Archive
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Document Name: MISSION DRIVEN, RESULTS ORIENTED BUDGETING
Date: 09/30/93
Owner: National Performance Review
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Title: Mission Driven, Results Oriented Budgeting
Author: NPR
Date: September 1993
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MISSION DRIVEN, RESULTS ORIENTED BUDGETING
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Accompanying Report of the National Performance Review
Office of the Vice President
Washington, DC
September 1993
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This accompanying report, prepared by the staff of the National
Performance Review (NPR), laid the groundwork for the
recommendations in the NPR report "From Red Tape to Results:
Creating a Government that Works Better and Costs Less," released
on September 7, 1993. This report is based on the best information
available at that time. The specific recommendations within these
reports have been and will continue to be given priority as part
of the FY95 Budget, legislative proposals, or other administration
initiatives, as appropriate.
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CONTENTS
Executive Summary 1
Strengthen Accountability for Results
BGT01: Develop Performance Agreements with Senior Political
Leadership that Reflect Organizational and Policy Goals 9
BGT02: Effectively Implement the Government Performance and
Results Act of 1993 15
Empower Managers to Achieve Results
BGT03: Empower Managers to Perform 27
BGT04: Eliminate Employment Ceilings and Floors by Managing
Within Budget 37
BGT05: Provide Line Managers with Greater Flexibility to
Achieve Results 41
Make the Budget Process More Efficient and Meaningful
BGT06: Streamline Budget Development 51
BGT07: Institute Biennial Budgets and Appropriations 57
BGT08: Seek Enactment of Expedited Rescission Procedures 65
Appendices
A. Summary of Actions By Implementation Category 71
B. The Traditional Budget Process 73
C. Major Budget Laws and Regulations 79
D. Budget Functions and Subfunctions 81
E. Accompanying Reports of the National Performance Review 83
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Implementation Categories
Each action is followed by a number in parentheses that indicates
the necessary avenue for effective implementation. Appendix A
organizes all actions according to these categories.
(1) Agency heads can do themselves
(2) President, Executive Office of the President,
or Office of Management and Budget can do
(3) Requires legislative action
(4) Good idea, but will require additional work, or may be
better suited for future action
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Abbreviations
ACUS Administrative Conference of the United States
BEA Budget Enforcement Act
CASU Cooperative Administrative Service Units
CBO Congressional Budget Office
CFO Chief Financial Officer
DOD Department of Defense
EPA Environmental Protection Agency
FCCSET Federal Coordinating Committee for Science, Engineering
and Technology
FTE FullTime Equivalent
GAO General Accounting Office
GPRA Government Performance and Results Act
GSA General Services Administration
HHS Department of Health and Human Services
HUD Department of Housing and Urban Development
NAPA National Academy of Public Administration
NPR National Performance Review
OMB Office of Management and Budget
OPM Office of Personnel Management
OSD Office of the Secretary of Defense
PAYGO Pay As You Go
SAP Statements of Administration Policy
SES Senior Executive Service
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EXECUTIVE SUMMARY
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To understand the overarching role that budgeting plays in the
federal government, consider just one figure: 60 percent of all
roll call votes in Congress are on budget-related issues.
However striking, this figure should not surprise us. If, after
all, Washington is a quintessentially political town, budgeting is
a quintessentially political process. A half-century ago,
political scientist Harold D. Lasswell defined politics as "who
gets what, when, how." [1] The budget, in essence, answers
Lasswell's question. It shows which groups., the elderly, the
poor, children get what benefits. At the same time, it shows who
pays taxes to finance those benefits.
The budget, however, should tell us much more. Indeed, budgeting
should be a managerial process that sets direction for management
improvement and efficiency. It should be a financial process that
assimilates and ties together a wealth of financial data. It
should be a marketing process, by which the government sells its
programs and services. And finally, it should be an accountability
process, through which government communicates its decisions about
priorities and expected performance.
But the traditional budget process the government's procedures for
crafting a budget has not been up to par. In both the executive
branch and Congress, it has consumed far too much time, often by
forcing policymakers to address the same issues numerous times
during the course of one year. It has revolved around inputs, not
outputs, thus reducing accountability for results. It has not
forced senior officials, such as cabinet secretaries, to state
their goals and report on their progress.
FOCUS ACCOUNTABILITY ON ACHIEVING RESULTS
In its budgeting, the federal government needs to undergo a kind
of cultural revolution, like the one experienced by many
businesses and some states and localities. It must better link
purposes, resources, and results to help government better serve a
nation of 250 million citizens and cost less. By adopting mission-
driven, results-oriented budgeting, it can:
* provide leaders with better means to make political choices,
set goals, and establish priorities among many competing demands
and desirable ends for customer services;
* encourage long-term thinking, define goals, translate them
into desired results, and use performance measures more
effectively to make more informed decisions on program priorities
and resource allocations;
* translate choices about goals and priorities into
actions/performance objectives and standards and communicate those
objectives and standards more effectively to the 2 million federal
employees;
* remove needless constraints on managers' uses of resources
to encourage innovation and provide positive incentives to manage
effectively and cut wasteful spending; and
* convert accountability for spending money to accountability
for achieving results within resources allocated to meet or exceed
performance standards and objectives.
CURRENT PROCESS NEEDS TO FOCUS MORE ON ACHIEVING RESULTS
In Washington, budgeting does not occur in a vacuum. It is
strongly influenced by two basic realities: the federal
government's budget deficits, and the relatively small share of
federal spending that must, by law, come up for executive and
congressional review each year.
Spending in FY 1993 totaled about $1.4 trillion, while revenues
tot
financed by borrowing, thus adding to the national debt. At the
same time, only a third of the budget about $540 billion is
subject to annual decisions. This "discretionary" spending
includes most of the grant funding for education, law enforcement,
Head Start, and environmental protection. It also includes total
spending for the operation of the federal government defense,
national parks, salaries of federal employees, etc.
About half of annual spending goes for "mandatory" spending, such
as social security, Medicare, Medicaid, and Aid to Families with
Dependent Children. The rest about 14 percent of annual spending
pays net interest costs on the debt.
The massive size of the budget, when combined with year-to-year
adjustments, means that small changes in interest rates,
inflation, employment levels, or the size of beneficiary
populations can add or subtract billions in federal spending. For
instance, a 1 percent rise in unemployment increases Food Stamp
participation by about a million persons, costing about $1 billion
a year.
Were it easy to greatly reduce the deficit, past Presidents and
Congresses would have done so. Needs greatly outweigh resources,
so demand far exceeds supply. Everyone wants more, feels justified
in seeking more, organizes to get more. Changes in the budget
process won't alter that reality. Nor, alone, will they close the
gap between revenues and spending. Nevertheless, changes in the
budget process can make the solutions more obvious and easier to
implement and will create a focus on achieving results.
CHANGING THE PROCESS TO MAKE IT MORE MEANINGFUL
During the budget process, most attention focuses on justifying
new spending proposals, not examining what the money buys or
ensuring that it accomplishes its purpose. Managers often do not
get clear instructions on which results have the highest priority,
nor on the results-oriented performance measures to which they
will be held accountable. Few government managers get the clear
charge, tools, and flexibility to provide quality services to
customers. Because programs' purposes and priorities are not
always clear, and recipients' interests are, the process focuses
on complying with controls to ensure that the money goes for those
interests.
A Focus on Performance. Congressional testimony in support of the
Government Performance and Results Act2 (which President Clinton
signed August 3, 1993) stressed the need for a fundamental shift
in the federal government's accountability system from one
oriented to accountability for processes and who gets which
"inputs" (in this case, fiscal resources) to one focusing
accountability on performance and results.
A 1992 General Accounting Office (GAO) survey on program
performance measures found that nearly two-thirds of 103 agencies
contacted had long-term strategic plans, and more than three-
quarters said they were collecting various program performance
data. But fewer than half made substantial use of performance
information in assessing progress toward strategic objectives.
Even fewer used performance measures for external performance and
accountability reporting. In a more detailed examination of 14
sample agencies, GAO found only a very limited application of
performance information in program and policy decision making.3
No wonder. The budget process does not focus on performance
information. It wastes inordinate time on detail and numbers only
loosely tied to achieving missions and results. The effort diverts
time and energy from the tough policy and managerial judgments
needed to cut the deficit.
A labor-intensive Process. Specifically, budgetmaking is a labor-
intensive process, full of incentives to request maximum funding
and spend all appropriations, and a control-oriented process, in
which who makes spending decisions and who gets the money is more
important than results. It focuses more on the demands of
individual agencies than on interagency missions to meet broader
administration goals. It deals primarily with marginal spending
changes, not the base from which those changes are made, to
achieve missions, goals, and results. And it devotes an inordinate
amount of time to debating the use of discretionary funds compared
with the mandatory spending and tax expenditures that, more than
ever, fuel the ever-growing national debt.
Transforming the Process. This administration has already begun to
transform these processes. The focus of the budget is moving away
from seeking more, more, more. The process must be transformed to
focus on what managers produce and citizens get for their
money/results, performance, value, quality, and customer service.
As veteran public servant Elliot Richardson put it: "Whether or
not an administration succeeds or fails depends on how clearly,
forcefully, and persuasively it defines its goals and creates
understanding of the necessity for sacrificing desirable ends that
do not have sufficient priority to claim a share of the available
[time and monetary] resources. Given the deficit on the one side
and ever-increasing demands on the other, the crunch between
claims and resources is more brutal than ever. Leadership that
squarely addresses this crunch is therefore more needed than
ever."4
The deficit is fueling the rethinking, but our recommendations
represent a logical, rational way for government to plan for,
allocate, and manage resources with or without a deficit.
Underpinning the recommendations is a commitment to deliver the
best value, quality, and service for taxpayers' money.
For government to meet 21st century challenges and regain taxpayer
confidence, its focus on processes and inputs must give way to
results and outputs. This report lays out three major initiatives
to develop mission-driven, results-oriented budgeting that
empowers policy leaders and managers to link purposes, resources,
and results to make government work better and cost less. These
three initiatives, and the recommendations that go with them, are
summarized below.
1. Strengthen accountability for results, with political
leadership defining political priorities first, then reaching
agreements with managers on what they are expected to accomplish
and how their accomplishments will be measured.
* The President should establish performance agreements with
his cabinet officers and agency heads to articulate what is
expected of them and how they will be accountable for their
performance.
* Each agency should develop a clear strategic plan, as
mandated by the 1993 Government Performance and Results Act, and
agency heads should use performance agreements to forge an
effective team committed to the accomplishment of organizational
goals and objectives.5
* Each agency and its sub-units should strive to be the "best
in its class"i.e., compare favorably in benchmark standards for
quality, service, and cost with other organizations carrying out
the same or similar operations.
* Policy officials, managers, agency budget offices, and OMB
should incorporate performance objectives and results as key
elements in management and budget development, review, and
deliberations.
* Agencies should identify teams, led by line managers, to
develop and coordinate the development and use of measures to
improve performance and ensure the quality and validity of
performance information.
2. Once decisions have been reached, empower managers to achieve
expected results by providing the necessary resources, unburdened
by excessively detailed restrictions.
* To enable managers to use resources effectively and
efficiently to achieve desired results, the number of detailed,
itemized limitations on spending should be substantially
decreased, including overly detailed and minutely divided
appropriation line items, earmarks in report language, object
class limitations, apportionments, allotments, and sub-allotments.
Appropriation accounts and line items ought to be more aligned
with programs designed to carry out policy decisions and charged
with the costs that their programs generate.
* Operational plans and performance goals should be updated
after enactment of appropriations. Agency heads should adjust
their operating plans to clarify performance goals and results
sought.
* Budgeting for, and managing within, funds provided for the
cost of direct federal operations should replace use of employment
ceilings and floors as a tool to control overall federal
employment levels.
* More appropriations should be converted from annual to multi
or no-year availability, and 50 percent of unobligated yearend
balances of operating funds in annual accounts should be rolled
over into the next year for use by managers to address unnecessary
end-of-year spending.
* The executive branch should evaluate its handling of
requests to move funds from one line item or organization to
another (i.e., for handling reapportionments, reprogrammings, and
reallotments), eliminating burdensome procedures that add little
or no value. Negotiations should be conducted with Congress toward
greater flexibility to transfer between appropriations and to
reprogram funds within appropriation accounts.
* Agency heads should submit reprogrammings to Congress, after
the advance notification and approval of OMB. OMB should
automatically approve reprogramming unless it objects within a set
period of time, such as five days.
* Revolving or working capital funds should be established to
finance administrative and other support services, where
appropriate.
* Managers should make greater use of flexibility currently
available to achieve results within limitations set by policy
determinations.
3. Streamline and improve the budget development process to give
managers more time to manage their programs, to provide them with
more timely information on policy priorities and funding levels in
order to more effectively use resources, and to provide links
between budgetary resources, missions, goals, and results.
* The President should propose a biennial budget. Congress
should adopt biennial budget resolutions and appropriations.
* The administration should develop an internal mechanism for
communicating total fiscal limits, allocating resources within
those limits, and enunciating multiyear spending targets. This
mechanism, analagous to the Congressional Budget Resolution,
should allocate funding by the broad missions of government cross-
tabulated by agency, thus avoiding months of effort spent
developing unrealistic budget requests. Policy discussions should
involve all affected agencies.
* The President should make extensive use of White House
policy staff to strengthen budget developments on priority issues
that involve multiple federal agencies.
* The former secretive, hierarchical development of the
President's budget should be replaced with a coordinated team
approach focused on achieving results.
* The President should have expedited rescission authority, a
form of line item veto, to support his managerial role in
effecting savings in government operations.
CHANGING THE PROCESS
The key recommendations summarized here and additional ones in the
following report are intertwined with other NPR recommendations,
especially those relating to leadership and management, financial
management, organizational structures, human resources, program
design, and customer service. Together, these recommendations
create the framework for changing the management culture in the
federal government to focus on results, quality, and customer
service. Major changes such as these will require years of hard
work.
Let us begin.
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Endnotes
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1. Lasswell, Harold D., Politics: Who Gets What, When, How (New
York: McGrawHill, 1936).
2. Government Performance and Results Act of 1993, Public Law
10362, signed by President Clinton August 3, 1993.
3. U.S. General Accounting Office, Program Performance Measures:
Federal Agency Collection and Use of Performance Data, GAO/GGD9265
(Washington, D.C., U.S. General Accounting Office: May 1992).
4. Memorandum from Elliot Richardson to Chris Williams of the
National Performance Review (NPR), dated July 29, 1993, providing
comments on draft NPR papers. Among his many contributions to
public service, Elliot Richardson has served as Secretary of
Health, Education and Welfare, Secretary of Defense, Attorney
General, and Secretary of Commerce.
5. Throughout this report the term "agency" refers to
organizational units reporting directly to the President. "Agency"
includes cabinetlevel departments (e.g., Labor, Commerce, and
Interior) as well as independent agencies (e.g., the Environmental
Protection Agency and the National Aeronautics and Space
Administration).
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Strengthen Accountability for Results
BGT01:
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Develop Performance Agreements with Senior Political Leadership
that Reflect Organizational and Policy Goals
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BACKGROUND
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When General Dwight D. Eisenhower was assigned to command the
Allied Expeditionary Force during World War II, the mission order
he received was clear and measurable: "You will enter the
continent of Europe and, in conjunction with the other United
Nations, undertake operations aimed at the heart of Germany and
the destruction of her armed forces."1 This simple, direct order
spelled out expectations for a vast organization of more than 1.5
million American men and women at its peak, required a working
relationship with other services and countries, and empowered one
of this century's great generals to change the course of history.2
Civilian government has been slow to set such clear expectations
for the performance of its top leaders. In general, there have not
been written agreementsor any other systematic approachesl inking
the goals of the President to the performance of top political
appointees and, in turn, to the civil servants below. Thus, the
chain of command in the executive branch is weakened at the
highest levels.
Faced with severe fiscal constraints and a desire to improve their
efficiency and effectiveness, a number of countries, states, and
localities as well as numerous American corporations are using
performance agreements with senior officials to set mutually
agreed upon objectives for organizational performance. For
example, many senior officials in Australia, Canada, New Zealand,
and the United Kingdom now have written agreements that are tied
to agency specific strategic plans (similar to those strategic
plans envisioned in the Government Performance and Results Act of
1993).3 The agreements establish priorities, set understandings
about expected performance, and grant specific delegations of
authority. Senior officials in these countries said that
performance agreements probably had a greater impact on
organizational performance than any other single aspect of
government reform.4
In the United States, a number of states and localities, from Ohio
to Seattle, Washington, have developed some type of performance
agreement with senior managers. For example, in Sunnyvale,
California, managers from the city manager on down have written
agreements that support city objectives. The experience of AT&T,
Microsoft, and many other American corporations has underlined the
importance of linking performance agreements to organizational
goals and team performance.5
At the federal level, there are precedents besides the military.
Ambassadors customarily receive two letters before going to a new
country a State Department letter of instruction describing a few
objectives for the ambassador to pursue and a presidential letter
that lays out the relationships among cabinet agencies with
overseas representation.6 In 1991, following a series of
management problems, the Deputy Director for Management of the
Office of Management and Budget and the three members of the
Railroad Retirement Board exchanged letters that committed the
resources and set out the actions necessary to achieve operational
improvements and "restore confidence in the operations and
integrity of the railroad retirement system."7
All career federal employees participate in some form of
performance evaluation system. Federal law requires that the
compensation, retention, and tenure of top civil servants, the
Senior Executive Service, be based on "individual and
organizational performance (including such factors as improvements
in efficiency, productivity, quality of work or service, cost
efficiency, and timeliness of performance and success in meeting
equal opportunity goals)."8
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NEED FOR CHANGE
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There are two critical weaknesses in the chain of command between
the President and the performance of federal agencies. One is the
lack of a systematic way to establish objectives for the
performance of presidential appointees with respect to their
agencies' performance. The second is the break between the
organizational and policy goals of political appointees who lead
the agencies and the career civil servants who carry out the
policies and programs. These two weaknesses undermine the
performance of the federal government in several ways. They
encourage distrust between political appointees and career
officials, contribute to confusion about organizational and policy
goals, diffuse lines of authority and accountability, and
undermine a sense of organizational cohesion, direction, and
fairness. These key weaknesses in line authority invite
intervention and interpretation by those in staff positions. Thus,
the lack of guidance and agreement on priorities results, not in
decentralized authority, but in the imposition of top-down
controls and micro-management.
The federal performance appraisal system traces its roots to 1842,
when the head of each agency was required to submit an "annual
individual employee service report" to Congress. Today,
presidential appointees belong to the only federal personnel
category without written performance agreements or a system of
accountability other than to the President.9
Surprisingly, regardless of political party there is no
established process by which senior appointees or even Cabinet
members of a new administration are oriented to policies and
priorities and reach consensus about an administration's goals and
objectives for departmental performance. Two months after he
arrived from Merrill Lynch to became Secretary of the Treasury,
Donald Regan recorded, "Never has [President Reagan], or anyone
else, sat down in private to explain to me what is expected of me,
what goals he would like to see me accomplish, what results he
wants. Since I am accustomed to management by objective, where
people have in writing what is expected, and explicit standards
are set, this has been most disconcerting. How can one do a job if
the job is not defined? I have been struggling to do what I
consider the job to be. . . . This is dangerous." He recalled
later, "From the first day to last at Treasury, I was flying by
the seat of my pants. The President never told me what he believed
or what he wanted to accomplish in the field of economics. I had
to figure those things out like any other American, by studying
his speeches and reading the newspapers."10 While this may be an
extreme case, senior government officials have confirmed that, at
least in the last several administrations, appointees have rarely
been given upfront guidance on priorities for their agencies'
policy or management agenda.
Although members of the Senior Executive Service, both career and
appointed, do have performance agreements, the effect of these
agreements is weakened since they are not effectively tied to
organizational goals or to the political leadership. In a General
Accounting Office study of the use of performance measures by
federal agencies, nearly half the agencies reported that the
goals, standards, or objectives of the organization were not
reflected at all or, if so, to only a minor or moderate extent in
Senior Executive Service or other senior management performance
contracts.11 Even where they are tied to organizational goals in a
personnel evaluation document, performance agreements do little to
enhance organizational performance when the document and the
system that produces it become ends in themselves.12
What is important is not the paperwork system but the fact that
priorities are established and that people in an organization both
political and career come to an understanding of clear
organizational goals.13 Only then can employees plan how to work
together to accomplish their objectives, obtain support and
feedback from their customers and colleagues, give and receive
assistance when groups are failing to meet their objectives, and
be fairly recognized for their contribution to the achievement of
organizational goals.
Having this kind of process flowing from the top can only
strengthen the effectiveness of the performance agreement system
below. Having such a process by which a public sector manager's
"mandate for action" or "bottom line" is negotiated is the
concrete way to establish the substantive terms of a manager's
accountability.14
As the federal government reinvents its human resource and other
systems and moves increasingly toward managing for results,
political appointees, senior career executives, and other civil
servants need to be joined in fair and coherent systems of
organizational accountability. It is essential to develop a more
effective link and clearer consensus with career executives about
the objectives and goals of the organizations that they are
leading and to base accountability and incentive systems on
progress toward the accomplishment of these goals and
objectives.15
The need to develop a more systematic approach is more urgent
today because of the number and importance of management roles
that political appointees have come to play in the federal
government. The Volcker Commission, the General Accounting Office,
and others have expressed concern about the growing number of
political appointees in management positions in federal agencies
over several administrations and, because of their short average
tenure, the impact of these appointees on program stability and
continuity.16 A more coherent system firmly based on
organizational mission and goals is needed to help ensure greater
continuity and stability in achieving organizational and policy
objectives.
Performance agreements should not only be vehicles for
accountability but also for empowerment. For example, a
performance agreement could include delegations of authority to
support the achievement of objectives. For example, limitations on
personnel, administration of the Paperwork Reduction Act, and
other authorities could be delegated from central agencies to
agency heads or designees as part of a performance agreement
between the President and an agency head.17 Agreement in advance
about priorities could also reduce the micromanagement that may
occur when priorities are not clear.
Certainly corporate and other organizational experience suggests
that managers at all levels should be held accountable for
achieving results from the activities under their direct
control.18 Managing for results, however, speaks about leadership.
It requires benchmarking performance against higher standards and
reaching beyond those things within the manager's direct control
and working with other organizations to achieve higher order
outcomes. It also requires continuous change to refine strategies,
respond to customer and employee feedback, and take advantage of
new information and technology.
Managing for results also requires making adjustments when desired
outcomes are not achieved and understanding the reasons for
success or failure. It means a willingness to terminate programs,
substantially alter them, increase or decrease funding, and
conduct research and evaluation to identify the sources of and
solutions to problems. Managers, in other words, can succeed even
when programs fail or fail even when everything is delivered.
Managers who aim high should not be penalized because ambitious
objectives are not achieved, if they are effectively managing for
results.
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ACTIONS
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1. The President should develop written performance agreements
with department and agency heads. (2)
The President should develop performance agreements with agency
heads that reflect a mutual understanding of key organizational
objectives and delegations. These performance agreements should:
* focus on broad goals important enough to be followed by the
President;
* focus on a very limited number of mutually agreed upon
objectives specific to the organization and supportive of its
mission;
* include agreed upon delegations of authorities and
managerial flexibility that are within the power of the executive
branch and are related to areas of performance;
* be verifiable, reviewed on a regular basis, and updated as
appropriate; and
* avoid extensive reporting.
Performance agreements should be introduced incrementally by
beginning with: (1) the heads of the 14 cabinet departments and
the 10 largest agencies, and (2) very limited priority goals or
objectives as few as one, perhaps no more than three. The best
performance agreements are clear, simple, and measurable.19
There are many models for the content of agreements and for the
process by which the content is developed. New Zealand's
ministerial level agreements, for example, contain elements of
personal, organizational, and managerial performance. Agreements
with heads of agencies that are engaged with reform in the United
Kingdom called Next Steps Agencies are based on the strategic
plans of the agencies. The letters of instruction for ambassadors
are often prepared by a country desk officer and then widely
reviewed in the Department of State.
Whatever approach and model are adopted, they will need to be
flexible to reflect different agency missions, capacities,
approaches, and organizational cultures. For example, if
performance agreements contain budgetary agreements between the
agency head and the President, they will need to be adjusted if
appropriated funds are significantly higher or lower than planned.
Senior officials in agencies that have formulated clear goals and
a well developed capacity to measure their performance might have
agreements that include considerable delegation of authority and
administrative flexibility to manage within their agreed upon
budget. Although approaches may vary, key features of effective
performance agreements should include: "the substantive values,
goals or objectives that are to guide the manager's ACTIONS," an
agreement on how objectives will be measured, a method for
reporting and verification, and a system for making adjustments.20
Although there are compelling reasons to move to performance
agreements with senior political officials, there are also strong
reasons to proceed cautiously and incrementally. Perhaps the
greatest single risk is overloading the system and thereby sowing
the seeds of its collapse. This is what happened with efforts to
establish management by objectives during previous administrations
and contributed to their brief tenures. Too many objectives
diffuse focus. Too much reporting clogs critical communication
channels and will tend to be delegated to staff and lose
importance.
2. In every federal agency, use performance agreements and other
approaches to forge an effective team committed to the
accomplishment of organizational goals and objectives. (1)
Agency heads should lead, first, by example and, second, by
encouraging the development of mission-oriented, empowering
performance agreements throughout their departments and agencies.
Agency heads should ensure that performance contracts in the
Senior Executive Service focus clearly on organizational
objectives and inspire organizational performance. In most
agencies, this will require significant changes in how the Senior
Executive Service system of contract, evaluation, and rewards
functions. According to the Office of Personnel Management,
current laws and regulations governing personnel performance
evaluation also permit the use of other federal performance
planning and evaluation systems to reinforce organizational
performance; it is practice that has failed to make an effective
linkage.
If effectively used, the Senior Executive Service and other
performance systems should be important vehicles to link political
and career employees in common cause, set and reinforce
expectations for organizational performance, give senior managers
the authority and flexibility they need to perform, and hold them
accountable for managing for results. Giving managers the
authority and flexibility to perform effectively is an essential
complement to performance measurement systems, as described later
in BGT03, BGT04, and BGT05.
There are many approaches to implementing this recommendation. For
example, this past spring Secretary Henry Cisneros at the
Department of Housing and Urban Development (HUD) began the
process by developing a vision statement for his agency. He and
his senior staff led workshops, involving all 13,500 HUD employees
across the country, that clarified HUD's values and mission. Based
on this vision statement, Secretary Cisneros led his senior staff
in establishing agreements on program and management priorities
that will guide the specific ACTIONS of each department and be the
basis of benchmarks for HUD's performance. In the late 1970's,
General Bill Creech in the U.S. Tactical Air Command focused his
organization on two expectations: flying and fighting. "Wing
commanders (executives) were ordered to resume flying and wear
their flying suits around the base. . . . Every squadron member .
. . knew precisely what he/she had to do to meet the
flying/fighting expectations."21 As a result, the Tactical Air
Command was able to increase sorties an average of 11 percent
annually and reduce its budget 40 percent.
Agency heads and managers will need to use approaches that best
suit their organizational needs and culture. However, as one
management expert advised, "it's the last 3 million employees in
the federal government who really count."22 In other words,
everyone from the top leader to the person answering the phone
needs to understand and feel part of a mission-driven, results-
oriented agency. As Vice President Al Gore said in a talk to NPR,
"Part of the secret of any high-performing organization is having
a clear mission that is well known and internalized by every
single man and woman in that organization."23
CROSS REFERENCES TO OTHER NPR ACCOMPANYING REPORTS
Reinventing Human Resource Management, HRM03: Authorize Agencies
to Develop Programs for Improvement of Individual and
Organizational Performance; HRM04: Authorize Agencies to Develop
Award and Bonus Incentive Systems to Improve Individual and
Organizational Performance; and HRM11: Strengthen the Senior
Executive Service So that It Becomes a Key Element in the
Governmentwide Culture Change Effort.
Creating Quality Leadership and Management, QUAL02: Improve
Government Performance Through Strategic and Quality Management;
and QUAL03: Strengthen the Corps of Senior Leaders.
Streamlining Management Control, SMC02: Streamline the Internal
Controls Program to Make It An Efficient and Effective Management
Tool; and SMC03: Change the Focus of the Inspectors General.
*********************
ENDNOTES
*********************
1. Directive issued to Dwight D. Eisenhower, February 12, 1944,
cited in Forrest C. Pogue, United States Army in World War II, The
European Theater of Operations: The Supreme Command, Department of
the Army (Washington, D.C., 1954).
2. According to Pogue, cited above, there were 1.8 million
American troops in the European theater as of July 1944. By April
1945, that number had risen to more than 3 million plus additional
troops from European and other nations.
3. The Government Performance and Results Act of 1993, Public Law
10362, signed by President Clinton on August 3, 1993, calls for
all government agencies to prepare and submit strategic plans by
September 30, 1997.
4. U.S. General Accounting Office, Managing for Results:
Experience in Four European Countries and How They Might Be
Applied in the U.S. (Washington, D.C.: U.S. General Accounting
Office [GAO], January 1993), p. 15.
5. See U.S. Environmental Protection Agency, Administration and
Resources Management, Performance Management Quality Action Team,
Alignment Task Force Interim Report, Washington, 1992.
6. Discussion with Ambassador Dennis Kux, Oral History Program,
1993.
7. Exchange of letters between the Railroad Retirement Board and
the Office of Management and Budget, January 22, 1991, and March
1, 1991.
8. Title V, United States Code, Section 3131 (2).
9. U.S. Department of Defense, Navy Personnel Research and
Development Center, Team Oriented Performance Management (San
Diego, CA, December 1990), p. 1.
10. Regan, Donald T., For the Record: From Wall Street to
Washington (New York: 1988), p. 142.
11. See U.S. General Accounting Office, Program Performance
Measures: Federal Agency Collection and Use of Performance Data,
GAO/GGD9265 (Washington, D.C., May 1992).
12. In a 1986 survey, 41 percent of former members of the Senior
Executive Service (SES) said that the SES was ineffective in
basing pay and success on performance. See U.S. Merit Systems
Protection Board, The Senior Executive Service: Views of Former
Federal Executives (Washington, D.C. 1989), p. 14.
13. Richardson, Elliot, The Creative Balance: Government, Politics
and the Individual in America's Third Century (London: Hamish
Hamilton, 1976).
14. Moore, Mark H., Accounting for Change: Reconciling the Demands
for Accountability and Innovation in the Public Sector
(Washington, D.C.: Council for Excellence in Government, 1993), p.
142.
15. See National Academy of Public Administration, Beyond
Distrust: Building Bridges between Congress and the Executive
(Washington, D.C., 1992).
16. Volcker, Paul A., Leadership for America: Rebuilding the
Public Service (Washington, D.C., 1989). Also, U.S. Congress,
House, Committee on Post Office and Civil Service, "Political
Appointees in Federal Agencies," testimony by Bernard L. Ungar,
Director, Federal Human Resource Management Issues, General
Government Division, GAO, October 26, 1989.
17. Discussion with General Counsel, Office of Management and
Budget.
18. The issue of establishing accountability and incentives that
encourage teamwork rather than individual competition are
discussed more fully in the NPR Accompanying Reports Reinventing
Human Resource Management and Creating Quality Leadership and
Management.
19. The following agencies, identified under the Chief Financial
Officers Act, and the three central management agencies are
recommended for inclusion: the Departments of Agriculture,
Commerce, Defense, Education, Energy, Health and Human Services,
Housing and Urban Development, Interior, Justice, Labor, State,
Transportation, Treasury, and Veterans Affairs; the Environmental
Protection Agency; the National Aeronautics and Space
Administration; the Agency for International Development; the
Federal Emergency Management Agency; the General Services
Administration; the National Science Foundation; the Nuclear
Regulatory Commission; the Office of Management and Budget; the
Office of Personnel Management; and the Small Business
Administration.
20. Moore, p. 104.
21. Belasco, James A., Teaching the Elephant to Dance: Empowering
Change in Your Organization (New York: 1990), p. 155.
22. Discussion with James Belasco, July 1993. See also U.S. Office
of Personnel Management (OPM), The Fact Book (Washington, D.C.,
1992), p.3. The OPM reports executive branch employment at 3.04
million in 1991. This includes 0.8 million Postal Service
employees and just over 1 million Defense employees.
23. Vice President Al Gore, Remarks to the National Performance
Review, April 15, 1993.
****************************************************************
Effectively Implement the Government Performance and Results Act
of 1993
BGT02:
****************************************************************
***************
BACKGROUND
***************
To manage federal programs more effectively to "do the right
things better"managers need to know what the "right things" are
and how much they need to achieve. There are innovative federal
agencies that have clear, results-oriented objectives and use
performance measurement to continuously improve their programs.
However, surveys by the General Accounting Office and the
Congressional Budget Office suggest that strategic planning and
performance measurement remain a veneer in most federal agencies,
having little effect on program operations.1 Earlier efforts to
improve the performance or effectiveness of federal programs from
the "performance government" of the 1940's and 1950's and
programming, planning, and budgeting in the 1960's through zero
based budgeting of the 1970's and management by objectives in the
1980'shave had a limited impact.2
Current processes cause federal managers to be more concerned with
following rules and procedures, justifying new resources, and
reporting on compliance than with developing strategic plans,
measuring progress, and achieving results. In a sad parody of a
well known corporate motto, one federal employee lamented,
"Process is our most important product."
Since the 1970's, American industry has changed in response to
international competition. It has decentralized and streamlined
its operations, reoriented its focus toward customer service, and
placed an overall emphasis on quality. Managers are being asked to
measure their performance and make continuous improvements in
processes and products. Many managers are using bench marking
measuring performance, comparing it against a standard, and
constantly seeking to improve results. For example, Xerox
Corporation, a Malcolm Baldrige National Quality Award winner,
continuously benchmarks its performance against similar functions
in such companies as Nordstrom and L.L. Bean.
An emphasis on managing for results is also permeating state and
local government. As early as 1973, Sunnyvale, California, began
adopting comprehensive performance planning, measurement, and
budgeting as part of a new approach to city management.
Sunnyvale's success has stimulated results-oriented management in
other states and cities. Florida, Minnesota, Texas, and Phoenix,
Arizona, are among those that are changing their management
practices to emphasize results and improve performance.3
Oregon, for example, is using what it calls benchmarks "to guide
our state to a better future as a people, as a place, and as an
economy."4 The legislature adopted statewide measures unanimously.
According to Oregon Governor Barbara Roberts, "In state government
the benchmarks have already been adopted as a tool for stating
concrete objectives, setting program and budget priorities and
measuring performance. They are helping our agencies to focus
differently, work more closely together, and make better use of
existing resources.5 Other countries the United Kingdom,
Australia, New Zealand, Canada, Sweden, and others as cited
earlier have also increased their use of performance measurement
to guide management and budgeting over the last decade.6
Today, concerns with government inefficiency and mounting deficits
are spurring federal programs to improve performance. Building on
the total quality movement of the 1980's and the Chief Financial
Officers Act of 1990, a number of federal agencies are making
substantial progress. For example, the Internal Revenue Service
(IRS) has developed a strategic plan with a strong customer-
oriented mission, explicit performance objectives, and a strategy
for achieving those objectives. IRS pilot sites in Cincinnati and
elsewhere are collecting performance data and beginning to relate
them to financial measures. The Agency for International
Development (AID) is implementing a bottom-up strategic planning
and performance measurement system; more than 60 of its field
missions have begun to use performance information in program
decision making. AID programs, such as child survival and family
planning, have set clear goals and strategies, invested for more
than a decade in the development and collection of performance
indicators, and widely use performance information for planning,
operational decisions, and reporting.
The Government Performance and Results Act of 1993 (GPRA) provides
a sound basis for strengthening these and other ongoing agency
efforts to use strategic planning and performance measurement to
improve results. Signed by President Clinton on August 3, 1993,
the law's purposes are to:
* improve the confidence of the American people in the
capability of the federal government, by systematically holding
federal agencies accountable for achieving program results;
* initiate program performance reform with a series of pilot
projects in setting program goals, measuring program performance
against those goals, and reporting publicly on their progress;
* improve federal program effectiveness and public
accountability by promoting a new focus on results, service
quality, and customer satisfaction;
* help federal managers improve service delivery, by requiring
that they plan for meeting program objectives and by providing
them with information about program results and service quality;
* improve congressional decision making by providing more
objective information on achieving statutory objectives, and on
the relative effectiveness and efficiency of federal programs and
spending; and
* improve internal management of the federal government.7
This law requires all agencies to define their long-term goals,
set specific annual performance targets, and report annually on
performance compared to targets. It calls for some key components
strategic plans, annual performance plans, and annual performance
reports and provides the managerial flexibility that is crucial to
mission-driven, results-oriented budgeting and management. The law
begins with pilot programs in fiscal year 1994 before proceeding
to government-wide implementation in fiscal year 1999. In signing
the bill, President Clinton summarized the GPRA's provisions: "The
law simply requires that we chart a course for every endeavor that
we take the people's money for, see how well we are progressing,
tell the public how we are doing, stop the things that don't work,
and never stop improving the things that we think are worth
investing in."8
******************************************************************
Requirements of the Government Performance and Results Act of 1993
******************************************************************
All Agencies Pilot Agencies OMB and Others
******************************************************************
At least 10 three year OMB designates pilots
pilots in performance goal, OPM develops training
setting, measurement program
. and reporting for fiscal
years 1994-96
******************************************************************
Agencies develop At least five two OMB reports to
and submit year pilots on managerial Congress on initial
strategic accountability-flexibility pilots by May 1, 1997
plans (covering for fiscal years 1995 96. GAO reports to
at least 5 years) Congress on GPRA
to OMB and implementation by
Congress by June 1, 1997
September 30,
1997.
Agencies submit
annual performance
plan (including
targets and
proposed waivers)
beginning with
fiscal year 1999.
******************************************************************
Agencies begin At least five two year OMB submits
reporting in performance budgeting government wide
annually on fiscal year 1998-99 performance plan
performance for fiscal year 1999
beginning no (by February 1998).
later than OMB reports to
March 31, 2000 Congress on
performance budgeting
pilots by March 31,
2001
******************************************************************
******************
NEED FOR CHANGE
******************
As President Clinton noted when signing the GPRA, "This is an
effort that is long, long overdue."9 Testimony in support of the
GPRA and many government experts have emphasized the need for a
fundamental shift in the system of accountability in the federal
government from one oriented around accountability for processes
and "inputs" (i.e., activities or resources to achieve results) to
one that measures performance and is accountable for results
actually achieved. As a U.S. General Accounting Office (GAO)
report noted, "Whether the goal is defending the nation or
immunizing children against disease, government officials and the
public need to know how well government is accomplishing its
intended objectives."10
A recent survey of leaders in 75 major American corporations,
conducted by the U.S. Department of the Treasury, concluded that
federal program managers could learn "immeasurably" from corporate
best practices. The report noted that "measurement of the
effectiveness, efficiency and economy of products, services and
processes is the keystone for assessing current circumstances,
planning strategic goals, and monitoring incremental and
comprehensive improvements."11
A 1992 GAO survey on program performance measures found that
twothirds of the 103 agencies contacted had strategic plans and
more than three-quarters collected program performance data.
However, fewer than half of these agencies were making substantial
use of performance information in assessing progress toward
strategic goals and objectives. Even fewer were using performance
measures in external performance and accountability reporting. The
GAO's more detailed look at 14 sample agencies found only a very
limited application of performance information in program and
policy decision making.12
In contrast, when one looks at the most successful federal
programs and managers, it is clear that they not only measure
their performance, they act on what they learn. For example,
whenever one Assistant Commissioner at the Treasury Department's
Financial Management Service learns that checks going to
particular zip codes are arriving late, his staff immediately meet
with the Postal Service to resolve the problem. With this kind of
commitment, it's not surprising that this manager can attest that
he "directs the largest, most reliable, low-cost and productive
payment disbursing operation in the world and that he has the
data to support his claim.13
Agencies that have undertaken comprehensive strategic planning
exercises have usually emerged with a much clearer sense both of
the objectives they can reasonably achieve and how these
objectives should be pursued. Strategic planning at the Social
Security Administration, for example, resulted in measurable
customer service objectives and a set of activities to achieve
them. At the National Archives, strategic planning improved
employee motivation and helped managers make more informed
decisions by providing information about results. Strategic
planning has long characterized programs in the Department of
Defense (DOD). Recently, DOD has applied "business process
reengineering" and developed new corporate information management
systems to reorient its operations around common missions and
priority objectives.14
Everyone agrees that it is important to measure and manage for
results. Nonetheless, there are a number of challenges facing
federal managers. First, many federal programs encompass multiple,
contradictory, ambiguous, changing, or even unfunded objectives.
Yet, just as America's military commanders have insisted that no
American troops be committed to combat without clear objectives,
"if a public agency is asked to attack a particular problem, it
ought to be given a clear goal; it ought to know what it takes to
reach the goal and what intermediate successes can be achieved
along the way."15 This is not always easy. Setting objectives
requires choices. It can require careful consideration and
possible tradeoffs between competing objectives, between long and
short-term goals, or between innovation and certainty. What are
the tradeoffs between clean air and short-term economic growth?
What are the risks that expanding the availability of credit will
increase the number of bank failures?
Second, federal programs are diverse ranging from income security
to diplomacy, from research to national defense. These diverse
programs produce very different outputs, resulting in very
different outcomes, requiring very different performance measures.
Many federal programs co-fund activities administered by state and
local governments or private and nonprofit organizations and
interact only indirectly with the ultimate users or recipients of
these programs. Because of this diversity, federal managers
developing performance measurement will find some of their best
assistance from managers of programs similar to theirs who have
found useful ways to measure performance.
Third, federal managers need to keep performance measurement
simple and useful. The goal should be to adopt a few relatively
simple measures that tell line managers how programs are
performing, to use that information to find potential problems and
solutions, and to stimulate continuous improvement.
Finally, the relationship between customers and federal programs
is often less direct than in state or local government or in the
private sector, and customer feedback has rarely been built into
the assessment of federal programs. In reality, however, the
federal government has hundreds of millions of direct contacts
with the public every year. Better feedback from these customers
would provide extremely useful information about the performance
of many federal programs.
These are the challenges that federal managers will need to
address to implement the GPRA effectively. The findings and
recommendations in this report are consistent with the GPRA and,
in some cases, go beyond certain provisions of the legislation to
capitalize on the momentum as federal employees across the country
realize how they can make an important contribution toward
reinventing the federal government. Successfully implementing the
GPRA will improve federal program effectiveness and public
accountability by promoting a new focus on results, service
quality, and customer satisfaction. This will require strong
leadership from the top and from line managers across the federal
government. It will need caution to avoid establishing new
performance information bureaucracies. It will need active
participation from the bottom, expanded use of performance
information in management and budget decision making, and
effective systems for assuring that performance information is
valid and reliable.
******************
ACTIONS
******************
1. Accelerate planning and measurement to improve performance in
every federal program and agency. (2)
OMB, through its GPRA leadership role, and the Office of Personnel
Management (OPM), through its training, should encourage all
agencies to make greater use of performance planning and
measurement now, whether or not they are designated as pilot
agencies. Every agency, for example, could identify prototype
sites, assess current status, identify benchmarks, formulate
implementation milestones to cover its major mission areas, and
make much better use of currently available data. Agencies should
be encouraged to display performance measures in internal budget
submissions and to tie performance to budget decisions, where
possible, even before formal implementation of the performance
budgeting portions of GPRA. Although this will be difficult for
some agencies, others are in a position to try early
implementation and should be encouraged to do so.
Even small differences in federal program performance can make
large differences in people's lives whether they want a reliable
weather report before going on a picnic, the right answer to a tax
question, or the timely arrival of a government check before the
rent is due. The Department of Treasury's Financial Management
Service, for example, delivers 99.8 percent of its checks on time.
If this performance were to fall just one fifth of one percent to
99.6 percent an additional 1.6 million social security or other
payments would be late.
Some federal programs are already the best in their class. They
have established goals and standards for program achievements the
quantity and quality of goods and services the program will
deliver and can compare their performance with other programs,
agencies, or organizations delivering similar goods and services.
Other agencies and programs have farther to go. They need to begin
by establishing a clear understanding of their mission and goals
and of the strategies they will be pursuing to achieve those
goals, drawing on program legislation and policy, historical and
current data on program activities, and the needs and expectations
of the program's customers and stakeholders. Once the program's
objectives, and the kinds of goods and services it delivers, are
clear, managers can begin comparing the program with other,
similar programs in its "class" and establish performance
benchmarks based on what other programs in that class are
accomplishing. Finally, managers can develop operational plans and
short-term performance targets for reaching these benchmarks,
based on realistic appraisals of current activities and practical
steps for improvement.
For many federal programs, the only appropriate benchmarks might
come from another federal agency or from state government. For
some agencies, such as the Department of State's counselor
services, the best benchmarks might come from another country.
Other programs might look to industry for comparisons as, for
example, the Air Force commander who replaced lengthy written
guidelines for the quality of visiting airmen's temporary quarters
with a pithy benchmark: comparable to "a moderately priced hotel,
like Ramada."
Such a process can help managers more rationally identify customer
needs and serve as a powerful process for fact-based continuous
improvement by providing a broader, outward-looking perspective
that enables managers to challenge "business as usual." There will
be additional benefits from benchmarking. Identifying similar
activities in other organizations helps sharpen managers'
understanding of constraints and opportunities. It also provides a
framework for discussing and managing expectations with customers
and stakeholders. "What special legislative or other governmental
constraints make us different from industry?" "Are our patients
older or younger than another hospital's?" "Why can't our cars be
as clean as the cars at Hertz or Dollar?" Seeking external
standards taps into external expertise and experience that can be
immediately relevant to one's own activities. And, the standards
and measures for program achievement are drawn from actual
practices, rather than theoretical models of causality. In effect,
one can jump-start performance measurement by beginning not with
complex models or training on abstract principles of strategic
planning and indicator development, but with the people who are
already doing something similar.
2. Build effective teams to improve performance and strengthen
organizational accountability. (1)
Agency heads should assign line managers, not staff offices or
central agencies, to lead strategic planning and performance
measurement in the programs for which they are accountable. Line
managers should establish networks and teams to develop program
strategies, identify performance indicators and targets, and
collect and use performance data. These teams should include other
program managers and staff as well as outside persons to provide a
broader perspective, ensure that line managers aim high enough and
consult their customers, encourage work across organizational
boundaries, provide training, and ensure that indicators are valid
and data are reliable. Staff offices and central agencies should
report, verify, and consolidate information, but not manage agency
efforts.
In addition to program staff, teams might typically include
persons from other programs in the agency; from other agencies
that have similar programs; from planning, evaluation, budget, and
finance staffs; and from some central agency analytical group such
as OMB. Information technology specialists could also be included
to ensure that information is integrated into existing systems and
that paperwork is minimized. The team should identify
characteristics of importance to customers and stakeholders in the
program. The team might invite staff of legislative committees
with oversight over their programs, or the General Accounting
Office. To obtain customer input, the agency could, for example,
include customer representatives on the team, use focus groups
covering major categories of customers, and have the team role-
play as customers and public interest groups. This team procedure
worked well with the State of Minnesota's Department of Trade and
Economic Development and the State of Maryland's Department of
Economic and Employment Development. Both departments convened
working groups and held focus groups of customers to help identify
performance indicators for selected programs in their
departments.16
Line managers are generally in the best position to chose relevant
and useful performance indicators, and the full participation of
line managers in selecting performance measures and using
performance information is critical. Indeed, the single most
important element for ensuring both the quality of performance
information and the achievement of improved results is the
effective use of that information in program decision making. If
performance information is used by line managers to make
operational decisions that improve programs' outcomes, those
managers who are accountable for the management of the programs
will have a direct interest in ensuring the accuracy and integrity
of that information.
Teams can help ensure that, whatever objectives and indicators are
chosen, performance information is simple, valid, and reliable.
For example, the Departments of Labor, Education, and Health and
Human Services have created performance indicator teams including
line managers, financial managers, strategic planners, and budget
analysts. Teams help ensure that performance information is
relevant to actual program activities. Negotiations and
discussions across the organization also provide checks and
balances that will keep performance information valid and
honest.17
3. Develop common goals and data collection efforts for
crosscutting issues. (2)
The multi-agency coordination initiated by OMB under the Chief
Financial Officers (CFO) Act to encourage cooperative development
of common measures, benchmarking, and data collection in programs
with a similar commercial function provides some useful experience
in this area. The selection of common goals should not be
prescribed by OMB, but should be the joint responsibility of the
agencies involved. Interagency groups should develop a limited
number of core goals and measures in related programs and reduce
the costs and burden of data collection where a common approach is
appropriate. Agencies could add agency specific measures and data
collection as needed to reflect the unique aspects of their
programs. The interagency group working on ecosystem management
and the President's Community Enterprise Board's community
empowerment efforts are examples where these interagency measures
could be considered.18
4. Incorporate performance objectives and results as key elements
in budget and management reviews. (2)
Over time, both the Executive Office of the President and
individual agencies should use performance information as a key
element in program and policy decision making and as a basis for
management and budget reviews. The incorporation of performance
objectives and results as key elements of budget and management
reviews should be clearly reflected in White House policy
guidance; in a substantially revised OMB Circular A11 (which
guides budget formulation); in agency budget guidance and review
procedures; in strategic and operational plans; and in revised
position descriptions and training for budget, management, and
program analysts. This recommendation can be more fully
implemented as agencies develop strategic plans, performance
measures, and targets by September 30, 1997, as required by the
GPRA.
At first, managers may not have sufficient experience to set
reasonable performance targets. Even with indicators on which a
program has been collecting data for many years, the program is
likely to have quite limited information on the relationship
between outcomes and the program's staffing and budget. Users of
information comparing annual goals to actual achievement need to
understand these inherent difficulties. The numerical goals will
likely be much less useful than the data on actual outcomes. The
process by which the program attempts to link resources to
outcomes may itself, however, help agencies in their annual
planning. It should also be remembered that performance
measurement is not meant to replace research or evaluation, but
rather to signal potential problems for which more information or
attention is needed.
Agencies should reallocate sufficient resources for performance
planning and measurement for the long term. This reallocation of
human and financial resources to performance planning and
measurement should occur as part of the normal budget development
and review process. While some funds may need to be reallocated
explicitly to performance data collection and analysis, the
primary issue is ensuring that managers devote sufficient time and
attention to planning for results and to applying performance
information in decision making.
OMB's budget analysts can provide some of the feedback and broad
oversight that is necessary for an effective system for example,
by asking agencies to improve on indicators that are clearly
inadequate. OMB should, for example, actively discourage the use
of work activity measures masquerading as output or outcome
measures. Since there can be disagreement, even among "experts,"
over what is or is not an outcome measure, OMB's Deputy Director
for Management should probably exercise overall oversight of the
appropriateness of outcome measures to avoid uneven implementation
across OMB divisions and performance indicator shopping.
Other action steps to ensure more results-oriented program and
budget reviews by agencies and OMB include formal training
programs for staff, internal consulting arrangements, and joint
management/budget review teams. Training is needed, for example,
to counter the frequent misconception that outcome data indicates
that the government alone produced (caused) those outcomes. This
leads to employee blame-setting that is usually unwarranted and is
also a major source of manager resistance to outcome measurement.
An explicit educational effort will be needed to clarify that in
most, if not all, cases, outcomes are produced only in part by
program activities.
5. Clarify the objectives of federal programs. (3)
The executive branch should work with Congress to clarify the
goals and objectives of federal programs and identify those
programs where lack of clarity about legislative intent is
affecting execution. Congress should review existing and new
legislation for clarity of objectives and, where needed, take
steps to clarify legislative intent so as to encourage and
facilitate improved executive branch performance in executing
legislation.
Cross References to Other NPR Accompanying Reports
Improving Customer Service, ICS02: Customer Service Performance
StandardsInternal Revenue Service; ICS03: Customer Service
Performance Standards Social Security Administration; ICS04:
Customer Service Performance Standards-Postal Service; and ICS05:
Streamline Ways To Collect Customer Satisfaction and Other
Information From the Public.
Rethinking Program Design, DES01: Activate Program Design as a
Formal Discipline.
Reinventing Environmental Management, ENV02: Develop CrossAgency
Ecosystem Planning and Management.
Improving Financial Management, FM03: Fully Integrate Budget,
Financial, and Program Information; FM09: Simplify the Financial
Reporting Process; and FM10: Provide an Annual Financial Report to
the Public.
Strengthening the Partnership in Intergovernmental Service
Delivery, FSL01: Improve the Delivery of Federal Domestic Grant
Programs; and FSL06: Strengthen the Intergovernmental Partnership.
Reinventing Human Resource Management, HRM03: Authorize Agencies
to Develop Programs for Improvement of Individual and
Organizational Performance; HRM04: Authorize Agencies to Develop
Incentive Award and Bonus Systems to Improve Individual and
Organizational Performance; and HRM06: Clearly Define the
Objective of Training as the Improvement of Individual and
Organizational Performance; Make Training More MarketDriven.
Transforming Organizational Structures, ORG03: Establish a List of
Specific Field Offices to Be Closed; and ORG05: Sponsor Three or
More Cross-Departmental Initiatives Addressing Common Issues or
Customers.
Reinventing Federal Procurement, PROC16: Promote Excellence in
Vendor Performance.
Creating Quality Leadership and Management, QUAL01: Provide
Improved Leadership and Management of the Executive Branch;
QUAL02: Improve Government Performance Through Strategic and
Quality Management; QUAL03: Strengthen the Corps of Senior
Leaders; and QUAL04: Improve Legislative/Executive Branch
Relationships.
Streamlining Management Control, SMC01: Implement a Systems Design
Approach to Management Control; SMC02: Streamline the Internal
Controls Program to Make it an Efficient and Effective Management
Tool; SMC03: Change the Focus of the Inspectors General; SMC06:
Reduce the Burden of Congressionally Mandated Reports; and SMC08:
Expand the Use of Waivers to Encourage Innovation.
Agency for International Development, AID01: Redefine and Focus
AID's Mission and Priorities.
Department of Agriculture, USDA03: Reorganize the Department of
Agriculture to Better Accomplish Its Mission, Streamline Its Field
Structure, and Improve Service to Its Customers.
Department of the Interior, DOI12: Create a New Mission for the
Bureau of Reclamation.
Department of Education, ED11: Build a Professional MissionDriven
Structure for Research.
Department of Health and Human Services, HHS01: Promote Effective
Integrated Service Delivery for Customers by Increasing
Collaboration Efforts.
Executive Office of the President, EOP05: Reinvent OMB's
Management Mission; and EOP06: Improve OMB's Relationship with
Other Agencies.
******************
Endnotes
******************
1. See U.S. General Accounting Office, Program Performance
Measures: Federal Agency Collection and Use of Performance Data,
GAO/GGD9265 (Washington, D.C.: U.S. General Accounting Office
[GAO], May 1992); U.S. Congress, Congressional Budget Office,
Using Performance Measures in the Federal Budget Process
(Washington, D.C., July 1993).
2. See, for example, Schick, Allen, Performancebased Budgeting
System for the Agency for International Development, Program and
Operations Assessment report #4 (Washington, D.C.: Agency for
International Development, 1993); and DiIulio, John, Gerald
Garvey, and Donald Kettl, Improving Government Performance: An
Owner's Manual (Washington, D.C.: Brookings Institution, July
1993).
3. Osborne, David, and Ted Gaebler, Reinventing Government: How
the Entrepreneurial Spirit is Transforming the Public Sector
(Reading, MA: AddisonWesley, 1992); Epstein, Paul, "Get Ready: The
Time for Performance Measurement is Finally Coming!" Public
Administration Review (September/October 1992), pp. 513519; Texas
Performance Review, "Performance Measurement Should be Improved to
Ensure Better Outcome Measurement and Cost Accounting," Breaking
the Mold: New Ways to Govern Texas (Austin, TX: State of Texas,
July 1991), pp. 1730.
4. State of Oregon, Oregon Benchmarks, Standards for Measuring
Statewide Progress and Government Performance, Report to the 1993
Legislature, Oregon Progress Board, December 1992, p. 1.
5. Ibid., p. iii.
6. Kamensky, John, and Julie Tessauro, Performance Measurement in
the United Kingdom and Australia, presentation to the National
Academy of Public Administration Performance Measurement Seminar,
Washington, D.C., May 1992.
7. The Government Performance and Results Act of 1993, Public Law
10362, Sec. 2, Findings and Purposes.
8. President William J. Clinton, President's Statement at Bill
Signing for the Government Performance and Results Act of 1993,
August 3, 1993.
9. Ibid.
10. U.S. General Accounting Office, Managing the Cost of
GovernmentBuilding An Effective Financial Management Structure,
GAO/AFMD8535 (Washington, D.C.: GAO, 1985).
11. U.S. Department of Treasury, Financial Management Service,
Performance Measurement: Report on a Survey of Private Sector
Performance Measures (Washington, D.C.: Project USA, Financial
Management Service, January 1993), p. 12.
12. U.S. General Accounting Office, Program Performance Measures:
Federal Agency Collection and Use of Performance Data, GAO/GGD9265
(Washington, D.C.: GAO, May 1992).
13. Serlin, Michael D., "Payment Initiatives: The Plane Truth
About Electronic Fund Transfers," Speech to the Treasury
Management Institute, Department of the Treasury, Washington,
D.C., March 26, 1990.
14. As, for example, through the DOD "Enterprise Model" being
developed and implemented by the Assistant Secretary of Defense
for C3I (Command, Control, Communications, and Intelligence).
15. Behn, Robert D., BottomLine Government (Durham, North
Carolina: Institute for Public Policy, Duke University, 1993), pp.
7 and 12.
16. Letter from Harry P. Hatry, Director, State and Local
Government Research Program, The Urban Institute, to David
Osborne, Senior Advisor, National Performance Review, July 8,
1993.
17. See, for example, the discussion of management controls in the
NPR Accompanying Report Streamlining Management Control.
18. Omnibus Reconciliation Act of 1993, Public Law 10366, signed
by President Clinton on August 10, 1993. See also "FSL01: Improve
the Delivery of Federal Domestic Grant Programs" in the NPR
Accompanying Report Strengthening the Partnership in
Intergovernmental Service Delivery.
******************************************************************
Empower Managers to Achieve Results
BGT03:
******************************************************************
Empower Managers to Perform
************
BACKGROUND
************
Managers find that funds arrive in many small, separate "checking
accounts," each with restricted purposes and other detailed
limitations. Some of these detailed limitations take away the
manager's capacity to decide how to do the job, defining the use
of inputs like personnel, travel, or purchase of computers, for
example. These detailed restrictions absorb excessive time and
energy as managers figure out how to comply and yet get results.
As Dale Robertson, Chief of the U.S. Forest Service, has observed,
"On our best days government will be only mediocre in performance
unless we can figure out how to focus more of our time and energy
on the end results that benefit the American people."
Some restrictions on spending are necessary to reflect policy
priorities and decision show much to spend on which food and
nutrition programs, for example. But restrictions frequently run
to the other extreme, becoming excessively detailed and intrusive
for no real policy purpose mousemilking" was the term one budget
officer used to describe them.
Two ACTIONS are necessary to empower managers to perform better:
* To develop with managers what they are expected to
accomplish and how it will be measured. This is the theme of Part
1 of this report.
* To provide the necessary resources without excessively
detailed restrictions. Removing or decreasing these itemized
limitations is the major theme of this section of the report.
Excessively detailed limitations are restrictions on spending
money that are not needed for policy control, take away the
manager's capacity to perform, and impede the accomplishment of
results.1 These detailed limitations are imposed on line managers
by several means.
* Enacting statutory requirements in appropriations, such as
defining periods of availability for funds, earmarking funds for
certain projects or activities, and breaking accounts down into
subaccounts (activities). In addition, Congress may include
detailed instructions and earmarkings in the committee reports
that accompany appropriation bills.
* Inserting footnotes in apportionments, the means by which
the President makes appropriations available to ensure that funds
are spent without either overspending the appropriation or
creating pressures for a supplemental appropriation to complete
the year.
* Including restrictions in allotments, the system of
documents by which agencies (1) ensure that deficiencies will be
prevented, usually referred to as administrative control of funds,
and (2) allocate, distribute, and delegate spending authority down
the chain of command to program and field managers, often
accomplished through a financial operating plan.
Appropriations. There are over 1,000 appropriation accounts in the
federal budget the number varies slightly from year to year.
Appropriation account totals are usually divided into activities
and sometimes subactivities, for which separate funding totals are
provided (i.e., line items). For example, in the President's
budget, appropriations for military construction are divided among
the three activities of major construction, minor construction,
and planning, each with a discrete funding total.
Congressional subdivision of appropriation amounts into line items
is usually more detailed than is shown in the President's budget.
For example, the President's budget divides the appropriation for
the Office of the Secretary in the Department of the Interior into
six activities; the support table for the Interior and Related
Agencies appropriation for the same office subdivides the
appropriation among 29 line items.2 Overall, there are many
thousands of activities, subactivities, and projects subject to
line item control in appropriations acts; the total number is
unknown.
General provisions in each appropriations bill impose additional
limitations on how funds should or should not be spent. The 1993
Defense Appropriations Act has 219 general provisions, compared to
47 in the 1963 Act.3 Report language adds an extensive array of
earmarks and instructions. For example, the Department of the
Interior found that language in the House, Senate, and Conference
Committee Reports and the 1992 Appropriations Act for Interior and
Related Agencies contained about 2,150 directives, earmarks,
instructions, guidance, and prohibitions.4
Report language is not law, but agencies not following report
language may be cross-examined closely in future hearings and may
find the language written into the general provisions of future
appropriations acts.
Any member of Congress may request the insertion of earmarking and
report language. If the appropriations committee agrees, the
earmarking and report language is inserted in the House, Senate,
or Conference Committee Reports. The House Appropriations
Committee received more requests for such report language in 1993
than in any prior year. The requests are thought to be in reaction
to the need to cut back to meet the caps on discretionary spending
set in the Budget Enforcement Act, which in turn places a premium
on protecting spending in a member's district or items of
particular interest to a member. There are also instances where
federal employees have asked members of Congress to include items
in report language. In the years when Congress was controlled by
one political party and the presidency by another, report language
was a mechanism used by Congress to ensure that its will was
carried out. The House Appropriations Committee is moving, in the
fiscal year 1994 appropriation bills, to have fewer requirements
in report language.5
Apportionments. OMB has been delegated the President's authority
to apportion make available for obligation almost all
appropriation and fund accounts.6 The statutes specify that "any
appropriation subject to apportionment shall be distributed by
months, time periods, or by activities, functions, projects, or
objects, or by a combination thereof."7 Apportionments:
* Provide a mechanism by which the President can prevent
agencies from spending money too quickly by limiting the amount
that can be spent by month or by quarter of the year. For example,
spending funds meant to last the whole fiscal year in the first
half of the year would create pressure for supplemental
appropriations to continue operations. Funds can be apportioned so
that only one-half of the amount appropriated is available in the
first half of the year, avoiding a second-half shortfall.
* Provide a mechanism to effect management ACTIONS, such as
(a) achieving savings made possible by changes in requirements or
greater efficiency of operations, (b) providing for contingencies,
or (c) those specifically provided by law, such as carrying out
sequestrations. Proposed savings for reasons (a) and (b) are
required to be reported to Congress for their action as deferrals
or rescission proposals.8
Spending in excess of the amount in an appropriation or fund
account has been less of a problem in the last decade than in
earlier periods. Between 1982 and 1993, there have been 51
violations of the Anti-deficiency Act (which restricts both
obligations and expenditures from each appropriation to the amount
available in the appropriation or fund) reported to the President.
This time period coincides with the installation of better
financial management systems in federal agencies at the urging of
the General Accounting Office, OMB, Treasury, and Congress.9
Apportionments can be more extensive than appropriations in
setting detailed limitations, since for example they can break
down spending authority by time period during the fiscal year, by
object class, or by program activity. Also, OMB sometimes includes
footnotes with instructions concerning spending or requiring
reports to be submitted.
Allotments. Allotments subdivide apportionments and incorporate
appropriation limitations within agency accounting systems.10 Most
federal agencies develop financial operating plans that include
appropriation limitations and distribute funds among
organizational components as the appropriation process draws to a
close in August and September. Financial operating plans are
finalized after enactment of appropriations and include the means
by which allotments are issued to organizational components.
It is in the carrying out of statutory requirements, apportionment
footnotes, and allotment restrictions that problems and costs
occur. Each limitation usually involves a system of controls and
reports to ensure that the limitations are not exceeded and/or are
carried out as set in the law or report. The control system
requires subdividing the total amount of funds from discrete
appropriation accounts among the managers who will be responsible
for spending those funds. Control also requires an information
system that feeds back to the managers and to monitors along the
chain of command,current status compared to the limitation and
assurance that the money is properly spent. Depending upon
organizational structure, this subdivision of funds and controls
can multiply into ever smaller allocations through the whole
pyramid of managers and staff. Allotment control systems and
efforts to manage large numbers of restrictions on small
allocations of funds are labor and overhead-intensive.
For example, the Forest Service, a bureau in the U.S. Department
of Agriculture, has managers who receive allotments and sub-
allotments from the Forest Service's 29 appropriations activity
accounts through nine regional offices, 122 forest supervisor
offices, 633 ranger districts, and 69 research locations.11 One of
these national forests, the Ochoco National Forest in central
Oregon, administers funds from 19 of these 29 activities. For
financial management, these 19 activities translate into 70
separate accounts, 556 separate management codes, and 1,769
accounting lines for the Ochoco National Forest. The budget is
split into such small increments that tracking and balancing
amounts becomes the major consumer of managers' time.12
Ochoco participated in a Forest Service pilot project to test the
results of greater managerial flexibility.13 The 70 internal
accounts were reduced to six and the emphasis was changed to
"output targets accomplished" rather than maintaining elaborate
records to control how the individual allocations of money were
spent. Productivity in terms of "output targets accomplished"
jumped 25 percent in the first year and an additional 35 percent
in the second year. Resource managers who had spent 4560 days a
year in the office "crunching numbers" found they could adequately
develop budgets in one day.14
Operating Costs. Operating costs are sometimes defined as the
costs associated with direct federal operations. The National Park
Service is a direct federal operation providing services to the
public, and the operating costs associated with providing these
services are in an account aptly named "Operation of the National
Park System." The Social Security Administration provides payments
to beneficiaries. The payments themselves are not direct federal
operations, but the staff and machinery to make those payments are
direct federal operations. In some federal programs, the direct
federal operating portion and the grant or service provider
portion are mixed and not easily identified or separated. The
intramural and extramural research programs of the Public Health
Service are an example. Cancer research serves the same goal,
whether done in-house or by contract or grant.
For sound management, it is important to identify, monitor, and
control all direct operating costs. This does not require that
they be subject to detailed limitations; rather, that the
financial system provide management with timely, accurate, ongoing
reports on the cost of operations. Ideally, these costs should
include full costs, not only of federal personnel but also all
support of direct operations, so that financial analyses and
comparisons are even and tell the full story. Presently, federal
operations do not include the full costs of federal employee
benefits, excluding some expenses for retirees. The National
Performance Review Accompanying Report Improving Financial
Management includes a recommendation (FM13) to charge agencies for
the full cost of employee benefits. The Federal Accounting
Standards Advisory Board (FASAB) has a project under way to
account for costs, which is intended to address this problem.
Revolving Funds. The Department of Defense (DOD) has used the
revolving fund concept in many of its support operations for more
than 40 years. Most of its shipyards and aircraft repair depots
have operated under this financing arrangement since 1975.
Revolving fund activities operate with no, or very little, direct
appropriated funds. They are instead financed on a reimbursable
basis from appropriated funds. These funds are appropriated to
customers of those activities a Navy sea command or an Air Force
tactical fighter squadron who in turn purchase goods and services
from the revolving fund activity much like any private business.
These support activities financed by revolving funds operate more
efficiently and effectively without the constraints of fiscal year
limitations and excessively detailed administrative restrictions.
Separating support activities from their customers and giving the
customer the funding create a check and balance situation that
ensures the revolving fund activity engages only in efforts for
which there is customer demand. Better yet, there is competition
for customers based on price and quality of service, and customers
have a choice of suppliers.
DOD has developed a method of budgeting called Unit Cost
Resourcing, used primarily for organizations that operate within a
revolving fund. Unit Cost Resourcing accounts for expenditures in
terms of their impact upon work outputs/buying uniforms or payroll
account processing. Budget authority is given to an activity in
terms of cost per output. That is, if the output's estimated cost
is $100, then the activity "earns" $100 per output. There are no
frontend limitations imposed on the activity, such as spending
only so much for personnel, training, travel, etc. Budget
formulation and execution are based on cost per output and
mission-oriented measures, such as the percentage of tactical
aircraft that are mission-capable. Managers make the same
essential tradeoff decisions among various outputs and their costs
that are taken for granted by private industry managers.15
In some federal activities, this type of budgeting would be
difficult, but many federal organizations can learn from DOD's and
other agencies' experience to manage their resources to achieve
results more efficiently. While some agencies work to overcome
difficulties in performance budgeting for their operations, others
will make progress based on their experience with working capital
funds and cooperative administrative service units (CASU's).
Matching Mission with Appropriations. Historically there has been
no mechanism by which the decisions reached in proposing missions
and functions in the president's budget are updated and adjusted
after final appropriations action. If agencies jointly put
considerable effort into mission and functional planning and
budget formulation, agencies should then follow up, after
appropriations became available, to make necessary updates and
adjustments to manage resources made available in the budget for
results.
The apportionment and allotment systems required under the Anti-
deficiency Act focus on administrative control of funds. While
such compliance is important, there are other critical issues that
must be considered in budget execution in order to manage for
results. The missions of the federal government will be more
effectively accomplished if some executive branch staff and
attention are shifted from budget development to policy
implementation, budget execution, and review of results being
achieved.
*****************
NEED FOR CHANGE
*****************
As long as the emphasis is on compliance with detailed
restrictions on inputs rather than outputs and accomplishment,
many managers will see the goal of federal programs as spending
money or preserving options to do so. Incentives for savings are
absent. As one manager put it, "If you as a manager showed at the
end of the year that you spent less money than you had been
allocated at the beginning of the year, the difference is taken
away from you for the upcoming year on the assumption you don't
need it. However, no manager likes to be faced with a shrinking
budget, i.e., fewer resources, since 1) your budget tends to be
symbolic of your program's importance and your own sphere of
influence and 2) because you never know what new responsibilities
may come your way during the next fiscal year that you need
resources for. Since new responsibilities often come unfunded and
pools of resources are generally not available (OMB and Congress
are the first ones to strike any such pool of unallocated
reserves) it is currently not in any manager's interest to "admit
to" savings. It is much more rewarding to spend all your money and
then claim a need for more next year than to show genuine
savings."16
There should be incentives to save money, to attend less to new
budget requests and detailed control of inputs and more to
performance and results. Excessively detailed limitations and
failure to focus on outputs cost money adding several percent or
more in direct federal operations than would otherwise be
necessary. Such constraints force managers to spend large amounts
of time in the financial administration of their work, distort
work program priorities, encourage spending, and bloat overhead
and support costs through labor-intensive activities to maintain
and monitor all of the controls. Many of these limitations direct
spending to matters of political concern; efficient or effective
management is not a consideration.
Operations that have consolidated resources into a small number of
accounts without excessively detailed front-end limitations and
have simplified other internal rules have reduced operating costs
by 10 percent or more while improving the quality of their
services.17 To achieve both savings and productivity improvements,
there is a need to eliminate expensive but unnecessary itemized
restrictions while reducing the mind-numbing volume of internal
regulation, as recommended in the National Performance Review
Accompanying Report Streamlining Management Control.
There must be an explicit agreement here: more flexibility, fewer
restrictions, more accountability for managers, but also smaller
budgets. Some of the savings will go for training, tools to
enhance productivity, and positive incentives, like bonuses, but
some must also go to reduce the overall cost of government.
The executive branch uses too much time developing and justifying
budget proposals for which there is little hope of approval and
then takes too little time to examine how to use appropriations
enacted to meet mission needs and priorities more effectively.
Strategic planning is sketchy. Managers haven't been told what
results to achieve and then held accountable for results. Tools
like revolving funds, full cost accounting, and competition among
suppliers are underutilized in efforts to supply quality services
to customers at lower costs.
Accountability for resources and results without detailed
limitations can be maintained through sound financial management
systems and through reporting systems on accomplishments. Given
timely, accurate information, management can intervene in
operations and take action to achieve performance objectives
during the operating year, based on spending patterns and results
they see emerging through their information systems and other
feedback mechanisms.
***************
ACTIONS
***************
1. Revise operational plans and performance goals to reflect
actual appropriations by mission and function. (2)
The President should direct agency heads to review appropriations
to determine if changes are needed in policy priorities and
performance goals. Agency heads should consult with the White
House Policy Councils and the Office of Management and Budget
about suitable modifications to operating plans. This update
should begin with the fiscal year 1995 appropriations and spread
in subsequent years as performance measurement is implemented more
broadly throughout government.
After appropriations are enacted, agencies develop their financial
operating plans and internal allocations. It is also at this point
that senior managers need to revisit presidential policies and
priorities presented in proposals to Congress and to adjust for
final appropriations action.
Agency heads need to review appropriations as soon as
congressional directions are known and discuss with the White
House Policy Councils and the Office of Management and Budget how
to match policy priorities and performance goals with the revised
availability of funds. Performance plans and targets throughout
the agency should be updated and refined based upon the enacted
availability of resources.
2. Restructure appropriations accounts to reduce over-itemization
and to align them with programs. (3)
Agency heads should begin now to identify appropriation accounts
and overly itemized limitations that seriously impede cost-
effective management and to develop and propose better structures.
Restructuring should begin as quickly as possible, although early
discussions with OMB and with appropriations subcommittees are
recommended. A long-term and more extensive restructuring should
be proposed to Congress in the fiscal year 1996 budget.
Congressional consideration and action is necessary, since the
support tables to the appropriations bills establishing line items
are usually more detailed than the information submitted in the
Budget Appendix.
The goals of this restructuring are to consolidate appropriations
accounts and activities more closely along the lines of programs
providing services to the public or internally and to minimize the
number of detailed limitations that impede efficient management.
These program accounts would receive appropriations for the full
cost of the program, including the usual administrative expenses
as well as the accruing cost of retiree benefits.18 The
appropriation would also cover the purchase of support services
(e.g., supplies, equipment, payroll services) from support
accounts in or outside the agency or from the private sector. This
restructuring should be undertaken in conjunction with the
implementation of the Government Performance and Results Act
(GPRA) of 1993.
3. Ensure that direct operating costs can be identified. (1)
Agency heads should issue internal guidance to ensure that
operating costs can be readily identified and to implement any
changes necessary in financial management systems in the execution
of the fiscal year 1995 budget.
It is important that total operating costs be readily identifiable
under any restructuring, so that the direct operating costs of
programs can be measured, compared to results, and controlled by
policy decisions, incentives, and good management rather than by
detailed spending limitations. They can also be weighed against
total program costs, including amounts for grants to
beneficiaries, to ensure that program operating costs are not
excessive. The capacity to identify, track, and control operating
costs is necessary to trade across-the-board full-time equivalent
(FTE) limitations for a managerially more sound control through
funding allocations.
Operating costs need not be set in separate appropriation accounts
with detailed restrictions and breakdowns. Estimates for operating
costs can be shown in the budget, and financial management systems
can track actual expenditures during the operating year.
Deviations from plan, inevitable with the passage of time and
dynamic management, should be documented and justified. There is
ample precedent for this treatment.
The effort to identify and track operating costs should be
initiated for the fiscal year 1996 budget formulation cycle.
4. Propose revolving funds for those agencies that do not have
them. (3)
Agency heads should assess their needs for revolving or working
capital funds and propose legislation for them where appropriate
in the fiscal year 1996 budget cycle.
Support accounts should be organized in the form of revolving fund
accounts, replacing separate line items for administrative
activities and services.19 Support accounts would cover most
commercially available items, such as office space, supplies,
automobiles, personnel and payroll services, building maintenance,
and legal, accounting, and auditing services. This effort should
be completed in the fiscal year 1996 cycle.
DOD is a good model of the desired approach. The DOD revolving
fund approach incorporates many of DOD's support activities as
business areas that provide goods and services to mission-related
activities or customers. The appropriation-funded, mission-related
activities purchase goods and services from organizations or
business areas that operate within the fund. The Unit Cost
Resources methodology allows DOD to budget by mission (showing
full costs of the mission) and to control unit costs at the same
time. Incentives in the form of bonuses to employees are provided
to those organizational elements that show savings below their
unit cost targets. Other agencies, such as the General Services
Administration and the Department of Justice, also have
reimbursable revolving funds through which support services are
purchased.
Revolving funds do require good financial management systems to
succeed. Review of periodic financial management statements is
also required. Concerns have been expressed that working capital
and revolving funds will build up "profits" that amount to "slush
funds" and that any such funds could potentially be used to avoid
the detailed limitations on other funds. Appropriate policy and
management oversight is therefore necessary.
5. Reduce overly detailed restrictions and earmarks in
appropriation and report language. (3)
Agency heads should identify the overly detailed restrictions and
earmarks in the fiscal year 1995 appropriations and reports that
seriously impede the missions or the most efficient management of
their agencies. They should be prepared to discuss how to
eliminate or reduce the need for them with the chairpersons of
their appropriations subcommittees.
Restrictions and earmarks in appropriation and report language add
expensive limitations to management ACTIONS and take time and
attention to track. A number of agencies have been working with
their appropriations subcommittee staffs to document concerns with
and reduce general language provisions and earmarks and directives
in report language that are expensive to administer for the
advantage gained. Some may be there as a matter of history rather
than current need. This effort should be continued and accelerated
in the fiscal year 1995 and 1996 budgets.
6. Simplify the apportionment process. (2)
The OMB Director should immediately issue internal guidance to
staff to use simple letter apportionments and process
apportionments within the time frames called for in the law (i.e.,
within 30 calendar days after approval of the appropriations act
or by September 10, whichever is later).20 Policy decisions should
be relayed by OMB policy officials to agency policy officials by
means other than apportionments. OMB is already encouraging
automation of apportionment submissions and working with the
Department of the Treasury on an automated monthly reporting
system. These efforts should be completed by fiscal year 1995 to
assist in timely review.
Any exceptions to the letter apportionment process should be
explained to the affected agency. Examples of reasons for
exceptions are:
* to force discipline on an agency that is violating the Anti-
deficiency Act;
* to sequester funds under the Budget Enforcement Act;
* where the time phasing of obligations during the fiscal year
is of critical interest to government-wide management; or
* when rescissions or deferrals are proposed that require
formal apportionment action.
This change in the apportionment process would be implemented by
OMB internal instructions to its staff. Changes to the
apportionment process should be developed in consultation with
Department of the Treasury and agency staff as in the past. Any
revisions to OMB Circular A34, "Instructions on Budget Execution,"
necessary to accommodate the changes should also be made.
Related to this recommendation, OMB, the Department of the
Treasury, and federal agencies should proceed as soon as possible
with an integrated budgeting and financial management information
system to promote better and more effective use of financial
management information in budget formulation and more effective
oversight of budget execution.21
7. Reduce the excessive administrative subdivision of funds in
financial operating plans. (1)
Agency heads should internally review their procedures for
developing financial operating plans at the beginning of the
operating year to reduce the excessive subdivision of allotments
subject to Anti-deficiency Act controls and penalties. This review
should be completed in fiscal year 1995.
The standard for developing and implementing financial operating
plans is that allotments and allocations are made to responsible
managers within 30 days of enactment of an appropriation or
continuing resolution. Any agencies not able to meet this standard
should be held accountable for corrective action first by their
internal managers at all levels and, failing there, by OMB,
Treasury, and GAO.
Experience by agencies that have looked into simplifying detailed
limitations is that the majority of the problem limitations are
self-inflicted by the agency and can be corrected internally. The
concern frequently expressed is that some managers deliberately
overspend their budgets, leaving to the official accountable under
Anti-deficiency Act penalties the problem of balancing accounts.
Good financial management and other support information systems
(e.g., personnel/payroll, procurement) can amply provide
accountability for the use of inputs. Those systems should be
upgraded to provide real-time, on-line information feedback to all
managers and on-line, read-only summary reports to higher levels
of management and external monitors, such as Inspectors General,
without separate systems for reports. Two effective incentives for
better accountability in open systems are peer pressure, where
managers serve as a check and balance on one another, and
visibility, where there is less ability to hide questionable
transactions to delay their discovery until an audit years later.
Cross References to Other NPR Accompanying Reports
Improving Financial Management, FM01: Accelerate the Issuance of
Federal Accounting Standards; FM03: Fully Integrate Budget,
Financial, and Program Information; FM04: Increase the Use of
Technology to Streamline Financial Services; FM06: "Franchise"
Internal Services; FM07: Create Innovation Funds; FM12: Manage
Fixed Asset Investments for the Long Term; and FM13: Charge
Agencies for the Full Cost of Employee Benefits.
Reengineering Through Information Technology, IT01: Provide Clear,
Strong Leadership to Integrate Information Technology Into the
Business of Government; IT11: Improve Methods of Information
Technology Acquisition; and IT12: Provide Incentives for
Innovation.
General Services Administration, GSA01: Separate Policymaking from
Service Delivery and Make the General Services Administration a
Fully Competitive, RevenueBased Organization.
Reinventing Human Resource Management, HRM01: Create a Flexible
and Responsive Hiring System; and HRM04: Authorize Agencies to
Develop Incentive Award and Bonus Systems to Improve Individual
and Organizational Performance.
Transforming Organizational Structures, ORG01: Reduce the Costs
and Numbers of Positions Associated with Management Control
Structures by Half; and ORG03: Establish a List of Specific Field
Offices to Be Closed.
Reinventing Federal Procurement, PROC01: Reframe Acquisition
Policy; PROC08: Reform Information Technology Procurement; and
PROC18: Authorize Multiyear Contracts.
Streamlining Management Control, SMC03: Change the Focus of the
Inspectors General; SMC06: Reduce the Burden of Congressionally
Mandated Reports; SMC07: Reduce Internal Regulations by More than
50 Percent; and SMC08: Expand the Use of Waivers to Encourage
Innovation.
***************
Endnotes
***************
1. See Handy, Charles, "Balancing Corporate Power: A New
Federalist Paper," Harvard Business Review (November/December
1992), pp. 5972. He notes that "subsidiarity . . . means that
power belongs to the lowest point in the organization" and that
"all managers are tempted to steal their subordinates' decisions"
(page 64). The article is provocative and provides insights about
the successful management of large, diverse organizations.
2. U.S. Office of Management and Budget (OMB), Budget of the
United States Government, Fiscal Year 1994 (Washington, April 8,
1993), p. 745; and U.S. Congress, House, Committee on
Appropriations, Interior and Related Agencies Subcommittee,
Interior Support Table (Washington, D.C., June 15, 1993), pp.
2122.
3. OMB, pp. 502 to 509 and 352355. The prior fiscal year's
appropriation language is shown marked up as proposed for the next
fiscal year by the administration.
4. Data from unpublished paper by the Department of the Interior
budget staff, Washington, D.C., July 17, 1992.
5. Interview with House Appropriations Committee staff, June 23,
1993.
6. 31 U.S.C. 1516 provides that certain categories may be exempted
from apportionment, such as working capital and revolving funds;
certain trust funds; payments of claims, judgments, or refunds;
and interest on the public debt.
7. See 31 U.S.C. 1512 through 1519 for laws concerning
apportionment.
8. Deferrals are proposals to postpone spending, while rescissions
are proposals to cancel spending. Sequestration is a process to
take away spending authority to meet spending limits or caps. For
a good description of these, see Collender, Stanley E., A Guide to
the Federal Budget (Washington, D.C.: Urban Institute, 1992).
9. Information supplied by Office of Management and Budget staff,
July 16, 1993.
10. In theory, allotments should not be overly detailed. 31 U.S.C.
1514 calls for a simplified system for administratively dividing
appropriations, with the objective of financing each operating
unit from not more than one administrative division for each
appropriation affecting the unit.
11. U.S. Congress, Senate, Committee on Government Affairs,
"Organization of the Federal Executive Departments and Agencies as
of 1 January 1992," Senate Committee Print 102107, Part 1. (Wall
chart).
12. U.S. Department of Agriculture, Forest Service, "Proposal for
Change: Ochoco National Forest," Washington, D.C., undated.
13. A description of the Forest Service pilot program appears in
U.S. General Accounting Office, Forest Service: Evaluation of
"EndResults" Budgeting Test (Washington, D.C.: U.S. General
Accounting Office (GAO), March, 1988) and in Overcoming Barriers
to Productivity: An Agency Call to Action (Washington, D.C.:
Interagency Barriers Working Group, May 1988), pp. 89.
14. U.S. Department of Agriculture, Forest Service, Summary of
Experience (Washington, D.C., undated). Also interviews with Rod
Collins, business manager for the Ochoco National Forest,
Washington, D.C., June 16, 1993.
15. Memorandum from Elvon Lloyd, Directorate for Business
Management, Comptroller of the Department of Defense, Washington,
D.C., July 20, 1993, p. 3.
16. Letter to Vice President Al Gore from Helga B. Butler,
Executive Officer to the Deputy Administrator, Environmental
Protection Agency, Washington, D.C., March 3, 1993.
17. Summary of experience from pilot efforts in DOD, the U.S.
Forest Service, and the Department of Veterans Affairs. For
example, the Eastern Regional Office of the U.S. Forest Service
was able to reduce its operating costs from $15 million to $13
million and staff from 223 people to 183 between 1989 and 1993
through internal improvement efforts, according to an article by
Leslie Kaufman, "The U.S. Forest Service: Decentralizing
Authority," Government Executive (Washington, D.C.), pp. 2334.
18. For discussion and recommendations concerning full costs for
federal employees, see NPR Accompanying Report Improving Financial
Management, FM13: Charge Agencies for the Full Cost of Employee
Benefits.
19. See McCann, S. Anthony, Government Revolving Funds and
Cooperative Administrative Support Unit Funding (Washington, D.C.,
undated).
20. Dates are set in 31 U.S.C. 1513. See also OMB, Instructions on
Budget Execution, Circular A34 Washington, D.C., 1991), Section
44.10, p. IV7.
21. See NPR Accompanying Report Improving Financial Management,
FM03: Fully Integrate Budget, Financial, and Program Information.
Another good description of what's needed to improve budgeting and
financial management is in U.S. General Accounting Office,
Managing the Cost of Government: Building an Effective Financial
Structure, GAO/AFMD8535 (Washington, D.C.: GAO, February 1985).
******************************************************************
Eliminate Employment Ceilings and Floors by Managing Within Budget
BGT04:
******************************************************************
****************
BACKGROUND
****************
Employment ceilings were instituted in 1964 by the Bureau of the
Budget in Circular A64 to ensure the most effective use of
government resources.1 At that time, agency heads were charged
with monitoring the employment ceilings and pursuing a position
management program that provided a proper balance among mission
needs, efficiency of operations, and effective employee
utilization. This meant "achieving lower employment levels and
increasing productivity through tighter management, redeployment
of personnel, simplification of procedures, and stripping work to
essentials."2
Since the early 1980's, nondefense agencies have been required to
use the full-time equivalent (FTE) as a limitation on the size of
their workforce. One FTE is equal to one compensable work year or
2,080 hours. Before that time, a control of head counts on the
last day of the year was used. Under this system, some agencies
would spend the entire last month of the year processing personnel
ACTIONS to ensure they met but did not exceed the Office of
Management and Budget (OMB) employment ceiling. Agencies were
concerned that failure to be fully staffed at the end of the year
would signal that assigned staff levels were too high. However,
what often resulted was a freeze or slowdown of productivity until
later in the year, at which time managers started this cycle
again. The objective of the FTE ceiling approach was to provide
agencies with greater flexibility in managing the "mix" of their
workforcefulltime and part-time, permanent and temporary
throughout the year.
While the use of employment ceilings has, for the most part, been
successful in keeping the number of federal civilian personnel
within desired limits, it has been neither the most efficient nor
effective means of achieving overall management improvement and
economies.
Current Process. OMB Circular A11 (which replaced Circular A64)
requires agencies to prepare estimates relating to personnel
requirements in terms of FTE. Subsequent employment ceilings
reflect budget proposals and assumptions with regard to workload,
efficiency, proposed legislation, interagency reimbursable
arrangements, and other special financing methods. Maximum
allowable personnel resources are determined at the time of the
annual budget review for the fiscal year then in progress, and for
the succeeding two fiscal years. Agencies are advised of their
ceilings formally in allowance letters that are sent shortly after
transmittal of the annual budget to Congress.3 FTEs are allocated
as follows:
* OMB allocates the FTE ceilings among departments and
agencies as required by Presidential Executive Order, then
notifies departments and agencies of their ceilings.
* Department/agency budget staff receive ceiling numbers and
determine the breakdown by departmental components.
* Further breakdowns are determined by departments and
agencies through the organizational levels to offices, bureaus,
divisions, branches, units, etc.
* These smaller entities then comply according to their
individual FTE ceiling, budgeting separately general grade levels
and overall dollars.
****************
NEED FOR CHANGE
****************
We spend an awful lot of time arguing with the personnel bureau
about the levels of FTE usage, and yet there is no consideration
of the dollars. And a perfect example of that is, at least 18
months ago, we justified saving perhaps $100,000 $200,000 by
hiring government workers to do work that was being done by
contractors. My first experience with this was at the Foreign
Service Institute, when I was responsible for managing million
dollar contracts, and I found that the cost of a junior
programmer, his hourly rate, was equivalent to the head of the
institute. Now, that did not make sense, and doesn't make sense
today.4
Federal managers have frequently mentioned employment ceilings as
their most oppressive limitation. Some of the problems are as
follows:
* Ceilings or floors requiring fewer or more employees than
needed to accomplish a mission can create mismatches with agreed
upon allocations of dollars. Managers have dollars for positions,
but can't hire because of the FTE ceiling, or they have to fill
unneeded positions because of the floor.
* Ceilings are frequently arbitrary and reduced across-the-
board, without adequate assessment as to how reductions fit with
operations and priorities.
* Ceilings are frequently not synchronized with the imposition
of rules, regulations, and demands that cause more work. Ceilings
are not adjusted for changes made in the appropriations process.
Managers are left with mandates and limited means of fulfilling
them.
* Ceilings force work to be contracted out that could be done
less expensively in-house or that is more appropriately
accomplished by government employees rather than the private
sector.
* Ceilings limit the effectiveness of customer-driven
operations financed by revolving and working capital funds,
particularly where competition is involved.
* Employment ceilings inhibit managers' ability to balance
dollars optimally among costs salaries and benefits, space,
equipment, supplies, travel, and training.
* All employees count equally under FTE ceilings regardless of
grade; thus, managers often hire employees at a higher grade than
necessary since they do not have the flexibility to hire the two
or more lower-graded employees they would prefer.
Central agency employment requirements, as well as special
congressional employment earmarks or constraints such as FTE
floors, significantly influence the general management of all
government agencies: they create confusion, increase workloads,
and detract from the commonsense principles of good management.
For instance, at the National Institutes of Health, FTE ceilings
have been an obstacle to carrying out the biomedical research
mission of the agency and actually have a deleterious effect on
the institutional research base there. Often, scientific
investigation requires personnel who are skilled in modern
research techniques and familiar with modern biotechnology. This
science also requires a stable research environment in that a
relatively long period of time is required to conclude complex
investigations. Because of the FTE ceilings, investigators
frequently must engage training fellows, who do not count against
FTE ceilings, to support this research, instead of more
experienced postdoctoral investigators, who must be appointed
against the FTE ceilings. The same salaries and expenses accounts
finance both. This artificial FTE barrier hinders scientific
investigation because it slows down the pace of research, creates
an unstable environment (trainees have a much higher turnover
rate), and enhances the institutional research base of outside
institutions rather than the government's.5
In some cases there is an essential step to be accomplished before
FTE ceilings are removed. Currently, some agencies' budgeting and
financial management systems do not break out operational costs as
separate expenditure categories; therefore, some program
operations cannot be budgeted and managed within the agency on
that basis. In those cases, an alternative means of controlling
workforce levels is necessary.
****************
ACTIONS
****************
1. Budget and manage on the basis of operating costs rather than
full-time equivalents or employment ceilings. (2)
The President should direct OMB and agency heads to manage within
operating costs rather than using FTE or employment ceilings.
Employment ceilings should be phased out as soon as there is
assurance that the employment reduction targets will be met.
It is envisioned that eventually employment ceilings will be
lifted for most agencies and organizational subcomponents within
agencies, and certainly for fully reimbursable organizations
(i.e., organizations that do not receive appropriations for
operating costs, but are reimbursed by other organizations for
services provided to those organizations). Organizations that
cannot separately identify, track, and report operating costs
should propose to OMB (in the case of agency heads) or to agency
heads (in the case of subcomponents)alternatives for managing the
size of their workforce prior to removal of employment ceilings.
This recommendation fully supports President Clinton's commitment
to maintain a reduced federal workforce. Instead of controlling
the size of the federal workforce by employment ceilings which
clearly cause inefficient distortions in managers' personnel and
resource allocation decisions the size of the workforce will be
controlled by the dollars available in federal operating funds.
2. Request Congress to remove FTE floors.(3)
The fiscal year 1996 budget requests prepared for Congress should
include provisions for the removal of FTE floors from
appropriation bill and report language. Examples of agencies that
have had FTE floors in the past include the Food and Drug
Administration, the Farmers Home Administration, a Coast Guard
yard, and certain fossil energy research and development
facilities in the Department of Energy. Most of these floors have
been established by the Congress in reaction to FTE ceilings
imposed by the executive branch. Managing within appropriated
funds without FTE ceilings leaves little reason for FTE floors,
which also impede management decisions on the most efficient use
of funds to achieve results.
Cross References to Other NPR Accompanying Reports
Transforming Organizational Structures, ORG01: Reduce the Costs
and Numbers of Positions Associated with Management Control
Structures by Half; ORG02: Use MultiYear Performance Agreements
between the President and Agency Heads to Guide Downsizing
Strategies; and ORG03: Establish a List of Specific Field Offices
to Be Closed.
Improving Financial Management, FM06: "Franchise" Internal
Services; and FM13: Charge Agencies for the Full Cost of Employee
Benefits.
General Services Administration, GSA01: Separate Policy making
from Service Delivery and Make the General Services Administration
a Fully Competitive, Revenue-Based Organization.
Reinventing Human Resource Management, HRM01: Create a Flexible
and Responsive Hiring System; HRM02: Reform the General Schedule
Classification and Basic Pay System; and HRM08: Improve Processes
and Procedures Established to Provide Workplace Due Process for
Employees.
Department of Agriculture, USDA03: Reorganize the Department of
Agriculture to Better Accomplish Its Mission, Streamline Its Field
Structure, and Improve Service to Its Customers; and USDA04:
Implement a Consolidated Farm Management Plan.
Department of Energy, DOE01: Improve Environmental Contract
Management.
Environmental Protection Agency, EPA08: Reform EPA's Contract
Management Process.
Department of Health and Human Services, HHS13: Review the Field
and Regional Office Structure of HHS and Develop a Plan for
Shifting Resources to Match Workload Demands.
Department of Housing and Urban Development, HUD06: Streamline HUD
Field Operations.
Department of the Interior, DOI10: Consolidate Administrative and
Programmatic Functions in DOI; and DOI11: Streamline Management
Support Systems in DOI.
****************
Endnotes
****************
1. Bureau of the Budget, Circular A64, Control over Employment and
Reporting on Related Cost Reductions (Washington, D.C., March 31,
1964). The Bureau of the Budget was the predecessor to the current
Office of Management and Budget.
2. Ibid.
3. U.S. Office of Management and Budget, OMB Circular No. A11,
Instructions on Budget Formulation (Washington, D.C., 1992). See
section titled "Basis for Reporting on Employment and Personnel
Compensation," 13.113.4.
4. Sander, John, Bureau of Finance and Management policy, quoted
in State (Washington, D.C.: U.S. Department of State, JulyAugust
1993), p. 5. He went on to say: "As long as we have centrally
managed salary budgets and we could change that here in the
Department, I'm confident of that we will not get the efficiency
by allowing managers to make those decisions as to whether you
hire a contractor . . . I think I speak for a lot of people in
this room that they have seen dollars wasted. They have seen jobs
done by contractors at two and three times the cost."
5. Fax from Steve Ficca, Associate Director for Research Services,
National Institutes of Health, U. S. Department of Health and
Human Services, August 22, 1993.
*****************************************************************
Provide Line Managers with Greater Flexibility to Achieve Results
BGT05:
*****************************************************************
***************
BACKGROUND
***************
There are several mechanisms permitting managerial flexibility
within resource limitations or adjusting those limitations, that
is, moving funds from one restricted account to another. Some of
these involve Congress, such as requests for reprogrammings and
appropriation transfers; others can be implemented within the
executive branch, either through requesting reapportionments (if
required) or reallotments. Flexibility frequently involves
charting a course among different mechanisms for adjusting
restrictions. The following example illustrates the interplay of
restrictions and mechanisms for adjustment.
Appropriations for the Department of Defense (DOD) fall in the
general categories of military personnel, operations and
maintenance, procurement, research, development, test and
evaluation, military construction, family housing, and management
funds. The appropriation specifies how much should be spent on
each category by military service. The appropriation does not
specify how much should be spent for each category at each
military installation. Each service breaks down each appropriation
into sub-allotments for each installation. Each installation
commander then has a number of small, restricted sub-allotments
for specific purposes based on a budget prepared two or three
years earlier that does not reflect current conditions and
requirements. Due to the complications related to reprogramming or
some other formal transfer mechanism, there is an incentive to
spend the funds in each suballotment even though such spending may
not reflect current needs and priorities.
It is worth noting that the DOD appropriations structure has
little to do with military missions, such as strategic deterrence
or antisubmarine warfare. In effect, by using categories that
relate neither to missions nor installations, Congress has
provided DOD and the military services with incentives to use
initiative to apply their appropriations to meet their needs.1
DOD developed a methodology in 1986 to make wise and flexible use
of appropriation and activity accounts and applied it at a set of
pilot installations. This methodology, the Unified Budget Plan,
gave installation commanders flexibility to transfer funds among
allotments and cost categories. Although about 90 to 93 percent of
their funds were spent exactly as budgeted and allocated, the
installation commanders were able to move the remaining 7 to 10
percent out of their original accounts and thereby meet the
highest priorities of the installation. At Fort Leonard Wood, for
example, money not needed for medical testing was used to
refurbish substandard housing. The pilot test showed that more
needs were met, funds were used more efficiently, and readiness
was enhanced.2
Despite the demonstrated effectiveness of the Unified Budget Plan,
DOD did not adopt the concept or continue the test. The primary
reason given for abandoning the plan was that greater central
budgetary control was needed to handle major unbudgeted activities
such as medical cost overruns, Desert Storm, and emergency
disaster assistance.
Nevertheless, the example illustrates a restriction and a means to
work with it. In addition, there are other major mechanisms to
create managerial flexibility.
Appropriation Transfer Authority. A source of flexibility for
agency management is appropriation transfer authority. Various
statutes grant agencies some limited authority to transfer between
appropriations accounts when emergencies arise during the
operating year. For example, the Department of the Interior can
transfer appropriations with the approval of the secretary for the
emergency reconstruction, replacement, or repair of aircraft,
buildings, utilities, or other facilities or equipment damaged or
destroyed by fire, flood, storm, or other unavoidable causes. The
secretary can also transfer funds from any no-year appropriation
to an annual appropriation for the suppression or prevention of
forest and range fires.3
Reprogramming. Departments and agencies propose adjustments to
current year financial operating plans that require congressional
notification or concurrence through the reprogramming process.
Reprogramming is the reallocation of funds from one budget
activity or line item to another within the same appropriation
account. For construction or land acquisition accounts,
reprogramming usually entails the reallocation of funds from one
project to another. Most reprogramming guidelines are not
statutory; they are procedures mutually agreed upon between
appropriations subcommittees and agencies. The reprogramming
guidelines ensure that the content of appropriations acts and
accompanying reports are implemented rigorously and also encourage
all changes to be included in annual budget justifications.
As noted by a National Academy of Public Administration (NAPA)
study in 1985, reprogramming guidelines vary considerably for each
federal agency depending on its appropriations subcommittee.4
Contributing to strengthening reprogramming limitations has been
the budgetary pressure to cut appropriations, which has put a
premium on preserving particular programs, projects, and
activities from executive branch as well as congressional action.
The National Performance Review surveyed several federal agencies
to determine their current reprogramming guidelines. It found they
still vary considerably but are more widespread and tighter than
at the time of the NAPA survey.
Detailed, minimal reprogramming thresholds pose numerous problems
for agency and program management. For example, the smaller of the
giving or receiving line items determines the threshold. The more
detailed the agency's appropriation and line item structure, the
more likely that reprogrammings, sometimes involving relatively
small amounts of money, will be required. This means in some
instances that program changes of as little as $25,000 in
Interior's $6 billion of appropriated funds can trigger a
reprogramming action.
Some agencies have worked with their congressional appropriations
subcommittees to achieve greater flexibility in their ability to
reprogram funds. For example, the former Deputy Executive Director
of the Consumer Products Safety Commission found that he had a
large number of accounts, one for each hazard, with little money
attached to each, so that reprogrammings were a constant headache.
After negotiations, the appropriations subcommittees agreed to
reduce the hazard accounts from 10 to three and thereby solved the
reprogramming problem.
Reapportionments and Allotment Revisions. Reapportionments of
appropriation accounts can be necessary when limitations in
previous apportionments need to be revised. Action in response to
agency reapportionment requests is taken by the Office of
Management and Budget (OMB).
Allotments, on the other hand, are controlled by agencies, but may
be the cause of most of the inflexibilities perceived by field
managers. Allotments and sub-allotments distribute apportioned
funds to program and field offices and are more detailed than
apportionments. Most field installations receive funds from a
number of different apportionments through the allotment process.
Procedures for amending allotments and sub-allotments are
determined by each agency. The Department of Defense, the Forest
Service, and the Department of Veterans Affairs have all found
through their studies that 70 to 95 percent of the ACTIONS needed
to empower managers were within existing agency authorities and
available resources. In these agencies senior managers sometimes
did not realize they had the authority to take action. Sometimes,
financial management systems did not provide timely,
understandable information to managers to aid decision making
about reallocations.
Year end Spending. Many managers and much of the public
correspondence to the Vice President and to the National
Performance Review commented on the rush to spend money,
particularly at year end.5 Some feel caught between the Anti-
deficiency Act, which cautions managers against the risk of
overspending an appropriation, and the Impoundment Control Act,
which cautions managers against not spending what the
appropriations act intended be spent.
Pressure to spend all funds appropriated comes from many sources:
interest groups, members of Congress, headquarters personnel, and
managers themselves, whose performance is partially judged by
success in fully obligating all funds. The pressure to spend is
particularly acute when the funds come from an annual
appropriation, for those funds are either obligated within the
fiscal year or returned to the Treasury. Subsequent year
allocations may be reduced because of such returns, since failure
to spend funds weakens justifications for the same level of
funding the following year. The perception that funds are spent to
avoid returning them to Treasury elicits frequent complaints about
wasteful end-of-year spending.
A review by OMB indicates that yearend spending is not the problem
it once was, due to statutory ACTIONS, OMB efforts, and better
agency management practices.6
Some spending late in the year is intentional. Some managers do
maintain a small contingency amount until late in the fiscal year
to be able to cover unanticipated problems without running a
deficiency. In other cases, they save during the year to be able
to upgrade office equipment at yearend to improve future
productivity. Federal contracting procedures are so complicated
that managers have difficulty accurately estimating when contracts
will be awarded and do contingency planning. There have been
efforts to overcome yearend spending problems:
* Congress has helped the Forest Service solve some of its
yearend spending dilemmas by providing an appropriation available
for two years. Because Forest Service activities such as
construction, maintenance, and fire suppression continue after the
end of the fiscal year on September 30th, the two-year
appropriation availability smooths the transition and avoids an
artificial accounting problem.
* The Department of Justice has been given authority by
Congress to roll unobligated balances from its annual salaries and
expenses accounts to its no-year revolving fund account and to use
some of those balances for program or management improvements.
These funds may be used, for example, to buy law enforcement
vehicles or pay for automated litigation support.7
* The Department of Defense has used the revolving fund
concept in many of its support operations for more than 40 years.
Revolving fund activities operate with no, or very little, direct
appropriated funding. They are instead funded on a fully
reimbursable basis. Appropriated funds are provided to the
customers of these activities who in turn purchase goods and
services from the activity financed by the revolving fund much
like any private business. These support activities operate more
efficiently and effectively without the constraints of fiscal year
limitations. By separating support activities from their customers
and giving the customer the funding, DOD creates a check and
balance that ensures the revolving fund activity engages only in
efforts for which there is customer demand.8
***************
NEED FOR CHANGE
***************
The present managerial culture encourages spending, discourages
innovation and investment, and uses managers' time poorly.
Every manager has saved money, only to have his allocation reduced
in the subsequent year. This usually happens only once, then the
manager becomes a spender rather than a planner. Managing becomes
watching after little pots of money that can't be put where it
makes business sense because of reprogramming restrictions. So
managers who are monitors of these little pots of money are
rewarded for the ability to maneuver, however limitedly, through
the baroque and bizarre world of federal finance and procurement.
In a program year that runs in reality from January 1 to June 30,
due to typically late allocations and the need to close out
(versus roll over) the current fiscal year, most managers must
focus on custodial activities versus creative management.9
The problems cited in this quote can be categorized as follows:
* Too many small, restricted sub-allotments: The subdivision
of restricted appropriation accounts as they come down to the
field manager leaves the latter little discretion to apply them to
the highest priority needs.
* "Use it or lose it": Annual appropriations are spent by the
end of the fiscal year or lost by the recipient manager.
* Disincentives to change sub-allotments: attempts to make
changes in sub-allotments, even though the mechanisms are there,
run a high risk of the loss of funds for the field manager, as
headquarters managers reallocate them to their own priorities.
* Late action and delay: Late allotment of funds or delays in
approving requested changes cause field managers to be slow in
taking ACTIONS to improve services to customers or to make
improvements in operations.
The implications of these problems are:
* Customers aren't served in a timely fashion; the federal
government appears bureaucratic and indifferent.
* Managers hold onto funds and spend them in accordance with
restrictions, not where there would be the greatest gain in
product or service for the least cost.
* There is little flexibility or incentive to improve
operations.
* Overcoming these perceptions and habits of working within
restrictions requires both a change of behavior on the part of
those imposing restrictions and constructive use of available
mechanisms to increase flexibility.
***************
ACTIONS
***************
1. Identify those appropriations that should be converted to multi
or no-year status. (3)
OMB should issue guidance to assist agencies in a review of
appropriation accounts to determine where it may be appropriate to
propose conversion of annual accounts to multi-year or no-year
availability. The proposals should be prepared for inclusion in
the fiscal year 1996 budget. Agency heads should develop proposals
and be prepared to work with OMB and the appropriations
subcommittees on their review.
An answer to "end of year" spending problems is to change annual
appropriations to multi or no-year availability. The number of
such appropriations should be increased. Where the normal flow of
activities such as repair and maintenance or the administrative
requirements in contracting make the end of the fiscal year an
artificial barrier to managing effectively, a two-year
availability for an appropriation can be a constructive answer. In
some cases, agencies have prepared proposals and justifications
for change; in other cases, more work remains to be done. Ready
changes should be included in the fiscal year 1996 President's
budget; others may need to wait for the fiscal year 1997 budget.
If changes are proposed in the President's budget, the changes
will need to be negotiated with the appropriations subcommittees.
The Forest Service received support from the General Accounting
Office for two-year appropriations availabilities, which bolstered
its case with the appropriations subcommittees.10
2. Permit agencies to roll over 50 percent of their unobligated
yearend balances in annual operating costs to the next year. (3)
Agency heads should seek from Congress new general provisions in
their fiscal year 1996 appropriations to permit the rollover of
unobligated yearend balances in annual operations appropriations
into the next fiscal year. A small portion perhaps 2 percent
should be used to provide bonuses to the employees involved. This
practice creates a strong incentive for field managers and their
employees not to indulge in yearend spending and to look for cost
savings and ways to improve efficiency. The practice has been
successfully applied at DOD, the General Services Administration,
and the Forest Service, all of which have offered bonuses to
employees who contributed to yearend savings.11 OMB and Congress
should not automatically reduce operating costs in the next
cycle's budget because of savings. Chief Financial Officers in
agencies should review this process to ensure that managers are
not unduly penalized for savings in future budget decisions.
3. Expedite reprogramming of funds within agencies. (2)
Agency Chief Financial Officers should examine internal processes
to ensure timely response to program managers and to expedite the
review of reprogrammings (e.g., 30 working days within an agency
from time of program manager's request to correspondence to
appropriations subcommittee).
Necessary actions to reprogram funds from one line item to another
within an appropriation account should be sent directly from the
agency head (or the agency head's designee) to the appropriations
subcommittee, after the advance notification and approval of OMB.
OMB should automatically approve reprogramming unless it objects
within a set period of time, such as five days. This change should
be made for the fiscal year 1995 budget's execution.
Agencies will need to work with appropriations subcommittees to
meet the latter's concerns and to develop best practices to ensure
concurrence as quickly as possible.
4. Formulate financial operating plans and adjust allotments/sub-
allotments on a timely basis. (1)
Financial operating plans with allotments and sub-allotments
should be established by some set target date after appropriations
and apportionment action. Agency Chief Financial Officers should
review the process to ensure timely response to program managers
and establish a standard for timely response, say, 15 working days
for a reallotment action. This action should be completed during
fiscal year 1995 for full implementation with fiscal year 1996
appropriations.
The best and least costly defense against fraud, waste, and abuse
is not a system of detailed budget limitations, but timely,
accurate, accessible financial and program performance information
that quickly divulges trends and problems to attentive management.
Detailed limitations won't work well if the financial management
system can't adequately process, track, and report on
transactions, but neither will efforts to develop more flexibility
in financial operations, such as through the Unified Budget Plan.
Many agencies have adequate financial management systems; others
may need to upgrade their own or contract with another agency for
financial services if their own are inadequate.
5. Adapt and apply the Unified Budget Plan throughout DOD and to
civilian agencies, where appropriate. (1)
The Secretary of Defense, at his discretion, should implement the
Unified Budget Plan by internal directive, where appropriate,
during fiscal year 1995. Other agency heads may want to apply the
Unified Budget Plan on a voluntary pilot basis if it appears
useful and can be done within their statutory constraints. The
Unified Budget Plan constructively addresses the problem of
meeting priorities within predetermined restrictions. DOD should
grant installation commanders flexibility to transfer funds, as
needed, among allotments and cost categories within statutory
constraints to improve mission capability, cope with unforeseen
contingencies, and take advantage of opportunities to use monies
more effectively.
Commanders and managers will require information systems to ensure
compliance with reprogramming thresholds and legislative mandates.
Accurate and timely monitoring can provide feedback to managers at
all levels if transfers are approaching reprogramming thresholds.
Civilian agencies should consider the use of the Unified Budget
Plan to allow funds to be shifted at the program, regional or
district office, and/or field installation levels. A system
whereby field offices can move funds without a long delay awaiting
approval by headquarters is desirable.
The problem encountered by DOD that higher levels will take and
use elsewhere any excess funds that a lower level office or
installation identifies can be a serious disincentive for the
Unified Budget Plan to operate effectively. Reallocation is, after
all, a responsibility of higher headquarters as well. There does
need to be discussion and understanding over the ground rules
among levels in the chain of command. The Chief Financial Officer
of an agency should be designated to facilitate the smooth
operation of the Unified Budget Plan, including the reallocation
of funds among installations that have identified those funds for
trade and prevention of the taking away of savings that are being
applied to management improvements.
This recommendation is also addressed in the NPR Accompanying
Report Department of Defense.
Cross References to Other NPR Accompanying Reports
Improving Financial Management, FM04: Increase the Use of
Technology to Streamline Financial Services; FM06: "Franchise"
Internal Services; FM07: Create Innovation Funds; FM12: Manage
Fixed Asset Investments for the Long Term; and FM13: Charge
Agencies for the Full Cost of Employee Benefits.
General Services Administration, GSA01: Separate Policy making
from Service Delivery and Make The General Services Administration
a Fully Competitive, Fee-Based Organization.
Reengineering Through Information Technology, IT11: Improve
Methods of Information Technology Acquisition; and IT12: Provide
Incentives for Innovation.
Reinventing Federal Procurement, PROC04: Establish New Simplified
Acquisition Threshold and Procedures; PROC08: Reform Information
Technology Procurement; PROC09: Lower Costs and Reduce Bureaucracy
in Small Purchases Through the Use of Purchase Cards; PROC15:
Encourage Best Value Procurement; and PROC18: Authorize Multi-year
Contracts.
Streamlining Management Control, SMC02: Streamline the Internal
Controls Program to Make It an Efficient and Effective Management
Tool; SMC03: Change the Focus of the Inspectors General; SMC06:
Reduce the Burden of Congressionally Mandated Reports; SMC07:
Reduce Internal Regulations By More Than 50 Percent; and SMC08:
Expand the Use of Waivers to Encourage Innovation.
Reinventing Support Services, SUP03: Improve Distribution Systems
to Reduce Costly Inventories; SUP04: Streamline and Improve
Contracting Strategies for the Multiple Award Schedule Program;
SUP06: Give Agencies Authority and Incentive for Personal Property
Management and Disposal; SUP07: Simplify Travel and Increase
Competition; and SUP08: Give Customers Choices and Create Real
Property Enterprises That Promote Sound Real Property Asset
Management.
Department of Defense, DOD02: Establish a Unified Budget for the
Department of Defense; DOD03: Purchase Best Value Common Supplies
and Services; DOD06: Establish and Promote a Productivity-
Enhancing Capital Investment Fund; and DOD10: Give Department of
Defense Installation Commanders More Authority and Responsibility
over Installation Management.
Department of the Interior, DOI10: Consolidate Administrative and
Programmatic Functions in DOI; and DOI11: Streamline Management
Support Systems in DOI.
***************
Endnotes
***************
1. For examples, see U.S. Office of Management and Budget (OMB),
Budget of the United States, Fiscal Year 1993 (Washington, D.C.,
1993), pp. 441509.
2. See Deputy Assistant Secretary of Defense (Installations), A
Special Report: The Unified Budget Test (Washington, D.C., March
1988).
3. OMB, p. 750.
4. National Academy of Public Administration, Revitalizing
Management, Managers, and Their Overburdened Systems (Washington,
D.C., 1983), p. 24. The National Academy of Public Administration
recommended more flexibility for reprogramming and transfers in
its 1983 study, but the reprogramming authority limits appear to
have tightened in the past 10 years.
5. See, for example, "Government bleeds funds, workers say," Rocky
Mountain News (June 7, 1993), p. 36, which provides comments by
some that there is excessive yearend spending and by others that
the problem is overblown.
6. Phil Lader, Consultant, and Barry Anderson, Assistant Director
for Budget Review, Memorandum for the Director, Office of
Management and Budget, Subject: Year End Spending, Washington,
D.C., dated March 24, 1993.
7. Interview with Adrian Curtis, Director, Budget, Office of the
Controller, Department of Justice, Washington, D.C., June 29,
1993.
8. Memorandum from Elvon Lloyd, Directorate for Business
Management, Comptroller of the Department of Defense, July 20,
1993, p. 3.
9. Letter from Edwin G. Fleming, Chief, Resources Management
Division, Cleveland District, Internal Revenue Service, to
Treasury Reinvention Team, June 29, 1993.
10. See U.S. General Accounting Office, Forest ServiceEvaluation
of "EndResults" Budgeting Test (Washington, D.C.: U.S. General
Accounting Office (GAO), 1988).
11. See Inter Agency Barriers Working Group, Overcoming Barriers
to Productivity: An Agency Call to Action (Washington, D.C., May
1988), p. 9. GSA's Western Distribution Center in Stockton,
California, is an example of gainsharing with team awards. Cash
awards from gainsharing may be paid under 5 U.S.C. 4503.
*****************************************************************
Make the Budget Process More Efficient and Meaningful
BGT06:
*****************************************************************
Streamline Budget Development
***************
BACKGROUND
***************
The President's budget formulation process is a tool to be used in
support of policy decision making. The process requires input from
front-line managers, bureau and agency budget offices, and
departmental budget and policy offices, culminating in the
preparation of the President's budget by the Office of Management
and Budget. The content of the the processs should be of primary
concern to every manager at every level of the federal government.
At the same time, it is important to ensure that the process is
designed to clearly identify national goals and to efficiently
determine resource allocations in a manner fully supporting the
achievement of the identified goals.
Ideally, the budget should evolve from discussions between
policymakers and program managers. Flexibility should be built
into the process to allow overall policy decisions to be molded,
as necessary, to fit the needs of diverse federal activities.
Traditional Process Has Been Too Bureaucratic. The traditional
executive branch budget formulation process has departed from this
ideal in significant ways. The traditional process has been
layered rather than collaborative; it has been laden with controls
that inhibit flexibility; and within the agencies it begins so far
in advance of the budget year that initial decisions are based on
guesses, not data. Furthermore, the traditional process has been
better at generating claims for new resources than at allowing
informed choices within available resources. In addition, the
traditional process has not been well designed to identify
national goals or to encourage efficient allocation of resources
between competing areas of national needs. Because the budget is
primarily formulated around organizational structures rather than
around categories of national need, review of similar or related
programs across agency lines has been rare.
The problems in the budget process have been process problems, not
problems related to the federal personnel responsible for budget
formulation activities. Most federal budget specialists are
sharply focused and hardworking professionals. They pride
themselves on being able to respond to requests for information on
the time schedule and in the format required by the federal budget
hierarchy.
The Budget is Process-Driven, Not Results-Driven. Consider our
process. Early in the year, each agency estimates what it will
need to run its programs in the fiscal year that begins almost 2
years later. This is like asking someone to figure out not only
what they will be doing, but how much it will cost 3 years later
since that's when the money will be spent. (See Appendix C.)
Bureau and program managers typically examine the previous year's
activity data and project the figures 3 years out, with no word
from top political leaders on their priorities, or even on the
total amount that they want to spend. In other words, planning
budgets is like playing "pin the tail on the donkey." Blindfolded
managers are asked to hit an unknown target.
OMB, acting for the President, then crafts a proposed budget
through back and forth negotiations with departments and agencies,
still a year before the fiscal year it will govern. Decisions are
struck on dollars Congress may never appropriate dollars that, to
agencies, mean people, equipment, and everything else they need to
do their jobs. OMB's director considers options during a series of
Director's Review meetings, each one focused on a different
department or agency. Then, OMB "passes back" recommended funding
levels for the agencies, and final figures are worked out during a
final appeals process.
Early the next year, the President presents a budget proposal to
Congress for the fiscal year beginning the following October 1.
Lawmakers, the media, and interest groups pore over the document,
searching for winners and losers, new spending proposals, and
changes in tax laws. In the ensuing months, Congress puts its own
stamp on the plan.
Although House and Senate budget committees guide congressional
action, every committee plays a role. Authorizing committees
debate the merits of existing programs and the President's
proposals for changes within their subject areas. While they
decide which programs should continue and recommend funding
levels, separate appropriations committees draft the 13 annual
spending bills that actually constitute the budget.
Congressional debates over its own budget resolution,
authorization bills, and appropriations often extend into the
fall. Frequently the President and Congress pass one or more
"continuing resolutions" to keep the money flowing, often at the
previous year's level. Until the end, agency officials troop back
and forth to OMB and to the Hill to make their case. States and
localities, interest groups, and advocates seek time to argue
their cause. Budget staffs work nonstop, preparing estimates and
projections on how this or that change will affect revenues or
spending. All this work is focused on making a budget not planning
or delivering programs.
Additional Complications. As if the budget process in itself were
not awkward enough, it also suffers from other factors that divert
attention from coherent policy making. For example, much of the
material produced by budget specialists for the internal agency
budget process is irrelevant to and unnecessary for policy
decision making. The materials produced, in many cases, are in
response to attempts by higher levels to micro-manage lower levels
in the government organization structure. Requests for information
are often a way of restricting the amount of decision making
delegated to agency heads or line managers.
In addition, the current process tends to mask the fact that
agencies' budgets and programs are interdependent. No single
agency includes all the programs and activities necessary to
reform welfare, to meet the needs of children and their families,
or to reduce crime. Replenishment of Pacific salmon requires the
coordinated efforts of the Departments of Commerce, Energy,
Interior, and Agriculture, plus several states and Indian tribes.
Yet for all its weaknesses, the budget formulation process remains
the most effective tool in the executive branch for enforcing
discipline in the policy development process. In order for
resource allocations to be made in accordance with policy
priorities, policy decisions must be made on a time schedule that
coincides with the budget formulation process. At the outset of
this administration it was clearly time to review the executive
branch budget formulation process to make it more efficient and
meaningful.
Obviously, formulation of the federal budget is not exclusively an
executive branch issue. The U. S. Constitution gives Congress the
primary power of the purse in our nation's government structure.
In recognition of the respective roles of Congress and the
executive branch in the federal budget formulation process, the
NPR budget team met with staff members from several congressional
committees in the development of this report. However, most of the
discussion and recommendations in this report concern potential
changes in the executive branch budget formulation process rather
than the legislative branch budget process.
***************
NEED FOR CHANGE
***************
No change in the federal budget process will solve our nation's
debt dilemma. Deficit reduction is a policy decision, not the
result of a process. As the director of the Congressional Budget
Office, Robert D. Reischauer, testified before the Joint Committee
on the Organization of Congress in March 1993, "[P]rocedures are
no substitute for substantive policy agreement and action."2
There have been, however, a number of potential improvements to
the budget formulation process that have been apparent to this
administration. In particular, it certainly appears that the
executive budget development process could benefit from procedures
similar to those used by Congress in its budget development.
Congress substantially revamped its internal budget process in
1974. Before then, each appropriations subcommittee, working
individually and in an information vacuum, had designated and
approved spending levels for its particular area of oversight.
Until all the subcommittees had finalized their appropriations
levels, no one knew what total level of spending had been
approved, or for what purpose. In 1974, Congress adopted the
Congressional Budget and Impoundment Control Act, requiring
congressional agreement on budget totals and functional
allocations before the appropriations subcommittees began their
analysis. Now, in approving appropriated funds, the subcommittees
work with an understanding of available resources and negotiated
priorities.
Describing the importance of this concurrent budget resolution,
Reischauer said it would be hard to imagine the current deficit
reduction effort if this change had not occurred. Specifically,
Reischauer noted that "under the pre-1974 system, Congress had no
capacity to focus comprehensively on budget totals and never had
to vote on overall spending or overall revenues." He went on the
say that Congress today is forced to make tradeoffs among
conflicting priorities "because it has to vote on the whole and on
the deficit."3 The importance of the budget resolution was also
noted by budget expert Allen Schick in his study of budget
reforms. In the report he completed for the Congressional Research
Service, Schick noted, "the heart of the [congressional] budget
process is the budget resolution setting forth budget totals and
functional allocations."4
Traditional Process Fails Decisionmakers. Unfortunately, the
traditional executive budget formulation process more closely
mirrors the pre-1974 congressional model. Decisions have seemed ad
hoc because there is no requirement for a mission-driven budget
framework or resolution to set forth the policy and fiscal
guidance within which decisions must be made.
As a result, the budget requests submitted by federal agencies
have often exceeded affordable limits and are of little value to
the decision making process. Agency heads and program managers
have been often greatly disappointed if not disgruntled by the
final totals for their programs. Agency heads have sometimes been
ill-prepared to explain, let alone support with any enthusiasm,
the final decisions made in the President's budget.
The traditional federal policy and budget planning processes were
developed in a time when resources were increasing and agency
interdependence was less of a problem. Emphasis has been given to
bottom-up justification for the use of new resources. Although
there have been pockets of innovation across the federal
government, the traditional budget and planning process has been,
for the most part, poorly designed for a time of belt-tightening.
Decision-makers can no longer merely decide to create a new
program; they must now determine where to find the resources for
the new program and the implications of reducing current programs
and activities. It has been difficult to make informed choices
across program lines and garner the necessary political agreement
to make reductions, when there are few effective mechanisms for
establishing priorities that cross agency lines. The traditional
policy development system has not had adequate tools to identify
potential consolidations or termination of activities or to make
comparisons of different approaches to achieve the same mission.
At the outset of this administration, personnel involved at all
levels of the executive branch expressed to the National
Performance Review (NPR) a desire for more definitive guidance at
the beginning of the budget formulation process. Many expressed
concern that the traditional process concentrated a
disproportionate amount of effort on incremental increases or
decreases in discretionary activities, particularly in operational
accounts, while spending relatively little time on policies
related to mandatory programs and tax expenditures. Many described
frustration over lack of comprehensive policy reviews across
agency lines. Finally, it was often noted that in past
administrations, key policy personnel Cabinet-level appointees and
members of the White House staff had not been well integrated into
budget formulation processes.
The incoming administration had to change traditional practices to
put together an economic plan by mid-February and a budget by
early April. It shifted from limited participation to more
collegial decision making. This paid immediate dividends a new
budget plan adopted almost in its entirety by Congress. To expand
this collegial decision making, the White House policy councils
and OMB have continued to modify and update traditional practices.
***************
ACTIONS
***************
1. Begin budget formulation with a more collegial and open process
like an "executive budget resolution" to provide early guidance to
the departments and agencies. (2)
A revised executive budget formulation process will reduce, to the
extent possible, the burdens that accompany the traditional budget
development process by providing definitive guidance early, using
an approach similar to the congressional budget resolution
process.
Revisions to the traditional process were piloted shortly after
President Clinton took office. This revised process was more open;
it set broad policy priorities; and it considered crosscutting
policy initiatives affecting each agency. OMB expanded the roles
of the White House staff and other policy groups, such as the
National Economic Council, the Domestic Policy Council, and the
National Security Council. OMB went to great lengths to involve
executive branch leaders in budget decisions and to communicate
priorities.
The FY 1995 budget process has expanded on this. OMB held meetings
with agencies during the summer of 1993 to discuss major issues
and priorities, especially those cutting across agencies. Cabinet
members and other key agency heads will be involved in discussions
with the President on their budgets before final decisions are
made.
For the FY 1996 budget process, agencies should receive earlier
guidance from OMB regarding their allocations under the
discretionary spending limits established by law. This would be
similar to the process that Congress uses in developing its budget
resolution. OMB, Treasury, and other White House policy groups
should take the lead in discussing crosscutting budget
initiatives.
The resulting fiscal and policy guidance early in the budget
process should render top officials responsible for budget totals
and policy decisions and will encourage low-level ingenuity to
devise funding options within those guidelines. This will also
make the budget process more meaningful by allowing agencies to
make their budget decisions with full knowledge of the available
resources. As a result, it should eliminate multiple requirements
at the agency level for detailed budget justification materials
prior to issuance of OMB guidance.
Use of an executive budget resolution process that determines
funding allocations through a collaborative process should yield
greater understanding of and support for the President's budget
throughout the executive branch.
2. Replace hierarchical budget development and review with team
approaches. (2)
Teamwork should be encouraged at all stages of budget development.
Replacing the past hierarchical process with teamwork will
streamline the process, provide better information to make
decisions, improve communication about expected results, recognize
agency interdependence in achieving the administration's goals,
and increase buy-in to the decisions.
At the White House policy council, OMB, and agency head level,
teamwork has already involved agency heads attending the
leadership and interagency meetings held for the purpose of
developing the budget.
The expectation is that OMB and agency staffs work collaboratively
in budget development as well. The Department of Defense (DOD) is
further along in this respect than civilian agencies, as DOD and
OMB have had a joint budget review process for many years.
Other agencies can learn from the DOD process, and DOD as well as
civilian agencies can apply this type of team approach to internal
agency budget development. Agency heads and bureau directors
within agencies should engage, whenever possible, all levels of
the bureaucracy involved in issues under discussion within their
agency.
If the issues under discussion concern activities that cross
agency lines, meetings should include representatives from
different organizations involved in the activity. The Department
of Commerce requires its bureaus that ask for funds for activities
or initiatives that relate to other bureaus' work to submit joint
funding requests or the agency budget office will not consider the
request.
Teams will greatly reduce the amount of time spent in the current
budget development process, in which each level in the bureaucracy
prepares issues and options in secret until they are passed to the
next level.
3. Review functional categories used in the budget process and
streamline budget justification details provided to Congress. (2)
OMB should expedite the already initiated review of the 19
functional funding categories used in the current federal budget
and consult with Congress and executive branch agencies in
developing new categories. The current categories were developed
in 1975 and are outdated. Consideration should be given to tying
revised categories to the performance and planning requirements of
the recently enacted Government Performance and Results Act.
OMB should also work with agencies and congressional leaders to
develop more effective ways to produce and coordinate the
submission of budget justification materials to Congress. For
example, an agreement might be reached to focus congressional
appropriation hearings more along mission than organizational
lines, or to allow for joint presentations by agencies with
related missions or joint committee hearings on issues of concern
to multiple committees. The goal of the negotiations should be to
(1) reduce significantly the amount of repetitive information
produced and provided sometimes in only a slightly different
configuration to multiple congressional committees, and (2) better
take into consideration the interrelationships of programs and
activities with similar missions.
Cross References to Other NPR Accompanying Reports
Reinventing Environmental Management, ENV02: Develop Cross-Agency
Ecosystem Planning and Management.
Transforming Organizational Structures, ORG01: Reduce the Costs
and Numbers of Positions Associated with Management Control
Structures by Half; and ORG06: Identify and Change Legislative
Barriers to Cross-Organizational Cooperation.
Creating Quality Leadership and Management, QUAL04: Improve
LegislAtive/Executive Branch Relationship.
Improving Financial Management, FM12: Manage Fixed Asset
Investments for the Long Term.
Reinventing Human Resource Management, HRM01: Create a Flexible
and Responsive Hiring System; HRM02: Reform the General Schedule
Classification and Basic Pay System; HRM06: Clearly Define the
Objective of Training as the Improvement of Individual and
Organizational Performance; Make Training More MarketDriven; and
HRM08: Improve Processes and Procedures Established to Provide
Workplace Due Process for Employees.
Reengineering Through Information Technology, IT01: Provide Clear,
Strong Leadership to Integrate Information Technology Into the
Business of Government; IT08: Plan, Demonstrate, and Provide
Government-wide Electronic Mail; IT09: Improve Government's
Information Infrastructure; and IT13: Provide Training and
Technical Assistance in Information Technology to Federal
Employees.
Executive Office of the President, EOP06: Improve OMB's
Relationship with Other Agencies; and EOP09: Establish a Customer
Service Bureau in the Executive Office of the President.
***************
Endnotes
***************
1. Required by the Budget Enforcement Act of 1990.
2. Reischauer, Robert, Director, Congressional Budget Office,
Testimony before Joint Committee on the Organization of Congress
of the United States, March 4, 1993.
3. Ibid.
4. Schick, Allen, Five Reforms in Search of Budget Control:
Congress Versus the Federal Budget, Report 92443 E (Washington,
D.C.: Library of Congress, Congressional Research Service, January
1992).
****************************************************************
Institute Biennial Budgets and Appropriations
BGT07:
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**************
BACKGROUND
**************
The President currently submits an annual budget request to
Congress by the first Monday in February.1 Congress adopts annual
budget resolutions and enacts appropriation bills covering all
discretionary budget accounts each year. An annual process,
however, is not the only choice available.
The idea of biennial budgeting has been around for some time. The
first biennial budgeting bill was introduced by then Congressman
Leon Panetta in 1977, and many dozens have been introduced since.2
Although none have passed, an increasing deficit and pressure to
reduce that deficit has made budget decisions more difficult and
the budget process more time consuming. Accordingly, the time is
ripe for biennial budgeting.
The government has had some experience with two-year or longer
budget plans. In 1987, for example, Congress and the President
agreed to a two-year budget plan for fiscal years 1988 and 1989.
The November 1987 legislative executive branch budget summit
agreement set two-year spending levels for major programs,
demonstrating the success possible from this kind of budgeting.
This accord streamlined the budget process significantly and
allowed Congress for the first time since 1977 to enact all 13
appropriations bills without using continuing resolutions.3
The Budget Enforcement Act, enacted in 1990, set 5-year spending
limits for discretionary programs and pay-as-you-go (PAYGO)
requirements for mandatory programs. With these multi-year caps
agreed upon, neither the President nor Congress has to decide the
total level of discretionary spending each year. The fact that
these caps are now set in advance provides even more reason to
move to biennial budget and appropriation cycles.
In another test of biennial budgeting, Congress directed the
Department of Defense (DOD) to submit a biennial budget for fiscal
years 1988 and 1989. It was anticipated that a biennial budget
would help Congress move away from detailed annual budget reviews
and provide more time for broad policy oversight. Congress
expressed its belief that a biennial budget would "substantially
improve DOD management and congressional oversight," and that
while it was preferable to subject all federal spending to a two-
year budget, "beginning with the DOD budget is important."4 The
administration continued to submit biennial budgets for DOD, as
well as for the Coast Guard.
Thus far, however, Congress has been dissuaded from enacting
biennial appropriations for DOD or the Coast Guard or from passing
a general biennial budget measure. Congressional reluctance is
due, in part, to unanswered questions about what aspects of the
process should be included the budget resolution, authorizations,
appropriations, or some combination thereof. Equally vital are
questions about whether the reduced workload envisioned would
actually be achieved, or if the need for mid-cycle revisions would
make this impossible, as well as what implications such a change
might have for the balance of power between the President and
Congress.5
At the state level, 21 states adopt biennial budgets. The General
Accounting Office (GAO) has reported that in states with biennial
budgeting, off-year budget adjustments did not consume as much
time as regular budgeting, leaving more time for other legislative
activities.6
**************
NEED FOR CHANGE
**************
Formulation of the President's budget is an incredibly time
consuming and expensive process, as described throughout this
report. After an election, a new President sworn into office on
January 20 has approximately two weeks before he or she must
present a budget to Congress. Clearly, this timing does not allow
for full development of a President's priorities and analyses of
those priorities within total fiscal limitations and the condition
of the U.S. economy.
The congressional budget process is also extremely time consuming
for Congress and the agencies and can result in significant delays
in funding. One primary congressional complaint about the budget
process in recent years has been the amount of time it requires.7
Some 60 percent of all congressional roll call votes now involve
budget-related issues.8 Consideration of such budget questions as
concurrent resolutions on the budget, authorization measures,
continuing resolutions, and reconciliation bills has been
criticized as repetitive and redundant. Since DOD is under annual
authorizations, for example, there are at least 18 votes for DOD
alone each year for the subcommittee, full committee, and floor
votes for an annual budget resolution, authorization, and
appropriation. These votes occurred even when Defense had its own
spending cap in law, so all these votes were essentially on the
same total number.
Sometimes all or some of the 13 appropriation bills are not passed
by the required October 1 deadline, thus requiring one or more
continuing resolutions. GAO found that continuing resolutions
covered 10 of the 13 appropriations bills during at least part of
the year for 20 of the 26 years reviewed (196085). Based on a
calculation of the total number of days an appropriation operated
under continuing resolutions each year, GAO found that Foreign
Assistance, LaborHealth and Human Services (HHS)Education, and
Commerce Justice State Judiciary appropriations ranked above the
rest, operating under a continuing resolution almost one-third to
one-half of the time over the 26 years.9 Lack of final
appropriation action by October 1 results in uncertainty among
agencies of funding levels and resultant delays in program
operations. These delays cause problems for all programs, but
particularly for programs that need most of their funds early in a
fiscal year, such as HHS's low-income home energy assistance
program, primarily a winter program providing home heating support
to low-income individuals and families.
On the agency side, agencies spend an inordinate amount of time
preparing for appropriation hearings that usually occur between
March and May each year. This preparation includes developing
material for witnesses on every line item, since the issues on
which the appropriation committee has chosen to focus often are
not known to the executive branch. In the HHS Budget Office, for
example, a briefing book that usually exceeds 700 pages is
prepared for use in as many as 60 appropriation hearings.10 The
major HHS organizational operating components (i.e., Social
Security Administration, Health Care Financing Administration,
Public Health Service, Administration for Children and Families,
Administration on Aging) also prepare their own briefing books for
their assistant secretaries or commissioners who must testify.
In our review of numerous studies and interviews throughout the
government, we found that many people favor some form of biennial
budgeting. A 1993 survey of members of Congress, conducted by the
Joint Committee on the Organization of Congress, showed that 70
percent favor a biennial process with a two-year concurrent budget
resolution and multi-year authorizations, and 57 percent favor
multi-year authorizations and two-year appropriations. The table
below shows the level of support for multi-year authorizations and
two-year appropriations by type of respondent. As shown, 57
percent of all respondents and 55 percent of both House and Senate
members favor or strongly favor multi-year authorizations and two-
year appropriations. Reasons cited for their support include the
advantages of more time for congressional decision making,
reduction in repetitive ACTIONS by Congress, and opportunities for
better budgeting by allowing time for more detailed analysis on
individual issues. Members of appropriations committees are a
notable exception, citing for the most part the advantages of
annual congressional over sight. The Joint Committee found that 23
percent of Representatives and 18 percent of Senators responding
to the committee's survey opposed or strongly opposed multi-year
authorizations and two-year appropriations.
Executive branch staff mentioned as benefits of biennial budgeting
the increase in predictability of budget ACTIONS and more time for
better budget analysis, program planning, budget execution, and
program evaluation.
Considerable time could be saved and used more effectively in both
the executive and legislative branches of government if budgets
and appropriations were moved to a biennial cycle. The chief
benefits include:
* greater stability and rationality of the budget process;
* better management as managers have more time to manage their
programs and more time to think about their programs and put new
policies in place;
* increased ability for oversight by both Congress and the
executive branch, including more time for program evaluation;
* increased predictability for those served by government
programs and for those who administer them; and
* less waste, by reducing the opportunities to enact wasteful
spending.
*****************************************************************
Congressional Support for Multi-year Authorizations and Two Year
Appropriations
*****************************************************************
(Percent of Respondents)
Strongly Favor/ Strongly Not Sure (N)
Favor/Favor Oppose Equally Oppose/Oppose
All Respondents 57% 10% 21% 12% 137a
House:
Total Respondents 55% 9% 23% 13% 109
First year Members 56% 6% 12% 27% 34
Senate:
Total Respondents 55% 14% 18% 14% 22
*****************************************************************
Source: Survey by the Joint Committee on the Organization of
Congress, 1993.
N = number of members responding to the survey.
a = Six respondents did not identify their House or Senate
affiliation.
*****************************************************************
************
ACTIONS
************
1. Enact legislation to move from an annual to a biennial budget
submission by the President. (3)
The President should submit legislation to Congress to move to a
biennial budget, including a biennial budget submission from the
President to Congress. In the second year of a biennium, the
President should submit not a new budget, but only amendments to
the previously submitted budget for exceptional areas of concern
or change, emergencies, or other unforeseen circumstances.
Supplementals, rescissions, deferrals, and reprogramming could
continue to be considered any time. Regular updates of estimates
for mandatory programs (which are more volatile and most of which
are not subject to annual appropriations) would continue.
The President can submit a two-year request without legislative
change. To avoid having to present such a budget every year,
however, the President should submit a legislative proposal to
move the requirements related to the President's budget submission
from an annual to a biennial cycle. This recommendation should be
pursued regardless of whether Congress chooses to switch to
biennial budget resolutions and/or appropriations. OMB should
revise OMB circular A11 by March 1995 to accommodate this change.
Biennial budgeting will not make the budget decisions facing our
nation any easier, but it may create an environment that will
better facilitate the hard decision making process. Considerable
time would be saved and used more effectivelyif budgets were moved
to a streamlined biennial cycle.
The time-consuming processes of developing the President's budget
(albeit a process shortened by other NPR recommendations) and of
defending every line item of that budget in congressional
justifications would occur once every two years rather than
annually. Program managers would have more time to manage their
programs, and policy and budget analysts more time to conduct more
in-depth analysis of program structure, effectiveness, results,
and results-oriented performance measures.
Agencies would not spend less time interacting with Congress, but
the time would be better spent. Instead of agencies and Congress
spending months in appropriation hearings covering line item
detail, more time would likely be spent on longer term budget
issues and effective programmatic and evaluation oversight.
There is more than one reasonable alternative to when a biennium
begins and which years it covers. The first biennium could begin
October 1, 1996, to cover fiscal years 1997 and 1998. Subsequent
biennia would begin October 1 of each even-numbered year. This
timing permits a newly elected President slightly over one year to
fully develop a complete package of policy and spending priorities
(both increases and decreases) in the context of total fiscal
limitations and the condition of the U.S. economy. This timing for
a biennial budget was recently supported by former Vice President
Walter Mondale who testified, before the Joint Committee on the
Organization of Congress, "First of all, I suspect that a new
administration would feel pretty good about having an existing
appropriation in place when they took over, so that they didn't
have to start from scratch."11 This timing would allow sufficient
time for President Clinton to fully develop the first
comprehensive biennial federal budget, using the proposed
executive budget resolution based on missions.
Alternatively, a biennium could begin October 1 of odd-numbered
years. This timing would permit budgets to be adopted during the
first year of a President's term and at the start of a new
Congress, thus giving a new President and Congress the ability to
more quickly enact their programs rather than having to operate
for two years under an earlier approved budget. This would also
allow difficult budget votes to come in non-election years. If
this timing is selected, however, provisions should be made to
postpone beyond the first week in February the required date of
submission of the President's budget to Congress in the year a new
President takes office. Such a provision must allow a new
President sufficient time in office to finalize his or her first
biennial budget request. A delayed submission of the President's
budget could be coupled with an automatic continuing resolution so
Congress also has sufficient time to consider the President's
request and enact appropriations.
2. Establish biennial budget resolution and appropriations
processes. (3)
Congress should establish biennial budget resolutions and
appropriations. NPR also recommends that Congress adopt multi-year
authorizations since it does not make sense to have annual
authorizations once there are biennial appropriations. The current
annual process of adopting a concurrent resolution on the budget
would be replaced with one that requires congressional action only
every other year. Congress could enact appropriations bills once
every two years, including annual or multi-year appropriations for
all accounts in the federal budget that are subject to
appropriations.12
Considerable time would be saved and used more effectively by both
the legislative and executive branches if budgets and
appropriations were moved to a biennial cycle. Details need to be
closely worked out with agencies, OMB, and congressional
appropriations committees to avoid the potential for setting in
place an even more complex process.
Congressional budget workload would be reduced, allowing more time
for congressional review and other legislative activities, such as
considering authorizations. Most budget-related votes would be
concentrated in a single year, freeing up time in the off-year for
more productive activities. Reducing the number of spending
decisions that have to be made and the resultant level of conflict
would leave additional time for congressional evaluation and
oversight of program results.
With biennial appropriations, there would only be half as many
potential crises for being without funds, or operating under
continuing resolutions, on October 1. Since the stakes are higher
with biennial budgets and appropriations (since policy and
spending decisions are made for two rather than one years), it may
be more difficult to get agreement on the President's budget, the
budget resolution, and appropriations within Congress and between
the President and Congress. However, once agreements are reached,
federal, state, and local program managers will have relative
certainty for two years.
As an alternative to biennial appropriations for all functions,
Congress could consider retaining annual appropriations for
selected programs where funding levels are relatively
unpredictable and biennial appropriations might result in an
increase in the likelihood for supplemental appropriations. The
National Academy of Public Administration (NAPA) recommended such
an approach in 1983.13 Because it is possible that a biennial
cycle is appropriate for some but not all annually appropriated
accounts, NAPA argued, experiments could first be limited to only
those cases where there is little fluctuation in resource
requirements from year to year.
With this in mind, the current Joint Committee on the Organization
of Congress asked the Congressional Budget Office (CBO) to
identify those programs in which annual, rather than multi-year,
appropriations might be more desirable based on the following
criteria:
* funding patterns heavily dependent on economic factors;
* emergency items; and
* other programs with unpredictable funding demands.
CBO's analysis led to a list of 30 programs that met the Joint
Committee's criteria. This list represented a total of $18.5
billion in fiscal year 1993 budget authority, or less than 4
percent of total discretionary spending. More than one-third of
the programs identified are in the international affairs area, in
large part because uncertainties in the world make needs for
security assistance, migration and refugee assistance,
international peacekeeping, and food aid highly unpredictable from
year to year. Other programs susceptible to changes in funding
needs because of unforeseen emergencies include the firefighting
activities of the Interior and Agriculture departments and the
disaster assistance activities of the Small Business
Administration and the Federal Emergency Management Agency.
Activities such as the administration of unemployment insurance
are tied to economic trends that are difficult to predict. Still
other programs, like the renewal of contracts for housing
subsidies, have proved difficult to predict for other reasons.14
Congress could use this list as a starting point to determine the
few programs that would remain on an annual cycle.
3. Evaluate program effectiveness and refine performance measures
in the off-year. (3)
The off year in a biennial budget cycle should be used by both the
executive branch and Congress to thoroughly review and analyze all
federal programs within programs and organizations and across
organizational boundaries to:
* focus on long-term planning than currently feasible due to
the time constraints and products required by an annual budget
cycle;
* evaluate program effectiveness in terms of the achievement
of results in the context of missions and goals;
* thoroughly examine the base funding of programs rather than
only incremental changes;
* review and refine performance measures and targets; and
* update goals and timetables for meeting standards and
outside benchmarks.
These reviews and analyses should be conducted by program
managers, as well as by agency budget and evaluation staff, OMB
management and budget staff, executive branch policy officials,
and the legislative branch. Moving to a biennial cycle beginning
with a budget for fiscal years 199798 would allow these thorough
reviews to begin in 1996 and 1997 when development of a fiscal
year 1998 budget would have occurred.
States and localities with biennial budgeting report that their
long-range planning is enhanced, less time is spent on budgeting,
and more time is spent on other matters.15 Sunnyvale, California,
for example, does not modify its base budget in the second year
except through a budget supplement process to reflect a specific
service level change.16 What routinely happens in Sunnyvale during
the off-year is that program managers take a closer look at the
established service (performance target) level, by assessing and
analyzing specific data, to decide whether the program structure
in place (i.e., program objectives, performance indicators, and
tasks) still reflects the appropriate level and quality of service
established through city council action. If not, specific changes
to these elements are made. In general, however, program managers
use this review period to make various minor improvements in their
program structures or to establish additional customer
satisfaction mechanisms to help them measure their success at
achieving results.
Cross References to Other NPR Accompanying Reports
Improving Financial Management, FM12: Manage Fixed Asset
Investments for the Long Term.
Creating Quality Leadership and Management, QUAL04: Improve
Legislative/Executive Branch Relationship.
Streamlining Management Control, SMC03: Change the Focus of the
Inspectors General.
************
Endnotes
************
1. The Budget Enforcement Act of 1990 changed the date by which
the President is required to transmit the budget to Congress from
the first Monday after January 3 to the first Monday in February.
As a result, President Clinton was the first President in modern
times required to construct and submit to Congress a complete
budget so soon after taking office. President Clinton submitted a
report to Congress, Vision of Change for America, on February 17,
1993, which summarized his economic and budgetary plan for the
nation. The Budget of the United States Government, Fiscal Year
1994, was transmitted in early April 1993.
2. U.S. Congress, Congressional Budget Office, Biennial Budgeting
(Washington, D.C., February 1988), pp. 67. See also Margeson,
Michael D., and James Saturno, Congressional Approaches to
Biennial Budgeting, (Washington, D.C.: Library of Congress,
Congressional Research Service [CRS], July 27, 1987), which lists
biennial budgeting bills from 19771988.
3. DioGuardi, Joseph J., Unaccountable Congress: It Doesn't Add Up
(Regnery Gateway, 1992), p. 82.
4. U.S. Congress, Senate, Department of Defense Authorization Act,
1986, Conference Report. S. Rpt. 99118, 99th Cong., 1st Sess.,
1985, p. 484. This was first reported by the Senate Committee on
Armed Services as an amendment proposed by Senator Nunn. The House
version of the measure contained a similar provision, and it was
included in the conference agreement on the bill as Section 1405.
5. Saturno, James V., Biennial Budgeting: BACKGROUND and
Congressional Options (Washington, D.C., May 11, 1990).
6. U.S. General Accounting Office, Managing the Cost of
Government: Proposals for Reforming Federal Budgeting Practices,
GAO/AFMD901 (Washington, D.C.: U.S. General Accounting Office
(GAO), October 1989), p. 28.
7. See Saturno.
8. DioGuardi, p. 82.
9. U.S. General Accounting Office, Appropriations, Continuing
Resolutions, and an Assessment of Automatic Funding Approaches,
GAO/AFMD8616 (Washington, D.C.: GAO, 1986), p. 16.
10. The House appropriations subcommittees usually hold 32
separate hearings on the President's budget submission for HHS
programs. The Senate appropriations subcommittees sometimes hold
as many hearings but have tended to combine many of the hearings
over the last few years. Most of HHS's appropriation hearings are
before the EducationHHSLabor Appropriation Subcommittee, but some
are also held by the Agriculture, Rural Development and Related
Agencies subcommittees (to cover the Food and Drug Administration)
and the Interior subcommittees (to cover the Indian Health
Service).
11. Testimony of former Vice President Mondale before the Joint
Committee on the Organization of Congress, July 1, 1993.
12. This recommendation does not increase the duration of
availability of appropriations from a single year to two fiscal
years. We did not propose this, in part, because it would require
amendments to the Budget Enforcement Act spending limits to
accommodate roughly double the budget authority that would be
available the first year and because of unlikely passage. Another
recommendation in this report (BGT05.1) addresses the issue of
multi-year and no-year availability of funds on a more selective
basis.
13. National Academy of Public Administration, Revitalizing
Federal Management: Managers and Their Overburdened Systems
(Washington, D.C., 1983); and National Academy of Public
Administration, Deregulation of Government Management (Washington,
D.C., October, 1983).
14. U.S. Congress, Congressional Budget Office, Annual and Multi-
year Appropriations and Authorizations (Washington, D.C., 1993).
15. CRS, p. 22. See also: U.S. General Accounting Office, Budget
Issues: Current Status and Recent Trends of State Biennial and
Annual Budgeting, AFMD8753FS (Washington, D.C.: GAO, July 1987).
16. City of Sunnyvale, California, Planning and Management System
Manual, Performance Auditing and Budgeting System, 1978, as
revised.
*****************************************************************
Seek Enactment of Expedited Rescission Procedures
BGT08:
*****************************************************************
************
BACKGROUND
************
"A Vision of Change for America," issued on February 17, 1993, to
outline President Clinton's economic plan, declared that a
"strong, workable enforcement mechanism is essential to the
credibility of any deficit reduction package." As a part of the
President's commitment to support mechanisms to enforce deficit
reduction, "A Vision of Change for America" expressed support for
enactment of enhanced rescission authority legislation that would
require expeditious congressional action on Presidential
rescissions.1
On April 1, 1993, the House Rules Committee reported out a rule
"Providing For The Consideration of H.R. 1578," a bill known as
the Expedited Rescission Act of 1993. In an April 27, 1993 letter
to the Speaker of the House Tom Foley, President Clinton expressed
support for H.R. 1578, saying the bill "would increase the
accountability of both the executive and legislative branches for
reducing wasteful spending. It would provide an effective means
for curbing unnecessary or inappropriate expenditures without
blocking enactment of critical appropriations bills." Further, in
recognition of the concerns related to lineitem veto proposals,
President Clinton's letter expressed his feeling that the
expedited rescission procedures proposed in H.R. 1578 "would [not]
shift the constitutional balance of powers that is so critical to
the success of our form of government."2 In effect, the bill would
enable the President to reject items in an appropriations bill.
On April 29, 1993, H.R. 1578 passed the House of Representatives
by a vote of 258157. To date, no action has been taken on the bill
in the Senate.
***************
NEED FOR CHANGE
***************
Under current law the President must sign or veto appropriations
acts in their entirety. The President has no authority to approve
some items and reject others. As a result, enactment of
appropriations for necessary and needed activities is sometimes
held up pending the resolution of a controversy related to only
one item in an appropriations act. A recent example of this
situation was at the beginning of fiscal year 1990 when operations
of nearly the entire federal government ceased because President
Bush vetoed a Continuing Resolution passed by Congress as a result
of disagreements over specific line items in the legislation.
Over the past several years, several proposals, both in the form
of statutes and in the form of constitutional amendments, have
been made to allow the President "lineitem veto" authority; in
other words, to allow the President to veto specific line items
from an appropriations act. Supporters of line-item veto authority
argue that such a procedure will enable the President to reject
wasteful items, or items that escape scrutiny because of their
inclusion in large appropriations bills, and will require Congress
to cast a separate vote on those items. Congress, however, has
been reluctant to confer on the President directly any sort of
item veto authority. This reluctance reflects, at least in part, a
fear that a shift in spending power from the legislative to the
executive branch might result.3
Under current procedures, as provided by the Congressional Budget
Impoundment and Control Act of 1974, the President is required to
submit to Congress proposed rescissions (the permanent
cancellation of previously appropriated budget authority)
throughout the year.4 To propose a rescission, the President must
submit a message to Congress specifying the amount to be
rescinded, the accounts and programs involved, the estimated
fiscal and program effects, and the reasons for the rescission.
Multiple rescissions can be grouped in a single message. Congress
then has 45 days of "continuous session" (usually a larger number
of calendar days) during which it can pass a rescission bill.
Congress may rescind all, part, or none of the amount proposed by
the President.5
The major weakness in current rescission authority, however, is
that Congress is not required to vote on the President's
rescissions proposals. Under the current procedures, if Congress
does not approve a rescission in legislation by the expiration of
this period, the President must make the funds available for
obligation and expenditure.6 In others words, if Congress takes no
action whatsoever, the President must make the funds available.
Moreover, under current provisions, it is difficult for Members of
Congress supporting a rescission proposal to even bring the
proposal out of committee for floor consideration. According to
current law, if the Appropriations Committee fails to report a
rescission proposal within 25 days, a Member supporting a
rescission proposal must have the support of 20 percent of the
House to secure a discharge of the rescission proposal from the
Appropriations Committee.
***************
Action
***************
Pursue negotiations with the leadership of the House and Senate to
gain enactment of expedited rescission authority. (3)
As part of congressional ACTIONS anticipated in regard to fiscal
year 1994 funding levels, the Clinton Administration encourages
the leadership of the House and Senate to continue negotiations on
Senate consideration of H.R. 1578, the Expedited Rescission Act of
1993, with an aim toward passage of the bill before the end of the
first session of the 103rd Congress. Expedited rescission
authority is good public policy that will help restore fiscal
discipline.
H.R. 1578, as passed by the House, would expedite consideration of
rescission proposals and provide a simpler procedure for bringing
rescission proposals to a vote on the floor of the House of
Representatives. The procedure set forth in H.R. 1578 would apply
to Presidential rescission proposals submitted to the Congress
within three days of signing an appropriation act. If the
rescission bill is not introduced by the congressional leadership
within two days of being received, any member may introduce it.
Once introduced, the bill must be referred to the House Committee
on Appropriations, which shall report the bill, without
substantive revision, not later than the seventh day after receipt
of the proposal from the President.
If the Appropriations Committee fails to report the bill within
the sevenday period, the bill shall be automatically discharged
from the committee and placed on the appropriate calendar for
floor consideration. A vote on final passage of the bill must be
taken in the House of Representatives on or before the close of
the 10th day after the date of the introduction of the bill in the
House. If the bill is passed by the House, it must be transmitted
to the Senate within one calendar day of the day on which it
passed the House.
Then, expedited procedures similar to those described for the
House would apply to consideration of the bill in the Senate.
Congress would not be allowed to amend the President's rescission
proposals. Either House, though, could reject the President's
proposal and could consider an alternative bill under the
expedited procedures. An alternative bill, however, could only be
considered under the expedited procedures if it rescinds amounts
in the same appropriations act covered by the President's proposal
and in at least the same aggregate amount as the President's
proposal.
In remarks on April 27, 1993, President Clinton expressed his
strong support for the expedited rescission procedures proposed in
H.R. 1578. In that speech, he noted that the proposal was like a
"line-item veto," since the proposal would give the President
power to cut individual spending items while allowing the rest of
the bill to go into effect. He went on to explain that under the
proposal, "these items would be out there by themselves, not
buried in some big bill, so that when the votes were taken . . .
they would be taken in view of the press and the public and you
could draw your own conclusions. . . . It respects the separation
of powers. It ultimately respects the right of the United States
Congress to do what the Constitution gives it and not the
President the power to do. But it makes both of us more
responsible in how your money is spent."7
***************
Endnotes
***************
1. Clinton, William J., A Vision of Change for America
(Washington, D.C., February 17, 1993), p. 106.
2. Letter from President Clinton to The Honorable Thomas S. Foley,
Speaker of the House of Representatives, April 27, 1993.
3. See McMarty, Virginia A., The President and the Budget Process:
Expanded Impoundment and Item Veto Proposals (Washington, D.C.:
Library of Congress, Congressional Research Service [CRS], May 3,
1993).
4. Democratic Study Group Legislative Report, "Expedited
Rescissions Act (H.R. 1578)," week of April 26, 1993.
5. Schick, Allen, Robert Keith, and Edward David, Manual on the
Federal Budget Process (Washington, D.C.: CRS, December 24, 1991).
6. Ibid.
7. Remarks by the President to the National Realtors Association,
Sheraton Washington Hotel, Washington, D.C., April 27, 1993.
******************************************************************
Appendices
******************************************************************
**************
Appendix A:
**************
Summary of ACTIONS by Implementation Category
(1) Agency heads can do themselves
BGT01.2: In every federal agency, use performance agreements
and other approaches to forge an effective team committed to the
accomplishment of organizational goals and objectives.
BGT02.2: Build effective teams to improve performance and
strengthen organizational accountability.
BGT03.3: Ensure that direct operating costs can be identified.
BGT03.7: Reduce the excessive administrative subdivision of
funds in financial operating plans.
BGT05.4: Formulate financial operating plans and adjust
allotments/sub-allotments on a timely basis.
BGT05.5: Adapt and apply the Unified Budget Plan throughout
DOD and to civilian agencies, where appropriate.
(2) President, Executive Office of the President, or Office of
Management and Budget can do
BGT01.1: The President should develop written performance
agreements with department and agency heads.
BGT02.1: Accelerate planning and measurement to improve
performance in every federal program and agency.
BGT02.3: Develop common goals and data collection efforts for
crosscutting issues.
BGT02.4: Incorporate performance objectives and results as key
elements in budget and management reviews.
BGT03.1: Revise operational plans and performance goals to
reflect actual appropriations by mission and function.
BGT03.6: Simplify the apportionment process.
BGT04.1: Budget and manage on the basis of operating costs
rather than full-time equivalents or employment ceilings.
BGT05.3: Expedite reprogramming of funds within agencies.
BGT06.1: Begin budget formulation with a more collegial and
open process like an "executive budget resolution" to provide
early guidance to the departments and agencies.
BGT06.2: Replace hierarchical budget development and review
with team approaches.
BGT06.3: Review functional categories used in the budget
process and streamline budget justification details provided to
Congress.
(3) Requires legislative action
BGT02.5: Clarify the objectives of federal programs.
BGT03.2: Restructure appropriations accounts to reduce over-
itemization and to align them with programs.
BGT03.4: Propose revolving funds for those agencies that do
not have them.
BGT03.5: Reduce overly detailed restrictions and earmarks in
appropriation and report language.
BGT04.2: Request Congress to remove FTE floors.
BGT05.1: Identify those appropriations that should be
converted to multi or no-year status.
BGT05.2: Permit agencies to roll over 50 percent of their
unobligated yearend balances in annual operating costs to the next
year.
BGT07.1: Enact legislation to move from an annual to a
biennial budget submission by the President.
BGT07.2: Establish biennial budget resolution and
appropriations processes.
BGT07.3: Evaluate program effectiveness and refine performance
measures in the off-year.
BGT08.1: Pursue negotiations with the leadership of the House
and Senate to gain enactment of expedited rescission authority.
**************
Appendix B:
**************
The Traditional Budget Process
The traditional budget process is complex and arcane to most
people. It involves the simultaneous consideration of policy
priorities, the resource needs of individual programs, the
appropriate allocation of resources among the varying functions of
government, the effect of government outlays or revenue
collections on the current and prospective condition of the
national economy, and the statutory or regulatory constraints
governing federal expenditures or income. Also, with the massive
increase in the national debt, the budget process has been used to
reduce budget deficits.
The traditional budget process is a five-year-plus process with
three main phases:
* Phase 1: Formulation of the President's budget.
* Phase 2: Congressional review and action on the federal
budget.
* Phase 3: Agency implementation and management execution of
enacted budget.
At any given point in time at least three budgets are in the
process of being either formulated, reviewed, or implemented. In
addition, during the formulation and review of any one budget,
numerous parties in the agencies, at OMB, and in Congress are
working on the specifics, both jointly and independently. This is
hardly a linear process. A series of formal and informal
communications among the agencies, OMB, and congressional staff
occur as the budget moves forward.
Phase 1: Formulation of the President's Budget
Getting a Head Start Without Knowing Where the Finish Line Is.
Depending on the agency, the formulation of the new President's
budget begins around February each year 12 months before the
budget is to be released and 20 months before the beginning of the
fiscal year to be covered by the budget.1 As an example, some
bureaus began preparing the fiscal year 1995 President's budget
around February 1993 less than half way through fiscal year 1993
and months before macro level fiscal and policy guidance are
determined, and before any congressional action has been taken on
fiscal year 1994 appropriation levels.
Besides lacking definitive fiscal data at the beginning of the
process, budget formulation often begins without any specific
guidance on total budget levels or on presidential priorities. In
addition, there has often been little guidance about internal
priorities from the agency head. As noted by one bureau director,
bureau options are usually based upon "flashes of information"
regarding administration policies. For the most part, this results
in bureaus putting together budget requests that discuss the need
for additional resources.
What limited presidential guidance is received often comes
immediately after the annual budget is transmitted to Congress in
February. On behalf of the President, OMB prepares allowance
letters for executive branch agencies. The letters formally convey
the new five-year budget authority and outlay estimates in the
President's budget as allowances, offer guidance on employment
levels, and outline specific information requests and other
instructions related to future agency budget requests.
Frequently these allowance letters are updated during the spring
or summer with revised formal planning guidance for the upcoming
budget cycle. In addition, guidance is normally issued to agencies
during the summer months in an updated version of OMB Circular
A11, which "provides detailed instructions and guidance on the
preparation and submission of agency budget requests and related
materials."2 A general OMB letter may accompany the updated
circular, but no specific discussions are held on policy
priorities, total budget levels, or agency allocations at this
time.
Beginning the Formal Process at the Agency Level. At the agency
level the formal budget formulation process ordinarily begins in
March or April of each year with the issuance of a "call memo"
from the agency level budget office to agency bureaus. Typically,
agency call memos for the fiscal year 1995 budget would be
released in March or April of 1993. Usually, the call memo asks
bureaus to develop a series of budget options for each account
within their jurisdiction. For example, the call memo may ask for
two or three levels of budgetary resources for each account. The
call memo may ask for the bureau's proposed level, a current
services level (i.e., last year's level plus inflation), and a
level 5 percent or more below the estimated current services level
or below the level in the most recent President's budget (which is
the only known level at the time the process begins). In recent
years, the President's budget request was required to appear as
the middle column of the budget materials prepared by agencies. In
other words, the materials being prepared for each account in the
fiscal year 1995 budget show fiscal year 1993 spending levels, the
President's fiscal year 1994 budget request level (which had not
yet been acted upon by Congress), and the fiscal year 1995 request
level. Note that none of these numbers are actuals; they are all
estimates at this point.
Internal Agency Review. Normally, bureaus are asked in the agency
call memo to submit their budget requests to the agency head by a
specified date in late June or early July. Most agencies conduct a
hearings process on the bureau budget requests during June, July,
or August each year. The hearings process allows bureaus to make
presentations of their requests before agency-level policy and/or
budget personnel. The hearings process is often the first time
bureau personnel are informed about agency-level policy
priorities. At this point, however, neither the bureaus nor the
agencies have received specific presidential guidance.
Internal Agency Decision Sessions. Upon completion of the bureau
budget hearings, agency heads consult with staff offices to decide
funding requests for each of the accounts within the agency's
jurisdiction. Since the agency's total funding request usually
must be kept within a target figure, the agency's policy
priorities are ultimately revealed through the process of
determining the requested funding level for each account within
the agency's jurisdiction. However, since the policy choice must
be made among programs solely within the agency's jurisdiction,
the choices are often made between very diverse and unrelated
activities such as between the farm support and food stamp
programs of the Department of Agriculture. At this point in the
budget formulation process, however, there is no mechanism for
making policy priority decisions on a mission or functional basis
across agency lines.
Further, with the exception of the unique process for the
Department of Defense (DOD), bureau officials and/or OMB budget
personnel may not be a part of the decision sessions held to
determine agency request levels. In some cases, the bureau level
involvement may only be through an appeals process once agency-
level decisions are made.
Submitting Estimates to OMB. Historically, agency budget estimates
have been submitted to OMB on September 1 each year. Between
September and late November, OMB personnel and sometimes other
Executive Office of the President personnel review the agency
estimates. Agency staff are asked to supply data on various topics
in answer to questions posed by OMB examiners, who are in the
process of drafting OMB option papers.
Matching Presidential Policy with Budget Estimates OMB Director's
Review. After receiving budget estimates from each of the
agencies, OMB has traditionally held a series of director's review
meetings, in part based on the option papers drafted by OMB
examiners. These meetings constitute the first point in the
current process formally designated for discussion of
administration policy priorities across agency lines. These
meetings also constitute the point in the process when decisions
are made on total budget levels, including revenue estimates and
deficit reduction goals.
Unfortunately, agency heads or their designees are usually not
involved in any of the boundary spanning issue discussions that
may be held or in the discussions concerning total budget levels.
Moreover, agency personnel usually have not seen or been told
anything about the OMB option papers used in the director's review
process. Agencies are already locked into their budget decisions
by their submissions to OMB.
Communicating the President's Guidance. The OMB review of agency
estimates ordinarily finishes in late November or early December.
At that point, agency heads are called to a "passback" session to
receive the decisions reached at through the OMB review process.
The passback session with agency heads is often the first time
agency heads are formally advised of the President's specific
policy priorities and the funding level within which the agency
budget must be developed. Also, it may be the first time they are
given information on issues that have been raised by OMB
examiners, issues that cross agency lines, or issues related to
total budget levels.
Decision making by Default the Appeals Process. Traditionally, the
agency head is given 72 hours after receipt of the passback
materials to file an appeal to OMB on the passback
recommendations. Given the short turn around, program manager
involvement in the appeals process may be severely limited or
nonexistent. As a result, the appeals made by agencies often lack
staff analysis, and issues of importance to program management are
not taken into consideration. This lack of adequate response time
is the root of much frustration expressed with regard to the
current appeals process a process that seems to foster decision by
default, rather than decision based on analysis.
Appeals Filed with the OMB Director. In some cases, though, the
issue may be raised to the President for decision. The appeals
process may last through several weeks in December as negotiations
take place between agency, OMB, and other presidential policy
personnel. In fact, the appeals process is usually stopped only at
the point where no time is left to enter figures into the budget
system database prior to the printing of the President's budget.
Presentation of the President's Budget. The President is required
by law to submit the fiscal year 1995 budget to Congress no later
than the first Monday in February 1994.3 Traditionally, the
President's budget is released shortly after the State of the
Union address to Congress. Besides the physical submission of the
budget documents to Congress, each agency usually holds a press
conference, briefs congressional staff, and issues materials to
explain the agency's portions of the budget to the public and to
justify estimates to the Congress.
Phase 2: Congressional Review and Enactment
Reaching Agreement in Congress. Congress begins its budget cycle
after submission of the President's budget. The first step to be
completed by May 15 each year is the drafting of a Concurrent
Budget Resolution by the House and Senate budget Committees on the
basis of estimates submitted from each authorizing committee,
consideration of congressional priorities, and consideration of
the proposals in the President's budget submission. The Concurrent
Budget Resolution sets the broad outlines of fiscal policy with
regard to national needs, including both spending and taxation. It
sets targets for total receipts and for budget authority and
outlays, in total and by functional category, without regard to
agency or congressional committee jurisdiction.
Once adopted, the Concurrent Budget Resolution reflects agreed
upon aggregate funding levels by defined functional categories in
the federal budget. (Appendix D lists the functions and
subfunctions used in the federal budget.) A report accompanying
the budget resolution provides guidance on the assumptions made to
arrive at the functional totals, but neither the report language
nor the functional totals are binding on other committees. Only
the total discretionary spending caps and the pay-as-you-go
(PAYGO) provisions are binding limitations. The Concurrent Budget
Resolution is not enacted as a law and does not require
Presidential approval.
Congressional Hearings. During the debate over the Concurrent
Budget Resolution, the appropriations subcommittees are also
holding hearings on the President's budget submission. Each agency
head and bureau head testifies before the committees on the
contents of the budget submission. The extensiveness of the
questions vary greatly, but budget offices spend a good deal of
time preparing administrators for the hearings.
Appropriating and Authorizing Spending. After passage of the
Concurrent Budget Resolution, authorizing and appropriations
committees begin drafting legislation to meet the budget
resolution targets for the upcoming fiscal year. Authorizing
committees work on legislation that will increase or decrease
spending from entitlement programs or increase or decrease
receipts from user fees. For example, a change in eligibility
criteria for the Food Stamp or Medicaid programs will increase or
decrease the spending for these programs. Similarly, a change in
the requirements concerning meat and poultry inspection could
increase or decrease user fee receipts.
The appropriations committees must keep discretionary spending
within the Budget Enforcement Act discretionary spending cap.
Spending targets for the various appropriations subcommittees are
devolved under an allocation process. Appropriation bills must be
signed by the President by October 1 for most federal agencies to
have funds to continue operations. When appropriation action
cannot be completed by October 1, a continuing resolution is
passed, permitting a continuation of agencies' operations at some
stipulated rate.
A sequestration process is triggered if discretionary spending
caps are exceeded, if new mandatory spending resulting from an act
of Congress is not offset by spending reductions or revenue
increases, or if a maximum deficit amount is exceeded.
Sequestration is the mandatory reduction of appropriation levels
and direct spending in nonexempt accounts. OMB is the final
arbiter in determining if sequestration is to be invoked.
Phase 3: Budget Execution Process
Managing and spending of resources the actual budget execution
occurs throughout the fiscal year and (especially with multi-year
appropriations) beyond. It may involve budget amendments,
rescissions, deferrals, or supplemental, if necessary, to reflect
changing priorities and requirements. It includes close-out of
appropriations, including contracts and other obligations. For
fiscal year 1995, the bulk of budget execution will occur between
October 1, 1994, and September 30, 1995. Outlays from obligation
authority made available with fiscal year 1995 appropriations will
take place over several subsequent years.
Most funds made available to federal agencies are subject to the
apportionment process established by the Anti-deficiency Act and
delegated by the President to OMB. The primary purpose of the
apportionment process is to ensure that resources are available
throughout the fiscal year so as to avoid overspending of an
appropriation that would force Congress to pass a supplemental
appropriation. OMB sometimes apportions by time periods (e.g.,
quarter of the fiscal year) and sometimes by activities or object
classes. Agencies may request that an account be reapportioned
during the year to accommodate changing circumstances.
Most agencies develop a financial operating plan as soon as
appropriation levels are known. The financial operating plan sets
the various appropriations committee and OMB apportionment funding
limitations into the financial management control system of the
agency and includes allotments for the agency's organizational
elements and programs, projects, and activities, as defined by
congressional action.
In addition to prohibitions on overspending, government officials
cannot impound (i.e., not spend) appropriated funds. If funds are
not needed, the President may propose rescissions (in essence,
negative appropriations) or deferrals (postponed spending) within
certain guidelines established by Congress. Funds must be spent on
the programs, projects, and activities for which they were
appropriated unless a transfer of funds has been approved or
Congress is notified of and consents to a reprogramming.
Supplemental funding requests may be submitted to Congress at any
time during the year, but under the Budget Enforcement Act must be
offset as necessary to ensure that spending is under the Act's
caps, unless the President declares an emergency.
Most agencies do periodic reviews of year-to-date progress against
their financial operating plans, make adjustments within
reprogramming thresholds, and identify issues requiring
reprogramming or supplemental action. These reviews usually occur
more frequently late in the fiscal year when management decisions
are needed to ensure that spending targets are met (e.g., whether
contracts can be awarded by the end of the fiscal year, whether
grants will be awarded, etc.). Close-out of appropriations is also
required after the end of the fiscal year to ensure that
obligations are liquidated.
**************
Endnotes
**************
1. Throughout this appendix, the term "agency" is used to refer to
cabinetlevel departments (e.g., Labor, Commerce) as well as
independent agencies (e.g., the Environmental Protection Agency).
"Bureau" is used to refer to agency subcomponents (e.g., Federal
Highway Administration in the Department of Transportation).
2. Darman, Richard, Director, Office of Management and Budget,
Transmittal Memorandum No. 63, Circular No. A11, revised July 2,
1992.
3. The Budget Enforcement Act of 1990, Public Law 101508.
**************
Appendix C:
**************
Major Budget Laws and Regulations
Pertinent Laws
Article 1, Section 9, Clause 7 of the Constitution of the United
States
Requires appropriations in law before money may be spent from the
Treasury.
Chapter 11 of Title 31, United States Code
Codifies and consolidates laws applicable to the budget process
(e.g., procedures for submission of the President's budget and the
information contained in it, appropriations, apportionments, and
accounting including the requirements of the Anti-deficiency Act.)
The Budget and Accounting Act of 1921 (P.L. 6713)
Created the Bureau of the Budget (now the Office of Management and
Budget) and the General Accounting Office, and required the
President to present a set of budget recommendations annually to
the Congress.
Congressional Budget and Impoundment Control Act of 1974 (P.L.
93344)
Prescribes the congressional budget process and controls certain
aspects of budget execution, created the House and Senate Budget
Committees, established the Congressional Budget Office, and
created the concurrent budget resolution.
Federal Managers' Financial Integrity Act of 1982
Requires ongoing evaluations and reports on the adequacy of the
systems of internal accounting and administrative control of each
executive agency.
Balanced Budget and Emergency Deficit Control Act of 1985 (P.L.
99177)
Commonly known as the GrammRudmanHollings Act, this law prescribes
rules and procedures (including sequestration) designed to
eliminate excess deficits.
Budget Enforcement Act of 1990 (Title XIII, P.L. 101508)
Significantly amended the laws pertaining to the budget process,
including the Congressional Budget Act and the Balanced Budget and
Emergency Deficit Control Act. Also prescribes the budget
treatment for federal credit programs.
Anti-deficiency Act (Codified in Chapters 13 and 15 of Title 31,
United States Code)
Prescribes rules and procedures for budget execution, prohibiting
obligations or expenditure of funds in excess of amounts
appropriated by law.
Chief Financial Officers Act (P.L. 101576)
Established Chief Financial Officers in OMB and in 23 of the
largest federal agencies. Although the primary purpose of the CFO
Act is the improvement of financial systems within the federal
government, it includes the beginning of a greater focus on
program results. It requires CFO's to develop systematic measures
of performance and to prepare and submit to the agency head timely
reports, and establishes that financial statements shall reflect
results of operations.
Government Performance and Results Act of 1993 (P.L. 10362)
Provides for the establishment of performance measurement in the
federal government.
OMB Circulars
A11 Guides preparation and submission of budget estimates,
sets forth definitions and processes for budget formulation.
A19 Governs legislative coordination and clearance.
A34 Promulgates instructions for budget execution.
A50 Sets instructions on audit followup.
A73 Sets federal audit policy.
A76 Provides guidance on performance of commercial activities.
A87 Sets cost principles for state and local governments.
A94 Provides guidelines and discount rates for benefit-cost
analysis of federal programs.
A102 Sets uniform principles for grants and cooperative
agreements with state and local governments.
A109 Provides instructions on acquisitions of major systems.
A123 Provides guidance on internal accounting and
administrative control systems for federal agencies and
instructions regarding management control reviews (Federal
Managers Financial Integrity Act).
A127 Promulgates guidelines on federal financial systems.
A129 Sets guidelines for managing federal credit programs.
A130 Provides guidance on management of federal information
systems.
A131 Promotes value engineering to analyze systems, equipment,
and services to achieve essential functions at lowest lifecycle
cost.
A134 Describes financial accounting principles and standards.
General Accounting Office (GAO) Documents
Principles of Federal Appropriations Law, July 1991. This
reference document organizes the principal rulings of GAO in the
appropriations field.
**************
Appendix D:
**************
Budget Functions and Subfunctions
Budget functions and subfunctions in order of magnitude by fiscal
year 1994 proposed funding level.
650 Social Security $307 billion
Old Age and Survivors Insurance
Disability Insurance
050 National Defense $263 billion
Department of Defense Military
Atomic Energy Defense Activities
Defense Related Activities
600 Income Security $218 billion
General Retirement and Disability Insurance
Federal Employee Retirement and Disability
Unemployment Compensation
Housing Assistance
Food and Nutrition Assistance
Other Income Security
900 Net Interest $212 billion
Interest on the Public Debt
Interest Received by On Budget Trust Funds
Interest Received by Off Budget Trust Funds
Other Interest
570 Medicare $147 billion
550 Health $116 billion
Health Care Services
Health Research and Training
Consumer and Occupational Health Safety
500 Education, Training,
Employment, and
Social Services $57 billion
Elementary, Secondary and Vocational Education
Higher Education
Research and General Education Aids
Training and Employment
Other Labor Services
Social Services
400 Transportation $42 billion
Ground Transportation
Air Transportation
Water Transportation
Other Transportation
700 Veterans Benefit and Services $37 billion
Income Security for Veterans
Veterans Education, Training and Rehabilitation
370 Commerce and Housing Credit $23 billion
Mortgage Credit
Postal Service
Deposit Insurance
Other Advancement of Commerce
300 Natural Resources and Environment $20 billion
Water Resources
Conservation and Land Management
Recreational Resources
Pollution Control and Abatement
Other Natural Resources
150 International Affairs $20 billion
International Development and Humanitarian Assistance
International Security Assistance
Conduct of Foreign Affairs
Foreign Information and Exchange Activities
International Financial Programs
250 General Science, Space and Technology $18 billion
General Science and Basic Research
Space Flight, Research and Supporting Activities
350 Agriculture $17 billion
Farm Income Stabilization
Agricultural Research and Services
750 Administration of Justice $16 billion
Federal Law Enforcement Activities
Federal Litigative and Judicial Activities
Federal Correctional Activities
Criminal Justice Assistance
800 General Government $14 billion
Legislative Functions
Executive Direction and Management
Central Fiscal Operations
General Property and Records Management
Central Personnel Management
General Purpose Fiscal Assistance
450 Community and Regional Development $9 billion
Community Development
Area and Regional Development
Disaster Relief and Insurance
270 Energy $4 billion
Energy Supply
Energy Conservation
Emergency Energy Preparedness
Energy Information, Policy and Regulation
***************
Appendix E:
***************
Accompanying Reports of the National Performance Review
Governmental Systems Abbr.
Changing Internal Culture
Creating Quality Leadership and Management QUAL
Streamlining Management Control SMC
Transforming Organizational Structures ORG
Improving Customer Service ICS
Reinventing Processes and Systems
MissionDriven, ResultsOriented Budgeting BGT
Improving Financial Management FM
Reinventing Human Resource Management HRM
Reinventing Federal Procurement PROC
Reinventing Support Services SUP
Reengineering Through Information Technology IT
Rethinking Program Design DES
Restructuring the Federal Role
Strengthening the Partnership in Intergovernmental Service
Delivery FSL
Reinventing Environmental Management ENV
Improving Regulatory Systems REG
Agency for International Development AID
Department of Agriculture USDA
Department of Commerce DOC
Department of Defense DOD
Department of Education ED
Department of Energy DOE
Environmental Protection Agency EPA
Executive Office of the President EOP
Federal Emergency Management Agency FEMA
General Services Administration GSA
Department of Health and Human Services HHS
Department of Housing and Urban Development HUD
Intelligence Community INTEL
Department of the Interior DOI
Department of Justice DOJ
Department of Labor DOL
National Aeronautics and Space Administration NASA
National Science Foundation/Office of Science and Technology
Policy NSF
Office of Personnel Management OPM
Small Business Administration SBA
Department of State/ U.S. Information Agency DOS
Department of Transportation DOT
Department of the Treasury/ Resolution Trust Corporation TRE
Department of Veterans Affairs DVA