Performance Budgeting
Efforts to Restructure Budgets to Better Align Resources with Performance Gao ID: GAO-05-117SP February 1, 2005Efforts to better align and integrate budget and performance information raises many issues, including the question of budget structure--should appropriations accounts or congressional budget justifications or both be restructured to tighten the link between resources and performance? If so, how and to what extent? The administration elevated attention to this issue by including budget restructuring as part of the President's Management Agenda in 2001. To provide an overview of the various budget restructuring efforts underway in the federal government, GAO: (1) summarized steps taken by the Office of Management and Budget (OMB) and nine selected agencies to better align their budgets with performance and to better capture the cost of performance in the budget; (2) discussed the potential implications of these efforts for congressional oversight and executive branch managerial flexibility and accountability; (3) described the experiences and implementation challenges associated with these efforts; and (4) identified lessons learned that can provide insights useful in considering current and future budget restructuring efforts.
Budget restructuring--changes to the congressional budget justifications and in some cases appropriations accounts to better align budget resources with programs and performance--has the potential to help reframe budget choices and is one tool among many that can advance results-oriented management. The administration has pursued budget restructuring, requiring agencies to submit a "performance budget" beginning with fiscal year 2005. Agencies took a variety of approaches, and these different approaches have different implications for agency management and congressional oversight. The budget structure reflects fundamental choices about how resource allocation choices are framed and the types of controls and incentives considered most important. As such, budget restructuring involves significant tradeoffs between the type of information provided and accountability frameworks used and has implications for the balance between managerial flexibility and congressional control. Accordingly, our work revealed differing views on the potential benefits and shortcomings of budget restructuring. OMB and agency officials credited budget restructuring with supporting more results-oriented management by increasing attention to strategic planning, performance, and results, providing more complete information on the budget resources associated with performance, and in some cases, enhancing agencies' flexibility and incentives to make tradeoffs necessary to increase efficiency and effectiveness. However, budget changes did not meet the needs of some executive branch managers and congressional appropriations subcommittees. Officials from two case study agencies said that restructuring may complicate resource management. For example, by allocating administrative expenses across programs, the restructuring has the potential to reduce their ability to shift resources among programs to address unanticipated needs. Also, congressional appropriations subcommittee staff expressed general support for budget and performance integration but objected to changes that substituted rather than supplemented information traditionally used for appropriations and oversight, such as object class and workload information. In addition, questions have been raised about the ability of agencies' performance and financial management systems to support the new budget structures. Going forward, infusing a performance perspective into budget decisions may only be achieved when the underlying information becomes more credible, accepted, and used by all major decision makers. Thus, Congress must be considered a partner. In due course, once the goals and underlying data become more compelling and used by Congress, budget restructuring may become a more compelling tool to advance budget and performance integration.
GAO-05-117SP, Performance Budgeting: Efforts to Restructure Budgets to Better Align Resources with Performance
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Staff Study:
February 2005:
Performance Budgeting:
Efforts to Restructure Budgets to Better Align Resources with
Performance:
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-117SP]:
GAO Highlights:
Highlights of GAO-05-117SP:
Why GAO Did This Study:
Efforts to better align and integrate budget and performance
information raises many issues, including the question of budget
structure”should appropriations accounts or congressional budget
justifications or both be restructured to tighten the link between
resources and performance? If so, how and to what extent? The
administration elevated attention to this issue by including budget
restructuring as part of the President‘s Management Agenda in 2001.
To provide an overview of the various budget restructuring efforts
underway in the federal government, GAO: (1) summarized steps taken by
the Office of Management and Budget (OMB) and nine selected agencies to
better align their budgets with performance and to better capture the
cost of performance in the budget; (2) discussed the potential
implications of these efforts for congressional oversight and executive
branch managerial flexibility and accountability; (3) described the
experiences and implementation challenges associated with these
efforts; and (4) identified lessons learned that can provide insights
useful in considering current and future budget restructuring efforts.
What GAO Found:
Budget restructuring”changes to the congressional budget justifications
and in some cases appropriations accounts to better align budget
resources with programs and performance”has the potential to help
reframe budget choices and is one tool among many that can advance
results-oriented management. The administration has pursued budget
restructuring, requiring agencies to submit a ’performance budget“
beginning with fiscal year 2005. Agencies took a variety of approaches,
and these different approaches have different implications for agency
management and congressional oversight.
The budget structure reflects fundamental choices about how resource
allocation choices are framed and the types of controls and incentives
considered most important. As such, budget restructuring involves
significant tradeoffs between the type of information provided and
accountability frameworks used and has implications for the balance
between managerial flexibility and congressional control. Accordingly,
our work revealed differing views on the potential benefits and
shortcomings of budget restructuring. OMB and agency officials credited
budget restructuring with supporting more results-oriented management
by increasing attention to strategic planning, performance, and
results, providing more complete information on the budget resources
associated with performance, and in some cases, enhancing agencies‘
flexibility and incentives to make tradeoffs necessary to increase
efficiency and effectiveness.
However, budget changes did not meet the needs of some executive branch
managers and congressional appropriations subcommittees. Officials from
two case study agencies said that restructuring may complicate resource
management. For example, by allocating administrative expenses across
programs, the restructuring has the potential to reduce their ability
to shift resources among programs to address unanticipated needs. Also,
congressional appropriations subcommittee staff expressed general
support for budget and performance integration but objected to changes
that substituted rather than supplemented information traditionally
used for appropriations and oversight, such as object class and
workload information. In addition, questions have been raised about the
ability of agencies‘ performance and financial management systems to
support the new budget structures.
Going forward, infusing a performance perspective into budget decisions
may only be achieved when the underlying information becomes more
credible, accepted, and used by all major decision makers. Thus,
Congress must be considered a partner. In due course, once the goals
and underlying data become more compelling and used by Congress, budget
restructuring may become a more compelling tool to advance budget and
performance integration.
What GAO Recommends:
This staff study does not contain recommendations.
www.gao.gov/cgi-bin/getrpt?GAO-05-117SP.
To view the full product, including the scope and methodology, click on
the link above. For more information, contact Susan J. Irving at (202)
512-9142 or irvings@gao.gov.
[End of section]
Contents:
Executive Summary:
Purpose:
Results in Brief:
Background:
GAO Analysis:
Budget Restructuring Has Potential to Help Reframe Budget Choices:
Budget Restructuring Viewed by Some as Supporting Results-Oriented
Management and Oversight:
Some Noted Limitations and Concerns:
Lessons Learned:
Agency Comments:
Section 1: Introduction:
1.1: Recent Budget Restructuring Efforts Are Part of Broader Efforts
toward a More Results-Oriented Federal Government:
1.2: Lessons Learned in Performance Budgeting Initiatives Provide
Insights for Considering Current Restructuring Efforts:
1.3: Challenges Confront Efforts to Better Align Budget and Performance
Structures:
1.4: Clarification of Report Focus and Terminology Used:
Section 2: Variety of Efforts Undertaken to Restructure Budgets to
Better Align Budget Resources with Programs and Performance:
2.1: OMB Recently Placed Greater Emphasis on Budget Restructuring:
2.2: Agencies Took Differing Approaches to Restructure Budgets to
Better Align Resources with Programs and Performance:
Section 3: Restructuring Budgets May Help Reframe Budget Choices and
Raises Tradeoffs Among Different Decision Makers' Needs:
3.1: Restructuring Appropriations Accounts and Congressional Budget
Justifications Has the Potential to Help Reframe Budget Choices:
3.2: Approach Used and Corresponding Changes Affect the Extent to Which
Budget Restructuring May Influence Management and Oversight:
3.3: Some Viewed Budget Restructuring as Supporting Improved Management
and Oversight, but Concerns and Limitations also Raised:
Section 4: Budget Restructuring Efforts Face Challenges:
4.1: Lack of Consensus between Congressional Appropriators and Other
Decision Makers Creates Challenges for Budget Restructuring Efforts:
4.2: Budget Restructuring Requires Sustained Commitment and Leadership:
4.3: Concerns Raised about Ability of Agencies' Systems to Accurately
Link Budget Resources to Performance and to Track Cost in the New
Budget Structures:
4.4: Budget Restructuring May Be a Long-Term, Iterative Process
Requiring Flexibility to Explore Different Approaches:
Section 5: Lessons Learned and General Observations:
Appendixes:
Appendix I: Objectives, Scope, and Methodology:
Methodology for Selection of Agencies:
Methodology for Agency and Congressional Interviews:
Methodology for Panel Discussions:
Appendix II: Department of Labor:
Background:
Objectives and Implementation Time Line:
Summary of Labor's Budget Restructuring Approach:
Agency Views on Implications of Budget Restructuring for Management and
Oversight:
Future Direction:
Appendix III: Department of Veterans Affairs:
Background:
Objectives and Implementation Time Line:
Summary of VA's Budget Restructuring Approach:
Agency Views on Benefits and Limitations of Budget Restructuring for
Management and Oversight:
Future Direction:
Appendix IV: Environmental Protection Agency:
Background:
Objectives and Implementation Time Line:
Summary of EPA's Budget Restructuring Approach:
Agency Views on Implications of Budget Restructuring for Management and
Oversight:
Future Direction:
Appendix V: National Aeronautics and Space Administration:
Background:
Objectives and Implementation Time Line:
Summary of NASA's Budget Restructuring Approach:
Agency Views on Implications of Budget Restructuring for Management and
Oversight:
Future Direction:
Appendix VI: GAO Contact and Staff Acknowledgments:
GAO Contact:
Acknowledgments:
Tables:
Table 1: Where Agencies Made or Proposed Changes to Better Align Budget
Resources with Programs and Performance:
Table 2: Statutory Framework for Improving Accountability of Federal
Government, 1990 through 1996:
Table 3: Overview of Some Previous Initiatives:
Table 4: Where Agencies Made or Proposed Changes to Better Align Budget
Resources with Programs and Performance:
Table 5: Program Activity Listing for EPA's Environmental Programs and
Management Appropriations Account (Fiscal Years 1998, 1999, and 2005
Budgets):
Table 6: Comparison of EPA's Appropriations Account Structure and
Organizing Framework for Its Fiscal Year 2005 Congressional Budget
Justification:
Table 7: Level of Program or Performance to Which Agencies Showed or
Requested "Full Cost" in Congressional Budget Justifications:
Table 8: Resource Table Presented in Labor's Fiscal Year 2005
Congressional Budget Justification for Job Corps:
Table 9: Agencies Considered for Review:
Table 10: Agencies Selected for Case Studies:
Table 11: Resource Table Presented in the Fiscal Year 2005
Congressional Budget Justification for Job Corps:
Table 12: Performance Goal Cost Allocation Presented in the Fiscal Year
2005 Congressional Budget Justification for Job Corps:
Table 13: Labor's Main Cost Categories: Definitions and Examples:
Table 14: Example of Relationship between VA's Strategic and
Programmatic Frameworks:
Table 15: Program Activity Changes Since Fiscal Year 1998 Budget:
Environmental Programs and Management Appropriations Account Example:
Table 16: Resource Table Presented in EPA's Fiscal Year 2005
Congressional Budget Justification: Resources by Goal/Appropriation:
Table 17: Resource Table Presented in EPA's Fiscal Year 2005
Congressional Budget Justification: Resources by Goal/Objective:
Table 18: Cost Definitions and Examples:
Figures:
Figure 1: Relationship among the PMA, the BPI, and Budget
Restructuring:
Figure 2: Time Line of OMB and Agency Efforts to Align Appropriations
Accounts and Congressional Budget Justifications with Performance:
Figure 3: Appropriations Accounts Funding the Medical Care Program
under VA's Fiscal Year 2003 Enacted and Fiscal Year 2004 Proposed
Appropriations Account Structure:
Figure 4: Appropriations Accounts Funding General Operating Expenses
under VA's Fiscal Year 2003 Enacted and Fiscal Year 2004 Proposed
Appropriations Account Structure:
Figure 5: Supplemental Table from DOT's Congressional Budget
Justification:
Figure 6: Example of Labor's Strategic Framework:
Figure 7: Labor's Implementation Time Line:
Figure 8: VA's Implementation Time Line:
Figure 9: Comparison of Appropriations Accounts Funding Each Major
Program under Fiscal Year 2003 Enacted Appropriations Account Structure
and Fiscal Year 2004 Proposed Appropriations Account Structure:
Figure 10: Program Activity Listing: Medical Care Appropriations
Account:
Figure 11: Comparison of Appropriations Accounts Funding Each Major
Program under Fiscal Year 2004 Enacted Appropriations Account Structure
and Fiscal Year 2005 Proposed Appropriations Account Structure:
Figure 12: Example of EPA's Budget Structure Organized by Strategic
Goal and Objective:
Figure 13: The Relationship between Strategic Goals and Objectives,
Program Projects, and Appropriations Accounts:
Figure 14: EPA's Implementation Time Line:
Figure 15: Excerpt from EPA's Fiscal Year 2005 Congressional Budget
Justification:
Figure 16: Example of Relationship between NASA's Strategic and
Organizational Frameworks:
Figure 17: NASA's Implementation Time Line:
Figure 18: NASA's Appropriations Account Structure Incrementally
Changed between Fiscal Years 2001 and 2005 to Reflect Organizational
Framework:
Abbreviations:
BLS: Bureau of Labor Statistics:
BPI: Budget and Performance Integration:
CFO: Chief Financial Officers:
CoF: Construction of Facilities:
Commerce: Department of Commerce:
CPPR: Center for Program Planning and Results:
DOJ: Department of Justice:
DOT: Department of Transportation:
EBSA: Employee Benefits Security Administration:
EEOICF: Energy Employees Occupational Illness Compensation Fund:
EPA: Environmental Protection Agency:
ETA: Employment and Training Administration:
ESA: Employment Standards Administration:
FAA: Federal Aviation Administration:
FASAB: Federal Accounting Standards Advisory Board:
FFMIA: Federal Financial Management Improvement Act:
FMCSA: Federal Motor Carrier Safety Administration:
FTA: Federal Transit Administration:
FTE: Full-time equivalent:
G&A: General and Administrative:
GMRA: Government Management Reform Act:
GOE: General Operating Expenses:
GPRA: Government Performance and Results Act:
HUD: Department of Housing and Urban Development:
IFMP: Integrated Financial Management Program:
IFMS: Integrated Financial Management System:
IG: Inspector General:
IT: Information Technology:
Labor: Department of Labor:
MAMOE: Medical Administration and Miscellaneous Operating Expenses:
MBO: Management by Objectives:
MRB: Management Review Board:
MSHA: Mine Safety and Health Administration:
NASA: National Aeronautics and Space Administration:
NCA: National Cemetery Administration:
NPA: National Program Administration:
NPR: National Performance Review:
OMB: Office of Management and Budget:
OPPTS: Office of Prevention, Pesticides, and Toxic Substances:
ORD: Office of Research and Development:
OSHA: Occupational Safety and Health Administration:
P&F: Program and Financing:
PART: Program Assessment Rating Tool:
PBAA: Planning, Budgeting, Analysis, and Accountability:
PBGC: Pension Benefit Guaranty Corporation:
PMA: President's Management Agenda:
PPBS: Planning, Program-Budgeting System:
S&E: Salaries and Expense:
SBA: Small Business Administration:
VA: Department of Veterans Affairs:
VBA: Veterans Benefit Administration:
VHA: Veterans Health Administration:
VR&E: Vocational Rehabilitation and Employment:
ZBB: Zero-based Budgeting:
[End of section]
Executive Summary:
Purpose:
Over the last decade, Congress, the Office of Management and Budget
(OMB), and other executive agencies have worked to implement a
statutory and management reform framework to improve the performance
and accountability of the federal government. Key components of this
framework include the Government Performance and Results Act (GPRA),
the Chief Financial Officers (CFO) Act, and the Government Management
Reform Act (GMRA). These reforms are designed to inform congressional
oversight and executive decision making by providing objective
information on the relative effectiveness and efficiency of federal
programs and spending. As a result of this framework, there has been
substantial progress in the last few years in establishing the basic
infrastructure needed to create high-performing federal organizations.
However, the federal government is in a period of profound transition
and faces an array of challenges--including diffuse security threats
and homeland security needs and a growing long-term fiscal imbalance--
and opportunities to enhance performance, ensure accountability, and
position the nation for the future. GAO has sought to assist Congress
and the executive branch in considering the actions needed to support
the transition to a more high-performing, results-oriented, and
accountable federal government.[Footnote 1] This report focuses on one
strategy--budget restructuring--suggested to increase the focus on
performance and results during budget deliberations.
The current administration has taken several steps to strengthen the
integration of budget, cost, and performance information for which
GPRA, the CFO Act, and GMRA laid the groundwork. This administration
has made the integration of budget and performance information one of
five governmentwide management priorities under its President's
Management Agenda (PMA).[Footnote 2] This initiative includes efforts
such as the Program Assessment Rating Tool (PART), improving outcome
measures, and improving monitoring of program performance. Another
effort is budget restructuring--changes to congressional budget
justifications and in some cases appropriations accounts--to better
align budget resources with performance.
Improving connections between budget and performance information is
neither a new nor a simple undertaking. Since about 1950 the federal
government has attempted several governmentwide initiatives designed to
better inform spending decisions based on expected
performance.[Footnote 3] Efforts such as the Planning, Program-
Budgeting System (PPBS) and Zero-based Budgeting (ZBB) were limited in
part because their performance structures were not clearly linked to
the budget. GPRA was established to provide improved connections
between planning and budgeting by requiring performance plans to cover
all program activities[Footnote 4] listed in the budget. The
expectation was that agency goals and measures would be taken more
seriously if they were perceived to be useful and used in the resource
allocation process. Thus, GPRA established a basic foundation for
linking resource allocation decisions and results. Together with the
CFO Act GPRA seeks to improve decision making by providing information
on the relative effectiveness and efficiency of federal programs and
spending and to help federal managers improve service delivery by
providing them with information about program results, costs, and
service quality.
Efforts to integrate performance information formally into budget
decisions raise many issues, including the question of budget
structure--should appropriations accounts or congressional budget
justifications or both be restructured to tighten the link between
resources and performance? If so, how and to what extent? The federal
budget is organized into about 1,100 appropriations accounts, and most
accounts have subsidiary program activities that allocate budget
authority to more specific levels of inputs, outputs, or outcomes
funded by the account. Our previous review of appropriations accounts
revealed a complex and varied structure characterized by a mix of
account orientations--object, organization, process, and program--that
reflect a specific focus or interest of Congress.[Footnote 5] While the
current account structure may help satisfy congressional control and
oversight objectives, it does not always align well with performance
goals, nor does it always readily capture the "full costs" of
programs.[Footnote 6] For example, certain performance goals cut across
multiple program activities and appropriations accounts. Also, the
costs of a single program can sometimes be split among multiple
accounts, such as accounts for salaries and expenses and accounts for
other expenditure items such as capital or construction. Although
clearer and closer associations between performance information and
budget requests could more explicitly inform and help focus budget
discussions on performance, this is easier said than done. Planning and
budget structures serve different purposes, and any effort to achieve
meaningful connections between them highlights tensions between their
differing objectives.
In 2001, OMB elevated attention to this issue by including budget and
performance integration (BPI) as a key initiative within the PMA. As
part of this initiative, OMB has pursued budget restructuring to better
align budget resources with programs and performance. OMB provided
agencies guidance on ways to restructure their appropriations accounts
and congressional budget justifications and, beginning with the fiscal
year 2005 budget, OMB required agencies to submit a "performance
budget" that would integrate the annual performance plan and the
congressional budget justification into one document.[Footnote 7] The
"performance budget" should reframe budget requests around what
agencies intend to accomplish with the resources requested and enhance
public and congressional understanding of government performance.
"Performance budgeting" may be thought of as an umbrella of various
initiatives, including OMB's PART, to better infuse performance
information into the budget process. The focus of this report is budget
restructuring. Our objectives in this study were to (1) summarize the
steps taken by OMB and selected agencies to better align their budgets
with performance and to better capture the cost of performance in the
budget, (2) discuss the potential implications of these efforts for
congressional oversight of budget resources and for executive branch
managerial flexibility and accountability over budget resources, (3)
describe the experiences and implementation challenges associated with
these efforts, and (4) identify lessons learned that might be useful in
considering future efforts for linking resources to results in the
budget. Observations and lessons learned in this study together with
lessons learned from previous "performance budgeting" initiatives
provide insights useful in consideration of current and future budget
restructuring efforts and other steps to improve the use of cost and
performance information in the budget process.
To provide an overview of the various budget restructuring efforts
underway in the federal government, we reviewed nine[Footnote 8]
agencies' account structures and congressional budget justifications.
These nine agencies were judgmentally selected based on a combination
of their scores for Budget and Performance Integration in the Executive
Branch Management Scorecard in the President's fiscal year 2004
budget,[Footnote 9] OMB's published statements highlighting agencies'
progress in this area, and the types and extent of budget structure
changes made. The nine agencies are:
1. Department of Commerce (Commerce),
2. Department of Housing and Urban Development (HUD),
3. Department of Justice (DOJ),
4. Department of Labor (Labor),
5. Department of Transportation (DOT),
6. Department of Veterans Affairs (VA),
7. Environmental Protection Agency (EPA),
8. National Aeronautics and Space Administration (NASA), and:
9. Small Business Administration (SBA).
To gain a deeper understanding of the implications of agencies' efforts
for managerial flexibility and accountability and implementation
experiences and challenges, we selected four of the nine agencies--
Labor, VA, EPA, and NASA--for more in-depth case study review. To help
select case study agencies from the nine in our review, we divided the
agencies into three general groupings based on the type of changes
made: (1) those with changes to the appropriations account structure
(VA, NASA, DOJ, DOT); (2) those with changes within the account
structure at the program activity level (EPA, SBA); and (3) those with
changes only to the congressional budget justification (Labor,
Commerce, HUD). From each category, we judgmentally selected at least
one agency[Footnote 10] for case study based on how well they had been
implementing the BPI initiative and then on the extent of their
changes. Thus, agencies that received higher scores for BPI on the
Executive Branch Management Scorecard and made or proposed more
apparent budget structure changes were more likely to be included in
our study.[Footnote 11] For a more detailed discussion of how we
selected our agencies and addressed the study's objectives, see
appendix I.
We conducted our work from May 2003 through December 2004 in
Washington, D.C. in accordance with generally accepted government
auditing standards.
Results in Brief:
Budget restructuring is one effort among a broader initiative to
improve government performance and outcomes. Because the budget is the
basis for resource allocation decisions, strengthening the link between
resources and performance in congressional budget justifications is
viewed as an important step to increase the focus on performance in
budget deliberations. Moreover, changing the appropriations account
structure is intended to provide managers with the incentives to manage
resources more efficiently. According to OMB staff, aligning authority
and accountability--or appropriating budget authority[Footnote 12] by
programs and outcomes--provides both the information and flexibility to
allocate resources and execute the budget with a focus on
effectiveness.
Given the multiplicity of budgetary actors in our system, any budget
restructuring effort represents more than structural or technical
changes. It reflects important trade-offs among different and valid
perspectives and needs of these different decision makers. The
structure of appropriations accounts and congressional budget
justifications reflects fundamental choices about how resource
allocation choices are framed and the types of controls and incentives
considered most important. As such, changes to the account structure
have the potential to change the nature of management and oversight and
ultimately the relationship among the primary budget decision makers--
Congress, OMB, and agencies. Accordingly, our work revealed differing
views on the potential benefits and shortcomings of restructuring
budgets to better align budget resources with performance.
The nine agencies in our review took a variety of approaches to
restructure their appropriations accounts and congressional budget
justifications over the past several years. These approaches differed
in terms of the:
* specific budget structures affected (e.g., appropriations account
structure, program activities within the appropriations account
structure, or congressional budget justification);
* orientation or organizing framework used to restructure the budget
(e.g., bureaus, strategic goals, programs, etc.);
* level of performance for which budget resources were shown or budget
authority was requested (e.g., strategic goals, performance goals,
programs, etc.); and:
* types of resources (e.g., central administration, Inspector General
(IG) offices, etc.) distributed within the performance-based budget
structure to reflect "full cost."
OMB staff and agency officials credited budget restructuring with
supporting results-oriented management by increasing attention to
strategic planning, performance, and results and providing more
complete information on the budget resources associated with
performance. Beyond providing better information, OMB staff and
officials in six agencies said budget restructuring enhanced agencies'
flexibility and incentives to make trade-offs necessary to increase
efficiency and effectiveness. NASA officials in particular said that
their restructured budget, which allocated all direct and indirect
resources to programs, gives managers greater information and
incentives to use these resources more efficiently.
However, budget changes did not meet the needs of some executive branch
managers and congressional appropriations committees. For example,
officials from two case study agencies said budget restructuring had
the potential to complicate resource management. These case study
agencies proposed allocating administrative expenses to program
appropriations accounts. While this change would better capture the
program's "full cost," paying each program's administrative expenses
from separate appropriations accounts could make it more difficult for
agencies to shift administrative resources across programs to address
emerging needs because transferring resources between appropriations
accounts requires statutory authority.
Congressional appropriations subcommittee staff for the most part
continued to state a preference for and rely on previously established
budget structures. Appropriations subcommittees and staff said that the
changes in budget accounts and presentations shifted the focus away
from programs and items of expenditures of interest to congressional
appropriators and instead highlighted strategic and performance goals.
While these staff expressed general support for budget and performance
integration, they objected to changes that replaced information, such
as workload and output measures, traditionally used for congressional
appropriations and oversight with the new performance perspective. The
importance of workload and output measures for making budget decisions
is also important at the state level. In our recent review of state
performance budgeting efforts, state officials indicated this
information was most relied upon by legislators when determining
funding levels and desired levels of service relative to funding.
Agencies' implementation experiences to date highlight a number of
challenges and issues for current and future budget restructuring
efforts, such as gaining congressional support and improving financial
and performance information. Achieving better alignment and integration
between budget and performance planning structures has the potential to
promote greater attention to performance issues in budgeting, but only
if supported by key executive and congressional decision makers. While
some agencies have demonstrated sustained commitment by agency
leadership, this commitment has not yet been shared by congressional
appropriators and other decision makers. Some congressional staff were
concerned about what they described as insufficient consultation in
developing the new budget structures. Questions have also been raised
about the ability of agencies' performance and financial management
systems to support the allocation and tracking of resources adequately
within the new budget structures. Some budget experts and agency
officials suggested that improving underlying financial and performance
information should be a prerequisite to restructuring budgets and that,
in their opinion, this step is more important to improving management
and oversight than the recent budget restructuring efforts. To the
extent budget decisions are to be based on this information, the
credibility of the underlying systems supporting the allocation of
costs to performance becomes more critical.
Budget restructuring is one tool among many that can advance results-
oriented management. However, it involves significant trade-offs
between different types of information and accountability frameworks
and has implications for the balance between managerial flexibility and
congressional oversight and control. Thus, Congress must be considered
a partner in the effort. While congressional buy-in is critical to
sustain any major management initiative, it is especially important for
performance budgeting given Congress' constitutional role in setting
national priorities and allocating the resources to achieve them. The
concerns raised by appropriations staff suggest that when creating
"performance budgets" OMB and agencies should find ways to supplement,
rather than replace, key information used by the appropriations
committees to make decisions. The greatest challenge of budget
restructuring may be discovering ways to reflect both the broader
planning perspective that can add value to budget deliberations and
foster accountability in ways that Congress considers appropriate for
meeting its appropriations and oversight objectives. Moving forward
without agreement on whether and how to structure budgets, without
agreement on how to measure and report cost and performance
information, and without the ability to track and explain how resources
are spent in various ways may result both in more work--as agencies
prepare budgets in multiple forms--and in structures that fall short of
achieving their objectives.
Going forward, the important goal of infusing a performance perspective
into budget decisions may only be achieved when the underlying supply
of information becomes more credible, compelling, accepted, and used by
all significant decision makers in the system. Indeed, if budget
decisions are to be based on this cost and performance information,
there is a more compelling need to improve the integrity of the data.
As OMB's own PART reviews suggest, much work remains to be done in
improving the underlying information, evaluations, and systems within
agencies to support performance goals. Ultimately, once the goals and
underlying information become more compelling and used by Congress,
budget restructuring may come to be viewed as a strategy to advance
congressional budgeting and oversight objectives. In other words, the
budget structure may come to reflect--rather than drive--the use of
performance and cost information in budget decisions.
Background:
Consistent with GPRA, OMB sought to forge stronger linkages between
plans and budgets and to prompt greater attention to results in the
resource allocation process. Over the last 10 years, OMB has discussed
the need to reexamine appropriations account structures to better align
them with program outputs and outcomes and to charge the appropriate
account with significant costs used to achieve these results. OMB said
that multiple accounts leading to the same output or outcome may
inhibit a manager striving to achieve results. Also, some program
activities within appropriations accounts show either inputs or only a
portion of the funding for an output and make it difficult to show the
full annual cost of resources used to achieve results. For example, the
budget resources used to achieve VA's burial program performance goals
are not readily apparent under its current appropriations account
structure. The burial program is funded by six appropriations accounts
spread across separate volumes of its congressional budget
justification.
GAO Analysis:
Variety of Efforts Undertaken to Restructure Budgets to Better Align
Budget Resources with Performance:
More recently, OMB placed greater emphasis on budget restructuring by
including it as one effort in the BPI initiative of the PMA that was
issued in August 2001. Beginning with the Circular A-11 for the fiscal
year 2004 budget, OMB provided guidance to agencies on ways to
restructure their appropriations accounts and congressional budget
justifications and later required agencies to submit a "performance
budget" for fiscal year 2005 to OMB and Congress. While the PMA and
OMB's recent "performance budget" requirements provided greater
incentives to move in this direction, some case study agencies began
thinking about budget restructuring and ways to better align the budget
with performance before the PMA was introduced. One case study agency's
effort to better align budget resources with performance could be seen
in the budget as early as 1998.
The nine agencies we reviewed took different approaches to
restructuring budgets to better align budget resources with
performance. Table 1 shows that the budget structure (e.g.,
appropriations account, program activity listing, or congressional
budget justification) affected in the nine agencies in our study
varied.
Table 1: Where Agencies Made or Proposed Changes to Better Align Budget
Resources with Programs and Performance:
Changes to appropriations account structure: Changes to accounts;
VA: Yes;
NASA: Yes;
DOJ: Yes;
EPA: No;
SBA: No;
COMMERCE: No;
HUD: No;
LABOR: No;
DOT: [A].
Changes to appropriations account structure: Changes within accounts to
program activities;
VA: Yes;
NASA: Yes;
DOJ: Yes;
EPA: Yes;
SBA: Yes;
COMMERCE: No;
HUD: No;
LABOR: [B];
DOT: [A].
Changes to congressional budget justification;
VA: Yes;
NASA: Yes;
DOJ: Yes;
EPA: Yes;
SBA: Yes;
COMMERCE: Yes;
HUD: Yes[C];
LABOR: Yes;
DOT: Yes.
Source: GAO analysis.
[A] Some bureaus within DOT made or proposed changes to their account
structure and program activities within accounts to better align with
performance, but DOT as a whole did not restructure its budget
accounts.
[B] The Pension Benefit Guaranty Corporation and the Employment and
Training Administration made or proposed changes to the program
activities within their appropriations accounts, but according to Labor
officials these changes reflect policy changes. Labor as a whole did
not restructure its appropriations accounts to better align resources
with programs or performance.
[C] For the fiscal year 2004 budget only. The House Appropriations
Committee directed HUD not to submit a "performance budget" for fiscal
year 2005 and consequently, HUD did not resubmit a "performance budget"
for fiscal year 2005.
[End of table]
While some changes or proposed changes sought to modify the way
resources are appropriated and thus the framework for resources trade-
offs, other changes sought to provide additional information on the
connection between budget resources and programs and performance for
presentational purposes. The three agencies proposing account structure
changes--NASA, VA, and DOJ--requested that budget authority be
appropriated to cover the "full cost" of programs or collections of
programs that support common goals.[Footnote 13] The remaining six
agencies--Commerce, Labor, DOT, EPA, HUD, and SBA--for the most part
maintained their existing appropriations account structures that
reflected a mix of orientations and either restructured their
congressional budget justifications to reframe their budget request
around the "full cost" of performance or provided supplemental
crosswalk tables to show the "full cost" or "total budgetary resources"
of performance units for presentational purposes. In addition, some
agencies also sought corresponding changes to other methods by which
Congress oversees resource use, including transfer authority and
reprogramming guidelines.[Footnote 14]
In most of the selected agencies, the organizing framework of each
agency's congressional budget justification followed its appropriations
account structure; however, three agencies in our study-
-EPA, SBA, and HUD--used organizing frameworks for their congressional
budget justification that did not match their appropriations account
structures. For example, EPA's appropriations account structure
generally reflects a mix of orientations, including object (items of
expense) and organization. However, EPA organized its congressional
budget justification by strategic goal. Any one strategic goal might
have been funded by multiple appropriations accounts. As a result, it
was easier to see the resources associated with strategic goals and
objectives in the congressional budget justification but more difficult
to see the resources associated with each appropriations
account.[Footnote 15]
Agencies linked budget resources to various levels of performance in
their congressional budget justifications. Most agencies in our review
aligned budget resources to programs or collections of programs that
support common strategic goals. Four agencies--EPA, SBA, HUD, and DOT-
-aligned budget resources to strategic goals or objectives or both, and
three agencies--Commerce, Labor, and DOT--aligned budget resources to
performance goals.
While agencies included in our study all took steps to more completely
capture the "full cost" of programs and performance, the types of
resources agencies allocated to program and performance units varied.
In particular, the treatment of central administrative resources and IG
office resources differed. For example, EPA allocated 100 percent of
its resources to its strategic objectives. NASA and SBA each allocated
almost all resources except for the IG to their programs and goals.
Other agencies, including VA and DOJ, did not allocate central
administrative resources to their programs. Thus, what was described as
"full cost" or "total budgetary resources" was not the same in all
agencies. This lack of consistency has the potential to complicate the
understanding of what is meant by "full cost" and "total budgetary
resources." For more information on how the resources allocated to
programs and performance differed, see section 2.2c.
Budget Restructuring Has Potential to Help Reframe Budget Choices:
Recent budget restructuring efforts have sought to help reframe budget
choices and to focus decisions more on the expected results of budget
resources and less on inputs or line items. The different approaches
used by agencies in our review provide different information and
incentives and thus have different implications for management and
oversight. For example, appropriations account structure changes, which
change the statutory control over resources, generally have a greater
potential to change management and oversight than changes to
congressional budget justifications alone, which may be primarily
presentational. Regardless of the approach used, a full understanding
of the implications of budget restructuring efforts cannot be
understood without looking also at the effect of corresponding changes
to the other methods by which Congress and agencies oversee and manage
budget resources, such as earmarks and reprogramming guidelines. (See
section 3.2b for a more detailed discussion.)
Budget Restructuring Viewed by Some as Supporting Results-Oriented
Management and Oversight:
OMB staff and agency officials credited these appropriations account
and congressional budget justification changes with supporting results-
oriented management. Officials we spoke with or documents we reviewed
from five agencies indicated that the restructured budgets increased
the attention to strategic planning, performance, and results during
internal budget deliberations and, in some of these agencies, increased
the coordination of programs supporting common strategic goals or
objectives. Also, OMB staff and officials from seven agencies credited
budget restructuring with providing more complete information on the
budget resources associated with performance.
Officials we spoke with from six agencies also emphasized that the
changes went beyond providing more complete information on the
resources associated with programs or performance to providing
incentives to recognize resource trade-offs and the flexibility to make
them. For example, a key objective of NASA's restructuring was to
provide incentives for improved resource management. According to NASA
officials, because NASA's program budgets now include direct and
indirect budget resources associated with a project and managers are
responsible for these resources, managers have better information and
incentives to be cost effective and the flexibility to make trade-offs
between various resources, such as administrative costs, supplies,
direct civil servants, and contractors or consider whether lower cost
alternatives exist. In addition, NASA officials credited "full cost"
budgeting with helping to identify underutilized facilities. Because
service pool[Footnote 16] resources are allocated to NASA's programs
and included as part of program budgets based on use, NASA said
underused service pools became more visible. If programs did not cover
a service pool's costs, NASA officials said that it would raise
questions about whether that capability was needed. (See section 3.3a
for a more detailed discussion of the perceived benefits of budget
restructuring.)
Some Noted Limitations and Concerns:
Despite these perceived benefits, officials from two case study
agencies raised concerns that budget restructuring has the potential to
complicate resource management by, among other things, reducing
flexibility to respond to changing needs across program accounts,
creating budget execution difficulties, or adversely affecting the
balance between maintaining institutional capacity--its physical assets
and workforce--and operational efficiency. For example, some VA
officials raised concerns that VA's proposed account structure might
affect their ability to respond to changes in benefit claims.
Currently, administrative costs are funded through one appropriations
account so VBA can shift administrative funds among multiple programs
throughout the year to address performance issues or respond to changes
in benefit claims that might arise. Under the proposed appropriations
account structures for fiscal years 2004 and 2005, each benefit
program's administrative expenses would have been funded from separate
appropriations accounts; as a result, shifting administrative funds
among program appropriations accounts throughout the year would require
transfer authority and VBA's ability to respond to changing needs would
have been more limited.
Appropriations committee reports and subcommittee staff for the most
part reflect congressional concerns and sometimes disapproval of budget
restructuring efforts. Although some appropriations committee reports
and staff we spoke with expressed general support for efforts to better
link budget resources to performance, they were generally less
comfortable with specific proposed changes. For the most part,
committees continued to state a preference for and use previously
established structures. For example, of the three agencies that
proposed agencywide appropriations account changes--NASA, VA, and DOJ-
-only NASA was appropriated under the new structure. Several staff said
that the organizational frameworks agencies used to restructure budgets
did not align with how the agency operated, relied on units for which
the agency was unable to track spending, did not provide useful
information, or did not align with the focus of congressional
appropriations committees. For example, appropriations subcommittee
staff for EPA said that because appropriators generally focus on and
fund resources by program, the congressional budget justification
structured around strategic goals and objectives did not provide
information they need. In 2004, after receiving justifications
structured around performance for 7 years, the House and Senate
appropriations subcommittees urged EPA to reformat its congressional
budget justification.[Footnote 17] In response, EPA structured its
fiscal year 2006 budget justification around appropriations accounts
and program/projects.
Further, several staff said the restructured congressional budget
justification not only introduced new perspectives but omitted
information that appropriators have come to rely on such as changes to
appropriations language and funding levels, historical information,
funding levels by program or state, object class information, workload
information, and detailed cost information. Lastly, some subcommittee
staff said they found the narrative included in performance-based
congressional budget justifications too voluminous and that, while it
might be useful information, it is too cumbersome and difficult to use.
As expressed in one committee report, "In the place of critical budget-
justifying material, the Committee is provided reams of narrative text
expounding on the performance goals and achievements of the various
agencies."[Footnote 18] (Section 3.3b provides a more detailed
description of congressional concerns.)
Executive branch officials and staff with whom we spoke expressed
differing views on the extent to which appropriations account structure
changes are important for efforts to advance results-oriented
management. Some saw the changes in appropriations accounts structures
as necessary to reinforce transformations in agency culture and
accountability processes. However, most did not view these changes as
critical to their efforts to advance results-oriented management at
this time. In the view of some officials, budget restructuring alone
does not necessarily provide the detailed cost and performance
information most useful for advancing results-oriented management and
addressing some key management challenges. Some agency officials,
congressional appropriations committee staff, and budget experts
suggested that improving underlying financial and performance
information should be a prerequisite to restructuring budgets and that,
in their opinion, this step is more important to improving management
and oversight than the recent budget restructuring efforts. Others
noted that efforts to develop improved performance measures and metrics
have a much greater impact on results-oriented management than budget
restructuring. These officials noted that management initiatives were
generally advanced when internal management and accountability
processes were recast to focus on performance and results, but budget
restructuring was not viewed as essential to foster this shift in
managerial perspective.
Budget Restructuring Efforts Face Challenges:
History has shown that designing effective approaches to achieve
meaningful connections between performance and budget structures is a
complex undertaking. Restructuring budgets inevitably requires trade-
offs among the needs and perspectives of Congress and other decision
makers because budget structures reflect fundamental choices about how
to frame budget choices and influence controls and incentives. In many
cases, Congress and other key decision makers--OMB and different levels
of agency management--have not reached consensus on the value of
restructuring budgets or the frameworks used to do so. This is not
surprising given the different roles these decision makers have within
our constitutional system of separated powers. However, developing
budget structures that balance the needs of both the executive and
legislative branches is made more difficult if there is no
consultation; some agency officials and congressional appropriations
subcommittee staff we spoke with said there was insufficient dialogue
between agencies and appropriators on agencies' budget restructuring
efforts.
This lack of consensus, whatever the cause, has and will likely
continue to raise challenges for those attempting to develop and
implement restructured budgets. Agencies' experiences have shown that
pursuing restructured budgets without the agreement--or at least
acquiescence of appropriations subcommittees--can result in significant
resources being used to develop budget structures that are rejected or,
if accepted, do not fully meet congressional needs. For example,
although Congress accepted EPA's fiscal year 1999 through 2005
congressional budget justifications structured around strategic goals
and objectives and allowed reprogramming within strategic objectives,
Congress required that EPA provide program information and continued to
set specific funding levels in committee reports based on
programs.[Footnote 19] Appropriations subcommittee staff said that they
generally did not use the performance-based budget to conduct their
work; rather they used the program-based information they requested
from EPA.
Structuring budgets to better capture the "full cost" of programs and
performance involves numerous judgments, such as the contribution of
various programs to achieve goals and objectives and the allocation of
resources among these programs and goals. However, questions have been
raised about agencies' capacity to develop meaningful allocations and
track costs within the new frameworks. Indeed, both GAO and IGs have
reported weaknesses in several of our case study agencies' financial
management systems in providing reliable, useful, and timely financial
information, including cost data.[Footnote 20] Thus, while budget
restructuring might provide a more complete picture of the resources
associated with expected results, it is dependent on these underlying
systems and assumptions.
Lessons Learned:
These challenges suggest that budget restructuring may be a long-term,
iterative process requiring flexibility to explore different
approaches. Budget restructuring is one tool that can support results-
oriented management. However, it involves significant trade-offs
between information provided and accountability frameworks used.
Congress, OMB, and agencies hold differing views on the information and
incentives necessary to support effective decision making and
oversight. Recent efforts to increase the focus on results in
congressional budget justifications have generally reduced the
visibility of other information, such as workload and output measures,
that congressional appropriations committees consider important for
making resource allocation decisions. The need for workload and output
measures for making resource allocation decisions is not unique to the
federal government. State officials indicated this information is used
by legislators in making resource allocation decisions, as discussed in
our most recent review of state performance budgeting efforts.
The history of budget reform suggests that budget structures will
necessarily reflect multiple perspectives on resource allocation.
Performance goals and planning structures can clearly add value to
budget debates by focusing attention on the broad missions and outcomes
that individual programs and activities are intended to address.
However, budget structures also serve the legitimate role of helping
Congress control and monitor agency activities and spending by
fostering accountability for inputs and outputs within the control of
agencies. The greatest challenge of budget restructuring may be
discovering ways to address these competing values that are mutually
reinforcing, not mutually exclusive. The concerns raised by
appropriations staff suggest that when creating "performance budgets"
OMB and agencies find ways to tailor the agencies' performance
information to meet those needs and to supplement, rather than replace,
key information used by Congress to make decisions.
While congressional buy-in is critical to sustain any major management
initiative, it is especially important for performance budgeting given
Congress' constitutional role in setting national priorities and
allocating the resources to achieve them. Experience suggests that
Congress needs to be comfortable with the appropriateness and utility
of the new budget structures since budget structures fundamentally
shape the focus of appropriations decisions as well as the nature of
the controls through which Congress oversees executive agencies'
spending. Accordingly, if performance goals and measures are to become
the basis for the new budget structures, Congress must view them as a
compelling framework through which to achieve their own budgetary
objectives. Indeed, GPRA itself was premised on a cycle where measures
and goals were to be established and validated during a developmental
period before they were subjected to the rigors of the budget process.
This suggests that the goal of enhancing the use of performance
information in budgeting is a multifaceted challenge that must build on
a foundation of accepted goals, credible measures, reliable cost and
performance data, tested models linking resources to outcomes, and
performance management systems that hold agencies and managers
accountable for performance. Restructuring appropriations accounts and
presentations to better capture the "full cost" of performance is part
of this agenda as well. However, creating performance budgets without
establishing and validating the requisite foundation and consensus on
measures and goals among primary decision makers will likely not
succeed in gaining support in the budgetary decision-making process.
While some argue that budget restructuring might be necessary to
provide incentives to take the performance goals seriously and improve
the underlying information, our work suggests that restructuring can
only take root once support exists for the underlying performance goals
and metrics. In due course, once the goals and underlying information
become more compelling and are used by Congress, budget restructuring
may become a more compelling tool to advance performance budgeting. In
other words, the budget structure will more likely reflect--rather than
drive--the use of performance and cost information in budget decisions.
Agency Comments:
We provided a copy of the draft report to OMB and the nine agencies in
our review for comment. OMB said they generally agreed with the
report's findings and had no specific comments. VA, Commerce, and DOJ
did not provide any comments. NASA, Labor, EPA, DOT, HUD, and SBA
provided technical comments, which we incorporated as appropriate.
[End of section]
Section 1: Introduction:
Budgeting--the allocation of resources among multiple claims--is the
process for making choices among often-conflicting objectives. How the
budget is structured matters a great deal because these structures
frame fundamental choices about resource allocation and the types of
controls and incentives provided. Over the past 50 years, various
efforts have sought to restructure budgets so as to link budgetary and
performance information. The Office of Management and Budget (OMB) and
agencies are again looking at these issues as part of the President's
Management Agenda (PMA). These efforts fall under the PMA's Budget and
Performance Integration initiative (BPI). One element of BPI involves
budget restructuring[Footnote 21]--changes to appropriations accounts
and congressional budget justifications to better align budget
resources with programs and performance (i.e., to better capture the
"full cost" of programs and performance). Past efforts at budget
restructuring have proven complex and posed challenges. These
challenges have included structuring budgets in ways that can meet the
multiple perspectives and needs of Congress, OMB, and different levels
of management at executive branch agencies. Lessons learned from past
initiatives can provide insights useful in considering today's efforts,
such as understanding that no single definition or structure
encompasses the range of needs and interests of federal decision
makers.
1.1: Recent Budget Restructuring Efforts Are Part of Broader Efforts
toward a More Results-Oriented Federal Government:
Recent OMB and agency efforts to restructure appropriations accounts
and congressional budget justifications to better align budget
resources with programs and performance are part of broader efforts
toward achieving a more results-oriented government. Over the last
decade a statutory and management framework was established, and
Congress, OMB, and other executive agencies have worked to implement it
to improve the performance and accountability of the executive branch
and to enhance executive branch and congressional decision making. Key
components of this framework include the Government Performance and
Results Act (GPRA), the Chief Financial Officers (CFO) Act, and the
Government Management Reform Act (GMRA). Among their complementary
purposes, these acts seek to inform congressional oversight and
executive decision making by providing information on the relative
effectiveness and efficiency of federal programs and spending and to
help federal managers improve service delivery by providing them with
information about program results, costs, and service quality. As a
result of this framework, there has been substantial progress in the
last few years in establishing the basic infrastructure needed to
create high-performing federal organizations.
However, the federal government is in a period of profound transition
and faces an array of challenges and opportunities to enhance
performance, ensure accountability, and position the nation for the
future. A number of overarching trends, such as diffuse security
threats and homeland security needs, increasing global interdependency,
the shift to a knowledge-based economy, and the looming fiscal
challenges facing our nation drive the need to reconsider the role of
the federal government in the 21ST century, how the government should
do business (including how it should be structured), and in some
instances, who should do the government's business. GAO has sought to
assist Congress and the executive branch in considering the actions
needed to support the transition to a more high-performing, results-
oriented, and accountable federal government.[Footnote 22] This report
focuses on one strategy--budget restructuring--suggested to increase
the focus on performance and results during budget deliberations.
GPRA explicitly sought to promote a connection between performance
plans and budgets with a key objective of helping Congress, OMB, and
other executive branch agencies develop a clearer understanding of what
is being achieved in relation to what is being spent. The expectation
was that agency goals and measures would be taken more seriously if
they were perceived to be useful and used in the resource allocation
process. By requiring that an agency's annual performance plan cover
each program activity[Footnote 23] in the President's budget request
for that agency, GPRA established a basic foundation for linking
resource allocation decisions and results. However, recognizing that
agencies' program activity structures are often inconsistent across
appropriations accounts, the act did not specify a level of detail or
components needed to achieve this coverage. Agencies are provided
flexibility to consolidate, aggregate, or disaggregate program
activities so long as no major function or operation of the agency is
omitted or minimized.
The CFO Act, as amended, also provides a foundation for understanding
the connection between resources and results. The act sought to remedy
the government's lack of timely, reliable, useful, and consistent
financial information. Twenty-four agencies are required to prepare
financial statements annually and have them audited. The required
statements include, among other things, a statement of net cost. The
statement of net cost is intended to provide timely and reliable cost
information to (1) help ensure that resources are spent efficiently to
achieve expected results, and (2) compare alternative courses of
action.
Other core components of this framework include financial management
statutes that expanded and amended the CFO Act, such as GMRA and the
Federal Financial Management Improvement Act (FFMIA) (see table 2). In
addition, the Federal Accounting Standards Advisory Board
(FASAB)[Footnote 24] developed managerial cost accounting standards
aimed at providing reliable and timely information "on the full cost of
federal programs, their activities, and outputs."[Footnote 25] If
successfully implemented these reforms provide the basis for improving
accountability of government programs and operations as well as
routinely producing valuable cost and performance information that can
inform resource management and oversight decisions. All these efforts
recognize that improving cost and performance information to better
understand the connection between resources and results is essential to
promoting a more results-oriented government. And, taken together, they
lay the groundwork for current and future reform effects to better
integrate performance, budget, and cost information.
Table 2: Statutory Framework for Improving Accountability of Federal
Government, 1990 through 1996:
Reform: Government Performance and Results Act of 1993, P.L. 103-62;
Description: A key part of the statutory framework, GPRA requires
executive branch agencies to complete strategic plans in which they
define their missions, establish results-oriented goals, and identify
the strategies that will be needed to achieve those goals. GPRA also
requires executive branch agencies to prepare annual performance plans
that articulate results-oriented annual goals for the upcoming fiscal
year that are aligned with their long-term strategic goals. GPRA also
requires that annual performance plans be tied to budget requests by
linking annual goals to the program activities displayed in the budget
presentations. Agencies also are required to annually issue performance
reports that provide important information to agency managers,
policymakers, and the public on what each agency accomplished with the
resources it was given.
Reform: Chief Financial Officers Act of 1990, P.L. 101-576;
Description: The CFO Act laid the legislative foundation for the
federal government to provide taxpayers, the nation's leaders, and
agency program managers with reliable financial information. The CFO
Act provided a framework for improved federal government financial
systems, with a focus on program results in part by centralizing within
OMB the establishment and oversight of federal financial management
policies and practices. The CFO Act also set up a series of pilot
audits whereby certain agencies were required to prepare agencywide
financial statements and subject them to audit by the agencies'
inspectors general.
Reform: Government Management Reform Act of 1994, P.L. 103-356;
Description: The Government Management Reform Act expanded the CFO Act
by, among other things, extending financial statement preparation and
audit requirements to 24 agencies beginning with fiscal year 1996 and
for the preparation and audit of consolidated financial statements for
the federal government beginning with fiscal year 1997. The covered
agencies are to prepare the statements in accordance with federal
standards developed by FASAB, including a requirement for cost
information.
Reform: Federal Financial Management Improvement Act of 1996, P.L. 104-
208, Div. A, Title I, sec. 101(f) [Title VIII], 110 Stat. 3009-389;
Description: The purpose of FFMIA is to ensure that agency financial
management systems comply with federal financial system requirements,
applicable federal accounting standards, and the United States
Government Standard General Ledger to provide uniform, reliable, and
more useful financial information, including managerial cost accounting
information, to evaluate program and activities on their "full costs
and merits," to make fully informed decisions, and to ensure
accountability on an ongoing basis.
Source: GAO analysis.
[End of table]
The federal government is moving into an important and more difficult
phase of implementation--formally using results-oriented performance
and cost information as part of agencies' day-to-day management and
congressional and executive branch decision making. Within this area,
one important and long-standing issue is how to better integrate
performance, cost, and budget information to better support resource
allocation decisions. Among the issues to be resolved are if, how, and
to what extent the budget might be restructured to help and encourage
better understanding of the connection between budget resources and
performance and to support more effective and efficient resource use.
The federal budget is organized into about 1,100 appropriations
accounts, and most accounts have subsidiary program activities that
show budget authority of more specific levels of inputs, outputs, or
outcomes funded by the account. While the current account structure may
help satisfy congressional control and oversight objectives, it does
not always align well with performance goals, nor does it always
readily capture the "full cost" of programs. For example, program
activities may show only a portion of the funding for an output or
outcome and certain performance goals cut across multiple program
activities and appropriations accounts. Also, the costs of a single
program can sometimes be split among multiple accounts, such as
accounts for salaries and expenses and accounts for other expenditure
items such as capital or construction.
Concerns continue that a general lack of integration among performance,
budget, and financial management functions and reporting structures
impedes transparency and may hamper efforts to understand fully the
relationship between performance, requested resources, and resources
consumed. We have reported that closer integration among performance,
budgeting, and financial management functions and information might
provide greater reinforcement of results-oriented management efforts
and could help improve the quality and availability of budget,
financial, and performance information. Clearer and closer associations
between performance information and budget requests could more
explicitly inform and help focus budget discussions on performance.
However, it is important to recognize that budget and planning
structures serve different purposes. Achieving a connection between
these structures is easier said than done. There will almost always be
tension between these structures. Our past work suggests that the
account structure has evolved over time to help Congress control and
monitor agencies activities and spending and, as such, is geared more
to fostering accountability for inputs and outputs.[Footnote 26] On the
other hand, performance plans need to be broad and wide-ranging if they
are to articulate the missions and outcomes agencies seek to influence.
Efforts to align budget and performance structures represent more than
structural or technical changes but important trade-offs among
different and valid perspectives and needs of Congress, including
appropriators and authorizers, and different levels of Executive Branch
management.
The current administration has taken several steps to strengthen the
integration of budget, cost, and performance information for which
GPRA, the CFO Act, and GMRA laid the groundwork. The administration
included BPI as one of its management initiatives under the umbrella of
the PMA. The PMA, by focusing on a number of targeted areas (including
five mutually reinforcing governmentwide goals and a number of program
initiatives), seeks to improve the performance and management of the
government. As shown in figure 1, BPI is one of five crosscutting
initiatives within the PMA and the initiative includes efforts such as
the Program Assessment Rating Tool (PART), improving outcome measures,
and improving monitoring of program performance. Budget restructuring
to better align budget resources with programs and performance is one
effort within the BPI initiative. As will be discussed in more detail
in section 2, two aspects of budget restructuring discussed as part of
the BPI initiative included:
1. alignment: structural and format changes to congressional budget
justifications, and in some cases, appropriations accounts to better
align resources with programs and performance; and:
2. "full cost: " changes to the way certain budget resources are
distributed or measured to better reflect where and when resources are
consumed.
Figure 1: Relationship among the PMA, the BPI, and Budget
Restructuring:
[See PDF for image]
[End of figure]
In outlining its BPI initiative, the current administration expressed
concern that the structure of the federal government budget "makes it
impossible to identify the full cost associated with individual
programs."[Footnote 27] The administration stated that it would seek to
"integrate more completely information about costs and programs
performance in a single oversight process." According to the
administration, the initiative would include "budgeting for the full
cost of resources where they are used, making budget program and
activity lines more parallel with outputs, and, where useful, improving
alignment of budget accounts." With regard to "full cost," the
administration transmitted legislative changes that proposed to more
completely recognize the accruing costs of federal employee retirement
benefits. The administration noted that additional legislative changes
may be necessary to better align other resources with results in the
budget.
OMB officials and staff we spoke with described restructuring budgets
to better align budget resources with programs and performance as
supporting efforts to achieve a more results-oriented government.
Because the budget is the basis for resource allocation decisions,
strengthening the link between resources and performance in
congressional budget justifications is viewed as an important step to
increase the focus on performance in budget deliberations. Moreover, an
OMB staff member said changing the appropriations account structure
could help better inform and drive budget decisions by providing not
only the information but also the incentives to recognize and make
resource trade-offs to manage resources more efficiently. According to
the fiscal year 2004 Analytical Perspectives, "a program manager who is
authorized to manage the program, controls budget authority that covers
the 'full cost' of resources used, and has authority over program staff
can focus his attention on getting results." Thus, according to OMB
staff, aligning authority and accountability--or, appropriating budget
authority[Footnote 28] by programs and outcomes--provides both the
information and incentives to allocate resources and the flexibility to
execute the budget with a focus on effectiveness.
OMB staff said appropriations account structure changes may not be
necessary. Beginning with the fiscal year 2005 budget, OMB required
agencies to change their congressional budget justification. According
to OMB the structure of a "performance budget" justification--by
explaining goals, how they will be achieved, and what resources are
required--encourages an analytical congressional budget justification
that answers key questions in an organized format and might enhance
public and congressional understanding of government
performance.[Footnote 29]
1.1a: Alignment of Budget and Performance Structures Is a Long-Standing
and Complex Issue:
Improving the connections between budget and performance information is
not a new or simple task. Since about 1950 the federal government has
attempted several governmentwide initiatives designed to better align
spending decisions with expected performance.[Footnote 30] These
efforts provide insights into both the potential limitations of
establishing performance structures that are not clearly linked to the
budget as well as some of the challenges associated with trying to
better align performance and budget structures. Table 3 provides a
brief overview of the objectives of some previous initiatives as well
as some of the challenges faced in terms of better aligning budget and
performance structures.
Table 3: Overview of Some Previous Initiatives:
Previous initiative: Hoover Commissions; 1949 and 1953;
Brief description: In 1949 the first Hoover Commission's
recommendations were intended to shift the focus away from the inputs
of government to its functions, activities, costs, and accomplishments.
Rather then emphasizing items of expenditure, such as salaries, a
"performance budget" was to describe the expected outputs resulting
from a specific function or activity. Consistent with the Commission's
recommendations, Congress enacted the Budget and Accounting Procedures
Act of 1950 that, among other things, required the President to present
in his budget submission to Congress the "functions and activities" of
the government, ultimately institutionalizing as a new budget
presentation "obligations by activities." These presentations continue
today although they are now referred to as "obligations by program
activity" or more informally "program activities." However, reflecting
on the implementation of the first Commission's recommendations, the
Second Hoover Commission observed that many programs did not have
adequate cost information and suggested that budget activities and
organizational patterns be made consistent and accounts established to
reflect this pattern. The Commission suggested that budget
classification, organization, and accounting structures should be
synchronized.
Previous initiative: Planning, Program-Budgeting System (PPBS); 1965;
Brief description: PPBS, mandated governmentwide in 1965, introduced a
decision-making framework to executive branch budget formulation that
involved presenting and analyzing choices among long-term policy
objectives and alternative ways of achieving them. As originally
designed, PPBS information systems were not expected to correlate to
the President's budget submission to Congress. However, a later Bureau
of the Budget bulletin directed agencies to provide crosswalks between
their PPBS and appropriations structures. This "two-track system" was
found to be burdensome, and subsequent efforts to align PPBS program
structures with the federal budget were ultimately unsuccessful. While
the Department of Defense continues to use PPBS procedures, the
governmentwide initiative was formally discontinued in 1971.
Previous initiative: Management by Objectives (MBO) 1973;
Brief description: Initiated in 1973, MBO put in place a process to
hold agency managers responsible for achieving agreed-upon outputs and
outcomes. While in its first year no attempt was made to establish an
explicit connection between MBO and the budget process, ultimately a
link between agencies' stated objectives and their budget requests was
sought. Although certainly affected by President Nixon's resignation,
MBO suffered from its initial separation from existing budget
formulation processes and from problems in identifying and measuring
objectives. The last objectives under MBO were requested in 1975.
Previous initiative: Zero-based Budgeting (ZBB); 1977;
Brief description: ZBB was an executive branch budget formulation
process introduced in 1977. Its main focus was on optimizing
accomplishments available at alternative budget levels. Under ZBB,
federal agencies were expected to set priorities based on program
results that could be achieved at alternative spending levels, one of
which was to be below current funding. In concept, ZBB sought a clear
and precise link between budget resources and program results. The
initiative, however, faced a number of challenges. Initially there was
no attempt to explicitly connect the ZBB structure with agencies'
organizational structures or congressional budget justifications, and
crosswalks between the ZBB structure and the budget structure were
viewed as obscuring the analysis of alternative spending levels and
performance. Paperwork burdens also were cited as a problem for both
agencies and appropriators.
Previous initiative: National Performance Review (NPR) 1993;
Brief description: In the mid-1990s, NPR--an executive branch reform
effort aimed at making the government "work better and cost less"--
included hundreds of recommendations generally intended to emphasize
results and managerial flexibility.[A] Among these recommendations, NPR
included several proposals to deal with "mission-driven, results
oriented budgeting," including restructuring appropriations accounts to
reduce overitemization and align them with programs. In a 1994 report
on the status of NPR implementation,b GAO cautioned that the degree of
"overitemization" is a matter of interpretation and political judgment.
Further, GAO noted that one reason for congressional attention on
processes rather than on results has been the absence of reliable
performance data.
Source: GAO analysis.
[A] Office of the Vice President, From Red Tape to Results: Creating a
Government that Works Better and Costs Less, Report of the National
Performance Review (Washington, D.C.: Sept. 7, 1993).
[B] GAO, Management Reform: Implementation of the National Performance
Review's Recommendations, [Hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO/OCG-95-1].
[End of table]
1.2: Lessons Learned in Performance Budgeting Initiatives Provide
Insights for Considering Current Restructuring Efforts:
As previous efforts have shown, determining effective approaches to
achieve meaningful connections between performance and budget
structures is a large and complex undertaking.
The lessons and common themes that have emerged from previous
initiatives provide insights for considering the most recent budget
restructuring efforts discussed in this report. First, previous efforts
have shown that any effort to link plans and budgets must actually
involve both the executive and legislative branches of our government.
While congressional buy-in is critical to sustain any major management
initiative, it is especially important for performance budgeting given
Congress' central role in setting national priorities and allocating
the resources to achieve them. Past initiatives often faltered because
the executive branch developed plans and performance measures in
isolation from congressional oversight and resource allocation
processes. Second, previous efforts that did not initially attempt to
explicitly connect performance with the budget showed the difficulty
associated with using crosswalks and in maintaining congressional
interest in performance structures disconnected from the congressional
oversight and budget processes. For example, past federal government
performance budgeting initiatives have resulted in unique and often
voluminous presentations unconnected to the structure and processes
used in congressional decision making.
Third, past initiatives demonstrate that there is no single definition
of "performance budget" that encompasses the range of needs and
interests of federal decision makers.[Footnote 31] For example, while
to some "performance budgeting" might mean increasing the focus on
results during budget deliberations, it might mean greater flexibility
and discretion in operations to another. Finally, past initiatives
showed that performance budgeting cannot be viewed in simplistic terms.
Ultimately, budgeting is and will remain an exercise in political
choice in which performance can be one factor, but not necessarily the
only factor underlying decisions.
Building on the lessons of these previous efforts, GPRA aimed for a
closer and clearer linkage between requested resources and expected
results. As noted previously, the act established a basic connection
between an agency's performance and budget structures by requiring an
agency's performance plan to cover each program activity in the
President's budget request for that agency. Our previous review of
performance plans found that agencies have made progress in
demonstrating how their performance goals and objectives relate to
program activities in the budget. Similarly, agencies' initial efforts
to link performance plans to their statements of net cost are
improving, but some presentations are more informative than others.
Despite these improvements, we found that additional effort is needed
to more clearly describe the relationship between performance
expectations, requested funding, and consumed resources.[Footnote 32]
In addition, the measures and goals used were to be established and
validated during a developmental period before being subjected to the
rigors of the budget process.
1.3: Challenges Confront Efforts to Better Align Budget and Performance
Structures:
Efforts to align budget and performance structures confront the
multiple perspectives and needs of Congress, including congressional
members and staff serving on appropriations and authorizing committees,
and other decision makers such as officials and staff at OMB, and
different levels of agency management. These multiple perspectives are
manifested in the following three challenges, and any efforts to
restructure budgets to better align budget resources with programs and
performance must address these challenges:
* a fundamentally heterogeneous appropriations account structure that
serves many different needs and objectives,
* a variety of ways "costs" can be described and measured, and:
* a variety of understandings of what constitutes and might be expected
from "performance budgeting."
1.3a: Appropriations Account Structure:
Appropriations accounts are established by law and facilitate
congressional allocation and oversight responsibilities. Appropriations
accounts frame resource allocation decisions and the types of
incentives provided as well as serve as the unit of control. The
appropriations account structure, developed over the last 200 years,
was not created as a single integrated framework but rather developed,
for the most part, as separate accounts over time in response to
specific needs. Although appropriations acts generally establish
appropriations accounts, the appropriations account structure serves
the needs and objectives of many users of the budget and an intricate
network of relationships among Congress and these users. A continual
challenge in structuring appropriations accounts is finding ways to
balance managerial flexibility and congressional control.
Our previous review of appropriations accounts revealed a complex and
varied structure characterized by a mix of account
orientations.[Footnote 33] Each of the four orientations used in our
previous analysis--object, organization, process, and program--reflects
a specific focus or interest of Congress. An object orientation
emphasizes the items of expense while an organization orientation
focuses on the responsible government unit. A process orientation
concentrates on the specific operations or approaches underlying the
federal activities. A program orientation focuses on the missions and
objectives of government units.[Footnote 34] All orientations were
found throughout the appropriations account structures. Within this
varied structure, a number of additional complexities related to better
aligning budget and performance structures exist. One complexity is
that some appropriations accounts with a program orientation include
the resources for a number of programs within a single account.
However, other appropriations accounts with a program orientation do
not necessarily capture all related program resources. For example,
some programs separate an appropriations account for salaries and
expenses from other program expenditure appropriations accounts.
1.3b: Concept of "Cost"
Recent efforts to better align budget and performance structures often
use terms such as "full cost" and aim to provide improved and
comparable cost information. However, the various users of performance,
budget, and cost information may have different but valid perspectives
on what is meant by "cost." These differences determine how information
and incentives are framed and thus, the extent to which particular cost
information might be considered useful for a given purpose and user.
Understanding these different perspectives and approaches to cost
provides insights into the challenges associated with restructuring
budgets in ways that will support the various users' perspectives and
needs.
"Cost" generally can be thought of as the value of resources that have
been, or must be used or sacrificed to attain a particular objective.
However, what is meant by "cost" in a given situation depends on:
* when costs are recognized,
* what unit of cost is being measured (e.g., strategic goal or
program), and:
* the extent to which individual cost components (e.g., salaries,
materials, general administrative costs) are included in the measure.
When costs are measured varies based on the intended purpose. Users
focused on control over spending may want to recognize the complete
costs when a decision is made to commit resources. For example, the
obligations-based budget helps ensure upfront control over asset
acquisition costs by requiring budget authority for the full cost of
the asset when it is purchased. Conversely, users focused on
performance assessment (including cost efficiency and cost
effectiveness) may want to recognize resources when they are used to
produce goods and services. For example, accrual-based measurement
records transactions in the period when the underlying economic
activity generating the revenue, consuming the resources, or increasing
the liability occurs, regardless of when the associated cash is
actually paid or received. Each method provides different information
on the "cost" of an object or activity.
What unit of cost is being measured helps frame decisions and has
implications for how cost information might be used, including the
types of questions that might be answered. For example, cost
information could be aligned to strategic or performance goals, to
programs or activities, or to more detailed levels of analysis such as
the unit cost of a specific output.
The extent to which individual cost components are included in "full
cost" may differ among users. "Full cost" is generally viewed as
including both direct costs (costs that can be specifically identified
with a cost object, such as an output, etc.)[Footnote 35] and indirect
costs (costs of resources that are jointly or commonly used to produce
two or more types of outputs but are not specifically identifiable with
any of the outputs).[Footnote 36] However, differences about what cost
components to recognize as "full cost" will arise in part due to
different perspectives on what "costs" are critical to achieving a
given objective.
1.3c: The Concept of "Performance Budgeting"
The concept of "performance budgeting"--essentially the process of
linking budget levels to expected results, rather than to inputs or
activities--has and continues to evolve. For many years, numerous
experiments have attempted to change the emphasis of budgeting from its
traditional focus on inputs to the allocation of resources based on
program goals and measured results. As noted earlier, past initiatives
demonstrate that there is no single definition of a "performance
budget" that encompasses the range of needs and interests of federal
decision makers.[Footnote 37] As such, Congress, OMB, and the agencies
might hold a range of views and perceptions about what is meant by
"performance-based budgets" and "performance budgeting" as well as what
might be achieved. For example, "performance budgeting" might be viewed
in simplistic terms--that is, resource allocation is mechanically
linked to performance or as presenting the varying levels of
performance that would result from different budget levels. However,
performance information will not provide mechanistic answers for budget
decisions, nor can performance data eliminate the need for considered
judgment and political choice. Alternatively, "performance budgeting"
might be viewed as providing performance information in ways that
inform resource allocation decisions. The different interpretations of
the term "performance budgeting" increase the importance of
understanding the objectives of any particular initiative and its
elements.
"Performance budgeting" might best be thought of as an umbrella of
tools to increase the focus on performance during the budget process.
An example of a current initiative to increase visibility and focus on
performance information during budget deliberations is OMB's PART. The
PART is a diagnostic tool meant to provide a consistent approach to
evaluating federal programs as part of the executive branch budget
formulation process, thereby more explicitly infusing performance
information into the budget at a level at which funding decisions are
made. Efforts might involve increasing credible cost and performance
information and improving the government's capacity to account for and
measure the total cost of federal programs and activities. Lastly,
improving the alignment of the account structure to align authority
with accountability and relate resources used to the results produced
can also fall under the umbrella of "performance budgeting."
1.4: Clarification of Report Focus and Terminology Used:
While "performance budgeting" may be thought of as an umbrella of
various initiatives to better infuse performance information into the
budget process, the focus of this report is budget restructuring, which
involves:
1. alignment: structural and format changes to congressional budget
justifications, and in some cases, appropriations accounts to better
align budget resources with programs and performance; and:
2. "full cost: " changes to the distribution or measurement of certain
budget resources to better capture the cost of those resources where
and when they are used.
Although OMB's concept of "full cost" initially included efforts to
change the budgetary measurement of certain items to better recognize
costs in the budget when resources are consumed, this effort has not
been a primary focus of reform efforts. Rather, reform efforts to date
have focused on changes in the structure of appropriations accounts or
congressional budget justifications and the distribution of resources
within these structures to more completely align budget resources with
programs and performance. As a result, these efforts are the primary
focus of this report.
In describing efforts to restructure budgets to better align budget
resources with performance, OMB and other agencies use terms such as
"full cost" and "total budgetary resources." In most but not all cases,
these terms are used to refer to the alignment of requested budget
authority with programs and performance within congressional budget
justifications or appropriations accounts. However, various users of
performance, cost,
and budget information,[Footnote 38] including users across agencies,
may interpret "full cost" and "total budgetary resources" differently.
Thus, for the purposes of this report, we use the term "budgetary
resources" generally to describe the budget information within
appropriations accounts and congressional budget justifications that
has been aligned to programs and performance during restructuring
efforts. When we use terms "full cost" and "total budgetary resources"
as used by OMB or the agencies or both, we place them in quotations.
In this report "performance budget" refers to congressional budget
justifications that are structured around agency strategic and
performance goals and not to any process or approach in which resource
allocation decisions are being more generally linked to performance. We
place the term in quotations because different users may interpret
"performance budget" differently.
[End of section]
Section 2: Variety of Efforts Undertaken to Restructure Budgets to
Better Align Budget Resources with Programs and Performance:
The Office of Management and Budget (OMB) has been discussing the need
to reexamine appropriations accounts within the last decade, and
beginning with the fiscal year 1999 budget, some agencies' efforts to
better align budget resources with programs and performance could be
seen in the budget. Recently, OMB has placed greater emphasis on budget
restructuring by including it as one effort in the Budget and
Performance Integration (BPI) initiative. OMB has also increased the
focus on changing the congressional budget justification by requiring
agencies to submit "performance budgets" to both OMB and Congress that
integrate the performance plan and congressional budget justification
into one document. The nine agencies we reviewed exemplify a variety of
approaches taken, differing in terms of the:
* specific budget structure affected (e.g., appropriations accounts,
program activities within the appropriations account structure, or
congressional budget justifications);
* orientation or organizing framework used to restructure the budget
(e.g., strategic goals, bureaus, programs, etc.);
* level of performance (e.g., strategic goals, performance goals,
programs, etc.) for which budget resources were shown or budget
authority requested; and:
* types of resources (e.g., central administration, Inspector General
(IG) offices, etc.) distributed within the performance-based budget
structure to reflect "full cost."
2.1: OMB Recently Placed Greater Emphasis on Budget Restructuring:
After discussing budget restructuring in the Analytical Perspectives
for a number of years, in 2001 OMB placed more emphasis on it by
including it as one of several efforts in the BPI initiative of The
President's Management Agenda (PMA). Then, in 2003, OMB required
agencies to restructure their congressional budget justifications
creating a "performance budget" for fiscal year 2005. During the same
period, some agencies were also taking steps to restructure their
appropriations accounts or congressional budget justifications to
better align budget resources with programs and performance. OMB staff
told us that they saw budget restructuring as a process that would
evolve over time and that they had no single vision of the right
approach.
2.1a: OMB and Some Agencies Made Concurrent Efforts to Restructure
Budgets:
Building on the statutory framework established in the early 1990s, OMB
and some agencies made concurrent efforts to restructure budgets to
better align budget resources with performance. Figure 2 provides a
time line of recent efforts by OMB and our four case study agencies.
Figure 2: Time Line of OMB and Agency Efforts to Align Appropriations
Accounts and Congressional Budget Justifications with Performance:
[See PDF for image]
[End of figure]
OMB's interest in budget restructuring did not originate with the PMA.
Over the last 10 years, OMB has discussed the need to "reexamine
account structures to better align them with program outputs and
outcomes and to charge the appropriate account with significant costs
used to achieve these results."[Footnote 39] More recently, OMB placed
greater emphasis on budget restructuring by including it as one effort
in the BPI initiative of the PMA that was issued in August 2001.
Beginning with the Circular A-11[Footnote 40] for the fiscal year 2004
budget, OMB included guidance for agencies on ways to restructure their
congressional budget justifications and appropriations accounts to
better align budget resources with programs and performance. OMB later
required agencies to submit a "performance budget" to OMB and Congress
beginning with the fiscal year 2005 budget.
During the same period, some agencies were taking steps to restructure
their appropriations accounts or congressional budget justifications to
better align budget resources with programs and performance. Some case
study agencies began restructuring their budgets or thinking about ways
to better align the budget with performance before the PMA in 2001. For
example, beginning with its fiscal year 1999 budget, the Environmental
Protection Agency (EPA) made changes to the program activity listing
within its appropriations accounts and to its congressional budget
justification to better align budget resources with its strategic goals
and objectives. Beginning with its fiscal year 2002 budget, the
National Aeronautics and Space Administration (NASA) began taking steps
toward restructuring its appropriations accounts and congressional
budget justification and, for the fiscal year 2004 budget, requested
budget authority for the "full cost" of its programs.
Some officials reported that the Government Performance and Results Act
(GPRA) requirements and other results-oriented management initiatives,
such as the Federal Financial Management Improvement Act (FFMIA), led
them to think about ways to better incorporate a planning perspective
into budget decisions and capture the "full cost" of their programs and
activities. Officials from some agencies noted however that the PMA,
which holds agencies publicly accountable for achieving goals of the
management initiatives, and OMB's recent "performance budget"
requirements provided greater incentives to move in this direction.
2.1b: OMB Provides Budget Restructuring Guidance and Requires a
"Performance Budget"
Beginning with the fiscal year 2005 budget, OMB required agencies to
submit a "performance budget" to OMB and Congress that would integrate
an agency's annual performance plan and congressional budget
justification into one document.[Footnote 41] The agency's strategic
plan was to be the template for the "performance budget." Agencies were
instructed to provide an overview of strategic goals, past and expected
outcomes for each strategic goal, how supporting programs would work
together toward those goals, and how past shortcomings would be
remedied. Tables would show the "full cost" paid by the agency toward
each strategic goal and for each program. Each bureau or other
organization was instructed to analyze its contribution to strategic
goals followed by a detailed analysis of supporting programs. OMB said
agencies should consult with congressional committees before submitting
their budget to ensure Congress is aware of changes being made to the
budget structure.
OMB also provided guidance to agencies on ways to change their current
account structure to better align resources with programs and
performance in the budget. The Circular A-11 guidance for the fiscal
years 2005 and 2006 budgets said, "where possible" agencies should
restructure the budget to align accounts and program activities with
"programs or the components of the programs that contribute to a single
strategic goal or objective."[Footnote 42] In addition, the guidance
for the fiscal years 2005 and 2006 budgets also suggested that agencies
align program activities with Program Assessment Rating Tool (PART)
programs. Agencies should also, where possible, include the "full cost"
of a program in the "performance budget."[Footnote 43]
OMB described two ways in which agencies could restructure accounts to
better capture "full cost." The Circular A-11 said that in some cases
agencies might consider requesting budgetary resources to cover all
direct and indirect costs in the budget account or program activity
that funds the program. This might involve changing the program
activities in the program and financing (P&F) schedules or changing the
appropriations account structure or shifting resources between
accounts. In other cases, agencies might request budget authority for
some support services in central accounts; in these cases, OMB
suggested including a table showing the "full cost" of budget resources
used by each program.
OMB defined "full cost" as "the sum of all budget resources used by an
agency to achieve program outputs."[Footnote 44] These resources were
to include not only traditional elements of costs, such as salaries and
expenses, procurement of goods and services, grants, and transfers but
also the cost of all support services and goods used and provided for
centrally. In addition, these resources were to include accruing
retiree pension and health benefits. OMB said that the "full costs"
should be included in restructured accounts or displayed in
informational tables. As part of these efforts, the administration
proposed legislation that would change the budgetary measurement to
recognize the accruing cost of retiree pension and health benefits in
the budget. (See text box 1.) Congress, however, did not pass this
legislation and OMB dropped the discussion from the Circular A-11.
OMB Proposed Legislation to Change How Certain Costs Are Captured in
the Budget;
The U.S. budget is a cash and obligation-based budget. An obligation
serves as the primary point of fiscal control in the budget process.
Obligational budgeting involves three stages: (1) Congress must enact
budget authority up front before government officials can obligate the
government to make cash outlays, (2) government officials incur
obligations (i.e., commit the government to make outlays) by entering
into legally binding agreements, and (3) outlays (cash disbursements)
are made to liquidate obligations. With limited exceptions,[A] budget
authority, obligations, outlays, and receipts are measured on a cash-or
cash-equivalent basis and the unified deficit or surplus--the key focus
of policy debate--represents the difference between cash receipts and
cash outlays in a given year. That is, receipts are recorded when
received and outlays are recorded when paid without regard to the
period in which the taxes and fees were assessed or the costs resulting
in the outlay were incurred;
The cash and obligation-based budget has several advantages, including
that the deficit (or surplus) closely approximates the cash borrowing
needs (or cash in excess of immediate needs) of the government and, in
most cases, costs are recognized at the time decisions are made to
commit the government to spending. However, OMB, GAO, and others have
raised concerns that, for certain items, the current budget does not
recognize the complete cost up front when decisions are made or provide
policymakers with comparable cost information.[B];
The budgetary focus on annual cash flows does not match the "full cost"
of an employee with the services the employee provides. For example,
some deferred compensation (e.g., some federal employee pensions and
federal retirees' earned health care benefits) is currently only
recorded in the federal budget when benefits are paid rather than when
benefits are earned by employees. Federal employees earn pension
benefits while they are working but receive pension benefits after they
have stopped working. The accruing cost of the pensions earned by
current employees is part of the costs of the goods and services they
provide, but the budget does not capture the full extent of these
costs. Instead total budget outlays include the cash payments made to
current retirees. The failure to align budget recognition with the
consumption of resources can affect the government's efforts to assess
its performance by making it more difficult to assess and compare the
costs associated with a given level of performance;
Also, some federal agencies acquire assets that generate hazardous
substances that the agency is required by law to clean up at the end of
the asset's operating life. Since the budget is primarily measured on a
cash basis, these costs are paid after the asset is acquired.
Information on the estimated cleanup costs is currently not included in
the budget when budgeting decisions are being made about such
activities. As a result, not only are the government's ultimate costs
not fully recognized at the time the commitment is made, these costs
are not properly matched with the provision of government goods and
services.[C];
Capital is another area where the current budgetary treatment does not
match resource use with the provision of goods and services. By
requiring up-front budget authority for the asset's full cash purchase
price, the cash-and obligation-based budget importantly recognizes the
complete cost of capital assets and permits congressional control
before the purchase is made. However, this treatment does not match the
cost of the use of the asset with the provision of goods and services
and performance. As a result, the budget resources requested in a
period may misstate the costs of achieving performance in that period;
To better capture retiree costs in the budget, OMB proposed legislation
titled Budgeting and Managing for Results: Full Funding of Retiree
Costs Act of 2001. This legislation proposed to charge the employer's
share of the full accruing cost of retirement benefits to federal
employers as they are earned and each agency included the accrued cost
in their fiscal year 2003 budget requests. Congress, however, did not
pass this legislation. The administration instead listed the accrued
cost as a notational entry to the P&F schedules of the President's
fiscal year 2004 budget. In the Analytical Perspectives for the fiscal
year 2005 budget, OMB stated that its proposals to include the "full
cost" of accruing federal employee retiree benefits in the budget
should be reexamined and proposed to continue working with Congress to
address concerns.[D];
OMB has also discussed how to better consider the cost of capital
assets and environmental liabilities. In the Analytical Perspectives
for the fiscal year 2004 budget, OMB said that one way to show a more
"uniform annual cost for the use of capital" without changing current
requirements for up-front budget authority would be to create capital
acquisition funds (CAF).[E] To pay the up-front costs of new capital
assets for an agency's program accounts, the CAF would request budget
authority to borrow from the Treasury. The CAF would then charge the
program account annually for a share of the principal and interest and
use those collections to repay Treasury. This idea is still conceptual
and would need studying. Similarly, programs that generate hazardous
waste could request budget authority for the annually accruing cleanup
costs and pay these amounts to a designated fund.[F]
[A] One exception is the treatment of credit programs for which budget
authority, obligations, and outlays for the estimated cost to the
government of a credit program are measured on an accrual basis.
Certain interest payments are also measured on an accrual basis.
[B] See, for example, GAO, Accrual Budgeting: Experiences of Other
Nations and Implications for the United States, GAO/AIMD-00-57
(Washington, D.C.: Feb. 18, 2000); Long-Term Commitments: Improving the
Budgetary Focus on Environmental Liabilities, [Hyperlink,
http://www.gao.gov/cgi-bin/getrpt?GAO-03-219] (Washington, D.C.: Jan.
24, 2003); and Fiscal Exposures: Improving the Budgetary Focus on Long-
Term Costs and Uncertainties, GAO-03-213 (Washington, D.C.: Jan. 24,
2003).
[C] For more information, see GAO-03-219, p. 2.
[D] The 2005 budget included a limited proposal that would permit the
Patent and Trademark Office to use fees it collects to cover the
current accruing cost of postretirement annuities and health and life
insurance benefits.
[E] Office of Management and Budget, Analytical Perspectives, Budget of
the U.S. Government, Fiscal Year 2004 (Washington, D.C.: February
2003), p. 13.
[F] This was one of several approaches discussed in [Hyperlink,
http://www.gao.gov/cgi-bin/getrpt?GAO-03-219].
[End of table]
In discussing appropriations account restructuring efforts, OMB staff
said that although it is beneficial to align the appropriations account
structure to give program managers authority over the budget resources
needed to achieve results, there are other factors to consider, and
restructuring is not always necessary. OMB staff recognized that
appropriations account structure changes must be negotiated with
Congress and that each agency's account structure may reflect the
agency's programmatic and performance frameworks and organizational
structure. For example, some agencies' strategic goals may be more
program-specific while others may be more crosscutting and supported by
multiple programs. Given these differences, appropriations account
structure and activity alignment should be "considered with
care."[Footnote 45] OMB said there often is a good managerial reason
for bureaus or offices to be funded by more than one appropriations
account but that "multiple small accounts for similar purposes are
usually unnecessary,"[Footnote 46] and that appropriations accounts
should be consolidated or modified when the current structure inhibits
good management. An OMB staff person said appropriations account
structures that lack incentives to manage more effectively and do not
allow managers the flexibility to make resource trade-offs might
provide barriers to achieving goals.
2.2: Agencies Took Differing Approaches to Restructure Budgets to
Better Align Resources with Programs and Performance:
Agencies took differing approaches to restructuring budgets to better
align budget resources with programs and performance. Some agencies
proposed changing their appropriations account structure or the program
activities within that structure while others made changes solely to
their congressional budget justification. Some agencies also sought
corresponding changes to their transfer authority and reprogramming
guidelines. In addition, the orientation or organizational frameworks
for restructured budgets varied both among and within agencies.
Further, agencies showed or requested budget resources for the "full
cost" of various levels of performance-such as strategic goals,
performance goals, and programs-and the types of resources agencies
allocated within the performance-based budget structure varied. As
discussed in section 3, understanding an agency's particular approach
is important because different approaches provide different information
and incentives to the users of the budget. As a result, these
approaches have potentially different implications for the management
and oversight of budget resources.
2.2a: Agencies Differed on Whether They Changed Their Appropriations
Account Structure, Congressional Budget Justification, or Both:
Some agencies proposed changing the appropriations account
structure[Footnote 47] or the program activities within their accounts
while others made changes solely to their congressional budget
justification. Table 4 highlights where changes were made or proposed
by all nine agencies in our study and that the budget structure
affected varied.[Footnote 48]
Table 4: Where Agencies Made or Proposed Changes to Better Align Budget
Resources with Programs and Performance:
Changes to appropriations account structure: Changes to accounts;
VA: Yes;
NASA: Yes;
DOJ: Yes;
EPA: No;
SBA: No;
COMMERCE: No;
HUD: No;
LABOR: No;
DOT: [A].
Changes to appropriations account structure: Changes within accounts to
program activities;
VA: Yes;
NASA: Yes;
DOJ: Yes;
EPA: Yes;
SBA: Yes;
COMMERCE: No;
HUD: No;
LABOR: [B];
DOT: [A].
Changes to congressional budget justification;
VA: Yes;
NASA: Yes;
DOJ: Yes;
EPA: Yes;
SBA: Yes;
COMMERCE: Yes;
HUD: Yes[C];
LABOR: Yes;
DOT: Yes.
Source: GAO analysis.
[A] Some bureaus within the Department of Transportation (DOT) made or
proposed changes to their account structure and program activities
within accounts to better align with performance, but DOT as a whole
did not restructure its budget accounts.
[B] The Pension Benefit Guaranty Corporation and the Employment and
Training Administration made or proposed changes to the program
activities within their appropriations accounts, but according to
Department of Labor (Labor) officials these changes reflect policy
changes. Labor as a whole did not restructure its appropriations
accounts to better align resources with programs and performance.
[C] For the fiscal year 2004 budget only. The House Appropriations
Committee directed the Department of Housing and Urban Development
(HUD) not to submit a "performance budget" for fiscal year 2005 and
consequently, HUD did not resubmit a "performance budget" for fiscal
year 2005.
[End of table]
Changes to Appropriations Account Structure:
Three agencies in our study--NASA, VA, and the Department of Justice
(DOJ)--proposed agencywide appropriations account structure changes to
better align budget resources with performance.[Footnote 49] These
agencies also made corresponding changes to the program activity
listing within their appropriations accounts and congressional budget
justifications. NASA, for example, proposed to eliminate its mission
support appropriations account that funded, among other things,
construction projects, personnel expenses for NASA's civil service
workforce, and its central administrative functions. VA and DOJ also
proposed to eliminate appropriations accounts funding construction but
chose to maintain separate appropriations accounts for departmental
administration.
The following description of VA's proposed changes illustrates how
these proposed appropriations account structure changes looked. VA
proposed to consolidate resources from multiple accounts and split some
appropriations accounts among multiple programs. In VA's enacted
appropriations account structure for fiscal year 2003, each of VA's
programs was funded by multiple appropriations accounts. Figure 3 shows
that the Medical Care program was funded by five appropriations
accounts in fiscal year 2003. Under VA's proposed account structure for
fiscal year 2004, resources from these five appropriations accounts
would have been consolidated into one appropriations account called
Medical Care.[Footnote 50]
Figure 3: Appropriations Accounts Funding the Medical Care Program
under VA's Fiscal Year 2003 Enacted and Fiscal Year 2004 Proposed
Appropriations Account Structure:
[See PDF for image]
[A] Portions of these accounts were allocated to other program
accounts.
[End of figure]
Some of VA's accounts, such as Major Construction or General Operating
Expenses (GOE), provided resources associated with multiple programs.
VA proposed that these accounts be disaggregated and the resources
allocated to the programs they support. Figure 4 illustrates this for
the GOE account, which funded the Veterans Benefit Administration (VBA)
program administration for seven programs and general administration.
VA proposed to disaggregate this account and allocate the resources to
eight different appropriations accounts. Similarly, VA proposed to
eliminate its Construction accounts and allocate those resources among
program accounts.
Figure 4: Appropriations Accounts Funding General Operating Expenses
under VA's Fiscal Year 2003 Enacted and Fiscal Year 2004 Proposed
Appropriations Account Structure:
[See PDF for image]
[End of figure]
In addition to VA, NASA and DOJ also proposed to eliminate
appropriations accounts that funded construction projects. However, the
extent to which resources for construction remained visible in the
proposed appropriations account structure differed. VA showed the
resources for construction as a separate, identifiable program activity
line in the P&F schedule of the President's Budget Appendix. In
contrast, NASA and DOJ's construction resources were allocated to
program activities within appropriations accounts and thus were not
separately identified within the appropriations accounts.[Footnote 51]
Of these three agencies, the appropriations account structure for only
one agency changed. An agency cannot change its appropriations account
structure on its own because appropriations accounts are established by
law. Thus, agencies' appropriations account structure proposals must be
enacted by Congress to take effect. Congress appropriated funds for
NASA under its proposed account structure beginning with the fiscal
year 2002 budget. However, for the most part, Congress did not accept
VA and DOJ's proposed appropriations account structure changes for
either fiscal year 2004 or 2005.[Footnote 52]
Changes to Program Activity Listing:
Two other agencies in our study--EPA and the Small Business
Administration (SBA)--did not change their appropriations account
structures but rather made changes within appropriations accounts to
the program activity listing in the P&F schedule. Both EPA and SBA also
made changes to their congressional budget justifications to better
align budget resources with performance. Beginning with the fiscal year
1999 budget, EPA changed the program activities within its
appropriations accounts from programmatic areas (e.g., Pesticides,
Radiation) and individual items of expense (e.g., Regional Management)
to strategic goals such as Clean Air and Clean Water (see table 5). For
the fiscal year 2005 budget, EPA consolidated the number of program
activities to reflect changes to its strategic plan, which reduced the
number of strategic goals from 10 to 5. Importantly, since a strategic
goal might have been supported through multiple appropriations
accounts, the amount shown for a strategic goal in any one
appropriations account did not necessarily represent the total budget
resources associated with that goal.
Table 5: Program Activity Listing for EPA's Environmental Programs and
Management Appropriations Account (Fiscal Years 1998, 1999, and 2005
Budgets):
Fiscal year 1998 budget: Program activities:
Air; Water Quality; Drinking Water; Hazardous Waste; Pesticides;
Radiation; Multimedia; Toxic Substances; Mission and Policy Management;
Agency Management; Regional Management; Support Costs; Superfund;
Fiscal year 1999 budget: Program activities:
Clean Air; Clean Water; Safe Food; Preventing Pollution; Waste
Management; Global and Cross-border; Right to Know; Sound Science;
Credible Deterrent; Effective Management;
Fiscal year 2005 budget: Program activities:
Clean Air and Global Climate Change; Clean and Safe Water; Land
Preservation and Restoration; Healthy Communities and Ecosystems;
Compliance and Environmental Stewardship; Reimbursable program[A].
Source: President's Budget Appendix for EPA for fiscal years 1998,
1999, and 2005.
[A] This program activity is not a strategic goal.
[End of table]
In the fiscal years 2004 and 2005 budgets, SBA maintained its
programmatic and functional program activities but eliminated one
program activity called "administrative expenses" and allocated those
resources to the other program activities within that appropriations
account. One bureau in DOT, the Federal Aviation Administration (FAA)
also made changes to its program activity listing without changing its
appropriations account structure. FAA changed the program activities
under two appropriations accounts--(1) Facilities and Equipment and (2)
Research, Engineering, and Development--to describe FAA's performance
goals.
Changes to Congressional Budget Justifications:
While every agency in our study restructured its congressional budget
justification to better align budget resources with programs and
performance, four of the nine agencies did not make corresponding
agencywide changes to or within their appropriations account
structures. As shown in table 4, four of the nine agencies for the most
part maintained their existing account structure and program activity
listing and made agencywide changes only to their congressional budget
justifications.[Footnote 53] These agencies--the Department of Commerce
(Commerce), HUD, Labor, and DOT--maintained appropriations accounts
that generally reflected a mix of orientations--object, organization,
process, and program--and embedded additional information on the "full
cost" of programs and performance within their congressional budget
justifications.
In most of the selected agencies, the organizing framework of the
congressional budget justification followed the appropriations account
structure; however, three agencies in our study used organizing
frameworks for their congressional budget justification that did not
match their appropriations account structures. EPA, SBA, and HUD each
maintained their previously established appropriations accounts, which
generally reflected a mix of orientations, but restructured their
congressional budget justifications around strategic goals.[Footnote
54] For example, as shown in table 6, EPA's fiscal year 2005
appropriations account structure and congressional budget justification
were organized differently. EPA had five appropriations accounts,
including Environmental Programs and Management and State and Tribal
Assistance Grants. However, EPA's fiscal year 2005 congressional budget
justification was organized by strategic goal. The congressional budget
justification included chapters for Clean Air and Global Climate Change
and Clean and Safe Water followed by information for strategic
objectives and programs. While it was easier to see the resources
associated with strategic goals and objectives in the congressional
budget justification, it was correspondingly more difficult to see the
resources associated with each appropriations account because any one
strategic goal, strategic objective, or program might have been funded
by multiple appropriations accounts. EPA provided crosswalk tables
showing the relationship between appropriations account, strategic
goals, and programs as supplemental information.[Footnote 55]
Table 6: Comparison of EPA's Appropriations Account Structure and
Organizing Framework for Its Fiscal Year 2005 Congressional Budget
Justification:
2005 Appropriations Accounts:
Environmental Programs and Management;
Science and Technology;
State and Tribal Assistance Grants;
Building and Facilities;
Office of Inspector General;
2005 Annual Performance Plan and Congressional Justification:
Table of Contents:
Introduction and Overview.
Resource Tables.
Goal 1: Clean Air and Global Climate Change.
Goal 2: Clean and Safe Water.
Goal 3: Land Preservation and Restoration.
Goal 4: Healthy Communities and Ecosystems.
Goal 5: Compliance and Environmental Stewardship.
Enabling/Support Programs.
Annual Performance Goals and Measures.
Special Analysis.
Source: GAO analysis.
[End of table]
2.2b: Agencies Showed or Requested "Full Cost" of Different Levels of
Performance:
As illustrated in table 7, agencies showed or requested budget
resources for the "full cost" of programs or different levels of
performance in their congressional budget justifications. Most agencies
in our review aligned budget resources with programs or collections of
programs that support common strategic goals. For example, VA aligned
budget resources with each of its nine "business lines," or main
programmatic areas, such as Medical Care. The lowest level to which
NASA aligned budget resources was programs, such as Flight Hardware and
Ground Operations, within a "theme" such as the Space Shuttle.[Footnote
56] Four agencies (EPA, SBA, HUD, and DOT) aligned budget resources
with strategic goals or objectives or both. Three agencies (Commerce,
Labor, and DOT) aligned budget resources with performance goals.
Table 7: Level of Program or Performance to Which Agencies Showed or
Requested "Full Cost" in Congressional Budget Justifications:
Program or Performance Level: Strategic goal;
VA: Yes;
NASA: No;
DOJ: Yes;
EPA: Yes;
SBA: No;
COMMERCE: Yes;
HUD[A]: Yes;
LABOR: Yes;
DOT: Yes.
Program or Performance Level: Strategic objective;
VA: No;
NASA: No;
DOJ: No;
EPA: Yes;
SBA: Yes;
COMMERCE: No;
HUD[A]: No;
LABOR: No;
DOT: No.
Program or Performance Level: Performance goal;
VA: No;
NASA: No;
DOJ: No;
EPA: No;
SBA: No;
COMMERCE: Yes;
HUD[A]: No;
LABOR: Yes;
DOT: Yes.
Program or Performance Level: Collection of programs (themes, decision
units);
VA: No;
NASA: Yes;
DOJ: Yes;
EPA: No;
SBA: No;
COMMERCE: No;
HUD[A]: No;
LABOR: No;
DOT: No.
Program or Performance Level: Program;
VA: Yes;
NASA: Yes;
DOJ: No;
EPA: Yes;
SBA: Yes;
COMMERCE: No;
HUD[A]: Yes[B];
LABOR: Yes;
DOT: No.
Source: GAO analysis.
Note: Shaded area denotes the performance level for which agency is
proposing budget authority be appropriated in the restructured
framework. See discussion following this table.
[A] For fiscal year 2004, HUD submitted two congressional budget
justifications--one in the previously established program-based
structure and the other in a new performance-based structure. Our
analysis focuses on the performance-based justification. HUD did not
resubmit a "performance budget" for fiscal year 2005.
[B] "Full cost" was not shown in cases where a program supports more
than one strategic goal.
[End of table]
While some changes or proposed changes sought to modify the way
resources are appropriated and thus the framework for resources trade-
offs, other changes sought to provide additional information on the
connection between budget resources and programs and performance for
presentational purposes. The three agencies proposing appropriations
account structure changes--NASA, VA, and DOJ--requested that budget
authority be appropriated to cover the "full cost" of programs or
collections of programs that support common goals. (The program levels
for which NASA, VA, and DOJ have requested that funds be appropriated
in the new framework are shown as shaded cells in table 7.) The
remaining six agencies restructured their congressional budget
justifications to generally reframe their budget request around the
"full cost" of performance or to provide supplemental crosswalk tables
to show the "full cost" or "total budgetary resources" of performance
units for presentational purposes.
Table 8 shows one such table from Labor's fiscal year 2005
congressional budget justification. Beginning with the fiscal year 2004
congressional budget justification, for example, Labor showed the
"total budgetary resources" (both direct and indirect costs) associated
with strategic goals, programs, and related performance goals. Prior to
restructuring its budget, Labor showed only the direct resources
associated with its programs. Currently, as shown in table 8, Labor
presents program budget requests together with the administrative
resources and full-time equivalents (FTEs) related to the program.
Importantly, resources included in the "Program Admin" row are
appropriated in a different appropriations account than the other Job
Corp program resources and are also presented elsewhere in the
congressional budget justification.
Table 8: Resource Table Presented in Labor's Fiscal Year 2005
Congressional Budget Justification for Job Corps:
Dollars in thousands.
Job Corps appropriation;
Fiscal year 2004: $1,537,074;
Fiscal year 2005 estimate: $1,557,287;
Difference fiscal year 04/05: $20,213.
Program Admin;
Fiscal year 2004: $28,670;
Fiscal year 2005 estimate: $29,496;
Difference fiscal year 04/05: $826.
Reimbursables;
Fiscal year 2004: $4,000;
Fiscal year 2005 estimate: $4,000;
Difference fiscal year 04/05: $0.
Total resources;
Fiscal year 2004: $1,569,744;
Fiscal year 2005 estimate: $1,590,783;
Difference fiscal year 04/05: $21,039.
FTE;
Fiscal year 2004: 187;
Fiscal year 2005 estimate: 187;
Difference fiscal year 04/05: 0.
Source: Department of Labor's Fiscal Year 2005 Budget Justification of
Appropriations Estimates for Committee on Appropriations, Volume 1.
[End of table]
DOT provided supplemental crosswalk tables illustrating the links
between the department's budget request and its six strategic goals.
Figure 5 is an excerpt from DOT's fiscal year 2005 budget
justification.
Figure 5: Supplemental Table from DOT's Congressional Budget
Justification:
[See PDF for image]
[End of figure]
2.2c: Agencies Allocated Different Types of Resources to Performance:
While the agencies included in our study all took steps to more
completely capture the "full cost" of programs and performance, the
types of resources agencies allocated to programs and performance units
varied. In particular, the treatment of central administrative
resources and IG office resources differed. For example, EPA allocated
its total budget request, including the IG's office, to strategic goals
and objectives. Other agencies did not allocate all resources to
programs and performance. NASA, for example, did not allocate resources
from the IG's office; it did, however, allocate all other direct and
indirect resources including procurement, civil servants, the program's
share of service pool resources, and portions of administrative
resources from its field offices and headquarter offices. Similarly,
SBA allocated most central administrative resources to its programs and
goals but did not allocate the IG's office. Labor allocated some
central administrative (i.e., departmental) resources including legal
services and some information technology resources but did not allocate
all central administrative resources, such as the Office of the
Secretary or the Office of the Chief Financial Officer, to programs and
performance. Commerce, HUD, and DOT allocated most central
administrative resources to a separate management goal. EPA did this as
well in its fiscal year 2004 congressional budget justification.
However, in its fiscal year 2005 budget, its management goal was
eliminated and central administrative resources were allocated to its
five mission-related strategic goals. VA and DOJ did not allocate
central administrative (i.e., departmental) resources. The lack of
consistency in what is included in "full cost" or "total budgetary
resources" has the potential to complicate the understanding of what is
meant by "full cost" and "total budgetary resources."
2.2d: Some Agencies Sought Corresponding Changes to Transfer or
Reprogramming Guidelines or Both:
Some agencies also sought corresponding changes to methods by which
Congress oversees resource use, including their transfer authority or
reprogramming guidelines or both. Providing transfer authority, or the
ability to shift all or part of the budget authority provided in one
appropriations account to another, provides agencies greater
flexibility because transferring funds between accounts is prohibited
by law. For example, after NASA's Mission Support appropriations
account was eliminated and those resources were allocated to its two
mission-related appropriations accounts in fiscal year 2002, NASA
received authority to transfer funds as necessary for administrative
resources, including federal salaries and benefits, training, travel,
and facilities, between its two mission-related accounts.[Footnote 57]
VA also sought transfer authority when proposing account structure
changes for the fiscal years 2004 and 2005 budgets. Specifically, VA
requested transfer authority for operations and construction expenses
among different business line accounts. Appropriators did not accept
VA's proposed account structure and so did not provide VA this
authority.
While a transfer of funds involves shifting funds from one
appropriations account to another, reprogramming involves shifting
funds within an appropriations account to use for different purposes
than those contemplated at the time of appropriation. Agencies are
implicitly authorized to reprogram funds as part of their general
responsibility to manage funds. Sometimes committee oversight of
reprogramming is prescribed by statute requiring that the agencies
either notify or consult with the appropriate congressional committees
when reprogramming funds that have certain program impacts or are above
a certain threshold. Guidelines also may include what types of
reprogramming are allowable without notifying or consulting with the
committee. For example, reprogramming may be expressly permitted among
programs, activities, or object classes under certain dollar
thresholds. For the fiscal year 2004 budget, NASA requested that
appropriations committees change its reprogramming guidelines to allow
reprogramming within a theme (a collection of programs and projects
that support a common strategic goal). NASA also sought to increase its
reprogramming threshold to $10 million.[Footnote 58] Congress accepted
neither change. When EPA made its budget changes for the fiscal year
1999 budget, its reprogramming dollar threshold remained the same but
Congress changed EPA's reprogramming guidance to allow funding shifts
within broad strategic objectives, such as Healthier Outdoor Air. Prior
to restructuring, EPA's reprogramming guidance only allowed shifting
funds within specific program elements, such as Air Quality Planning
and Standards and Air Quality Management Implementation. Section 3
discusses how changes or lack thereof to an agency's transfer authority
and reprogramming guidelines will influence how and to what extent
budget structure changes might change resource management and
oversight.
[End of section]
Section 3: Restructuring Budgets May Help Reframe Budget Choices and
Raises Tradeoffs Among Different Decision Makers' Needs:
Different approaches to restructuring budgets provide different
information and create different incentives and ultimately have
different implications for management and oversight of budget
resources. Understanding the specific approach used by an agency, what
issues the approach raises, and what might be achieved is important to
evaluate the impact on resource management and oversight. In addition,
restructuring budgets should not be considered in isolation but rather
in the context of any other changes occurring to the methods or
structures for congressional and agency resource management and
oversight. In this report, the specific approach of one agency may be
used to illustrate a number of different issues that can arise.
Our work revealed differing views on the potential benefits and
shortcomings of restructuring budgets to better align budget resources
with programs and performance. These differing views reflect the
multiplicity of roles, perspectives, and needs of Congress, OMB, and
different levels of agency management. OMB and agency officials
credited changes in appropriations accounts and congressional budget
justifications with supporting results-oriented management. However,
budget changes did not meet the needs of some executive branch managers
and congressional appropriations committees, leading some to raise a
number of issues. For example, officials from two case study agencies
said budget restructuring had the potential to create new resource
management challenges. And although some appropriations committee
reports and subcommittee staff we spoke with expressed general support
for budget and performance integration efforts, almost all
appropriations subcommittee staff we spoke with said that the
organizational frameworks used to restructure budgets did not meet
their needs.
Agency officials' views differed on whether appropriations account
structure changes were necessary to advance results-oriented
management. It is not practical for a single reform to address all
possible budget decision makers' needs. Therefore, understanding what
realistically can be expected from any particular effort and how
various efforts fit together is necessary to permit judgments about
whether, how, and to what extent the budget might be restructured given
limited resources.
3.1: Restructuring Appropriations Accounts and Congressional Budget
Justifications Has the Potential to Help Reframe Budget Choices:
The structure of appropriations accounts and congressional budget
justifications reflects fundamental choices about how resource
allocation choices are framed and the types of controls and incentives
considered most important. Different budget structures frame budget
choices differently and affect the range of possible resource trade-
offs. For example, budgets could be structured to focus on individual
items of expenses (e.g., program administration or construction), on
individual programs, or on an agency's broader strategic and
performance framework. A budget structure in which a single
appropriations account funds total administrative costs--administrative
costs for a number of programs are contained in one account--may
increase the focus of congressional decision making and oversight on
the costs of administering programs but make it difficult to see the
"full cost" of the associated programs. During budget execution, such
an account may allow managers to shift administrative resources among
different programs to meet needs. Alternatively, a budget structure in
which a single appropriations account contains the total resources
associated with a program--funding the "full cost" of a program in one
appropriations account, including direct and indirect resources such as
administration or construction--might increase the focus on programs;
however, information on individual items of expense might be obscured
in such a budget structure. Such an account could allow trade-offs
among different items of expense within a program during budget
execution, but it would hinder the ability of managers to shift
administrative resources across programs. By changing the information
and incentives provided, restructuring budgets has the potential to
change both the nature of resource management and oversight and the
information readily transparent and available in the budget. This means
budget restructuring represents more than structural or technical
changes and involves important trade-offs among different perspectives
and needs of Congress and executive branch agencies. Not surprisingly,
the perceived benefits and shortcomings of various approaches are
likely to vary based on the role and perspectives of particular budget
decision makers as well as the nature of the programs in question.
3.1a: Recent Budget Restructuring Efforts Have Sought to Help Reframe
Budget Choices:
Recent efforts to restructure budgets have sought to help reframe
budget choices to establish clearer and closer associations between
expected performance and budget resources and to focus decisions more
on the expected results associated with budget resources and less on
inputs or line items. OMB has suggested that restructured "performance
budgets," with the strategic plan serving as the template, should frame
budget requests around what agencies intend to accomplish with the
resources requested.
Appropriations account structure and congressional budget justification
changes made or proposed by our case study agencies help illustrate how
budget restructuring might help reframe budget choices and so change
the nature of resource management and oversight. In some cases,
agencies restructured the budget to reduce the focus on individual
items of expense and instead sought to focus on program resources as a
whole. For example, NASA proposed and Congress agreed to eliminate its
mission support appropriations account and to allocate those resources
across programs. While information on construction, personnel, and
travel resources are provided as supplementary information in the
congressional budget justification, these resources are no longer
separately appropriated and are no longer intended to be the focus of
NASA's budget request. Rather, resources for mission support are
included in program budgets to better reflect the "full cost" of
programs.
Similarly, VA's proposed appropriations account structure for fiscal
years 2004 and 2005 would have also helped reframe budget choices and
change the nature of resource allocation, management and oversight.
VA's fiscal year 2004 appropriations account structure included
accounts for direct benefits, construction, grants, and program
administration. VA officials sought to provide Congress with more
information on total program resources, thereby shifting the resource
debate from inputs to outcomes and results. In doing so, VA would go
from the current structure, under which trade-offs generally are made
between similar types of spending among programs, to one in which trade-
offs would be made across all types of spending within a program. Today
if a minor construction project costs more than anticipated or a new
need arises, managers might make trade-offs among other construction
projects by, for example, deferring another construction project.
Similarly, a larger than anticipated utility bill might defer other
operating expenses. Under the proposed change, construction, grants,
and program administration appropriations accounts would be eliminated
and those resources allocated among program appropriations accounts.
Under the proposed structure, resource trade-offs would be focused
within a program and managers might, for example, defer a new minor
construction project to cover increased operating expenses, once
appropriate reprogramming requests were processed.[Footnote 59]
3.1b: When Reframing Budget Choices, Some Information May Be Less
Transparent or No Longer Included:
When changing budget structures to better align budget resources with
programs and performance, the total resources associated with programs
and performance may be more visible. However, information that had
previously been readily transparent in either the appropriations
account structure or congressional budget justification may be less
transparent or no longer included. As the focus on programs or how
programs fit together to support the agency's strategic and performance
framework is increased, information on individual items of expense may
become less apparent. In moving toward the theme-based budget
structure, for example, NASA provided more information on how programs
and resources fit together to achieve goals, but provided less detail
about its individual programs. In the fiscal year 2003 congressional
budget justification, the distribution of the Space Shuttle resources
among the various programs within that theme, such as Flight Hardware
and Program Integration, was visible.[Footnote 60] Further, beneath
these programs, NASA provided information on program elements. For
example, for Flight Hardware, NASA showed the resources requested for
external tank production, main engine production, and main engine test
support. These program elements and the associated resources are not
visible in either the fiscal year 2004 or 2005 congressional budget
justifications.
VA provides another example. For the fiscal years 2004 and 2005
budgets, as noted, VA proposed eliminating construction, grants, and
program administration appropriations accounts and allocating these
resources among program appropriations accounts. While one objective
was to make the budget resources associated with programs more readily
apparent, some previously reported information was either less
transparent or not included in the fiscal year 2004 and fiscal year
2005 budgets. For example, we found that total resources requested for
construction were less transparent in the fiscal years 2004 and 2005
budgets than in the fiscal year 2003 budget. In fiscal year 2003, total
construction for VA was appropriated in two accounts--Construction,
Major and Construction, Minor--and was shown in a separate volume of
the congressional budget justifications. In both fiscal years 2004 and
2005, total construction resources were allocated among eight of VA's
nine major programs and to Departmental Administration and the
Inspector General.[Footnote 61] Further, VA no longer provided a
separate volume for Construction in its congressional budget
justification.
Different budget structures may focus attention on direct resources or
on all the budget resources--both direct and indirect--associated with
programs. For example, while NASA's new structure provides more
complete information on budget resources associated with programs, the
direct and indirect cost components are not clearly delineated, making
it harder to distinguish between them. In contrast, NASA's old
congressional budget justification format included only direct
procurement costs in program budgets. This format did not represent all
the resources associated with operating the programs, but budget
decision makers could clearly see direct program resources. Similarly,
while EPA's fiscal year 1998 congressional budget justification showed
the direct resources for programs, the restructured congressional
budget justification for fiscal years 2004 and 2005 showed more
completely the resources associated with programs, including office-
level administrative resources. While centralized administrative
resources are clearly delineated from direct program resources, the
office-level administrative resources are not.
3.2: Approach Used and Corresponding Changes Affect the Extent to Which
Budget Restructuring May Influence Management and Oversight:
As described in section 2, agencies took a variety of approaches. Each
approach has different potential implications for resource management
and oversight. Appropriations account structure changes, which change
the statutory control over resources, are more likely to change
management and oversight than changes to congressional budget
justifications. In either case a complete view of the implications for
resource management and oversight requires looking at other elements of
resource control, such as reprogramming and transfer rules.
3.2a: Appropriations Account Structure Changes Generally Have More Far-
Reaching Implications for Management and Oversight than Changes to
Program Activities or Congressional Budget Justifications Alone:
Restructuring appropriations accounts changes the statutory framework
for appropriating and overseeing funds. Appropriations accounts are
established by law to facilitate congressional resource allocation and
oversight responsibilities. Appropriations accounts generally restrict
obligations to a specific amount, purpose, and time availability.
Changing the appropriations account structure changes the legal
framework governing the availability and use of federal funds, and thus
a central aspect of congressional oversight.
Some of the appropriations account structure changes proposed by
agencies in our study would change the way Congress has traditionally
appropriated funds and potentially give managers more flexibility over
some resources. Two of our case study agencies (NASA and VA) and one
agency included in our general review (DOJ) made or proposed agencywide
changes to their appropriations account structures. NASA's
appropriations accounts were consolidated and its mission support
account was eliminated. NASA's resources for mission support are now
funded through two mission-related appropriations accounts. Under this
new structure, NASA managers have more flexibility to make trade-offs
among budget resources for procurement, facilities, or general
administration without requiring transfer authority. Managers at VA and
DOJ, which both proposed eliminating appropriations accounts funding
construction and funding construction projects through program
appropriations accounts, could also gain some flexibility if Congress
enacted the proposed account structures.
Changing solely the program activity listing or congressional budget
justification may not change the framework for resource management and
oversight because unless otherwise explicitly stated in statutory
language agencies are not legally bound by funding levels shown for
program activities in the Program and Financing (P&F) schedules of the
President's budget or presented in the congressional budget
justifications submitted to Congress by agencies. However, the program
activity listing and budget estimates included in an agency's
congressional budget justification form some of the bases for assessing
agency needs and making appropriations and, together with congressional
hearings and statements in committee reports indicating how funds
should or should not be spent, reflect an understanding of how federal
funds will be used by an agency during the fiscal year. As such, the
program activity listing and congressional budget justification play an
important role in budget deliberations and execution.
EPA and SBA made agencywide changes to both their program activities
and congressional budget justifications, and four other agencies
(Labor, Commerce, HUD, and DOT) made agencywide changes only to their
justifications.[Footnote 62] Although the statutory framework for
budget resource trade-offs and oversight did not change in these six
agencies, in one (EPA) it served as the basis for corresponding changes
in reprogramming guidelines--part of the management and oversight
framework for budget resources. When EPA restructured its budget to
better align with its strategic plan, Congress changed EPA's
reprogramming guidance to allow funding shifts within strategic
objectives, such as "Healthier Outdoor Air." Prior to restructuring,
EPA's reprogramming guidance only allowed shifting funds within
specific program elements. This change could potentially give managers
more flexibility. The other departments changed the congressional
budget justification without related changes to their reprogramming
guidelines.
3.2b: Other Congressional Controls Influence Management and Oversight
of Budget Resources:
Budget restructuring alone may not necessarily change management and
oversight of budget resources because of other ways Congress and
agencies oversee and manage budget resources. In addition to creating
appropriations accounts, Congress oversees resource use through various
methods, including statutory language (e.g., earmarks[Footnote 63] or
restrictions in appropriations acts), transfer authority,[Footnote 64]
reprogramming guidelines,[Footnote 65] and appropriations committee
report language indicating how funds should or should not be spent. For
example, as stated in committee report language, agencies are usually
required to notify or consult with the appropriate congressional
committees about reprogramming. Agencies also have more detailed
mechanisms required by law such as systems of administrative control of
funds--project and activity plans maintained by program managers to
monitor and control obligations and expenditures.[Footnote 66]
For example, although VA's proposed consolidation of some
appropriations accounts would on its own have changed the resource
trade-offs available to managers, VA also proposed appropriations
language that would have limited some trade-offs among budget
resources. For fiscal years 2004 and 2005, VA proposed to include all
medical-care related expenses--including facilities operations and
maintenance, provision of care, construction, grants, and
administration--under one appropriations account. This change might
have allowed greater flexibility to make trade-offs among these
components, but the proposed appropriations language included ceilings
for central administration and grants--a limitation on the Veterans
Health Administration's (VHA) ability to make trade-offs among these
resources. Under the proposed language, VHA would have been allowed to
shift funds from construction to administration but not from
administration to construction. Appropriations language providing
similar limitations was included for the other VA administrations. For
example, in the proposed Disability Compensation Administration account
for fiscal year 2005, construction funding would have been limited. As
a result, the Veterans Benefit Administration (VBA) would have been
able to shift funds from construction to operations but not from
operations to construction.
While EPA's budget restructuring focused on managing resources by
strategic goals and objectives, appropriations language and committee
report language have continued to focus on the program/project level.
As a result, resource trade-offs would be limited. Prior to
restructuring, EPA was required to notify appropriations committees
when shifting funds among "programs, activities, or elements." Since
its fiscal year 1999 budget (the first budget structured around
strategic goals and objectives), appropriations committees changed
EPA's reprogramming guidelines to allow funding changes within more
aggregated strategic objectives, such as Healthier Outdoor Air. This
change potentially would allow EPA to make resource trade-offs among
program/projects that support a common strategic objective (e.g.,
between the Clean School Bus Initiative and Administrative Projects
within the Healthier Outdoor Air strategic objective). However,
appropriations language specified funding for a number of EPA's
programs and appropriations committee report language also included
funding directives for programs or projects.[Footnote 67] EPA officials
said that they execute the budget based on congressional intent
reflected in committee reports. Thus, EPA incorporates congressional
funding directives into the agency's operating plan. An added
limitation to EPA's ability to make trade-offs among programs that
support a common strategic objective is that some program/projects are
funded from different appropriations accounts, and EPA does not have
authority to transfer resources among appropriations accounts.
Although NASA's restructuring provides flexibility for some additional
resource trade-offs, internal management controls and reprogramming
guidelines limit other trade-offs. Consolidated appropriations accounts
provide program managers with more flexibility and influence over the
resources used by their programs, but that flexibility is limited by
the fixed cost nature of services and labor; in particular, resource
trade-offs among items of expense, such as general administration and
civil personnel salaries, are limited during budget execution. NASA
officials told us that during budget formulation, all resources within
a program (excluding center and corporate G&A)[Footnote 68] are
interchangeable, but during budget execution trade-offs among resources
for civil servants and other resources are limited because contract
agreements are established for some services and civil service
regulations must be followed. Also, while NASA restructured its budget
to help manage at the more aggregated theme level, its ability to
reprogram remained tied to its programs. This limits the resource trade-
offs that can be made among programs within a theme to a certain dollar
threshold.[Footnote 69] For example, under its reprogramming
guidelines, NASA must notify the appropriations committees before
making resource trade-offs above the reprogramming threshold between
Flight Hardware and Ground Operations within the Space Shuttle Theme.
3.3: Some Viewed Budget Restructuring as Supporting Improved Management
and Oversight, but Concerns and Limitations also Raised:
Our work revealed differing views on the potential benefits and
shortcomings of restructuring budgets to better align budget resources
with programs and performance. These differing views reflect the
multiplicity of roles, perspectives, and needs of Congress, OMB, and
different levels of management within agencies. OMB staff and agency
officials we spoke with described benefits or anticipated benefits of
budget changes, including increasing agency management's understanding
of and attention to strategic planning, performance, and results and
providing more complete information on the budget resources associated
with programs and performance. Beyond enhancing information, some
agency officials saw incentives to recognize and make resource trade-
offs.
However, some executive branch managers and congressional staff
indicated that budget restructuring did not meet their needs. Agency
officials from two of our case study agencies noted that budget
restructuring might create new resource management challenges.
Officials and program managers from most of the nine agencies we
reviewed as well as appropriations staff we spoke with viewed
appropriations account restructuring as unnecessary to advance results-
oriented management. While some appropriations committee reports and
subcommittee staff we spoke with gave general support to budget and
performance integration efforts, including aligning resources with
programs and performance, appropriations staff raised a number of other
concerns in several appropriations committee reports or in interviews
with us. Further, some congressional appropriations staff and agency
officials noted that, in their opinion, the changes did not result in
information they consider most useful for improving management and
oversight.
3.3a: Budget Restructuring Viewed by Some as Supporting Results-
Oriented Management and Oversight:
OMB staff and agency officials credited appropriations account
structure and congressional budget justification changes with
supporting results-oriented management and oversight by:
* increasing attention to strategic planning, performance, and results;
* providing more complete information on the budget resources
associated with performance; and:
* in some cases, enhancing incentives and flexibility to make resource
trade-offs.
Increasing Attention to Strategic Planning, Performance, and Results:
OMB staff emphasized the importance of budget restructuring for
increasing attention to results during the budget process. One of OMB's
objectives for this initiative is for agencies to justify their budget
requests based on the resources needed to make planned progress toward
strategic goals. Through its budget guidance, OMB said the agency's
strategic plan was to be the template for the "performance budget" and
encouraged agencies to change their current budget account structures
to enhance the understanding of programs and measures of performance.
Further, OMB said that structuring the budget this way presents a more
complete picture of what an agency is trying to achieve and enhances
public and congressional understanding of government performance.
Officials we spoke with or documents we reviewed from five agencies
indicated that the restructured budgets were intended to increase the
attention to strategic planning, performance, and results during budget
deliberations. For example, some EPA and Labor officials credited
changes with increasing their agency's focus on strategic and
performance goals. In the case study agencies, some officials said that
managers now have a greater incentive to better understand and pay
attention to the strategic and performance frameworks because they must
tie budget requests to goals. According to an EPA official, the move to
the performance-based budget structure was part of an effort to more
fully integrate the budgeting and planning system. Without changing and
combining the congressional budget justification and performance plan,
changing EPA's culture would have been more difficult. NASA officials
credited budget restructuring with helping to ensure that funding
decisions are aligned with its strategic plan, noting that prior to
budget restructuring, NASA could not show how some activities related
to its strategic plan. In its fiscal years 2004 and 2005 congressional
budget justifications, VA stated that the new structure would better
position VA to make resource decisions based on programs and results
and improve planning, among other things. Officials from several
agencies also said that they anticipate that changes would help provide
a more complete picture for external users of their agencies' overall
missions and how budget resources support their missions.
OMB and officials from four agencies also credited the budget changes
with facilitating increased coordination among programs that support
common goals and objectives. For example, OMB staff credited EPA's
budget restructuring with leading to greater integration of
program/projects that support common goals and objectives. OMB staff
explained that there is more coordination among EPA's program offices
because programs that support common goals and objectives have to
"sell" themselves together under the new planning and budget structure.
For example, the Endocrine Disruptor Screening Program[Footnote 70]
(within the Office of Prevention, Pesticides, and Toxic Substances
(OPPTS)) and the Office of Research and Development (ORD) both support
EPA's strategic objective Enhance Science and Research. OMB staff said
the OPPTS reviewed ORD's research plans to ensure the research and
development would support the program. This type of coordination did
not happen prior to the strategic planning and budget structure
changes, according to an OMB program examiner.
A NASA official also credited the agency's new theme-based budget
structure, which shows the collection of programs that support common
strategic goals and objectives, with showing how program elements
relate to each other in achieving strategic plan objectives. A VA
official also credited the process of restructuring its congressional
budget justification with bringing managers together in a more
coordinated manner. For example, VA works toward goals for increasing
veteran access to burial space in two ways: (1) VA builds cemeteries
incurring the maintenance and operational costs associated with them,
or (2) provides grants to states. VA officials explained that prior to
budget restructuring efforts, VA tended to work "in stovepipes" and did
not look at all resources used to provide burial services. In the
officials' views, budget restructuring, which pulled together resources
that were presented separately in prior congressional budget
justifications, provides managers with a better picture of the total
resources of the program.
Providing More Complete Information on the Budget Resources Associated
with Performance:
OMB staff and officials from seven agencies also credited budget
restructuring with providing more complete information on the budget
resources associated with performance. For example, prior to the fiscal
year 1999 budget, EPA's justification had been organized with a chapter
for each appropriations account and sections within each chapter for
each EPA office. The justification contained a Science and Technology
chapter, which in turn included sections for EPA's offices funded by
that appropriations account, which was followed by program information.
Beginning with the fiscal year 1999 budget justification, EPA's budget
information was organized by strategic goals and objectives and EPA
tied both direct and indirect budget resources to strategic goals and
objectives.[Footnote 71] EPA officials credited its restructured
congressional budget justifications with highlighting the program
funding levels associated with achieving goals and objectives and
providing a better understanding of how resources fit together to
achieve goals and objectives.
A Labor official and OMB staff also credited changes with giving
decision makers a better idea of resources needed to achieve
performance. In its previous congressional budget justification, Labor
tied only direct budget resources to its programs and highlighted, but
did not tie budget resources to, its annual performance goals. Now,
Labor shows the direct and indirect budget resources associated with
its programs and their associated performance goals, including some
indirect costs, such as legal services and bureau administration. The
Labor official said this information gives budget decision makers a
better idea of what can be expected to be achieved with a given level
of resources.
OMB staff and agency officials also said that NASA and VA's budget
restructuring efforts provide more complete information. OMB staff, a
NASA official, and a congressional staff we spoke with said "full cost"
is useful because it provides context for institutional costs,
including the cost of civil servants and facilities, and provides
better information on total program costs. Some VA officials also noted
the anticipated benefits of improving information on the budget
resources used to achieve the program performance goals and helping
highlight potential trade-offs among resources.
According to VA officials and program managers, the budget resources
used to achieve the program performance goals are not readily apparent
under VA's current appropriations account structure. The burial
program, for example, is funded by six appropriations accounts[Footnote
72] and the program's budget resources were shown in separate volumes
of the congressional budget justification prior to restructuring.
According to VA officials, this format complicated discussions about
the relationship between the program's performance goals and the
resources needed to achieve them. For example, performance measures
related to ensuring that veterans and eligible family members have
reasonable access to veteran cemeteries are supported by the operating,
construction, and grant appropriations accounts, which previously were
shown in separate volumes of the congressional budget justification.
After presenting the burial program's budget resources together, VA
officials said that presenting these budget resources together provided
a better understanding of the resources needed to achieve the Burial
program's performance goals and helped highlight potential trade-offs
among resources. For example, some officials noted that consolidating
Burial program resources would have helped to highlight the potential
trade-offs between federal construction and grants to states to
construct veteran cemeteries.
In addition, officials from several agencies in our general review
noted that the new format provided more insight into the resources
associated with programs and performance. For example, an official from
DOJ said that appropriations account structure changes would provide a
fuller picture of resources being used to achieve its performance
goals. When talking about overcrowded prisons, for example, one would
have to look at two accounts under the existing account structure to
get the full picture of resources being used to achieve related
performance goals. DOJ proposed to merge salaries and expenses accounts
with construction accounts, thereby showing all the resources used in
one place.
Enhancing Incentives and Flexibility to Make Resource Trade-offs:
OMB stressed the importance of aligning budget authority and
accountability with programs and performance to provide not only the
information but also the incentives and flexibility to allocate
resources and execute the budget with a focus on effectiveness.
Although OMB staff said information could be provided on the cost of
programs or performance in crosswalk tables, it is the appropriations
account structure that provides the framework for management incentives
and resource trade-offs. According to OMB, "a program manager who is
authorized to manage the program, controls budget authority that covers
the full cost of resources used, and has authority over program staff
can focus his attention on getting results. With this combination of
authority and some flexibility, a program manager has the tools
necessary to be accountable for results, efficiently producing
effective outputs."[Footnote 73]
Officials we spoke with from six agencies also emphasized that the
appropriations account structure changes not only provided more
complete information on the resources associated with programs or
performance but also provided incentives to recognize and flexibility
to make resource trade-offs to improve efficiency and effectiveness.
For example, a key objective of NASA's budget restructuring was to
provide incentives for improved resource management. According to NASA
officials, because NASA's program budgets now include all direct and
indirect budget resources associated with a project and managers are
responsible for these resources, managers now have better information
and incentives to consider trade-offs between various items of expense,
such as administrative costs, supplies, direct civil servants, and
contractors to use resources more efficiently. Before budget
restructuring, program managers' budgets only included procurement
dollars and not the cost of civil servant salaries, so that civil
servants appeared "free" to program managers. Under NASA's restructured
"full cost" budget, civil servants' salaries are included in program
managers' budgets, and NASA officials said that they view this change
as making program managers more accountable for these resources because
these managers have greater incentives to use civil servants' time more
efficiently. In addition, they believe that the allocation of a portion
of central administrative costs to each program makes program managers
more likely to pay attention and question these costs, which in turn
increases pressure on headquarters and centers to reduce costs.
Similarly, some OMB staff said that VA's proposed appropriations
account structure would provide the incentives and flexibility to make
resource trade-offs to improve program management. For example, VA
proposed to include all medical care related expenses (i.e., facilities
operations and maintenance, provision of care, construction, grants,
and administration) under one appropriations account. OMB staff said
that because construction projects would be included in program
budgets, managers would be more accountable for those resources and
would be more compelled to make trade-offs between capital and human
assets. Under the proposed structure, VHA, which is responsible for
providing medical care, would be able to shift funds from
administration and grants to construction or operations without
transfer authority.[Footnote 74] OMB staff said that only showing the
total resources associated with programs through presentational changes
would not provide the incentive for managers to more carefully consider
resource use and use them more efficiently.
In addition, NASA officials credited "full cost" budgeting with helping
to identify underutilized facilities, such as service pools--the
infrastructure capabilities that support multiple programs and
projects. NASA's service pools include wind tunnels, information
technology, and fabrication services. Prior to "full cost" budgeting,
service pool resources were shown and budgeted for separately from the
programs that used them and were not aligned with NASA's strategic
plan. Now these resources are allocated to NASA's programs and included
as part of program budgets based on use. NASA officials credit this
approach with making underused service pools more visible. If programs
do not cover a service pool's costs, NASA officials said that it raises
questions about whether that capability is needed. NASA officials also
explained that when program managers are responsible for paying service
pool costs associated with their program, program managers have an
incentive to consider their use and whether lower cost alternatives
exist. As a result, NASA officials said "full cost" budgeting provides
officials and program managers with a greater incentive to improve the
management of these institutional assets.
3.3b: Some Noted Limitations and Concerns:
Proposed budget restructuring did not meet with universal approval:
concerns were raised both by some executive branch managers and
congressional appropriations committees. Officials from two case study
agencies noted that the changes had the potential to create new
resource management challenges. Appropriations subcommittee staff
expressed concerns and sometimes disapproval of agencies' efforts to
restructure budgets. Even among those supportive of advancing results-
oriented management, universal agreement on the necessity of account
structure changes did not exist. In addition, both agency staff and
appropriations subcommittee staff said that budget restructuring did
not provide some information they saw as most useful to advancing
results-oriented management.
Some Expressed Concerns that Budget Restructuring Has the Potential to
Create New Resource Management Challenges:
Some VA and NASA officials expressed concern that budget structure
changes have the potential to create new resource management
challenges. These concerns stem, in part, from differences between the
proposed appropriations account structure and how an agency currently
operates as well as concerns about the ability to accurately allocate
resources within the new structure. One area in which restructured
budgets were seen as likely complicating resource management at VA was
where resources that were previously provided in a single
appropriations account are disaggregated to flow through multiple
appropriations accounts to better align with programs and performance.
For example, under VA's fiscal year 2003 account structure, the General
Operating Expenses (GOE) appropriations account funded administrative
expenses for VBA's benefit programs. Within this appropriations account
and within reprogramming guidelines, VBA could shift administrative
funds among programs throughout the year to address performance issues
or changes in benefit claims that might arise due to war or legislative
changes. Under the proposed account structures for fiscal years 2004
and 2005, each program's administrative expenses would have been paid
from separate appropriations accounts. Disaggregating appropriations
accounts would limit the ability to shift administrative funds among
programs throughout the year to address emerging needs because
transferring resources between appropriations accounts generally
requires further congressional action. VA officials raised concerns
about how the changes might affect their ability to respond to changes
in benefit claims.
In addition, some expressed concerns that estimation uncertainty
surrounding the allocations of administrative costs may have
implications for executing the budget properly and avoiding
antideficiency violations.[Footnote 75] Currently in VA, a VBA employee
who administers compensation, pensions, and burial benefits is paid
from the GOE appropriations account. Under the proposed appropriations
account structures for fiscal years 2004 and 2005, a VBA employee's
salary would have been paid from more than one appropriations account.
Splitting a VBA employee's salary among three appropriations accounts
would require estimating the time the employee spent on each program.
Similar concerns were raised by VHA officials because doctors that
spend time providing medical care and conducting medical research would
be paid through two appropriations accounts under the fiscal years 2004
and 2005 proposed account structures. VA officials told us that
estimation uncertainty surrounding the allocations of administrative
costs was one reason VA requested transfer authority for operational
expenses between six program accounts.[Footnote 76]
OMB staff's response to VA's concerns was that the proposed
appropriations account structure would have provided needed incentives
for the department to address long-standing cost estimation and
financial management issues. OMB staff said that changing the
appropriations account structure to align budget resources with
programs and performance creates an incentive for managers to consider
more seriously the budget resources of their programs during budget
formulation, including whether the requested amount is adequate in
terms of operating the program and meeting performance goals and to
develop the systems to better track spending.
At NASA, views differed about the potential implications of the budget
structure changes for managers' ability to respond to changing needs.
Some program managers expressed concerns that the changes could limit
their ability to respond to staffing uncertainties. Under NASA's
previous budget structure, program budgets were not charged for civil
servants working on their projects and staffing uncertainties were
covered in center budgets. A program needing additional staff would
request them from the center, which retained additional full-time
equivalents (FTEs). Under the new budget structure, civil servants and
the associated budget authority are requested and funded through
program budgets. Some NASA program managers expressed concern that they
might not be able to deal with an unexpected increase in workload
because NASA program managers will have to come up with the money to
pay for the civil servants, which might limit the extent to which they
can shift budget resources among programs. Another program manager,
however, suggested that since control over civil servants has moved
from center managers to program managers, "full cost" budgeting would
reduce some "red tape" in dealing with sudden needs or emergencies and
that as a result, program managers could move FTEs more
quickly.[Footnote 77]
Another area of concern is how budget structure changes would affect
the balance between maintaining strategic or institutional capacity--
its physical and human capital--and creating incentives for operational
efficiencies. Specifically, some at NASA expressed concerns that its
changes created incentives that could over time erode the agency's
commitment to institutional assets such as central facilities and
service pools. Under the new structure, budget authority for
institutional assets are allocated to and requested by program budgets.
The rate used to charge program budgets is determined by the operating
cost of the facility and the units of consumption. As a result, a
declining number of users can lead to increasing service charges for
others using centers or service pools. Some speculated that this could
in turn lead to a "death spiral" as increasing user charges drove out
other programs, resulting in even higher user charges. Consequently,
assets not adequately covered by user charges might be eliminated even
though they might be valuable to the institution as a whole. A NASA
official told us, however, that any asset considered to be mission
critical would be maintained even if underused. These underused assets
could be funded through general administration, which is allocated
across all programs or by directing other work activities to the asset.
Some Appropriations Subcommittees Noted General Support for Budget and
Performance Integration Efforts but Raised Concerns about Agency Budget
Restructuring Efforts:
While some appropriations committee reports and subcommittee staff we
spoke with gave general support to budget and performance integration,
including efforts to better link budget resources to performance, they
raised a number of concerns about the agencies' budget restructuring
efforts. For the most part, subcommittees continued to state a
preference for and rely on previously established budget structures.
Several key concerns were raised:
* organizational frameworks used to restructure budgets did not meet
appropriators' needs,
* reduced visibility of items of particular interest to appropriations
subcommittees, and:
* overly cumbersome and difficult-to-use congressional budget
justifications.
Regardless of General Support for Budget and Performance Integration
Efforts, Appropriations Subcommittees Continue to State a Preference
for and Rely on Previously Established Structures:
Some appropriations committee reports and subcommittee staff with whom
we spoke expressed general support for budget and performance
integration efforts, including efforts to better align resources with
programs and performance. Some recognized the potential value of budget
restructuring efforts for agency strategic and performance management.
However, for the most part subcommittees continued to state a
preference for and rely on previously established structures. Several
stated that congressional budget justifications are intended for the
congressional appropriations subcommittees and should be done to meet
the needs of congressional members and their staff. In some cases,
appropriations committees generally objected to changes that replaced
information traditionally used for congressional appropriations with
new performance information, which they viewed as supplemental at best.
In our review of appropriations committee reports, we found some
general expressions of support for budget and performance integration
efforts. Further, appropriations subcommittee staff we spoke with could
see the potential value of budget restructuring efforts for agency
management. For example, in its reports for VA's fiscal years 2004 and
2005 appropriations, the committee stated that it "supports the
administration's efforts to align costs and funding with each program
and to simplify the account structure."[Footnote 78] Also, in the House
Appropriations Committee report on fiscal year 2005 appropriations for
DOJ, Commerce, and SBA, the committee stated that it "is supportive of
budget and performance integration so that government programs can
become more results-oriented."[Footnote 79] An appropriations
subcommittee staff we spoke with said that the budget structure changes
aligned the agency's facilities and infrastructure to its programs and
provided the information needed--total program cost. In its report on
Labor's fiscal year 2004 appropriations, the House Appropriations
Committee urges agencies under its jurisdiction "to manage themselves
based on performance and outcomes" and to "use outcome and performance
measures as the primary management tool for resource allocation and the
evaluation of programs and individuals."[Footnote 80] Also, while
expressing concerns about EPA's restructured budget for their purposes,
appropriations subcommittee staff we spoke with said the information in
EPA's congressional budget justification might be useful for agency
managers. Another staff said "performance budgeting is a good concept,"
and that agency managers should know whether and how they are achieving
goals.
However, general support did not translate into acceptance of the
specific proposed changes, and for the most part appropriations
subcommittees continued to state a preference for and rely on
previously established budget structures and presentations. For
example, although the appropriations subcommittee accepted EPA's
congressional budget justification, which was structured around its
strategic goals and objectives, the subcommittee required that EPA
provide program information. In committee reports on EPA's fiscal year
2005 budget, the House and Senate appropriations subcommittees urged
EPA to reformat its congressional budget justification to increase
clarity and transparency.[Footnote 81] Only in NASA's case did Congress
adopt the proposed appropriations account structure to appropriate
funds.
Appropriations subcommittees rejected the proposed appropriations
account structure changes for VA and DOJ.[Footnote 82] VA's House and
Senate Appropriations Committees did not adopt VA's proposed
appropriations account structure for fiscal year 2004 or for fiscal
year 2005. In fact, the House Appropriations Committee moved in a
different direction, proposing a new account structure for VHA that
differed from what VA had proposed.[Footnote 83] Further, the House
Committee report for fiscal year 2004 directed VA "to refrain from
incorporating 'performance-based' budget documents in the 2005 budget
justification submitted to the Committee, but keep the Performance Plan
as a separate volume."[Footnote 84] However, VA resubmitted a
restructured performance-based budget for fiscal year 2005. In the
House Appropriations Committee report for the fiscal year 2005 budget,
the committee reiterated its concerns about the performance-based
structure. While the committee recognized "the right of the executive
branch to propose whatever structure it deems necessary," it stated,
"If the Department wishes to continue the wasteful practice of
submitting a budget structure that will not serve the needs of the
Congress, the Congress has little choice but to reject that structure
and continue providing appropriations that serve its
purposes."[Footnote 85] Also, for the most part, Congress did not
accept DOJ's proposed account structure changes that would merge
construction funding with the salaries and expense accounts for either
fiscal year 2004 or 2005.[Footnote 86]
In some cases, the House Appropriations Committee directed DOT to
submit the fiscal year 2006 congressional budget justification in a
format similar to fiscal year 2003 or earlier congressional budget
justifications. For example, for the salaries and expenses of the
Office of the Secretary, the committee directed the department "to
submit its fiscal year 2006 Congressional justification materials at
the same level of detail provided in the Congressional justifications
presented in fiscal year 2003."[Footnote 87] Also, while the House and
Senate Appropriations Committees used FAA's restructured budget to
appropriate funds for fiscal years 2003 and 2004, the House committee
returned to the fiscal year 2002 structure--the structure used prior to
restructuring--for the fiscal year 2005 budget. The committee
explained, "After testing this structure for the past two years, the
Committee finds that it is inferior to the previous structure" and "To
avoid confusion, the Committee encourages the agency to follow this
organization in future budget requests."[Footnote 88]
Similarly, the House Appropriations Committee stated a preference for
previously submitted budget structures and presentations, saying that
it considered HUD's "performance-based budget" a "strategic planning
document for departmental managers, rather than a detailed budget
justification document." The committee directed HUD "not to submit or
otherwise incorporate the strategic planning document or its structure
into its fiscal year 2005 Budget Justification submission to the
Committee."[Footnote 89] At least in part because of congressional
concerns, HUD did not submit a "performance budget" for fiscal year
2005 and instead included links between resources and results in a
separate performance plan. In the fiscal year 2005 report, the
committee expressed appreciation and continued its direction that
"strategic planning document, formats or materials are not to be
incorporated into the [budget] submission."[Footnote 90]
While Labor's Senate appropriations committee stated that displaying
performance-based budgets is a "commendable goal" in its fiscal year
2004 committee report, the committee "continues to rely on the
traditional display of appropriations account information provided
prior to fiscal year 2004."[Footnote 91] In its fiscal year 2005
report, the Senate Appropriations Committee encouraged Labor "to
continue using outcome and performance measures as the primary
management tool for resource allocation and the evaluation of programs
and individuals," but required Labor "to submit its fiscal year 2006
congressional budget justifications in the traditional budget structure
rather than in a 'performance' budget structure."[Footnote 92]
Additional performance information should be submitted as a separate
appendix in the budget justification.
Organizational Frameworks Used to Restructure Budgets Did Not Meet
Appropriators' Needs:
OMB instructed agencies to structure the "performance budgets" like
their strategic plans and, where possible to align budget accounts with
programs or the components of programs that contribute to a single
strategic goal or objective. While some appropriations subcommittee
staff we spoke with said that performance information is useful, they
did not agree with structuring the appropriations account and
congressional budget justifications around this type of information.
Some appropriations subcommittee staff explained that, in their
opinion, the organizational frameworks agencies chose did not align
with how the agency operated or with how the subcommittee appropriated
funds, did not rely on units by which the agency was able to track
spending, or did not provide useful information.
Appropriations committee reports or subcommittee staff we spoke with
highlighted several examples of how the frameworks used to restructure
the budget did not meet their needs. For example, a fiscal year 2005
House Appropriations Committee report stated that VA's proposed account
structure was not adopted "because it does not address the needs of the
Congress in its role of reviewing and allocating federal budgetary
resources."[Footnote 93] Specifically, one appropriations subcommittee
staff person noted that the proposed framework did not align with how
the agency operated. For example, in the staff person's view, the
organizational framework for VBA's proposed account structure, which
would structure its budget around programs and fund administration
resources from several different program accounts, did not align with
how regional offices operated, in which one staff person's time may be
split across multiple programs. The staff person indicated a preference
for information organized around functional area, such as
administration.
EPA offers another example. House appropriations subcommittee staff
said that the organizational framework used for EPA's restructured
congressional budget justification did not align with how the
subcommittees appropriated funds. They explained that EPA's new
structure around strategic goals and objectives didn't match
appropriators' interests or the structure used for appropriations
because appropriators generally focus on and provide resources by
program. Staff said that tracing program funding changes back to goals
or determining the effect of changes in goal funding to programs was
difficult.
Others expressed concern that the performance-based organizational
structure focused on units with which staff did not agree. For example,
appropriations subcommittee staff said that the goals presented in the
congressional budget justification did not reflect those of the
subcommittee. Further, an appropriations subcommittee and its staff
expressed concern that organizing the budget around performance goals
or missions might obscure information about how agencies are spending
money. For example, in its committee report for the fiscal year 2005
budget, the House Appropriations Committee explained that FAA's
restructured budget "depends on overlapping budget categories and
subjective judgments among agency officials concerning a program's
predominant purpose."[Footnote 94]
Subcommittee staff also expressed concern that agencies request
appropriations in the performance-based frameworks but are unable to
track spending in this framework. For example, some of the nine
agencies in our review have structured their congressional budget
justification around their strategic or performance plans and show or
request funding by goals or objectives. However, according to some
appropriations subcommittee staff, some agencies do not track spending
by these goals and objectives and thus cannot report the amount spent
by goal. In addition, these appropriations subcommittee staff thought
this shift could make it more difficult to track historical spending
trends since goals might change from year to year. GPRA requires an
agency to develop a strategic plan at least every 3 years to cover the
following 5-year period, and GAO has reported that changes in political
leadership may also result in a new agenda with new objectives.
A concern was also raised that the organizational framework used did
not provide useful cost information. An appropriations subcommittee
staff said that VA's allocation of resources among its programs and
offices seemed "incomplete and inconsistent." Specifically, according
to the staff, claim adjudication was included as part of the Disability
Compensation program's administrative costs, but appeals and court
costs, which cover the lawyers in the Office of General Counsel who are
a large part of the claim adjudication process, were not included.
Also, the staff questioned why a portion of the department's
construction resources were allocated to and requested by VA's
Inspector General office. Generally, to the extent staff were
uncomfortable with agencies' ability to meaningfully allocate
resources, they expressed concerns about the value of the information
provided by the restructured budgets.
Reduced Visibility of Items of Particular Interest to Appropriations
Subcommittees:
As agencies increased the performance perspective in congressional
budget justifications, some appropriations subcommittee staff we spoke
with said some information they needed was either less transparent or
not provided within the restructured budgets. For example, several
staff said they found that the restructured congressional budget
justification failed to include information appropriators are most
interested in, such as changes to appropriations language and funding
levels, historical information, funding levels by program or state,
object class information, and more detailed cost and performance
information, such as unit cost, workload information, and output
measures. This information lends itself to the budget process. For
example, workload measures, in combination with cost-per-unit
information, can be used to help develop appropriations levels, and
legislators can more easily relate output information to a funding
level to help define or support a desired level of service. Other staff
explained that appropriators also focus on agencies, offices, and
activities and need object class and workload-related information to
make decisions.
The importance of workload and output measures for making budget
decisions is also important at the state level. In a recent review of
state performance budgeting efforts, some state officials said that
outcome measures and performance evaluations were useful in budget
deliberations, but that legislators rely most on workload and output
measures when determining funding levels and desired levels of service
relative to funding.[Footnote 95]
Concerns that performance information replaced information needed to
make budget decisions were also expressed in committee reports. For
example, a House Appropriations Committee report said that, "while the
amount of performance data included in budget documents has increased,
in many cases it has been at the expense of programmatic budget data
and justifications that are critical to the work of the
Committee."[Footnote 96] Similar concerns were raised in another
committee report and the committee directed the department to "include
in the budget justification funding levels for the prior year, current
year, and budget year for all programs, activities, initiatives, and
program elements."[Footnote 97] In addition, the committee said that
one agency's restructured budget obscured information and made it
easier for agencies to cover cost overruns with little scrutiny.
Along these lines, some appropriations subcommittee staff said that
they sought additional information from the agency instead of using
what was included in the restructured congressional budget
justifications or used the previous year's congressional budget
justifications. For example, in response to congressional concerns that
its fiscal year 1999 congressional budget justification lacked program
information, EPA provided appropriations staff with supplemental
information on the budget request broken down by program in its fiscal
year 2000 through fiscal year 2004 justifications. Appropriations
subcommittee staff said that Labor's fiscal year 2004 congressional
budget justification failed to provide historical information and
differences in funding for various training programs; appropriations
subcommittee staff asked Labor for additional information or used
earlier congressional budget justifications and constructed their own
tables.
Overly Cumbersome and Difficult-to-Use Congressional Budget
Justifications:
Some appropriations subcommittee staff felt strongly that the
restructured congressional budget justifications were often overly
cumbersome and difficult to use. Not only did the congressional budget
justifications omit information the committees wanted, they sometimes
included information the committees did not need. Several
appropriations committee reports or subcommittee staff we spoke with
stated that congressional budget justifications are intended for the
congressional appropriations committees and should be prepared to meet
the needs of congressional members and their staff. As expressed in one
appropriations committee report, "In the place of critical budget-
justifying material, the Committee is provided reams of narrative text
expounding on the performance goals and achievements of the various
agencies."[Footnote 98] In the view of some staff, the type of
performance information agencies provided is supplemental and including
it in the congressional budget justification made it hard to use for
their purposes. For example, some subcommittee staff said they found
the narrative included in performance-based congressional budget
justifications too voluminous and cumbersome, making any useful
information contained in them too difficult to find. In its fiscal year
2005 committee report, the House Appropriations Committee directed DOT
and other agencies to refrain from including substantial amounts of
performance data within the congressional budget justifications
themselves, and to instead submit performance-related information under
separate cover.
Not only did appropriations subcommittee staff see the restructured
congressional budget justifications as providing too much performance-
based information, but some also said that the performance-based
justifications were poorly organized or formatted, making it even more
difficult to find needed information. For example, in one case
subcommittee staff pointed out that in the agency's restructured
congressional budget justification, program performance goals were
listed by number without sufficient information to identify the goals.
In addition to using congressional budget justifications from previous
years and creating their own tables, appropriations subcommittee staff
said they needed to flip from section to section to find information
that should be listed on the same page. In the staff's opinion it was
much easier to use the previous congressional budget justifications.
Further, staff also said that the congressional budget justification
didn't clearly show how the programs contributed to the agency's goals
and missions, and that it was difficult to understand the relationship
between the administrative resources shown in "full cost" summary
tables and those shown in the administrative appropriations accounts.
Another issue was the imbalance between the amount of information
provided and the amount of the funding request. For example, FAA
provided over 170 pages of text discussing the relatively small share
of its budget that is capital programs and only about 20 pages on the
relatively larger operating portion of the budget.
Agencies Address Congressional Concerns:
Some agencies made changes to their performance-based budget structures
in response to congressional concerns or direction. For example, both
EPA and Labor reported that they made changes to their budget
justifications for fiscal year 2006 to address congressional concerns.
Specifically, in response to congressional direction to reformat its
justification to increase clarity and transparency, EPA restructured
its budget justification so that it is organized by appropriations
account and program/projects. The new format provides information in a
way that Congress makes decisions--at the program level. EPA continues
to provide information on strategic goals and objectives and the
resources associated with them, but it is streamlined and treated more
like a supplement. According to Labor officials, since the submission
of the fiscal years 2004 and 2005 budget justifications, they have
worked with congressional appropriations committee staff to address
concerns about the elimination of program-specific information. Several
exhibits, including the 5-year funding histories, have been reinstated
in Labor's "performance budget" for fiscal year 2006.
Extent to Which Appropriations Account Restructuring Considered
Necessary to Advance Results-Oriented Management Varied:
Despite all the recent efforts to restructure the budget, little
consensus exists on whether appropriations account restructuring is
necessary to advance results-oriented management. OMB staff said that
it is important to move beyond aligning budget resources to results for
presentational purposes to appropriating budget authority with programs
and performance, which will provide improved incentives for
appropriators and program managers to recognize and make resource trade-
offs. However, OMB also noted that other factors must be considered and
the restructuring appropriations accounts should be "considered with
care."[Footnote 99] OMB staff we spoke with agreed that the need for
appropriations account restructuring should be considered on a case-by-
case basis, noting that appropriations account restructuring may not be
necessary for all agencies.
Agency officials from the nine agencies in our review differed in the
extent to which they viewed appropriations account structure changes as
important for efforts to improve performance. Some saw the changes in
appropriations accounts as necessary to reinforce performance-based
cultural transformations and accountability processes within agencies.
However, most expressed the opinion that appropriations account
structure changes were not critical to their efforts to advance results-
oriented management at this time. Officials generally said that the
structure itself did not present a significant impediment to efforts to
improve performance, noting that other factors, such as underlying
authorizing statutes and earmarks, might create more significant
impediments. There were some agency officials who saw ways in which the
appropriations account structure hindered efforts to improve
performance. For example, some NASA officials said that, prior to
restructuring, the previous appropriations account structure resulted
in a lack of accountability over the resources used to achieve
performance and limited managers' abilities to make resource trade-offs
to use resources more efficiently. Others cited examples in which the
current appropriations account structure complicates the discussion of
performance. For example, a DOJ official noted that DOJ's
appropriations account structure does not provide a full picture of the
resources associated with meeting its performance goals. When talking
about overcrowded prisons, for example, one would have to look at two
appropriations accounts under the existing account structure to get the
full picture of resources being used to achieve related performance
goals.
While officials from most agencies did not view appropriations account
structure changes as critical to their results-oriented management
efforts, some officials said that changing the congressional budget
justification without making corresponding changes to the
appropriations account structure might create new challenges. For
example, a Commerce official explained that Commerce currently operates
under a performance-based budget. However, Congress still appropriates
under the previously established appropriations account structure. As a
result, Commerce must translate from appropriations accounts to its
strategic goals by creating crosswalks, which were described as time-
consuming. Similarly, EPA officials reported that, prior to the fiscal
year 2005 budget, they formulated and executed the budget at the goal,
objective, and subobjective level. However, once Congress appropriated
by key program, the funds were translated to the performance-based
framework. EPA was concerned that they couldn't track spending by key
program and so, for the fiscal year 2005 budget, EPA implemented
changes to its budget and financial management systems in order to
include programs in budget formulation and execution.
New Budget Structures Do Not Address Some Shortcomings in Cost and
Performance Information Identified as Useful for Results-Oriented
Management:
Previous initiatives suggest that it is not practical for one reform to
address the multiple needs and perspectives of Congress, OMB, and other
executive branch managers. Accordingly, it is important to recognize
that budget restructuring alone does not necessarily provide some
detailed cost and performance information cited by agency officials and
congressional staff as most useful in advancing results-oriented
management and addressing some key management challenges. The need for
detailed and adequate cost and performance information is a long-
standing challenge. OMB stressed that budget restructuring is one
effort among many that are intended to work together to advance the
integration of budget, cost, and performance information to support
results-oriented management efforts.
One objective of recent budget restructuring efforts is to provide
better information on the "full cost" of achieving performance;
however, some agency officials--mainly at the program manager level--
and appropriations subcommittee staff stressed the importance of more
detailed cost and performance information, such as unit cost and
workload information, as more useful for improving management and
oversight than what is provided by budget restructuring. As an example,
the ability to compare the unit cost of programs or activities across
regions was cited as beneficial to highlighting potential
inefficiencies. Similarly, some appropriations subcommittee staff said
detailed unit cost information, such as cost per patient or cost per
insurance claim, was potentially useful in making budget decisions.
Further, a VA official cited the need for cost accounting information
that could help VHA identify underused medical equipment and divert
some of its resources to another medical facility to help cover costs.
These congressional staff and the agency official pointed out that the
restructured budgets did not provide this information. While
restructured budgets are intended to better capture the "full cost" of
programs and performance, the level at which budgets generally are
organized is more aggregated than the detailed managerial cost
information needed for this type of analysis.
Some also expressed concern that budget restructuring would not provide
information to help address some key agency management challenges. For
example, NASA has had long-standing contracting issues that the
information provided by budget restructuring would not necessarily
address. NASA program managers we spoke with said budget restructuring
would not help reduce or limit cost overruns, which has been a key
performance issue. They said they need more detailed cost information
on contract cost components, including labor and materials, to monitor
contractor performance.[Footnote 100] Others noted that efforts to
develop improved performance measures and metrics have a much greater
impact on results-oriented management than budget restructuring. For
example, an agency official said improving management is not only about
managing dollars more effectively but also improving the level of
service. In the official's view, performance measures about the
accessibility and quality of services--not the budget structure--drive
management decisions about whether or not to build a facility to expand
services.
Other officials noted that management initiatives were generally
advanced when internal management and accountability processes, such as
performance management systems, were recast to focus on performance and
results, but budget restructuring was not viewed as essential to foster
this shift in managerial perspective. For example, according to Labor
officials, changes to Labor's performance management system that
increase managers accountability for achieving results affect
management more than budget structure changes. An official suggested
that changes to the budget structure reflect, rather than drive,
efforts to advance results-oriented management.
Given these types of issues, some agency officials, congressional
appropriations staff, and budget experts suggested that improving
financial and performance information should be a prerequisite to
restructuring budgets and some added that, in their opinion, this step
is more important to improving management and oversight than the recent
budget restructuring efforts. Since it is not practical for one reform
to address all decision makers' needs, it is important to understand
what can realistically be expected from any particular effort as well
as how various efforts fit together so that effective judgments can be
made on whether, how, and to what extent the budget might be
restructured given limited resources.
[End of section]
Section 4: Budget Restructuring Efforts Face Challenges:
The history of performance budgeting efforts has shown that designing
effective approaches to achieve meaningful connections between
performance and budget structures is a complex undertaking. Current
efforts face many of the same challenges faced by previous initiatives.
Restructuring budgets inevitably requires trade-offs among the needs
and perspectives of Congress and other decision makers because budget
structures reflect fundamental choices about how to frame budget
choices and influence controls and incentives. Structuring budgets to
better capture the "full cost" of programs and performance also
involves numerous judgments about such issues as the relative
contribution of various programs to achieve performance and the
appropriate allocation of resources among these programs and goals.
These complexities suggest that designing and implementing budget
restructuring proposals will be a long-term and experimental process.
While some agencies have demonstrated that sustained commitment by
agency leadership is important to move budget restructuring forward,
this commitment has not yet been shared by congressional appropriators
and other decision makers. A lack of consensus among Congress and other
key decision makers exists on the value of budget restructuring and on
the value of the organizing frameworks used to structure agencies'
performance-based budgets. In some cases this lack of consensus has
increased agencies' workloads and raised questions about the
sustainability of budget restructuring efforts. Questions have also
been raised about the ability of agencies' performance and financial
management systems to support the allocation and tracking of resources
adequately within the new budget structures. Congressional staff and
others expressed concerns about moving forward on budget restructuring
without adequate performance and financial information.
Experiences to date highlight a number of implementation challenges and
issues for current and future budget restructuring efforts including:
* lack of consensus between congressional appropriators and other
decision makers,
* need for sustained commitment, and:
* need for adequate systems to support allocation and tracking of costs
within new frameworks.
These challenges suggest that budget restructuring may be a long-term,
experimental process requiring flexibility to explore different
approaches.
4.1: Lack of Consensus between Congressional Appropriators and Other
Decision Makers Creates Challenges for Budget Restructuring Efforts:
In many cases, Congress and other key decision makers--OMB and
different levels of agency management--have not reached consensus on
the value of restructuring budgets or the frameworks used to do so. The
multiplicity of roles and needs of Congress and other decision makers
may mean complete consensus is unattainable because no one structure or
approach is likely to satisfy all. However, in some cases, there has
been no dialogue between Congress, OMB, and the agencies. The lack of
any consensus creates and will continue to create significant
challenges and frustrations for those attempting to develop, implement,
and use restructured budgets.
As noted in section 3 of this report, agreement has not been reached
about either the value of restructuring budgets around performance or
the specific organizational frameworks used to do so. Any frameworks
used to structure performance budgets--such as strategic goals,
performance goals, programs, or individual item of expense (e.g.,
salaries and expenses or construction)--will meet some needs but not
others. This is not surprising given the different roles decision
makers have within our constitutional system of separated powers. For
example, appropriations subcommittee staff highlighted their oversight
role and accountability for resource use. They also cited the demands
of allocating limited resources within the time constraints of the
appropriations process. All of these factors led them to want
consistently presented information in areas such as object classes,
program funding, major new initiatives, changes in policy, and
historical spending trends for key functional areas and organizational
units.
In contrast, OMB staff and agency officials tended to emphasize the
importance of linking resource allocation decisions to strategic and
performance goals and the need for increased authority and flexibility
over the resource use to improve efficiency and effectiveness. The
various roles of decision makers within agency management also create
differing needs. As discussed in section 3 of this report, aligning
resources with high-level strategic and performance goals may be useful
for strategic management and assessing performance, but it may not
provide the detailed information needed to inform operational
management decisions to improve efficiency and effectiveness.
These contrasting perspectives were evident in the different reactions
of appropriations staff and OMB officials and staff to agencies'
appropriations account or congressional budget justification changes.
While OMB and some agencies were pursuing efforts to implement
restructured budgets, several appropriations subcommittees were
specifically directing some agencies in their jurisdiction to use
previously established structures and refrain from incorporating
performance-based information into congressional budget justifications.
For example, one House Appropriations Committee report directed
agencies to, "refrain from incorporating 'performance-based' budget
documents in the 2005 budget justification submission to the Committee,
but keep the Performance Plan as a separate volume."[Footnote 101]
Meanwhile, for the fiscal year 2005 budget, OMB required agencies to
submit a "performance budget" that would integrate an agency's annual
performance plan and congressional budget justification into one
document.
Determining whether it is possible to develop any approach to
restructuring budgets around performance acceptable to all decision
makers is made more difficult if there is no consultation. OMB said
agencies should consult with congressional committees before submitting
the budget to ensure they are aware of changes being made to the budget
structure, and OMB recognizes that account structure changes must be
negotiated with Congress. However, some agency officials and
congressional appropriations subcommittee staff we spoke with cited
insufficient dialogue between the agencies and appropriators. For
example, some appropriations subcommittee staff said that they had not
been sufficiently consulted about proposed budget structure changes.
Moreover, some appropriations subcommittee staff said agency officials
had presented the changes without providing enough detail about the
changes or, in other cases, did not adequately seek and respond to
their input. One Senate Appropriations Committee report also reflected
these concerns about the need for communication on the framework used
to restructure budgets, stating that "[the Committee] expects the
Department to work with the Committee to make sure that the fiscal year
2004 budget justifications meet Committee needs."[Footnote 102]
The lack of consensus, whatever the cause, has and will likely continue
to raise challenges for those attempting to develop and implement
restructured budgets. Agencies' experiences have shown that pursuing
restructured budgets without the agreement--or at least acquiescence--
of appropriations subcommittees can result in significant resources
being used to develop budget structures that are rejected or, if
accepted, do not fully meet congressional needs. This leads in turn to
increased agency and appropriations subcommittee staffs' workloads or
frameworks that are not fully used by congressional appropriators. For
example, to satisfy OMB's requirement to submit a performance budget,
some agencies likely expended significant resources to create
performance-based budgets only to be appropriated and have to execute
based on previously established structures. Furthermore, appropriations
subcommittee staff said they used alternative methods to get the
information they needed, including asking agency staff to provide
supplemental information and creating crosswalks between the
performance-based framework and the previously established framework
because some formerly reported information was not included in the new
performance-based congressional budget justifications.
The lack of agreement on the framework used to structure the budget may
not only increase workload but also raise questions about the extent to
which the restructured budget will in fact reframe budget choices. This
can be true even in cases where restructured budgets are adopted. For
example, although Congress accepted EPA's fiscal years 1999 through
2005 congressional budget justifications, which were structured around
its strategic goals and objectives and changed EPA's reprogramming
guidance to expressly allow funding shifts within strategic objectives,
Congress required that EPA provide program information and continued to
set specific funding levels in committee reports based on
programs.[Footnote 103] Appropriations subcommittee staff said that
they generally did not use the performance-based budget to conduct
their work but rather the program-based information they requested from
EPA. Although Labor submitted a "performance budget" for fiscal years
2004 and 2005, appropriations subcommittee staff we spoke with said
they either relied on the fiscal year 2003 congressional budget
justification to find information they needed or requested supplemental
information from Labor. In short, they did not generally use the
performance-based budget.
Given the differing needs and perspectives of appropriators and agency
officials there may always be some gaps. Therefore, the challenge will
be to seek alternatives beyond and complementary to budget
restructuring that can both provide the information decision makers
need and improve the use of performance information during various
stages of the budget process.
4.2: Budget Restructuring Requires Sustained Commitment and Leadership:
Successfully changing appropriations accounts and congressional budget
justifications requires sustained commitment by key decision makers.
Most of our case study agencies had been working on the framework and
methods used to better capture the cost of programs and performance in
the budget for several years prior to proposing appropriations account
structure changes or submitting a restructured congressional budget
justification to Congress. Even after the initial changes, agencies
continue to refine the appropriations account structure and
congressional budget justification to reflect revised strategic plans
or address concerns. EPA, for example, changed its budget framework to
reflect changes to its strategic plan. At the same time, EPA
implemented additional changes to improve financial management.
Furthermore, some officials from our case study agencies told us that
it might take time to see the benefits of any changes for management
and oversight. For example, NASA officials said that they began working
on the "full cost" initiative in 1995. The formulation of the fiscal
year 2004 budget was primarily a headquarters exercise and the fiscal
year 2005 budget was the first budget program managers formulated in
"full cost." As a result, according to NASA officials, program managers
have limited experience with budgeting and managing in "full cost," and
it may take a few more years to completely achieve the benefits of
"full cost" management.
Some agencies said that commitment by agency leadership and staff,
early involvement of OMB, and integration of agencies' budget and
planning staff were helpful in their long-term effort to better link
resources to performance in the budget. For example, EPA officials
credited their senior leadership with supporting budget restructuring
efforts and integrating planning and budget staff. Labor and NASA
officials reported that they involved OMB in task forces or decisions
related to the design of restructured budgets. Labor officials said
that integrating its budget and planning staff to provide central
coordination, direction, and planning on department goals and
objectives facilitated increased collaboration between budget and
planning staff and supported budget restructuring. However, while a
sustained commitment by agency leadership and staff appears necessary
to advance budget-restructuring efforts, it is not sufficient.
4.3: Concerns Raised about Ability of Agencies' Systems to Accurately
Link Budget Resources to Performance and to Track Cost in the New
Budget Structures:
Structuring budgets to better capture the "full cost" of programs and
performance involves numerous judgments, such as the contribution of
various programs to achieve goals and objectives and the allocation of
resources among these programs and goals. Restructuring budgets to
better align budget resources with programs and performance might
provide a more complete picture of the resources associated with
expected results, but that is dependent on these underlying estimates
and assumptions. To the extent performance and resource allocations are
made on an arbitrary or misleading basis, the new structures cannot be
assumed to provide improved information on the connections between
performance and resources. Questions have been raised about agencies'
capacity to:
* develop meaningful allocations of resources to program and
performance within the new frameworks,
* track costs within the new frameworks, and:
* develop meaningful estimates of the contribution of programs to goals
and objectives within the new framework.
Agency officials and appropriations subcommittee staff we spoke with
raised concerns about the ability of agencies' financial management
systems to accurately allocate budget resources within the performance
framework used to structure appropriations accounts and budget
justifications as well as to adequately track costs. Officials from
several agencies questioned their ability to accurately allocate
resources, including staff time, among programmatic or goal areas.
Indeed, both GAO and inspectors general have reported weaknesses in
several of our case study agencies' financial management systems in
providing reliable, useful, and timely financial information, including
cost data.[Footnote 104] Also, OMB's PART reviews suggest that much
work remains to be done in improving the underlying information,
evaluations, and systems within agencies to support performance
goals.[Footnote 105] Some OMB staff said that budget restructuring
would provide a much-needed incentive to address these issues.
Officials from a number of agencies noted that they are in the process
of improving financial management systems or developing managerial cost
accounting systems, which they expected to better inform the estimates
used in the budgets in the future.
Agencies face two broad challenges in seeking to align budget resources
to performance in the budget structure. The first challenge is that
unless each program or activity is linked directly to one and only one
goal or objective, the performance contribution of a program must be
allocated across goals or objectives. This places greater importance on
exploring the analytical linkage between programs and goals. The second
challenge is allocating resources, such as central administration,
across goals. If one VBA staff's salary will be funded from multiple
appropriations accounts, accurate estimates of the amount of time they
spend on each program becomes important. Allocating resources requires
establishing a basis on which to spread resources and having the
supporting data to support allocation estimates. Officials we spoke
with used a variety of bases to allocate resources to programs and
performance, ranging from specific projects, full-time equivalents
(FTEs), workload estimates, etc. To the extent the basis used reflects
true resource needs, allocating resources has the potential to provide
more complete information on the resources associated with programs and
performance. If the basis used is arbitrary or does not reflect true
resource use, then information and incentives will not be improved. The
appropriate basis may vary. For example, FTEs may be an appropriate
basis to allocate some resources but not others. An agency that uses
FTEs as a method to allocate publishing costs might wrongly assume that
an office with many FTEs should be allocated a greater share of
publishing resources despite the fact that an office with fewer FTEs
might publish more (or need more expensive types of published products)
and thus have higher publishing costs than the office with more FTEs.
Regardless of the basis of allocation, the systems and underlying data
to support resource allocation is important for agencies to have. Some
agency officials and congressional staff questioned the ability of
agencies' systems and data to support resource allocation and track
costs in new structures. For example, VA officials explained that VBA
staff often divide their time between administering disability
compensation, pension, and burial claims. Under the current structure,
the staff's salary is paid from the General Operating Expense (GOE)
account regardless of which activities the staff is undertaking. Under
the proposed structure, the staff's salary would be paid from three
different appropriations accounts depending on the activities
undertaken. VA officials said that allocating salaries among the three
accounts would be difficult to properly estimate.
Some also expressed concerns about potential difficulties arising from
executing budgets within a structure built from uncertain resource
allocation estimates. Accounting systems and budget execution concerns
have led some agencies to request transfer authority; that is, the
ability to shift resources among appropriations accounts. For example,
when it began allocating administrative resources to its programs in
two separate appropriations accounts, NASA requested and received
transfer authority for administrative expenses between its two
appropriations accounts. NASA officials said this flexibility is needed
because of the inherent difficulty in correctly estimating resource
allocations since staff divide their time among projects. Also, VA
requested transfer authority for administrative expenses to avoid
antideficiency violations because estimation uncertainties exist around
separating administrative resources into multiple program
accounts.[Footnote 106] Appropriators did not accept VA's proposed
account structure and so did not provide VA this authority.
Concerns were also raised about agencies' ability to track costs within
the new structure and to provide supplemental cost information by
organizational unit or functional area. For example, VA's budget office
does not track what is spent by strategic goal and objective throughout
the year because its financial system does not track costs in this way;
rather, VA applies assumptions to spread costs among strategic goals
and objectives. Without adequate performance and financial information
systems, agency managers may be unable to accurately track these costs
and help make informed resource management decisions. Although Labor
allocates both direct and indirect resources to performance goals,
costs are not tracked at this level during budget execution, and
managers are not bound to spend the amounts shown for performance goals
in the budget justification. Without adequate performance and financial
information, some agency officials and congressional appropriations
subcommittee staff expressed concerns about moving forward with budget
restructuring. For example, appropriations subcommittee staff we spoke
with said that given agencies' inability to report how funds were being
spent in both the previously established and new performance-based
budget structures, the staff were unwilling to accept proposed budget
structure changes.
While there was general agreement among the agency officials and budget
experts we spoke with on the need for integrated financial management
systems that provide reliable and timely information, they expressed
differing views on the extent to which these systems need to be in
place prior to restructuring budgets around programs and performance.
Some agency officials, appropriations staff, and budget experts
emphasized the importance of having integrated financial management
systems in place that can accurately estimate and track spending before
proceeding with budget restructuring. As such, some said that improving
performance and cost information should be the first step, especially
given that some approaches to budget restructuring provide increased
managerial discretion over resource use. Some OMB staff and agency
officials, however, expressed the differing view that requiring budgets
to be structured around programs and performance provides much needed
incentives for agencies to address long-standing financial management
issues.
4.4: Budget Restructuring May Be a Long-Term, Iterative Process
Requiring Flexibility to Explore Different Approaches:
These challenges suggest that budget restructuring may be a long-term,
iterative process requiring flexibility to explore different
approaches. As OMB and agencies have wrestled with the issues described
above and the broader Budget and Performance Integration (BPI)
initiative has evolved, OMB's guidance related to budget restructuring
has changed. OMB staff we spoke with described budget restructuring as
a long-term effort requiring experimentation to determine effective
approaches. OMB staff said they have refined their guidance as they
learn more about what is working for agencies at the forefront of
budget restructuring efforts. Moreover, they said their intention is
not to dictate specific approaches. Instead they want to encourage
agencies to change congressional budget justifications--and in some
cases appropriations accounts--to better align budget resources with
programs and performance in ways that meet agencies' and other users'
needs while increasing the information and incentives to recognize and
make resource trade-offs with a focus on results. However, while
experimentation and flexibility may be needed to develop and implement
a complex and evolving initiative, changes in specific guidance
nevertheless may reduce clarity with respect to the objectives of and
steps necessary for budget restructuring as well as the role of budget
restructuring within broader budget and performance integration
efforts.
[End of section]
Section 5: Lessons Learned and General Observations:
Budget restructuring is one tool that can advance results-oriented
management. However, it involves significant trade-offs between
information provided and accountability frameworks used. Congress, OMB,
and the agencies hold differing views on information and incentives
necessary to support effective decision making and oversight. While
increasing the focus on results in budget decisions is important,
recent efforts to increase the focus in congressional budget
justifications have generally reduced the visibility of other
information, such as object class, workload, and output measures that
congressional appropriations committees consider important for making
resource allocation decisions. The need for workload and output
measures for making resource allocation decisions is not unique to the
federal government. State officials indicated this information is used
by legislators in making resource allocation decisions, as discussed in
our most recent review of state performance budgeting efforts.
The history of budget reform suggests that budget structures will
necessarily reflect multiple perspectives on resource allocation.
Performance goals and planning structures can clearly add value to
budget debates by focusing attention on the broad missions and outcomes
that individual programs and activities are intended to address.
However, budget structures also serve the legitimate role of helping
Congress control and monitor agency activities and spending by
fostering accountability for inputs and outputs within the control of
agencies. The greatest challenge of budget restructuring may be
discovering ways to address these competing values that are mutually
reinforcing, not mutually exclusive.
Budget restructuring has implications for the balance between
managerial flexibility and congressional oversight and control and
ultimately the relationship among the primary budget decision makers--
Congress, OMB, and agencies. Thus, Congress must be considered a
partner in this effort. While congressional buy-in is critical to
sustain any major management initiative, it is especially important for
performance budgeting given the Congress' constitutional role in
setting national priorities and allocating the resources to achieve
them. The concerns raised by appropriations staff suggest that when
creating "performance budgets" OMB and agencies should find ways to
tailor the agencies' performance information to meet those needs and to
supplement, rather than replace, key information used by appropriations
committees to make decisions. Lessons from previous initiatives and
agencies' recent experiences suggest that Congress needs to be
comfortable with the appropriateness and utility of the new budget
structures since budget structures fundamentally shape the focus of
appropriations decisions as well as the nature of the controls through
which Congress oversees executive agencies' spending. Accordingly, if
performance goals and measures are to become the basis for the new
budget structures, Congress must view them as a compelling framework
through which to achieve its own appropriations and oversight
objectives. Indeed, GPRA itself was premised on a cycle where measures
and goals were to be established and validated during a developmental
period before they were subjected to the rigors of the budget process.
This suggests that the goal of enhancing the use of performance
information in budgeting is a multifaceted challenge that must build on
a foundation of accepted goals, credible measures, reliable cost and
performance data, tested models linking resources to outcomes, and
performance management systems that hold agencies and managers
accountable for performance. Restructuring appropriations accounts and
presentations to better capture the "full cost" of performance is part
of this agenda as well. However, creating performance budgets without
establishing and validating the requisite foundation and consensus on
measures and goals among primary decision makers will likely not
succeed in gaining support in the budgetary decision-making process.
Going forward, the important goal of infusing a performance perspective
into budget decisions may only be achieved when the underlying supply
of information becomes more credible, compelling, accepted, and used by
all significant decision makers in the system. Indeed, if budget
decisions are to be based on this cost and performance information,
there is a more compelling need to improve the integrity of the data.
As OMB's own PART reviews suggest, much work remains to be done in
improving the underlying information, evaluations, and systems within
agencies to support performance goals. Thus, improving the supply of
credible cost and performance information as well as generating
consensus for the goals themselves are essential parts of a longer-term
strategy to infuse performance into budget decisions.
While some argue that budget restructuring might be necessary to
provide incentives to take the performance goals seriously and improve
the underlying information, our work suggests that restructuring can
only take root once support exists for the underlying performance goals
and metrics. In due course, once the goals and underlying information
become more compelling and used by Congress, budget restructuring may
become a more compelling tool to advance performance budgeting. In
other words, the budget structure will more likely reflect--rather than
drive--the use of performance and cost information in budget decisions.
[End of section]
Appendixes:
Appendix I: Objectives, Scope, and Methodology:
In this report we refer to budget restructuring as involving both (1)
changes to the structure and format of appropriations accounts and
congressional budget justifications to better align with programs and
performance and (2) changes to distribution or measurement of certain
budget resources to better capture the cost of those resources where
and when they are used. Although the Office of Management and Budget's
(OMB) concept of "full cost" originally included efforts to change the
budgetary measurement of certain items to better capture "when" they
are used, the primary focus of reform efforts to date and this report
has been on changes in alignment of appropriations accounts or
congressional budget justifications and the distribution of resources
within these structures to more completely show the cost of resources
"where" they are used.
Our objectives for this report were to (1) summarize the steps taken by
OMB and selected agencies to better align their budgets with
performance and to better capture the cost of performance in the
budget, (2) discuss the potential implications of these efforts for
congressional oversight of budget resources and executive branch
managerial flexibility and accountability over budget resources, (3)
describe the experiences and implementation challenges associated with
these efforts, and, (4) describe the lessons learned that might be
useful in considering future efforts for linking budget resources to
results in the budget. Observations and lessons learned in this study
together with lessons learned from previous "performance budgeting"
initiatives provide insights useful in consideration of current and
future budget restructuring efforts and other steps to improve the use
of cost and performance information in the budget process.
To address our objectives, we reviewed OMB documents, such as the
President's Management Agenda (PMA),[Footnote 107] Circular A-
11,[Footnote 108] as well as presentations of OMB officials and staff.
We also analyzed appropriations account structures and congressional
budget justifications for nine federal agencies for mainly the fiscal
years 2003 through 2005 budgets.[Footnote 109] For four of the nine
agencies, we conducted more in-depth case studies to gain a fuller
perspective of the potential implications of the budget changes for
executive branch management and agencies' experiences implementing
these changes. For the four case study agencies, we held interviews
with agency officials at various levels of management and with senior
staff and budget examiners from OMB's Resource Management Offices.
Also, to obtain views and gain insight about the potential implications
for congressional oversight of budget resources, we met with House and
Senate majority and minority staff of the appropriations subcommittees
with jurisdiction over some of the nine agencies of our review. We had
at least one interview with appropriations staff for each of our case
study agencies. Furthermore, we reviewed House and Senate
appropriations committees' reports for language about agencies'
appropriations account and congressional budget justification changes.
In addition, we conducted two panel discussions to obtain the views of
officials from our case study and review agencies as well as budget
experts in an interactive setting. We summarized the interviewees' and
panelists' answers, identified recurring themes or observations, and
considered insights provided by previous initiatives to describe the
lessons learned that might be useful in considering future efforts.
In some cases, budget restructuring efforts have only recently been
implemented (and in some cases only in part). Thus, it may be too early
to fully understand both the implications of budget restructuring on
executive branch management and congressional oversight and the
implementation experiences and challenges associated with these
efforts. Also, while we describe the various approaches all nine
agencies took, the approaches should not be directly compared because
each agency is different and may have had different objectives for its
budget restructuring efforts. Comparisons are also difficult because
agencies start with different missions, organizational frameworks, and
appropriations account structures. For example, the National
Aeronautics and Space Administration (NASA) is a research and
development agency and is almost entirely funded by discretionary
accounts whereas the Department of Veterans Affairs (VA) is funded
largely by mandatory accounts. Much of EPA's work is done with third
parties (e.g., contractors and states), which involves the provision of
grants and other pass-through resources to states, localities, and
Indian tribes. Nevertheless, describing efforts undertaken at a variety
of agencies provides a broader look at the implications of various
approaches taken to link resources to performance.
To provide specific information on each of our case study agencies'
budget restructuring efforts, this report includes an appendix for each
case study agency with a more in-depth description of each agency's
approach as well as the benefits and limitations noted by agency
officials and OMB staff we spoke with. In these appendixes, we neither
evaluated agencies' choices nor critiqued their processes. We sent
copies of the appendixes for technical review and comment to officials
or staff at our case study agencies to ensure accuracy of our portrayal
of their reform efforts.
Given the objectives and scope of this work, we did not evaluate
agencies' financial systems, the reliability and validity of data
underlying agencies' budget requests, or internal controls related to
the general management of the agencies. We also did not evaluate
agencies' strategic or performance plans or the goals or measures to
which agencies tied their resources. Of necessity, our evidence is
largely based on testimonial evidence from individuals knowledgeable
about these efforts. In many cases, efforts to align budgets with
performance efforts are fairly recent and agencies may not have had
time to fully realize the implications of their approaches. Thus, many
agencies provided testimonial information about the anticipated
benefits or limitations of these initiatives rather than specific
examples. Where possible, we corroborate testimonial evidence with
documentary evidence.
We conducted our work from May 2003 through December 2004 in
Washington, D.C. in accordance with generally accepted government
auditing standards. We provided drafts of the report to OMB and the
nine agencies in our review for comment.
Methodology for Selection of Agencies:
To provide an overview of the various budget restructuring efforts
underway in the federal government, we reviewed nine agencies'
appropriations account structures and congressional budget
justifications. To gain a deeper understanding of the implications of
agencies' efforts for managerial flexibility and accountability and
implementation experiences and challenges, we selected four agencies
out of the nine agencies for more in-depth case study review. The four
case study agencies are:
1. Department of Labor (Labor),
2. Department of Veterans Affairs (VA),
3. Environmental Protection Agency (EPA),
4. National Aeronautics and Space Administration (NASA).
The five agencies for general review are:
1. Department of Commerce (Commerce),
2. Department of Justice (DOJ),
3. Department of Transportation (DOT),
4. Department of Housing and Urban Development (HUD), and:
5. Small Business Administration (SBA).
Agencies were judgmentally selected based on a combination of their
scores for Budget and Performance Integration (BPI) in the Executive
Branch Management Scorecard in the President's fiscal year 2004
budget,[Footnote 110] OMB's published statements highlighting agencies'
progress in this area, and the types and extent of changes made. The
Executive Branch Management Scorecard is a traffic-light grading system
to report how well federal agencies are implementing the PMA's five
governmentwide initiatives. OMB assesses agency "status" based on the
"Standards for Success."[Footnote 111] Under each initiative, an agency
is "green" if it meets all of the standards for success, "yellow" if it
has achieved some but not all of the criteria, and "red" if it has any
one of a number of serious flaws. OMB assesses agency "progress" on a
case-by-case basis against the deliverables and time lines established
under each initiative that are agreed upon with each agency. The
"Standards for Success" describe expectations for the extent to which
agencies incorporate financial and performance information into
management decisions, the quality of strategic and annual performance
plans, and the ability of agencies to report the "full cost" of
performance goals. We considered agencies receiving higher scores on
OMB's Scorecard, which indicates OMB's assessment of agency efforts in
this area, because they might potentially provide lessons to other
agencies. We also considered the type and extent of budget
restructuring. Thus, agencies that received higher scores and made or
proposed more apparent changes were more likely to be included in our
study.
As a starting point, we considered 11 federal departments and agencies
out of 26 receiving scores in the Executive Branch Management Scorecard
in the President's fiscal year 2004 budget for review (see table 9).
First, we considered all agencies that received a "yellow light" for
"status" in BPI.[Footnote 112] Nine of these agencies in total had a
"yellow light" in status. We added to the list 2 agencies that had a
"red light" for status because they were mentioned by OMB in the fiscal
year 2004 Analytical Perspectives as having taken steps toward better
capturing the cost of performance in the budget.
Table 9: Agencies Considered for Review:
Yellow light on status:
Environmental Protection Agency;
Department of Commerce;
Department of Defense;
Department of Labor;
Department of Transportation;
Department of Veterans Affairs;
National Aeronautics and Space Administration;
Small Business Administration;
Social Security Administration;
Red light on status; efforts highlighted:
Department of Housing and Urban Development.
Department of Justice.
Source: GAO analysis of Budget of the United States Government, Fiscal
Year 2004.
[End of table]
For each of these 11 agencies, we then looked more specifically at
budget restructuring efforts to better align budget resources with
performance. We began by reviewing agencies' proposed appropriations
account structures, as shown in Budget of the United States Government,
Fiscal Year 2004--Appendix and agencies' congressional budget
justifications. We identified the type of changes made and reviewed the
extent of changes undertaken. Of the 11 agencies, we identified 9
agencies that made the most significant changes to their
budget.[Footnote 113] Consequently, all 9 of these agencies were
included in our study.
To help select case study agencies from these nine agencies, we divided
the agencies into three general groupings based on the type of changes
made: (1) those with changes to the appropriations account structure
(VA, NASA, DOJ, DOT); (2) those with changes within the account
structure at the program activity level (EPA, SBA); and (3) those with
changes only to the congressional budget justification (Labor,
Commerce, HUD).
Within each category, we then judgmentally selected at least one agency
for case study based on their "status" in the BPI initiative on the
Executive Branch Management Scorecard and then by the extent of their
changes. For example, within the group that made or proposed changes to
their appropriations account structure, we selected two agencies--VA
and NASA. The final selection of agencies for case studies is outlined
in table 10.
Table 10: Agencies Selected for Case Studies:
Changes to account structure: Department of Veterans Affairs;
Status/Reason: Selected for case study.
Changes to account structure: National Aeronautics and Space
Administration;
Status/Reason: Selected for case study.
Changes to account structure: Department of Justice;
Status/Reason: Not selected for case study/Red light in status.
Changes to account structure: Department of Transportation;
Status/Reason: Not selected for case study/Proposed account structure
changes not agencywide.
Changes within account structure to program activities: Environmental
Protection Agency;
Status/Reason: Selected for case study.
Changes within account structure to program activities: Small Business
Administration;
Status/Reason: Not selected for case study/Based on preliminary review
it appeared that EPA had made more significant changes.
Changes to congressional justification only: Department of Labor;
Status/Reason: Selected for case study.
Changes to congressional justification only: Department of Commerce;
Status/Reason: Not selected/Based on preliminary review it appears that
Labor had made more significant changes.
Changes to congressional justification only: Department of Housing and
Urban Development;
Status/Reason: Not selected/Red light in status.
Source: GAO.
[End of table]
As discussed previously, we conducted a general review of the five
agencies not selected for a case study.[Footnote 114] Because we
reviewed only a subset of agencies, our study does not provide a
complete view of all budget restructuring efforts underway in the
federal government. Likewise, our findings are not generalizable to all
federal agencies. However, we believe our observations apply more
broadly across the federal government given their congruence to
previous work done by GAO and others examining budget and performance
integration efforts.
Methodology for Agency and Congressional Interviews:
To gain information and insights on the rationale for budget
restructuring, the role the budget plays in broader efforts to improve
management, the perceived benefits and limitations of budget changes
for agency management, and the implementation issues associated with
budget changes, we met with agency officials who were responsible for
designing and implementing budget changes, including those responsible
for presenting the changes to Congress. These same officials were also
able to generally describe how budget restructuring had affected or was
expected to affect agency management. To get a broader perspective on
the potential implications of the budget changes for different levels
of management, we met with program managers at three different program-
level offices within each case study agency. For our study, program
managers are defined as those below the department level (for VA and
Labor) or headquarter level (for NASA and EPA) who are responsible for
formulating and executing a program's budget. Specifically, we spoke
with directors and officers for budget, planning, and finance. These
officials described generally how budget restructuring had affected or
was expected to affect resource management.
To select the program managers to interview, we mainly relied on
department or headquarter budget officials' referrals. At each entrance
conference, we asked agency officials to identify programs or program
managers who could describe how the budgetary changes have affected
program management. We indicated that it would be beneficial to talk
with officials who could speak about how budgetary changes were
implemented and how management has changed (i.e., experience with the
budget before and after budget restructuring). In cases where examples
were provided in initial interviews, we requested that we interview the
related program officials.
We also met with an OMB official and some staff to discuss OMB's
overall objectives and vision for budget restructuring efforts. To
discuss the potential implications for management and oversight at
individual agencies, we met with senior staff and program examiners
from OMB's Resource Management Offices responsible for our case study
agencies.
To discuss the potential implications for congressional oversight, we
met with some House and Senate majority and minority appropriations
subcommittee staff responsible for our case study agencies and in some
cases, general review agencies. Although we attempted to meet with as
many congressional appropriations committee staff as possible, given
our time frames, the congressional schedule, and the schedules of
appropriations staff, we were not able to interview all relevant staff.
We contacted a majority and minority staff member from each of the
House and Senate appropriations subcommittees with jurisdiction over
our case study agencies (NASA, VA, EPA, and Labor), and interviewed 10
staff members on the House and Senate appropriations subcommittees
responsible for our case study agencies (7 majority staff and 3
minority staff). In addition, we discussed two of our general review
agencies--HUD and DOT--with appropriations staff.
For each set of interviews, we developed a standard list of questions;
however, we did not perform structured interviews. We tailored the
questions to each agency because each case study agency had different
objectives and took different approaches to this initiative. To the
extent possible, we obtained supporting information, such as internal
budget guidance and financial management guidelines, to corroborate
testimonial evidence. We summarized the interviewees' answers and
identified recurring themes or observations for our analysis.
Methodology for Panel Discussions:
To discuss the conceptual benefits and limitations of budget
restructuring in an interactive setting, we conducted two panel
discussions, on November 12, 2003, and December 18, 2003, at GAO. We
invited officials from each of the nine agencies we reviewed to attend
each panel. Out of the nine agency officials we invited, eight
participated.[Footnote 115] To help contribute to identifying and
assessing the implications of budget restructuring for management and
oversight, we included two federal budget experts in each panel. We
judgmentally selected four experts who provided expertise in wide-
ranging budget and management issues in both the executive and
legislative branches.
Prior to the panel meeting, each participant received a short summary
of approaches agencies have taken to link resources to results in the
budget as well as the list of questions to be discussed at the panel so
they would be aware of our interests and be better able to provide us,
where possible, with specific examples. Specifically, we asked panel
participants to discuss: (1) the extent to which the previous budget
structure and/or presentation impeded efforts to improve management and
performance, (2) the objectives in making budgetary changes, (3) the
rationale and the trade-offs agencies faced in determining the approach
taken, and (4) specific examples of advantages and disadvantages budget
restructuring had in terms of the information and incentives provided
for strategic and day-to-day management and the agency's ability to
communicate to Congress and OMB how resources tie to the agency's
mission and strategic direction. The panels were intended to supplement
information gathered in interviews. As with our interview summaries, we
summarized the panel discussions to identify general themes or
observations that emerged.
[End of section]
Appendix II: Department of Labor:
The Department of Labor (Labor) submitted its first integrated
"performance budget" for fiscal year 2004, building on earlier efforts
to better incorporate budget and performance in its performance plans
and financial statements. Labor introduced uniform changes to its
fiscal year 2004 congressional budget justification aimed at more
directly linking budget resources to performance but did not make
changes to its appropriations account structure. Within its
congressional budget justification, Labor now presents the "total
budgetary resources"[Footnote 116] for each program and the supporting
performance goals. Labor officials we spoke with said they anticipate
that these changes will support increased use of performance and cost
information in decision making, but they also noted some areas for
improvement and limitations.
Background:
Labor describes its mission as assisting job seekers, wage earners, and
retirees by providing for better working conditions, increasing
training and employment opportunities, securing benefits, improving
free collective bargaining, and tracking national economic
measurements. Labor is composed of 15 major bureaus and
offices[Footnote 117] and employs over 17,000 staff. The department's
fiscal year 2005 budget request was approximately $57.3 billion. Of
this amount, approximately $17 billion is subject to the congressional
appropriations process. The remaining $40 billion is permanent
authority, which is under the jurisdiction of authorizing committees.
Labor's strategic management framework is structured around four
strategic goals--(1) a Prepared Workforce, (2) a Secure Workforce, (3)
Quality Workplaces, and (4) a Competitive Workforce--and supporting
outcome and performance goals. Below this level, some bureaus have
additional, bureau-specific performance goals and may subdivide
departmental performance goals into bureau-specific performance goals.
For example, ESA's Wage and Hour Division further breaks down the
departmental strategic goal for a secure workforce into three bureau-
specific performance goals. Figure 6 provides an example of this
framework using Labor's Strategic Goal 2, a Secure Workforce.
Figure 6: Example of Labor's Strategic Framework:
[See PDF for image]
[End of figure]
Within this framework, strategic goals may cross bureaus (e.g., ETA and
ESA support the Secure Workforce strategic goal) and bureaus may
support multiple strategic goals (e.g., ETA supports three strategic
goals: a Prepared Workforce, a Secure Workforce, and a Competitive
Workforce). Generally, programs and performance goals align with
bureaus and performance goals are associated with a particular program
or activity. However, in some cases, multiple programs within a bureau
support the same performance goal or goals. For example, all seven of
OSHA's budget activities support the same two performance
goals.[Footnote 118] As discussed in section 4 of the report, when
there are multiple contributors and funding streams to strategic goals
and objectives, determining the performance contributions of programs
to goals or objectives within the new budget structures is challenging.
Objectives and Implementation Time Line:
Labor officials described the objectives of Labor's most recent efforts
to link resources to performance as providing better cost and
performance information to users of the budget, including Congress and
executive branch management, to improve decision making. Labor focused
on providing better information in the congressional budget
justification about the department's goals and the budget resources
needed to achieve them.
Changing managerial flexibility over budget resources was not one of
Labor's objectives since this type of flexibility already exists in the
form of reprogramming and transfer authorities. According to Labor and
OMB officials, the current appropriations account structure adequately
aligns its budget resources with the department's management and
performance structure at this time. Labor's appropriations account
structure is organized around bureaus with a separate departmental
administrative account, which, according to Labor officials, generally
reflects the manner in which Labor conducts its business. Five of
Labor's seven bureaus are funded through single appropriations
accounts[Footnote 119] and Labor's reprogramming unit--"programs,
activities, or elements"--is generally tied to its budget activities,
which reflect direct and indirect program activities.
Labor officials and program managers we spoke with said this
appropriations account structure provides them sufficient flexibility
over budget resources. For example, BLS officials said each of their
budget activities (e.g., Labor Force Statistics, Prices and Cost of
Living) contains the resources (e.g., data processing, analytic work,
information technology (IT), field support) program managers need to
manage effectively and they have sufficient flexibility to make
resource trade-offs within each program. Similarly, ESA officials said
they have sufficient flexibility to move resources within their five
program activities (e.g., Enforcement of Wage and Hour Standards,
Federal Programs for Workers Compensation) and rarely need to shift
resources among them. While ETA officials noted that the structure of
their program activities within their appropriations account structure
is not as flexible as they would like for program management, they said
their appropriations account structure, in conjunction with existing
reprogramming and transfer authorities, generally provides the
flexibility they need to manage effectively.[Footnote 120]
Labor's Efforts Have Progressed Over Several Years and Have Involved
Staff Integration:
Labor's efforts to link budget resources and performance in the budget
progressed over the last several years, building on earlier efforts to
better link resources to performance in its performance plans and
financial statements. Figure 7 presents a time line of Labor's key
efforts to link resources with performance. As the figure shows, Labor
began linking budget resources to its strategic goals in its fiscal
year 1999 Annual Performance Plan. Parallel to this effort, Labor began
linking resources[Footnote 121] to strategic and performance goals in
its fiscal year 1999 financial statements. For its fiscal year 2002
Annual Performance Plan, Labor went further by tying budget resources
to its 10 outcome goals, the level below strategic goals. For its
fiscal year 2004 congressional budget justification, Labor took steps
to shift the focus of its congressional budget justification from a
process orientation to a performance orientation and, for the first
time, to link "total budgetary resources" to its programs as well as
strategic and performance goals within the congressional budget
justification itself.
Figure 7: Labor's Implementation Time Line:
[See PDF for image]
[End of figure]
To put a more direct focus on results, in fiscal year 2002 the Center
for Program Planning and Results (CPPR) was established within the
Office of the Assistant Secretary for Administration and Management.
According to Labor officials, establishing the CPPR while maintaining
close integration with the Departmental Budget Center has allowed Labor
to more effectively provide central coordination, direction, and
planning on departmental goals and objectives and implement the
President's Management Agenda component of the Budget and Performance
Integration initiative.
Both OMB and Labor officials and staff said the department collaborated
with OMB to determine how to change the congressional budget
justification. Labor convened a task force that included OMB staff and
budget and planning staff from key bureaus within Labor. Another key
player in implementing these budgetary changes was the department's
Management Review Board (MRB), which oversees Labor's efforts under the
President's Management Agenda. The MRB periodically meets with OMB
leadership and is the overall steering committee for Labor's Budget and
Performance Integration efforts.
Summary of Labor's Budget Restructuring Approach:
As noted, Labor made changes to its congressional budget justification,
but did not make departmentwide appropriations account structure
changes. Labor's congressional budget justification changes did not
change the framework for either its transfer authority and
reprogramming guidelines or its internal control of funds. For cost
allocation, Labor uniformly defined "total budgetary resources."
Bureaus had some discretion over determining how to allocate costs.
Congressional Budget Justification Changed to Better Link Budget
Resources to Performance, but No Department-wide Changes Made to
Appropriations Account Structure:
Labor redesigned the presentation of its fiscal year 2004 congressional
budget justification to better link "total budgetary resources" to its
programs and its strategic and performance goals. Labor continued this
basic format in fiscal year 2005 with only minor refinements. Labor's
efforts focused on three areas within its congressional budget
justification. First, Labor replaced narrative that focused only on
tasks with narrative that related tasks or activities to outcomes and
results. Second, "total budgetary resources," including indirect costs
(e.g., program administration), were shown with the programs they
support, whereas in the past only some portion of indirect costs was
shown with programs. Third, steps were taken to link "total budgetary
resources" to strategic and performance goals. Labor officials said
these changes were aimed at providing a more complete picture of the
department's objectives and the budgetary resources associated with
programs and supporting performance goals.
Beginning in fiscal year 2004, Labor began replacing task-oriented
narrative with information explaining the relationship of those tasks
or activities to anticipated outcomes and results in its congressional
budget justification. Labor formatted its congressional budget
justification around the appropriations account structure (basically,
each bureau or agency) and added a departmental overview section to
bring every agency's programs and resources together, depicting at a
higher level the department's intended performance and its resources.
The departmental overview outlines the Secretary's vision for the
department; lays out the department's strategic, outcome, and
performance goals; and includes the budget resources requested to
achieve its strategic goals. Bureau "performance budgets" include
appropriations account information, strategic and performance goal
information, and justifications for "budget activities" funded by those
accounts. "Budget activities" are generally direct and indirect program
activities one level lower than the bureau level. In each budget
activity section, Labor provides a performance summary with the stated
performance goal and past and planned performance, as well as critical
strategies to meet those goals. However, according to Labor officials,
to maintain the approximate size of the budget document, some
previously reported information was eliminated. For example, 5-year
funding histories were provided at the appropriations level but were no
longer included with every budget activity, and some previously
provided program-specific information was eliminated, such as Job Corps
construction costs. According to Labor officials, since the submission
of the fiscal years 2004 and 2005 budget justifications, they have
worked with congressional appropriations committee staff to address any
concerns about the elimination of program-specific information. They
said several exhibits have been reinstated in the fiscal year 2006
"performance budget," including the 5-year funding histories.
Under the new format, Labor shows direct and indirect budget resources
associated with programs. The section for each program in the bureau's
"performance budget" includes a table that links direct and indirect
resources to programs. Table 11 shows budget resource tables provided
in the fiscal year 2005 congressional budget justification for the Job
Corps program.[Footnote 122] To provide a more complete picture of
resources associated with the Job Corps program, the fiscal year 2005
table shows not only the direct program appropriation, but also
indirect resources including Program Administration and Reimburseable.
For example, the fiscal year 2005 table provides an estimate of
approximately $29 million for program administration and $4 million for
reimburseable--figures not provided with the Job Corps budget request
prior to the fiscal year 2004 congressional budget justification.
Resources included in the "Program Admin" row are appropriated in a
different appropriations account than the other Job Corps program
resources and are also presented elsewhere in the congressional budget
justification.
Table 11: Resource Table Presented in the Fiscal Year 2005
Congressional Budget Justification for Job Corps:
Dollars in thousands.
Job Corps appropriation;
Fiscal year 2004: $1,537,074;
Fiscal year 2005 estimate: $1,557,287;
Difference fiscal year 04/05: $20,213.
Program admin;
Fiscal year 2004: $28,670;
Fiscal year 2005 estimate: $29,496;
Difference fiscal year 04/05: $826.
Reimbursables;
Fiscal year 2004: $4,000;
Fiscal year 2005 estimate: $4,000;
Difference fiscal year 04/05: $0.
Total resources;
Fiscal year 2004: $1,569,744;
Fiscal year 2005 estimate: $1,590,783;
Difference fiscal year 04/05: $21,039.
FTE[A];
Fiscal year 2004: 187;
Fiscal year 2005 estimate: 187;
Difference fiscal year 04/05: 0.
Source: Department of Labor's Fiscal Year 2005 Performance Budget.
[A] Full-time equivalent:
[End of table]
The new congressional budget justification format also provided more
information on the budget resources associated with strategic and
performance goals. In the overview section of the congressional budget
justification as well as each bureau "performance budget," Labor links
budget resources to strategic goals. Beginning in the fiscal year 2004
congressional budget justification, each program budget request
includes information on the budget resources of associated performance
goals. Table 12 presents a "performance goal cost allocation summary"
from the fiscal year 2005 congressional budget justification for the
Job Corps program performance goal, "to improve educational
achievements of Job Corps students, and increase participation of Job
Corps graduates in employment and education." The summary shows budget
resources associated with the performance goal listed not only by
appropriations (program appropriation, other appropriation, and other
resources), but also by cost type (direct and indirect). The links
between programs, performance goals, and Labor's strategic goals are
presented in an appendix to each bureau's "performance budget."
Table 12: Performance Goal Cost Allocation Presented in the Fiscal Year
2005 Congressional Budget Justification for Job Corps:
Performance Goal 1.2B[A] Cost Allocation Summary:
Job Corps appropriation;
Cost (by type of appropriation)[B]: Resources in 000's: $1,557,287;
Cost (direct and indirect)[C]: Direct cost of all outputs: Resources in
000's: $1,585,682.
Other appropriation: PA;
Cost (by type of appropriation)[B]: Resources in 000's: $29,496;
Cost (direct and indirect)[C]: Indirect cost: Resources in 000's:
$5,101.
Other resources: Reimbursements;
Cost (by type of appropriation)[B]: Resources in 000's: $4,000;
Cost (direct and indirect)[C]: Common Administrative Systems: Resources
in 000's: N/A.
Total resources for goal;
Cost (by type of appropriation)[B]: Resources in 000's: $1,590,783;
Cost (direct and indirect)[C]: Resources in 000's: $1,590,783.
Source: Department of Labor's Fiscal Year 2005 Performance Budget.
[A] Performance goal 1.2B is "To improve educational achievements of
Job Corps students, and increase participation of Job Corps graduates
in employment and education." Labor does not list this definition with
this table, but rather it is listed elsewhere, such as the budget
activity narrative.
[B] Labor uses the following definitions:
Direct Appropriation: Resources directly attributable to a program
activity, such as employee salaries and travel.
Other Appropriation: Resources appropriated elsewhere, but whose
benefits accrue toward the operation of the budget activity. Examples
include departmental administration, IT Crosscut, and legal and
adjudication services.
Other Resources: Resources available for a budget activity, but not
appropriated. Examples include reimbursements and fee collections.
[C] See table 13 for definitions and examples of direct and indirect
costs.
[End of table]
While the new congressional budget justification is aimed at providing
a more complete picture of both total budget resources associated with
goals, these changes were primarily presentational and it was not
intended that managers be required to execute their budgets based on
the allocations made to goals. No departmentwide changes associated
with linking resources to performance were made to the appropriations
account structure or within the structure to the program activity
listing in the P&F schedule of the President's Budget Appendix for
Labor.[Footnote 123] In addition, no changes were made to transfer
authority, reprogramming guidelines, or internal control of funds. Both
Labor and OMB officials and staff told us that it was not necessary to
make departmentwide appropriations account structure changes at this
time because the current structure adequately reflects the manner in
which Labor conducts its business and managers have sufficient
flexibility over resources to manage their programs.
"Total Budgetary Resources" Is Uniformly Defined at Labor but Bureaus
Have Discretion Determining How to Allocate Costs:
Labor defined "total budgetary resources" uniformly across the
department by issuing guidance on which categories of cost to be
included. Labor defined three main cost categories: "Direct,"
"Indirect," and "Common Administrative Systems," as shown in table 13.
A fourth category, "Other Program Mandates," which included costs not
included in the previous three categories, was not allocated to
performance goals or programs because, according to Labor, those costs
were not associated with current performance goals. These costs were
allocated to strategic goals (e.g., unemployment benefits).[Footnote
124]
Labor does not allocate certain departmental costs (e.g., the Office of
the Secretary, Office of the Chief Financial Officer, Office of the
Assistant Secretary for Administration and Management, some information
technology expenses, and program evaluation) to performance goals and
programs. Although Labor officials said they are working toward
allocating more resources in future iterations of the "performance
budget," they and OMB staff cautioned that allocating some costs with
non-material amounts could be of limited benefit.
Table 13: Labor's Main Cost Categories: Definitions and Examples:
Cost category: Direct;
Definition: Costs that can be identified specifically with a particular
final cost objective;
Examples: Adult Activities program grant dollars received by states.
Cost category: Indirect[A];
Definition: Costs that are (a) incurred for a common or joint purpose
benefiting more than one cost objective, and (b) not readily assignable
to the cost objectives specifically benefited;
Examples: Departmental management, legal, working capital fund.
Cost category: Common Administrative Systems;
Definition: Costs that cut across the department;
Examples: IT crosscut and legal and adjudication services.
Source: GAO analysis of internal Labor guidance.
[A] Internal Labor guidance states that indirect costs are generally
allocated by direct program funding or FTE.
[End of table]
While Labor uniformly defined "total budgetary resources" and issued
guidance on which cost categories to include, bureaus have discretion
in determining the appropriate method to allocate departmental and
bureau-level costs to programs and performance goals. Labor centrally
allocated Common Administrative Systems--costs such as legal and
adjudication services that cut across the department--to bureaus
according to standardized methods. Although bureaus were not able to
negotiate departmental allocations, they did have discretion over how
to allocate these costs within the bureau. Labor officials explained
that one bureau's portion of Common Administrative System resources
might only apply to a specific program within the bureau (i.e., legal
costs might only apply to the enforcement program of an enforcement
agency), in which case 100 percent of those funds would be applied to
that program. In contrast, another bureau's portion of Common
Administrative Systems might apply to two or more of its programs or
budget activities, requiring the costs to be spread among them, as
appropriate. For example, while ESA allocated its share of departmental
costs to each of its program activities (e.g., Enforcement of Wage and
Hour Standards), ETA allocated those costs only to its Apprenticeship
Training, Employer and Labor Services program activity within its
program administration appropriations account. Labor officials said
that they did this because, in their view, it did not make sense to
allocate relatively minor departmental costs among appropriations
accounts and program activities.
How bureaus allocate bureau-level costs also differs. For example, ESA
allocated bureau-level administrative costs to its four program
activities based on FTEs. BLS allocated IT costs based on number of
users (e.g., LAN support based on number of personal computers and
servers in the system for a particular program) and bureau
administrative costs based on FTEs. While bureaus' cost-allocation
methods vary, the methods most commonly used are direct funding and
FTEs. Labor officials also noted that standardized methods for
allocating costs might not be appropriate--even for agencies that serve
similar goals--because each bureau is unique.[Footnote 125]
Agency Views on Implications of Budget Restructuring for Management and
Oversight:
Labor officials highlighted several benefits resulting from the new
congressional budget justification. They credited the changes with (1)
providing better information on the "total budgetary resources"
associated with programs and performance goals, (2) prompting increased
attention to overhead costs, and (3) helping increase the focus on
performance. However, the officials we spoke with also noted some areas
for improvement and limitations.
Labor Officials Viewed Congressional Budget Justification Changes as
Providing More Complete Information on "Total Budgetary Resources"
Associated with the Department's Programs and Goals:
Labor officials said that the new budget presentation provides a more
complete picture of the budget resources associated with programs and
strategic and performance goals. In their view, because both direct and
indirect costs are presented with programs and performance goals,
budget users should be better able to understand the relationship
between performance and budget resources and thus, make decisions based
on more complete information. For example, Labor officials said that
showing direct and indirect costs gives more insight into the
relationship between program administration costs and goals associated
with program delivery. Labor officials further explained that looking
at administrative resources associated with their programs helped ETA
create a system that is less "siloed" and can serve multiple
populations more efficiently because redundant administrative costs
could be redirected to program delivery. ETA proposed to consolidate
programs, such as the Adult and Dislocated Worker Grants programs, into
the larger portfolio of Workforce Investment Act training programs.
This legislative proposal focused on creating a system that wasn't
"stovepiped" and creates one pot of money to serve multiple
populations. ETA proposed an appropriations account structure change to
accommodate the proposed policy and authorization change. Generally
speaking, however, Labor officials and program managers cautioned that
it is still too early to fully understand how program managers might
use information provided under the new budget presentation to improve
decision making.
Labor Officials Credited Congressional Budget Justification Changes
with Prompting Increased Attention to Overhead Costs:
According to Labor officials we spoke with, changes in the budget
presentation have increased the attention given to overhead costs. Some
Labor officials and program managers noted that because these overhead
costs are allocated to programs, managers have begun to pay more
attention and raise questions about these costs. For example, BLS
officials said they have been holding annual meetings with program
managers to justify bureau-level overhead allocations.[Footnote 126]
Officials said some allocations, such as retirement, are fixed, while
others, such as new bureau-level initiatives, may be questioned by
program managers. In a specific example, BLS officials told us that
prior to showing total budget resources, recruiting efforts were
decentralized; both programs and bureau-level staff were conducting
similar recruiting efforts without coordination, leading to
inefficiencies. According to BLS officials, the charge for bureau-level
recruiting costs led bureau and program managers to better coordinate
and eliminate duplicative efforts.
Congressional Budget Justifications Changes Credited with Helping
Increase Focus on Performance:
According to Labor officials, because budget resources must be tied to
performance goals and program managers need to justify their programs
in terms of their contribution to the department's strategic goals, the
congressional budget justification changes have increased managers'
focus on the department's performance framework. Labor officials said
they believe this effort has increased the attention managers give to
performance issues when preparing their budgets and hoped the change
will continue to increase the dialogue between bureau-level planning
and budgeting staff on performance issues. For example, ESA officials
credited the link between the congressional budget justification and
performance goals with supporting the development of better, outcome-
based performance goals in the bureau's Wage and Hour
Division.[Footnote 127] OSHA's performance budget narrative also
suggests that Labor's new integrated budget and performance
justification led to the bureau developing new performance goals.
Some Labor Officials Noted Limitations of the Congressional Budget
Justification Changes:
While Labor officials pointed out several benefits as discussed above,
some areas for improvement and limitations related to the congressional
budget justification changes were also noted. Some program managers
questioned the value of showing indirect costs--for which they don't
have control--for improving program management and noted it is not
particularly useful to know their share of the department's resource
allocation.[Footnote 128]
Other officials said that, in some cases, knowing the usefulness of
total budget resource information depends on the nature of a program's
activities, and the added value of allocating certain costs should be
considered. For example, the department allocates a share of its
central legal costs (Solicitor's Office and Legal and Adjudication
costs) to each bureau to provide a better picture of the budget
resources used by each bureau. BLS officials said that because of the
nature of their operations as a data collection organization and the
relatively minimal legal costs they incur, it might not be as critical
for them to know the legal costs associated with its programs. In
contrast, they said that bureaus such as OSHA and MSHA, designed for
regulatory purposes with relatively high legal costs, might find such
information more useful. However, in bureaus such as BLS, legal costs
are negligible as compared with enforcement agencies such as OSHA and
MSHA where legal costs contribute significantly to the cost of doing
business.
In addition, program officials noted that the provision of total budget
resources in the congressional budget justification might not provide
the detailed cost information they need to improve program management.
For example, some bureau officials said the new budget presentation
does not provide unit and output/outcome cost information, such as cost
per program participant, which they say is an important factor in
providing more effective program management. Although this information
might be available elsewhere in the agency.
Future Direction:
Moving into the future, Labor officials said the department plans to
continue to use an incremental approach to link resources to
performance in the budget to ensure that the choices it makes are
useful for the department and acceptable to Congress. The department is
focusing its current efforts on refining the allocation of resources to
programs and performance. Labor officials added that another key and
complimentary effort is the development of a cost accounting system,
which they said could improve the budget process, resource allocation,
and program management.
[End of section]
Appendix III: Department of Veterans Affairs:
The Department of Veterans Affairs (VA) budget restructuring efforts
are intended to meet multiple objectives, including better positioning
VA to more effectively evaluate program results and allowing managers
to more readily recognize and make resource trade-offs. Beginning with
the fiscal year 2004 budget, VA proposed changes to its appropriations
account structure and made corresponding changes to the organizing
framework of its congressional budget justification to more readily
show the "full cost" requested for its nine major programs. VA also
showed the budget resources associated with its strategic goals and
objectives in its congressional budget justification and integrated its
annual performance plan into its congressional budget justification.
VA's proposed account structure for fiscal years 2004 and 2005 was not
accepted by Congress. While some VA officials credited budget
restructuring with providing a more complete picture of total program
resources and helping to highlight resource trade-offs, some said that
the proposed account structure might reduce flexibility to respond to
changing needs and create budget execution difficulties. Some VA
officials said that budget restructuring did not provide information
they consider most useful to improving management and oversight.
Background:
VA's mission is to serve America's veterans and their families by
assuring that they receive medical care, benefits, social support, and
lasting memorials. VA is one of the world's largest health care,
medical research, and insurance benefits organizations and is divided
into three administrations: the Veterans Health Administration (VHA),
the Veterans Benefits Administration (VBA), the National Cemetery
Administration (NCA), and the staff offices of VA's central office. VHA
is responsible for providing medical care, educating health care
professionals, conducting medical research, and serving as a resource
in the event of a national disaster or national emergency. VBA
administers six programs: Disability Compensation, Pensions, Insurance,
Education, Housing, and Vocational Rehabilitation and Employment
(VR&E). VBA administers the monetary benefits and burial flag portions
of the burial program, but NCA is responsible for the operations and
maintenance of veterans' cemeteries and administers the grant program
for aid to states in establishing, expanding, or improving state
veterans' cemeteries. VA's budget is split between mandatory (e.g.,
disability compensation benefits, pension benefits) and discretionary
(e.g., medical care, construction, program administration) spending.
For fiscal year 2005, VA requested a budget of approximately $67.7
billion--$35.6 billion in mandatory spending and $32.1 billion in
discretionary spending.
VA has five strategic goals--four mission-related goals and one
administrative goal. Within each strategic goal there are three to five
strategic objectives, which are supported by one or more of VA's major
programs. Table 14 uses the strategic goal to restore the capability of
veterans with disabilities to provide an example of VA's strategic
framework. Within this goal there are four strategic objectives
supported by one or more programs.
Table 14: Example of Relationship between VA's Strategic and
Programmatic Frameworks:
Strategic goal 1: Restore the capability of veterans with disabilities
to the greatest extent possible and improve the quality of their lives
and that of their families.
1.1: Maximize the physical, mental, and social functioning of veterans
with disabilities and be recognized as a leader in the provision of
specialized health care services;
Programs: Medical Care; Medical Research.
1.2: Provide timely and accurate decisions on disability compensation
claims to improve the economic status and quality of life of service-
disabled veterans;
Programs: Compensation; Staff Offices.
1.3: Provide all service-disabled veterans with the opportunity to
become employable and obtain and maintain suitable employment while
providing special support to veterans with serious employment
handicaps;
Programs: Vocational Rehabilitation and Employment.
1.4: Improve the standard of living and income status of eligible
survivors of service-disabled veterans through compensation, education,
and insurance benefits;
Programs: Education; Insurance; Compensation.
Source: Department of Veterans Affairs, FY2005 Budget Submission:
Summary Volume 4 of 4 (February 2004).
[End of table]
Objectives and Implementation Time Line:
VA said the budget structure changes are intended to better position VA
to more readily determine the "full cost" of each program and thereby
help VA more effectively evaluate program results. VA officials said
they also anticipate that budget restructuring would allow managers to
more readily recognize and make trade-offs between resources, for
example between capital and operating expenses. Lastly, some VA
officials said VA's proposed budget structure will provide Congress and
the American public a better understanding of what VA does.
VA's budget restructuring efforts have been underway for quite some
time, as shown in the time line in figure 8. According to VA officials,
VBA began aligning budget resources, including indirect resources such
as administration, with its major programs for presentational purposes
in its fiscal year 1996 congressional budget justification. In 1998, VA
and the Office of Management and Budget (OMB) established a joint
working group, including the budget and finance staff from VA's central
office and administrations, to identify options for account
restructuring to bring about a closer connection between resources and
results. VA submitted the Annual Performance Plan volume as a separate
volume of its congressional budget justification for the first time for
fiscal year 2000. According to VA officials, all three of VA's
administrations showed the budget resources associated with their
programs in the fiscal year 2001 congressional budget justification. In
fiscal year 2004, VA proposed to restructure its appropriations
accounts to better align budget resources with its major programs. VA
also made corresponding changes to the organizing format of its
congressional budget justification. Congress did not enact the proposed
account structure and directed VA "to refrain from incorporating
'performance-based' budget documents in the 2005 congressional budget
justification" and to submit the justification with the traditional
appropriations account structure.[Footnote 129] Despite congressional
objections, VA proposed appropriations account structure changes for
the fiscal year 2005 budget and also integrated its annual performance
plan into its congressional budget justification, rather than
submitting it as a separate volume as it had done previously. Again,
Congress did not appropriate under the proposed account structure.
Figure 8: VA's Implementation Time Line:
[See PDF for image]
[End of figure]
Summary of VA's Budget Restructuring Approach:
For the fiscal years 2004 and 2005 budgets VA both proposed changes to
its appropriations account structure and made corresponding changes to
the organizing framework of its congressional budget justification.
These changes increased the focus on programs and associated resources
but made information on individual items of expense less apparent. To
facilitate transition to the new account structure, VA provided OMB and
Congress with crosswalk tables to assist them in evaluating its budget
request. In addition, VA proposed new transfer authority for some
expense items between some program accounts. VA allocates budget
resources other than Departmental Administration to its nine major
programs. Different types of resources are allocated differently.
VA Proposed Appropriations Account Structure Changes for Fiscal Years
2004 and 2005:
In its proposed changes to its appropriations account structure for
fiscal years 2004 and 2005, VA chose to focus the proposed
restructuring around VA's nine major programs, which are the eight
direct benefits--Medical Care, Compensation, Pensions, Insurance,
Education, Housing, VR&E, and Burial--and one indirect benefit--Medical
Research and Support--that VA provides. The key features of VA's
proposed appropriations account structure for fiscal year 2004 were:
* Reducing the number of appropriations accounts by, for example,
eliminating the medical administration account, two construction
appropriations accounts, and two grant appropriations accounts.
* Allocating indirect expense items, including program administration,
construction, and grants for construction to the program accounts they
support.
* Funding a program's mandatory and discretionary components in one
appropriations account.
* Continuing to fund departmental administration in a separate account,
General Administration.
In VA's enacted appropriations account structure for fiscal year 2003,
VA's programs were funded by multiple appropriations accounts. Some
accounts, such as Major Construction or General Operating Expenses
(GOE), provided resources associated with multiple programs and some
accounts, such as MAMOE[Footnote 130] and Medical and Prosthetic
Research, provided resources for only one program. Figure 9 compares
the enacted appropriations account structure for fiscal year 2003 to
the proposed appropriations account structure for fiscal year 2004 and
illustrates how the proposed account structure would consolidate
resources from multiple accounts and split some appropriations accounts
among multiple programs. For example, under VA's proposed account
structure for fiscal year 2004, resources from five appropriations
accounts that support the medical care program would be consolidated
and funded through one appropriations account. The GOE account would be
split among eight appropriations accounts.
Figure 9: Comparison of Appropriations Accounts Funding Each Major
Program under Fiscal Year 2003 Enacted Appropriations Account Structure
and Fiscal Year 2004 Proposed Appropriations Account Structure:
[See PDF for image]
Note: Excludes some trust funds, special funds, revolving funds, and
nonbudgetary accounts.
[End of figure]
Despite some appropriations accounts being eliminated, VA is
maintaining some visibility by showing the different types of resources
funded within each program account in the program activity listing. For
example, as shown in figure 10, the Medical Care account's program
activity listing includes NPA-MAMOE, Major Construction, Minor
Construction, and Grants to states for construction of extended care
facilities. As a result, although appropriations accounts for
construction and administration would be eliminated, the portion of
VA's construction and administration resources related to a specific
program could be found within each program account.
Figure 10: Program Activity Listing: Medical Care Appropriations
Account:
[See PDF for image]
[End of figure]
VA's proposed appropriations account structure was not accepted by
Congress for fiscal year 2004. Rather, Congress made different changes
to VA's account structure. For the most part, VA continued operating
under the same appropriations account structure. However, appropriators
created three separate appropriations accounts for Medical Care--
Medical Services, Medical Administration, and Medical Facilities.
According to appropriations subcommittee staff, the enacted account
structure was intended to provide a better understanding that
increasing funding for Medical Care does not necessarily result in an
equal increase in medical services provided to veterans because there
is associated infrastructure and overhead to finance.
VA again proposed to change its account structure for the fiscal year
2005 budget. The fiscal year 2005 proposed structure differed from the
fiscal year 2004 proposed structure in that VA proposed separate
appropriations accounts for the mandatory and discretionary portions of
some benefits programs (see figure 11). For example, VA proposed
funding mandatory benefits of the Compensation program in the
Disability Compensation Benefits appropriations account and the
associated discretionary spending, including GOE (i.e., program
administration) and construction in the Disability Compensation
Administration appropriations account. As in the fiscal year 2004
budget proposal, VA proposed to fund Departmental Administration in a
separate account. Again, VA's proposed account structure was not
enacted for fiscal year 2005 and appropriators used the same account
structure as used for the fiscal year 2004 budget.
Figure 11: Comparison of Appropriations Accounts Funding Each Major
Program under Fiscal Year 2004 Enacted Appropriations Account Structure
and Fiscal Year 2005 Proposed Appropriations Account Structure:
[See PDF for image]
Note: Excludes some trust funds, special funds, revolving funds, and
some nonbudgetary accounts.
[End of figure]
Changes to Congressional Budget Justification Followed Organizing
Framework Used for Proposed Account Structure:
For both fiscal years 2004 and 2005, VA changed the organizing
framework for its congressional budget justification to reflect the
proposed appropriations account structure framework (i.e., around its
major programs). For the fiscal year 2003 congressional budget
justification, budget information within each volume was generally
organized by appropriations account and then programmatic area. For
example, within the "Benefits Program" volume, there was a section for
the Compensation and Pensions appropriations account and a discussion
of the mandatory portion of three programs it funded. The extent to
which the program discussion included individual items of expense
associated with each program varied by administration. VHA's
administrative budget request was discussed in the same volume as the
direct program budget request, whereas VBA's administrative budget
request was discussed in the "Departmental Administration" volume
separate from the direct program budget. The congressional budget
justification included one volume devoted solely to Construction
providing an agencywide summary of the total resources requested for
construction. The performance plan also was submitted as a separate
volume of the budget justification.
Key changes in the fiscal years 2004 and 2005 congressional budget
justifications were the reorganization of program-related information
and fuller incorporation of the annual performance plan. VA presented
the direct program portion of each program and the administrative
budget request for that program in the same volume for all
administrations similar to VHA in fiscal year 2003. Also, VA eliminated
the Construction volume and discussed construction projects along with
the program-specific budget request. Further, beginning in the fiscal
year 2005 budget, VA more fully incorporated its annual performance
plan into the budget justification and no longer submitted it as a
separate volume.
As Focus on Programs Increased, Some Previously Reported Information
Became Less Transparent:
As the focus on programs increased in VA's fiscal years 2004 and 2005
budget structure, information on individual items of expense became
less apparent. For example, we found that total resources requested for
construction were less transparent in the fiscal years 2004 and 2005
budgets than in the fiscal year 2003 budget. In fiscal year 2003, total
Construction for VA was appropriated in two accounts--(1) Construction,
Major and (2) Construction, Minor--and was shown in a separate volume
of the congressional budget justification. In contrast, in both the
fiscal years 2004 and 2005 budget structures, total construction
resources were allocated to eight of VA's nine major programs and to
Departmental Administration and the Inspector General.[Footnote 131]
Further, VA no longer provided a separate volume for Construction in
its congressional budget justification.
To facilitate transition to the new account structure, VA provided OMB
and Congress with crosswalk tables to assist them in evaluating its
budget request. These side-by-side tables presented VA's budget request
under both the old and new appropriations account structures. A VA
official said these tables were designed to assist OMB and
congressional appropriations committee staff to become more familiar
and comfortable with the proposed account structure.
Requests for Transfer Authority Accompany Proposed Account Structure
Changes:
VA requested new transfer authority for administrative expenses between
the Medical Care and Medical Research accounts of up to 5 percent in
the first year, 2 ½ percent in the second year, and zero percent
thereafter. Also, VA requested transfer authority for operational
expenses between Compensation, Pensions, Insurance, Education, VR&E,
and Burial of up to 10 percent in the first year, up to 5 percent in
the next year, and zero percent in the third year. VA said that
transfer authority was needed to facilitate the transition to the new
appropriations account structure. Additionally, according to VA
officials, this transfer authority was needed to avoid antideficiency
violations that might arise for two reasons: (1) estimation
uncertainties surrounding their allocations of administrative costs and
(2) changes in benefit claims that might arise due to war or
legislative changes.
VA Allocates Budget Resources Other Than Departmental Administration to
Its Nine Major Programs Using Different Methods to Allocate Different
Types of Resources:
VA allocates budget resources to its nine major programs. For the
fiscal year 2004 budget, resources allocated to and requested by
program budgets were benefit payments, program administration,
operations, construction projects, and grants. For example, VA proposed
that the Medical Care appropriations account include funding for
medical administration, related Construction projects, related Grants
to build extended care facilities, as well as the capital and operating
expenses traditionally funded through this account. VA also proposed
that VBA's administrative expenses and construction projects be funded
through separate program appropriations accounts. However, VA did not
allocate departmental administration to its programs, but rather
continued to finance these costs in a separate account.
VA used various methods, ranging from specific projects, full-time
equivalents (FTEs), workload estimates, and cost accounting system
estimates, to distribute different types of resources. For example, VA
officials said construction costs were distributed to the
administrations on a project basis. For example, resources for the
construction of new cemeteries were distributed to NCA. VBA distributed
construction project resources among its programs based on the number
of program FTEs. VBA considers estimated workload (e.g., estimated
number of pension, compensation, and burial claims received) and
associated FTEs to distribute administrative costs among six programs-
-Compensation, Pensions, Education, VR&E, Housing, and Insurance. At
VHA, physicians' salaries were divided between medical care and medical
research based on information from its cost accounting system, which
tracks time doctors spend providing service or conducting research. VHA
officials questioned the value of distributing certain costs. For
example, some VHA officials noted that distributing utilities among
medical care and research is complicated and time consuming and, in
their opinion, does not necessarily provide benefits commensurate with
these costs.
Agency Views on Benefits and Limitations of Budget Restructuring for
Management and Oversight:
VA officials credited budget restructuring with providing a more
complete picture of total program resources and helping to highlight
resource trade-offs. However, the extent to which resource trade-offs
could be made might be limited by proposed appropriations language,
among other things. Some program managers raised concerns that proposed
appropriations account structure changes would create new problems such
as reducing flexibility to respond to changing needs and creating
budget execution difficulties. Lastly, some VA officials said that
budget restructuring did not provide information they consider most
useful to improving management and oversight.
Changes Alter the Framework for Budget Choices:
VA's budget restructuring efforts sought to increase the focus on
program resources as a whole, rather than on individual items of
expense. In doing so, VA's proposed appropriations account structure
would reframe budget choices and change the nature of resource
management and oversight. Whereas under the current structure trade-
offs are generally made between similar types of spending, trade-offs
would be made across all types of spending within a program under the
proposed structure. For example, under the current structure, if a
minor construction project cost more than anticipated or a new need
arose, managers might make trade-offs among other construction
projects, by for example, deferring another construction project.
Similarly, a larger than anticipated utility bill might defer other
operating expenses. Under the proposed structure, however, resource
trade-offs would be focused within a program among different types of
spending. For example, managers might defer a new minor construction
project to cover increased operating expenses once appropriate
reprogramming requests were approved.
Changes Provide a More Complete Picture of Total Program Resources and
Help Highlight Trade-offs:
According to VA officials, one objective of VA's proposed
appropriations account structure and congressional budget justification
changes is to provide a more complete picture of the resources used to
achieve program performance. VA officials and program managers said the
budget resources used to achieve program performance goals are not
readily apparent under VA's current appropriations account structure.
The burial program, for example, is currently funded by six
appropriations accounts.[Footnote 132] Performance measures related to
ensuring that veterans and eligible family members have reasonable
access to veteran cemeteries are supported by the operating,
construction, and grant appropriations accounts, which were shown in
separate volumes of the fiscal year 2003 congressional budget
justification. VA officials said this format complicated discussions
about the relationship between the program's performance goals and the
resources needed to achieve them. VA officials indicated that prior to
budget restructuring efforts, VA tended to work "in stovepipes" and
didn't look at all resources used to provide burial services. After
presenting the burial program's budget resources together, VA officials
said that budget restructuring provided a better understanding of the
resources needed to achieve the burial program's performance goals. It
also helped highlight potential trade-offs among resources used to
achieve goals (e.g., federal construction projects and grants to states
to construct veteran cemeteries). A VA program manager also credited
changes with bringing managers together in a more coordinated manner.
Ability to Make Resource Trade-offs Under Proposed Budget Structure May
Be Limited:
Under VA's proposed account structure, managers potentially would have
some increased flexibility to make trade-offs within a program between
individual items of expense including construction or program
administration without requiring transfer authority. However, according
to VA officials, several factors may limit a manager's ability to make
trade-offs, including proposed appropriations language, authorizing
legislation, and the nature of appropriated funds. For example, for
both the fiscal years 2004 and 2005 budgets, VA's proposed
appropriations language for a number of program appropriations accounts
included a ceiling on construction costs. This ceiling would limit
managers' ability to make trade-offs between program administration and
construction; managers could shift funds from construction to
administration but not from administration to construction.[Footnote
133] Authorizing legislation, which requires VBA to provide specific
services, would also limit VBA's ability to make trade-offs among
programs or within a program between benefits (to which veterans are
entitled) and operating expenses. Another reason, according to VA
officials, it would be difficult for managers to make additional trade-
offs is the different nature or periods of time for which appropriated
funds are available for obligation. For example, construction resources
are generally available until expended while other resources are
available for only 1 or 2 years. VA officials said that because
resources are appropriated with different rules and tracked separately,
it would be difficult to commingle them.
Appropriations Account Structure Changes May Create New Resource
Management Challenges:
While some officials and managers noted potential advantages of
appropriations account structure changes for resource management,
others noted that appropriations account structure changes may create
new resource management challenges. These concerns were raised in cases
where budget resources that were previously appropriated in a single
appropriations account are disaggregated and allocated among multiple
appropriations accounts to better align with programs and performance.
The concerns stem, in part, from differences between the proposed
appropriations account structure and how VA currently operates as well
as concerns about the ability to accurately allocate resources within
the new structure. As a result, VA officials we spoke with raised the
concern that budget restructuring may, among other things, reduce
flexibility to respond to changing needs and create budget execution
difficulties.
For example, some VA program managers raised concerns that the proposed
account structure might reduce VA's flexibility and ability to manage
the workload during budget execution to respond to changes in benefit
claims or performance needs. Under VA's fiscal year 2003 account
structure, the GOE appropriations account funded administrative
expenses for all VBA benefit programs. Within this appropriations
account and within reprogramming guidelines, VBA could shift
administrative funds among programs throughout the year to address
performance issues or changes in benefit claims that might arise due to
war or legislative changes. For example, to meet compensation workload
goals, VBA sometimes used pension administrative funds to process
disability compensation claims. In contrast, under the proposed account
structures for fiscal years 2004 and 2005, the ability to shift
administrative funds among programs throughout the year would be more
limited because each program's administrative expenses would be paid
from separate appropriations accounts. As a result, VA would make trade-
offs within a program among different types of spending. For example,
if there were a surge in disability compensation claims due to a war or
change in legislation and VBA had to increase compensation claims
processing, VBA would have to either reduce other administrative costs
associated with the disability compensation program, such as travel or
operating expenses, or would face antideficiency violations.[Footnote
134] Officials noted that, if the requested transfer authority were
granted along with the enactment of the proposed account structure,
possible antideficiency violations would be less of an issue during the
first 2 years.
In addition, some expressed concerns that estimation uncertainty
surrounding the allocations of administrative costs may complicate
paying administrative expenses and civil servant salaries having
implications for executing the budget properly and avoiding
antideficiency violations. For example, at VBA one employee might
administer benefits from several different programs. Currently, that
employee's salary is paid from the GOE appropriations account. Under
the proposed appropriations account structures for fiscal years 2004
and 2005, a VBA employee's salary would have been paid from more than
one appropriations account. Splitting a VBA employee's salary among
three appropriations accounts would require estimating the time the
employee spent on each program. Similar concerns were raised by VHA
officials because doctors that spend time providing medical care and
conducting medical research would be paid through two appropriations
accounts under the fiscal years 2004 and 2005 proposed account
structures. VA officials told us that estimation uncertainty
surrounding the allocations of administrative costs was one reason VA
requested transfer authority for operational expenses between six
program accounts. However, this authority was only to be in place for 2
years.
Budget Restructuring Does Not Provide Some Information Cited as Useful
for Improving Management and Oversight:
Some program managers and appropriations subcommittee staff said
detailed cost information and performance measures were more important
for improving management and oversight than the information provided by
the budget restructuring effort. For example, VBA officials said
performance information on quality and timeliness informs resource
allocation decisions in VBA's field offices. Another official said cost
accounting information could help VHA identify underused medical
equipment and divert some of its resources to another medical facility
to help cover costs. Similarly, some appropriations subcommittee staff
said they needed more detailed cost information than what was provided
under the proposed account structure. According to appropriations
subcommittee staff, information such as cost per patient or cost per
insurance claim was potentially useful in making budget decisions.
Further, an appropriations subcommittee staff said that improving cost
and performance information was important to have before moving forward
with budget restructuring efforts.
Future Direction:
VA officials indicated that they plan to continue showing the budget
resources associated with VA's programs in the congressional budget
justification and fully integrating the performance plan, but said they
were unsure at this time how they would proceed with appropriations
account restructuring. They said that while budget restructuring put
them in a better position to focus on how resources could be used more
efficiently to achieve VA's access goals, they did not view the
appropriations account structure changes as critical to these efforts.
[End of section]
Appendix IV: Environmental Protection Agency:
Beginning with the fiscal year 1999 budget, the Environmental
Protection Agency (EPA) made changes within its appropriations accounts
and congressional budget justification to better link budget resources
to strategic goals and objectives. EPA changed its program activities
within its appropriations accounts to better align with its strategic
plan. EPA also integrated its annual performance plan into its
congressional budget justification and restructured the justification
around its strategic goals and supporting strategic
objectives.[Footnote 135] However, EPA officials said that partly in
response to congressional concerns, program information continues to be
provided in the congressional budget justification. Moving forward, EPA
plans to continue to make necessary adjustments every three years to
reflect revised Strategic Plans required under the Government
Performance and Results Act (GPRA) and to improve performance and cost
data.
Background:
EPA's stated mission is "to protect human health and the environment."
EPA's work involves five key areas: developing regulations, providing
financial assistance, conducting environmental research, sponsoring
voluntary partnerships and programs, and fostering compliance of
national environmental standards. Much of EPA's work involves the
provision of grants and other pass-through resources to states,
localities, and Indian tribes to carry out environmental work. The
agency is composed of 13 offices[Footnote 136] and employs 18,000 staff
located in Washington, D.C., regional offices, labs, and other
facilities located across the country. EPA requested $7.8 billion in
discretionary budget authority for fiscal year 2005.[Footnote 137]
EPA's strategic plan served as the organizing framework for its budget
changes. Figure 12 provides a simplified example of EPA's organizing
framework using the Clean Air and Global Climate Change strategic
goal.[Footnote 138] Each strategic goal is broken down into a number of
strategic objectives. Objectives are supported by a number of
program/projects.[Footnote 139] For example, the Clean Air and Global
Climate Change strategic goal and the strategic objective, Healthier
Outdoor Air, are supported by a number of program/projects, including
the Clean School Bus initiative and Clean Air Allowance Trading
Programs. Some program/projects may support one or more goals or
objectives. For example, figure 12 shows that Clean Air Allowance
Trading Programs support both the Healthier Outdoor Air and Enhance
Science and Research strategic objectives. The same hierarchy is used
for each of EPA's five strategic goals.
Figure 12: Example of EPA's Budget Structure Organized by Strategic
Goal and Objective:
[See PDF for image]
[End of figure]
Within this framework, strategic goals and strategic objectives,
appropriations accounts, and program/projects may cross. Figure 13
shows these relationships. Strategic goals and objectives are supported
by multiple program/projects, which may be funded by multiple
appropriations accounts. For example, figure 13 shows the Clean Air
goal and one of its supporting objectives--Healthier Outdoor Air--are
funded by five appropriations accounts. Program/projects may also be
funded by multiple appropriations accounts and, in some cases, support
multiple strategic goals and objectives. For example, the Homeland
Security: Critical Infrastructure Protection program/project receives
funding through three appropriations accounts and contributes to a
number of strategic goals and objectives. Similarly, appropriations
accounts generally provide funding for multiple strategic goals and
objectives. For example, the Environmental Programs and Management and
Science and Technology appropriations accounts fund all five of EPA's
strategic goals and their supporting strategic objectives. As discussed
in section 4 of the report, when there are multiple contributors and
funding streams to strategic goals and objectives, determining the
performance contributions of programs to goals or objectives within the
new budget structures is challenging.
Figure 13: The Relationship between Strategic Goals and Objectives,
Program Projects, and Appropriations Accounts:
[See PDF for image]
[End of figure]
Objectives and Implementation Time Line:
Beginning in the mid-1990's, EPA undertook steps aimed at better
linking its budget to its strategic plan. EPA officials described the
previous budget structure as focused on program inputs and lacking the
strategic vision and consideration of performance to support decision
making. According to EPA officials, the changes to the budget were made
to provide a better picture of what EPA is trying to achieve with a
given level of budget resources and to better incorporate a performance
perspective in the budget process.
EPA officials did not view changing managerial flexibility over budget
resources as one of the primary objectives of EPA's budget changes. EPA
officials and program managers we spoke with generally did not view the
appropriations account structure as an impediment to management or as
posing a barrier to incorporating a performance perspective into the
budget. For example, some officials and staff from EPA's offices noted
that although their programs are funded by multiple appropriations
accounts, they generally have adequate authority and flexibility over
those budget resources to manage their programs.
As shown in figure 14, EPA's effort to better link budget resources to
performance in the budget began in the mid-1990's. In fiscal year 1996,
EPA created the Planning, Budgeting, Analysis, and Accountability
(PBAA) process to meet requirements set forth in GPRA and better
position EPA to focus on results. One of the PBAA's stated purposes was
improving the link between long-term planning and annual resource
allocation.[Footnote 140] During fiscal year 1997, EPA undertook
efforts to better link its budgeting, planning, and financial
management processes and to integrate relevant staff. Then, for the
fiscal year 1999 budget, EPA integrated its performance plan within its
congressional budget justification and restructured its program
activities and its congressional budget justification to better align
with its strategic plan. Most recently in its fiscal year 2005 budget,
EPA modified the program activities within its appropriations accounts
and its budget justification to reflect changes to its strategic plan.
Figure 14: EPA's Implementation Time Line:
[See PDF for image]
[End of figure]
Summary of EPA's Budget Restructuring Approach:
After Congress restructured EPA's appropriations accounts in 1996, EPA
made performance-related budget changes within its appropriations
accounts and to the congressional budget justification rather than
proposing changes to the account structure. Within its appropriations
accounts, EPA changed program activities to better align with its
strategic goals. EPA also integrated its annual plan into its
congressional budget justification and organized the justification
around strategic goals and objectives. Within the restructured budget,
budget resources were aligned with strategic goals and objectives. At
the same time these changes were made to the budget structure, EPA's
reprogramming guidance also changed. However, partly in response to
congressional concerns, EPA incorporated additional information to
assist users, including funding by program and appropriations accounts.
Some Changes Made to EPA's Appropriations Account Structure in the Mid-
1990s:
Congress initiated appropriations account structure changes in the late
1990s that were intended to allow EPA greater flexibility to manage its
programs. After the release of a 1995 congressionally requested report
by the National Academy of Public Administration,[Footnote 141]
Congress restructured EPA's appropriations accounts for the fiscal year
1996 budget. Specifically, Congress eliminated the Program and Research
Operations account (which mainly funded administrative expenses, such
as salaries) and the Abatement, Control and Compliance accounts (which
funded activities, such as setting environmental standards and issuing
permits). According to a 1995 conference report, a new Environmental
Programs and Management account was created in an effort to provide EPA
with increased flexibility to meet personnel and program requirements;
it funded most of the items previously funded by the eliminated
accounts. State categorical grants that were proposed under the
Abatement, Control and Compliance account were moved to a newly created
account, State and Tribal Assistance Grants. In addition, a Science and
Technology account was created for research activities.
Strategic Goals and Objectives Used as Organizing Framework for
Appropriations Account Structure and Budget Justification Changes:
EPA made its performance-related changes to the program activities
within its existing appropriations account structure and the budget
justification rather than change the account structure itself. Table 15
uses the Environmental Programs and Management account to illustrate
changes made to EPA's program activities since the fiscal year 1998
budget. Beginning in the fiscal year 1999 budget, EPA changed the
program activities within its appropriations accounts from programmatic
and functional areas, such as Pesticides and Support Costs, to
strategic goals, such as Clean Air and Clean Water.
Table 15: Program Activity Changes Since Fiscal Year 1998 Budget:
Environmental Programs and Management Appropriations Account Example:
Fiscal year 1998 budget: Program activities:
Air; Water Quality; Drinking Water; Hazardous Waste; Pesticides;
Radiation; Multimedia; Toxic Substances; Mission and Policy Management;
Agency Management; Regional Management; Support Costs; Superfund;
Fiscal year 1999 budget: Program activities:
Clean Air; Clean Water; Safe Food; Preventing Pollution; Waste
Management; Global and Cross-border; Right to Know; Sound Science;
Credible Deterrent; Effective Management;
Fiscal year 2005 budget: Program activities:
Clean Air and Global Climate Change; Clean and Safe Water; Land
Preservation and Restoration; Healthy Communities and Ecosystems;
Compliance and Environmental Stewardship; Reimbursable program[A].
Source: President's Budget Appendix for EPA for fiscal years 1998,
1999, and 2005.
[A] This program activity is not a strategic goal.
[End of table]
The formats for the fiscal years 2000 through 2004 budgets used the
same basic format as EPA introduced for the fiscal year 1999 budget.
For the fiscal year 2005 budget, EPA consolidated the number of program
activities to reflect changes to its strategic plan, which reduced the
number of strategic goals from 10 to 5. Within each appropriations
account, budget resources, including indirect office-level and central
administrative resources, were aligned to strategic goals and
objectives. Since a strategic goal might have been supported through
multiple appropriations accounts, the amount shown for a strategic goal
in any one appropriations account did not necessarily represent the
total budget resources associated with that goal.
EPA also made changes to its congressional budget justification.
Beginning with the fiscal year 1999 budget, EPA integrated its annual
plan into the congressional budget justification and reformatted the
justification to better align its budget request with the agency's
strategic goals and objectives. Previously, EPA's justification had
been organized with a chapter for each appropriations account and
sections within each chapter for each EPA office. For example, the
previous justification contained a Science and Technology chapter,
which in turn included sections for EPA's offices funded by that
appropriations account, which was followed by program information. EPA
staff said that previous congressional budget justifications included
program elements,which were breakdowns of programmatic areas. For
example, the Air Toxics program was broken down by several program
elements, including Air Quality Planning and Standards and Air Quality
Management Implementation. EPA's reprogramming guidance was tied to
these program elements.
For the fiscal year 1999 through 2005 justifications, EPA aligned
budget resources to strategic goals and objectives. Budget information
was shown by strategic goals and objectives in both summary tables at
the front of the congressional budget justification and within chapters
organized by strategic goal. For example, summary tables at the front
of the fiscal year 2005 congressional budget justification showed (1)
budget authority by goal and appropriations account, and (2) budget
authority by goal and objective. Examples of these tables are shown in
tables 16 and 17.
Table 16: Resource Table Presented in EPA's Fiscal Year 2005
Congressional Budget Justification: Resources by Goal/Appropriation:
Dollars in thousands.
Clean Air and Global Climate Change:
Budget Authority;
FY2003 Actuals: $882,811.6;
FY2004 Pres. Budget: $915,983.1;
FY2005 Pres. Budget: $1,004,615.5.
Full-time equivalents (FTE);
FY2003 Actuals: 2,702.6;
FY2004 Pres. Budget: 2,737.9;
FY2005 Pres. Budget: 2,756.6.
Environmental Programs and Management:
Budget Authority;
FY2003 Actuals: $416,801.6;
FY2004 Pres. Budget: $451,848.7;
FY2005 Pres. Budget: $467,758.4.
FTEs;
FY2003 Actuals: 1,919.0;
FY2004 Pres. Budget: 1,948.8;
FY2005 Pres. Budget: 1,963.7.
Environmental Programs and Management-reimbursable:
FTEs;
FY2003 Actuals: 1.2;
FY2004 Pres. Budget: 0.5;
FY2005 Pres. Budget: 0.6.
Science and Technology:
Budget Authority;
FY2003 Actuals: $197,661.1;
FY2004 Pres. Budget: $199,500.1;
FY2005 Pres. Budget: $205,788.5.
FTEs;
FY2003 Actuals: 703.2;
FY2004 Pres. Budget: 702.7;
FY2005 Pres. Budget: 702.9.
Science and Technology-reimbursable:
FTEs;
FY2003 Actuals: 3.2;
FY2004 Pres. Budget: 3.0;
FY2005 Pres. Budget: 3.0.
Buildings and Facilities:
Budget Authority;
FY2003 Actuals: $8,560.5;
FY2004 Pres. Budget: $8,710.1;
FY2005 Pres. Budget: $9,387.0.
State and Tribal Assistance Grants:
Budget Authority;
FY2003 Actuals: $252,531.8;
FY2004 Pres. Budget: $247,750.0;
FY2005 Pres. Budget: $312,750.0.
FEMA -reimbursable:
FTEs;
FY2003 Actuals: 6.8;
FY2004 Pres. Budget: 0.0;
FY2005 Pres. Budget: 0.0.
Inspector General:
Budget Authority;
FY2003 Actuals: $4,198.2;
FY2004 Pres. Budget: $5,147.0;
FY2005 Pres. Budget: $5,724.6.
FTEs;
FY2003 Actuals: 31.3;
FY2004 Pres. Budget: 38;
FY2005 Pres. Budget: 40.9.
Hazardous Substance Superfund:
Budget Authority;
FY2003 Actuals: $3,058.4;
FY2004 Pres. Budget: $3,027.2;
FY2005 Pres. Budget: $3,207.1.
FTEs;
FY2003 Actuals: 18.7;
FY2004 Pres. Budget: 17.3;
FY2005 Pres. Budget: 18.2.
Working Capital Fund-reimbursable:
FTEs;
FY2003 Actuals: 19.2;
FY2004 Pres. Budget: 27.6;
FY2005 Pres. Budget: 27.3.
Source: Environmental Protection Agency 2005 Annual Performance Plan
and Congressional Justification.
Note: Strategic goal shown in bold text. Appropriations accounts shown
in italics.
[End of table]
Table 17: Resource Table Presented in EPA's Fiscal Year 2005
Congressional Budget Justification: Resources by Goal/Objective:
Dollars in thousands.
Clean Air and Global Climate Change:
Budget Authority;
FY2003 Actuals: $882,811.6;
FY2004 Pres. Budget: $915,983.1;
FY2005 Pres. Budget: $1,004,615.5.
FTEs;
FY2003 Actuals: 2,702.6;
FY2004 Pres. Budget: 2,737.9;
FY2005 Pres. Budget: 2,756.6.
Healthier Outdoor Air:
Budget Authority;
FY2003 Actuals: $557,907.1;
FY2004 Pres. Budget: $579,059.2;
FY2005 Pres. Budget: $659,876.2.
FTEs;
FY2003 Actuals: 1,706.6;
FY2004 Pres. Budget: 1,751.5;
FY2005 Pres. Budget: 1,765.9.
Healthier Indoor Air:
Budget Authority;
FY2003 Actuals: $44,299.1;
FY2004 Pres. Budget: $48,042.5;
FY2005 Pres. Budget: $48,954.7.
FTEs;
FY2003 Actuals: 152.0;
FY2004 Pres. Budget: 149.9;
FY2005 Pres. Budget: 153.2.
Protect the Ozone Layer:
Budget Authority;
FY2003 Actuals: $18,145.2;
FY2004 Pres. Budget: 19,069.4;
FY2005 Pres. Budget: $21,813.7.
FTEs;
FY2003 Actuals: 39.2;
FY2004 Pres. Budget: 36.1;
FY2005 Pres. Budget: 36.7.
Radiation:
Budget Authority;
FY2003 Actuals: $30,046.8;
FY2004 Pres. Budget: $34,858.9;
FY2005 Pres. Budget: $34,718.0.
FTEs;
FY2003 Actuals: 168.1;
FY2004 Pres. Budget: 185.0;
FY2005 Pres. Budget: 183.9.
Reduce Greenhouse Gas Intensity:
Budget Authority;
FY2003 Actuals: $99,836.4;
FY2004 Pres. Budget: $106,936.5;
FY2005 Pres. Budget: $108,389.3.
FTEs;
FY2003 Actuals: 251.3;
FY2004 Pres. Budget: 244.1;
FY2005 Pres. Budget: 244.6.
Enhance Science and Research:
Budget Authority;
FY2003 Actuals: $132,577.0;
FY2004 Pres. Budget: $128,016.6;
FY2005 Pres. Budget: $130,863.6.
FTEs;
FY2003 Actuals: 358.2;
FY2004 Pres. Budget: 371.2;
FY2005 Pres. Budget: 372.4.
Source: Environmental Protection Agency 2005 Annual Performance Plan
and Congressional Justification (EPA's Proposed Budget).
Note: Strategic goal shown in bold. Strategic objectives shown in
italics.
[End of table]
EPA's fiscal year 1999 through 2005 budget justifications were
organized by strategic goal. In the fiscal year 2005 congressional
budget justification, each strategic goal chapter began with a goal
overview, including a summary table of budget resources for the
strategic goal broken down by strategic objective and narrative
describing the supporting strategic objectives and performance goals
and strategies. A section for each strategic objective followed the
goal overview. Each strategic objective section contained two main
tables: (1) a resource summary table that broke down the budget request
for the objective by appropriations account, and (2) a table that
listed all of the program/projects and associated resources that
support the objective. Figure 15 provides an example using the resource
summary table and the program/project table for the Clean Air and
Global Climate Change goal and Healthier Outdoor Air objective from the
fiscal year 2005 congressional budget justification.
Figure 15: Excerpt from EPA's Fiscal Year 2005 Congressional Budget
Justification:
[See PDF for image]
[End of figure]
EPA Reprogramming Guidance Change Potentially Provided More
Flexibility:
At the same time that EPA made changes within its appropriations
accounts and congressional budget justification, Congress changed EPA's
reprogramming guidance to allow funding shifts within strategic
objectives, although its reprogramming dollar threshold remained the
same.[Footnote 142] Previously, EPA's reprogramming guidance only
allowed shifting funds within program elements, which was a tighter
reprogramming unit than the more aggregated strategic objective unit.
EPA officials and OMB staff said that the change to the strategic
objective potentially provides more flexibility to make trade-offs
among program/projects.
EPA Showed Budget Resources by Strategic Goals and Objectives:
As shown in the congressional budget justification, strategic goals and
objectives included associated budgetary resources, including direct
costs and indirect costs, such as central planning, facilities
management, and human resources management. Resources were allocated to
strategic goals and objectives through the program/projects that
support them. EPA officials explained that most program/projects
included direct program resources as well as all office-level
administrative resources that are directly traceable to
program/projects such as personnel and travel costs. However, central
administrative resources were not allocated to program/projects; rather
these resources were shown as separate program/projects, which were
then allocated across strategic goals and objectives.[Footnote 143] For
example, "Central Planning, Budgeting, and Finance" and "Facilities
Infrastructure and Operations" were program/projects. These types of
enabling or support programs were aggregated and listed as
"administrative projects" beneath each objective and were included in
the budget resources of the strategic goals and objectives they
support.[Footnote 144]
While the tables within the strategic goal and objectives sections of
the congressional budget justification included the budget resources--
both direct and indirect--associated with the strategic goal and
objectives, only the portion of the appropriations account supporting
the particular strategic goal or objective was included. Similarly, in
cases where a program/project supported multiple strategic objectives,
the program/projects listed under strategic goals and objectives
included only the portion of the program/projects that supported the
strategic goal and objectives. For example, the Homeland Security:
Critical Infrastructure Protection program/project supported a number
of strategic goals (e.g., Clean Air and Global Climate Change, Clean
and Safe Water) and their supporting strategic objectives (e.g.,
Healthier Outdoor Air, Protect Human Health). The Healthier Outdoor Air
strategic objective, for example, only included the portion of the
program/projects associated with that objective. As noted below, EPA
showed its total budget request by program/project in the back of the
justification.
Budget Justification Was Organized Around Strategic Goals but
Additional Information Was Included to Assist Decision Makers:
While restructuring its congressional budget justification based on
strategic goals and objectives, EPA took steps to include additional
information to assist in congressional decision making. EPA officials
and staff told us that the focus of congressional interest and
oversight remained at the program/project level. In response to
congressional concerns that its fiscal year 1999 budget justification
lacked program information, EPA included a list of "key programs" in
its fiscal year 2000 justification. According to EPA officials, the
list covered approximately 30 percent of EPA's programs at first but
was later expanded to cover EPA's entire budget request. In its fiscal
year 2005 congressional budget justification, EPA replaced "key
programs" with "program/projects," which EPA officials said were a
refinement because they were created using a more formal process.
Program/projects covered both programmatic (e.g., Geographic Program:
Chesapeake Bay) and central administrative functions (e.g., Facilities
Infrastructure and Operations). EPA included a table providing a
complete list of program/projects, the appropriations accounts they
were funded through, and the resource request in the back of the
congressional budget justification.
EPA's congressional budget justification also included an
"Enabling/Support Programs" appendix providing detailed information on
these support programs, which mainly include central administrative
functions such as Facilities Infrastructure and Operations, IT/Data
Management, and Acquisition Management. This appendix was organized by
office (e.g., Office of Environmental Information, Office of
Administration and Resources Management) and included each
enabling/support program's resource request and performance
information.
Agency Views on Implications of Budget Restructuring for Management and
Oversight:
EPA officials described several benefits or potential benefits of the
appropriations account and congressional budget justification changes
and noted some limitations. EPA central office budget staff and program
managers also emphasized the importance of the agency's efforts to
improve its financial management system for its performance management
efforts.
EPA officials viewed the changes within the appropriations accounts and
congressional budget justification as enhancing the performance
perspective initiated under GPRA. EPA officials said that the new
structure better links budget resources to EPA's strategic plan and
highlights the program/project funding levels associated with achieving
goals and objectives. According to EPA officials and OMB staff, the
current structure focuses on the achievement of goals and objectives
rather than focusing on individual programs as the pre-fiscal year 1999
budget did. Specifically, because managers now are required to justify
their budgets in terms of the agency's strategic direction, some
credited the changes with increasing understanding of and attention
given to the agency's strategic and performance management framework.
This new approach, which requires budget requests to be aligned to
strategic goals and objectives, was credited by EPA officials with
providing greater incentives for officials and program managers to
understand the agency's strategic framework and explain how particular
program/projects fit within that framework. Some staff credited the
budget changes with leading to better integration of program/projects
that support common goals and objectives. EPA officials also noted that
these efforts have supported greater integration of and collaboration
among planning and budget staff.
Although central administrative resources were allocated to strategic
goals and objectives, EPA officials noted that increasing management
flexibility to make resource trade-offs among central administrative
resources or between central administrative and program resources was
not an objective of budget restructuring. For the most part, staff we
spoke with said that sufficient flexibility over resources to manage
programs already existed. An EPA official explained that their
intention included ensuring that the new structure provided managers
the ability to implement their programs with at least the same level of
flexibility as in the old structure. EPA officials said administrative
resources were allocated to strategic goals and objectives to provide a
better picture of the resources associated with the achievement of
those goals and objectives rather than to change the management of
those resources.
EPA officials said that budget restructuring helped focus budget
decisions and resource management at the strategic objective level. EPA
officials and OMB staff explained that changing EPA's reprogramming
guidance from allowing funding shifts within specific program elements
to allowing funding shifts within broader strategic objectives
potentially provides more flexibility to make trade-offs among
program/projects to achieve strategic objectives. Along these lines,
officials from one program office explained that under the old
structure funding was tied to a number of program elements. Under the
current structure, EPA officials said that those program elements have
been changed to program/projects that support strategic objectives.
Because there are fewer strategic objectives than program elements,
this change potentially provides managers with greater flexibility than
previously available to make trade-offs within that objective. EPA
officials noted that although increased flexibility was not a primary
objective of the reforms, increased flexibility would be viewed as
positive.
While EPA's budget changes were described as supporting EPA's efforts
to manage based on strategic goals and objectives and could potentially
provide more flexibility to make resource trade-offs among programs,
EPA officials also noted some limitations. First, the various
program/projects that support a particular strategic objective are
funded from different appropriations accounts, and EPA does not have
authority to transfer resources between appropriations accounts.
However, as discussed previously, EPA central office budget officials
and program managers we spoke with generally did not view the
appropriations account structure as an obstacle to management or as a
barrier to incorporating a performance perspective into the budget.
Secondly, EPA officials and OMB staff noted that much of Congress's
focus remains on programs rather than on strategic goals and
objectives. For example, appropriations committee report language for
EPA specifies funding levels by program. EPA officials noted that they
incorporate these congressional directives with respect to program
funding into the operating plan, which may restrict the ability to make
resources trade-offs among programs.
Finally, some EPA central office budget officials and program managers
emphasized the importance of integrating the budget and financial
management and noted the agency's efforts to improve its financial
management system.[Footnote 145] According to EPA officials, the agency
has been implementing a new integrated accounting and budget
formulation system to increase cost information. EPA officials noted
that EPA's Integrated Financial Management System (IFMS)[Footnote 146]
tracks EPA's budget to various levels including strategic goals,
objectives, program/projects, and activities. Both EPA officials and
program managers noted the improvements to the financial management
system as useful to its budget restructuring efforts as well as its
broader efforts to improve performance management.
Future Direction:
In response to congressional direction, EPA has significantly
restructured its congressional budget justification for fiscal year
2006 to organize by appropriations account and program, rather than
strategic goal and objective. EPA continues to provide information on
strategic goals and objectives in the budget justification, but its
handled more as a supplement. EPA plans to continue to make necessary
adjustments every 3 years to reflect revised Strategic Plans required
under GPRA and to improve cost and performance information.
[End of section]
Appendix V National Aeronautics and Space Administration:
The National Aeronautics and Space Administration (NASA) restructured
its budget to better align budget resources to programs and performance
in the budget. The budget structure changes are intended to improve
internal management and provide a better understanding of what it takes
to do NASA's work. NASA officials said that these changes were part of
a broader "Full Cost Initiative" and provide not only information but
also incentives to make decisions on the most efficient use of
resources. This has been a long-term process--NASA began putting the
processes and tools in place in fiscal year 1995. NASA incrementally
changed its appropriations account structure and congressional budget
justification to support implementation of "full cost" practices and to
better reflect the relationship of its budget to the Strategic Plan.
Currently, NASA requests budget authority for the "full cost" of its
programs and uses different methods to allocate different types of
resources to its programs. While NASA officials anticipate that budget
restructuring will support results-oriented management, some
limitations and concerns were raised.
Background:
NASA is the nation's leading organization for research and development
in aeronautics and space. NASA describes its mission as to understand
and protect our home planet; explore the universe and search for life;
and to inspire the next generation of explorers "as only NASA
can."[Footnote 147] This mission is carried out by a workforce of
federal employees (about 18,900 full time equivalents) and contract
employees (over 100,000) in NASA's centers and other facilities across
the country. NASA's budget has remained relatively constant in real
terms over the last decade; its fiscal year 2005 budget request was for
about $16 billion in discretionary funding.
When preparing the fiscal year 2005 budget, NASA was organized around
seven Strategic Enterprises, or main programmatic units: (1) Space
Science, (2) Earth Science, (3) Biological and Physical Research, (4)
Aeronautics, (5) Education, 6) Space Flight, and (7) Exploration
Systems.[Footnote 148] Enterprises were composed of one or more themes,
or groups of programs that could be attributed to related strategic
goals. For example, the Space Science Enterprise included Solar System
Exploration, Mars Exploration, and other themes. NASA had 18 themes,
which were used as the basis for the agency's budget planning,
management, and performance reporting. Within a theme there were
multiple theme elements, or programs, that work together to achieve
strategic goals. For example, the Mars Exploration Theme (within the
Space Science Enterprise) included the Mars Global Surveyor, the 2003
Mars Exploration Rovers, and 2005 Mars Reconnaissance Orbiter, which
all supported NASA's strategic goal to explore the solar system and
universe beyond. In June 2004 (following the fiscal year 2005 budget
submission), NASA fundamentally restructured its enterprises into
Mission Directorates to position the organization to better implement
the vision set forth in A Renewed Spirit of Discovery, The President's
Vision for U.S. Space Exploration.[Footnote 149] NASA's fiscal year
2006 congressional budget justification reflected its new
organizational framework.
The relationship between NASA's organizational framework and its
strategic plan was complex. NASA had 10 strategic goals--7 science-and
research-related strategic goals and 3 enabling goals. Most strategic
goals were supported by multiple themes and themes provide primary or
contributing support to multiple strategic goals. Figure 16 shows the
relationship between NASA's strategic and organizational framework
using themes within the Space Science and Space Flight Enterprises. The
complex relationship may raise challenges for agency efforts to better
align resources with performance.
Figure 16: Example of Relationship between NASA's Strategic and
Organizational Frameworks:
[See PDF for image]
[End of figure]
Objectives and Implementation Time Line:
According to NASA officials, restructuring the budget to better align
budget resources with programs and performance is intended to improve
internal management and provide a better understanding of what it takes
to do NASA's work. NASA's budget restructuring efforts were part of the
broader "Full Cost Initiative," which involves changes to accounting,
budgeting, and management. NASA officials emphasized that the pieces
all fit together and support one another. The accounting and budgeting
portions support the management decision-making process by providing
not only better information, but also incentives to make decisions on
the most efficient use of resources. According to NASA officials,
accounting changes alone would not change managers' behavior. NASA also
needs to budget and manage under "full cost" to realize the anticipated
benefits of more efficient resource use. Under "full cost" budgeting,
project managers are both expected to continue to control direct costs
and have greater control or influence over indirect costs, such as
service pools and administrative costs. Lastly, by tying resources to
performance, this initiative is intended to provide internal and
external parties with information about how programs and resources are
tied to NASA's mission and strategic plan.
NASA officials highlighted several limitations to the previous
appropriations account structure and congressional budget
justification. Specifically, NASA officials said the previous
appropriations account structure and congressional budget justification
did not align resources with its strategic plan and also limited
program managers' accountability and flexibility to make resource trade-
offs to use resources more efficiently. For example, NASA officials
said that prior to changing its budget justification it was difficult
to show how some activities related to its strategic plan. They also
said that because mission support resources were requested and funded
in a separate appropriations account than its programs and projects,
the resources requested may not have reflected the amount needed by
NASA's programs and projects. In addition, since mission support
resources were not included in program managers' budgets under the
previous budget structure, program managers lacked accountability over
the resources used to achieve performance and had limited ability to
make resource trade-offs to use resources more efficiently.
Specifically, whereas project managers had considerable control over
contractor-supplied hardware and labor prior to budget restructuring,
they had less control over the number and type of civil service
personnel assigned to their projects and no control over the cost of
the assigned personnel and other support costs. As a result, civil
servants and other support costs appeared "free" to program managers
and they had less incentive to use those resources efficiently.
Budget restructuring, including NASA's efforts to better capture the
"full cost" of its programs in the budget, has been a long-term process
at NASA. NASA began putting the processes and tools in place in fiscal
year 1995. (See figure 17.)
Figure 17: NASA's Implementation Time Line:
[See PDF for image]
[A] NASA's Full Cost Initiative Agency-wide Implementation Guide
(February 1999).
[End of figure]
NASA implemented the Core Financial Module of the Integrated Financial
Management Program (IFMP) in fiscal year 2003 with the objective of
standardizing cost components across the agency. NASA said the
integrated financial management system was necessary to support
implementation of "full cost" practices and to submit its first "full
cost" budget, which it did in fiscal year 2004.
Despite the progress that has been made, the initiative remains
relatively new. For example, the "full cost" allocations for
formulation of the fiscal year 2004 budget was primarily a headquarters
exercise and the fiscal year 2005 budget was the first budget program
managers formulated in "full cost." As a result, according to NASA
officials, program managers have only 1 year's experience with
budgeting and managing in "full cost," and the agency has not yet
achieved the complete benefits of "full cost" management.
Summary of NASA's Budget Restructuring Approach:
Beginning with the fiscal year 2002 budget, NASA incrementally changed
its appropriations account structure and congressional budget
justification to support implementation of "full cost" practices and to
better reflect the relationship of its program budgets to the agency's
strategic plan. The organizational framework of NASA's congressional
budget justification followed its appropriations account structure and
provided budget information by enterprises, themes and programs.
Changes to its appropriations account structure and congressional
budget justification were accompanied by changes to transfer authority
and proposed changes to reprogramming guidelines. The extent of the
linkage between resources and performance has progressed over time and
now NASA links budget resources to its programs and projects within
themes and enterprises. NASA uses different methods to allocate
different types of resources.
NASA's Appropriations Account Structure Changes Began in Fiscal Year
2002:
The first step in NASA's incremental changes to its appropriations
account structure was made in the fiscal year 2002 budget. That year,
NASA proposed to eliminate its mission support appropriations account
and Congress accepted the account structure change. (See figure 18.)
NASA spread the budget resources for research, program management, and
Construction of Facilities (CoF) to NASA's mission-related accounts--
(1) Human Space Flight and (2) Science, Aeronautics, and Technology. No
major changes were proposed or made to the appropriations account
structure for fiscal year 2003.
Figure 18: NASA's Appropriations Account Structure Incrementally
Changed between Fiscal Years 2001 and 2005 to Reflect Organizational
Framework:
[See PDF for image]
(R)= Renamed.
[A] Although listed as a separate program activity like enterprises,
Crosscutting Technology is a component of the Aeronautics Enterprise.
Note: Accounts funding the Office of Inspector General and Trust Funds
excluded because those resources were not allocated to NASA's programs
or projects.
[End of figure]
In fiscal year 2004, NASA further refined its appropriations account
structure and program activity listing within the accounts. NASA
created two mission-related appropriations accounts--(1) Science,
Aeronautics and Exploration (SAE) and (2) Space Flight Capabilities.
Within these appropriations accounts, NASA also changed the program
activity listing in the program and financing (P&F) schedule of the
President's Budget Appendix to better align with NASA's enterprises.
For example, between the fiscal years 2002 and 2004 budgets the Space
Station and Space Shuttle program activity lines were combined to form
the Space Flight program activity line (see figure 18).
For the fiscal year 2005 budget, NASA's basic structure remained the
same; however a new program activity line, Explorations Systems, was
added to the Exploration Capabilities (formerly called Space Flight
Capabilities) account. The new program activity line reflected NASA's
newly created enterprise that was added to better align with the new
vision for space exploration.
Changes to the Budget Justification Followed Account Structure
Organizing Framework:
NASA also changed its congressional budget justification and more fully
incorporated the annual performance plan into its budget justification
beginning with the fiscal year 2004 budget. In the congressional budget
justification, NASA provided budgetary information by appropriations
account, enterprise, themes, and then program and projects that compose
them. For example, in the fiscal year 2005 budget justification, within
the chapter for the Exploration Capabilities appropriations account,
there was discussion and presentation of budgetary information for the
Space Flight Enterprise, followed by the International Space Station
and Space Shuttle Program Themes. Within themes, the supporting
programs and the associated budget resources were shown. Within the
Space Shuttle Theme, NASA provided the budget resources associated with
Shuttle programs such as Ground Operations, Flight Operations, Flight
Hardware, and the Service Life Extension Program.
NASA linked its themes to its strategic plan within the congressional
budget justification. Each theme was linked to one or more of NASA's 10
strategic goals. Themes, and the programs and projects that support
them, were also linked to NASA's strategic objectives and annual
performance goals. While resources could be linked to strategic goals,
objectives, and performance goals through the themes, NASA did not show
the "full cost" of strategic goals, objectives, and performance goals
in the budget justification. For example, in the fiscal year 2004
congressional budget justification, NASA showed the Space Shuttle
Program Theme supported some mission-related goals, but it primarily
contributed to the enabling strategic goal "to ensure the provision of
space access and improve it by increasing safety, reliability, and
affordability." This goal was also supported by other themes in the
Space Flight and Aeronautics Enterprises. The dollar contribution of
the Space Shuttle Theme was not distinguishable and the "full cost" of
activities supporting that goal was not provided.
Some Previously Reported Information Less Transparent or No Longer
Included:
As the focus on programs or how programs fit together to support the
agency's strategic and performance framework increased in NASA's budget
structure, information on individual program elements or items of
expense became less apparent. For example, in the fiscal year 2003
appropriations account structure, the Space Station and the Space
Shuttle program were two program activities listed in the P&F schedule
of the Human Space Flight account. Beginning with the fiscal year 2004
budget, when NASA changed its program activity listing to align with
its enterprises, the budget resources associated with the Space Station
and the Space Shuttle Program Themes (and the programs or projects that
compose them) were combined into one program activity line labeled
"Space Flight" within the Space Flight Capabilities account. As a
result, the resources requested for the Space Station and Space Shuttle
programs were no longer transparent in the program activity listing of
the President's Budget Appendix for NASA.
Some resources were also less transparent in the fiscal years 2004 and
2005 congressional budget justifications. Specifically, there was less
information on program elements and direct and indirect cost components
were not clearly delineated in the fiscal years 2004 and 2005 budget
justifications. In the fiscal year 2003 congressional budget
justification, one could see the distribution of Space Shuttle
resources among various programs, such as Flight Hardware and Program
Integration. Beneath these programs, NASA provided information on
program elements. For example, for Flight Hardware, NASA showed the
resources requested for external tank production, main engine
production, and main engine test support. These program elements and
the associated budget resources were not visible in the fiscal years
2004 and 2005 budget justifications. Direct and indirect cost
components were also less transparent in the fiscal years 2004 and 2005
budget justifications. Under NASA's old congressional budget
justification format, program budgets included only direct procurement
costs and indirect costs were budgeted separately. While decision
makers and other budget users could not see all the resources
associated with operating the programs prior to the fiscal year 2004
budget, they could clearly distinguish between direct and indirect
resources. Under the restructured congressional budget justification,
the direct and indirect cost components associated with NASA's programs
were combined and not clearly delineated.
Supporting information on NASA's institutional resource request was
provided in supplemental tables in NASA's fiscal years 2004 and 2005
congressional budget justifications. These tables provided information
on general and administrative resources by center (i.e., Center G&A);
direct travel and personnel in each center; full-time equivalents
(FTEs) by center; and headquarter and agencywide general and
administrative resources (i.e., Corporate G&A). They also provided
information on CoF projects by center.
Changes to Transfer and Reprogramming Authority Accompanied Budget
Structure Changes:
NASA's budget structure changes were accompanied by new transfer
authority. Beginning with fiscal year 2002, NASA's mission support
account was eliminated and the resources were allocated to its two
mission appropriations accounts. Since then, NASA has been funded
mainly by two appropriations accounts and has had transfer authority
for administrative services, including federal salaries and benefits,
training, travel, and facilities funding between these appropriations
accounts. The legislation said this transfer authority was granted "to
ensure the safe, timely, and successful accomplishment of
Administration missions."[Footnote 150] NASA officials said this
additional flexibility was needed because there is an inherent
difficultly in estimating program resources because staff divide their
time among multiple programs.
In fiscal year 2004, NASA also requested that congressional
appropriations committees change its reprogramming guidelines.
Currently, NASA's reprogramming guidelines allow managers to shift
funds among and within programs or other line items presented in the
congressional budget justification up to certain dollar thresholds
specified by appropriations committees without first notifying
them.[Footnote 151] NASA requested that it be allowed to shift funds
within and among its 18 themes (rather than programs) without the
requirement to notify Congress first. NASA also asked that they
increase the dollar threshold for such reprogrammings to $10 million.
NASA said this change would provide theme managers additional
flexibility during budget execution to make trade-offs between programs
and projects within a theme that support a common goal. They saw it as
is important to not only properly align resources with performance but
also to allow for the most efficient use of resources within a theme.
Currently, if additional funds are needed throughout the year, program
managers must shift resources within that program. Under the proposed
reprogramming guidelines, additional costs that arise throughout the
year could be offset by reducing another program's costs within the
same theme. Congress, however, did not change NASA's reprogramming
guidelines for fiscal years 2004 or 2005 and they continue to be
generally tied to programs.[Footnote 152]
NASA Requested Budget Authority for the "Full Cost" of Programs:
The extent of NASA's resource linkage has progressed over time.
Beginning in fiscal year 2002, NASA allocated mission support resources
to its program appropriations accounts. In the fiscal years 2004 and
2005 budgets, NASA allocated all budget resources (except the Inspector
General's office) to the more detailed program/project level and
combined program resources to show the budget resources associated with
themes and enterprises. Program budgets include direct program costs,
including procurement and personnel as well as a share of general and
administrative costs from NASA's centers (Center G&A) and from NASA
headquarters (Corporate G&A). Resources for the use of service pools,
or centralized infrastructure, such as wind tunnel services and
information technology, are also allocated to program budgets. Table 18
describes these costs allocated to and requested by program budgets in
more detail.
Table 18: Cost Definitions and Examples:
Cost type: Direct;
Definition: Direct costs that can be related or traced to a specific
project at the time costs are incurred;
Examples:
* Purchased goods and services;
* Contracted support;
* Direct civil service salaries/benefits/travel.
Cost type: Service pool costs;
Definition: Infrastructure capabilities supporting multiple program and
projects at NASA centers that can be linked to programs and projects
based on usage or consumption;
Examples:
* Facilities and related services;
* Information technology;
* Science and Engineering;
* Fabrication;
* Test Services;
* Wind Tunnel Service.
Cost type: Center G&A;
Definition: Indirect costs from NASA's centers that are not related to
specific programs and projects;
Examples:
* Center director and other indirect civil service
salaries/benefits/travel;
* Center training and awards;
* Security;
* Grounds maintenance;
* Library;
* Human resources department;
* Medical services.
Cost type: Corporate G&A;
Definition: NASA headquarter operating costs and agencywide G&A costs
(costs of corporate G&A function performed at NASA centers on behalf of
the agency);
Examples:
* NASA administrator and immediate staff;
* Enterprise level/management;
* Headquarters Operations management.
Source: NASA's fiscal year 2005 budget justification.
[End of table]
Allocation Methods Vary Among Different Types of Resources:
NASA uses different methods to distribute different types of resources.
* Service Pool resources are funded by a specific program based on
usage. The rate for its use is determined by the operating cost of the
facility or function and the units of consumption.
* Center G&A are distributed to programs operating in each center based
on the number of direct and service pool FTEs and on-site contractors
that work on a program or project.
* Corporate G&A are distributed to programs based on the program's
share of NASA's total direct and indirect costs.
According to NASA officials, NASA's cost allocation methods have been,
and may continue to be, refined.
Agency Views on Implications of Budget Restructuring for Management and
Oversight:
NASA officials anticipate that budget restructuring to better align
budget resources with programs and performance will support results-
oriented management by helping managers identify and address
underutilized assets and by providing managers with information and
incentives to recognize and make resource trade-offs. However, because
this initiative is still relatively new, NASA officials said it is too
early to see the full benefits of its budget restructuring efforts.
Concerns were raised that the budget structure changes may, among other
things, reduce flexibility to respond to changing needs or adversely
affect the balance between maintaining institutional capacity and
operational efficiency.
Budget Restructuring Credited with Increasing Information and
Incentives to Recognize and Make Resource Trade-offs; However, Trade-
offs Would Be Limited:
NASA officials credited budget restructuring with providing managers
the information and incentives to recognize and make resource trade-
offs. Before budget restructuring, program managers' budgets only
included procurement dollars and not the cost of civil servant salaries
or use of central facilities. NASA officials said that, as a result,
civil servants and central facilities appeared "free" to program
managers. Under NASA's restructured "full cost" budget, all costs
associated with a program are included in program managers' budgets,
and NASA officials said that they view this change as making program
managers more accountable for these resources. As a result, managers
are more likely to pay attention to these costs and have greater
incentives to use civil servants' time more efficiently. In addition,
given that programs are allocated a portion of central administrative
costs, NASA officials noted that program managers are paying more
attention to and questioning these costs, which in turn increases
pressure on headquarters and centers to reduce costs.
Changes to NASA's appropriations account structure and congressional
budget justification would facilitate resource trade-offs. As discussed
earlier, NASA's mission support account was eliminated and resources
for mission support are now funded through NASA's two mission-related
appropriations accounts. Under this new structure, managers can make
trade-offs between direct program and mission support resources. In
addition, changes to NASA's congressional budget justification have, in
effect, increased NASA's ability to move funds within appropriations
accounts during budget execution. For example, within the Flight
Hardware program in the fiscal year 2003 congressional budget
justification, resources were tied to program elements, such as
external tank production, main engine production, and main engine test
support. These items and their costs are not shown in the fiscal years
2004 and 2005 congressional budget justifications. According to NASA
officials, because reprogramming is essentially tied to any line item
in the congressional budget justification, aggregating programs and
providing less detailed information on program elements in the budget
justification provides NASA with more flexibility to make resource
trade-offs among program elements. As a result, managers have more
flexibility to move resources among these program elements during
budget execution.
While NASA's restructuring changes provide some additional resource
trade-offs, internal management controls and reprogramming guidelines
limit other trade-offs. NASA officials said that flexibility is limited
by the fixed-cost nature of services and labor. In particular, resource
trade-offs among items of expense, such as general administration and
civil personnel salaries, are limited during budget execution. NASA
officials told us that during budget formulation, all resources within
a program (excluding center and corporate G&A) are interchangeable, but
during budget execution trade-offs among resources for civil servants
and other resources are limited because contract agreements are
established for some services and civil service regulations must be
followed. Also, while NASA restructured its budget to help manage at
the more aggregated theme level (e.g., Space Shuttle), its
reprogramming unit remains tied to its programs (e.g., Flight Hardware,
Ground Operations). This limits the resource trade-offs that can be
made among programs within a theme. For example, NASA cannot make
resource trade-offs (above the reprogramming threshold) between Flight
Hardware and Ground Operations within the Space Shuttle Theme without
notifying Congress first.
Budget Structure Changes May Create New Resource Management Challenges:
At NASA, views differed about the potential implications of the budget
structure changes for managers' ability to respond to changing needs.
Some program managers expressed concerns that the changes could limit
their ability to respond to staffing uncertainties. Under NASA's
previous budget structure, program budgets were not charged for civil
servants working on their projects and staffing uncertainties were
covered in center budgets. A program needing additional staff would
request them from the center, which retained additional FTEs. Under the
new budget structure, civil servants and the associated budget
authority are requested and funded through program budgets. Some NASA
program managers expressed concern that they might not be able to deal
with an unexpected increase in workload because NASA program managers
will have to come up with the money to pay for the civil servants,
which might limit the extent to which they can shift budget resources
among programs. Another program manager, however, suggested that since
control over civil servants has moved from center managers to program
managers, "full cost" budgeting would reduce some "red tape" in dealing
with sudden needs or emergencies and that as a result, program managers
could move FTEs more quickly.
An official stated that NASA addressed these concerns and issued a
policy statement describing how unexpected staffing needs would be met.
If a program needed additional FTEs, program managers could obtain
additional staff from other projects or from the center's "Workforce in
Transition." The costs for the program receiving the staff would
increase, and the program providing staff would have funds available to
hire more staff or could carry over its excess funding to the following
year. If NASA management determined cost increases were legitimate, the
costs would be funded most likely from center reserve funds.[Footnote
153] If they determined the increased costs are not legitimate, they
would not be funded and the program would need to reconfigure its
budget by negotiating resources with other programs. In either case,
funds would move in accordance with current policies surrounding
changes to operating plans or NASA management practices.
Allocation of Service Pool Costs to Programs Credited with Providing
Better Information and Incentives to Identify and Address Underutilized
Assets:
According to NASA officials, aligning budget resources with programs or
projects provides the information and incentives to identify and
address underutilized assets. Prior to the changes, central
administrative facilities, such as service pools, were shown and
budgeted for separately from the programs that used them. Now these
resources are allocated to NASA's programs and included as part of
program budgets based on use. NASA officials credited this approach
with making underused assets more visible because if a service pool or
other asset's costs were not covered by programs, questions would be
raised about whether that asset or capability is needed. NASA officials
also explained that when program managers are responsible for paying
service pool costs associated with their program, program managers have
an incentive to consider their use and whether lower cost alternatives
exist. As a result, NASA officials said "full cost" budgeting provides
officials and program managers with a greater incentive to improve the
management of these institutional assets.
Some NASA program managers raised concern that the budget structure
changes might affect the balance between maintaining strategic or
institutional capacity and creating incentives for operational
efficiencies. Specifically, some expressed concerns that NASA's changes
created incentives that could over time erode the agency's commitment
to institutional assets such as central facilities and service pools.
Under the new structure, budget authority for institutional assets are
allocated to and requested by program budgets. The rate used to charge
program budgets is determined by the operating cost of the facility and
the units of consumption. As a result, a declining number of users can
lead to increasing service charges for others using centers or service
pools. Some speculated that this could in turn lead to a "death spiral"
as increasing user charges drive out other programs, resulting in even
higher user charges. Consequently, assets not adequately covered by
user charges might be eliminated even though they might be valuable to
the institution as a whole.
A NASA official told us, however, that NASA would remain committed to
assets considered by agency management to be important for achieving
NASA's mission even if they are underused. The costs of underused
assets determined to be of institutional value could be absorbed by the
programs using the asset, funded by general administration, which is
allocated across all program budgets, or by directing other work
activities to the asset. Further, the NASA official said "death
spirals" are unlikely to occur at centers in the short term for two
reasons: (1) center directors have some control over where
program/projects do their work and (2) program managers must execute
the budget within the commitment made about resources and results
during budget formulation, including the use of centers. However, the
NASA official said, the "death spiral" phenomenon may be more likely
with some service pools, such as fabrication shops.
Budget Restructuring Not Intended to and Will Not Address Some Key
Performance Issues:
One objective of NASA's recent budget restructuring efforts is to
provide better information and incentives to help managers focus on
efficiency and effectiveness. However, budget restructuring alone does
not necessarily provide some cost and performance information cited by
some NASA officials and program managers as most useful in advancing
results-oriented management and addressing some key management
challenges. NASA program managers we spoke with said budget
restructuring would not help reduce or limit cost overruns, which has
been a key performance issue.[Footnote 154] They said they need more
detailed cost information on contract cost components, including labor
and materials, or at the task level to monitor contractor performance.
In contrast, the information provided by budget restructuring--total
program cost--is more aggregate than the data needed to monitor and
improve contract management. Others noted that efforts, including
developing improved performance measures and metrics, have a much
greater impact on results-oriented management than budget
restructuring.
Future Direction:
While the accounting and budget aspects of the "full cost" initiative
have been implemented, the more difficult management aspect lies ahead.
NASA officials said it may take a few more years to see the full
benefits of the "full cost" initiative at NASA.
[End of section]
Appendix VI: GAO Contact and Staff Acknowledgments:
GAO Contact:
Susan J. Irving, (202) 512-9142:
Acknowledgments:
In addition to the person mentioned above, Mark Keenan, Elizabeth
McClarin, James Whitcomb, and Melissa Wolf made key contributions to
this report.
(450217):
FOOTNOTES
[1] GAO has done constructive reviews of GPRA and various executive
branch efforts to improve performance and accountability. See, for
example, Results Oriented Government: GPRA Has Established a Solid
Foundation for Achieving Greater Results, GAO-04-38 (Washington, D.C.:
Mar. 10, 2004) and Performance Budgeting: Observations on the Use of
OMB's Program Assessment Rating Tool for the Fiscal Year 2004 Budget,
GAO-04-174 (Washington, D.C.: Jan. 30, 2004).
[2] In addition to budget and performance integration, the other four
priorities under the PMA are strategic management of human capital,
expanded electronic government, improved financial performance, and
competitive sourcing.
[3] For a more detailed discussion of these initiatives, see GAO,
Performance Budgeting: Past Initiatives Offer Insights for GPRA
Implementation, GAO/AIMD-97-46 (Washington, D.C.: Mar. 27, 1997).
[4] The term "program activity" refers to the listings shown in the
Program and Financing (P&F) schedule of the Appendix portion of the
Budget of the United States Government. Program activity structures are
intended to provide a meaningful representation of the operations
financed by a specific budget account usually by projects, activities,
or organization.
[5] GAO, Budget Account Structure: A Descriptive Overview, GAO-AIMD-95-
179 (Washington, D.C.: Sept. 18, 1995).
[6] OMB and other agencies use terms such as "full cost" and "total
budgetary resources" that in most cases refer to the alignment of
requested budget authority with programs and performance. However, some
may interpret these terms differently. Thus, when we use terms "full
cost" and "total budgetary resources" we place them in quotations.
[7] In this report "performance budget" refers to congressional budget
justifications that are structured around agency strategic and
performance goals and not to any process or approach in which resource
allocation decisions are being more generally linked to performance. We
place "performance budget" in quotations because different users may
interpret the term differently.
[8] Nine agencies were selected out of 26 federal departments and
agencies receiving scores in the Executive Branch Management Scorecard
in the President's fiscal year 2004 budget.
[9] The Executive Branch Management Scorecard is a traffic-light
grading system to report how well federal agencies are implementing the
PMA's five governmentwide initiatives.
[10] We selected two agencies--VA and NASA--within the group that made
or proposed changes to their appropriations account structure.
[11] When we initiated our study and chose agencies for review in May
2003, no agency had achieved a green light for "status"--or met all of
the administration's standards for success--in implementing the BPI
initiative. Since then, eight agencies have achieved green lights,
including four in our review--NASA, Labor, DOT, and SBA. All agencies
in our review have a green light for progress.
[12] Budget authority is authority provided by law to enter into
financial obligations that will result in immediate or future outlays
involving federal government funds.
[13] Congress, specifically the appropriations committees, establishes
appropriations accounts to facilitate congressional allocation and
oversight responsibilities. The President's budget generally reflects
these appropriations account structures, but the executive branch may
propose changes to the structure.
[14] Transfer authority is specifically authorized by law and allows
shifting all or part of the budget authority provided in one
appropriations account to another. Reprogramming is shifting funds
within an appropriations account to use them for different purposes
than those contemplated at the time of appropriation. Sometimes
committee oversight of reprogramming is prescribed by statute requiring
that the agencies either notify or consult with the appropriate
congressional committees when reprogramming funds that have certain
program impacts or are above a certain threshold.
[15] This refers to changes made up through EPA's fiscal year 2005
budget justification. For fiscal year 2006, EPA restructured its budget
justification so that it is organized by appropriations account and
program/project.
[16] Service pools are infrastructure capabilities that support
multiple programs and projects.
[17] House Committee on Appropriations Report 108-674, Departments of
Veterans Affairs and Housing and Urban Development, and Independent
Agencies Appropriations Bill, 2005 (Sept. 9, 2004), p. 91;
Senate Committee on Appropriations Report 108-353, Departments of
Veterans Affairs and Housing and Urban Development, and Independent
Agencies Appropriations Bill, 2005 (Sept. 21, 2004), p. 111, and H.R.
Conf. Rep. No. 108-792, p. 1597 (2004).
[18] House Committee on Appropriations Report 108-671, Departments of
Transportation and Treasury and Independent Agencies Appropriations
Bill, 2005 (Sept. 8, 2004), p. 5.
[19] According to our analysis, over 50 percent of EPA's budget is
dedicated to specific programs.
[20] GAO, Financial Management: FFMIA Implementation Necessary to
Achieve Accountability, GAO-03-31 (Washington, D.C.: Oct. 1, 2002).
[21] For purposes of this report, the term budget restructuring is used
to describe changes to budget structures and measurement to better
align budget resources with programs and performance. Budget
restructuring involves both (1) alignment: structural and format
changes to congressional budget justifications, and in some cases,
appropriations accounts to better align budget resources with programs
and performance; and (2) "full cost: " changes to the way certain
budget resources are distributed or measured to better reflect where
and when resources are consumed.
[22] GAO has engaged in constructive reviews of GPRA and various
executive branch efforts to improve performance and accountability.
See, for example, Results Oriented Government: GPRA Has Established a
Solid Foundation for Achieving Greater Results, GAO-04-38 (Washington,
D.C.: Mar. 10, 2004) and Performance Budgeting: Observations on the Use
of OMB's Program Assessment Rating Tool for the Fiscal Year 2004
Budget, GAO-04-174 (Washington D.C.: Jan. 30, 2004).
[23] The term "program activity" refers to the listings shown in the
Program and Financing (P&F) schedule of the Appendix portion of the
Budget of the United States Government. Program activity structures are
intended to provide a meaningful representation of the operations
financed by a specific budget account usually by projects, activities,
or organization.
[24] The Comptroller General of the United States, the Director of OMB,
and the Secretary of the Treasury established FASAB in October 1990 to
develop accounting standards and principles for the U.S. government. To
meet its unique mission, FASAB considers the information needs of the
public, Congress, managers, and other users of federal financial
information.
[25] Federal Accounting Standards Advisory Board, Statement of Federal
Financial Accounting Standards Number 4: Managerial Cost Accounting
Standards and Concepts (Washington, D.C.: July 31, 1995).
[26] GAO, Budget Account Structure: A Descriptive Overview, GAO/AIMD-95-
179 (Washington, D.C.: Sept. 18, 1995).
[27] The President's Management Agenda, Fiscal Year 2002, p. 28.
[28] Budget authority is authority provided by law to enter into
financial obligations that will result in immediate or future outlays
involving federal government funds. The basic forms of budget authority
include (1) appropriations, (2) borrowing authority, (3) contract
authority, and (4) authority to obligate and expend offsetting receipts
and collections. Budget authority may be classified by its duration (1-
year, multiple year, or no-year), by the timing of the legislation
providing the authority (current or permanent), by the manner of
determining the amount available (definite or indefinite), or by its
availability for new obligations.
[29] Office of Management and Budget, Analytical Perspectives, Budget
of the United States Government, Fiscal Year 2003 (Washington, D.C.:
February 2002).
[30] For a more detailed discussion of these initiatives, see GAO,
Performance Budgeting: Past Initiatives Offer Insights for GPRA
Implementation, GAO/AIMD-97-46 (Washington, D.C.: Mar. 27, 1997).
[31] GAO, Performance Budgeting: Initial Agency Experiences Provide a
Foundation to Assess Future Directions, GAO/T-AIMD/GGD-99-216
(Washington, D.C.: July 1, 1999).
[32] GAO, Managing for Results: Agency Progress in Linking Performance
Plans With Budgets and Financial Statements, GAO-02-236 (Washington,
D.C.: Jan. 4, 2002); and Performance Budgeting: Initial Experiences
Under the Results Act in Linking Plans with Budgets, GAO/AIMD/GGD-99-67
(Washington, D.C.: Apr. 12, 1999).
[33] GAO, Budget Account Structure: A Descriptive Overview, GAO-AIMD-95-
179 (Washington, D.C.: Sept. 18, 1995).
[34] The four orientations are a variation on a theme developed by
Allen Schick in "On the Road to PPB: The Stages of Budget Reform," in
Perspectives in Budgeting (Washington, D.C.: American Society for
Public Administration, 1987).
[35] According to FASAB No. 4, Managerial Cost Accounting Standards and
Concepts, examples of direct costs include: salaries and other benefits
for employees who work directly on the output, materials and supplies
used in the work, office space, and equipment and facilities that are
used exclusively to produce the output.
[36] According to FASAB No. 4, Managerial Cost Accounting Standards and
Concepts, examples of indirect costs include: general administrative
services; general research and technical support; security; rent; and
operations and maintenance costs for building, equipment, and
utilities.
[37] GAO, Performance Budgeting: Initial Agency Experiences Provide a
Foundation to Assess Future Directions, GAO/T-AIMD/GGD-99-216
(Washington, D.C.: July 1, 1999).
[38] For example, in federal budgeting, "budgetary resources" refers to
all available budget authority given to an agency allowing it to incur
obligations. Budgetary authority includes appropriations, borrowing and
contract authority, and authority to obligate and expend offsetting
receipts and collections.
[39] Office of Management and Budget, Analytical Perspectives, Budget
of the United States Government, Fiscal Year 1996 (Washington, D.C.:
February 1995), p. 100. Similar discussions were included in the
Analytical Perspectives for the fiscal years 1997 through 2004 budgets
as well.
[40] Circular A-11 provides, among other things, guidance on how to
formulate, develop, and submit materials required for OMB and
presidential review of agency budget requests.
[41] According to OMB, because the plan would be integrated into the
"performance budget," a separate annual performance plan would not be
needed to satisfy GPRA requirements.
[42] OMB, Circular No. A-11: Preparation, Submission, and Execution of
the Budget (Washington, D.C.: July 2003), p. 51-3 and OMB, Circular No.
A-11: Preparation, Submission, and Execution of the Budget (Washington,
D.C.: July 2004), p. 51-3.
[43] OMB, Circular No. A-11 (July 2003), p. 51-3 and OMB, Circular No.
A-11 (July 2004), p. 51-3.
[44] OMB, Circular No. A-11 (July 2002), p. 221-5.
[45] Office of Management and Budget, Analytical Perspectives, Budget
of the United States Government, Fiscal Year 2003 (Washington, D.C.:
February 2002), p. 10.
[46] Office of Management and Budget, Analytical Perspectives, Budget
of the United States Government, Fiscal Year 2003 (Washington, D.C.:
February 2002), p. 10.
[47] Congress, specifically the appropriations committees, establishes
appropriations accounts to facilitate congressional allocation and
oversight responsibilities. The President's budget generally reflects
these appropriations account structures but the executive branch may
propose changes to the structure.
[48] For a fuller description of the approaches taken by our case study
agencies, see apps. II thru V.
[49] While some agencies did not propose agencywide appropriations
account structure changes, some bureaus within such agencies proposed
changes in part reflecting broader policy or authorizing language
changes. For example, two bureaus within DOT--the Federal Transit
Administration (FTA) and the Federal Motor Carrier Safety
Administration (FMCSA)--proposed appropriations account structure
changes to more closely align budget resources with performance and to
reflect the administration's proposals to consolidate various programs.
Congress did not accept FTA or FMCSA's proposed appropriations account
structure for either fiscal year 2004 or fiscal year 2005.
[50] See app. III for a fuller comparison of VA's current and proposed
account structure.
[51] For the fiscal years 2004 and 2005 budgets, NASA's program
activities reflect its enterprises, or main programmatic units such as
Space Science, Earth Science, and Biological and Physical Research.
DOJ's program activities generally reflected its programs, activities,
or "decision units" -major program activities that better align with
DOJ's mission and strategic objectives. For example, within the Federal
Bureau of Investigation's Salaries and Expense account, the program
activities include National Security, Counterterrorism, Criminal
Enterprises and Federal Crimes, and Criminal Justice Services.
[52] For fiscal year 2005, Congress approved the proposed account
structure for DOJ's Drug Enforcement Agency to merge construction and
salaries and expenses (S&E) accounts.
[53] As noted in table 4, certain bureaus within Labor and DOT made
changes to their appropriations account structures or the program
activities within the accounts; however neither Labor nor DOT made
agencywide changes to its appropriations account structure.
[54] While SBA lists resources by appropriations account in its
congressional budget justification, the program descriptions are
included in the performance plan section of the congressional budget
justification that is organized by strategic goal. For fiscal year
2004, HUD submitted two congressional budget justifications--one in the
previously established program-based structure and the other in a
performance-based structure. Our analysis focuses on the performance-
based congressional budget justification because HUD did not resubmit a
performance-based justification for fiscal year 2005.
[55] This refers to changes made up through EPA's fiscal year 2005
budget justification. For fiscal year 2006, EPA restructured its budget
justification so that it was organized by appropriations account and
program/project. Information on strategic goals and objectives and the
resources associated with them was provided as a supplement.
[56] Themes were a key organizational unit in NASA's fiscal year 2004
and fiscal year 2005 congressional budget justifications. However,
during fiscal year 2004 (following the fiscal year 2005 budget
submission), NASA fundamentally restructured its organization to
position it to better implement the vision set forth in A Renewed
Spirit of Discovery, The President's Vision for U.S. Space Exploration
(National Aeronautics and Space Administration, February 2004). NASA's
fiscal year 2006 congressional budget justification reflected its new
organizational framework.
[57] National Aeronautics and Space Act of 1958 (Pub. Law 85-568) as
amended by Pub. Law 106-377, 114 Stat 1441, 1441A-57 (2000).
[58] For fiscal year 2004, the House Appropriations Committee allowed
reprogrammings between programs, activities, object classifications,
and elements up to $500,000 without notifying the committee. The Senate
Appropriations Committee allowed reprogrammings among programs,
activities, and elements only up to $250,000.
[59] Proposed appropriations language would limit the extent to which
VA managers could make trade-offs among cost components. For more
information, see app. III.
[60] Themes were a key organizational unit in NASA's fiscal year 2004
and 2005 budget justifications. However, during fiscal year 2004
(following the fiscal year 2005 budget submission), NASA fundamentally
restructured its organization to position it to better implement the
vision set forth in A Renewed Spirit of Discovery, The President's
Vision for U.S. Space Exploration (National Aeronautics and Space
Administration, February 2004). NASA's fiscal year 2006 budget
justification will reflect its new organizational framework.
[61] VA did not allocate construction resources to the Medical Research
budget.
[62] While some bureaus within Labor or DOT proposed changes to their
account structure or program activities, the departments as a whole did
not restructure their budgets. Congress did not accept DOT's proposed
appropriations account structure for either fiscal year 2004 or fiscal
year 2005. According to Labor officials, its proposed changes reflect
policy changes and were not part of this initiative.
[63] Earmarking is dedicating collections by law for a specific purpose
or program or dedicating appropriations for a particular purpose.
Legislative language may designate any portion of a lump-sum amount for
particular purposes. Earmarking may refer to statutory language (in
appropriations acts) or nonstatutory language (in reports accompanying
the acts).
[64] Authority specifically authorized by law that allows shifting all
or part of the budget authority provided in one appropriations account
to another.
[65] Reprogramming is shifting funds from one object to another within
an appropriations account to use them for different purposes than those
contemplated at the time of appropriation.
[66] The Antideficiency Act requires that agencies prescribe, by
regulation, a system of administrative control of funds.
[67] According to our analysis, over 50 percent of EPA's budget is
dedicated to specific programs.
[68] Center G&A (General and Administrative) costs are center costs
that cannot be related or traced to a specific project but benefit all
activities. Corporate G&A are costs related to the business operations
of NASA headquarters. While a share of these are allocated to program
budgets and program managers may question their allocation of these
costs during budget formulation, NASA's program managers cannot make
trade-offs between them and other resources once allocations have been
established.
[69] For fiscal year 2004, the House Appropriations Committee allowed
reprogrammings between programs, activities, object classifications,
and elements up to $500,000 without notifying the committee. The Senate
Appropriations Committee allowed reprogrammings among programs,
activities, and elements only up to $250,000 without notifying the
committee. NASA requested that appropriations committees change its
reprogramming guidelines to allow reprogramming within a theme and also
sought to increase its reprogramming level to $10 million; however,
Congress did not accept these changes.
[70] The Endocrine Disruption Screening Program is mandated to screen
and test chemicals to identify potential endocrine disruptors, or
substances that have adverse hormonal effects in humans.
[71] For fiscal year 2006, EPA reorganized its justification so that it
is organized by appropriations account and program/project.
[72] These appropriations accounts include: (1) National Cemetery
Administration, which funds the operations and maintenance of veterans
cemeteries; (2) Compensation and Pensions, which funds the burial
benefits provided, such as burial flags, graveliners, and headstones;
(3) General Operating Expenses, which funds VBA's burial-related
administrative expenses; (4) Grants for the Construction of State
Veterans Cemeteries; (5) Major Construction, which funds new national
cemeteries; and (6) Minor Construction.
[73] Office of Management and Budget, Analytical Perspectives: Budget
of the United States Government, Fiscal Year 2004 (February 2003).
[74] This flexibility would be limited by both reprogramming guidelines
and proposed appropriations language. VHA would have to notify Congress
for shifts in funds above reprogramming guidelines. Also, proposed
appropriations language for the medical care account included ceilings
for central administration and grant spending. As a result, VHA would
not be able to use construction or operations funding for central
administration or grants. OMB staff said this proposed appropriations
language was intended to address congressional concerns.
[75] The Antideficiency Act, among other things, prohibits making
expenditures or incurring obligations in excess of amounts available in
appropriations accounts unless specifically authorized by law.
[76] Transfer authority of up to 10 percent in the first year, up to 5
percent in the next year, and zero percent in the third year was
requested among the following accounts: Compensation, Pensions,
Insurance, Education, Vocational Rehabilitation and Employment (VR&E),
and Burial.
[77] To address staffing concerns, NASA issued a policy statement
describing how unexpected staffing needs would be met. For more
information about this issue, see app. V.
[78] Senate Committee on Appropriations Report 108-143, Departments of
Veterans Affairs and Housing and Urban Development, and Independent
Agencies Appropriations Bill, 2004 (Sept. 5, 2003), p. 8; and Senate
Committee on Appropriations Report 108-353, Departments of Veterans
Affairs and Housing and Urban Development, and Independent Agencies
Appropriations Bill, 2005 (Sept. 21, 2004), p. 8.
[79] House Committee on Appropriations Report 108-576, Departments of
Commerce, Justice, and State, the Judiciary, and Related Agencies
Appropriations Bill, Fiscal Year 2005 (July 1, 2004), pp. 7-8.
[80] House Committee on Appropriations Report 108-188, Departments of
Labor, Health and Human Services, and Education and Related Agencies
Appropriation Bill 2004 (July 8, 2003), p. 8.
[81] House Committee on Appropriations Report 108-674, Departments of
Veterans Affairs and Housing and Urban Development, and Independent
Agencies Appropriations Bill, 2005 (Sept. 9, 2004), p. 91; Senate
Committee on Appropriations Report 108-353, Departments of Veterans
Affairs and Housing and Urban Development, and Independent Agencies
Appropriations Bill, 2005 (Sept. 21, 2004), p. 111; and H.R. Conf. Rep.
No. 108-792, p. 1597 (2004).
[82] In addition, for DOT, Congress did not accept the Federal Transit
Administration's (FTA) and the Federal Motor Carrier Safety
Administration's (FMCSA) proposed appropriations account structures for
either fiscal year 2004 or 2005.
[83] The House committee recommended an alternative account structure
that included three separate appropriations accounts for the Medical
Care program: (1) Medical services, (2) Medical facilities, and (3)
Medical administration. According to the House committee report, the
alternative account structure "will provide a better accounting of
appropriated and receipt funds and will lead to better oversight of the
costs and expenditures of VHA." House Committee on Appropriations
Report 108-235, Departments of Veterans Affairs and Housing and Urban
Development, And Independent Agencies Appropriations Bill, 2004 (July
24, 2003), p. 9.
[84] House Committee on Appropriations Report 108-235, Departments of
Veterans Affairs and Housing and Urban Development, and Independent
Agencies Appropriations Bill, 2004 (July 24, 2003), p. 4.
[85] House Committee on Appropriations Report 108-674, Departments of
Veterans Affairs and Housing and Urban Development, and Independent
Agencies Appropriations Bill, 2005 (Sept. 9, 2004), p. 4.
[86] For fiscal year 2005, Congress approved the proposed account
structure for DOJ's Drug Enforcement Agency.
[87] House Committee on Appropriations Report 108-671, Departments of
Transportation and Treasury and Independent Agencies Appropriations
Bill, 2005 (Sept. 8, 2004), p. 8.
[88] House Committee on Appropriations Report 108-671, Departments of
Transportation and Treasury and Independent Agencies Appropriations
Bill, 2005 (Sept. 8, 2004), p. 22.
[89] House Committee on Appropriations Report 108-235, Departments of
Veterans Affairs and Housing and Urban Development, and Independent
Agencies Appropriations Bill, 2004 (July 24, 2003), p. 79.
[90] House Committee on Appropriations Report 108-674, Departments of
Veterans Affairs and Housing and Urban Development, and Independent
Agencies Appropriations Bill, 2005 (Sept. 9, 2004), p. 75.
[91] Senate Committee on Appropriations Report 108-81, Department of
Labor, Health and Human Services, and Education and Related Agencies
Appropriation Bill 2004 (June 26, 2003), p. 41.
[92] Senate Committee on Appropriations Report 108-345, Departments of
Labor, Health and Human Services, and Education, and Related Agencies
Appropriation Bill 2004 (Sept. 15, 2004), p. 34.
[93] House Committee on Appropriations Report 108-674, Departments of
Veterans Affairs and Housing and Urban Development, and Independent
Agencies Appropriations Bill, 2005 (Sept. 9, 2004), p. 4.
[94] House Committee on Appropriations Report 108-671, Departments of
Transportation and Treasury and Independent Agencies Appropriations
Bill, 2005 (Sept. 8, 2004), p. 22.
[95] GAO, Performance Budgeting: States' Experiences Can Inform Federal
Efforts, GAO-05-215 (Washington, D.C.: Feb. 28, 2005).
[96] House Committee on Appropriations Report 108-576, Departments of
Commerce, Justice, and State, The Judiciary, and Related Agencies
Appropriations Bill, Fiscal Year 2005 (July 1, 2004), p. 8.
[97] House Committee on Appropriations Report 108-671, Departments of
Transportation and Treasury and Independent Agencies Appropriations
Bill, 2005 (Sept. 8, 2004), pp. 8, 22.
[98] House Committee on Appropriations Report 108-671, Departments of
Transportation and Treasury and Independent Agencies Appropriations
Bill, 2005 (Sept. 8, 2004), p. 5.
[99] Office of Management and Budget, Analytical Perspectives, Budget
of the United States Government, Fiscal Year 2003 (Washington, D.C.:
February 2002), p. 10.
[100] GAO has also reported that NASA program managers need systems
with the ability to integrate these data with contract schedule
information to monitor progress on the contract. See Business
Modernization: Improvements Needed in Management of NASA's Integrated
Financial Management Program, GAO-03-507 (Washington, D.C.: Apr. 30,
2003).
[101] House Committee on Appropriations Report 108-235, Departments of
Veterans Affairs and Housing and Urban Development, and Independent
Agencies Appropriations Bill, 2004 (July 24, 2003), p. 4.
[102] Senate Committee on Appropriations Report 108-81, Departments of
Labor, Health and Human Services, and Education, and Related Agencies
Appropriation Bill, 2004 (June 26, 2003), p. 41.
[103] According to our analysis, over 50 percent of EPA's budget is
dedicated to specific programs.
[104] GAO, Financial Management: FFMIA Implementation Necessary to
Achieve Accountability, GAO-03-31 (Washington, D.C.: Oct. 1, 2002).
[105] GAO, Performance Budgeting: Observations on the Use of OMB's
Program Assessment Rating Tool for the Fiscal Year 2004 Budget, GAO-04-
174 (Washington, D.C.: Jan. 30, 2004).
[106] The Antideficiency Act, among other things, prohibits making
expenditures or incurring obligations in excess of amounts available in
appropriations accounts unless specifically authorized by law.
[107] The PMA, by focusing on 14 targeted areas (5 mutually reinforcing
governmentwide goals and 9 program initiatives), seeks to improve the
performance and management of the government.
[108] Circular A-11 provides, among other things, guidance on how to
formulate, develop, and submit materials required for OMB and
presidential review of agency budget requests.
[109] However, in some cases, agencies began budget restructuring prior
to fiscal year 2004. In those cases, such as the Environmental
Protection Agency (EPA), we looked at earlier account structures and
justifications.
[110] Budget of the United States Government, Fiscal Year 2004,
Executive Office of the President, Office of Management and Budget
(February 2003), p. 45.
[111] "Standards for Success" were defined by the President's
Management Council and discussed with experts throughout government and
academe, including the National Academy of Public Administration.
[112] At the time of our agency selection, no agency had received a
"green light" for status on the budget and performance integration
initiative. Since then, eight agencies have achieved green lights,
including four in our review--NASA, Labor, DOT, and SBA. All agencies
in our review have a green light for progress.
[113] We eliminated the Department of Defense and Social Security
Administration because we did not identify significant changes to their
appropriations account structure or congressional budget
justifications.
[114] For HUD, we only reviewed its fiscal year 2004 budget because it
did not submit a "performance budget" to Congress for fiscal year 2005.
[115] Due to scheduling conflicts representatives from SBA did not
attend the panel sessions.
[116] Term used by Labor in its fiscal years 2004 and 2005
congressional budget justifications. "Total budgetary resources"
includes direct program funds, other funds appropriated within Labor
(e.g., IT crosscut, legal services, and other indirect costs) and
additional other resources available (e.g., reimbursements and user
fees) associated with a particular program or project.
[117] Labor's bureaus and offices are the Employment and Training
Administration (ETA), the Employee Benefits Security Administration
(EBSA), the Pension Benefit Guaranty Corporation (PBGC), the Employment
Standards Administration (ESA), the Occupational Safety and Health
Administration (OSHA), the Mine Safety and Health Administration
(MSHA), the Bureau of Labor Statistics (BLS), the Office of the
Solicitor, Bureau of International Labor Affairs, Office of the
Assistant Secretary for Administration and Management, Women's Bureau,
Office of the Chief Financial Officer, Veterans' Employment and
Training Service, Office of Disability Employment Policy, and Office of
the Inspector General.
[118] The two performance goals are: (1) by 2008, reduce the rate of
workplace fatalities by 15 percent from the baseline; and (2) by 2008,
reduce the rate of workplace injuries and illnesses by 20 percent from
the baseline.
[119] BLS, EBSA, PBGC, OSHA, and MSHA are all funded through a single
Salaries and Expense (S&E) appropriations account. Although ESA is
funded through eight appropriations accounts--S&E, Special Benefits,
Energy Employees Occupational Illness Compensation Fund (EEOICF),
Administrative Expenses for EEOICF, Special Benefits for Disabled Coal
Miners, Panama Canal Commission Compensation Fund, Black Lung
Disability Trust Fund, and Special Workers' Compensation Expenses--
ESA's primary administrative functions are funded through the S&E
account. ETA, however, is funded through multiple accounts, with a
separate program administration account.
[120] ETA officials said that consolidating their program activities,
which are generally organized by population (e.g., Youth Activities,
Adult Activities), would provide them with more flexibility to make
trade-offs and better serve different populations.
[121] Labor provides net costs, which are calculated on an accrued
basis, to outcome goals in its financial statements. Resources are
defined differently for financial management purposes than for budget
purposes.
[122] The fiscal year 2005 congressional budget justification followed
the same general structure as the fiscal year 2004 justification.
[123] While no departmentwide appropriations account structure changes
were made, the Pension Benefit Guarantee Corporation (PBGC) made and
the Employment Training Administration (ETA) proposed to make some
account structure changes. For example, in fiscal year 2004, the PBGC
divided the "Services related to terminations" program activity into
"Pension insurance activities" and "Pension Plan terminations" to more
accurately reflect their business activities within its PBGC Fund
appropriations account. ETA proposed to consolidate Adult, Dislocated
Worker, and Employment Service State Grants within the Training and
Employment Services appropriations account. This corresponds with the
changes to authorizing legislation being proposed by the administration
to consolidate these programs into a single block grant.
[124] Labor directed bureaus to include the budget authority and FTE
for all other administrative or program costs not captured in program
and performance goal resource tables in "Other Program Mandates." This
category replaced the category, "Mission Critical," which Labor used
for the fiscal year 2004 congressional budget justification. Labor
defined "Mission Critical" as "the budget authority and FTE for the
remainder of the budget activity, i.e., those resources not
specifically identified with a performance goal."
[125] However, if using common measures across government, Labor
officials said that "full cost" should be consistently applied.
[126] Although this process was initiated in BLS prior to the fiscal
year 2004 performance budget, it is nonetheless worth noting that the
allocation of indirect resources to programs and performance has led to
discussion among the bureau and program managers over proper cost
allocations.
[127] The two new goals were "Improving Customer Satisfaction by
Decreasing the Average Number of Days to Conclude a Complaint" and
"Ensuring Timely and Accurate Prevailing Wage Determinations." Wage and
Hour Division officials also credited PART with the development of
these goals.
[128] BLS officials did say that knowing their allocation of the
department's Working Capital Fund (WCF) may be useful for future budget
planning because program managers can plan for the resources they will
require. The WCF includes financial and administrative services, field
services, human resource services, and telecommunications, as well as
an investment in reinvention fund and non-Labor reimbursements.
[129] House Committee on Appropriations Report 108-235, Departments of
Veterans Affairs and Housing and Urban Development, and Independent
Agencies Appropriations Bill, 2004 (July 24, 2003), p. 4.
[130] Medical Administration and Miscellaneous Operating Expenses.
[131] VA did not allocate construction resources to the Medical
Research budget.
[132] These appropriations accounts are: (1) National Cemetery
Administration, which funds the operations and maintenance of veterans
cemeteries; (2) Compensation and Pensions, which funds the burial
benefits provided, such as burial flags, graveliners, and headstones;
(3) General Operating Expenses, which funds VBA's burial-related
administrative expenses; (4) Grants for the Construction of State
Veterans Cemeteries; (5) Major Construction, which funds new national
cemeteries; and (6) Minor Construction.
[133] VA would have to consult or notify appropriations committees of
funding shifts among programs or activities above certain dollar
thresholds depending on its specific reprogramming guidelines.
[134] The Antideficiency Act, among other things, prohibits making
expenditures or incurring obligations in excess of amounts available in
appropriations accounts unless specifically authorized by law.
[135] This report focused on budget restructuring efforts up through
the fiscal year 2005 budget. EPA restructured its fiscal year 2006
budget in response to congressional direction so that it is organized
by appropriations account and program/project. Information on strategic
goals and objectives is provided as a supplement.
[136] EPA's offices are: (1) Office of Air and Radiation; (2) Office of
Water; (3) Office of Prevention, Pesticides and Toxic Substances; (4)
Office of Solid Waste and Emergency Response; (5) Office of Enforcement
& Compliance Assurance; (6) Office of Research and Development; (7)
Office of Environmental Information; (8) Office of Administration and
Resources Management; (9) Chief Financial Officer; (10) Office of
General Counsel; (11) Office of International Affairs; (12) Office of
the Administrator; and (13) Office of Inspector General.
[137] The Budget of the United States Government, Fiscal Year 2005--
Appendix, shows that this requested amount includes, for example, about
$1.3 billion for the Superfund account, and $2.3 billion for the
Environmental Programs and Management account.
[138] EPA has four other strategic goals, including: (1) Clean and Safe
Water, (2) Land Preservation and Restoration, (3) Healthy Communities
and Ecosystems, and (4) Compliance and Environmental Stewardship.
[139] Program/projects are defined as major program areas of
responsibility and describe "what" EPA does based on specific statutory
authority (programs) or "what" significant tasks or problems the agency
is addressing (projects).
[140] The PBAA had four stated purposes: (1) to develop goals and
objectives for accomplishing the agency's mission, (2) to make better
use of scientific information related to human health and environmental
risks in setting priorities, (3) to improve the link between long-term
planning and annual resource allocation, and (4) to develop a new
management system to assess accomplishments and provide feedback for
making future decisions.
[141] Setting Priorities, Getting Results: A New Direction for the
Environmental Protection Agency, National Academy of Public
Administration, 1995. This report provides recommendations to EPA and
Congress for strengthening EPA's management, including how EPA
allocates its budget and how its managers think about the programs,
priorities, and responsibilities.
[142] According to the fiscal year 2004 House and Senate Appropriations
Committee reports, the reprogramming threshold is $500,000, except for
(1) in the Environmental Programs and Management account, up to
$1,000,000 may be reprogrammed with prior congressional approval; and,
(2) in the State and Tribal Assistance Grants account, reprogramming
for performance partnership grants funds is exempt.
[143] In its fiscal year 2004 budget justification, some indirect costs
were captured in separate mission-support goals (e.g., Effective
Management and Sound Science). In the fiscal year 2005 budget
justification, EPA allocated these resources to its five mission-
related goals and their objectives.
[144] EPA officials said that, in general, indirect resources are
allocated to strategic objectives based on supporting program/projects
FTE levels.
[145] EPA received a "green light" for financial performance on the
Executive Branch Management Scorecard for the fiscal year 2005 budget.
According to OMB, EPA demonstrated the use of financial and performance
information for day-to-day decision making.
[146] The new IFMS structure includes a Program Results Code organized
by goal, objective, National Program Manager, program/project, and
activity. Activities describe how EPA conducts its work.
[147] National Aeronautics and Space Administration 2003 Strategic
Plan, p.2 .
[148] Exploration Systems was created in fiscal year 2005 to better
reflect the new vision for space exploration.
[149] National Aeronautics and Space Administration, The Vision for
Space Exploration (February 2004).
[150] National Aeronautics and Space Act of 1958 (Pub. Law 85-568) as
amended by Pub. Law 106-377, 114 Stat 1441, 1441A-57 (2000).
[151] For fiscal year 2004, the House Appropriations Committee allowed
reprogrammings between programs, activities, object classifications,
and elements up to $500,000 without notifying the committee. The Senate
Appropriations Committee allowed reprogrammings among programs,
activities, and elements only up to $250,000.
[152] NASA officials said, however, that because reprogramming guidance
is essentially tied to any line item in the budget justification,
aggregating program elements and providing less detailed information in
essence changed the interpretation of the reprogramming guidance. The
implications of this change are discussed in more detail later in this
appendix.
[153] According to NASA officials, centers have "investment accounts"
that fund nonprogram Construction of Facilities and research and
development. However, officials noted center managers face pressures to
keep Center G&A down in order to compete for programs to operate at
their center.
[154] GAO has reported that NASA has had long-standing contracting
issues in part because it lacked accurate and reliable information on
contract spending. See Business Modernization: Improvements Needed in
Management of NASA's Integrated Financial Management Program, GAO-03-
507 (Washington, D.C.: Apr. 30, 2003).
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