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



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                  2. BUDGET AND PERFORMANCE INTEGRATION

                             I. INTRODUCTION

  The American taxpayer expects the Federal Government to implement 
programs that will ensure the Nation's security and provide critical 
services. Taxpayers deserve to have their money spent wisely to create 
the maximum benefit. The Executive Branch should be held accountable for 
program performance by the American people. For the Federal Government 
to be held accountable, the American people must have clear, candid 
information about each program's success and failures. The 
Administration is providing this type of information. More importantly, 
in all cases, the Administration is implementing detailed plans to 
improve program performance.
  The role of the President's Budget and Performance Integration (BPI) 
Initiative is to ensure that Federal dollars produce the greatest 
results. To accomplish this, agencies and OMB identify which programs 
work, which are deficient, and what can be done to improve the 
performance of them all. In some cases, it may be necessary to 
reallocate funding to more effective programs. This and other decisions 
about programs are ultimately made jointly by the Congress and the 
President, but the analysis of program performance can help the 
Executive and Legislative Branches make more informed decisions. To 
expand the use of information about program performance, OMB is 
launching ExpectMore.gov, a user-friendly website that provides the 
public with performance information about Federal programs. (Greater 
detail about ExpectMore.gov will be provided in a subsequent section.)
  The Budget and Performance Integration Initiative measures its success 
in two principal ways:
    Improved Program Performance: Through the use of performance 
          assessments, programs will have the information they need to 
          improve their performance every year. The initiative requires 
          each agency to identify opportunities to improve program 
          management and design, and then develop and implement clear, 
          aggressive plans to get more for tax dollars every year.
    Greater Investment in Successful Programs: Overall, scarce 
          resources need to be allocated to programs that benefit the 
          Nation most effectively and efficiently. Program performance 
          will not be the only factor in decisions about how much 
          funding programs receive. However, the Congress and the 
          President, equipped with information about program peformance 
          can consider performance to a greater degree in their 
          decision-making and invest primarily in programs that provide 
          the greatest return on the investment of taxpayer dollars. If 
          poor performing programs are unable to demonstrate improved 
          results, then that investment may be reallocated to programs 
          that can demonstrate greater success.
  Currently, the Initiative is showing great progress toward the first 
goal. Programs are becoming more efficient and more effective through 
implementation of meaningful improvement plans.
  Many programs are demonstrating improved results.
    The Department of Veterans Affairs is reducing the time 
          veterans wait to get medical appointments. From 2001 to 2005, 
          the Veterans Health Administration (VHA) substantially reduced 
          the number of new veteran enrollees unable to schedule an 
          appointment for medical care from a high of 176,000 to 22,494. 
          VHA remains a leader in customer satisfaction, with an 
          inpatient satisfaction score of 84 out of 100 on the American 
          Customer Satisfaction Index, slightly higher than the score of 
          79 for comparable private sector services.
    To reduce fatalities from automobile accidents, the National 
          Highway Traffic Safety Administration promoted greater seat 
          belt use among high-risk groups such as younger drivers, rural 
          populations, pick-up truck occupants, 8-15 year-old 
          passengers, occasional safety belt users, and motor vehicle 
          occupants in States with secondary safety belt use laws. As a 
          result, nationwide seat belt use increased from 73 percent in 
          2001 to 82 percent in 2005, an all-time high.
  Agencies are also identifying the steps they will take to improve each 
program's performance even more. All programs, regardless of whether 
they perform poorly or well, should strive to perform better each year.
  Progress toward the second goal of improving resource allocation is 
slow. Overall high performers received larger funding increases than 
those that did not perform as well, but in general, recommendations to 
reduce funding for ineffective programs or those that can not 
demonstrate results have been less successful.

     II. HOW THE BUDGET AND PERFORMANCE INTEGRATION INITIATIVE WORKS

  There are several aspects of the Initiative designed to maximize 
program performance:
    Assess performance with the PART (Program Assessment Rating 
          Tool)

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    Publish a Scorecard to hold agencies accountable for 
          managing for results, addressing PART findings, and 
          implementing follow-up actions
    Broadcast results on a new website, ExpectMore.gov
    Implement inter-agency program improvement

  Comprehensive Assessment by the Program Assessment Rating Tool (PART)

  How do we ensure programs are improving every year? First, we assess 
their current performance. In order to improve program outcomes, it is 
critical to have a good understanding of how the program is currently 
performing. To date, we have assessed the performance of 80 percent of 
all Government programs using the PART.
------------------------------------------------------------------------

                                      What is the PART and How is it Used?
 
 
 
The PART helps assess the management and performance of individual programs. With the PART, agencies and OMB
 evaluate a program's purpose, design, planning, management, results, and accountability to determine its
 overall effectiveness. Recommendations are then made to improve program results.
 
To reflect that Federal programs deliver goods and services using different mechanisms, the PART is customized
 by program type. The seven PART types are: Direct Federal, Competitive Grant, Block/Formula Grant, Research and
 Development, Capital Assets and Service Acquisition, Credit, and Regulatory. The PART types apply to both
 discretionary and mandatory programs. ExpectMore.gov also classifies each program by its specific program area
 (such as environment, transportation, education, etc) so we can accelerate the improved performance of programs
 with similar missions.
 
Each PART includes 25 basic questions and there are additional questions tailored to different program types.
 The questions are divided into four sections. The first section of questions gauges whether a program has a
 clear purpose and is well designed to achieve its objectives. The second section evaluates strategic planning,
 and weighs whether the agency establishes outcome-oriented annual and long-term goals for its programs. The
 third section rates the management of an agency's program, including the quality of efforts to improve
 efficiency. The fourth section assesses the results programs can report with accuracy and consistency.
 
The answers to questions in each of the four sections result in a numerical score for each section from 0 to 100
 (100 being the best score). Because reporting a single weighted numerical rating could suggest false precision,
 or draw attention away from the very areas most in need of improvement, numerical scores are combined and
 translated into qualitative ratings. The bands and associated ratings are as follows:
 


 
------------------------------------------------------------------------
                            Rating                               Range
------------------------------------------------------------------------
Effective....................................................     85-100
 
Moderately Effective.........................................      70-84
 
Adequate.....................................................      50-69
 
Ineffective..................................................       0-49
------------------------------------------------------------------------


 
 
 
 
Regardless of overall score, programs that do not have acceptable performance measures or have not yet collected
 performance data generally receive a rating of ``Results Not Demonstrated.'' This rating suggests that not
 enough information and data are available to make an informed determination about whether a program is
 achieving results.
 
PART ratings do not result in automatic decisions about funding. Clearly, over time, funding should be targeted
 to programs that can prove they achieve measurable results. In some cases, a PART rating of ``Ineffective'' or
 ``Results Not Demonstrated'' may suggest that greater funding is necessary to overcome identified shortcomings,
 while a funding decrease may be proposed for a program rated ``Effective'' if it is not a priority or has
 completed its mission. However, most of the time, an ``Effective'' rating is an indication that the program is
 using its funding well and that major changes are not needed.
 

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

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            Publish a Scorecard To Hold Agencies Accountable

  Agencies are achieving greater results with the help of the habits and 
discipline established through the Budget and Performance Integration 
Initiative (BPI). These agencies recognize that the PART can be a useful 
tool to drive the agencies to improved performance.
  The President's Management Agenda established clear, Government-wide 
goals or Standards for Success (http://results.gov/agenda/standards.pdf) 
for several key areas, one of which is Budget and Performance 
Integration. Agencies have developed and are implementing detailed, 
aggressive action plans to achieve these goals. Most importantly, 
agencies are held publicly accountable for adopting these disciplines. 
The Standards for Success for the BPI Initiative are below:
     Meets quarterly with senior agency managers to examine 
          reports that integrate financial and performance information 
          that covers all major responsibilities of the Department. 
          Agency achieves planned improvements in program performance 
          and efficiency in achieving results each year;
     Develops strategic plans that contain a limited number of 
          outcome-oriented goals and objectives. Annual budget and 
          performance documents incorporate measures identified in the 
          PART and focus on the information used in the senior 
          management report described in the first criterion;
     Demonstrates that it has performance appraisal and awards 
          systems for all Senior Executive Service (SES) and managers, 
          and more than 60 percent of the workforce, that effectively: 
          link to agency mission, goals, and outcomes; hold employees 
          accountable for results appropriate for their level of 
          responsibility; differentiate between various levels of 
          performance (i.e., multiple performance levels with at least 
          one summary rating above Fully Successful); and provide 
          consequences based on performance. In addition, at a beta 
          site, there is evidence that clear expectations are 
          communicated to employees; rating and awards data demonstrate 
          that managers effectively planned, monitored, developed and 
          appraised employee performance; and the site is ready to link 
          pay to the performance appraisal systems. The agency is 
          working to include all agency employees under such systems;
     Reports the full cost of achieving performance goals 
          accurately in budget and performance documents and can 
          accurately estimate the marginal cost of changing performance 
          goals;
     Has at least one efficiency measure for all PARTed 
          programs; and
     Uses PART evaluations to direct program improvements, and 
          PART ratings and performance information are used consistently 
          to justify funding requests, management actions, and 
          legislative proposals. Less than 10 percent of agency programs 
          receive a Results Not Demonstrated rating for two years in a 
          row.
  Each quarter, agencies received two ratings. First, they are rated on 
their status in achieving the overall goals for each initiative. They 
are then given a green, yellow or red rating to clearly announce their 
performance. Green status is for success in achieving each of the 
criteria listed earlier; yellow is for an intermediate level of 
performance; and red is for unsatisfactory results.
  Second, agency progress toward reaching the Budget and Performance 
Integration standards is assessed separately. This is reviewed on a case 
by case basis against the work plan and related time lines established 
for each agency. Progress is also given a color rating. Green is given 
when implementation is proceeding according to plans agreed upon with 
the agencies; Yellow for when some slippage or other issues require 
adjustment by the agency in order to achieve the initiative objectives 
on a timely basis; and Red when the Initiative is in serious jeopardy. 
In this case, it is unlikely to realize objectives absent significant 
management intervention.
  As of December 31, 2005, nine agencies achieved green status on the 
Budget and Performance Integration Initiative Scorecard. The agencies at 
green are:
1.          Department of Energy
2.          Department of Labor
3.          Department of Transportation
4.          Department of State
5.          National Aeronautics and Space Administration
6.          National Science Foundation
7.          Small Business Administration
8.          Social Security Administration
9.          U.S. Agency for International Development
  The Scorecard is an effective accountability tool to ensure agencies 
manage the performance of their programs. Although a scorecard rating is 
not directly linked to any specific consequences, it is quickly 
understood at the highest levels of the Administration as an indicator 
of an agency's strength or weakness.
  The Government-wide scorecard reporting on individual agency progress 
is published quarterly at http://results.gov/agenda/scorecard.html.

                   Broadcast Results on ExpectMore.gov

  This year, a new website, ExpectMore.gov, will provide Americans with 
candid information about which programs work, which do not, and what all 
programs are doing to get better every year.
  Up until now, Americans have had limited access to information on how 
the Federal Government performs. In many cases, the Federal Government 
performs well. In some cases, it performs better than the private 
sector.
  This site will contain PART summaries for all programs that have been 
assessed to date. The site will provide the program information a 
concerned citizen would need to assess a program's performance. Each 
assessment includes a brief description of the program's purpose, its 
overall rating, some highlights about its performance and the steps it 
will take to improve in

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the future. For those interested in more information, there are links to 
the detailed program assessment, as well as that program's website and 
the assessment summaries of other similar programs. The detailed PART 
assessment includes the answer to each PART question with an explanation 
and supporting evidence. It also includes the performance measures for 
the program along with current performance information. In addition, 
there is an update on the status of follow-up actions to improve program 
performance.
  A visitor to the site may find, at least initially, programs are not 
performing as well as they should or program improvement plans are not 
sufficiently ambitious. We expect this site to change that. The website 
will have a variety of benefits. It will:
    Increase public attention to performance;
    Draw greater scrutiny to agency action (or inaction) to 
          improve program results:
            --Improvement plans will be transparent
            --Statements about goals and achievements will
                be clearer; and
    Create demand for better quality and more timely performance 
          data.

                                     


               Implement Inter-Agency Program Improvement

  The Administration continues to look for new ways to improve the 
performance of programs with similar purpose or design by using the PART 
to analyze performance across agencies (i.e., cross-cutting analysis). 
Cross-cutting analysis can improve coordination and communication by 
getting managers from multiple agencies to agree to a common set of 
goals and placing the focus on quantifiable results. This type of 
analysis breaks down barriers across the Federal, State, and local 
levels so all are working toward the same goal. Only topics that are 
expected to yield meaningful results are selected for cross-cutting 
analyses. This past year the Administration completed cross-cutting 
analyses of block grant programs, Small Business Innovation Research, 
and credit programs.

  Block Grants. One of the most common tools used by the Federal 
Government is the block grant, particularly in the social services area 
where States and localities oftentimes award grants to local service 
providers. Block grants are embraced for their flexibility to meet local 
needs and criticized because accountability for results can be difficult 
when funds are allocated based on formulas and population counts rather 
than achievements or needs. In addition, block grants pose performance 
measurement challenges precisely because they can be used for a wide 
range of activities. The obstacles to measuring and achieving results 
through block grants are reflected in PART scores: they receive the 
second lowest average score of the seven PART types: 8 percent of block 
grant programs assessed to date are rated ineffective, and 45 percent 
are results not demonstrated.
  The characteristics that distinguish high performing block grant 
programs from low performing ones are:
     Top management is committed to managing for results;

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     Strong, outcome-oriented performance measures and goals are 
          used by management and grantees;
     Performance information is relevant, transparent and 
          accessible so management and grantees can easily find out what 
          works and replicate it
     Program performance is incorporated into managers' and 
          employees' performance appraisals.
  The goal of this cross-cutting analysis was to share best practices 
for block grant programs across agencies. During this past year, the BPI 
Initiative led a seminar where multiple agencies learned lessons about 
performance measurement, accountability, data collection, and reporting 
for block grants.
  All block grant programs will integrate the lessons from this work 
into aggressive improvement plans that ensure:
     Grantees and subgrantees strive to achieve outcome-oriented 
          goals;
     Data on whether those goals are achieved are collected and 
          made public; and
     Information about proven interventions and how to implement 
          them is shared widely.
  The long term impact of this work will be visible over the coming 
years as we monitor the ability of these programs to create better 
outcomes for the citizens they serve.

  Small Business Innovation Research (SBIR). The SBIR program sets aside 
2.5 percent of Government research and development contract and grant 
funding for small businesses. The goal of the program is to assist small 
businesses in undertaking and obtaining the benefits of research and 
development leading to commercial products, while assisting agencies in 
achieving their missions. Approximately $2 billion was spent last year 
in SBIR programs.
  All Federal agencies with Research and Development budgets above $100 
million per year must publish a list of technical topics that they would 
like to support, after which small businesses are encouraged to submit 
research funding proposals addressing opportunities in those areas. 
First, agencies provide winning companies seed funding to explore the 
feasibility of their projects and, if deemed promising after initial 
investigation, funding is provided for subsequent research and 
development. Awards generally are limited to less than $1 million per 
project. Agencies monitor the progress of the selected projects and 
report key data annually to the Small Business Administration.
  A team, consisting of agency and OMB representatives, is carrying out 
the following activities:
     Assessing the program's impact;
     Focusing on improving program administration;
     Determining if legislative reform is needed;
     Developing common long-term and annual measures; and
     Developing a database that tracks commercialization and 
          sales in a consistent manner.

  Credit Programs. The Federal Government is one of the world's largest 
lenders. At the end of 2003, the Government held a financial asset 
portfolio of nearly $1.5 trillion, including direct loans, loan 
guarantees, defaulted loans, and non-credit debt owed to agencies. Many 
agencies lack the data, processes, or overall understanding of the 
credit lifecycle (origination, loan servicing/lender monitoring, 
liquidation, and debt collection) needed to effectively assist intended 
borrowers while also proactively reducing errors, risk, and cost to the 
Government. Some credit program PART scores reflect these fundamental 
inefficiencies. More information about the performance of credit 
programs is available in chapter 7 in this volume.
  The Budget and Performance Integration initiative identified the 
``back office'' function of the five largest credit agencies 
(Agriculture, Education, Housing and Urban Development, Small Business 
Administration, and Veterans Administration) and Treasury as an 
appropriate target for analysis. The Deputy Director for Management 
created a Council to address improvements in these back office 
functions. The Federal Credit Council convened its first meeting in 
March 2005.
  In order to create accountability in credit programs, the President's 
Management Agenda scorecard has been expanded to include a set of 
standards for credit program management. The standards include criteria 
for red, yellow and green status related to:
     loan origination;
     servicing and/or lender monitoring; and
     debt collection.
  The first scorecard will be published subsequent to the President's 
2007 Budget, with quarterly scorecard reports describing individual 
agencies' milestones for addressing weaknesses.
  Many agencies lack the systems and data to conduct regular analysis 
consistent with minimum private sector standards, resulting in larger 
than anticipated losses to the Government. For example, institution of 
early warning systems to identify high-risk borrowers and provide 
targeted intervention at agencies currently without such systems could 
reduce defaults substantially, given the size of agency portfolios. The 
Council is working to improve compliance with the provision of the Debt 
Collection Improvement Act that bars certain borrowers through increased 
reporting to, and use of, private credit bureaus. This permits better 
identification of delinquent Federal debtors and avoids extending 
additional credit to poor credit risks. Savings to the Government are 
expected to be up to $100 million per year.
  The Council has substantially completed the Sharing Lender Performance 
Data (SLPD) portal that allows comparison of private lenders' default 
and delinquency rates, and other portfolio data, across agencies. This 
will result in better decisions to approve lender participation in 
programs, provide benchmarks for ranking lenders, and could provide an 
additional monitoring tool to reduce borrower defaults through early 
action.
  Initiatives of the Council aim to improve management functions and 
have the potential to reduce delinquent debt by up to $10 billion, in 
addition to substantial

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cost savings on the front end in the form of reduced administrative and 
subsidy cost expenses.

  Community and Economic Development Programs. The Federal Government 
spends more than $16 billion annually to support local economic and 
community development. In 2004, agencies and OMB participated in a 
crosscutting review of the 35 Federal programs that make up this effort. 
Based on PART analyses, input from agencies, and other program 
information, the team identified common problems that reduced the 
effectiveness of this Federal spending. They concluded that the 
programs, taken together, were duplicative, not well-targeted, and in 
many cases lacked clear goals, and a system to measure community 
progress and evaluate program impacts.
  Last year's budget proposed to consolidate 18 of the programs (which 
spend about $4.8 billion) in a new Strengthening America's Communities 
Initiative. For 2007, the Administration re-proposes program 
consolidation--this time in HUD and Commerce. The consolidation will be 
accompanied by three major reforms to make more effective use of these 
resources by: 1) better targeting funds to places that lack the means to 
create conditions for economic progress, 2) consolidating overlapping 
and/or ineffective programs into flexible grants that include rewards 
for community progress and results, and 3) coordinating the full set of 
Federal economic and community development programs within a common 
framework of goals, standards, and outcome measures.

                              III. RESULTS

  As mentioned above, the BPI Initiative measures its success according 
to two measures:
    Improved Program Performance; and
    Greater Investment in Successful Programs
  There has been a good deal of success toward achieving goals of the 
first measure. The BPI Initiative has caused agencies to think more 
systematically about how they measure and improve program performance. 
Though there are many factors that impact program performance, it is 
clear that the BPI Initiative has framed the discussion around results. 
Agencies have developed ways to measure their efficiency so they can 
figure out how to do more with Americans' tax dollars.
  This marks the fourth year that the PART was used to (1) assess 
program performance, (2) take steps to improve program performance, and 
(3) help link performance to budget decisions. To date, the 
Administration has assessed 794 programs, which represent approximately 
80 percent of the Federal budget. Over the next year, the Administration 
will use the PART to assess the performance and management of most of 
the remaining Federal programs.
  With the help of the PART, we have improved program performance and 
transparency. There has been a substantial increase in the total number 
of programs rated either ``Effective'', ``Moderately Effective'', or 
``Adequate''. This increase came from both re-assessments and newly 
PARTed programs. The chart below shows the percentage of programs by 
ratings category.

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  The results demonstrate that the BPI initiative is having success 
focusing Agencies' attention on program performance. For example, 
approximately:
     1 in 7 programs has improved its PART rating;
     Half of programs rated Results Not Demonstrated have 
          improved their ratings;
     80 percent of programs have acceptable performance 
          measures;
     40 percent have achieved their long-term goals and 60 
          percent have achieved their annual goals; and
     80 percent of programs have efficiency measures and about 
          half of them have achieved their efficiency targets.
  Unfortunately, there has not been a similar level of accomplishment in 
the second measure: Greater Investment in Successful Programs. Though 
use of performance information has been limited, most in the Congress 
are aware of the PART. This topic was discussed extensively in a 
Government Accountability Office (GAO) report issued last year.
  GAO recommends that OMB select PART reassessments and crosscutting 
reviews based on factors including the relative priorities, costs, and 
risks associated with clusters of related programs, and reflective of 
congressional input. Additionally, GAO recommended OMB solicit 
congressional views on the performance issues and program areas most in 
need of review; the most useful performance data and the presentation of 
those data. As mentioned above, OMB is using the PART to improve the 
performance of similar programs in areas that are expected to yield 
meaningful results. OMB and agencies are also actively soliciting the 
views of the Congress in PART assessments, on improvement plans, and 
oversight efforts.

                             IV. NEXT STEPS

  The BPI Initiative has identified several activities to improve its 
effectiveness over the coming year:
  Ensure Plans are Aggressive and Result in Improved Performance.--
Rigorous follow-up on recommendations from the PART will accelerate 
improvements in the performance of Federal programs. This will ensure 
that the hard work done through the PART produces performance and 
management improvements. Additionally, implementation of these plans 
must be tracked and reported.
  Expand Cross-Cutting Analyses.--Use the PART to facilitate cross-
cutting analysis where there is a higher return than approaching 
programs individually. The goal of these efforts is to increase 
efficiency and save

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dollars. We want to continue to build on the success of previous cross-
cuts. Congressional guidance will be a factor in choosing topics for the 
next group of cross-cutting analyses.
  Maximize ExpectMore.gov Impact.--The Federal Government should be 
accountable to the public for its performance. This new web-based tool 
will provide candid information on how programs are performing and what 
they are doing to improve. The BPI Initiative will work to increase the 
reach and impact of this valuable information to improve program 
performance and accountability for results.
  Note.--A table with summary information for all programs that have 
been reviewed using the Program Assessment Rating Tool (PART) is 
available at http://www.whitehouse.gov/omb/budget/fy2007/sheets/part.pdf 
This table provides program ratings, section scores, funding levels, and 
other information.