seeking to damage State operations, commit terrorism, or obtain
financial gain could possibly exploit the department's information
security weaknesses. 

In our report to State, we made a variety of recommendations directed
toward improving the department's management of its information
security efforts and assisting State in developing a comprehensive
information security program.  State formally acknowledged weaknesses
in its information security management and generally agreed with our
recommendations.  Senior State managers say that their commitment to
improving information security has increased but that fully
implementing our recommendations will require time and resources. 


--------------------
\11 Computer Security:  Pervasive, Serious Weaknesses Jeopardize
State Department Operations (GAO/AIMD-98-145, May 18, 1998). 


      DEPARTMENT OF JUSTICE
-------------------------------------------------------- Chapter 2:1.7

In September 1997, the Department of Justice IG reported serious
departmentwide computer-based control weaknesses that jeopardized a
number of sensitive operations.\12

Access controls were weak over files supporting various operations at
the Federal Bureau of Investigation, Drug Enforcement Administration,
Immigration and Naturalization Service, and the U.S.  Marshals
Service.  User passwords were not required to be changed, security
software was not configured to prevent access by inactive users,
system programmers had been inappropriately provided the ability to
make numerous types of modifications to files that would allow them
to circumvent security controls or assist others in such actions. 
Program change control procedures for system and application software
were not formally documented or uniformly followed, increasing the
risk that unauthorized software changes or unintentional errors could
be made.  Further, the IG reported that the department did not have a
plan to recover primary systems, critical data processing
applications, or key business processes in the event of a disaster. 
An underlying problem was that written security policies and
procedures were outdated and did not define the roles and
responsibilities of managers and others with security
responsibilities.  The Department of Justice management agreed with
the findings and has stated that each departmental component will
work with Justice's CIO to develop corrective actions. 


--------------------
\12 U.S.  Department of Justice Annual Financial Statement for Fiscal
Year 1996 (DOJ/OIG-97-24B, September 1997). 


      OTHER FEDERAL OPERATIONS
-------------------------------------------------------- Chapter 2:1.8

Examples of risks at other agencies include the following: 

  -- In May 1998, we reported that weak computer security practices
     at the Federal Aviation Administration (FAA) jeopardize flight
     safety.\13 FAA's air traffic control network is an enormous,
     complex collection of interrelated systems, including
     navigation, surveillance, weather, and automated information
     processing and display systems that reside at, or are associated
     with, hundreds of facilities.  All the critical areas included
     in our review--facilities physical security, operational systems
     information security, future systems modernization security, and
     management structure and policy implementation were ineffective. 
     For example, in the physical security area, a March 1997
     inspection of one facility that controls aircraft disclosed 13
     physical security weaknesses, including unauthorized personnel
     being granted unescorted access to restricted areas.  FAA is
     unaware of the weaknesses and vulnerabilities that may currently
     exist at other locations because the agency has not assessed the
     physical security controls at 187 facilities since 1993.  When
     we met with FAA officials in late July 1998, they acknowledged
     that major improvements are needed in all areas of FAA's
     security program and discussed preliminary efforts to address
     most of our recommendations. 

  -- In April 1997, the Department of Transportation's IG identified
     multiple security exposures in the Department's extended wide
     area network which connects hundreds of local area networks and
     50,000 computer workstations that support operations throughout
     the department, including the Federal Aviation Administration,
     Federal Highway Administration, United States Coast Guard,
     Federal Railroad Administration, National Highway Safety Traffic
     Administration as well as DOT headquarters.\14

  -- In April 1997, the Department of Housing and Urban Development's
     IG identified a variety of weaknesses that affected systems
     critical to supporting all facets of the department's
     operations, including providing (1) housing subsidies for low
     and moderate income families, (2) grants to states and
     communities, and (3) direct loans for construction and
     rehabilitation of housing projects.\15 In particular, weaknesses
     associated with an application that annually processed over $9
     billion in disbursements increased the risk of over or
     underpayments to housing authorities, inaccurate budget
     projections, and users maliciously entering unauthorized
     transactions for payments. 

  -- In July 1997, the audit of the Department of Education's fiscal
     year 1996 and 1995 financial statements reported access control
     weaknesses in the Payment Management System, which controlled
     disbursements of over $28 billion annually.  As a result,
     unauthorized users could potentially have accessed confidential
     data, changed data, made unauthorized payments, or disabled the
     system.\16

  -- In April 1997, the Department of the Interior's IG reported\17
     that the Bureau of Indian Affairs' had not implemented an
     effective system security program for the Bureau's major and
     sensitive mainframe applications, including the Land Records
     Information System and the Individual Indian Monies System, that
     processed approximately 2.5 million transactions weekly.  In
     particular, the Bureau had inadequate (1) access controls over
     the mainframe computers, (2) software development and change
     controls, and (3) segregation of duties for the systems support
     functions, including data administration, data security, and
     quality assurance/testing.  In addition, a service continuity
     plan had not been developed and the off-site storage facility
     was not secure or environmentally protected. 

  -- In March 1997, the Department of Commerce Inspector General
     reported material weaknesses at several Commerce Bureaus.  For
     example, the Economic Development Administration, which managed
     a $1 billion grant program in fiscal year 1997, did not
     adequately segregate programming responsibilities or adequately
     restrict access to its information systems.  Inappropriately
     segregated duties can lead to implementation of unauthorized or
     inadequately tested programs.  Further, unrestricted access can
     lead to accidental or intentional changes to program data.\18

Recommended corrective actions have been provided to each of these
agencies, and many have begun to implement them. 


--------------------
\13 Air Traffic Control:  Weak Computer Security Practices Jeopardize
Flight Safety (GAO/AIMD-98-155 May 18, 1998). 

\14 Report on the Department of Transportation Fiscal Year 1996
Consolidated Financial Statement (AD-OT-7-004, April 10, 1997). 

\15 Audit of the U.S.  Department of Housing and Urban Development's
Fiscal Year 1996 Financial Statements (97-FO-177-0003, April 10,
1997). 

\16 U.S.  Department of Education Fiscal Years 1996 and 1995
Financial Statements and Accompanying Notes, Price Waterhouse, LLP
July 31, 1997. 

\17 Audit Report on General Controls Over Automated Information
Systems, Operations Service Center, Bureau of Indian Affairs (Number
97-I-771, April 30, 1997). 

\18 The U.S.  Department of Commerce Consolidating Financial
Statements Fiscal Year 1996 (Audit Report No FSD-9355-7-0001, March
1997) (attachment 1, Department of Commerce IG report, Economic
Development Administration report, p.  5). 


   ALTHOUGH NATURE OF RISKS VARY,
   CONTROL WEAKNESSES ACROSS
   AGENCIES ARE SIMILAR
---------------------------------------------------------- Chapter 2:2

Although the nature of agency operations and the related risks vary,
there are striking similarities in the specific types of general
control weaknesses reported and in their serious negative impact on
an agency's ability to ensure the integrity, availability, and
appropriate confidentiality of its computerized operations.  In many
cases, agencies have developed policies and begun to implement
control techniques that could provide effective security.  However,
they have not yet done enough to ensure that these policies and
controls remain effective on an ongoing basis.  The following
sections describe each of the six areas of general controls and the
specific weaknesses that were most widespread at the agencies covered
by our analysis. 


      ENTITYWIDE SECURITY PROGRAM
      PLANNING AND MANAGEMENT
-------------------------------------------------------- Chapter 2:2.1

Each organization needs a set of management procedures and an
organizational framework for identifying and assessing risks,
deciding what policies and controls are needed, periodically
evaluating the effectiveness of these policies and controls, and
acting to address any identified weaknesses.  These are the
fundamental activities that allow an organization to manage its
information security risks cost effectively, rather than reacting to
individual problems ad hoc only after a violation has been detected
or an audit finding has been reported. 

Despite the importance of this aspect of an information security
program, we found that poor security planning and management was a
widespread problem.  Of 17 agencies where this aspect of security was
reviewed, all had deficiencies.  Many agencies had not developed
security plans for major systems based on risk, had not formally
documented security policies, and had not implemented a program for
testing and evaluating the effectiveness of the controls they relied
on.  Examples include the following. 

  -- In August 1997, the IG at the Department of Health and Human
     Services reported that the Health Care Financing Agency had not
     reviewed internal controls or developed security plans for its
     computer center, telecommunications networks, or significant
     applications.  Further, it did not have a consistent set of
     policies for overseeing the effectiveness of security at its
     contractor locations.\19

  -- In July 1997, the Department of the Treasury IG reported that
     the Bureau of Alcohol, Tobacco and Firearms had not developed
     formal policies, standards, and procedures; had not established
     a formal program for security awareness and training; and had
     not identified all of its major applications.\20

  -- In April 1997, we reported that the Internal Revenue Service
     needed to strengthen computer security management and that its
     approach to computer security was not effective in preventing
     serious and persistent computer security control weaknesses that
     exposed tax processing operations to the serious risk of
     disruption and taxpayer data to the risk of unauthorized use,
     modification, and destruction.\21

  -- In May 1997, independent auditors recommended that the Office of
     Personnel Management develop security plans, identify system
     owners, and require periodic independent reviews of security
     controls.\22

  -- In May 1996, we reported that the Department of Defense needed
     to establish a more comprehensive information systems security
     program.  Specific weaknesses included (1) outdated and
     incomplete policies for detecting and reacting to computer
     attacks, (2) lack of awareness among computer users, and (3)
     inadequately trained system and network administrators.\23

As a result of these types of deficiencies, agencies (1) were not
fully aware of the information security risks to their operations,
(2) had accepted an unknown level of risk by default rather than
consciously deciding what level of risk was tolerable, (3) had a
false sense of security because they were relying on controls that
were not effective, and (4) could not make informed judgments as to
whether they were spending too little or too much of their resources
on security.  Security program management is discussed in greater
detail in chapter 3. 


--------------------
\19 Report on the Financial Statement Audit of the Department of
Health and Human Services for Fiscal Year 1996 (A-17-96-00001, August
29, 1997). 

\20 Audit of the Bureau of Alcohol, Tobacco, and Firearms Fiscal
Years 1996 and 1995 Financial Statements (OIG-97-094, July 9, 1997). 

\21 IRS Systems Security:  Tax Processing Operations and Data Still
at Risk Due to Serious Weaknesses (GAO/AIMD-97-49, April 8, 1997). 

\22 Financial Statements, Fiscal Year 1996, U.S.  Office of Personnel
Management, Independent Auditors' Report (May 30, 1997). 

\23 Information Security:  Computer Attacks at Department of Defense
Pose Increasing Risks (GAO/AIMD-96-84, May 22, 1996). 


      ACCESS CONTROLS
-------------------------------------------------------- Chapter 2:2.2

Access controls limit or detect inappropriate access to computer
resources (data, equipment, and facilities) thereby protecting these
resources against unauthorized modification, loss, and disclosure. 
Access controls include physical protections, such as gates and
guards, as well as logical controls, which are controls built into
software that (1) require users to authenticate themselves through
the use of secret passwords or other identifiers and (2) limit the
files and other resources that an authenticated user can access and
the actions that he or she can execute.  Without adequate access
controls, unauthorized individuals, including outside intruders or
terminated employees, can surreptitiously read and copy sensitive
data and make undetected changes or deletions for malicious purposes
or personal gain.  In addition, authorized users could
unintentionally modify or delete data or execute changes that are
outside of their span of authority. 

For access controls to be effective, they must be properly
implemented and maintained.  First, an organization must analyze the
responsibilities of individual computer users to determine what type
of access (e.g., read, modify, delete) they need to fulfill their
responsibilities.  Then, specific control techniques, such as
specialized access control software, must be implemented to restrict
access to these authorized functions.  Such software can be used to
limit a user's activities associated with specific systems or files
and to keep records of individual users' actions on the computer. 
Finally, access authorizations and related controls must be
maintained and adjusted on an ongoing basis to accommodate new or
terminated employees and changes in users' responsibilities and
related access needs. 

Access control weaknesses were reported for all 23 of the agencies
for which this area of controls was evaluated.  Specific common
problems included the following. 

  -- Managers had not precisely identified access needs for
     individual users or groups of users.  Instead, they had provided
     overly broad access privileges to very large groups of users. 
     As a result, far more individuals than necessary had the ability
     to browse and, sometimes, modify or delete sensitive or critical
     information.  At one agency, for instance, a number of
     interconnected systems with very poorly implemented access
     controls were accessible from remote locations by anyone who had
     the telephone number for the supporting network.  Because access
     controls associated with both the network and the systems were
     weak, an anonymous intruder could easily have dialed into the
     network, accessed any one of several systems, and committed any
     number of malicious actions, including reading, modifying, and
     deleting both data and other users' access rights and severely
     disrupting service.  At another agency, 90 employees could
     change amounts available to grantees and contractors associated
     with an $8 billion grant program. 

  -- Access was not appropriately authorized and documented.  For
     example, at one agency, user access was verbally requested and
     approved and no related documentation was maintained. 

  -- Users shared accounts and passwords or posted their passwords in
     plain view, making it impossible to trace specific transactions
     or modifications to an individual.  Also, use of default, easily
     guessed, and unencrypted passwords significantly increased the
     risk of unauthorized access. 

  -- Software access controls were improperly implemented, resulting
     in unintended access or gaps in access control coverage.  For
     example, at one agency location, any one of 17,000 system users
     could search, view, and print information in any of the other
     users' print files because access to temporary files holding
     users' output was not adequately restricted. 

  -- User activity was not adequately monitored to deter and identify
     inappropriate actions, and when suspicious activity was noticed,
     it was often not investigated nor the perpetrator penalized. 
     For example, records of user activity, referred to as audit
     logs, were either not maintained, not maintained in a useable
     format, or were too voluminous to be practical.  As a result, it
     was either not possible or practical to review these logs to
     identify inappropriate actions and link any such actions to
     individual users.  Such monitoring is especially important to
     prevent users with access to sensitive data from inappropriately
     browsing data that do not pertain to the work at hand and to
     identify activity indicating an intrusion into a network or
     system.  However, tests showed that most attacks at this agency
     were not detected and reported. 

  -- Access was not promptly terminated when users either left the
     agency or adjusted when their responsibilities no longer
     required them to have access to certain files.  In addition,
     inactive user identifications were not routinely identified and
     deleted.  As a result, contractors and former employees who were
     no longer associated with the agency, could still read, modify,
     copy, or delete data, and employees who changed positions within
     an agency had access to files that were not needed in their new
     positions.  For example, at one location, automated controls
     were set to allow former employees access for 90 days after
     their employment had terminated. 

To illustrate the risks associated with poor authentication and
access controls, in recent years, we have begun to incorporate
penetration testing into our audits of information security.  Such
tests involve attempting to gain unauthorized access to sensitive
files and data by searching for ways to circumvent existing controls,
often from remote locations.  Unfortunately, our auditors have been
successful, in almost every test, in readily gaining unauthorized
access that would allow intruders to read, modify, or delete data for
whatever purpose they had in mind. 


      APPLICATION SOFTWARE
      DEVELOPMENT AND CHANGE
      CONTROLS
-------------------------------------------------------- Chapter 2:2.3

Application software development and change controls prevent
unauthorized software programs or modifications to programs from
being implemented.  Key aspects of such controls are ensuring that
(1) software changes are properly authorized by the managers
responsible for the agency program or operations that the application
supports, (2) new and modified software programs are tested and
approved prior to their implementation, and (3) approved software
programs are maintained in carefully controlled libraries to protect
them from unauthorized changes and ensure that different versions are
not misidentified. 

Such controls can prevent both errors in software programming as well
as malicious efforts to insert unauthorized computer program code. 
Without adequate controls, incompletely tested or unapproved software
can result in erroneous data processing that, depending on the
application, could lead to losses or faulty outcomes.  In addition,
individuals could surreptitiously modify software programs to include
processing steps or features that could later be exploited for
personal gain or sabotage. 

The effectiveness of software change controls is of particular
concern as agencies design, test, and implement changes to ensure
that their computer software will properly handle the year-2000 date
change.  As the end of the millennium approaches, agencies are under
increasing pressure to ensure that their computers can distinguish
between the year 1900 and the year 2000, since many use only the last
two digits when identifying years.  In an effort to accomplish these
changes on time, agencies may be forced to speed up their software
change process and increase their reliance on newly hired personnel
or contractors.  In such an environment, it will be especially
important to ensure that software changes are properly tested and
approved before they are implemented. 

Weaknesses in software program change controls were identified for 14
of the 18 agencies where such controls were evaluated.  The most
common types of weaknesses in this area included the following: 

  -- Testing procedures were undisciplined and did not ensure that
     implemented software operated as intended.  For example, at one
     agency, changes were made directly to software programs in
     operation rather than in a separate and controlled test
     environment, increasing the risk that erroneous or unauthorized
     software would result in miscalculations of pension liability. 

  -- Implementation procedures did not ensure that only authorized
     software was used.  In particular, procedures did not ensure
     that emergency changes were subsequently tested and formally
     approved for continued use and that implementation of
     "locally-developed" unauthorized software programs was prevented
     or detected. 

  -- Access to software program libraries was inadequately
     controlled.  For example, at one agency, most system users--over
     13,000 individuals--had the ability to modify application
     programs that processed millions of dollars in financial
     transactions.  At another agency, approximately 16,000 users had
     unrestricted access to application programs, which allowed them
     to modify and delete programs and data. 


      SEGREGATION OF DUTIES
-------------------------------------------------------- Chapter 2:2.4

Segregation of duties refers to the policies, procedures, and
organizational structure that help ensure that one individual cannot
independently control all key aspects of a process or
computer-related operation and thereby conduct unauthorized actions
or gain unauthorized access to assets or records without detection. 
For example, one computer programmer should not be allowed to
independently write, test, and approve program changes. 

Although segregation of duties, alone, will not ensure that only
authorized activities occur, inadequate segregation of duties
increases the risk that erroneous or fraudulent transactions could be
processed, that improper program changes could be implemented, and
that computer resources could be damaged or destroyed.  For example,

  -- an individual who was independently responsible for authorizing,
     processing, and reviewing payroll transactions could
     inappropriately increase payments to selected individuals
     without detection; or

  -- a computer programmer responsible for authorizing, writing,
     testing, and distributing program modifications could either
     inadvertently or deliberately implement computer programs that
     did not process transactions in accordance with management's
     policies or that included malicious code. 

Controls to ensure appropriate segregation of duties consist mainly
of documenting, communicating, and enforcing policies on group and
individual responsibilities.  Enforcement can be accomplished by a
combination of physical and logical access controls and by effective
supervisory review. 

Segregation of duties was evaluated at 17 of the 24 agencies covered
by our analysis.  Weaknesses were identified at 16 of these agencies. 
Common problems involved computer programmers and operators who were
authorized to perform a wide variety of duties, thus providing them
the ability to independently modify, circumvent, and disable system
security features.  For example, at one data center, a single
individual could independently develop, test, review, and approve
software changes for implementation.  Segregation of duty problems
also were identified related to transaction processing.  For example,
at one agency, all users of the financial management system could
independently perform all of the steps needed to initiate and
complete a payment--obligate funds, record vouchers for payment, and
record checks for payment--making it relatively easy to make a
fraudulent payment. 


      SYSTEM SOFTWARE CONTROLS
-------------------------------------------------------- Chapter 2:2.5

System software controls limit and monitor access to the powerful
programs and sensitive files associated with the computer systems
operation.  Generally, one set of system software is used to support
and control a variety of applications that may run on the same
computer hardware.  System software helps control and coordinate the
input, processing, output, and data storage associated with all of
the applications that run on the system.  Some system software can
change data and program code on files without leaving an audit trail
or can be used to modify or delete audit trails.  Examples of system
software include the operating system, system utilities, program
library systems, file maintenance software, security software, data
communications systems, and database management systems. 

Controls over access to and modification of system software are
essential in providing reasonable assurance that operating
system-based security controls are not compromised and that the
system will not be impaired.  If controls in this area are
inadequate, unauthorized individuals might use system software to
circumvent security controls to read, modify, or delete critical or
sensitive information and programs.  Also, authorized users of the
system may gain unauthorized privileges to conduct unauthorized
actions or to circumvent edits and other controls built into
application programs.  Such weaknesses seriously diminish the
reliability of information produced by all of the applications
supported by the computer system and increase the risk of fraud,
sabotage, and inappropriate disclosures.  Further, system software
programmers are often more technically proficient than other data
processing personnel and, thus, have a greater ability to perform
unauthorized actions if controls in this area are weak. 

The control concerns for system software are similar to the access
control issues and software program change control issues discussed
earlier in this section.  However, because of the high level of risk
associated with system software activities, most entities have a
separate set of control procedures that apply to them. 

Operating system software controls were covered in audits for only 9
of the 24 agencies included in our review.  However, problems were
identified for all 9 agencies, illustrating the importance of
reviewing operating system controls.  A common type of problem
reported was insufficiently restricted access that made it possible
for knowledgeable individuals to disable or circumvent controls in a
wide variety of ways.  For example, at one facility, 88 individuals
had the ability to implement programs not controlled by the security
software and 103 had the ability to access an unencrypted security
file containing passwords for authorized users. 


      SERVICE CONTINUITY CONTROLS
-------------------------------------------------------- Chapter 2:2.6

Service continuity controls ensure that, when unexpected events
occur, critical operations continue without undue interruption and
critical and sensitive data are protected.  For this reason, an
agency should have (1) procedures in place to protect information
resources and minimize the risk of unplanned interruptions and (2) a
plan to recover critical operations should interruptions occur. 
These plans should consider the activities performed at general
support facilities, such as data processing centers, as well as the
activities performed by users of specific applications.  To determine
whether recovery plans will work as intended, they should be tested
periodically in disaster simulation exercises. 

Although often referred to as disaster recovery plans, controls to
ensure service continuity should address the entire range of
potential disruptions.  These may include relatively minor
interruptions, such as temporary power failures or accidental loss or
erasing of files, as well as major disasters, such as fires or
natural disasters that would require reestablishing operations at a
remote location. 

Losing the capability to process, retrieve, and protect information
maintained electronically can significantly affect an agency's
ability to accomplish its mission.  If controls are inadequate, even
relatively minor interruptions can result in lost or incorrectly
processed data, which can cause financial losses, expensive recovery
efforts, and inaccurate or incomplete financial or management
information.  Service continuity controls include (1) taking steps,
such as routinely making backup copies of files, to prevent and
minimize potential damage and interruption, (2) developing and
documenting a comprehensive contingency plan, and (3) periodically
testing the contingency plan and adjusting it as appropriate. 

Service continuity controls were evaluated for 20 of the agencies
included in our analysis.  Weaknesses were reported for all of these
agencies.  Common weaknesses included the following: 

  -- Plans were incomplete because operations and supporting
     resources had not been fully analyzed to determine which were
     the most critical and would need to be resumed as soon as
     possible should a disruption occur.  For example, one agency had
     identified critical workloads and processing priorities that
     would need to be resumed and supported after a disruption but
     had not identified the specific software needed for users to
     perform their jobs.  Such information could be difficult to
     compile in the confusion that would be likely after a major
     disruptive event. 

  -- Disaster recovery plans were not fully tested to identify their
     weaknesses.  One agency's plan was based on an assumption that
     key personnel could be contacted within 10 minutes of the
     emergency, an assumption that had not been tested. 


   CONCLUSION
---------------------------------------------------------- Chapter 2:3

Important operations at every major federal agency are at some type
of risk due to weak information security controls.  There are many
specific causes of these weaknesses, but many result from poor
security program management and poor administration of available
control techniques. 

The audit reports cited in this chapter include numerous
recommendations to individual agencies that address the specific
weaknesses reported.  For this reason, we are making no additional
recommendations to these agencies in this report.  However, our
executive guide, Information Security Management:  Learning From
Leading Organizations (GAO/AIMD-98-68), discusses the results of our
recent study of information security best practices and outlines a
number of principles and practices that could enable federal agencies
to implement more effective information security programs.  Chapter 3
summarizes the principles outlined in the executive guide. 


NEED FOR IMPROVED SECURITY PROGRAM
PLANNING AND MANAGEMENT AT
INDIVIDUAL AGENCIES
============================================================ Chapter 3

Although auditors can provide periodic independent assessments of
agency operations, ultimately it is agency management that is
responsible for ensuring that internal controls, including
information security controls, are appropriately selected and
effectively implemented on an ongoing basis.  In September 1996, we
reported that an underlying cause of poor federal information
security was that many agencies had not instituted a framework for
proactively managing the information security risks associated with
their operations.\1 Instead, there was a tendency to react to
individual audit findings as they were reported, with little ongoing
attention to the systemic causes of control weaknesses.  Since then,
as discussed in chapter 2, additional audits have identified the same
underlying problem.  Security program planning and management
deficiencies were reported for 17 of the 24 agencies included in our
analysis.  In particular, agencies were not adequately assessing
risks and monitoring control effectiveness. 

To identify potential solutions to this problem, during 1997, we
studied the security management practices of eight nonfederal
organizations known for their superior security programs.  We found
that these organizations managed their information security risks
through a cycle of risk management activities, and we identified 16
specific practices that supported these risk management principles. 
These findings were initially published as an exposure draft in
November 1997.  Subsequently, they were published in May 1998 in an
executive guide entitled Information Security Management:  Learning
From Leading Organizations (GAO/AIMD-98-68).  The guide is generally
consistent with OMB and NIST guidance on information security program
management, and it has been endorsed by the CIO Council as a useful
resource for agency managers.  The guide's major points are
summarized below. 


--------------------
\1 Information Security:  Opportunities for Improved OMB Oversight of
Agency Practices (GAO/AIMD-96-110, September 24, 1996). 


   BEST PRACTICES PROVIDE A
   FRAMEWORK FOR IMPROVEMENT
---------------------------------------------------------- Chapter 3:1

Our study of information security management practices identified a
fundamental set of management principles and 16 specific practices. 
Together, these principles and practices constitute a cycle of
activity for managing risk. 


      THE RISK MANAGEMENT CYCLE
-------------------------------------------------------- Chapter 3:1.1

The risk management cycle, as depicted in figure 3.1, begins with an
assessment of risk and determination of needs, including selecting
cost-effective policies and related controls.  Once policies and
controls are decided on, they must be implemented.  Then, policies
and controls, as well as the risks that prompted their adoption, must
be communicated to those responsible for complying with them. 
Finally, and perhaps most importantly, there must be procedures for
evaluating the effectiveness of policies and related controls and
reporting the resulting conclusions to those who can take appropriate
corrective action.  Also, our study found that a strong central
security management focal point can help ensure that the major
elements of the risk management cycle are carried out and serve as a
communications link among organizational units.  This cycle of
activity, coordinated by a central focal point, can help ensure that
existing controls are effective and that new, more advanced control
techniques are prudently and effectively selected and implemented. 

   Figure 3.1:  The Risk
   Management Cycle

   (See figure in printed
   edition.)

The elements of the risk management cycle are not new.  They have
been described in various ways in OMB and NIST guidance and in
various other guides on information security and internal controls. 
Nevertheless, as basic as these principles are, audits continue to
show that many federal agencies have not implemented this cycle of
activity. 

One possible cause for this deficiency is that some senior agency
officials, like many private sector executives, may be just beginning
to realize how critical their information resources are to their
program operations and may not fully understand that security
weaknesses present formidable risks to mission-related operations. 
Another reason is that maintaining adequate information security can
be difficult.  The complicated and technical nature of many of the
risks and controls requires that organizations adopt more defined
processes than are needed to manage other types of internal controls. 
These defined processes are needed to ensure that personnel with the
right mix of expertise are involved in risk management decisions;
that all pertinent factors are considered; that the effectiveness of
controls, especially technical controls, is reliably evaluated; and
that the results of these evaluations and their potential effects on
critical operations are clearly reported to senior officials. 

Within this basic risk management cycle, we identified 16 practices
that were key to the effectiveness of an information security
program.  A brief description of these practices, organized according
to the five elements of the risk management cycle, follows.  A more
detailed description accompanied by case examples can be found in our
executive guide. 


      ASSESS RISK AND DETERMINE
      NEEDS
-------------------------------------------------------- Chapter 3:1.2


         PRACTICE 1:  RECOGNIZE
         INFORMATION RESOURCES AS
         ESSENTIAL ORGANIZATIONAL
         ASSETS
------------------------------------------------------ Chapter 3:1.2.1

Organizations that have become heavily dependent on computers,
electronic data, and telecommunications to conduct their activities
must recognize that these information resources are critical assets,
essential to supporting business operations.  Information protection
should be viewed as an integral element of operational management and
strategic planning.  In particular, senior executives must understand
the importance of data and systems and be willing to devote an
appropriate level of resources to protecting these assets. 


         PRACTICE 2:  DEVELOP
         PRACTICAL RISK
         ASSESSMENTS THAT LINK
         SECURITY TO BUSINESS
         NEEDS
------------------------------------------------------ Chapter 3:1.2.2

Security needs should be based on risk, and this requires some type
of risk assessment.  Various methods can be used, from relatively
informal discussions to complex analyses.  Key success factors are
that risk assessments

  -- be required and involve defined minimum procedures;

  -- involve a mix of individuals with knowledge of business
     operations and technical aspects of the organization's systems;

  -- rank, but not necessarily precisely quantify, risks;

  -- require sign-off by business managers indicating agreement with
     risk reduction decisions and acceptance of the residual risk;
     and

  -- result in documentation that is provided to more senior
     officials and internal auditors, so that participants can be
     held accountable for their decisions. 


         PRACTICE 3:  HOLD PROGRAM
         AND BUSINESS MANAGERS
         ACCOUNTABLE
------------------------------------------------------ Chapter 3:1.2.3

Primary responsibility for managing risk should rest with business or
program managers because they are in the best position to determine
what the business impact of a loss of integrity, confidentiality, or
availability of information resources would be.  The security
specialists, on the other hand, should play more of an educational
and advisory role.  However, they should not hesitate to elevate
discussions to higher levels if they believe that inappropriate risk
management decisions are being made. 


         PRACTICE 4:  MANAGE RISK
         ON A CONTINUING BASIS
------------------------------------------------------ Chapter 3:1.2.4

Risk must be continuously reassessed because the factors that affect
risk---threats, technology, known vulnerabilities, and the
sensitivity of the operations being supported--frequently change. 


      ESTABLISH A CENTRAL
      MANAGEMENT FOCAL POINT
-------------------------------------------------------- Chapter 3:1.3


         PRACTICE 5:  DESIGNATE A
         CENTRAL GROUP TO CARRY
         OUT KEY ACTIVITIES
------------------------------------------------------ Chapter 3:1.3.1

Central security management groups can ensure that the various
elements of the risk management cycle are implemented.  They can also
serve as a conduit for communicating information across
organizational lines and from outside sources. 


         PRACTICE 6:  PROVIDE THE
         CENTRAL GROUP READY AND
         INDEPENDENT ACCESS TO
         SENIOR EXECUTIVES
------------------------------------------------------ Chapter 3:1.3.2

Regardless of their organizational position, an organization's
central security manager must feel that he or she can comfortably
raise issues to higher levels.  Independent access to senior
executives allows senior security managers to provide an objective
assessment of security needs and gives them the clout to be effective
throughout their organizations. 


         PRACTICE 7:  DESIGNATE
         DEDICATED FUNDING AND
         STAFF
------------------------------------------------------ Chapter 3:1.3.3

Central groups should have defined budgets that allow them to plan
and set goals.  However, they may also rely on a network of
subordinate security specialists who work in other organizational
units. 


         PRACTICE 8:  ENHANCE
         STAFF PROFESSIONALISM AND
         TECHNICAL SKILLS
------------------------------------------------------ Chapter 3:1.3.4

Develop security managers into a cadre of respected specialists. 
Technical training and professional certification should be
encouraged and kept current. 


      IMPLEMENT APPROPRIATE
      POLICIES AND RELATED
      CONTROLS
-------------------------------------------------------- Chapter 3:1.4


         PRACTICE 9:  LINK
         POLICIES TO BUSINESS
         RISKS
------------------------------------------------------ Chapter 3:1.4.1

Policies and the controls to implement policies should flow directly
from risk assessments and, thus, be linked to business risks.  Also,
as risk factors change, policies and controls should be updated. 


         PRACTICE 10:  DISTINGUISH
         BETWEEN POLICIES AND
         GUIDELINES
------------------------------------------------------ Chapter 3:1.4.2

Distinguishing between policies and guidelines provides flexibility
for individual business units.  However, high-risk operations are
likely to require a more detailed set of mandatory policies and
standards. 


         PRACTICE 11:  SUPPORT
         POLICIES THROUGH THE
         CENTRAL SECURITY GROUP
------------------------------------------------------ Chapter 3:1.4.3

Central groups can promote consistency in policy implementation by
developing the related written documents, based on input from
business managers, attorneys, and others, and by serving as the
organizational focal point for policy questions. 


      PROMOTE AWARENESS
-------------------------------------------------------- Chapter 3:1.5


         PRACTICE 12:  CONTINUALLY
         EDUCATE USERS AND OTHERS
         ON RISKS AND RELATED
         POLICIES
------------------------------------------------------ Chapter 3:1.5.1

Awareness of both risks and policies should be vigorously promoted so
that users understand the importance of complying with policies and
controls.  In particular, sensitizing employees and other users to
risks can make users (1) think twice before revealing sensitive data
and (2) more likely to notice and report suspicious activity. 


         PRACTICE 13:  USE
         ATTENTION-GETTING AND
         USER-FRIENDLY TECHNIQUES
------------------------------------------------------ Chapter 3:1.5.2

Various promotion techniques, such as intranet websites, awareness
days, and posters can keep security in the forefront of users' minds. 
Two effective techniques are customized briefings to individual
business units and videos featuring top organization executives
promoting security as everyone's responsibility. 


      MONITOR AND EVALUATE POLICY
      AND CONTROL EFFECTIVENESS
-------------------------------------------------------- Chapter 3:1.6


         PRACTICE 14:  MONITOR
         FACTORS THAT AFFECT RISK
         AND INDICATE SECURITY
         EFFECTIVENESS
------------------------------------------------------ Chapter 3:1.6.1

Managers should develop procedures for periodically evaluating the
effectiveness of their information security programs, paying closest
attention to the controls associated with the most critical
operations.  Monitoring and evaluation efforts should focus primarily
on (1) determining if controls are operating as intended and (2)
evaluating the effectiveness of the security program in communicating
policies, raising awareness levels, and reducing incidents.  Testing
controls, including penetration testing, is an effective way to
determine if policies and controls are operating effectively.  Other
types of monitoring and evaluation activities include periodic
reports on compliance with various policies, the number of inquiries
from users, and the number and nature of security incidents reported. 


         PRACTICE 15:  USE RESULTS
         TO DIRECT FUTURE EFFORTS
         AND HOLD MANAGERS
         ACCOUNTABLE
------------------------------------------------------ Chapter 3:1.6.2

The full benefits of monitoring are not achieved unless results are
reported to officials who can take any actions needed to improve the
security program.  Such action can include (1) reassessing previously
identified risks, (2) identifying new problem areas, (3) reassessing
the appropriateness of existing controls and security-related
activities, (4) identifying the need for new controls, (5)
redirecting subsequent monitoring efforts, and (6) holding managers
accountable for compliance.  Effecting change and holding managers
accountable generally requires involvement of an organization's most
senior executives. 


         PRACTICE 16:  BE ALERT TO
         NEW MONITORING TOOLS AND
         TECHNIQUES
------------------------------------------------------ Chapter 3:1.6.3

Because new technology is being introduced at a fast pace, with
related security controls often lagging behind, security specialists
must keep abreast of information on new risks and control techniques
through professional organizations and literature. 


   IMPROVED SECURITY DEPENDS ON
   BROADER IMPROVEMENTS TO
   INFORMATION TECHNOLOGY
   MANAGEMENT
---------------------------------------------------------- Chapter 3:2

The risk management activities described in our executive guide and
summarized above are likely to be most successful if implemented in
the context of broader improvements to federal information technology
management.  Over the last few years, the Congress has enacted
legislation that is prompting landmark reforms in this broader area. 
In particular, the Paperwork Reduction Act of 1995 and the
Clinger-Cohen Act of 1996 emphasize the need for agencies to apply
information resources to effectively support agency missions and
delivery of services to the public.  These laws stress the importance
of involving senior executives in information management decisions,
appointing senior-level chief information officers, and using
performance measures to assess the contribution of technology in
achieving mission results.  Both specify security as an aspect of
information management that must be addressed.  These broader
information management improvements are apt to improve security
management because they prompt senior agency officials to take a more
active role in managing their organizations' use of information
technology.  Further, agencies may find this environment of reform
conducive to rethinking their security programs and considering new
practices. 


   CONCLUSION
---------------------------------------------------------- Chapter 3:3

Although existing federal guidance outlines basic security planning
and management requirements, many, if not most, of the reported
weaknesses in agency information security controls can be traced to
poor performance in this area.  Good management is essential to
ensure that relied-upon controls are working effectively on a
continuous basis.  It is also important to help ensure that agencies
promptly identify emerging risks and take full advantage of more
sophisticated security controls as they become available.  Our
executive guide, which outlines the risk management practices
employed by leading organizations, provides a framework of solutions
that supplement existing federal guidance and can assist agencies in
strengthening their management of this critical area. 


CENTRALLY DIRECTED IMPROVEMENT
EFFORTS HAVE INCREASED, BUT MOST
HAVE NOT PROGRESSED BEYOND
PLANNING STAGE
============================================================ Chapter 4

Several new governmentwide efforts to improve federal information
security have been initiated since we last reported on this topic in
September 1996, such as the recent issuance of Presidential Decision
Directive (PDD) 63 on critical infrastructure protection.  Most of
these efforts, however, had only recently been started and had not
progressed far beyond the planning stages at the close of our review. 
In addition, while these efforts address some important information
security problems, such as inadequate risk awareness and incident
reporting capabilities, none provides a comprehensive strategy for
adequate monitoring and oversight of agency performance in this area. 

Federal agencies are primarily responsible for protecting their
respective information resources, but governmentwide leadership,
coordination, and oversight are important to (1) ensure that federal
executives understand the risks to their operations, (2) monitor
agency performance in mitigating these risks, (3) ensure
implementation of needed improvements, and (4) facilitate actions to
resolve issues affecting multiple agencies.  To help achieve this,
the Paperwork Reduction Act of 1980 made OMB responsible for
developing information security policies and overseeing related
agency practices. 

Since September 1996, OMB has continued to review selected agency
system-related projects and provide input through various federal
task forces and working groups.  These efforts were supplemented in
late 1997 when the CIO Council, under OMB's leadership, designated
information security as one of six priority areas and established a
Security Committee.  The Committee, in turn, has developed a
preliminary plan and taken several actions primarily related to
promoting awareness, planning for improving agency access to incident
response services, and establishing links with other federal entities
involved in security issues.  However, neither OMB nor the Council
has developed a comprehensive strategy for ensuring that agency
security programs are effective. 

More recently, in May 1998, PDD 63 was issued, which established
several entities within the National Security Council, the Department
of Commerce, and the Federal Bureau of Investigation to address
critical infrastructure protection, including federal agency
information infrastructures.  This directive specified several
requirements related to evaluating and coordinating federal agency
information security practices.  However, at the close of our review
in early August 1998, it was not clear how and when these new
requirements would be implemented and how they would be coordinated
with existing requirements and with efforts underway at other federal
entities. 


   PREVIOUS RECOMMENDATIONS URGED
   MORE ACTIVE OVERSIGHT
---------------------------------------------------------- Chapter 4:1

In 1996, we reported that, although OMB had improved federal guidance
pertaining to information security, its oversight efforts were
uneven, and it generally did not proactively attempt to identify and
promote resolution of fundamental security program weaknesses that
were likely to be at the root of reported deficiencies at individual
agencies.  Our report recommended that OMB

  -- take advantage of the wide range of information currently
     reported in financial statement audit reports and agency
     self-assessments to monitor agency compliance with OMB's
     guidance and the effectiveness of agency information security
     programs, and

  -- implement a program for increasing its program examiners'
     understanding of information security management issues so that
     they can more readily identify and understand the implications
     of information security weaknesses on agency programs. 

We also recommended that OMB promote the CIO Council's (1) adoption
of information security as one of its top priorities and (2)
development of a strategic plan for increasing awareness of the
importance of information security, especially among senior agency
executives, and improving information security program management
governmentwide.  We suggested that the CIO Council's strategic plan
include plans for

  -- developing information on the existing security risks associated
     with nonclassified systems currently in use,

  -- developing information on the risks associated with evolving
     practices, such as Internet use,

  -- identifying best practices regarding information security
     programs so that they can be adopted by federal agencies,

  -- establishing a program for reviewing the adequacy of individual
     agency information security programs,

  -- ensuring adequate review coverage of agency information security
     practices by considering the scope of various types of audits
     and reviews performed and acting to address any identified gaps
     in coverage,

  -- developing or identifying training and certification programs
     that can be shared among agencies, and

  -- identifying proven security tools and techniques. 


   CIO COUNCIL PLANS FOCUS ON
   SOLVING SELECTED CROSSCUTTING
   PROBLEMS
---------------------------------------------------------- Chapter 4:2

The CIO Council has begun to lay the groundwork for improvements in
several areas, but has not developed a comprehensive strategy that
identifies the most critical issues affecting federal information
security and includes long-term goals and objectives, including
annual performance goals.  During 1997, the Council discussed various
critical information management issues, and in late 1997, formally
declared information security as one of six priority areas that will
guide the Council's activities.  The stated goal for this area is to
"ensure implementation of security practices within the Federal
Government that gain public confidence and protect Government
service, privacy, and sensitive and national security information."
Two other priority areas--defining an interoperable architecture and
improving information technology workforce skills--may also support
security improvements.  An interoperable federal computer systems
architecture will make it easier to implement and manage security
controls, and improving technical workforce skills will help provide
expertise needed to select and properly implement technical controls. 

To guide activities associated with its information security goal,
the Council established the Security Committee, also in late 1997. 
Since then, the Committee has taken some steps to coordinate its
plans with related activities at other federal entities and address
some of the most prominent governmentwide problems associated with
information security, such as insufficient awareness of risks,
inadequate technical training, and poor incident response
capabilities.  These projects have been conducted during monthly
meetings and by part-time efforts of individual committee members
between meetings.  Accomplishments as of August 1998 are described
below. 


      PRELIMINARY STRATEGIC PLAN
      DEVELOPED
-------------------------------------------------------- Chapter 4:2.1

During late 1997, the Security Committee developed a preliminary
strategic plan, which was incorporated into a larger strategic
information technology management plan developed jointly by OMB and
the CIO Council and issued in January 1998.\1 The information
security segment of the plan includes three general objectives: 
promote awareness and training, identify best practices, and address
technology and resource issues.  Under each of these objectives,
three or four specific activities and related milestones are briefly
identified.  Committee members told us that they expect to expand on
this initial plan as the year progresses. 

Expansion of the plan is important to help ensure that the many
facets of this problem are identified, prioritized, and addressed
efficiently and effectively.  Ideally, such a plan would identify the
many policy, technical, legal, and human resource issues that affect
federal information security and describe the various roles and
activities of other federal entities involved in improving the
protection of unclassified federal data.  Such entities include, but
are not limited to, NIST, the National Security Agency, and the
Government Information Technology Services Board.  A description of
the information security-related activities of OMB's Office of
Information and Regulatory Affairs, Office of Federal Financial
Management, and program examiners also would be useful.  Further, the
plan could include long-term goals and objectives, including time
frames, priorities, and expected accomplishments, and annual
performance goals. 

For example, to better coordinate agency activities, increase
efficiency, and build on existing expertise, the plan could provide
for identifying and sharing individual agency solutions to common
challenges, such as incident handling, investigations, contingency
planning, security plan development, virus protection, security
awareness, and system architecture design.  Related efforts could
include, for each functional area,

  -- designating an individual to serve as a focal point;

  -- developing a consolidated e-mail directory for key agency
     personnel;

  -- identifying useful web sites and evaluation tools;

  -- publicizing software and training aids and opportunities; and

  -- reviewing, filtering, and distributing notices and advisories on
     software vulnerabilities, such as those issued by
     Carnegie-Mellon University's Computer Emergency Response Team. 

In addition to coordinating and optimizing the value of agency
efforts, such a plan could help inform agency managers about their
information security responsibilities, maximize the value of audit
results, and facilitate administration and Congressional oversight. 
Further, it could provide support for the governmentwide performance
plan that OMB is required to include in the president's annual budget
submission to the Congress under the Government Performance and
Results Act.  The first governmentwide performance plan and related
"priority management objectives" were published in early 1998 as part
of the President's Fiscal Year 1999 Budget.  However, that plan
provided few details on the administration's strategy for addressing
widespread deficiencies in federal information security. 


--------------------
\1 The Paperwork Reduction Act requires OMB to annually submit a
governmentwide information technology plan to the Congress.  The 1998
plan is the first such plan jointly prepared by OMB and the CIO
Council. 


      EFFORTS TO FACILITATE
      PROJECTS SPONSORED BY OTHERS
-------------------------------------------------------- Chapter 4:2.2

The Security Committee has established links with other federal
entities with information security responsibilities, including NIST
and the National Security Agency; requested briefings on other
federally sponsored information security efforts; and acted to
support and facilitate these efforts.  For example, in late 1997 and
early 1998, the Committee explored ways to gain broader federal
agency participation in FedCIRC, a program initiated by NIST in 1996
to provide agencies a means of responding to computer security
incidents.  OMB Circular A-130, Appendix III, requires agencies to
have a capability to (1) help users when a security incident, such as
a suspected system intrusion, occurs, (2) share information on common
vulnerabilities and threats, and (3) assist in pursuing appropriate
legal action.  In May 1998, the Council took action on the FedCIRC
issue by endorsing the Security Committee's recommendation to shift
sponsorship of FedCIRC to GSA and to change the funding mechanism. 
As of August 1998, the Council was developing detailed arrangements
in anticipation of implementing the change at the start of fiscal
year 1999. 

Other briefing topics at Security Committee meetings have included
our study of information security management best practices, which is
discussed in chapter 3, and the "Information Security Countermeasures
Assessment Project," sponsored by the Air Force Research Laboratory. 
The latter is an effort to develop a better understanding of the
effectiveness of administrative and technical measures for preventing
security incidents. 


      SECURITY AWARENESS SEMINAR
-------------------------------------------------------- Chapter 4:2.3

In February 1998, the Security Committee arranged for and held a
security awareness seminar to brief federal officials on information
security risks.  Speakers included representatives from the National
Security Agency, NIST, and private sector organizations who described
the latest challenges to maintaining adequate security.  The seminar
was attended by about 80 individuals--primarily agency CIO and
federal agency information security officers.  Comments from seminar
attendees indicated that the program was a success and that more such
programs addressing an expanded variety of topics would be welcome. 

The results of our recent study of information security management
practices indicate that it would be valuable to expand the reach of
such awareness seminars beyond agency CIO offices to a broader
audience of senior program executives.  If program officials have a
more thorough understanding of the information security risks to
their operations and assets, they will be more likely to (1)
encourage their staff to comply with security requirements, (2)
devote resources for security, and (3) make prudent decisions
regarding the appropriate levels of protection needed. 


   OVERSIGHT OF AGENCIES REMAINS
   LIMITED
---------------------------------------------------------- Chapter 4:3

A major aspect of our previous recommendations that is not being
addressed by either OMB or the CIO Council is establishing a more
structured program for ensuring that agency security programs are
adequately evaluated and the results used to measure performance and
prompt improvement.  Minimum requirements for agency security
programs are outlined in OMB Circular A-130, Appendix III, "Security
of Federal Automated Information Resources." Updated in February
1996, Appendix III requires agencies to assign responsibility for
security, develop a system security plan, screen and train individual
users, assess risk, plan for disasters and contingencies, and
periodically review their security safeguards.  It also requires
agencies to clearly define responsibilities and expected behavior for
all individuals with access to automated systems and to implement
security incident response and reporting capabilities. 

Central oversight of the effectiveness of agency security programs is
important because audit results indicate that agencies are not
adequately identifying and addressing security weaknesses on their
own.  One resource for such oversight is the large body of audit
evidence that has become available in the last few years, primarily
due to reviews of computer security controls performed as part of
financial statement audits.  Although, as discussed in chapter 2,
comprehensive audits of computer security are not yet being performed
at all agencies, analyses of these audit results and related reports
could provide a starting point for measuring progress.  The results
can also be useful in identifying continuing problem areas and
encouraging agency managers to take a more proactive role in
identifying and addressing weaknesses themselves--before the
weaknesses are discovered and reported by auditors. 


      OMB'S OVERSIGHT EFFORTS
      FOCUS ON INDIVIDUAL ISSUES
      AND PROJECTS
-------------------------------------------------------- Chapter 4:3.1

OMB's program examiners may consider information security during
their broader review of an agency's mission-related programs,
generally, as part of their review of agency information technology
investment plans.  Program examiners are assisted in this area by
policy analysts in OMB's Information Policy and Technology Branch. 
In addition to their own specialized expertise, these policy analysts
keep abreast of governmentwide information security issues by
interacting with other federal entities such as the Federal Computer
Security Managers Forum, the National Security Telecommunications and
Information Systems Security Committee, the Security Policy Board,
and the National Security Telecommunications Advisory Committee. 

In 1996, we reported that few of the program examiners had
significant experience or expertise in dealing with information
systems or related security issues and most did not consider the
effectiveness of an agency's overall information security program. 
For this reason, in our September 1996 report, we recommended that
OMB implement a program for increasing its program examiners'
understanding of information security management issues and of the
related audit results that were available to them. 

Since then, officials in OMB's Information Policy and Technology
Branch say that they have provided two specialized security training
sessions to program examiners and have continued to advise them on
various security-related issues, such as the adequacy of system
security plans, authentication, encryption, privacy of data and
databases, and Internet and World Wide Web use.  Agency projects
cited as receiving attention pertaining to information security since
early 1997 include (1) DOD's Defense Messaging System, (2) the FBI's
National Crime Information Center information sharing initiative, (3)
encryption of online services at the Departments of Education and the
Interior and the Office of Personnel Management, and (4) critical
infrastructure protection issues at the Federal Aviation
Administration and the Departments of Energy and Defense. 


      A MORE COMPREHENSIVE AND
      STRUCTURED ASSESSMENT
      PROGRAM WOULD PROVIDE
      BENEFITS
-------------------------------------------------------- Chapter 4:3.2

While OMB's policy analysts and program examiners can provide
valuable oversight of specific issues and projects, in light of the
continuing reports of serious deficiencies, a more structured
approach for measuring broader compliance with Circular A-130,
Appendix III, and the effectiveness of agency security programs is
needed.  To be effective, such an approach must include comprehensive
evaluations and tests of agency security programs at major agencies
and reports at regular intervals that show improvements and
deteriorations in program effectiveness. 

Much could be learned by analyzing the results that are already
available from financial statement audits, as discussed in chapter 2. 
Also, agency-initiated assessments, required by both OMB Circular
A-130, Appendix III, and FMFIA, can be a source of evaluation
results.  Periodic evaluations initiated by agency management are an
essential step in helping determine whether controls are effective,
which is an essential aspect of managing risk, as discussed in
chapter 3.  However, recent audits have identified numerous serious
information security weaknesses that have apparently not been
identified by agency managers and have not been reported in annual
reports to the President and the Congress, as required by FMFIA.  As
a result, these reports are of limited value for oversight and, more
importantly, agencies do not have the information they need to manage
their information security risks. 

To assist agencies in reviewing their computer-based controls and
supplement audit information that is already available, OMB or the
CIO Council could establish an independent cadre of experts to review
critical areas of agency operations that are not being adequately
evaluated.  Such a cadre of experts could be created by drawing on
the resources of many federal agencies, as we suggested in our
September 1996 report, or a specialized unit could be established at
an agency that already has a relatively high degree of expertise,
such as NIST or the National Security Agency. 

Regardless of how and by whom evaluations are conducted, results
could be used to measure agency performance, identify recurring or
longstanding problems, and identify gaps in audit coverage.  For
example, annual summary reports could be developed to show (1) the
most commonly reported types of problems and (2) agencies where the
same information security weaknesses were identified for more than 1
year.  More refined performance indicators could distinguish between
weaknesses classified as "material weaknesses" and those considered
"reportable conditions," which are less serious than material
weaknesses.  These are standard classifications used in financial
statement audit reports.  OMB and the CIO Council could work with
agency IGs, through the President's Council on Integrity and
Efficiency, to develop other performance indicators.  Such an annual
"report card" could highlight improvements in agency performance as
well as provide agencies an additional incentive to avoid being
designated as an organization with long-standing information security
problems. 


   PDD 63 SUPPLEMENTS EXISTING
   REQUIREMENTS FROM A NATIONAL
   SECURITY PERSPECTIVE
---------------------------------------------------------- Chapter 4:4

PDD 63 provides for additional central oversight of agency practices
by the National Security Council in the Executive Office of the
President.  However, at the close of our review in August 1998, it
was too early to determine how these provisions would be implemented,
how effective they would be, and how they would be coordinated with
ongoing efforts by the CIO Council and others. 

In its October 1997 report, Critical Foundations:  Protecting
America's Infrastructures, the President's Commission on Critical
Infrastructure Protection recognized the need for improved oversight
of agency security practices and recommended assigning responsibility
for oversight of federal systems security to a proposed Office of
National Infrastructure Assurance within the National Security
Council.  As envisioned by the Commission, this Office would be given
"overall program responsibility for infrastructure assurance matters,
including policy implementation, strategy development, federal
interagency coordination, and liaison with state and local
governments and the private sector."

On May 22, 1998, PDD 63 established such an entity under the National
Coordinator for Security, Infrastructure Protection and
Counter-Terrorism, who is to report to the President through the
Assistant to the President for National Security Affairs.  This new
entity, termed the Critical Infrastructure Coordination Group, is to
be supported by a newly created Critical Infrastructure Assurance
Office within the Department of Commerce. 

The PDD addresses a range of national infrastructure protection
issues and includes several provisions intended to ensure that
critical federal computer, or "cyber-based," systems are protected
from attacks by our nation's enemies.  Specifically, it states that
"the Federal Government shall serve as a model to the private sector
on how infrastructure assurance is best achieved" and that federal
department and agency CIOs shall be responsible for information
assurance.  Although details are not provided, the Directive requires
each department and agency to develop a plan within 180 days from the
issuance of the Directive in May 1998 for protecting its own critical
infrastructure, including its cyber-based systems.  The Critical
Infrastructure Coordination Group is then to sponsor an "expert
review process" for those plans.  Other key provisions related to the
security of federal information systems include

  -- a review of existing federal, state, and local bodies charged
     with information assurance tasks;

  -- enhanced collection and analysis of information on the foreign
     information warfare threat to our critical infrastructures;

  -- establishment of a National Infrastructure Protection Center
     within the Federal Bureau of Investigation to facilitate and
     coordinate the federal government's investigation and response
     to attacks on its critical infrastructures;

  -- assessments of U.  S.  Government systems' susceptibility to
     interception and exploitation; and

  -- incorporation of agency infrastructure assurance functions in
     agency strategic planning and performance measurement
     frameworks. 

Several of these provisions appear to overlap with existing
requirements prescribed in the Paperwork Reduction Act of 1980, OMB
Circular A-130, Appendix III, the Computer Security Act, the
Clinger-Cohen Act, and the Federal Managers' Financial Integrity Act. 
In addition, some of PDD 63's objectives are similar to objectives
being addressed by other federal entities, such as development of the
FedCIRC program by NIST and the CIO Council.  The relationship among
these requirements and existing efforts had not been clarified at the
conclusion of our review. 


   CONCLUSION
---------------------------------------------------------- Chapter 4:5

Since September 1996, the need for improved federal information
security has received increased visibility and attention.  However,
central oversight has remained limited and a comprehensive strategy
has not been developed.  As a result, many aspects of the
recommendations we made in September 1996 are still applicable.  The
CIO Council's efforts during late 1997 and the first half of 1998, as
well as issuance of PDD 63 in May 1998, indicate that senior federal
officials are increasingly concerned about information security
risks, both to federal operations as well as to privately-controlled
national infrastructures, and are now moving to address these
concerns.  Coordinated efforts throughout the federal community, as
envisioned by PDD 63, will be needed to successfully accomplish the
objectives of these efforts and substantively improve federal
information security.  It is especially important that a
governmentwide strategy be developed that clearly defines and
coordinates the roles of new and existing federal entities in order
to avoid inappropriate duplication of effort and ensure
governmentwide cooperation and support. 


   RECOMMENDATION
---------------------------------------------------------- Chapter 4:6

Accordingly, we recommend that the Director of the Office of
Management and Budget and the Assistant to the President for National
Security Affairs ensure that the various existing and newly initiated
efforts to improve federal information security are coordinated under
a comprehensive strategy.  Such a strategy should

  -- ensure that executive agencies are carrying out the
     responsibilities outlined in laws and regulations requiring them
     to protect the security of their information resources;

  -- clearly delineate the roles of the various federal organizations
     with responsibilities related to federal information security;

  -- identify and rank the most significant information security
     issues facing federal agencies;

  -- promote information security risk awareness among senior agency
     officials whose critical operations rely on automated systems;

  -- identify and promote proven security tools, techniques, and
     management best practices;

  -- ensure the adequacy of information technology workforce skills;

  -- ensure that the security of both financial and nonfinancial
     systems is adequately evaluated on a regular basis;

  -- include long-term goals and objectives, including time frames,
     priorities, and annual performance goals; and

  -- provide for periodically evaluating agency performance from a
     governmentwide perspective and acting to address shortfalls. 


   AGENCY COMMENTS AND OUR
   EVALUATION
---------------------------------------------------------- Chapter 4:7

In commenting on a draft of this report, OMB's Acting Deputy Director
for Management stated that OMB and the CIO Council, working with the
National Security Council, have developed a plan to address the PDD
63 provision that the federal government serve as a model for
critical infrastructure protection and to coordinate the new
requirements of the PDD with the existing requirements of the various
laws pertaining to federal information security.  The comments
further stated that the plan is to develop and promote a process by
which government agencies can (1) identify and assess their existing
security posture, (2) implement security best practices, and (3) set
in motion a process of continued maintenance.  Also described are
plans for a CIO Council-sponsored interagency security assist team
that will review agency security programs.  Regarding our conclusion
that many aspects of the recommendations in our September 1996 report
are still applicable, OMB reiterated its concern that the 1996
report's "overemphasis on OMB's role could distract program managers
in the Federal agencies from their primary responsibility for
assuring information security."

OMB's comments indicate that it, the CIO Council, and the National
Security Council are moving to coordinate their responsibilities and
beginning to develop the comprehensive strategy that is needed. 
Based on the description provided, the plans being developed include
several key elements, most notably a means of evaluating agency
performance.  These plans were still being finalized at the close of
our work and were not yet available for our review.  Accordingly, we
are not able to comment on their content, scope, and detail, or
whether they will be effective in improving federal information
security. 

Regarding OMB's concern that we have overemphasized its role, we
agree that agency managers are primarily responsible for the security
of their operations.  Increased attention and support from central
oversight, if done effectively, should not distract agencies from
their responsibilities in this area.  On the contrary, active
oversight of agency performance is more likely to have the effect of
emphasizing the agency managers' accountability and providing more
visibility for agencies that are achieving their information
assurance goals as well as those that are falling short. 


GAO REPORTS ON INFORMATION
SECURITY ISSUED SINCE MARCH 1996
=========================================================== Appendix I

Note:  This list does not include products for which distribution was
limited to official use because the products contained sensitive
information. 

VA Information Systems:  Computer Control Weaknesses Increase Risk of
Fraud, Misuse and Improper Disclosure (GAO/AIMD-98-175, September 23,
1998). 

FAA Systems:  Serious Challenges Remain in Resolving Year 2000 and
Computer Security Problems (GAO/T-AIMD-98-251, August 6, 1998). 

Air Traffic Control:  Weak Computer Security Practices Jeopardize
Flight Safety (GAO/AIMD-98-155, May 18, 1998). 

Computer Security:  Pervasive, Serious Weaknesses Jeopardize State
Department Operations (GAO/AIMD-98-145, May 18, 1998). 

Executive Guide:  Information Security Management:  Learning From
Leading Organizations (GAO/AIMD-98-68, May 1998). 

U.S.  Government Financial Statements:  Results of GAO's Fiscal Year
1997 Audit (GAO/T-AIMD-98-128, April 1, 1998). 

Financial Audit:  Examination of IRS' Fiscal Year 1996 Custodial
Financial Statements (GAO/AIMD-98-18, December 24, 1997). 

Financial Management:  Review of the Military Retirement Trust Fund's
Actuarial Model and Related Computer Controls (GAO/AIMD-97-128,
September 9, 1997). 

Financial Audit:  Examination of IRS' Fiscal Year 1996 Administrative
Financial Statements (GAO/AIMD-97-89, August 29, 1997). 

Small Business Administration:  Better Planning and Controls Needed
for Information Systems (GAO/AIMD-97-94, June 27, 1997). 

Social Security Administration:  Internet Access to Personal Earnings
and Benefits Information (GAO/T-AIMD/HEHS-97-123, May 6, 1997). 

Budget Process:  Comments on S.261--Biennial Budgeting and
Appropriations Act (GAO/T-AIMD-97-84, April 23, 1997). 

IRS Systems Security and Funding:  Employee Browsing Not Being
Addressed Effectively and Budget Requests for New Systems Development
Not Justified (GAO/T-AIMD-97-82, April 15, 1997). 

IRS Systems Security:  Tax Processing Operations and Data Still at
Risk Due to Serious Weaknesses (GAO/T-AIMD-97-76, April 10, 1997). 

IRS Systems Security:  Tax Processing Operations and Data Still at
Risk Due to Serious Weaknesses (GAO/AIMD-97-49, April 8, 1997). 

High Risk Series:  Information Management and Technology
(GAO/HR-97-9, February 1997). 

Information Security:  Opportunities for Improved OMB Oversight of
Agency Practices (GAO/AIMD-96-110, September 24, 1996). 

Financial Audit:  Examination of IRS' Fiscal Year 1995 Financial
Statements (GAO/AIMD-96-101, July 11, 1996). 

Tax Systems Modernization:  Actions Underway But IRS Has Not Yet
Corrected Management and Technical Weaknesses (GAO/AIMD-96-106, June
7, 1996). 

Information Security:  Computer Hacker Information Available on the
Internet (GAO/T-AIMD-96-108, June 5, 1996). 

Information Security:  Computer Attacks at Department of Defense Pose
Increasing Risks (GAO/AIMD-96-84, May 22, 1996). 

Information Security:  Computer Attacks at Department of Defense Pose
Increasing Risks (GAO/T-AIMD-96-92, May 22, 1996). 

Security Weaknesses at IRS' Cyberfile Data Center (GAO/AIMD-96-85R,
May 9, 1996). 

Tax Systems Modernization:  Management and Technical Weaknesses Must
Be Overcome To Achieve Success (GAO/T-AIMD-96-75, March 26, 1996). 


AGENCY REPORTS ISSUED SINCE
SEPTEMBER 1996 THAT IDENTIFY
INFORMATION SECURITY WEAKNESSES
========================================================== Appendix II

Department of Health and Human Services Accountability Report: 
Fiscal Year 1997 (April 1998). 

Report on the Financial Statement Audit of the Health Care Financing
Administration for Fiscal Year 1997 (A-17-97-00097, April 24, 1998). 

Report on the Department of Health and Human Services Consolidated
Financial Statements for Fiscal Year 1997 (A-17-98-00001, April 1,
1998). 

Department of the Treasury's Inspector General Report:  Report on the
U.S.  Customs Service's Fiscal Years 1997 and 1996 Financial
Statements (OIG-98-050, March 5, 1998). 

Audit of the Extent to Which USAID's Financial Management System
Meets Requirements Identified in the Federal Financial Management
Improvement Act of 1996 (OIG-A-000-98-003-P, March 2, 1998). 

Report on USAID's Financial Statements, Internal Controls, and
Compliance for Fiscal Years 1997 and 1996 (OIG-0-000-98-001-F, March
2, 1998). 

EPA's Fiscal Year 1997 and 1996 Financial Statements Audit Report
(E1AML7-20-7008-8100058, March 2, 1998). 

NASA Data Center General Controls, Johnson Space Center (IG-98-005,
January 29, 1998). 

Federal Managers' Financial Integrity Act Report, Fiscal Year 1997
(USAID, December 31, 1997). 

EPA 1997 Integrity Act Report to the President and Congress
(EPA-205-R-98-002, December 19, 1997). 

Social Security Accountability Report for Fiscal Year 1997, (SSA Pub. 
No.  31-231, November 1997). 

General and Application Controls Over the Mechanization of Contract
Administration Services System (DODIG, Report Number 98-007, October
9, 1997). 

Audit of USAID's Compliance with Federal Computer Security
Requirements (OIG-A-000-97-008-P, September 30, 1997). 

Audit of the Status of USAID's New Management System (NMS)
(OIG-A-000-97-010-P, September 30, 1997). 

Audit of the Internal Controls for the Operational New Management
System (OIG-A-000-97-009-P, September 30, 1997). 

NASA Data Center General Controls, Marshall Space Flight Center
(IG-97-039, September 30, 1997). 

Evaluation of the Social Security Administration's Back-up and
Recovery Testing of Its Automated Systems (SSA/OIG-A-13-97-12014,
September 24, 1997). 

U.S.  Department of Justice Annual Financial Statement for Fiscal
Year 1996 (DOJ/OIG-97-24B, September 1997). 

Report on the Financial Statement Audit of the Department of Health
and Human Services for Fiscal Year 1996 (A-17-96-0001, August 29,
1997). 

NASA Data Center Facility, Langley Research Center (IG-97-035, August
28, 1997). 

U.S.  Department of Education Fiscal Years 1996 and 1995 Financial
Statements and Accompanying Notes (Price Waterhouse, LLP, July 31,
1997). 

Physical Security at Ames Research Center's NAS Facility (IG-97-030,
July 18, 1997). 

Audit of USAID's Efforts to Resolve the Year 2000 Problem
(OIG-A-000-97-005-P, July 11, 1997). 

Department of the Treasury's Inspector General Report:  Audit of the
Bureau of Alcohol, Tobacco and Firearms Fiscal Years 1996 and 1995
Financial Statements (OIG-97-094, July 9, 1997). 

The Royalty Management Program's Automated Information Systems,
Minerals Management Service (DOI/OIG-97-I-1042, July 1997). 

Review of Physical Security at the Social Security Administration's
National Computer Center (SSA/OIG-A-13-96-11046, June 26, 1997). 

Audit of OPM's Benefit Programs Fiscal Year 1996 Financial Statements
- Management Letter (Transmitted to OPM's OIG on June 20, 1997). 

Review of the Back-up and Recovery Procedures at the National
Computer Center (SSA/OIG-A-13-96-11052, June 19, 1997). 

Audit of OPM's Benefit Programs Fiscal Year 1996 Financial Statements
(Transmitted to the Director, OPM, on June 17, 1997). 

General Services Administration, Fiscal Year 1996 Management Letter
Comments and Suggestions for Consideration (OIG-A62709, June 10,
1997). 

Audit of Security Controls at the Hines Benefits Delivery Center,
Department of Veterans Affairs, Office of Inspector General (Report
Number 7D2-G07-062, May 13, 1997). 

Audit of SBA's FY 1996 Financial Statements - Management Letter
(SBA/OIG-7-6-H-006-015, April 29, 1997). 

Audit of the U.S.  Department of Housing and Urban Development's
Fiscal Year 1996 Financial Statements (Case Number 97-FO-177-0003,
April 10, 1997). 

Report on the Department of Transportation Fiscal Year 1996
Consolidated Financial Statement (Report Number AD-OT-7-004, April
10, 1997). 

Federal Emergency Management Agency Management Letter for the Year
Ended September 30, 1996 (April 4, 1997). 

General Controls Over Automated Information Systems, Operations
Service Center, Bureau of Indian Affairs (DOI/OIG-97-I-771, April
1997). 

Department of the Treasury's Inspector General Report:  Report on the
U.S.  Customs Service's Fiscal Years 1996 and 1995 Financial
Statements (OIG-97-054, March 31, 1997). 

NSF's Fiscal Year 1996 Management Letter Report (OIG-97-2110, March
31, 1997). 

Review of CA-TOP SECRET Access Control Software
(SSA/OIG-A-13-95-00606, March 18, 1997). 

Department of Commerce's Consolidating Financial Statements for
Fiscal Year 1996 (OIG-FSD-9355-7-0001, March 1, 1997). 

Department of Commerce Economic Development Administration Financial
Statements for Fiscal Year 1996 (OIG-FSC-8837-7-0001, March 1, 1997). 

Department of Commerce International Trade Administration Financial
Statements for Fiscal Year 1996 (OIG-FSC-8838-7-0001, March 1, 1997). 

Department of Commerce National Oceanic and Atmospheric
Administration Financial Statements for Fiscal Year 1996
(OIG-FSC-8841-7-0001, March 1, 1997). 

Mainframe Computer Policies and Procedures, Administrative Service
Center, Bureau of Reclamation (DOI/OIG-97-I-683, March 1997). 

U.S.  Environmental Protection Agency FY 1996 Audited Financial
Statements (March 1997). 

Audit of SBA's FY 1996 Financial Statements (SBA/OIG-7-6-H-006-010,
February 28, 1997). 

Auditor's Reports on NSF's Fiscal Year 1996 Financial Statements,
(Transmitted to the Chairman, NSF, on February 28, 1997). 

U.S.  Department of Labor Consolidated Financial Statement Audit for
Fiscal Years 1995 and 1996 (DOL/OIG-12-97-005-13-001, February 28,
1997). 

Reports on USAID's Financial Statements, Internal Controls, and
Compliance for Fiscal Year 1996 (OIG-0-000-97-001-C, February 24,
1997). 

Department of Veterans Affairs Annual Accountability Report for
Fiscal Year 1996 (February 14, 1997). 

U.S.  Department of Energy Consolidated Financial Statements for
Fiscal Year 1996 (February 1997). 

Management Letter to the Administrator of NASA (January 31, 1997). 

Secretary's Annual Statement and Report, Federal Managers' Financial
Integrity Act, U.S.  Department of the Treasury 1996 (December 30,
1996). 

Report on Applying Agreed-Upon Procedures to the Internal Controls
over the Federal Financial System, Fiscal Year Ended September 30,
1996 (NRC/OIG, November 25, 1996). 

General Control Environment of the Federal Financial System at the
Reston General Purpose Computer Center, U.  S.  Geological Survey
(DOI/OIG-97-I-98, October 1996). 

Interim Report on the Status of USAID's New Management System
(OIG-A-000-96-001-S, September 27, 1996). 

Department of Health and Human Services Accountability Report: 
Fiscal Year 1996. 

Department of State Consolidated Financial Statements for Fiscal Year
1996. 

Financial Statements Fiscal Year 1996, Office of Personnel
Management. 

National Aeronautics and Space Administration Fiscal Year 1996
Accountability Report. 




(See figure in printed edition.)Appendix III
COMMENTS FROM THE OFFICE OF
MANAGEMENT AND BUDGET
========================================================== Appendix II



(See figure in printed edition.)


MAJOR CONTRIBUTORS TO THIS REPORT
========================================================== Appendix IV


   ACCOUNTING AND INFORMATION
   MANAGEMENT DIVISION,
   WASHINGTON, D.C. 
-------------------------------------------------------- Appendix IV:1

Jean H.  Boltz, Assistant Director, (202) 512-5247
Ronald W.  Beers, Assistant Director
Darrell L.  Heim, Assistant Director
Carol A.  Langelier, Assistant Director
Crawford L.  Thompson, Assistant Director
Gregory C.  Wilshusen, Assistant Director
Gary R.  Austin, Senior Information Systems Analyst
Kirk J.  Daubenspeck, Senior Information Systems Analyst
Ernest A.  Dring, Senior Evaluator
Michael W.  Gilmore, Senior Information Systems Analyst
William F.  Wadsworth, Senior Information Systems Analyst


   ATLANTA FIELD OFFICE
-------------------------------------------------------- Appendix IV:2

Sharon S.  Kittrell, Senior EDP Auditor


   DALLAS FIELD OFFICE
-------------------------------------------------------- Appendix IV:3

David W.  Irvin, Assistant Director
Debra M.  Conner, Senior EDP Auditor
Shannon Q.  Cross, Senior Evaluator
William H.  Thompson, Senior Evaluator
Charles M.  Vrabel, Senior EDP Auditor

*** End of document. ***