Managing for Results: Emerging Benefits From Selected Agencies' Use of
Performance Agreements (Letter Report, 10/30/2000, GAO/GAO-01-115).

The Veterans Health Administration, the Department of Transportation,
and the Office of Student Financial Assistance have begun to use
results-oriented performance agreements to align agency expectations
with organizational goals. Each agency developed and implemented
agreements that reflected their specific organizational priorities,
structures, and cultures. GAO identified five common emerging benefits
(1) strengthened alignment of results-oriented goals with daily
operations (2) collaboration across organizational boundaries (3)
opportunities to use performance information to improve federal programs
(4) results-oriented basis for individual accountability and (5)
continuity of program goals during leadership transitions. The three
agencies' experiences show that effective implementation of performance
agreements can encourage communication about progress towards agency
goals. Their experiences also indicate that performance information
should be provided to executives and managers in a timely fashion and in
a useful format.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  GAO-01-115
     TITLE:  Managing for Results: Emerging Benefits From Selected
	     Agencies' Use of Performance Agreements
      DATE:  10/30/2000
   SUBJECT:  Accountability
	     Interagency relations
	     Public administration
	     Performance measures
	     Strategic planning
IDENTIFIER:  Government Performance and Results Act
	     GPRA
	     VA Veterans Integrated Service Network
	     Senior Executive Service
	     SES

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GAO-01-115

A Report to the Honorable Dan Burton, Chairman, Committee on Government
Reform, House of Representatives

October 2000 MANAGING FOR RESULTS

Emerging Benefits From Selected Agencies' Use of Performance Agreements

GAO- 01- 115

Letter 3 Results in Brief 5 Background 7 Scope and Methodology 8 Common
Benefits Emerge From Agencies' Use of Performance Agreements 9

Concluding Observations 21 Agency Comments 21

Appendixes Appendix I: VHA's Implementation of Performance Agreements 24

Appendix II: DOT's Implementation of Performance Agreements 31 Appendix III:
SFA's Implementation of

Performance Agreements 34 Figures Figure 1: Emerging Benefits of VHA's,
DOT's, and SFA's Use of

Results- Oriented Performance Agreements 6 Figure 2: Translating DOT
Strategic Goals Into FAA Programmatic and Executive Goals 10

Figure 3: Excerpt of Performance Information on Follow- up Care After
Hospitalization for Mental Illness in VHA's Quarterly Network Performance
Report and VISN 5's Biweekly Performance Report 16 Figure 4: Excerpts of VHA
Performance Agreement Template for 2000 26

Abbreviations

CFIT Controlled Flight into Terrain CFO Chief Financial Officer CIO Chief
Information Officer CNO Chief Network Officer COO Chief Operating Officer
DOT Department of Transportation FAA Federal Aviation Administration GPRA
Government Performance and Results Act MSAW Minimum Safe Altitude Warning
NHTSA National Highway and Traffic Safety Administration PATS Performance
Agreement Tracking System PBO Performance- Based Organization PI Prevention
Index RSPA Research and Special Programs Administration SES Senior Executive
Service SFA Office of Student Financial Assistance VAMHCS Veterans Affairs
Maryland Health Care System VHA Veterans Health Administration VISN Veterans
Integrated Service Network

Lett er

October 30, 2000 The Honorable Dan Burton Chairman, Committee on Government
Reform House of Representatives

Dear Mr. Chairman: The Government Performance and Results Act (GPRA)
provides a strategic management framework intended to improve federal
performance and hold agencies accountable for achieving results. Effective
implementation of this framework requires agencies to clearly establish
results- oriented performance goals for which they will be held accountable,
measure progress towards those goals, determine the strategies and resources
to cost effectively accomplish the goals, and then use performance
information to make the programmatic decisions necessary to improve
performance. One way to embed such a framework throughout agencies is to
align individual employee performance expectations with agency goals so that
individuals understand the connection between their daily activities

and their organization's success. As a first step towards this end, you
asked us to review federal agencies that have begun to use performance
agreements to align executive performance expectations with organizational
goals. As agreed, this report identifies the common emerging benefits, if
any, from the Veterans Health

Administration's (VHA), the Department of Transportation's (DOT), and the
Office of Student Financial Assistance's (SFA) implementation of performance
agreements that may be applicable to other agencies as they too seek to use
performance agreements as one tool to improve organizational performance and
accountability. We selected VHA and DOT

because of their experience with performance agreements since the mid1990s,
and SFA because of its statutory requirement to use them.

VHA uses performance agreements with career executives to help translate its
strategic goals into day- to- day operations and to hold those executives
accountable for achieving program results. VHA's performance agreements
between its Under Secretary for Health and each of its 22 Veterans

Integrated Service Network 1 (VISN) directors include goals within each of
VHA's five domains of health care- quality, functional status, satisfaction,
access, and cost- as well as other areas of special interest, such as
patient safety. The agreements also specify executive “core
competencies,” such as interpersonal effectiveness, flexibility/
adaptability, or technical competency, that are considered during the
evaluation process. VHA

considers progress towards the goals in the agreements when evaluating VISN
director performance and making performance reward decisions. (Additional
information on VHA's implementation of performance agreements appears in
app. I.)

DOT implements performance agreements between the Secretary of
Transportation and the heads of its eleven operating administrations and
bureaus or “modal administrators,” its Assistant Secretaries,
and Office Directors. DOT's annual performance plan developed under GPRA
serves

as the basis for its performance agreements and DOT assigns its annual
performance goals and the activities intended to achieve those goals to the
appropriate executive's performance agreement. The agreements also include
“corporate management strategies” that cut across organizational
boundaries and set additional expectations for administrators, such as to

use customer feedback to improve programs. These agreements represent what
modal administrators have agreed to accomplish, but because administrators
are appointed by the President and confirmed by the Senate, the
administrators are not eligible for cash awards. (Additional information on
DOT's implementation of performance agreements appears in app. II.)

Additionally, Congress has recognized the role that performance agreements
can play in holding organizations and executives accountable for results. In
1998, Congress chartered SFA as a Performance- Based Organization (PBO) and
required SFA to implement performance agreements. SFA's performance plan
required under its PBO legislation also served as the basis for the
performance agreements at SFA. The performance agreement between the
Secretary of Education and SFA's 1 A VISN is a VHA regional office that has
primary responsibility for health care delivery and

coordinates the activities of hospitals, outpatient clinics, nursing homes,
and other facilities.

Chief Operating Officer (COO) set three goals for the COO, which are in the
areas of customer satisfaction, the cost of delivering student aid and
services, and employee satisfaction. The performance agreements between the
COO and the senior managers include corresponding goals. For example, the
General Manager for Schools, who is responsible for working towards SFA's
performance objectives related to higher education institutions, is expected
to contribute to SFA's overall goals, as well as to improve customer
satisfaction among school administrators and financial aid advisors, reduce
his or her organization's unit costs, and improve satisfaction among
employees who work to support school services. Under the PBO legislation,
progress towards the goals in performance agreements is to serve as the
basis by which to determine the amount of any annual

performance bonuses for the COO and the senior managers. (Additional
information on SFA's implementation of performance agreements appears in
app. III.)

Results in Brief As part of a series of concerted management reform efforts
designed to improve organizational performance, VHA, DOT, and SFA used
resultsoriented

performance agreements for their senior political and career executives to
define accountability for specific goals, monitor progress during the year,
and then contribute to performance evaluations. Although

each agency developed and implemented agreements that reflected their
specific organizational priorities, structures, and cultures, we identified
five common emerging benefits from each agency's use of results- oriented
performance agreements. These emerging benefits are shown in figure 1.

Figure 1: Emerging Benefits of VHA's, DOT's, and SFA's Use of Results-
Oriented Performance Agreements

1. Strengthened alignment of results- oriented goals with daily operations:
Performance agreements define accountability for specific goals and help to
align daily operations with agencies' results- oriented, programmatic goals.

2. Fostered collaboration across organizational boundaries:

Performance agreements encourage executives to work across traditional
organizational boundaries or "silos" by focusing on the achievement of
results- oriented goals.

3. Enhanced opportunities to discuss and routinely use performance
information to make program improvements: Performance agreements facilitate
communication about organizational

performance, and provide opportunities to pinpoint improved performance.

4. Provided results- oriented basis for individual accountability:

Performance agreements provide results- oriented performance information to
serve as the basis for executive performance evaluations.

5. Maintained continuity of program goals during leadership transitions:

Performance agreements help to maintain a consistent focus on a set of broad
programmatic priorities during changes in leadership.

Source: GAO analysis based on VHA's, DOT's, and SFA's implementation of
performance agreements.

A shift in the orientation of individual performance expectations and
accountability from an adherence to process or completion of activities to a
greater focus on contributions to results will require a cultural
transformation for most federal agencies. In this respect, officials at VHA,

DOT, and SFA stressed that they are continually refining how they develop
and then use their agreements. They are also addressing ongoing
implementation issues, such as refining their understanding of how their
activities contribute to results, providing executives readily accessible
performance information in a useful timeframe and format, and further
cascading accountability to the appropriate levels. As they- and the

federal government as a whole- gain experience with the use of performance
agreements, on the basis of the benefits seen thus far, it appears that such
agreements can become an increasingly vital part of overall efforts to
improve programmatic performance and better achieve

results. VHA, DOT, and SFA generally agreed with the contents of this
report. Background A number of the world's major democracies have initiated
performance

agreements as one element within a broader series of public sector reforms
to enhance government performance and strengthen accountability for results.
For example, in 1995, we reported on four countries- the United Kingdom, New
Zealand, Canada, and Australia- that implemented

performance agreements between department leaders and their top civil
service managers to instill a sense of personal responsibility for
performance and to reinforce the connection between employee performance and
organizational missions and goals. 2 In the United States, the federal
government is also seeking ways to reinforce the connection between employee
performance and agency

goals. The Office of Management and Budget's Circular A- 11 which provides
guidance on the preparation and submission of agencies' budget requests,
including GPRA plans and reports, calls for executive agencies to discuss in
their fiscal year 2002 annual performance plans goals and

strategies to make their workforces more performance- oriented, such as
linking personnel appraisals to program performance. In addition, a February
2000 report to the President's Management Council recommended linking
employee goals to their agency's strategic goals. The

report highlighted a number of initiatives, including the use of performance
agreements, that can contribute to improving performance and enhancing
accountability. Finally, the Office of Personnel Management recently issued
amended regulations that change the way agencies are to evaluate the
performance

of members of the Senior Executive Service (SES). 3 Agencies are to place
increased emphasis on holding executives accountable for results, appraising
executive performance on those results balanced against other perspectives,
and using results as the basis for performance awards and other personnel
decisions. The amended regulations also give agencies

2 Managing for Results: Experiences Abroad Suggest Insights for Federal
Management Reforms (GAO/ GGD- 95- 120, May 2, 1995). 3 The amended
regulations, 65 Fed. Reg. 60837 - 60845, can be found in their entirety at
http:// www. opm. gov/ fedregis/ 2000/ 65- 60837- a. pdf.

more flexibility to tailor their performance management systems to their
unique organizational requirements and climates. Agencies must develop
systems to implement the new policies for the SES appraisal cycles that
begin in 2001.

Scope and As agreed, we examined VHA and DOT because of their experience in
using Methodology

performance agreements as part of broader efforts to improve their
performance. Our assessment of agencies' fiscal year 2000 performance plans
produced under GPRA indicated that VHA and DOT were using performance
agreements as a mechanism to link employee performance to organizational
results. 4 Additionally, we selected SFA because the

legislation chartering it as a PBO requires it to use performance
agreements, which we have described as a way to align organizational goals
and clarify accountability. 5 To meet our objective, we collected and
analyzed these agencies' current

and previous performance agreements; strategic plans, annual performance
plans, and performance reports; personnel policies and memoranda; and other
related management documents. We discussed (1) VHA's performance agreements
with the Chief Network Officer (CNO), former Under Secretary for Health, and
all but 1 of the 22 VISN directors and spoke with the director's designee at
the remaining VISN; (2) DOT's performance agreements with the Deputy
Secretary of Transportation, the Assistant Secretary for Administration, and
knowledgeable officials at each

of DOT's 11 modal administrations; and (3) SFA's performance agreements with
its COO and five senior managers. We also contacted planning and human
capital officials at each agency to discuss their experiences with
performance agreements. We performed our work in Washington, D. C., with
additional visits to two VISN headquarters in the field, from January
through September 2000 in accordance with generally accepted government
auditing standards.

4 Managing for Results: Opportunities for Continued Improvements in
Agencies' Performance Plans (GAO/ GGD/ AIMD- 99- 215, July 20, 1999). 5
Management Reform: Elements of Successful Improvement Initiatives (GAO/ T-
GGD- 00- 26, Oct. 15, 1999).

Common Benefits VHA, DOT, and SFA used results- oriented performance
agreements with Emerge From

their senior political and career executives to define accountability for
specific goals, monitor progress, and contribute to performance Agencies'
Use of

evaluations. Although each agency developed and implemented Performance

agreements that reflected their organizational priorities, structures, and
Agreements

cultures, we identified five common benefits that emerged from their use.
Strengthened Alignment of

High- performing organizations know how the products and services they
Results- Oriented Goals With

deliver contribute to achieving results. In fact, an explicit alignment of
daily Daily Operations

activities with broader results is one of the defining features of
highperforming organizations. At the federal level, we have found that such
alignment is still very much a work in progress. 6 Many agencies continue to
struggle with clearly understanding how what they do on a day- to- day basis

contributes to results outside of their organizations. The experiences of
VHA, DOT, and SFA suggest that results- oriented performance agreements can
be effective mechanisms to define accountability for specific goals and

to align daily activities with results. For example, at the Federal Aviation
Administration (FAA), a program director's goal to develop software to help
aircraft maintain safe altitudes in their approach paths is intended to
contribute to DOT's strategic goal to promote public health and safety (see
fig. 2).

6 GAO/ GGD/ AIMD- 99- 215, July 20, 1999.

Figure 2: Translating DOT Strategic Goals Into FAA Programmatic and
Executive Goals

Source: GAO analysis based on DOT and FAA planning documents.

The FAA Administrator's performance agreement for fiscal year 2000 includes
a goal to reduce the commercial air carrier fatal accident rate by
implementing the Safer Skies Agenda. As part of implementing the Safer Skies
Agenda, the Flight Standards Service Director has a goal to meet

milestones for reducing a type of crash called “Controlled Flight into
Terrain,” which occurs when pilots lose their sense of the plane's
relation to the surface below. These milestones include validating Minimum
Safe Altitude Warning software, which is to be developed by the Aviation
Systems Standards Program Director. This software system is expected to aid
air traffic controllers through both visual and aural alarms by alerting
them when a tracked aircraft is below, or predicted by the computer to go
below, a predetermined minimum altitude.

At VHA, a goal included in the VISN directors' performance agreements to
improve their VISN's scores in the Prevention Index (PI) is intended to
contribute to VHA's, and subsequently the Department of Veterans Affairs',
goal to improve the overall health care of veterans. The PI measures the
percentage of patients who receive eight medical interventions, such as
alcohol screening, and is designed to assess how well VHA follows nationally
recognized approaches for primary prevention and early detection of diseases
with major social consequences, such as alcohol

abuse. To gauge its progress in this area, VHA has a performance goal to
increase the scores on the PI, from a fiscal year 1998 baseline of 85
percent, to 98 percent of patients receiving the intervention by fiscal year
2003. VHA has then translated this goal into the performance agreements for
each of VHA's VISN directors. For 2000, for example, 85 percent of patients
receiving the interventions is considered “fully successful”
performance, and 90 percent is considered “exceptional”
performance.

For SFA, the COO's goal to improve SFA's customer service is intended to
contribute to the Department of Education's strategic goal to ensure access
to postsecondary education and lifelong learning and its strategic objective
that student aid delivery and program management are efficient, financially
sound, and customer- responsive. This objective is then translated into a
goal in the COO's performance agreement to raise SFA's score on the American
Customer Satisfaction Index. 7 SFA's score on the index is based on
surveying first- time and continuing postsecondary education students about
the fairness of the application process, usefulness of the information

that SFA provides, and professionalism of SFA's staff. The corresponding
goal in the COO's performance agreement is to raise SFA's score, from its 7
The American Customer Satisfaction Index measures customer satisfaction for
public and private sector organizations and is produced by a partnership of
the University of Michigan Business School, the American Society for
Quality, and Arthur Anderson. The highest

possible score on the index is 100.

fiscal year 1999 score of 63, to the private sector industry average of 74
by 2002. The COO then translates this goal into the performance agreements
for each of SFA's five senior managers. For example, in support of this goal

to improve customer satisfaction, the General Manager for Students has goals
to increase aid awareness among students and their families and to simplify
the application process.

Fostered Collaboration Collaboration, interaction, and teamwork across
organizational boundaries Across Organizational

are key characteristics of high- performing organizations. 8 To this end,
all Boundaries three agencies were including results- oriented goals in
performance agreements to encourage executives to work collaboratively
across traditional organizational boundaries or “silos.” For
example, to encourage collaboration, the VISN headquartered in Cincinnati
has implemented separate performance agreements that focus on its patient
services, such as geriatrics, in addition to agreements that focus on
traditional

organizational boundaries, such as medical centers. The VISN director has a
performance agreement with each of the VISN's “care line”
directors for patient services in primary care, medical and surgical care,
mental health care, rehabilitation care, geriatrics and extended care, and
clinical support. For example, the mental health care line director's
performance agreement

includes mental health- related improvement goals for the entire VISN. To
make progress towards these mental health- related goals, the care line
director must work across each of the VISN's four medical centers and with
corresponding care line managers at each medical center. As part of this
collaboration, the care line director needs to establish consensus among
VISN officials and external stakeholders on a strategic direction for the
mental health care line, develop and implement integrated clinical programs,
and allocate resources among the centers for mental health

programs. DOT officials said that performance agreements provided a
mechanism by which to collaborate and interact on a regular basis across
modal administration boundaries. DOT's “flagship” initiatives
designate certain modal administrations with lead responsibility for
specific annual performance goals. These lead administrations work with
other administrations to collaboratively achieve the flagship goals by
identifying

barriers to success, sharing best practices, and streamlining procedures. 8
Human Capital: Managing Human Capital in the 21st Century (GAO/ T- GGD- 00-
77, Mar. 9, 2000).

For example, the Research and Special Programs Administration (RSPA)
conducts cross- cutting research and programs with other DOT modal
administrations to make the nation's transportation systems more integrated,
effective, and secure. As set forth in the administrator's performance
agreement, RSPA has lead responsibility- under DOT's flagship initiatives-
for DOT's safety goal to reduce the number of serious

reportable hazardous materials transportation incidents and their related
human and economic costs. To make progress towards this goal, RSPA works
with other DOT modal administrations that also contribute to this goal. For
example: FAA will examine the feasibility of using new noninvasive screening
technologies to detect hazardous materials in baggage and cargo for air

transport. The Federal Highway Administration, and as of January 1, 2000,
the

Federal Motor Carrier Safety Administration, will identify key risk factors
affecting highway safety for carriers transporting hazardous materials. The
Federal Railroad Administration will participate in developing and

conducting symposiums on best practices to address major causes of hazardous
materials incidents, such as non- accident releases of hazardous materials
from rail tank cars.

The Coast Guard will complete training of all its units and begin keeping
records on the occurrence of undeclared shipments of hazardous materials.

In addition to these activities, these agencies formed a team to evaluate
the effectiveness of DOT's hazardous materials safety program. The team
found that the program worked reasonably well, but among other things, DOT
needed to strengthen its training on industry safety practices and
compliance with regulations in order to reduce human error- the single
greatest contributing factor to hazardous materials incidents. To encourage
collaboration across its senior managers' operations, SFA

officials told us they plan to evaluate the senior managers' performance and
then make bonus decisions based on (1) SFA's overall performance and (2) the
extent to which the senior manager meets the goals in his or her performance
agreement. For example, for the General Manager for Students, 50 percent of
his or her performance evaluation will be based on his or her contribution
towards SFA's overall performance goals for customer satisfaction, unit
cost, and employee satisfaction. The remaining 50 percent will be based on
progress towards the goals in his or her

agreement that specifically relate to students, which are to improve
customer satisfaction among aid applicants and their families, reduce his or
her organization's unit costs, and improve satisfaction among employees who
work to support student services.

Enhanced Opportunities to High- performing organizations use performance
information on a routine

Discuss and Routinely Use basis to pinpoint opportunities to improve their
performance. Towards this Performance Information to end, the experiences of
VHA, DOT, and SFA show how results- oriented

Make Program performance agreements can be an effective vehicle to foster
routine Improvements

communication about progress towards achieving goals, existing and emerging
performance gaps, and strategies to better achieve results. Officials at all
three agencies noted that data on progress in meeting goals in the
agreements were examined in light of the internal or external factors

beyond the control of the agency that can influence the degree to which
goals are achieved. This contributed to more specific discussions and
decisions to mitigate or leverage these internal or external factors, as

appropriate, to better achieve results. In addition, this more routine use
of performance information highlighted the implementation issue of making
performance information more accessible and helpful to executives. For
example, VHA's CNO meets quarterly with each VISN director to discuss that
VISN's progress towards the goals in the director's performance agreement.
At these meetings, the CNO and directors also discuss the

impact of internal or external factors and strategies to address their
effects. To inform these meetings, VHA produces a quarterly Network
Performance Report that presents both VHA- wide and VISN- specific progress
on each of the performance goals in the VISN directors' performance
agreements. In

turn, some VISNs also report information on a more frequent basis to
communicate progress, identify performance gaps, and consider possible
actions to improve performance. VHA's quarterly Network Performance Report,
an example of which is shown in figure 3, shows each of the 22 VISNs'
progress towards the goals in the VISN directors' agreements, such as the
goal for follow- up care after hospitalization for mental illness. For
example, 90 percent of the patients within VISN 5, which is headquartered in
Baltimore, received follow- up care for the third quarter of fiscal year
2000. In between VHA's quarterly reports, the Baltimore VISN also produces
biweekly reports that allow it to monitor even more frequently progress on a
consistent set of goals by its three medical centers. As shown in the lower
part of figure 3, the VISN's biweekly performance report for August 2000
allowed it to see that its VISN- wide rate remained at 90 percent; its
medical center at Martinsburg,

WV was at 91 percent; its Veterans Affairs Maryland Health Care System
(VAMHCS) was at 89 percent; and its medical center at Washington was at 91
percent. For this goal, a VISN's performance is fully successful when 75
percent of discharged patients received follow- up care after
hospitalization for mental illness, and its performance is exceptional when
90 percent of patients received follow- up care.

Figure 3: Excerpt of Performance Information on Follow- up Care After
Hospitalization for Mental Illness in VHA's Quarterly Network Performance
Report and VISN 5's Biweekly Performance Report

a “FS” stands for fully successful, which a VISN attains when 75
percent of its discharged patients receive follow- up care. b
“E” stands for exceptional, which is attained when 90 percent of
discharged patients receive follow- up

care. Source: VHA Quarterly Network Performance Report, May 8, 2000; and
VISN 5's Biweekly Performance Report, August 17, 2000.

The Baltimore VISN's Executive Leadership Council, which comprises the VISN
director, its medical center directors, and other staff, such as nurse
executives, uses the VISN's biweekly performance report during its monthly
meetings to discuss the VISN's progress. VISN officials said that having
this performance information routinely available provided a

foundation to discuss the VISN's progress each month and, where appropriate,
discuss strategies to address any performance gaps.

As agencies use performance agreements to enhance opportunities to
communicate progress and discuss strategies to address performance gaps,
they have been pushed to make performance information more accessible to
executives in a time frame and format that corresponds to what is most
helpful to them. For example, in attempts to provide timely and readily
accessible performance information, VHA provides VISNs access to the VISN
Support Service Center, which has a Web site that offers on- line access to
reports and databases related to a range of VISN operations, including VISN
progress towards performance goals. According to VHA, this allows VISNs to
access and use performance information on a more frequent and timely basis
than was possible with previous VHA data collection and reporting systems.
To further encourage staff to access

performance information more frequently, some VISNs have also developed
their own intranet- based data systems to make data more easily available to
staff. VHA can continue to make progress in providing timely and readily
accessible performance information. For example, some VISN directors told us
that they still need to receive more timely performance information on
additional measures, such as customer satisfaction. Specifically, VHA
collects data for customer satisfaction annually, and officials indicated
that receiving data so infrequently made it difficult to change strategies
during the year to improve their VISNs' customer satisfaction ratings. In
addition, as illustrated by our recent report on VHA's patient waiting
times, it needs

to continue its efforts to develop reliable performance information that is
readily accessible to all of its VISNs. 9 Performance agreements at DOT- and
the bimonthly meetings between the Deputy Secretary and modal administrators
to discuss progress towards the goals and activities in the agreements- also
provided

9 Veterans' Health Care: VA Needs Better Data on Extent and Causes of
Waiting Times (GAO/ HEHS- 00- 90, May 31, 2000).

opportunities to enhance communication about results, identify performance
gaps, and then consider actions the modal administrations can take to
further improve performance. For example, the 1999 performance agreement for
the National Highway and Traffic Safety Administration's (NHTSA)
Administrator included a goal to “continue progress toward meeting or
exceeding the President's goal to increase safety belt use nationwide by 85
percent by 2000 and 90 percent by 2005.” Nationwide seatbelt usage,
however, hovered between 68 and 70 percent from 1995 to 1998 and declined
slightly to 67 percent in 1999. Although DOT remains committed to the
national seat belt goal, NHTSA officials told us they will need to rethink
strategies to meet the goal and focus on

increasing seat belt use among groups with lower use rates and expanding
information and educational campaigns to target diverse audiences. The
strategies NHTSA plans to use in the coming year to increase seat belt use
include expanding its Buckle Up America Campaign to all 50 states and
working with states to strengthen their programs and pass primary
enforcement of seat belt laws. Officials said they will then evaluate the
success of these initiatives to determine if further adjustments are needed
to achieve the 2001 seat belt use goal.

In order to further enhance communication about progress towards its goals,
DOT is seeking to implement a revised and streamlined system that will be
more widely accessible within each modal administration.

Currently, DOT's Performance Agreement Tracking System tracks and provides
information for each of its executives' performance agreements. DOT
officials said this current system has evolved into multiple databases that
do not efficiently sort and analyze results across DOT, which detracts

from the usefulness of the performance information. Provided Results-
Oriented

High- performing organizations hold executives accountable for Basis for
Individual contributing to the achievement of results- oriented goals. 10 In
pursuit of Accountability

this characteristic, officials at VHA and SFA told us that performance
agreements were a vehicle to bring results- oriented performance information
into evaluations of executive performance. For example, VHA officials said
that progress towards the goals in the agreements played an important role
in determining the VISN director performance evaluations

and bonuses- which in 1999 were up to $20,000. Progress towards VHA's 10
Human Capital: Key Principles From Nine Private Sector Organizations (GAO/
GGD- 0028, Jan. 31, 2000).

health care- related goals accounts for 50 percent of the agreement, areas
of special interest 30 percent, and the core managerial competencies 20
percent. VISN directors also submit self- assessments of their performance
that include examples of actions or accomplishments, which VHA also
considers in director evaluations.

Similarly, SFA said performance agreements play a major role in its
evaluation process. Progress towards the goals in performance agreements is
the basis by which SFA determines how much of the allowed bonuses its COO
and senior managers receive. According to SFA's PBO legislation, the

COO is entitled to a bonus of about $61,000 in 2000, and the senior managers
are entitled to salaries and bonuses of up to $153,000 in 2000.
Specifically, the COO's evaluation is based on SFA's progress towards the
three goals in the COO's performance agreement. According to SFA officials,
SFA plans to evaluate its senior managers' performance on the extent to
which the senior manager meets the goals in his or her performance
agreement, as well as SFA's overall performance in customer satisfaction,
unit cost, and employee satisfaction. Under its PBO legislation, SFA is
required to submit copies of both the COO and senior manager evaluations to
Congress along with its annual performance report.

Whereas VHA and SFA consider progress towards the goals in performance
agreements as part of the process to determine executive ratings and
bonuses, DOT's modal administrators, however, are appointed by the President
and confirmed by the Senate, so they are not eligible for cash awards. Since
1998, however, the Deputy Secretary has “tallied” for each
administration the percentage of activities it accomplished that are
intended to achieve DOT's goals. The tally also showed where each
administrator stood relative to other administrators in achieving the goals
in his or her agreement, which in turn underscored to the administrators the
importance of their performance agreements.

Maintained Continuity of High- performing organizations recognize that they
need to reinforce

Program Goals During accountability for organizational goals during times of
leadership Leadership Transitions

transitions. To this end, DOT and VHA noted that their results- oriented
performance agreements helped provide continuity during times of leadership
transition by maintaining a consistent focus on a set of broad

programmatic priorities. They said that because the agreements clearly and
concisely outlined top leadership priorities during a given year, the
agreements served as a convenient vehicle for new leadership to identify

and maintain focus on the most pressing issues confronting the organization.
More generally, the existence of an established process for developing and

using performance agreements provides new leadership with a tested tool that
it can use to communicate its priorities and instill those priorities
throughout the organization. VHA, DOT, and SFA are in the initial phases of
implementing performance agreements beyond the senior political and career
executive levels and are exploring how far and how best to cascade them.

For staff at lower levels of VISNs, agreements are being cascaded to varying
extents- for example to facility directors, chiefs of staff, and service-
line directors. For fiscal year 2000, DOT is requiring all modal
administrations and

other offices, as appropriate, to align the performance plans of the
associate administrators, executive directors, and other SES who report
directly to modal administrators with their respective administrator's
performance agreement. SFA's PBO legislation also requires it to establish a
performance

management system that creates goals for employee, group, or organizational
performance that are consistent with the PBO's performance plan. According
to SFA officials, SFA is in the initial stages of developing this system.

Looking at potential SES retirements underscores the importance of having
stabilizing mechanisms, such as performance agreements, in place to ensure
continuity through leadership transitions. We recently found that the
federal government as a whole may need to replace a substantial number of
career SES members who will become eligible to retire between

September 30, 1999, and September 30, 2005. 11 Although not all of this
group of SES members who become eligible will actually retire within that
time, a sizeable percentage likely will. The Office of Personnel Management
estimates that of the almost 6,000 career SES members, about 45 percent will
retire during fiscal years 1999 through 2005.

11 Senior Executive Service: Retirement Trends Underscore the Importance of
Succession Planning (GAO/ GGD- 00- 113BR, May 12, 2000).

Concluding As agencies continue to shift towards a greater focus on results,
there is Observations also growing recognition on the part of Congress and
the executive branch

that agencies need to make progress connecting employee performance with
agency success. The emerging benefits we identified from VHA's, DOT's, and
SFA's experiences suggest that performance agreements are one management
tool agencies can use as they seek to improve performance and
accountability. The experiences of VHA, DOT, and SFA also suggest

that as agencies move forward in using performance agreements, they will
need to address several key implementation issues, as highlighted throughout
this report. For example, our work has shown that many agencies continue to
struggle with clearly understanding how what they do on a day- to- day basis
contributes to results outside of their organization. VHA, DOT, and SFA used
performance agreements to strengthen the alignment of daily operations with
results- oriented performance goals. In addition, while the

experiences of VHA, DOT, and SFA show how performance agreements can be
effective vehicles to foster routine communication about progress towards
goals, existing and emerging performance gaps, and strategies to better
achieve results, their experiences also underscore the need to

ensure that executives and managers have the performance information they
need, when they need it, and in a format that meets their needs. As such,
agencies are seeking to improve the timeliness and accessibility of

data to executives and line managers. Finally, all three agencies appreciate
that to be fully effective, performance agreements need to cascade beyond
the senior political and executive level into lower organizational levels.
All three are therefore undertaking initial efforts in this regard. As part
of these initial efforts, they are exploring how far and how best to cascade
the use of agreements.

Nevertheless, the experiences of VHA, DOT, and SFA suggest that as they and
other agencies continue to gain experience with performance agreements, it
appears that such agreements can become an increasingly vital part of
overall efforts to improve programmatic performance and better achieve
results.

Agency Comments We provided drafts of this report in October 2000 to the
Acting Secretary of Veterans Affairs, the Secretary of Transportation, SFA's
Chief Operating Officer, and the Secretary of Education, or their designees,
for their review and oral comment. They responded through their GAO liasons
that they

agreed with the contents of the draft report and in some cases provided
clarifying technical comments. Where appropriate, we have made changes to
this report that reflect these technical comments.

As agreed with your office, unless you publicly announce its contents
earlier, we plan no further distribution of this report until 30 days from
the date of this letter. At that time, we will provide copies of this report
to Representative Henry Waxman, Senator Fred Thompson, and Senator Joseph
Lieberman in their respective capacities as the Ranking Minority Member of
the Committee on Government Reform, Chairman of the Senate Committee on
Governmental Affairs, and Ranking Minority Member of the Senate Committee on
Governmental Affairs; the heads of the agencies we reviewed; the Honorable
Janice Lachance, Director of the Office of Personnel Management; and other
interested parties. We will also make

this report available to others upon request. If you have any questions
about this report, please contact me or Lisa Shames on (202) 512- 6806.
Justin Brown and Janice Lichty were key contributors to this report.

Sincerely yours, J. Christopher Mihm Director, Strategic Issues

Appendi xes VHA's Implementation of

Appendi x I

Performance Agreements The Veterans Health Administration (VHA) operates an
approximately $18 billion health care system and serves the medical care
needs of veterans by providing primary and specialized care at hundreds of
service delivery locations across the country. Between 1946 when VHA was
established, and 1995, VHA grew into the nation's largest direct provider of
health care. VHA served veterans at more than 600 locations and focused
primarily on

hospital care, the use of high technology, and medical specialization.
During this time, however, our work showed that VHA did not keep pace with
societal and industry changes, such as a market- based restructuring of
American health care and the increase of managed care. 1

Beginning in October 1995, VHA sought to shift its emphasis from being a
hospital operator to a health care provider that relied on community- based,
integrated networks. In fiscal year 1996, VHA furthered this transformation
by decentralizing its management structure from 4 regions to 22 Veterans
Integrated Service Networks (VISN). The VISNs were designed to coordinate
the activities of hundreds of hospitals, outpatient clinics,

nursing homes, and other facilities within a given geographic area. VHA
expected the VISN structure to improve efficiency by reducing duplicative
services and shifting services from costly inpatient care to less costly
outpatient care. To accomplish its reform goals, VHA gave each VISN

substantial operational autonomy and established performance goals to hold
network and medical center directors accountable for achieving performance
improvements.

Define Accountability for One key VHA initiative to drive its reforms was to
have each of the 22 VISN Specific Goals

directors enter into a performance agreement with the Under Secretary for
Health. VHA began implementing these performance agreements in 1996. These
performance agreements included performance goals with specific targets that
each VISN was responsible for accomplishing during the next year. The VISN
director; the Chief Network Officer (CNO), whose office

administers the performance agreements; and the Under Secretary for Health
initiate the agreement at the beginning of each year. As illustrated in
figure 4, the agreements for fiscal year 2000 consist of three weighted
parts- A, B, and C.

1 Veterans Affairs: Progress and Challenges in Transforming Health Care
(GAO/ T- HEHS99- 109, April 15, 1999).

Part A accounts for 20 percent of the agreement and outlines “core
competencies” that define the behaviors VISN directors are expected to
exhibit as they manage the VISN during the coming year. Core competencies
within Part A include such areas as interpersonal effectiveness,
flexibility/ adaptability, and technical competency.

Part B accounts for 30 percent of the agreement and outlines “areas of
special interest” that reflect priority areas for VHA during the
coming year. Areas of special emphasis within Part B include such areas as
patient safety. Part C accounts for 50 percent of the agreement and contains
the

majority of the performance goals that gauge each VISN's progress towards
VHA's health care mission. Part C is further divided into VHA's five domains
for health care: quality, functional status, satisfaction, access, and cost.
Within each of these domains, the agreement sets measurable goals for each
VISN. For most goals, the agreement also sets achievement levels that VISNs
are expected to attain for “fully

successful” and “exceptional” performance. For example,
under the domain of access, VISNs were to decrease the average waiting time
for patients to obtain appointments in ophthalmology, audiology,
orthopedics, cardiology, urology, and primary care by September 30,

2000. For this goal, a VISN's performance was fully successful at 45 days
and exceptional at 30 days or less.

Figure 4: Excerpts of VHA Performance Agreement Template for 2000

Part A: Core Competencies I. Interpersonal Effectiveness: The ability to
build and sustain relationships, resolve conflict, handle negotiation
effectively, and develop collaborative working relationships. The successful
executive displays empathy, empowers others, and possesses written and oral
communication skills.

IV. Flexibility/ Adaptability: The ability to quickly adapt to change,
handle multiple inputs and tasks simultaneously, and accommodate new
situations and realities. The successful executive works well with all
levels and types of people, welcomes divergent ideas, and maximizes limited
resources.

VIII. Technical Competency: The knowledge and skills to perform and evaluate
the work of the organization based upon a clear understanding of the
processes, procedures, standards, methods, and technologies of the
organization. The successful executive demonstrates functional and technical
literacy and measures results of work.

A

Part B: Areas of Special Interest 4. Patient Safety: a. All facilities will
participate in distribution of the National Center for Patient Safety's
culture and

attitudinal survey addressing patient safety.

b. Each facility will have at least one person trained in performing Root
Cause Analysis (RCA) in accordance with process as defined by the National
Center for Patient Safety.

Part C: Performance Measures Healthcare Value: Domain of Quality 1.
Prevention Care Index (PI)

By September 30, 2000, the performance on the PI will increase.

Achievement levels

Fully Successful: PI is 85% based on entire FY 2000 data Exceptional: PI is
90% based on entire FY 2000 data

Healthcare Value: Domain of Access 8. Waiting Times

By September 30, 2000, the average waiting time will decrease for the
following DSS identifier categories (clinics): ophthalmology, audiology,
orthopedics, cardiology, urology, and Primary Care.

Achievement levels

Fully successful: 45 days Exceptional: 30 days or less

____________________________________ Network Director Date

____________________________________ Chief Network Officer Date

____________________________________ Under Secretary for Health Date

Source: VHA 2000 Network Performance Plan.

In addition to the goals in the agreements, the CNO uses a list of
“monitors” that represent important areas of focus for VISNs.
These monitors can cover areas that for the most part have been
accomplished, yet still deserve attention; or they can also be used to focus
on certain areas that may be emerging departmental priorities. Recent
monitors have included the

percentage of long- term care patients who received pneumococcal
vaccinations and the percentage of patients in ambulatory or long- term care
who have received a pain assessment. The monitors can also be tailored to
local needs and VISNs can use monitors to highlight up to six initiatives
that they believe require attention.

Each year, the CNO and the Office of Performance and Quality refine the
previous year's performance agreement template. These two offices, along
with the Performance Measurement Working Group, which comprises VISN
directors and other staff, work to develop the goals and measures for the
VISN director performance agreements. To define the performance measures
that are included in the VISN director agreements, VHA provides a document
that provides definitions and data collection strategies for each goal in
the agreement, with a particular focus on health care- related performance
goals.

Monitor Progress During the VHA has a standardized approach to monitoring
VISN directors' progress Year

during the year that consists of formal reporting of progress towards the
health care- related goals and areas of special interest included in their
agreements, which is then followed by meetings to discuss performance. The
Office of Performance and Quality produces a network performance report each
quarter, which is provided to each VISN. This report provides a status of
each VISN's and VHA's overall progress towards the goals included

in the performance agreements. Following these quarterly reports, the CNO
meets with each VISN director to discuss progress towards the goals and any
internal or external factors that may be affecting progress. VHA officials
told us that these meetings are valuable opportunities to monitor progress
and discuss performance.

To support their efforts to monitor progress, VHA has several data systems.
VISNs have access to the VISN Support Service Center, which has a Web site
that allows both VHA headquarters and VISN officials access to reports and
databases on these systems that track VISN progress towards some of the
goals in the performance agreements. VHA also uses these collection systems
to produce the quarterly performance reports. To verify and validate some of
its performance information, VHA has an External Peer

Review Program, which is designed to provide a national database that
ensures more objective performance information. As part of this program, an
independent contractor assesses the data's accuracy by reviewing samples of
patient records and then generates data files and reports for each quarter
of the fiscal year on specific aspects of clinical care.

Contribute to Performance To evaluate the performance of VISN directors at
the end of each fiscal

Evaluations year, the CNO, Under Secretary for Health, and Performance
Review Board use both quantitative and qualitative performance information
to

contribute to their judgement when making evaluation decisions. The
quantitative performance information includes progress towards the health
care- related goals and areas of special interests included in the
performance agreements. The qualitative performance information

includes the VISN director's self- assessment of his or her performance
during the year that describes actions or accomplishments that reflect each
competency and the CNO's assessment of the director's management
competencies included in the agreement. VHA officials indicated that having
the quantitative performance information related to the agreements helped
them assess VISN director performance when making performance rating and
bonus decisions. In 1999, VISN directors could receive bonuses of up to $20,
000.

A key aspect of VHA's evaluation of VISN directors is its annual network
performance agreement report, which takes the place of a fourth- quarter
report. Most recently, the 1999 performance report included a summary of
VHA's overall progress towards the goals in the VISN director performance

agreements and individual VISN progress towards the goals. Charts and graphs
allowed senior political and career executives, as well as employees, to
compare each VISN to the entire agency and to other VISNs across the
country.

A VHA official indicated that although VHA has not evaluated the discrete
contributions performance agreements have made to its performance, including
corresponding goals in the performance agreements of VISN directors
contributed to improvements in those key organizational goals. For example,
between fiscal years 1997 and 1999, VHA reported that its

performance on the Prevention Index had improved from 69 to 81 percent. A
goal requiring VISNs to produce measurable increases in the Prevention Index
has been included in the directors' performance agreements each year between
1997 and 1999.

To further define accountability at lower levels, most VISNs are
implementing performance agreements between the VISN directors and
individuals reporting to them, such as medical center directors, clinical
managers, and quality managers. Some medical center directors also then

have agreements with individuals who report to them, such as associate
directors or chiefs of staff.

DOT's Implementation of

Appendi x II

Performance Agreements The Department of Transportation (DOT) has for a
number of years faced critical challenges in its efforts to help ensure the
safe and efficient movement of people and the cost- effective investment of
resources in the nation's transportation infrastructure. Although DOT has
contributed to improving the nation's transportation systems, we have
reported that it has also experienced problems, such as cost overruns and
delays in air traffic

control modernization programs and highways and transit projects. 1
According to DOT, its efforts to implement performance agreements were in
response to the National Performance Review's initiative to improve
performance and accountability at executive agencies and a specific 1993
recommendation to “develop performance agreements with senior
political leadership that reflect organizational and policy goals.” In
1994, all DOT

administrators were asked to sign DOT's first performance agreement, which
was between the Secretary of Transportation and the President. DOT has
implemented performance agreements with its administrators in each
subsequent year. Define Accountability for As of 1999, DOT had implemented a
total of 26 annual performance Specific Goals

agreements with its modal administrators, all Assistant Secretaries, and
Office Directors within the Office of the Secretary. DOT has a template for
its performance agreements that generally dovetails its annual performance
plans produced under the Government Performance and Results Act (GPRA).
According to DOT officials, this helps ensure that the performance
agreements are consistent with DOT's goals. The agreements include
organization- specific activities that are collectively intended to achieve
DOT's performance goals, as well as “corporate management

strategies” that cut across organizational boundaries and set
additional expectations for administrators, such as to use customer feedback
to improve programs. Monitor Progress During the

DOT's approach to monitoring executives' progress during the year Year
consists of formal reporting of progress towards the activities in the
administrator's agreements, which is then followed by meetings to discuss
performance. Each modal administration produces a performance report to
prepare for regular meetings between the Deputy Secretary and the

1 Major Management Challenges and Program Risks: Department of
Transportation (GAO/ OCG- 99- 13, Jan. 1999).

modal administrator. These meetings occur on at least a bimonthly basis. At
these meetings, the Deputy Secretary uses the performance reports as the
basis to discuss progress against the goals in the performance agreements.
The Deputy Secretary and each administrator also discuss internal or
external factors that may be affecting progress and actions that can be
taken to improve performance.

DOT's Performance Agreement Tracking System (PATS) is used to produce each
administration's monthly performance report. The PATS includes a database
for each modal administrator and the other Assistant Secretaries and
Directors who have an agreement with the Secretary. DOT officials indicated
DOT is seeking to make PATS more widely accessible within each

modal administration. Other groups within DOT also monitor progress towards
the goals in the agreements. For example, the Senior Leadership Team, which
comprises modal administrators and assistant secretaries, meets each week to
discuss, among other issues, progress towards activities in the

administrator's agreements. The modal administrations also reported using
the PATS reports for a number of meetings and discussions of their
performance.

Contribute to Performance Since 1998 the Deputy Secretary has
“tallied” for each administration the

Evaluations percentage of activities listed in the administrator's
performance

agreement it accomplished. The tally also included completion rates for
DOT's strategic goals and corporate management strategies. DOT's modal
administrators are appointed by the President and confirmed by the Senate,
thus they are not eligible for cash awards.

As part of an overall effort to evaluate and improve its accountability
systems and its progress towards achieving strategic goals, DOT found in
1999 that its system of performance planning and performance agreements
“do an excellent job of communicating one set of achievable goals for
the

organization ï¿½ and holding the most senior managers accountable for
achievement of those goals.” Accordingly, the report recommended that
DOT expand its use of performance agreements. On the basis of these
findings, DOT intends to continue to implement performance agreements at
lower levels and consider progress towards the goals in those

agreements in performance evaluations. For fiscal year 2000, DOT instructed
the heads of the modal administrations to enter into performance agreements
with the highest level members of the Senior

Executive Service (SES) in their administrations. DOT envisions that the
agreements will eventually cascade through the entire SES ranks, and then
below.

SFA's Implementation of

Appendi x I II

Performance Agreements The Office of Student Financial Assistance (SFA),
which administered more than $48 billion in student financial aid to more
than 8.5 million students in fiscal year 1998, has been on our high- risk
list since 1992. 1 This has been due in part to the number of SFA's programs
that have been

vulnerable to waste, fraud, abuse, and/ or mismanagement. In response to
longstanding management weaknesses, Congress chartered SFA as a Performance-
Based Organization (PBO) in 1998. The newly created PBO- subject to the
authority of the Secretary of Education- is responsible for administering
the information and financial systems that support SFA programs, excluding
the development of policy, and exercises

independent control of its budget allocations and expenditures. In
chartering SFA as a PBO, Congress gave SFA personnel authorities, such as
the ability to appoint up to 25 technical and professional employees without
regard to the provisions of title 5, United States Code, governing
appointments in the competitive service. Congress also provided SFA with
certain procurement authorities, such as the ability to procure property and
services, subject to the authority of the Secretary of Education. To hold
SFA accountable for addressing its management challenges and achieving
results, Congress is requiring SFA's Chief Operating Officer (COO) to have a
performance agreement with the Secretary of Education. SFA also is required
to use performance agreements between the COO and its senior

managers. Define Accountability for The development of the performance
agreement for SFA's COO is to be an Specific Goals

annual exercise in which the COO and the Secretary of Education agree on
measurable organizational and individual goals that the COO will be
accountable for achieving. This agreement, once completed, is to be
transmitted to Congress and made publicly available. According to the

legislation, on the basis of progress towards the goals defined in his or
her performance agreement, the COO can receive a performance bonus of up to
50 percent of his or her basic pay, or about $61,000 in 2000. The COO can
also be removed or reappointed on the basis of progress towards the goals in
his or her performance agreement. The legislation also requires the COO to
enter into subsequent performance agreements with SFA's senior managers. The
agreements are parallel to the agreement between the COO

and the Secretary. A senior manager's salary and performance bonus 1 Major
Management Challenges and Program Risks: Department of Education (GAO/ OCG-
99- 5, Jan. 1999).

cannot exceed 125 percent of the maximum rate of basic pay for the Senior
Executive Service, or up to $153,000 in 2000. A senior manager can be
removed at the discretion of the COO.

According to SFA, its performance plan serves as the performance agreement
between the COO and the Secretary of Education. In 1999, SFA published its
5- year performance plan that sets three goals for SFA and, consequently,
its COO: to improve customer satisfaction, improve employee satisfaction,
and lower the unit cost of its operations. Appendix A of SFA's performance
plan sets out the annual performance objectives and corresponding
performance measures for each of SFA's five senior managers: General
Managers for Students, Schools, and Financial Partners;

the Chief Financial Officer (CFO); and the Chief Information Officer (CIO).
According to SFA, this appendix also serves as the performance agreements
between the COO and the senior managers.

Monitor Progress During the SFA's approach to monitoring progress during the
year includes reporting

Year of progress towards the goals in performance agreements and meetings to
discuss performance. Progress towards the goals and the effects of internal
or external factors on these goals are discussed weekly by two groups. The

first, SFA's Management Council, comprises the COO; the Chief of Staff; the
CIO; CFO; and the General Managers for Students, Financial Partners, and
Schools. The second, the Senior Leadership Team, includes the Management
Council as well as other managers. To inform these meetings, SFA produces a
biweekly performance report, which details SFA's progress towards its
performance goals and highlights goals about which SFA is concerned. SFA
also produces quarterly progress reports, which show its

progress in meeting organizational goals. Contribute to Performance SFA's
PBO legislation requires it to prepare and submit to Congress an Evaluations

annual report on its performance, including the extent to which it met the
goals in its performance plan. The report is also to include, among other
things, the evaluation rating for the COO and senior managers, including

the amounts of the bonuses they received. SFA reported that it met most of
its interim goals for fiscal year 1999 relating to improving customer
satisfaction, reducing the overall cost of student aid, and transforming
itself to a PBO. For example, SFA reported that it completed its

modernization blueprint and met its goal to attract 3 million electronic
filings of student aid applications by the end of the fiscal year. On the
basis of SFA's performance in fiscal year 1999, the COO received a
performance

bonus that was less than the maximum amount allowed under the PBO
legislation. According to officials, SFA based the amount on the number of
interim goals SFA met in 1999.

According to SFA officials, as the basis to evaluate the performance of its
senior managers, SFA plans to emphasize that senior managers are responsible
for helping SFA to accomplish its overall goals, as well as corresponding
goals for their respective organizations, by weighting senior manager
performance evaluations accordingly. Specifically, progress towards each
senior manager's performance goals will account for 50 percent of his or her
overall evaluation. The remaining 50 percent will be determined by the
extent to which SFA reaches its three overall

performance goals. According to agency officials, SFA managers will receive
bonuses based on this evaluation. Though SFA is in the early stages of
implementing its performance agreements, officials told us they believe the
concept is effective and worth replicating at lower levels of the agency.
Consistent with these efforts, SFA's PBO legislation requires it to
establish a performance management system that creates goals for employee,
group, or organizational

performance that are consistent with the PBO's performance plan. According
to SFA officials, it has begun to take preliminary steps to develop a
performance management system to meet its requirements.

(410529) Lett er

GAO United States General Accounting Office

Page 1 GAO- 01- 115 Managing For Results: Performance Agreements

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Appendix I

Appendix I VHA's Implementation of Performance Agreements

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Appendix I VHA's Implementation of Performance Agreements

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Appendix I VHA's Implementation of Performance Agreements

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Appendix I VHA's Implementation of Performance Agreements

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Appendix I VHA's Implementation of Performance Agreements

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Appendix I VHA's Implementation of Performance Agreements

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Appendix II

Appendix II DOT's Implementation of Performance Agreements

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Appendix II DOT's Implementation of Performance Agreements

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Appendix III

Appendix III SFA's Implementation of Performance Agreements

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Appendix III SFA's Implementation of Performance Agreements

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