Government Management: Observations on OMB's Management Leadership
Efforts (Testimony, 02/04/99, GAO/T-GGD/AIMD-99-65).
Pursuant to a congressional request, GAO discussed its observations on
the Office of Management and Budget's (OMB) efforts to carry out its
responsibilities to set policy and oversee the management of the
executive branch, focusing on: (1) OMB's wide-ranging management
responsibilities and the question of whether to integrate or separate
management and budget functions; (2) the effectiveness of OMB's
management leadership; and (3) the factors that appear to contribute to
progress in sustaining improvements in federal management.
GAO noted that: (1) OMB is the lead agency for overseeing a statutory
framework of financial, information resources, and performance planning
and measurement reforms designed to instill a performance-based approach
to federal management, decisionmaking, and accountability; (2) the Chief
Financial Officers Act of 1990 mandated significant financial management
reforms and established the Deputy Director for Management (DDM)
position within OMB; (3) the DDM is to serve as the government's key
official for financial management and coordinate and supervise a wide
range of general management functions; (4) OMB is responsible for
providing guidance and oversight for various other laws and executive
orders as well; (5) OMB's perennial challenge is to carry out its
central management leadership responsibilities in such a way that
leverages opportunities of the budget process, while at the same time
ensuring that management concerns receive appropriate attention in an
environment driven by budget and policy decisions; (6) prior OMB
reorganizations have alternated between seeking to more directly
integrate management into the budget review process and creating
separate management offices; (7) previous congressional and OMB attempts
to elevate the status of management by creating separate management
units within OMB sought to ensure that an adequate level of effort was
focused on management issues; (8) OMB has focused increased attention on
management issues, but there is much more that needs to be done; (9) OMB
should ensure that agencies incorporate appropriate goals and strategies
in their annual performance plans and describe their relevance to
achieving the priority management objectives described in the
governmentwide performance plan; (10) the record of OMB's stewardship of
management initiatives suggests that creating and sustaining attention
to management improvement is a key to addressing the federal
government's longstanding problems; (11) in the past, management issues
often remained subordinated to budget concerns and timeframes, and the
leverage the budget could offer to advance management efforts was not
directly used to address management issues; and (12) continued
improvement in OMB's strategic plans would provide congressional
decisionmakers with better information to use in determining the extent
to which OMB is addressing its statutory management and budgetary
responsibilities, as well as in assessing OMB's contributions toward
achieving desired results.
--------------------------- Indexing Terms -----------------------------
REPORTNUM: T-GGD/AIMD-99-65
TITLE: Government Management: Observations on OMB's Management
Leadership Efforts
DATE: 02/04/99
SUBJECT: Presidential budgets
Agency missions
Computer security
Financial management systems
Federal procurement
Information resources management
Federal agency reorganization
Financial statement audits
Congressional/executive relations
IDENTIFIER: OMB 2000 Initiative
Joint Financial Management Improvement Program
Y2K
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GOVERNMENT MANAGEMENT
Observations on OMB'sManagement Leadership
Efforts
Statement of J. Christopher Mihm, Associate
Directo rFederal Management and Workforce Issues General Government
Division and Paul L. Posner, Director, Budget Issues,Accounting
and Information Management Division
United States General Accounting OfficeGAO Testimony Before the
Subcommittee on Government Management, Information and
TechnologyCommittee on Government Reform
House of Representatives
For Release on DeliveryExpected at 10:00 a.m., ESTon Thursday
February 4, 1999
GAO/T-GGD/AIMD-99-65
Notice: This draft is restricted to official use. This draft
testimony is being provided to obtain advancereview and comment
from those with responsibility for the subjects it discusses. It
has not been fully reviewed withinGAO.
Statement Government Management: Observations onOMB's Management
Leadership Efforts
Page 1 GAO/T-GGD/AIMD-99-65 Mr. Chairman and Members of the
Subcommittee: We are pleased to be here today to discuss our
observations on the Office of Management and Budget's (OMB)
efforts to carry out its responsibilities to set policy and
oversee the management of the executive branch. As you know, last
month we issued a major new series of reports, entitled
Performance and Accountability Series: Major Management Challenges
and Program Risks, and an update of our high risk series. 1
Collectively, the reports show that long-standing performance and
management challenges hinder the federal government's efforts to
achieve results. The report series also highlighted numerous
improvements that agencies need to make in their performance,
management, and accountability. Making these improvements will
require the sustained efforts of the leadership and staff within
agencies. At the same time, the report series also underscored the
pivotal role that the federal government's central management
agencies-- in particular, OMB--must play in guiding and overseeing
agencies' efforts to address the shortcomings that we identified
and to implement the changes necessary to improve performance.
Today, as requested by the Subcommittee, we will cover three major
points. First, we will provide an outline of OMB's wide-ranging
management responsibilities and note that the question of whether
to integrate or separate management and budget functions has been
long debated. Second, we will discuss the effectiveness of OMB's
management leadership, which, in our view, has been uneven.
Finally, we will discuss the factors that appear to contribute to
progress in sustaining improvements in federal management. As
agreed, our statement today is based on, and updates as
appropriate, the testimony we provided on these three points when
we appeared before this Subcommittee last May.2 Our observations
are made on the basis of work we are currently doing and have done
at federal agencies and at OMB.
OMB was established under presidential reorganization authority in
1970, in large part to increase the attention given to management
issues in the federal government. OMB is the lead agency for
overseeing a statutory framework of financial, information
resources, and performance planning and measurement reforms
designed to instill a performance-based approach to federal
management, decisionmaking, and accountability. This
1 Performance and Accountability Series: Major Management
Challenges and Program Risks and High
Risk Series: An Update (GAO/OCG-99-22SET, January 1999). 2
Government Management: Observations on OMB's Management Leadership
Efforts (GAO/TGGD/AIMD-98-148, May 12, 1998).
OMB Has Wide-Ranging Management Responsibilities
Statement Government Management: Observations on OMB's Management
Leadership Efforts
Page 2 GAO/T-GGD/AIMD-99-65 framework contains as its core
elements financial management improvement legislation, including
the Chief Financial Officers (CFO) Act of 1990, the Government
Management Reform Act of 1994, and the Federal Financial
Management Improvement Act of 1996; information technology
reforms, including the Paperwork Reduction Act (PRA) of 1995 and
the Clinger-Cohen Act of 1996; and the Government Performance and
Results Act of 1993 (the Results Act).
The CFO Act mandated significant financial management reforms and
established the Deputy Director for Management (DDM) position
within OMB. In addition to serving as the government's key
official for financial management, the DDM is to coordinate and
supervise a wide range of general management functions of OMB.
These functions include those relating to managerial systems, such
as the systematic measurement of performance; procurement policy;
regulatory affairs; and other management functions, such as
organizational studies, long-range planning, program evaluation,
and productivity improvement.
OMB is responsible for providing guidance and oversight for
various other laws and executive orders as well. For example, the
Federal Acquisition Streamlining Act (FASA) requires that
executive agency heads set cost, performance, and schedule goals
for major acquisition programs and that OMB report to Congress on
agencies' progress in meeting these goals. Executive Order 12866
directs OMB to coordinate the review of agencies' rules and
regulations to ensure that they impose the least burden, are
consistent between agencies, focus on results over process, and
are based on sound cost/benefit analysis. OMB also has been
responsible since 1967, through its Circular A-76, for carrying
out executive branch policy to rely on competition between the
federal workforce and the private sector for providing commercial
goods and services.
OMB's perennial challenge is to carry out its central management
leadership responsibilities in such a way that leverages
opportunities of the budget process, while at the same time
ensuring that management concerns receive appropriate attention in
an environment driven by budget and policy decisions. Concern that
OMB and its predecessor agency, the Bureau of the Budget, lacked
the support and institutional capacity necessary to sustain
management improvement efforts throughout the executive branch has
prompted numerous calls for changes in the past.
During the past 50 years, a number of presidential advisory groups
have recommended changes designed to strengthen the Office's
central management leadership. In response to the recommendations
of one of
Historically, ThereHave Been Questions About Whether toIntegrate
or Separate Management andBudget Functions
Statement Government Management: Observations on OMB's Management
Leadership Efforts
Page 3 GAO/T-GGD/AIMD-99-65 these groups, the Ash Council, the
Bureau of the Budget was reorganized in 1970 and renamed OMB,
thereby signaling the intent to heighten the management focus in
the agency. However, the creation of OMB did not ensure that an
institutionalized capacity for governmentwide management
leadership would be sustained, nor did it establish how OMB should
balance its budget and management responsibilities. As a result,
observers have continued to debate how to best ensure that
management issues can be effectively considered within the context
of--yet without being overwhelmed by--the budget process. Some
observers have advocated integrating the two functions, while
others have proposed the creation of dedicated offices or a
separate agency to provide governmentwide management leadership.
Prior OMB reorganizations, reflecting these different points of
view, have alternated between seeking to more directly integrate
management into the budget review process and creating separate
management offices. Previous congressional and OMB attempts to
elevate the status of management by creating separate management
units within OMB sought to ensure that an adequate level of effort
was focused on management issues. Underscoring its concern that
management issues receive appropriate attention, Congress
established the DDM position to provide top-level leadership to
improve the management of the federal government.
In 1994, OMB reorganized to integrate its budget analysis,
management review, and policy development roles, in an initiative
called "OMB 2000." This reorganization was the most recent of a
series of attempts to bolster OMB's management capacity and
influence. To carry out its responsibilities, OMB's Resource
Management Offices (RMO) are responsible for examining agency
budget, management, and policy issues. Linking management reforms
to the budget has, at a minimum, provided the opportunity to
include management issues as part of the president's yearly budget
reviews--a regularly established framework for making decisions.
The RMOs' efforts are supplemented by three OMB statutory offices
created by Congress: (1) the Office of Federal Financial
Management (OFFM) to guide the establishment of systems and
controls needed for agencies' financial management; (2) the Office
of Federal Procurement Policy (OFPP) to provide overall direction
for executive agencies' procurement policies, regulations, and
procedures; and (3) the Office of Information and Regulatory
Affairs (OIRA) to direct and oversee agencies' management of
information resources and reduction of unnecessary paperwork. The
OMB 2000 initiative reduced the statutory offices' staffing
Statement Government Management: Observations on OMB's Management
Leadership Efforts
Page 4 GAO/T-GGD/AIMD-99-65 levels and transferred their
responsibilities for overseeing agencies' implementation of many
governmentwide management initiatives to the RMOs.3 This increased
OMB's reliance on RMO managers and staff to focus on management
issues and coordinate their activities with the statutory
offices.4 In fiscal year 1997, OMB obligated $56 million and
employed over 500 staff.
In recent years, OMB has focused increased attention on management
issues, but there is much more that needs to be done. In last
year's budget, the Administration took an important first step in
what can be seen as an evolving results-based planning and
budgeting process. The first Governmentwide Performance Plan, as
required by the Results Act, was prepared as an integrated
component of the President's 1999 Budget; this year's Plan,
released on Monday with the President's 2000 Budget, again
describes three aspects of federal government performance: fiscal,
management, and program. In OMB's view, the performance of
government programs is inextricably linked to the fiscal and
economic environment and the management framework in which they
operate.
In our assessment of the Fiscal Year 1999 Governmentwide
Performance Plan, we noted that the separate management
performance section within the plan was a useful approach that
added essential context and depth to the Plan. 5 This year's Plan
follows a structure similar to that developed last year, including
(1) a discussion of the Administration's High Impact Agencies
initiative, which focuses on defining service delivery
commitments, developing customer and employee satisfaction
measures, using interagency partnerships, and enhancing electronic
access; and (2) 24 specific priority management objectives (PMO),
many of which are also on GAO's high risk list. These PMOs were
selected by OMB as areas in need of real change and are intended
to create a clear set of priorities for the Administration's
management improvement efforts.
The PMOs include not only governmentwide issues, several of which
we discuss further on, but also program- and agency-specific
issues, such as Department of Energy contract management and
Federal Aviation Administration management reforms. We have not
yet fully reviewed the
3OIRA retained its oversight responsibilities for regulatory and
paperwork issues.
4See Office of Management and Budget: Changes Resulting From the
OMB 2000 Reorganization (GAO/GGD/AIMD-96-50, Dec. 29, 1995) and
OMB 2000: Changes Resulting From the Reorganization ofthe Office
of Management and Budget (GAO/T-GGD/AIMD-96-68, Feb. 7, 1996).
5 The Results Act: Assessment of the Governmentwide Performance
Plan for Fiscal Year 1999 (GAO/AIMD/GGD-98-159, Sept. 8, 1998).
The Effectiveness ofOMB's Management Leadership Has BeenUneven
Statement Government Management: Observations on OMB's Management
Leadership Efforts
Page 5 GAO/T-GGD/AIMD-99-65 PMOs included in the Fiscal Year 2000
Governmentwide Performance Plan. However, in our assessment of the
Fiscal Year 1999 Plan, we noted that there needed to be a clearer
and stronger linkage between these PMOs and the underlying agency
annual performance plans. Specifically, by improving the
discussion of the program performance consequences of the PMOs,
OMB could better ensure that agencies develop relevant goals and
strategies in their performance plans and clarify agency
accountability for specific results. We recommended that OMB
ensure that agencies incorporate appropriate goals and strategies
in their annual performance plans and describe their relevance to
achieving the priority management objectives described in the
governmentwide performance plan.
Today, we will highlight some of the management issues that have
been both of particular concern to this Subcommittee and the
subject of our recent work.
Like most organizations, federal agencies increasingly depend on
information technology (IT) to improve their performance and meet
mission goals. Federal agencies, however, face serious challenges
in ensuring effective performance and management of the nearly $27
billion in planned obligations for computer technology and
information systems each year. Agencies face the challenge of
meeting recent legislative reform requirements to implement strong
IT leadership and effective processes for improved management of
information technology investments. Of primary concern are
agencies' abilities to identify and correct date coding problems
with mission-critical systems to meet the Year 2000 deadline.
Safeguarding critical government systems and sensitive information
from unauthorized access is also crucial. As the policy and
oversight arm of the executive branch, OMB is responsible for
guiding and overseeing agency efforts to meet these challenges and
enforcing accountability through the executive branch budget
formulation and execution process.
Resolving the Year 2000 computing problem is the most pervasive,
timecritical risk facing the federal government today due to its
widespread dependence on large-scale, complex computer systems to
deliver vital public services and carry out its massive
operations.6 Over the past 2 years, the government has revamped
and intensified its approach to this problem. In February 1998,
the President established the President's Council on Year 2000
Conversion. Chaired by an Assistant to the President who
previously served as OMB's DDM, this Council, which is supported
by
6Year 2000 Computing Crisis (GAO/T-AIMD-98-101, Mar. 18, 1998).
Helping Agencies MeetInformation Technology Management Challenges
Increasing Year 2000 Compliance
Statement Government Management: Observations on OMB's Management
Leadership Efforts
Page 6 GAO/T-GGD/AIMD-99-65 OMB, is charged with ensuring that no
system critical to the federal government's mission experiences
disruption because of the Year 2000 problem.
As the Council has concentrated its efforts on international,
private-sector, and state and local government issues, OMB has
played a key role in tightening requirements on agency reporting
of Year 2000 progress. OMB now requires that, beyond the original
24 major departments and agencies, 9 additional agencies report
quarterly on their progress, and that all agencies report on their
status. 7 Further, OMB places each of the 24 major agencies into
one of three tiers after receiving quarterly progress reports,
based on OMB's judgment as to whether evidence of the agency's
reported progress is or is not sufficient. Additionally, OMB has
clarified instructions on agencies preparing business continuity
and contingency plans. 8
Many congressional committees have played a central role in
addressing the Year 2000 challenge by holding agencies accountable
for demonstrating progress and by heightening public appreciation
of the problem. The Congress also passed important Year 2000
legislation.
However, serious risks remain. Our reviews of federal Year 2000
programs have found uneven progress; some major agencies are
significantly behind schedule and are at high risk that they will
not correct all of their missioncritical systems in time.9 In
summary, it is essential that OMB provide leadership in ensuring
that priorities continue to be set, rigorous testing be completed,
and thorough business continuity and contingency plans be prepared
to successfully meet the Year 2000 challenge.
Continuing computer security weaknesses also put critical federal
operations and assets at great risk. In September 1998, we
reported that recent audits have identified significant
information security weaknesses at virtually every major agency.10
Since 1997,when we designated information security as a
governmentwide risk, there has been increased recognition by the
Administration and
7Progress on Year 2000 Conversion, U.S. Office of Management and
Budget, as of November 1998.
8Year 2000 Computing Crisis: Business Continuity and Contingency
Planning, Exposure Draft (GAO/AIMD-10.1.19, Mar. 1998). 9 Year
2000 Computing Challenge: Readiness Improving, But Critical Risks
Remain (GAO/T-AIMD-99- 49, Jan. 20, 1999). 10 Information
Security: Serious Weaknesses Place Critical Federal Operations
and Assets at Risk (GAO/AIMD-98-92, Sept. 23, 1998).
Enhancing Information Security
Statement Government Management: Observations on OMB's Management
Leadership Efforts
Page 7 GAO/T-GGD/AIMD-99-65 others of the importance of
information security. This has led to significant actions,
including a Presidential directive requiring each major department
and agency to develop a plan for protecting critical
infrastructures. A series of Senate hearings also highlighted
these risks and the need for greater action. OMB, the Chief
Information Officer (CIO) Council, and the National Security
Council are working collaboratively on a plan to (1) assess
agencies' security postures, (2) implement best practices, and (3)
establish a process of continued maintenance.
In addition, on January 22, President Clinton announced major new
initiatives to strengthen our nation's defenses against attacks to
our critical infrastructure, computer systems, and networks.
Implementing these initiatives effectively will require a more
concerted effort at individual agencies and at the governmentwide
level. Agencies need to do a better job of establishing
comprehensive computer security programs that address systemic
problems as well as individual audit findings in this area.
Moreover, we found that most agencies have not addressed enhancing
information security in their fiscal year 1999 performance plans.
In addition to individual agency actions, more effective
governmentwide oversight is important to (1) ensure that agency
executives understand the risks, (2) monitor agency performance,
and (3) resolve issues affecting multiple agencies. As these
efforts progress, it is important that OMB play a key role in
ensuring that a comprehensive federal strategy emerges.
Over the last several years, OMB has taken a number of important
steps to support agency efforts to implement the requirements of
the Paperwork Reduction Act and the Clinger-Cohen Act and to
improve IT planning and decisionmaking. For example, in 1995, OMB
worked with us to design new, more effective governmentwide
guidance, including a joint guide that established a "select,
control, evaluate" decisionmaking framework.11 OMB also issued
additional IT investment management guidance, including rules for
funding systems investments, a guide on overall capital
programming, and a policy on information technology
architectures.12 To monitor agency progress in implementing
effective IT management processes, in 1997 OMB requested that
agencies submit information on their processes as
11 Evaluating Information Technology Investments: A Practical
Guide, Version 1.0 (Executive Office of
the President, Office of Management and Budget, Office of
Information and Regulatory Affairs,Information Policy and
Technology Branch, November 1995).
12 "Funding Information Systems Investments," OMB Memorandum M-97-
02, October 25, 1996; Capital Programming Guide, Version 1.0
(Executive Office of the President, Office of Management and
Budget,July 1997); OMB Memorandum M-97-16, "Information Technology
Architectures," June 18, 1997.
Information Management Capabilities
Statement Government Management: Observations on OMB's Management
Leadership Efforts
Page 8 GAO/T-GGD/AIMD-99-65 part of the fiscal year 1999 budget
cycle review.13 In addition, working with the CIO Council, OMB
recently revised its guidance to agencies on preparing and
submitting their annual IT budget requests. The new format for
agency budget exhibits provides greater clarity about types of IT
spending and the mission area of the agency that these investments
support. Finally, OMB has indicated its intention to revise
governmentwide guidance dealing with strategic information
management planning and security.14
Nevertheless, broad IT management reforms are still in their early
stages in most federal agencies. As our reviews demonstrate,
agencies continue to be challenged by (1) weaknesses in IT
investment selection and control processes; (2) slow progress in
designing and implementing IT architectures; (3) inadequate
software development, cost estimation, and acquisition practices;
and (4) the demand for effective CIO leadership and
organizations.15 Improvements in these areas will be difficult to
achieve without effective agency leadership support, highly
qualified and experienced CIOs, and effective OMB leadership and
oversight. With the Deputy Director for Management serving as its
co-chair, OMB must continue to work effectively with the federal
CIO Council to focus management attention on putting in place
disciplined information technology management processes that can
lead to improvements in the delivery of high quality, cost-
effective results. The development of the "Raines' Rules"--
requiring agencies to satisfy a set of investment management
criteria before funding major systems investments--can potentially
serve to further underscore the link between information
technology management and spending decisions. These criteria were
incorporated into OMB guidance to agencies for the fiscal year
2000 budget process.
OMB's DDM and the OFFM, in concert with the CFO Council, have led
governmentwide efforts to focus greater attention on financial
management issues. OMB has played a pivotal role in fostering
ongoing financial management reforms ranging from improved
financial systems and reporting to the Federal Accounting
Standards Advisory Board's new accounting and cost accounting
standards. We are seeing positive results
13 OMB Memorandum M-97-12, "Evaluation of Agency Implementation of
Capital Planning and
Investment Control Processes," April 25, 1997. 14 OMB Circular A-
130 (Revised), "Management of Federal Information Resources"
(Executive Office of the President, Office of Management and
Budget, Feb. 8, 1996). 15 Major Management Challenges and Program
Risks: A Governmentwide Perspective (GAO/OCG-99-1, January 1999).
Greater Attention to Financial ManagementIssues
Statement Government Management: Observations on OMB's Management
Leadership Efforts
Page 9 GAO/T-GGD/AIMD-99-65 from OMB's efforts. For instance, 11
agencies received unqualified audit opinions on their fiscal year
1997 financial statements--up from 6 in fiscal year 1996.
At the same time, there are major obstacles to overcome. The most
serious challenges are framed by the results of our first-ever
audit of the government's consolidated financial statements, for
fiscal year 1997; deficiencies in the statements prevented us from
being able to form an opinion on their reliability. These
deficiencies are the result of widespread material internal
control and financial systems weaknesses that significantly impair
the federal government's ability to adequately safeguard assets,
ensure proper recording of transactions, and ensure compliance
with laws and regulations.
Financial management has been designated one of OMB's priority
management objectives, with a goal of producing performance and
cost information in a timely, informative, and accurate way,
consistent with federal accounting standards. To help accomplish
this goal, a May 26, 1998, presidential memorandum required agency
heads to develop plans for resolving the problems that have been
identified. Further, House Resolution 447, passed on June 9, 1998,
underscored congressional expectations for timely resolutions of
the problems.
Considerable effort is now being exerted several agencies have
made good progress towards achieving financial management reform
goals. With a concerted effort, the federal government as a whole
can continue to make progress toward generating reliable financial
information on a regular basis.
While annual audited financial statements are essential to
identifying any serious problems that might exist and providing an
annual public scorecard on accountability, an unqualified audit
opinion, while certainly important, is not an end in itself. The
CFO Act is focused on providing on a systematic basis, accurate,
timely, and relevant financial information needed for management
decisionmaking and accountability. For some agencies, the
preparation of financial statements requires considerable reliance
on ad hoc programming and analysis of data produced by inadequate
financial management systems. Thus, the overarching challenge in
generating timely, reliable data throughout the year is
overhauling financial and related management information systems.
OMB is focusing on improving financial systems. Through its
participation as a principal member of the Joint Financial
Management Improvement
Statement Government Management: Observations on OMB's Management
Leadership Efforts
Page 10 GAO/T-GGD/AIMD-99-65 Program (JFMIP), which issues
financial systems requirements to be followed by all CFO Act
agencies. Together with the CFO Council, OMB has established eight
priorities as discussed in OMB's Federal Financial Management
Status Report and the Five-Year Plan (June 1998). They are: (1)
obtaining unqualified opinions on financial statements and issuing
accounting standards, (2) improving financial management systems,
(3) implementing the Results Act, (4) developing human resources
and CFO organizations, (5) improving management of receivables,
(6) ensuring management accountability and control, (7)
modernizing payments and business methods, and (8) improving
administration of federal assistance programs.
Finally, OMB is currently piloting accountability reports that
provide a single overview of federal agencies' performance, as
authorized by the 1994 Government Management Reform Act. By
seeking to consolidate and integrate the separate reporting
requirements of the Results Act, the CFO Act, and other specified
acts, the accountability reports are to show the degree to which
an agency met its goals, at what cost, and whether the agency was
well-run. If effectively implemented, accountability reports that
include information on the full cost and results of carrying out
federal activities could greatly aid decisionmaking for our
national government.
OMB has a vital role in leading and overseeing agencies' efforts
to instill a more performance-based approach to decisionmaking,
management, and accountability. OMB has shown a clear commitment,
articulated in its fiscal year 1999 annual performance plan and
the fiscal year 1999 governmentwide plan, to implement the Results
Act.
As part of that commitment, we have recommended that OMB implement
a concerted agenda aimed at substantially enhancing the usefulness
of the agencies' performance plans for congressional and executive
branch decisionmaking. That agenda should center on five key
improvement opportunities that our work suggests are particularly
important to improving the usefulness of annual plans. These key
improvement opportunities are: (1) better articulating a results
orientation, (2) coordinating crosscutting programs, (3) clearly
showing how strategies will be used to achieve goals, (4) showing
performance consequence of budget decisions, and (5) building the
capacity within agencies to gather and use performance
information.16 More generally, we also have
16 For more information on these improvement opportunities, see
Managing for Results: An Agenda to
Improve the Usefulness of Agencies' Annual Performance Plans
(GAO/GGD/AIMD-98-228, Sept. 8,1998).
Instilling Performance-Based Management Through Implementation
ofthe Results Act
Statement Government Management: Observations on OMB's Management
Leadership Efforts
Page 11 GAO/T-GGD/AIMD-99-65 recommended that OMB work with
Congress and the agencies to identify specific program areas that
can be used as best practices. We believe that this would help to
demonstrate the use and benefits of performance-based management
and how concrete information about program results can contribute
directly to congressional and executive branch decisionmaking.
OMB's efforts to improve capital decision-making are another
example of where OMB's leadership efforts are yielding some
results. OMB and GAO have worked together in this area, with OMB
developing a Capital Programming Guide that provides agencies with
the key elements for producing effective plans and investments. 17
OMB's Guide drew on GAO's work on best practices used by leading
private sector and state and local governments, which was
subsequently published.18 Consistent with these best practices,
OMB has required agencies to submit 5-year capital spending plans
and justifications--thus encouraging a longer-term consideration
of agency capital needs and alternatives for addressing them.
OMB's Guide provides a basic reference on principles and
techniques, including appropriate strategies for analyzing
benefits and costs, preparing budget justifications, and managing
capital assets once they are in place. In addition, OMB has worked
closely with the President's Commission to Study Capital
Budgeting, which is expected to issue its report and
recommendations soon.
As federal agencies implement the performance-based management
agenda established by the Congress in the 1990s, the government's
human capital policies and practices will increasingly become
prominent issues. Leading performance-based organizations
understand that effectively managing their human capital is
essential to achieving results. Organizational success hinges on
having the right employees on board and on providing them with the
training, tools, structures, incentives, and accountability to
work effectively. Thus, human capital planning must be an integral
part of any organization's strategic and program planning and
human capital itself should be thought of not as a cost to be
minimized but as a strategic asset to be enhanced. The challenge--
and opportunity-- confronting federal agencies as they seek to
become more performancebased is to ensure that their human capital
policies and practices are aligned with their program goals and
strategies.
17 Capital Programming Guide, Version 1, July 1997 (Executive
Office of the President, OMB).
18 Executive Guide: Leading Practices in Capital Decision-Making
(GAO/AIMD-99-32, Dec. 1998).
Improving Capital Decision-Making Enhancing theGovernment's Human
Capital
Statement Government Management: Observations on OMB's Management
Leadership Efforts
Page 12 GAO/T-GGD/AIMD-99-65 An important opportunity exists for
OMB to take a leadership role in impressing upon the agencies the
importance of adopting a strategic approach to human capital
planning--traditionally a weak link in federal agency management.
Although the Office of Personnel Management's role in informing
the agencies about effective strategic human capital planning is
potentially significant, the Results Act provides the statutory
impetus for OMB to bring its considerable influence to bear. The
Act requires agencies to describe in their strategic plans and
annual performance plans the human resources they will need to
meet their performance goals and objectives. OMB Circular A-11
states that annual plans may include goals and indicators
involving the workforce or the workplace environment, such as
employee skills and training, workforce diversity, retention,
downsizing, and streamlining.
Nevertheless, in examining the first round of agency strategic
plans and annual performance plans, we found that few of these
documents emphasized human capital or the pivotal role it must
play in helping agencies achieve results. Through active
participation in the development of agency strategic and annual
performance plans and by holding agencies accountable for their
attention to human capital considerations, OMB could bring
considerable energy and discipline to the federal government's
efforts to build, maintain, and marshal the human capital needed
to achieve results.
We also testified and reported on the inadequacies of OMB's
efforts to meet congressional paperwork reduction goals.19 In
particular, we do not believe that OMB has fully satisfied the
Paperwork Reduction Act's requirements to review and control
paperwork, develop and oversee information resource management
policies, or keep Congress and congressional committees fully and
currently informed about major activities under the Act. OIRA does
not attempt to set priorities for agencies' regulations on the
basis of risk (e.g., the number of lives saved or injuries
avoided). Concerns have been raised by experts in regulatory
issues that federal regulations are not sufficiently focused on
the factors that pose the greatest risk and that, as a result,
large amounts of money may be spent to accomplish only a slight
reduction in risk.20 Using these
19Paperwork Reduction: Governmentwide Goals Unlikely to Be Met
(GAO/T-GGD-97-114, June 4, 1997);
Paperwork Reduction: Burden Reduction Goal Unlikely to Be Met
(GAO/T-GGD/RCED-96-186, June 5,1996); Regulatory Management:
Implementation of Selected OMB Responsibilities Under the
Paperwork Reduction Act (GAO/GGD-98-120, July 9, 1988). 20For
example, see Tammy O. Tengs and John D. Graham, "The Opportunity
Costs of Haphazard Social Investments in Life-Saving," in Robert
W. Hahn, ed., Risks, Costs, and Lives Saved (New York: 1996).
Reviewing Regulations
Statement Government Management: Observations on OMB's Management
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Page 13 GAO/T-GGD/AIMD-99-65 same resources in other areas that
pose higher risks could yield significantly greater payoffs.
OMB's OFPP has worked to implement FASA and the Clinger-Cohen Act.
OFPP has also been working to streamline the procurement process,
promote efficiency, and encourage a more results-oriented approach
to planning and monitoring contracts. OFPP is spearheading a
multi-agency effort to revise parts of the Federal Acquisition
Regulation (FAR). For example, a major revision to Part 15 of the
FAR should contribute greatly to a more flexible, simplified, and
efficient process for selecting contractors in competitively
negotiated acquisitions. OFPP also developed best practices guides
to help agencies draft statements of work, solicitations, and
quality assurance plans, as well as to aid in awarding and
administering performance-based service contracts. OFPP issued a
best practices guide for multiple award task and delivery order
contracting to encourage agencies to take advantage of new
authorities under FASA. In addition, OMB has encouraged agencies
to buy commercial products, conduct electronic commerce, and to
consolidate their ordering to take advantage of the buying power
of the federal government.
OMB's Circular A-76 sets forth federal policy for determining
whether commercial activities associated with conducting the
government's business will be performed by federal employees or
private contractors. The A-76 process calls for agencies to
contract for commercial services once they have determined on the
basis of cost studies that it would be cost effective to contract
out these services. Agencies' efforts to undertake cost studies--
with the important exception of the Department of Defense--have
declined significantly in recent years.
In June 1998, we testified that OMB had undertaken only limited
efforts to monitor or enforce compliance with its A-76 guidance or
evaluate the success of this process.21 Since then, Congress
passed the Federal Activities Inventory Reform (FAIR) Act that,
among other things, provides a statutory basis for some
requirements of Circular A-76. Like Circular A76, FAIR requires
federal agencies to develop a list of all commercial services that
are possible candidates for performance by the private sector. OMB
is reviewing agencies' efforts to develop commercial activities
lists and is developing supplemental guidance to Circular A-76 to
assist agencies in complying with FAIR.
21 OMB Circular A-76: Oversight and Implementation Issues (GAO/T-
GGD-98-146, June 4, 1998).
Streamlining theProcurement Process Implementing OMB'sCircular A-
76
Statement Government Management: Observations on OMB's Management
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Page 14 GAO/T-GGD/AIMD-99-65 Finally, OMB's oversight role across
the government can provide the basis for analyzing crosscutting
program design, implementation, and organizational issues. We have
pointed to the need to integrate the consideration of the various
governmental tools used to achieve federal goals, such as loans,
grants, tax expenditures, and regulations. Specifically, we
recommended that OMB review tax expenditures with related spending
programs during their budget reviews.
In addition, our work has provided numerous examples of mission
fragmentation and program overlap within federal missions as shown
in table 1.22
22Managing for Results: Using the Results Act to Address Mission
Fragmentation and Program Overlap
(GAO/AIMD-97-146, Aug. 29, 1997) contains an annotated
bibliography of GAO work on missionfragmentation and program
overlap.
Analyzing CrosscuttingIssues
Statement Government Management: Observations on OMB's Management
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Page 15 GAO/T-GGD/AIMD-99-65
Mission area ProgramAgriculture Commerce and housing credit
Community and regional development
Education, training, employment and social services General
science, space, and technology General government Health
Income security International affairs Law enforcement
Natural resources and environment
* Food safety
* Financial institution regulation
* Community development* Economic development
* Emergency preparedness* Housing
* Rural development
* Early childhood programs* Employment training
* Student aid
* High performance computing* National laboratories
* Research and development facilities* Small business innovation
research
* Federal statistical agencies
* Long-term care* Substance abuse
* Nuclear health and safety* Telemedicine
* Child care* Welfare and related programs
* Youth programs
* Educational programs* Policy formulation and implementation
* Border inspections* Drug control
* Investigative authority* Drug trafficking
* Combating terrorism
* Federal land management* International environmental programs
* Hazardous waste cleanup* Water quality
OMB, in the Fiscal Year 1999 Governmentwide Performance Plan,
sought to present a thematic picture of federal performance that
grouped together similar programs and allowed for different agency
goals and performance measures to be related. To do this, OMB
chose to aggregate agency
Table 1: Areas of Fragmentation andOverlap Discussed in GAO
Products
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Page 16 GAO/T-GGD/AIMD-99-65 performance into budget functions--a
well-known and long used budget classification structure that
focuses on federal missions, or "areas of national need." We found
in reviewing the Fiscal Year 1999 Plan that in several parts of
the Plan, descriptions of program performance were presented in a
sequential, agency-by-agency format that missed opportunities to
address well-known areas of fragmentation and overlap.
Organization-based presentations are appropriate to emphasize
agency accountability but tend to "stovepipe" performance
discussions and inadequately describe crosscutting governmentwide
performance goals.
More broadly, we concluded that while the use of the budget
functions offers a reasonable and logical approach, it does not
always provide mutually exclusive descriptions of governmentwide
missions and that a more cohesive picture of federal performance
was needed. A more cohesive picture of federal missions would be
presented if discussions were broadened beyond functional lines
where necessary to capture the full range of government players
and activities aimed at advancing broad federal goals.
Beyond questions of how best to analyze and describe
governmentwide missions and performance, OMB's efforts to ensure
crosscutting programs are properly coordinated may be hampered if
efforts to resolve problems of program overlap and fragmentation
involve organizational changes. OMB lacks a centralized unit
charged with raising and assessing government-organization issues.
OMB has not had such a focal point since 1982 when it eliminated
its Organization and Special Projects Division.
Mr. Chairman, the record of OMB's stewardship of management
initiatives that we have highlighted today suggests that creating
and sustaining attention to management improvement is a key to
addressing the federal government's longstanding problems. In the
past, management issues often remained subordinated to budget
concerns and timeframes, and the leverage the budget could offer
to advance management efforts was not directly used to address
management issues.23 The experiences to-date suggest that certain
factors are associated with the successful implementation of
management initiatives. Building and sustaining these factors
appears to be pivotal regardless of the specific organizational
arrangements used to implement the management initiatives.
23Managing the Government: Revised Approach Could Improve OMB's
Effectiveness (GAO/GGD-89-65,
May 4, 1989).
SustainingImprovements in Federal Management
Statement Government Management: Observations on OMB's Management
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Page 17 GAO/T-GGD/AIMD-99-65 First, 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. Thus, institutional focal points can have
important roles in sustaining these initiatives over time by
serving as continuing "champions" to maintain attention to
management initiatives and help ensure follow-through.
Second, a strong linkage with the budget formulation process can
be a key factor in gaining serious attention for management
initiatives throughout government. Regardless of the location of
the leadership, management initiatives need to be reflected in and
supported by the budget and, in fact, no single organizational
arrangement by itself guarantees this will happen. Many management
policies require budgetary resources for their effective
implementation, whether it is financial management reform or
information systems investment. Furthermore, initiatives such as
the Results Act seek to improve decision-making by explicitly
calling for performance plans to be integrated with budget
requests. We have found that previous management reforms, such as
the Planning-Programming-BudgetingSystem and Management By
Objectives, suffered when they were not integrated with routine
budget presentations and account structures.24
Third, effective collaboration with the agencies--through such
approaches as task forces and interagency councils--has emerged as
an important central leadership strategy in both developing
policies that are sensitive to implementation concerns and gaining
consensus and consistent followthrough within the executive
branch. In effect, agency collaboration serves to institutionalize
many management policies initiated by either Congress or OMB. In
our 1989 report on OMB, we found that OMB's work with interagency
councils was successful in fostering communication across the
executive branch, building commitment to reform efforts, tapping
talents that exist within agencies, keeping management issues in
the forefront, and initiating important improvement projects.
24Performance Budgeting: Past Initiatives Offer Insights for GPRA
Implementation (GAO/AIMD-97-46,
Mar. 27, 1997).
Statement Government Management: Observations on OMB's Management
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Page 18 GAO/T-GGD/AIMD-99-65 Finally, support from the 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. 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.
Separate from the policy decisions concerning how best to organize
and focus attention on governmentwide federal management issues,
there are some intermediate steps that OMB could take to clarify
its responsibilities and improve federal management. For example,
OMB could more clearly describe the management results it is
trying to achieve, and how it can be held accountable for these
results, in its strategic and annual performance plans. Many of
OMB's strategic and annual goals were not as resultsoriented as
they could be. Continued improvement in OMB's plans would provide
congressional decisionmakers with better information to use in
determining the extent to which OMB is addressing its statutory
management and budgetary responsibilities, as well as in assessing
OMB's contributions toward achieving desired results. In our 1995
review 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. We believe it is important that OMB understand how its
organization affects its capacity to provide sustained management
leadership.
Mr. Chairman, this concludes our statement. We would be pleased to
answer any questions that you or other Members of the Subcommittee
have at this time.
(410419/935297)
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