OMB 2000: Changes Resulting From the Reorganization of the Office of
Management and Budget (Testimony, 02/07/96, GAO/T-GGD/AIMD-96-68).

GAO discussed the changes that have occurred at the Office of Management
and Budget (OMB) as a result of OMB 2000, focusing on: (1) changes in
OMB organizational structure, responsibilities, staffing, and statutory
offices; (2) OMB attention to management issues in the budget process;
and (3) OMB plans to evaluate OMB 2000. GAO noted that: (1) OMB has
reorganized and replaced budget program areas with resource management
offices (RMO) staffed by employees reassigned to new program examiner
positions; (2) RMO have assumed the statutory offices' oversight
responsibilities, while the statutory offices have retained
responsibility for developing governmentwide management policies; (3)
increased OMB attention to agency management issues in the 1996 budget
formulation process has allowed examiners more leverage for change; (4)
although some OMB personnel have expressed concern regarding their
expanded responsibilities, they generally have a positive view of OMB
2000; (5) while OMB originally planned to evaluate OMB 2000 as a
distinct management initiative, it plans to more broadly assess its
effectiveness in formulating and implementing government management
policies; and (6) it is unclear whether positive results can be
sustained over the long term, since OMB 2000 is still in its beginning
stages.

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

 REPORTNUM:  T-GGD/AIMD-96-68
     TITLE:  OMB 2000: Changes Resulting From the Reorganization of the 
             Office of Management and Budget
      DATE:  02/07/96
   SUBJECT:  Federal agency reorganization
             Reductions in force
             Human resources utilization
             Budget administration
             Personnel management
             Agency missions
             Strategic planning
             Employee transfers
IDENTIFIER:  OMB 2000
             
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Cover
================================================================ COVER


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

For Release on Delivery
Expected at
10:00 a.m.  EDT
Wednesday
February 7, 1996

OMB 2000 - CHANGES RESULTING FROM
THE REORGANIZATION OF THE
OFFICE OF MANAGEMENT
AND BUDGET

Statement of L.  Nye Stevens, Director
Federal Management and Workforce Issues
General Government Division and
Paul L.  Posner, Director, Budget Issues
Accounting and Information Management Division

GAO/T-GGD/AIMD-96-68

GAO/GGD/AIMD-96-68T

OMB 2000

(410015)


Abbreviations
=============================================================== ABBREV


OMB 2000:  CHANGES RESULTING FROM
THE REORGANIZATION OF THE OFFICE
OF MANAGEMENT AND BUDGET
============================================================ Chapter 0


   STATEMENT
---------------------------------------------------------- Chapter 0:1

Mr.  Chairman and Members of the Subcommittee: 

We are pleased to be here today to discuss the changes at the Office
of Management and Budget (OMB) resulting from its April 1994
reorganization--commonly known as OMB 2000.  The primary goal of OMB
2000 was to integrate OMB's budget analysis, management review, and
policy development roles under a new organizational structure.  In
doing so, OMB intended to improve its decisionmaking process and its
oversight of executive branch operations.  A critical question facing
OMB is whether its new approach toward integrating management and
budgeting, as well as its implementation of statutory management
responsibilities, can be sustained over the long term. 

At the request of the Chairmen and Ranking Members of this Committee
and the Senate Committee on Governmental Affairs, we conducted a
descriptive review of this initiative.  We did not, however, evaluate
OMB's capacity to carry out its central management responsibilities. 
Our report, Office of Management and Budget:  Changes Resulting From
the OMB 2000 Reorganization (GAO/GGD/AIMD-96-50), was issued on
December 29, 1995. 

Throughout the history of OMB and its predecessor organization, the
Bureau of the Budget, management and budget issues have competed for
attention and resources.  In general, budget issues have tended to
squeeze out management issues.  During the past 50 years, a number of
presidential advisory groups have recommended changes designed to
strengthen central management leadership in the Executive Office of
the President.  Previous OMB reorganizations have alternated between
integrating management into the budget review process and creating
separate management offices.  Congress has also attempted to increase
OMB's attention to management problems, creating three statutory
management offices--the Office of Federal Financial Management
(OFFM), the Office of Federal Procurement Policy (OFPP), and the
Office of Information and Regulatory Affairs (OIRA).  Congress also
gave OMB clear management responsibilities through legislation such
as the Chief Financial Officers Act and the Government Performance
and Results Act (GPRA).  Therefore, OMB 2000 is the most recent in a
series of attempts to bolster OMB's management capacity and
influence. 

Our review of OMB 2000 focused on three issues:  (1) changes in OMB's
structure, responsibilities, and staffing, including changes to the
statutory offices; (2) changes in OMB's attention to management
issues in the budget process; and (3) the way OMB planned to evaluate
OMB 2000.  Concerning the first issue, OMB 2000 reorganized and
replaced OMB's former budget program areas with five resource
management offices (RMO) staffed by employees reassigned to new
program examiner positions.  Program examiners' responsibilities were
expanded from those of budget examiners to include responsibilities
for agency management oversight.  The RMOs were assigned integrated
responsibilities for examining agency management, budget, and policy
issues.  In general, the agency-specific oversight responsibilities
of the three statutory offices were shifted to the RMOs, but OMB
decided to retain responsibility for developing governmentwide
management policies in the statutory offices. 

Staff reductions in these statutory offices varied, and each office
followed a different approach in devolving its responsibilities.  For
example, 21 of OFFM's 41 authorized staff positions were shifted to
the RMOs, directly transferring responsibilities and resources to the
RMOs.  In contrast, only 4 of OIRA's 56 staff positions were
transferred because OMB wanted OIRA staff in place to implement
Executive Order 12866 on regulatory planning and review.  In OFPP, 10
of the 30 staff positions were reallocated, and 6 of the 10 became
jointly managed in a "matrix management" approach.  After the initial
restructuring, each RMO branch chief was permitted to determine what,
if any, technical skills the branch needed to fulfill its new
responsibilities and to develop those skills within given staffing
allocations.  However, OMB did not provide specific guidance or
technical support in this regard.  In addition, OMB's General
Management Division was eliminated when two of its branches with
oversight responsibilities for the General Services Administration
and the Office of Personnel Management were moved to the RMOs.  The
third branch, Evaluation and Planning, was eliminated. 

Our review of budget documents and interviews with OMB staff
indicated that there was greater attention to agency management
issues in the fiscal year 1996 budget process (after OMB 2000 was
implemented) than in the fiscal year 1995 process.  A greater variety
of management issues was presented in more depth in the fiscal year
1996 budget documents than in the previous year's documents.  For
example, in fiscal year 1995 documents for one agency, the discussion
of financial management issues was limited to a statement that the
agency faced challenges in such areas as contract management and
financial systems.  In contrast, the fiscal year 1996 documents
contained a detailed assessment of financial management issues at the
agency, including a review of the agency's 5-year plan and how it
related to reengineering and streamlining efforts. 

RMO staff said that budget examiners had looked at agency management
issues before OMB 2000.  However, they said that more attention was
given to particular management issues by the RMOs after the
reorganization, specifically to the fiscal year 1996 budget
initiatives on agencies' streamlining plans and use of performance
information.  OMB's emphasis on these issues was also apparent in the
budget documents.  For example, whereas the fiscal year 1995
documents discussed streamlining primarily in terms of the number of
positions to be eliminated, the fiscal year 1996 documents included
discussions about how proposed staff reductions could affect the
agencies' performance.  Several OMB staff also said that OMB and
agencies were more likely to take action on management issues when
they were associated with the budget.  They said linking management
and budget issues provided examiners with more leverage for change in
the agencies. 

Although OMB staff generally had a positive view of OMB 2000, some
RMO staff expressed concerns about its initial implementation.  For
example, because they had to balance competing responsibilities,
several program examiners said that less emphasis had been placed on
certain management issues--those that lacked a clear budgetary
impact, did not require an immediate response to a short-term
deadline, or did not reflect the administration's priorities.  In
particular, they said that the expansion of their responsibilities as
a result of OMB 2000 combined with short-term budget pressures could
limit their examination of long-term management issues. 

Some program examiners also said that the reduction of centralized
management expertise in the statutory offices and the elimination of
the General Management Division left them with fewer sources of
expertise and assistance.  For example, some program examiners said
that they were uncertain how to address certain credit and cash
management questions.  Finally, although they said that top OMB
officials had focused greater attention on management issues in the
budget, OMB staff also voiced concerns about whether this focus had
become institutionalized for the longer term. 

Although OMB initially planned to evaluate OMB 2000 as a distinct
management initiative, it now plans to assess more broadly its
overall effectiveness in formulating and implementing management
policies for the government in response to GPRA requirements.  Part
of this assessment will be an evaluation of the integration of OMB's
management and budget responsibilities. 

Only one budget cycle has been completed since this reorganization. 
Therefore, some of the problems OMB staff described may be
transitional in nature.  OMB's initial experience with the OMB 2000
approach during the 1996 budget process showed the clear support of
top OMB officials and staff to enhance the treatment of certain
management issues in the budget.  Even though this was a particularly
difficult budget cycle, there was a noticeable increase in the
attention OMB gave to management issues that transcended immediate
budgetary concerns.  However, it remains to be seen whether OMB
2000's initial positive results can be sustained over the longer
term.  Congress expects OMB to play a key role in addressing federal
management issues.  In view of this expectation and the historic
tension between the two concepts of integrating and segregating
management and budget responsibilities, we believe it is important
that OMB understand how the reorganization has affected its capacity
to provide sustained management leadership.  A review focused on this
issue could also inform the ongoing debate regarding how best to
protect management from being overwhelmed by budgetary
pressures--specifically, whether a separate office of management is
needed. 

We believe that OMB's planned GPRA-based review of its management
strategies and approaches is the appropriate context in which to
consider these issues.  Therefore, in our report we recommend that
OMB consider the lessons learned from OMB 2000 by focusing its
analysis on the specific concerns raised by OMB staff during our
review.  For example, OMB could assess whether its on-the-job
training and decentralized staffing approach are appropriate to
develop the skills and abilities RMOs need to carry out their
management oversight responsibilities.  OMB could also assess how
well its RMOs and statutory offices are working together to address
management issues.  In particular, OMB could determine whether any of
the approaches it used to structure relations between the statutory
offices and the RMOs are more effective than the others or whether
changes are needed in the way those approaches have been implemented. 

-------------------------------------------------------- Chapter 0:1.1

Mr.  Chairman, this concludes my prepared statement.  We will be
pleased to answer any questions. 
*** End of document. ***