[Analytical Perspectives]
[Budget and Performance Integration]
[1. Budget and Performance Integration]
[From the U.S. Government Printing Office, www.gpo.gov]



[[Page 1]]



  ======================================================================

                   BUDGET AND PERFORMANCE INTEGRATION

========================================================================

[[Page 2]]



ANALYTICAL PERSPECTIVES
1. BUDGET AND PERFORMANCE INTEGRATION


[[Page 3]]

 
                  1. BUDGET AND PERFORMANCE INTEGRATION

  A year and a half ago, the Administration began an effort to improve 
budgeting and management to achieve better results--and to do so 
consistently. It was called the President's Management Agenda. One of 
the major problems identified was lack of budget and performance 
integration (see box). For seven years, agencies had developed Strategic 
Plans and Annual Plans under the Government Performance and Results Act 
(GPRA). But these plans were not integrated into the budget, and the 
budget drives policy making, allocates resources, and provides 
incentives to program managers. The budget showed dollars requested, but 
not the cost of producing an output or achieving a goal. As a result, 
the plans were not linked to reality and driven by the cycle of budget 
preparation and execution. Also as a result, budget dollars could not be 
allocated systematically to achieve the best outcomes per dollar spent.
------------------------------------------------------------------------

        At the Start: Budget and Performance Were Not Integrated



                    Past and planned results were not shown with
                             budget requests, let alone linked in a cost-
                             and-results relationship.

                    Program managers responsible for achieving
                             results often did not control the resources
                             they use or have flexibility to use them
                             efficiently.

                    Performance and cost data were recorded in
                             separate systems and not integrated to
                             provide timely, analytical feedback to
                             decision-makers and managers.

                    Americans could not readily assess program
                             results, and could not compare performance
                             and cost across programs.


------------------------------------------------------------------------
  The Administration is using complementary approaches to strengthen the 
link between budget dollars and results achieved.

  Using Performance Information to Make Budget Decisions. One of these 
approaches focuses on the use of performance information to make budget 
decisions. Starting with the Budget for 2003, the Administration 
collected and used all of the performance information available in 
making budget decisions; this increased demand for performance 
information. For this Budget, the Administration created a new Program 
Assessment Rating Tool (PART), which was applied to individual programs 
comprising about 20 percent of agency budgets. The PART questionnaire 
asked about the program's purpose, performance measures, alignment with 
budget, and results, as well as its planning and management practices. 
The PART summarizes but does not create information. To the extent that 
it is influential in making budget decisions, however, it creates demand 
from policy makers, program managers, and program advocates for the kind 
of information used to make the rating. The Administration plans to 
improve the PART this year and apply it to more programs.
  Linking Performance and Cost in a Performance Budget. The other 
approach will create a framework of information and incentives covering 
all programs in the agency and across government. Agencies have been 
asked for a revised strategic plan (draft due in March 2003) that would 
be a template for their 2005 budget. This places the plan in a realistic 
context, requiring the agencies to focus their goals and set priorities. 
The plan is to analyze how all of the programs that influence each goal 
exert their influence--and how well they do it. Performance measures 
must include the outcomes desired (measuring progress in carrying out 
the program's purpose) and outputs produced (the tools used). To the 
extent possible, the full annual budgetary cost of resources to produce 
these outputs are to be requested in separately identified lines in the 
budget along with measures of what is produced--ready for monitoring and 
analysis of the effect of resources on performance. (This link between 
cost and production is routine in business, but rare in government.) 
Performance results, cost, and evaluations would provide feedback for a 
cycle of using linked performance and cost data year-round to improve 
budgeting and management.

[[Page 4]]

                       An Assessement of Progress

  This is an ambitious list. Yet precisely these objectives are behind 
the Standards for Success by which the Budget and Performance 
Integration Initiative is rated on the President's Management Agenda 
scorecard. In the summer of 2001, the standards were created, reviewed 
by outside experts, and approved by the President's Management Council--
the Chief Operating Officers of the major agencies. The ``Scorecard 
Standards for Success'' are reprinted at the end of the chapter 
``Progress on the President's Management Agenda'' in the new Performance 
and Management Assessments volume of this Budget.
  The Budget and Performance Integration Initiative is one of the most 
challenging of the items on the President's Management Agenda. While no 
green status scores have been achieved yet, gains in a half-dozen 
departments and independent agencies testify to fundamental improvement 
in their ability to relate resource requests to results produced. Nine 
agencies out of 24 have reached yellow status for this Initiative, and 
several others have made notable strides toward linking budget dollars 
with improvements for citizens.
  OMB Director Daniels testified in September 2002, ``I see this as a 
common sense idea upon which people of different philosophies should 
agree. For those who think that government does too much, costs too 
much, and is too big, basing funding on results makes sense. But those 
who believe government should be more active, should have greater 
influence on people's lives, also should want resources invested in 
programs that produce results.''
  The remainder of this chapter has three sections. The first section 
describes the approach of increasing the use of performance measures to 
make budgetary and management decisions. The second describes the 
substantial progress made in the past year in building an information 
and incentive framework to support continuing improvement in results. 
The third describes the ways in which the other four Management Agenda 
initiatives interrelate with the Integration Initiative.
  Budgeting and Managing for Results. Eager to make government work 
better, last year the Administration used all of the performance 
information it could gather in making decisions for the 2003 Budget. It 
also began a transition to place the burden of proof on agencies and 
advocates to supply evidence of program effectiveness instead of 
assuming effectiveness in the absence of evidence to the contrary.
  For the 2004 budget, emphasis broadened to creating better ratings of 
program effectiveness and using them to make budget, policy, and 
management decisions. To make ratings more systematic, OMB developed a 
Program Assessment Rating Tool (PART), a diagnostic questionnaire that 
was used to rate programs that comprised about 20 percent of each 
agency's total budget. Common performance measures were developed in 
several program areas and used for cross-cutting comparisons. The first 
section of this chapter analyzes this effort to use ratings to budget 
and manage for results.
  Foundation for Results. To create a foundation for continual 
improvement in government effectiveness, agencies increased 
collaboration among planning, budget, financial, and program staff. Some 
agencies began to give program managers control over resources, while 
making them accountable for achieving results. Agencies are revising 
Strategic Plans to be delivered to OMB in March. They are refining 
goals, improving outcome measures, and relating programs to outcomes.
  These forthcoming plans, according to OMB guidance, are to be 
considered the template for an integrated ``performance budget'' for 
2005. The annual performance plan and the budget justification will 
become an integrated document organized by strategic plan goals. For 
each goal, the plan analyzes the relationships from goal to outcomes to 
programmatic effects on outcomes to resource requests.
  Half of the agencies took steps toward creating an integrated 
performance budget this year--ahead of schedule--showing programs in 
relation to the strategic goals they are intended to achieve. These 
early performance budget justifications reveal efforts to link full cost 
to program activities, and to explain how program activities work 
together to achieve the agency's goals.
  To encourage efficient use of resources, the budget needs a uniform 
measure of the full annual cost of the resources used that will be 
charged to each program and activity. As it has before, the 
Administration will propose to reflect program costs more accurately by 
moving toward charging program costs to the appropriate programs, 
including the accruing costs of retirement and retiree health care 
benefits. The Administration has also developed proposals to charge for 
support services, capital assets, and hazardous substance cleanup where 
these resources are used. These proposals do not change total budget 
outlays, budget concepts, or public-private cost comparisons. However, 
they would provide a better assessment of program costs.
  A Complementary Management Agenda. Budget and Performance Integration 
is one of five interrelated initiatives in The President's Management 
Agenda. The others are Strategic Management of Human Capital, 
Competitive Sourcing, Expanded Electronic Government, and Improved 
Financial Performance. They are all interrelated .They all give program 
managers the ability to deliver services more effectively. The third 
section of this chapter shows some of their progress toward making 
federal programs more effective.

[[Page 5]]

                   BUDGETING AND MANAGING FOR RESULTS

  Testifying before Congress in May 2001, the Director of OMB signaled 
his intention to focus on performance. ``Our main focus. . . .will be 
working toward full integration of budget and performance information, 
and using performance data to help make program and budget decisions.''
  Budgeting for Results, 2003. OMB staff and agencies followed up, 
collecting evidence on which programs were improving desired outcomes. 
Budget decisions were influenced by performance information. For each 
agency, the Budget included a table listing selected programs with an 
assessment of the program's effectiveness and a brief explanation of the 
assessment.
  The results of this performance-oriented process of policy development 
and budget allocation were analyzed a year ago in Chapter 1 of 
Analytical Perspectives. Five analytical categories were discussed. 
First were programs that had been identified in the review process as 
effective--yielding real benefits for Americans. Many of them received 
increased funding, including the Special Supplemental Nutrition Program 
for Women, Infants, and Children (WIC); the Bureau of Economic Analysis, 
which produces gross domestic product (GDP) statistics; Health Centers; 
drug treatment; the Job Corps; and the National Science Foundation.
  In the second category, the review process compared programs for 
similar purposes and identified some as comparatively more effective. 
Funding was shifted toward these programs. In the third category, 
performance measures were used to set targets for better results, with 
or without more funding. A fourth use of performance measures was to 
provide incentives to states and other recipients who achieved the most 
with federal grants, or to charge costs so management decisions would 
balance cost against results. And fifth, performance measures were used 
to drive improvements in efficiency in programs and support services.
  Like the scorecard system, the immediate use of existing performance 
measures to make budget decisions was a motivational success. Agencies 
saw that having good performance measures and being able to demonstrate 
effectiveness, or at least improvement, in performance was going to make 
a real difference in their budgets. Performance became a factor to 
address in agency budget development.
  Budgeting with the PART, 2004. Shortly after the 2003 Budget was 
published, OMB set out to strengthen the process for assessing the 
effectiveness of programs by making it more rigorous, systematic, and 
transparent. OMB staff developed a questionnaire, the PART, designed to 
provide a consistent tool for rating programs. Questions are designed to 
be answered ``yes'' or ``no'', and require a brief narrative, including 
evidence to support the answer. In scoring, half of the grade depends on 
program results.
  The story of the development and application of the PART can be found 
in ``A Tool to Evaluate Federal Programs,'' in the new Performance and 
Management Assessments volume of this Budget. It includes a one-page 
summary of the PART for each rated program, scorecards showing the 
status and progress of each of the five Management Agenda Initiatives 
for each agency, and a chapter ``Progress on the President's Management 
Agenda.'' Upon publication of the 2004 Budget, all of the completed 
PARTs will be posted on the OMB website, www.OMB.gov.
  The PART was not designed to obviate the need for the many other 
judgments that must go into budget decision making, such as setting 
priorities. While a high PART score, good performance measures, and 
documented influence on outcomes give programs an advantage in budget 
decisions, as shown by the examples below, they are demonstrably not the 
only factors considered.
  The PART was applied to 234 programs of different types, sizes, and 
expected levels of effectiveness. Of the programs rated, 6 percent were 
found effective; 24 percent moderately effective; 15 percent adequate; 
and 5 percent ineffective. The remaining 50 percent of programs were 
given a new rating, developed in December after discussion with the 
President's Management Council, called ``results not demonstrated.'' 
This rating was applied to programs for which adequate long-term and 
short-term performance measures have not been established, or where 
there is no data to indicate how the program is performing under the 
measures that have been established. It was applied regardless of the 
program's numerical score.

[[Page 6]]

------------------------------------------------------------------------

                                 Availability and Use of Performance Information



``. . . .there are important questions to be asked regarding the availability and use of
 performance information at each stage of the traditional budget process--i.e., budget
 preparation, budget approval, budget implementation or execution, as well as audit and
 evaluation. . . .a limited scope of inquiry risks missing important opportunities for
 applying and capturing the benefits from performance-informed budgeting.''
                    Performance Information and Budgeting
                    In Historical and Comparative Perspective
                    Rita M. Hilton and Philip G. Joyce


------------------------------------------------------------------------
  Effective Programs. In the 2004 Budget, the PART-rated programs in the 
topmost ``effective'' category all received budget increases, or were 
held level.
     As they were last year, the Bureau of Economic Analysis 
          (the producer of GDP statistics), and the Health Centers were 
          in this top category. Their budget increases were significant. 
          Health Centers, moreover, had low cost per patient and the 
          next to highest number of patient visits per worker in the 
          common measures assessment. Two programs rated effective last 
          year, the WIC nutrition program for women, infants, and 
          children, and the Job Corps, were not included in the PART 
          evaluation this year. Both got funding increases.
     Newly rated effective programs that got budget increases 
          above 6 percent included the Energy Conservation Improvement 
          program in the Department of Defense (funding was doubled), 
          the International Nuclear Materials Protection and Cooperation 
          program in the Department of Energy, the National Weather 
          Service in the Department of Commerce, and NASA's Mars 
          Exploration program.
     Other programs deemed effective included coin production at 
          the United States Mint, bank regulation by the Office of the 
          Comptroller of the Currency, thrift regulation by the Office 
          of Thrift Supervision, the Advanced Simulation and Computing 
          program in the Department of Energy, basic research in the 
          Department of Defense and the Medicare Integrity program at 
          the Department of Health and Human Services.
    There were 56 programs in the moderately effective category. 
          Budget outcomes were more varied, but on balance were 
          favorable. Three out of five got increased funding; about one 
          in five, a reduction.
  Ineffective and Results-Not-Demonstrated Programs. The PART 
assessments were often particularly valuable when programs were deemed 
ineffective or simply without demonstrable results. Some of these 
programs have been funded for many years without regard to whether they 
achieved program goals. PART reviews have led to reform proposals in the 
Departments of Education and Labor.
     The PART rated the Vocational Education State Grant program 
          ineffective. In high schools, national evaluations and annual 
          performance data show that vocational education has little or 
          no benefit for student academic performance, job skills, or 
          postsecondary degrees. In community colleges, there is no 
          accountability for how the funds are used and no meaningful 
          connection to student outcomes. The reform proposal in this 
          Budget will give States and school districts the flexibility 
          to design high quality programs, provided they meet strict 
          accountability standards for student performance. They may 
          also use this funding for Elementary and Secondary Education 
          Title I programs. Postsecondary school funding will be 
          distributed competitively to community and technical colleges 
          and will be based on a rigorous assessment that student 
          outcomes are being achieved.
    Overlapping programs at the Department of Labor would be 
          similarly reformed: the Workforce Investment Act adult 
          program, the dislocated worker program, and the Employment 
          Service state grants would be folded into a single block grant 
          that would allow the States and the Secretary to target 
          resources where most needed. Underexpended resources will be 
          shifted to where they will do more good. Overlap with 
          Department of Education programs will be minimized by using 
          the Department of Labor's youth formula resources for out-of-
          school youth and non-school programs.
  Use to Improve Management. The PART improved program management this 
year. As OMB and agencies began answering questions together, different 
views about the program's purpose sometimes emerged; these were 
sometimes clarified in the ensuing discussion or even reconciled. There 
were discussions about program planning, analyzing how the program could 
best influence its desired outcome, and what initiatives might be taken 
to remove obstacles. Ideas for improving management were considered. 
Indeed, some agencies and programs applied the PART themselves for this 
purpose.
  In a wider context, many of the PART summaries--for effective as well 
as ineffective programs--included recommendations for program 
improvement. These recommendations, accessible on OMB's website, will 
encourage program improvements throughout the agencies next year.

[[Page 7]]

  Expanding Use of These Tools. The Administration plans to improve 
these tools and expand their use. Given the fact that use of the PARTs 
for budget decisions creates a demand for information to respond to 
these questions--and given the parallels between these questions and the 
GPRA planning and budget integration tasks described in the next 
section--there may be useful additional information to be gained if some 
of the PART questions addressed these tasks more precisely.
     Given the high proportion of programs without good 
          performance measures, it is vital to communicate the 
          importance of including outcome measures in the Strategic Plan 
          that show how the program is making a difference for 
          Americans. Since programs influence outcomes, but do not 
          control them, and often influence them only after a lag, it is 
          also important to measure intermediate outcomes or 
          characteristics of outputs that monitor the route by which the 
          program affects the desired outcome. And finally, in order to 
          match resources with the tools that programs use to influence 
          these outcomes, it is important to include output measures. As 
          shown in Chart 1.1, outputs and outcomes are complements, not 
          alternatives; outputs are needed in the equation to relate 
          resources to outcomes.
     One PART question asks: ``Is the program budget aligned 
          with the program goals in such a way that the impact of 
          funding, policy, or legislative changes on performance is 
          readily known.'' That question can be read in different ways, 
          and could usefully be subdivided so that one question can 
          specifically relate to the database changes the agencies need 
          to link cost and performance.

                                     


                         FOUNDATION FOR RESULTS

  It is a major undertaking to institutionalize a reform as profound as 
infusing a performance orientation into federal budgeting and 
management.
  Integration starts with increasing collaboration among planning, 
budget, financial, and program staffs. Program managers must be given 
authority--program management authority, budget authority for full cost, 
and staff supervision--and then held accountable for results. The 
agency's Strategic Plan should capture the overarching purposes of the 
agency in a limited number of strategic goals. It should have outcomes 
that measure progress toward the goals and should explain how each 
program contributes toward the desired outcomes. Activities that 
contribute to the same outcome should coordinate and monitor progress. 
The agency should develop a ``performance budget,'' organized like its 
Stra

[[Page 8]]

tegic Plan, that matches resources with outputs and justifies resources 
requested by their effectiveness at influencing the desired outcomes. In 
the past year, most agencies have made progress in implementing some of 
these changes, and each of them has been implemented by some agencies.
  Collaboration. Breaking down the ``stovepipes'' that separate 
planning, budgeting, financial management, and evaluation is essential 
to integration. A plan is only realistic if it drives a budget request; 
a budget request is not meaningful unless justified by a plan. Budgets 
are more meaningful when they tell the cost of producing an output or 
achieving a performance goal. Budgeting and accounting form a continuum, 
with the budget reporting proposals and the accounting reporting what 
happened. Moreover, the next year's plan and budget should build on the 
past record of cost and performance.
  Wherever progress is reported in this section of the chapter, its 
foundation is greater collaboration among such staff units, and between 
them and the operating programs.
     For example, in the Department of Justice, planning, 
          budget, and financial management teams at all departmental 
          levels worked together. They identified major program 
          activities (``decision units''), and requested budget 
          authority to reflect the full cost of outputs produced by each 
          of the decision units.
     The Department of State, which is just beginning to use its 
          new Strategic Plan to manage for results, has merged its 
          budget staff and planning staff into an office called Resource 
          Management to link budget and performance on a daily basis.
     And the Department of Transportation, where the budget 
          submission was formatted as a performance budget, pulled it 
          all together with help from the planning and budget staffs 
          under the leadership of the Chief Financial Officer.
  Strengthening Programs. A program manager who is authorized to manage 
the program, controls budget authority that covers the full cost of 
resources used, and has authority over program staff can focus his 
attention on getting results. With this combination of authority and 
some flexibility, a program manager has the tools necessary to be 
accountable for results, efficiently producing effective outputs.
  The other four Management Agenda initiatives all help to strengthen 
programs. Aligning staff with programs, and giving managers more 
flexibility to hire staff and reward good work, are key goals of the 
Strategic Management of Human Capital Initiative. Giving program 
managers flexibility in buying support goods and services is a key goal 
of the Competitive Sourcing Initiative. Increasing program effectiveness 
by electronic delivery of services is a goal of the Electronic 
Government Initiative. Providing programs with timely financial 
information and more accurate financial management are key goals of the 
initiative to Improve Financial Performance. Together, these changes 
focus programs on good management, make them increasingly effective, and 
attract civil servants to opportunities to do worthwhile work under 
conditions that permit doing it well.
  What the integration initiative contributes to this process may seem 
technical, but it is actually just common sense budgeting. It seeks to 
align budget accounts with programs, and to align sub-accounts with an 
output or cluster of related outputs. In each of these accounts or sub-
accounts, budget authority would be requested to cover the full cost of 
the resources used. This would link budgetary cost with outputs, which 
is the first step in routine comparison of costs and benefits.
    The Department of Veterans Affairs (VA) has completely 
          restructured its budget so that accounts are aligned with 
          their programs. The 2004 budget justification shows how the 
          old account structure transforms into the new; it also shows 
          how each account in the new structure contributes to the 
          Department's strategic goals and objectives. VA consulted with 
          its Congressional Committees on these changes and has included 
          the changes in the 2004 budget database. The new structure, VA 
          believes, will improve delivery of services to veterans.
     The Department of Justice worked at a finer level of 
          detail. Within each account, they aligned ``obligations by 
          program activity,'' in effect, sub-accounts, with one or more 
          related outputs. They show the outputs, the full cost of 
          producing them, and the outcomes they are designed to 
          influence. These changes also are in the 2004 budget database. 
          Chart 1-2 provides an example of the new account and program 
          activity structure in the United States Marshals Service.

                                     

[[Page 9]]





     The National Aeronautics and Space Administration (NASA) 
          modified its account and program activity structure to show 
          the full cost of its programs. NASA's budget development was a 
          paper-less electronic process, and it is carried down to the 
          project level at which NASA will manage.
  Harnessing Programs to Strategic Goals. For the past seven years, GPRA 
has required agencies to produce a Strategic Plan every three years, 
explaining the agency's mission and its strategic goals, and discussing 
how these goals will be achieved over the long term. Plans are generally 
grounded in the major laws that the agency implements. In crafting a 
plan, the agency is required to consult with the Congress, with other 
agencies, and OMB, and to conduct outreach to the public. The plans 
should be analytical--explaining how agency programs will help reach 
their goals, and what external factors may affect success.
  Draft revised Strategic Plans are due to OMB in March 2003, and most 
agencies are far along in preparing their revisions. OMB Circular A-11 
instructions for preparation are unchanged, but for one significant 
addition: these plans are intended to provide the template for a fully 
integrated performance budget for 2005. Instead of separate instructions 
for a performance plan and a budget justification, the instructions will 
require an integrated performance budget.
  This change brings a dose of reality to strategic plans. Do the 
agency's programs really achieve their goals? Are they designed and 
coordinated for that purpose? Is there a place for everything, and if 
not, what should be done about it? Is it possible, in sum, to present 
each goal, the outcomes that assess progress toward the goal outcome, 
and what the agency does to influence each outcome? As agencies acquire 
an overview of themselves, they are increasingly focusing their goals, 
improving their strategies for achieving goals, and shifting the balance 
and coordination of their program portfolio to get better results. This 
transformation is particularly impressive in agencies that are large, 
diverse, and decentralized.
     The Department of Health and Human Services is developing a 
          ``One HHS'' plan with goals which stretch across the 
          Department and are designed to improve public health for 
          everyone. Its goals include promoting healthy behavior and 
          other preventive steps, strengthening the public health system 
          to respond to bioterrorism, enhancing the capacity and 
          productivity of health research, improving the quality of 
          health care services, and increasing access. Considerable 
          thought has gone into selecting these goals, the strategies to 
          achieve them, and the right combination of program activities 
          to get the most public benefit for the cost.
     The Department of the Interior is also crafting a Strategic 
          Plan to integrate its decentralized activities. The four major 
          sectors of its plan are resource protection, resource use, 
          recreation, and

[[Page 10]]

          serving communities. This framework is useful in searching for 
          the right balance among these categories, and also in 
          comparisons to identify the most cost effective way of 
          achieving goals within each. Programs in many bureaus are 
          participating in achieving Departmental goals.
     Sorting through programs to determine the best strategy is 
          no easy job. The Department of Housing and Urban Development 
          (HUD) has already done a good job of figuring out what 
          combination of services and housing is needed to prevent and 
          reduce chronic homelessness. HUD has just begun to think about 
          extending the same strategic approach to some other major 
          policy goals.
  Using Performance to Manage. In agencies where developing good 
performance measures is particularly difficult, the Departments of 
Defense and State have developed Strategic Plans, chosen performance 
measures, and are beginning to use them to coordinate and monitor 
progress.
     The Department of Defense (DoD) has crafted a balanced 
          scorecard to assess four risks and identify the right balance 
          in responding to them in order to minimize overall risk. The 
          risks are: force management risk, operational risk, future 
          challenges risk, and institutional risk. In each area, five to 
          eight measures have been chosen which will be calculated and 
          monitored by each DoD component, and reported to the Secretary 
          at least quarterly. They are collectively called ``the 
          Secretary's instrument panel,'' which acknowledges that he is 
          using them to steer. But primary responsibility for 
          performance tracking, linkage of plans, outputs, and 
          resources, and scorecards have been ``cascaded'' down to all 
          DoD components. Specific performance metrics are also being 
          reported by the military services and defense agencies. The 
          Secretary's greatly revised Annual Defense Report and 
          Congressional Justifications are incorporating all of these 
          metrics and linkages.
     The Department of State and USAID are merging their 2003 
          Strategic Plans into one consolidated document that will link 
          all foreign operation and international affairs programs. The 
          new Strategic Plan framework has four high-level strategic 
          objectives and a reduction from 20 to 12 strategic goals for 
          better focus and clarity. Each of the Department's missions 
          around the globe, and each regional or functional office in 
          the Department, was asked to select five priority performance 
          goals and describe specific outcomes they would achieve in 
          support of each. Coordinating these outcomes with other 
          program managers working toward the same goal throughout the 
          Department, at overseas missions, and at the interagency level 
          creates a virtual team and an implicit strategy for moving 
          toward that goal. The restructuring of the Department's 2004 
          Performance Plan better conveys the linkages among policy 
          priorities, budget decisions, and program outcomes. Efforts 
          are also underway to automate the Mission and Bureau 
          Performance Plan processes to streamline performance 
          information with direct linkage to resources.
  Creating a Performance Budget. Perhaps the best way to sum up the 
accomplishments of the past year is to look at the first attempts to 
create an integrated performance budget. The art of creating an 
integrated performance budget is not yet fully developed or uniformly 
applied. But the structure of a performance budget--explaining goals, 
how they will be achieved, and what resources are required--encourages 
an analytical justification which answers key questions in an organized 
format.
     The Department of Labor started from a good Strategic Plan 
          with many useful performance measures, created collaborative 
          teams, and plunged into the task of creating a performance 
          budget for the whole department. It was based on a uniform 
          format, and included tables showing full cost and how much was 
          funded by accounts other than the main program account.
     The Department of Transportation (DOT) also started from a 
          good Strategic Plan, and decided early to capitalize on that 
          plan by presenting an integrated performance budget. Tables 
          were structured by strategic goal, performance goal, and 
          account. The highway safety goal, for example, commits to 
          reducing highway fatality rates from 1.7 per hundred million 
          vehicle miles in 1996 to 1.0 million by 2008. It analyzes the 
          causes of fatalities and explains precisely what contributions 
          it plans from 16 programs to help reduce them. One-third of 
          all fatalities result from vehicles leaving the road and 
          hitting something or overturning. Solutions range from road 
          engineering to rumble strips and reflective markers. Heavy 
          trucks are a disproportionate cause of fatalities; in 
          response, road inspections will be increased and commercial 
          driver education improved. The entire section on highway 
          safety leaves the reader with a solid sense that DoT has a 
          thoughtful plan for reducing fatalities. Chart 1-3 was 
          included in DoT's thorough analysis of the causes of traffic 
          fatalities.

                                     

[[Page 11]]





  An Integrated Database. OMB has begun a multi-year effort 
systematically to collect and publish integrated budget and performance 
information. When the project is complete, information will be routinely 
available to Congress and the public on how much agencies are spending 
on outputs and other performance goals.
  As agencies improve budget alignment and request resources where they 
are used, OMB, Treasury and the agencies may find new ways to simplify 
the collection of data linking performance with cost. This would move 
the government toward an integrated 21st century information system. 
This collaboration includes finding an Architecture--a blueprint for 
developing a strategic information database--that is effective in 
advancing Budget and Performance Integration and all of the other 
Management Agenda initiatives.

[[Page 12]]

------------------------------------------------------------------------

                                       Charging Full Annual Budgetary Cost



                         To make good budgetary choices, decision makers require not
                          only measures of benefits, but a matching, uniform measure of
                          full annual budgetary cost. In preparing their 2004 budgets,
                          several agencies moved in that direction.

                            NASA has traced all of its costs to the program
                          activities for which they are used, even allocating overhead.
                          For each program activity, they propose to request budget
                          authority for all associated costs. The Department of Justice
                          has done that too, and the Department of Veterans Affairs has
                          done it at the more aggregated program level while tracking
                          appropriations within the program total. These agencies are
                          giving programs flexibility to get the best inputs and
                          incentives to achieve results. They are also providing better
                          information to decision makers.

                            The Department of Labor, the Small Business
                          Administration, and other agencies have calculated the costs
                          that would be associated with their activities and show them
                          in text tables in their budget justification. Labor shows how
                          much is financed in the program's account and how much is
                          financed elsewhere. These agencies are providing decision
                          makers with better information.

                         The first set of agencies has voluntarily agreed to charge
                          salaries and expenses, the full cost of support goods and
                          services, and an allocation for overhead to programs, and the
                          second set of agencies to show those costs. But in neither
                          case will the agency charge or show costs that are not
                          charged to the agency. Legislation is needed for that
                          purpose.

                         In October 2001, the Administration transmitted to the
                          Congress legislation to charge the employer's share of the
                          full accruing cost of retirement benefits to federal
                          employers as they are earned. ``Budgeting and Managing for
                          Results: Full Funding of Retiree Costs Act of 2001'' would
                          charge to salary and expense accounts in all federal agencies
                          the employer's share of the accruing cost of pensions,
                          retired pay, and retiree health care. Existing liabilities of
                          the retirement funds for these benefits would be amortized by
                          mandatory payments from the general fund, and the benefit
                          payments would continue to be mandatory.

                         Agencies have made full accrual payments to the Federal
                          Employee Retirement System (FERS) and the Military Retirement
                          System (MRS) since the mid-1980s. The Civil Service
                          Retirement System and associated Foreign Service and Central
                          Intelligence Agency systems, which are for employees hired
                          earlier, are only partly funded. At the time the legislation
                          was transmitted, Congress had recently enacted a law to shift
                          health care for Medicare-eligible military retirees to an
                          accrual basis. Retired pay for the three small uniformed
                          services (the Coast Guard, Public Health Service, and
                          National Oceanic and Atmospheric Administration Commissioned
                          Officers), and retiree health care for civilians and for
                          military retirees who are not Medicare-eligible, is not
                          accrued at all.

                         The Administration will work with the Congress to enact
                          legislation that charges federal employers their full share
                          of the accruing cost of all retiree benefits as those
                          benefits are earned, and to amortize the unfunded liabilities
                          of the retirement funds by payments from the general fund.
                          The legislation would not change total budget outlays or the
                          deficit; the benefits are already required by law. The
                          amounts involved are shown as memorandum items in the Budget
                          Appendix.

                         The General Accounting Office (GAO) supported these concepts
                          in a report on Accrual Budgeting: Experiences of Other
                          Nations and Implications for the United States (February,
                          2000). The Congressional Budget Office (CBO) reviewed them in
                          The President's Proposal to Accrue Retirement Costs for
                          Federal Employees (June, 2002). The Comptroller General,
                          Association of Government Accountants, and the American
                          Institute of Certified Public Accountants supported the
                          proposal.


------------------------------------------------------------------------

[[Page 13]]


------------------------------------------------------------------------

                                 Charging Full Annual Budgetary Cost--Continued



                         Charging appropriately for retiree benefits would go a long
                          way to permitting agencies to charge programs uniformly for
                          the full annual budgetary cost of the resources they use.
                          Legislation to cover two other types of cost would be needed
                          to complete the job.

                            Some agencies, notably the Departments of Energy
                          and Defense, acquire assets that generate hazardous
                          substances which the agency is required by law to clean up at
                          the end of the asset's operating life. Currently, these costs
                          are paid long after the asset is acquired and after its
                          period of use as well. Good budgeting requires that the
                          estimated cost be considered when the asset is acquired and
                          when it is used.

                            From the standpoint of showing the cost of usage,
                          capital assets are also problematic. From a program's
                          perspective, the cost may be: 1) zero if they are financed
                          centrally, 2) the program's share of the acquisition cost if
                          it is allocated among programs, 3) the rental value if office
                          space is rented from GSA, or 4) a substantial bite out of
                          their budget for an occasional capital acquisition. One way
                          to show a uniform annual cost for the use of capital without
                          changing the Constitutional requirement to get an
                          appropriation up front would be to create agency Capital
                          Acquisition Funds (CAF). Following good budget practice, the
                          CAF would request budget authority (BA) up front to acquire
                          assets, and outlays would be recorded in the budget when
                          payment was made. The BA would be in the form of authority to
                          borrow from Treasury. The CAF would then borrow for the
                          period of the asset's useful life, charge programs each year
                          in proportion to asset use, and make the mortgage payments to
                          Treasury.

                         Discussions along these lines have been held with GAO, CBO,
                          and others with encouraging interest. Draft legislation has
                          been developed, discussed with agencies, and improved. As
                          agencies make progress in developing performance budgets and
                          improving the alignment of budget accounts and sub-accounts
                          with program outputs, the advantage of having a fully uniform
                          budgetary measure of the annual cost of running programs and
                          producing outputs becomes greater. Such a measure would
                          permit continual comparison of cost with benefits among
                          similar programs and over time. These changes, like the ones
                          for retiree costs, can be made without changing the basic
                          budget concepts of BA, obligations, and outlays or the
                          deficit or surplus of the budget as a whole.


------------------------------------------------------------------------
    

                    A COMPLEMENTARY MANAGEMENT AGENDA

  Each of the other Management Agenda initiatives makes programs more 
efficient and effective. Each encourages more cross-cutting 
collaboration to coordinate programs so that they influence outcomes 
effectively. Collectively, all the initiatives highlight the importance 
of top management policy development and oversight. This final section 
of the chapter discusses the complementarities of these initiatives with 
Budget and Performance Integration. It also notes particular examples of 
progress agencies have made in the past year.
  Chart 1-4 provides a perspective on the relationships of the other 
Initiatives and the Integration Initiative. Budgetary and human 
resources would be aligned with programs and reported by financial 
management; all elements focus on getting and rewarding results.

                                     

[[Page 14]]





                  Strategic Management of Human Capital

  A large proportion of the federal workforce will become eligible to 
retire by 2005--40 percent of all workers, and 71 percent of senior 
executives. A key factor in attracting new entrants into federal service 
is shaping their jobs so that they carry out clear and worthwhile 
missions--and do so under conditions which give them a chance to be 
effective. Surveys show that many young people are avoiding federal 
service because they believe they are more likely to be able to ``make a 
difference'' in the non-profit or private sectors.
  For agencies to meet policy goals and objectives, both human and 
budgetary resources need to be aligned with programs and activities that 
produce results. Managers should be given the authority they need to get 
the job done, including more flexibility to hire and manage personnel. 
Reducing layers of review and program overlap is equally important to 
improve performance and results. Both the Integration and Human Capital 
Initiatives support linking rewards to individual and group success in 
reaching performance goals. Changes like these raise the prospect that 
civil servants will feel they can be effective.
  Progress So Far. Perhaps the greatest change the Human Capital 
Initiative has made so far is to develop in agencies the understanding 
that human capital management is a tool to propel mission 
accomplishment. People are assets for the organization; they become more 
valuable with investment in their special skills and knowledge. At the 
same time, organizations need to think strategically about the abilities 
they will need to meet future challenges. The Office of Personnel 
Management (OPM) has been helping agencies to elevate the level of 
analysis that supports this approach. Agencies have collected data to 
assess what skills will be needed in future years, analyze what the gaps 
are, identify where leadership succession needs urgent attention, and 
set priorities for training and development programs.
  Few agencies have moved into the implementation stage of better 
managing their human capital, which explains why most are still red in 
status. But this year, they will begin implementing their new human 
capital plans. To help, OPM is restructuring itself to be more 
responsive to agency needs, and is working closely with OMB and 
Executive Branch agencies. It offers policy guidance and links to 
exemplary products on its website.
  The Administration is continually evaluating each agency's progress 
and the hiring, classification, pay, performance management, and other 
human capital tools that are available to help agencies become as 
productive as possible. Several personnel reforms, including authorities 
to streamline and speed up the hiring process, were enacted as part of 
the Homeland Security Act of 2002.
  Rewarding top performers and those with critical skills is preferable 
to the traditional practice of evenly spreading raises across the 
federal workforce regardless

[[Page 15]]

of performance or contribution. For 2004, the Administration proposes to 
allow managers to increase pay beyond annual raises for high-performing 
employees. A new $500 million fund will be established in OPM and 
allocated among agencies based on plans submitted to and approved by 
OPM. The Administration also proposes to eliminate the current pay 
structure for senior managers and increase their pay ceiling. Under this 
proposal, each agency will adjust pay for its senior managers on the 
basis of individual performance, which will help address the current 
lack of meaningful senior manager appraisal systems.
  Examples of Success. While few agencies are implementing strategies to 
address all six standards for success in human capital management, there 
are numerous examples of impressive change.
     The Social Security Administration (SSA) is an example of 
          effective leadership planning and knowledge management. SSA 
          uses succession planning, hiring and retention flexibility, 
          aggressive developmental programs, and cost/benefit analysis 
          of training. It anticipates vacancies, targets critical 
          positions to designate ``understudies,'' and is managing the 
          retirement wave with early-out flexibility.
     The Department of Veterans Affairs provided automated data 
          tools to help managers and staff with workforce planning. It 
          assesses organizational and geographic needs in relation to 
          goals, documents barriers to its efforts, and seeks ways 
          around them.
     The Department of Labor worked with consultants to identify 
          competencies for mission-critical occupations and devised 
          strategies to address its competency gaps.
     The Departments of Energy, Health and Human Services, and 
          Labor have linked performance expectations for their 
          executives to agency strategic goals and objectives. These new 
          Senior Executive Service appraisal systems are designed to 
          distinguish and reward top performers.
     The Department of Transportation adopted an effective human 
          capital strategy for staffing the new Transportation Security 
          Administration (TSA). It hired tens of thousands of federal 
          screening employees, and at the same time embraced its 
          authority to conduct screening pilot projects at five airports 
          utilizing contract screeners. TSA decided for the long term to 
          harness the law enforcement resources of state and local 
          governments to staff airport checkpoints, rather than hiring 
          3,000 of its own officers. Finally, TSA aggressively 
          outsourced most administrative activities.
  The Human Capital Initiative has become a powerful agent for change in 
the past year. It has the attention and support of agency heads, and 
agencies are making headway toward meeting the initiative's standards 
for success.

                          Competitive Sourcing

  The Competitive Sourcing and Integration Initiatives share the goal of 
giving program managers more flexibility--in this case, by increasing 
the ease with which they can acquire the support goods and services 
needed to accomplish their mission. The previous cumbersome and limited 
process for acquiring support is being replaced by one which makes 
competition recurrent, simplifies the competitive process, and permits 
the use of a ``best value'' cost and technical trade-off in selecting 
the winning source.
  These changes are intended to bring innovation and efficiency into 
public services, to build an environment in which agencies explore new 
options, and to encourage learning from commercial practices. They are 
expected to improve contract administration information systems and 
increase the use of electronic commerce.
  OMB is revising its old, burdensome Circular No. A-76, ``Performance 
of Commercial Activities,'' drawing on testimony from numerous 
congressional hearings, participation on the Commercial Activities 
Panel, chaired by Comptroller General Walker, and responses to OMB's 
Federal Register request (67 FR 69769) for agency and public comments. 
The revision seeks to encourage federal managers and employees 
performing commercial activities to compete ( often for the first time--
to demonstrate their professional capabilities in much the same way as 
their commercial private sector counterparts do on a recurring basis. 
Both public-private and private-private competitions for commercial work 
will be based on the principles of the Federal Acquisition Regulation 
(FAR).
  Principles of Competition. The proposed revisions to Circular A-76 are 
designed to facilitate broader and more strategic use of competitive 
sourcing as a management tool for improving agency performance. The 
major proposed revisions include:
  1.  Requiring agencies to presume that all activities are commercial 
in nature unless an activity is justified as inherently governmental. To 
reinforce this presumption, agencies are required to submit annual 
inventories of their inherently governmental positions, using a more 
concise definition of ``inherently governmental.''
  2.  Eliminating the ``grandfather clause'' that currently permits 
public reimbursable service providers working under commercial inter-
service support agreements (ISSAs) in existence prior to March 1996 to 
perform work indefinitely without being subject to competition. Agencies 
relying on public reimbursable providers will be required to develop 
plans for competing work done by these commercial ISSAs.
  3.  Establishing standards for conducting competitions. Public-private 
competitions take too long--longer on average than private-private 
competitions. The revised Circular establishes time limits and requires 
agencies to report when these are exceeded. Agencies, for example, will 
be permitted the same time-frames to develop an in-house offer as the 
agency is prepared to give to private sector offerors.

[[Page 16]]

  4.  Requiring that agencies generally comply with the Federal 
Acquisition Regulation (FAR) in conducting competitions. The general 
principles of the FAR are well established and enjoy widespread 
familiarity within the procurement community. Greater application of 
FAR-type principles and practices throughout the Circular is intended to 
bring public-private competitions closer to mainstream source selection 
and reduce confusion that may currently make it more difficult for 
parties to compete.
  5.  Accountability for in-house performance after a contract is 
awarded is now required that is similar to what is expected of private 
sector contractors. Agencies relying on an in-house provider or a public 
reimbursable provider will be required to document changes to the 
solicitation, track actual costs, and terminate for failure to perform.
  Alternative Approaches. The new focal point will be on ``standard 
competitions,'' or direct conversions when appropriate. Recognizing that 
agency needs cannot be met through a ``one-size-fits all'' approach, the 
Circular's guidance is broader and more accommodating than the 
procedures developed over the years for conducting cost comparisons. For 
example, when conducting a standard competition, agencies will have 
three options for considering non-cost factors.
     An agency may conduct a source selection where the decision 
          is based on the low cost of offers that have been determined 
          to be technically acceptable.
     Alternatively, the agency may conduct a ``phased evaluation 
          process.'' During the first phase, technical factors are 
          considered, and offerors may propose performance standards 
          different from those specified in the solicitation. If the 
          agency determines that the proposed alternative performance 
          standards are appropriate and are within the agency's current 
          budget, the agency could issue a formal amendment to the 
          solicitation and allow revised submissions. The technically 
          qualified offerors and the in-house offeror would then compete 
          based on price against the revised performance standard.
     Finally, if non-cost factors are likely to play a more 
          dominant role, agencies may conduct an ``integrated evaluation 
          process'' with cost-technical tradeoffs similar to those 
          authorized by FAR Part 15. Private sector offers, public 
          reimbursable providers, and in-house providers may submit 
          higher performance standards than the solicitation. If the in-
          house offer is not among the most highly rated proposals, it 
          could be eliminated from the competitive range. The Circular 
          recognizes that this integrated evaluation technique may not 
          be appropriate for all needs and should be tested before wider 
          application is authorized.

                     Expanding Electronic Government

  Expanding Electronic Government focuses directly on improving the 
government's effectiveness. It helps programs work together to improve 
outcomes, such as better educational achievement and better health care. 
It coordinates services to citizens, businesses, and government by 
common internet sites. And it has a yet undeveloped potential to improve 
not just the use of information technology, but the overall organization 
and effectiveness of federal programs. This Initiative strongly supports 
the work of the Budget and Performance Integration Initiative.
  Improving Program Outcomes. Two of the E-government initiatives under 
way are directly related to agency efforts to use performance 
information to improve budget and management decisions.
     A Performance-Based Data Management Initiative is under way 
          to streamline the collection of performance data so that it 
          will provide accurate and timely information to help inform 
          state, local, and federal management of education programs.
     The Department of Veterans Affairs and the Department of 
          Defense are working jointly to improve services to veterans. 
          DoD's eligibility and enrollment system will be the base for 
          veterans' enrollment, providing seamless services as veterans 
          leave the military. The two Departments are working together 
          on computerized patient records, which will improve the 
          quality of patient care, since many veterans and their 
          families use both systems.
  Coordinating Service Delivery. The most visible and effective of the 
E-government initiatives deliver services via the internet directly to 
citizens, businesses, or government. Agencies that provide similar 
services must work together to deliver them in seamless, coordinated, 
electronic form. Information about the service and often the service 
itself can be delivered this way in minutes or hours instead of weeks or 
months.
    FirstGov.gov is the American citizens' gateway to the 
          federal government. Last year, it was completely redesigned to 
          provide government services within ``three clicks.'' The 
          Office of Citizen Services was created to facilitate one-stop 
          shopping for citizens who do business electronically with the 
          government. This strategy has increased the number of site 
          visitors by 50 percent. Last summer, FirstGov.gov was named by 
          Yahoo ``One of the Top 50 Most Incredibly Useful Web Sites.''
     GovBenefits.gov provides one-stop access to information and 
          services of almost 200 government programs representing more 
          than $1 trillion in annual benefits. GovBenefits.gov receives 
          over 500,000 visitors per month and appears on USA Today's 
          list of ``Hot Sites.''
     IRS Free Filing is a new point of access to free online tax 
          preparation and electronic filing services provided by 
          Industry Partners to reduce taxpayer burden and costs. As of 
          January 2003, this service is available to a substantial 
          majority of taxpayers at www.firstgov.gov or www.irs.gov.
     Recreation.gov  provides online access to America's 
          National Parks and public recreation areas. The

[[Page 17]]

          site links to 1900 federal, state, and local parks and 
          recreation centers; it has over 750,000 site visitors per 
          month.
  Similarly, federal internet sites deliver effective services to 
businesses, governments, and federal agencies.
     Businesses are helped by E-government projects that make it 
          easier to comment on proposed regulations, identify the 
          regulations that affect them, and find opportunities to sell 
          to the government and expand their international trade.
     State and local governments use E-Grants.gov to apply for 
          federal grant programs. A single electronic application will 
          allow grant applicants to enter identifying information once; 
          using a single identifier for each grantee allows the 
          government to track and oversee grantees.
     Federal agencies are supported by many E-government 
          projects. Common sites have been created for hiring, security 
          clearance, training, and employee payroll. Other sites help 
          with acquisitions, travel, and intra-governmental payments.
  Sharpening the Focus of What Government Does. The Expanding Electronic 
Government Initiative seeks to rationalize the use of information 
technology across the federal government. Its initial focus was on 
reducing overlap and redundancy in IT investments. To assess 
commonalities across government--and to categorize the data in IT 
systems in useful ways--the Federal Enterprise Architecture team 
developed a Business Reference Model that identifies different lines of 
business. It was used to question possible redundancies in the funding 
requests for new and expanded IT investment submitted for the 2004 
Budget.
  Additional uses for the Federal Enterprise Architecture are under 
consideration, including recording the outcomes that agencies are 
attempting to influence and the outputs they produce. The value of a 
common Architecture across the federal government that could support all 
of the Management Agenda has become increasingly clear. To make a 
lasting E-Government transformation, it would be useful to integrate 
with categories that have been developed with the Congress for budget 
justification and execution and that are already in agency IT systems, 
providing considerable historical data for analysis and comparison.
  As agencies revise their Strategic Plans to create performance 
budgets, they are focusing goals, measuring outcomes, and coordinating 
programs to achieve them. Goals in different agencies overlap; the same 
process of increasing focus and coordination is needed across agencies. 
By recording the new agency goals and measures in relation to each 
other, a modern Architecture could evolve. E-government projects would 
help them to come together to achieve their common goals, rationalizing 
not only the use of IT but the strategies for achieving outcomes. The 
same evolving Architecture could also be the key to a 21st century 
integrated budget, performance, and accounting system providing rapid 
analytical feedback for government decision making.

                     Improving Financial Management

  The Improved Financial Performance initiative complements the Budget 
and Performance Integration Initiative because successful financial 
performance ensures that accurate and timely financial information is 
available to measure past activities, affect current operations, and 
better predict the outcome of planned activities. In fact, to meet the 
standards for success fully under the Improved Financial Performance 
Initiative--to get a ``green'' score--requires that agency financial and 
performance systems be integrated. Integration makes the true cost of 
programs more transparent.
  More Integrated Financial and Performance Information. A major step 
toward integration of financial and performance information was taken 
this year. For 2002, agencies must submit combined Performance and 
Accountability Reports that contain the audited financial statements and 
performance results for the same period. More importantly, the due date 
for this report moves from February 27, as was the case in 2001, to 
November 15 in 2004. In short, performance results and audited financial 
information for 2004 will be available 45 days after the close of the 
fiscal year, and in time to inform the 2006 budget process.
  OMB also requires agencies to produce comparative and quarterly 
reports. To meet these more frequent and accelerated due dates, agencies 
must reinvent their business processes, develop estimating techniques 
and methods, and improve their underlying systems. In addition to 
meeting these reporting requirements, these new systems must be 
sufficiently robust to provide budget, financial, and performance 
information to support day-to-day operations and decision-making.
  Better Cost Measurement. A number of agencies such as the 
Environmental Protection Agency are beginning to implement full cost 
accounting systems. Cost accounting helped the Department of Veterans 
Affairs, the Department of Justice, and the National Aeronautics and 
Space Administration to calculate budget requests for each of their 
programs and activities as they restructured their budget accounts and 
``program activity'' lines in this budget (discussed earlier in this 
chapter). As more agencies align their budgets with strategic plans, the 
demand for sound cost information will escalate because it is essential 
for measuring program performance and improving program effectiveness.
  Using Performance Information. One example of managing integrated 
financial and performance information is in an area of particular 
vulnerability, erroneous payments. Federal agencies make hundreds of 
billions of dollars of benefit payments each year. Today, the 57 Federal 
programs responsible for distributing more than $1.2 trillion each year 
in benefit payments must submit with their budgets an estimate of their 
erroneous payments and goals for reducing them. These agencies will also 
report on their expected performance against these goals.
  Results are already apparent. The National Food Stamp erroneous 
payment rate fell from 8.9 percent

[[Page 18]]

in 2000 to 8.6 percent in 2001, its lowest ever, and the Department of 
Agriculture is aggressively enforcing its quality control program in 
states with high error rates. Also, for the first time ever, California 
and Michigan, with Food Stamp payment error rates of 17.4 percent and 
12.5 percent respectively, are being assessed cash sanctions called for 
under the law. And Medicare reported a continued decrease in its 
erroneous payment rate from 6.8 percent in 2000 to 6.3 percent in 2001.

                               Conclusion

  A year and a half ago, the Administration embarked on a Management 
Agenda intended to make government results-oriented. At that time, there 
was little assessment of the effectiveness of existing programs. 
Performance information was not consistently at hand when budget 
decisions were made. Costs and results were not linked; budget requests 
were not organized to fund a plan to achieve specific results. A great 
deal has been accomplished since then to increase the influence of 
performance information on budgeting and management. However, the 
Management Agenda has only been partly fulfilled. More still needs to be 
done to make government routinely effective.