Managing for Results: Agency Progress in Linking Performance
Plans With Budgets and Financial Statements (04-JAN-02,
GAO-02-236).
This report updates GAO's previous assessments of agencies'
experiences in linking performance plans and budgets under the
Government Performance and Results Act of 1993 (GPRA). GAO has
also included in this report an initial assessment of the
approaches used by agencies to link performance plans with their
audited annual financial statements. Over the first four years of
agency efforts to implement GPRA, GAO observed that agencies
continue to tighten the required linkage between their
performance plans and budget requests. Of the agencies GAO
reviewed over this period, all but three met the basic
requirement of the act to define a linkage between their
performance plans and the program activities in their budget
requests, and most of the agencies in GAO's review had moved
beyond this basic requirement to indicate some level of funding
associated with expected performance described in the plan. More
importantly, more agencies each year--almost 75 percent in fiscal
year 2002 compared to 40 percent in fiscal year 1999--were able
to show a direct link between expected performance and requested
program activity funding levels--the first step in defining the
performance consequences of budgetary decisions. However, GAO has
also observed that the nature of these linkages varies
considerably. Most of the agencies in GAO's review associated
funding requests with higher, more general levels of expected
performance, rather than the more detailed ''performance goals or
sets of performance goals'' suggested in the Office of Management
and Budget guidance. Similarly, agencies' initial efforts to link
performance plans to their statements of net cost are encouraging
and improving, but some presentations were more informative than
others. However, various approaches were used to present this
information, ranging from broad linkages of overall agency costs
to general goals to more specific descriptions of component
organization costs by strategic objective.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-02-236
ACCNO: A02631
TITLE: Managing for Results: Agency Progress in Linking
Performance Plans With Budgets and Financial Statements
DATE: 01/04/2002
SUBJECT: Audit reports
Budget administration
Budgeting
Financial statements
Performance measures
Reporting requirements
Government Performance and Results Act
(GPRA)
GPRA
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GAO-02-236
United States General Accounting Office
GAO Report to the Ranking Minority Member, Committee on Governmental
Affairs, U.S. Senate
January 2002
MANAGING FOR RESULTS
Agency Progress in Linking Performance Plans With Budgets and Financial
Statements
a
GAO-02-236
Contents
Letter
Results in Brief
Background
Progress Made Linking Plans With Budgets but Nature of Linkages
Could Be Improved Efforts to Link Plans to Cost Statements Are Encouraging
but
Improvements Are Needed Recent Initiatives by OMB Concluding Observations
Agency Comments
1 3 4
8
22 34 38 41
Appendixes
Appendix I: Scope and Methodology 44
Scope 44
Methodology 46
Table 1: Agency Status in Linking Plans and Budgets, Fiscal
Tables Year
2002 12
Table 2: Agencies That Linked Performance Plans With Net Cost
Statements, Fiscal Years 1999 and 2000 23
Table 3: Performance Plans Reviewed 45
Figures Figure 1: Figure 2: Figure 3: Figure 4: Figure 5: Figure 6: Figure
7: Figure 8:
GPRA Performance Planning, Budget, and Net Cost
Model 8
Agencies Show Progress in Linking Plans and Budgets,
Fiscal Years 1999 Through 2002 10
Change in HUD's Presentation of Performance
Plan-Budget Linkages, Fiscal Years 2000 and 2001 14
HUD's Presentation of Performance Plan-Budget
Linkages, Fiscal Year 2002 15
Agencies Used Multiple Approaches to Link Plans and
Budgets 17
ACF Used Aggregation and Consolidation to Link
Program Activities to Sets of Performance Goals 18
EPA Consolidated Funding Allocations by Strategic
Objective 19
NRC Linked Program Activities and Funding Allocations
by General Goal 20
Contents
Figure 9: Forest Service Linked Multiple Budget Accounts With
Multiple Strategic Objectives 21
Figure 10: Agencies Used Multiple Approaches to Link Plans and
Net Cost Statements. 24
Figure 11: VA Reported Net Cost by Program Area 25
Figure 12: NRC Associated Net Cost With General Goals 27
Figure 13: DOE Associated Net Cost With General Goals 29
Figure 14: DOE Used Subordinate Schedules to Report Costs for
Each General Goal Against Related Program Activities
From Its Budget 30
Figure 15: Treasury Showed Net Cost by General Goal in Its
Consolidated Statement 32
Figure 16: Treasury Used Subordinate Schedules to Report Net Cost
by General Goal and Responsibility Segment 33
A
United States General Accounting Office Washington, D.C. 20548
January 4, 2002
The Honorable Fred Thompson Ranking Minority Member Committee on
Governmental Affairs United States Senate
Dear Senator Thompson:
As you requested, this report updates our previous assessments of agencies'
experiences in linking performance plans and budgets under the Government
Performance and Results Act of 1993 (GPRA).1 As agreed with your staff, we
have also included in this report an initial assessment of the approaches
used by agencies to link performance plans with their audited annual
financial statements. Pursuing a closer alignment between performance
planning, budgeting, and financial reporting is essential in supporting the
transition to a more results-oriented and accountable federal government.
For example, developing a discrete allocation between requested budget
funding and expected performance goals is a critical first step in defining
the performance consequences of budgetary decisions. Comparably, linking
performance and financial information is both a key feature of sound
management-reinforcing the connection between resources consumed and results
achieved-and an important element in presenting to the public a useful and
informative perspective on federal spending.
The trend information in this report can be useful for the Congress and
others in considering the administration's new management reform agenda. As
part of this agenda and the proposed Managerial Flexibility Act of 2001, the
Office of Management and Budget (OMB) has proposed several steps to better
achieve transparency in performance, budgeting, and accounting and will
attempt to integrate more completely information about cost and program
performance during the fiscal year 2003 budget process.
1Performance Budgeting: Initial Experiences Under the Results Act in Linking
Plans With Budgets (GAO/AIMD/GGD-99-67, Apr. 12, 1999), and Performance
Budgeting: Fiscal Year 2000 Progress in Linking Plans With Budgets
(GAO/AIMD-99-239R, July 30, 1999).
We used the same universe of 35 agencies2 reviewed in our previous reports
to discuss the progress shown in making funding allocations to performance
goals and to identify the approaches used to associate performance goals
with budgetary requests. Specifically, we determined whether each agency (1)
linked its performance plans to program activities3 in its budget, (2)
presented funding estimates for expected levels of performance, and (3)
clearly indicated how the funding estimates were derived or allocated from
the program activities in its budget request. In our two previous
assessments covering fiscal years 1999 and 2000, we focused solely on the
extent to which agencies described in their performance plans the linkage
between their goals and budget requests. However, for the fiscal year 2001
and 2002 performance plans, we also looked at the nature of the linkage-that
is, the level of the agency's performance planning structure (i.e., general
goals, strategic objectives, or performance goals)-related to the program
activities in the agency's budget.
To assess the extent to which performance planning and financial statements
were related, we reviewed the statement of net cost from the fiscal year
1999 and 2000 audited financial statements for the 24 agencies covered by
the Chief Financial Officers Act of 1990 (CFO Act), as amended. The
statement of net cost, a required component of the annual financial
statement, is expected under OMB's guidance to present the net cost of
operations based on the missions and outputs described in the agency's
performance plan and budget structure. Fiscal year 1999 was the first year
for which agencies could provide both performance reports under GPRA and
audited financial statements under the CFO Act; fiscal year 2000 statements
were reviewed to indicate progress made by the agencies and also to assess
the nature of the linkages.
2See appendix I for a list of these agencies and the methodology used to
select them. As of August 15, 2001, 3 of these 35 agencies-the Department of
Agriculture's Food and Nutrition Service and the departments of Defense and
Education-had not released fiscal year 2002 performance plans and were
therefore not considered in our assessment of fiscal year 2002 plans. In
this report, we refer to a performance plan, whether of a department,
agency, or bureau, as an "agency plan."
3The term "program activity" refers to the list of projects and activities
shown for each account in the appendix to the Budget of the United States
Government. Subject to OMB clearance and generally resulting from
negotiations between agencies and appropriations subcommittees, program
activity structures are intended to provide a meaningful representation of
the operations financed by a specific budget account.
Appendix I provides additional details on our scope and methodology.
Results in Brief Over the first 4 years of agency efforts to implement GPRA,
we have observed that agencies continue to tighten the required linkage
between their performance plans and budget requests. Of the agencies we
reviewed over this period, all but three met the basic requirement of the
act to define a linkage between their performance plans and the program
activities in their budget requests, and most of the agencies in our review
had moved beyond this basic requirement to indicate some level of funding
associated with expected performance described in the plan. Most
importantly, more agencies each year-almost 75 percent in fiscal year 2002
compared to 40 percent in fiscal year 1999-were able to show a direct link
between expected performance and requested program activity funding
levels-the first step in defining the performance consequences of budgetary
decisions. However, we have also observed that the nature of these linkages
varies considerably. Most of the agencies in our review associated funding
requests with higher, more general levels of expected performance, rather
than the more detailed "performance goals or sets of performance goals"
suggested in OMB guidance.
Similarly, agencies' initial efforts to link performance plans to their
statements of net cost are encouraging and improving, but some presentations
were more informative than others. For fiscal year 2000, 13 of the 24
agencies covered by the CFO Act, compared to 10 in fiscal year 1999,
reported net costs in their audited annual financial statements using a
structure that was based on their performance planning structure. However, a
variety of approaches were used to present this information, ranging from
broad linkages of overall agency costs to general goals to more specific
descriptions of component organization costs by strategic objective.
OMB's recent initiatives and guidance to agencies are consistent with and
reinforce our observations that agencies have made progress in achieving the
goals of GPRA and the CFO Act but that additional effort is needed to
clearly describe the relationship between performance expectations,
requested funding, and consumed resources. The uneven extent and pace of
development described in this report should be seen as a reflection of the
mission complexity and variety of operating environments across federal
agencies. Describing the planned and actual use of resources in terms of
measurable results remains an essential action that will continue to require
time, adaptation, and effort on the part of all agencies.
Background Both GPRA and the CFO Act are key components of a statutory
framework that the Congress put in place during the 1990s to promote a new
focus on results and improved management.4 Among their complementary
purposes, both acts seek to improve congressional decision-making by
providing information on the relative effectiveness and efficiency of
federal programs and spending, and to help federal managers improve service
delivery by providing them with information about program results, cost, and
service quality.
Among its major purposes, GPRA aims for a closer and clearer linkage between
requested resources and expected results. The general concept of linking
performance information with budget requests is commonly known as
performance budgeting.5 GPRA establishes a basic foundation for performance
budgeting by requiring that an agency's annual performance plan cover each
program activity in the President's budget request for that agency. GPRA
does not specify any level of detail or required components needed to
achieve this coverage. Further, the act recognizes that agencies' program
activity structures are often inconsistent across budget accounts for the
purposes of the act and thus gives agencies the flexibility to consolidate,
aggregate, or disaggregate program activities, so long as no major function
or operation of the agency is omitted or minimized.
4Managing for Results: The Statutory Framework for Performance-Based
Management and Accountability (GAO/GGD/AIMD-98-52, Jan. 28, 1998).
5In this report, the term "performance budgeting" refers generally to the
process of linking expected results to budgets, but not to any particular
approach. For a discussion of past federal initiatives and the evolution of
the concept and techniques of performance budgeting in the federal
government, see Performance Budgeting: Past Initiatives Offer Insights for
GPRA Implementation (GAO/AIMD-97-46, Mar. 27, 1997).
OMB's original guidance regarding this provision of the act set forth an
additional criterion: Plans should display, generally by GPRA program
activity, the funding level to be applied to achieve performance goals. OMB
defined the term "GPRA program activity" to mean that which results from the
agency's consolidating, aggregating, or disaggregating the program
activities shown in the President's budget submission. That is, OMB expected
agency performance plans to show how amounts from the agency's budget
request would be allocated to the performance goals displayed in the plan.
In subsequent guidance for fiscal years 2000 and 2001, OMB stated that
"agencies should show significant further progress in associating funding
with specific performance goals or sets of goals." As part of its
preparation for the President's fiscal year 2002 budget, OMB tasked each
agency to develop integrated performance plans and budgets. Agencies were
asked to assess their own progress on such issues as the method of
presentation of plans and budgets; the extent of alignment between
performance objectives, budget accounts, and program activity structures;
and the precision of funding allocations made to each of the plan's
objectives. Consistent with our recommendations in April 1999,6 OMB stated
its intent to use this information as a baseline for further discussions on
efforts to improve the relationship between performance planning and
budgets.
The CFO Act, as amended, sought to remedy the government's lack of timely,
reliable, useful, and consistent financial information. Twenty-four agencies
are required to prepare financial statements annually, and have them
audited. The statements include, among other required presentations, a
statement of net cost. Audited financial statements are intended to improve
accountability over government operations, and the statement of net cost, in
particular, is intended to provide timely and reliable cost information to
(1) help ensure that resources are spent efficiently to achieve expected
results and (2) compare alternative courses of action. OMB guidance further
states that statements of net cost should both reflect an agency's major
programs classified by the missions and outputs described in its strategic
and annual performance plans prepared under GPRA and be consistent with
managerial cost accounting standards.7
6GAO/AIMD/GGD-99-67, Apr. 12, 1999.
7Statement of Federal Financial Accounting Standards No. 4, Managerial Cost
Accounting Concepts and Standards for the Federal Government, July 31, 1995.
Agencies were expected to comply with this standard beginning with fiscal
year 1998.
In March 2000, federal agencies issued their first performance reports under
GPRA, summarizing and discussing performance results for fiscal year 1999.
Thus, fiscal year 1999 offered the first opportunity to link annual
performance planning and reporting under GPRA with annual audited financial
statements under the CFO Act. OMB's guidance to agencies on the preparation
of annual performance reports did not define a specific format.8 However, in
its form and content guidance for financial statements, OMB clarified the
importance and manner of linking performance report information with
financial statements.9 The guidance stated that performance information in
the annual financial statement's narrative overview should be consistent
with information previously included in the agency's plans and budget
documents and should be linked to the programs presented in the statement of
net cost.
Across the departments and agencies of the federal government, performance
plans, budget presentations, and cost accounting structures can vary
considerably, depending on the missions, organizational arrangements, and
other specific operating characteristics of the entity. GPRA does not
require a standard format or establish expectations or limitations on an
agency's number of performance goals and objectives, but it does generally
describe a three-level performance planning architecture. An agency's
strategic and annual performance plans are expected to include
* general goals, which define, typically in outcome terms, how an agency
will carry out its mission over an extended period;
* strategic (or general) objectives, which describe a more specific level of
accomplishment within a specific general goal to help assess whether a
general goal was or is being achieved; and
* annual performance goals, which define a target level of performance
expressed as a tangible, measurable objective, in outcome or output terms.
8Preparation and Submission of Budget Estimates, OMB Circular A-11, Sec.
232.1 and 232.3, July 1999.
9Form and Content of Agency Financial Statements, OMB Bulletin No. 97-01,
Oct. 16, 1996.
The federal budget structure is similarly diverse. The current account
structure was not created as a single integrated framework, but rather
developed over time to reflect the many roles it has been asked to play and
to address the diverse needs of its many users.10 However, annual budget
presentations can be generally described as providing funding information
(1) on an agency basis, (2) by budget account within the agency, and (3) for
separate program activities funded within a specific budget account.
Finally, cost accounting information, to be useful, must rely on consistent
and uniform terminology for concepts, practices, and techniques but also
must allow agencies sufficient flexibility to reflect their unique operating
environments and to meet the needs of different user groups. Toward this
end, the managerial cost accounting standard describes a common but
generalized structure applicable to all federal agencies to capture the cost
of operations at three levels:
* on an entitywide (or agency) basis;
* by responsibility segment, defined as a component of the reporting entity
that is responsible for carrying out a mission, conducting a major line of
activity, or producing one or a group of related products or services; and
* by segment outputs, that is, the cost centers associated with the separate
types of outputs produced within each responsibility segment.
Figure 1 depicts these generalized planning, budgeting, and cost accounting
structures. Although these terms are not necessarily analogous and will
change in specific circumstances-for example one agency may refer to its
top-level goals as "business lines" while another may use the term
"strategic goals"-the model can provide a useful comparative structure
across unique agency adaptations. We use it as such in this report.
Nevertheless, while this model can be useful in graphically portraying
approaches and relationships across agencies, it is important to emphasize
that each structure is independent and somewhat stylistic and becomes
informative only when adapted to a specific agency context.
10For additional discussion of this issue, see Budget Account Structure: A
Descriptive Overview (GAO/AIMD-95-179, Sept. 18, 1995).
Figure 1: GPRA Performance Planning, Budget, and Net Cost Model
The agencies in our review continued to show the capacity for meeting a
basic requirement of GPRA: to "prepare an annual performance plan covering
each program activity set forth in the budget." In addition, these agencies
continued to show progress in translating these plan-budget linkages into
budgetary terms, thus indicating the performance consequences of their
budget proposals. For example, nearly 75 percent of the agencies we reviewed
for fiscal year 2002, compared to 40 percent in fiscal year 1999, were able
to associate some level of their performance plans with a specific
allocation of requested funding. Our review also showed, however, that there
was substantial variation in the manner-and therefore the resulting
informative value-in which these linkages were being achieved. For example,
some agencies related general goals to entire budget accounts while others
were able to associate sets of performance goals with GPRA program
activities.
Source: GAO.
Progress Made Linking Plans With Budgets but Nature of Linkages Could Be
Improved
Continued Improvement in Connecting Resources to Results
Over the 4-year period of our review, fewer agency plans failed to show how
their performance goals covered the program activities in their budget
requests, and more agency plans clearly indicated proposed funding
allocations linked to performance expectations. Figure 2 summarizes our
assessments for fiscal years 1999 through 2002 while table 1 indicates our
assessments by agency for fiscal year 2002. Figure 2 is displayed in
percentage terms because, for fiscal year 2002, our universe of agencies
changed from 35 to 32. As of August 15, 2001, the departments of Defense and
Education, and the Food and Nutrition Service of the Department of
Agriculture had not released fiscal year 2002 plans.11
Figure 2 can be characterized as follows. Fewer agencies failed to show a
link between plans and budgets (group A); fewer agencies showed a link but
did not show funding information (group B); and fewer agencies showed a link
and indicated funding information, but did not show how the funds were
derived from the budget request (group C). Thus, over the 4-year period in
our review, more agencies established links between their performance plans
and their budgets and translated those links into budgetary terms (group D).
11With respect to their fiscal year 2001 plans, these agencies were assessed
as follows: Defense, group A; Education and Food and Nutrition Service,
group D.
Figure 2: Agencies Show Progress in Linking Plans and Budgets, Fiscal Years
1999
Through 2002
Source: GAO analysis.
Note: For fiscal years 1999 through 2001 our universe was 35 agency plans;
for fiscal year 2002, 32
agency plans. For more information, see appendix I, "Scope and Methodology."
Group A in table 1 and figure 2 indicates agency plans for fiscal year 2002
that did not portray a clear link between the plan's goals and the budget's
program activities. It is worth noting that the agency composition of this
group has changed substantially over time as agencies experimented with
different presentation methods for their plans.12 Also, although no linkage
between the plan's performance goals and the budget's program activities was
described in these agency plans, the 2002 performance plans for each agency
in group A did include general funding estimates.13
12Two agencies moved out of this group in fiscal year 2000 (Social Security
Administration and National Institutes of Health) and three moved in (the
Department of Commerce, the Federal Bureau of Investigation, and the Federal
Highway Administration). In fiscal year 2001, the Federal Highway
Administration and the Rural Housing Administration moved out, but the
Department of State moved in. Lastly, in fiscal year 2002, the Federal
Bureau of Investigation and the Immigration and Naturalization Service moved
out, while the Internal Revenue Service move in.
Specific agency circumstances can also affect the manner and extent of
linkage presented in the performance plan. For example, IRS is in the midst
of an agencywide modernization effort, as required by the Revenue
Restructuring Act of 1998. As part of this effort, IRS reorganized and also
implemented a new strategic planning and budget process that included a new
mission statement and goal structure. While IRS did not show a clear link in
its performance plan between these new goals and its fiscal year 2002 budget
submission, we noted that the IRS Oversight Board did make this link in its
independent budget submission.
13For example, the Department of Commerce chose to present a departmentwide
plan, which included funding estimates for strategic objectives but did not
indicate how the performance goals or the funding estimates were related to
program activities. As described in appendix I, we accepted the agency's
definition of what constituted its annual plan and thus did not consider
Commerce's subordinate bureau plans because these plans were not
specifically included as component parts of the department's plan. Some of
these plans, however, did provide useful linkages. See Observations on the
Fiscal Year 1999 Annual Program Performance Report and Fiscal Years 2000 and
2001 Annual Performance Plans for Selected Science Agencies Within the
Department of Commerce (GGD-00-197R, Sept. 25, 2000).
Table 1: Agency Status in Linking Plans and Budgets, Fiscal Year 2002
D: Linked program
activities to
C: Linked program performance goals,
activities to showed funding
A: No link between B: Linked program performance goals; levels needed to achieve
showed goals, and
program activities activities to funding levels needed allocated funding from
and performance to achieve program
activities to
performance goals goals goals performance goals
* Commerce * Occupational Safety and * Federal Emergency Management *
Administration for Children and Health Administration Agency Families
* InternalRevenue * Forest Service * Agency for International Development
Service
* State * General Services Administration * Bureau of Indian Affairs
* National Institutes of Health * Bureau of Land Management
* Department of Veterans Affairs * Customs Service
* Employment Training Administration
* Energy
* Environmental Protection Agency
* Federal Aviation Administration
* Federal Bureau of Investigation
* Federal Highway Administration
* Federal Prison System
* Health Resources and Service Administration
* Housing and Urban Development
* Immigration and Naturalization Service
* National Park Service
* National Aeronautical and Space Administration
* National Science Foundation
* Nuclear Regulatory Commission
* Office of Personnel Management
* Rural Housing Service
* Small Business Administration
* Social Security Administration
Note: Column letters correspond to group letters in figure 2. Source: GAO
analysis.
Groups B, C, and D in table 1 and figure 2 include those agencies that, at a
minimum, indicated how their performance plans covered the program
activities in their budgets-the basic requirement established by GPRA.
Groups C and D include agencies that went beyond this basic requirement to
also provide funding information. Group C shows agencies that
described a plan-budget linkage and also requested funding levels to achieve
expected performance. Group D indicates those agencies that not only
developed the required linkage and provided an estimate of funding
associated with expected performance, but also clearly indicated how that
funding was derived or allocated from the program activities of their budget
requests-the first step in defining the performance consequences of a budget
decision. As shown in figure 2, there has been steady improvement in
associating funding information with expected performance (group C plus
group D)-from 57 percent of the agency plans in our review in fiscal year
1999 to nearly 90 percent in fiscal year 2002. More importantly, nearly 75
percent of the agency plans for fiscal year 2002, compared to 40 percent of
the fiscal year 1999 plans, translated the linkages between expected
performance and budget program activities into budgetary terms by allocating
funding from their program activities to elements of the performance plans
(group D).
The Department of Housing and Urban Development (HUD) provides an example of
the progression depicted in figure 2. Figures 3 and 4 show the approaches
used by HUD in its last three performance plans. In fiscal years 2000 and
2001, HUD used the same basic format in a summary table to link its general
goals to its budget accounts and program activities; figure 3 depicts
selected examples from each plan for comparison. In the fiscal year 2000
plan, total requested funding for each account or activity was indicated but
was arrayed by general goal by the use of an "x" rather than a specific
dollar allocation. In the fiscal year 2001 performance plan, HUD replaced
the simple "x" marks with funding estimates derived from its fiscal year
2001 budget request. By using this approach, HUD was able not only to show
the linkage of its general goals to its budget request but also to indicate
more clearly the allocation-and thus the performance consequences-of its
fiscal year 2001 budget request. Subsequently, in its fiscal year 2002 plan,
the agency removed these summary charts and, in the body of the plan, linked
its budget request by account or program activity to each of its five
general goals. Figure 4 is an excerpt of one page from the plan.
Figure 3: Change in HUD's Presentation of Performance Plan-Budget Linkages,
Fiscal Years 2000 and 2001
Fiscal Year 2000 Performance Plan
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Figure 4: HUD's Presentation of Performance Plan-Budget Linkages, Fiscal
Year 2002
Source: HUD's fiscal year 2002 performance plan.
While the approaches portrayed in figures 3 and 4 show steady progress in
developing clearer linkages, it should be noted that HUD linked the highest
levels of the HUD performance plan- general goals-to program activities.
Linking funding allocations to more specific performance goals or sets of
performance goals, as called for under OMB guidance, would make the
presentations still more informative. HUD's 2002 strategic plan recognizes
this and notes, "In the following years, HUD will further link our budget
with the strategic planning and performance measurement processes." HUD has
already attempted to extend linkages to the strategic objective level. For
example, in its fiscal year 2000 and 2001 plans, HUD used "x" marks to
describe the linkages between its budget program activities and the
strategic objectives within each general goal. In the fiscal year 2002 plan,
HUD replaced these "x" marks and showed funding allocations by strategic
objective, although we have reported that the presentation could be
improved.14
Agencies Have Developed Many Ways to Link Plans and Budgets
The HUD example demonstrates that, notwithstanding the progress agencies
have made in associating plans and budgets, there remain many challenges in
achieving presentations that are sufficiently clear and precise to be useful
and informative. Agencies are taking advantage of the flexibility available
to them under GPRA to establish plan-budget linkages, and it is unlikely,
given the nature of missions and operating environments, that any one
approach will fit all circumstances. Nevertheless, it is clear that some
associations are more informative than others in clarifying the performance
consequences of budgetary decisions.
Our assessment indicates that during these first years of GPRA
implementation, agencies have developed many methods to link their plans
with their budgets. Figure 5 portrays the variety of associations used by
agencies to develop performance plans that covered the program activities in
their budget request. Overall, agencies have associated higher or more
general levels of their performance plans with lower or more specific levels
of their budget structures. Of the 29 agencies in our review that linked
their plans and budgets (groups B, C, and D in table 1), only 5 established
connections at the performance goal level-the most specific goal level in
the plans. The remaining 24 agencies were evenly split between links to
14For further information, see Department of Housing and Urban Development:
Status of Achieving Key Outcomes and Addressing Major Management Challenges
(GAO-01-833, July 6, 2001).
general goals and strategic objectives. Conversely, none of the 29 agencies
established links to agencywide budget totals-the most general level in a
budget presentation-and only nine defined links at the next level, budget
accounts. The remaining 20 agencies established connections to budget
program activities-the more detailed level of the budget presentations. The
following examples demonstrate more specifically some of the associations
portrayed in figure 5.
Figure 5: Agencies Used Multiple Approaches to Link Plans and Budgets
Source: GAO analysis of fiscal year 2002 performance plans.
The Administration for Children and Families (ACF), within the Department of
Health and Human Services, is an example of an agency that linked
allocations of requested program activity funding to sets of performance
goals in its fiscal year 2002 performance plan. As shown in figure 6, ACF
aggregated and consolidated program activities from multiple budget accounts
and linked the associated funding information to sets of performance goals,
which it referred to as "subobjectives," such as child welfare and youth
programs.
Figure 6: ACF Used Aggregation and Consolidation to Link Program Activities
to Sets of Performance Goals
Note: Dollars in millions. Source: GAO analysis of ACF fiscal year 2002
performance plan.
Figure 7 presents a different approach. The Environmental Protection Agency
(EPA) linked strategic objectives to its program activities. The EPA
presentation is aided by its decision to define for each of its budget
accounts a uniform program activity structure-10 activities, as shown under
the Science and Technology budget account in figure 7. These 10 activities,
which correspond to EPA's general goal structure, are applied, as
appropriate, across each of its budget accounts. Figure 7 portrays how EPA
is able to consolidate and allocate funding from multiple budget accounts
using the "clean air" program activity-and general goal-to the strategic
objective "acid rain."
Figure 7: EPA Consolidated Funding Allocations by Strategic Objective
Note: Dollars in millions. Source: GAO analysis of EPA fiscal year 2002
performance plan.
The Nuclear Regulatory Commission (NRC) is an example of an agency that
linked program activities to general goals. Like EPA, NRC defined a program
activity structure that is identical to its general goals, thus creating a
direct linkage and allocation of its funding request. However, unlike EPA,
the NRC plan defines only two performance planning levels-
general goals and performance goals. For each program activity, the plan
includes more specific funding information on related "program areas"-in
effect, disaggregated or subprogram activities. The plan includes specific
requested funding allocations for each program activity and subprogram
activity as shown in figure 8. Within each general goal, the plan crosswalks
each subprogram activity to one or more of the performance goals.
Figure 8: NRC Linked Program Activities and Funding Allocations by General
Goal
Note: Dollars in millions. Source: GAO analysis of NRC fiscal year 2002
performance plan.
Figure 9 portrays an agency that clearly indicated in its plan requested
funding levels at the strategic objective level, and broadly associated
budget accounts, program activities, and disaggregated program activities
with these strategic objectives, but did not clearly indicate how or where
the requested funding was allocated. This is an example of an agency
assessed as belonging in table 1 as group C, rather than group D. As shown
in figure 9, the Forest Service associated multiple budget accounts, program
activities, and subprogram activities with multiple strategic objectives,
and it was not clear how the funding information shown in the performance
plan was derived from the budget request.
Figure 9: Forest Service Linked Multiple Budget Accounts With Multiple
Strategic Objectives
Note: Dollars in millions. Source: GAO analysis of Forest Service fiscal
year 2002 performance plan.
Each of the above examples portrays methods used by agencies to achieve
GPRA's required linkage between performance plans and budgets. However, as
discussed above, most agencies in our review tied funding estimates from
their budget requests to the higher level general goals or
strategic objectives in their performance plans rather than the more
specific performance goals or sets of goals expected under OMB guidance.
Thus, although there have been improvements since fiscal year 1999 in
structurally relating performance expectations to requested budgetary
resources, there is substantial variation in the nature of those
relationships and resulting differences in how informative and useful the
linkages may be. Nevertheless, the fact that some agencies have been able to
achieve more informative presentations, and the general progress that has
been made since 1999, indicate that potential exists for achieving an
important goal of GPRA: to demonstrate the performance consequences of
budget decisions.
Efforts to Link Plans to Cost Statements Are Encouraging but Improvements
Are Needed
Similar to the findings in our assessment of plan-budget linkages, agency
efforts to more clearly associate results with resources consumed have
improved from the fiscal year 1999 financial statements to those for fiscal
year 2000. For example, 13 of the 24 agencies required to prepare financial
statements used some element of their performance planning structure in
structuring their statement of net cost, compared to 10 of 24 in 1999.15
Table 2 lists those agencies that reflected their performance planning
structure in their statements of net cost. Also similar to the findings in
our assessment of plan-budget linkages, the usefulness of these
presentations varied significantly, with most agencies linking costs to the
highest levels of their goal structure. (See figure 10.)
15Those agencies that did not use a structure based on their performance
plans generally used traditional accounting-based presentations that
captured costs for either the agency in total or for separate organizational
components ("responsibility segments"). Typically, this structure displayed
the net cost of operations as governmental and intragovernmental program
costs less earned revenues plus nonproduction costs.
Table 2: Agencies That Linked Performance Plans With Net Cost Statements,
Fiscal Years 1999 and 2000
Fiscal Year 1999 Statements of Net Cost Fiscal Year 2000 Statements of Net
Cost
* Department of Commerce
* Department of Energy
* Department of Justice
* Department of Labor
* Department of State
* Department of the Treasury
* Department of Veterans Affairs
* National Aeronautical and Space Administration
* Nuclear Regulatory Commission
* U.S. Agency for International Development
* Department of Commerce
* Department of Energy
* Department of Health and Human Services
* Department of the Interior
* Department of Justice
* Department of Labor
* Department of State
* Department of the Treasury
* Department of Veterans Affairs
* Environmental Protection Agency
* National Aeronautical and Space Administration
* Nuclear Regulatory Commission
* U.S. Agency for International Development
Source: GAO analysis of fiscal years 1999 and 2000 financial statements.
Source: GAO analysis of fiscal year 2000 financial statements.
Note: Agencies portrayed are: Department of Commerce (DOC), Department of
Energy (DOE), Department of Health and Human Services (HHS), Department of
the Interior (DOI), Department of Justice (DOJ), Department of Labor (DOL),
Department of State (State), Department of the Treasury (Treasury),
Department of Veterans Affairs (VA), Environmental Protection Agency (EPA),
National Aeronautical and Space Administration (NASA), Nuclear Regulatory
Commission (NRC), and U.S. Agency for International Development (AID).
Figure 11 shows the Department of Veterans Affairs (VA) statement of net
cost from its fiscal year 2000 financial statements. VA structured its
statement of net cost around its "programs," such as medical care,
compensation, and education. In its performance plan, VA defined these
"programs" as the GPRA program activities created by aggregating,
disaggregating, or consolidating the program activities in its budget
request and then linked its annual performance goals to this program
structure. Thus, by showing the net cost of operations for the department
against the
same structure used to summarize its annual performance goals and measures,
VA was able to establish a direct link between results achieved and
resources consumed.
Source: VA fiscal year 2000 financial statements.
Figure 12 excerpts the statement of net cost from the NRC fiscal year 2000
financial statements. In this approach, the net cost of operations was shown
for each NRC general goal. As discussed above, the NRC fiscal year 2002
performance plan defined only two performance levels-strategic (general)
goals and performance goals. In addition, NRC defined a structure in which
its program activities were identical to its general goals, so it became
straightforward to display requested budget amounts by goal. By structuring
its statement of net cost around the same general goals, NRC was able to
create a clear link between performance and requested funding, and between
resources consumed and results.16
16Because the statement of net cost is prepared on an accrual basis while
budget estimates for program activities are developed on an obligations
basis, the reported figures will likely not match, but they will present a
planned versus actual perspective linked to the same goal structure.
Source: NRC fiscal year 2000 financial statement.
The Department of Energy (DOE) took an approach similar to NRC's, but then
went a step further. First, like NRC, DOE used its consolidated statement of
net cost to report summary, agencywide cost information for each of its
"business line goals"-the general goals for the agency. Second, DOE then
used separate notes to the consolidated statement to present the net cost
for each business line goal and its associated budget program activities.
The separate notes report net cost of operations for a specific general goal
using the program activity structure in the DOE budget request. Figure 13
displays the consolidated statement and figure 14 presents one example of a
separate note dealing with the business line goal "NNSA and other National
Security Activities."
Source: DOE fiscal year 2000 financial statement.
Source: DOE fiscal year 2000 financial statement.
Finally, figures 15 and 16 excerpt the statement of net cost from the
Department of Treasury fiscal year 2000 financial statements. Treasury
reported net cost of operations on its consolidated statement for each of
three program areas-the three "missions" or general goals in its performance
plan (see figure 15). Treasury noted that the complexity of its
organizational structure required this approach, with supporting schedules
used to report the net cost of each program area (general goal) by bureau.
In figure 16, the subordinate schedule for the three program areas are
shown. Because Treasury's annual performance plan is also organized by
bureau ("responsibility segment"), this approach allowed them to associate
net costs not only with general goals but also with each bureau-and
therefore each bureau's strategic objectives.
Source: Department of Treasury fiscal year 2000 financial statement.
Source: Department of Treasury fiscal year 2000 financial statement.
As these examples illustrate, agencies are making progress in presenting
their cost of operations in performance terms. While it is unlikely that a
single approach to relating performance and financial reporting will fit the
variety of organizational contexts, missions, performance planning, and
financial management structures present-and developing-in federal agencies,
some presentations are more informative than others.17 Moreover, even the
most meaningful linkages between performance results and resources consumed
are only as good as the underlying data. As we have reported, agencies must
first address long-standing problems within their financial systems in order
to ensure confidence in the completeness and accuracy of annual financial
statements, including the required statement of net cost.18
Recent Initiatives by OMB
During the last 2 years, OMB completed performance budgeting pilots required
under GPRA and has continued to revise and sharpen its guidance to federal
agencies on linking plans, budgets, and financial reporting. An important
development is OMB's announcement of the administration's intention to more
completely integrate information about cost and performance during its
annual budget review process. The administration also has proposed a new
initiative-the Managerial Flexibility Act-to better link budget and
management decisions to performance by showing the full cost of program
operations with the output produced in that year. Each of these efforts is
consistent with and reinforces the basic observations in this report-that
although agencies have shown progress in their efforts to achieve the goals
of GPRA and the CFO Act, continued attention is needed to clearly show the
relationship between performance expectations and budgetary resources, and
between performance results and resources consumed.
17It should also be noted that the above discussion only addresses the
extent of linkage between the statement of net cost and performance planning
structures. It does not comment, directly or indirectly, on the quality of
financial management within an agency or the adequacy of its financial
reporting or managerial cost accounting processes.
18See Financial Management: FFMIA Implementation Critical for Federal
Accountability (GAO-02-29, Oct.1, 2001); U.S. Government Financial
Statements: FY 2000 Reporting Underscores the Need to Accelerate Federal
Financial Management Reform (GAO-01-570T, Mar. 30, 2001); and Financial
Management: Agencies Face Many Challenges in Meeting the Goals of the
Federal Financial Management Improvement Act (GAO/T-AIMD-00-178, June 6,
2000).
OMB Performance Budgeting Pilots Useful, but Challenges Remain
GPRA required OMB to report on the feasibility and advisability of including
a performance budget as part of the President's budget, and on whether
legislation requiring performance budgets should be proposed. The act
defined a performance budget as that which presents varying levels of
performance resulting from different budgeted amounts. OMB initially
deferred these pilots-originally to be designated in fiscal years 1998 and
1999-to give federal agencies time to develop the capability of calculating
the effects of marginal changes in cost or funding on performance. When
begun in August 1999, OMB designed the pilots as case studies prepared by
OMB staff to demonstrate how performance information could be used to
compare alternatives and to develop funding recommendations for
incorporation into the President's fiscal year 2001 budget submission.
On January 18, 2001, OMB reported the results of five performance budgeting
pilots that explored agencies' capabilities of more formally assessing the
effects of different funding levels on performance goals. OMB selected the
pilots19 to reflect a cross section of federal functions and capabilities so
that a representative range of measurement and reporting issues could be
explored. In its report, OMB concluded that legislative changes were not
needed. OMB reported that the pilots demonstrated that assuring further
performance measurement improvements and steadily expanding the scope and
quality of performance measures is paramount, and that the existing statute
provides sufficient latitude for such improvement.
The pilots also highlighted other issues that have and will continue to
challenge efforts to more closely link desired performance with annual
budget requests. For example, for those activities where output performance
was of principal interest (e.g., military recruitment, continuing disability
reviews, and premarket reviews and inspections), OMB observed that agency
information was generally available and useful in developing a funding
request. However, where outcome performance was of greater interest, OMB
noted that "recommending a particular funding level is not the primary focus
of the analysis or decision making process." Rather, "the focus is on how
funds will be allocated among different uses to achieve program goals and
what criteria are used to make
19The pilots included (1) the Food and Drug Administration, (2) military
recruitment programs at the Department of Defense, (3) diplomatic security
programs at the Department of State, (4) severely distressed housing
programs at HUD, and (5) continuing disability reviews in the Social
Security Administration.
allocation decisions." For example, OMB observed that the HUD severely
distressed housing program
is a "buy-by-the-pound" program. Provide an appropriation and HUD can
approximate how many units can be removed and replaced in relation to the
funding level, because per unit demolition, construction and voucher costs
are readily available and simple to quantify. However, since the program is
assessed on whether it achieves broader outcomes-such as creating stable,
economically integrated communities-that do not correlate directly with
funding levels, the Administration cannot systematically budget for the
results it wants to see.
Overall, OMB concluded that the pilots raised several key challenges
regarding performance budgeting at the federal level including, for example,
the following:
* In many instances, measuring the effects of marginal, annual budget
changes on performance is not precise or meaningful.
* While continuing to change from an almost total reliance on output
measures to outcome measures, it will be much more difficult to associate
specific resource levels with those outcomes, particularly over short
periods of time.
* Establishing clear linkages between funding and outcomes will vary by the
nature of the program and the number of external factors.
* Delays in the availability of performance data, sometimes caused by
agencies' reliance on non-federal program partners for data collection, will
continue to present synchronization problems during budget formulation.
Continued Refinement of Guidance to Agencies
OMB has continued to sharpen and clarify its guidance to agencies regarding
the alignment of performance planning, budget formulation, and financial
reporting. Both the fiscal year 2002 and 2003 budget guidance included more
specific expectations about the extent of linkage between performance
planning and budget formulation. Also, in September 2001, OMB issued revised
form and content guidance for financial statements that was intended to
achieve better integration between execution, financial reporting, and
performance reporting.
As described above, OMB's guidance for the President's fiscal year 2002
budget process called for agencies to prepare an integrated performance plan
and budget, in which the plan would display the amount budgeted for each
GPRA program activity. If an agency was unable to develop this presentation,
it was expected to provide to OMB a timetable that would describe the steps
to be taken to develop the capability of aligning plans and budgets.
Subsequently, in July 2001, OMB clarified this guidance for the fiscal year
2003 budget process.20 While noting that agencies had made progress in
aligning plans and budgets, OMB instructed agencies that the fiscal year
2003 performance plan "should describe the culminating steps and schedule
for completing a full alignment of resources with performance." OMB noted
that this alignment could be phased, with budget information initially
linked to general goals and strategic objectives and subsequent annual plans
providing greater detail "until a budget amount can be shown for each GPRA
program activity."
Also, in September 2001, OMB issued revised guidance on the form and content
of agency financial statements. While the revised guidance did not
substantially change the statement of net cost, it does significantly alter
expectations regarding performance and financial reporting. Beginning with
the fiscal year 2002 reporting cycle, agencies are expected to issue a
single "performance and accountability report." This report is intended to
integrate what are typically stand-alone financial reports under the CFO Act
and stand-alone performance reports under GPRA into a single, consolidated
report, now permanently authorized by the Reports Consolidation Act of 2000
(P.L.106-531). The performance and accountability report is expected to
provide to the Congress and the public a comprehensive and integrated
picture of each agency's performance. In addition, OMB has accelerated
reporting dates. For example, fiscal year 2000 reports were generally due at
the end of March; but under this revised guidance, fiscal year 2001 reports
will be due by the end of February 2002, and fiscal year 2002 reports by
February 1, 2003. OMB expects that consolidated and accelerated reporting
will provide more timely and reliable information to measure and affect
performance.
20Preparation and Submission of Budget Estimates, OMB Circular A-11, Jul,
2001, Sec. 220.8(d).
The President's Management Agenda
Lastly, as announced in the Fiscal Year 2002 Budget, OMB released in August
2001 the President's Management Agenda, which by focusing on 14 targeted
areas-5 governmentwide goals and 9 program initiatives-seeks to improve the
management and performance of the federal government. One of the
governmentwide goals, Budget and Performance Integration, seeks to
capitalize on the progress made by agencies and to operationalize the
revised guidance described above.
According to the President's Management Agenda, as part of the fiscal year
2003 budget process, OMB plans to formally integrate performance reviews
with its budget decisions and "to begin to produce performance-based budgets
starting with the 2003 Budget submission." OMB expects to "work with
agencies to select objectives for a few important programs, assess what
programs do to achieve these objectives, how much that costs, and how
effectiveness could be improved." These actions are expected to produce
near-term results such as shifting resources among programs devoted to
similar goals to emphasize those that are most effective, budgeting for the
full costs of retirement and health care programs, and, over time, to allow
nonperforming activities to be reformed or terminated. Also, because this
goal is part of a broader agenda, OMB expects other long-term results. For
example, control over resources used and accountability for results by
program managers will be mutually reinforced by the interaction of this goal
with the President's strategic management of the human capital goal, which
increases staff and responsibility at the "front line" of service delivery
and links rewards to performance.
Concluding Observations
Aligning performance goals with all key management activities- budgeting,
financial management, human capital management, capital acquisition, and
information technology management-is an essential step in the implementation
of GPRA.21 While alignment is not sufficient to guarantee results-based
accountability, it is a necessary action to achieve
21See also Human Capital: A Self-Assessment Checklist for Agency Leaders
(GAO/OCG-00-14G, Sept. 2000), Executive Guide: Creating Value Through
World-class Financial Management (GAO/AIMD-00-134, Apr. 2000), Executive
Guide: Leading Practices in Capital Decision-Making (GAO/AIMD-99-32, Dec.
1998), Executive Guide: Improving Mission Performance Through Strategic
Information Management and Technology (GAO/AIMD-94-115, May 1994), and
Executive Guide: Measuring Performance and Demonstrating Results of
Information Technology Investments (GAO/AIMD-98-89, Mar.1998).
two key purposes of the act-to improve congressional decision-making and to
help federal managers improve service delivery by providing them with
information on program results. Clearer and closer alignment between an
agency's performance goals and objectives and its key management activities
is an important and practical means to emphasize and reinforce results-based
accountability in the oversight and day-to-day management of programs.
With respect to the management activities discussed in this report, aligning
performance plans with both budgeting and financial management offers
different but complementary perspectives. Linking plans with budgets offers
the potential for more clearly infusing performance information into
separate budgetary decisions, both in the Congress and in agency management.
Certainly, congressional budget decisions are and will remain an exercise in
political choice, in which performance can be one, but not necessarily the
only, factor underlying decisions. But clearer and closer association
between expected performance and budgetary requests can more explicitly
inform budget discussions and focus them-both in the Congress and in
agencies-on expected results, rather than on inputs or transactions
solely.22 Linking performance goals with cost information addresses a
related but different question: How much has been spent for what was
achieved? Clearer and closer alignment between performance results and the
reported net cost of agency operations can assist management by relating
total resources consumed with actual results achieved. In sum, the closer
the linkage between an agency's performance goals, its budget presentation,
and its statement of net cost, then the greater the reinforcement of
performance management throughout the agency and the greater the reliability
of budgetary and financial data associated with the performance plans.
Our assessments indicate that progress has been made. Agencies are
developing approaches to better link performance plans with budget
presentations and financial reporting. Progress has been demonstrated both
in establishing linkages between performance plans and budget requests and
in translating those linkages into budgetary terms by clearly allocating
funding from the budget's program activities to performance goals. Progress
can also be seen in agencies' initial efforts to link annual performance
reporting with annual audited financial statements. Agencies
22GAO/AIMD-97-46, Mar. 27, 1997.
have developed approaches that allow them to better describe their net cost
of operations in performance terms.
But our assessment of the nature of the resulting associations also suggests
that additional effort will be needed. Most of the alignments we have
observed, as shown in figures 5 and 10, were at relatively high levels of
performance planning-general goals or strategic objectives-rather than the
more detailed "performance goal or sets of goals" target defined in OMB
guidance. As OMB has noted in its most recent guidance, additional
refinement is needed. For critical management functions to successfully
emphasize, support, and reinforce the introduction of results-based
accountability throughout agencies, they will need to address performance
goals and measures that are meaningful to managers.
To be sure, GPRA and the entire management agenda prompted by the statutory
reforms of the 1990s present many daunting challenges to agencies. As we
have noted,23 the finding of progress made by agencies in these initial
years of implementation must be tempered by recognition of the continuing
performance management demands, such as needed improvements in
* developing and articulating a clear sense of intended results,
* ensuring that daily operations contribute to results,
* coordinating crosscutting programs,
* building the capacity to gather and use performance information, and
* addressing mission-critical management problems.
23Managing for Results: Using GPRA to Assist Oversight and Decisionmaking
(GAO-01-872T, June 19, 2001), Major Management Challenges and Program Risks:
A Governmentwide Perspective (GAO-01-241, Jan. 2001), Managing for Results:
Continuing Challenges to Effective GPRA Implementation (GAO/T-GGD-00-178,
July 20, 2000), and Managing for Results: Opportunities for Continued
Improvements in Agencies' Performance Plans (GAO/GGD/AIMD-99-215, July 20,
1999).
The approaches being developed by federal agencies to more clearly associate
performance expectations, budgetary requests, and financial reporting
demonstrate the kind of unique adaptations that will be needed to ensure
sustained success. The uneven extent and pace of development revealed in our
assessments should not be surprising given the mission complexity and
variety of operating environments across federal agencies, and OMB's
enhanced efforts to incorporate performance information into its budget
reviews should further stimulate all agencies' interests. As we have
previously reported,24 the concept of performance budgeting has and will
likely continue to evolve, and no single definition or approach can be
expected to encompass the range of needs and changing interests of federal
decisionmakers. Governmentwide guidance is clearly necessary to prompt
continued progress, and such guidance should continue to encourage agencies
to develop their own unique approaches to linking resources and results
consistent with their different environments and performance management
challenges. Ultimately, the need to translate the planned and actual use of
resources into concrete and measurable results remains an essential step in
achieving a more results-oriented government, and the heterogeneity of the
federal government suggests that sustained efforts and attention will be the
hallmark of long-term success.
Agency Comments We provided a draft of this report to the Director of OMB on
November 8, 2001. On December 7, 2001, a senior OMB official told us that
OMB would not be providing written comments on the draft. However, this
official noted that OMB found the report to be useful, well done, and
constructive. The official said that the agency progress described in this
report was consistent with and supportive of initiatives which the
Administration intends to announce in the forthcoming budget submission to
further promote budgeting and managing for results within the federal
government.
As agreed with your offices, 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 send copies of this report to
the Chairman, Senate Committee on Governmental Affairs; the Chairman and
Ranking Minority Member of the House Committee on Governmental
24GAO/AIMD-97-46, Mar. 27, 1997.
Reform; other appropriate congressional committees; and the Director, Office
of Management and Budget. We will also make copies available to others on
request.
Please contact me on (202) 512-9573 or Michael J. Curro, Assistant Director,
on (202) 512-2991 if you or your staff have any questions. Major
contributors to this report included Jacqueline M. Nowicki and Trevor J.
Thomson.
Sincerely yours,
Paul L. Posner Managing Director, Strategic Issues (Federal Budget Analysis)
Appendix I
Scope and Methodology
Scope To meet our objectives regarding the linkage between performance plans
and budgets, we limited our review to the performance plans from the same 35
departments and agencies that we studied in our initial assessments of
agency experience in linking performance plans and budget requests.25
However, as of August 15, 2001, 3 of these 35 agencies-the Department of
Agriculture's Food and Nutrition Service and the Departments of Defense and
Education-had not released fiscal year 2002 performance plans and were
therefore not considered in our assessment of fiscal year 2002 plans. Also,
we generally focused on bureau-level plans for each department when the
department specifically identified such plans as components of the
departmentwide plan. In those cases, we limited our review to the three
largest bureaus with discretionary spending over $1 billion, or, if none of
the bureaus in the department had discretionary spending over $1 billion, to
the two largest bureaus.26
To meet our objectives regarding the linkages between performance plans and
statements of net cost, we reviewed the fiscal year 1999 and 2000 statements
of net cost-a required component of the annual financial statements-to
identify the reporting structure selected by the agency to report the net
cost of its operations. We limited this review to the 24 departments and
independent agencies represented in table 2-those required to prepare annual
financial statements under the CFO Act. Table 3 lists all of the agencies
covered in our review.
25GAO/AIMD/GGD-99-67, Apr. 12, 1999, and GAO/AIMD-99-239R, July 30, 1999.
26Discretionary spending was used as an indicator of a bureau's relevancy to
appropriators because discretionary funding is affected by appropriations
actions.
Appendix I Scope and Methodology
Table 3: Performance Plans Reviewed
Departmentwide Plans
* Department of Commerce
* Department of Defense
* Department of Education
* Department of Energy
* Department of Housing and Urban Development
* Department of State
* Department of Veterans Affairs
Bureau-Level Plans
Department of Agriculture
* Food and Nutrition Service
* Forest Service
* Rural Housing Service Department of Health and Human Services
* Administration for Children and Families
* Health Resources and Services Administration
* National Institutes of Health Department of the Interior
* Bureau of Indian Affairs
* Bureau of Land Management
* National Park Service Department of Justice
* Federal Prison System
* Federal Bureau of Investigation
* Immigration and Naturalization Service Department of Labor
* Employment and Training Administration
* Occupational Safety and Health Administration Department of the Treasury
* Customs Service
* Internal Revenue Service Department of Transportation
* Federal Aviation Administration
* Federal Highway Administration
Independent Agency Plans
* Environmental Protection Agency
* Federal Emergency Management Agency
* General Services Administration
* National Aeronautics and Space Administration
* National Science Foundation
* Nuclear Regulatory Commission
* Office of Personnel Management
* Small Business Administration
* Social Security Administration
* U.S. Agency for International Development
Source: GAO.
Appendix I Scope and Methodology
Methodology In our initial review of agencies' experiences in linking
performance goals and budget requests, we developed a methodology for
assessing the plans on a variety of different dimensions and
characteristics.27 In this review, we used three of those characteristics.
* Program activities were linked to goals - We identified agencies that
either (1) linked program activities-directly, or by aggregation,
disaggregation, or consolidation-to some level of their performance planning
structure or (2) did not specify this linkage.
* Plans associated dollars with goals - We identified agencies that either
(1) associated an amount of funding with some level of their performance
planning structure or (2) did not identify funding with any aspect of their
planning structure.
* Funding was allocated to a discrete set of goals and/or measures - We
identified agencies that either (1) displayed how requested funding for
program activities-directly, or by aggregation, disaggregation, or
consolidation-was allocated among specific or a unique set of performance
goals or measures or (2) did not indicate an allocation of requested program
activity funding.
To assess the nature of linkages between performance plans and agency
budgets, we reviewed each plan to determine the level of the performance
planning structure that was used to establish a linkage with the budget's
program activities. Generally, consistent with expectations in GPRA, agency
performance plans are organized in a hierarchy of goals. Figure 1 in the
body of this report presents a generalized portrayal of this hierarchy.
To assess the extent and nature of linkages between agency performance plans
and annual financial statements, we compared the statement of net cost
reporting structure to the entities' performance plan to determine if there
was correspondence between the two and, if so, the specific level of the
performance planning structure that was used to establish a linkage.
To ensure consistency and accuracy in the analysis of both performance plans
and statements of net cost, two staff members independently reviewed the
performance plans and financial statements and developed an assessment on
each characteristic. Differences in assessments were
27See GAO/AIMD/GGD-99-67, Apr. 12, 1999, appendix I.
Appendix I Scope and Methodology
resolved by having a third staff member jointly reevaluate the separate
assessments to identify and resolve differences.
The following qualifications apply to this analysis.
* The agencies in our review were not randomly selected. The results of this
study cannot be extrapolated to agencies and departments not included in our
population.
* Our analysis focused on the linkages described between performance plans,
budget submissions, and financial reports. We did not assess the
appropriateness of the goal structure or of individual performance goals and
measures.28 We also did not independently verify requested funding amounts
allocated to performance goals.
* Although we did not verify the information contained in the agencies'
statements of net cost, independent auditors, as part of the annual
financial audit, reviewed the information reported in these statements.
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