21st Century Challenges
Performance Budgeting Could Help Promote Necessary Reexamination Gao ID: GAO-05-709T June 14, 2005As part of its work to improve the management and performance of the federal government, GAO monitors progress and continuing challenges in performance budgeting and the Administration's related initiatives, such as the Program Assessment Rating Tool (PART). In light of the nation's long-term fiscal imbalance and other emerging 21st century challenges, we have also reported that performance budgeting can help facilitate a needed reexamination of what the federal government does, how it does it, who does it, and how it is financed in the future. GAO remains committed to working with Congress and the Administration to help address these important and complex issues.
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--including the nation's long-term fiscal imbalance--drive the need to reexamine what the federal government does, how it does it, who does it, and how it gets financed. This will mean bringing a variety of tools and approaches to bear on the situation. Performance budgeting holds promise as a means for facilitating a reexamination effort. It can help enhance the government's capacity to assess competing claims for federal dollars by arming decision makers with better information both on the results of individual programs as well as on entire portfolios of tools and programs addressing common goals. However, it is important to remember that in a political process, performance information should be one, but will not be the only, factor in decision making. Existing performance budgeting efforts, such as PART, provide a means for facilitating a baseline review of certain federal policies, programs, functions, and activities. Successful application of these initiatives in this reexamination process rests on building a supply of credible and reliable performance information, encouraging demand for that information by garnering congressional buy-in on what is measured and how it is presented, and developing a comprehensive and crosscutting approach to assessing the performance of all major federal programs and policies encompassing spending, tax expenditures, and regulatory actions. Through the President's Management Agenda and its related initiatives, including PART, the Administration has taken important steps in the right direction by calling attention to successes and needed improvements in federal management and performance. However, it is not clear that PART has had any significant impact on authorization, appropriations, and oversight activities to date. It will only be through the continued attention of the executive branch and Congress that progress can be accelerated and sustained. Such an effort can strengthen the budget process itself and provide a valuable tool to facilitate a fundamental reexamination of the base of government. We recognize that this process will not be easy. Furthermore, given the wide range of programs and issues covered, the process of rethinking government programs and activities could take a generation or more to complete.
GAO-05-709T, 21st Century Challenges: Performance Budgeting Could Help Promote Necessary Reexamination
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Testimony:
Before the Subcommittee on Federal Financial Management, Government
Information, and International Security, Committee on Homeland Security
and Governmental Affairs, U.S. Senate:
For Release on Delivery Expected at 2:00 p.m. EDT Tuesday, June 14,
2005:
21st Century challenges:
Performance Budgeting Could Help Promote Necessary Reexamination:
Statement of David M. Walker Comptroller General of the United States:
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-709T]:
GAO Highlights:
Highlights of GAO-05-709T, a testimony before the Chairman,
Subcommittee on Federal Financial Management, Government Information,
and International Security, Committee on Homeland Security and
Governmental Affairs, U.S. Senate:
Why GAO Did This Study:
As part of its work to improve the management and performance of the
federal government, GAO monitors progress and continuing challenges in
performance budgeting and the Administration‘s related initiatives,
such as the Program Assessment Rating Tool (PART). In light of the
nation‘s long-term fiscal imbalance and other emerging 21st century
challenges, we have also reported that performance budgeting can help
facilitate a needed reexamination of what the federal government does,
how it does it, who does it, and how it is financed in the future. GAO
remains committed to working with Congress and the Administration to
help address these important and complex issues.
What GAO Found:
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”including the nation‘s long-term fiscal
imbalance”drive the need to reexamine what the federal government does,
how it does it, who does it, and how it gets financed. This will mean
bringing a variety of tools and approaches to bear on the situation.
Performance budgeting holds promise as a means for facilitating a
reexamination effort. It can help enhance the government‘s capacity to
assess competing claims for federal dollars by arming decision makers
with better information both on the results of individual programs as
well as on entire portfolios of tools and programs addressing common
goals. However, it is important to remember that in a political
process, performance information should be one, but will not be the
only, factor in decision making.
Existing performance budgeting efforts, such as PART, provide a means
for facilitating a baseline review of certain federal policies,
programs, functions, and activities. Successful application of these
initiatives in this reexamination process rests on
* building a supply of credible and reliable performance information,
* encouraging demand for that information by garnering congressional
buy-in on what is measured and how it is presented, and
* developing a comprehensive and crosscutting approach to assessing the
performance of all major federal programs and policies encompassing
spending, tax expenditures, and regulatory actions.
Through the President‘s Management Agenda and its related initiatives,
including PART, the Administration has taken important steps in the
right direction by calling attention to successes and needed
improvements in federal management and performance. However, it is not
clear that PART has had any significant impact on authorization,
appropriations, and oversight activities to date. It will only be
through the continued attention of the executive branch and Congress
that progress can be accelerated and sustained. Such an effort can
strengthen the budget process itself and provide a valuable tool to
facilitate a fundamental reexamination of the base of government. We
recognize that this process will not be easy. Furthermore, given the
wide range of programs and issues covered, the process of rethinking
government programs and activities could take a generation or more to
complete.
What GAO Recommends:
We are not making any new recommendations in this testimony. However,
as we have previously stated, governmentwide strategic and performance
plans could provide a framework for reexamining existing federal
programs and policies. These plans could help decision makers address
critical federal management issues and articulate the role, goals,
objectives, and effectiveness of the federal government. Obtaining
congressional buy-in on what to measure is especially important given
Congress‘s constitutional role in the budget process. We have also
suggested that Congress consider the need to develop a more systematic
vehicle for communicating its top performance concerns and priorities.
www.gao.gov/cgi-bin/getrpt?GAO-05-709T.
To view the full product, including the scope and methodology, click on
the link above. For more information, contact Paul L. Posner at (202)
512-9573 or posnerp@gao.gov.
[End of section]
Mr. Chairman and Members of the Subcommittee:
I am pleased to be here today to discuss performance budgeting and the
Office of Management and Budget's (OMB) Program Assessment Rating Tool
(PART).[Footnote 1] Given current trends and challenges facing the
nation--including the federal government's long-term fiscal imbalance-
-it is critical to reexamine the relevancy of federal programs and
their fit with national priorities, while maximizing program
performance within current and expected resource levels. The
implementation of performance budgeting approaches can be an important
step to help achieve this goal.
As Congress is well aware, our nation is currently on an unsustainable
fiscal path. Long-term budget simulations by GAO,[Footnote 2] the
Congressional Budget Office (CBO), and others show that we face a large
and growing long-term structural deficit due primarily to known
demographic trends and rising health care costs. Continuing on this
unsustainable fiscal path will gradually erode, if not suddenly damage,
our economy, our standard of living, and ultimately our national
security. All reasonable simulations indicate that the problem is too
big to be solved by economic growth alone or by making modest changes
to existing spending and tax policies. Rather, a fundamental
reexamination of major spending and tax policies and priorities will be
important to recapture our fiscal flexibility and ensure that our
programs and priorities respond to key emerging social, economic, and
security changes and challenges.
Performance budgeting holds promise as part of a process of reexamining
the base of the federal government. It can help enhance the
government's capacity to assess competing claims for federal dollars by
arming decision makers with better information both on the results of
individual programs as well as on entire portfolios of policies,
programs, and other tools designed to address common goals. However, it
is also important to remember that in a political process performance
information is likely to be one, but not the only, factor in budgetary
decision making. In other words, performance information can change the
terms of debate but it will not necessarily determine the ultimate
decision.
Existing performance budgeting efforts, such as the Government
Performance and Results Act of 1993 (GPRA)[Footnote 3] and PART,
provide a foundation for a baseline review of existing federal
policies, programs, functions, and activities. We recognize that this
will not be easy. Reforming programs and activities leads to winners
and losers, notwithstanding demonstrated shortfalls in performance and
design. Given prior experiences and political realities, there is
little real "low-hanging fruit" in the federal budget.
Today I will touch first on the need for a fundamental reexamination of
government given our nation's long-term fiscal challenge. Then I will
turn to and discuss the important role of performance budgeting in any
such reexamination. The successful application of performance budgeting
in this reexamination process rests on:
* continuing to build on the legacy of GPRA by improving the
reliability and credibility of performance information and increasing
program evaluation capacity;
* encouraging demand for that information by garnering stakeholder buy-
in--particularly from Congress--on what to measure and how to present
this information, since only then will it be linked to the
congressional authorization, appropriations, and oversight processes;
and:
* developing a comprehensive, crosscutting approach to assessing the
performance of all programs--including tax expenditures--relevant to
common goals.
This testimony draws upon our wide-ranging work on GPRA and federal
budget and performance integration and on information in the
President's Budget of the U.S. Government, Fiscal Year 2006,
specifically the budget and performance integration initiative of the
President's Management Agenda (PMA). We conducted our work in
accordance with generally accepted government auditing standards.
Long-term Fiscal Challenge Provides Reexamination Impetus:
As I noted, known demographic trends and rising health care costs are
major drivers of the nation's large and growing structural deficits.
The nation cannot ignore this fiscal pressure--it is not a matter of
whether the nation deals with the fiscal gap, but how and when. GAO's
long-term budget simulations illustrate the magnitude of this fiscal
challenge. Figures 1 and 2 show these simulations under two different
sets of assumptions. Figure 1 uses the CBO January 2005 baseline
through 2015. As required by law, that baseline assumes no changes in
current law, that discretionary spending grows with inflation through
2015, and that all tax cuts currently scheduled to expire are permitted
to expire. In Figure 2, two assumptions about that first 10 years are
changed: (1) discretionary spending grows with the economy rather than
with inflation and (2) all tax cuts currently scheduled to expire are
made permanent. In both simulations discretionary spending is assumed
to grow with the economy after 2015 and revenue is held constant as a
share of Gross Domestic Product (GDP) at the 2015 level. Also in both
simulations long-term Social Security and Medicare spending are based
on the 2005 trustee's intermediate projections, and we assume that
benefits continue to be paid in full after the trust funds are
exhausted. Long-term Medicaid spending is based on CBO's December 2003
long-term projections under midrange assumptions.
Figure 1: Composition of Spending as a Share of GDP under Baseline
Extended:
[See PDF for image] - graphic text:
Line/Stacked Bar combo chart with 4 groups, 1 line (Revenue) and 4 bars
per group.
2004;
All other spending; Percent of GDP: 10.4%;
Medicare & Medicaid; Percent of GDP: 3.8%;
Social Security; Percent of GDP: 4.3%;
Net interest; Percent of GDP: 1.4%;
Revenue; Percent of GDP: 16.3%.
2015;
All other spending; Percent of GDP: 7.6%;
Medicare & Medicaid; Percent of GDP: 5.2%;
Social Security; Percent of GDP: 4.7%;
Net interest; Percent of GDP: 1.5%;
Revenue; Percent of GDP: 19.6%.
2030;
All other spending; Percent of GDP: 7.6%;
Medicare & Medicaid; Percent of GDP: 8.1%;
Social Security; Percent of GDP: 6.6%;
Net interest; Percent of GDP: 2.1%;
Revenue; Percent of GDP: 19.6%.
2040;
All other spending; Percent of GDP: 7.6%;
Medicare & Medicaid; Percent of GDP: 9.9%;
Social Security; Percent of GDP: 7.2%;
Net interest; Percent of GDP: 4.8%;
Revenue; Percent of GDP: 19.6%.
Source: GAO‘s March 2005 analysis.
Notes: In addition to the expiration of tax cuts, revenue as a share of
GDP increases through 2015 due to (1) real bracket creep, (2) more
taxpayers becoming subject to the AMT, and (3) increased revenue from
tax-deferred retirement accounts. After 2015, revenue as a share of GDP
is held constant.
[End of figure] - graphic text:
Figure 2: Composition of Spending as a Share of GDP Assuming
Discretionary Spending Grows with GDP after 2005 and All Expiring Tax
Provisions Are Extended:
[See PDF for image] -graphic text:
Line/Stacked Bar combo chart with 4 groups, 1 line (Revenue) and 4 bars
per group.
2004;
Net interest: 1.4%;
Social Security: 4.3%;
Medicare & Medicaid: 3.8%;
All other spending: 10.4%;
Revenue: 16.3%.
2015;
Net interest: 2.8%;
Social Security: 4.7%;
Medicare & Medicaid: 5.2%;
All other spending: 9.7%;
Revenue: 17.4.
2030;
Net interest: 7.7%;
Social Security: 6.7%;
Medicare & Medicaid: 8%;
All other spending: 9.7%;
Revenue: 17.4%.
2040;
Net interest: 15.7%;
Social Security: 7.9%;
Medicare & Medicaid: 9.7%;
All other spending: 9.7%;
Revenue: 17.4%.
Source: GAO‘s March 2005 analysis.
Notes: Although expiring tax provisions are extended, revenue as a
share of GDP increases through 2015 due to (1) real bracket creep, (2)
more taxpayers becoming subject to the AMT, and (3) increased revenue
from tax-deferred retirement accounts. After 2015, revenue as a share
of GDP is held constant.
[End of figure]
As these simulations illustrate, absent policy changes on the spending
and/or revenue side of the budget, the growth in spending on federal
retirement and health entitlements will encumber an escalating share of
the government's resources. Indeed, when we assume that recent tax
reductions are made permanent and discretionary spending keeps pace
with the economy, our long-term simulations suggest that by 2040
federal revenues may be adequate to pay little more than interest on
the federal debt. Neither slowing the growth in discretionary spending
nor allowing the tax provisions to expire--nor both together--would
eliminate the imbalance. Although federal tax policies will likely be
part of any debate about our fiscal future, making no changes to Social
Security, Medicare, Medicaid, and other drivers of the long-term fiscal
gap would require at least a doubling of federal taxes in the future--
and that seems both unrealistic and inappropriate.
These challenges would be difficult enough if all we had to do is fund
existing commitments. But as the nation continues to change in
fundamental ways, a wide range of emerging needs and demands can be
expected to compete for a share of the budget pie. Whether national
security, transportation, education, or public health, a growing
population will generate new claims for federal actions on both the
spending and tax sides of the budget.
Although demographic shifts and rising health care costs drive the long-
term fiscal outlook, they are not the only forces at work that require
the federal government to rethink its role and entire approach to
policy design, priorities, and management. Other important forces are
working to reshape American society, our place in the world, and the
role of the federal government. These include evolving defense and
homeland security policies, increasing global interdependence, and
advances in science and technology. In addition, the federal government
increasingly relies on new networks and partnerships to achieve
critical results and develop public policy, often including multiple
federal agencies, domestic and international non-or quasi-government
organizations, for-profit and not-for-profit contractors, and state and
local governments. If government is to effectively address these
trends, it cannot accept all of its existing programs, policies, and
activities as "givens." Many of our programs were designed decades ago
to address earlier challenges. Outmoded commitments and operations
constitute an encumbrance on the future that can erode the capacity of
the nation to better align its government with the needs and demands of
a changing world and society. Accordingly, reexamining the base of all
major existing federal spending and tax programs, policies, and
activities by reviewing their results and testing their continued
relevance and relative priority for our changing society is an
important step in the process of assuring fiscal responsibility and
facilitating national renewal.[Footnote 4]
A periodic reexamination offers the prospect of addressing emerging
needs by weeding out programs and policies that are redundant,
outdated, or ineffective. Those programs and policies that remain
relevant could be updated and modernized by improving their targeting
and efficiency through such actions as redesigning allocation and cost-
sharing provisions, consolidating facilities and programs, and
streamlining and reengineering operations and processes. The tax
policies and programs financing the federal budget can also be reviewed
with an eye toward both the overall level of revenues that should be
raised as well as the mix of taxes that are used.
We recognize that taking a hard look at existing programs and carefully
reconsidering their goals and financing are challenging tasks.
Reforming programs and activities leads to winners and losers,
notwithstanding demonstrated shortfalls in performance and design.
Moreover, given the wide range of programs and issues covered, the
process of rethinking government programs and activities may take a
generation to unfold.
We are convinced, however, that reexamining the base offers compelling
opportunities to both redress our current and projected fiscal
imbalance while better positioning government to meet the new
challenges and opportunities of this new century. In this regard, the
management and performance reforms enacted by Congress in the past 15
years have provided new tools to gain insight into the financial,
program, and management performance of federal agencies and activities.
The information being produced as a result can provide a strong basis
to support the needed review, reassessment, and reprioritization
process.
Current Performance Budgeting Initiatives Hold Promise for Reexamining
the Base:
While this kind of oversight and reexamination is never easy, it is
helped by the availability of credible performance information focusing
on the outcomes achieved with budgetary resources and other tools.
Performance budgeting can help enhance the government's capacity to
assess competing claims in the budget by arming budgetary decision
makers with better information on the results of both individual
programs as well as entire portfolios of tools and programs addressing
common outcomes. To facilitate application of performance budgeting in
reexamination, it is useful to understand the current landscape. Going
forward, decision makers need a road map--grounded in lessons learned
from past initiatives--that defines what successful performance
budgeting would look like and identifies the key elements and potential
pitfalls on the critical path to success. Central to this is an
understanding of what is meant by success in performance budgeting and
the key factors that influence that success.
Current Performance Budgeting Initiatives Are Grounded in Past Efforts:
Performance budgeting efforts are not new at the federal level. In the
1990s, Congress and the executive branch drew on lessons learned from
50 years of efforts to link resources to results to lay out a statutory
and management framework that provides the foundation for strengthening
government performance and accountability. With GPRA as its
centerpiece, these reforms also laid the foundation for performance
budgeting by establishing infrastructures in the agencies to improve
the supply of information on performance and costs. GPRA is designed to
inform congressional and executive decision making by providing
objective information on the effectiveness and efficiency of federal
programs and spending. A key purpose of GPRA is to create closer and
clearer links between the process of allocating scarce resources and
the expected results to be achieved with those resources. Importantly,
GPRA requires both a connection to the structures used in congressional
budget presentations and consultation between the executive and
legislative branches on agency strategic plans. Because these
requirements are grounded in statute, this gives Congress an oversight
stake in GPRA's success.[Footnote 5] Over a decade after its enactment,
GPRA has succeeded in expanding the supply of performance information
and institutionalizing a culture of performance as well as providing a
solid foundation for more recent budget and performance
initiatives.[Footnote 6] In part, this success can be attributed to the
fact that GPRA melds the best features, and avoids the worst, of its
predecessors.
Building on GPRA's foundation, the current administration has made the
integration of performance and budget information one of five
governmentwide management priorities under its PMA.[Footnote 7] PART is
central to the Administration's budget and performance integration
initiative.[Footnote 8] OMB describes PART as a diagnostic tool meant
to provide a consistent approach to assessing federal programs as part
of the executive budget formulation process. It applies 25 questions to
all "programs"[Footnote 9] under four broad topics: (1) program purpose
and design, (2) strategic planning, (3) program management, and (4)
program results (i.e., whether a program is meeting its long-term and
annual goals) as well as additional questions that are specific to one
of seven mechanisms or approaches used to deliver the program.[Footnote
10]
Drawing on available performance and evaluation information, the PART
questionnaire attempts to determine the strengths and weaknesses of
federal programs with a particular focus on individual program results
and improving outcome measures. PART asks, for example, whether a
program's long-term goals are specific, ambitious, and focused on
outcomes, and whether annual goals demonstrate progress toward
achieving long-term goals. It is designed to be evidence-based, drawing
on a wide array of information, including authorizing legislation, GPRA
strategic plans and performance plans and reports, financial
statements, inspector general and GAO reports, and independent program
evaluations.
Since the fiscal year 2004 budget cycle, OMB has applied PART to 607
programs (about 60 percent of the federal budget) and given each
program one of four overall ratings: (1) "effective," (2) "moderately
effective," (3) "adequate," or (4) "ineffective" based on program
design, strategic planning, management, and results. A fifth rating,
"results not demonstrated," was given--independent of a program's
numerical score--if OMB decided that a program's performance
information, performance measures, or both were insufficient or
inadequate. During the next 2 years, the Administration plans to assess
all remaining executive branch programs with limited
exceptions.[Footnote 11]
As I testified before this subcommittee in April,[Footnote 12] PMA and
its related initiatives, including PART, demonstrate the
Administration's commitment to improving federal management and
performance. By calling attention to successes and needed improvements,
the focus that these initiatives bring is certainly a step in the right
direction, and our work shows that progress has been made in several
important areas over the past several years. However, it is not clear
that PART has had any significant impact on congressional
authorization, appropriations, and oversight activities to date. In
order for such efforts to hold appeal beyond the executive branch,
developing credible performance information and garnering congressional
buy-in on what to measure and how to present this information to them
are critical. Otherwise, as some congressional subcommittees have
noted, PART is unlikely to play a major role in the authorization,
appropriations, and oversight processes.
Prior initiatives have left us with some lessons about how to build a
sustainable approach to linking resources to results. Before I discuss
those critical factors let me touch briefly on the importance of
realistic expectations. I say this because previous management reforms
have been doomed by inflated and unrealistic expectations. Performance
budgeting can do a great deal: it can help policymakers address
important questions such as whether programs are contributing to their
stated goals, are well-coordinated with related initiatives at the
federal level or elsewhere, and are targeted to the intended
beneficiaries. However, it should not be expected to provide the
answers to all resource allocation questions in some automatic or
formula-driven process. Performance problems may well prompt budget
cuts, program consolidations, or eliminations, but they may also
inspire enhanced investments and reforms in program design and
management if the program is deemed to be of sufficiently high priority
to the nation. Conversely, even a program that is found to be exceeding
its performance expectations can be a candidate for budgetary cuts if
it is a lower priority than other competing claims in the process. The
determination of priorities is a function of competing values and
interests that may be informed by performance information but also
reflects other factors, such as the overall budget situation, the state
of the economy, security needs, equity considerations, unmet societal
needs, and the appropriate role of the federal government in addressing
any such needs.
Accordingly, we found that while PART scores for fiscal year 2004 were
generally positively related to the Administration's proposed funding
changes in discretionary programs, the scores did not automatically
determine funding changes. That is, for some programs rated "effective"
or "moderately effective" OMB recommended funding decreases, while for
several programs judged to be "ineffective" OMB recommended additional
funding in the President's budget request with which to implement
changes.[Footnote 13] As we have noted, success in performance
budgeting should not be defined only by its impact on funding decisions
but also on the extent to which it helps inform Congress and executive
branch policy decisions and improve program management.[Footnote 14] In
this regard, for the fiscal year 2004 PART assessments we reported that
over 80 percent of the PART recommendations focused on improving
program management, assessment, and design; less than 20 percent
related to funding.[Footnote 15]
We also reported that OMB's ability to use PART to identify and address
future program improvements and measure progress--a major purpose of
PART--is predicated on its ability to oversee the implementation of
PART recommendations. At the request of the Chairman of the House
Subcommittee on Government Management, Finance, and Accountability,
Committee on Government Reform, we are currently conducting a review of
(1) OMB's and agencies' perspectives on the effects PART
recommendations are having on agency operations and results and issues
encountered in responding to PART recommendations; (2) OMB's leadership
and direction in ensuring an integrated, complementary relationship
between PART and GPRA, including how OMB is assessing performance when
multiple programs or agencies are involved in meeting goals and
objectives; and (3) steps OMB has taken to involve Congress in the PART
process.
Achieving Success in Performance Budgeting Requires Credible
Information, Congressional "Buy-in," and a Comprehensive and
Crosscutting Perspective:
Let me now turn to three factors we believe are critical to sustaining
successful performance budgeting over time:
1. building a supply of credible performance information,
2. encouraging demand for that information and its use in congressional
processes by garnering stakeholder buy-in, and:
3. taking a comprehensive and crosscutting approach to assessing
related programs and policies.
Having a Supply of Credible Performance Information:
The credibility of performance information, including related cost
data, and the ability of federal agencies to produce credible
evaluations of their programs' effectiveness are key to the success of
performance budgeting. As I testified before this subcommittee in
April, this type of information is critical for effective performance
measurement to support decisions in areas ranging from program
efficiency and effectiveness to sourcing and contract management. To be
effective, this information must not only be timely and reliable, but
also both useful and used. Agencies are expected to implement
integrated financial and performance management systems that routinely
produce information that is (1) timely--to measure and affect
performance, (2) useful--to make more informed operational and
investing decisions, and (3) reliable--to ensure consistent and
comparable trend analysis over time and to facilitate better
performance measurement and decision making. Producing timely, useful,
and reliable information is critical for achieving the goals that
Congress established in GPRA, the Chief Financial Officers (CFO) Act of
1990,[Footnote 16] and other federal financial management reform
legislation.
Unfortunately, as our work on PART and GPRA implementation shows, the
credibility of performance data has been a long-standing
weakness.[Footnote 17] Likewise, our work has noted limitations in the
quality of agency evaluation information and in agency capacity to
produce rigorous evaluations of program effectiveness. We have
previously reported that agencies have had difficulty assessing many
program outcomes that are not quickly achieved or readily observed and
contributions to outcomes that are only partly influenced by federal
funds.[Footnote 18] Furthermore, our work has shown that few agencies
deployed the rigorous research methods required to attribute changes in
underlying outcomes to program activities.[Footnote 19] Our 2003 review
of agencies' evaluation capacity identified four main elements that can
be used to develop and improve evaluation efforts. They are (1) an
evaluation culture, (2) data quality, (3) analytic expertise, and (4)
collaborative partnerships.[Footnote 20]
OMB, through its development and use of PART, has provided agencies
with a powerful incentive for improving data quality and availability.
Agencies may make greater investments in improving their capacity to
produce and procure quality information if agency program managers
perceive that program performance and evaluation data will be used to
make actual resource decisions throughout the resource allocation
process and can help them get better results.
Improvements in the quality of performance data and the capacity of
federal agencies to perform program evaluations will require sustained
commitment and investment of resources. Over the longer term, failing
to discover and correct performance problems can be much more costly.
More importantly, it is critical that budgetary investments in this
area be viewed as part of a broader initiative to improve the
accountability and management capacity of federal agencies and
programs.
Obtaining Congressional Buy-in:
Federal performance and accountability reforms have given much
attention to increasing the supply of performance information over the
past several decades. However, improving the supply of performance
information is in and of itself insufficient to sustain performance
management and achieve real improvements in management and program
results. Rather, it needs to be accompanied by a demand for and use of
that information by decision makers and managers alike. Key stakeholder
outreach and involvement is critical to building demand and, therefore,
success in performance budgeting.
Lack of consensus by a community of interested parties on goals and
measures and the way that they are presented can detract from the
credibility of performance information and, subsequently, its use.
Fifty years of past executive branch efforts to link resources with
results have shown that any successful effort must involve Congress as
a full partner. We have previously reported that past performance
budgeting initiatives faltered in large part because they intentionally
attempted to develop performance plans and measures in isolation from
the congressional authorization, appropriations, and oversight
processes.[Footnote 21] While congressional buy-in is critical to
sustain any major management initiative, it is especially important for
performance budgeting given Congress's constitutional role in setting
national priorities and allocating the resources to achieve them.
Obtaining buy-in on goals and measures from a community of interested
parties is critical to facilitating use of performance information in
resource allocation decisions. PART was designed for and is used in the
executive branch budget preparation and review process; as such, the
goals and measures used in PART must meet OMB's needs. However, the
current statutory framework for strategic planning and reporting is
GPRA--a broader process involving the development of strategic and
performance goals and objectives to be reported in strategic and annual
plans. OMB's desire to collect performance data that better align with
budget decision units means that the fiscal year 2004 PART process
became a parallel competing structure to the GPRA framework. Although
OMB acknowledges that GPRA was the starting point for PART, the
emphasis is shifting. Over time, as the performance measures developed
for PART are used in the executive budget process, these measures may
come to drive agencies' strategic planning processes.
Opportunities exist to strengthen PART's integration with the broader
GPRA planning process. Some tension about the amount of stakeholder
involvement in the internal deliberations surrounding the development
of PART measures and the broader consultations more common to the GPRA
strategic planning process is inevitable. Compared to the relatively
open-ended GPRA process, any budget formulation process is likely to
seem closed. However, if PART is to be accepted as other than one
element in the development of the President's budget proposal,
congressional understanding and acceptance of the tool and its analysis
will be critical.
As part of the executive branch budget formulation process, PART must
clearly serve the President's interests. However, measures developed
solely by the executive branch for the purposes of executive budget
formulation may discourage their use in other processes, such as
internal agency management and the congressional budget process,
especially if measures that serve these other processes are eliminated
through the PART process. PART's focus on outcome measures may ignore
stakeholders' needs for other types of measures, such as output and
workload information. Our recent work examining performance budgeting
efforts at both the state and federal levels revealed that
appropriations committees consider workload and output measures
important for making resource allocation decisions.[Footnote 22]
Workload and output measures lend themselves to the budget process
because workload measures, in combination with cost-per-unit
information, can be used to help develop appropriation levels and
legislators can more easily relate output information to a funding
level to help define or support a desired level of service. Like PART,
GPRA states a preference for outcome measures. However, in practice,
GPRA also recognizes the need to develop a range of measures, including
output and process measures. Since different stakeholders have
different needs and no one set of goals and measures can serve all
purposes, PART can and should complement GPRA but should not replace
it.
Moreover, as we have previously reported, several appropriations
subcommittees have cited the need to link PART with congressional
oversight.[Footnote 23] For example, the House Report accompanying the
Transportation and Treasury Appropriations Bill for fiscal year 2004
included a statement in support of PART, but noted that the
Administration's efforts must be linked with the oversight of Congress
to maximize the utility of the PART process, and that if the
Administration treats as privileged or confidential the details of its
rating process, it is less likely that Congress will use those results
in deciding which programs to fund.[Footnote 24] Moreover, the
subcommittee said it expects OMB to involve the House and Senate
Committees on Appropriations in the development of the PART ratings at
all stages in the process.
In our January 2004 report on PART,[Footnote 25] we suggested steps for
both OMB and Congress to take to strengthen the dialogue between
executive branch officials and key congressional stakeholders, and OMB
generally agreed. We recommended that OMB reach out to key
congressional committees early in the PART selection process to gain
insight about which program areas and performance issues congressional
officials consider warrant PART review. Engaging Congress early in the
process may help target reviews with an eye toward those areas most
likely to be on the agenda of Congress, thereby better ensuring the use
of performance assessments in resource allocation processes throughout
government.
The importance of getting buy-in for successful performance budgeting
can be seen in the experience of OMB's recent efforts to restructure
budget accounts.[Footnote 26] While OMB staff and agency officials
credited budget restructuring with supporting results-oriented
management, the budget changes did not meet the needs of some
congressional appropriations committees. While congressional
appropriations subcommittee staff expressed general support for budget
and performance integration, they objected to changes that substituted
rather than supplemented information traditionally used for
appropriations and oversight purposes. As we said in our February 2005
report on this issue,[Footnote 27] 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 authorizing, appropriations, and oversight objectives.
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 full partner in any efforts to infuse a
performance budget perspective into budget structure and budget
deliberations. 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.
Reexamination Requires a Crosscutting Perspective:
While existing performance budgeting initiatives provide a foundation
for a baseline review of federal policies, programs, functions, and
activities, several changes are in order to support the type of
reexamination needed. For example, PART focuses on individual programs,
but key outcome-oriented performance goals--ranging from low income
housing to food safety to counterterrorism--are addressed by a wide
range of discretionary, entitlement, tax, and regulatory approaches
that cut across a number of agencies. While PART's program-by-program
approach fits with OMB's agency-by-agency budget reviews, it is not
well suited to addressing crosscutting issues or to looking at broad
program areas in which several programs address a common goal.
The evaluation of programs in isolation may be revealing, but a broader
perspective is necessary for an effective overall reexamination effort.
It is often critical to understand how each program fits with a broader
portfolio of tools and strategies--such as regulations, direct loans,
and tax expenditures--to accomplish federal missions and performance
goals. Such an analysis is necessary to capture whether a program
complements and supports other related programs, whether it is
duplicative and redundant, or whether it actually works at cross-
purposes to other initiatives. OMB reported on a few crosscutting PART
assessments in the fiscal year 2006 budget and plans to conduct
additional crosscutting reviews in 2005. However, we would urge a more
comprehensive and consistent approach to evaluating all programs
relevant to common goals.
Such an approach would require assessing the performance of all
programs related to a particular goal--including tax expenditures and
regulatory programs--using a common framework. Our federal tax system
includes hundreds of billions of dollars of annual expenditures--the
same order of magnitude as total discretionary spending. Yet relatively
little is known about the effectiveness of tax incentives in achieving
the objectives intended by Congress. PART, OMB's current framework for
assessing the performance of federal programs, has not been applied to
tax expenditures. Assessing complete portfolios of tools related to key
outcome-oriented goals is absolutely critical to the type of
reexamination needed. The governmentwide performance plan required by
GPRA could help address this issue.
GPRA requires the President to include in his annual budget submission
a federal government performance plan. Congress intended that this plan
provide a "single cohesive picture of the annual performance goals for
the fiscal year."[Footnote 28] The governmentwide performance plan
could help Congress and the executive branch address critical federal
performance and management issues, including redundancy and other
inefficiencies in how we do business. It could also provide a framework
for any restructuring efforts. Unfortunately, this provision has not
been fully implemented. Instead, OMB has used the President's budget to
present high-level information about agencies and certain program
performance issues. The agency-by-agency focus of the budget does not
provide the integrated perspective of government performance envisioned
by GPRA.
If the governmentwide performance plan were fully implemented, it could
also provide a framework for congressional oversight and other
activities. In that regard, we have also suggested that Congress
consider the need to develop a more systematic vehicle for
communicating its top performance concerns and priorities; develop a
more structured oversight agenda to prompt a more coordinated
congressional perspective on crosscutting performance issues; and use
this agenda to inform its authorization, appropriations, and oversight
processes. One possible approach would involve developing a
congressional performance resolution identifying the key oversight and
performance goals that Congress wishes to set for its own committees
and for the government as a whole. Such a resolution could be developed
by modifying the current congressional budget resolution, which is
already organized by budget function. Initially, this may involve
collecting the "views and estimates" of authorization and
appropriations committees on priority performance issues for programs
under their jurisdiction and working with such crosscutting committees
as this committee, the House Committee on Government Reform, and the
House Committee on Rules.
In addition, we have previously recommended that Congress consider
amending GPRA to require the President to develop a governmentwide
strategic plan to provide a framework to identify long-term goals and
strategies to address issues that cut across federal agencies.[Footnote
29] A strategic plan for the federal government, supported by key
national outcome-based indicators to assess the government's
performance, position, and progress, could be a valuable tool for
governmentwide reexamination of existing programs, as well as proposals
for new programs. Developing a strategic plan can help clarify
priorities and unify stakeholders in the pursuit of shared goals.
Therefore, developing a strategic plan for the federal government would
be an important first step in articulating the role, goals, and
objectives of the federal government. If fully developed, a
governmentwide strategic plan can potentially provide a cohesive
perspective on the long-term goals of the federal government and
provide a much-needed basis for fully integrating, rather than merely
coordinating, a wide array of federal activities. The development of a
set of key national indicators could be used as a basis to inform the
development of governmentwide strategic and annual performance plans.
The indicators could also link to and provide information to support
outcome-oriented goals and objectives in agency-level strategic and
annual performance plans. Successful strategic planning requires the
involvement of key stakeholders. Thus, it could serve as a mechanism
for building consensus. Further, it could provide a vehicle for the
President to articulate long-term goals and a road map for achieving
them. In addition, a strategic plan can provide a more comprehensive
framework for considering organizational changes and making resource
decisions.
Concluding Observations:
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. In addition to
the serious long-term fiscal challenges facing the nation, a number of
overarching trends, such as defense and homeland security policies,
increasing global interdependence, and advances in science and
technology, drive the need to reconsider the proper role for the
federal government in the 21st century, including what it does, how it
does it, who does it, and how it gets financed. This will mean bringing
a variety of tools and approaches to bear. In our February 2005 report
on 21st century challenges, we outline a number of approaches that
could facilitate a reexamination effort.[Footnote 30] Today, I've
discussed several of these, as well as some additional steps that I
believe are necessary for an effective reexamination effort.
Much is at stake in the development of a collaborative performance
budgeting process. This is an opportune time for the executive branch
and Congress to consider and discuss how agencies and committees can
best take advantage of and leverage the new information and
perspectives coming from the reform agenda under way in the executive
branch. Through PMA and its related initiatives, including PART, the
Administration has taken important steps in the right direction by
calling attention to successes and needed improvements in federal
management and performance. Some program improvements can come solely
through executive branch action, but for PART to meet its full
potential the assessments it generates must also be meaningful to and
used by Congress and other stakeholders.
Successful integration of inherently separate but interrelated
strategic planning and performance budgeting processes is predicated on
(1) ensuring that the growing supply of performance information is
credible, useful, reliable, and used (2) increasing the demand for this
information by developing goals and measures relevant to the large and
diverse community of stakeholders in the federal budget and planning
processes, and (3) taking a comprehensive and crosscutting approach. It
will only be through the continued attention of the executive branch
and Congress that progress can be sustained and, more importantly,
accelerated. This effort can both strengthen the budget process itself
and provide a valuable tool to facilitate a fundamental reexamination
of the base of government. We recognize that this process will not be
easy. Given the wide range of programs and issues covered, the process
of rethinking the full range of federal government programs, policies,
and activities could take a generation or more to complete. Regardless
of the specific combination of reexamination approaches adopted,
success will require not only the factors listed above but also
sustained leadership throughout the many stages of the policy process.
In addition, for comprehensive reexamination of government programs and
policies, clear and transparent processes for engaging the broader
public in the debate are also needed.
Mr. Chairman, this concludes my prepared statement. I would be pleased
to answer any questions you or the other Members of the Subcommittee
may have at this time.
For future information on this testimony, please contact Paul L. Posner
at (202) 512-9573 or [Hyperlink, posnerp@gao.gov]. Individuals making
key contributions to this testimony include Jacqueline Nowicki, Tiffany
Tanner, and Benjamin Licht.
(450417):
FOOTNOTES
[1] In this testimony, the term performance budgeting refers to any
linkage between budgeting and expected or actual evidence-based
performance information.
[2] For more information see GAO's Web site "Our Nation's Fiscal
Outlook: The Federal Government's Long-Term Budget Imbalance,"
http://www.gao.gov/special.pubs/longterm.
[3] Pub. L. No. 103-62 (1993).
[4] For more information on reexamination of federal programs, see GAO,
21st Century Challenges: Reexamining the Base of the Federal
Government, GAO-05-325SP (Washington, D.C.: February 2005).
[5] See Pub. L. No. 103-62 § 2, 5 U.S.C. § 306, and 31 U.S.C. §§ 1115-
1116.
[6] GAO, Results-Oriented Government: GPRA Has Established a Solid
Foundation for Achieving Greater Results, GAO-04-38 (Washington, D.C.:
Mar. 10, 2004).
[7] In addition to budget and performance integration, the other four
priorities under PMA are strategic management of human capital,
expanded electronic government, improved financial performance, and
competitive sourcing.
[8] For a detailed examination of PART, see 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).
Another significant element of the performance and budget integration
initiative is efforts to restructure budgets. See GAO, Performance
Budgeting: Efforts to Restructure Budgets to Better Align Resources
with Performance, GAO-05-117SP (Washington, D.C.: February 2005).
[9] There is no standard definition for the term "program." For
purposes of PART, OMB described the unit of analysis (program) as (1)
an activity or set of activities clearly recognized as a program by the
public, OMB, and/or Congress; (2) having a discrete level of funding
clearly associated with it; and (3) corresponding to the level at which
budget decisions are made.
[10] The seven major categories are competitive grants, block/formula
grants, capital assets and service acquisition programs, credit
programs, regulatory-based programs, direct federal programs, and
research and development programs.
[11] The administration is considering alternative methods and
timelines for assessment of programs with limited impact and large
activities where it is difficult to determine an appropriate unit of
analysis.
[12] GAO, Management Reform: Assessing the President's Management
Agenda, GAO-05-574T (Washington, D.C.: Apr. 21, 2005).
[13] GA0-04-174, 14.
[14] GAO, The Government Performance and Results Act: 1997
Governmentwide Implementation Will Be Uneven, GAO/GGD-97-109
(Washington, D.C.: June 2, 1997), 90.
[15] GA0-04-174, 12.
[16] Pub. L. No. 101-576 (1990).
[17] GAO has suggested various approaches to addressing this and other
challenges. See GAO/GGD-97-109 and GAO-04-38.
[18] GAO, Performance Budgeting: Opportunities and Challenges, GAO-02-
1106T (Washington, D.C.: Sept. 19, 2002).
[19] GAO, Program Evaluation: Agencies Challenged by New Demand for
Information on Program Results, GAO/GGD-98-53 (Washington, D.C.: Apr.
24, 1998).
[20] GAO, Program Evaluation: An Evaluation Culture and Collaborative
Partnerships Help Build Agency Capacity, GAO-03-454 (Washington, D.C.:
May 2, 2003).
[21] GAO, Performance Budgeting: Past Initiatives Offer Insights for
GPRA Implementation, GAO/AIMD-97-46 (Washington, D.C.: Mar. 27, 1997).
[22] See GAO, Performance Budgeting: States' Experiences Can Inform
Federal Efforts, GAO-05-215 (Washington, D.C.: Feb. 28, 2005) and GAO-
05-117SP.
[23] GAO-04-174.
[24] H.R. Rep. No. 108-243, pp. 168-69 (2003).
[25] GAO-04-174.
[26] For more information on this effort, see GAO-05-117SP.
[27] GAO-05-117SP.
[28] S. Rep. No. 103-58, p. 27 (1993).
[29] GAO-04-38.
[30] GA0-05-325SP, 82-7.
