21st Century Challenges: Performance Budgeting Could Help Promote
Necessary Reexamination (14-JUN-05, GAO-05-709T).		 
                                                                 
As part of its work to improve the management and performance of 
the federal government, GAO monitors progress and continuing	 
challenges in performance budgeting and the Administration's	 
related initiatives, such as the Program Assessment Rating Tool  
(PART). In light of the nation's long-term fiscal imbalance and  
other emerging 21st century challenges, we have also reported	 
that performance budgeting can help facilitate a needed 	 
reexamination of what the federal government does, how it does	 
it, who does it, and how it is financed in the future. GAO	 
remains committed to working with Congress and the Administration
to help address these important and complex issues.		 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-05-709T					        
    ACCNO:   A26537						        
  TITLE:     21st Century Challenges: Performance Budgeting Could Help
Promote Necessary Reexamination 				 
     DATE:   06/14/2005 
  SUBJECT:   Accountability					 
	     Budget administration				 
	     Budget controllability				 
	     Budget deficit					 
	     Budgeting						 
	     Federal funds					 
	     Future budget projections				 
	     Performance management				 
	     Performance measures				 
	     Program evaluation 				 
	     Strategic planning 				 
	     General management reviews 			 
	     Productivity in government 			 
	     Funds management					 
	     Performance-based budgeting			 
	     OMB Program Assessment Rating Tool 		 

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GAO-05-709T

United States Government Accountability Office

GAO Testimony

Before the Subcommittee on Federal Financial Management, Government
Information, and International Security, Committee on Homeland Security
and Governmental Affairs, U.S. Senate

For Release on Delivery
Expected at 2:00 p.m. EDT 21ST CENTURY
Tuesday, June 14, 2005

CHALLENGES

        Performance Budgeting Could Help Promote Necessary Reexamination

Statement of David M. Walker Comptroller General of the United States

                                       a

GAO-05-709T

[IMG]

June 14, 2005

21ST CENTURY CHALLENGES

Performance Budgeting Could Help Promote Necessary Reexamination

  What GAO Found

The federal government is in a period of profound transition and faces an
array of challenges and opportunities to enhance performance, ensure
accountability, and position the nation for the future. A number of
overarching trends-including the nation's long-term fiscal imbalance-
drive the need to reexamine what the federal government does, how it does
it, who does it, and how it gets financed. This will mean bringing a
variety of tools and approaches to bear on the situation.

Performance budgeting holds promise as a means for facilitating a
reexamination effort. It can help enhance the government's capacity to
assess competing claims for federal dollars by arming decision makers with
better information both on the results of individual programs as well as
on entire portfolios of tools and programs addressing common goals.
However, it is important to remember that in a political process,
performance information should be one, but will not be the only, factor in
decision making.

Existing performance budgeting efforts, such as PART, provide a means for
facilitating a baseline review of certain federal policies, programs,
functions, and activities. Successful application of these initiatives in
this reexamination process rests on

o  building a supply of credible and reliable performance information,

o  	encouraging demand for that information by garnering congressional
buy-in on what is measured and how it is presented, and

o  	developing a comprehensive and crosscutting approach to assessing the
performance of all major federal programs and policies encompassing
spending, tax expenditures, and regulatory actions.

Through the President's Management Agenda and its related initiatives,
including PART, the Administration has taken important steps in the right
direction by calling attention to successes and needed improvements in
federal management and performance. However, it is not clear that PART has
had any significant impact on authorization, appropriations, and oversight
activities to date. It will only be through the continued attention of the
executive branch and Congress that progress can be accelerated and
sustained. Such an effort can strengthen the budget process itself and
provide a valuable tool to facilitate a fundamental reexamination of the
base of government. We recognize that this process will not be easy.
Furthermore, given the wide range of programs and issues covered, the
process of rethinking government programs and activities could take a
generation or more to complete.

                 United States Government Accountability Office

Mr. Chairman and Members of the Subcommittee:

I am pleased to be here today to discuss performance budgeting and the
Office of Management and Budget's (OMB) Program Assessment Rating Tool
(PART).1 Given current trends and challenges facing the nation- including
the federal government's long-term fiscal imbalance-it is critical to
reexamine the relevancy of federal programs and their fit with national
priorities, while maximizing program performance within current and
expected resource levels. The implementation of performance budgeting
approaches can be an important step to help achieve this goal.

As Congress is well aware, our nation is currently on an unsustainable
fiscal path. Long-term budget simulations by GAO,2 the Congressional
Budget Office (CBO), and others show that we face a large and growing
long-term structural deficit due primarily to known demographic trends and
rising health care costs. Continuing on this unsustainable fiscal path
will gradually erode, if not suddenly damage, our economy, our standard of
living, and ultimately our national security. All reasonable simulations
indicate that the problem is too big to be solved by economic growth alone
or by making modest changes to existing spending and tax policies. Rather,
a fundamental reexamination of major spending and tax policies and
priorities will be important to recapture our fiscal flexibility and
ensure that our programs and priorities respond to key emerging social,
economic, and security changes and challenges.

Performance budgeting holds promise as part of a process of reexamining
the base of the federal government. It can help enhance the government's
capacity to assess competing claims for federal dollars by arming decision
makers with better information both on the results of individual programs
as well as on entire portfolios of policies, programs, and other tools
designed to address common goals. However, it is also important to
remember that in a political process performance information is likely to
be one, but not the only, factor in budgetary decision making. In other
words, performance information can change the terms of debate but it will
not necessarily determine the ultimate decision.

1In this testimony, the term performance budgeting refers to any linkage
between budgeting and expected or actual evidence-based performance
information.

2For more information see GAO's Web site "Our Nation's Fiscal Outlook: The
Federal Government's Long-Term Budget Imbalance,"
http://www.gao.gov/special.pubs/longterm.

Existing performance budgeting efforts, such as the Government Performance
and Results Act of 1993 (GPRA) 3 and PART, provide a foundation for a
baseline review of existing federal policies, programs, functions, and
activities. We recognize that this will not be easy. Reforming programs
and activities leads to winners and losers, notwithstanding demonstrated
shortfalls in performance and design. Given prior experiences and
political realities, there is little real "low-hanging fruit" in the
federal budget.

Today I will touch first on the need for a fundamental reexamination of
government given our nation's long-term fiscal challenge. Then I will turn
to and discuss the important role of performance budgeting in any such
reexamination. The successful application of performance budgeting in this
reexamination process rests on

o 	continuing to build on the legacy of GPRA by improving the reliability
and credibility of performance information and increasing program
evaluation capacity;

o 	encouraging demand for that information by garnering stakeholder
buyin-particularly from Congress-on what to measure and how to present
this information, since only then will it be linked to the congressional
authorization, appropriations, and oversight processes; and

o 	developing a comprehensive, crosscutting approach to assessing the
performance of all programs-including tax expenditures-relevant to common
goals.

This testimony draws upon our wide-ranging work on GPRA and federal budget
and performance integration and on information in the President's Budget
of the U.S. Government, Fiscal Year 2006, specifically the budget and
performance integration initiative of the President's Management Agenda
(PMA). We conducted our work in accordance with generally accepted
government auditing standards.

3Pub. L. No. 103-62 (1993).

  Long-term Fiscal Challenge Provides Reexamination Impetus

As I noted, known demographic trends and rising health care costs are
major drivers of the nation's large and growing structural deficits. The
nation cannot ignore this fiscal pressure-it is not a matter of whether
the nation deals with the fiscal gap, but how and when. GAO's long-term
budget simulations illustrate the magnitude of this fiscal challenge.
Figures 1 and 2 show these simulations under two different sets of
assumptions. Figure 1 uses the CBO January 2005 baseline through 2015. As
required by law, that baseline assumes no changes in current law, that
discretionary spending grows with inflation through 2015, and that all tax
cuts currently scheduled to expire are permitted to expire. In Figure 2,
two assumptions about that first 10 years are changed: (1) discretionary
spending grows with the economy rather than with inflation and (2) all tax
cuts currently scheduled to expire are made permanent. In both simulations
discretionary spending is assumed to grow with the economy after 2015 and
revenue is held constant as a share of Gross Domestic Product (GDP) at the
2015 level. Also in both simulations long-term Social Security and
Medicare spending are based on the 2005 trustee's intermediate
projections, and we assume that benefits continue to be paid in full after
the trust funds are exhausted. Long-term Medicaid spending is based on
CBO's December 2003 long-term projections under midrange assumptions.

Figure 1: Composition of Spending as a Share of GDP under Baseline
Extended Percent of GDP

                                       50

                                       40

                                       30

                                       20

                                       10

                                       0

2004 2015 2030 2040 Fiscal year

All other spending Medicare and Medicaid Social Security Net interest

Source: GAO's March 2005 analysis.

Note: In addition to the expiration of tax cuts, revenue as a share of GDP
increases through 2015 due to (1) real bracket creep, (2) more taxpayers
becoming subject to the Alternative Minimum Tax (AMT), and (3) increased
revenue from tax-deferred retirement accounts. After 2015, revenue as a
share of GDP is held constant.

Figure 2: Composition of Spending as a Share of GDP Assuming Discretionary
Spending Grows with GDP after 2005 and All Expiring Tax Provisions Are
Extended

Percent of GDP

50

40

30

20

10

0 2004 2015 2030 2040 Fiscal year

All other spending

Medicare and Medicaid

Social Security

Net interest

Source: GAO's March 2005 analysis.

Note: Although expiring tax provisions are extended, revenue as a share of
GDP increases through 2015 due to (1) real bracket creep, (2) more
taxpayers becoming subject to the AMT, and (3) increased revenue from
tax-deferred retirement accounts. After 2015, revenue as a share of GDP is
held constant.

As these simulations illustrate, absent policy changes on the spending
and/or revenue side of the budget, the growth in spending on federal
retirement and health entitlements will encumber an escalating share of
the government's resources. Indeed, when we assume that recent tax
reductions are made permanent and discretionary spending keeps pace with
the economy, our long-term simulations suggest that by 2040 federal
revenues may be adequate to pay little more than interest on the federal
debt. Neither slowing the growth in discretionary spending nor allowing
the tax provisions to expire-nor both together-would eliminate the
imbalance. Although federal tax policies will likely be part of any debate
about our fiscal future, making no changes to Social Security, Medicare,
Medicaid, and other drivers of the long-term fiscal gap would require at

least a doubling of federal taxes in the future-and that seems both
unrealistic and inappropriate.

These challenges would be difficult enough if all we had to do is fund
existing commitments. But as the nation continues to change in fundamental
ways, a wide range of emerging needs and demands can be expected to
compete for a share of the budget pie. Whether national security,
transportation, education, or public health, a growing population will
generate new claims for federal actions on both the spending and tax sides
of the budget.

Although demographic shifts and rising health care costs drive the
longterm fiscal outlook, they are not the only forces at work that require
the federal government to rethink its role and entire approach to policy
design, priorities, and management. Other important forces are working to
reshape American society, our place in the world, and the role of the
federal government. These include evolving defense and homeland security
policies, increasing global interdependence, and advances in science and
technology. In addition, the federal government increasingly relies on new
networks and partnerships to achieve critical results and develop public
policy, often including multiple federal agencies, domestic and
international non- or quasi-government organizations, for-profit and
notfor-profit contractors, and state and local governments. If government
is to effectively address these trends, it cannot accept all of its
existing programs, policies, and activities as "givens." Many of our
programs were designed decades ago to address earlier challenges. Outmoded
commitments and operations constitute an encumbrance on the future that
can erode the capacity of the nation to better align its government with
the needs and demands of a changing world and society. Accordingly,
reexamining the base of all major existing federal spending and tax
programs, policies, and activities by reviewing their results and testing
their continued relevance and relative priority for our changing society
is an important step in the process of assuring fiscal responsibility and
facilitating national renewal.4

A periodic reexamination offers the prospect of addressing emerging needs
by weeding out programs and policies that are redundant, outdated, or

4For more information on reexamination of federal programs, see GAO, 21st
Century Challenges: Reexamining the Base of the Federal Government,
GAO-05-325SP (Washington, D.C.: February 2005).

ineffective. Those programs and policies that remain relevant could be
updated and modernized by improving their targeting and efficiency through
such actions as redesigning allocation and cost-sharing provisions,
consolidating facilities and programs, and streamlining and reengineering
operations and processes. The tax policies and programs financing the
federal budget can also be reviewed with an eye toward both the overall
level of revenues that should be raised as well as the mix of taxes that
are used.

We recognize that taking a hard look at existing programs and carefully
reconsidering their goals and financing are challenging tasks. Reforming
programs and activities leads to winners and losers, notwithstanding
demonstrated shortfalls in performance and design. Moreover, given the
wide range of programs and issues covered, the process of rethinking
government programs and activities may take a generation to unfold.

We are convinced, however, that reexamining the base offers compelling
opportunities to both redress our current and projected fiscal imbalance
while better positioning government to meet the new challenges and
opportunities of this new century. In this regard, the management and
performance reforms enacted by Congress in the past 15 years have provided
new tools to gain insight into the financial, program, and management
performance of federal agencies and activities. The information being
produced as a result can provide a strong basis to support the needed
review, reassessment, and reprioritization process.

  Current Performance Budgeting Initiatives Hold Promise for Reexamining the
  Base

While this kind of oversight and reexamination is never easy, it is helped
by the availability of credible performance information focusing on the
outcomes achieved with budgetary resources and other tools. Performance
budgeting can help enhance the government's capacity to assess competing
claims in the budget by arming budgetary decision makers with better
information on the results of both individual programs as well as entire
portfolios of tools and programs addressing common outcomes. To facilitate
application of performance budgeting in reexamination, it is useful to
understand the current landscape. Going forward, decision makers need a
road map-grounded in lessons learned from past initiatives-that defines
what successful performance budgeting would look like and identifies the
key elements and potential pitfalls on the critical path to success.
Central to this is an understanding of what is meant by success in
performance budgeting and the key factors that influence that success.

Current Performance Budgeting Initiatives Are Grounded in Past Efforts

Performance budgeting efforts are not new at the federal level. In the
1990s, Congress and the executive branch drew on lessons learned from 50
years of efforts to link resources to results to lay out a statutory and
management framework that provides the foundation for strengthening
government performance and accountability. With GPRA as its centerpiece,
these reforms also laid the foundation for performance budgeting by
establishing infrastructures in the agencies to improve the supply of
information on performance and costs. GPRA is designed to inform
congressional and executive decision making by providing objective
information on the effectiveness and efficiency of federal programs and
spending. A key purpose of GPRA is to create closer and clearer links
between the process of allocating scarce resources and the expected
results to be achieved with those resources. Importantly, GPRA requires
both a connection to the structures used in congressional budget
presentations and consultation between the executive and legislative
branches on agency strategic plans. Because these requirements are
grounded in statute, this gives Congress an oversight stake in GPRA's
success.5 Over a decade after its enactment, GPRA has succeeded in
expanding the supply of performance information and institutionalizing a
culture of performance as well as providing a solid foundation for more
recent budget and performance initiatives.6 In part, this success can be
attributed to the fact that GPRA melds the best features, and avoids the
worst, of its predecessors.

Building on GPRA's foundation, the current administration has made the
integration of performance and budget information one of five
governmentwide management priorities under its PMA.7 PART is central to

5See Pub. L. No. 103-62 S: 2, 5 U.S.C. S: 306, and 31 U.S.C. S:S:
1115-1116.

6GAO, Results-Oriented Government: GPRA Has Established a Solid Foundation
for Achieving Greater Results, GAO-04-38 (Washington, D.C.: Mar. 10,
2004).

7In addition to budget and performance integration, the other four
priorities under PMA are strategic management of human capital, expanded
electronic government, improved financial performance, and competitive
sourcing.

the Administration's budget and performance integration initiative.8 OMB
describes PART as a diagnostic tool meant to provide a consistent approach
to assessing federal programs as part of the executive budget formulation
process. It applies 25 questions to all "programs"9 under four broad
topics: (1) program purpose and design, (2) strategic planning, (3)
program management, and (4) program results (i.e., whether a program is
meeting its long-term and annual goals) as well as additional questions
that are specific to one of seven mechanisms or approaches used to deliver
the program.10

Drawing on available performance and evaluation information, the PART
questionnaire attempts to determine the strengths and weaknesses of
federal programs with a particular focus on individual program results and
improving outcome measures. PART asks, for example, whether a program's
long-term goals are specific, ambitious, and focused on outcomes, and
whether annual goals demonstrate progress toward achieving long-term
goals. It is designed to be evidence-based, drawing on a wide array of
information, including authorizing legislation, GPRA strategic plans and
performance plans and reports, financial statements, inspector general and
GAO reports, and independent program evaluations.

Since the fiscal year 2004 budget cycle, OMB has applied PART to 607
programs (about 60 percent of the federal budget) and given each program
one of four overall ratings: (1) "effective," (2) "moderately effective,"
(3) "adequate," or (4) "ineffective" based on program design, strategic
planning, management, and results. A fifth rating, "results not
demonstrated," was given-independent of a program's numerical score-

8For a detailed examination of PART, see GAO, Performance Budgeting:
Observations on the Use of OMB's Program Assessment Rating Tool for the
Fiscal Year 2004 Budget, GAO04-174 (Washington, D.C.: Jan. 30, 2004).
Another significant element of the performance and budget integration
initiative is efforts to restructure budgets. See GAO, Performance
Budgeting: Efforts to Restructure Budgets to Better Align Resources with
Performance, GAO-05-117SP (Washington, D.C.: February 2005).

9There is no standard definition for the term "program." For purposes of
PART, OMB described the unit of analysis (program) as (1) an activity or
set of activities clearly recognized as a program by the public, OMB,
and/or Congress; (2) having a discrete level of funding clearly associated
with it; and (3) corresponding to the level at which budget decisions are
made.

10The seven major categories are competitive grants, block/formula grants,
capital assets and service acquisition programs, credit programs,
regulatory-based programs, direct federal programs, and research and
development programs.

if OMB decided that a program's performance information, performance
measures, or both were insufficient or inadequate. During the next 2
years, the Administration plans to assess all remaining executive branch
programs with limited exceptions.11

As I testified before this subcommittee in April,12 PMA and its related
initiatives, including PART, demonstrate the Administration's commitment
to improving federal management and performance. By calling attention to
successes and needed improvements, the focus that these initiatives bring
is certainly a step in the right direction, and our work shows that
progress has been made in several important areas over the past several
years. However, it is not clear that PART has had any significant impact
on congressional authorization, appropriations, and oversight activities
to date. In order for such efforts to hold appeal beyond the executive
branch, developing credible performance information and garnering
congressional buy-in on what to measure and how to present this
information to them are critical. Otherwise, as some congressional
subcommittees have noted, PART is unlikely to play a major role in the
authorization, appropriations, and oversight processes.

Prior initiatives have left us with some lessons about how to build a
sustainable approach to linking resources to results. Before I discuss
those critical factors let me touch briefly on the importance of realistic
expectations. I say this because previous management reforms have been
doomed by inflated and unrealistic expectations. Performance budgeting can
do a great deal: it can help policymakers address important questions such
as whether programs are contributing to their stated goals, are
wellcoordinated with related initiatives at the federal level or
elsewhere, and are targeted to the intended beneficiaries. However, it
should not be expected to provide the answers to all resource allocation
questions in some automatic or formula-driven process. Performance
problems may well prompt budget cuts, program consolidations, or
eliminations, but they may also inspire enhanced investments and reforms
in program design and management if the program is deemed to be of
sufficiently high priority to the nation. Conversely, even a program that
is found to be exceeding its

11The administration is considering alternative methods and timelines for
assessment of programs with limited impact and large activities where it
is difficult to determine an appropriate unit of analysis.

12GAO, Management Reform: Assessing the President's Management Agenda,
GAO-05574T (Washington, D.C.: Apr. 21, 2005).

performance expectations can be a candidate for budgetary cuts if it is a
lower priority than other competing claims in the process. The
determination of priorities is a function of competing values and
interests that may be informed by performance information but also
reflects other factors, such as the overall budget situation, the state of
the economy, security needs, equity considerations, unmet societal needs,
and the appropriate role of the federal government in addressing any such
needs.

Accordingly, we found that while PART scores for fiscal year 2004 were
generally positively related to the Administration's proposed funding
changes in discretionary programs, the scores did not automatically
determine funding changes. That is, for some programs rated "effective" or
"moderately effective" OMB recommended funding decreases, while for
several programs judged to be "ineffective" OMB recommended additional
funding in the President's budget request with which to implement
changes.13 As we have noted, success in performance budgeting should not
be defined only by its impact on funding decisions but also on the extent
to which it helps inform Congress and executive branch policy decisions
and improve program management.14 In this regard, for the fiscal year 2004
PART assessments we reported that over 80 percent of the PART
recommendations focused on improving program management, assessment, and
design; less than 20 percent related to funding.15

We also reported that OMB's ability to use PART to identify and address
future program improvements and measure progress-a major purpose of
PART-is predicated on its ability to oversee the implementation of PART
recommendations. At the request of the Chairman of the House Subcommittee
on Government Management, Finance, and Accountability, Committee on
Government Reform, we are currently conducting a review of (1) OMB's and
agencies' perspectives on the effects PART recommendations are having on
agency operations and results and issues encountered in responding to PART
recommendations; (2) OMB's leadership and direction in ensuring an
integrated, complementary relationship between PART and GPRA, including
how OMB is assessing performance when multiple programs or agencies are
involved in meeting

13GA0-04-174, 14.

14GAO, The Government Performance and Results Act: 1997 Governmentwide
Implementation Will Be Uneven, GAO/GGD-97-109 (Washington, D.C.: June 2,
1997), 90.

15GA0-04-174, 12.

goals and objectives; and (3) steps OMB has taken to involve Congress in
the PART process.

  Achieving Success in Performance Budgeting Requires Credible Information,
  Congressional "Buyin," and a Comprehensive and Crosscutting Perspective

Let me now turn to three factors we believe are critical to sustaining
successful performance budgeting over time:

1. building a supply of credible performance information,

2.	encouraging demand for that information and its use in congressional
processes by garnering stakeholder buy-in, and

3.	taking a comprehensive and crosscutting approach to assessing related
programs and policies.

Having a Supply of Credible Performance Information

The credibility of performance information, including related cost data,
and the ability of federal agencies to produce credible evaluations of
their programs' effectiveness are key to the success of performance
budgeting. As I testified before this subcommittee in April, this type of
information is critical for effective performance measurement to support
decisions in areas ranging from program efficiency and effectiveness to
sourcing and contract management. To be effective, this information must
not only be timely and reliable, but also both useful and used. Agencies
are expected to implement integrated financial and performance management
systems that routinely produce information that is (1) timely-to measure
and affect performance, (2) useful-to make more informed operational and
investing decisions, and (3) reliable-to ensure consistent and comparable
trend analysis over time and to facilitate better performance measurement
and decision making. Producing timely, useful, and reliable information is
critical for achieving the goals that Congress established in GPRA, the
Chief Financial Officers (CFO) Act of 1990,16 and other federal financial
management reform legislation.

16Pub. L. No. 101-576 (1990).

Unfortunately, as our work on PART and GPRA implementation shows, the
credibility of performance data has been a long-standing weakness.17
Likewise, our work has noted limitations in the quality of agency
evaluation information and in agency capacity to produce rigorous
evaluations of program effectiveness. We have previously reported that
agencies have had difficulty assessing many program outcomes that are not
quickly achieved or readily observed and contributions to outcomes that
are only partly influenced by federal funds.18 Furthermore, our work has
shown that few agencies deployed the rigorous research methods required to
attribute changes in underlying outcomes to program activities.19 Our 2003
review of agencies' evaluation capacity identified four main elements that
can be used to develop and improve evaluation efforts. They are (1) an
evaluation culture, (2) data quality, (3) analytic expertise, and (4)
collaborative partnerships.20

OMB, through its development and use of PART, has provided agencies with a
powerful incentive for improving data quality and availability. Agencies
may make greater investments in improving their capacity to produce and
procure quality information if agency program managers perceive that
program performance and evaluation data will be used to make actual
resource decisions throughout the resource allocation process and can help
them get better results.

Improvements in the quality of performance data and the capacity of
federal agencies to perform program evaluations will require sustained
commitment and investment of resources. Over the longer term, failing to
discover and correct performance problems can be much more costly. More
importantly, it is critical that budgetary investments in this area be
viewed as part of a broader initiative to improve the accountability and
management capacity of federal agencies and programs.

17GAO has suggested various approaches to addressing this and other
challenges. See GAO/GGD-97-109 and GAO-04-38.

18GAO, Performance Budgeting: Opportunities and Challenges, GAO-02-1106T

(Washington, D.C.: Sept. 19, 2002).

19GAO, Program Evaluation: Agencies Challenged by New Demand for
Information on Program Results, GAO/GGD-98-53 (Washington, D.C.: Apr. 24,
1998).

20GAO, Program Evaluation: An Evaluation Culture and Collaborative
Partnerships Help Build Agency Capacity, GAO-03-454 (Washington, D.C.: May
2, 2003).

Obtaining Congressional Buy-in

Federal performance and accountability reforms have given much attention
to increasing the supply of performance information over the past several
decades. However, improving the supply of performance information is in
and of itself insufficient to sustain performance management and achieve
real improvements in management and program results. Rather, it needs to
be accompanied by a demand for and use of that information by decision
makers and managers alike. Key stakeholder outreach and involvement is
critical to building demand and, therefore, success in performance
budgeting.

Lack of consensus by a community of interested parties on goals and
measures and the way that they are presented can detract from the
credibility of performance information and, subsequently, its use. Fifty
years of past executive branch efforts to link resources with results have
shown that any successful effort must involve Congress as a full partner.
We have previously reported that past performance budgeting initiatives
faltered in large part because they intentionally attempted to develop
performance plans and measures in isolation from the congressional
authorization, appropriations, and oversight processes.21 While
congressional buy-in is critical to sustain any major management
initiative, it is especially important for performance budgeting given
Congress's constitutional role in setting national priorities and
allocating the resources to achieve them.

Obtaining buy-in on goals and measures from a community of interested
parties is critical to facilitating use of performance information in
resource allocation decisions. PART was designed for and is used in the
executive branch budget preparation and review process; as such, the goals
and measures used in PART must meet OMB's needs. However, the current
statutory framework for strategic planning and reporting is GPRA-a broader
process involving the development of strategic and performance goals and
objectives to be reported in strategic and annual plans. OMB's desire to
collect performance data that better align with budget decision units
means that the fiscal year 2004 PART process became a parallel competing
structure to the GPRA framework. Although OMB acknowledges that GPRA was
the starting point for PART, the emphasis is shifting. Over time, as the
performance measures developed for PART are

21GAO, Performance Budgeting: Past Initiatives Offer Insights for GPRA
Implementation, GAO/AIMD-97-46 (Washington, D.C.: Mar. 27, 1997).

used in the executive budget process, these measures may come to drive
agencies' strategic planning processes.

Opportunities exist to strengthen PART's integration with the broader GPRA
planning process. Some tension about the amount of stakeholder involvement
in the internal deliberations surrounding the development of PART measures
and the broader consultations more common to the GPRA strategic planning
process is inevitable. Compared to the relatively openended GPRA process,
any budget formulation process is likely to seem closed. However, if PART
is to be accepted as other than one element in the development of the
President's budget proposal, congressional understanding and acceptance of
the tool and its analysis will be critical.

As part of the executive branch budget formulation process, PART must
clearly serve the President's interests. However, measures developed
solely by the executive branch for the purposes of executive budget
formulation may discourage their use in other processes, such as internal
agency management and the congressional budget process, especially if
measures that serve these other processes are eliminated through the PART
process. PART's focus on outcome measures may ignore stakeholders' needs
for other types of measures, such as output and workload information. Our
recent work examining performance budgeting efforts at both the state and
federal levels revealed that appropriations committees consider workload
and output measures important for making resource allocation decisions.22
Workload and output measures lend themselves to the budget process because
workload measures, in combination with cost-per-unit information, can be
used to help develop appropriation levels and legislators can more easily
relate output information to a funding level to help define or support a
desired level of service. Like PART, GPRA states a preference for outcome
measures. However, in practice, GPRA also recognizes the need to develop a
range of measures, including output and process measures. Since different
stakeholders have different needs and no one set of goals and measures can
serve all purposes, PART can and should complement GPRA but should not
replace it.

Moreover, as we have previously reported, several appropriations
subcommittees have cited the need to link PART with congressional

22See GAO, Performance Budgeting: States' Experiences Can Inform Federal
Efforts, GAO05-215 (Washington, D.C.: Feb. 28, 2005) and GAO-05-117SP.

oversight.23 For example, the House Report accompanying the Transportation
and Treasury Appropriations Bill for fiscal year 2004 included a statement
in support of PART, but noted that the Administration's efforts must be
linked with the oversight of Congress to maximize the utility of the PART
process, and that if the Administration treats as privileged or
confidential the details of its rating process, it is less likely that
Congress will use those results in deciding which programs to fund.24
Moreover, the subcommittee said it expects OMB to involve the House and
Senate Committees on Appropriations in the development of the PART ratings
at all stages in the process.

In our January 2004 report on PART,25 we suggested steps for both OMB and
Congress to take to strengthen the dialogue between executive branch
officials and key congressional stakeholders, and OMB generally agreed. We
recommended that OMB reach out to key congressional committees early in
the PART selection process to gain insight about which program areas and
performance issues congressional officials consider warrant PART review.
Engaging Congress early in the process may help target reviews with an eye
toward those areas most likely to be on the agenda of Congress, thereby
better ensuring the use of performance assessments in resource allocation
processes throughout government.

The importance of getting buy-in for successful performance budgeting can
be seen in the experience of OMB's recent efforts to restructure budget
accounts.26 While OMB staff and agency officials credited budget
restructuring with supporting results-oriented management, the budget
changes did not meet the needs of some congressional appropriations
committees. While congressional appropriations subcommittee staff
expressed general support for budget and performance integration, they
objected to changes that substituted rather than supplemented information
traditionally used for appropriations and oversight purposes. As we said
in our February 2005 report on this issue,27 the greatest challenge of
budget restructuring may be discovering ways to reflect both the broader
planning

23GAO-04-174.
24H.R. Rep. No. 108-243, pp. 168-69 (2003).
25GAO-04-174.
26For more information on this effort, see GAO-05-117SP.
27GAO-05-117SP.

perspective that can add value to budget deliberations and foster
accountability in ways that Congress considers appropriate for meeting its
authorizing, appropriations, and oversight objectives.

Going forward, infusing a performance perspective into budget decisions
may only be achieved when the underlying information becomes more
credible, accepted, and used by all major decision makers. Thus, Congress
must be considered a full partner in any efforts to infuse a performance
budget perspective into budget structure and budget deliberations. In due
course, once the goals and underlying data become more compelling and used
by Congress, budget restructuring may become a more compelling tool to
advance budget and performance integration.

Reexamination Requires a Crosscutting Perspective

While existing performance budgeting initiatives provide a foundation for
a baseline review of federal policies, programs, functions, and
activities, several changes are in order to support the type of
reexamination needed. For example, PART focuses on individual programs,
but key outcomeoriented performance goals-ranging from low income housing
to food safety to counterterrorism-are addressed by a wide range of
discretionary, entitlement, tax, and regulatory approaches that cut across
a number of agencies. While PART's program-by-program approach fits with
OMB's agency-by-agency budget reviews, it is not well suited to addressing
crosscutting issues or to looking at broad program areas in which several
programs address a common goal.

The evaluation of programs in isolation may be revealing, but a broader
perspective is necessary for an effective overall reexamination effort. It
is often critical to understand how each program fits with a broader
portfolio of tools and strategies-such as regulations, direct loans, and
tax expenditures-to accomplish federal missions and performance goals.
Such an analysis is necessary to capture whether a program complements and
supports other related programs, whether it is duplicative and redundant,
or whether it actually works at cross-purposes to other initiatives. OMB
reported on a few crosscutting PART assessments in the fiscal year 2006
budget and plans to conduct additional crosscutting reviews in 2005.
However, we would urge a more comprehensive and consistent approach to
evaluating all programs relevant to common goals.

Such an approach would require assessing the performance of all programs
related to a particular goal-including tax expenditures and regulatory
programs-using a common framework. Our federal tax system includes

hundreds of billions of dollars of annual expenditures-the same order of
magnitude as total discretionary spending. Yet relatively little is known
about the effectiveness of tax incentives in achieving the objectives
intended by Congress. PART, OMB's current framework for assessing the
performance of federal programs, has not been applied to tax expenditures.
Assessing complete portfolios of tools related to key outcome-oriented
goals is absolutely critical to the type of reexamination needed. The
governmentwide performance plan required by GPRA could help address this
issue.

GPRA requires the President to include in his annual budget submission a
federal government performance plan. Congress intended that this plan
provide a "single cohesive picture of the annual performance goals for the
fiscal year."28 The governmentwide performance plan could help Congress
and the executive branch address critical federal performance and
management issues, including redundancy and other inefficiencies in how we
do business. It could also provide a framework for any restructuring
efforts. Unfortunately, this provision has not been fully implemented.
Instead, OMB has used the President's budget to present high-level
information about agencies and certain program performance issues. The
agency-by-agency focus of the budget does not provide the integrated
perspective of government performance envisioned by GPRA.

If the governmentwide performance plan were fully implemented, it could
also provide a framework for congressional oversight and other activities.
In that regard, we have also suggested that Congress consider the need to
develop a more systematic vehicle for communicating its top performance
concerns and priorities; develop a more structured oversight agenda to
prompt a more coordinated congressional perspective on crosscutting
performance issues; and use this agenda to inform its authorization,
appropriations, and oversight processes. One possible approach would
involve developing a congressional performance resolution identifying the
key oversight and performance goals that Congress wishes to set for its
own committees and for the government as a whole. Such a resolution could
be developed by modifying the current congressional budget resolution,
which is already organized by budget function. Initially, this may involve
collecting the "views and estimates" of authorization and appropriations
committees on priority performance issues for programs under their
jurisdiction and working with such crosscutting committees as

28S. Rep. No. 103-58, p. 27 (1993).

this committee, the House Committee on Government Reform, and the House
Committee on Rules.

In addition, we have previously recommended that Congress consider
amending GPRA to require the President to develop a governmentwide
strategic plan to provide a framework to identify long-term goals and
strategies to address issues that cut across federal agencies.29 A
strategic plan for the federal government, supported by key national
outcome-based indicators to assess the government's performance, position,
and progress, could be a valuable tool for governmentwide reexamination of
existing programs, as well as proposals for new programs. Developing a
strategic plan can help clarify priorities and unify stakeholders in the
pursuit of shared goals. Therefore, developing a strategic plan for the
federal government would be an important first step in articulating the
role, goals, and objectives of the federal government. If fully developed,
a governmentwide strategic plan can potentially provide a cohesive
perspective on the long-term goals of the federal government and provide a
much-needed basis for fully integrating, rather than merely coordinating,
a wide array of federal activities. The development of a set of key
national indicators could be used as a basis to inform the development of
governmentwide strategic and annual performance plans. The indicators
could also link to and provide information to support outcome-oriented
goals and objectives in agency-level strategic and annual performance
plans. Successful strategic planning requires the involvement of key
stakeholders. Thus, it could serve as a mechanism for building consensus.
Further, it could provide a vehicle for the President to articulate
long-term goals and a road map for achieving them. In addition, a
strategic plan can provide a more comprehensive framework for considering
organizational changes and making resource decisions.

Concluding	The federal government is in a period of profound transition
and faces an array of challenges and opportunities to enhance performance,
ensure

Observations	accountability, and position the nation for the future. In
addition to the serious long-term fiscal challenges facing the nation, a
number of overarching trends, such as defense and homeland security
policies, increasing global interdependence, and advances in science and
technology, drive the need to reconsider the proper role for the federal

29GAO-04-38.

government in the 21st century, including what it does, how it does it,
who does it, and how it gets financed. This will mean bringing a variety
of tools and approaches to bear. In our February 2005 report on 21st
century challenges, we outline a number of approaches that could
facilitate a reexamination effort.30 Today, I've discussed several of
these, as well as some additional steps that I believe are necessary for
an effective reexamination effort.

Much is at stake in the development of a collaborative performance
budgeting process. This is an opportune time for the executive branch and
Congress to consider and discuss how agencies and committees can best take
advantage of and leverage the new information and perspectives coming from
the reform agenda under way in the executive branch. Through PMA and its
related initiatives, including PART, the Administration has taken
important steps in the right direction by calling attention to successes
and needed improvements in federal management and performance. Some
program improvements can come solely through executive branch action, but
for PART to meet its full potential the assessments it generates must also
be meaningful to and used by Congress and other stakeholders.

Successful integration of inherently separate but interrelated strategic
planning and performance budgeting processes is predicated on (1) ensuring
that the growing supply of performance information is credible, useful,
reliable, and used (2) increasing the demand for this information by
developing goals and measures relevant to the large and diverse community
of stakeholders in the federal budget and planning processes, and (3)
taking a comprehensive and crosscutting approach. It will only be through
the continued attention of the executive branch and Congress that progress
can be sustained and, more importantly, accelerated. This effort can both
strengthen the budget process itself and provide a valuable tool to
facilitate a fundamental reexamination of the base of government. We
recognize that this process will not be easy. Given the wide range of
programs and issues covered, the process of rethinking the full range of
federal government programs, policies, and activities could take a
generation or more to complete. Regardless of the specific combination of
reexamination approaches adopted, success will require not only the
factors listed above but also sustained leadership throughout the many
stages of the policy process. In addition, for comprehensive

30GA0-05-325SP, 82-7.

reexamination of government programs and policies, clear and transparent
processes for engaging the broader public in the debate are also needed.

Mr. Chairman, this concludes my prepared statement. I would be pleased to
answer any questions you or the other Members of the Subcommittee may have
at this time.

For future information on this testimony, please contact Paul L. Posner at
(202) 512-9573 or [email protected]. Individuals making key contributions to
this testimony include Jacqueline Nowicki, Tiffany Tanner, and Benjamin
Licht.

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