District of Columbia Government: Management Reform Projects Not
Effectively Monitored (Testimony, 06/30/2000, GAO/T-AIMD-00-237).

Pursuant to a congressional request, GAO discussed the District of
Columbia's management reform initiatives.

GAO noted that: (1) over the past 3 fiscal years, the District
government has proposed hundreds of management reform initiatives that
were estimated to save millions of dollars as well as improve government
services; (2) however, as of June 1, 2000, the District had only
reported savings of about $1.5 million related to these initiatives and
had not consistently tracked the status of these projects; (3) neither
the District of Columbia Financial Responsibility a nd Management
Assistance Authority nor the District could provide adequate details on
the goals achieved for all of the projects that had been reported as
completed or in various stages of completion; (4) the District does not
have a systematic process to monitor these management reform projects
and determine where savings or customer service improvements have been
realized; and (5) the District cannot say for certain how funds
designated for management reform have been spent or whether the key
goals of these initiatives have been realized.

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

 REPORTNUM:  T-AIMD-00-237
     TITLE:  District of Columbia Government: Management Reform
	     Projects Not Effectively Monitored
      DATE:  06/30/2000
   SUBJECT:  Municipal governments
	     Productivity in government
	     Municipal budgets
	     Reengineering (management)
	     Planning programming budgeting
	     Budget cuts
	     Management information systems
	     Cost control
	     Financial management
IDENTIFIER:  District of Columbia Automated Integrated Tax System
	     District of Columbia Real Property Inventory System
	     District of Columbia Motor Vehicle Information System
	     District of Columbia

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GAO/T-AIMD-00-237

   * For Release on Delivery
     Expected at
     10 a.m.

Friday,

June 30, 2000

GAO/T-AIMD-00-237

district of columbia government

Management Reform Projects Not Effectively Monitored

        Statement of Gloria L. Jarmon

Director, Health, Education, and Human Services Accounting and Financial
Management Issues

Accounting and Information Management Division

Testimony

Before the Subcommittee on the District of Columbia, Committee on
Appropriations, House of Representatives

United States General Accounting Office

GAO

Mr. Chairman and Members of the Subcommittee:

I am pleased to be here today to provide you with information on the
District of Columbia's management reform initiatives. Begun in fiscal year
1998, management reform was seen as a way to transform the District's
operations to provide quality services to its citizens, businesses, and
visitors. From fiscal years 1998 through 2000, the District budgeted over
$300 million, $33 million of which was federal appropriations, to fund these
initiatives. Included in the District's budgets for this period were
projected savings of about $200 million, including $17 million in management
reform productivity savings. Because of your concern that little information
was available regarding the results achieved from these initiatives, you
asked us to provide information on the

   * status of the over 250 management reform initiatives;
   * estimated $10 million in management reform productivity savings
     resulting from these initiatives contained in the fiscal year 1999
     budget;
   * estimated $41 million in management savings outlined in the fiscal year
     2000 budget; and
   * $152.4 million in estimated cost savings initiatives contained in the
     fiscal year 1998 budget as proposed in the previous Mayor's plan, A
     Transformed Government of the People of Washington, D.C.

In summary, over the past 3 fiscal years, the District government has
proposed hundreds of management reform initiatives that were estimated to
save millions of dollars as well as improve government services. However, as
of June 1, 2000, the District had only reported savings of about $1.5
million related to these initiatives and had not consistently tracked the
status of these projects. Neither the District of Columbia Financial
Responsibility and Management Assistance Authority (the Authority) nor the
District could provide adequate details on the goals achieved for all of the
projects that had been reported as completed or in various stages of
completion. The District does not currently have a systematic process to
monitor these management reform projects and determine where savings or
customer service improvements have been realized. Consequently, the District
cannot say for certain how funds designated for management reform have been
spent or whether the key goals of these initiatives have been realized.

Before discussing these matters in more detail, I will provide some
background information to the Subcommittee regarding management reform in
the District. A chronology of key events related to management reform in the
District is included as an attachment to the testimony.

Background

In September 1997, the Authority hired 11 consultants, at a cost of
$6.6 million, to develop management reform plans for these agencies and
functions. The District's management reform team, consisting of the Chairman
of the Authority, the former Mayor, the Chairman of the City Council, and
the heads of each agency, approved the projects for implementation. The
Authority then hired a Chief Management Officer (CMO) who was delegated
responsibility for these projects. The CMO implemented a system to manage
these projects that included development of operational plans,
identification of the official directly responsible for each project, and
periodic monitoring of each project. Agencies were required to report
monthly on expenditures and the results of the projects. On October 30,
1998, the Authority reported in its Fiscal Year 1998 Annual Performance
Report that 69 projects had been completed. In January 1999, the Authority
returned responsibility for the nine city agencies and four citywide
functions to the newly elected Mayor.

District officials told us that the current administration established a new
reform agenda that incorporated a small number of the remaining management
reform projects. Specifically, the District selected 20 of the remaining 200
projects that it considered to be the best projects to be continued in
fiscal year 1999. The District also initiated 7 new projects, for a total of
27 projects that were funded in fiscal year 1999.

To determine the status and results of the District's management reform
initiatives, we reviewed pertinent financial documents and reports provided
by the Office of the Chief Financial Officer (OCFO), the Authority, the
office of the former CMO, and the D.C. City Council. We also interviewed the
Deputy Mayor for Operations, the Chief Financial Officer, and other
officials from those offices and the Authority.

We did not audit the District's management reform funds or expenditures, and
accordingly, we do not express an opinion or any other form of assurance on
these reported amounts. Our work was done in accordance with generally
accepted government auditing standards between April and June 2000.

I will now discuss in more detail the matters I highlighted earlier.

Management Reform Projects Were Not Consistently Tracked

During fiscal years 1998 and 1999, the District budgeted over $300 million
to begin implementing over 250 management reform projects. The reported
fiscal year 1998 investment in management reform of about
$293 million included $112.6 million of operating funds and $180.3 million
of capital funds. For fiscal year 1999, the investment in management reform
of $36.2 million included $30.9 million of operating funds and
$5.3 million of capital funds. Of the $36.2 million, about $33 million was
federal appropriations provided to the Authority specifically for management
reform. Table 1 shows the total funds provided to the District for
management reform for fiscal years 1998 through 2000, the amounts reported
as obligated, estimated savings from those initiatives, and reported savings
from those initiatives.

Table 1: Management Reform Funding, Reported Obligations, Remaining
Balances, Estimated Savings, and Reported Savings Achieved for Fiscal Years
1998, 1999, and 2000 (unaudited)
 Dollars in millions
                                                  Estimated
 Fiscal   Total funds   Total funds  Total funds  savings      Reported
 year     budgeted      obligated    remaining at included in  savings
                                     year-end
                                                  the budget
 1998     292.8         126.9        165.9        0a           0
 1999     36.2          29.1         7.1          10.0         1.5
 2000     0             0            0            7.0b         0
 Totals   329.0         156.0        173.0        17.0         1.5

(Differences due to rounding)

a While not directly related to the management reform projects identified in
fiscal year 1998, $152.4 million in estimated cost savings initiatives were
in the fiscal year 1998 budget as proposed by the previous Mayor's plan, A
Transformed Government of the People of Washington, D.C.

b This amount was part of the $41 million in management productivity savings
outlined in the fiscal year 2000 budget. The remaining $34 million was not
directly related to management reform initiatives identified for fiscal
years 1998 and 1999.

Source: District of Columbia OCFO. We did not independently verify this
information.

Fiscal Year 1998 Projects

The status of the funds appropriated for the management reform projects
initially identified in fiscal year 1998 and the disposition of those
projects is as follows:

   * The District reported in its Final Fiscal Year 1998 Management Reform
     Summary of Operating and Capital Funds, as of September 30, 1998, that
     of the $292.8 million budgeted for management reform, approximately
     $126.9 million had been spent and about $165.9 million was available at
     the end of fiscal year 1998. Of this amount, approximately $2.3 million
     of operating funds lapsed, resulting in about $163.6 million remaining
     at the end of fiscal year 1998.
   * About $3.2 million of operating funds (included in the $163.6 million
     above), which was not allocated to any particular project, was carried
     over to fiscal year 1999 for management reform projects in accordance
     with the District of Columbia Appropriations Act of 1999, Public Law
     105-277.
   * The remainder was allocated to 35 former management reform initiatives
     that were designated as capital projects and were no longer considered
     part of the management reform program. According to the District's
     Expenditure Data on Capital Projects report, the $160.4 million in
     capital funds (included in the $163.6 million previously mentioned)
     unspent at the end of fiscal year 1998 was carried over into fiscal
     year 1999 for the 35 projects. Included in the 35 projects were
     initiatives for the Automated Integrated Tax System, implementing the
     Real Property Inventory System, and implementing a new Motor Vehicle
     Information System.
   * According to the Authority, 69 projects had been completed. Included in
     the completed projects were the modification of the Department of
     Corrections Employee Pay Plan and an increase in the number of building
     inspections.

Although the District's Final Fiscal Year 1998 Management Reform Summary
reported fiscal year spending on these management reform projects totaling
about $127 million, the District could not specifically identify the amount
of funds spent that was used to pay consultants, contractors, and District
employees. According to District officials, the former CMO requested
information regarding funds spent for consultants and contractors from the
agencies during fiscal year 1998. This information was reported to the OCFO
on a monthly basis. However, we found that the data was inconsistent, and no
such information related to these management reform projects was requested
in fiscal year 1999. The District, however, has acknowledged that management
reform funds were used for projects other than management reform; for
example, about
$11.3 million was used for the pay increase for District of Columbia Public
School teachers.

Fiscal Year 1999 Projects

As of June 16, 2000, the District had not determined the status of the 27
management reform projects for fiscal year 1999. In February 2000, the
Office of the Deputy Mayor for Operations asked District agencies
responsible for the projects to provide information on the original project
goals and the results that had been achieved. According to District
officials, they obtained information on only a few projects. The Deputy
Mayor for Operations told us that he expected to have the status of each
project by mid-June. As of June 26, 2000, we had not received this
information.

Projected Management Reform Savings Not Realized

Fiscal Year 2000 Management Initiative Savings Not Likely to Be Realized

   * $7 million in management reform productivity savings;
   * $14 million in savings resulting from the implementation of the
     District of Columbia Supply Schedule; and
   * $20 million in productivity bank savings.

The District does not know whether any savings will be realized from the $7
million of management reform productivity savings. District officials told
us that the former CMO and the Authority set the goal of $7 million;
however, no one identified the savings targets related to specific
management reform initiatives prior to the formulation of the fiscal year
2000 budget. The District does not expect any savings in fiscal year 2000
from the $14 million, which was to be derived from the District's
establishment of a District Supply Schedule. District officials told us that
the new Chief Procurement Officer had reviewed the D.C. Supply Schedule
initiative in the summer of 1999 and determined that it did not offer
advantages beyond existing federal schedules that District agencies were
already utilizing. The District expects no savings from the $20 million
productivity bank project, nor are these savings directly related to any
management reform initiatives. The timing of congressional approval of the
federal budget resulted in productivity bank funds not being available to
agencies until the second quarter of fiscal year 2000. According to District
officials, the timing of the budget approval, combined with the same year
repayment requirement, has discouraged agencies from taking advantage of
this fund, as productivity savings are often realized in small amounts
within the first year and in increasing amounts in subsequent years.

Transformed Government Plan Cost-Savings Initiatives Have Not Been
Implemented

Originally proposed by the previous Mayor's 1996 plan, A Transformed
Government of the People of Washington, D.C., this group of initiatives was
included as an appendix to the fiscal year 1998 budget. The projects, which
ranged from reducing the number of District employees to streamlining
services to promote economic development, were estimated to save about
$152.4 million. According to District and Authority officials, many of the
initiatives listed in the plan have not been implemented and no savings have
been realized. In many instances, the initiatives have been overtaken by
other events, such as the National Capital Improvement and Revitalization
Act of 1997. Because so few of the initiatives have been implemented,
District officials told us that information is not available to determine
the net benefit to the District either in terms of dollars saved or improved
efficiencies and effectiveness of District services.

Conclusion

Contact and Acknowledgments

Attachment

District of Columbia Chronology of Key Events Related to Management Reform

 Date                Event
                     The President signed into law the District of Columbia
                     Financial Responsibility and Management Assistance
                     Act, P. L. 104-8, creating the District of Columbia
                     Financial Responsibility and Management Assistance
                     Authority (Authority), to address fiscal and
 April 17, 1995      management problems in the government of the District
                     of Columbia. The Authority and Chief Financial Officer
                     (CFO) of the District were charged with improving the
                     delivery of city services and returning the District
                     of Columbia to a position of financial solvency as
                     evidenced by 4 consecutive years of balanced municipal
                     budgets.

 October 1995        The Mayor appointed Anthony Williams to the position
                     of CFO of the District.
                     The President announced his National Capital
                     Revitalization and Self-Government Improvement Plan, a
                     proposal to substantially alter the financial
                     relationship between the District of Columbia and the
 January 14, 1997    federal government. The National Capital
                     Revitalization and Self-Government Improvement Plan
                     was the precursor to the National Capital
                     Revitalization and Self-Government Improvement Act,
                     Title XI of the Balanced Budget Act of 1997, Public
                     Law 105-33.

 May 1997            The District CFO appointed Dr. Abdusalam Omer to the
                     position of Deputy CFO for Budget and Planning.
                     The Authority conducted a Resident Satisfaction Survey
 Spring 1997         to assess the impact of management failures on service
                     delivery to citizens of the District.
                     The President signed into law the National Capital
                     Revitalization and Self-Government Improvement Act, P.
                     L. 105-33, transferring to the Authority control of
                     the District's nine largest agencies. The act required
                     the Authority to obtain consultants to develop
                     management reform plans for these nine agencies and
                     for four citywide functions. The Authority announced
                     that the position of Chief Management Officer (CMO)
 August 5, 1997      would be created. The CMO would be charged with the
                     responsibility of overseeing the management reform
                     initiatives and working on a daily basis with agency
                     directors. Section 11103 of the act authorized
                     appropriations to the Authority in amounts necessary
                     to execute management reform plans. The Authority
                     issued an Order whereby it appointed Acting Directors
                     of each of the nine District agencies identified in P.
                     L. 105-33.
                     The Authority issued a request for proposals for
                     assessing, developing, and implementing management
 August 20, 1997     reform plans. One hundred thirty-three solicitations
                     were distributed and 71 proposals were received and
                     evaluated.
                     In accordance with P. L. 104-8, the Authority awarded
 September 4, 1997   contracts to 11 consultants for development of
                     management reform plans. The cost was $6.6 million.

 October 8, 1997     The consultants submitted organizational assessment
                     reports to the Authority.

 October 25, 1997    The consultants submitted recommended improvement
                     projects to the Authority.
                     The President signed into law the District of Columbia
                     Appropriations Act of 1998, P. L. 105-100, which
                     provided a federal payment to the District of Columbia
                     for management reform in the amount of $8 million, to
                     remain available until September 30, 1999. This sum
 November 19, 1997   was provided to help pay consultants to develop reform
                     plans and fund the position of CMO. The act also
                     provided $201.1 million resulting from a smaller
                     federal payment to the District government in exchange
                     for the federal assumption of certain District
                     functions or expenses, in accordance with the
                     Revitalization Act.
                     The consultants submitted, through the reform teams,
 November 25, 1997   final management reform plans to the Authority
                     containing 340 management improvement projects.
                     The Authority submitted Management Reform in the
                     District of Columbia: Introduction and Summary to
                     Congress in which it identified 269 out of the 340
 January 2, 1998     suggested management reform projects for
                     implementation, in collaboration with the management
                     reform teams, and included implementation plans for
                     these projects. The cost was estimated at $184.9
                     million.
 January 15, 1998    The Office of the CMO began operations.
                     The CMO and CFO issued instructions to the directors
 January 21, 1998    of management reform agencies for preparing
                     implementation and spending plans for management
                     reform projects.
                     The District submitted to Congress its Comprehensive
 March 2, 1998       Performance Management System and a timetable for its
                     implementation, which included the management reform
                     initiatives.
                     The District's Fiscal Year 1999 Budget and Financial
 June 1, 1998        Plan, submitted to Congress, included an estimated $10
                     million in management reform productivity savings.
                     The Authority notified the Congress of the allocation
                     of the
 June 24, 1998       $201.1 million resulting from the Revitalization Act.
                     The District used $171 million of the $201.1 million
                     to fund management reform projects in fiscal year
                     1998.
                     The Chairman of the Authority sent a letter to the
                     heads of 13 District agencies and the CMO notifying
 July 31, 1998       them of the Authority's intent to hold a series of
                     meetings to review the status of management reform
                     projects.
                     The President signed into law the District of Columbia
                     Appropriations Act, 1999, P. L. 105-277, which
                     provided a federal payment to the District of Columbia
                     for management reform in the amount of $25 million to
                     remain available until September 30, 1999. Congress
 October 21, 1998    authorized that $3.2 million in unspent fiscal year
                     1998 management reform funds could be carried over
                     into fiscal year 1999. Furthermore, the act provided
                     for the CFO of the District to make reductions of $10
                     million in local funds to one or more of the
                     appropriation headings in the act for productivity
                     savings.
                     The Authority reported in its FY 1998 Annual
                     Performance Report: A Report on Service Improvements
 October 30, 1998    and Management Reform that, of the 269 projects
                     selected and approved for implementation, 69 were
                     completed.
                     The Council of the District of Columbia's Committee on
                     Government Operations issued its report on Management
                     Reform in areas under its purview: the Department of
                     Employment Services (DOES), information technology,
                     personnel, procurement, and real estate asset
                     management. The committee reported that the District
                     was not making sufficient progress on management
 November 9, 1998    reform, spending had occurred in areas outside the
                     scope of the Revitalization Act, management reform
                     funds had been used to support agency operating
                     expenses rather than productivity enhancements, there
                     were structural inefficiencies in the Office of the
                     CMO, there was a lack of collaboration among the
                     Council, the Authority, and the Mayor, and management
                     reform efforts in the DOES and the Office of Property
                     Management had been almost nonexistent.
                     The District's former CFO was sworn into office as
                     Mayor of the District of Columbia. The new Mayor and
                     the members of the Authority signed a Memorandum of
                     Agreement (MOA) to convey back to the Office of the
                     Mayor responsibility for day-to-day supervision,
 January 2, 1999     direction, control, and management of all executive
                     branch departments, agencies, boards, commissions,
                     offices, and other entities of the District government
                     and its personnel, excluding the District of Columbia
                     Public Schools, as well as programmatic and policy
                     responsibility. The Authority retained all of its
                     statutory oversight responsibilities.
 January 7, 1999     The CMO announced her resignation.
                     The Mayor, in a letter to the Authority, outlined
                     funding proposals for 7 new management reform projects
 February 17, 1999   at an estimated cost of $10.7 million. Included in the
                     letter was a proposal to fund a salary increase for
                     D.C. public school teachers with available management
                     reform funds at an estimated cost of $11.8 million.
                     The Office of Budget and Planning sent a memorandum to
                     District agencies notifying them of the allocation of
                     the $10 million in management reform productivity
 March 2, 1999       savings provided for in the fiscal year 1999 District
                     of Columbia Appropriations Act. The allocation was
                     based on the percentage of new operating funds an
                     agency invested in management reform projects in
                     fiscal year 1998.
                     The President signed into law the District of Columbia
                     Management Restoration Act of 1999, P. L. 106-1, which
 March 5, 1999       repealed the District of Columbia Management Reform
                     Act of 1997 (Subtitle B of Title XI of the Balanced
                     Budget Act of 1997, P.L. 104-8).
                     The District's FY 2000 Operating Budget and Financial
 June 1, 1999        Plan, submitted to Congress, included an estimated $7
                     million in management reform productivity savings.
                     The Authority authorized the allocation of $11.34
 July 1, 1999        million in management reform monies to fund a salary
                     increase for D.C. public school teachers.
                     The Office of Budget and Planning issued FY 1998
                     Management Reform in which it reported that the
 July 1999           District invested a total of $293 million in 280
                     management reform projects in fiscal year 1998, and
                     that $153 million in management reform funds were
                     unobligated as of the end of the fiscal year.
                     The President signed into law the District of Columbia
                     FY 2000 Appropriations Act, P. L. 106-113. The act
 November 29, 1999   directed the CFO of the District to make reductions of
                     $7 million for management reform savings in local
                     funds to one or more of the appropriation headings in
                     the act.
                     The Authority notified the Deputy Mayor for Operations
                     that it was conducting a closeout review of the
 January 14, 2000    results of the management reform initiatives and
                     requested information about each of the initiatives
                     through calendar year 1999.
                     The Deputy Mayor for Operations distributed a survey
 February 2, 2000    to the agencies requesting the results of the fiscal
                     year 1999 management reform initiatives.

 March 27, 2000      The Deputy Mayor for Operations provided the Authority
                     a partial response to its January 14, 2000, request.
                     The Authority notified the Deputy Mayor for Operations
                     of its intent to finalize its closeout review of the
 April 21, 2000      results of the fiscal year 1999 management reform
                     initiatives. To track the results of the initiatives,
                     the Authority asked the Deputy Mayor for Operations to
                     submit survey responses from each agency.
                     The District's proposed Fiscal Year 2001 Operating
 May 2000            Budget and Financial Plan includes an estimated $37
                     million in management reform productivity savings.
                     The Deputy Mayor for Operations provided GAO with a
 June 28, 2000       draft project status report of the fiscal year 1999
                     management reform operating projects as of September
                     30, 1999.

(916354)

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