As requested, the General Accounting Office (GAO) reviewed the 24 Chief Financial Officers (CFO) Act agencies' fiscal year 1999 performance reports and fiscal year 2001 performance plans required by the Government Performance and Results Act of 1993 (GPRA). In essence, under GPRA annual performance plans are to establish performance goals and measures covering a given fiscal year and provide the direct linkage between an agency's longer-term goals and day-to-day activities. Annual performance reports are to subsequently report on the degree to which those performance goals were met. This letter contains three enclosures concerning key program outcomes and major management challenges at the Department of Defense (DOD). Enclosure I to this letter provides GAO's observations on DOD's fiscal year 1999 actual and fiscal year 2001 planned performance for the key outcomes that was identified as important mission areas for the agency. These key outcomes are: (1) the U.S. maintains technological superiority in key war-fighting capabilities; (2) U.S. military forces are adequate in number, well qualified, and highly motivated; (3) combat readiness is maintained at the desired level; (4) infrastructure and operating procedures are more efficient and cost-effective; (5) reduced availability and/or use of illegal drugs; and (6) fewer erroneous payments to contractors. Enclosure II lists the major management challenges facing the agency that we and DOD's Inspector General identified, how the fiscal year 1999 performance report discussed the progress the agency made in resolving these challenges, and the applicable goals and measures in the fiscal year 2001 performance plan. Enclosure III contains DOD's comments on a draft of GAO's report.