[Senate Hearing 105-857]
[From the U.S. Government Publishing Office]
S. Hrg. 105-857
DISTRICT OF COLUMBIA APPROPRIATIONS FOR FISCAL YEAR 1999
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HEARINGS
before a
SUBCOMMITTEE OF THE
COMMITTEE ON APPROPRIATIONS UNITED STATES SENATE
ONE HUNDRED FIFTH CONGRESS
SECOND SESSION
on
H.R. 4380/S. 2333
AN ACT MAKING APPROPRIATIONS FOR THE GOVERNMENT OF THE DISTRICT OF
COLUMBIA AND OTHER ACTIVITIES CHARGEABLE IN WHOLE OR IN PART AGAINST
THE REVENUES OF SAID DISTRICT FOR THE FISCAL YEAR ENDING SEPTEMBER 30,
1999, AND FOR OTHER PURPOSES
__________
Council of the District of Columbia
Financial Responsibility and Management Assistance Authority
Office of the Mayor
__________
Printed for the use of the Committee on Appropriations
Available via the World Wide Web: http://www.access.gpo.gov/congress/
senate
______
U.S. GOVERNMENT PRINTING OFFICE
46-093 cc WASHINGTON : 1999
_______________________________________________________________________
For sale by the U.S. Government Printing Office
Superintendent of Documents, Congressional Sales Office, Washington, DC
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ISBN 0-16-058095-1
COMMITTEE ON APPROPRIATIONS
TED STEVENS, Alaska, Chairman
THAD COCHRAN, Mississippi ROBERT C. BYRD, West Virginia
ARLEN SPECTER, Pennsylvania DANIEL K. INOUYE, Hawaii
PETE V. DOMENICI, New Mexico ERNEST F. HOLLINGS, South Carolina
CHRISTOPHER S. BOND, Missouri PATRICK J. LEAHY, Vermont
SLADE GORTON, Washington DALE BUMPERS, Arkansas
MITCH McCONNELL, Kentucky FRANK R. LAUTENBERG, New Jersey
CONRAD BURNS, Montana TOM HARKIN, Iowa
RICHARD C. SHELBY, Alabama BARBARA A. MIKULSKI, Maryland
JUDD GREGG, New Hampshire HARRY REID, Nevada
ROBERT F. BENNETT, Utah HERB KOHL, Wisconsin
BEN NIGHTHORSE CAMPBELL, Colorado PATTY MURRAY, Washington
LARRY CRAIG, Idaho BYRON DORGAN, North Dakota
LAUCH FAIRCLOTH, North Carolina BARBARA BOXER, California
KAY BAILEY HUTCHISON, Texas
Steven J. Cortese, Staff Director
Lisa Sutherland, Deputy Staff Director
James H. English, Minority Staff Director
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Subcommittee on the District of Columbia
LAUCH FAIRCLOTH, North Carolina, Chairman
KAY BAILEY HUTCHISON, Texas BARBARA BOXER, California
TED STEVENS, Alaska, (ex officio) ROBERT C. BYRD, West Virginia (ex
officio)
Professional Staff
Mary Beth Nethercutt
C O N T E N T S
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Wednesday, March 18, 1998
Page
Financial Responsibility and Management Assistance Authority..... 1
Wednesday, June 10, 1998
Council of the District of Columbia.............................. 105
Office of the Mayor.............................................. 113
Financial Responsibility and Management Assistance Authority..... 125
DISTRICT OF COLUMBIA APPROPRIATIONS FOR FISCAL YEAR 1999
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WEDNESDAY, MARCH 18, 1998
U.S. Senate,
Subcommittee of the Committee on Appropriations,
Washington, DC.
The subcommittee met at 10:20 a.m., in room SD-124, Dirksen
Senate Office Building, Hon. Lauch Faircloth (chairman)
presiding.
Present: Senator Faircloth.
DISTRICT OF COLUMBIA
Financial Responsibility and Management Assistance Authority
STATEMENTS OF:
DR. CAMILLE CATES BARNETT, CHIEF MANAGEMENT OFFICER
DR. ANDREW F. BRIMMER, CHAIRMAN
ANTHONY A. WILLIAMS, CHIEF FINANCIAL OFFICER
OPENING STATEMENT OF LAUCH FAIRCLOTH
Senator Faircloth. Good morning. I am delighted to see all
the friends and people who are going to make the city of
Washington work here this morning. I am sorry to be a little
late. We had an SBA meeting which I felt I had to attend. We
have a distinct capability in the Senate of scheduling all
committee hearings on the same morning at the same time. I do
not know how we work it out, but we have been able to do so.
The hearing is called to order.
This is the first hearing this year of the Senate
Appropriations Subcommittee on the District of Columbia. I want
to welcome Dr. Brimmer, Tony Williams, and Dr. Barnett. We
thank you for being here this morning, and I thank you for what
you are doing.
progress in implementing management reform
The reason for this morning's hearing is to review the
progress being made in implementing the management reforms
called for by legislation which I insisted be a part of last
year's rescue plan for the District of Columbia. Dr. Barnett,
as you know, that legislation led to the creation of the
position of Chief Management Officer, and I think the city is
lucky to have someone with your qualifications to accept that
role.
Tony Williams has done a tremendous job working at the
direction of Dr. Brimmer and the rest of the Control Board in
getting control of the city's finances. That was one step on
the road to recovery for the Nation's Capital. The rest is
really going to be up to you, Dr. Barnett.
overhaul of the way the city delivers services
Congress and the American people and certainly I do want
this city to succeed, and what is needed is a complete overhaul
of the way the city delivers services to its citizens. We need
professional management that can clean, repair, and do the
ordinary functions of the city, like issuing drivers licenses,
and many of the things other cities deliver on a proper and
regular basis that we have failed to do here for so many years.
Dr. Barnett, it is a tall order, but I want you to know we
expect the job to be done. Congress and, I think, everybody
will support you, but there have been enough hand wringing and
excuses as to why things simply do not happen. There is no one
in this Congress--and I am sure in the entire city or the
administration of the city--that does not want to see this to
be the finest capital in the world, as it should be. Certainly
there is no dissension in the direction in which we are moving.
It is just a question of how we are going to get there.
number of city employees
For years the District's agencies have been drifting in a
sea of mismanagement. This city has roughly 35,000 municipal
employees for a population of 529,000. There are simply too
many employees for a city of this size. Hopefully, this is
going to change under the new Chief Management Officer, and
certainly a lot of it will change because duties the city has
been performing, like the prisons, will be moving to the
Federal Government. But that is entirely too many people for a
city of this size to be employing.
While Congress last year provided a rescue package for the
District, quality of life services such as recordkeeping,
public safety, health, street repair, trash collection, and the
public school system are still in serious condition and still
in need of much, much, much improvement.
Just last month the District audit revealed that 20 former
District employees who had died have been receiving pension
checks. The District still cannot account for its employees
whether they are dead or alive.
delay in school opening
Last September, despite a pledge that all public schools
would open on schedule, the opening was delayed due to
incomplete repairs. Now, I am totally in sympathy with General
Becton, and the city administrators in thinking that the judge
that delayed the school opening for minor roof repairs was
totally wrong. That simply is not the way business is conducted
anywhere at any time. Nobody wants to endanger the children,
but a hole in the roof is no reason to close the school.
We cannot, and the Congress will not, allow the District
school children to be penalized by another delay. I have talked
to General Becton, and he has assured me that the schools will
be ready to open at opening time next August.
police department run by committee
The Police Department is being run by a committee, which is
not the best way to run a police department. The memorandum of
understanding for the Police Department was set up to study
what was wrong with the Department. We have learned that the
District of Columbia has more police per capita than almost any
major city, but the large majority of them are sitting behind
desks.
Just recently we heard the Acting Police Chief, whom I
think is doing a good job, has three chauffeurs of her own. For
this type of thing to be going on is absolutely ludicrous.
There is no reason for the Police Chief to have one chauffeur,
much less three.
crime rate
The crime rate is still too high. The District reported
over 300 homicides last year. The police force has a deplorable
record of apprehending killers.
The D.C. medical examiner is often unable to determine how
or why people die.
Citizens complain that not enough police officers have been
assigned to the patrol service areas, and I think they are
right in complaining.
I will be carefully reviewing the first quarterly report on
the 83 patrol service areas that is due Congress at the end of
this month. This provision was included in the fiscal year 1998
appropriations bill at my insistence so we can monitor crime
reduction in the District's neighborhoods.
We are also aware of the embarrassing circumstances
surrounding the resignation of Chief Soulsby.
The District's residents and the thousands of citizens who
visit our Capital each year deserve better.
surplus for fiscal year 1997
Last year the District projected a $74 million deficit at
the end of fiscal year 1997. Today the District's Chief
Financial Officer, Tony Williams, reports a surplus for fiscal
year 1997 of $185.9 million. This is the good news, but until
District citizens can feel and see the effects of the surplus
through a better quality of life and city services, the
District will continue to have its problems. We need to improve
the services to the city.
Today we are going to hear from three key figures in the
District: Dr. Andrew Brimmer, Chairman of the Control Board;
Dr. Camille C. Barnett, the District's new Chief Management
Officer; and Mr. Anthony Williams, the District's Chief
Financial Officer. We hope our distinguished panel will have
more good news to report to the committee. We look forward to
your testimony.
I am sorry that neither Senator Hutchison nor Senator Boxer
was able to join us this morning. Senator Boxer had a couple of
questions that she would like to be posed for the record, and
we will do so.
Without objection, the record will remain open until 5:00
p.m. on Tuesday, March 24, 1998, for the submission of any
additional testimony or response to questions members might
have for our witnesses.
I would now like to welcome our first witness, Dr. Camille
Barnett. Dr. Barnett, this is your first appearance before the
committee, and we look forward to your testimony.
Dr. Barnett. Thank you.
Senator Faircloth. I might say for those who are not aware,
Dr. Barnett has 27 years of professional experience in
municipal management, and she recently served as city manager
of Austin, TX, one of the fastest growing cities in Texas. Dr.
Barnett, we welcome you.
statement of camille cates barnett
Dr. Barnett. Thank you and good morning, Mr. Chairman. It
is a pleasure to be with you today. As is stated, I am Camille
Cates Barnett, Chief Management Officer for the District of
Columbia.
management reform
You have my written testimony, and so I want only to
summarize a few things in terms of our initiatives for
management reform for the District of Columbia. I have some
charts here to assist me.
One of the things that I have done, since coming to the
District, is to focus the District's activities on a few key
goals. I would like to draw your attention to something that we
are summarizing as the District of Columbia commitment. It is
our commitment to the citizens who live here on what we are
doing, as well as to the people who work and visit here. It
talks about our vision, our values, and our goals.
The vision statement that we have is that we want the
District of Columbia to be a model of the very best of American
cities. We need to strive for excellence. We need to use best
practices, and we need to work together as one government.
We have two values that underscore everything that we do:
customer service and accountability. This is not currently in
all cases a service-oriented organization, and we are going to
make it one. We are all accountable to the people that we
serve.
three goals
We have three goals. One is to improve customer service.
The second is to implement management reform, and the third is
to meet our budget targets. All of the work that we are doing
in the District can be focused around these three goals.
One of the things that I have done in addition to reviewing
the 269 management reform projects, which you have seen, is to
conceptualize management reform, and these projects as part of
a multiyear change process. We are really changing the way we
think.
Senator Faircloth. Dr. Barnett, how many reform----
Dr. Barnett. Two hundred and sixty-nine projects have been
approved.
Senator Faircloth. For reform.
Dr. Barnett. Yes.
Senator Faircloth. 269.
Dr. Barnett. 269.
Senator Faircloth. That constitutes a day's work.
Dr. Barnett. Yes; I think so. I think it will keep us busy.
One of the things that we have done is to talk about this
new management system in terms of quality management techniques
and business process reengineering techniques that are familiar
not only in the private sector, but increasingly in the public
sector.
What we have done is to put together a performance
management system. It is based on a simple cycle of plan, do,
check, act, where you do some planning, both strategic planning
as well as operational work planning. Then you actually
accomplish it. You check the results, both in terms of reports
that you do on performance measures, but also with your
customers to see how well you are doing. Then you take action
based on those results. It is a very simple concept that can
really transform the way we manage.
performance management system
This is what it looks like when we apply it to the District
of Columbia and the initiatives that we have underway. This
summarizes the report that we gave you on March 2, 1998, of
what we are doing in the District of Columbia to institute a
performance management system. The darker blue circles on this
chart are things that exist now. The lighter blue circles
either exist only partially or we are creating them. Let me
briefly walk through this management cycle because it is our
philosophy, and it shows you how management reform fits into a
new way of doing business.
Senator Faircloth. Dr. Barnett, may I say there is not any
need to rush. We are going to take our time. We are here today
to thoroughly review what we are doing and where we are headed.
Dr. Barnett. Great. My time is your time.
Senator Faircloth. So, you take your time.
strategic plan
Dr. Barnett. What we are going to be doing is putting
together a 5-year strategic plan for the District. This 5-year
strategic plan I hope to accomplish in the next 2 months where
we talk about our long-term change process. This 5-year
strategic plan will also drive long-term strategic plans in
each of the agencies. You see that on the outer circle of the
chart.
This 5-year strategic plan then every year has an
operational plan, and the inside circle on this chart is really
the plan, do, check, act cycle. It goes on an annual basis.
So, you will have a District of Columbia commitment each
year, much like the one I just reviewed with you, that is a
one-page summary of what we are doing that year. That will be
the work plan that has specific projects, timetables, people
assigned, performance measures and outcomes.
That annual work plan then drives the budget and the
management reform initiatives. Both of those activities are
indicated in other circles there.
One of the things that we have done, in conjunction with
the Chief Financial Officer, is to institute performance
measures throughout the budget. These measures now are in some
cases not totally tracked by the agencies. In some cases they
are targets more than they are measures, but we are beginning
to look at the budget as performance based budgeting.
We are also tracking performance measures with each of the
management reform projects and all of the management reform
initiatives.
Those two items, as well as the agency's strategic plan,
then work toward developing the annual work plan of each of the
agencies. This is what summarizes what that agency is going to
do, and it is tied to the budget so that the funding and the
plan are matched.
That agency work plan is the basis for individual
performance contracts with each of the agency directors.
performance contracting
We are beginning performance contracting now. I have
briefed all of the agency heads on performance contracts. I
expect in the next 30 to 60 days to have signed performance
contracts with each of the agency heads where they will commit
to results to accomplish by the end of this fiscal year.
Senator Faircloth. May I ask you what is a performance
contract?
Dr. Barnett. Sure. That is a negotiated agreement between
me and each of the agency heads on what they will accomplish
during the remainder of this fiscal year. Each year we will
execute new performance contracts where there will be
objectives for each of the years that the agency directors are
personally accountable for achieving. A performance contract is
a way to make operational this value of accountability and
customer service.
Senator Faircloth. What is the fiscal year here? When does
it end?
Dr. Barnett. September 30, 1998, fiscal year 1998.
Senator Faircloth. September. Thank you.
Dr. Barnett. Then these individual performance contracts
are the basis for the evaluation of the agency directors and
would be the basis for any kinds of increases in pay as well as
any kinds of changes in position. I expect that we will be able
to do performance contracting with all of the agencies and all
of the second tier of the agencies starting next fiscal year.
personnel reform legislation
In addition, the personnel reform legislation that is
making its way through the Council now allows us to tie pay to
performance throughout the whole organization. I am hopeful
that this concept of performance management is really brought
home to everyone in the organization because they will know
their part in doing this, and when they know their part, they
can be held accountable.
Then we go into the next part of the plan, do, check, act
cycle, which is actually producing the results and checking to
see what we are doing. I am hopeful that we will be able to get
to a point where we will be giving you and others quarterly
reports not only on management reform, not only on our
financial performance, but also on the operational performance
of the city.
We need to be able to standardize our reporting and to
connect both the performance and the financing in one document
so it is easy for everyone to see what we are doing, what we
are accomplishing, and what issues need to be addressed. So, we
will be working on redesigning reporting so that it is easier
to read, and it is more comprehensive.
customer service survey
But we do not want to just check our results based on
reports. We want to see what our customers think. We have done
a customer service survey. We did that last year. I am sure you
have seen and reviewed the results. They are not good. They are
some of the worst results I have ever seen in terms of
customers' evaluations of their services. We are not going to
be able to say that we have improved customer service until our
customers agree with us. One of the things we want to do is to
use customer surveys, focus groups, and other ways of thinking
through how we are measuring our performance with our
customers. That is part of our checking.
When we do that checking, that then feeds back into the
long-range planning as well as the next annual plan.
This is what we call our performance management system. We
have talked with the agency directors about it. We are
beginning to fill in each of the pieces, and I am confident
that if we implement this system, we will not have to talk
about management reform as a separate initiative. We will not
have to talk about a number of separate projects. If we do
this, we will have changed the way we manage, and that to me is
true management reform.
We are beginning, as is indicated in my written comments, a
thorough analysis of all of the management reform initiatives
and encouraging and facilitating their implementation through
the organization.
With that, I will conclude my initial remarks and be happy
to answer any of your questions.
[The statement follows:]
Prepared Statement of Camille Cates Barnett
Mr. Chairman and Members of the Subcommittee: Good morning. My name
is Camille Cates Barnett, the Chief Management Officer appointed by the
District of Columbia Financial Responsibility and Management Assistance
Authority to oversee management reform in the Nation's Capital. I
appreciate the opportunity to present testimony on this important
topic.
introduction
Mr. Chairman, as you know, I have been CMO for about two months,
specifically since January 15, 1998. Previous to this position, I have
been privileged to hold a number of positions in City government, and
in private sector jobs that focused on the improvement of local
government services. Most recently, I was employed by the Research
Triangle Institute's Center for International Development to implement
innovations in the structure and management of cities, primarily in
foreign governments.
Previously, I was the City Manager for Austin, Texas, a city with
roughly the population of the District of Columbia. In my time at
Austin, I believe that the City made considerable progress in improving
basic services, and in creating a strategic planning system and a
structure for initiating service improvements for years to come. This
experience, combined with my 27 years in city management, should prove
beneficial as I shift my attention to the problems and challenges of
the Nation's Capital.
I believe that the District of Columbia has an historic
opportunity. The Authority and the Chief Financial Officer have made
considerable strides in the financial recovery of the District. Now, we
need to improve customer service and build institutional capacity to
sustain those improvements. The National Capital Revitalization and
Self-Government Improvement Act (Revitalization Act) provides an
effective vehicle for ensuring that we fundamentally restructure the
District Government. I am pleased to be a part of the management reform
effort outlined by the Authority and submitted to Congress, in
accordance with the Revitalization Act.
My focus, as I begin, is on the vision that ``The District of
Columbia is a model for the very best of American cities.'' The values
that guide us will be customer service and accountability. My primary
goals for 1998 are to: (1) improve customer service; (2) implement
management reform; and (3) meet budget targets.
management reform program
The goal of management reform is to have government that works for
the citizens of the District of Columbia. Management Reform is a
multiyear process to change the way we do business in the District of
Columbia. As you know, the Authority commissioned studies of the
departments, which led to 269 projects being selected for
implementation. The departments have reviewed the consultants' reports
and begun implementation of some of the projects.
Management reform is more than a list of projects, of course.
Reforming management must translate into better performance and
improved service delivery. As such, we have begun to develop a
comprehensive performance management system. It is a variation of the
Plan, Do, Check, Act Cycle of quality management. The system is
designed to coordinate and integrate all performance measurement
initiatives together in a city-wide organizational framework. This
system is described in the Comprehensive Performance Management System
Report submitted to Congress on March 2, 1998. The components of this
system include:
--The District's five year strategic plan;
--The annual District of Columbia Commitment;
--The District's annual budget;
--The management reform initiatives;
--Agency strategic plans;
--Individual performance contracts;
--Development of Government-wide performance measurement; and
--The District Government performance scorecard.
The performance management system is illustrated below:
[GRAPHIC] [TIFF OMITTED] T03MA18.001
The key to management reform is to transform the thinking of our
people. We need:
1. Department heads who know how to deliver services.--We should
not continue to need consultants to tell us what to do--but just to
help us implement our plans until we develop sufficient internal
capacity. Department heads should be able to efficiently and
effectively deliver services. They must implement the needed changes in
business processes. They must be held accountable for the performance
of their departments.
Initiative.--Department heads will be asked to sign performance
contracts which call for them to develop and implement specific
outcomes/results for which they will be held accountable.
Initiative.--We will recruit for selected department heads where
vacancies exist or where performance is lacking.
Initiative.--Department heads will develop strategic plans. There
will be five year and annual strategic plans for the Government as a
whole and for each agency.
Initiative.--Consultants will be engaged to reengineer processes
and implement reform projects.
2. A trained, motivated properly equipped workforce.--Our workforce
must be given a chance to succeed by knowing how to properly do their
jobs. We must provide them the tools necessary to perform their jobs,
such as working phones and management information systems. And, they
should have a work environment that is clean and conducive to serving
citizens.
Initiative.--Implement a working telephone system and develop a
phone directory.
Initiative.--Implement new automated systems where required.
Initiative.--Upgrade the District's Wide Area Network.
Initiative.--Resolve year 2000 issues.
Initiative.--Continue training the workforce and encourage their
attendance at the motivational seminars. Training initiatives include:
The Center for Excellence in Municipal Management (CENMS), technology
training at the Skill Development Institute housed at the University of
the District of Columbia.
Initiative.--Conduct a compensation/classification study.
Initiative.--Select a vendor to conduct physical assessments of our
facilities so that plans can be made to upgrade the facilities.
3. A fully staffed operational Chief Management Officer's Office.--
Key to the full and implementation of management reform is an effective
Office of the Chief Management Officer. So that management reforms do
not wait for the recruitment, selection and hiring of key personnel, I
am bringing on managers under contracting arrangements to assist in
reviewing and implementing the projects and to form a partnership with
the agency heads to handle critical operational issues.
4. Responsive internal service functions.--Operating departments
should be able to procure goods and services without a long burdensome
process. Department heads should be able to concentrate on service
delivery and not spend time trying to get the resources they need to do
a good job.
Initiative.--Complete implementation of reforms in the Office of
Procurement to streamline the procurement process.
Initiative.--Complete implementation of the Comprehensive Automated
Personnel and Payroll System (CAPPS).
Initiative.--Complete implementation of the Office of the Chief of
Technology in order to provide reliable enabling technology and be able
to leverage technology to improve productivity.
5. To explore alternative ways of doing business.--Just as the
private sector is reviewing its activities, determining core
competencies and instituting selective outsourcing, so should we.
Agencies should be encouraged to recommend alternative ways of
operating that would improve service delivery and cost efficiency. The
goal should be to consolidate and provide best value to our citizens.
It is very important that appropriate contracting mechanisms be in
place to monitor contractor performance, to hold them accountable and
to control costs.
Initiative.--Outsource operation of the data centers.
Initiative.--Outsource lease administration.
The departmental management reform projects will result in improved
service delivery including:
--Implementing a new motor vehicle information system to improve the
turnaround time for obtaining drivers licenses and vehicle
tags.
--Purchasing fire and EMS equipment to improve public safety.
--Reengineering business processes and implementing a new automated
system in the Department of Consumer and Regulatory Affairs to
improve the turnaround time on licenses and permits.
--Implementing improvements in the Department of Housing and
Community Development which will provide better expenditure
monitoring and control to improve the housing stock.
--Developing a solid waste disposal plan, realigning street cleaning
and trash collection routes and consolidating transfer station
operations to improve the effectiveness and efficiency of solid
waste collection and disposal.
--Creating internal capacity and program delivery to improve the
street program.
implementation process
On March 26, 1998 there will be a Joint Budget Workshop on
Management Reform and Budget Enhancements. This session includes the
Mayor, the City Council and the Authority. In preparation for that
workshop, the Office of the Chief Management Officer (OCMO) and the
Office of the Chief Financial Officer (OCFO) are reviewing the status
of management reform and budget enhancement requests. The reviews will
have the intent of----
--1. Closing out completed projects;
--2. Determining the status of projects started in 1998;
--3. Determining whether funds will be needed for those projects in
1999;
--4. Determining if the project can be integrated into overall
operations or needs to be continued as a management reform
project; and
--5. Determining what dollars will be required for consulting
services in 1998 and 1999.
The remaining reviews are scheduled for March 16th and 17th. The
results of these reviews will be presented at the March 26th workshop.
Interim Deputy Management Officers and other staff from my office
will be assigned to the departments to work with departmental personnel
to:
--Review the products produced by previous consultants to determine
their adequacy and the suitability of that consultant to
continue the process.
--Review the proposed scope of work for the new tasks and determine
its sufficiency.
Work with the agency to determine whether the task really requires
outside assistance or could be performed by internal resources.
--Prioritize or group tasks requested to minimize the number of
projects to be successfully managed at once.
--Work with the agency to establish joint agency/consultant teams so
as to support internal capacity building and to facilitate
integrating the project into normal operations.
--Request proposals where the consultant's expertise may not match
the work effort required at this time.
Some of my personnel will be sent onsite to work with the agencies
where required to assist in the implementation of reform projects.
implementation status
Briefly, let me highlight some elements of management reform
already underway:
--Both the Office of Procurement and the Office of the Chief
Technology Officer have been established. Organizations are
being defined and new procedures implemented. Council approval
is still needed on some issues.
--A contract has been awarded to Maximus for the implementation of
the Human Services reform projects.
--The Office of Personnel reports completion of most of its
operational type management reform projects.
--The Department of Housing and Community Development has been told
to proceed with tasking of its consultant for implementation.
--The remaining departments are in various stages of review to
consolidate their projects and issue either tasks to the
current contractors or new requests for proposal.
budgetary issues
We are working with the Chief Financial Officer to present a
funding plan to the Joint Budget Work Session on March 26 that funds
all 269 management reform projects by the end of fiscal year 1999.
1. Approximately $60 million in management reform funds has been
set aside in capital for implementation of the major management reform
projects as follows:
Paygo Management Reform Budget
[In millions of dollars]
Integrated Tax System............................................. 15.7
Telecommunications System......................................... 15.0
Material Management System (Procurement).......................... 1.3
Year 2000 Compliance.............................................. 10.0
Automated Fueling System.......................................... 0.5
DCRA-Corrective Actions........................................... 5.8
Motor Vehicle information System.................................. 4.8
Facilities Condition Assessment................................... 2.0
Comprehensive Automated Personnel and Payroll System (CAPPS)...... 5.0
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________________________________________________
Total....................................................... 60.1
2. Personnel in this office will assist the departments with
implementation of their management reform projects and will manage and
monitor operational issues. Further, this office will centrally manage
some of the major management reform initiatives.
3. 1998 funding will be required to implement the Office of Asset
Management. The Facilities Assessment is included in the capital
budget, but additional operating funds will be required to combine
functions, obtain consulting assistance and fully staff this Office.
4. The 1999 Management Reform budget requests will most likely
include some organizational realignment, which could include the
creation of some new entities. The CMO is currently reviewing these
issues and will present these reorganizations during budget
discussions.
In conclusion, Mr. Chairman, I want to thank you and the
subcommittee for your leadership and interest in the revitalization of
the District of Columbia. I hope this information has been helpful, and
I will be able to supply you with information in much greater detail
shortly.
I look forward to the work in front of us--if we are successful,
the District and its residents will receive the quality services that
they deserve.
I would be pleased to respond to any questions that you or other
members of the subcommittee wish to ask at this time.
Senator Faircloth. Thank you, Dr. Barnett.
We will ask Dr. Brimmer to come forth with his statement.
Dr. Brimmer is Chairman of the D.C. Financial--Dr. Brimmer, we
use the proper name so seldom--D.C. Financial Responsibility
and Management Assistance Authority. He has a distinguished
career in both the public and private sector. Dr. Brimmer, it
is always a pleasure to receive you.
Dr. Barnett, I just want to say one thing. Just one word
you kept using, and I was delighted to hear, referring to those
people that do business with the city as customers or clients.
I think for so long here the people who had to do business with
the city were viewed by city employees as in-the-way irritants,
and I am delighted to see we are referring to them differently.
Dr. Brimmer.
STATEMENT OF ANDREW F. BRIMMER
Dr. Brimmer. Thank you very much, Senator.
Since this is the first time I have had an opportunity to
appear before this committee since the full implementation of
the Revitalization Act signed in August 1997, I want to take a
little time to----
Senator Faircloth. Well, we are not in a rush for time here
today. We are here to get to the facts.
Dr. Brimmer. Thank you very much.
I have a prepared statement. I will ask that it be included
into the record in full.
Senator Faircloth. Without objection, it will be.
Dr. Brimmer. Some of what I will say sounds better, to me
at least, if I speak it rather than just reading it.
Senator Faircloth. You speak it as you see fit.
management reform act
Dr. Brimmer. From the point of view of the Authority,
management reform really began with the Congress' adoption of
the Management Reform Act in 1997. As you all know, Senator,
you were responsible substantially for that part of the act,
and we proceeded to implement it promptly.
You might recall that the Management Reform Act provided
that in carrying out the reforms, the nine key departments were
to report solely to the Authority. It also provided that for
four crosscutting citywide functions, the same arrangement was
to prevail. Each member of the management reform team was to
take any and all steps within the member's authority to
implement the terms of the plan under the direction of and
subject to the instructions of the chair of the Authority or
the chair's designee.
Thus, Congress expected that the Authority would undertake
a far-reaching program of management reform to implement
services for the District government, acting through its
designated agents and exercising control over the nine
departments and four governmentwide functions.
implementation of management reform plans
Implementation of these management reform plans requires
supervision of the day-to-day operations of the government to
achieve their purpose. When the Authority accepted this
responsibility, we stated that we would engage a Chief
Management Officer to whom we would delegate the assignment.
agencies reporting to authority
An order of the Authority, issued on August 5, 1997,
required the heads of each of the nine departments and each
governmentwide function to report to the Authority and to act
under the direction and subject to the instructions of the
chair of the Authority with respect to the exercise of all
powers and performance of all the duties of the office. Using
my options, I have instructed the heads of these departments
and functions to report to the Authority through the chief
management officer.
Mr. Chairman, I pause to emphasize the reporting
arrangement because there is some question that has been raised
as to whether the Congress intended that the heads of the
departments should report to the Authority, as opposed to the
traditional reporting arrangements whereby they had reported to
the Mayor. We have interpreted that to mean that Congress meant
what it said, that these departments report to the Authority
solely, and we are acting on that assumption.
management reform teams
The Management Reform Act stipulated that management reform
teams would be established to implement reform plans
recommended by consultants and approved by the Authority.
Senator Faircloth. Dr. Brimmer, I just might interject that
that part of the plan was not drawn lightly, carelessly, or
flippantly. That is exactly what it meant.
Dr. Brimmer. Thank you. That is our interpretation.
Senator Faircloth. There is no other way to interpret it.
Dr. Brimmer. Thank you.
Senator Faircloth. If you read the English language.
Dr. Brimmer. Thank you.
Now, the teams consist of the Mayor, the chair of the
Council, and the chair of the Authority, and we have been
working to implement the plans, but the implementation is
really the responsibility under the statute of the department
heads, and we have delegated that to the Chief Management
Officer. That is the framework within which we are working.
management reform plans
Since the passage of the act, the Authority has moved
aggressively to develop and to implement management reform
plans to address service delivery. The Authority has developed
those plans. In many areas we already have begun to fix the
problems, and we are beginning to deliver some improvements in
services.
The Management Reform Act declared vacancies in the
position of agency director of the nine agencies. As I said,
the act itself began the management reform process. As a
result, the Authority named acting heads for each of the
agencies and functions. In subsequent action, the Authority
named permanent agency heads. Some of them were recruited from
outside the government, and others were persons who were
serving in other capacities but who in our judgment had the
capacity and the ability to assume these responsibilities of
pursuing management reform and improving service delivery.
chief management officer
To carry out its responsibilities in accordance with the
act, the Authority also created the position of Chief
Management Officer. In announcing this decision, I stated that
the person appointed to that position must have substantial,
high-level experience in municipal management. The task of
identifying and recruiting a CMO has already begun, I said, and
it will be accomplished promptly.
We accomplished that. After a nationwide search, we were
able to identify Dr. Camille Barnett, and we selected her to be
the CMO. I should say, Mr. Chairman, that the response to our
search was very strong. We had a number of very promising
candidates, and Dr. Barnett stood out head and shoulders. I
want to stress that again. She was not competing against
second-raters. We had a very rich list of candidates, and she
was the best of the lot, and we selected her solely on that
basis.
Senator Faircloth. I think we are all proud of your
selection and looking forward to seeing her show us that you
made the right one. [Laughter.]
Dr. Brimmer. Thank you.
office of city administrator
I will also note that as part of the process, the Office of
City Administrator is currently downsizing its operation.
Previous to the passage of the Revitalization Act, the City
Administrator's Office was responsible for the management
oversight of most District government agencies. Since the
Authority has been mandated by Congress to assume
responsibility for the majority of these functions, both in
terms of personnel and budget, the Authority is working closely
with the Mayor to restructure the City Administrator's Office
to ensure that its resources are in line with its current
responsibilities. Thus, we expect that the size of the City
Administrator's Office will decrease in the coming months.
Let me pause and amplify on those comments because I know
that the committee is interested in that matter, and I may as
well answer it directly at this point.
Before the act transferred oversight responsibility of the
nine departments and four agencies, the City Administrator,
acting under the Mayor's direction, had oversight
responsibility for about 75 percent of the employees in the
District government and for about 85 percent of the budget. If
we add in the Police Department, the numbers increase. If we
look at the City Administrator's Office then, that office had
29 persons and a budget of about $4 million.
With the transfer of the responsibility to the Control
Board and our delegation of the day-to-day oversight of the
bulk of the government to this CMO, there is no need for a City
Administrator's Office of the magnitude and the level of
resources we just described.
So, we are in the midst of conversation with the Mayor
right now to restructure that office and to reallocate and
reprogram those resources. The conversation, as I said, is
going on and has not been concluded. We have some differences
of opinion, but I am confident we will resolve those in the
near future and that the office will be refashioned and
revamped because we do not need two persons, two offices, with
the level of responsibility we have just described.
services of consultants
Now, with respect to the management reform legislation, it
was required that the Authority obtain the services of
consultants within 30 days. These consultants were supposed to
review the departments and make recommendations for
improvement.
We met the deadline. We engaged those consultants, and they
made recommendations. As was already mentioned, we, in fact,
are implementing those reform plans.
In developing the management reform plans, the consultants
first conducted an assessment of the program. Basically, Mr.
Chairman, I have characterized their work as the first round of
effort at problem finding. They found a lot of problems. The
second phase of their work I have described as problem solving,
and they have done that. Now the implementation is up to us. As
already stated, we are in the midst of doing that right now.
Briefly I wish to indicate to you the range of the
management service delivery problems that will be addressed by
management improvement projects. As mentioned, we did in
January 1998, submit a report to the Congress. It had some 269
improvement projects. All of those projects cannot be
implemented simultaneously. We have approached the matter
roughly as follows.
There are a number of proposals that cut across the city.
Many of these deal with information systems, communications. We
will need to invest substantially in the improvement of
computers, telephones, other communications activities. Let me
give you one example.
motor vehicles
Motor Vehicles is far behind in its improvement of systems
and the acquisition of computers so that Motor Vehicles has
been unable to respond to the public in a timely fashion.
Moreover, the systems are so decrepit that Motor Vehicles
cannot provide the assistance which we normally would provide
for police and others because of the fact that its records are
in such poor shape.
consumer and regulatory affairs
Consumer and Regulatory Affairs issues thousands of
licenses to businesses and others. It has a wide range of
responsibilities. So, while I had low expectations of what they
would find, I was really stunned to find that in that
department much of the work is still done on 3 by 5 cards. Many
fees are not collected because they cannot perform.
They need improvements in equipment and systems, and above
all--and this cuts across the government as well--while the
District has many, many employees that you just noted,
thousands of employees, the level of training of employees has
been abysmal. The city simply has not kept pace with the
requirements. Because of the early retirement program in effect
a few years ago, the city lost a substantial number of its
skilled employees who were the more experienced employees. They
have not been replaced by persons who were equally able.
So, we can talk in greater detail about the individual
projects, as you wish, but I want to stress that we are
underway, and we will be able to finance the services of the
projects. Let me talk a little bit about that.
Thanks to your efforts, sufficient resources--I want to
take note of that. You started us off with $8 million. The
Congress approved the use of the net benefit of the
Revitalization Act, which was appropriated to the Authority,
some $200 million. We said that if Congress were to appropriate
that to us, we would use it to finance a number of improvements
in the government. Our first task, of course, is to use some of
that surplus to make certain we reduce the deficit.
We said also that we would set aside $30 million to pay for
productivity and management improvements.
So, we got the $8 million you provided, $30 million from
the net benefit earmarked.
borrowing
We said we would also use $3.5 million to pay the cost of
borrowing $50 million in additional capital funds. We have
decided to do that. We will borrow an additional $50 million,
and we will allocate about----
Senator Faircloth. You did decide to borrow.
Dr. Brimmer. Yes; we have decided.
Senator Faircloth. To borrow.
Dr. Brimmer. We will borrow the additional $50 million in
capital. I instructed the staff yesterday to combine that $50
million for capital purposes with the city's planned borrowing
of $150 million. I see no point in having two borrowings for
the same purpose. So, that will go forward in the next few
weeks.
Of the $50 million of borrowed capital proceeds, we will
use $10 million to aid the schools in their capital expenditure
program. We will use another $10 million explicitly for public
works, to provide capital expenditures for public works. That
will leave $30 million which we will use to finance some of the
capital components of the management reform program. So, that
will give us immediately $68 million of funds available
promptly.
It turns out that there were some capital funds already
appropriated in the 1998 budget, and those have been
identified, and those funds will also be earmarked for
improvements.
implementation of management reform programs
Mr. Chairman, the implementation of a number of the
management reform programs will result in some savings, cost
avoidance, or some revenue generation. We believe that
additional revenues of about $140 million would be available.
Those figures are being refined. Mr. Williams, the Chief
Financial Officer, and his staff are working to do that.
The basic point I want to make is that the implementation
of the management reform programs will not be hampered by lack
of funds. We will make certain the funds are available to do
that.
As I said earlier, the projects are being scheduled. We
anticipate that we can make some start on most, the substantial
proportion of those, but a number of these are multiyear
projects. So, some will get started this year. They will
continue into next year and the funds should be available
because we have identified the funds to the project. Once we
have committed those funds to finance the project, they should
be available until the end of the project. My budget people
tell me that this is an interpretation which is consistent with
the appropriation language because we said to the committee and
to the Congress that we would use the funds to finance the
projects. So, in our view these funds' availability should not
lapse at the end of this fiscal year. Now, Mr. Chairman, I
could amplify that somewhat more fully if you wish.
But let me say that the next steps with respect to
implementation have been described amply by Dr. Barnett. This
is now her responsibility. We on the management reform teams
will support her in every way, and the steps she has described
will be implemented promptly.
Rest assured that the Authority has fully backed the
management reform efforts. All of us are working hard at it. We
are confident that the benefits we have projected will accrue
and that we will, in fact, see an improvement in service
delivery and some improvement in the management of the city's
business. As I said, we started with the passage of the act. We
have new people in place. Others are being recruited, and I am
quite confident that we will fulfill the mandate which Congress
gave us.
Thank you very much.
[The statement follows:]
Prepared Statement of Andrew F. Brimmer
Mr. Chairman and Members of the Subcommittee: Good morning. My name
is Andrew F. Brimmer, and I am Chairman of the District of Columbia
Financial Responsibility and Management Assistance Authority
(Authority). Accompanying me this morning is Dr. Camille Cates Barnett,
the Authority's Chief Management Officer. I appreciate the opportunity
to appear before the Subcommittee today to discuss management reform of
the District of Columbia government.
introduction
Mr. Chairman, the National Capital Revitalization and Self-
Government Improvement Act (Revitalization Act), which was signed by
the President on August 5, 1997, included the Management Reform Act
which required that the Authority engage consultants to develop and to
implement management reform plans to improve public services for the
following departments and government-wide functions: Administrative
Services; Consumer and Regulatory Affairs; Corrections; Employment
Services; Fire and Emergency Services; Housing and Community
Development; Human Services; Public Health; Public Works; Asset
Management; Information Resources Management; Personnel Management; and
Procurement.
The Department of Administrative Services encompassed the
government-wide functions of information technology, procurement and
real property asset management. With the implementation of management
reform plans, the Department of Administrative Services will cease to
exist as a separate entity. The heads of these separate functions will
report directly to the Chief Management Officer (CMO).
agency reporting responsibilities
Management Reform of the District Government is a considerable
undertaking, but the Authority is committed to the results such reform
can achieve in terms of improved public service delivery. For the
Authority, management reform began when we accepted the Congressional
mandate to implement the legislation and to effect a reorganization in
the leadership and responsibilities of major public agencies.
In the Management Reform Act, Congress provided that, ``in carrying
out any of the management reform plans,'' the ``head of a department''
of the District government ``shall report solely'' to the Authority.
With respect to the four government-wide functions, Congress
directed that ``each member of the management reform team shall take
any and all steps within the members' authority to implement the terms
of the plan, under the direction and subject to the instructions of the
Chair of the Authority (or the Chair's designee)''.
Congress thus expected that the Authority would undertake a far-
reaching program of management reform to implement services for the
District government, acting through its designated agents and
exercising control over the nine departments and four government-wide
functions. Implementation of these management reform plans requires
supervision of the day-to-day operations of the government to achieve
their purpose. When the Authority accepted this responsibility, we
stated that we would engage a Chief Management Officer to whom we would
delegate the assignment.
An Order of the Authority on August 5, 1997, required the head of
each of the nine departments and each government-wide function to
``report to the Authority and act under the direction and subject to
the instructions of the Chair of the Authority with respect to the
exercise of all the powers and the performance of all the duties of the
office.'' Using my options, I have instructed the heads of these
departments and functions to report to the Authority through the CMO.
management reform program
The Management Reform Act stipulated that management reform teams
would be established to implement reform plans recommended by
consultants and approved by the Authority. The management reform teams
consist of the Chairman of the Authority, the Mayor, the Chairman of
the Council of the District of Columbia, and the head of the affected
department. To ensure that the management reform teams are
knowledgeable about the plans and projects prior to their
implementation, and to facilitate the participation of the elected
leadership in the development of the plans, teams were established and
convened early in the reform process, and the participation of all
parties was sought and provided.
Since the passage of the Management Reform Act, the Authority has
moved aggressively to develop and to implement management reform plans
to address service delivery problems facing the District of Columbia
government, and to establish the capacity and capability for permanent
and continuing improvement in government operations. The Authority has
developed those plans and, in many areas, already has begun to fix the
problems of poor service delivery to our citizens.
The Management Reform Act declared vacancies in the position of
agency director of the nine agencies. As a result, the Authority named
acting heads for each of the agencies and functions, in subsequent
action, the Authority named permanent agency heads. Some of them were
recruited from outside the government. For example, Richard Fite, the
Chief Procurement Officer, came to the District after a career with the
Ford Motor Company. Others, such as Ms. Jearline Williams, Director of
Human Services, were already employees of the District Government.
To carry out its responsibilities in accordance with the Act, the
Authority also created the position of Chief Management Officer. In
announcing this decision on August 5, 1997, I stated that ``The person
appointed to that position must have substantial, high-level experience
in municipal management. The task of identifying and recruiting a CMO
has already begun, and it will be accomplished without delay.''
The Authority undertook a nation-wide search for the Chief
Management Officer to assist us in implementation of the management
reform plans and the operations of the departments and functions under
our purview. After completion of the search and interviews with leading
candidates, the Authority on December 22, 1997, announced the selection
of Dr. Camille Barnett to be the CMO. She is charged with overseeing
the implementation of the management reform plans and working on a
daily basis with agency directors. Dr. Barnett, a former City Manager
of Austin, Texas, began her employment on January 15, 1998. The CMO
reports to the Authority through the Chairman, and she is already
working to improve management practices and the reform of city
services. The CMO is appointed for a fixed term of five years.
I would also note that, as part of this process, the Office of the
City Administrator is currently downsizing its operations. Previous to
the passage of the Revitalization Act, the City Administrator's office
was responsible for the management oversight of most District
Government agencies. Since the Authority has been mandated by Congress
to assume responsibility for the majority of these functions--both in
terms of personnel and budget--the Authority is working closely with
the Mayor to restructure the City Administrator's office to ensure that
its resources are in line with its current responsibilities. Thus, we
expect that the size of the City Administrator's Office will decrease
in the coming months.
management reform process
The Management Reform legislation required the Authority to obtain
the services of consultants within 30 days of enactment. Therefore, on
August 20, 1997, the Authority issued a solicitation requesting
proposals for assessing, developing, and implementing management reform
plans. One hundred and thirty-three solicitations were distributed, and
71 proposals were received and evaluated. By September 4, 1997, within
the 30 day requirement, contracts were awarded to management and
program experts. The total cost was $6.6 million. On January 2, 1998,
within 120 days of obtaining the consultants, the Authority submitted
the management reform plans to Congress.
In developing the management reform plans, the consultants first
conducted an assessment of the management and program operations of the
agencies and District wide functions enumerated by law. The assessment
entailed the review of strategic plans, organizational structures,
service delivery systems and processes, and the actual delivery of
services to citizens. The consultants were instructed to solicit the
views of citizens, stakeholders, and employees at all levels, as well
as to review existing analysis and studies where available. Citizen
surveys, group meetings, and interviews also were conducted to provide
insight into satisfaction levels with service performance, and to
obtain recommendations on how to improve service delivery.
As the Authority discussed in its report to Congress, the
assessments documented serious deficiencies in how the agencies were
delivering public services. The findings ranged from the lack of
capable staff with the requisite skills to do their jobs; the presence
of outdated and, in some instances, obsolete technology to support
service delivery; inadequate business practices; and an absence of
effective cost reduction methods.
The second step in developing the management reform plans consisted
of the identification of management improvement projects that would
address the many deficiencies cited by the contractors during the
assessment phase. On October 25, 1997, the consultants submitted
recommended improvement projects, which outlined the costs and benefits
of implementing the projects and the capacity of agencies to implement
them. Then, on November 25, 1997, the consultants submitted the final
management reform plans, containing 340 management improvement
projects.
Through a collaborative process with the members of the management
reform teams, the Authority reviewed and selected 269 management
improvement projects to be included in the management reform plans. The
selected projects, once implemented, will have an immediate and long-
term impact on the provision of public services. The projects will
address serious deficiencies in infrastructure and organizational
capacity, and will help to alter fundamentally how services are
performed. Some projects will reduce costs, while others will generate
increased revenues.
reform issues
Briefly, I wish to indicate to you the range of management and
service delivery problems that will be addressed by management
improvement projects. They include some of the following:
--In the Department of Human Services, contractors found that the
organizational structure and current staffing patterns needed
to be aligned more effectively with the priorities of the
agency. The DHS Management Reform Plan includes projects to
eliminate the Office of the Commissioner for Social Services
and consolidate functions into the Office for Social Services,
to out-source some functions of the Office of Facilities
Management, and to establish generally a new administrative
structure.
--Contracts are developed in agencies without benefit of a District-
wide Procurement Policy and Procedure Manual, or without any
commonly-accepted quality assurance standards. Performance
based Statements of Work, objective comparison of bids, and
contract management practices are of poor quality. The lack of
standards makes it time consuming and expensive to do business
with the District, and risks supplier protests, which in turn
disrupt contract executions. The District will develop a
procurement and operations manual to provide standards and
contract formats, so as to ensure consistent and uniform
performance.
--The Department of Consumer and Regulatory Affairs collects over $25
million in revenue each year, primarily from permit and license
fees. However, it does not have a policy for setting permit and
license fees, and the agency does not review them periodically.
A comprehensive review of all fee schedules and the development
of a policy for setting permit and license fees is one element
of the management reform plan.
--The District will implement a one-stop shopping system in the
Bureau of Motor Vehicles, similar to systems in the states of
Virginia and Oregon, which will reduce customers' waiting time
by 50 percent.
--In the Department of Housing and Community Development, the
consultants found weak loan underwriting and monitoring
procedures, poor financial record keeping, and high loan
default rates which have jeopardized program performance and
future funding. The Department of Housing and Community
Development Management Reform emphasizes outsourcing loan
underwriting and other loan servicing functions.
--The fire death rate per capita in the District is 60 percent above
the national average. Response times for advanced life support
calls are extraordinarily high on the average, and do not come
close to meeting national goals. One project for addressing
response times is the development of a Fire/EMS automatic
vehicle location system to facilitate dispatch of vehicles.
--Fundamental communication needs are unmet due to a failing and
archaic telephone system. This problem negatively impacts staff
productivity and service delivery, and increases the cost of
doing business. Forty percent of the District Government's
telephones are of the rotary style, and many lack telephone
features such as voice mail and transfer capabilities. The plan
calls for replacing the District's telephone system.
--In the Department of Health, at a time of scarce resources, an
average of 25 percent of grant funds was not expended in fiscal
years 1991 through 1997. The Department of Health plan contains
a project to redesign grant management operations in order to
utilize better available funds to provide more effective
services.
reform plan costs and implementation
Mr. Chairman, it is important to state that, thanks particularly to
your efforts sufficient resources exist to support implementation of
the management reform projects in fiscal year 1998. To fund the
projects, a variety of sources will be used. The CMO, working in
collaboration with the Chief Financial Officer of the District, have
reviewed the estimated needs for expenditures on management reform
activities. They report that there is approximately $47 million
contained in the consensus operating budget, and approximately $79
million contained in the capital budget. The total estimated cost for
management reform projects in fiscal year 1998 is $126 million.
This is partially financed from the operating budget by the direct
appropriation of $8 million contained in the Fiscal Year 1998 District
of Columbia Appropriations Act, $30 million we have anticipated using
from the net benefit generated by the Revitalization Act's
implementation, and $9 million that was already in the budget. In
addition, we anticipated an increase of $50 million in capital
borrowing, to be combined with the $29 million for management reform
projects that were already included in the estimated fiscal year 1998
capital program. Finally, it is expected that some of these projects
will result in cost savings, or additional revenues estimated to total
$140 million, which can be used to support the projects in future
years.
To ensure that sufficient resources exist to support the projects,
it will be critical to track the spending and revenue streams
associated with each project. Working with the Chief Financial Officer,
we are in the process of developing detailed spending plans to
accomplish this task.
The Authority has instructed the department heads to implement all
of the selected reform plans, both those which can be effected
immediately, and projects which first require additional scheduling and
coordination. There are opportunities to address performance problems,
to make employees more productive, to increase revenues, and to improve
service delivery. Some projects are already being implemented. They
range from stabilizing the Motor Vehicle Information System at the
Department of Public Works to strengthening the Special Operations
Function of the Fire Department. All of them will give citizens better
quality services at lower cost.
next steps
Mr. Chairman, the Authority looks forward to the implementation of
the reform plans, and to the revitalization of City services that will
be improved as a result of this program. The Authority will continue
its collaborative approach with the management reform teams to ensure
that all actions are taken to ensure implementation of the reform
plans. Moreover, the Authority, members of the District Council, and
the Mayor are engaged in a series of meetings that will lead to the
development of a consensus budget and financial plan for fiscal year
1999.
In the weeks and months ahead, the Authority, utilizing the offices
of the Chief Management Officer and the Chief Financial Officer, will
work to integrate important elements of the District's overall reform
structure with the Management Reform Act's efforts. First, we will
require that agencies engage in a strategic planning process that
focuses on their appropriate mission, goals and objectives, to ensure
that they are supported by the reform plans. Furthermore, under the
CMO's direction, the District is developing a Comprehensive Performance
Management System to coordinate and integrate all performance
measurement initiatives together in a city-wide organizational
framework. The details of this Comprehensive Performance Management
System and a timetable for its implementation were submitted to the
Congress on March 2, 1998. Additionally, we will ask that agencies, as
they develop such plans, to link performance outcomes to budget
factors. Implementation of the reform plans should reflect these
factors, and we look to the CMO and the CFO to ensure their effective
implementation.
The Authority will, through the CMO, use a centrally-managed
automated project tracking system to monitor the effective
implementation of the Management Reform Plans. The data base will
contain the detailed plans for each management improvement project. The
data base will stipulate the time frames, the major tasks, and the
person responsible for each major task. We will also refine the
performance measures for each management improvement project. In turn,
this will help us to determine the progress made in implementing the
projects and the impact of the projects on service delivery.
The Authority will provide regular updates to the Congress and the
public on the progress made in management reform plan implementation.
We wish to make sure that information is widely available to the public
on the improvements in City services, and we will use, where
appropriate, the Internet, timely public briefings, and other means to
ensure communication with all stakeholders. Finally, the Authority will
continue its regular survey of citizens to measure the impact of
service delivery improvements on residents' daily lives.
The Authority will produce swift and sustained improvements to the
quality of life of District residents and visitors--positive change
that our citizens can measure and support on their own. We believe that
the District can achieve sustained improvement in City services with a
determined implementation of this reform program.
Mr. Chairman, that concludes my prepared testimony. I would be
happy to respond to any questions that you or other members of the
Subcommittee have at this time.
Senator Faircloth. Thank you, Dr. Brimmer, and thank you
for the report.
Before we get into questions and more discussion than
questions, I would like to hear from Mr. Tony Williams. If we
could first take just a brief break.
[A brief recess was taken.]
Senator Faircloth. Thank you. The hearing will come to
order, and we will hear from Mr. Tony Williams, the Chief
Financial Officer.
STATEMENT OF ANTHONY A. WILLIAMS
Mr. Williams. Mr. Chairman, thank you for the opportunity
to testify today before the subcommittee. It is always a
pleasure, and I would like to thank the subcommittee for its
support in our efforts to improve the financial and fiscal
status of the District over the last year, calendar year 1997.
If I may, Mr. Chairman, I have some charts I would like to
use to illustrate some of my points.
Senator Faircloth. Any charts. As I said earlier to the
other people, there is no rush. Take your time.
Mr. Williams. OK, Mr. Chairman.
positive financial news
Our written testimony has been submitted for the record.
I want to start by just highlighting for the committee some
of the recent positive financial news that we have seen in the
District and some of the issues behind this good financial
news.
clean audit
I would start first and foremost with the clean audit that
the District received, the unqualified opinion, on our 1997
financial statements. This was the first unqualified opinion in
some time for the District. I think it represents a number of
things. It represents, one, the fact that we have at least met
the minimum acceptable accounting standards in terms of our
processes and procedures that produce those reports and allow
those reports to be judged fairly with other institutions like
the District. So, investors, stakeholders, citizens, this
Congress, the leadership in general can make informed
decisions, and I think that is important.
I think it also represents, Mr. Chairman, some significant
achievements we have made in bringing our people, our
employees, up to a higher level of service. There was a lot of
consternation, a lot of questions about the introduction of the
new financial management system and whether our people were
ready to accept the challenge of implementing and managing that
system. I think the fact that we are able to challenge our
people, bring them to the level of producing this clean audit
says a great deal about their ability and capacity as we move
forward.
balanced budget
Next, let me talk about the balanced budget. Mr. Chairman,
the surplus that we produced in fiscal year 1997 was a result
not only of a robust economy--that certainly contributed to an
increase in income revenues for the District--no question about
it--but very, very importantly, improvements in tax
administration, tax collection, and improvements in our funds
control and reporting also contributed to the budget surplus.
All those factors, I think, contributed to that improved fiscal
outlook in 1997.
tax system
Just to give you an example of how we have improved the tax
system--I may not have shared this with you, Mr. Chairman,
before, but last year as of this date, I think we had processed
on the order of magnitude maybe 150 tax refunds that we had
sent back to citizens. That is not in thousands. That is 150.
This year we have sent back over 30,000. Last year the cycle
time for tax refunds was 4, 5, 6 months, God knows how long.
This year our cycle time is something like 15, 16 days. We have
made a commitment to process our refunds ahead of the IRS. We
are doing that as I speak, and I am very proud of that. I would
like to thank Dr. Nat Ghandi, our Tax Director, for a lot of
his work in bringing us to that point.
Senator Faircloth. Last year we had sent back 159 refunds.
Mr. Williams. I may be off by 100, but an extremely low
number.
Senator Faircloth. And this year you are at 30,000.
Mr. Williams. Over 30,000 now have been sent back.
Senator Faircloth. Well, talk about spectacular
turnarounds. That is one.
cashing checks
Mr. Williams. Another, Mr. Chairman, is posting, cashing
our checks within 24 hours. John Hill, the Executive Director
of the Authority, and I were out visiting California and their
introduction of a new tax system, and they were showing us
their floor, their management floor, where they literally had
runners pick up checks and rush them to the bank. We were
comparing this with the District where last year I was getting
calls from folks. One gentleman called me and said that he had
sent a check of $60,000 to the District and would we please get
around to cashing it because it had been something like 3 or 4
months.
Senator Faircloth. $60,000.
Mr. Williams. $60,000. Dr. Ghandi implemented a policy
where checks are deposited on a 24-hour basis. We now have
cashed over $40 million in checks, and on that basis will save
the District $4 million a year on interest alone.
investment grade
So, with these different improvements, we have reentered
the public market. Even though our credit rating is still below
investment grade, we are trading on an investment grade basis.
As you know, Mr. Chairman, we have enjoyed two rating upgrades
now, one from Moody's and one from Standard and Poor's, which
put us on the threshold of investment grade.
I have talked about the budget surplus. We are paying our
vendors on time, and as we speak under the direction of Dr.
Barnett and our new Procurement Director, we are integrating
our financial operations and procurement operations to see that
the remaining vendor payment problems are addressed and
rectified.
financial reporting
Finally--and something that we are very proud of--we are
providing decisionmakers throughout the District with
consolidated, streamlined financial reporting. It is not on the
speed we would like. It is still 60 days old, but I think we
have come light years, given the fact that we have an
inadequate and decrepit financial management system.
So, Mr. Chairman, on the basis of these improvements in our
financial and fiscal affairs, I think we can see now a
difference in our general fund revenue and expenditure
patterns.
In this first chart, we basically show the period from 1994
to 1997, and we see before 1996 expenditures trending ahead of
revenues in the District, and we see in 1997 that red line
diving below the black line, the revenue line, for the first
time.
In the second chart, we see----
Senator Faircloth. The red line is the----
Mr. Williams. The red line is expenditures.
Senator Faircloth. And the dark blue line is----
Mr. Williams. Total revenues in the general fund. So, you
see on the basis of the work that we are doing, the Authority,
and the work of this committee with the Revitalization Act, you
can look now, projecting 1998 to 2002, and see that revenue
line running ahead of the expenditure line.
Mr. Chairman, that is good news for the District, and it
shows that we are now facing the potential for real structural
balance in the District. I say potential because, I think as
Dr. Brimmer would agree, this balance is tentative, fragile,
and subject to change. I think, as the Authority would also
agree, the District still faces, notwithstanding this good
financial news, a number of deficits.
tax deficit
One deficit I would call our tax deficit. If you take
information technology firms, biotechnology firms, services,
associations, we tax these folks too much to be competitive.
Senator Faircloth. Would you say that again?
Mr. Williams. Information technology firms, biotechnology
firms, service firms, and associations, all of these entities
are taxed on a noncompetitive basis in the District. We tax
them much higher than surrounding jurisdictions, and this does
not put the District in a competitive position going forward.
revitalization act
Even though the Revitalization Act has meant a lot for us
in terms of our fiscal status, and our net benefit from the
Federal Government has increased since the Revitalization Act,
there is still a deficit between what we feel the District
deserves, if you will, from the Federal Government and what we
have actually obtained.
capital deficit
There is a capital deficit that remains in the District
both on the physical side and the human side. A study of the
schools has shown that there is $1 billion left in capital
investment. The U.S. Department of Transportation has shown
that there is a $2 billion capital deficit.
Senator Faircloth. How much?
Mr. Williams. Two billion dollars, sir, for public works,
transportation, and a study last year by the schools showed a
$1 billion capital shortfall. So, there is a huge capital
shortfall in the District.
Senator Faircloth. Did you say there was a $2 billion
capital deficit for public works as in streets and----
Mr. Williams. Yes, sir, bridges, public works in general,
streets, sewer systems, all of the capital you need to have a
solid public works infrastructure in the District.
Senator Faircloth. Thank you.
service delivery deficit
Mr. Williams. Then finally, Mr. Chairman--and this gets us
to the next point and the whole reason for the management
reforms--a service delivery deficit. And it is in service
delivery, coupled with economic development and tax
restructuring, that we can boost the city's economy and improve
its revenues.
budget process
Which allows me to wrap up, Mr. Chairman, with this final
chart. The Chief Management Officer, Dr. Barnett, and I,
working in conjunction with the Authority and under the
direction of Dr. Brimmer, based on legislation by this
committee that gave the District the ability to streamline and
reorganize the budget process, are focusing in this year's
budget process, which includes the Financial Authority, the
Mayor, and the Council, on 10 key areas.
One, financial management, meeting some key financial
targets. Obviously they are subject to policy, but they are
general goals we all want to shoot for, whether trying to
create structural balance in the District, creating a reserve
fund or trying to manage our debt load better.
Management reform, the purpose of the hearing today.
A comprehensive labor strategy, matching pay and
performance on a consolidated basis, I believe, under the
direction of the Chief Management Officer.
Tax restructuring we have talked about already.
Federal relations. I think the committee is well aware of
all of those issues.
Capital priorities. We have talked about the capital
deficit in the District.
receiverships
Managing the receiverships, a big joint effort on all of
our parts, under the auspices of the Chief Management Officer
and the Authority, to try to enter successfully and ultimately
collectively with all of the receiverships into an agreement
that would allow the District to be assured that it will move
out of these receiverships by improving service delivery in
these key areas, whether it is foster care or mental health or
whatever.
I would personally think that the Congress would pay a lot
of attention to that because I think that the District itself
in general is in fix-up mode, and the courts have ordered fix-
up mode in some of these receiverships. And there may be some
way to try to reconcile all the fix ups so that we are working
on a coordinated basis.
D.C. public schools is a big funding issue for the
District.
Health care policy, trying to get the most bang for our
buck in health care.
And then, finally, all the different program enhancements
that will be part of the overall improvement efforts of the
Chief Management Officer.
Mr. Chairman, those are the 10 issues that we face and why
I think the 1999 budget is one of the most important budgets
the District is going to formulate and enact.
With that general testimony, Mr. Chairman, I would be happy
to answer any questions you may have.
[The statement follows:]
Prepared Statement of Anthony A. Williams
Chairman Faircloth, members of the committee, my name is Anthony
Williams and I am the Chief Financial Officer for the District of
Columbia. Thank you for this opportunity to testify on the issue of
management reform in the District, specifically with respect to the
financing of these reforms and its associated effect on the District's
financial and fiscal stability. In addition, you requested that I
discuss the current status of the new financial management system and
any other important issues facing the District.
background
The District's recent financial crisis was years in the making.
Poor financial management practices that had been masked in the 1980's
by the healthy stream of real estate revenues became acutely obvious in
the 1990's. The District faced a bleak revenue picture, both because of
a shrinking tax base and an ineffective tax collection system.
Compounding this, the District's spending pattern continued unchecked.
Also, the District's budget was and continues to be structurally
imbalanced. While we now have reversed the trend of expenditures
outpacing revenues, without further assistance from the federal
government, like the President's revitalization plan, District
expenditures, in the long term will continue to outpace revenues. This
is primarily due to the District's narrow tax base. And our financial
reporting system was abysmal. By 1995, the years of financial
mismanagement and neglect posed a significant threat to the long-term
viability of the District government.
Today, the District has a balanced budget, due in large part to
more effective spending controls and better collection efforts by the
Office of Tax and Revenue. Indeed, we have gone from a projected budget
deficit of $75 million to a surplus of $105 million. We have recently
had our bond ratings upgraded by both Standard and Poor's and Moody's
Investor Service. In addition, we have achieved the first clean audit
for the District government since 1993. These successes would not have
been possible without the support and assistance of this Committee.
However, we still have a lot of work to do. With our financial
house in order, the District is now in a position to successfully
implement management reforms that will result in better service
delivery to our citizens.
management reform
We recognize the need for management reform. At the same time, we
must also recognize the need to implement reform in a financially
responsible manner. Management reform must be brought about along with
the reduction of the District's accumulated deficit. District
stakeholders must maintain and continue to improve upon the financial
health that we have worked so hard to restore.
financial reform created the conditions for successful management
reform
The enormous progress that we have made in reforming the District's
financial management provides the foundation for successful management
reform. Additionally, the Council, the Mayor and the Authority have
made the difficult decisions to help put the District on sound
financial footing. The District's overall financial position improved
dramatically in fiscal year 1997, and, with responsible decision making
by District leadership, we expect that to continue into 1998 and 1999.
--This improved financial outlook is not just a byproduct of the
economy. Much of the District's increased revenue is due to
improved collection efforts of the Office of Tax and Revenue.
[In billions of dollars]
Estimated
Fiscal year local revenue
1997.............................................................. 2.749
1998.............................................................. 2.811
1999.............................................................. 2.870
Indeed, the fiscal year 1997 financial audit results show that
improved revenue collection and spending discipline left the District
with a surplus for the first time since 1993.
--The improved budget process produces better information for making
decisions while aggressive budget execution increases the
capacity to enforce accountability.
--The efforts of our Treasury department have given the District new
credibility in the bond markets. Our improved financial
performance has been recognized by the bond markets through
lower rates and the recent upgrade of the District's credit
rating.
--The Controller's Office has made tremendous strides in rebuilding
our financial infrastructure.
Our financial progress gives the District's stakeholders the
institutional capacity to implement management reform. Working closely
with the new Chief Management Officer, we can now ensure that the
District connects resources with results.
funding
One of the most important issues regarding management reform is
funding: where will the money come from. The starting point should be
the fiscal year 1998 consensus budget. Our analysis of the management
reform proposals indicates that it will be possible to implement a
substantial one time management reform program with current available
funds. While the Chief Management Officer is still reviewing and
assessing agency implementation plans, it is now estimated that at
least $38 million will be spent on management reform in fiscal year
1998. Funding for the $38 million is already included in the District's
fiscal year 1998 budget. Additional funds have been identified to the
extent additional projects are approved.
The funds identified in agency budgets are based on existing
spending plans, although the decision makers are still working out the
final numbers on management reform. It is possible to increase the
funding available for management reform even further by reducing
spending for current programs, but I strongly urge all stakeholders to
remain consistent with the overall consensus budget framework.
reducing the accumulated deficit
As we move forward with management reform, it is important that the
District make progress in reducing the District's accumulated deficit.
I believe that all the stakeholders have this priority at the
forefront. It is also one of the key requirements to move the District
toward regaining Home Rule. The following principles may serve as a
useful framework for discussion:
--The District should live within its approved fiscal year 1998
budget. Management reform funds must only be used for approved
projects, not diverted to fund ongoing agency operations. To
ensure that this happens, the Chief Management Officer and I
required agencies to develop detailed spending plans for each
project. After the plans are approved, we recommend that
management reform funds be placed in separate accounts to track
projected expenses and progress. We will show the District's
residents exactly how much was spent for each project and
exactly what results each project achieved.
--Management reform should be directed towards one-time expenses.
Projects which have significant continuing costs should be
implemented through the regular budget process.
--Although the primary purpose of management reform is to improve
services, many projects are also projected to either increase
revenue or create cost avoidance. We must ensure that projected
savings and revenues actually materialize or clearly identify
funds to pay for needed reforms. The Chief Management Officer
and I will work closely together to track progress in cost
reductions and revenue enhancement.
coordination and collaboration between cfo and cmo
As the financial organization moves from a control posture to a
support posture, we are committed to integrating financial management
into program management in order to improve governmental efficiencies.
As we move out of a control period, this integration will be central to
the long term success of the District. Our office has supported the
Chief Management Officer in her initial efforts at implementing
management reform and we are committed to continuing that support.
overview of fiscal year 1999 budget process and priorities
Working together, the Mayor, the Council of the District of
Columbia, and the Financial Responsibility and Management Assistance
Authority reached agreement on the top budget priorities for fiscal
year 1999. These were identified as follows:
1. Meet financial management targets.--Obviously, enhancing the
District's financial position remains a primary concern. The budget
must support achievement of key financial goals, including the
following:
--Eliminate accumulated deficit
--Establish a positive fund balance
--Achieve investment grade bond rating
--Reduction of debt burden
--Develop structural budget balance
2. Funding for management reform.--Baseline budgets will not
include management reform funding. Initiatives must be prioritized and
implementation decisions must be made concurrently for fiscal year 1998
and fiscal year 1999.
3. Develop a labor strategy.--To better prioritize and support the
compensation needs of District employees, decision-makers must first
devise a comprehensive labor strategy, which will then guide budgeting
and negotiating decisions for fiscal year 1999.
4. Tax restructuring policy.--The Office of Tax and Revenue has
developed options for modifying the tax code to promote economic
development and parity with surrounding jurisdictions. These options,
in conjunction with the Tax Revision Commission's proposals, will
provide the foundation for discussion and policy decisions.
5. Federal relations.--The federal government provides financial
contributions to the District through various forms. This discussion
will focus on the best approach to negotiating and leveraging these
contributions for fiscal year 1999 and beyond.
6. Capital financing priorities.--The District faces substantial
capital needs in excess of available funding. The Capital Review Team
has prioritized the requests of agencies according to sound criteria.
Providing adequate funding will be a central focus of budget
discussions.
7. Returning receiverships to District control.--Currently,
receiverships and court orders account for $200 million of the District
budget. To improve service delivery and regain budgetary discretion,
decision-makers must develop a strategy to improve these operations so
that they may be returned to the District.
8. Funding for D.C. Schools.--Improving the public schools
continues to be a major priority for the District. A combination of
reform initiatives and funding support must be evaluated for fiscal
year 1999.
Health policy.--Rising costs, operational issues, and a rapidly
changing federal environment will require essential policy and funding
decisions to be made regarding health policy in the District.
Particularly, this discussion should focus on the following issues:
--Funding for D.C. General/Public Benefit Corporation
--Medicaid policy
10. Program enhancements and service improvements.--As part of
their budget request, agencies submitted specific program enhancements.
Decision-makers must set priorities and review the associated budget
requirements to determine which will be funded.
The District's decision makers have a window of opportunity to set
the District on sound financial footing for years to come. Therefore,
it is critically important that these ten priorities be achieved.
The Mayor, the Council of the District of Columbia, and the
District of Columbia Financial Responsibility and Management Assistance
Authority have also agreed to a revised budget process for fiscal year
1999, as provided for in Section 11603 of the National Capital
Revitalization Act. The process includes a series of joint budget
workshops held with the Mayor, the Council, and the Financial
Authority. Each workshop is focused on these ten priorities.
After the final work session, options will be submitted to the
Council for passage, then to the Financial Authority for approval. The
Financial Authority plans to transmit the complete consensus budget to
Congress for enactment.
implementation of financial management system
Mr. Chairman, due to the leadership of this Committee, the District
was able to let a contract for the installation of a critically
important new financial management system. The need for a new system is
vital for the long term financial stability of the District. And I
thank you personally for your support.
There are two aspects to the new Financial Management System (FMS):
Hardware/Software and the reengineering of process/training of
personnel. With the assistance of this Committee and the Authority, we
secured funding for and selected a vendor to implement the first piece,
a new system. This system has already been installed on a pilot basis
at the Metropolitan Police Department and the D.C. Public Schools. The
feedback from these agencies has been positive. Over the next few
months, we will include the Department of Public Works and portions of
the Department of Human Services and procurement and personnel
functions. The system will be fully operational by October 1, 1998.
The new FMS allows agency heads and others to access financial
information in real time: that is, instantaneously. Currently,
financial information is usually 60-90 days old by the time it is
compiled into a report for officials. Some information is never
available. With the new system, agency heads will be able to access
financial information at their desktops with the click of a mouse
button.
Having timely information available will allow managers to make
informed decisions regarding departmental priorities. The new FMS will
dramatically improve the ability of District officials to make the
important budgetary and programmatic decisions necessary to streamline
and improve agency operations while at the same time ensure that
spending caps are not exceeded.
Another major component of the FMS installation includes an
intensive, ongoing training program and reengineering of our financial
processes. As you know, these elements of the implementation are
critical to the success of the overall project and ones that we take
very seriously. All users will be fully trained in the operation of the
new system. Training for these pilot agencies has been completed.
Additionally, we are undertaking a reengineering of our financial
process in order to ensure that our systems and processes are
synchronized for maximum efficiency and performance.
I want to thank the Committee for their support of this critically
important system and will continue to meet with you and your staff as
we make progress towards completion.
economic development corporation
Although the District has balanced its books and realized a budget
surplus for the current year, and continues to enhance its revenue
collection efforts, real recovery requires the growth of the District's
economy. The National Capital Revitalization Corporation (NCRC)
consolidates the currently fragmented economic development functions of
the City into one entity which will stimulate the economy and create
new jobs in the District.
Initially, the NCRC will be charged with preparing a strategic plan
for economic development. As we all know, the District has been lacking
an economic development strategy. Unfortunately, this has cost us
significantly, in terms of lost opportunities to attract and retain
businesses, thereby reducing the increase in revenue that many other
cities have been experiencing. With the NCRC, the District will begin
to see the benefits of a growing economy and a rebirth of the city,
both downtown, and perhaps more significantly, in the surrounding
neighborhoods.
Too often in the past, economic development entities did not have
the right staff to make the important decisions that had to be made.
The NCRC will be staffed with economic development professionals that
will be held accountable for achieving specific results.
The NCRC will have the authority to finance economic development
through the issuance of revenue bonds, including tax increment bonds,
as well as other financing, including the use of loans and grants.
conclusion
In closing, a properly financed management reform plan will provide
immediate and visible benefits to the citizens of the District.
However, we must remember that management reform should be part of a
broader strategy of revitalizing the District: economic development,
tax relief, and long term financial stability are equally vital
components of the District's recovery, as is deficit reduction. If the
District acts responsibly it will be possible to improve basic services
and reduce excessive taxes.
Thank you and I am pleased to answer any questions the Committee
may have.
Senator Faircloth. Thank you, Mr. Williams, and thank all
of you for what we are doing here and what we are trying to do.
Just as a broad statement on where we stand and what we are
doing, we have begun to make a start in this city in
straightening out the problems that have tended to inundate it
for the last 20-plus years. I find and feel a spirit of
excitement in the city and among the citizens that I see and
talk to on a regular basis. Somebody is always saying that they
are beginning to see improvements, and I think that is an
excitement that we can all share and be proud of, that it is
beginning to happen.
As has been pointed out by each of you, we are a long way
from being where we need to be and where we want to be and
where we want the city to be. But I think there is a strong
feeling both here and certainly in the Congress--there is the
feeling with you all and with the citizens of the city that we
have started to make the turn. And there is the determination
to continue to make it and to make the city the type of city we
want it to be.
press coverage
Now, Dr. Barnett, everyone else at that table and most of
them in this room know it, but you will rapidly find it out,
that in Washington you are under a very finely filtered
spotlight. Anything we do here, both good and bad I must say
for the press, gets excellent coverage. [Laughter.]
And that is good because the things we do right, the
improvements we make will be properly reported and we will know
about them. Those tend to inspire further improvements in
things.
I have got a lot of questions. When I say questions, I mean
we are here to discuss what we can do to make the city better,
so do not hesitate to speak up or ask questions yourselves.
police department
I want to start. One of the first things, Dr. Brimmer and
Dr. Barnett, is the police department. The Metropolitan Police
Department is currently operating under a memorandum of
understanding. Some have criticized the MOU partnership because
it has too many chiefs and creates too many lines of authority.
Among those who have criticized it, I am in the group.
I was disappointed to see that after 1 year, the MOU
received a report about the number of police still behind
desks. The police still do not deploy officers to the streets
as recommended. Some are there. It is a little better, but it
is a long way from where it should be.
Do you all share the criticism of the MOU partnership?
Would you recommend continuing MOU as a structure, or is it
something we should monitor very, very closely in the next
year?
We have time to think. We have begun to make the turn, so
we can take the time to think.
I think we have made great headway, Dr. Barnett, in
speeding tickets and getting building permits, and we are
beginning to function as a city should.
police chief chauffeurs
But the Police Chief, Chief Proctor, who I think is doing a
good job and trying, has three chauffeurs. That is the type of
ludicrous thing we have been reading and the public has been
reading about the city now for far too many years. It is time
that we cut out that kind of stuff and move to running it like
a hard, tough, real city should be run and eliminate the fluff.
memorandum of understanding
That having been said--and I will ask any one of the
three--do you share the criticism that has been levied against
the MOU, not as individual members of the MOU because I think
that every one there has truly tried to make it work, but as an
operating entity, as a way of doing business?
Dr. Brimmer. Mr. Chairman, I will speak to it. I am a
member of the MOU group. Three of us at the Authority are
members: Vice Chairman Harlan and Ms. Newman.
The group was formed in order to bring to bear all of the
resources in the city concerned with criminal justice in order
to mobilize those resources and use them most effectively. It
got started when the police department was under the day-to-day
direction and supervision of the Mayor.
booz allen study
You might recall that soon after the group was started, we
engaged a management consulting firm, Booz Allen and Hamilton,
to study the department, tell us what is wrong, what can be
done to improve it. We thought it was better to have that study
and review paid for by the Control Board. We paid for it. We
engaged them, but we thought the one way to get it done was to
take responsibility for it.
members of memorandum of understanding group
But we also concluded that the members of what later became
the group had different responsibilities. The memorandum of
understanding group includes the three members of the
Authority. The Mayor is a member, the chair of the Council is a
member, as is the chair of the Judiciary Committee, and the
Corporation Counsel. The Chief of Police is a member. The U.S.
Attorney is a member and the Chief Judge of the Superior Court.
All are members.
Senator Faircloth. How many members total? Seven?
Dr. Brimmer. Seven, that is correct.
It is an informal group. We meet, we discuss a number of
issues. The group is chaired by Mr. Harlan who is the Vice
Chair of the Authority and the member among us who already had
oversight responsibilities for public safety, the police,
corrections, and fire.
What has the group done in relation to the implementation
of the reforms and now the role it is playing in the search for
a new police chief?
The group serves in an advisory role. The MOU group does
not give day-to-day instruction and direction to the police
chief. When we empowered the Chief in February 1997 to run the
department, we made it clear, first, that the day-to-day
operations of the department were in the hands of the Chief.
The Mayor delegated that authority to the Chief.
authority delegated to chief
Senator Faircloth. I am sorry?
Dr. Brimmer. The Mayor delegated his day-to-day oversight
and direction.
Senator Faircloth. The Mayor does not have that.
Dr. Brimmer. No, no; under the statute he has it, but we
encouraged the Mayor in the winter of 1997 to delegate that
authority to the Chief of Police.
One of the recommendations of the Booz Allen group was that
the day-to-day direction of the department be transferred from
the Mayor and vested in the chief. They said that as a result
of their study, they had concluded that there was an
unnecessary degree--there had been an unnecessary degree of
day-to-day intervention by the Mayor's office in the conduct of
the police department. They said that intervention had not been
helpful, but it had been a source of difficulties.
We took that advice seriously, and we discussed the matter
with the Mayor and encouraged him to delegate his authority to
the chief for day-to-day operations and oversight.
At the same time, we at the Control Board used our
authority, which we could do under our legislation. We gave the
chief the power to make personnel decisions outside of the city
personnel rules. We delegated to the chief the power to make
procurement decisions outside. Booz Allen and Hamilton told us
that those powers were necessary to enable the Chief to
function. So, for well over 1 year, the Chief has had the
responsibility to run the department.
Now, the Chief does consult, and I want to stress that. The
Chief does consult with the MOU group, and particularly the
Chief does consult with the chair of the MOU group, Mr. Harlan,
because Mr. Harlan is available and devotes more time and
attention to it. But the MOU group has not been running the
department, and I am going to stress that. The Chief runs the
department, and the oversight is provided basically by the
Control Board. I want to stress that because there are three of
us, and Mr. Harlan is the chair.
search for police chief
Now, let me say one thing about the role of the MOU in the
search for the police chief. Under the statute the Mayor has
the authority to appoint the chief with the approval of the
Council, but at the very beginning it was understood, and the
Mayor has said it publicly, that the search, while technically
it will be conducted by the Mayor, in fact----
Senator Faircloth. Would be conducted by----
Dr. Brimmer. Would be conducted by three people, the Mayor,
the chair of the MOU group, Mr. Harlan, and Mr. Evans, the
chair of the Council's Judiciary Committee. Those three persons
are, in fact, acting as the search committee for the chief.
However, all of us are participating and discussing the
search. I participate. Ms. Newman participates.
The search was put in the hands of a management recruiting
firm, Norm Roberts of California. He has produced a list of
candidates that is very strong. The list has been reviewed by
us, and we will be interviewing those candidates. I can assure
you that, just as was the case with our search for the Chief
Management Officer, we will play a strong role in identifying
those candidates. I can assure you--and the Mayor has said it
publicly--the candidate recommended to be police chief will be
the candidate agreed to by the MOU group. I said that that
means the whole group. All of us are participating.
The search is quite far along, and my review of the list
and the references convinces me that we will end up with a
first-rate chief of police.
Now, I know the Mayor has established a committee. He is
looking for public input, and that would be appreciated, and
their views will be considered. But in the end the selection of
the Chief of Police will be the result of the process I have
just described where the search is in the hands of the MOU, and
those of us who are members of it will be playing a strong
role.
Senator Faircloth. Thank you, Dr. Brimmer. I thank you. I
have a question I want to ask you in a little bit but not right
now.
memorandum of understanding win-win situation
The MOU started out in a win-win situation because from
where the Police Department was, there was not much you could
do to make it worse. So, the MOU had a pretty good base to
begin with. Booz Allen did not have to bring their top brains
to the table to figure out that there was an unnecessary degree
of interference in the Police Department by the Mayor. That did
not require deep and long study. It was pretty obvious from day
one.
Dr. Brimmer. Mr. Chairman, may I just say one other thing?
I realize you did ask the question, is the MOU needed, should
we keep it?
Senator Faircloth. Yes; that was my one question I wanted
to ask you. Dr. Brimmer, in a word, yes or no. Is it good or
bad?
Dr. Brimmer. Yes. Yes, and I reached that because I raised
the question myself 1 week or 10 days ago.
Senator Faircloth. Is that the way to run a police
department with an MOU? Yes or no.
Dr. Brimmer. In the District's setting with this diversity
and dispersion of authority, the answer is yes, but I would
hope that the need for the MOU would disappear very quickly.
Senator Faircloth. Thank you, Dr. Brimmer. I have got some
other questions.
Dr. Barnett, I do not mean to put you on the spotlight, but
this is a question we are going to face. You have had a fairly
full plate with nine agencies and have not really had time to
get beyond your purview of what you are assigned to do. But
would you recommend the change of the MOU structure in the way
the Police Department has been handled?
memorandum of understanding partnership
Dr. Barnett. I think the MOU partnership is a good way to
get people together from a criminal justice system and
coordinate activities. In that sense, I think it has been an
extremely valuable group, and I would hope that it continues.
In terms of the management of the police department, I have
not seen any police department managed by a group like this,
and as Dr. Brimmer has indicated, I do not think it was the
intent for the MOU partners to manage the police department. I
think we do need to look at clarifying the lines of authority
in the police department, and I think in the police department,
like many of the other agencies, we need to bring the
government back together because we all need to work together.
One of the things that I am trying to do operationally is
to be sure that the police department and the nine agencies
that I work with and any of the other agencies work together to
provide the service because that is ultimately what it is going
to take. I recognize that we are in a transition period, and so
some things are necessary now that may not be necessary later,
but I do hope that we will be able to bring the government back
together.
Senator Faircloth. Thank you, and that is a good summation,
I think, of where we stand. The MOU has certainly served well.
They have served without benefit of pay or anything else. They
have just dug in and the three members of the Control Board,
totally unpaid, have done work, and have tried to make it work.
Tony, would you care to----
Mr. Williams. Mr. Chairman, as the CFO, I really do not
have any public, formal opinion on the matter. I think that is
best to have it that way.
Senator Faircloth. I am sorry?
Mr. Williams. I think it is best to have it that way, for
me to focus on the financial issues.
Senator Faircloth. Since we are on you, Mr. Williams, I
wanted to just say one thing in great praise. I have heard
nothing, in visits with you and Dr. Barnett, but of the
cooperation between the CFO and Dr. Barnett's office. Behind
your back, she has been high in praise of your cooperation and
what you have done and how it is working together to bring a
coordinated effort. For that, I thank both of you.
management improvement projects
Dr. Brimmer and Dr. Barnett, following the release of the
management reform plan, the Control Board selected 269
management improvement projects to be included in the reform
plan. These projects cover pretty much every area from welfare
to work to street cleaning, trash collection, improvements that
are long overdue. It appears that some of these projects will
be completed this year and some will extend on to the turn of
the century.
Could you tell us what percentage of the projects are short
term, to be completed immediately and what percentage are long
term, to be completed over an extended period of time? Dr.
Barnett, would you----
Dr. Barnett. I can estimate that for you. Much of the
management reform projects are----
Senator Faircloth. Name me some examples of what we are
trying to do immediately.
Dr. Barnett. Well, a lot of the immediate work has to do
with what I would call short-term operational issues that
require attention. In some cases a management reform project is
characterized as stabilizing the leadership of the department,
which means hiring where there has not been a permanent
director. Or it is developing a strategic plan, as I discussed
in my testimony earlier, that we will be doing citywide. Or it
might be buying a piece of equipment such as a fire truck or an
ambulance that is needed to provide the service. So, in those
cases, those types of management reform projects are pretty
easy to accomplish within the scope of the remainder of this
fiscal year.
Other types of projects are mostly systems implementation.
There are computer systems that need to be designed and
installed to do things like support the motor vehicle
registration or the grants processing in the Housing
Department, or a wide area network throughout the city, or
installing telephone systems. Those may not all be completed.
In fact, they will not all be completed by the end of the year.
year 2000 complaint
One of our major projects is to be sure that all of our
computers are year 2000 compliant. That is one of our major
initiatives under management reform. That project is underway,
but it is not anticipated that we will complete that until
midyear 1999.
So, those are the examples of them. The large dollar
projects generally, where most of the effort and most of the
money are, are going to take more than this fiscal year to
complete just because of the nature of the project. Some of the
shorter-term projects I think we will be able to finish this
year.
Senator Faircloth. Dr. Brimmer, if I heard you correctly in
earlier testimony, you mentioned, however the phrasing was,
that once money is appropriated for a major project, that it
stays there. It is not chopped off at the end of the year to be
redone. Would you tell me what you said again?
Dr. Brimmer. Yes; before I do, Mr. Chairman, may I call
your attention to my testimony?
Senator Faircloth. All right.
projects underway
Dr. Brimmer. I did include some of the examples of the
projects that are underway. They give the flavor of what is
being done. A couple of items Dr. Barnett mentioned are
included. I put this in deliberately to indicate that we are
not twiddling our thumbs.
Senator Faircloth. You are not what?
Dr. Brimmer. We are not twiddling our thumbs. It is not
just efforts being planned, but project that are actually being
done.
Now, I will call your attention to some of those. They
illustrate what under certain circumstances I might be tempted
to call low-hanging fruit, but I will not. These are examples
of activities that are going on in a variety of departments
already. Some of them will be completed in months. Some will be
completed by the end of the year and so on. So, they are
actually being implemented. Very soon the service delivery
associated with these will be showing up.
Senator Faircloth. I hope we are gathering the low-hanging
fruit quickly and carefully.
Dr. Brimmer. Yes.
completion of goals and projects
Senator Faircloth. My question was really--and maybe Mr.
Williams will speak to this--that there had been a tendency in
the city of no continuity of a project, that we would start a
plan, a program and chop it off and the budgeting did not flow
from year to year to arrange for the proper completion of a
given goal or project.
Dr. Brimmer. Yes; that is the point I was addressing, Mr.
Chairman. It is my understanding that in the past most
appropriated funds were fiscal year funds that gave rise to the
deplorable habit of agencies finding themselves during the year
rushing at the end to spend the money before the authority
lapses.
funds available for life of project
What I am saying is that--and this is what we spelled out
in our testimony when we were before you with the budget--the
funds we are earmarking for management reform we would like to
have available over the life of the project and not have it
lapse at the end of the fiscal year simply because the funds
were appropriated during a given fiscal year. So, the $8
million, for example, that you provided. The chances are that
we will spend all of it this fiscal year, but if we do not, we
do not want to see it lapse. That is what I meant. We want the
funding earmarked for management reform to be available to
finance the implementation of that project, however long it
takes.
Senator Faircloth. Thank you, Dr. Brimmer.
Mr. Williams, I had two questions. One I am sure is
overlapping and I am not into the details of the city's
operation enough to understand, but I remember very clearly in
time--maybe it was almost 2 years ago--that we met and maybe
with the Control Board at the time.
accounting system
In essence what you said was that the city did not have an
accounting system, that the equipment was antiquated to broken,
that a lot of the people were untrained. I am not trying to
quote you, but that is in essence what you said and that we
just did not really have an accounting system for the city.
What I would like to know--and I heard what Dr. Barnett
said, that one of our first goals and moves was to improve
equipment. Would you tell me how that is coming, how much of it
we have outsourced, which is one thing we were going to do?
Would you tell us how that is coming? Because the core and the
basis of the operations of the city have to come from sound
accounting practices. So, would you tell us what you have been
able to do and where we stand?
Mr. Williams. Yes, sir; when we talked to you, we discussed
with you the fact that, in our estimation, the District was
lacking in a number of the key elements of a workable financial
system, and we defined a financial system to include not only
hardware and software but operations, people, and processes,
and that we needed to do a lot of work in each of these
different areas.
financial management system
As we began to do work on the people, process, and
operations front, under the auspices of the Authority and in
conjunction with them, we issued a solicitation for a new
financial management system. We had involvement from the
Congress in terms of oversight and critique of that
solicitation. The GAO was involved in terms of critique. The
OMB was involved as well. It was directly involved, along with
our people and staff of the Authority, to move forward on the
solicitation.
After an exhaustive amount of analysis and review,
including an analysis of the capabilities of the current
system, we made a decision. That decision was based on
comparing the existing, as-is situation, with a situation in
which we basically took the system, tried to improve it, bought
a new system, and another option in which we took the new
system and looked at what additional people or combinations of
people and staffing patterns we needed to make this thing work
best. We decided that of all of the different options, the
option to implement was a new system, and so we proceeded with
the solicitation on that basis.
Having done that, I think we did two things in the
financial management system from a risk management point of
view that have allowed us to move forward I think on time and
under budget.
risk management
The first is we enlisted, again on the basis of a
nationwide solicitation, the help of a contract management
firm, James Martin, known around the country for contract
management of projects like this. To provide us assistance and
consultation in managing the firm, Peat Marwick is being used
for installing the project. And I think that was a big step in
terms of risk management.
Another risk management step that we have taken was that we
have all along planned on installation of the system on an
incremental, as opposed to what is called a big bang, basis. In
other words, rather than waiting to a certain point in the year
turning the system on in all the different agencies, we decided
that what we would do is prioritize the major service areas,
the agencies with the major dollar volumes, bring them up on a
pilot basis, test them on an experimental basis while we still
use the old system as what we call the system of record, and
then over the summer bring the remaining agencies on board so
that on October 1, the beginning of the next fiscal year, we
can execute the new system throughout all the agencies as the
system of record. This will leave us another 6 months to do
what we call the reengineering, the final indepth fix on all
these processes and operations that plague the District.
Senator Faircloth. Mr. Williams, where does that stand now?
How far are we into that?
Mr. Williams. Mr. Chairman, we have now installed the major
initial pilots. Those are the police department, public works,
public schools, and part of the Controller's Office, my office,
that services the smaller agencies in the District.
Senator Faircloth. This will all, as I understand it, feed
into one entity.
Mr. Williams. That is correct, sir. Essentially all the
different financial accounting activities feed into the general
ledger, and then associated with this general ledger are
different what you call modules, many of which we do not have
right now, I might add. If I go down the list, you will not
believe what we do not have right now. We do not have, for
example, an accounts payable.
Senator Faircloth. You are getting them.
Mr. Williams. Right. We do not have accounts receivable. We
do not have grants. We do not have budget. I mean, it is
incredible.
Senator Faircloth. But we are getting there.
Mr. Williams. But we are getting them, yes, sir.
One final thing--and I think you would appreciate this with
your experience, Mr. Chairman, in highways--is we really are
insistent on the belief that while we are essentially digging
up the road that we not only fix, let us say, the storm drains,
we fix everything while we have got the road open. So, the
analogy here is that, while we have got this system being
installed in the agencies, we use this opportunity to
aggressively and thoroughly reengineer not only the financial
operations and processes, but in conjunction with the CMO, also
look at all the other related and interfaced management
information processes, a spectacular example of which would be
procurement.
Dr. Brimmer. Mr. Chairman?
Senator Faircloth. Yes; Dr. Brimmer.
Dr. Brimmer. You said we could make comments or questions.
Senator Faircloth. Yes; we are wide open. There are no
strict rules here.
Dr. Brimmer. I want to take this opportunity to report to
you that the progress Mr. Williams just described was made
possible entirely by your efforts. You might recall well over 1
year ago, we had a great deal of difficulty getting
authorization to proceed with the acquisition of the financial
management system and the implementation of the plan Mr.
Williams described. In fact, there was active opposition which,
if it had prevailed, we would have still been stuck with the
old system with no progress being made. So, what you see here
today is a result of the position you took when you insisted
that these funds be included and that the management of the
system be left to the Authority and Tony Williams. I want to
report that because this is good news, a favorable outcome.
Senator Faircloth. I sure appreciate it. I need it in North
Carolina worse than I do here. [Laughter.]
But thank you.
Mr. Williams. I want to echo that, Mr. Chairman.
Senator Faircloth. I do have a question for Mr. Williams.
As I said and alluded to a while ago, I guess no city in the
country, certainly not in this country, is more under the
intense scrutiny, that problems are more magnified than here.
deceased retirees on payroll
So, saying that, I ask you, Mr. Williams. Peat Marwick
determined that 20 deceased retirees from the District's
payrolls were receiving retirement benefits. I understand where
we are moving, but would you explain to the committee how this
happened and what we are doing to avoid that kind of glaring
bad publicity in the future?
Mr. Williams. Yes, sir; what had happened was--essentially,
Mr. Chairman, what you are always trying to do in these
personnel and payroll situations is you are trying to take
three universes, if you will, and make sure that----
Senator Faircloth. Three?
Mr. Williams. You are trying to take three universes or
databases, if you will, and you want to make sure that they are
always synchronized. So, you have got people who show up or
people who have filed for retirement, and you want to make sure
that the count of who is working or who is eligible for
retirement matches, who you are paying matches your records for
what you have budgeted. Position control in the District is
something that is one of our top priorities and something we
have been working on all along to try to bring forward.
What had happened with this particular case was that we
were getting these accounts and the Social Security numbers
related to these accounts coming to pay and retirement, and we
were only reviewing them on a yearly basis. In reviewing them
only on a yearly basis, we had accounts falling between the
cracks or under the radar.
What we had already started doing when the audit came out
was accelerating that review to every quarter or every 3
months, using outside help to review these files to see that
all the different databases matched, to make sure all the
accounts are authentic before the retirement payroll was
actually sent.
I also might add, Mr. Chairman, I believe we have reclaimed
one-half of these accounts, and we have efforts underway to
reclaim the amounts owed the District in the remaining accounts
as well.
Senator Faircloth. By reclaiming the accounts, you mean get
the money back?
Mr. Williams. Getting restitution for the money we paid
out, right.
Senator Faircloth. Well, that is great.
I understand that what you took over, and we have to
evaluate where we are from, where we came from.
financial operations
Mr. Williams. If I could say, Mr. Chairman, I think it is
important you mentioned that case because it is our goal now in
the financial operation. You talked about the win-win situation
for the MOU. In a lot of ways, I inherited a win-win situation
because things were so bad, you could not do anything but win
in some cases.
We have got to do more than simply get an unqualified
opinion. We have committed ourselves now to really bringing the
District ahead of the rest of the pack or ahead of other
governments in the country, in that it is our goal now to
eliminate all material weaknesses and to minimize the
management letter comments that the District has. Most
governments are happy if they have got one or two material
weaknesses and some management letter comments. We want to have
no material weaknesses and minimum management letter comments
because I think that is a testament to the soundness and
integrity of the financial operations.
Senator Faircloth. Well, thank you. This is a goal of where
we have got to go. As I say, we have begun to move, and I
redundantly say I sense a spirit of revitalization among the
citizens of the city. It might not be total and unanimous, but
I think the vast majority of the people in the District feel
that we are doing the right thing and moving in the right
direction.
medical malpractice reform
Dr. Brimmer, I had a question here and maybe Dr. Barnett
would like to help on it. I ask this question because it is of
interest to a lot of people and a lot of Members of Congress.
The Senate report accompanying the fiscal year 1998
appropriations bill required the Control Board to submit to
Congress by March 1 of this year a report on malpractice reform
for the District.
Malpractice reform is not only an area of interest to
members of this subcommittee, but it is pretty high on the
radar screen of all the Members of Congress. In fact, medical
malpractice reform is an issue of concern to the entire Nation.
Sometimes it seems trial attorneys are running up the cost of
everything we do.
Dr. Brimmer, we have not received this report. When can we
expect it and when it arrives, will it be making
recommendations for reform? What will it say?
Dr. Brimmer. Actually, Mr. Chairman, it was submitted
yesterday. It probably got to your office very late, but it was
submitted yesterday.
Senator Faircloth. Would you tell us very briefly what it
says?
Dr. Brimmer. Yes; we concluded, based on the evidence in
front of us, based on our hearings, based on our investigation,
that there was no basis for imposing the kind of caps that the
proponents of the reform had recommended. We did recognize that
the evidence is conflicting.
Senator Faircloth. I am sorry.
Dr. Brimmer. The evidence is conflicting.
First, the cost of medical malpractice insurance is higher
in the District than it is in Maryland or Virginia.
But we also found that the cost of medical malpractice
insurance for the various specialties is very close to the cost
in Baltimore, that when the setting, population groups,
demographic characteristics, members with insurance coverage
are compared, there are very few differences.
The proponents were not able to demonstrate that the cost
of insurance is uniquely related to settlements and awards in
the malpractice suits.
That is the essence of the proposal that was in front of
us.
Senator Faircloth. Well, thank you.
Dr. Brimmer. We concluded that that was an area where it
would be better for the local government, the City Council
specifically, to address the question, and if the evidence
demonstrated that the effects were adverse, they should act.
We also said that the economic case was not made at this
time, but if evidence comes to our attention, if experience
shows that there is a negative impact on the economic viability
of the District and the availability of services, we would come
back into the matter. But for the time being, we concluded it
with the recommendations I just made.
Senator Faircloth. I thank you.
One thing that brought it to my attention, I saw that a
prominent malpractice attorney was attacking maybe me and the
Control Board for what we were doing in trying to reform some
of the problems. I understand that you are making no
recommendation, but I do think the issue requires close
scrutiny.
Dr. Brimmer. I am sorry, Mr. Chairman. Our recommendation
was that the Congress leave this to the locals.
Senator Faircloth. I was somewhat, if I must say,
disappointed at your not making recommendations on the caps
because this is a problem. But we have many problems and we are
going to solve them, and we will address that one later, too,
if it needs attention.
Dr. Barnett, you are new to the job. You have been on the
job 2 months now, or 3?
Dr. Barnett. 2 months.
Senator Faircloth. 2 months.
Prior to your coming to the board, the Control Board
approved management reform plans which were developed by
consultants. These plans identified management improvement
projects that you have discussed, the 269 projects.
Let me ask you. I am sure you have had an opportunity to
look at the recommendations. Are these areas of priorities with
which you agree with the Control Board?
Dr. Barnett. Yes.
Senator Faircloth. Of the 269, you are going to be
undertaking some of them, as you said, earlier this year and
some are not.
consultants
I have always had a theory that if a private company, if
the executives went out and hired consultants, that there was
something wrong with the executives if they needed somebody to
come tell them what to do.
How can we make sure that the city learns and that we keep
our management practices up to date, that we are not forever
getting into the pit that we feel like we need outside
intelligence to lift us out?
implementation of management reform
Dr. Barnett. The first thing that we are doing is looking
at the consultant contracts that we have on the table for
implementing management reform. One of the things I have asked
all the agency directors to do is to tell me whether they think
the plan for implementation is appropriate, whether they think
the consultant that has done the recommendations is the
appropriate one to do the implementation, and to convince me
that we need the consultant at all, that we do not have
internal capacity. If the recommendation is that we do not have
internal capacity to implement all or part of these management
reforms, then part of what the job of the consultant will be is
to build that internal capacity so that we are restructuring
the way we are using the consultants and the implementation of
management reform.
The question you ask, however, goes to a longer-term issue
in the District which is the capacity of the managers and the
work force, and this is something that is going to take us a
while to address, but we have some training and development
initiatives underway. I expect that we will expand those
greatly, and I expect that we will also be recruiting
additional talent. So, in these ways I think we will be able to
fill the gaps and also build the organization so that it is not
dependent on outside consultants.
Senator Faircloth. Thank you, Dr. Barnett, and I thank you,
Dr. Brimmer and Mr. Williams.
As we have said here this morning, and each of you have
pretty much said the same thing, we are making headway. We have
come a long way. I must say that I want to briefly praise what
you all have done and where you have come from in the
relatively short time.
The people that have been by with various ones of you, and
I will not name the people, but I have been impressed by each
of the assistants and people that are working under you to
bring about the spirit and the enthusiasm with what we are
doing.
status of receiverships
I had one last question I wanted to bring, and it would be
to Dr. Barnett and to Mr. Williams. It is the status of
receiverships. I think this city has probably had more problems
with judges, and particularly I am referring to the school
system and keeping the schools closed for weeks and months
beyond what I think should have been.
But what we have are receiverships running several of the
District's departments and programs--child welfare, mental
health services, public housing, and the health system at the
D.C. jail. I assume that is the jail rather than Lorton.
When can we expect to get out from under these
receiverships? They are burdensome, they are bothersome, and
they are in essence an insult to the city. When do we hope and
think we can begin to get rid of some of these?
Well, you both have worked together beautifully on it, so I
will listen to both answers.
number of receivers or trustees
Dr. Barnett. One of the things that I mentioned earlier was
the need to bring the government together. One of the ways that
we need to do that is to deal with these receivers. We have 14
receivers or trustees or special masters running parts of the
city operation. Our objective, and one of the reasons that we
have identified this as one of the 10 budget issues for the
Council and the Mayor and the Control Board to deal with, is
because of the effect that it has on both our finances and our
operations.
We are going to be discussing plans for exit strategies for
receivers this Friday in the budget work sessions that we have
with the policymakers to begin discussions with the receivers
and with the policymakers about how we can improve the services
so that the receivers are no longer necessary.
I cannot specifically answer your question on how long it
is going to take us to do that because in many cases we do not
have clear exit strategies from the receivers. We do not have
clear performance expectations that we need to achieve before
we are sure that we have met the standards. But more
importantly, we need to develop new kinds of dialogs and
negotiations so that we can develop those in such a way that we
can do them.
mental health and child welfare receivers
We have made some progress with the two receivers that you
particularly mentioned in mental health and also on child
welfare. We have negotiated what we are calling memorandum of
understanding agreements with those receivers that has to do
with how we will conduct ourselves operationally and
financially. We have got some agreements about how we will work
together, and how they will develop what is essentially their
management reform initiatives so that we can support each other
in doing that. I am encouraged by that progress and I think
that there is opportunity for more progress with the other
receivers.
As you know, it is a substantial portion of our budget that
is not controlled by our regular budgetary process because of
the court ordered initiatives. So, it is in everyone's best
interest to have an exit strategy. It is one of our top
priorities. Working with the Corporation Counsel on the legal
side of all of this, I think we will develop some strategies,
for the first time in a long time, that not only set the goal
of bringing services to the point where these receivers are no
longer necessary, but that actually achieve that goal.
Mr. Williams. Mr. Chairman, I would agree with everything
that Dr. Barnett has stated. I think for a long time we have
not been able to chart a path for getting out of the
receiverships because we have not really had the kind of
program information, let alone the kind of financial
information, matched to it from them that allows us to make
that kind of projection. So, this effort to work with them to
develop that information, develop these plans, we
wholeheartedly support.
But I would also mention, Mr. Chairman, this is just a
thought and I guess it does intrude slightly, if not
completely, into the policy area, and it does not represent
anyone's official opinion. But it seems to me that the
receivers are all in the process on behalf of the courts in
pursuing remedies. In pursuing those remedies, they are
generally operating under a Federal mandate and ultimately a
legislative mandate. It seems to me the financial plan for the
District ultimately is the responsibility of the Authority,
reporting to the Congress, to see that the District's recovery
commences.
financial authority responsible for management and fiscal recovery
The Financial Authority is responsible ultimately for the
management and fiscal recovery of the District, responsible to
this Congress for that, if you want to call it, remedy.
Senator Faircloth. The Financial Authority meaning the
Control Board.
Mr. Williams. The Control Board.
Senator Faircloth. Yes; OK.
Mr. Williams. Just using the fancy title. The Control Board
for basically financial management and recovery of the
District, reporting to the Congress.
receivers pursuing their own fix
Now, you have got a number of these different receivers
also pursuing their own fix. Right? The problem is they are not
coordinated in any way or synchronized in any way with the
overall management/fiscal fix in the District. It seems to me
there may be some opportunity for some legislative language
that would at least put these remedies pursued by the receivers
under the same kind of fiscal auspices and framework the rest
of the District operates under. It just would make good
management sense.
Senator Faircloth. Well, it certainly does to me, and this
is one reason I was pursuing the question. If your job is being
a receiver, there is a tendency to perpetuate your job.
Dr. Brimmer. Mr. Chairman.
Senator Faircloth. Yes; Dr. Brimmer. Just one second.
And recommendations from all three of you is what we need
to do to get control of the city from the receivers. I would
like to have just a call or visit, whatever we need to do, to
begin to effect this.
Yes; Dr. Brimmer.
Dr. Brimmer. The question of receivers and the relation
between the city and the receivers is a policy matter. The
Authority has taken the initiative to try to work this through.
The Corporation Counsel is taking the lead because it is a
legal matter, a matter of the courts, in working with the
Authority, and the CMO has joined that effort most recently.
But the fundamental issue is the extent to which the
conditions which gave rise to the receivership----
Senator Faircloth. I am sorry. What now?
city not providing services
Dr. Brimmer. The receiverships, the masters are there
because the courts concluded that the city was not providing
the services, was not carrying out the law, and the only remedy
was to have the court step in, provide a mechanism for
enforcing the law.
The task now is to correct the deficiencies so that the
basis for the receivership can disappear, and that is the
responsibility of the Authority. We are making certain that
some of these deficiencies are being corrected, and I call your
attention to the editorial in today's Washington Post which
deals directly with the question you have just described.
Senator Faircloth. Well, I am glad to hear the gospel.
[Laughter.]
youth detention
Dr. Brimmer. But it reports that the city administration
did nothing about--this is the youth detention case--until the
court stepped in, and the Authority then stepped in to enforce
the changes.
Senator Faircloth. The Authority being the Control Board.
Dr. Brimmer. The Control Board stepped in, provided the
resources, ordered the revamping of the management, and the
condition has now improved, not to the point where the court is
likely to disappear anytime soon or the receivers disappear
anytime soon, but it describes how it is to be done. It is not
simply denouncing the receiver but correcting the problems, and
that is what we are trying to do.
Senator Faircloth. I understand, and I thank you. I am
thoroughly familiar with why they were appointed, the necessity
for them, but my question is--and it is not a question. We have
to begin to get rid of that oversight because of the
inefficiency in running the city. What form we go at it, I do
not know, but all I know is that whatever a governmental agency
happens to be--and the receivership is a governmental agency--
usually its primary goal is not to terminate its existence. So,
I think that is something that, as people running the city, we
need to make sure that we stay alert to, and as soon as these
masters can be eliminated, we need to eliminate them.
receivers--budgetary implication
Dr. Brimmer. I agree, and the budgetary implications are
very serious. As matters stand now, basically the receivers,
while one or two of them consult with us over their budget,
basically write their budget and pass it through. This will
have serious budget implications.
We are now seeking to have discussions with all of the
receivers, and I can tell you now that you might see some more
controversy because at the Control Board, we have to weigh
these budget claims against all other budget claims. The time
might come when we will simply have to say to the receivers,
please try to operate more efficiently because we cannot
provide all the money you are seeking.
Senator Faircloth. This is what I am saying, that we need
to get this receivership thing behind us, and the quicker we
can do it, the better off we are.
Additional committee questions
Again, I say I thank you for what you are doing for the
city. We certainly all have the same goals, the same hopes in
mind, and no question we have turned the corner and we have
started to move in the direction that we are going to have to
go. I want to say to you as one of the representatives of the
Congress, certainly from the Senate, and Congressman Charles
Taylor from the House, we all want the same thing, and we will
give you total cooperation from the Congress to bring it about.
I thank you so much.
[The following questions were not asked at the hearing, but
were submitted to the Department for response subsequent to the
hearing:]
Questions Submitted to Dr. Barnett
Questions Submitted by Senator Faircloth
improved customer service
Question. You have stated that your primary goals for 1998 are to
(1) improve customer service; (2) implement management reform; and meet
budget targets.
Please explain in detail how you intend to achieve each of the
stated goals.
Answer. It should first be noted that many of the improvements to
customer service are facilitated by management reform. Our department
directors have been asked to implement any management reform
initiatives that relate to customer service as well as any service
delivery improvements that they feel can be implemented within existing
resources.
Our directors' commitment to delivering services will be documented
in their performance contracts. They are developing specific
performance targets and will be held accountable for directing their
departmental personnel toward the achievement of those goals. Their
goals must be specific and measurable and geared toward results. Our
other personnel will also be asked to sign employment contracts, which
document the expected outcomes of their positions, customer service
being a primary component of their job performance.
The performance contracts are a part of our overall performance
management system that is illustrated on the following page. Our
performance measurement system is based on the PDCA Cycle--(Plan Do
Check Act). The first step is to plan a change for improvement. We will
expect our department directors to develop specific strategic plans
that involve service enhancements geared toward improving the services
they deliver to our citizens. Second, we implement change. The actions
suggested by those plans will be implemented along with the management
reform projects. Third, we analyze the results. The departments will
record activities against their performance measures. The results will
be provided in quarterly reports. In addition, we will evaluate the
outcome by citizen surveys. These surveys will allow us to determine
how our citizens feel about our service delivery.
In order for our services to improve, we must have a trained,
motivated, equipped workforce. Significant resources have been devoted
to training and motivating the workforce. It is my belief that we have
dedicated, hard working employees who desire to do the best job of
delivering service. In some instances they simply lack the skills
necessary to perform at the required level. In order to assist them,
skills training, supervisory training, and automation training is being
made available.
In addition, a compensation study will be conducted to determine
where inequities in pay might exist that could dampen the motivation of
our employees to do a good job. Further, we will assess the condition
of our facilities so that improvements can be made to the working
environment of our employees as well as the public access areas.
Finally, we must provide them with the equipment necessary to do their
job. This includes computer resources, management information systems,
working telephones, telephone directories and the like.
management reform
We are implementing management reform with both consulting
resources and internal resources. Personnel in my office are involved
in a review of the 269 original management reform projects to determine
which ones have been completed or will be completed by the end of the
fiscal year. Further, we are reviewing the remaining projects for
activities which are in process and have been integrated into the
normal operating functions of the department. These projects will
become a part of the normal course of business and not be counted as
management reform in the future. Our field personnel will monitor the
continuation of these activities as warranted.
The remaining management reform projects are in process. The Office
of Procurement and the Office of the Chief Technology Officer have both
been established and their reform projects are in process. The
Department of Human Services has contracted with its implementation
consultant and is moving forward. The Department of Housing and
Community Development has been given approval to move forward with
contracting for its implementation consultants.
In order to establish appropriate accountability for resources, my
personnel are reviewing the remaining management reform projects for
which consulting assistance has been requested, to determine whether
the internal capacity exists to perform the work, whether some projects
could be consolidated, or whether the consultant who performed the
initial study are the appropriate consultants to assist with
implementation. Once a determination is made, contracts or tasks will
be awarded to begin the reform effort in all remaining departments.
Where there are major projects that cannot be completed by the end
of the fiscal year, we have established, with the assistance of the
Chief Financial Officer, carryover capital funds to pay for these
ongoing activities. Some of the major projects will be managed from my
office, in order that I might pay personal attention to their progress.
budget targets
The District's Chief Financial Officer and his Budget Office staff
have assisted me greatly in the monitoring of the budget. Through the
vigilance of our department heads and the oversight of the CFO's Office
we appear to be on track to meet our budget targets. Joint reviews
being conducted by his staff and mine are reviewing with departments
their expected spending for the remainder of the fiscal year. Although
those sessions have not been fully completed, I am not aware of any
problems with regard to the budget. All department heads have been
instructed to monitor their budgets monthly and notify me immediately
of any projected deficits.
Question. Can you estimate the overall costs associated with
improving customer service for fiscal year 1999?
Answer. The primary means of improving service delivery, as
previously stated, are the management reform initiatives, training and
budget enhancements for 1999. We will have our Budget Workshop on
Management Reform and 1999 Budget Enhancements on March 26, 1998, and
following that session we will have significantly better information. I
will certainly provide detailed information subsequent to the
completion of our budget process.
Question. Can you estimate the overall costs associated with
implementing management reform for fiscal year 1999?
Answer. First, it must be noted that the review process we have
underway will identify some management reform projects that will be
completed in 1998. Further, some previous reform projects will be
incorporated into the ongoing operations of a department and will
become part of operating budget for 1999. Again, once we have gone
through the budget development process, we will be in a better position
to accurately quantify what the funding needs are for management reform
in fiscal year 1999.
Question. You are familiar with the provisions of the Management
Reform Act of 1997. In your opinion, should Congress have included all
of the District's departments and agencies in the legislation, or are
you satisfied that only the nine listed agencies are in need of reform?
Answer. I believe that it is important to have all agencies
involved in management reform whether they are included in the
Revitalization Act or not. We are achieving that in part through
funding provided through the four cross cutting agencies. Further, we
are inviting all agencies to participate in department meetings and
government-wide initiatives such as strategic planning.
Many of the agencies are inter-dependent and need shared
information. One of my objectives is to facilitate inter agency
cooperation in the way that I manage.
Question. What is the status of the spending plans you are
developing with the CFO for each of the reform projects?
Answer. As previously stated, we are in the midst of joint reviews
of the departments' current spending and 1999 requests. The information
will be reviewed by the Council and others during the March 26, 1998
budget workshop.
Question. Have you identified any reform project that has generated
a net benefit or revenue stream?
Answer. With respect to reform projects having revenue-generating
ability, there are approximately 40 such projects identified. As noted
in earlier testimony, consultants estimated that by implementing these
projects in the first quarter the city could potentially reap roughly
$140 million in revenue and cost savings. As you may recall, key
factors in the selection process were both revenue generation and cost
savings.
It is important to emphasize as well that time frames for realizing
such proceeds will vary with project implementation. Such projects
require time intense startup and in most cases, we have determined that
the city will not realize revenue growth until well into the next
fiscal year. However, in other cases the city will benefit upon
immediate completion of the project. We have requested that the Office
of the Chief Financial Officer analyze these projects and make a
judgment on the revenue projections. The Office of the Chief Financial
Officer will also set up accounting procedures to track additional
revenue and cost savings. We estimate that upon full implementation,
the city's revenues will substantially increase and improve the revenue
stream.
Among these projects are:
--Compliance with Regulatory Requirements, to be implemented by the
Department of Consumer and Regulatory Affairs. This project
will result in stricter compliance with regulatory requirements
and bolster $2.3 million in revenue as a result of issuing
increased numbers of business licenses.
--The Revenue Realization initiative, to be implemented by Asset
Management. Consultants estimate that this project will
generate approximately $1.5 million by year-end 1999. This
project will both improve the management of accounts receivable
functions and out-source the collection of receivables that
have aged over 120 days.
--Process Redesign.--Fraud and Abuse Detection, to be implemented by
Public Health. This project will generate an estimated $3
million in Medicaid fraud recoveries and hopefully serve as a
deterrent to future crimes.
Question. Prior to your coming on board, the Control Board approved
management reform plans, which had been developed by consultants.
These plans identified management improvement projects that could
address many of the deficiencies plaguing the District government. The
Control Board selected 269 projects for implementation. You have had an
opportunity to review the Control Board's recommended priorities. Are
there any areas or priorities with which you disagree with the Control
Board?
Answer. My discussions with the department directors who have
reviewed the projects for their departments have indicated broad
agreement. These projects address issues of primary concern to the
residents of the District and as such, are all warranted and needed in
order to significantly improve service delivery. We are combining some
reform projects to facilitate implementation and allow for more
effective monitoring.
Question. One of the most expensive components of the city's
operations are the receiverships that are operating four agencies of
the DC government. Please tell us what management reform steps are
being taken to end the receivership in the Department of Human
Services?
Answer. The Department of Human Services consists of the Commission
on Mental Health Services and the Commission on Social Services. The
entirety of the Commission on Mental Health Services is currently under
the Dixon Receivership. A portion of the Commission on Social Services,
the foster care and child welfare functions, is under the LaShawn
General Receivership.
All components of the Department of Human Services, including the
functions under receivership, were reviewed or are being reviewed under
the management reform process. (The review of the mental health system
is currently in process. Authorization of the review was held until the
new receiver, Dr. Scott Nelson, was appointed and on site.) While the
receivers have a great deal of latitude in determining the course of
reforms they will pursue, the Authority commissioned these reviews in
order to assist the receivers in their reform efforts.
The Authority has also executed memoranda of understanding with the
LaShawn and the Dixon receiverships. These documents serve to
facilitate the day to day working relationship by clarifying policies
and procedures related to procurement, fiscal accounting, and the like.
Two criteria were established by the court that must be met before
returning control of the mental health system back to the District. The
Dixon court order states that ``the Order will remain in effect until
such time as the Service Development Plan and the orders of the court
are fully implemented, and the receiver is no longer necessary to
assure the ongoing operation of the District of Columbia's mental
health system.''
We are working with the Dixon Receiver to create a plan that will
satisfy the two criteria identified by the court. Again, these are (1)
to meet the specific service mandates of the court order and (2) to put
a system in place that will ensure that the service mandates will
continue to be met once the receivership is concluded. Once the reform
plan is completed, we will be assisting the receiver in carrying out
these plans. A similar process is being undertaken with the LaShawn
Receivership.
In total there are 14 receivers. More information is available from
the Corporation Counsel. A budget workshop on receivers is being held
on March 20, 1998. Issues surrounding the receivers will be discussed
in that session.
Question. What steps have been taken to ensure that the Department
of Human Services shifts its efforts from the old entitlement focus to
the new temporary assistance focus?
Answer. No set of reforms are more critical to the health of
District families and communities than those of welfare reform. This
opinion is shared by District residents in that nearly three quarters
of District residents rank the need for improvements in services to
low-income District residents as a top priority. For the past six
months, the District's Department of Human Services has been intensely
engaged in the welfare reform effort. The management reform process is
serving to support and expedite the welfare reforms efforts that are
underway.
The District's welfare reform program is moving from a basic cash
subsistence program to an aggressive effort to provide the necessary
support services to guide current and potential recipients into viable
employment opportunities.
To accomplish this, we are working to connect the needs of the
business community with the activities of the human services and
employment services agencies of the District government. The federal
Department of Labor has been tapped to provide technical assistance. A
working group has been established, led by DC Agenda, to better define
the roles of the various participants in this effort, such as
government agencies, the Private Industry Council, and private
contractors.
While still in its infancy, welfare reform has produced results in
the District. At present, the welfare rolls are declining at a rate of
1.2 percent per month. This is an annual rate of decline of 14.4
percent. Since October 1996, the District's welfare caseload has fallen
by 3,700 families, representing a 14.7 percent reduction over the
period. It is important to note that no family was dropped from
receiving cash assistance due to the imposition of a pre-established
time limit. The families leaving the rolls are doing so because of
their actions to secure employment or because they have chosen not to
comply with the new requirements.
Under the District's redesigned program, a ``Work First'' strategy
is being employed. When first contacting the public assistance office,
applicants are immediately encouraged to undertake job search
activities. If the recipient is not successful in securing employment
during the initial 30-day period, the individual will be assigned to a
contractor that has experience with, and will receive compensation
based upon their success with, transitioning welfare recipients into
employment. The contractor will be provided additional compensation for
ensuring that the welfare recipient retains employment over an
eighteen-month period.
To implement this ``Work First'' strategy, the District Government
must restructure its internal operations and must build a capacity to
monitor private contractors. Fourteen of the management reform projects
currently underway relate to this restructuring effort.
Question. Please report to the committee on reforms currently being
implemented in real property asset management.
Answer. The 1997 Asset Management Reform Report, the 1996 Strategic
Facilities Report, and the 1990 Rivlin Report, have all found that the
District's real estate management structure is highly decentralized and
fragmented, and operates without a consistent operational strategy or
leadership. As a result, the District is generally unable to manage its
real property assets to their highest and best use, or ensure that high
quality management and maintenance services are delivered to tenants.
The District's real property management system is characterized by
a highly decentralized structure, with each agency, office, or division
within the government primarily concerned with managing their
respective office space or buildings. There is limited centralized
coordination of these efforts, There is also significant duplication
and waste among the various management and administrative support
services, and in service delivery. This results in excess office and
warehouse space, the inability to efficiently manage inventory and
tracking functions, contractual services, and equipment purchasing.
Altogether, these factors result in valuable properties sitting vacant
or underutilized. This lack of coordination is also evident in the
District's poor maintenance schedule, deferred maintenance, and
unfunded capital repairs.
The Office of the Chief Management Officer has begun to implement
structural and operational reforms in the management of District owned
real property. We are currently recruiting for a Chief Real Property
Officer, whom we expect will have significant public and private sector
experience in real estate management, as well as experience in
overseeing and implementing comprehensive change management and process
reengineering efforts.
We are also creating a new centralized organization to be called
the Office of Real Property, for which we will leverage funds from the
management reform process. We expect this new office to operate in a
manner similar to a responsive commercial real estate management
company. Its primary mission will be to attain the highest return on
all real estate investments. It will also assume the responsibility and
accountability for the life-cycle management of all of District owned
real property--from acquisition, management and maintenance, to
ultimate disposition. We are currently redefining the organizational
structure, personnel characteristics and skills, job descriptions, and
budgetary requirements necessary to implement and operate this new
office.
We are also performing a comprehensive skills assessment of
personnel involved in the management of real property, creating new
position descriptions where necessary, and determining the appropriate
staffing levels for each unit involved in the real property management
process. We are also identifying functions that are required to be in-
house, and those that can best be obtained under private sector
contract. We are identifying and building performance measures to be
employed in connection with the real property management process, and
identifying appropriate feedback mechanisms to gauge the level of
internal (District employees), and external (business, community and
neighborhood development organizations, District residents)
stakeholders satisfaction with service delivery. Finally, we are
working to establish and implement new operational policies, procedure
manuals, and regulations required to effectively manage all aspects of
real estate. We expect this new organization to be operational and
functional by September 30, 1998.
______
Question Submitted by Senator Boxer
labor-management partnerships as a tool for reform
Question. Dr. Barnett, welcome and congratulations on your
appointment.
I am advised that the City government has set up a ``DC Labor-
Management Partnership Council.'' The expressed purpose of this
partnership is to be a forum for communication and cooperation between
unions and management to support their joint mission to deliver high
quality, cost effective service to D.C. residents and visitors, while
maintaining a high quality work environment for employees of the D.C.
government.
I am told that a goal of a robust Labor-Management Partnership is
to transform the labor-management relationship from the traditional
adversarial model to a joining-of-forces model to focus on improving
service, and performance.
It would appear that a strong and healthy partnership between
managers and the workers closest to the delivery of services is vital
if the D.C. government is to improve its operations.
I am told that on February 24, 1998, the Chief Management Officer
(CMO) signed on to the D.C. Labor-Management Partnership Council as the
Management Co-Chairperson representing both the CMO and the D.C.
Financial Authority.
Dr. Barnett, how do you intend to use the D.C. Labor-Management
Partnership Council to review, implement, and re-evaluate the various
recommended management reform changes?
Dr. Barnett, what more can you tell us about this?
Dr. Barnett, is there anything else you wish to report to the
Committee about the matters under your jurisdiction?
Answer. I am very pleased that you have asked this question,
Senator Boxer. I have decided to use the Labor Management Partnership
Council as one of the primary mechanisms to bring about management
reform, to improve the quality of customer service, and to foster
greater job satisfaction among District government employees. On behalf
of the Authority, I have become a signatory to the Council's Charter,
and in the future, I will serve as one of the three co-chairs.
In addition, I am proposing that the District expand the scope of
the Council to include the membership of the independent entities, such
as the District of Columbia Public Schools, the University of the
District of Columbia, and the Public Benefit Corporation (formerly D.C.
General Hospital), and the entities currently under the control of
court-appointed receivers. In this way, I intend to introduce the
cooperative labor-management relations approach to the entire District
government. I am convinced that this approach will greatly facilitate
the acceptance of the management reform projects and ultimately
expedite their implementation.
Furthermore, to ensure that this process continues, I am attempting
to obtain from the Department of Labor full time personnel with
experience in this area to oversee this activity. Initial indications
are that the Department is willing to detail such an individual to my
staff to serve in this capacity.
______
Questions Submitted to Dr. Brimmer
Questions Submitted by Senator Faircloth
Question. In November, the Congress appropriated $8 million to the
Control Board for a program of management reform for the District of
Columbia.
Please give the Committee an accounting of how this money has been
spent.
Answer. On January 2, 1998 the Authority reported to the Congress
on the management reform plans as required by Public Law 105-33, the
District of Columbia Revitalization and Self-Government Improvement Act
of 1997. Contained in that report is the approval of 269 projects
selected for implementation as part of the management reform plans for
the eight agencies and four city-wide functions.
The $8 million will be used to fund a portion the implementation of
these projects.
Question. In December, 1997, Cotton & Company completed an audit of
the summer capital repair program for the District's Public Schools. In
particular, the audit focused on the process used by the school system
to conduct procurement operations in connection with the repairs.
The audit concluded that the school system did not have an
effective procurement system in place, and that the system did not meet
statutory and regulatory needs in the schools. The District will soon
embark on another round of capital repairs of the District's public
schools.
What steps are being taken by the Authority to correct the errors
in the District's system for the procurement of goods and services?
What improvements can we expect in the upcoming contracting
procedures for the District's school repairs?
Answer. The public schools' procurement operations have been placed
under the District's Chief Procurement Officer, and has been
reorganized under new leadership. This change has the support of the
Chief Executive Officer/Superintendent, General Julius Becton. New
procedures are being developed for the entire District government, and
will apply to the public schools.
Question. How many repair projects are planned for the public
schools this summer?
How many contracts are currently in place for the commencement of
those repairs?
Since the Parents United law suit has been settled, can the repairs
begin before school is over for the summer?
Answer. DCPS facilities personnel are continuing to execute the
current emergency program of replacing boilers and chillers, and is
putting together a program for the fiscal year 1998 capital funds.
Procurements are underway for design of the next phase of school
repairs. The planned completion date for these repairs is August 15,
1998.
Question. In January, 1998, the D.C. Court ruled that the Control
Board went too far in transferring its authority to the Emergency
Transitional Education Board of Trustees. The Control Board elected not
to appeal the court's ruling.
What role is the Emergency Board playing in the management of the
District's public school system since the Court's decision, and what is
the future role of the Emergency Board?
Answer. On February 12, 1998, the Control Board adopted a second
order relating to the District of Columbia public school system. It
reconstituted the Emergency Transitional Education Board of Trustees as
its agent for purposes of making recommendations to it with respect to
the school system. The Emergency Board has done so, and the Control
Board presently has its first set of recommendations under
consideration. I have written to the Emergency Board advising them that
the Control Board will hold a public meeting to consider these
recommendations and to take action on them. The Authority expects the
Emergency Board to play a constructive role in the development of
policy for the school system.
Question. Are you confident that given the court's ruling, the
Control Board and the Emergency Board can continue to address, in an
effective manner, the crisis in the District's public school system?
Answer. I am confident that, if the order of February 12, 1998, is
permitted to be effectuated, the Authority and the Emergency Board of
Trustees, working together and with the advice and input of the Board
of Education, can continue to address in an effective manner the crisis
in the District's public school system.
Question. Mayor Barry has insisted that he be allowed to hire a new
City Administrator and staff that office. You have opposed the filling
of this position and stated that such a person would simply interfere
with the Chief Management Officer's duties.
What is the status of the City Administrator and Assistant City
Administrator positions within the Office of the Mayor?
Answer. The City Administrator post remains open. Section 1-242(7)
provides that the Mayor shall appoint a City Administrator to be the
chief administrative officer of the Mayor, and shall assist the Mayor
in carrying out the Mayor's functions as the chief executive of the
District. The City Administrator, who is not a part of the Office of
the Mayor, has no statutory powers of his own, but rather performs such
duties as are assigned to him by the Mayor.
With the implementation of the Management Reform Act the Authority
has chosen an experienced municipal manager, Dr. Camille Cates Barnett,
to act as the Chief Management Officer (CMO) over the nine city
agencies and four cross-cutting functions now under the Authority's
control. Those agencies and functions constitute 75 percent of the
total budget of the District and 85 percent of the personnel of the
city government. These facts make clear that, at this time, the
District does not require a person to fulfill the statutory role of the
City Administrator. The Authority has informally requested that the
Mayor simply leave the office vacant for the time being.
Question. What is the status of staffing of the office of the Chief
Management Officer?
Answer. The Authority has transferred many of its program analysis
staff, and several support staff to the CMO's office. It is expected
that the CMO will obtain additional staff in the coming weeks.
Question. Do adequate District funds exist to fund both offices?
In your opinion, can the District government justify fully staffing
both offices?
Answer. The Authority is now reviewing appropriate staffing levels
for a restructured City Administrators Office.
Question. The Federal Payment Reauthorization Act of 1994 required
the Mayor to develop and submit to Congress by March 1 of each year,
beginning in 1995, a ``Performance Accountability Plan'' which would
include measurable performance goals for all departments, agencies and
programs of the District of Columbia.
The Mayor did not comply with this law. Following the shift in
control of nine District agencies from the Mayor to the Control Board,
Congress amended the original law to require the Control Board to
prepare the report by March 1, 1998.
On March 2, the Control Board submitted its ``Report on a
Comprehensive Performance Management System.'' This report does not
provide the details Congress anticipated when it required the Control
Board to produce a Performance Plan. Instead, it is more of a schedule
for the production of more reports. The Committee recognizes that the
Management Reform Act has had a significant impact on the plans for
operating most city agencies. However, the information required by the
Performance Plan is valuable to both the District and Congress in
having a vision for the future.
When will the Control Board produce a performance accountability
plan for all of the District's departments, agencies and programs?
Will the plan include, as required by law:
--a statement of measurable, objective performance goals for all
significant activities;
--the title of the manager responsible for achievement of each
performance goal; and
--a statement of the status of any court orders and actions taken by
the government to comply with the order.
Answer. In the ongoing fiscal year 1999 budget development process,
agencies have been asked to develop performance measures for every
program within a department. The Offices of the Chief Financial Officer
and the Chief Management Officer are currently working with agencies to
refine these standards and to ensure that the measures reflect outcomes
and customer satisfaction, as well as outputs. Additionally, a vigorous
training and coaching schedule is being developed to make government
managers more comfortable with the concept of performance measurement--
so that managers may view it as a management tool, and not as simply a
reporting requirement.
In concordance with the budget development schedule, these
performance measures are to be complete, and will be made available, by
May 15, 1998.
Question. Would you please give us an update on the status of the
various receiverships that are running several of the District's
departments and programs: child welfare, mental health services, public
housing, and the health system at the D.C. jail.
Answer. A number of receiverships remain in effect, including
foster care, community mental health services, public housing, and the
health system at the District of Columbia jail. The Authority has
entered into working agreements with the receivers for foster care and
community mental health services. It reviews budgets and contracts
proposed to be entered into by a number of these receiverships. The
Authority has established collaborative relationships with a number of
the receivers and the judges who are administering the receiverships.
Meanwhile, the Office of the Corporation Counsel has devoted
increasing attention to determining how the District may best comply
with the court orders that led to the creation of the receiverships,
with a view toward persuading the courts eventually to lift the
receiverships. The Authority supports the Corporation Counsel's Office
in this effort.
The Chief Management Officer is working closely with the
Corporation Counsel and the receivers to develop an exit strategy for
each receivership. It is the Authority's expectation that the needs
which led to the imposition of the receiverships on the District
government by the courts will be met, as the District's economic
situation improves. The ultimate object is the return of all segments
of the District government to the control of that government.
Question. In January, the U.D.C. Law School received a 5-year
provisional accreditation by the American Bar Association. The Fiscal
Year 1998 Appropriations Act for the District of Columbia required the
Control Board to report to Congress by March 1 on whether or not the
law school should (1) continue to operate; and (2) continue to receive
funds from the District Government.
What improvements is the law school required to make in order to
receive full accreditation?
What are the costs associated with these improvements?
Given the limited resources available for the University of the
District of Columbia, can both the undergraduate program and the law
school continue to be funded to the degree required to give the
students the quality of education they deserve?
What are the Control Board's recommendations with respect to
continued operation and funding of the law school?
Answer. The Authority will submit answers to these questions upon
completion of its report to the Congress on the D.C. Law School, which
will be submitted shortly.
______
Question Submitted by Senator Boxer
collective bargaining agreements which were negotiated and ratified in
july 1997
Question. I am advised that the management representatives of the
District--with clear guidelines from the D.C. Financial Authority--sat
down at the bargaining table with labor to negotiate a comprehensive
Collective Bargaining Agreement with the City's employees. The parties
reached agreement in July 1997. I am told that there has been a
question about who has the authority to move the agreements forward,
and thus, the agreements which the unions negotiated with the City have
yet to go into effect.
The Chief Financial Officer just recently sent the bargaining
agreement to the City Council for its consideration. After 60 days it
must move to the Control Board.
Dr. Brimmer, do you see any apparent reason that the Control Board
would not act quickly and positively on the collective bargaining
agreement, once it is received, inasmuch as the negotiating teams
followed the D.C. Financial Authority guidelines for the negotiations
and that the CFO has already reviewed and forwarded the collective
bargaining agreement to the City Council?
What can you tell us about this, Dr. Brimmer?
Dr. Brimmer, is there anything else you wish to report to the
Committee about the matters under your jurisdiction?
Answer. At present, the Authority has no specific information about
the collective bargaining agreement referenced by Senator Boxer.
However, as a rule, the Authority moves expeditiously to review and
approve labor contracts. The Authority understands that once the
parties have reached an accord, they are anxious to see that it is
implemented as soon as possible. The Authority has not approved
agreements that do not contain sufficient funding for their
implementation. As long as an agreement has sufficient funding and
otherwise comports with the Authority's Guidelines for Collective
Bargaining, it should move rapidly through the Authority's review
process. We will look forward to the agreements from the Office of the
Chief Financial Officer, and we shall endeavor to review them quickly.
______
Questions Submitted to Anthony A. Williams
Questions Submitted by Senator Faircloth
financial management system (fms)
Question. GAO recently issued a report placing the contract for the
procurement of the new financial management system (FMS) for the
District in a ``high risk'' category.
For example, the report states that the District has not
established the necessary evaluation process to ensure that the new FMS
will meet the contract requirements, such as testing requirements to be
used for acceptance testing.
Please respond to the concerns raised in this report.
What procedures are in the place to ensure that District personnel
are adequately trained to operate the new FMS?
Answer. The District does have an immature software acquisition
process and the implementation of the system is a high-risk effort.
However, the report does not consider that the District has not
acquired any new major systems or software for many years. As a result,
policies and procedures do not exist for software acquisitions. Despite
this weakness, we disagree that our process for this acquisition is
``undisciplined''. A comprehensive source selection plan was applied
that objectively assessed and evaluated proposed solutions for the FMS
including upgrading the existing system, outsourcing the financial
operations, and acquiring a new system. Furthermore, an oversight group
to address the need for the new financial system was formed that
included OMB, HAC staff, the District's CFO, the Authority's Executive
Director, the District's Inspector General, and the GAO. Ultimately,
the group developed an aggressive time line for considering solutions
for the FMS. The aggressive time line is a result of the looming Year
2000 Problem that must be addressed. The aggressive time line
represents a primary reason for the high risk scenario the new system
is being implemented under.
While the District agrees that the implementation of the new system
is a high risk effort, we do not agree with the reasons cited in the
draft report. The system is high risk due to the aggressive schedule
required to implement a solution before the Year 2000; the lack of
infrastructure to support a modern financial system; conversion of
unreliable and inaccurate data into the new system; and the complexity
of the system.
Furthermore, the district does not agree with the characterization
of the draft findings related to requirements development, contract
tracking, and risk management. The following discusses the District's
actions in more detail:
Requirements development.--Initial requirements were defined in a
capabilities assessment in December 1996. These were further refined
during the spring of 1997 by James Martin and Company and were fully
defined by the KPMG as part of the new system solution during the fall
of 1997.
Contract tracking.--The District contracted with James Martin and
Company to supplement the program management of this monumental effort.
Their responsibilities include a variety of contract monitoring efforts
including the measure of performance versus payment, timeliness of
deliverables (as well as quality), and constantly monitors the project
plan and risk mitigation plans.
Risk management.--Two separate risk assessments have been developed
for the project. The primary management focus of the program management
office continues to be risk management. A comprehensive risk management
plan calls for the identification of risk, source of the risks,
analyzing the risk, developing alternative risk mitigation strategies,
constantly tracking the status of the risks, and ensuring
implementation of risk action plans. Proactive risk management is a
continuous emphasis for the program management of this effort.
Many of the GAO recommendations are changes that the District will
embody as we continue to develop and refine our policies and procedures
for financial operations.
Question. The Office of Tax and Revenue is recommending a ``tax
restructuring framework'' that would: (1) cut current taxes by $355M by
fiscal year 2002 and modify the code and regulations; (2) eliminate as
many as 7 taxes, streamline user fees and charges, and make additional
modifications to the code; (3) increase revenue from not-for-profit
activities and create a D.C. gross-receipts tax; (4) implement
administrative improvements, an integrated tax system, clear policies
and professional management.
Please identify the 7 taxes that are under consideration for
elimination:
Answer. Personal property tax.--currently assessed only against
business equipment.
Unincorporated business franchise tax.--currently assessed against
the entity income of some partnerships and proprietorships.
Arena Fee.--revenue to be folded into the proposed broad-based,
low-rate (-0.350/0) gross receipts tax that is similar to the current
arena fee.
Motor Vehicle Excise Tax.--with sale of motor vehicles to be folded
into the existing sales and use tax.
Hotel Occupancy Tax.--with revenue for the convention center fund
generated, instead, through the hotel ad valorem sales tax.
Professional License Fee and Vendor License Fee in Lieu of Tax.--
with revenue generation folded either (1) into the professional and
vendor licenses collected by the Department of Consumer and Regulatory
Affairs or (2) into collections of the broad-based, low-rate gross
receipts tax.
Question. Please explain in detail the gross-receipts tax under
consideration by the OTR?
Answer. The proposed broad-based low-rate gross receipts tax is
modeled after the current Arena Tax-All business entities doing
business in the District would be subject to the tax on their D.C.
generated gross receipts. This tax 2 is very similar to the gross
receipts tax in use in Virginia's counties. Either actual gross
receipts in the District could be reported, or all gross receipts could
be apportioned according to an apportionment factor; for the Arena Fee
the apportionment factor is the equally weighted average of D.C.
payroll, property, and sales of all payroll, property, and sales. At a
rate of 0.35 percent of gross receipts, the tax is believed to generate
roughly $110 million annually.
Question. Please outline the process and date line for enactment of
the tax restructuring proposal under consideration.
Answer. The District Government is in the process of building a
consensus budget proposal for fiscal year 1999. As part of this
process, the Council, CMO, CFO, Mayor, and Financial Authority have met
jointly to discuss tax restructuring. Other key decisions for the
consensus budget also have been or will be reviewed by these bodies.
The actions will be folded into the budget document. We do not know the
extent to which these recommendations will be incorporated into the
fiscal year 1999 proposed budget.
The framework prepared by OTR proposes to revise and reduce certain
taxes in fiscal year 1999, to introduce the broad-based gross receipts
tax and other changes and reductions in fiscal year 2000,and to
complete restructuring in fiscal year 2001. In total, these changes
should improve the tax structure to ``track'' more fully with the
District's economy, while also reducing individual income taxes by $60M
and reducing business taxes so that no industry pays materially more
and virtually all industries have a net tax reduction.
Question. The February 5, 1998 KPMG Marwick Independent Auditor's
Report found that the District's financial statements conformed to
generally accepted accounting principles. In other words, it received a
``clean'' opinion. At the same time, the report identified material
weaknesses in internal control over the District's financial reporting
related to:
--the District of Columbia Procurement Practices Act of 1986
--the Anti-Deficiency and Home Rule Acts
--the Quick Payment Provision of the District of Columbia Code
--electronic data processing
--business tax information system processing
--monitoring of Department of Housing and Community Development loan
activity
--DC Lottery and Charitable Games Control Board financial management
--bank reconciliation controls
--controls over transactions involving the Authority
--lack of timely entry of transections into FMS
--other reconciliation and management items
For each of these material weaknesses, please explain for the
committee:
--A description of the exact nature of the material weakness; and
--Steps being taken to remedy the material weakness.
Answer. The Office of the Chief Financial Officer, through its
Office of Financial Operations and Systems, will continue its efforts
to correct all internal control structure deficiencies and management
letter comments to and maintain a ``clean'' audit opinion. To
facilitate this goal, the Office of Financial Operations and Systems
established a goal committee composed of agency chief financial
officers, controllers, and OCFO central finance personnel. The
committee reports its progress through 8 subtasks, each representing an
area of attention critical to elimination of the District's internal
control structure deficiencies.
As in fiscal year 1996, the goal committee will review the
auditor's reports, meet with the designated agency representatives to
ascertain the agency's position on the weaknesses identified; evaluate
the appropriateness of each agency's written responses; observe the
extent of the agency's follow-through; ensure multi-agency resolution
coordination, as necessary; examine and evaluate available remedial
documentation, systems and processes instituted to resolve the issue
and recommend further corrective actions, as appropriate. The review is
dynamic. With the recent release of the fiscal year 1997 report, the
goal committee and OFOS are only in the initial stages of the process--
ascertaining the agency's position on the weakness identified and
obtaining actions plans as to how the agency will correct the problems.
Thus, while the responses are preliminary in nature; we remain
available to provide subsequent updates as the process and corrective
actions unfold.
violations of the district of columbia procurement practices act of
1985
While violations of the District of Columbia Procurement Practices
Act of 1985 remained a problem during fiscal year 1997, improvements
were made in the instances cited in the following areas:
--Improper extension of emergency procurement contracts down by 21
percent from fiscal year 1996.
--Splitting of invoices to avoid dollar ceilings down by 41 percent
from fiscal year 1996.
Procurement and contracting policy and processes is the
responsibility of the Chief Procurement Officer under the purview of
the Chief Management Officer. The District does not require agencies to
prepare quarterly listings of emergency procurements. DAS' system does
not include a mechanism for extracting this information and/or for
tracking emergency type procurements. In 1997, DAS, however, was in the
process of developing an automated tracking system for contracts. This
system was to include a field which can be coded with the contract type
(``E'' for emergency and ``S'' for sole source). Based on this coding
process, reports of various types of contract information, would be
generated, as needed.
DAS staff indicated that emergency procurements are frequently
required to provide continuous financial support to critical city
services. Services such as ambulatory care, food services, and
respiratory care, cannot be suspended for any period of time. Thus, as
contracts expire, emergency procurements are conducted to continue
service/support.
DAS has implemented procedures whereby staff must closely examine
emergency requests to first determine whether there is a true emergency
need. Unless there are circumstances which are life threatening or
potentially detrimental to the operations of the District, a
procurement is deemed not to be an emergency and is denied. These
requests will then be processed as a ``regular'' procurement.
The District does not require agencies to prepare quarterly
listings of sole source procurement. DAS' system does not include a
mechanism for extracting this information and for tracking sole source
procurements.
In 1997, DAS was in the process of developing an automated tracking
system for contracts. This system would include a field which can be
coded with the contract type (``E'' for emergency and ``S'' for sole
source). Using that information, various types of contract reports can
be generated.
The District experiences sole source procurements problems
primarily because there is no acquisition plan in place at the agency
level. There is consensus that there must be a system for procurement
planning throughout the year. Accordingly, agencies should be aware of
time frames for exercising contract options and dates of contract
expirations. Agencies should use this information to plan ahead and
should forward the relevant documents to DAS as necessary throughout
the year rather than all at once at yearend.
As such, DAS plans to implement a process where agencies will be
required to submit packages several months before their contract
expiration date. For example, contracts expiring on September 30 should
be sent to DAS before June 30. This will allow DAS sufficient time to
review and process agency procurement requests and should reduce the
need for sole-sourcing. DAS, however, maintains that some sole-source
contracts will be awarded in cases where it is necessary to protect the
life/health of individuals.
DAS agrees with the audit findings that emergency procurements are
an inappropriate substitute for well-planned procurement of
requirements on a systematic, timely basis, but disagree that the act
of tracking emergency procurements, whether manually or automatically,
is an effective way to manage the problem preventatively. The root
cause of the problem is the absence of a comprehensive procurement
planning process. The Office of Contracting and Procurement is
presently engaged in establishing such a process to manage the
procurement of goods and services across all District of Columbia
Government agencies and commissions. A descriptive outline of the
process which is currently planned to be deployed is included in this
reply below.
A secondary root cause of the excessive dependence on emergency
procurements is the fiscal year paradigm, which refers to the fact that
the substantial majority of District contracts are unnecessarily and
inappropriately aligned in terms of expiration date to fiscal year
funding mechanisms employed by the District. In practical terms, this
means that the majority of contracts expire on September 30 of each
year, making their timely replacement unmanageable by definition and
process. In an operating environment of unmanageability, agencies must
necessarily rely on emergency procurements to avoid interruption of
supply. In this context, it is not reasonable for agency contracting
officers to be expected to differentiate, as the audit report suggests,
between critical services such as medical care and food services and
all other goods and services since government operations would not be
able to function without continuity of supply of most goods and
services. The Office of Contracting and Procurement is in the process
of orchestrating a realignment of all contract expiration dates to
address this problem.
Sole source procurement has a justifiable role to play in many
cases of proprietary know-how and expertise or other unique areas of
specialization in goods and services. Sole source procurement in the
District of Columbia Government has attracted a negative connotation as
a result of the lack of organizational competence which is responsible
for the absence of a sound procurement planning processes. This in turn
drives excessive emergency procurements, a high percentage of which are
also sole source procurements because they can be put in place in the
least amount of time. The misuse of sole source procurement methodology
will be addressed by the implementation of Demand-Pull Procurement
Planning discussed in the attached.
The issues raised in the audit report concerning splitting of
invoices and inadequate file maintenance are presumed accurate by
virtue of disclosure in the audit report. These types of problems will
be addressed by the procurement reform initiatives which are now
underway.
Parenthetically, it would be appropriate for the audit report to
refer to the Office of Contracting and Procurement in future audit
reports inasmuch as procurement is no longer organizationally aligned
with DAS.
Demand-Pull Procurement Planning
Procurement transactions in the District are uniformly sub-
optimized in economic, operational and regulatory terms by mix-aligned
timing between procurement efforts and the realities of program
delivery requirements. The root causes of this condition are
inappropriate focus on expiration dates of contracts, the alignment of
contract periods to the fiscal year paradigm, and the syndrome where
program managers wait for Procurement to do something and Procurement
waits for Program Management to do something. The result is that
neither does anything until ``do nothing'' becomes operationally
egregious, at which point it is already too late.
Organizationally, it is unrealistic to expect multiple program
management operations throughout the city to adopt the correct
forecasting and milestone practices to correct this problem for
themselves; hence, standardized planning practices will be led by the
Office of Contracting and Procurement to institutionalize District-wide
prioritization of procurement requirements. These standardized planning
practices will follow the ``demand-pull'' convention in which:
Procurement actions in the future are forecasted by program
activities at first inception of knowledge of a requirement. In the
case of grants, for example, program activities will be required to
forecast all contract spin-offs at the point a grant is either
requested or granted, whichever comes first.
Procurement actions are assigned a contract number even at this
embryonic stage as required to attract milestone checkpoints for each
segment of the procurement process based on timelines which reflect
District processing times, supplier and major sub-supplier lead times,
and strategic contingencies for economic and regulatory optimization.
The Procurement Planning organization pulls transactions through
the system based on milestone tracking and management by exception
reporting in which:
--The Chief Procurement Officer is regularly informed of ``at risk''
conditions as required to facilitate corrective intervention.
--Agency Directors are informed of a pattern of ``at risk''
conditions and missed deadlines as both a personnel and
organizational performance metric.
Key features of the demand-pull process are: milestone tracking
based on performance and delivery needs, NOT contract expiration dates;
compliance disciplines based on performance and timely feedback; and
integration of both program planning and procurement into one process
aimed at prioritization, manageability, and optimization of economic
value.
Implementation status is a follows:
Procurement Planning operations now staffed at managerial level for
Health and Human Services, Public Safety, and Public Management
Procurement Divisions.
Senior procurement planning analysts will oversee planning
activities by organizational cluster working directly with full-time
dedicated analysts in each agency service bureau which are now being
evaluated and appointed.
Contract inventories complete for all agency and commission
operations responsible to the Office of Contract and Procurement except
for Department of Health and being analyzed for vital contract
attributes necessary for establishment of milestones by category of
affected goods and services.
anti-deficiency and home rule acts
The Office of the Chief Financial Officer executed the issuance of
$237,810,000 of General Obligation Bonds, Series 1997A in June 1997.
The bonds were issued to provide new money capital funds and a
refunding escrow that was used to retire higher coupon outstanding
bonds. The new money component totaled $155,440,000 and the refunding
component totaled $82,270,000. The refinancing of higher interest bonds
was due to lower marketing interest rates and the District's improved
financial position. Below, we have summarized the retired bonds.
DISTRICT OF COLUMBIA GENERAL OBLIGATION BONDS, SERIES 1997A--SUMMARY OF REFUNDED DEBT
----------------------------------------------------------------------------------------------------------------
Coupon Call
Series Maturity Amount (Percent) Price
----------------------------------------------------------------------------------------------------------------
1986A............................................................ 1998 $17,045,000 7.70 101.5
1986B............................................................ 1998 7,500,000 7.70 101.5
1986C............................................................ 1998 10,745,000 7.90 101.5
1986D............................................................ 1998 13,140,000 7.70 101.5
1986D............................................................ 1999 14,065,000 7.00 101.5
1987A&B.......................................................... 1998 9,105,000 7.25 101.5
1987A&B.......................................................... 1999 9,765,000 7.40 101.5
----------------------------------------------------------------------------------------------------------------
The refunding component of the Bonds was structured to realize debt
service savings that resulted in the current refunding of bond
candidates. The District's financial advisor performed: standard
savings analysis, a maturity by maturity analysis of the savings
candidates, a marginal savings analysis, a break-even analysis and an
option value savings analysis and recommended bond candidates from the
District's outstanding debt portfolio for refunding. The Office of the
Chief Financial Office received and has available, the report of the
District financial advisors, dated June 4, 1997 which provided the
recommendation of the firm and the detail of the transaction.
The refunding bonds were amortized with a 1.29 average life to
match the debt service on the refunded bonds (June 1, 1998 and June 1,
1999). The refunding produced over $1,900,000 gross savings over life
of the issue and approximately $988,000 in present value debt service
savings. Below we have summarized the refunding bonds.
DISTRICT OF COLUMBIA GENERAL OBLIGATION BONDS, SERIES 1997A--SUMMARY OF REFUNDING BONDS
----------------------------------------------------------------------------------------------------------------
Coupon Yield
Series Maturity Amount (Percent) (Percent)
----------------------------------------------------------------------------------------------------------------
1997A........................................................... 1998 $58,065,000 5.50 4.50
1997A........................................................... 1999 24,250,000 5.50 4.95
----------------------------------------------------------------------------------------------------------------
Under the provisions and requirements of gross budgeting, the
refunding bonds were treated as an additional source of funds--an
expenditure to the ``Repayment of Bonds and Interest'' expenditure
agency and the ``Financing and Other Uses'' appropriation title. Under
this treatment, the Repayment of Bonds and Interest agency was
$78,332,000 over the amount of the approved budget, due to the
allocation of $82,270,000 of refunding bonds.
The office of the Chief Financial Officer, Office of Finance and
Treasury is reviewing the District's anti-deficiency provisions with
regard to Repayment of Bond and Interest appropriation. Home Rule Act,
Sec. 483(d) provides that an additional appropriation not apply to
``(2) any amount obligated or expended for the payment of the principal
of, interest on, or redemption premium for any general obligation bond
or note issued under 461(a) * * * of the Act. However, the treatment of
the refunding bonds as an additional source of revenues and an
additional expenditure, due to the gross budgeting.
The refunding transaction lowered the District's capital and
reduced the debt service owed by approximately $1,000,000 due to lower
interest rates and the District's improved financial position. The
transaction is being reviewed in order to assure a proper
interpretation of the federal statutes and to permit the District from
taking advantage of future opportunities to lower its debt cost through
refinancings.
quick payment provision of the district of columbia code
As with the areas in violation of the Procurement Practices Act of
1985, much work remains to be done in the area of compliance with the
Quick Payment Provision although the number of citations identified
improved by 11 percent from fiscal year 1996. Many of the provisions of
the Quick Payment Act are obsolete, particularly those in areas
requiring payment to vendors in less than 30 days, and are in need of
revisiting. During fiscal year 1998, the Accounts Payable Unit within
OFOS in conjunction with the Office of Finance and Treasury will review
the Act and propose recommended changes while maintaining the purpose
and the spirit of the Act.
electronic data processing
Serious Internal Control Structure (ICS) weaknesses remain within
the District's management information systems with little improvement
to date. Management information systems (MIS) deficiencies represented
57 percent of the fiscal year 1996 ICS findings and appear to remain
the most significant aspect of the fiscal year 1997 ICS comments. This
lack of progress in MIS specifically warrants a separate, concerted
effort for improvement. The Office of the Chief Technology Officer
(CTO) aligned with the Department of Administrative Services, under the
auspices of the Chief Management Officer. The Chief Technology Officer
is a recently created position, with the incumbent only reporting in
the winter of 1997. Last year, the Office of the Chief Financial
Officer (OCFO), Chief Information Officer coordinated system
improvements to assist the agencies then under the Mayor's purview due
to their lack of a chief information officer (CIO). Responsibility,
however, for developing and restoring systems deficiencies resides with
each agency that have identified weaknesses. This effort was largely
unsuccessful, since the agency electronic data processing and
information resources management staff did not report to the OCFO/CIO.
During fiscal year 1998, it is incumbent upon the District CTO to
take responsibility in the correction of these deficiencies and
continue the work begun by the OCFO/CIO to motivate the District-wide
EDP steering committee, and coordinate the efforts among the different
District departments. The District CTO must ensure an overall,
integrated effort that avoids duplication of resources and facilitates
the proper interface of all systems, finalizing the draft comprehensive
data security policies and procedures manual; establishing end user
training; and working with the OCFO/CIO to ensure the automated
interface between feeder systems and EMS occur. As of September 16,
1997, the reviewer was informed that a new CTO for the District of
Columbia had been selected and is expected to be on board in October,
1997.
As part of a city-wide plan headed by the OCFO/CIO, a contractor
was engaged to develop and implement standard policies and operating
procedures. The drafted policies and procedures include standards for
data security, system back-up, and disaster recovery changes in
applications programs, and segregation of duties. The draft policies
and procedures have been distributed to all agencies for comment. The
newly hired CTO for the District must work with the OCFO/CIO to
finalize and implement the policy and procedures, modify, as necessary,
the standards to reflect the characteristics of each individual agency,
and establish an internal audit team to recommend, oversee and review
appropriate changes for the physical processing environment at each
installation.
business tax information processing
The qualified audit opinion in fiscal year 1996 was a result of the
auditor's inability to obtain sufficient evidence supporting the
General Fund Business Tax receivables. That significant progress was
made as during fiscal year 1997 is evidenced by the Auditor's removal
of such qualification. Additional work is still needed however, in the
business tax information processing area.
The Office of Tax and Revenue (OTR) plans to install an additional
modification to BTIS that will further improve the returned mail. The
enhancement will allow the Returns Processing Administration (RPA) to
input corrected addresses into the BTIS master file from forwarding
address labels provided by the postal service. This enhancement will
reduce the number of documents routed to the responsible areas in the
agency. OTR has already implemented an enhancement to flag taxpayer
accounts with returned mail for which no forwarding address is
provided, and suspend the generation of future mail to those taxpayers.
The Returns Processing Administration is not experiencing any staff
shortages or lack of resources.
In addition, OTR plans to use the Internet's Switchboard feature,
the Haines Directory, taxpayer contact, as well as a National Change of
Address vendor which utilizes the U.S. postal service's Code I program.
In addition to implementing the system changes to track returned mail,
OTR also sent a tape of the addresses in question to the National
Change of Address vendor. Of a population of 17,000 questionable
addresses, approximately 1,200 new/corrected addresses were received.
Currently OTR is analyzing the remaining questionable addresses to
determine the materiality and collectibility of the receivable
accounts, and whether the taxpayer has any valid addresses (e.g., for a
different location) on the BTIS master file. OTR plans to continue
further efforts in fiscal year 1998, as part of their normal course of
business, to obtain corrected addresses. Efforts planned include data
entering addresses from returns, data matches with the Real Property
Administration, as well as continued use of the National Change of
Address vendor.
KPMG noted tax returns were not readily available or easily
traceable due to an inadequate system. During fiscal year 1997, OTR
acquired the additional space and the new filing system equipment. The
Returns Processing administration (RPA) completed its re-filing of tax
returns in the new filing system. In addition, RPA updated the
applicable portions of OTR's record retention policy and will continue
to refine the process.
To reduce the occurrence of processing errors, OTR plans to (1)
implement several enhancements to its on-line data-entry system for the
sales and withholding tax returns; (2) work with the Office of Finance
and Treasury to ensure that a new lock box contract is issued that will
address OTR requirements; and (3) continue data purification as needed
until system enhancements are in production.
monitoring of department of housing and community development loan
activity
The Department of Housing and Community Development (DHCD) concurs,
in part, with the comment that ``the District does little to monitor
the financial condition of the borrower to determine the ultimate
collectibility of the note. Rather, it relies on foreclosure notices
from the primary lender to determine whether a loan should be
considered uncollectible. A deferred loan normally has no repayment
requirement on the principal balance until the housing unit is sold,
transferred or ceases to be the borrower's principal place of
residence. In addition, deferred loans take on a ``quasi grant''
characteristic because the loan may be transferred at the borrower's
death to a member of the borrower's household who has resided in the
property for at least one (1) year and who will occupy the property as
his or her principal residence.
However, the vehicle for performance measurement on deferred loan
borrowers with the primary lender is the current contract with the new
servicer. It provides for monitoring the delinquency status of all
superior liens on borrowers' collateral (including deferred loans), as
well as monitoring to ensure that the residency clause has not been
violated.
On an annual basis, a sample will be selected from the deferred
loan population by the Department and the servicer will confirm whether
the deferred borrowers are current with their primary mortgage. This
will assist the Department in determining whether the contractor is in
compliance with their duties under the contract, and the potential
collectibility of the deferred loan.
Regarding the auditor's statement that there were a ``significant
number of loans past due greater than 120 days; however, no loans were
forwarded to the collection agency during the year'', DHCD concurs, in
part. A work order was completed and executed for $1.4 million on
August 19, 1997. An additional $18.3 million in loans greater than 120
days were transferred to the collection agency during the first quarter
of fiscal year 1998. The Department is working with the contractor to
develop a system whereby this provision is implemented on a routine
basis. This would reduce the time required to move a loan from the
servicer to the debt collector, and enhance the possibility of
collection.
DHCD concurs with the comment that ``DHCD maintains little
historical information on collection of deferred payment loans and
amortized loans to allow it to determine the adequacy of the loan
reserve on a recurring basis. Where some collection data is available,
it has not been compiled to develop trends from one fiscal year to the
next, and therefore has not been utilized to develop a strategy on the
loan loss reserve.'' The Department is currently developing a strategy
which will encompass the use of data from the debt collector, and in-
house analysis from reports provided by the loan servicer. Fiscal year
1997 will serve as the base year for development of future trend
analysis.
DHCD does not concur with the comment that they did not adequately
monitor the performance of the contractor. Meetings were initiated by
DHCD and held with both the prior and current contractor to address
ongoing concerns regarding the transfer of data and reporting
requirements. Weekly meetings and site visits were held and written
correspondence was addressed to the current contractor to assist in
facilitating the expeditious handling of the related problems which
occur in a transfer of approximately 6,300 loans to a new contractor
with one month remaining in the fiscal year.
Regarding the loans receivable subledger not reconciled to the FMS
loans receivable balance during the year ended September 30, 1997, DHCD
indicated that the loan receivable subledger was reconciled to FMS at
year end and has instituted procedures for this reconciliation to occur
on a quarterly basis in fiscal year 1998.
bank reconciliation controls
The Office of Finance and Treasury (OFT) and OFOS share the burden
and responsibility to ensure the cash is recorded in FMS, is reflective
of the true cash position maintained by the banks and other holding
institutions in the name and for use by the District. Questions raised
by the fiscal year 1997 audit could have been more readily resolved had
OFT and OFOS communicated better throughout the year on day-to-day cash
accounting. The tremendous workload experienced during the closing days
of the audit, in this area, can be attributed to the backlog of
reconciling items caused by the following reasons:
--Cash documents being coded with an incorrect cash account number.
--Data entry errors.
--Wire transfers being deposited without a corresponding FMS
recording document.
--Wire transfers being sent out without a corresponding FMS recording
document.
--Wire transfers being sent out not in accordance with FMS requesting
document.
--Items being posted in the Check Writing System without a
corresponding FMS recording document.
--Items being posted in FMS without a corresponding Check Writing
System document.
--Cash documents being processed to an incorrect fiscal year.
--FMS recording documents are not being prepared at all.
--FMS recording documents not being prepared correctly.
--Non-FMS checks being distributed without corresponding FMS
recording documents.
Additionally, there were several contributing factors to the delays
in the closing process/audit relating to cash. These contributing
factors are as follows:
--The District has too many bank accounts.
--The opening of bank accounts and corresponding FMS bank accounts
are neither coordinated, timely, nor have responsibilities and
instructions been clearly disseminated.
--Lack of procedures involving recording and distribution of cash.
--Confusion and lack of assumed responsibility in correcting
inaccurate FMS documents.
The following recommendations are under consideration to improve
the bank reconciliation process:
OFOS revise the cash reconciliation procedures to address these
problems that became magnified during the fiscal year 1997 audit. These
revisions will be focused on the timely recording of cash transactions
and will include the following objectives:
--OFOS/OFT establish clear and finite procedures which will define
the role and responsibility of the Cash Reconciliation Unit
versus the responsible agency as it comes to clearing
reconciling items.
--OFT establish a threshold dollar amount for which reconciling items
under the threshold will be recorded in a miscellaneous
account--which are not cost effective to pursue--to concentrate
needed research on larger value items.
--OFOS identify and seek resolution for the different kinds of errors
and the related research that should be performed by the Cash
Reconciliation Unit in identifying reasons for outstanding
reconciling items.
--OFOS/OFT establish a format for transmittal of information to
responsible agencies when notifying them of errors or
outstanding reconciling items. These procedures will further
address required due dates for responses as well as appropriate
follow-up actions that should be taken when items are not
cleared within the specified time limit.
Additionally, it is OFOS' plan (with OFT's cooperation) to review
the current procedures for establishing new bank accounts as well as
analyzing current existing accounts for ways to reduce the total number
of District controlled bank accounts.
inadequate controls over transactions involving the authority
The Office of Finance and Treasury does keep an ongoing record of
Authority held funds. This record takes into consideration funds
received by the Authority on the District's behalf (primarily the
federal contribution and bond/note proceeds) and transfers made to the
District from the Authority for operating and capital expenditures. Any
other account activity, i.e. interest earnings or transfers to other
agencies, are not reconciled on a regular basis due to insufficient
information from the authority. Although it is necessary to have actual
data in order to reconcile the District's records, OFT has been unable
to receive from the Authority actual bank records on a regular basis.
As such, the reconciliation occurs at year-end as part of the audit
process.
The funds held by the Authority on the District's behalf are used
for operating or capital expenditures. The operating funds held by the
Authority typically consist of the federal contribution and note
proceeds. Given that this pool of money is used for general operating
expenditures, OFT tracks the principal amounts of these funds based on
a first-in/first-out method. The Authority generally does not share its
account information with the District, as such, OFT has no way of
knowing whether these funds are pooled or tracked separately by the
Authority.
Other funds received by the Authority typically have specific-use
requirements. As such, requests for these funds must specify which
funding source to withdraw from. For example, capital bond proceeds are
deposited into separate accounts and are withdrawn according to
approved agency expenditures by bond issue. The Office of Finance &
Treasury also tracks the receipt/disbursement of these funds based on
limited information received from the Authority. Interest earnings and
the use of those interest earnings is not available on a regular basis.
The Office of Finance & Treasury is usually aware of the amount of
funds anticipated to be received by the Authority on behalf of the
District. Most of the anticipated funds are the federal payment or
bond/note proceeds. Information regarding other federally appropriated
funding is usually reported to the Office of Finance & Treasury on a
timely basis by the Authority.
Monthly receipt of banking records or account activity from the
Authority would allow the District to reconcile its internal records on
a regular basis and assist the District with improved cashflow
management. As stated earlier, the Office of Finance & Treasury has not
been able to receive this information from the Authority.
lack of timely entries into fms
An environment in which financial information is timely, accurate
and reliable is dependent upon the recordation of all transactions into
the District's existing or new Financial Management System as close to
the occurrence of the transaction as possible.
Likewise, the timely analysis of data is a prerequisite to the
early detection of any anomalies or exceptions subject to correction or
further scrutiny. In the past, the District has relied upon the good
faith efforts of agency personnel to enter timely and accurate data
into FMS during the course of the fiscal year with little or no
periodic oversight by the central accounting office. The results have
been mixed, with some agencies waiting until the fiscal year-end
closing process to enter information and/or make significant cost
allocation changes.
To further ensure the integrity of the District's financial
information, the OFOS is instituting an interim closing process in
fiscal year 1998. While the OCFO and OFOS had determined that an
interim close and increased periodic reporting was necessary, the
auditor's report citing the untimely entry of transactions into FMS as
an internal control deficiency (resulting in significant transaction
input, analysis, adjustments and late entries) has accelerated the need
to institute such requirements. While OFOS remains cognizant of the
workload of the operating agencies, and the hurdles faced during the
fiscal year 1997 closing process, the environment reemphasized the need
to implement an interim close this year. The interim/monthly closing
process will be focused on improving day-to-day accounting activities
in the agencies; fostering the importance or connection of their daily
activities to the closing process; and creating an appreciation that
maintaining good records throughout the year will diminish the
transaction amount and volume activity required at year-end.
The approach to ensure the timely, accurate and reliable provision
of data will be a two-pronged effort. Beginning in April 1998, OFOS
will require the monthly submission of specific information for
analysis and tracking. Also beginning in April, OFOS will require the
closing of specific packages by certain agencies for activity through
the first 6 months of the fiscal year. The forms to be completed will
focus upon those agencies and submissions that were inaccurate,
extremely tardy or required significant transaction input at year end.
The completion of any other quarterly or monthly closing packages will
be determined based upon the assessment of information and accuracy of
the midyear submissions.
Recommendations:
Monthly Reporting
OFOS prepares and OFIS distribute the new reports on non local
source potential overspending, revenue recognition and cash collection.
The agency prepares monthly explanatory reports on non local source
potential overspending, revenue not recognized timely, and cash not
collected timely. OFOS submits a monthly status report to the CFO on
local expenditure, revenues, and cash collections, along with agency
explanations.
Monthly agency reporting of large vendor invoices not vouchered
into FMS, using the agency invoice tracking log.
Monthly agency reporting of significant new litigation against the
agency.
Monthly recording of WASA bills to District.
Quarterly Reporting
Quarterly agency reporting and FMS and subsidiary system updating
for fixed assets acquired from operations, and for fixed asset
disposals.
Quarterly agency reporting and FMS entries for new capital leases.
Quarterly agency status reporting of significant litigation against
the agency.
Quarterly or cyclical inventory counting, reconciling, and
recording in FMS.
Quarterly update by agency of Medicaid accrual.
OFOS develop methodology to estimate annual leave accrual change on
monthly or quarterly basis.
Interim Close
------------------------------------------------------------------------
Closing package Title
------------------------------------------------------------------------
Form 2-5.................................. Checking Accounts Under
Agency Control.
Forms 3-2/3-3............................. Analysis of Outstanding
Encumbrances.
Form 3-4.................................. Analysis of Open Vouchers.
Form 3-6.................................. Accrued Expenses and other
Current Liabilities.
Form 3-7.................................. Central Payment Accounts,
adjusted to appropriate
balance for end of period.
Form 4-2.................................. Analysis of Intra-District
Revenue and Related
Expenditures.
Form 8-3.................................. Adjustments to Receivables,
Revenues and Advances.
Form 8-4.................................. Revenue source ``HOLD.''
Form 10-2................................. Reimbursable Revenues and
Receivables.
Form 10-4................................. Clean Up Funding Source
``9999.''
Chapter 12................................ Enterprise Funds--only
balance sheet, operating
statement, and cash flow.
------------------------------------------------------------------------
Question. The President's proposed budget for the District of
Columbia includes $50 million in start-up funds for a National Capital
Revitalization Corporation, designed to undertake economic development
projects.
In your opinion, what would be the necessary components for an
economic development program to be successful in the District of
Columbia?
Answer. The essential components of an economic revitalization
strategy for the District of Columbia must include:
--improvement in the capacity of the District to provide efficient
financial services and other forms of governmental assistance
that facilitate private investment in the District by small,
medium and large businesses;
--development and implementation of policies, plans and programs that
improve the conditions of private and public infrastructure by
eliminating blight, encouraging investment in the acquisition,
construction and renovation of business plant and equipment,
reducing the incidence of crime, disease, mortality and other
threats to the health and safety of residents, workers and
visitors;
--expansion of opportunities for intra-regional business linkages and
greater cooperation in the training, retraining and placement
of residents in jobs within the District and throughout the
region.
Each of these components must be developed and implemented in
collaboration with local civic, trade, business, not-for-profit-
institutional, and neighborhood interests.
Question. What aspects of the President's plan for economic
development do you support?
Answer. Although, the President's effort last year to create a
federally-established Economic Development Corporation (EDC) set forth
a specific plan of action for that entity, the proposed fiscal year
1999 request for $50 million of start-up funds for the District-
proposed NCRC does not specify an expenditure ``plan''. Nevertheless,
the NCRC and EDC initiatives share several similarities that highlight
the points of agreement between the respective approaches of the
President and District officials. Each plan, among other things, seeks
to achieve the following objectives through establishment of a
politically independent economic development instrumentality that will:
--eliminate unnecessary and ineffective economic revitalization
policies, plans, strategies and programs;
--consolidate fragmented and duplicative economic development
functions;
--develop coherent short and long range policies and plans in
collaboration with private and federal stakeholders that
reflect neighborhood and regional interest in the development
of human and social capital and the improvement of public and
private infrastructure;
--recruit and maintain a credible, experienced staff of business and
economic development professionals with the knowledge,
flexibility and institutional capacity required to meet
economic challenges and changing market conditions.
The President's support for the District NCRC is, in part, based
upon the achievement of a broad consensus among local business,
government civic and community leaders on the need for establishment of
such an organization to develop and deliver economic development on
behalf of the District.
Question. With what aspects of the President's plan do you
disagree?
Answer. The President's original proposal for federal control over
the policies, programs and operations of a District economic
development instrumentality generally was not favored by local elected
and appointed officials.
Question. The recent KPMG Peat Marwick audit determined that 20
deceased retirees from the District's payroll.
What steps are being taken to avoid payment of benefits to these
``payroll ghosts?''
Answer. In concept, the District is in agreement with the overall
theme of the draft report. The District does have an immature software
acquisition process and the implementation of the system is a high-risk
effort. However, the report does not consider that the District has not
acquired any new major systems or software for many years. As a result,
policies and procedures do not exist for software acquisitions. Despite
this weakness, we disagree that our process for this acquisition is
``undisciplined''. A comprehensive source selection plan was applied
that objectively assessed and evaluated proposed solutions for the FMS
including upgrading the existing system, outsourcing the financial
operations, and acquiring a new system. Furthermore, an oversight group
to address the need for the new financial system was formed that
included OMB, HAC staff, the District's CFO, the Authority's Executive
Director, the District's Inspector General, and the GAO. Ultimately,
the group developed an aggressive time line for considering solutions
for the FMS. The aggressive time line is a result of the looming Year
2000 Problem that must be addressed. The aggressive time line
represents a primary reason for the high risk scenario the new system
is being implemented under.
While the District agrees that the implementation of the new system
is a high risk effort, we do not agree with the reasons cited in the
draft report. The system is high risk due to the aggressive schedule
required to implement a solution before the Year 2000; the lack of
infrastructure to support a modern financial system; conversion of
unreliable and inaccurate data into the new system; and the complexity
of the system.
Furthermore, the district does not agree with the characterization
of the draft findings related to requirements development, contract
tracking, and risk management. The following discusses the District's
actions in more detail:
Requirements development.--Initial requirements were defined in a
capabilities assessment in December 1996. These were further refined
during the spring of 1997 by James Martin and Company and were fully
defined by the KPMG as part of the new system solution during the fall
of 1997.
Contract tracking.--The District contracted with James Martin and
Company to supplement the program management of this monumental effort.
Their responsibilities include a variety of contract monitoring efforts
including the measure of performance versus payment, timeliness of
deliverables (as well as quality), and constantly monitors the project
plan and risk mitigation plans.
Risk management.--Two separate risk assessments have been developed
for the project. The primary management focus of the program management
office continues to be risk management. A comprehensive risk management
plan calls for the identification of risk, source of the risks,
analyzing the risk, developing alternative risk mitigation strategies,
constantly tracking the status of the risks, and ensuring
implementation of risk action plans. Proactive risk management is a
continuous emphasis for the program management of this effort.
Many of the GAO recommendations are changes that the District will
embody as we continue to develop and refine our policies and procedures
for financial operations.
Question. The recent KPMG Peat Marwick Audit determined that 20
deceased retirees from the District's payroll.
What steps are being taken to avoid payment of benefits to these
``payroll ghosts?''
Answer. The District's Office of Pay & Retirement Services (OPRS)
was notified that social security numbers for 21 of 15,000 annuitants
on the active retirement roll were found questionable as a result of
KPMG's verification of the numbers against the Social Security
Administration's Death Index. KPMG utilized a private pension research
services corporation to obtain the data.
As a result, OPRS has instituted quarterly verification of social
security numbers, as opposed to our previous annual verification,
through a private pension research services corporation to report
social security number mismatches and deceased retirees. The company
will also supply copies of the death certificates.
Of the 21 social security numbers reported as deceased annuitants:
--2 recipients were reported in error and were not deceased;
--3 recipients were removed from the retirement rolls prior to
receipt of the audit report;
--annuities for 16 recipients were immediately discontinued and OPRS
reclamation procedures were instituted through the banking
institutions; eight (8) of these annuities have been refunded
in full.
The OPRS is pursuing collections from the remaining estates and/or
financial institutions which in some cases have made partial payments
toward the District's reclamation request.
______
Question Submitted by Senator Boxer
collective bargaining agreements which were negotiated and ratified in
july 1997
Question. I am advised that the management representatives of the
District--with clear guidelines from the D.C. Financial Authority--sat
down at the bargaining table with labor to negotiate a comprehensive
Collective Bargaining Agreement with the City's employees. The parties
reached agreement in July 1997. I am told that there has been a
question about who has the authority to move the agreements forward,
and thus, the agreements which the unions negotiated with the City have
yet to go into effect.
The Chief Financial Officer just recently sent the bargaining
agreement to the City Council for its consideration. After 60 days it
must move to the Control Board.
Dr. Brimmer, do you see any apparent reason that the Control Board
would not act quickly and positively on the collective bargaining
agreement, once it is received, inasmuch as the negotiating teams
followed the D.C. Financial Authority guidelines for the negotiations
and that the CFO has already reviewed and forwarded the collective
bargaining agreement to the City Council?
What can you tell us about this, Dr. Brimmer?
Dr. Brimmer, is there anything else you wish to report to the
Committee about the matters under your jurisdiction?
Answer. At present, the Authority has no specific information about
the collective bargaining agreement referenced by Senator Boxer.
However, as a rule, the Authority moves expeditiously to review and
approve labor contracts. The Authority understands that once the
parties have reached an accord, they are anxious to see that it is
implemented as soon as possible. The Authority has not approved
agreements that do not contain sufficient funding for their
implementation. As long as an agreement has sufficient funding and
otherwise comports with the Authority's Guidelines for Collective
Bargaining, it should move rapidly through the Authority's review
process. We will look forward to the agreements from the Office of the
Chief Financial Officer, and we shall endeavor to review them quickly.
subcommittee recess
Senator Faircloth. If there is nothing further the
subcommittee will be in recess.
[Whereupon, at 12:25 p.m., Wednesday, March 18, the
subcommittee was recessed, to reconvene subject to the call of
the Chair.]
Material Submitted Subsequent to Conclusion of Hearings
[Clerk's note.--Public witness testimony was unable to be
heard before the subcommittee, but the statement of the witness
will be made a part of the record.]
[The statement follows:]
Prepared Statement of David J. Schlein, National Vice President,
District 14, American Federation of Government Employees
Mr. Chairman and Members of the Subcommittee: Thank you for the
opportunity to present our views in writing.
The 14th District of the American Federation of Government
Employees (AFGE) represents nearly five thousand employees of the
District of Columbia and several of its independent Authorities. These
are the front-line employees who do the demanding, often dirty, and
sometimes dangerous, and almost always thankless work that keeps the
city running.
workers want real management reform
Like you, AFGE believes that addressing the urgent and glaring
crisis in management is the long-term key to prosperity for the City
and to assuring that the City's residents and visitors to our nation's
capitol receive service excellence.
The cause of the City's twin financial and management crises has
never been that rank and file City workers are overpaid, or that there
are too many people hired to pave the roads, fix the school boilers and
roofs, renew licenses, maintain water and sewer lines, clean up the
parks, or process the paperwork. Unfortunately, it is that political
patronage had come to mean a management job or lucrative private
contract. There were, and still are, too many bosses and not enough
front-line workers or equipment or spare parts to get the job done.
There were, and still are, questionable contracting practices that
result in contracts let without proper regard to the price, the
quality, or the experience of the contractor.
And like you, as hardworking and dedicated employees, our DC
members are extremely frustrated, when the City's government just
doesn't work. Our members are the folks who try to continue to deliver
services to District residents and businesses in an efficient, and
humane way--despite that obstacles and frustrations caused by layers of
redundant management, lack of training, materials, and/or equipment.
They are the folks who arrive to work on time and do their jobs--
despite untrained, unprofessional, politically well-connected
``managers'' who ignore ideas on how to make government work better.
They are the skilled workers who keep plugging away at their work--
despite having their salaries cut twice in the past 24 months, their
earned benefits reduced or eliminated, and their pay for overtime,
hazardous duty, and holiday work being severely reduced. We are proud
of our DC members. As public employees for DC Government they truly are
the unrecognized heroes and heroines toiling under exceptionally
difficult, demanding and often dreary conditions.
Let's be clear. Our members have no stake in the status quo of
management. As the front-line workers our members have a keen awareness
of the problems with the city's operations. It is because they are
closest to the delivery of services, that our members and their union
representatives can offer a clear perspective on solving these
problems. Transforming the DC governmental system into one that
inspires public confidence in the city's ability to deliver high
quality public service in a cost-effective manner is our goal.
collective bargaining agreements are key to management reforms
But DC employees cannot participate in the kind of city
transformation--that both you and our members seek--unless they are
treated with at least the basic tenets of worker fairness by sound
management. Such basic principles include the right to bargain
collectively over the terms and conditions of work.
Unfortunately, the very institution of collective bargaining has
been placed at risk because of the absence of clear lines of authority
and management accountability in bargaining. With whom are the unions
to bargain? What entity is legally able to represent Management and the
City? Is it the Mayor, the Chief Financial Officer (CFO), the Control
Board, the Council, the Office of Labor Relations and Collective
Bargaining, the new CMO, the Congress or all or some of the above? The
very modest agreements our union negotiated with the City, which were
ratified in July, 1997, have yet to go into effect. They have
languished for months, as the Mayor, the CFO, and the Authority play a
shell-game of ``Who has the authority?'' I am glad to report that the
CFO has just recently sent the collective bargaining agreement to the
Council for its consideration. Then it must move to the Control Board.
The forward movement of this agreement will do much to assist the city
in improving services.
labor-management need to be partners in creating and implementing
solutions
We understand that our members' futures are dependent on resolving
the city's ongoing financial and management crisis. We also know that
it is the front-line employees who do the city's work who must be in
the center of any effort to fix the city's delivery of services.
We are pleased to see that Camille Cates Barnett has signed on to
participate in the DC Labor-Management Partnership Council. To
transform how this city runs we must transform the relationship between
management and labor. We must move away from adversarial postures and
move towards working in partnership to identify problems and craft
solutions, to form an alliance for real change. We welcome the
opportunity to work with Ms. Barnett in partnership for real and
lasting change in how this city operates.
Indeed, over two and a half years ago AFGE, AFSCME and the City
successfully applied for a grant from the Federal Mediation and
Conciliation Service (FMCS) to establish a labor-management pilot
program at the Fleet Maintenance Division at the Department of Public
Works. The project has already yielded impressive results in improving
efficiency and labor management relations. Furthermore, the grant
required that a city-wide labor-management partnership committee be
established. Both FMCS and the Department of Labor have generously
donated resources and expertise to make the project a success. The
successes achieved by this project as well as its historic successes in
the federal government and other cities such as Philadelphia,
Cincinnati, Indianapolis, Fort Lauderdale, etc. gives us reason for
hope.
management reform consultant's reports
We have a few comments on the reports by various business
consultants hired by the Authority to analyze shortcomings in the
management, operations, and structures of the agencies under its direct
operating authority. Attached to this testimony is AFGE's response is
entitled: Service Excellence: A Union's Vision for the District of
Columbia. In it we respond specifically to the consultants reports on
Emergency Medical Services, and the Departments of Employment Services,
Consumer and Regulatory Affairs, Public Works, Health, and Housing and
Community Development. We have also responded to the so-called ``cross-
cutting'' reports which focus on personnel management.
Our approach to the consultants reports was systematic. We analyzed
their ``findings'' and ``recommendations'' from the perspective of
whether they would further the following eight AFGE goals and
principles:
--1. Strengthening collective bargaining in order to make reforms
effective.
--2. Empowering employees and treating us with respect.
--3. Improving management accountability
--4. Improving performance management
--5. Improving the rewards system
--6. Flatten and modernize the management hierarchy
--7. Support the development and use of skill
--8. Create Service Excellence.
Number eight is last, but certainly not least, as we believe the
preceding seven to be its necessary pre-conditions.
Our findings at this point indicate that where union leaders and
members have been actively engaged in the process of analyzing
agencies' strengths and weaknesses, and formulating reform proposals,
the consultants findings were more accurate and the ideas for
restructuring have been seen by workers as more likely to be effective.
Unfortunately, we have little indication that as agency's move to
implement recommendations, that employees through their unions will be
involved.
Our report makes several recommendations which we hope will be
implemented:
1. Accelerate the development to the city-wide labor management
committees. The Authority needs to make a strong commitment to the
process.
2. Establish labor-management committees in each department. These
offer the best channels for workforce participation to shape and
implement effective reforms.
3. The severe workforce downsizing of the past several years should
be brought to an end. There should be no further contracting out where
city personnel can do the job.
4. Improve management accountability. Consistent leadership for
reform must start from the top.
5. Allow the collective bargaining process to work. Pay our members
the salaries agreed to in our negotiated contract.
conclusion
The front-line workers of the District of Columbia remain ready,
willing, and able to work with any official or authority who approaches
the job of improving the financial management and service delivery
challenges we face with integrity, with a rational plan, and with
respect for the crucial role we will play in any revival of this City.
Thank you for your time and consideration.
summary
Service Excellence presents a plan for reforming DC government by
involving those who have firsthand knowledge of the District's
agencies, their problems and the needed solutions--Washington's front-
line workers. Labor-management partnerships for reform have succeeded
in building quality public services in other cities. We can build a
successful partnership reform here. And the reform process can't work
without drawing on the knowledge, insights and concerns of the
District's workforce.
As the largest union of DC employees, AFGE has mobilized its
members to review 13 consultant reports commissioned by the Control
Board to develop recommendations for DC management reform. We knew from
experience across the country that labor participation can be a highly
effective process for creating successful reform initiatives.
afge findings
Our principal findings in reviewing the consultants'
recommendations tracked eight principles for effective reform that we
developed before the consultants' reports were completed.
The different agencies experienced a wide variation in the extent
of union/workforce involvement in the development of the consultant
assessments and reform proposals. One basic finding ties all the
consultant reports together.
--Where the union leaders and members have been more actively engaged
in the process, the consultant findings are more accurate and
the proposed reforms are seen by front-line workers as more
likely to be effective.
When the consultants reached out to the local unions and front-line
workers, seeking their full participation their reports hit close to
the mark in defining reform programs that are well matched to the needs
of the agencies. When the consultants excluded the local unions and had
only minimal or deeply flawed interactions with front-line workers, the
assessments are full of factual errors and their reform proposals badly
miss the target. This shows that labor participation is a highly
effective process for creating successful reform initiatives. This
participative method should be systematically implemented in following
through with the city's management reform process.
Principle 1: Strengthen Collective Bargaining to Make the Reforms
Effective
Because of the urgency of rapid, effective reforms, we propose to
work with the Authority and with senior agency managers to establish
channels for labor participation in the reform process, both city-wide
and in each of the city's agencies. An intensive effort to mobilize all
the knowledge and good ideas in the Department is needed on a priority
basis.
--To provide ongoing problem-solving capability, we propose to
accelerate the development of the City-Wide Labor-Management
Committee. Meeting on a more frequent basis, the Labor-
Management Committee can help provide an environment supportive
of the reform process.
--To directly address and support the organizational change--both
city-wide and in each of the Departments--we propose that an
active subcommittee of the Labor-Management Committee be
created as a City-Wide Joint Redesign Committee.
--Within each department, we propose Joint Redesign Committees and
Labor-Management Committees. These offer the best channels for
workforce participation in the process of shaping and
implementing effective reforms and advancing the city to
Service Excellence.
Based on the general principles of successful government reforms
around the country, the labor-management partnerships should be
undertaken city-wide, not one agency now, and others later. If we're in
an emergency reform mode, then workforce participation needs to be
organized from the beginning. We need input from the front-line worker:
What do you think you need to do your job better, more efficiently,
with better customer service?
Finally, the consultants typically see the collective bargaining
functions of the city--where they are acknowledged at all--in a
negative and defensive way. We think collective bargaining should be
seen as a vehicle for problem solving and dealing successfully with the
challenges faced by DC government, DC citizens, and DC employees.
Principle 2. Empower employees and treat them with respect
A basic premise of employee participation in reforming their
organizations is that they can not be punished for that participation--
at least not if the reforms are meant to succeed. DC workers and our
unions need to be mobilized as partners in the reform process, not
treated as uninterested observers or pieces to be moved around on other
people's chess boards.
--The severe workforce downsizing of the past seven years must be
brought to an end now if we are now to embark on a successful
reform process. Most consultant reports recognize this basic
fact. One at least plainly does not.
--There should be no more layoffs and no further contracting out
where city personnel can do the job. This city can't make
further cuts while expecting to rebuild morale and employee
initiative.
--Agencies and the city should reject those few consultant
recommendations to fire current employees and make them re-
apply for their existing jobs, with the likelihood of bringing
in new outside hires.
--Agencies should not pursue policy of further ``hollowing out'' of
internal capacity through additional staff cuts and contracting
out. This is inefficient and ineffective in improving service
quality.
The city must recognize in practice that ultimately ``people are
our most important resource.'' Agencies and the city can not give
insincere lip service to this principle while continuing to treat the
workforce primarily as a cost to be cut--rather than a resource to be
developed and built upon. This kind of inconsistent, destructive
message will only engender further disillusionment and cynicism among
the workforce. And this approach will undermine efforts to reform
service delivery in DC government.
Principle 3. Improve Management Accountability
The most important prerequisite for effective reform is consistent
leadership for reform from the top. This is needed within each agency.
Even more important, consistent top level leadership for reform is
needed for the city as a whole.
--The Authority needs to firmly express its commitment to workforce
and union participation in the reform process. Department
directors need to hear this message loud and clear, and more
than just once. The Mayor and the City Council also need to
endorse this direction for reform of service delivery in the
District.
--Agency heads need to provide consistent leadership within their
departments and for their senior managers. Labor participation
should be built into every manager's job evaluation.
--The city needs to recognize that labor participation in design and
implementation of agency systems and technologies, goals,
objectives and metrics will yield more effective results for
everyone's goals.
Principle 4. Improve performance management
Several key points that come up across all the agency reports that
demand urgent attention.
--The personnel function needs a radical overhaul, not only on a
city-wide basis, but within every agency as well. Hiring
decisions, performance evaluations, and promotions today are
typically not objective and not geared to meeting agency
service delivery goals. Personal relationships and cronyism
must be replaced by objective assessments based strictly on
performance and merit.
--Front-line workers should be integral participants in process
redesign, bringing in new technologies, and establishing
feasible goals for continuous improvement in service quality
and cost effectiveness. As designers of the systems and their
performance metrics, they will have every incentive for
achieving the goals they have helped to establish.
--It is wrong to blame employees for productivity and quality
problems. W. Edwards Deming, the long-time DC resident
recognized as the father of the quality movement, said that
quality problems are 90 percent due to bad management. It is
wrong and ineffective to try to remedy quality problems by
punishing or replacing workers.
Principle 5. Improve the rewards system and allow the bargaining
process to work
We think it is possible to design appropriate positive performance
incentives, for teams, work groups, and other groups that work together
to produce superior quality or greater cost effectiveness. These are
issues that ultimately must be collectively bargained.
Principle 6. Flatten and modernize the management hierarchy
Modernization of management means more than using new technologies.
High participation, high learning, high performance work systems mean
demands for new management approaches and skills. We would like to see
modernized high performance work systems matched by high performance
management.
Principle 7. Support the development and use of skill in the workplace
Very few of the consultant reports recognize that workforce skill
is fundamental to high quality, high productivity service delivery.
High performance work systems and jobs require skill and continuous
learning.
--We need to develop skill requirement profiles for the new jobs in
our reformed agencies, objectively assess existing workforce
skills, and develop systematic training programs for all city
workers.
--Joint training committees should be set up in the agencies and
city-wide.
--Adequate budget resources must be secured to support a training
program that reaches the agreed minimum of 2 percent of payroll
for each employee.
Principle 8. Create excellence in customer service
We in AFGE believe that this city's agencies can be reformed to
provide service excellence for residents, commuters, and visitors to
Washington DC. We stand ready to work with the Authority, agency heads
and senior managers, and elected officials to make this goal a reality.
``The District must do more to involve the District's labor unions
in the financial recovery of the District.'' \1\ The Authority, May,
1997.
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\1\ ``Human Resource Management Reform: A Strategic Approach,'' May
1997, The District of Columbia Financial Responsibility and Management
Assistance Authority, p. 23.
---------------------------------------------------------------------------
part 1. introduction
Service Excellence.--A Union Vision for the District of Columbia
makes the case for involving front-line union members in the reform of
their workplace. In the end, it is up to us, the District's workers, to
transform the rough mandate of laws passed by Council and Congress into
the indispensable reality of quality government services and benefits.
Front-line workers know what it will take to turn this city around.
Whether fighting illegal drugs or caring for the poor, DC workers know
the barriers to service excellence and we want to help The Authority
break them down. Reform can only succeed if it builds on the knowledge
and insights of the people who best know what's wrong with DC
government and how to fix it--DC workers and their unions.
The Authority has hired 13 outside consulting firms to conduct
organizational assessments and make improvement recommendations for
seven agencies and four city-wide services. AFGE District 14 has shared
these assessments and recommendations with the front-line workers from
the respective agencies. This report presents a front-line analysis of
the consultants' work. Merging workforce insights with consultant
expertise is critical to successful reform.
Service excellence identifies eight basic principles that are the
foundation for successful reform efforts. These all hinge on seeing
city workers and their unions as valuable resources for reform--not as
roadblocks to be avoided.
--Strengthen collective bargaining to make the reform process
effective
--Empower employees and treat them with respect
--Improve management accountability
--Improve performance management
--Improve the rewards system and allow the bargaining process to work
--Flatten and modernize the management hierarchy
--Support the development and use of skill in the workplace
--Create excellence in customer service
Restoring DC's fiscal health while at the same time improving
service delivery is a challenge that can only be met if Congress and
the city's political leaders work with, rather than against, DC front-
line workers and their unions. This report proposes concrete steps the
city can take to achieve effective management reforms through an
indispensable method: involving front-line workers and their unions in
reform of our city.
The American Federation of Government Employees (AFGE)--in addition
to being the largest union representing federal government workers in
the United States and overseas--represents some 5,000 employees working
for the District of Columbia government. AFGE District 14 provides
supervision and support to its 14 locals representing D.C. workers.
AFGE Council 211, comprised of all D.C. local unions also serves the
membership through coordinated activities. AFGE represents DC employees
at the following agencies:
--Department of Public Works
--Water and Sewer Authority
--Department of Human Services
--Department of Health
--Department of Administrative Services
--Board of Parole
--Department of Employment Services
--Department of Fire and Emergency Medical Services
--Department of Recreation and Parks
--Department of Housing and Community Development
--D.C. Public Housing Authority
--Metropolitan Police Garage
--Department of Consumer and Regulatory Affairs
--D.C. Energy Office/Office of Planning
background
Congress is now spending millions of taxpayer dollars to have
outside consultants tell them what AFGE and our members have been
trying to tell them for years. Poor management is the biggest problem
facing the District of Columbia.
AFGE and the DC workers we represent have time and again raised
concerns about the management problems in our city, but no one
listened. We also have offered our views on how the problems could be
solved, but our advice and offers to help were put aside while the
financial fires were put out (largely through reducing pay and benefits
for front-line workers). Now, as top-down consultant reports are
presenting management reform plans--usually developed without
meaningful involvement of the workers who have the best knowledge of
what is wrong with DC government systems and of how to fix them--it is
time for DC workers to be heard.
the track record of reform to date: little or no workforce
participation, disproportionate impact on front-line workers
DC's unionized workers have already borne a disproportionate share
of the spending cuts made--without meaningful workforce input--to
address the financial crisis we had no part in creating. Over the past
two years, DC workers have suffered pay cuts of more than $40 million,
which have severely impoverished many working families in the District.
What is more, we have borne the shame and humiliation of blame for the
City's inability to deliver decent, reliable, effective and cost
efficient services to City residents. Yet in agency after agency,
budget cuts were implemented by halting needed training, neglecting
needed equipment purchases and repairs, reducing front-line staff, and
delaying the purchase of essential materials and supplies. When
management deprives workers of the resources we need to do our jobs, a
crisis like the one now facing the District is inevitable.
Since 1995 when the Authority was established and given ultimate
authority over the city's budget, its management, its procurement, and
its labor contracts, the only real changes that have been implemented
are job reductions and pay and benefit cuts for front-line service
delivery workers and reductions in income assistance to the very poor.
Meanwhile, the City has twice rolled back property taxes, which now
stand at 1993 rates. These cuts have severely reduced the revenue
available to the District to meet its budget shortfall.
In the past two years, unionized city workers have endured:
--12 days of mandatory, unpaid furloughs
--6 percent salary reductions for the last half of fiscal year 1995
--3 percent salary reductions throughout fiscal year 1996 and fiscal
year 1997
--A 2 percent reduction in the employer's contribution to the post-
1987 pension plan, made up by the employees (in effect, another
2 percent reduction in pay)
--Restrictions on overtime pay
--The temporary elimination of optical and dental benefits.
These cuts were far deeper than those imposed on the non-union
workforce. Outside contractors and service providers have not been
asked to re-negotiate their contracts at all. In the midst of a severe
budget crisis the City continues to spend millions of dollars in
wasteful contracting out.
Union workers have also borne the brunt of job elimination. The
Authority in its May, 1997 report, Human Resource Management Reform: A
Strategic Approach,\2\ points out that, instead of targeting reductions
at the management level as directed by the Authority, most reductions
have been of employees in lower pay grades who actually deliver
services. In August 1995, the Authority called for the District to
reduce full-time equivalent (FTE) personnel from 40,208 to 35,771 by
September 30, 1996. Although the District met the targeted FTE level,
the majority of the reductions have occurred in the front-line
workforce, not in the management ranks. Seventy-two percent of the net
2,488 non-school reductions have occurred in grades 9 and below; and 42
percent have occurred in grade 5 and below.
---------------------------------------------------------------------------
\2\ ``Human Resource Management Reform: A Strategic Approach,''
May, 1997, The District of Columbia Financial Responsibility and
Management Assistance Authority.
---------------------------------------------------------------------------
In addition to destroying morale, management's self-serving
approach to reducing the workforce has resulted in:
--Severe shortages of employees with critical expertise, especially
in procurement, information services, and environmental
engineering skills
--A disproportionate distribution of workload, with the result that
many employees who perform critical tasks are overworked
--An excessive amount of overtime being worked by critical personnel,
particularly in the Public Safety agencies.
Collective bargaining, grievance and arbitration are the
traditional processes that workers have available to them to voice and
resolve these important financial and workplace issues. But even these
most fundamental vehicles have broken down under the weight of the
City's crisis. Although the Financial Responsibility and Management
Assistance Act of 1995 called for the Authority to approve all labor
union contracts, there have been no labor union contracts agreed to by
the District and a bargaining unit in the two years of the Authority's
existence. In fact, agreements reached by City officials and the unions
sit waiting for the most basic of decisions: determining who has the
authority to implement the agreements. A court-mandated settlement on
back pay has languished for months waiting for Control Board approval.
Compensation agreements ratified last summer sit in the CFO's office
waiting to be submitted to the Authority.
critical role of workforce involvement
According to the Authority's own report, ``The District Government
must do more to involve the District's labor unions in the financial
recovery of the District.'' \3\ The report goes on to recommend that
the city work with the city's unions and the Federal Mediation and
Conciliation Service to expand the current city-wide joint labor-
management effort to include the formation of joint councils in
selected departments and agencies. AFGE stands ready to work with the
City and the FMCS to expand this important initiative. We believe that
a strong partnership will provide our members with the voice in the
reform process that we have been seeking all along. However, a strong
partnership can only emerge within the context of a strong and viable
system of collective bargaining that allows for workers interests in
financial and employment security to be aired and addressed.
---------------------------------------------------------------------------
\3\ ``Human Resource Management Reform A Strategic Approach,'' May
1997, p 23.
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This is an extremely important point. If workers' knowledge,
insights, and interests are not taken into account, then the reform
process simply will not work. Whatever the reform process does, whether
it cuts costs or not, it is the DC workers who must ensure that it is
done well and that it meets the needs of a demanding public. Every
endeavor of the DC government ultimately relies on the skills, ability,
and motivation of DC workers. Before workers will fully support the
reform process, we must first know that our efforts to improve the city
will also serve to improve the quality and stability of our work lives.
a reform process that will last: labor-management partnership
The problems with the District government are deeply rooted in its
ineffective organizational structure and obsolete management
philosophy. The current organizational model is based on centralized
control of a multi-layered, autocratic management hierarchy. With its
emphasis on control, rules, and standardization, this model is designed
to take the thinking out of work and to devalue and discourage employee
participation in workplace decision making. In this system, DC's front-
line workers are hamstrung by red tape and often pointless rules,
buried under stacks of pointless paperwork, and if managed at all,
micro-managed to within an inch of their lives. The central message of
this system is that workers can not be trusted to do the right thing.
By the early 1980's American business and government began to
abandon this outdated management philosophy of command and control in
order to remain competitive and survive in a new world of tough global
competition, new complex technology, and lightning-fast communications.
These companies learned the hard way that in the transformation from an
industrial age to an information age a premium is placed on
intelligent, highly trained, creative workers who have the resources
and responsibility to analyze new situations and act quickly and
effectively in response to new opportunities.
As more organizations moved to form new systems that support the
development and use of skill in the work process, they discovered that
the knowledge and creativity of their employees was often the margin of
difference between mediocrity and excellence. There is no question that
the engines that drove the change in successful companies and
government agencies have been the principles of employee empowerment
and labor-management partnership.
Employee empowerment rests on a simple but powerful notion: the
people who are closest to the work know where the problems are and
usually have the best solutions. Not all good ideas flow from the top
down. When front-line workers are trusted to identify and correct
problems, and when their decisions are supported by top management,
they will be motivated to make continuing and meaningful improvements
to the work they do. The key is to push decision making down and give
workers the authority to think creatively and act independently, within
the context of the organization's objectives and values.
the positive role of labor-management relations
The evidence shows that long-term organizational success is bound
together inseparably with good relations between labor and management.
Time and again it has been proven that effective labor-management
partnerships have led to increased productivity, greater quality,
better customer service, and greater employee satisfaction on the job.
Union involvement in the design and implementation of reforms
strengthens both the reforms and the process by which the reforms are
designed and implemented. Notable union contributions to reform efforts
include:
1. Unions provide reform efforts with credibility. Employees are
skeptical about the potential of the reform effort to make a real
difference. The involvement of the union will send the message that The
Authority is making a meaningful attempt to fundamentally reform the
District. Labor-management partnership is the first step in developing
a culture based on mutual respect and trust.
2. Unions provide workers with an independent locus of control in
the reform process. Collective bargaining will ensure workers that they
will receive a share of the gains they help to achieve, and the
protection of the union encourages employees to speak their minds on
controversial issues without fear of reprisal.
3. Unions promote and help to institutionalize change within
agencies. Unions remain long after the elected leaders and top managers
who initiated the change process. The union and its members are the
only constant, and therefore are the ones who will carry on the changes
long after the reforms are implemented.
4. Unions bring needed knowledge, insight, and skill to the change
process. AFGE represents workers in a number of government agencies. We
can share information, ideas and experiences gained from our other
partnerships and joint reform initiatives. This type of learning
exchange could help to create a powerful synergy within the DC reform
initiative.
As DC employees who believe deeply in public service, AFGE members
want to participate in positive ways to improve the performance of our
government. But time and again we have been frustrated. For years we
have offered thoughts on how to make government work better and more
efficiently, but we have been told ``that's management's job.'' Now the
Authority has hired consultants to do what we have been willing to do
all along, identify problems and recommend proactive changes in how the
city is operated. Next, the consultants' studies and recommendations
will go to a team of top leaders and managers to implement, even though
the reports have clearly identified management as the primary reason
why many of the city's problems exist in the first place.
DC's problems of inefficient and outdated management can not be
solved by top-down, consultant driven reforms. AFGE provides the
Authority with the only viable path to effective reform--to partner
with city employees in the reform process. That is why AFGE urges the
Authority to pursue a reform approach that recognizes that DC's front-
line workers are the solution. We urge the Authority to involve the
union and our members in the Management Reform Teams that are about to
implement the consultants' recommendations.
afge's service excellence principles
Underlying AFGE's involvement in the reform initiative will be a
set of basic principles we will use to shape and evaluate the DC reform
process. These principles are based on a solid understanding of how to
make the system changes needed if the DC Reform process is to produce
the results it has promised to District residents. Our principles will
allow the City to develop and implement a reform process that draws
upon the knowledge and talent of its workforce in improving the
District Government and enhancing the community we serve.
1. Strengthen Collective Bargaining to Make Reforms Effective. To
succeed, the reforms must broaden the scope of bargaining and provide
employees with a voice in improving productivity, increasing efficiency
and enhancing customer service. New vehicles for labor relations that
expedite the bargaining process and grievance administration will
provide workers with the protection they need, and serve to free up the
time of labor representatives to play a meaningful role in the reform
process. The framework of labor-management councils should be expanded
to other departments and be provided with a role in the evaluation and
implementation of the consultant's recommendations.
2. Empower Employees and Treat Them with Respect. Employees hold
the key to solving the City's service problems. No one knows the
problems that DC faces better than the dedicated workers who serve this
City. Our front-line workers through their unions should be given a
voice in the reform process, and in every day decisions regarding the
delivery of the services they provide.
3. Improve Management Accountability. Systems that support
strategic planning and the establishment of performance goals must be
established. Further, these systems must include mechanisms that hold
management accountable to achieving goals and to behaviors that support
a professional and equitable work environment for employees. If
management is not held accountable to reforms, the reform process will
not produce needed results.
4. Improve Performance Management. Earlier in the 20th century
performance management systems focused on identifying and disciplining
individuals for non-performance. The current system in DC still
functions in this negative way. Today it is realized that performance
results from many factors, some individual, but many more that are
group or organizational in nature. DC needs a new performance
management system that will provide individuals with clear direction on
positive work related goals, and which will support team work and
problem solving. Any change in the performance management system should
provide for bargaining and direct involvement in its design by the
employees whose performance the system will measure. If employees do
not have ownership in the system, they will have no real confidence in
its fairness or effectiveness.
5. Improve the Rewards System and allow the bargaining process to
work. Instead of establishing an arbitrary awards system that will
reinforce cronyism, allow us to negotiate a fair system where we
emphasize gainsharing and make increased productivity our goal.
6. Flatten and Modernize the Management Hierarchy. The District's
current command and control system is supported by an excessive
management hierarchy that must be dismantled in size and scope. Once
employees are empowered to make operational decisions, managers are
freed up to focus on longer term strategic concerns. This system needs
less managers and it needs different managers. The managers who remain
in an empowered work system must assume new roles that require
different skills. For example, managers must build and support
teamwork, aid in troubleshooting and provide clear goals and
performance measures. Individual managers who remain must be supported
through training and performance management mechanisms if they are to
succeed in assuming their new roles.
7. Support the Development and Use of Skill in the Workplace. If
employees are to take on a broader role in the work process, training
and skill development must be viewed as a strategic investment in
quality--not as a cost to be controlled or eliminated. One of the worst
causalities of the budget crisis has been the virtual elimination of
front-line worker training. What little training that still exists in
the City is concentrated in mid-to-upper level management while the
front-line workers who actually deliver city services are ignored.
Action must be taken to turn the training deficit around. However, the
skills gap in the city is not merely a training challenge. The current
command and control work organization does not support workers in using
the skills they already have. The work structure must also change if
workers are to bring current and new skills to bear in their work.
8. Create Excellence in Customer Service. Like other governmental
agencies and private employers, the DC government must focus on
providing prompt, cost-effective, and customer-responsive services.
This is what taxpayers demand and what the public has every right to
expect. It is also what DC's union-represented employees want to
deliver. Our city's government systems, supported by an empowered work
force and engaged unions, should aim for and consistently deliver
excellence in customer service.
As a first step toward our involvement in the reform process, AFGE
shared the consultant's studies and recommendations with union members
on the front-line of the agencies under review. This report contains
their views on those reports. Included is an evaluation of the
recommendations against AFGE's Service Excellence principles, and in
cases where we think the consultants are off base, we provide what we
believe to be a more viable course of action.
part ii--the afge response to consultant assessments and
recommendations
Introduction: Stakeholder Participation and Consultant Recommendations
in the Reform Process
Consultants can use a variety of methods to help a client
understand and respond to its strengths and weaknesses. An essential
key to success is the degree of involvement the selected method affords
the stakeholders in the problem identification and resolution process.
Effective assessments generate a consensus regarding the barriers to
effectiveness and create ownership within an organization for the
implementation of chosen solutions. Without stakeholder buy-in,
proposed solutions often sit on a shelf collecting dust, rather than
producing the results they were intended to help achieve.
Effective consultants (and managers) involve workers and their
unions in the design of studies. They use the knowledge of the people
who work within a system to identify issues around which people can be
mobilized. Successful consultants go beyond cursory surveys and focus
groups and rely heavily methods that involve key stakeholders directly
in analyzing problems and crafting solutions.
The consultants hired by the Authority to conduct the
organizational assessments and develop reform recommendations often
fell far short of the best practice benchmarks for stakeholder
participation. The selected consultants relied heavily on managers in
the information gathering and assessment process. Those consultants who
chose to involve workers through the use surveys, town meetings and
focus groups limited worker involvement to discussing questions that
the consultants viewed as important. The consultants shaped the
questions, assessed the data, and decided what issues to pass on for
further consideration and what to leave out. Worker involvement also
often occurred on managements terms. Workers were selected by managers
to participate in the study, yet many managers may not see it as in
their best interest that all views be heard. In most cases basic
methodological rules for soliciting worker views were violated: the
consultants almost always mixed managers in with front-line workers in
their focus groups, thus limiting the ability of workers to freely
express their views.
The Authority has invested too much money and political capital in
the Reform Process to see it hampered by ineffective studies and
implementation processes. The candid, informed views of front-line
workers, provided on their own terms, is essential if the process is to
produce valid data and positive results in successful, effective
reforms.
Overview: Main AFGE Findings
As AFGE members responded to consultant reports for six agencies
and the city-wide personnel function, we found a remarkably consist
pattern in our findings and recommendations across the agencies and the
personnel function.
First, we noted the wide variation in the extent of union/workforce
involvement in the development of the consultant assessments and reform
proposals in the different agencies. Those differences in the quality
of worker participation in generating the reports led directly to
differences in the quality of the reports themselves.
--Where the union leaders and members have been more actively engaged
in the process, the consultant findings are more accurate and
the proposed reforms are seen by front-line workers as more
likely to be effective.
When the consultants reached out to the local unions and front-line
workers, seeking their full participation--as in Emergency Medical
Services--their reports hit very close to the mark in diagnosing
problems and then in defining reform programs well matched to the needs
of the agencies. These reports treat the workforce with respect and
generally integrate workforce insights and employee interests (e.g.,
job security, increased training, adequate resources for doing our
jobs) into their reform proposals.
When the consultants excluded the local unions and had only minimal
or deeply flawed interactions with front-line workers--as in the report
on the Department of Housing and Community Services, at the extreme end
of the spectrum--the assessments are replete with erroneous findings
and their reform proposals miss the target by a wide margin. These low
quality processes have generated resentment and resistance already--
creating early barriers to successful reform. These barriers will have
to be addressed and overcome soon if reform is to succeed in those
agencies.
This remarkably consistent pattern underscores the need for active
union involvement in the design and implementation of the reform
process. In short, Labor participation is a highly effective process
for creating successful reform initiatives. This method should be
followed in the rest of the city's management reform process.
Certain other fundamental themes stand out in common across the
seven individual agency and functional reports developed by AFGE
members and local unions. These basic themes fit well within the
framework of the union's eight Service Excellence principles.
Principle 1: Strengthen Collective Bargaining to Make the Reforms
Effective
Because of the urgency of effectively implementing well conceived
reforms in the shortest possible time, we propose to work with the
Authority and with senior agency managers (and outside consultants, as
needed) to establish a joint reform, redesign, and implementation
process in each of the city's agencies. An intensive effort is needed
to mobilize all the knowledge and good ideas in the Department on a
priority basis. We feel such joint initiatives will make the reform
process much more successful.
--To provide ongoing problem-solving capability, we propose to
accelerate the development of the City-Wide Labor-Management
Committee. Meeting on a more frequent basis, the Labor-
Management Committee can provide a forum for solving problems
that may arise in the general framework surrounding the reform
process. It can help provide an environment that consistently
supports the reform process.
--To directly address and support productive organizational changes--
both city-wide and in each of the Departments--we propose that
an active subcommittee of the Labor-Management Committee be
created as a City-Wide Joint Redesign Committee. This would be
a practical working group. It would support and facilitate the
redesign initiatives in each department and in city-wide
functions. Interacting with agency directors and local union
leaders, it would work toward consistency in following ``best
practice'' approaches across the agencies.
--Within each department, we propose a similar structure of Joint
Redesign Committees and Labor-Management Committees. These
offer the best channels for workforce participation in the
process of shaping and implementing effective reforms and
advancing the city to Service Excellence.
Based on the general principles of successful government reforms
around the country, the Labor-Management partnerships should be
undertaken city-wide, not one agency now, and others later. If we are
in an emergency reform mode, then workforce participation needs to be
organized from the beginning. We need input from the front-line worker:
What do you think you need to do your job better, more efficiently,
with better customer service?
It has to be recognized that most of the consultant reports have
poorly recognized the fundamental linkage between collective bargaining
and successful reform in union-organized city governments. While there
is some variation across the reports from different consultants on the
various agencies, the majority of the consultant processes have shown
little recognition of the unions as potential partners in the reform
process. They have, with important exceptions, limited the engagement
of unions in the assessment and redesign processes. They have failed to
develop proposals for union participation in the redesign efforts, or
for redesign teams. For those consultant reports that did recommend
benchmarking of best practices around the country, they generally
selected the ``best practice'' sites themselves, according to unstated
and questionable criteria, and they failed to propose ideas for labor
to participate in designing or conducting the benchmarking analyses.
None of them recognized the importance of labor-management committees
as channels for advancing a successful reform process.
The collective bargaining responsibilities of the city--where they
are acknowledged at all--are typically seen in a negative and defensive
way.
--Collective bargaining should be seen as a vehicle for problem
solving and dealing successfully with problems that that are
faced in common by DC government, DC citizens, and DC employees
and their unions. Labor-management partnerships for work system
redesign are basic building blocks of best practice in
municipal government reform around the country.
Workers are principal stakeholders, along with DC citizens as the
``owners'' of city government and citizens as customers of the full
range of public services. Workers as stakeholders participate
collectively through their unions and individually in their own
workplaces. Several reports advocate a ``stakeholder'' process (e.g.,
in DCRA) but fail to recognize that workers are basic stakeholders.
Principle 2. Empower employees and treat them with respect
A basic premise of employee participation in reforming their
organizations is that it won't work if employees are to be punished for
their participation. DC workers and our unions need to be mobilized as
partners in the reform process, not treated as uninterested observers
or pieces to be moved around on other people's chess boards, and then
discarded.
--The severe workforce downsizing of the past seven years must be
brought to an end if we are now to embark on a successful
reform process. Most consultant reports recognize this basic
fact. One at least plainly does not (Price Waterhouse at
Housing and Community Development).
--There should be no more layoffs and no further contracting out
where city personnel can do the job. This city can't make
further cuts while expecting to rebuild morale and employee
initiative.
--Agencies and the city should reject recommendations to fire current
employees and make them re-apply for their existing jobs
(DHCD), with the likelihood of bringing in new outside hires.
--Agencies should not pursue policies of further ``hollowing out''
their internal capacity through additional staff cuts and
contracting out. This is inefficient and ineffective in
improving service quality.
--The city must recognize in practice that ultimately ``people are
our most important resource.'' Agencies and the city can not
give insincere lip service to this principle while continuing
to treat the workforce primarily as a cost to be cut--rather
than a resource to be developed and built upon. Treating city
employees as the problem, rather than the solution, will only
engender further disillusionment and cynicism among the
workforce and undermine efforts to reform service delivery in
DC government.
Finally, it must be recognized that genuine workforce empowerment
is not a significant recommendation in most of consultant
recommendations for agency reforms. While some agency recommendations
do call for more modern organizational structures, notably on the
management side (e.g., fewer layers of management), there are virtually
no calls for restructuring work systems toward best practice high
participation, high performance systems. Traditional top-down
bureaucratic thinking predominates.
--There are important opportunities for creating more effective
service delivery through empowering employees with wider, more
holistic job responsibilities and supporting them in these new
roles with appropriate training.
Principle 3. Improve Management Accountability
The most important prerequisite for effective reform is consistent
leadership for reform from the top. Such leadership is needed in each
agency. Even more important, consistent leadership for reform based on
workforce participation is needed for the city as a whole.
--The Authority needs to express its commitment to workforce and
union participation in the reform process. Department directors
need to hear this message loud and clear, and more than just
once. The Mayor and the City Council also need to endorse this
direction for reform of service delivery in the District.
--Agency heads need to provide consistent leadership within their
departments and for their senior managers. The message needs to
flow down through senior management ranks as well as through
the leadership structures of the unions. Participative change
processes are often resisted by middle managers who are fearful
of unfamiliar new roles--in spite of the fact that the new
approaches can provide superior service delivery and cost
effectiveness.
--Labor participation in design and implementation of agency systems
and technologies, goals, objectives and metrics will yield more
effective results for everyone's goals.
Without this kind of leadership commitment, the reform process is
not likely to succeed.
Principle 4. Improve performance management
Several key points come up across all the agencies for improving
performance management.
--The personnel function needs a radical overhaul, not only on a
city-wide basis, but in each agency as well. Hiring decisions,
performance evaluations, and promotions are not objective or
geared to meeting agency service delivery goals. Personal
relationships and cronyism must be replaced by objective
assessments of performance and merit.
--Front-line workers should be integral participants in process
redesign, bringing in new technologies, and establishing
feasible goals for continuous improvement in service quality
and cost effectiveness. As designers of the systems and their
performance metrics, workers will have every incentive for
achieving the goals they have helped to establish.
--It is wrong to blame employees for productivity and quality
problems. W. Edwards Deming, the long-time DC resident
recognized as the father of the quality movement, said that
quality problems are 90 percent due to bad management. However,
several consultant reports seem to place the principal blame
for bad performance on workers. They therefore, wrongly, seek
to remedy the problems by punishing and/or replacing workers.
This approach can not lead to successful reforms or
improvements in service quality.
Principle 5. Improve the rewards system and allow the bargaining
process to work
AFGE is interested in exploring appropriate approaches to positive
performance incentives, for teams, work groups, and other groups that
work together to produce superior quality or greater cost
effectiveness. These are issues that ultimately must be collectively
bargained.
Principle 6. Flatten and modernize the management hierarchy
Modernization of management means more than using new technologies.
High participation, high learning, high performance work systems mean
demands for new management approaches and skills. We would like to see
modernized high performance work systems matched by high performance
management. Neither empowerment nor respect plays a significant role in
most of consultant recommendations for agency reforms:
As noted above (principle 2, empowerment and respect) traditional
top-down bureaucratic thinking about reforms and operations will cause
the city to miss important opportunities for creating more effective
service delivery.
Principle 7. Support the development and use of skill in the workplace
Very few of the consultant reports recognize that workforce skill
is fundamental to high quality, high productivity service delivery.
High performance work systems and jobs require skill and continuous
learning.
--We need to develop skill requirement profiles for the new jobs in
our reformed agencies, objectively assess existing workforce
skills, and develop systematic training programs for all city
workers.
--Joint training committees should be set up in the agencies and
city-wide.
--Adequate budget resources must be secured to support a training
program that reaches the agreed minimum of 2 percent of payroll
for each employee.
Principle 8. Create excellence in customer service
We in AFGE believe that this city's agencies can be reformed to
provide service excellence for residents, commuters, and visitors to
Washington DC. We stand ready to work with the Authority, agency heads
and senior managers, and elected officials to make this goal a reality.
City Departments: Responses to Consultant Reports
emergency medical services afge local 3721
The quality of emergency health care response provided by the
District's Emergency Medical Services is in a crisis condition that is
deeply troubling to many of those who live and work in DC. Response
times for the most critical ambulance service, advanced life support,
are unacceptably slow. These dangerously long response times threaten
the health and lives of those who need emergency medical service in the
District. Turning this situation around, quickly and effectively, is a
critical test for DC government and for the reform process.
DC's EMS system has been the focus of many studies over the years,
but effective reforms have not previously been implemented. Many EMS
employees are weary of good recommendations not being implemented. We
want it to be different this time.
TriData Corporation has studied the EMS system since September.
TriData's team was built around knowledgeable experts with extensive
hands-on work experience in emergency medical systems; they weren't
just academic experts. They used two criteria in developing their
assessment and their reform proposals. First, ``What is best for the
patient?'' And second, ``How to provide the desired level of service
most effectively.'' We think these are good questions to start with.
TriData had extensive contact with the local union representing EMS
employees from the beginning of their assessment effort. They reached
out to the local union leadership and met and spoke with union
executive board members repeatedly as the study moved forward. In
addition they went to firehouses and spoke with individual firefighters
and EMS personnel. We feel we had a great deal of input. In general we
support most of their recommendations because our thinking and insights
were included in the process of developing the recommendations.
--Our local union needs to continue participating in the process of
shaping reforms as recommendations are finalized and the EMS
system moves into the implementation phase of reform. We
propose to work with management (and with support from
consultants, as needed) to launch a Joint Redesign Team that
can work intensively on creating a successful reform effort. We
know that active involvement of front-line EMS employees and
their union will result in better reform projects that will be
more quickly and more enthusiastically put into effect.
--To provide ongoing support for the Joint Redesign Team and to deal
with other ongoing issues facing the EMS Bureau, we want to
build on recent preliminary discussions to create an EMS Labor
Management Committee. Such an ongoing committee can deal with
issues beyond the scope of the critical near-term reform and
redesign challenge.
evaluation of reform recommendations against afge's service excellence
principles
In reviewing the written reports from TriData on Emergency Medical
Services, we have compared their recommendations with AFGE's eight
principles of Service Excellence. Our main findings are summarized
below.
Principle 1. Strengthen collective bargaining to make the reform
process effective
The good beginning by TriData needs follow-through from top-level
management and the union to assure that the collective bargaining
aspects of the reforms are properly addressed.
--Some of the contemplated changes in organizational structure, in
job descriptions, and in the personnel system require
bargaining as a legal matter, but these and other reforms could
be strengthened, we feel, by incorporating supportive language
in the collective bargaining agreement.
Principle 2. Empower employees and treat them with respect
The TriData methodology for gathering information for their reports
has been to empower workers to participate from the early stages of the
reform process. The report and its methods have also treated front-line
workers with respect--recognizing their high levels of qualifications
and the extremely high extent to which they are overworked under
current inefficient, outmoded EMS systems.
--It is critical for front-line employees to have empowered roles in
the next stages of the reform process--when specific reform
strategies are finally determined and when implementation plans
are put into effect. The EMSB Joint Redesign Team we have
proposed can help make sure that this happens properly and
effectively.
--Providing supportive telecommunications and other technologies,
increasing the number of ambulances, and improving operations
protocols will make it easier for employees to do a quality
job.
Principle 3. Improve management accountability
The proposed reforms go a long way toward upgrading management
accountability at the EMSB.
--The critical underlying organizational point is that Emergency
Medical Services are medical, public health services. They
should be organized under a Director who is a medical doctor to
provide patient-centered, medically oriented services. The
culture and mission of fire fighting organizations are unlikely
to change to give adequate emphasis to the needs of the EMS
system.
--Setting a goal for 8:00-8:59 minute response for critical calls
provides a measure of progress in system effectiveness.
--Upgrading computer-based automatic tracking systems will allow EMS
to understand and continue to improve operational patterns.
The TriData proposal (No. 5) to make the EMS promotion process
competitive and to review managerial positions and incumbents is sound.
We agree with the TriData's statements that:
``There is an active distrust of the EMSB supervisors and
management among the field providers; it is pervasive and
organizationally limiting * * * [T]here is a widespread feeling that
promotions [to and within management ranks] are made on the basis of
cronyism and without regard to the merit of the individual for the
position.'' (p 4-39)
We also concur with their recommendation that ``some impartial
review of the qualifications of incumbent managers will need to be
undertaken.''
Principle 4. Improve performance management
We believe that greater team-based operational autonomy would be a
natural extension of the TriData recommendations, but this is not
stated as an explicit goal.
Continuing workforce participation in shaping specific operational
goals and performance metrics for individual units will help assure
that the goals are realistic and have the support of EMS employees.
Principle 5. Improve the rewards system and allow the bargaining
process to work
Our local is interested in exploring innovations and improvements
in reward systems for individuals and groups of employees who work
together in teams or operating divisions.
Principle 6. Flatten and modernize the management hierarchy
We concur with the TriData recommendations to flatten, strengthen,
focus, and modernize the management hierarchy.
Principle 7. Support the development and use of skill in the workplace
The TriData reform project to better integrate EMS documentation,
quality assurance and training provides for close, supportive linkages
between improving service quality and assuring that employees have all
the skills they need to do an outstanding job.
--We would like to expand ongoing involvement of the union in
planning for the training office to make sure that skills are
defined with broad enough scope to support system-oriented
learning and portable skill sets.
Principle 8. Create excellence in customer service
We feel that the reforms proposed by TriData provide a strong
starting point toward the reform process for creating excellent
customer service. If the front-line workforce and the union can play
meaningful roles, and if the investments in new equipment, systems, and
technologies can be made, we are confident that we can move the
District's EMS system rapidly toward Service Excellence.
department of employment services afge local 1000
The Department of Employment Services (DOES) has a long history in
labor-management partnership. We believe that management and the union
can work together to rebuild that departmental partnership in a way
that can substantially strengthen the reform process that is about to
be launched.
AFGE Local Union 1000 has a good working relationship with the
current DOES executive director. The local's six person executive board
currently sits in on the Director's monthly executive staff meeting.
The Executive Director and the President of the local union co-chair a
DOES Labor-Management Committee that meets monthly and addresses a
range of agency issues. The incumbent Executive Director will have left
office on November 21, 1997.
These relatively structured channels for high level labor-
management communication and problem solving can be traced back to a
departmental Labor-Management Partnership created in 1991. The Labor-
Management Partnership facilitated negotiation of a win-win
departmental contract in only seven days and laid a solid foundation
for joint problem solving and development of high performance
organization at DOES. A notable example of our accomplishments at that
time was that every DOES employee received a full week's training on
quality service in customer-focused, employee-centered operations--
``how to provide customer service the first time, on time, all the
time.''
Unfortunately, the DOES Labor-Management Committee that succeeded
the original Labor-Management Partnership has been more adversarial
than cooperative in recent years. Subsequent Executive Directors and
many managers have not maintained the same high level of commitment to
an active, productive partnership that was shown by the Director and
senior managers in 1991.
Over the past 90 days, DOES has been the subject of an assessment
and development of recommendations for reforms by the Technical
Assistance and Training Corporation (TATC). The TATC consultants met
with the two top local union officers toward the beginning of the
assessment phase of their work. They said they would follow up with our
union leadership, but there has been no further contact from TATC since
that first meeting. TATC has likewise not organized strong
participation by front-line workers in its process of information
gathering and developing recommendations. Front-line employees appear
in their report as objects to be reengineered rather than as important
agents of the change process. With its organizational focus on training
issues, however, TATC does call for important and much needed increases
in the Department's investments in staff training. But, again, their
approach provides for little labor participation in shaping these
training or other reform efforts.
As employees at DOES, we want to encourage senior management to
reinvigorate the labor-management partnership that was so productive at
the beginning of the 1990's.
--In a setting of emergency priority for agency reform, we would like
to work with senior management to create a Joint Redesign Team.
This Redesign Team would bring together the best thinking
within the Department--from all sources, including the front-
line workers who actually deliver the Department's services--
and to combine them intelligently with outside resources, such
as consultants, on an as-needed basis.
--To address the broader, longer term issues of upgrading the
Department's service quality, timeliness, and cost
effectiveness, we propose that we work with senior management
to recreate the Labor-Management Partnership that flourished
under the agency's pro-active top leadership six years ago.
As front-line employees, we understand where the Department's
problems lie, and how they could be effectively remedied. All we want
is an opportunity to combine our knowledge with that of the management
team to design and implement reforms that will really work in practice,
not just in theory or on paper. We are ready to take up this challenge
with you.
evaluation of reform recommendations against afge's service excellence
principles
Local 1000 has studied the assessment and recommendations from
TATC. We have analyzed their reform proposals in light of the eight
principles of Service Excellence that AFGE has developed for this city-
wide reform effort.
Principle 1. Strengthen collective bargaining to make the reform
process effective
The evidence of best practice reform of government services around
the country makes it clear that real workforce participation in, and
ownership of, the assessment and reform process leads to the most
effective reform proposals and the most successful implementation of
reforms. Ownership from the beginning is always more powerful than
``buy in'' to somebody else's project after it is ready to move
forward.
--With union representation of the workforce, labor participation in
the reform process can provide highly effective channels for
workforce participation in the reform effort. This can take the
form of design or redesign teams, labor-management committees,
or broad labor-management partnerships. Local 1000 proposes to
build on all three of those options, as spelled out above.
Collective bargaining represents a time-tested process for
establishing joint reform programs. Consultation, joint fact-finding,
problem-solving, benchmarking, or design committees can operate under
the umbrella of collective bargaining, without entailing formal
bargaining on every issue or even most issues. Collective bargaining is
needed when issues of terms and conditions of employment come up.
Indeed, collective bargaining is legally required for those issues. But
bargaining can provide a broad umbrella under which workers can
participate in reform efforts, knowing that their interests are
properly represented and protected. It is the best, most inclusive
approach to problem solving and organizational improvement.
Unfortunately, neither collective bargaining nor AFGE is recognized
at all in the reform proposals from TATC. This repeated oversight is a
fundamental flaw in the process of developing the consultants'
proposals. It undermines the prospects of seeing their reform proposals
successfully implemented.
--The positive role collective bargaining plays in effecting changes
in job descriptions, performance evaluation criteria, training,
compensation, and other issues should be spelled out in serious
reform projects.
Principle 2. Empower employees and treat them with respect
TATC's process of assessment and developing reforms has flagrantly
disempowered employees by effectively excluding them from
participation. We think it is difficult, if not impossible, for
employees who are disempowered in the redesign process to become
empowered in the following stages of implementing reforms and operating
new work systems.
TATC's reform recommendations at various points come close to
proposing basic concepts of high participation, high performance work
systems, but they shy away from the target at the last moment, at least
where front-line workers are concerned. While it is suggested that
managers develop and operate a number of new cross-functional
activities, the TATC recommendation on the most basic point of
continuous improvement in operations states that the agency should
only: consider establishing process improvement teams to involve
employees in improving quality of service, and to increase a feeling of
employee empowerment. (p xix, p 4-20, emphasis added).
There is an important difference between ``a feeling of employee
empowerment'' and measures that actually empower front-line workers.\4\
---------------------------------------------------------------------------
\4\ It should be noted that TATC does call for involving
information technology users in their proposed redesign process for
information systems [p 4-2]. In this context they describe worker/user
participation as key to ``a rational, bottom-up planning process'' that
is otherwise missing in their report.
---------------------------------------------------------------------------
--Proposals to further cut Department staff levels are the opposite
of both empowerment and respect. Where some areas are found to
have excess personnel, those employees should be reassigned and
retrained so that the Department can maintain a commitment to
its staff members. Treating staff as disposable or expendable
fundamentally undermines morale.
Finally, the consultant's the one single concrete proposal for
employee ``empowerment'' deserves to be cited in full: ``Empowering
employees to decorate their own areas would boost employee morale,
improve the appearance of office space, and may make the space more
inviting to the public'' (p xxiii, p 4-29)
--AFGE recommends that work groups and job responsibilities be
redesigned on a joint basis to genuinely empower front-line
workers. When workers understand the goals, objectives, and
responsibilities of their work groups, they should be able to
devise means for fulfilling the mission through benchmarking
best practices, studying their own work flows and processes,
and solving problems as they are identified. This is the basis
of assuring quality and of continuous improvement in the
quality and cost effectiveness of service delivery.
Principle 3. Improve management accountability
TATC makes a number of positive recommendations for improving
management systems and accountability. Achieving longer tenure for the
Executive Director is critically important, as would be recruiting a
Director who has a proven track record in promoting participation and
partnership with workers and their union. Developing systems for
planning, more active communication, redesigning how work is done and
jobs are defined, establishing performance metrics (including quality
but also cost), and upgrading computers and communications systems are
all important for a more successful Department.
--What is missing in these recommendations are significant roles for
front-line workers in redesigning systems, implementing
changes, and operating new processes with high levels of
employee participation and empowerment. Those roles need to be
added through the work of the proposed Department-wide Redesign
Team and in smaller redesign teams within DOES divisions and
bureaus.
We are concerned that the consultant's report makes no mention of
the pending proposals to merge and privatize the disability and
workers' compensation systems. The City Council has held hearings on
this subject and it has been discussed on Capitol Hill. We feel that
any actual savings from such a move would be generated by denying
claims--whether or not those claims are valid.
--AFGE strongly opposes the idea of merging and privatizing the
disability and workers compensation programs.
Principle 4. Improve performance management
The TATC recommendations for redesigned job functions with
integrated job descriptions and performance evaluation metrics are
steps in the right direction. Again, more active autonomous roles for
the front-line workforce on issues like monitoring quality and
improving work processes would improve these recommendations.
The personnel system needs much greater attention than provided by
TATC. Hiring practices are widely perceived as arbitrary, often unfair,
and disconnected from qualifications and skills needed to fulfill the
Department's mission. AFGE addresses many of these issues in our report
on city-wide personnel functions (below).
--We support reforms to move away from cronyism and personal
favoritism toward a merit system based on objective criteria
and implemented with even-handedness and fairness. Although
linked to city-wide reforms, counterpart changes will have to
be implemented within DOES itself. Evasions of personnel
procedures should be identified and reversed as soon as
possible whenever they occur.
--Periodic personnel evaluations should be made more objective and
fair by having them performed by coworkers, by more than one
supervisor, and by customers inside and outside the agency.
This more thorough, balanced system can do more to help
identify areas of needed improvement. To be fully effective, it
should apply to all employees of DOES, both front-line workers
and supervisors and managers.
Finally, AFGE Local 1000 recognizes our own need to change if we
are to play a fully positive role in achieving service excellence. As
employees we need to clarify our fair expectations of one another on
issues such as absenteeism if we are to move into a world of high
performance work systems.
Principle 5. Improve the system and allow the bargaining process to
work
Our union is interested in sitting down with management to explore
improved systems for individual and group awards for outstanding
performance. In principle we agree that the rewards system should
structure positive incentives for improving the quality of our
services.
--We need to explore together possible innovations to implement such
positive incentives consistent with fairness and even-
handedness.
Principle 6. Flatten and modernize the management hierarchy
TATC has made several recommendations for simplifying the
management hierarchy and setting it up to operate on a cross-functional
basis, with improved planning and accountability. These suggestions
move in the right direction.
--Work systems built around high employee participation and
empowerment would lead to a further set of simplifications in
the management hierarchy. In some cases there may be more
supervisors than needed trying to monitor employees through
outmoded command-and-control observation. Many supervisors
might function more effectively in new roles as coaches, with
their particular areas of specialization strengthened by
additional training. Changing work itself is the true
foundation of modernizing management.
Principle 7. Support the development and use of skill in the workplace
As mentioned above, the training recommendations are probably the
strongest part of the TATC report. We agree that training and skill
development should be seen as necessary investments rather than as
costs to be minimized. We concur that individual skill development
plans should be worked out through a gap analysis based on an objective
assessment of skills required for different jobs and the skill
portfolio of the employees in those jobs (at all levels). We need to
work together to make sure that adequate resources are available to
support the needed training in DOES and elsewhere in DC government.
--We suggest that bargaining unit employees and their union need to
play a stronger role in the design of these skill profiling and
assessment systems. It is too easy for managers or consultants
to go off on a tangent and lose track of the skill sets
actually needed for excellent performance. Again, it must be
recognized that front-line workers have the most direct
understanding of what is needed for successful customer
service, including the skills of their coworkers and
themselves. It is a mistake to exclude us from this critical
process.
Principle 8. Create excellence in customer service
The focal point for all the changes we advocate is Service
Excellence. Front-line workers have critical knowledge and insights
that need to be mobilized in the process of redesign and reform of the
Department of Employment Services. We believe that our participation
can produce superior reform proposals that will be supported by the
workforce and therefore implemented more rapidly and more successfully.
--We look forward to working with DOES management to bring about
those results.
department of consumer and regulatory affairs afge local 2725
The Department of Consumer and Regulatory Affairs administers a
wide range of programs that impact on the quality of life, public
safety, and the regulatory environment for business in the District.
Many of these functions have operated poorly in recent years. Since
September DCRA has been studied by a KPMG consulting team, which
published their assessment and initial reform recommendations earlier
this autumn.
The KPMG team arrived on the scene shortly after the appointment of
the new Director of DCRA, David Watts. KPMG originally pursued a
methodology of very limited workforce and union participation in their
process of assessment developing reforms. The consultants did not meet
with AFGE leaders at all before publishing their assessment and
proposed reforms. As the KPMG reform proposals were being published
(October 23rd), Director Watts initiated a series of weekly meetings
with the leadership of our local union. He has been taking a very
active approach to promoting union involvement in the reform process.
He is committed to discussing issues with the unions and to sharing
information. He says that the unions need to be part of the reform
process from the beginning.
Since these meetings with the new Director began, KPMG has been
much more interested in involving the union in the further development
of their reform proposals and strategies. Director Watts has evidently
instructed the consultants to meet with our Local Union leadership and
to discuss reform proposals with us.
The published KPMG proposals contain many positive building blocks
for reform at the Department. Their analysis and recommendations give
much needed attention to areas of human resources and training for
front-line workers as well as managers. We believe that by working
proactively with David Watts, we can put in place a reform initiative
that will address the real needs of DCRA in ways that can generate
active engagement of the front-line workforce and the Union.
--Because of the urgency of the reform timetable, we propose to work
with Department management in creating a Joint Redesign Team
for DCRA. We believe that the Department's employees have a
store of knowledge and insights that can add important value to
the reform process. By working together, we can develop the
most effective reform plans and move them toward rapid
implementation, thanks to the informed participation and
support of front-line workers.
--To deal with the wider range of issues at DCRA, we further propose
immediate creation of a Departmental Labor-Management
Committee. Building on the city-wide Labor-Management
Committee, this group can build up a practice of developing
information and defining and solving problems throughout the
Department.
evaluation of reform recommendations against afge's service excellence
principles
Our Local has carefully reviewed the KPMG assessment and reform
proposals and evaluated them against the eight AFGE principles of
Service Excellence:
Principle 1. Strengthen collective bargaining to make the reform
process effective
The KPMG report makes no mention of the collective bargaining or
the Union.
DCRA Director David Watts, on the other hand, has recently
instituted a series of regular meetings with the Local Union leadership
that have started the process of strengthening collective bargaining
and creating a stronger foundation for the future reforms.
Principle 2. Empower employees and treat them with respect
--The participative process begun by the DCRA Director needs to
become part of the process and procedure for the future work of
KPMG. Participation of the local union and front-line workers
is a necessary part of shaping the reformed agenda, developing
an implementation strategy, and monitoring and fine-tuning the
reform process as it moves forward.
The KPMG process to date has not treated front-line workers with
respect. It has worked around the workers and their unions as a source
of independent insight and input. Again however the new Director has
sought to remedy this method.
The KPMG reform proposals do call for protecting DCRA workers from
further layoffs and RIF's. While certain functions are noted as perhaps
no longer necessary, the incumbent employees in those functions are
slated in their report for reassignment and retraining to carry out
other responsibilities in the Department. We agree with this approach.
It reflects an element of respect for DCRA workers--their need for job
security and they move into the reform process. This is important for
all employees who are being asked to contribute to improving the
organization where they work.
Principle 3. Improve management accountability
KPMG recommends improved planning, reorganizing some functions
processes for setting agency goals, defining objectives, and
establishing metrics to track improvements. These are important and
positive steps. However, we feel that the union can contribute
important insights and perspectives in shaping these changes. Before
implementation, the substance of these management system reforms should
be reviewed and discussed by the agency's Joint Redesign Committee.
Principle 4. Improve performance
The KPMG report properly recognizes the importance of human
resource issues in creating effective work system in a productive DCRA.
It properly connects workflow, job design, skill requirements and
training in an integrated whole.
--Redesigned work systems and new job requirements should be
addressed by the union and management together to reach the
best-informed decisions that will be most effectively
implemented. These questions should be taken up by the Joint
Redesign Committee and examined on a joint basis for each part
of the Department.
Principle 5. Improve the rewards system and allow the bargaining
process to work
DCRA, like other city Departments, will benefit from the broader
changes in the personnel systems, as outlined elsewhere in this report.
We believe that there is room to explore the development of team-based
and other collective performance metrics that can appropriately support
high participation, high quality operations.
Principle 6. Flatten and modernize the management hierarchy
Simplifying and rationalizing the organizational hierarchy and
bringing in new information and telecommunications technology systems,
as recommended by KPMG, can be a good start toward flattening and
modernizing the management hierarchy. What needs improvement in their
recommendations, again, is to build in workforce and union
participation.
KPMG even defines the goal, but their proposals don't quite fulfill
it. A good example (among many) is found in their discussion of
designing computer database software:
``All sections of DCRA must be involved in the integration process.
It is imperative that all parties feel that they will benefit from the
integration or there will be resistance and no commitment to ensure its
success.'' (p 12)
We, the front-line workers and our union, are definitely parties to
these system changes. Our participation will not only minimize the
potential problem of resistance or apathy, but will help generate the
best choices.
--Direct the Joint Redesign Team to review proposed changes in
organizational structure and functions.
--Create a specialized joint design team for new information and
telecommunications technologies, with the goal of mobilizing
user participation in the evaluation, selection, customization,
and implementation of these new technologies.
Principle 7. Support the development and use of skill in the workplace
KPMG's gives very positive attention to the needs for skill
development in quality-oriented service delivery. Their proposed
comprehensive training plan and program properly recognizes the need
for training for new roles and responsibilities, for using new
technologies, for maintaining professional skills, and for quality
interactions with customers.
--Create a Joint Skill Development and Training Committee to develop
the skills training program of DCRA.
Principle 8. Create excellence in customer service
We believe that our front-line workers and Local Union can work in
harness with the new Director and, under the right direction, with the
consultants in shaping and implementing a very successful reform
program for the Department of Consumer and Regulatory Affairs. We
welcome the opportunity to participate in making our agency more
effective through excellence in customer service.
department of public works afge locals 631 and 1975
The Department of Public Works encompasses many functions that
impact directly--and nowadays often negatively--on large numbers of DC
residents, commuters, and visitors. DPW functions include road
maintenance, snow removal, trash collection and street cleanup,
maintenance of DC public buildings, parking enforcement, and drivers
licenses and motor vehicle inspections, among others. Successful and
prompt reform of DPW is, therefore, a priority in the broader effort to
turn this city around.
As front-line workers represented by AFGE, we see the many problems
at DPW at close range. We see first hand how organizational structures
in DPW are fragmented and poorly coordinated and how, as a result,
customer service and efficiency are often poor. An ongoing lack of
investment in technology, training, and new vehicles and other
equipment increases costs and impedes timely delivery of services in a
host of areas--from building maintenance and repair to snow removal and
waste management.
The work force in the Department of Public Works has been roughly
cut in half during the 1990's. Key agencies such as Facilities
Operations and Maintenance Administration (FOMA) and Fleet Maintenance
have had even more than half their jobs eliminated since 1990, while
work assignments have not decreased to the same degree.
FOMA did the maintenance work (e.g., roofs and boilers) for the DC
public schools until the mid-1980's, and levels of maintenance were
considered to be good at that time. The work has since been contracted
out, with disastrous consequences for the school system.
In spite of the difficulties facing the agency and its employees,
we have made it clear that we are willing to work with DPW management
in seeking more effective ways to deliver quality services. The
positive track record of the Labor-Management Committee for Fleet
Management and other joint initiatives supported by DPW Director Cel
Bernadino in 1997 represent an important set of building blocks for
future joint union-agency problem solving and redesign efforts.
Since September DPW has been studied by a consultant group led by
Managing Total Performance, Inc. (MTPI). While the consultants'
recommendations for management reform in DPW contain some valuable
insights and suggestions, their process has not adequately engaged the
knowledge, insights and interests of the workforce stakeholders. DPW
workers and their unions feel they have a great deal to contribute
toward improving the department's operations, organization, and
processes. What we need is an opportunity to bring that contribution to
bear as recognized and valued participants in the process for
redesigning the Department of Public Works.
--Because of the urgency of effectively implementing well conceived
reforms, we propose to work with DPW management (and outside
consultants, as needed) to establish a Joint Redesign Team. An
intensive effort to mobilize all the knowledge and good ideas
in the Department is needed on a priority basis. We feel such a
joint initiative for reform will make the process much more
successful.
--To provide ongoing problem-solving capability, we propose a broader
DPW Labor-Management Committee. Building on the positive
experience of the city-wide Labor-Management Committee and the
pilot LMC in DPW's Fleet Services Division, a Department-wide
committee would provide an environment that would support the
reform process.
evaluation of reform recommendations against afge's service excellence
principles
The consultants' recommendations for management reform and the
process they used for determining these recommendations have been
evaluated by AFGE union members at DPW against the union's eight
principles for Service Excellence.\5\
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\5\ This report, prepared by AFGE members and leaders, does not
directly address areas of DPW where other unions represent the
workforce--e.g., the Solid Waste Management Administration (SWMA), the
Division of Transportation (DOT), or the Division of Motor Vehicles.
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Principle 1. Strengthen collective bargaining to make the reform
process effective.
There was only a limited engagement of the unions in the assessment
process. The Department of Public Works is one of the agencies in which
the consulting contractors made an effort to reach out to the agency's
union leadership. But that effort, however, did not go far enough.
The consultants met with the presidents of the unions representing
DPW employees early in the assessment phase. They also met with the
Fleet Maintenance Labor-Management Committee and met alone with the
union members of the LMC to seek their candid opinions about problems
in Fleet Maintenance.
Unfortunately MTPI used these encounters with union leaders only
for narrow information-gathering purposes. The consultants posed
structured questions, but they did not ask if the union leaders had
additional topics that they thought were important to pursue. After
those initial sets of meetings, there have been no follow-up
discussions with the union leaders by the consultants. The
recommendations that we put forward in those early meetings have not
been included in the reform proposals developed by MTPI.
By and large, the MTPI recommendations do not contain a meaningful
recognition of an ongoing role for the Department's unions and front-
line employees in the reform process. In spite of the very positive
activities of the city-wide Labor-Management Committee and the LMC for
Fleet Maintenance, the consultants' recommendations do not identify any
ongoing role for labor or the Labor-Management Committee in
benchmarking best practices in other jurisdictions, assessing the
strengths and weakness of existing DPW systems, or in participating in
the redesign of DPW systems.
We particularly note the value of the recent benchmarking trip made
by senior DPW managers and union leaders to Indianapolis--a city that
has made major strides in rebuilding its services on the basis of a
labor-management partnership. We need to build on this foundation of
joint benchmarking and assessment, not ignore it.
--We renew our offer to form a Joint Redesign Committee with
Department management on an emergency basis, and to support its
work by building up a Labor-Management Committee for the entire
department as a whole and for particular Administrations within
DPW, as appropriate.
The only major reference to unions and collective bargaining in the
Task 2 report is the recommendation that FOMA should ``seek changes in
labor agreements in areas affecting productivity,'' even though the
specific practices they propose to change ironically originated with
DPW management.
DPW management should work with the union leadership to develop
agreement on collective bargaining provisions on all issues that fall
under the bargaining mandate.
Unions must not be viewed in negative terms as obstacles to
productivity improvements. Unions can play a positive role.
Principle 2. Empower employees and treat them with respect
Empowering front-line workers as a means toward more effective
service delivery at DPW is suggested by a number of specific proposals,
but it is never really identified as an important step in its own
right.
The report refers to the need to remedy excessive layers of
management, high supervisor/staff ratios, and costly (and ineffective)
micro-management of workforce activities. Yet the other side of the
equation--allowing empowered and properly trained workers the authority
to direct their own work within a larger structure of high performance
operations--remains unstated.
--Reforming procurement and management practices so that workers can
successfully do their jobs (e.g., by having replacement parts
readily accessible for vehicle repair) should be matched by
high participation, high empowerment redesign of work processes
and teams so that that the Department's work can be done most
effectively.
The views of DPW employees were not solicited or meaningfully
valued in the consultant's process of assessing current practices or
developing their recommendations for reforms.
--DPW workers and their unions would like to see future reforms
implemented in ways that do empower them to do the best jobs
they can, based on the design of the new work organizations and
the training and resources that are available for employees to
provide quality services on a cost-effective basis.
We believe that the success of the reform process at DPW depends on
the active participation of the front-line workforce in the assessment
and redesign process. Top-down reforms coming from senior managers or
consultants without worker and union participation is, as spelled out
throughout this report, unlikely to succeed.
Principle 3. Improve management accountability
MTPI has made several proposals that have merit for improving
management systems and planning. We would, however, suggest important
improvements for those proposals.
MTPI proposes creating a ``DPW Management Committee,'' including
``business and civic leaders'', to provide counsel to the process of
determining areas of service improvement.
--Labor leaders representing the DPW workforce should participate as
internal members of this committee, and city-wide labor
officials should serve on it as external members.
Creating geographically based service districts for street repair;
tree maintenance, garbage collection and street cleaning can create
closer ties between the DPW workforce and the residents they serve.
Many questions need to be addressed for such a reform to be fully
effective.
--The city will need to assure that it works with workers and their
unions from the outset to coordinate the collective bargaining
implications of such a consolidation of service delivery,
especially as workers from different jurisdictions would work
together on a single project or under a single supervisor.
--The consultant's proposal to integrate DPW service delivery
districts should mirror the seven police precincts appear to
move in the wrong direction for increasing the effectiveness of
DC government. It would be preferable if multi-purpose
geographic service districts followed the boundaries of the
eight City Council wards. This would strengthen lines of
accountability between DC citizens and their elected local
representatives. It would ultimately make city government more
responsive to citizen needs.
The proposed centralization/integration of facilities management
functions now spread among several agencies as well as the proposed
upgrading of motor vehicle fleet management and maintenance functions
pose similar questions in terms of the nature of the new work systems.
--The City has an opportunity to work with its workers and their
unions in FOMA, DECA, DES and in Fleet Management to design
high participation, high learning, high performance work
systems that will provide excellent customer service in highly
efficient operations.
--Identification of ``best practice'' cities, counties and states for
benchmarking analysis should be done on a joint basis.
Selection of cases as ``best practices'' that are built around
massive and uncritical contracting out do not qualify as best
practices in the eyes of this city's workforce.
Finally, the huge resource shortfall in transportation services and
other areas of DPW responsibility is recognized by MTPI, but
recognition is not enough. The resource issue must be directly
addressed. Suburban Maryland jurisdictions are spending $27,181 per
lane mile of street on maintenance, while DC tries to struggle by with
$5,289 per lane mile--less than one-fifth as much. DC's pothole repair
crew has fallen from well over 100 staff to 22 workers, but DC's tens
of thousands of lane-miles of streets have not been reduced. The city's
more than 100,000 trees are now maintained by a staff of only 25--about
one-fifth the number in 1990.
--Adequate resources must be appropriated to carry out these
functions. Increased efficiencies alone can not close these
huge resource shortfalls.
--Contracting out positions as employees retire or quit does not
necessarily assure more cost-effective services. DC employees--
in properly structured systems with professional management--
can provide better quality at lower cost than outside
contractors.
Principle 4. Improve performance management
As in other parts of DC government, the personnel system is in
disarray. In most parts of DPW it is perceived by our members as
unfair, arbitrary, and grossly inefficient. The dysfunctional hiring
and promotion functions directly undermine morale and affect motivation
and performance. AFGE has addressed these issues in our response to the
city-wide personnel function report (below).
--For DPW, achieving a fair, objective and productivity-oriented set
of personnel practices is critical.
We agree that setting goals for service improvement is important
for groups within DPW (from Administrations to work teams) as well as
for individuals. But we feel that we have important knowledge that
needs to be part of the process for setting those goals.
--The determination of service improvement goals and the measurements
that can best gauge our progress in meeting them should be
taken up as joint redesign initiatives between the affected
agencies and the unions representing their employees.
Principle 5. Improve the rewards system and allow the bargaining
process to work
The scope and direction of changes outlined in the consultants'
management reform recommendations open the doors for collective
bargaining to address issues of changing jobs and their
responsibilities.
--DPW and the city should move early toward negotiating with AFGE and
the other unions to facilitate the smoothest possible
implementation of the agreed reforms. (Again, the reforms are
only likely to succeed if they are approached through joint
design programs between the departments and the unions
representing their workforces.)
Creating positive incentives for effective service delivery may be
a set of innovations that DPW and its unions can usefully address
through bargained innovations in the reward system. Many work groups or
teams in DPW have production and quality targets that could be
effectively measured through performance metrics that are jointly
evaluated, selected, and implemented.
--Groups that meet or exceed targets in cutting costs, improving
quality, or cutting response times may be suitable candidates
for increased bargained financial rewards, so that innovative
workers can share the benefits enjoyed by their service
customers and the city's taxpayers.
Principle 6. Flatten and modernize the management hierarchy
A flatter, more modern management hierarchy is a clearly stated
objective in many of MTPI's proposed reform projects. The full
potential value of these changes in modernizing how work is organized
for managers is accompanied by matching changes in modernizing how work
is organized for front-line workers, how their jobs are defined, and
how their skills are developed for these new jobs.
The benchmarks of best practice indicate that effective reforms
should lead not only to high quality, cost effective customer service,
but also to front-line service jobs that are more secure, more
autonomous, more challenging, more rewarding and ultimately more
enjoyable.
--The jobs and work organizations that will work best for DC are
those that combine high workforce participation, high skill,
and continuous learning with opportunities for advancement and
broader responsibilities with greater autonomy. AFGE is eager
to work with DPW to create this parallel evolution of high
performance service delivery and high performance jobs.
Principle 7. Support the development and use of skill in the workplace
Developing and implementing new skills for new systems with new job
responsibilities will be a critical success factor for reforms at DPW.
Achieving the goals of a well structured, responsive training
system that supports high performance work systems will require
important investments and a top-to-bottom restructuring of existing
training systems. Like other DC agencies, DPW starts with major
training and related system deficits. Training has not been widely used
over the years to promote training and skill development programs for
front-line workers. Most training has gone to managers, and even the
little bits of training available for service delivery workers have
been early casualties of cost-cutting initiatives in the 1990's.
MTPI has concentrated their training recommendations on building up
the skill of management personnel. We agree that upgraded and more
consistent management capabilities are sorely needed in DPW. But the
success of the organization does not depend on the skills of management
personnel alone.
--As organizations and jobs are redesigned, skill gaps should be
identified and addressed so that DPW front-line workers as well
as managers can have the tools to excel in their job of
providing excellent service to DC residents.
--Training should be available for all DPW employees on both
technical skills and quality or ``people'' skills for the
upgraded and reorganized systems.
--A joint labor-management skill development working group should be
instituted to assist in designing training systems and
continuous learning systems for the workplace.
Principle 8. Create excellence in customer service
The consultants' assessments and reform recommendations can be a
step in the right direction toward service excellence, but the city
will only reach its goals if additional steps are taken by management
and labor together, and if the direction of those steps is worked out
among the stakeholders.
Building joint labor-management design teams for DPW (as at other
DC agencies) is the foundation upon which the elements of high quality,
cost-effective customer service can be assembled and developed. We are
ready, willing, and able to work with management at DPW to achieve
these goals that will benefit the city, its citizens, and its work
force.
department of health afge locals 383, 2725, 2978
The Department of Health is a part of DC government that has
already begun to turn itself around in late 1997. The assessment and
recommendations by the outside consulting firm, University Research
Corporation (URC) appears relatively well balanced. What is missing
from their recommendations is what was also lacking in their
methodology: recognition (by management and by URC) of the positive
role of a labor-management partnership in achieving high quality, cost
effective health services for the District.
URC is one of the few consultants hired in the Management Reform
process to declare participation to be an important part of their
methodology. Their framework for design and implementation of reforms
is a variety of Total Quality Management (TQM) that emphasizes
continuous quality improvement. They present their approach as based on
participation and customer orientation (including front-line workers),
the use of objective data, a process or systems focus, and a team
approach (p 7). Their concept of participation, however, seems to have
been developed in non-union settings, since URC made no effort to
establish a dialogue with the union leadership.
Unfortunately, our information indicates that actual ``employee
participation'' in the URC processes for conducting the assessment and
developing recommendations was heavily tilted toward managers and
senior professional staff. The vast majority of front-line workers had
little or no contact with the consultants. The local union leadership
per se was not contacted by URC, and their report does not reflect any
awareness of the legally required role of collective bargaining in
making changes in the terms and conditions of employment.
--The members and leadership of AFGE at the Department of Health want
to work with the Department's management in a Joint Redesign
Team to create a set of mutually agreed reforms and then to
implement them with employee ownership and enthusiasm for the
reform process. We have a lot of work to do, but we think the
Joint Design Team would be a very positive step toward creating
a reform process that can fully succeed. The workforce at DOH
has a lot to contribute and can help design and implement
reforms that will work for city's residents and visitors as
well as for the staff at the Department of Health.
--More generally, we propose setting up a general DOH Labor-
Management Committee to address the wider range of ongoing
planning and problem solving issues that exist now alongside
the reform effort and will continue to exist in the years to
come.
evaluation of reform recommendations against afge's service excellence
principles
The front-line workers and AFGE local unions at DOH have evaluated
the URC assessment and reform proposals against AFGE's eight principles
of Service Excellence. We have reached the following conclusions:
Principle 1. Strengthen collective bargaining to make the reform
process effective
The participatory process that URC claims to follow needs to be
extended, within a union-represented workforce, to include union and
front-line worker participation and collective bargaining. The
consultant's report hardly acknowledges the existence of the union and
the contract at all. It discusses strategic planning, changes in
organizational structure and job descriptions, training, personnel
evaluation systems, and other fundamental issues without noting the
benefits from union participation in shaping the proposed changes and
the change process. The legal requirements for collective bargaining
are not mentioned.
The new senior management team at DOH has begun to recognize the
advantages of working with the union and the workforce, rather than
ignoring us. Contacts and communications with the new Director and
other senior managers have been improving in recent months, starting
from a very low point. A training session for managers on the union
contract was scheduled for October 1997, to increase manager awareness
of contract provisions and procedures (although no union
representatives were invited to speak or participate). In general we
think the labor-management relationship with the new management team is
beginning to move in the right direction.
--We extend our call for the creation of a labor-management Joint
Redesign Team to assure full labor input into the reform
process at DOH on an intensive, emergency basis.
--A broader DOH Labor-Management Committee, established to deal with
the full range of ongoing organizational and operational
issues, can provide important support to the proposed Joint
Redesign Team in studying problems and developing innovative
solutions that lead toward a more effective ways to fulfill the
Department's mission. With the training and facilitation
support advocated by AFGE for Labor-Management Committees
throughout the city, we believe that these processes can be
highly effective in strengthening the Department of Health and
its divisions.
Principle 2. Empower employees and treat them with respect
The URC proposals recognize many positive qualities of the DOH
workforce. Many of their proposals call for creation of cross-
functional teams that can operate with considerable self-direction.
These are positive steps.
Yet the URC methodology in practice heavily tilted its
participative thrust heavily toward managers and senior personnel. To
date they have virtually ignored the union. When front-line employees
participated in a focus group or meeting, they were mixed in with
supervisors and other managers, thus inhibiting candor and limiting
full expression of concerns and suggestions.
--We believe that many of the URC reform proposals can be extended to
generate work systems that genuinely empower workers, but that
will happen realistically and properly only through a new
element of labor participation.
--To be meaningfully empowered, employees will need the tools to do
their jobs--training, computers and information system
technologies, effective telephone systems, and fair personnel
systems based on objective facts, not personal favoritism. The
full access of front-line workers to these tools needs to be
clarified and confirmed by URC and DOH management.
Principle 3. Improve management accountability
The URC recommendations strongly emphasize strategic planning as a
way of clarifying agency goals and objectives and determining
appropriate metrics and benchmarks to track the extent to which they
are being achieved. They also suggest ``staff participation'' in the
strategic planning process.
--Union involvement in the strategic planning process can help assure
that the views and knowledge of front-line workers are fully
represented in the strategic planning process.
Principle 4. Improve performance management
The broad, integrating perspective of the URC assessment and
recommendations on this issue again needs to more fully include front-
line workers. The starting point for improved performance management is
developing realistic job descriptions with responsibilities and
evaluation criteria objectively and accurately spelled out.
Revising the personnel system to eliminate personal favoritism,
cronyism, and the predominance of subjective factors is one of the most
fundamental changes needed at DOH (and elsewhere in DC government).
Virtually all employees are demoralized by a system that seems to be
systematically disconnected from both fairness and from advancing the
service goals of the Department.
--Postings for new job openings need to be visible, and the criteria
for selection clearly spelled out.
--The performance evaluation criteria for each job should be
logically matched to requirements for achieving agency
missions. They should be determined in consultation between
managers and the union.
--The performance evaluation process should be carried out on a more
comprehensive and objective basis than it is now, with co-
workers and multiple supervisors offering their assessments,
perhaps along with internal and external customers.
--These more comprehensive performance evaluations should be
available for supervisory as well as nonsupervisory staff.
Front-line employees, as internal customers of supervisors,
can provide uniquely valuable in evaluating supervisors'
skills.
The objective of continuous improvements in performance should
provide opportunities for employees at all levels to contribute ideas
and innovations for improved services and processes:
--Opportunities should be provided for employees to make suggestions
for improving the implementation of their various assignments
Principle 5. Improve the rewards system and allow the bargaining
process to work
The existing system of financial bonuses for outstanding
performance is perceived as compromised by a lack of objectivity and
fairness. As in other aspects of the personnel system, personal
favoritism and personal relationships often appear to predominate over
outstanding effort and performance that advances system efficiency and
customer service.
--DOH employees are interested in exploring team-based and division
based rewards for outstanding effort and performance as a
supplement or alternative to individual awards. Performance
changes that improve efficiency, cut costs, or improve quality
are more often generated by work groups than by individuals.
--Individual employees who perform outstanding work should be fairly
and consistently rewarded.
--Employees who do the work of positions above their pay grade should
be fairly compensated according to the work they are doing.
--Simple recognition of outstanding employee efforts can do a lot to
improve morale. A spectrum of positive recognition and rewards
should be available to all employees.
Principle 6. Flatten and modernize the management hierarchy
The URC recommendations recognize the advantages of flatter
management hierarchies to replace unresponsive command and control
bureaucracies.
Beyond simply ``flatter'' management, the operational goal of
management should be to support an empowered workforce, to lead in
shaping mission goals, metrics and milestones and in mobilizing the
participation and initiative of all employees. We perceive the URC
assessment and recommendations as consistently falling short in these
aspects of modernizing the flattened management hierarchy so that it
supports, empowers, and energizes a fully engaged work force.
Principle 7. Support the development and use of skill in the workplace
The URC recommendations extensively address development of advanced
organizational skills for managers. This is important to move DOH
forward.
It is equally important that non-supervisory employees increase
their skill levels to move the Department forward as far and as quickly
as possible. This means more than just narrow technical skills for
operating new computers, software and communications systems.
--High performance skills for non-supervisory employees require
skills for team operations, problem solving, quality metrics
and continuous improvement, among others. Training for DOH
personnel should be provided for these high performance skill
sets.
--As jobs are redesigned and roles and responsibilities clarified,
all employees should be able to assess their current skills
objectively against the new skill requirements of their jobs.
Individual training plans should be developed for each employee
to raise skills to the levels required in the redesigned
organization.
Principle 8. Create excellence in customer service
The combination of all these changes should be focused on the goal
of increasing excellence in customer service. It is only by mobilizing
the knowledge, intelligence, insight and creativity of all employees
that the Department of Health will be able to move all of its services
toward service excellence.
department of housing and community development afge local 2725
The Department of Housing and Community Development has been the
single most battered program in DC government. Since 1990 employment
has been cut by 65 percent, from 469 to 164,\6\ while the agency's
mission and responsibilities have remained basically unreduced. We, the
agency's front-line employees have sadly witnessed a decline at DHCD,
from being nationally recognized for innovative and productive programs
during the 1980's to being generally described as dysfunctional in
1997. The workforce and local union see the principal causes of this
decline in repeated changes in top management and ineffective
management programs, practices, equipment and systems, and improperly
trained management personnel.
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\6\ The Price Waterhouse Task 2 report inaccurately indicates a cut
from 600 employees to 164.
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In spite of the demoralizing impact of deep RlF's, outmoded
technologies and systems, and ineffective management practices, the
Department's front-line employees still stand ready to work proactively
with top management in redesigning and upgrading DHCD toward the
union's goal of Service Excellence. Ironically, we feel we also have
had to overcome an outside consultant organization, Price Waterhouse.
Price Waterhouse (PW) has developed its assessment and reform
recommendations over the past three months as if the workforce and
union were principal barriers--not essential enablers and partners--to
restoring this agency to quality, efficient service.
Price Waterhouse has shown a unique disregard for the workforce,
unique even within the range of the consultant organizations hired by
the Authority to assess DC agencies and functions. Price Waterhouse is
the only consultant to propose still deeper job cutbacks as part of
their proposed solutions, in spite of the depth of job cuts already
experienced at DHCD. (We estimate, probably conservatively, that their
proposals would eliminate or replace 50 of the remaining 164 jobs, for
a further 30.5 percent cut on top of the 65.3 percent cutbacks made
earlier in the 1990's.) They further recommend firing still other
additional agency staff and allowing them to ``compete'' with outside
applicants for their existing jobs. This is also unique among the
recommendations from the consultants in the Management Reform process.
The insensitivity to workforce issues evident in their extreme
recommendations is also reflected in their PW's methodology: they met
with the union leadership only once, and then only after the union had
requested a meeting. Contrary to accepted practice in labor-management
consulting and research, they mixed front-line employees and
supervisors in their focus group meetings, hampering the candor of the
nonsupervisory employees in their only opportunity to put forward their
concerns and suggestions for improvement.
evaluation of reform recommendations against afge's service excellence
principles
With this backdrop, it is not surprising to find that PW's
recommendations generally fail to meet the standards of AFGE's eight
Service Excellence principles.
Principle 1. Strengthen collective bargaining to make the reform
process effective
The PW report fails to recognize the union and collective
bargaining as resources that can make the reform process effective. In
spite of the union's effort to reach out to the PW team, the
consultants did not follow up on the union's offer to assist. There are
no references to the union in the report as a potential partner in the
process of redesign or implementation of reform strategies. Perhaps
accurately in the context of this report, it principally mentions the
union as an expected source of resistance to recommendations such as
firing workers and making them compete with outside applicants for
their own jobs (p 41).
The consultants' rejection of the union's offer of active
engagement in the assessment process and in developing reform
recommendations, noted above, seems to show that the PW team's aversion
to unions is more than incidental. Their approach contrasts poorly with
the best practice benchmarks in city government around the country that
consistently show a strong role for working labor-management
partnerships in designing and implementing reforms.
--AFGE strongly recommends creation of a Labor-Management Redesign
Team for the Department of Housing and Community Development.
Through this redesign team union leaders and members would work
with managers to shape reforms that will move the Department
toward excellence by building on the knowledge and insight of
the DHCD workforce.
--This effort to lead reform via a Labor-Management Redesign Team at
DHCD should be a principal effort of a department-wide Labor-
Management Committee that should be set up as part of a city-
wide initiative to develop a productive dialogue between
managers and the workforce on a wider range of issues.
Principle 2. Empower employees and treat them with respect
Empowering employees and treating them with respect is essential
both to a successful reform process and to future operations
characterized by consistent quality and cost effectiveness. The PW
process and recommendations fail decisively on both of these fronts.
We agree with the fundamental insight of W. Edwards Deming that
quality problems are 90 percent due to management systems and practices
rather than to shortcomings of the workers. The PW report may not have
the candor to frankly blame the workers in so many words. Yet their
recommendations for cutting jobs another 30 percent or more,
transferring major functions to other departments of DC government, and
potentially outsourcing additional basic program responsibilities
hardly reflect a desire for empowerment or any sense of respect for
employees.
A high performance DHCD based on high workforce participation and
continuous learning is not a goal in the PW report. Their vision is
rather one of a more efficient, somewhat modernized Tayloristic
bureaucracy. Yes, they do want to see improved strategic planning (but
at the top only) and more consistent personnel and program practices
(but designed without workforce input), even positive financial
incentives (again designed exclusively top-down by consultants and
managers).
What is not mentioned is instructive: not continuous improvement in
agency processes arising from insights and innovations of front-line
workers; not continuous learning built into redesigned jobs, opening
the way for quality improvements and for skill-based career ladders;
nor team-based operations with cross-training and workforce-based
problem solving. There seems to be little recognition that DHCD
management now attempts to regulate the work of the staff with an
outmoded authoritarian management style, which results in
counterproductive bureaucratization and disharmony in the workplace.
The basic idea that we, the workforce, are the backbone of a successful
Department, or that workers are our most important resource, finds no
place in this report.
--Reorganization with skill development is a superior strategy
compared to firings and contracting out. In spite of ample
budgets available for training as part of federal housing
programs administered by DHCD, skill development training for
front-line workers has been virtually nonexistent in recent
years. Instead of further layoffs, contracting out, and forcing
employees to reapply for their own jobs, DHCD should develop
skill requirements profiles for the jobs in the jointly
redesigned agency. Based on an objective assessment of existing
skill levels of each employee compared to the skill
requirements of their jobs, individual skill development plans
should be developed for each employee and appropriate training
started immediately to close identified skill gaps.
As in other DC agencies, policies and procedures for hiring and
promotions seem to have been replaced by decisions reflecting personal
relationships with managers rather than objective assessments of
qualifications and skills. The prevalence of personal favoritism
undermines agency morale and impedes efficiency.
--Personnel policies and procedures should be developed in
consultation with the union to implement objective; job-related
criteria that can are factually--not subjectively--determined
in every case. This can be done for DHCD as part of the
overhaul of the city-wide Personnel functions.
--Establishing a new direction in the department will depend on
energizing and empowering staff to overcome technical,
bureaucratic, and resource barriers to improve people's lives.
That can best be accomplished if the organization develops and
implements its strategy through cultivation of trusting
relationship within the Department.
Principle 3. Improve management accountability
We generally agree with the PW recommendations for more systematic
strategic planning for and within the department, but see this as being
most effective only when the workforce has a recognized, validated role
in the process of strategic planning.
--The staff and union should be involved in the strategic planning
process of establishing organizational goals, selecting near-
term objectives, and determining the performance metrics for
tracking progress toward meeting those goals and objectives.
Wherever feasible this planning process should draw on the
knowledge of the workforce and the new capabilities of the
proposed DHCD Labor-Management Committee.
It is also important that the Department have strong, stable
management leadership, willing and able to make a commitment to the
staff and city. The succession of directors in the 1990's has
contributed to a lack of consistent strategic direction.
Principle 4. Improve performance management
The Department's existing negative performance management system,
focused on identifying and attempting to punish individuals for non-
performance, needs to be replaced by a system that positively
identifies performance goals and comprehensively supports the staff in
working to achieve them.
Upgrading technical systems--new telephone and computer systems
hardware, software, and practices--is necessary, though PW's
description of present systems has important inaccuracies. Redesigning
agency, program and staff functions can also be positive, but it is
much more likely to succeed if the knowledgeable and concerned staff
are involved in the redesign process.
--Participation by front-line workers and the union in an redesign
team and follow-on implementation teams throughout the
Department is essential if workers are to feel ownership of new
system goals and objectives and of the corresponding
performance objectives and evaluation criteria for individual
jobs. If an attempt is made to impose from the top, without
recognizing the knowledge and concerns of the workforce, they
are unlikely to succeed or be implemented quickly.
--Agency and program goals, objectives, and evaluation criteria
should be closely aligned with the agreed goals, objectives and
evaluation criteria for individual jobs and functions.
--Individual staff members should develop individual professional
development plans to help identify areas where improvements are
needed and to support them in achieving excellence in meeting
those objectives.
--The Department's joint redesign team should consider the idea of
evaluating job performance on a ``360 degree'' basis--where
supervisors, peers, and customers (internal and external)
contribute to developing an objective and complete picture of
job performance for each employee. This process can be positive
both for front-line workers and for supervisors and even senior
managers in helping to develop a culture of continuous
improvement.
--Where shortfalls are identified in skills or performance, employees
should be given the tools for positive improvement through real
access to meaningful training programs to upgrade their
individual skills and abilities.
--Threats of firing and contracting out must end for employee morale
to be restored and for reforms to move forward effectively.
Principle 5. Improve the rewards system and allow the bargaining
process to work
Performance-related financial rewards and non-financial recognition
can be important as part of a broader system of positive incentives for
service excellence. As addressed as part of AFGE's response to the
recommendations for the city-wide personnel system, the union is open
to discussing and negotiating such a system. At DHCD the local union is
ready to work with a proactive management to fine-tune the
implementation of such a system.
Everyone should understand, however, that the city and agencies can
not unilaterally design and impose a new compensation system--as
apparently suggested by Price Waterhouse (p 61, section 6). Relying on
legislation imposed on the District will not be any more effective. The
city-wide collective bargaining agreement signed in 1997 puts some of
these questions before a Labor-Management Committee.
Principle 6. Flatten and modernize the management hierarchy
High performance management is a natural component of high
performance work systems and front-line jobs. Unfortunately the PW
report does not identify the need to reduce layers of management or to
modernize management functions into coaches and resources for empowered
workplace teams.
Management functions within DHCD are in urgent need of
reorganization and reorientation toward supporting front-line employees
in doing the work of the agency and away from command-and-control and
punishment.
--The culture, structures and functions of managers at DHCD needs to
embody the principles of empowering and respecting workers and
supporting them as they strive to carry out the agency's
mission.
Principle 7. Support the development and use of skill in the workplace
Skill-based operations are an important source of increased
productivity and quality in many kinds of organizations. Unfortunately
skill development has not been a priority within DHCD in recent years.
Training funds are available as part of the federal programs
administered by the Department, but few training opportunities have
been made available to front-line employees. The PW report focuses on a
lack of computer skills without noting that many employees received
their first computers only last year. Almost none of them have received
training in computers or the software they should or could be using to
help them do their jobs more effectively.
--The PW report prefers firing and outsourcing rather than skill
development as an organizational strategy. We believe that
continuing training and skill development is a necessary part
of a high performing organization at DHCD. Employees want to
develop their skills, and want to be able to apply those skills
in their work.
--The skills and competencies needed at the Department encompass far
more than the technical computer skills mentioned by Price
Waterhouse. Quality systems, customer relations, financial
analysis, and overviews of federal and state/local housing and
economic development programs are all needed.
Principle 8. Create excellence in customer service
We, the workers of the Department of Housing and Community
Development and our AFGE Local Union, are committed to creating a
system that can consistently deliver service excellence for the city
and for the low and moderate income residents we are charged to serve.
We are ready to work with managers who are willing to work with us.
We believe that the anti-worker approach of Price Waterhouse, which
falls outside the spectrum of all the other consultant reports, can not
provide an adequate foundation for reform of DHCD. We restate our
desire to work with management in shaping the reform process through a
Joint Redesign Committee. We would welcome an opportunity to move
forward on a path to meaningful reform, starting with basic principles
of mutual respect.
city-wide functions
The Authority has hired outside consulting firms to examine four
city-wide functions through assessments and developing recommendations
for reform. Of these four areas--personnel management systems,
procurement, budgeting, and information systems--we feel that the
personnel management has the most direct impact on how work is done and
services delivered in the city. We have focused our comments on this
one city-wide function.
the personnel management function
The Authority retained Coopers & Lybrand to conduct an examination
of the present services and delivery methods of the Personnel
Management Function of the DC Government. The consultants' assessed
information from a wide variety of sources, and spoke with many people
within the DCOP and city agencies. However, the consultants appear to
have made no effort to involve the union in the study process or in the
development of their recommendations in any formal or informal way.
As is often the case when organizational assessments are undertaken
by external consultants facing time constraints, there are selected
errors, overly broad statements and glaring omissions, interspersed
with accurate analysis and supportable conclusions. The next section is
an overview of AFGE's evaluation of the consultant's report against our
Service Excellence principles. This section is followed by our response
to key recommendations. Embedded in these comments are our suggested
alternatives to recommendations we believe can not, or will not work
given the legal, financial, political or cultural constrains facing the
city.
afge service excellence principles and the personnel consultant report
Principle 1. Strengthen Collective Bargaining to Make Reforms Effective
Both the findings and recommendations are devoid of substantive
knowledge of the legal and practical obligations of employer to
employees and their elected union in a unionized work setting. In the
hundreds of pages that make up both reports: the assessment and
recommendations, the word ``union'' appears a total of three times.
Each time the union is referred to as obstacle to change or good
management rather than as the legitimate voice for workers interests
and concerns within the organization.
The collective bargaining agreement, the superseding source of
personnel rules and regulations in a unionized setting, appears on a
list of documents that the consultant reviewed during the assessment
process. The labor-management contract is not referred to at all within
the recommendations or work plan. The contract is impacted by many of
the consultant's recommendations, yet the consultants do not even
mention the city's need to negotiate any of their proposed changes.
Although the city has a legal obligation to bargain many of these
matters with the union, the city may also want to consider a negotiated
approach to implementing the consultant's recommendations (as modified
through stakeholder involvement), if only for the sake of expediency
and effectiveness. Coopers and Lybrand in their recommendations note
this need, if only indirectly:
``Beyond issues of coordination and cooperation with other
functions and Agencies, a major concern regarding the ability of DCOP
to implement many of these improvement projects is District culture:
will the District employees be able to not only support, but embrace,
the changes facing it? Change is not easy for most organizations, and
the District is being asked to implement widespread and deep reaching
changes. This will require concentrated effort and ongoing
monitoring.\7\
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\7\ Coopers & Lybrand, November 1997, p. 12.
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Collective bargaining is a process whereby employers work with
their employees and their representatives to provide for an equitable
distribution of resources and create a safe and just work environment.
Through bargaining the parties determine the rules of the game and
devise problem-solving mechanisms to assist in resolving issues and
disputes. Without collective bargaining, workers have no legitimate
rights to a say in their workplace, and are less likely to trust that
the rules governing the workplace also take their best interest into
consideration. Without an effective voice, workers have no reason to
support or embrace change, for they will have no real impact in shaping
the change, and no influence over how and whether the change is
actually institutionalized.
The legal problems raised by ignoring the requirements of
collective bargaining are equally fundamental. Substantive changes to
the personnel issues--like the compensation system, the classification
system, overtime formulas, environmental differentials, performance
management measures and processes, recruitment and promotions--are all
subjects of collective bargaining. The consultants may be unaware of
the city's obligation to negotiate any change in these areas with the
union, but AFGE is not, nor are city officials. As a simple legal
matter, implementing the consultant's recommendations through the
strategies suggested by the consultants will expose the city to very
well grounded unfair labor practice charges. In practice and in the
minds and lives of DC employees, ignoring these bargained provisions
and moving to over-ride them without further collective bargaining with
the employees and their unions is unlikely to have any positive result.
--Collective bargaining works if the parties abide by the rules of
engagement set forth in labor relations laws. AFGE strongly
advocates that the city do the right thing and engage the city
unions in negotiations over many of the proposed changes
recommended in this report.
--We recommend that the personnel function be addressed early in the
proposed city-wide Joint Redesign Team. The city's Labor-
Management Committee should monitor the progress of personnel
function reforms over time and propose additional reforms or
adjustments every six months. Success in this particular reform
effort is critical to the overall effort for the city as a
whole and for each of the departments.
Principle 2. Empower Employees and Treat Them with Respect
Our questions regarding the report's assessment against the Service
Excellence principle of empowerment are twofold:
--Are employees empowered by change?
--Are employees empowered in the change process?
In assessing whether the recommendations empower employees, we will
assess whether or not a proposed change will provide employees with the
information, resources or tools they need to take responsibility for
their development, careers and benefits within the city. We also look
to see whether the recommendations provide managers with the tools they
need to support employees in these objectives. A key priority for AFGE
is to ensure that we minimize the amount of variation in the way rules,
regulations, and benefits are interpreted and applied throughout the
city. If we can create a situation where everyone has the same
information, everyone plays by the same rules, and everyone is
evaluated through the same system and on same types of measures, then
we will have created a situation where employees all who wish to
advance in skill and recognition will have support in achieving their
goals.
Several recommendations, especially some related those related to
providing employees with information they need to plan their careers
will help to empower employees within key personnel processes. Other
recommendations, to the contrary, may in fact serve to minimize the
employees role in building a career within the city.
In order to assess whether employees are empowered in the change
process we look at whether employees are provided a voice in designing
and implementing changes to the personnel system. The report does not
spell out a specific role for employees or for unions in the change
process. Therefore we must conclude that the recommendations do little
to empower employees in the change process.
--If front-line workers can not create an effective channel for
participating in the redesign of the personnel function through
the Joint Redesign Committee and the Labor-Management
Committee, we seriously question the ability of a change
process to succeed. There must be a meaningful, structured
process for workers and their unions to contribute to the
design of these changes.
Principle 3. Improve Management Accountability
The consultant recommendations could serve to increase management
accountability throughout the city in several ways:
--A major problem the city is the ability of agency heads and mangers
to work around the current rules and regulations in promoting,
classifying, and disciplining employees. The proposed
reorganization recommendations related to the centralization of
the benefits, compensation, data base, policies and procedures
could serve to limit these current abuses. Top leaders like the
Mayor and Council would need to back this system by not
supporting agency heads or managers who might attempt to
circumvent the new systems and procedures once they are in
place.
--The recommended DCOP Steering Committee representing all agencies
to help set DCOP priorities and monitor its performance will
help to install a system to hold DOCP accountable to its
mission and mandates. Regular labor-management discussion on
these issues is essential.
--Mandatory supervisory training would improve supervisors'
understanding of the rules and regulations and may help to
instill a value for fairness and accountability within front-
line management.
--Cleaning up the policies and making them easily accessible to all
employees will help to ensure that everyone is held accountable
to the same set of rules.
--Recommendation related to improving position control and limiting
ad hoc work a-rounds to the classification system will limit
management's ability to play favoritism in hiring, promotion
and classification decisions.
--Supporting agencies in change management could help to instill a
higher level of professionalism within management and a value
for consistency and fairness. Strategies which involve workers
and unions in the change process within agencies will help to
build relationships between labor and management.
Accountability can also improve within the context of a strong
relationship based on mutual respect and support for common
goals.
Principle 4. Improve Performance Management
The consultant's report is weak on its proposed approach to
performance management. They advocate for a measurement-based approach
to performance management. Yet organizational performance is based on
many more factors. Performance is rooted in the nature and
configuration of the work organization which includes: the way work is
organized, the roles workers play and the skills they use in the work
process, the available technology, the access to, use of, and influence
over information and many more factors.
--Setting and measuring individual, team and department performance
goals will help to improve the way performance is managed. By
improving the measurement system, employees and managers will
be clearer about their expectations of each other, and this
will have positive effects relationships, the culture and work
environment.
But in and of itself this increased clarity will not lead to change
and improved performance.
--Structural changes in work processes, roles, technologies, methods
and practices must also occur to support performance
improvement.
Principle 5. Improve the Rewards System
The goals for consultant's recommendations regarding change to the
pay and classification system seems to be focused on making them
efficient and consistent. For example, the recommendations will serve
to: increase position control; increase control over wages and
benefits; align internal pay with the external labor market; and align
internal pay plan with consistent values and measures.
Although these goals will help to improve the pay and
classification system, they will not in and of themselves improve the
reward system within the city. A greater respect for equity must be
instilled in the culture of the city.
--A system that recognizes and compensates workers for the use of
skill and good judgment must be negotiated before people will
feel adequately rewarded for their contributions to the city.
Principle 6. Flatten and Modernize the Management Hierarchy
Changes to the classification system and job design should support
a flatter management hierarchy within the city, but this is not
recognized as a goal in the consultant report. Other than the proposals
related to supervisory training and to the change management program,
we see limited potential that the proposed changes as spelled out will
lead to a more modern approach to management based in employee
empowerment and improved labor-management partnerships.
Principle 7. Support the Development and Use of Skill
The proposed vision and role for the Center for Workforce
Development is limited and lacks understanding of today's innovative
workplace learning systems that empower employees to take charge of
their own development, while they also supporting improvements to
organizational performance.
First, the recommendations do not provide a role for employees and
their unions in the design, delivery and assessment of training. There
are hundreds of best practice examples of labor-management partnerships
that have improved the impact of training on organizational and
individual goals. These initiatives have developed rich methodologies
for involving workers directly in the training process. The consultants
have failed to draw on these experiences in developing their
recommendations. We believe the program will suffer as a result.
Second, the recommended training program is focused on narrow job
related tasks and will have limited impact on goals related to job
expansion, and will do little to support employees in developing
potable skills they need to maintain employment security in an
uncertain economy.
Third, the report does not address the demand side of the skill
challenge within the city. Until and unless the city pro-actively
addresses the obstacles to the use of skill in the workplace, workers
will have little motivation to invest in the development of additional
skills to improve their job performance. Workers must be empowered to
use the skills they have now to make job related decisions, solve
operational problems, and make improvements to the work processes they
operate within. Once a work environment that encourages innovation and
learning is established, and once workers are acknowledged for the
skills they now have, then the demand for and usefulness of in-house
training will increase.
Finally, several of the training recommendations, if implemented,
will serve to compromise confidentiality, and therefore will limit
employee's motivation to make use of the limited resources the program
does provide.
Principle 8. Create Excellence in Customer Service
An effective human resources and personnel system is fundamental to
creating an organization within which excellent customer service is the
goal and the norm in practice. Some of the components are present in
the C&L recommendations, but others are missing or incomplete, as
outlined above. The objective of excellent customer service should be
an important standard against which all of the proposals for the
personnel function are evaluated.
The persistent undertone of the Coopers & Lybrand reports is that
employees and their unions are a big part of the problem faced the city
in its personnel management processes--not the inefficient and outdated
management system within which we all operate. The consultants never
once looked to employees and their unions as allies in their mission to
make change. We encourage the Authority to take a different view. We
advocate for the use of collective bargaining and the labor-management
partnership to negotiate and problem solve the challenges laid out
within the consultant's report. The following are several suggestions
for how we might work together on these issues.
specific afge responses to key c&l personnel function recommendations
docp organization
C&L Recommendation: Employee Relations Division
`` * * * a coordinated Employee Relations function, which includes
Labor Relations as part of the DCOP * * *. The Deputy Director,
Employee Relations would be responsible for the field delivery of
personnel services, for both union and non-union employees.
The Employee Relations department would include personnel
specialists who would be resident in Agencies--but these specialists
would report to DCOP--to support individual Agency initiatives and
priorities, yet assume central monitoring of policy compliance.
The AFGE Alternative: The Office of Labor-Management Relations
The City should expand the Labor Relations Division to include
responsibly for collective bargaining, grievance administration and the
expansion for the labor-management partnership.
The Division's mission should be expanded to include to support of
Agencies in moving toward high performance work organizations which
empower employees to develop and use of skill in the conduct of their
work.
This mission will be accomplished through the formation of Joint
Redesign Committees and Labor-Management Committees within each agency.
Each committee will have at least one staff person selected by the
union to assist in facilitating workplace transformation and will help
the Agency access needed information, assistance and resources from the
centralized personnel functions. The Committees will develop and
oversee the implementation of an agency transformation program that
respond to the consultant reports and provide workers with a greater
voice in the services they deliver.
The city will also agree not to interfere in the unions' attempts
to organize non-union employees and will provide the union with access
to discuss membership with non-union employees during work hours,
provided such conversations do not interfere with agency operations.
In return the union agrees to enter into a partnership with the
city to assist in the implementation of the consultant recommendations.
C&L Recommendation: Center for Workforce Development
`` * * * we recommend * * * ongoing reviews with Agency management
to assure the training and assessment services offered meet the
priorities of the Agencies. We also recommend that DCOP completely
outsource the employee testing function, and place the interface to
testing vendors under the Center for Workforce Development, since it is
closely tied to skill assessment.
The AFGE Alternative: The Labor-Management Center for Workplace
Learning
We recommend the establishment of a city-wide labor-management
committee to assure the training and assessment services offered meet
line priorities.
The city-wide committee will develop central programs to meet the
development needs of individual workers. The city-wide committee will
also work with agency labor management committees to develop programs
to meet agency needs and that support the transformation process within
the agency.
The Center for Workplace Learning will not assume responsibility of
testing until such time the city moves to implement a classification
system based on nationally recognized skill standards. Testing for
entry and promotion is different than skill assessment in a work system
that has yet to moved to a skill based organizational structure.
Testing is traditionally used as a screening mechanism where
individuals are concerned about job security or income progression.
Assessment is more developmental and used by individuals to set goals
and guide their education. If these processes are confused, individuals
will come to mistrust both. Utilization of training will be effected.
processes and work structure
C&L Recommendation: Reengineer Personnel Processes
`` * * * begin to evaluate and reengineer core personnel processes
* * * the initial process for reengineering the Recruiting Process. We
recommend that in doing so, the Recruiting Process be defined to
include sourcing, and not confined to the District's paper process.''
The AFGE Alternative: Stakeholder Participation in Reengineering
Personnel Processes
The initial process for reengineering the collective bargaining
process. Most collective bargaining negotiations are at impasse, and
those agreements that have been reached have not been implemented
because no one knows who has the authority to do so. Two thirds of the
District's workforce is organized. That means that the city now has no
effective way to make decisions regarding the wages, benefits, and
working conditions effecting two thirds of its workforce. The city
needs a vehicle to negotiate the changes recommended by the
consultants. The fixing the labor relations process must take the
priority over other issues.
client service
C&L Recommendation: DCOP Steering Committee
``DCOP should establish an ongoing--Steering Committee * * * to
help set DCOP priorities and monitor * * * performance.''
The AFGE Alternative: Labor-Management Steering Committee
The labor-management steering committee, which will consist of
agency and union representatives should establish a DCOP sub-committee
to help DCOP establish priorities and monitor performance.
training
C&L Recommendation: Center for Workforce Development Priorities
``Based on feedback from the Agency Directors and their employees,
the priorities of the Center include:
--Develop a skill assessment tool for departments that can be tied
into process redesign, job descriptions, and training
--Make supervisory training a priority
--Make supervisory training mandatory for all newly promoted * * *
supervisors
--Develop a process to provide supervisor training for--supervisors
who never received training
the afge alternative
The priorities for the Center should include:
--The development of a labor-management infrastructure to guide the
development and delivery of training programs to front-line
union members
--The development of skill assessment tools based on nationally
recognized skill standards that provide workers with portable
skills and recognized expertise
--The development of recommendations for how skill standards could be
used to guide work re-organization and the development of a pay
for skill compensation system
--Improvements to supervisory training
C&L Recommendation: Additional Activities
* * * Other training needs we identified include * * * intra- and
inter-team building training.
The AFGE Alternative
Intra- and inter-team building training program will be designed
and tailored to support agency steering committees in implementing
their labor-management transformation plan.
compensation philosophy
C&L Issue/Problem: Authority to implement philosophy
``It is not clear who at the DC Government has the authority to
implement the Compensation Philosophy.''
The AFGE Alternative: Collective Bargaining
If the DC compensation philosophy will be used to govern decisions
regarding union employees, then the development of that philosophy is
the subject of collective bargaining.
The Labor-Management Steering Committee should develop a
recommended philosophy and present their recommendations to the
negotiating committees for inclusion in the collective bargaining
agreement. The C&L recommended philosophy should be reviewed and
considered by the Steering Committee. The Steering Committee will
determine whether the recommendations are included in the final
statement.
job information and evaluation
C&L Recommendation: Market Alignment
`` * * * establish what inherent characteristics within a job the
City is willing to pay for and identify the appropriate markets for
comparison pay * * * construct a flexible evaluation plan around which
jobs can be classified within occupations based on jobs,
qualifications, skills and responsibilities.''
The AFGE Alternative: Collective Bargaining
The characteristics of jobs and the value of those characteristics
are mandatory subjects of collective bargaining.
The job classification system around which jobs are classified is
also a mandatory subject of collective bargaining.
C&L Recommendation: Job Evaluation Team
``* * * establish a job evaluation team consisting of * * * DCOP,
payroll, financial agency personnel, and an Authority designee * * *
responsible for:
--Facilitating--data gathering and exit processes
--Developing appropriate job evaluations for each classification
--Building an internal compensation database
--Gathering qualifications, skills and required responsibilities for
each job''
The AFGE Alternative: Collective Bargaining
The evaluation team, consisting of union and management
representatives will devise a new classification system that will
become a part of the collective bargaining agreement once complete.
C&L Recommendation: Computerized Job Evaluation System
`` * * * consider a computerized job evaluation system to analyze
and monitor data collection, data analysis and recommendations
processes.''
The AFGE Alternative: Collective Bargaining
The union-management evaluation team will consider using a
computerized evaluation system, provided that system can be designed to
weight jobs according to negotiated criteria.
C&L Recommendation: Evaluate Based on Current Job Descriptions
`` * * * recommends building the data--to evaluate and classify
jobs from the current job descriptions for positions.''
The AFGE Alternative: Evaluate Based on the Work
This recommendation makes no sense given the finding that the
current job system does not reflect how work is or should be organized.
The evaluation process should be based the work people will be required
to do in transformed work systems, the skills the transformed work
system will require workers use, and the value people contribute to the
work process and product.
C&L Recommendation: Consistent Approach
`` * * * all jobs regardless of their union, classification, or
status be evaluated in a consistent manner which does not provide
special treatment to any individual classes of jobs.''
The AFGE Alternative: Collective Bargaining
The manner in which union jobs are evaluated is the subject of
collective bargaining. If the city wishes to be consistent with the
process they use to evaluate jobs, then they will need to use the same
process negotiated with the unions to evaluate non-union jobs.
compensation process
C&L Recommendation: Redefine pay structure
`` * * * the job evaluation team should--redefine the current
grade, structure and determine whether the current pay structures make
sense.''
The AFGE Alternative: Collective Bargaining
The union-management evaluation team should negotiate a new grade
structure to implement the results of the job evaluation.
C&L Recommendation: Pay for Performance
``Assuming the pay for performance initiative can be carried forth,
we see little use for the mechanical pay steps within the current pay
structure beyond the competitive market rate.''
The AFGE Alternative: Collective Bargaining
The job evaluation team should negotiate how workers will progress
through the new grade structure.
dcop technology
C&L Recommendation: Information Technology Task Force
As a management initiative for moving from mainframe to client-
server computer technologies.
AFGE Alternative: Information Technology Task Force
As a structured opportunity for user participation in determining
functional requirement, interfaces, and integrated training systems for
the new computer systems.
capacity for change
C&L Recommendation: Change Management Capability
`` * * * develop an in-house change management capability to
support Agencies in the implementation of recommendations.
The AFGE Alternative
The Labor-Management Steering Committee should help the city and
the union develop internal capacity to support union-management
transformation processes in the Agencies. Training and internal
consulting in strategic planning, work place change, high performance
work organizations, and labor-management partnerships should be offered
to managers, union leadership and the selected labor-management
facilitators. These leaders in turn should be supported in imparting
this information and skill to line workers and managers.
DISTRICT OF COLUMBIA APPROPRIATIONS FOR FISCAL YEAR 1999
----------
WEDNESDAY, JUNE 10, 1998
U.S. Senate,
Subcommittee of the Committee on Appropriations,
Washington, DC.
The subcommittee met at 2:05 p.m., in room SD-192, Dirksen
Senate Office Building, Hon. Lauch Faircloth (chairman)
presiding.
Present: Senator Faircloth.
DISTRICT OF COLUMBIA
Council of the District of Columbia
STATEMENT OF LINDA W. CROPP, CHAIRMAN
STATEMENT OF LAUCH FAIRCLOTH
Senator Faircloth. I thank you for being here. I am
delighted to see we have a full house of people attending and
the interest in the budget.
This afternoon marks the first hearing of the Subcommittee
of the District of Columbia concerning the budget for fiscal
year 1999. We are delighted to have with us to formally present
the city's budget Ms. Linda Cropp, chair of the District of
Columbia Council; Mayor Marion Barry; and Dr. Andrew Brimmer,
chair of the District of Columbia Financial Responsibility and
Management Assistance Authority.
hearing on fiscal year 1999 consensus budget
I want to note and be very clear that this afternoon's
hearing is not a hearing about the structure of the government
of the District of Columbia--it is not about the structure of
the government of the District of Columbia. That is a subject
for another time, another place. Today, we are going to focus
on the District's consensus budget and the impact of the
management reform process currently underway.
balanced budget
This year marks the second year in a row since the creation
of the Control Board that the Congress has been presented with
a balanced budget for the Nation's Capital. This is not a small
accomplishment, and it is something we can all be proud of.
This is a consensus budget, and I know that each of the
officials here have put in a lot of work and long hours to
produce it. This budget of $5.2 billion will result in a $41
million surplus. However, the surplus would have been much
higher were it not for the $62 million deficit in the budget of
the public school system.
progress of repairs to school buildings
In addition to budget deficits, I am concerned about the
progress of repairs within the school buildings. There have
been some who have suggested that the schools will not open on
time again this fall. I want to be very clear that we cannot
tolerate this again. Now, the Congress will not tolerate this
again. If something has to be done, if people have to be moved,
so be it. There is no excuse for this failure of the schools to
open year after year and no reason for passing the buck. I hope
and expect to hear concrete proposals for opening the schools
on time. While I am touching on that fiasco we went through
last year, when you could not open a school because somebody
was patching a little hole in the roof, I thought it was
ridiculous then and I still do.
The budget for the District of Columbia for fiscal year
1999 will be the second enacted by Congress since the passage
of the District of Columbia Revitalization Act, which started
the management reform process now underway. I strongly believe
the American people are willing to make the kind of investments
needed to repair this city. I said, ``the American people,'' if
it need be, because it is the capital of the United States. All
of us, all of us--the residents of the District, the people
that are serving in government and are here as temporary
residents--all of us want to see it be the crystal city on the
hill, and we are willing to do what it takes to make it happen.
use of funds for management reform
What we all want is the kind of city that the entire Nation
can be proud of, all 280 million of us, and especially the
500,000 or 600,000 or whatever we have as residents here within
the city. We are all moving for a common goal. I find nothing
in the Congress to indicate a lack of willingness to work with
the city to bring about what we need to do to make it the kind
of city we all want. Specifically, I would like to know how
funds for the management reform in this year's budget will be
used to reshape the thinking of the city's bureaucracy, reduce
the regulatory burdens and red tape and make better service
delivery a permanent part of city government. The citizens of
the District of Columbia and the Nation, as I just said,
deserve no less, and we in Congress intend to work with the
city to bring it about.
Before we begin, I would like to remind all of our
witnesses that your entire statement will be made part of the
record, so we ask if you would please limit your opening
statement to about 5 minutes. We will hear opening statements
followed by questions of our witnesses. If somebody is running
a little over, we want to be generous and easy, but try to
limit them to 5 minutes.
Without objection, the record will remain open until 5 p.m.
on Tuesday, June 16, if anybody wishes to submit additional
testimony or responses to questions. With that, I will turn to
our witnesses.
Our first witness this morning is Ms. Linda Cropp, the
chair of the District of Columbia Council, who has devoted many
hours to working with the District's leaders to produce a
consensus budget. Ms. Cropp, we welcome you, and if you will,
proceed with your testimony.
statement of linda w. cropp
Ms. Cropp. Thank you so very much, Senator Faircloth. Let
me say good afternoon to you. As the Senate Appropriations
Subcommittee of the District's Chair, I am here to testify----
Senator Faircloth. Ms. Cropp, if you do not mind, the sound
system is bad. If you will, pull the mike as close as you can.
fiscal year 1999 budget and financial plan
Ms. Cropp. I am here to testify--is that better--on the
District's fiscal year 1999 operating budget and financial
plan. This budget, balanced and unanimously approved by the
Council, was the result of months of hard work, tough decisions
and protracted negotiations. It is no small feat that this
consensus budget, bargained by the Council with the Mayor and
the Financial Authority, illustrates the story of how District
stakeholders can get together to design a cow and not produce a
camel. But, in fact, not only the cow, but a better Washington,
DC.
This $5.2 billion spending plan with tax relief, increased
funding for the schools, a $41 million accumulated deficit
reduction, and pay adjustments for city employees proves that
the District's fiscal condition is improving, and it can now
focus more on the rehabilitation of service delivery. That is a
very important function that needs to be addressed. I have a
copy of the Council's committee report that deals with the
Budget Request Act, and I would like for that to be made a part
of the record, and we submit it as such.
Senator Faircloth. Without objection, it will be.
Ms. Cropp. Thank you.
[Clerk's note.--The copy of the Council's committee report
that deals with the Budget Request Act is being held in the
files of the subcommittee.]
Prior to receiving the fiscal year 1999 budget in early
March, the Council had already developed its platform to
achieve a budget that is balanced and premised upon four
priorities espoused by the Council at their January retreat.
The four priorities are: to improve service delivery, to
eliminate the accumulated deficit, to invest in our work force
with appropriate compensation, and to begin tax relief and
restructuring.
fiscal year 1997 operating surplus
The financial audit showed that we ended 1997 with an
operating surplus of $186 million. However, I cautioned us then
and I continue to caution us, Mr. Chairman, that that is not a
true surplus. We still have more work to do. We must succeed
because it is the rehabilitation of our financial position
which becomes the underpinning for our service delivery
efforts, and then these efforts will provide the foundation for
economic growth. We are adamant about translating this surplus
into improved services and not just letting it be something on
paper for our citizens.
While you saw a $186 million plus surplus, it is not a true
surplus as long as our schools need fixing, as long as we have
potholes in our streets and as long as we have other services
that need to be improved. It means that we need to direct those
dollars into other areas. In addition, we anticipate $254
million available for deficit pay down for this fiscal year.
Although the numbers are not yet final, this new-found
prosperity is not just because of our strong economy, but more
importantly it demonstrates how the District can get back on
its feet financially by adopting sound budgeting procedures,
conducting stringent fiscal oversight and exerting prudent
control over our spending. In fact, the Council has taken the
initiative to finance some long-term capital projects, for
example, the year 2000 compliance with operating funds, current
revenue, not borrowed money.
Besides saving the District money in years to come, this
action reflects our determination that no financial good
fortune will be squandered unwisely. In this budget process,
the Council and its standing committee devoted many hours of
discussion and spent much time and effort in judiciously
reviewing our agencies' performance in numerous budget and
legislative hearings.
In fact, this year we held two sets of hearings. The first
set of hearings was totally based on performance to see what
the agencies were doing to make sure that there were
performance measures that could be evaluated. After reviewing
and scrutinizing the agencies past budget and spending pattern
during the budget markup sessions, the committees were
challenged to hold the line on expenditures, to make reductions
or enhancements where possible and feasible, yet enhance the
budget without shortchanging our citizens of basic services.
The Council's committees rose to that.
Thereafter, the committee of the whole proceeded to make
more revisions in order to bring the budget into balance. Be it
program enhancements for schools or young people or net
reductions--and let me reiterate the Council supported
additional funding for the schools and directed $2.3 million
for youth programs--we were able to discipline our spending by
allocating some $41 million for deficit reduction.
As you stated in your opening statement, we had hoped that
it would have been more. In fact, we had hoped we would have
had the opportunity to totally eliminate the accumulated
deficit. That, Mr. Faircloth, is no small task. I do not think
any other city that had the types of financial problems that
the District had would have been able to accomplish those
goals. In most of the other cities, their debt was paid off
from the very beginning. In the District it was not. Hopefully,
by the year 2000 we will totally eliminate that.
I must also say that this was accomplished with the first
surplus coming in. I need to remind people that it was prior to
the Revitalization Act going into effect. That was only for
this year's budget. Prompted by this first unqualified audit or
clean bill of health for several years, the Council took steps
to jumpstart the rehabilitation for our city.
public works projects
For example, we pushed for $7 million worth of public works
projects to transform our neighborhoods and enrich our living
environment because we care about houses lined up on smooth
streets sans potholes. We do not care for unsightly garbage and
recycled trash littering our curbs. We care about better
community policing. We do not care about criminals and
prostitutes lurking around our residences. We care about
breathing spaces for our kids to play and frolic in. We do not
care for violence and open air drug markets. In sum, we care
about building an idyllic District of Columbia because--as one
of the most overburdened taxpayers in America--we deserve a
good city.
pay adjustments for employees
For the city employees who have labored to produce the
surplus and contributed directly with layoffs and benefit
reductions, I am pleased to say that we are going to invest in
our work force with pay adjustments, the first since 1994 for
most of our workers.
tax relief
In this budget package, we have offered $11 million worth
of tax relief to residents and businesses and hope to encourage
people to move to the District by eliminating the motor vehicle
excise tax for new residents. However, this tax relief is just
one small step in a joint effort to resuscitate the Nation's
Capital. To recharge the District, we need to install a new
economic engine. In other words, we need to invest the $100
million, as promised by the President, in the new economic
initiatives.
local chartered corporation
More specifically, we need a locally chartered corporation
to lure more businesses into the District, to encourage
economic development and economic growth not only in the
downtown areas, but in all of our neighborhoods in the District
of Columbia. We envision a new convention center, so that the
District can compete with other cities and stop the exodus of
businesses which, in turn, hurts our hospitality industry and
ourselves. Second to government, the hospitality industry is
our major economic thrust. Not to sound trite or facetious, it
has been said that other mayors and city councils are happily
gobbling up Washington's million dollar lunch because our
convention center is much too small.
upgrade of deteriorated buildings and streets
We need to upgrade some of the city's most deteriorated
buildings and streets. We need to improve the quality of life
in the District period. All of these needs and the ability to
accomplish them cost money. Given the present improved
financial situation, this money should be given to us so that
we can transform the District into a thriving metropolis with
bright, gleaming buildings.
This goal cannot be achieved without these funds because,
let's face it, economic development is going to be the antidote
that propels this city toward fiscal veracity and physical
wellness. No doubt, we are in better economic times. But we
must be prudent and strive to find other resources to establish
an accumulated surplus to cushion us against the next economic
slowdown. The times now may not continue.
What I have described in our process is akin to your budget
in the Senate. While you strive to find fiscal priorities, the
Council did likewise. While you agonize over budget reductions,
the Council did the same. While we empathize with your
considerations, we implore you to recognize the fact that we
need more Federal funds to help change the city. Since this
request is a small line item in the Federal budget, we beseech
you to consider favorably the Federal fund portion of our
budget request as you successfully approve a balanced budget
for our Nation.
infrastructure needs over $3 billion
Finally, we urge Congress to grant the $254 million
infrastructure request. This fund is intended to support the
city's existing infrastructure needs of over $3 billion. This
fund can further alleviate our financial and structural burden
so that the District can provide and perform efficiently all
the State, county and local functions.
Mr. Chairman, this is the budget that will move the city
forward. This is the budget to endorse because we want you, Mr.
Chairman, to join the consensus between the Mayor and the
Financial Authority for a better District of Columbia.
Senator Boxer had written me a note and said that she was
unable to be here, but she wanted me to put on record an answer
to a concern that she had raised. You certainly said this was
not a hearing on this. But I do want you to be aware that
governance structure is an issue that has been in the mind of
many in the District of Columbia. In fact, Senator Faircloth,
the Council has held a hearing on that very issue where we have
had witnesses come in, citizens of the District of Columbia, to
talk to us about the different forms for governance structure
for the District.
While there has been a debate and different views regarding
the structure of the District, there is no debate over the
issue that the changed structure should start within the
citizens of the District of Columbia and their elected
officials. It is our intent to continue to hold hearings on
this very issue. We would certainly share with you the results,
the information and the dialog.
Mr. Faircloth, we would like to even submit to you for the
record, if you would like, some of the comments that have been
made by citizens of the District of Columbia at the Council's
earlier hearing with regard to governance, governance
structure. Many citizens have thought long and hard about that.
While this is a budget hearing, it is an issue that is on the
mind of many of our citizens, and we did want to add that.
Senator Faircloth. Thank you. Were you through?
Ms. Cropp. Thank you.
prepared statement
I am through. We just want you to be a part of our
consensus budget process and support the budget as submitted by
the Council, the Mayor and the Financial Authority.
[The statement follows:]
Prepared Statement of Linda W. Cropp
Good morning Chairman Faircloth and other members of the Senate
Appropriations Subcommittee on the District of Columbia. I am here to
testify on the District's fiscal year 1999 operating budget and
financial plan.
This budget--balanced and unanimously approved by the Council--was
a result of months of hard work, tough decisions, and protracted
negotiations. It is no small feat that this consensus budget, arduously
bargained by the Council with the Mayor and the Control Board,
illustrates the story of how District stakeholders can get together to
design a cow and not produce a camel. This $5.2 billion spending plan--
with tax relief, increased funding for the schools, a $41 million
accumulated deficit reduction, and pay adjustments for city employees--
proves that the District's fiscal condition is improving and it can now
focus more on the rehabilitation of service delivery.
[I've here a copy of the Council's committee report on the Budget
Request Act and I would ask that it be made part of the record.]
Prior to receiving the fiscal year 1999 budget in early March, the
Council had already developed its platform to achieve a budget that is
balanced and premised upon four priorities espoused by the Council at
their January retreat. The four priorities are:
--(i) Improve service delivery
--(ii) Eliminate the accumulated deficit
--(iii) Invest in our work force with appropriate compensation
--(iv) Begin tax relief and restructuring
The financial audit showed that we ended 1997 with an operating
surplus of $186 million. However, this is not a true surplus, Mr.
Chairman. We still have more work to do. We must succeed because it is
the rehabilitation of our financial position which becomes the
underpinning for our service delivery efforts and, then these efforts
will provide the foundation for economic growth. We are adamant about
translating this surplus into improved services and not just let it be
something on paper to the citizens.
In addition, we anticipate a $254 million available for deficit pay
down for this fiscal year, although the numbers are not yet final. This
new found prosperity is not just because of our strong economy, but
more important, it demonstrates how the District can get back on its
own two feet financially by adopting sound budgeting procedures,
conducting stringent fiscal oversight, and exerting prudent control
over our spending. In fact, the Council has taken the initiative to
finance some long-term capital projects, e.g., the Year 2000 Compliance
with operating funds, i.e., current revenue, NOT borrowed money.
Besides saving the District money in years to come, this action
reflects our determination that no financial good fortune will be
squandered unwisely.
In this budget process, the Council and its standing committees
devoted many hours of discussion and spent much time and effort in
judiciously reviewing the agencies' performances in numerous budget and
legislative oversight hearings. After reviewing and scrutinizing the
agencies' past budgets and spending patterns during the budget mark-up
sessions, the committees were challenged to hold the line on
expenditures, make reductions or enhancements where possible and
feasible and, yet balance the budget without shortchanging our citizens
of basic services.
Thereafter, the Committee of the Whole, under my leadership,
proceeded to make more revisions in order to bring the budget into
balance. Be it program enhancements for schools or young people or net
reductions (and let me reiterate--the Council supported additional
funding for the schools and directed $2.3 million for youth programs),
we were able to discipline our spending by allocating some $41 million
for deficit reduction.
Prompted by this first unqualified audit or clean bill of health in
several years, the Council took steps to jump start the rehabilitation
of the city. For example, we pushed for $7 million worth of public work
projects to transform our neighborhoods and enrich our living
environment BECAUSE we care about houses lined up on smooth streets
sans potholes. We don't care for unsightly garbage and recycled trash
littering our curbs. We care about better community policing. We don't
care for criminals and prostitutes lurking around our residences. We
care about the ``breathing spaces'' for our kids to play and frolic in.
We don't care for violence and open air drug markets. In sum, we care
about building an idyllic District because--as one of the most
overburdened taxpayers in America--we deserve it!
And for the city employees who had labored to produce the surplus
and contributed directly with lay-offs and benefit reductions, I am
pleased to say that we are going to invest in our work force with a pay
raise, the first since 1994 for most workers.
In this budget package, we have offered $11 million worth of tax
relief to residents and businesses and hope to encourage people to move
to the District by eliminating the Motor Vehicle Excise tax for new
residents. However, this tax relief is just one small step in our joint
effort to resuscitate the Nation's Capital. To recharge the District,
we need to install a new ``economic'' engine. In other words, we need
to invest the $100 million, as promised by the President, in new
economic initiatives. More specifically, we need a locally-chartered
corporation to lure more businesses into the District. We envision a
new convention center so that the District can compete with other
cities and stop the exodus of business which, in turn, hurt our
hospitality industry and ourselves. Not to sound trite or facetious, it
has been said that other mayors and city councils are happily gobbling
up Washington's million dollar lunch!
We need to upgrade some of the city's most deteriorated buildings
and streets. We need to improve the quality of life in the District.
PERIOD. All these needs cost money. Given the present improved
financial situation, this money should be given to us so that we can
transform the District into a throbbing metropolis with bright gleaming
buildings. And this goal cannot be achieved without these funds
because, let's face it, economic development is going to be the
antidote that propels this city toward fiscal veracity and ``physical''
wellness. No doubt, we are in better economic times. But we must be
prudent and strive to find other resources to establish an accumulated
surplus to cushion us against the next economic slowdown.
What I have described in our process is akin to your budget process
in the Senate. While you strive to fund your priorities, the Council
did likewise. While you agonize over budget reductions, the Council
endured the same. While we empathize with your considerations, we
implore you to recognize the fact that we need more federal funds to
help change this city. Since this request is a small line item in the
federal budget, we beseech you to consider favorably the federal fund
portion of our budget request as you successfully approve a balanced
budget for our nation.
Finally, we urge the Congress to grant our $254 million
infrastructure request. This fund is intended to support the city's
existing infrastructure needs of over $3 billion. This fund can further
alleviate our financial and structural burdens so that the District can
provide and perform efficiently all the state, county, and city
functions. Mr. Chairman, this is the budget that will move the city
forward. This is the budget to endorse--because we want you, Mr.
Chairman, to join the consensus for a better DC.
Office of the Mayor
STATEMENT OF HON. MARION H. BARRY, JR., MAYOR
Senator Faircloth. Thank you, Ms. Cropp, and certainly I
intend to be. You may remain seated, if you do not mind.
Our second witness is the Hon. Marion Barry. Mayor Barry
has dedicated many, many years of service as Mayor of the
District of Columbia. Mayor, if you do not run again, this may
be your last statement before this committee in your capacity
as Mayor. We welcome your comments and what you have to say,
and certainly wish you well in whatever your career endeavor
might move on from here. Mayor Barry, you may proceed.
Mayor Barry. Thank you very much, Mr. Faircloth and members
of the committee. I want to thank you for this opportunity to
share my views on District finances and to place in the
appropriate context the fiscal year 1999 financial plan and
budget. I would like for my entire statement of about 21 pages
to be entered into the record, and I will just highlight some
of those myself.
Senator Faircloth. Without objection, it will be. Your
entire statement will be submitted and included in the record.
introduction of interim chief financial officer
Mayor Barry. Before I proceed, I would like to introduce
publicly and officially the newly appointed interim chief
financial officer for the District. You met him a few minutes
ago, but I wanted to introduce him formally, Mr. Earl C.
Cabbell. Mr. Cabbell is a CPA, has served as Deputy Chief
Financial Officer of Financial Operations and Systems since
1996. He was previously the deputy director of finance, the
chief accounting officer for the city of Detroit. He also
served as director of finance for the State of Maryland's
Department of Transportation, a position he assumed in 1992.
We have some able people in the financial management
cluster. I interviewed many of them and came to the conclusion
that Mr. Cabbell would best serve us during this period. He has
indicated a desire to only serve as interim and some of his
staff wanted to urge him to consider it permanently. We are
going to start a national search for a chief financial officer.
Mr. Cabbell.
Senator Faircloth. Thank you.
Mayor Barry. Also, Mr. Chairman, the development of the
budget provides an opportunity to reflect on the past, to
measure progress and to plan for the future. As you indicated a
little bit earlier, this 1999 financial plan and budget is the
last that I will be submitting to the executive and legislative
branches of the Federal Government in that I have made a
decision after almost 40 years of public service to move on and
do other things as opposed to seeking reelection as Mayor of
our great city.
washington, dc, No. 1 city on east coast
Also, Mr. Chairman, some very good news came to the city
today in the form of Money Magazine. This is a magazine that
surveys cities all over America and came to the conclusion that
on the East Coast that Washington, DC, is No. 1. We are ahead
of Philadelphia, ahead of Boston, ahead of Buffalo, NY, ahead
of Pittsburgh, and ahead of a host of other cities in the East.
Our city is on the move, on the grow. Last year, we had a
record number of visitors, over 23 million people. So another
outside, independent----
Senator Faircloth. If I may interrupt a second, I saw it
also and I believe we came from 132d to----
Mayor Barry. 162d.
Ms. Cropp. 167th.
Mayor Barry. Yes, 167th.
Senator Faircloth. I thought it was 162d----
Mayor Barry. No. 1.
Senator Faircloth. Anyway, whatever. We came a long way
baby. [Laughter.]
Mayor Barry. We urge all the people of the Nation to come
and visit us including your constituency from North Carolina.
[Laughter.]
Senator Faircloth. They will be here.
fiscal year 1993 home rule charter
Mayor Barry. Mr. Chairman, before I speak of the 1999
budget, let me put this in perspective. In 1973, as you know,
we received our charter to govern ourselves. We were
enthusiastic about it. But when you examine that, and you have
done it and others have won it, you find that there was a
fundamental flaw in the structure of that charter. We were
charged with a mixed bag of State, county and municipal
functions, and even Federal functions with no matching revenue
streams. This is still true today as it was in 1973. In other
words, the design saddled the District with a full range of
nonmunicipal responsibilities.
Part of our charge here is not just to balance our budget
and not just to deliver quality services--that is very, very
important--but also we have to continue to examine the
structure of this government, and it ought to be done by the
people of Washington. We ought to have a charter commission and
others that will look at this and make recommendations to the
citizens. Let there be a referendum and then let the Congress
adjust whatever it is they want to do based on those kinds of
dialogs.
``the orphaned capital''
Carol O'Cleiracain in her book, ``The Orphaned Capital,''
stated that:
The District's tax base is severely constrained because it
is the Nation's Capital. Forty-one percent of the property tax
is exempt from property taxes. Sixty-five percent of the people
who work in the District live elsewhere and do not contribute
to the income tax base. Congress does not allow the District to
impose a nonresident tax to help pay for public services
provided to commuters during their workday. The District does
not collect taxes on the purchase or income of the large
numbers of military personnel and foreign diplomats living and
doing business here. Finally, the Federal Government does not
pay sales tax on purchases or personal property taxes.
Which means as the District moves into the new millennium
we have to also look at the best way to use this 43 percent of
the land that is available to us, since we cannot gather taxes
from the other. As you probably know, over 300,000 cars come
into this city each day beating up our roads and streets.
15th street resurfaced and potholes filled
Incidentally, Mr. Chairman, I think since we talked last
15th Street--I mean, Constitution Avenue has been fully
resurfaced, you had mentioned that at one point, the potholes,
and we have filled about 65,000 potholes with another 10,000 to
go. We are working on that.
relationship between federal and district government
We need to continue to look at the relationship with the
Federal Government and the District Government. Also, Mr.
Chairman, there is a view among some that the D.C. Government
in general, and this Mayor in particular, was not committed to
balanced budgets, and financial discipline, and management
improvements, and service delivery. We were long before the
Control Board.
In my statement, I go through a series of actions that I
took in 1979 where our books had not been audited in over 100
years, and I ordered that these books be audited. The auditing
firm could not do it the first year, but in 1980 we received
our first balance sheet audit. Lo and behold, we found that the
Federal Government had left us a deficit of $279 million, which
has been absorbed by the people of Washington, added to our
overall deficit. But we were committed.
On page 6 of my statement, you will see the number of years
that we went through. Starting in 1981, a surplus of $68
million; in 1982, $13 million; in 1983, $13 million; on down to
1988, when we had a small deficit of $14 million; and in 1990,
$118 million. I had sent over to the City Council a series of
moves to reduce that to zero, but during that particular year
there was not much receptivity to that, so we ran a large
deficit. But as you probably know, Mrs. Kelly was able to
borrow $331 million in 1991 to retire that deficit.
During that period, we did go downhill and ended up with a
$335 million deficit at the end of 1994. In fact, that deficit
lead us to the point of discussing with the Senate and the
House and the Treasury how we could borrow money, and thus the
Financial Management Assistance Authority was born in 1995.
summer jobs program
Also, on page 7, there are a number of things that we have
done to improve the city not just structurally, but in terms of
the downtown area. We went from a sleepy southern town to a
bustling metropolis and a cosmopolitan kind of city, 23 million
square feet of space. I am most proud of the fact that during
this period we were able to give and provide opportunities for
over 100,000 young people for our summer job program. I am sure
you would agree, Mr. Chairman, that our young people need to
work, need to learn how to come to work on time, how to dress
properly for success, et cetera. But it has also been a booster
for the city.
In 1995, when I came back into office, I inherited this
deficit. We went to work on trying to do something about it.
Obviously, we could not do it all by ourselves. But even before
the Control Board, we went from a $335 million deficit in 1994
to only $54 million in 1995, which demonstrated our commitment
and the Council's commitment to resolving that problem and to
balancing budgets.
Also, let me commend our employees, Mr. Chairman, during
this critical period. They really had their salaries cut by
almost 12 percent, but they continued to work as hard as they
could to provide quality services to our citizens. Despite
these setbacks, we have been able to continue.
reduction of full-time equivalent positions
We have done something remarkable, and that is, in the last
3 years--and Ms. Cropp alluded to this--to reduce the size of
government by over 7,500 full-time equivalents, for a savings
of at least $165 million, which represents a 27-percent
reduction in the size of this government. It took New York City
4 years to reduce it by 20 percent. When Philadelphia had its
problem, it did not reduce its payroll or its number of
employees by any number because they kept the same number. I
think I would like to just go on the record saying that because
of our commitment to trying to structurally reform the
government, at the same time increase the quality of services
and train our work force, we did that at the same time that
over 7,500 people left the payroll.
Our citizens suffered in some instances from that, because
you cannot reduce that number of people off a payroll and not
see some reductions in services. Otherwise, they were not doing
anything. They were working. The people who took it the
hardest, quite frankly, are the last, the least and the lost--
those who need social services, those who need the help of
government to be a safety net for them. They are the ones who
suffered the most during this period. That is why during our
budget deliberations we tried to begin to build that safety net
again for all of our citizens who through no fault of their own
needed the help of government.
department of health
Also, we did something that I think is very important in
creating the Department of Health which sort of gave us a focus
on health in this city, and the Public Benefit Corp. which
saved, in my view, D.C. General and our clinics as our safety
net situation and also we established a ward-based sanitation.
I tell you all this so that we can see this in the context of
facts that the District has done and not just rely on the
newspapers or television, because you know how they are in
terms of what they----
Senator Faircloth. I have an idea. [Laughter.]
Mayor Barry. Yes; I think you have experienced that a
little bit, too, about what is happening in our city. So we now
come to the present in the sense that we are the Nation's
Capital, the international capital of the world, as well as the
home for over 550,000 of us who are here.
nations' support for capital cities
I just returned not long ago from a conference a couple of
weeks ago in Taipei, Taiwan, where mayors from capital cities
all over the world came--the mayor of Warsaw, Poland, and
others--where we were talking about capital cities. In most of
those instances, the nations support their capital cities a lot
more than the Nation supports the District of Columbia.
So I am glad to hear you say that it is the responsibility
of all Americans, it seems to me, to assist us in assisting
ourselves. We are not looking for a handout, but a hand up. We
are not looking for--we would rather learn how to fish than to
give people fish. Because when the fish training session is
over, you can fish for yourselves. That is my philosophy about
self-help for our city.
Also, Mr. Chairman, let me say that even though there are
some growing pains associated with our new restructuring and
our new responsibilities, I think it is fair to say that both
the Mayor, the City Council and members of the Financial
Management Assistance Board have learned to work together in
terms of looking out for the best we can get for our city.
It has not always been easy because when you are elected
you may come to the table with a different point of view,
trying to represent the values and views of your constituency,
whereas when you are appointed you might not necessarily have
the same kind of interaction and the same kind of points of
view. But we have come together around a common goal of trying
to do better.
On page 16, we talk about some of those things we talked
about doing together, paying our vendors and some of our tax
refunds. The most important part of it was our city bond rate
increased to just less than junk bond. All of us are proud of
our MCI arena. Incidentally, Mr. Chairman, I am rooting for the
Capitals over the Detroit Reds, the Detroit team. I hope you
join us in making sure we bring home the bacon. I am sure you
have got influence in Detroit as you do in Washington and North
Carolina.
new convention center
Also, we have a new convention center planned, which is
going to be a great attraction. As Ms. Cropp pointed out,
tourism is our No. 1 industry behind government. Over 100,000
people work in the hospitality industry, we have over 24,000
hotel rooms, and so our new convention center will enable us to
expand our tax base and begin to attract more visitors to
Washington. I hope that at the proper time when it comes over
to the Senate from the House, if there are any amendments to
make it work, that you will be very supportive of our
convention center.
Mr. Chairman, you will hear from others--Ms. Cropp you have
heard from--and also Dr. Brimmer, about how we worked together
on trying to come to a consensus. On page 18 of my statement,
you will see the 9 or 10 areas that we focused on, which was a
good process, rather than me sending the budget over to the
City Council and then it goes back and forth to the Control
Board. In 1997, I think 18 different budgets were put together.
It was a mess, I mean. It confused the citizens, it was very
inefficient.
There was a flaw in the law that required it to be done.
This year because of the Revitalization Act, which gave us
flexibility, we decided that we would not send a budget over,
the Mayor would not, but we would all sit and look at a base
budget for 1999. For six different sessions over 4 or 5 hours
at a session, the members of the Council, the Control Board
members, myself, and the staff sat and hammered out these
policy positions.
policy positions in developing budget
No. 1 was eliminating the accumulated deficit through
budget surpluses and reduction in programs; established a
positive fund balance; maintained a balance between revenue and
expenditures, which was a structural balance; moderated the
debt burden; achieve investment rate bond ratings; fund
management reform areas that you wanted us to look at;
developed a labor strategy.
performance measures
As Ms. Cropp has said, our employees have not had a raise
since 1994. You know and I know that you cannot get the best
out of employees if they are mumbling and grumbling about the
fact that inflation has overtaken their pay. We also tied pay
to performance for the first time, that is: you cannot just
automatically get a pay increase because you are working for
the government. You now have to have some performance measures,
which helps to measure your efficiency, your effectiveness in
your job before the group of people will get a pay increase.
restructuring tax policy
We also looked at restructuring tax policy. We are the
highest taxed in this region, as you probably know. One of the
reasons we are the highest taxed is we cannot tax income at its
source, so we are losing several hundred million dollars, and
so the D.C. residents and businesses have to make up that
difference.
receiverships
We also looked at Federal-District relationships and
returned receiverships to District control. As you know, we are
under a number of receiverships. Frank Raines was down at the
judicial conference last Thursday, where he talked about
whoever said that lawyers and judges could write programs for
cities to carry out. We have to find a way to get these
receiverships back in the hands of the people, at the same time
ensuring quality services for the category of people that they
would desire to protect.
reform of school system
Mr. Chairman, this budget reflects a resolution of the
financial emergency that the city has faced in recent years. We
still face many difficult choices, many challenges.
Nevertheless, the basic elements are here, and we urge you to
support our consensus budget process, to support the efforts of
Ms. Ackerman in terms of trying to reform our school system. I
think the last 18 months have not been good for us. I think the
board did not make the best judgment, and somehow we proceeded.
But we now think we are on the road to the possibility of true
reform in our school system.
Incidentally, during this month I am a proud parent. I have
a son who is graduating next Tuesday from one of our public
schools at 10 a.m., June 16, at Constitution Hall. He will be
going to Hampton University. I am a proud parent.
But we have got to continue, though, to reform our school
system to insist that they improve these test scores, that our
long-term construction program be outlined.
Finally, Mr. Chairman, I would hope that no one would be
tempted, including yourself, to take any further local self-
government from us, from local elected officials. I know how
you feel about these things. We think we have done enough. Let
us continue with the local officials, with the appointed
officials. We see that it can work.
A good example of that is the Metropolitan Police
Department, which did not come under the management control. We
had a memorandum of understanding partnership, about 9 of us,
and we now have the lowest crime reduction in Washington in 20
years. That process does work.
prepared statement
I urge you and urge your colleagues not to load up our
budget with what I call Christmas tree ornaments about
everybody's interests as was attempted in the House last year.
Again, we urge you to examine this budget carefully, ask all of
the questions that you need to ask and get good, solid answers,
but in the final analysis to support this consensus budget
process.
Thank you.
[The statement follows:]
Prepared Statement of Marion Barry, Jr.
Good afternoon, Mr. Chairman and members of the committee. I thank
you for this opportunity to share my views on District finances and to
place in the appropriate context the fiscal year 1999 financial plan
and budget.
First I would like to introduce the newly appointed interim Chief
Financial Officer, Mr. Earl C. Cabbell. Mr. Cabbell, a CPA, has served
as Deputy Chief Financial Officer for Financial Operations and Systems
since 1996. He was previously the Deputy Director of Finance/Chief
Accounting Officer for the city of Detroit. He has also served as
Director of Finance for the State of Maryland's Department of
Transportation, a position he assumed in 1992 after serving as the
Accounting Systems Director for the city of Baltimore. In the past two
years, he has successfully handled the challenge of helping to bring
financial stability to the District.
The development of a budget provides an opportunity to reflect on
the past, to measure progress, and to plan for the future. The fiscal
year 1999 financial plan and budget is the last budget I will present
to the executive and legislative branches of the Federal Government.
Before I comment on the fiscal year 1999 budget request, I would
like to present a contextual framework relative to the inherent
problems confronting the District and to clarify for the record my
administration's commitment to management efficiency, quality services
and balanced budgets.
In our enthusiasm to govern ourselves, District residents accepted
a home rule charter twenty-five years ago that was structurally and
fundamentally flawed. It never drew a clear line between the Federal
Government's responsibility and that of the new government. We were
charged with a mixed bag of municipal, county, State, and even Federal
functions, but no matching revenue streams. This is still as true today
as it was in 1973.
In other words, the government design saddled the District with a
full range of non-municipal responsibilities, especially those
typically assigned to States, such as Medicaid, pension, and
corrections. These state functions have produced some of the most
volatile cost pressures in the public sector, and they have been
assumed without identification of adequate resources. Carol
O'Cleiracain clearly states in her book, ``The Orphaned Capital,''
that:
``The District's tax base is severely constrained because it is the
Nation's Capital. Forty-one percent of the property tax is exempt from
property taxes. Sixty-five percent of the people who work in the
District live elsewhere and do not contribute to the income tax base.
Congress does not allow the District to impose a nonresident tax to
help pay for public services provided to commuters during their
workday. The District does not collect taxes on the purchases or income
of the large number of military personnel and foreign diplomats living
and doing business here. Finally, the Federal Government does not pay
sales tax on purchases or personal property taxes on its equipment.''
Thus, the structure of the Federal relationship inherently provides
for unfunded mandates in terms of the services the District is required
to provide.
There were, and continue to be, some in Congress who question my
commitment to sound fiscal and programmatic management practices. My
record demonstrates the exact opposite. In 1979, I was the District's
second elected Mayor in modern times. I inherited a stagnant
bureaucracy, staggering inefficiency and waste. My platform was
predicated on my commitment to improve city services, improve
management at all levels, and institute sound financial management
practices. My administration was able to attract some of the most
qualified professional managers in the country.
The Barry administration has always demonstrated its commitment to
balanced budgets. In 1979, when I first took office, the finances of
the District of Columbia were in total disarray. They had not been
audited in 100 years. In 1976, Arthur Anderson had called the
District's financial management system unauditable. In fiscal year
1979, for the first time since the enactment of the Home Rule Act, I
ordered an independent audit of the District's books. The audit
revealed that the District had an accumulated deficit of $248 million.
During my tenure, we produced the first audit in 100 years and
achieved 8 years (out of 11 years) of reducing the accumulated deficit.
We also achieved a balanced budget by 1981, and continued to balance
the budget for every year but two between fiscal year 1981 through
fiscal year 1990, as the following chart demonstrates:
SUMMARY OF GENERAL FUND RESULTS
[In millions of dollars]
----------------------------------------------------------------------------------------------------------------
Bond
sales and Surplus
Fiscal year Revenues Expend transfers (deficit)
net
----------------------------------------------------------------------------------------------------------------
9/30/79............................................................ N/A N/A N/A N/A
1980............................................................... 1,732 (1,735) (102) (105)
1981............................................................... 1,908 (1,733) (107) 68
1982............................................................... 2,000 (1,875) (112) 13
1983............................................................... 2,208 (2,078) (117) 13
1984............................................................... 2,402 (2,289) (96) 17
1985............................................................... 2,635 (2,775) 165 25
1986............................................................... 2,815 (2,706) (89) 20
1987............................................................... 3,055 (2,941) (94) 20
1988............................................................... 3,364 (3,302) (76) (14)
1989............................................................... 3,489 (3,703) (64) 5
1990............................................................... 3,680 (3,703) (95) (118)
----------------------------------------------------------------------------------------------------------------
It is important to note that the audit in 1980 revealed that the
Federal Government owed the District approximately $279 million.
District taxpayers had to assume this debt.
Nevertheless, during this time, financial discipline was maintained
and the District received a series of clean audits. The District
realigned itself structurally, improved its management capacity,
continued to attract professional managers, and reaped the benefits of
an economic boom. The Barry administration oversaw an acceleration in
new construction that led to a radically altered downtown skyline, the
addition of 23 million square feet of office space in 10 years, and the
tripling of property tax revenue to $700 million annually.
When all is said and done, during this ten year period, the Barry
administration:
--Helped rebuild the District's downtown
--Transformed Washington into a thriving metropolis and a
cosmopolitan city
--Gave more than 100,000 young people summer jobs
--Increased support for senior citizen programs
--Provided a catalyst for thousands of jobs for African-Americans and
others who had been left out
--Fought constantly and tirelessly for home rule and democracy for
the District
--Was a booster for the city, traveled widely spreading the word
about what the city has to offer, and worked closely with
business leaders to bring increased commerce and recognition to
this, America's first city
--Encouraged community empowerment and community participation in the
operation of government.
The prosperity of the 1970's and 1980's hid many of the fundamental
flaws. The lean times of the 1990's not only exposed the cracks in our
foundation, but have led to dire consequences in service,
profitability, safety, and other factors that influence families,
businesses, and tourists.
Furthermore, during this period, court orders and mandatory
expenditures were growing at a rate that far out-stripped revenues.
Expenditures such as the pension liability, debt service, Medicaid and
AFDC could not be cut. Tax revenues declined as the District lost
population to the suburbs. Meanwhile, the Federal payment routinely
fell short of compensating the District for the net impact of the
Federal presence. Yet, the District's discretionary spending was under
control and financial discipline was strictly enforced recognizing the
need for reassessing the operation of government to ensure the
continued delivery of quality services, and fiscal stability, I
established the Commission on Budget and Finance Priorities of the
District of Columbia, chaired by Alice M. Rivlin. The commission's
report highlighted impending fiscal crisis and recommended management
reform. Unfortunately, the Kelly administration failed to implement the
commission's recommendations.
During the Kelly administration, from fiscal year 1991 through
fiscal year 1994, mandatory spending remained out of control, with the
imposition of additional court orders, a failing economy leading to
higher welfare spending and an ever-increasing pension liability. As a
result, the deficit ballooned to $335 million by the end of fiscal year
1994, despite the Kelly administration receiving congressional approval
to borrow $331 million from the U.S. Treasury to retire the accumulated
deficit from fiscal year 1990.
When I returned to office in January 1995, I discovered and
announced to the citizens the desperate and sorry state of the
District's finances: The previous administration had overspent by $335
million, an amount that if left unchecked, would have spiraled into a
$722 million shortfall. Getting our finances in order was one of the
highest priorities of my administration. To avoid this deficit that
would amount to 26 percent of the general fund, several drastic
measures and strategies were employed. These included:
1. Reducing agency spending by $229 million which included the
reduction of personal services expenditures by $79 million by rolling
back employee wages by 12 percent, and implementing furloughs,
voluntary separation programs and massive reductions in force.
2. Restructuring the debt for a $70 million savings.
3. Most important, a call to the President and the Congress to
assume some of the non-municipal services that were inherited by the
District by home rule.
The fiscal year 1995 expenditure reduction plan was largely
successful in that the fiscal year ended with a $54 million deficit,
instead of the potential $722 million shortfall. The annual independent
audit confirmed a net reduction in expenditures of $151 million from
the previous fiscal year.
This represented the largest turn around of any local government in
the same situation, and for the District, this turnaround represented
the first time in the history of home rule, that expenditures in one
fiscal year were lower than those of the previous fiscal year. Mind
you, this was all before the creation of the District of Columbia's
Financial Responsibility and Management Assistance Authority and
Independent Chief Financial Officer.
After containing the hemorrhaging, my administration embarked on a
systematic quest to craft a transformation plan. In 1996, approximately
one year after my return as Chief Executive of the District of
Columbia, and one year after I exposed the extent of the District's
fiscal crisis that the District was in, I presented a bold new
direction for the government of the District of Columbia and the people
of the District.
The underlying basis of this transformation was the implementation
of performance-based principles and programs--both in the budget
development and execution processes, and in the service delivery
systems.
Despite setbacks in the implementation of the transformation plan,
we made considerable progress. We contributed to balancing the budget,
and set the stage for management reform. We accomplished much and were
on the path of reform. we:
--Reduced the size of government by more than 7,500 FTE's for a
savings of $165 million, which also represents a 27-percent
reduction in the size of the workforce over a period of two and
a half years.
--Outsourced city services, the most notable being the correctional
treatment facility.
--Reduced AFDC benefits, unemployment benefits and workers
compensation costs in an effort to bring them more in line with
those of neighboring jurisdictions.
--Created a Department of Health and a Public Benefits Corporation
that dramatically improved health care in the District at a
lower cost.
--Improved public protection by adopting a community policing model,
even before the initiation of the MOU process.
--Established a ``ward-based'' sanitation system and increased the
number of solid waste inspectors.
--Created an Independent, Regional Water and Sewer Authority with the
ability to raise the necessary revenues through a much needed
rate increase and more importantly, enhanced borrowing
authority, resulting in much needed repairs to our drinking
water system.
--Focused on the District's finances, going from ``junk'' bond status
to the ability to sell more than $230 million in general
obligation bonds at a very competitive rate.
The District's financial condition has presented dynamics that had
never been encountered before--i.e. economic downturn experienced by
most cities, the financial mismanagement of the previous
administration, and inherently flawed fiscal structure. The Congress of
the United States responded by enacting the Financial Responsibility
and Management Assistance Authority Act, and created an Implementing
Authority. The act also created an Independent Chief Financial Officer
and empowered the inspector general. It is important to note that
several actions taken by the Financial Authority were not consistent
with their original mission as Financial Assistance Advisors or with
accountability to the citizens of the District--i.e., relegating the
elected school board to an advisory status.
Although there have been some ``growing pains'' associated with our
respective roles and responsibilities, I think that it is fair to say
that we all share a common commitment and vision of a higher quality of
life for the residents, businesses, and visitors of the Nation's
Capital.
The District's recovery involves much more than a Financial
Authority and a Chief Financial Officer with independent and broad
powers. We demonstrated the strong will and ability to reduce personnel
costs but the cost drivers for the District continue to be mostly those
functions that are typically performed by a State. Unfortunately, the
District inherited many of these functions at the inception of home
rule in 1973. The situation was compounded by the restrictions on the
District's taxing capabilities mentioned earlier.
In 1995, I first suggested many of the reforms which eventually
resulted in the National Capital Revitalization and Improvement Act.
Many people ridiculed my plan for the District. Yet, two years later,
much of the plan was adopted by President Clinton.
However, the citizens of the District did not expect, that as part
of the Revitalization Act, the loss of home rule. As I have said many
times since July 1997, it is clear to me that these anti-democratic
reforms went way beyond what I believe was originally envisioned by the
various stakeholders. The Financial Authority's actions in most cases
were in that they failed to work cooperatively with the local elected
officials. Thus, the Financial Authority has created a fractured
governance structure of unequal, unelected, independent parts.
Notwithstanding the governance issues, the assumption of the costs
for these State functions, coupled with a strong economy, resulted in
additional funds being available for programmatic and infrastructure
initiatives.
Recent accomplishments include:
--The payment of vendors doing business with the District are within
six weeks, not the eight months many complained about
previously.
--The timely remittance of tax refunds within 15 days, rather than
four months.
--The upgrade of the city's bond rating.
--A skyline dominated by building cranes related to commercial
construction.
--A new convention center is planned.
--The MCI arena.
--The return of tourists in rising numbers--22.4 million in 1997, an
8-percent increase from 1996.
--The rise of home sales by 33 percent in 1997, fueled partly by a
$5,000 tax credit for first-time buyers.
--Increased effort in improving municipal services, as evidenced by
the management reform program of 1998.
It is important to note that the act creating the Financial
Authority mandated a tedious and protracted budget development process
that resulted in the Mayor and City Council, and Financial Authority
submitting separate budgets for fiscal year 1998. The Revitalization
Act sought to remedy the inherent roadblocks in the budget development
process and stipulated that a consensus budget was to be submitted to
the President and Congress.
Thus, the development of the fiscal year 1999 financial plan and
budget demonstrates that a constructive and future-oriented budget
results from a collaborative process that supports the mutual goals of
improved service and financial prudence. Each stakeholder brought their
own priorities to the negotiations which produced this consensus
budget. While no one got everything they wanted, the resulting
consensus budget is acceptable to everyone.
In February 1998, the Mayor, Financial Authority, and the City
Council met and agreed upon 10 key budget decisions, the resolution of
which largely shaped the budget for fiscal year 1999 and beyond. These
key budget decision are as follows:
--Meeting financial management targets.
--Eliminate the accumulated deficit through budget surpluses
--Establish a positive fund balance
--Maintain a balance between revenue and expenditure rates
(structural balance)
--Moderate the debt burden
--Achieve investment grade bond ratings from all three rating
agencies
--Fund management reform
--Develop labor strategy
--Restructure tax policy
--Define District/Federal relations
--Define capital financing priorities
--Return receiverships to District control
--Fund D.C. public schools
--Define health and human services
--Adoption of program enhancements and service improvements
The budget for the District of Columbia reflects a resolution of
the financial emergency that the city has faced in recent years. The
District still faces many difficult choices. Nevertheless, the basic
elements of the budget clearly tell a story of improvement and
revitalization. The Fiscal Year 1999 Financial Plan and Budget
estimated revenues of $5.231 billion and total expenditures of $5.189
billion to achieve a $41 million budget surplus. The surplus is
projected to be $254 million in fiscal year 1998. Moreover, the
District is making significant inroads in reducing the accumulated
deficit that has drained funds and hindered access to capital markets.
The financial plan and budget projects that, by September 30, 1999, the
District's accumulated deficit will amount to $37.5 million down from
an accumulated deficit of more than $500 million on October 1, 1996.
The stakeholders established certain principles regarding the
nature of expenditures for fiscal year 1999. Most important was the
instruction given to agencies that no across-the-board spending
increases would be approved. Rather, all requests for budgetary
increases--except those in instances in which such program increases
were mandated--would have to compete for available funds. Spending
increases, where justified, were to be granted based on their expected
contribution to the improvement of public services and municipal
productivity. The fiscal year 1999 budget also includes a 2-percent
reduction in agencies' budgets other than for fixed costs and
transfers. This reduction did not apply to the MPD or DCPS. Agencies
are expected to continue their current level of service with less funds
by increasing productivity.
In accordance with section 202 of the District of Columbia
Financial Responsibility and Management Assistance Authority Act of
1995, I will submit to the President of the United States, the District
of Columbia's official fiscal year 1999 financial plan and budget.
In conclusion, we urge the Congress of the United States to support
and adopt the consensus budget of the District of Columbia. This budget
reflects the understanding of the locally elected and appointed
officials of the District's real needs. It reflects the true
appreciation of the needs and concerns of the residents of the
District. Most importantly, it is a sober allocation of the limited
resources available to the District.
Thank you for the opportunity to testify before the committee.
Financial Responsibility and Management Assistance Authority
STATEMENT OF DR. ANDREW F. BRIMMER, CHAIRMAN
Senator Faircloth. Thank you, Mr. Mayor. I do plan to study
it carefully, and I will not be jumping to any conclusions, I
can assure you.
Next, we have Dr. Brimmer, Dr. Andrew F. Brimmer. Dr.
Brimmer, this may be your last appearance also before this
committee in your capacity as chairman of the Control Board.
Through your efforts, the District's financial management
future is much brighter. Dr. Brimmer, I thank you for your
service to the Nation and to the city for all you have done,
and we would like to hear your testimony.
Mr. Brimmer. Thank you very much. Mr. Chairman, good
afternoon.
My associates have already described the principal
dimensions of the budget, so I will not go through those in any
detail. Instead, I would like to talk about several problems
that still remain with respect to the budget. But before doing
so, I would stress again that this is not only a balanced
budget we are projecting, but it is one that contains and
expects a surplus. That surplus would be used and would enable
us to reduce the accumulated deficit as well. In a year or two,
we expect to eliminate it entirely.
projected surpluses very small
However, I would also stress that the surpluses we are
projecting over the next few years are precarious; they are
very small. So we must be careful to assure that expenditures
will not rise at a rate that exceeds the slow growth in
revenues that we are projecting. For example, if the
projections hold, we would end up with an annual budget surplus
of $24 million, $16 million and $9 million in fiscal years
2000, 2001 through 2002, respectively. But I stress those are
precarious.
Now, the surplus we are experiencing, we did experience
last year and we expect to experience this year, probably
reflects the Revitalization Act. But we also had some growth in
revenues, reflecting the strength of the local economy.
As we look ahead to 1999, we should expect to see a major
shift in the sources and uses of local funds. For example, we
anticipate that we will be shifting the way we finance capital
improvements. In my testimony, I describe that in some detail,
but this will represent a major effort. We believe that the
time has come for the city to devote more of its expenditures
to its improvement of infrastructure while maintaining
services, of course, but we believe that infrastructure is a
serious problem, and we have some suggestions for the amounts
and how to use that requirement. My colleagues described the
budgetary process, and I will not go into that in any detail.
In fact, I will not need to mention that at all.
regroup appropriation titles
What I would like to do next is turn to the broad
categories of expenditures. We are requesting that more
simplified appropriation titles be adopted this year. In my
testimony, on page 11 there is a Table 2 entitled,
``Expenditures by function.'' You will see that we are
proposing that we group the appropriation titles so that we
would have the first category of: government direction,
finance, safety and justice; we would combine economic
development, regulation and public works; we would have a
separate appropriation title for the public education system;
we would have a more general title for human resource services
and----
Senator Faircloth. Excuse me, Dr. Brimmer. What page are
you? I am trying to follow you and I got lost.
Mr. Brimmer. It is Table 2. Oh, I apologize. I am reading
from a reading copy which might be different from the printed
copy.
Senator Faircloth. I have it now. It is page 9.
Mr. Brimmer. Oh. In your version, it is page 9?
Senator Faircloth. Yes.
Mr. Brimmer. All right. But the table number is two.
Senator Faircloth. Yes.
Mr. Brimmer. Table 2. Well, I will just repeat briefly.
What we are trying to do is to simplify the appropriation title
distribution. In the old one that we are now using, we have
many detailed line item appropriation titles. We believe that
is not the best way to do it.
We will propose and are proposing that the Congress adopt a
budget with a smaller, broader range of appropriation titles
and that the Congress give the Control Board the authority to
reallocate funds across appropriation titles. Congress did that
in 1998. It gave us the authority to reprogram and to use the
$200 million surplus in order to facilitate the most efficient
use of expenditures, and we are suggesting that that be done
this time. I would be delighted to amplify that further, Mr.
Chairman.
reductions in full-time equivalent positions
I also want to call the committee's attention to what has
happened to personnel costs. Now, in the testimony there is a
chart called Figure 3, which shows that from September 1995 to
March of this year we have had over 10,000 reductions in the
number of full-time equivalents on the payroll.
Frankly, Mr. Chairman, we feel that over the last 3 years,
this is one of the major accomplishments of the Control Board
working with the city. When we came into office in the summer
of 1995, we were given a budget projected for fiscal year 1996
which called for 45,000 FTE's. For the year just ending, 1995,
there were 43,000, and the plan was to go to 45,000. We said
that was unacceptable.
The first recommendation we made, which was taken not
simply as a recommendation but as instruction, was to reduce
the number of FTE's by 5,600. We did that very early in our
stay. Actually, during that year we achieved a reduction of
5,200, and today twice that number of FTE's have been
eliminated. Specifically, it is down 10,000 or 25 percent, and
thus 25 percent is essentially the same figure that the Mayor
had mentioned. We think it is vital that efforts be made to
hold down personnel expenditures.
As you look ahead to 1999, there are a couple of other
areas of the budget to which I would like to call the
committee's attention, and the first one is the public schools.
Now, we have made a lot of progress in improving the quality of
education and safety of the schools. However, much remains to
be done.
public schools budget
For fiscal year 1999, we are recommending $648 million in
gross funds for the schools. That is an increase of $81
million, over 14 percent, from the $567 million appropriated in
1998. Now, this is the largest dollar increase for an agency in
the 1999 budget.
The principal increases in this budget are the result of a
renewed emphasis on special education programs. Improved
transportation initiatives and the funding of certain health-
related measures that heretofore were the function and
responsibilities of the receiver overseeing the foster care
program. I mention this explicitly because this is a major
challenge facing the schools and the city. In 1998, special
education spending was $105 million. The projection for 1999 is
$156 million.
Mr. Chairman, that is mandated spending. Court orders,
receivers, monitors control a substantial portion of the
program and of the budget of the school system. Ms. Ackerman,
the recently appointed CEO and superintendent of the schools
has worked hard to hold down these expenditures, but there is
no way to avoid it. This is the biggest change in the budget,
and there is more ahead of us. Sometime I am hopeful that we
will be able to provide to the Congress a fuller assessment of
the impact of receivers on the budget. The Mayor mentioned
them, and I have mentioned them. It is a major problem.
department of corrections
Now I would also like to mention at this time another area,
Corrections. The Department of Corrections is undergoing vital
transformation as a result of the Revitalization Act. The
committee might recall that the Congress--that the
administration took over the responsibility for sentenced
felons for funding in the short run. Now, by December 31, 2001,
the Federal Government will assume total control over most of
our sentenced felons, and the prison system at Lorton, VA, will
be closed.
The temporary management of the D.C. prison system is being
carried out in part by a Federal Government corrections
trustee. The trustee has recommended a budget of $185 million
for 1999. However, we have determined that this amount
seriously underfunds the projected costs of running the system.
Consultants to the District's Budget Office have indicated that
the true cost of running the system for 1999 is approximately
$204 million, leaving a funding gap of $18.5 million.
In addition, other direct and indirect costs to the
District associated with the sentenced-felon population totals
$25.4 million for a total of $44 million of underfunding. As
part of the fiscal year 1999 financial planning budget, we are
asking the Federal Government, which is now responsible for
this system transfer, to assume the proper costs of
appropriating an additional $44 million.
infrastructure and public works improvements
Mr. Chairman, I will also note, as my colleagues have done
earlier, that the infrastructure and public works improvements
are vital. We also believe that there is a vital need to
promote economic development in the District. We have supported
the restoration and enhancement of basic services such as bulk
trash and so on. But we believe that in the long run we need
additional funding for infrastructure.
audit contract
Mr. Chairman, I would also like to mention that the
District is faced with a serious problem with respect to our
ability to get an audit. This is a narrow question. It is
probably a technical question, but we do need some relief.
Currently, there is a statutory prohibition on the ability of
the inspector general to enter into an audit contract for more
than 3 years. That limitation is proving to be a handicap in
the effort to recruit competent auditors.
We are proposing, and, in fact, the inspector general has
already recommended, to the chair of the Authorization
Committee in the House that this be changed to 5 years. We
support that. It has serious, serious implications for the
budget. We would hope this committee would support the matter
if it were to come forward.
Thank you very much, Mr. Chairman.
[The statement follows:]
Prepared Statement of Andrew F. Brimmer
Mr. Chairman and Members of the Subcommittee: Thank you for
inviting me to testify on the fiscal year 1999 District of Columbia
Financial Plan and Budget (FPB). This morning I will briefly summarize
the overall projected results of this budget, discuss the process used
to formulate the budget, outline some key factors in the revenue
projections, and present the critical expenditure components of the
budget.
I am pleased to report that this budget reflects a resolution of
the financial emergency that the District has faced in recent years. To
be sure, the District still faces many difficult choices, and its
return to fiscal solvency remains precarious. Nevertheless, the basic
elements of the budget clearly tell a story of improvement and
revitalization. First, the fiscal year 1999 FPB estimates total
revenues of $5.231 billion and total expenditures of $5.189 billion to
achieve a $41 million budget surplus.\1\ This comes on top of a fiscal
year 1998 surplus projected to be $254 million \2\ in fiscal year 1998.
Moreover, the District is making significant inroads in reducing the
accumulated deficit that has drained productive funds and hindered
access to the capital markets. The budget projects an accumulated
deficit of $37.5 million--down from a gap in excess of $500 million in
1996.
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\1\ The revenue and expenditure projections incorporate $728.6
million in Enterprise Funds, including the Water and Sewer Authority,
the Lottery and Charity Games Board, and D.C. General Hospital.
\2\ The large surplus projected in fiscal year 1998 is partially
due to the one-time Federal payment of $198 million that was approved
as part of the D.C. Revitalization Act.
---------------------------------------------------------------------------
The development of this budget demonstrates that a constructive and
future-oriented budget can result from extensive cooperation among all
principals, and it continues efforts from fiscal year 1998 to improve
service delivery and maintain fiscal stability. I would note that the
budget represents the combined views of all parties, a change from
previous years when the Authority has disapproved the budget submitted
by the Mayor or the Council. Such a step was mandated if the Authority
concluded that the budget did not meet the requirements of the District
of Columbia Financial Responsibility and Management Assistance Act of
1995 (``Act'') (Public Law 104-8). This year, based on the agreements
reached on all fundamental issues and changes to the budget process
contained in the Revitalization Act, the Authority has concluded that
the fiscal year 1999 budget is in conformance with the Act. The budget
will promote the financial stability of the District government and
further the interests of the people of the Nation's Capital.
The outyear projections, included in the Financial Plan for fiscal
years 2000 to 2002, show a modest growth in total revenues and
expenditures. If achieved, this would result in annual budget surpluses
of $24 million, $16 million, and $9 million in fiscal years 2000, 2001,
and 2002, respectively. These surpluses would eliminate the accumulated
deficit by the end of fiscal year 2001 and produce an $11 million
accumulated surplus by the end of fiscal year 2002. The progress in
reducing the accumulated deficit is shown in Figure 1.
[GRAPHIC] [TIFF OMITTED] T03JU10.001
Part of the budget improvement is the result of a more vigorous
economy, which has provided significant increases in tax revenues to
the District. The better budgetary climate also comes from structural
changes in spending that occurred as a result of the National Capital
Revitalization and Self-Government Improvement Act (``Revitalization
Act''), enacted in August, 1997. Although that law effectively
eliminated the annual federal payment of $660 million to the District,
it did provide a one-time Federal contribution of $190 million plus $8
million to help pay for Management Reform projects.
The fiscal year 1999 FPB also represents a major shift in the
funding of the District's capital improvement plan. Historically, the
District has primarily funded its capital improvement with long-term
general obligation bonds and loans provided from the U.S. Treasury. The
recommended fiscal year 1999 Capital Improvement Budget and Six-Year
Capital Plan (fiscal year 1999-fiscal year 2000) identifies a variety
of financing sources to address the huge capital infrastructure deficit
that exists within the District. The capital budget for fiscal year
1999 represents $324 million in new funding sources. This includes $172
million in long-term financing, $65 million in alternative medium- and
short-term financings, $28 million in equipment leases, $42
million in revenues generated from the sale and lease of school
buildings, $5.3 million in federal grants, and $12 million in current
operating funds (``PAYGO''). The agencies receiving the largest amounts
of local capital funds are the District of Columbia Public Schools
(``DCPS'') with $97 million and the Metropolitan Police Department
(``MPD'') with $47 million.
the budget process
The Revitalization Act also changed the process by which the
District formulates and approves an annual budget during control years.
In previous years, a cumbersome process of approvals and rejections
within set time periods reduced the flexibility of District officials
to reach consensus in the budget process. The Revitalization Act
streamlined that process, which now provides for a more effective set
of procedures to encourage greater cooperation among parties. Under
this process, the District produced a consensus budget that was
approved by the Council on May 20, 1998, signed by the Mayor, and
forwarded to the Authority. On May 28, 1998, the Authority approved the
fiscal year 1999 FPB and submitted it to the Congress, well in advance
of the June 15th statutory deadline.
The Authority, in conjunction with the Mayor and the Council,
established certain principles regarding the nature of expenditures for
fiscal year 1999. Most important was the instruction given to agencies
that no across-the-board spending increases would be approved. Rather,
all requests for budgetary increases--except in those instances in
which such program increases were mandated--would have to compete for
available funds. Spending increases, where justified, were to be
granted based on their expected contribution to the improvement of
public services and increased productivity of the City's workforce. The
fiscal year 1999 budget also includes a 2-percent reduction in
agencies' budgets other than for fixed costs and transfers. This
reduction did not apply to the MPD or DCPS. Agencies are expected to
continue their current level of service with less funds by increasing
productivity.
revenues
The fiscal year 1999 FPB projects total revenues of $5.231 billion.
For comparison purposes, figures for fiscal year 1997 and fiscal year
1998 are also shown in Table 1. For fiscal year 1999, the estimates
include:
--Local fund revenues of $2.907 billion,
--Federal grants of $1,203 billion,
--Private and other revenues of $304 million,
--Intradistrict revenues of $88 million, and
--Enterprise revenues of $729 million.
TABLE 1.--REVENUES BY TYPE
[In millions of dollars]
------------------------------------------------------------------------
Fiscal year
------------------------------
Revenue 1998 1999
1997 Revised Requested
Actual budget budget
------------------------------------------------------------------------
Taxes:
Property Taxes....................... 688 670 675
Sales and Use Taxes.................. 541 558 565
Individual Income Taxes.............. 753 812 835
Other Taxes.......................... 508 535 547
------------------------------
Total Taxes........................ 2,490 2,575 2,622
==============================
Non-Tax Revenue.......................... 212 194 217
Other Local Sources...................... 123 69 69
Federal Payment.......................... 666 198 .........
Federal Grants........................... 888 1,072 1,203
Private and Other Grants................. 196 140 304
Intra-District Revenue................... 99 102 88
Enterprise Funds Revenue................. 661 690 729
------------------------------
Total Gross Revenue................ 5,333 5,040 5,231
------------------------------------------------------------------------
Note: Totals may not agree due to rounding
The Chief Financial Officer (``CFO'') certified the District's
fiscal year 1999 local source general fund revenues to be $2.907
billion. This is a 2.4-percent increase over the $2.838 billion
expected to be collected in fiscal year 1998. Both of these amounts
should be compared to $2.773 billion actually collected in fiscal year
1997, which was a 4.6-percent increase over fiscal year 1996. These
projections are reasonable-given that most economic forecasts
anticipate continued growth in the nation's and the District's economy.
Moreover, there is still room for continued improvements in tax
administration. Figure 2 shows the source of these local revenues.
Figure 3.--Source of Local Revenue for Fiscal Year 1999
Percent
Income taxes...................................................... 36
Other taxes....................................................... 11
Non-tax revenues.................................................. 7
Other............................................................. 3
Property taxes.................................................... 24
Sales and use taxes............................................... 19
The financial plan does not address the impact of possible tax or
regulatory reform on the District's revenue structure. A number of
studies have argued for comprehensive and extensive tax reform, while a
comprehensive report to the Authority by the District of Columbia
Regulatory Reform Project laid out a full menu of regulatory reform.
The financial plan does not address the potential impact of tax
increment financing, linked to economic development districts, on
future revenue growth. Both tax and regulatory reform have long-term
revenue implications for the District, including a number of
justifications for federal payment-in-lieu of taxes, which the present
budget and financial plan do not address. Restructuring the District's
tax system, improving tax administration, and rationalizing the
structure and collection of fees, fines, and charges would
significantly affect the District's ability to remain fiscally sound.
The Authority will examine seriously all such plans in the context of
fiscal stability and growth. These tasks remain open for the outyears
of the current Financial Plan.
expenditures
The fiscal year 1999 gross budget requests $5.189 billion in
expenditures, which includes $728.6 million in enterprise funds. Table
2 below shows requested expenditures by function for fiscal year 1999,
as compared with the two previous years.
TABLE 2.--EXPENDITURES BY FUNCTION
[In millions of dollars]
------------------------------------------------------------------------
Fiscal year
------------------------------
Function 1998 1999
1997 Revised Requested
Actual budget budget
------------------------------------------------------------------------
Government Direction, Financing, Safety, 1,661 1,324 1,418
and Justice.............................
Economic Development, Regulation, and 332 366 402
Public Works............................
Public Education System.................. 754 683 745
Human Support Services................... 1,788 1,781 1,579
Receiverships............................ ........ ........ 319
Productivity Savings..................... ........ ........ (10)
Financial Authority \1\.................. 3 3 8
Enterprise Funds......................... 620 653 729
------------------------------
Total.............................. 5,158 4,812 5,189
------------------------------------------------------------------------
\1\ The Authority's budget has been increased from $3.220 million in
fiscal year 1998 to $7,840 million in fiscal year 1999. The line item
covers the core activities of the Authority and its component Office
of the Chief Management Officer. Specifically, the Authority's core
budget is decreased $500,000 to $2.720 million, and its component
Office of the Chief Management Officer's core allocation is $5.120
million.
Note: Totals may not agree due to rounding.
Next I will outline some critical components of the expenditures in
the fiscal year 1999 FPB. The most significant budget driver is the
cost of personnel. As of March, 1998, the District government had about
30,449 full-time-equivalent employees. Personnel costs are a
significant portion of total District expenditures, and they account
for the overwhelming majority of total expenditures for many key
agencies, including police, fire, and the schools. Total personnel and
benefit compensation in the fiscal year 1999 budget is projected at
$1.8 billion or 44 percent of the District's total General Fund
expenditures. Effective management of these resources is an extremely
important component of the District's fiscal and management recovery.
The fiscal year 1999 budget builds on past progress in reducing the
workforce as well as on new legislation to improve human resource
management that was enacted last year. The fiscal year 1999 budget
begins to address the District's salary disparities and increased
funding is provided for upgrading the skills of the workforce through
training and other initiatives. However, the District still must
develop a comprehensive labor strategy that addresses problems
resulting from the District's large number of unions and bargaining
units. In addition, it is critical that the District implement a modern
automated human resource management system.
The District has made substantial progress in reducing the number
of personnel. When we began our service, we were presented with a draft
budget for fiscal year 1996 that would have raised the District's Full-
Time Equivalents (FTE's) from 43,000 to 45,000. This provision was
unacceptable. Therefore, one of the first recommendations of the
Authority in August, 1995, was to reduce the number of FTE's by 5,600.
During fiscal year 1996, an actual reduction of 5,239 was achieved. To
date, nearly twice this number of FTE's have been eliminated.
Specifically, since September, 1995, the District has reduced the FTE
level 10,285, or by more than 25 percent. Of this reduction, 6,053 have
been through shifts of programs to independent enterprises or to the
federal government. More than 4,200 FTE's have been eliminated through
reductions in on-going District agencies. Figure 3 highlights the
reductions in the District's workforce.
[GRAPHIC] [TIFF OMITTED] T03JU10.002
A critical area in which the Authority will continue to focus funds
and attention is the DCPS. Although much progress has been made in
improving the quality of education and safety of our schools, much
remains to be done. For fiscal year 1999, the Authority recommends
$648.2 million in gross funds, an increase of $81.1 million (14.3
percent) over the $567 million appropriated in fiscal year 1998. This
is the largest dollar increase for an agency in the fiscal year 1999
budget. Principal increases in this budget are the result of a renewed
emphasis on Special Education programs, improved transportation
initiatives, and the funding of certain health related measures that
heretofore were functions and responsibilities of the LaShawn Receiver
overseeing the foster care program. Other major initiatives include
increasing staff accountability and continued support of students who
do not demonstrate basic skills through such programs as expanded
summer school.
One of the most essential services a jurisdiction provides is for
the public safety of its residents and visitors. Recognizing that
public safety is a prerequisite for a stable, vibrant community, it has
always been one of the Authority's foremost priorities. For fiscal year
1999, the Authority recommends $300.3 million in gross funds for the
MPD, an increase of $30 million (10.2 percent) over the $272.4 million
appropriated in fiscal year 1998. The Authority, in conjunction with
the Criminal Justice Coordinating Council (``CJCC''), recently hired a
new Police Chief for the District. Chief Charles Ramsey will continue
to focus the MPD's resources on reducing crime and the fear of crime in
the District. The initiatives range from increased police activity to
eliminate open-air drug markets to placing more than 400 additional
officers on the street. Police efforts have led to a dramatic decrease
in major crime in the District, with homicides at the lowest level in a
decade. This budget leverages improvements already made in fighting
crime, and it funds certain initiatives (including an additional pay
raise) that will expand MPD's capacity to fight crime, and which--in
turn--will improve the City's quality of life.
The Department of Corrections (``DOC'') is undergoing vital
transformation as a result of the Revitalization Act. By December 31,
2001, the federal government will assume total control over most
sentenced felons, and the prison system at Lorton, Virginia, will be
closed. The temporary management of the District's prison system is
being carried out, in part, by a Federal Corrections Trustee. The
Trustee has recommended a budget of $185 million for fiscal year 1999.
However, the Authority has determined that this amount seriously
underfunds the projected costs of running the system. Consultants to
the District's Budget Office have indicated that the true cost of
running the system for fiscal year 1999 is approximately $204 million,
leaving a funding gap of $18.5 million. In addition, other direct and
indirect costs to the District associated with the sentenced felon
population totals $25.4 million, for a total underfunding of $44
million. As part of the fiscal year 1999 FPB, the Authority is asking
the Federal Government, which is now responsible for the system
transfer, to assume the proper costs by appropriating an additional $44
million.
We would also note that the Authority considers infrastructure/
public works improvements to be crucial to the quality of life and
economic development opportunities in the District. The Authority has
supported the restoration and enhancement of basic services such as
bulk trash collection, tree trimming, and pothole repairs that are
contained in the budgets of the Mayor and Council. The operating budget
for Public Works for fiscal year 1999 is $153 million, an improvement
of $4 million.\4\ It includes initiatives such as: implementing the
District's recycling program, replacing street signs, and continuing to
fix local and Federal streets.
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\4\ For fiscal year 1999, the Department of Motor Vehicles has been
separated from Public Works. In fiscal year 1999, the Public Works
budget is $140 million and the Department of Motor Vehicles budget is
$13 million.
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In connection with public works improvements, the District's
capital budget is critically important to the overall upgrading of the
infrastructure. The District's financial crisis in recent years has
frequently prevented the District from adequately funding and
maintaining capital improvements. Thus, infrastructure improvements
have been routinely neglected or underfunded. The Authority was most
concerned about the infrastructure deficit that has been amassed over
the years because of neglect and the lack of appropriate spending on
capital projects. Immediate improvements are necessary not only in
vital areas such as streets and bridges, but also in government
facilities, in major technology-driven systems, and in the public
schools. To this end, the Authority is requesting that the federal
government appropriate $254 million to the District for desperately
needed infrastructure improvements. If this amount is appropriated to
the Authority, it would be used to finance a range of projects,
including repairs and modernization of schools, resurfacing and
reconstruction of local streets, and rehabilitation of police and fire
department facilities.
As previously reported in the Authority's report on the fiscal year
1999 FPB, the Authority has adjusted the amounts to be allocated from
the District's one-time surplus to support and fund the management
reform initiatives. The previous reported amount of $130 million
allocated during fiscal year 1998 has been changed accordingly:
--$88,902,343 of new fiscal year 1998 Operating Budget authorization;
--$66,262,311 of additional fiscal year 1998 Capital Budget
authorization;
--$1,340,000 of additional debt service;
--For an aggregate total allocation of $156,504,654 from the
$201,090,000 one-time surplus. The balance of $44,585,346
should be available to reduce the accumulated deficit during
fiscal year 1998. The management reform program is being
coordinated by the Chief Management Officer on behalf of the
Authority.
Finally, it is important to consider the impact that court orders,
receivers, and special masters have on the structure and effectiveness
of the District's budget. Through inadequate funding and program
mismanagement, the neglect of effective public services has forced
increasingly larger portions of the District's programs to be placed
under court orders. This situation was exacerbated by the financial
crisis, which further eroded the level of service provision given to
populations such as sentenced felons, mental health care recipients,
special education students, and others. The presence of court-ordered
receivers and others directing sections of the District's budget
presents numerous problems for the District in its efforts to plan and
execute a budget effectively. Today, there are 41 court orders and
mandates affecting District programs, 22 of which have current
budgetary impacts. The fiscal year 1999 FPB allocates $319 million to
the various receivers and other administrators.
To implement the fiscal year 1999 budget more efficiently, the
Authority is requesting additional flexibility in the reprogramming of
funds among District programs. Current law requires most reprogrammings
of funds between District functions to be approved by the Congress.
Last year, the Congress allowed the Authority flexibility in
reprogramming funds from the budget surplus. The Authority used some of
these funds for debt reduction, collective bargaining agreements, and
improvements in the schools. Having this flexibility is of vital
importance to the District, and we strongly urge Congress to provide it
for fiscal year 1999.
In summary, the fiscal year 1999 FPB submitted by the Authority
marks a turning point in the reform effort of the District by
programming a budget surplus. The fiscal year 1999 FPB also reduces the
accumulated deficit, meets the objectives of the Act, and adheres to
the major programmatic objectives of the Authority, the Mayor, and the
Council. This budget will accelerate the return of the Nation's Capital
to financial stability and lead to further improvements in the delivery
of public services.
Before concluding, Mr. Chairman, I would like to note one other
issue. The Authority is concerned that statutory limitations on the
time limit allowed any independent auditor selected to undertake the
annual audit of the District significantly reduces the interest of
qualified firms to bid on this contract. Essentially, we have found
that the legal limitation, which is three years, is having the
unanticipated effect of limiting competition for this important work.
Therefore, the Authority respectfully recommends to the Congress that
the law be changed, and that firms be allowed to conduct the annual
audit for up to five years instead of the current three-year limit. We
believe that the additional time period would provide firms with
greater incentive to bid on the contract, and would increase
competition.
Mr. Chairman, this concludes my prepared statement. I would be
pleased to respond to any questions you or Members of the Subcommittee
may have.
Total General Fund Expenditure by Function
[Fiscal year 1999 (by Old Appropriation Title)]
Percent
Public Education System........................................... 18
Public Safety and Justice......................................... 17
Financing and Other............................................... 10
Public Works...................................................... 6
Economic Development and Regulation............................... 4
Government Direction and Support.................................. 4
Human Support Services............................................ 41
Senator Faircloth. Thank you, Dr. Brimmer. Thank you for
your statement and what you do for the city.
I had a number of questions, but I must say the
presentation has been very thorough. Mr. Mayor, yours was and,
Ms. Cropp, you have answered a lot of the questions I had.
control board's budget
I noticed, Dr. Brimmer, the Control Board's budget is being
increased for next year by a substantial amount.
Mr. Brimmer. Yes, sir.
Senator Faircloth. Could you tell us what is bringing the
increase about? Is it management reform, or what is bringing it
about?
Mr. Brimmer. It is management reform, Mr. Chairman. You
might recall that when the Congress proposed transferring
oversight of the nine departments and four citywide functions
to the Authority, I said that while we did not seek the
responsibility, we would certainly accept it. In order to do so
and carry it out, we would need to engage some assistance,
professional assistance, because the five board members being
part-time people could not do that on a day-to-day basis.
I said we would need to go out and recruit what was being
called at that time a chief management officer, and that is
what we did. I also said that we would need to meet the market.
I warned that the market was very strong. We did recruit such a
person, and we had to meet the market. We have had to add some
staff to help carry out that function. It is that increased
function which is carried out as a part of the Control Board
that has lead to an increase in the budget. I believe we have
an amount in the budget in the neighborhood of about--there is
a table in my testimony which shows that figure.
You will see, Mr. Chairman, in Table 2 of my testimony the
Authority has about $8 million. That is composed of the
following: About $2.7 million is for the other functions of the
board and about $5 million is to support the efforts of the
chief management officer. That is the reason, Mr. Chairman,
that we see the increase. It is to implement that mandate.
Senator Faircloth. Thank you.
Mr. Brimmer. Mr. Chairman, as just a digression, I believe
that the description which I just repeated and which I gave
earlier was what the committee intended that we would do.
Senator Faircloth. I am sorry?
recruitment of chief management officer
Mr. Brimmer. I believe that the action we took, the
recruitment of a chief management officer and the payment of
compensation to attract such a person, were actions consistent
with the new mandate we got. I worked under the assumption that
that is precisely what the committee--and in particular you,
Mr. Chairman--anticipated we would have to do.
Senator Faircloth. Well, since we are on that subject, it
would certainly appear that Ms. Barnett has broad support,
bipartisan support. You, as soon to be ex-chairman of the
Control Board, would you have any recommendations to the
Congress as to what we might do or have not done or need to do
to support Dr. Barnett to make the system work better?
Mr. Brimmer. Yes; Mr. Chairman, I do. As I have said, the
steps we took and the way we arranged it are appropriate, and
it is working very well. Since we have gotten some expression
of doubt from some sources as to whether we had the power to do
what we did, I would suggest that we have an amendment to the
statute incorporated saying we, in fact, just as we have the
authority to appoint an executive director and to pay her
compensation, have the authority to appoint a chief management
officer to carry out the functions we have described and to pay
compensation required by the marketplace. Such an amendment
would be very helpful and remove any doubt.
Senator Faircloth. Thank you, Dr. Brimmer.
Mr. Brimmer. Yes, sir.
school system's budget request
Senator Faircloth. Mr. Mayor or Ms. Cropp, the District's
budget, recommended budget, for the District's public school
system and fiscal year 1999 is $60 million less than the $606
million that Dr. Ackerman had requested. Would you care to
comment on the areas of disagreement by the board, the Council,
the Control Board or the Mayor with respect to Ms. Ackerman's
request?
educational emergency board of trustees
Mayor Barry. Mr. Chairman, I think we are at sort of a--I
do not know how you would describe it. You had the emergency
board of trustees where the courts had indicated that they did
not have the authority to do what they were doing. And the
budget that we received----
Senator Faircloth. I am sorry?
Mayor Barry. That the courts had ruled that the Control
Board had overstepped its authority in appointing the emergency
board of trustees to run the school system. It was during that
period there was no clarity about it. The budget we received,
quite frankly, came from General Becton via the Control Board.
In my analysis, I am sure that Ms. Cropp would agree, it really
was not a good budget.
school-by-school budget
We have been insisting for a long time on a school-by-
school budget so that we can see exactly how much money is
going into the local schools. This budget did not do that. It
added money all over the place. When Ms. Ackerman came in and
presented her desires and her priorities, we found that there
were some reforms that could be funded. But because of the lack
of money, because this $81 million is a big growth, 14 percent
in anybody's budget, we focused on special education.
The $60 million reduction that they requested was not a
program budget in the first place the way I look at it. So,
therefore, I think the Council and certainly myself was very
scrutinizing of that and came to a conclusion that it is the
special education portion of it, and some of the reforms that
Ms. Ackerman wanted to do would be sufficient. I did not have
much faith in the past administration's budgets, quite frankly,
and you saw that when all of a sudden $62 million popped up out
of seemingly nowhere. So it was a matter of credibility, a
matter of no program but attachments to it. It was not a good
budget as far as I am concerned.
increase of $81 million in schools budget
The $81 million is a lot of money to add to a budget in 1
year. I am confident that Ms. Ackerman will make sure that it
is spent properly and that Mr. Rickford, who is the CFO over
there, will have better accounting of this money than has been
in the past.
Ms. Cropp. Mr. Chairman, the Council wanted to make sure
that the school system was funded.
Senator Faircloth. Ms. Cropp, if you would, pull the mike
up.
increase for special education
Ms. Cropp. The Council wanted to ensure that the school
system was funded appropriately. At the same time, we were very
concerned that we did not want to just spend money that was not
needed. Most of the dollars that was going to the school
system, the additional dollars, were going in the area of
special education. It has been an area of great concern, and I
cannot stress to you the level of concern that we have with
special education. Quite frankly, we have been talking about a
great need for us to form a task force of the Council, the
Mayor, the Financial Authority, the school system and some
parents, just to look at this one issue.
special education
Special education, if we do not take a hard look at it,
will totally control the school system, and we can see the
havoc that it played with regard to the city's budget. This
year that is what happened with a lot of the excess dollars
that we thought we were going to have to eliminate the deficit
totally. It is not an issue of whether or not we should provide
special education. We certainly do believe that, but we want to
make sure that the dollars are spent wisely.
We increased the budget, first of all, we increased the
budget by tens of millions of dollars. We took issue with--I
believe it was $80 million. I believe that was the figure. We
looked at it, and it was felt that there was not the
justification to increase it by the amount asked. Let me give
you an example.
hiring of additional staff
A lot of the request was based on hiring additional staff
by September of this year to perform certain needs. There was
no way that that staff would be able to be hired and
functioning in the school system by September; however, the
cost was there. What we suggested that should be done with the
school system is, yes, we agreed that you needed to have some
of those individuals, but to look at how many people can you
hire by September. If you cannot hire them all by September,
only fund the budget on how many you can hire in September, how
many you can hire in October and by January.
assessment of 300 students a month
Additionally, what we have been experiencing in the school
system is for special education we have been assessing, I
believe the figure is about 300 students a month. Let me say
that was needed, and the school system ought to be applauded
for dealing with a backlog in assessments, things that needed
to be done. I certainly would think and definitely would hope
that we would not continue with that rate of 300-students-per-
month need for assessment. We are going to run out of students
at some point and----
Senator Faircloth. I am sorry. Are you saying 300 students
per month in special education?
Ms. Cropp. That is right, the assessment for them, yes.
Senator Faircloth. This is not an increase? This is----
Ms. Cropp. This is to assess their educational needs. In
other words, these are students who are enrolled in the D.C.
Public School system, but for whatever reason a request has
been made for them to have an assessment to see what their
educational need may be, whether or not they needed to have
some type of special placement.
Senator Faircloth. 300 a month?
Ms. Cropp. 300 a month. Now part of this was due to a great
backlog. Again, I have to say the school system needs to be
applauded in being able to accomplish that. But I would say to
you, Mr. Faircloth, we certainly would not continue at that
level, and we do not need to fund a continuation at that level.
We raised concerns along those lines.
student enrollment
I have to also say that the Council continues to have great
concern with regard to the student enrollment. The student
enrollment is at 77,000 students or thereabout. That is the
exact same enrollment that has been given probably for the past
6 or 8 years. We have lost a large number of our citizens from
the District of Columbia. In the areas where we have lost the
citizens, that was also the area where we had the largest
enrollment for our public schools. What did they do, move and
leave their children behind?
Something has to happen. Something has to change. We have
lost population in the city, but our schools have not lost any
students. I suspect there is a problem with regard to the
number for the enrollment for our schools. We also would like,
in fact, the Council has asked for us to have, an audit of the
census and the population for our school system.
Mr. Brimmer. Mr. Chairman.
Senator Faircloth. You mean these areas of town that have
lost population are maintaining the school enrollment or
increasing?
Ms. Cropp. The school enrollment for the city has not
decreased while the population of the city has decreased. In
the areas of the city where we have seen the largest decrease
in our citizen population happens to also be the area where we
traditionally have the higher number of student enrollment in
our public schools. But there has not been the--we do not see
that nexus between the decrease in population and a decrease in
schools. We feel strongly that we need to get a handle on that.
Mr. Brimmer. Mr. Chairman.
Senator Faircloth. Yes; Dr. Brimmer?
audit of enrollment figures
Mr. Brimmer. Sir, I would hope that you would permit me to
ask Ms. Ackerman to join me at the table to respond to some of
the questions you have gotten. This is a vital area as I
mentioned. Special education is the driver, but there is a
great deal of divergence of views. For example, the question of
the enrollment in the schools. We have just had an audit of the
enrollment figures as Congress mandated us to do. We are
responsible for that now. We did it, and the number came out to
be in the neighborhood of 77,000.
role of special education
But the role of special education is vital. Our
recommendation is the figure in the budget for the schools, and
that is an amount of $545 million in local funds compared with
$460 million a year ago, an increase of $85 million.
Ms. Ackerman can share with the committee a complete
account. She can do it briefly. But I would like very much for
the committee to hear that testimony from the person
responsible rather than simply from those of us who have
oversight. May I call Ms. Ackerman to the table briefly?
Senator Faircloth. You certainly may.
Mr. Brimmer. Thank you.
Senator Faircloth. We would be delighted to hear what Ms.
Ackerman has to say.
Mr. Brimmer. Thank you.
Mayor Barry. Mr. Chairman, I hope you understand Ms.
Cropp's and my position, the $60 million reduction. What they
asked for was just not a good budget. So I hope you understand
our position.
Senator Faircloth. Yes; I do understand it.
Ms. Cropp. It was an increase, Mr. Faircloth. We support
the figure that is in the budget, but we do not support more.
Senator Faircloth. OK.
Mr. Brimmer. Ms. Arlene Ackerman, the CEO and
superintendent.
Senator Faircloth. Ms. Ackerman, if you would be as
succinct as you can and brief, we would appreciate it, but we
want to hear what you have to say.
Ms. Ackerman. OK. There were a couple of issues that did
come up in the last few minutes.
Senator Faircloth. Again, if you would, pull the mike
forward, real close.
Ms. Ackerman. Can you hear me now?
Senator Faircloth. Yes.
audit of enrollment
Ms. Ackerman. OK. There were a couple of issues that came
up. I would like to start with the enrollment. We did get an
independent audit, and it did confirm that we have
approximately 77,100 students. The year before our enrollment
figures were 78,648, so we are showing a decrease from the
previous year. I mean, we are not at the same, you know, we are
not at the same number. We are showing a decrease. So I want to
say that the audit did confirm that we do know how to count our
students, and that our count was relatively accurate within 1
or 2 percent.
assessing 300 students a month for special education
The other issue is related to special education, and the
numbers that we put forward in terms of the cost of special
education for next year. The special education issue, everybody
on this panel has already said is the major driver of our
budget. We spent $105 million. We are assessing approximately
300 students and placing approximately 300 students a month. We
anticipate for at least the next year or so we will continue at
that rate.
average cost of student outside of district
We have a current backlog of about 2,500 students, and so
we are anticipating if we continue with the same kind of
assessment rate that we will still maintain the need to hire
new teachers and new staff as we place students in the system.
Our goal is to develop programs within the system so that we do
not have to place students out of the District. The average
cost of a student placed outside of the District is $48,000, so
it is very important. The average cost per child to be placed
out of the system, out of the District, is $48,000. So as we--
--
Senator Faircloth. May I ask about how many you have in
that category?
Ms. Ackerman. About 1,400. We anticipate 1,400 next year,
about 1,200 now.
Senator Faircloth. 1,400?
Ms. Ackerman. Yes; students.
Senator Faircloth. You are paying $48,000 per year?
Ms. Ackerman. That is the average cost.
Mayor Barry. Also, Mr. Chairman, a number of these students
are placed there, by judges or hearing officers way outside the
city, some as far away as Minnesota and other places, which we
really want to try to figure out how we get programs locally to
do that.
Senator Faircloth. I will have a question on that as soon
as Ms. Ackerman finishes.
Mayor Barry. All right.
$600 million budget request
Ms. Ackerman. OK. The other thing that I wanted to say, in
the original $600 million budget, we did prorate the staffing
for our special education program knowing that at the beginning
of the school year we would not place all of those students, so
it was adjusted for in the budget. I guess I wanted to make
that clear, that we did not put all of the--while it was
counted that we would need 1,000 teachers, more teachers, by
the end of the year--I mean 1,000 more staff to address our
special education needs. We did prorate that knowing that we
would need so many per month.
Mr. Brimmer. Well, Mr. Chairman, thank you for allowing Ms.
Ackerman to come forward. Again, I would want to stress one
thing for the committee. Special education is driving the
District's school budget. Second, special education enrollment,
all of the procedures Ms. Ackerman described are court mandated
for the most part. Being required to adhere to standards set by
the Federal Government, and judges and monitors who are
interpreting those, is a serious matter. She has no option. If
she fails to do the testing, and so on, she is brought back
into court. I want to stress that.
Senator Faircloth. Well, let me ask. This is something that
I have heard around the country, particularly as I move around
North Carolina, that this edict from the Federal Government on
special education--I believe we call it handicapped or what is
the term the Federal Government uses? What is the term we use
here?
americans with disabilities act
Ms. Cropp. The American with Disabilities.
Ms. Ackerman. Oh, the Disability?
Senator Faircloth. Yes; this is part of that?
Ms. Ackerman. Yes.
Senator Faircloth. This is where that is coming from?
Ms. Ackerman. [Nodding head.]
Ms. Cropp. I think it grew out of Public Law 94-192, that
legislation. Initially, that was probably passed around 1982,
and it is Public Law 94-182. I believe that is the legislation
that it initially grew out of, how the placements started.
Senator Faircloth. Well, Ms. Ackerman, so the problem
Washington is having might be more accelerated, but you were in
Seattle I believe?
Ms. Ackerman. Right.
Senator Faircloth. Was the problem as severe there as here?
Ms. Ackerman. Well, it is complicated for sure here because
of the court mandates, and special education is certainly a
problem across this country because it is an unfunded mandate
for many of the school districts. Here, it is complicated
because of the court mandates that come with it.
We are under a lot of scrutiny. Dr. Brimmer said that we
are in sort of a catch-22. We have to assess more students. As
we assess more students and place them, the goal is to place
them inside of the school district in programs there, because
if we do not, the parents and the lawyers can decide to place
them outside of the school district because there are not
programs inside. We are caught between a rock and a hard place
here. We must continue to assess students, and we have to have
programs inside of the school district to bring down the cost
of out-of-district placement.
Ms. Cropp. Mr. Faircloth. Senator.
Senator Faircloth. Yes?
hurt home
Ms. Cropp. One of the things that needs to happen, I
suspect here and other places and what we are attempting to do,
is to also provide the appropriate facility or learning
environment for our students here. Our goal is to be able to
bring as many back to the District of Columbia as possible,
which means that we have to get that type of educational
environment for them. The Hurt Home is one example of something
that was done in the District of Columbia probably about 2 or 3
years ago where we were able to bring several students, about
20 students, from outside placement back to the District of
Columbia. We hope to be able to expand our capacity to do that.
cost of special education
Senator Faircloth. I just ran some figures here and I
cannot believe, I must have counted wrong, but I am looking at
about $65 million plus, $68 million for special education.
Ms. Ackerman. Yes; it is $105 million. We anticipate $105
million spent this year. For next year, we see that it will
grow approximately $156 million, and that is within what we can
see as coming. We will spend approximately $24 million on
transportation for about 2,400 students. That is 10,000 per
child on transportation. We actually have some students who are
on a bus with one child, an attendant and a bus driver. We
have----
Senator Faircloth. One driver?
Ms. Ackerman. One driver.
Senator Faircloth. An attendant?
Ms. Ackerman. One attendant.
Senator Faircloth. And a student?
Ms. Ackerman. And one child.
Ms. Cropp. We are mandated for that.
Ms. Ackerman. We are mandated.
Ms. Cropp. We do not want to do that.
Ms. Ackerman. That is right.
Ms. Cropp. We are mandated to do that.
Senator Faircloth. I understand.
Well, let me ask. This is not a problem, Mr. Mayor, that is
peculiar to the District. It is something that we would have to
address on a national level; is that not right?
number of days to assess students
Mayor Barry. I think it is peculiar, Senator, in the sense
that we are under this court order, and also we have 50 days in
which to assess these students, which is really one-half the
time that you have around the country. In most school
districts, you have between 125 days from the time a parent
asks that their youngster be assessed through these various
psychological tests and other kinds of tests.
As a result of that, a lot of these lawyers on the 51st day
or the 52d day represent these parents and get them into these
very expensive private school settings, where in other places
in the country within 125 days you have a chance to assess and
in most instances try to place them in the school district
itself. So that is what is unique about it. Also, something
else is strange here.
Senator Faircloth. Those number of days to assess?
Mayor Barry. I beg your pardon?
Ms. Cropp. That was recently changed.
Mayor Barry. Yes; the Council passed that.
Ms. Cropp. Yes; we have recently passed legislation to
change that.
Mayor Barry. It is not effective yet.
Ms. Cropp. I am not certain where it is now. I believe the
Mayor has signed it.
Senator Faircloth. It is in this budget, isn't it?
Ms. Cropp. Yes.
Mayor Barry. In this budget, yes.
Ms. Cropp. But we have passed it. We have put it in this
budget to try to expedite the process.
Ms. Ackerman. Senator, I wanted to say one other thing as
it relates to special education. We are in a reactionary mode
for sure with special education. But one of the things----
Senator Faircloth. What do you mean ``We are in a
reactionary mode''?
Ms. Ackerman. Well, I mean we are reacting to the courts.
We are reacting to the unfunded----
instructional process
Senator Faircloth. We are trying to follow the mandate?
Ms. Ackerman. That is right. But one of the things I want
to emphasize is that the original budget did address was
improvement of the instructional process. Because until you
improve the instructional process, you will continue to have
students who fall behind. And when they fall behind, we get
into again this vicious circle of trying to address their
individual needs. So the goal was to put more reading teachers
into our classrooms, more instructional programs that would
address needs early on.
Mr. Brimmer. Mr. Chairman, on that point we did insist on
putting money into this budget so that Ms. Ackerman could get
started on some of the reforms she has just described. In the
first version of the proposed cuts that we were discussing when
we were looking for a consensus budget, the number was cut even
further. We resisted that, so she does have some money. She
will be able to get started on some of these more fundamental
improvements. But I wanted to stress that special education is
a problem. Hopefully, we can focus on this at a later date.
Senator Faircloth. Well, I think we will have to. I think
it has become a lawyer's heyday. I suspect that a lot of
parents are using it as a way of getting their children in
different schools, in different situations and what they might
consider a better school situation. There is not any way that
any governmental entity can run a bus up and down the road with
a driver, an attendant and one student. We will look at that
again.
metro station at new convention center
Ms. Cropp, the President's budget proposal for the District
includes $25 million for improvements to the Metro station near
the planned new convention center. I understand that the
Council and the Control Board have approved the new convention
center, provided the cost is capped at $650 million. Is there
any way that we can be sure that the $25 million for the Metro
station is not used to get around the $650 million cap, or do
you have any objection to language which would make it clear
that the $25 million and other Federal funds may not be used
until the convention center contract is let?
Ms. Cropp. I certainly believe that we have opportunities
to ensure that the $25 million will be used for the Metro
funding, and we do not have any objection to that. I would
suspect, however, that we would not want to create language
that would delay the building of that Metro stop if, in fact,
it needs to be done in conjunction. So if the committee's
intention is to make sure that the dollars are used only for
Metro, I would encourage that. But I would not say delay it
until after other expenditures have been made. Just develop
language that would limit that $25 million for Metro only. We
have no problems in doing that.
Mayor Barry. Mr. Chairman, there has been some
accountability and guarantees. First of all, it was difficult
to get this kind of contract. I mean, this is a----
Senator Faircloth. On the----
Mayor Barry. On the fixed price. That is difficult and it
is unusual to happen in this kind of industry because of
overruns, but they have come to a decision on the amount of
money. The convention center board has sent to the Council its
financing based on that. My suggestion would be, if the
committee is concerned, you put a strong paragraph in the
committee report as opposed to language--there is no way that
the city would spend this money except on the Metro stop. It
may be that the money may have to be spent as part of the
construction phase of this and long before the convention
center itself. I would suggest language in the committee report
expressing concern. But the Council and the Mayor----
Senator Faircloth. No problem with that.
Mayor Barry. Thank you.
schools opening on time
Senator Faircloth. I am beginning to wind up my thoughts
here. But as I mentioned earlier, and anybody can take this on
that will--you, Dr. Brimmer, Ms. Cropp or Mayor Barry--I keep
hearing the rumblings, now I cannot attest to them and maybe
Dr. Ackerman has more--that the schools are not quite ready.
The boilers have not been fixed, some of the roofs, the bids
for repairs, the type of things that could delay. In a flat
word, are the schools going to open on time, all of them?
Mr. Brimmer. I would rather Ms. Ackerman speak from the
academic side.
Senator Faircloth. I would like for Ms. Ackerman to answer
that question.
Mr. Brimmer. I would like to speak on the question of the
repairs, because we have a different setup this year. We at the
Control Board have responsibility for the overall schools, and
we have asked the chief procurement officer, Mr. Fike, to take
on the responsibilities for monitoring those contracts. We have
asked Dr. Barnett to oversee the functions and activities of
the procurement officer. She shared with us----
status of school construction
Senator Faircloth. You asked who to do that?
Mr. Brimmer. Dr. Barnett. She shared with us today at the
Control Board an interesting report on the status of the
planning and the contracts for school construction. She assured
us that they were highly confident that it would be done.
Again, if you want a few minutes' description from her, I would
be delighted to ask her to do it.
Senator Faircloth. All right. I would because this is the
big question I think we are facing.
Mr. Brimmer. All right.
Dr. Barnett.
Senator Faircloth. Dr. Barnett, if you would not mind, we
have an extra chair down here. My question is very simple.
[Laughter.]
Are the schools going to open on school opening day?
Ms. Ackerman. And my answer is very short. Yes.
Senator Faircloth. Dr. Barnett, would you like to
elaborate?
Ms. Barnett. Do you want me to add to that?
Senator Faircloth. Well, I do not know that it really needs
adding to. But if there is any insight you might give us as to
assure us that Dr. Ackerman is right, why, I would like to hear
that--maybe what we would call cold clocked.
Mr. Brimmer. Mr. Chairman, Dr. Barnett may not--you may not
want her to do it, but I would want her to do it. I will ask
her to summarize for the benefit of the committee the report
she gave us. Because you are absolutely right, there are a
great deal of rumors around, speculation, and it is doing harm.
I think we ought to have a clear statement on the record as to
what the status is.
Dr. Barnett.
Senator Faircloth. You will have to pay attention to the
rumors.
Ms. Barnett. There are a couple of things that are
significantly different about the contracts this year with----
Senator Faircloth. Again, if you do not mind.
Ms. Barnett [continuing]. Repairing the schools than we had
last year. One of the most significant things is that we are
starting earlier. We are about 2 months ahead of where we were
last year so that we are starting the contracts earlier. We
expect them to be signed tomorrow or Friday. This will include
all of the work on all of the schools. Last summer, some
contracts were started and then some were started later. So all
through the summer there were contracts being initiated. All of
the contracts are ready to go, and all are ready and will start
early.
Senator Faircloth. You say all work. This means boilers,
roofs?
Ms. Barnett. Yes; boilers and roofs.
Senator Faircloth. Whatever is necessary to open the
schools?
Ms. Barnett. Boilers and roofs primarily. There are about,
I think, 42 schools, and about one-third of the schools are
involved. About 25 of the schools have roof repairs. We have
also got the Corps of Engineers working on these repairs this
year, so our design and construction and our specifications are
better than they were last year. We also have a group that is
pretty used to construction helping us with these projects.
contingency planning
For those reasons, I think we have changed the process
significantly so that we will be able to assure people that we
will be able to open the schools on time. The other thing that
we are doing is more contingency planning so that we will be
awarding additional contracts so that if there are problems
with performance with any of the contractors, we will have
substitutes to come in and will not lose any time. For those
reasons, I concur on Dr. Ackerman's suggestions that we will
open the schools on time.
Mr. Brimmer. Mr. Chairman, just further assurance. Under
our rules and regulations I signed those contracts.
Senator Faircloth. Yes.
Mr. Brimmer. I asked Dr. Barnett whether they could be
delivered so that I could sign them by the close of business
tomorrow. She assured me they would be, so I will be waiting to
sign the contracts tomorrow.
opening of schools late
Senator Faircloth. Well, this is good news for the city.
Because the school system--there are many, many problems with
the city, but the most embarrassing thing ever was the fact
that we went for weeks and literally months last year and could
not open the schools. You mentioned one thing, and this is just
a housekeeping matter, but have you prepared legislative
language to change the time line of the District's audit from
three to five?
Mr. Brimmer. Yes; we have it and we will share it.
Senator Faircloth. All right. If you will provide it to us,
we will go with it.
Mr. Brimmer. Thank you.
[The information follows:]
Letter From E. Barrett Prettyman, Jr.
Government of the District of Columbia,
Washington, DC, April 23, 1998.
Rep. Thomas M. Davis III,
Chairman, Subcommittee on the District of Columbia Committee on
Government Reform and Oversight,
Washington, DC.
Dear Chairman Davis: Three years ago, the 104th Congress enacted
Public Law 104-8, the D.C. Financial Responsibility and Management
Assistance Act of 1995. That important piece of legislation contained,
among other things, provisions substantially revising the powers and
duties of the Inspector General of the District of Columbia. As the
current holder of that Office, I am writing to request a modification
to one of those provisions.
Under Section 303(b) of Public Law 104-8, the Inspector General is
responsible for contracting with an independent outside auditor to
perform an annual audit of the District's financial statement and
report for each fiscal year. That same section also provides, however,
that the Inspector General may not award the audit contract to the same
auditor for more than three consecutive years. Section 303(b) reads In
relevant part as follows:
``The Inspector General shall enter into a contract with an auditor
who is not an officer or employee of the Office to audit the financial
statement and report [of the D.C. Government] for a fiscal year, except
that the financial statement and report may not be audited by the same
auditor (or an auditor employed by or affiliated with the same auditor)
for more than 3 consecutive fiscal years.''
Public Law No. 104-8, Sec. 303(b)(2), codified at D.C. Code Sec. 1-
1182.8(a)(4).
After careful consideration I have come to the conclusion that
Section 303(b) should be amended to bar the award of the annual audit
contract to the same auditor for more than five consecutive years
rather than three. I am convinced that this change will increase
competition among firms bidding for the audit contract, reduce the cost
of performing the audit, and result in substantial savings to the
District.
Auditing a large and complex public entity like the Government of
the District of Columbia is a massive and difficult undertaking. For an
auditor doing so for the first time, the learning curve--the time and
effort it takes to ``learn the ropes''--is steep indeed. After the
first year, however, the audit can be performed more efficiently, and
at less cost. Thus, the annual cost of an audit decreases with each
year that the same auditor performs it.
This point was made in 1988 by the National Intergovernment Audit
Forum (NIAF), an association of federal, state, and local government
auditors headed at that time by then-U.S. Comptroller General Charles
Bowsher. In a widely-consulted handbook designed to help public
entities procure high quality external audits, NIAF explained that
multiyear contracts reduce the cost of audit services and therefore
lower the price of such services:
``The first year of an audit engagement usually involves
significant start-up costs as auditors devote considerable time to
learning about the entity and its internal control systems. Having
completed this groundwork, the auditor usually is able to work at less
cost in the succeeding years. If authorized by law, a multiyear
agreement--perhaps a 1-year agreement with the option to extend the
agreement for up to five years--has a dual advantage: It enables an
auditor to propose a price that takes into account the savings to be
realized in subsequent years and saves the entity the costs associated
with repeating the selection process.''
NIAF, ``How to Avoid a Substandard Audit: Suggestions for Procuring
an Audit'' 6 (May 1988). See also ``Government Finance Officers
Association,'' Audit Management Handbook 25 (1989) (making a similar
observation and noting that, ``[a]s a general rule, multiyear contracts
provide governments with substantial audit savings'').
Significantly, my proposal for five-year audit contracts finds
support in a 1987 report issued by Congress' own General Accounting
Offing (GAO). In the 1980's, the GAO conducted a survey of the
procedures used by state and local governments to obtain the services
of public accounting firms. The GAO concluded that public entities
should use five-year audit agreements. The GAO report states:
``In discussions with us, many of our experts stated that multiyear
contracts not only provided an incentive for an audit firm to devote
time submitting a well developed proposal and to establish its learning
curve in the early years of the engagement but also minimized staff
resources the entity spent on procuring audit services. In addition,
according to experts, the audit firm recovers some of its costs and
realizes a profit in the second, third, or fourth year of the
engagement. Further, two CPA's on our panel stated that their firms
could minimize the risk of producing a poor quality audit and make the
greatest contribution to improving program and financial operations in
the final years of their multiyear agreements. This is due, in their
opinion, to the knowledge a firm can acquire over a period of time
while performing an audit.
``During our study, we found that some entities engaged in
multiyear agreements. These multiyear agreements normally provided for
annual contract renewal at the entity's option--usually contingent upon
the audit firm performing acceptable quality work. Although there was
some disagreement as to the ideal length of a multiyear agreement, most
of the experts we spoke with indicated a range of from 3 to 5 years. We
agree that entities should consider using multiyear agreements,
preferably of a 5-year duration due to the potential cost savings and
continuity benefits over the long-term.''
U.S. General Accounting Office, Report to the Chairman, Legislation
and National Security Subcomm., House Comm. on Government Operations,
House of Representatives: CPA Audit Quality: A Framework for Procuring
Audit Services, GAO/AFMD-87-34, at 28 (Aug. 1987).
A recent study of the auditor rotation practices of public entities
found that a large majority of those entities responding to a survey--
68 percent--had no law or policy requiring the rotation of auditors. Of
those public entities with such a law or policy, 20 percent rotated
auditors after three years, 25 percent after four years, 43 percent
after five years, and 12 percent after six or more years. See J.
Wendell, T. Pearson & T. Oregon, ``Auditor Rotation Policies of
Governmental Entities,'' Government Finance Review 61-62 (April 1998).
Thus, a majority of the surveyed entities (55 percent) rotated auditors
after five years or more. A distinct minority (20 percent) required the
rotation of auditors as frequently as Public Law 104-8 mandates with
respect to the District's annual audit.
Three examples illustrate the auditor rotation requirements of
other governmental entities:
The City of New York hires a firm of certified public accountants
to do an annual audit of the City's consolidated operating accounts and
year-end assets (unless the audit is performed by the state
comptroller). Chapter 5, Section 95 of the New York City Charter
provides that ``[n]o firm of certified public accountants shall perform
any such audit or a part of such audit for more than eight consecutive
years provided, however, that no audit engagement contract shall exceed
four years.''
The County of Milwaukee, Wisconsin, engages outside auditors to
perform annual financial and compliance audits of the County. Under
County policy,``an outside firm may provide services regarding a
particular audit engagement for no more than six conserve years'' and
``at the discretion of the Director of Audits, one-year extension
beyond the six consecutive years is permitted.'' Milwaukee County
Administrative Manual, Policy No. R-373 (Feb. 17, 1983).
The Council of the City and County of Honolulu, Hawaii, contracts
for independent annual financial audits of the City's operations. A
resolution adopted by the Council provides that ``[t]he auditor or
auditing firm selected shall be retained for [a] four-year period''
although ``[a]n incumbent auditor or auditing firm shall not be
eligible for the subsequent four-year period.'' Council Resolution No.
86-239 (July 9, 1986).
Prior to the adoption of Public Law 104-8, D.C. law provided that
the auditor selected to perform the District's annual audit would
perform the audit for a four year period, but could not succeed
himself. See D.C. Code Sec. 47-119. My proposal thus represents a
partial return to the practice that prevailed in the District before
1995. Unlike now, however, prior to 1995 the auditor was selected, not
by the Inspector General, but by the Mayor with the advice and consent
of the D.C. Council.
I am concerned that at present too few auditors are bidding on the
annual audit contract and that too much is being paid by the District
for the audit. This year only one firm--Mitchell & Titus--submitted a
proposal in response to our solicitation. During the bidding period, I
had to inform another firm interested in submitting a bid--Thompson,
Cobb, Bazilio & Associates--that it was disqualified because for the
past three years it had assisted the firm that performed the annual
audit and, under Public Law 104-8, the contract may not be awarded to
``the same auditor (or an auditor employed by or affiliated with the
same auditor, for more than 3 consecutive fiscal years.'' (emphasis
added).
In a letter dated April 10, 1998, Arthur Andersen, one of the
largest public accounting firms in the country, explained that one of
the reasons it did not submit a proposal was the three-year mandatory
rotation requirement. (The other reason concerned the indemnification
clause of the audit contract.) In its letter, Arthur Andersen stated
that ``[t]he frequent rotation of auditors reduces the ability of an
auditing firm to gain the in-depth understanding of the D.C.
Government's operations that we believe is required.'' Arthur Andersen
expressed precisely the same concern when it declined to submit a bid
last year. We have also been told informally that the three-year
rotation requirement is one important reason why none of the other
national public accounting firms submitted a bid this year.
While few firms have shown interest in the annual audit in recent
years, the cost of the audit to the District has become considerable.
KPMG Peat Marwick, which performed the audits for fiscal years 1995
through 1997, received $2.2 million for each of fiscal year 1995 and
fiscal year 1996, and $2.8 million for fiscal year 1997--a total of
$7.2 million over the three-year period. Mitchell & Titus' proposal--
which, again, is the only proposal we received this year--is for $1.8
million for fiscal year 1998, $1.86 million for fiscal year 1999, and
$1.9 million for fiscal year 2000.
It is noteworthy that the District paid much less for the annual
audit in the years prior to the adoption of Public Law 104-8, when the
audit contract could be awarded for four years. Coopers & Lybrand,
which performed the audits for fiscal years 1992 through 1994, was paid
$931,400 for fiscal year 1992, $946,550 for fiscal year 1993, and
$1,032,050 for fiscal year 1994. (Although Coopers was initially
awarded the contract for fiscal year 1995, it did not actually perform
it.) KPMG was paid approximately $835,000 to $855,000 per audit for
fiscal years 1988 through 1991. Although several factors are
responsible for the rise in the cost of the annual audit over the last
decade, I believe that one important cause of the increase is the
inability of this Office to award the audit contract for longer than
three years.
The rising cost of the annual audit over the last decade is
reflected in the following chart:
Fiscal year 1988-91 (KPMG) (approx.).................... $845,000
Fiscal year 1992 (Coopers).............................. 931,400
Fiscal year 1993 (Coopers).............................. 946,550
Fiscal year 1994 (Coopers).............................. 1,032,050
Fiscal year 1995 (KPMG)................................. 2,200,000
Fiscal year 1996 (KPMG)................................. 2,200,000
Fiscal year 1997 (KPMG)................................. 2,800,000
I understand that the 104th Congress had sound policy reasons for
insisting that the contract to audit the D.C. Government change hands
periodically. Rotating auditors every few years can bring a fresh
perspective and new ideas to the task. Nevertheless, because of the
efficiencies and cost savings to be gained by longer contracts, I now
believe that the line should be drawn at five years rather than three.
Thank you for considering this proposal. I am prepared to provide
any assistance that you or your stay should require.
Sincerely,
E. Barrett Prettyman, Jr.,
D.C. Inspector General.
Senator Faircloth. I want to thank you for, all of you for,
being here today and for what you have done. Now, certainly we
are going to study the budget. We will be looking at it and we
will probably be back talking to you all. But does anyone have
anything else that we might have failed to give you time to
say?
Mayor Barry, any comments you would like to make before we
close the hearing?
Mayor Barry. Well, I look forward to coming back up here
observing next year. [Laughter.]
Senator Faircloth. We will keep your chair.
Ms. Cropp.
consensus budget
Ms. Cropp. Only that we look forward to your supporting
this consensus budget. I think it says an awful lot for all
three of us and our prospective members to come together on a
consensus budget that will help make the District of Columbia a
much stronger and better functioning city. At this point, we
need for Congress to join us in partnership to make our city
work. We have put aside all of our own personal ideas sometimes
to look at what was best for the city. This budget represents
in our belief, our collective belief, and believe me that was
not an easy task when you bring the Mayor, the Council and the
Financial Authority all together.
We worked extremely hard. We worked on Saturdays, we worked
on Sundays and we put in an awful lot of time to put together a
budget that we believe--feel strongly that it is a good budget
on behalf of the citizens of the District of Columbia that will
move this city forward. We ask for your support in this budget
and in our efforts.
Mayor Barry. Mr. Chairman, let me underscore the
significance of the three of us coming together. As an elected
official, you know that your constituency expects you to
advocate and push certain points of view. It may seem to be
very easy on the surface dealing with personalities and dealing
with institutions. But we were able to overcome whatever
philosophical differences or program differences and
compromise. Also, I would hope that the Congress would
appreciate the tremendous amount of flexibility that we came to
this table with. That was not the case last year, quite
frankly. We came up with two budgets.
Senator Faircloth. I am quite aware that it was not.
Mayor Barry. Well, I wanted to underscore that.
Ms. Cropp. I would also just like to recognize that I am
joined here today by two members of the Council, David Catania,
at-large member, and Hilda Mason, at-large member.
Senator Faircloth. Would they stand up please so we can
all----
Well, let me say there are 535 members of the Congress, and
I certainly do not intend to speak for but one of them. But the
role of the Congress and the desire of the Congress, and for
this point I can speak for the other 534, they want to see the
best possible Capital of this country that we can have.
As I said earlier, I do not find a stinginess on the part
of the Congress when it comes to working with the District of
Columbia on the financial aspects of what we need to do to
bring the capital city to what we all want it to be, the
residents and the country as a whole and certainly the
Congress. So bear in mind the Congress is not the enemy. The
Congress is your partner to try to bring the city to the type
of city we would all be proud of. That is the goal of the
Congress, too.
Dr. Brimmer, would you?
city audit
Mr. Brimmer. Two quick points, Mr. Chairman. I mentioned
that we are reviewing the question of the audit. We have in the
budget now an amount of money that is in the neighborhood of
$1.5 million. We may end up having to spend more than that. As
we make further progress of reviewing this, I might have to
come to you and say that we need an additional amount as a part
of the appropriation. I hope you will give me the opportunity
to do that.
infrastructure fund
Second, in my testimony I spell out a request that the
Congress appropriate some money in the neighborhood of $200
million plus for infrastructure. I explain in my testimony why
we would like to have those funds appropriated by the Congress
and charged to and given to the Control Board and how we would
seek to spend it. I spell out in here an attempt to respond to
some of the things you have raised. You have visited some of
these police stations. You know what conditions many of these
facilities are in. We feel we need to get on with trying to
improve those, and we are asking for some funds to do that. I
did not mention it in my first go around, but it is in my
statement.
Thank you very much.
Senator Faircloth. Thank you very much, Dr. Brimmer.
prepared statement
I would like to note that Senator Boxer had planned to be
with us today, but was unable to be here because of conflicting
committee responsibilities. Without objection, Senator Boxer's
opening statement and questions will be incorporated in the
record, along with the answers prepared by the witnesses to her
questions. So you will get a copy of this.
[The statement follows:)
Prepared Statement of Senator Boxer
I would like to thank Senator Faircloth for his tireless efforts as
Chairman of the District of Columbia Appropriations Subcommittee. He
has spent countless hours on the largely thankless task of addressing
the District's financial ills, and I am happy that we have been able to
work together to begin to make some progress for the District. Today,
the District budget is actually in surplus, which pleases me very much.
I welcome our witnesses at today's hearing--Mayor Marion Barry,
D.C. Council Chairwoman Linda Cropp, and Dr. Andrew Brimmer, Chairman
of the Control Board.
The Subcommittee is meeting today to hear from our witnesses on the
proposed fiscal year 1999 budget. The budget proposal submitted by the
President calls for an appropriation of $486 million, while the budget
proposal submitted by the District calls for an additional $254 million
for infrastructure development. I hope that our witnesses today can
address and explain this discrepancy.
The budget reflects the changes in government operations which have
resulted from the federal government's assumption of city functions
that parallel the responsibilities of a state government. The budget
also reflects significant investment in implementing management reforms
and promoting infrastructure development. I look forward to hearing
from our witnesses about the impact of these changes and priorities on
the quality of life of the citizens in our nation's capital.
Unfortunately, I have conflicting commitments today and will not be
able to personally attend the hearing. However, I have a number of
items that I would like to have included in the record. With the
Chairman's approval, I would ask unanimous consent that my questions
and inserts be placed into the record of this hearing, along with
responses from the witnesses to my questions.
I thank the Chairman for his accommodation.
additional committee questions
Senator Faircloth. I want to thank all of you for the
testimony and for the government service you have rendered and
are rendering. It is a pretty thankless occupation. I think all
of us that have been in it can attest to that.
Your testimony today, I want to ask that anybody that would
like to submit answers or ask further questions, that the
subcommittee will keep the record open until 5 p.m., Tuesday,
June 16. If anybody would like to submit additional questions,
then we would forward them to you all for answers.
[The following questions were not asked at the hearing, but
were submitted to the Departments for response subsequent to
the hearing:]
Council of the District of Columbia
Questions Submitted by Senator Faircloth
Question. Several reputable non-profit organizations (Salvation
Army, YMCA) have reported to the Committee that they have asked the
Council for funds to assist them in providing services to children and
those suffering from alcohol and drug abuse, and that they have not had
much success.
What is the Council's process for reviewing requests for financial
support by non-profit groups in the DC community?
Answer. Non-profit groups in the DC community often make numerous
requests for financial support to the Chairperson of the Committee on
Human Services in the DC Council. The Committee's standard procedure is
to forward the request to the Director of the appropriate agency, i.e.,
the Department of Health, the Department of Human Services, etc., for
review and consideration. In the event that a particular program is
believed to deserve assistance, the Chairman meets with the non-profit
group, visits the program site, and then arranges for them to meet the
appropriate Department Director who can provide grant funding.
Regarding the Salvation Army, the Committee Chairperson, Sandy
Allen did meet with their officials about their Harbor Lights Program.
She also toured their facility and arranged for them to meet with the
Directors in the Departments of Human Services and Health. She believes
that the Department of Health is attempting to collaborate with the
Salvation Army in this program. As for the YMCA, the Committee has not
received such a request.
Question. Is the Council willing to provide some matching funds for
programs that it considers worthwhile?
Answer. As the legislative branch of the District Government, the
decision to make financial awards to individual organizations is not a
responsibility of the Council. While the Council knows of many non-
profit groups and their laudable and worthwhile programs in substance
abuse \1\ it is not able to provide any matching funds. Such program
decisions are handled by the Executive Branch, the Financial Authority,
and the various departments involved.
---------------------------------------------------------------------------
\1\ In fact, the Council led an effort to increase funding for
programs in the Addiction Prevention and Recovery Administration in
fiscal year 1999.
---------------------------------------------------------------------------
Question. The District's proposed budget transfers 16 employees and
$667,000 from the Office of Personnel to the Human Resource Development
to account for ``performance management initiative.'' Please explain
for the Committee what is meant by ``performance management
initiative'' and why they cost $667,000 and take 16 full-time employees
to implement?
Answer. The performance management initiative is an effort to
improve the evaluation of District employees by their supervisors. This
is consistent with DC Act 12-326, the ``Omnibus Personnel Reform Act of
1998'' which was enacted by the Council in March 1998 and completed the
30-day Congressional review period on June 10, 1998.
The legislation links pay to performance for the first time.
Managers and employees will have to develop individual performance
plans and employees will be rated at least once a year according to
four different levels listed below.
--(i) ``exceeds expectations''
--(ii) ``achieves expectations''
--(iii) ``below expectations''
--(iv) ``unacceptable''
In order to receive a periodic step increase, employees must
receive a rating of ``exceeds expectations'' or ``achieves
expectations.'' The performance management initiative is designed to
fund training for managers in the development and monitoring of
employee performance plans and in the evaluation of employee
performance. This initiative is a critical part of the District's
effort to upgrade services throughout the government.
The fiscal year 1999 budget does not transfer 16 employees from the
Office of Personnel to the Human Resources Development fund simply for
a performance management initiative. The 16 employees cover a range of
issue areas, including several training programs (one for high-level
managers, one for mid-level managers, and one for entry-level
employees); benefit programs (including studies of potential changes to
the District's disability, health insurance, and retirement programs);
an executive recruitment program; job classification; and, the
performance management initiative.
Question. The District plans to almost double the staff of the
Department of Consumer and Regulatory Affairs from 187 to 346 FTE's.
What new responsibility does the Department plan to assume to warrant
this increase in personnel?
Answer. The agency does not plan to double the staff of the
Department of Consumer and Regulatory Affairs (DCRA) nor assume any new
responsibilities in fiscal year 1999. This figure was attributed to a
computer error in the fiscal year 1998 budget document. The 187 FTE's
referenced in the fiscal year 1998 budget refer to employees that
comprised the health regulation and inspection functions of DCRA. When
those employees were transferred to the Department of Health in fiscal
year 1998, they remained in DCRA agency code, ``CR.'' All of DCRA's
remaining employees converted over to the (``EB'') agency code, thus
the discrepancy in the FTE number. For fiscal year 1999, 346 FTE's is
the correct figure of employees allocated to DCRA.
Question. Last week the Council passed legislation approving
construction of the new Convention Center at the Mt. Vernon location.
As part of this legislation, the Council voted to cap expenditures at
$650 million.
If midway through construction of the Convention Center, the
contractors tell District leaders they will need a few more million
dollars to put the roof on to complete the project, what will be the
Council's options?
Answer. The Washington Convention Center Authority (WCCA) reached
agreement with its Construction Manager (CM) on a Guaranteed Maximum
Price (GMP) of $550.6 million for construction of the new convention
center. The CM, a joint-venture of Clark Construction Company and the
Sherman R. Smoot Construction Company, will construct the new facility
at the Mount Vernon Square site for an amount not to exceed this GMP.
The attached schedule of construction risks and liabilities (see Chart
1) indicates responsibilities for completion of the project.
Since mid-February 1998, the CM, the WCCA, and its architect/
engineering team have engaged in an intensive design review process. As
part of the process, the parties have done the following:
--(i) engaged in value engineering to minimize the cost of
construction;
--(ii) validated the design;
--(iii) clarified ambiguities and inconsistencies in the design;
--(iv) agreed upon the CM's scope of work; and,
--(v) reviewed the design for ``constructibility'' and coordinating
issues.
The drawings and specifications for the project incorporate the
results of this design review.
As WCCA moves forward, the CM will be required to participate in
the periodic design and budget reviews in order to continue the value
engineering process and to insure that the final design is consistent
with the GMP and the project's scope of work. He has developed a
construction schedule that calls for completing the building in March
2003. If there are any delays in meeting this schedule, i.e., if the
building is not occupiable by this date, Clark/Smoot will incur
liquidated damages in the amount of $50,000 per day for every day
beyond the agreed upon completion date.
The GMP does not include the costs of two activities that will
occur off-site. As you know, President Clinton's fiscal year 1999
Budget allocates $25 million to the Washington Metropolitan Area
Transit Authority (WMATA) for the reconfiguration of portions of the
Mount Vernon Square metrorail station. Because the federal funds will
be transmitted under separate contract, this task has been removed from
the CM's scope of work. Also, costs for off-site utility relocation
will be offset by $10 million in federal funds provided to the District
through the Community Development Block Grant program of the U.S.
Department of Housing and Urban Development.
Question. Realistically, what protection does the cap give the
District from cost overruns?
Answer. The process of reaching the GMP for construction of the new
convention center has been thorough and rigorous. The WCCA has now
achieved guaranteed construction costs that allow the WCCA to stay
within its $650 million total projected budget. The Council voted with
confidence in the WCCA's negotiated guaranteed maximum price, yet
maintains several avenues of resolve should unanticipated costs arise.
These include requiring the contractor to maintain an adequate amount
of insurance, periodic project oversight review, and approval of annual
operating and capital budgets.
Question. The consensus budget recommends $18 million for the
Information Technology Initiative within the Metropolitan Police
Department.
Please describe these proposed initiatives and explain the goals to
be achieved if these initiatives are funded?
Answer. This Information Technology Initiative (ITI) is a
$17,900,000 capital recommendation made as a result of the Booze-Allen
management reform study mandated by Congress. This initiative is to
provide officers with timely, accurate, and comprehensive information
to identify and apprehend suspects. This system should reduce the time
officers spend processing paperwork, which will translate into more
police on the street. Systems included in the ITI are the
infrastructure, mobile data computer, SWISS intelligence system, Public
Works mobile reporting, automated dispatch, and a records management
system. The overall goal is to improve the information technology
capability of the police department and thereby, increasing the
efficiency of the citywide policing.
Question. The Department of Corrections (DOC) budget restores
funding for 53 teaching positions for an in-house education program.
Please explain this program and function.
Answer. The in-house education program provides courses taught by
DOC employees as well as University of the District of Columbia staff.
These programs include adult basic education, general high school
equivalency, and vocational education courses. Educational activities
include the testing and recommendation for the placement of inmates in
various academic and vocational programs according to their interests,
aptitude, and sentence structure. Additionally, inmates are encouraged
to enroll in correspondence and other self-study courses.
Question. What is the cost of this program?
Answer. The projected fiscal year 1999 cost for education is $2.5
million. In fiscal year 1998, the agency planned to privatize education
and contract with a vendor for the services. The fiscal year 1998
budget included $2.1 million in severance costs for planned staff
reduction in force (RIF) and $3.5 million for the education contract,
for a total education budget of $3.6 million. After the passage of the
President's Privatization Act, this agency--in conjunction with the
Corrections Trustee--decided not to privatize education and RIF
educational employees as facilities closed. This resulted in a net
decrease in the fiscal year 1999 education budget of $1.1 million.
Question. The newly-established Corrections Trustee Office is
budgeted to reimburse the District $185 million for costs related to
the care and custody of the sentenced adult felon population. The
District's budget projects the actual costs to be $203.5 million, which
is a difference of $18.5 million. Does the DOC proposed budget include
the additional $18.5 million?
Answer. The DOC local budget does not include this funding.
However, the fiscal year 1999 federal reimbursement amount (Trustee's
budget) proposed by the District for DOC does include funding for $18.5
million.
[GRAPHIC] [TIFF OMITTED] T03JU10.003
______
Office of the Mayor
Question Submitted by Senator Faircloth
Question. During the June 10, 1998 hearing, you testified that the
District could develop methods of ensuring that the $25 million
proposed for transportation improvements for the Washington Convention
Center project, if appropriated, would only be used for those
improvements and not be used for the construction of the convention
center.
Please identify the methods the District could adopt to ensure that
any appropriated funds would be used for their intended purpose.
Answer. The President's proposed budget which provides $25 million
for improvements to the new convention center Metro station states that
those funds will go directly to WMATA for the design and work for the
station improvements. Apart from the Metro station work, WMATA has no
role in the construction of the new convention center. Consequently,
there is no possibility that any of those funds could be used for the
construction of the new convention center.
______
District of Columbia Financial Responsibility and Management Assistance
Authority
Questions Submitted by Senator Faircloth
Question.The District's proposed budget contains a request for
$254,000,000 for infrastructure repairs to be used to improve the
District's schools, roads and police and fire stations.
Please provide an explanation of this proposal and a spending
schedule for the requested funds.
Answer. The National Capital Revitalization Act of 1997
(``Revitalization Act'') gave the District of Columbia the opportunity
to achieve a balanced operating budget. By enabling the District to
align revenues with expenditures, the Revitalization Act created the
potential for balanced operating budgets over the long-term. However,
because of years of inadequate funding, the District still faces a
massive infrastructure deficit.
While the exact size of the District's infrastructure deficit has
not yet been determined, it will be measured in the billions of
dollars. While the deficit in transportation and public schools
infrastructure are well documented, there are other deficits. For
example, police and fire facilities range in age from 20 to 50 years.
They suffer from the same deferred maintenance that was identified in
schools. Libraries and parks are in poor condition.
In April, 1997 the Authority issued a report, ``Toward a More
Equitable Relationship: Structuring the District of Columbia's State
Functions'', that addressed the relationship between the District of
Columbia and the national government. A part of that report dealt with
roads and bridges. It concluded that, while the District receives a
proportional amount of federal funding to maintain its federal-aid
highway routes, these routes comprise only 40 percent of the District's
roadways. The remaining 60 percent of the roadways are locally
designated roads and do not have a viable source of funding. The
District's motor fuel tax revenues are currently used to meet the
required local matching share of federal funds. In fiscal year 1997
those revenues were only approximately $28 million. This situation is
not likely to improve. Between 1977 and 1990 the number of gas stations
in the District decreased from 270 to 136, a 50 percent decrease.
Another mitigating factor is the proximity of the Maryland and Virginia
suburbs. In most cities when customers purchase gasoline in suburban
locations they are still paying the state gas tax, and the state may
distribute those funds as needed. That option is not available to the
District when purchases are made in Maryland and Virginia. Finally, the
District does not possess such options as tolls or other direct user
charges for the use and maintenance of its roadways and bridges.
The following table illustrates how the $254 million would be
spent.
Proposed National Capital Infrastructure Fund
[In thousands of dollars]
District of Columbia Public Schools........................... 132,000
Local Streets................................................. 87,000
Metropolitan Police Department................................ 25,000
Fire and Emergency Medical Services Department................ 10,000
--------------------------------------------------------------
____________________________________________________
Total................................................... 254,000
Question. Funds for this proposal were not included in the
President's proposed budget, and the Subcommittee's allocation does not
include sufficient funds to pay for this request. Do you recommend that
other components of the President's request not be funded in order to
provide funds for infrastructure repairs?
Answer. The District of Columbia Financial Responsibility and
Management Assistance Authority does not recommend that any of the
items contained in the President's budget request be reduced or
eliminated in order to accommodate this request. The request for
support of an appropriation for the National Capital Infrastructure
Fund is based upon the inability of the District to generate sufficient
capital funds to maintain the infrastructure, without the support that
other cities receive from their state governments. We hope that the
Congress will consider the above discussion, the April, 1997 report and
the arguments contained in the fiscal year 1999 operating budget
justification material (page VII-1) and provide the District with the
needed assistance.
Question. In 1997, Congress amended the Federal Payment
Reauthorization Act to require the Control Board to develop a
Performance Accountability Plan for all District departments, agencies
and programs. The plans were to be submitted to Congress by March 1,
1998. The Committee received a report this spring on Performance
Accountability, but it was more a road-map for performance management--
not the detailed plans required by law.
When can Congress expect to receive performance plans for each of
the District's departments and agencies?
Answer. As part of the District's Performance Management System
that was outlined in the report submitted to Congress on March 2, 1998,
the District of Columbia is in the process of developing the annual
Performance Accountability Plan. It is expected that a draft of the
Performance Accountability Plan will be submitted to the relevant
committees no later than, July 31, 1998. The final Performance
Accountability Plan will be submitted no later than, September 30,
1998.
Members of the staff of the Chief Management Officer and the
Authority have met with Committee staff, and with representatives from
the General Accounting Office to discuss the status of the District's
Performance Management System. A timeline was developed. It is our
intent to develop a Performance Accountability Plan that not only
complies with the requirements of the law but that also allows us to
implement a management system through which District government
managers, residents, and the Congress, can assess the effectiveness of
the services provided by the government. The Performance Accountability
Plan will contain specific outcome and customer satisfaction
performance measures. Additionally, the Performance Accountability Plan
will incorporate measures of the improvements in service delivery
resulting from the Management Reform Initiative that was part of the
National Capital Revitalization and Self Governance Improvement Act of
1997.
Our work to implement the Performance Management System is
proceeding on this schedule.
Question.The District's proposed budget recommends a reduction of
12 full-time equivalent positions from the Office of City
Administrator.
Given the transfer of responsibility of 9 major agencies to the
Chief Management Officer, how does the Control Board justify funding 17
positions in this office for fiscal year 1999?
Answer. The consensus budget developed by the Authority, the Mayor,
and members of the Council provides for a reduction from 29 full-time
equivalent positions (FTE's) and $4 million to 17 FTE's and $1.16
million. The number of personnel remaining are provided to assist the
Mayor in evaluating overall policy questions.
Question. Could the District better use the $1.16 million for
infrastructure repairs of the District's schools and roads or for
management reforms?
Answer. The District needs to take advantage of every opportunity
to address its multi-billion dollar deferred maintenance and
infrastructure needs, however, it is also important that policy
questions are thoroughly considered and alternatives are explored. To
that end these resources will be valuable to the management reform
efforts of the District government.
Question. Did the District of Columbia receive any funds in the
recently passed highway bill passed by Congress?
If so, how much did the District receive, and what was it ear-
marked for?
Answer. Under the federal-aid highway program, the District of
Columbia receives apportionments as if it were a state. Under the new
Transportation Equity Act for the 21st Century (TEA 21), Public Law
105-178 signed by the President on June 9, 1998, the District's
apportionment for fiscal year 1998 totals $87,933,000.
The District's Department of Public Works estimates that the
required matching funds required under the TEA 21 legislation will
exceed the total revenues available to the District's Transportation
Trust Fund. Primarily, these are comprised of amounts collected from
motor vehicle fuel taxes. This amounts to $5 million to $7 million
annually. The Trust Fund currently realizes approximately $30 million
annually.
Section 1225 of the TEA 21 Restoration Act provides that the
Secretary of Transportation may approve substitute highway and transit
projects in lieu of the construction of the Barney Circle Freeway
project. The effect of this provision is to extend, for up to four
years, the amount of time that the District has to match and make use
of the $173 million in funds withdrawn from the interstate system
project.
Question. In reviewing the District's budget, it appears that as of
December 20, 1997, the District employed 34,681 full-time equivalent
positions.
The budget tables show a projected work force in fiscal year 1999
of 34,169 full-time employees. This is a reduction of only about 500
employees.
Can you confirm for the Committee how many full-time equivalent
positions were employed by the District in fiscal year 1998?
Answer. While the fiscal year 1998 budget does not contain a
limitation on the number of FTE's, the current estimate is that the
District government will employ 32,885 FTE's, on a gross budget basis,
excluding FTE's funded by intra-District transfers. Of this number
25,819 are funded from local funds.
Question. How many full-time equivalent positions are you proposing
to employs for fiscal year 1999?
Answer. The consensus budget does not include a limitation on FTE
positions, the Authority believes that it is more important to control
expenditures and monitor service delivery levels rather than to
regulate the number of personnel. However, the District Office of
Budget and Planning estimates that the fiscal year 1999 budget will
support 32,891 FTE's, of which 24,683 are funded from local funds.
Question. In which departments are you reducing staff, and in which
departments are you increasing staff?
Answer. Attached is a copy of ``Government of the District of
Columbia Fiscal Year 1999 Proposed Full-Time Equivalent Employment
Authority--Local Funds''. This was included in the District's operating
budget document listing the estimated changes in FTE employment from
the current fiscal year.
Question. This year's budget appropriates $319 million for 3
agencies under court-ordered receivers.
Why did the budget drafters separate the receivers into a separate
budget function?
Answer. For fiscal year 1999 the proposed budget includes a
separate appropriation account for three of the receiverships that are
operating District of Columbia government agencies. Returning those
receiverships to District control is of vital importance because of the
loss of coordination over key governmental management and budget
functions. This results in the District government not achieving
various policy and program objectives. The lack of budgetary
independence is a liability for the District because the receivers have
historically claimed that they are under-funded and demand additional
resources as a requirement for improved service delivery. This is often
to the detriment of services not under the courts' control.
To address this risk, the District must develop a comprehensive
strategy for ensuring the timely return of these agencies back to the
control of the District. Court orders mandate minimum service levels or
timely action to remedy inadequately managed programs. These orders
contribute to the District's high fixed expenses and they limit budget
flexibility. Providing acceptable service levels and the resulting
return of these receiverships to the control of the District is
essential to the long-term fiscal recovery of the District.
The fiscal year 1999 budget funds the receiverships at levels that
are necessary to meet the requirements set by the courts. This required
larger increases in local funding, for agencies under court-ordered
receivers.
Question. Why did the District's budget not include the housing
receiver budget in this category?
Answer. The Superior Court of the District of Columbia appointed a
receiver to operate the Department of Public and Assisted Housing
(``DPAH'') in May, 1995. DPAH and the receiver operate primarily with
federal grant funds. These funds are used to manage and maintain the
public housing operations. The only District funds included in the
fiscal year 1999 budget total $2.1 million for the Tenant Assistance
Program, which is being phased out by the District. A decision has not
been made to include the housing receiver in the new appropriation
account. There is a need to develop an exit strategy for the housing
receiver.
Question. Since the receivers can demand additional resources at
any time, are these budget figures for the receivers merely estimates?
Answer. All amounts in the proposed budget should be considered
estimates. However, the amounts requested for the various receiverships
were developed in cooperation with the receivers. The total represents
significant increases over fiscal year 1998. Therefore these amounts
are expected to adequately address the needs of the receiverships
during fiscal year 1999.
Question. Last year, 11 schools in the District were closed in an
effort to put limited resources into fewer facilities. The goal was to
improve only those schools that are needed to educate the District's
school children.
Given the continued crisis in the District's public schools and the
lack of adequate funds to solve the crisis, does the Control Board
expect that more schools will be closed during the next school year?
Answer. Currently, no plans exist to close additional schools
during the next school year. However, given the declining student
population and the competing demands for scarce resources, the number
of schools should be reduced. The Superintendent/CEO, with the
assistance of the Emergency Board of Trustees, is revising the Long
Range Facilities Plan, which will establish criteria for determining
the utilization of the facilities and the space requirements of D.C.
Public Schools. The Authority expects to receive, as part of the long
range facilities planning process, recommendations regarding school
closures.
The Authority is mindful of the difficulty of these decisions. The
Superintendent and the Emergency Board of Trustees understand the
importance of involving the community in developing closure
recommendations.
Question. Does the District's proposed budget include any funding
for the recycling program?
If so, what is the amount of funding?
Answer. The proposed budget for fiscal year 1999 provides $4.2
million for recycling. In addition, $165,000 will be available from
fees collected from private haulers at the District's waste handling
facilities.
Question. Please describe the proposed recycling program for fiscal
year 1999.
Answer. The Department of Public Works anticipates that residential
recycling will resume by September, 1998, after a contract is executed
to provide recycling collection services for all residential buildings
in its service population (approximately 102,000 buildings). The
recycling program will provide for the collection of materials
including glass and metal; food and beverage containers; plastic
containers with recycling codes # 1 and # 2; aluminum foil; newspapers
(including inserts); magazines and catalogs; corrugated cardboard;
brown paper bags; office paper; and telephone books.
The new residential recycling program will provide several
noticeable service enhancements over previous efforts. It is designed
to make recycling customer friendly. The enhancements include:
Increased frequency.--The proposed program calls for weekly
recyclable collection service. The previous program offered bi-weekly
collections.
Same point of collection for recyclables and trash.--The proposed
program will collect recyclables from the same point of collection as
that used for trash--a mix of curbside and alley collections throughout
the city. Previous programs offered curbside service only.
Equitable treatment.--Same day collection of recyclables and trash
at one point of collection across the city's eight wards to provide
more equitable treatment.
New recycling bins.--All houses in DPW's service population will
receive a new, larger 18 gallon recycling bin. The bins will be
imprinted with the recycling logo, the sanitation information center
phone number, and instructions on how to prepare recyclables for
collection.
These service enhancements will be partnered with an aggressive
public information campaign to encourage program participation. It is
DPW's goal to reach a 30 percent participation rate by March, 1999.
Strategies to increase participation include securing pro bono
advertising services from public relations firms and beverage industry
groups, as well as launching an education campaign in the public
schools and community organizations.
Question. The District's budget states that District leaders have
planned an additional $25 million for management reform in fiscal year
1999, and the President has recommended $25 million in management
reforms to improve the District's economic development infrastructure.
If the District is appropriated $25 million for management reform,
for what type of management reforms would the funds be used?
Answer. The $25 million included in the President's budget for
fiscal year 1999 will be used primarily for capital investments and
departmental management improvements, including:
Asset management.--Funds are required to develop a comprehensive
database for real property information and to develop an automated
integrated tax system.
Department of Consumer and Regulatory Affairs (``DCRA'').--
Additional funds are needed to streamline the building permit and
zoning processes.
Department of Health.--Funds will be used to continue the transfer
of DCRA environmental health administration function to the Department
of Health.
Department of Public Works.--Management reform funds are required
to consolidate the waste transfer station operations, improvement of
right-of-way management, and to improve fleet management services.
Metropolitan Police Department.--Funds will be used to support
critical information technology for the improvement of public safety.
Question. Please provide the Committee with a complete list of all
non-profits currently using District public school facilities, as well
as a schedule of hours for each non-profit.
Answer. There are non-profit entities using all 146 public school
buildings. These non-profits include community groups, who use the
buildings for meetings, to early childhood programs that lease space in
surplus buildings. The D.C. Public Schools realize approximately
$500,000 in rent from these activities each year. The attached list
denotes school facilities that are occupied by non-profit tenants or
District government agencies that do not pay rent.
District of Columbia Schools Occupied by Government Agencies or Non-Profit Entities Paying no Rent
School facility Occupying entity
Addison School, 3210 O Street, NW..................... Department of Human Services.
Bundy School, 429 O Street, NW........................ Department of Human Services.
Blair School, 6239 Eye Street, NE..................... Department of Human Services--Homeless shelter.
Bryan School, 1325 Independence Avenue, SE............ Department of Human Services (Vacating July, 1998).
Crummel School........................................ Department of Human Services.
Galludet & Kendall Streets, NE........................ Homeless shelter (Proposed sale of property, homeless
trailers will be allowed to stay for one year from the
date of settlement).
Emery School, Lincoln Road & Prospect Street, NE...... Department of Human Services--Homeless shelter.
Grimke School, 1923 Vermont Avenue, NW................ Fire and Emergency Medical Services Department and
Department of Corrections headquarters.
Hamilton School, 610 Brentwood Parkway, NE............ Superior Court of the District of Columbia.
Madison School, 10th and G Streets, NE................ Department of Human Services--Homeless shelter.
Nicholas Avenue School, 2427 Martin Luther King ARCH/CEEP Training Program--Property will be proposed
Avenue, SE. for sale by September, 1998.
Pierce School, 14 and G Streets, NE................... Department of Human Services.
Randall School, 820 Half Street, SW................... Department of Human Services.
Reno School, Howard & Fessender Street, NW............ Department of Human Services.
Question. Recently the General Accounting Office issued a report
titled ``Software Acquisition Process for a New Financial Management
System'' (AIMD-98-88, April, 1998). Have you reviewed the final report,
and do you have any comments?
Answer. The GAO report measured the District's source selection
process against a standard that was not used in its selection,
therefore the GAO overstates the weaknesses of the District's process.
The Chief Financial Officer for the District, in a reply that is
contained in the GAO report, notes that the issues cited are being
addressed. On June 2, 1998, the Chief Management Officer provided the
Executive Director of the Authority with comments on the GAO report. A
copy of that letter is attached.
Letter From Camille Cates Barnett
District of Columbia Financial Responsibility and
Management
Assistance Authority,
Washington, DC, June 2, 1998.
Mr. John W. Hill, Jr.,
Executive Director, District of Columbia Financial Responsibility and
Management Assistance Authority, Washington, DC.
Dear Mr. Hill: I appreciate the opportunity to review the report
prepared by the United States General Accounting Office, Software
Acquisition Processes for a New Financial Management System for the
District of Columbia. Let me begin by noting that this report makes
several important, if somewhat critical, observations regarding the
state of software acquisition in the District.
Although the report found more strengths than weaknesses in the
District's FMS acquisition process, it emphasized weaknesses in
requirements development, management and evaluation. While it is fair
to challenge the FMS acquisition process in these areas, Mr. Williams,
in his reply to the report, is correct in pointing out that many of
these problems are being addressed. Moreover, as you noted, the absence
of any major software purchases by the District in recent years has
contributed to the lack of written policy in the software acquisition
area. Nevertheless, I believe the report somewhat overstates the
weaknesses in the FMS procurement.
The reason the report overstates the weaknesses is quite simple:
GAO utilized a tool--the Software Engineering Institute's (SEI)
Software Acquisition Capability Maturity Model (SA-CMM)--which has very
specific requirements for achieving a particular ``maturity'' level. It
is unlikely that any software acquisition project would score well on
the model, in the absence of prior knowledge of its specific
requirements. Moreover, a single weakness--such as the absence of
written policies, procedures or guidelines--negatively affects the
respondent's score in virtually every key process being evaluated.
Finally, the model seems best-suited for ensuring proper development
and implementation of very large, complex custom-designed software
applications--such as those developed for the Department of Defense
(DOD).
In contrast, many municipal applications are largely ``off-the-
shelf'' products, albeit with some modifications. Unlike many DOD-type
applications, they typically are products that have been tested
previously in the real-world. Consequently, risk management, while
important, is not as critical as in the development and implementation
of new and complex custom applications. Fully 29 percent of the
weaknesses noted in the GAO report for FMS, were in the risk management
area.
The SA-CMM model may set a good standard for the District to follow
in future software acquisition. However, I have some concern as to
whether this is the best model for the District to use, or to use in
all cases. Other standardized software acquisition protocols also may
be available. It is my recommendation that the District review the
various protocols available and select those which best suit the City's
needs. It may be that different protocols are appropriate for different
types of purchases.
I will follow-up on this with the District's Interim Chief
Technology Officer. If you have any questions, feel free to contact me.
Sincerely,
Camille Cates Barnett, Ph.D.,
Chief Management Officer.
Budgeted and Actual Expenditures for the Current Fiscal Year, for
District of Columbia Public Schools [DCPS]
Question. Please provide precise information, with supporting
documentation, as to the confirmed amount of the financial discrepancy
between DCPS' budgeted and actual expenditures.
Answer. As of May 31, 1998, the projected deficit for DCPS was
$26.818 million. This includes a projected Personal Services (``PS'')
deficit of $39.056 million and a Non-Personal Services surplus of
$12.238 million.
TABLE I.--FISCAL YEAR 1998 BUDGET AND PROJECTED EXPENDITURES
[Local funds]
------------------------------------------------------------------------
Fiscal year 1998
------------------------ Under/
Budget category Budgeted (over)
amount Expenditure budget
------------------------------------------------------------------------
Personal Services................... $366.076 $388.523 ($22.447)
Teamsters' Settlement........... ......... 14.769 (14.769)
Premium Pay..................... ......... 1.840 (1.840)
Non-Personal Services............... 128.803 116.565 12.238
-----------------------------------
Total......................... 494.879 521.697 (26.818)
------------------------------------------------------------------------
Personal Services Deficit.--The projected $39.056 million PS
deficit can be broken down as follows:
A. $22.447 million is the projected PS expenditures through
September 30, 1998.
B. $14.769 million is the net amount required to fulfill the
Teamsters' settlement through fiscal year 1999. This net figure
represents the total liability for DCPS of $25.4 million in the
settlement, less a reserved amount of $10.6 million. These are the
details of the settlement:
--$1.75 million for a 5 percent one-time payment which was paid in
December of 1997.
--$1.43 million for an additional one-time payment which was paid in
March of 1998.
--$2.78 million for a March 1, 1998 pay raise which remains an
element of the DCPS deficit.
--$19.4 million for three payments of $6.45 million for total back
payments for the period fiscal year 1993-1997. The first two
payments are due in fiscal year 1998. The third payment will be
due in fiscal year 1999.
C. $1.840 million is premium pay from June 1998 through the end of
the fiscal year. This amount was calculated based on the actual costs
of additional gross pay from the prior fiscal year and based on the
current freeze in place.
Non-Personal Services Cost Savings.--As a result of the increase in
budget authority and the Non-Personal Services (``NPS'') spending
freeze, DCPS anticipates $12.238 million in NPS cost savings.
Initially, DCPS identified a $9.6 million shortfall in NPS, includes
$8.1 million due to a court-mandated transportation program and $1.5
million to support additional academic enhancements. Since many of the
academic enhancements represent productivity and management
improvements, the Authority authorized management productivity funds to
DCPS. In addition, DCPS has frozen all NPS accounts, with exception of
those funds that are bound by contractual obligations or used for
emergency requests approved by the Superintendent and the CFO of DCPS.
Question. Provide the spending elements which have contributed to
the purported discrepancy between budget and expenditures. For each
spending element, include the budgeted and actual spending amounts and
the factors utilized in determining those amounts.
Answer. The components of the projected deficit can be classified
as either personnel overspending, program enhancement, or court-
mandated spending. The DCPS Superintendent introduced several academic
enhancements that were critical to carrying out academic reforms in
fiscal year 1998. Additionally, court mandates related to Special
Education required several unbudgeted expenditures. Personnel
overspending will be addressed in the Authority's response to inquiry
number four.
The following table shows the components of the deficit in
thousands:
Table II.--Components of the Deficit
Components Deficit
Fiscal Year 1998 Personal Services (PS) Budget................ $366.076
==============================================================
____________________________________________________
Actual YTD Expenditures (Group 6 (10/1/97 through 4/30/98, <14
pay periods)) (Groups I and 2 (10/1/97 through 5/9/98,
<15.8 pay periods))....................................... (260.521)
Projected Expenditures (Regular Pay and Benefits--11, 12, 14):
Group 6 @ 14,030 x 6 remaining pay periods................ (84.184)
Groups I and 2 @ 3,621 x 10.3 remaining pay periods....... (37.298)
Group 6 Summer Payroll.................................... (6.000)
Step Increases............................................ (0.520)
--------------------------------------------------------------
____________________________________________________
Total Actual and Projected Expenditures adjustments..... (388.523)
--------------------------------------------------------------
____________________________________________________
Subtotal (Actual and Projected v. Fiscal year 1998
Personal Servi-
........................................................
ces).................................................. (22.447)
==============================================================
____________________________________________________
Additional PS Funding Requirements:
Backpay for Teamsters' Union.............................. (14.769)
Premium Pay/Additional Gross.............................. (1.840)
--------------------------------------------------------------
____________________________________________________
Additional Adjustments Total............................ (16.609)
==============================================================
____________________________________________________
Total PS Potential Deficit.............................. (39.056)
Question. Provide specific information as to staffing levels at the
beginning of the school year and presently. Detail levels of personnel
for administrative, school-based v. non-school-based, classroom v. non-
classroom, school support and another employee classifications that
constitute the DPCS employment total. Numbers of full-time and part-
time employees must also be identified in the total and definitions of
each employee category should be provided.
Answer. Detailed below is a report on current staffing levels and
staffing levels for the beginning of fiscal year 1998.
employee categories
Central.--Employees who support local schools in administrative
areas such as budget and finance, human resources, and Management
Information Systems (``MIS'').
Instructional Support.--Employees who have supervisory,
coordinating, and planning responsibility in academic instructional
areas. Programs like media and library services are included in this
category.
Instructional.--Employees who provide instruction for elementary,
junior high/middle, or senior high school. This category also includes
special education and adult education.
Support Services.--Employees who perform services related to the
physical plants within the school system including custodial services
and building maintenance, building repairs and improvements, and
capital projects development.
TABLE III.--DCPS STAFFING BY FUNCTION
----------------------------------------------------------------------------------------------------------------
No. of FTE's \1\
--------------------------------------------------
Beginning of fiscal As of 5/31/98
year 1998 --------------------------
------------------------
Non- Local Non- Total
Local local Total local
----------------------------------------------------------------------------------------------------------------
Central...................................................... 228 413 641 260 438 689
Instructional Support........................................ 433 401 834 463 499 962
Instructional................................................ 6,394 164 6,558 6,564 166 6,730
Support Services............................................. 1,632 19 1,651 1,598 25 1,623
--------------------------------------------------
Total.................................................. 8,687 997 9,684 8,885 1,128 10,013
==================================================
Full-Time.................................................... 8,121 707 8,828 8,329 727 9,056
Part-Time.................................................... 566 290 856 556 401 957
--------------------------------------------------
Subtotal............................................... 8,687 997 9,684 8,885 1,128 10,013
--------------------------------------------------
Less: RIF.................................................... ...... ...... ...... (147) ...... (147)
--------------------------------------------------
Total.................................................. 8,687 997 9,684 8,738 1,128 9,866
----------------------------------------------------------------------------------------------------------------
\1\ FTE--Full-Time Equivalent.
Regarding the overspending in personal services, by June 30, 1998,
637 employees will be separated from DCPS through a system-wide
reduction-in-force. In addition, DCPS will release another 100-300
employees by September 30, 1998. These personnel reductions will result
in approximately $2.5 million in savings.
Question. Provide empirical evidence to address whether the
personnel costs contained in the approved budget were based on an
accurate representation of the annual costs for those respective
employment classifications, including full-year and partial-year
employment contracts. In addition, document the method for constructing
the baseline budget for personnel costs.
Answer. The fiscal year 1998 total budget request was $614.8
million, including $525.8 million in local funds and $89 million in
non-local funds. The request supported a total of 10,009 Full-Time
Equivalents (FTE's)--8,623 from local funding, 1,251 from federal
funds, and 135 from private, intra-District or other funds.
The fiscal year 1998 budget was comprised of two parts.
--The school-based staffing model was used to determine the number of
FTE positions needed to fund school-based personnel.
--DCPS did not to complete the analysis necessary to determine the
actual number of central overhead personnel required. As a
consequence, the non-school-based portion of the budget was
funded at fiscal year 1997 levels.
DCPS budget allocation for fiscal year 1998 left a 440 FTE gap
between the 9,063 FTE's authorized in fiscal year 1997 and the 8,623
FTE's requested in the fiscal year 1998 budget. The budget required the
elimination of 400 positions of school-based staffing or the
implementation of alternative offsetting FTE reductions within central
administration.
Question. As related to Inquiry No. 4, please advise as to what
impact these matters will have on the budget currently being developed,
and how that impact will be addressed.
Answer. The fiscal year 1999 PS budget is comprised of a school-
based budget, using average salaries for each pay plan and grade. The
PS budget in fiscal year 1999 will reflect changes driven by staffing
requirement assessments, corrections to a head count of personnel, and
reductions-in-force. Additionally, the actual expenditures for fiscal
year 1999 will be closely monitored. As a result of the implementation
of an integrated personnel and payroll data management system, DCPS
will have more accurate and timely personnel budget and expenditure
information.
Question. Provide information on the costs of the special education
program, particularly transportation requirements. This information
should include the number of students receiving special education
services, the congressionally approved budget versus the revised budget
(actual expenditures through April 1998, plus projected expenditures of
the balance of fiscal year 1998) separate for special education,
administration, assessment, instruction and support services and
transportation.
TABLE IV.--FISCAL YEAR 1998 SPECIAL EDUCATION COSTS
[In millions of dollars]
----------------------------------------------------------------------------------------------------------------
Fiscal Total
year Actual Projected (Actual and
Special education 1998 expenditures thru 9/ projected
budget thru 5/8/98 30/98 exp.) \1\
----------------------------------------------------------------------------------------------------------------
Administration.................................................. ........ 0.378 0.270 0.648
Instruction..................................................... ........ 7.501 5.587 13.088
Support Services................................................ ........ 9.052 6.891 15.943
Assessment...................................................... ........ 0.826 0.463 1.289
Benefits (est. 8.5 percent)..................................... ........ 1.439 1.084 2.523
Total-Personnel................................................. 40.592 19.196 14.295 \2\ 33.491
Total OTPS...................................................... 20.070 23.195 20.610 43.805
Local Funds Total............................................... 60.662 42.391 34.905 77.296
----------------------------------------------------------------------------------------------------------------
\1\ Assumes 10 remaining pay periods.
\2\ Data reflects employees coded to the special education division. Personnel information is still being
updated and corrected to accurately reflect employees' work locations. Therefore, these expenditure
projections will change as the information is updated.
[In millions of dollars]
----------------------------------------------------------------------------------------------------------------
Fiscal
year Actual Projected Actual
Transportation 1998 expenditures expenditures and
budget projected
----------------------------------------------------------------------------------------------------------------
Grant (Non-local).............................................. 3.508 1.421 2.087 3.508
Medicaid (Non-local)........................................... 6.200 5.000 1.200 6.200
------------------------------------------------
Non-local Total.......................................... 9.708 6.421 3.287 9.708
Transportation (Local)......................................... 24.800 13.023 11.777 24.800
----------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------
No. of Projected
Special Education population students no. thru
(5/4/98) 9/30/98
------------------------------------------------------------------------
DCPS............................................... 6,758 8,682
Tuition Grants..................................... 1,421 \1\ 1,497
--------------------
Total........................................ 8,179 10,179
Transportation required by:
Public School Students......................... 1,760 2,261
Private Schools Students....................... 893 941
--------------------
Total Students............................... 2,653 \2\ 3,202
------------------------------------------------------------------------
\1\ Growth factor is 19 students per month, based on special education
data of students placed in private schools over a twelve month period.
\2\ Projection based on the proportion of students receiving services as
of 5/4/98.
Question. Please provide information as to the effect of the Summer
School program, if any, on the budget discrepancy. Please include the
source of funding of what is estimated to by $10 million expenditure
requirements.
Answer. To date, DCPS has received a $10.3 million in Federal grant
funds for the Summer School program. Therefore, there will the Summer
School program will have no impact on the local deficit since all
funding has been provided through grant sources.
Table V.--Summer School Funding
Funding Source Amount
S.T.A.R.S. Grant (White House)................................ $4.997
Impact Aid unobligated fiscal year 1997 carry-over............ 0.449
Title I unobligated fiscal year 1997 carry-over............... 3.567
Title II unobligated fiscal year 1997 carry-over.............. 0.396
Title IV unobligated fiscal year 1997 carry-over.............. 0.228
Title IV unobligated fiscal year 1997 carry-over.............. 0.910
Title VI unobligated fiscal year 1997 carry-over.............. 0.595
--------------------------------------------------------------
____________________________________________________
Total................................................... 10.323
Question. Provide clarification of the supervisory oversight
responsibility and accountability related to these matters. Please
describe department and agency roles in budget development and
implementation for DC Public Schools. Specifically, who has
responsibility for the development and implementation of the annual
budget for DCPS once it has been approved?
Answer. The Authority is responsible for the performance of DCPS.
The CFO for the District of Columbia is responsible for the performance
of the CFO for DCPS. As with all other District agencies, the
management of the finances is independent from the management of the
program. The CFO for each agency must implement financial control
mechanisms to restrict unwarranted spending.
office of the chief financial officer monitoring
CFO's for agencies are required to submit monthly reports on the
financial status of their agencies The Financial Review Process
(``FRP'') shows the agency's year-to-date expenditures on a monthly
basis. The Deputy CFO for Budget and Planning for the District requests
agency CFO's to submit FRP's by the fifteenth of each month. The FRP
report includes:
--Summary and projection of local and non-local funds;
--PS forecast assumptions regarding hiring and attrition, overtime,
reductions-in-force, and on board FTE's;
--NPS spending assumptions, including fixed costs, contractual
service obligations, subsidies and transfers, and supply and
equipment purchases;
--Intra-District transfers, including payments and collections;
--Revenue shortfalls; and
--Requests for procedural assistance.
The FRP is an effective tool for the CFO to monitor the spending of
District agencies. Expenditure data from the District's Financial
Management System (``EMS'') is used to project spending throughout the
fiscal year. Together, the FRP and FMS provide OBP with a framework for
reconciling data, reviewing analytical assumptions, and testing
methodologies.
DCPS' Monthly Financial Report is submitted to the Congress, the
Authority, the Council of the District of Columbia, and the Mayor
fifteen days after each monthly reporting period, as required by the
School Reform Act of 1995.
Question. What actions will DCPS take to ensure a reliable and
credible budget process that ensures resources are available to sustain
a public education system in the District of Columbia that meets the
expectations of DCPS parents, communities and the taxpaying public?
Answer. The fiscal year 1999 budget for DCPS was developed based on
programmatic requirements. The budget was implemented in such a way
that each school, department, or program will have a budget plan and
improved monitoring tools. This will allow DCPS to hold individual
managers, accountable for budget implementation. Some of the highlights
of the new budgeting process follow:
1. The overall appropriated budget is now categorized into two
major portions, school-based expenses and supporting functions. The
school-based portion of the budget was developed using a new ground-up
staffing model, which consistently allocates school staff and local
school management to each school, based on enrollment size and other
criteria. The staffing model will reflect the new enrollment figures,
school closures, and revised staffing criterion. This school-based
budget allows each school to be empowered as well as accountable, for
the costs in the school.
2. The supporting functions of DCPS have been redesigned,
reflecting the new organizational structure implemented by the
Superintendent. Each program manager has identified base funding needs
associated with core programs, and determined amounts needed to fulfill
the mission of each program. With the fiscal year 1999 budget, each
program manager will meet with the budget office to provide an
implementation plan for personal services and non-personal services
costs. With the development, and reorganization of the departments,
each program manager will be solely responsible for carrying out their
budget plan, as well as having more accurate financial information.
3. With the implementation of the District's Central Automated
Personnel and Payroll system, the District's personnel budget and costs
will be more accurate. This new payroll and personnel control system
will prevent DCPS from hiring in excess of the authorized FTE limit for
each department, to more quickly enter new personnel, and personnel
changes in to the accounting system, and to eliminate or greatly reduce
reliance on the DCPS supplemental payroll system.
4. With the implementation of the District's new EMS system, DCPS
program managers and principals will have on-line information on their
budgets and related expenditures. They will have the ability to monitor
budgets, procurement and payments.
DCPS and the CFO are instituting actions to address the projected
shortfalls in fiscal year 1998. DCPS will comply with the approved
fiscal year 1998 budget. The Authority will ensure that the necessary
systems are implemented to ensure that the budget for fiscal year 1999
will be implemented within the constraints of the appropriated budget.
Conclusion of Hearings
Senator Faircloth. If there is no further business, the
subcommittee is recessed.
[Whereupon, at 3:45 p.m., Wednesday, June 10, the hearings
were concluded, and the subcommittee was recessed, to reconvene
subject to the call of the Chair.]
LIST OF WITNESSES, COMMUNICATIONS, AND PREPARED STATEMENTS
----------
Page
Barnett, Dr. Camille Cates, chief management officer, Financial
Responsibility and Management Assistance Authority............. 1
Prepared statement........................................... 7
Barry, Hon. Marion H., Jr., Mayor, Office of the Mayor........... 113
Prepared statement........................................... 119
Boxer, Hon. Barbara, U.S. Senator from California:
Prepared Statement........................................... 150
Questions submitted by...................................49, 52, 65
Brimmer, Dr. Andrew F., chairman, Financial Responsibility and
Management Assistance Authority................................1, 125
Prepared statement..........................................17, 128
Cropp, Linda W., chairman, Council of the District of Columbia... 105
Prepared statement........................................... 111
Faircloth, Hon. Lauch, U.S. Senator from North Carolina,
questions submitted by...........................45, 50, 53, 151, 155
Prettyman, E. Barrett, Jr., D.C. Inspector General, Government of
the District of Columbia, letter from.......................... 146
Schlein, David J., national vice president, District 14, American
Federation of Government Employees, prepared statement......... 67
Williams, Anthony A., Chief Financial Officer, Financial
Responsibility and Management Assistance Authority............. 1
Prepared statement........................................... 25
SUBJECT INDEX
----------
DISTRICT OF COLUMBIA
Council of the District of Columbia
Page
Balanced budget.................................................. 105
Deteriorated buildings and streets, upgrade of................... 109
Fiscal year:
1997 operating surplus....................................... 107
1999:
Budget and financial plan................................ 107
Consensus budget, hearing on............................. 105
Infrastructure needs over $3 billion............................. 110
Local chartered corporation...................................... 109
Management reform, use of funds for.............................. 106
Pay adjustments for employees.................................... 109
Public works projects............................................ 109
Repairs to school buildings, progress of......................... 106
Tax relief....................................................... 109
Financial Responsibility and Management Assistance Authority
Accounting system................................................ 35
Additional staff, hiring of...................................... 137
Americans with Disabilities Act.................................. 140
Assess students, number of days to............................... 142
Audit contract................................................... 128
Authority, agencies reporting to................................. 12
Balanced budget.................................................. 22
Booz Allen study................................................. 30
Borrowing........................................................ 15
Budget process................................................... 24
Capital deficit.................................................. 24
Cashing checks................................................... 22
Chief management officer......................................... 13
Recruitment of............................................... 135
Chief, authority delegated to.................................... 31
City Administrator, Office of.................................... 13
City:
Audit........................................................ 149
Delivers services, overhaul of the way....................... 2
Employees, number of......................................... 2
Not providing services....................................... 43
Clean audit...................................................... 21
Consensus budget................................................. 148
Consultants...................................................... 40
Services of.................................................. 14
Consumer and regulatory affairs.................................. 15
Contingency planning............................................. 145
Crime rate....................................................... 3
Control Board's budget........................................... 134
Customer service survey.......................................... 7
Department of Corrections........................................ 127
Educational emergency board of trustees.......................... 136
$81 million in schools budget, increase of....................... 136
Enrollment figures, audit of...................................138, 139
Financial Authority responsible for management and fiscal
recovery....................................................... 43
Financial management system...................................... 36
Financial operations............................................. 39
Financial reporting.............................................. 23
Fiscal year 1997, surplus for.................................... 3
Full-time equivalent positions, reductions in.................... 126
Goals and projects, completion of................................ 35
Hurt Home........................................................ 141
Infrastructure and public works improvements..................... 128
Infrastructure fund.............................................. 150
Instructional process............................................ 142
Investment grade................................................. 23
Life of project, funds available for............................. 35
Management improvement projects.................................. 34
Management reform................................................ 4
Implementation of............................................ 41
Progress in implementing..................................... 1
Teams........................................................ 12
Management reform plans.......................................... 13
Implementation of............................................ 12
Management reform programs, implementation of.................... 16
Managment Reform Act............................................. 11
Medical malpractice reform....................................... 39
Memorandum of understanding...................................... 29
Members of group............................................. 30
Partnership.................................................. 33
Win-win situation............................................ 32
Mental health and child welfare receivers........................ 42
Motor vehicles................................................... 15
New convention center, Metro station at.......................... 143
Opening of school late........................................... 145
Payroll, deceased retirees on.................................... 38
Performance contracting.......................................... 6
Performance management system.................................... 5
Personnel reform legislation..................................... 6
Police Chief:
Chauffeurs 30
Search for................................................... 32
Police department................................................ 29
Run by committee............................................. 3
Positive financial news.......................................... 21
Press coverage................................................... 29
Projected surpluses very small................................... 125
Projects underway................................................ 35
Public schools budget............................................ 127
Receivers budgetary implecations................................. 44
Or trustees, number of....................................... 42
Pursuing their own fix....................................... 43
Receiverships.................................................... 25
Status of.................................................... 41
Receivers--...................................................... 44
Regroup appropriation titles..................................... 126
Revitalization Act............................................... 24
Risk management.................................................. 36
Schools:
Construction, status of...................................... 144
Opening, delay in............................................ 2
Opening on time.............................................. 144
System's budget request...................................... 135
School-by-school budget.......................................... 136
Service delivery deficit......................................... 24
$600 million budget request...................................... 140
Special education................................................ 137
Assessing 300 students a month for........................... 139
Cost of...................................................... 141
Increase for................................................. 136
Role of...................................................... 138
Strategic plan................................................... 5
Student enrollment............................................... 138
Student outside of District, average cost of..................... 139
Tax:
Deficit...................................................... 23
System....................................................... 22
Three goals...................................................... 4
300 students a month, assessment of.............................. 137
Year 2000 complaint.............................................. 34
Youth detention.................................................. 44
Office of the Mayor
Capital cities, Nation's support for............................. 117
Department of Health............................................. 116
Developing budget, policy positions in........................... 118
Federal and District Government, relationship between............ 115
15th Street resurfaced and potholes filled....................... 115
Fiscal year 1993 Home Rule Charter............................... 114
Full-time equivalent positions, reduction of..................... 116
Interim chief financial officer, introduction of................. 113
New convention center............................................ 117
Performance measures............................................. 118
Receiverships.................................................... 118
Restructuring tax policy......................................... 118
School system, reform of......................................... 118
Summer Jobs Program.............................................. 115
``The Orphaned Capital''......................................... 114
Washington, DC, No. 1 city on east coast......................... 114
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