Office of Management and Budget: Future Challenges to Management
(Testimony, 04/07/2000, GAO/T-GGD/AIMD-00-141).

Pursuant to a congressional request, GAO discussed the management
challenges facing the Office of Management and Budget (OMB), focusing on
the broader challenges facing the nation and the federal government now
and in the future and their implications for central leadership
approaches in general, and OMB in particular.

GAO noted that: (1) the nation faces a wide range of challenges and
opportunities--both in policy and management--in the future; (2) they
include globalization trends, changing security threats, new and
emerging technological innovations, demographic changes, quality of life
challenges, and government performance and accountability issues; (3)
the globalization of the nation's economy for instance not only provides
new opportunities for producers and consumers, but also raises new
issues associated with the nation's growing economic and social
interdependence and national security; (4) technological innovation
continues to be a major driver of economic growth, transforming, among
other things, the way the nation communicates, learns, and conducts
commerce; (5) at the same time, the explosion in technology presents the
federal government with a host of new public policy and management
issues associated with widespread use of information, including the
areas of computer security and personal privacy in an electronic age;
(6) to address the challenges of the new century, the agenda for
governmentwide leadership must be broader and deeper; (7) accordingly,
the task facing central leadership is not to fulfill the nearly
impossible role of identifying and resolving all major problems itself;
(8) rather, it is to serve as the catalyst and strategist to prompt
agencies and other critical players to come to the table and take
ownership for addressing the agenda of governmentwide management issues;
(9) a strong linkage with the budget formulation process is a key factor
in gaining serious attention for management initiatives throughout
government; (10) effective coordination and collaboration with the
agencies has emerged as an important central leadership strategy in both
developing policies that are sensitive to implementation concerns and
gaining consensus and consistent follow-through within the executive
branch; (11) OMB needs to take more initiative in setting the agenda of
governmentwide issues; (12) crosscutting issues such as human capital,
computer security, and program fragmentation call for a more decisive
and assertive OMB role in defining the problem, developing appropriate
strategies and approaches to implementation, and overseeing progress;
(13) OMB can take more advantage of the new governmentwide management
reforms as leadership tools; and (14) for instance, the governmentwide
performance plan has great promise to provide a decisionmaking framework
for considering crosscutting policy, program, and management issues.

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

 REPORTNUM:  T-GGD/AIMD-00-141
     TITLE:  Office of Management and Budget: Future Challenges to
	     Management
      DATE:  04/07/2000
   SUBJECT:  Financial management
	     Productivity in government
	     Federal agency reorganization
	     Strategic planning
	     Information resources management
	     Performance measures
	     Interagency relations
	     Accountability
	     Economic analysis
	     Budget administration

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GAO/T-GGD/AIMD-00-141

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

Friday,

April 7, 2000

GAO/T-GGD/AIMD-00-141

office of management and budget

Future Challenges to Management

        Statement of David M. Walker

Comptroller General of the United States

Testimony

Before the Subcommittee on Government Management, Information and
Technology, Committee on Government Reform, House of Representatives

United States General Accounting Office

GAO

Mr. Chairman, Mr. Turner, and Members of the Subcommittee:

I am pleased to be here today to discuss the role of the Office of
Management and Budget (OMB) in addressing the governmentwide management
challenges facing the federal government. In an earlier testimony before
this subcommittee on OMB's managerial leadership, we discussed in some
detail OMB's effectiveness in a range of specific management areas. My
statement today will build on this by emphasizing the broader challenges
facing the nation and the federal government now and in the future and their
implications for central leadership approaches in general, and OMB in
particular.

This hearing comes at an opportune time. As I recently testified before the
Senate Governmental Affairs Committee, it is critical to take stock of where
we are as a nation and as a government. The newly emerging policy and
management issues are truly different in kind from those we have faced
before and call for different kinds of approaches and solutions. We need to
take a comprehensive view of government's structure and role as we think
about these new challenges. How can we best provide the kind of
governmentwide leadership to tackle these new problems and opportunities?

In my statement today, I want to make a number of points:

   * Meeting the governance challenges of the new century calls for us to
     build on the management reforms enacted in the 1990s to address a
     broader range of governmentwide issues. Many of the policy and
     management challenges that face the nation and the government are
     multidimensional and cross program, department, and agency boundaries.
     At the same time, sustaining real performance improvements in
     government will require transformations in the day-to-day management,
     cultures, and structures of many federal agencies.
   * As a result, our policy development and management processes need to
     become more integrated and comprehensive while at the same time
     promoting concerted action and support by federal agencies and their
     third-party providers who bear ultimate responsibility for delivering
     services to the people.
   * Since the challenges we face are diverse, no single leadership strategy
     or structure will serve to address all of them. Rather, a variety of
     strategies and structures provides flexibility and can be designed to
     fit the specific challenges, ranging from a central review approach to
     more devolved strategies focusing on agency buy-in.
   * Although meeting these challenges will require participation of the
     relevant departments and/or third-party entities, OMB needs to take a
     more active role. OMB must take the initiative to look across
     boundaries and identify both management and policy issues where greater
     attention is needed and take appropriate steps to ensure they are
     effectively addressed.

As we consider OMB's role, it is important to think about changes in society
and the world at large that will place new demands on management leadership.
We see that to a great extent we have succeeded as a nation in overcoming
some of the central problems that have dominated public discourse and debate
in the latter part of the 20th Century. The cold war has ended and we won.
The chronic deficits that cast a long shadow over government and the economy
for so many years have been replaced with surpluses that are now projected
to last for many years, assuming no further policy actions. We should
rightly celebrate our successes at this time, for they were hard-earned and
remind us that our public sector-political leaders and career civil servants
alike at many levels of government-have contributed greatly to the
achievement of these ends.

At the same time that we recognize these successes, however, we face a wide
range of challenges and opportunities-both in policy and management-as we
look ahead to the future. They include globalization trends, changing
security threats, new and emerging technological innovations, demographic
changes, quality of life challenges, and government performance and
accountability issues. These interconnected challenges and
opportunities-which have no borders either domestically or
internationally-are both exciting and somewhat daunting. The globalization
of our economy for instance not only provides new opportunities for U.S.
producers and consumers, but also raises new issues associated with our
growing economic and social interdependence and national security.
Technological innovation continues to be a major driver of economic growth,
transforming, among other things, the way we communicate, learn, and conduct
commerce. At the same time, the explosion in technology presents the federal
government with a host of new public policy and management issues associated
with widespread use of information, including the areas of computer security
and personal privacy in an electronic age. I have spoken in many forums of
the challenges presented by the aging of our population and about how we
provide economic security for a growing elderly population without imposing
an unreasonable burden on workers, the economy, or the federal budget in
future years.

Although the American people expect world-class public services and are
demanding more of government, the public's confidence in the government's
ability to address its demands remains all too low. Real constraints
continue to hamper federal agencies. For example, the development of modern
financial systems is still a work-in-progress for many agencies, and the
government's use of information technology has suffered from management
weaknesses that have resulted in widespread untapped potential to improve
service delivery. Although major reforms under way in performance,
financial, and information systems management are already showing
encouraging progress, they should be viewed as a foundation that is
necessary but not sufficient to address long-standing performance issues in
the federal government. Human capital is missing from the statutory
management framework, and it is important to recognize that people are the
linchpin for progress in any organization so that nothing less than a
transformation in how we think about human capital at the federal level will
be necessary. We must address what amounts to an emerging human capital
crisis in government. Given the importance and interdependency of these
issues, central governmentwide leadership is critical to resolving these
long-standing problems in federal management systems.

To address the challenges of the new century, however, the agenda for
governmentwide leadership must be broader and deeper. Now it is time to
build on the management reform initiatives of the 1990s to institutionalize
real change in what the government does and how it does it. In order to
transition agencies from process-oriented business practices to more of a
results orientation while taking greater advantage of technological advances
will require nothing less than a structural and cultural transformation of
the federal government.

Although agency-level reforms are of critical importance, many of the
leading performance goals and missions of government transcend individual
agency boundaries-and, increasingly, levels of government or sectors of the
economy. The results of federal programs are realized by the public as the
sum of various and often conflicting federal, state, local, and private
initiatives addressing a problem or concern. A more comprehensive approach
to sorting out and integrating related initiatives addressing common
performance goals is vital to meeting the public's expectations.

Implications of New Challenges for the Governmentwide Management Reform
Agenda

Management improvement has been defined by the statutory management reforms
enacted in the 1990s for performance management, financial management, and
information systems. As I indicated in my previous testimony, we are still a
long way from successful implementation of these initiatives. Over the
years, our work has shown that federal functions and programs critical to
personal and national security, ranging from Medicare to weapons
acquisition, have been hampered by daunting financial and program management
problems, exposing the federal government to waste and abuse. Since 1990, as
part of our high-risk initiative, we have reported on specific federal
activities and functions that are particularly vulnerable to waste, fraud,
abuse, and mismanagement.

   * Widespread financial system weaknesses, problems with fundamental
     recordkeeping, incomplete documentation, and weak internal controls
     prevented the government from having the information needed to
     effectively and efficiently manage operations or accurately reporting a
     large portion of its assets, liabilities, and costs.
   * Federal information systems have been plagued by huge cost overruns;
     schedule slippages measured in years; and marginal benefits in
     improving mission performance, cutting costs, and enhancing
     responsiveness. Continuing computer security weaknesses put critical
     federal operations and assets at great risk.
   * Underlying weaknesses in several program management areas raise
     inordinate risks-the loss of billions of dollars annually due to
     improper payments in certain benefit programs, difficulty in
     controlling tax filing fraud, inefficient and weak lending programs,
     and challenges in reducing Defense infrastructure costs.

It is increasingly clear that the enactment of statutory management reforms,
while critically important, is necessary but not sufficient to achieve
sustainable improvements in government performance. Continued perseverance
in addressing statutory management reforms and the areas that are the focus
of our current high-risk initiative will ultimately yield significant
benefits. However, a more daunting agenda lies ahead of us if we are to
bring about fundamental improvements.

First, progress on many performance problems calls for an integrated
multifunctional approach cutting across traditional programmatic and
functional boundaries. Achieving results calls for coordinated responses
from numerous public and private entities. In a recent report, for instance,
we identified widespread mission fragmentation and program overlap
throughout the major mission areas at the federal level. For example, 23
programs operated by 4 agencies offered housing services and 26 programs
administered by 6 agencies offered food and nutrition services.

Even more broadly, many missions are characterized by the presence of
multiple tools, such as tax expenditures, grants, loans, and direct federal
spending programs. For instance, in fiscal year 2000, the federal health
care mission area includes $34 billion in discretionary budget authority,
$123 billion in entitlement outlays, $100 million in loan guarantees, and
$89 billion in tax expenditures.

The outcomes achieved by these programs and tools are in a very real sense
highly interdependent. Any debate on policy in these areas and any
consideration of the management and performance of the government should
consider the broader picture of federal involvement. However, currently some
tools, such as discretionary spending, receive more scrutiny in the budget
and authorization processes than others do, such as tax expenditures and
regulations. In our view, one of the main agendas for governmentwide
management leadership is to promote more transparency and coordination
across tools and programs so that the costs and performance consequences of
each can be more readily compared.

The foregoing illustrates that the management issues facing the government
are increasingly complex and wide-ranging. It also suggests how critical
Congress and the President are to governmentwide performance issues.
Congressional committees often tend to favor different approaches and tools
to address common problems. Competition among different approaches can be
productive, but we have not had a decisionmaking and oversight vehicle or
forum for a healthy debate about those different approaches. There is no
neat way to separate management from policy or from program
design-especially to the public on the receiving end. I will discuss later
on how the governmentwide performance plan could provide a decisionmaking
framework to help both the President and Congress bring about greater
coherence in the design and management of our programs and policy tools.

The foregoing also suggests how intertwined management issues are with the
budget process. I understand that over the years the debate over central
management leadership has proceeded as if budgeting and management were
mutually exclusive processes. In fact, I think this is a Hobson's choice.
Regardless of where the responsibility for central management leadership is
located, integration with budgeting is absolutely critical for progress in
government performance and management. I say this not just because the
budget provides clout and reinforces the priorities of federal agencies'
management goals. Rather, the budget is the only annual process we have in
government where programs and activities come up for regular review and
reexamination. If we really believe that there is a need to reexamine what
we are doing as a government and how we are doing it, the budget process is
undeniably the focal point. Moreover, good budgeting stands to gain from
being integrated with management. Good budget analysis should lead to the
critical examination of the performance and implementation of federal
programs. From this perspective, the new tools provided by performance
measures, audited financial statements, and information systems planning can
help budget analysts improve their own review of competing claims and
programs within the federal government.

Second, transforming federal agencies into high-performing organizations
will require that performance, financial, and information systems and human
capital reforms become embedded in day-to-day management across government.
To transition agencies from process-oriented business practices to
results-oriented ones will require both structural and cultural
transformation. High performance and accountability depend on the three
enablers-people, process, and technology-and therefore it is important to
focus on each of these components to effectively enable agencies to achieve
their missions and visions for the future.

The agenda for federal management reform needs to expand to recognize that
both federal agencies and nonfederal third parties play key roles in
determining the results of federal initiatives. Increasingly, the federal
government has come to rely on a variety of third parties-state and local
governments, nonprofit agencies, and for-profit businesses-to achieve
federal objectives. It has done this by using a range of tools-grants,
loans, tax expenditures, and regulations-to engage third parties as the
workhorses of our federal system, rather than using federal employees to
directly implement national programs. Third-party government presents
diverse accountability challenges. In addition, the goals and interests of
these third parties may conflict with national goals and interests.

The choice and design of the tools for a program at its inception play a
large role in influencing the performance achieved through the complex
networks of third parties. This is why program design should be seen as a
critical part of the management agenda. As we seek to manage programs
indirectly and often at some distance from the client, we must pay attention
to how relatively mundane program requirements affect actual results. The
uncertainties between the creation and the outcomes of programs have
probably grown over the years as the federal role has become more ambitious
and as delivery networks have grown more complex. One analyst described the
governmental policy processes as "ready, fire, aim" -we initiate programs
armed with imperfect information and revise our approaches as we gain
experience and feedback. His point here was not that we should wait for
perfect information-which would be impossible-but that we need a way to get
feedback and adjust in response. The Government Performance and Results Act
(GPRA) is designed to help agencies sort out and measure the strategies used
to achieve objectives, whether directly through federal action or indirectly
through third parties. GPRA provides a feedback mechanism about the extent
to which agencies achieve their goals.

Evolving Approaches to Address Governmentwide Issues

Primary responsibility for addressing the fundamental performance challenges
facing the government rests in no small part with the federal agencies and
their third-party partners. Central leadership at the governmentwide level
can provide the impetus for change, but agencies and their networks must
actually implement the reform agenda for meaningful change to occur-and that
means we must find a way to get their "buy-in" and sustained commitment. It
also bears repeating that Congress is an essential part of the leadership.
It can either reinforce or frustrate the implementation of reforms and other
needed changes. In this regard, congressional oversight is key to ensuring
that continuing progress is made to maximize the government's performance
and ensure its accountability.

A Variety of Approaches Provides Flexibility in Addressing Management Issues

   * The "single central leader" approach was used for the year 2000
     computing crisis. The President appointed an assistant to deal with
     year 2000 issues in the federal government and to coordinate with other
     sectors of the world economy, both here and abroad. This was a
     time-critical issue that was a high priority for agencies, the
     President, and Congress. Appointing a high-level official outside OMB
     provided leverage and visibility for this role.
   * The "council" approach can help foster communication across the
     executive branch, build commitment to reform efforts, tap talents that
     exist within agencies, focus attention on management issues, and
     initiate improvements. In the case of the Chief Financial Officers
     (CFO) Council, implementing these reforms involves sharing best
     practices and expertise among agencies to achieve changes over a span
     of several years. Similarly, the Chief Information Officers (CIO)
     Council provides a forum for senior officials to interact and work
     towards achieving strategic information technology (IT) performance
     goals, improving work processes, integrating information technology
     architecture, and strengthening IT knowledge, skills, and capabilities.
   * A "task force" approach offers the benefit of an interagency council
     for technical or short-term tasks. This approach can bring expert
     knowledge outside of the federal government to bear on management
     problems and to concentrate federal efforts in addressing relatively
     narrow crosscutting issues. For example, 17 Offices of Inspectors
     General recently reviewed non-tax delinquent debt in order to highlight
     the importance of federal agencies' compliance with statutory debt
     collection requirements. Capital planning for federal assets also used
     a task force approach.
   * The "lead agency" approach can be effective in developing complementary
     goals; mutually reinforcing strategies; and where appropriate, common
     performance measures when policies cut across agencies and programs. An
     example is drug control, where responsibilities for governmentwide
     leadership have been assigned to a particular agency (the Office of
     National Drug Control Policy-ONDCP) outside of OMB. ONDCP is the
     President's primary policy office for drug issues, providing advice and
     oversight of drug programs and coordinating development of the
     President's National Drug Control Strategy. By developing a national
     drug control strategy, ONDCP has been able to enlist the support of
     federal agencies as well as nonfederal partners, such as state and
     local governments and the private sector.
   * The "integrated" approach can help achieve a more cohesive picture of
     government performance. To portray and analyze the performance of the
     federal government comprehensively, an integrated approach includes all
     federal strategies and tools-including tax expenditures and
     regulations-with key agency performance goals associated with federal
     spending. For example, OMB reviews agency performance plans within the
     context of agency budget requests. Implementation of GPRA requires
     leadership on the part of OMB to ensure that performance data are used
     to inform budget decisions and that agencies take GPRA seriously and
     use it to run their organizations.
   * The "partnership" approach offers various models in which other actors
     help articulate central leadership initiatives. The National
     Partnership for Reinventing Government, formerly known as the National
     Performance Review (NPR) for instance, played a key role in encouraging
     agencies to develop customer service standards. Another type of
     partnership provides a vertical approach to management and
     accountability for programs and policies implemented by third parties.
     The President's Management Council is chaired by OMB's Deputy Director
     for Management and includes Chief Operating Officers or equivalents
     from major agencies. Its agenda includes setting priorities,
     identifying and resolving cross-agency management issues, and
     establishing interagency task forces to transform governmentwide
     systems. Performance-based intergovernmental partnerships allow the
     federal government to extend its management role beyond its workforce.
     In exchange for greater recognition and say in the design and
     implementation of programs, states and others are held to agreed-upon
     results. When successful, this approach can improve service and lead to
     greater accountability.
   * The "central review" approach can be used to resolve potential
     conflicts stemming from differing perspectives or goals within the
     executive branch. For example, OMB brings a presidential, rather than
     single agency, perspective to its reviews of major regulations. The
     regulatory side of OMB's Office of Information and Regulatory Affairs
     acts on 3,000 to 5,000 information collection requests from agencies
     per year, reviews about 500 proposed and final rules each year, and is
     responsible for calculating the costs and benefits of all federal
     regulations.

This list is not meant to be exhaustive, but rather suggestive, of the
variety of approaches that has evolved to address emerging issues. Although
each approach is inevitably linked to the budget process in some manner,
OMB's role varies considerably in terms of control and oversight. In some
cases the importance of agency buy-in and the need for longer-term
development of capacity to fully implement needed changes argue for a
devolved approach. In other cases, conflicting goals and/or the
time-sensitivity of the issues may demand more centralized approaches.

Emerging Issues Use Several Approaches

   * Computer Security: The dramatic increase of computer
     interconnectivity-while facilitating communications, business
     processes, and access to information-has increased the risk that
     problems affecting one system will also affect other connected systems.
     Massive computer networks provide pathways among systems that, if not
     properly secured, can be used to gain unauthorized access to data and
     operations.

The administration's recently released Defending America's Cyberspace:
National Plan for Information Systems Protection discusses various proposals
to protect critical information assets and infrastructures. The plan clearly
recognizes OMB's core responsibility for managing federal computer security
and information technology. The administration's call to action through this
plan's development indicates a heightened concern over cyber-security and
provides a basis for increased oversight. OMB has a role in ensuring
agencies fulfill their obligations to set and evaluate meaningful controls
over their information environment. At the same time, this plan recognizes
that the effort to safeguard information systems is well beyond the capacity
of one agency to manage.

The plan introduces or formalizes a number of new entities, interagency
working groups, and projects that will have to be integrated into the
existing framework of computer security activities. Examples of these new
entities and efforts include an Expert Review Team for evaluating agency
infrastructure protection plans, a Federal Intrusion Detection Network, and
an interagency working group on system security practices. The lead agency
approach may be appropriate for some of these activities, such as the Expert
Review Team, which anticipates giving the National Institute of Standards
and Technology the lead in assisting agencies governmentwide. For other
activities, the plan focuses on developing a public-private partnership.
Information sharing about actual threats and vulnerabilities is one area
where partnerships can provide for the common defense of the infrastructure.
Because of the number of entities involved (some established by law, some by
executive order, and others with less formal mandates), strong and effective
leadership will be essential to ensure that their efforts are appropriately
linked with broader computer security efforts.

   * Human Capital Initiatives: An organization's human capital policies
     must be aligned to support its shared vision-that is, the mission,
     vision for the future, core values, goals, and strategies-by which the
     organization has defined its direction and its expectations for itself
     and its people. To meet the changing environment, federal agencies need
     to give human capital a higher priority than ever before and rethink
     how their workforces are developed and deployed to enhance achievement
     of organizational performance goals. Two principles are central to the
     human capital idea: investing in employees and aligning "people
     policies" to fulfill the organization's shared vision. The civil
     service has been evolving to be more and more decentralized.

OMB is using the integrated and central review approaches to oversee
agencies' development of their strategic and annual performance plans under
GPRA. OMB should try to ensure that agencies have well-thought-out
strategies, in particular that they have integrated human capital planning
into their strategic planning processes. Using an integrated approach OMB,
along with congressional oversight, can encourage discussion of agency
efforts to ensure that they have the needed human capital and that the
agency's human capital strategies are linked to strategic and programmatic
planning and accountability mechanisms. It is the agencies' responsibility
to rethink how their workforces are developed and deployed to enhance
achievement of organizational performance goals. Of course, the Office of
Personnel Management has an important role to play in helping agencies
develop effective tools and strategies, and we believe that this leadership
can be strengthened.

Using a central review approach, OMB has the opportunity in many cases to
directly influence agencies' human capital management practices through its
oversight of agencies' budgets. OMB can, for example, review the adequacy of
agencies' workforce planning and resource levels to meet targets and goals.

Using a partnership approach, the NPR illustrates another approach that can
also be used to significantly influence human capital matters. NPR supports,
for instance, partnership efforts between agency managers and unions and one
of its recommendations led to the establishment of Partnership Councils in
several major agencies to enhance labor-management relations.

   * Crosscutting Issues: Our work has repeatedly shown that mission
     fragmentation and program overlap are widespread in the federal
     government and that crosscutting program efforts are not well
     coordinated. It also has shown the importance of coordinating these
     programs. Without such coordination, scarce funds are wasted, program
     customers are confused and frustrated, and the overall effectiveness of
     the federal effort is limited.

As part of an integrated approach, one strategy that OMB could use is the
governmentwide performance plan, which is a key component of GPRA, to
address more cohesively the various programs and tools contributing to broad
federal performance goals. It could also be used to more clearly relate and
address the contributions of alternative federal strategies. Agencies, in
turn, could use the annual performance planning cycle and subsequent annual
performance reports to highlight crosscutting program efforts and to provide
evidence of the coordination of those efforts. Under a central review
approach, OMB could also help to ensure that agencies develop common or
complementary performance measures. In addition, the council approach could
involve the CIO Council in efforts to encourage data-sharing and other ways
to employ information technology to reduce fragmentation and overlap.

The more routine integration of performance measures and information should,
over time, also help facilitate this kind of debate in the budget process
itself. GPRA provides for such integration through the program activity
structure of the federal budget, but in many cases the program activities
need to be better aligned with the goals in performance plans to prompt
performance-oriented budgeting. In some cases, agencies may need to develop
effective crosswalks between strategic plans and the budget; in other cases,
agencies and Congress may decide to change the program activity structure in
the budget. Improved financial reporting and auditing, as required by the
CFO Act, will further strengthen the cost basis and reliability of data
underlying the link between performance information and the budget. But GPRA
should not be expected to eliminate the conflict inherent in the political
process of resource allocation; and final decisions will appropriately take
into account many factors, including performance.

The Central Leadership Challenge

A central focal point can play the essential role of ensuring that our
system sustains attention to management and other crosscutting issues needed
to improve government performance. Increasingly the challenges that we face
are multidimensional problems that cut across numerous programs, agencies,
and governmental tools. Although the respective departments and agencies
should have the primary responsibility and accountability to address their
own issues, central leadership has the responsibility to keep everyone
focused on the big picture by identifying the agenda of governmentwide
issues needing attention and ensuring that related efforts are complementary
rather than duplicative.

The challenge is to decide which approach-or mix of approaches-is most
appropriate to building and sustaining the support necessary to resolve a
given management problem over the long term. The real responsibility for
addressing these problems rests with the departments and agencies and the
networks of third parties they rely on to delivery program services. As I
have stated before, the support of agencies is particularly critical if we
are to transition government to more results-oriented business processes,
structures, and cultures.

Accordingly, the task facing central leadership is not to fulfill the nearly
impossible role of identifying and resolving all major problems itself.
Rather, it is to serve as the catalyst and strategist to prompt agencies and
other critical players to come to the table and take ownership for
addressing the agenda of governmentwide management issues. As we have
discussed, a number of approaches are already used in which OMB plays a more
supportive role, thereby emphasizing and reinforcing the accountability of
departments and agencies to take ownership and implement needed changes. If
well-chosen and managed, these approaches have the potential for expanding
the capacity of our system to address pressing management issues.

These strategies reinforce the point that any central leadership focal point
is ultimately dependent on support from others in the system to achieve a
sustained focus and lasting results. Experience from the past suggests
sustaining support for the implementation of governmentwide initiatives is
dependent on support from four critical actors.

   * Top management support and commitment within both OMB and the White
     House is often critical to providing a focus on governmentwide
     management issues throughout both the budget process and the executive
     agencies themselves. As our study of OMB 2000 pointed out, management
     and performance measurement issues gained considerable attention in the
     budget formulation process initially because of the clear commitment of
     OMB's leadership. However, top leadership's focus can change over time,
     which can undermine the follow-through needed to move an initiative
     from policy development to successful implementation.
   * A strong linkage with the budget formulation process is a key factor in
     gaining serious attention for management initiatives throughout
     government. Management initiatives need to be reflected in and
     supported by the budget. Many management policies require budgetary
     resources for their effective implementation, whether it is financial
     management reform or information systems investment. Furthermore,
     initiatives such as GPRA seek to improve decisionmaking by explicitly
     calling for performance plans to be integrated with budget requests. We
     have found that previous management reforms, such as the
     Planning-Programming-Budgeting-System and Management by Objectives,
     suffered when they were not integrated with routine budget
     presentations and account structures.
   * Effective coordination and collaboration with the agencies-through such
     approaches as task forces and interagency councils-has, as I have
     noted, emerged as an important central leadership strategy in both
     developing policies that are sensitive to implementation concerns and
     gaining consensus and consistent follow-through within the executive
     branch.
   * Support from Congress has proven to be critical in sustaining interest
     in management initiatives over time. Congress has, in effect, served as
     the institutional champion for many of these initiatives, providing a
     consistent focus for oversight and reinforcement of important policies.
     In fact, a study of management reforms over the postwar period found
     that the responsibility for initiating management reforms shifted from
     the president to Congress since 1974, although it was recognized that
     the executive branch played an important role in developing these
     statutory approaches. For example, Congress'-and in particular this
     Subcommittee's-attention to the Year 2000 problem, information
     management, and financial management has served to elevate these
     problems on the administration's management agenda.

Any number of organizational arrangements is possible, but I believe that
OMB can serve as the executive branch's management focal point. However,
several additional steps must be taken by OMB for governmentwide management
issues to be effectively addressed. First, OMB needs to take more initiative
in setting the agenda of governmentwide issues. Crosscutting issues such as
human capital, computer security, and program fragmentation call for a more
decisive and assertive OMB role in defining the problem, developing
appropriate strategies and approaches to implementation, and overseeing
progress. As I have noted, this often might entail devolving principal
responsibility to others, such as federal agencies, with OMB serving more as
a catalyst and convenor. In other cases, more active encouragement and
review might be called for, including such activities as developing
guidance, benchmarking, and disseminating best practices.

OMB can take more advantage of the new governmentwide management reforms as
leadership tools. For instance, the governmentwide performance plan has
great promise to provide a decisionmaking framework for considering
crosscutting policy, program, and management issues. The process of
preparing the plan can help prompt decisionmakers to focus on the relative
contributions of programs and tools addressing common performance goals. The
planning process can, thus, present tradeoffs for decisionmakers that cut
across conventional program, department, and OMB organizational lines.

I recognize that positioning OMB to be an effective focal point for
governmentwide management issues may raise issues about OMB's capacity and
resources to do the job. First and foremost, there is a need for a confirmed
Deputy Director for Management to provide a champion for management issues
at the highest levels of OMB. OMB also needs to understand how its
organization affects its capacity to provide sustained management
leadership. In our 1995 assessment of OMB 2000, we recommended that OMB
review the impact of its reorganization as part of its planned broader
assessment of its role in formulating and implementing management policies
for the government. OMB has not formally assessed the effectiveness, for
example, of the different approaches taken by its statutory offices to
promote the integration of management and budget issues, nor has it formally
assessed the skills and training of its program examining staff. Additional
targeted resources could ultimately be part of a broader strategy to enhance
OMB's leadership capacity.

Conclusions

Although we have suggested a central focal point in the executive branch,
Congress is clearly a key player in improving governmentwide performance as
well, and its leadership in enacting governmentwide performance, financial,
and information management reforms has already had a substantial impact.
Congressional oversight of individual programs and agencies is also
absolutely vital to promoting and sustaining needed performance
improvements. The new performance and financial information arising from
recent management reforms will provide new opportunities for congressional
oversight to identify weaknesses and reinforce programs that are working
effectively. For instance, the performance reports recently issued by
agencies should help Congress pinpoint problems more systematically.

However, just as we are challenging the executive branch to strengthen its
focus on crosscutting issues, so too should Congress consider approaches to
enable it to more effectively address common performance and management
issues that cut across its own jurisdictional and committee boundaries.
Elsewhere, I have suggested that Congress could use the governmentwide
performance plan as a starting point to prompt a more concerted oversight
agenda to focus its attention on the most pressing crosscutting management
concerns and alternative strategies offering the greatest promise to achieve
performance goals and federal missions. A more coordinated congressional
oversight agenda could be identified by the oversight committees of each
chamber and possibly in a "congressional performance resolution" linked to
the budget resolution.

Ultimately, the broad-based and rapid changes confronting government may
call for a longer term and more fundamental review of the structure for
major federal activities and the processes used for service delivery,
decisionmaking, and oversight. We stand at an important crossroads, and the
new challenges may indeed call for a comprehensive reexamination of what
government should be doing and how it does it. Freed of the constraints of
the cold war and chronic deficits, this current situation may provide a
golden opportunity to review the legacy of existing activities and programs
with an eye toward weeding out or reforming those proven to be outdated and
freeing up resources to address emerging needs. A recently proposed
Commission on Government Restructuring offers one mechanism to institute
such a systematic reexamination.

We at GAO are ready to assist both Congress and the executive branch in
addressing the agenda of important governmentwide management issues facing
us. Our work, including our Performance and Accountability and High-Risk
Series, the Budget Implications reports, as well as other information and
issues identified in our Strategic Plan could help identify the agenda of
key issues as well as potential solutions to improve performance for key
areas of government. When our work is coupled with the GPRA plans and
reports, financial audits, the work of inspectors general, and other
government reports, we can engage both Congress and the executive branch in
constructive partnerships to make real and sustainable progress in improving
government performance.

This concludes my statement. I would be pleased to answer any questions that
you or other Members of the Subcommittee may have.

(410573/935363)

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