President's Management Agenda
Review of OMB's Improved Financial Performance Scorecard Process Gao ID: GAO-07-95 November 16, 2006The President's Management Agenda (PMA) focuses attention on ensuring resources entrusted to the federal government are well managed and used wisely. The Office of Management and Budget (OMB) developed standards to measure success and a PMA scorecard that gives a "green", "yellow" or "red score" by agency. Green indicates success, yellow indicates mixed results, and red indicates unsatisfactory results. For the Improved Financial Performance Initiative, GAO was asked to (1) study and evaluate OMB's process and criteria for awarding a green score for current status and progress and (2) provide examples of how agency managers use financial data to better manage on a day-to-day basis. To fulfill these objectives, GAO interviewed OMB and agency officials and examined OMB and agency documentation relevant to OMB's scoring process.
OMB has established a reasonable process for assessing and scoring agencies' current status and progress (two separate scores) under the Improved Financial Performance Initiative of the PMA. OMB's established scoring criteria address the fundamental aspects of sound financial management and are geared toward achievement of the goals envisioned in the Chief Financial Officers (CFO) Act. Seven of the nine current status scoring criteria (yellow criteria) are objective and verifiable using publicly available information. The remaining two green criteria are more subjective and require OMB to make judgments about whether agencies (1) currently produce accurate and timely financial information that is used by management to inform decision making and drive results in key areas of operations and (2) have acceptable plans (referred to as a Green Plans) to continuously expand the routine use of financial data in decision making in additional areas of operations. GAO found OMB's staff were actively engaged in the scoring process and met regularly with agency officials to discuss progress in meeting scoring criteria and to provide input into agencies' efforts to expand the use of financial data in their day-to-day management of key agency operations. GAO also found opportunities for OMB to enhance the process by better documenting its assessments of the more subjective green scoring criteria and by systematically tracking the receipt and approval of key documents used in the process. Agency officials generally supported the scorecard process and stated that it has helped to focus top management's attention on financial management issues. The six agencies GAO visited (those with green scores as of September 30, 2004, as requested) provided examples on how they use financial data as well as performance data to make management decisions related to controlling costs, budgeting, allocation of resources, and management of contracts and grants. Agency officials told GAO that some of the examples or activities demonstrated to GAO were also previously demonstrated to OMB to show that the agency was using financial data to help inform management decision-making. OMB officials said they considered these and other examples in rendering the green scores. However, the documentation issues discussed above prevented GAO from specifically determining which examples were used by OMB in making these scoring decisions. The Improved Financial Performance Initiative scorecard process has clearly been a catalyst to improve financial management and to encourage agency managers to use financial data to enhance decision making as envisioned under the CFO Act. Better documenting the key decisions would help strengthen what is already a useful management tool by helping ensure consistency and continuity in the process and would enhance the value of the process to external users.
RecommendationsOur recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
Director: Team: Phone:GAO-07-95, President's Management Agenda: Review of OMB's Improved Financial Performance Scorecard Process
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Report to the Subcommittee on Government Management, Finance, and
Accountability, Committee on Government Reform, House of
Representatives:
United States Government Accountability Office:
GAO:
November 2006:
President's Management Agenda:
Review of OMB's Improved Financial Performance Scorecard Process:
Scorecard Process:
GAO-07-95:
GAO Highlights:
Highlights of GAO-07-95, a report to the Subcommittee on Government
Management, Finance, and Accountability, Committee on Government
Reform, House of Representatives
Why GAO Did This Study:
The President‘s Management Agenda (PMA) focuses attention on ensuring
resources entrusted to the federal government are well managed and used
wisely. The Office of Management and Budget (OMB) developed standards
to measure success and a PMA scorecard that gives a ’green“, ’yellow“
or ’red score“ by agency. Green indicates success, yellow indicates
mixed results, and red indicates unsatisfactory results. For the
Improved Financial Performance Initiative, GAO was asked to (1) study
and evaluate OMB‘s process and criteria for awarding a green score for
current status and progress and (2) provide examples of how agency
managers use financial data to better manage on a day-to-day basis. To
fulfill these objectives, GAO interviewed OMB and agency officials and
examined OMB and agency documentation relevant to OMB‘s scoring
process.
What GAO Found:
OMB has established a reasonable process for assessing and scoring
agencies‘ current status and progress (two separate scores) under the
Improved Financial Performance Initiative of the PMA. OMB‘s established
scoring criteria address the fundamental aspects of sound financial
management and are geared toward achievement of the goals envisioned in
the Chief Financial Officers (CFO) Act. Seven of the nine current
status scoring criteria (yellow criteria) are objective and verifiable
using publicly available information. The remaining two green criteria
are more subjective and require OMB to make judgments about whether
agencies (1) currently produce accurate and timely financial
information that is used by management to inform decision making and
drive results in key areas of operations and (2) have acceptable plans
(referred to as a Green Plans) to continuously expand the routine use
of financial data in decision making in additional areas of operations.
GAO found OMB‘s staff were actively engaged in the scoring process and
met regularly with agency officials to discuss progress in meeting
scoring criteria and to provide input into agencies‘ efforts to expand
the use of financial data in their day-to-day management of key agency
operations. GAO also found opportunities for OMB to enhance the process
by better documenting its assessments of the more subjective green
scoring criteria and by systematically tracking the receipt and
approval of key documents used in the process.
Agency officials generally supported the scorecard process and stated
that it has helped to focus top management‘s attention on financial
management issues. The six agencies GAO visited (those with green
scores as of September 30, 2004, as requested) provided examples on how
they use financial data as well as performance data to make management
decisions related to controlling costs, budgeting, allocation of
resources, and management of contracts and grants. Agency officials
told GAO that some of the examples or activities demonstrated to GAO
were also previously demonstrated to OMB to show that the agency was
using financial data to help inform management decision-making. OMB
officials said they considered these and other examples in rendering
the green scores. However, the documentation issues discussed above
prevented GAO from specifically determining which examples were used by
OMB in making these scoring decisions.
The Improved Financial Performance Initiative scorecard process has
clearly been a catalyst to improve financial management and to
encourage agency managers to use financial data to enhance decision
making as envisioned under the CFO Act. Better documenting the key
decisions would help strengthen what is already a useful management
tool by helping ensure consistency and continuity in the process and
would enhance the value of the process to external users.
What GAO Recommends:
To help strengthen OMB‘s scoring process for the Improved Financial
Performance Initiative, GAO made two recommendations for OMB to
establish a process to more systematically document (1) the basis for
all key decisions and judgments made in determining agency green scores
and (2) the receipt and review and approval of Green Plans, including
updates, used in the scoring process. OMB generally concurs with these
recommendations.
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-07-95].
To view the full product, including the scope and methodology, click on
the link above. For more information, contact Linda Calbom at (206) 287-
4809 or calboml@gao.gov.
[End of Section]
Contents:
Letter:
Results in Brief:
Background:
OMB Has a Reasonably Designed Scorecard Process, but Documentation of
the Process Could Be Enhanced:
Agency-Provided Examples Describing the Use of Financial Data to Manage
Programs:
Conclusions:
Recommendations for Executive Action:
Agency Comments and Our Evaluation:
Appendix I: September 30, 2006, Executive Branch Management Scorecard:
Appendix II: Comments from the Office of Management and Budget:
Appendix III: GAO Contact and Staff Acknowledgments:
Table:
Table 1: Dates When Agencies Received Their Current Status and Progress
Green Scores:
Figures:
Figure 1: Improved Financial Performance Initiative Scorecard Criteria:
Figure 2: Current Status Scores and Progress Scores for Improved
Financial Performance Initiative:
Abbreviations:
BAJA: Budget Automation, Justification and Administration:
CFO: Chief Financial Officer:
DOE: Department of Energy:
EBSA: Employee Benefits Security Administration:
Education: Department of Education:
EPA: Environmental Protection Agency:
ETA: Employment and Training Administration:
FFMIA: Federal Financial Management Improvement Act:
FSA: Federal Student Aid:
Labor: Department of Labor:
NSF: National Science Foundation:
OCFO: Office of the Chief Financial Officer:
OMB: Office of Management and Budget:
ORBIT: OCFO Reporting and Business Intelligence Tool:
OSRTI: Office of Superfund Remediation and Technology Innovation:
PAR: performance and accountability report:
PMA: President's Management Agenda:
SSA: Social Security Administration:
United States Government Accountability Office:
Washington, DC 20548:
November 16, 2006:
The Honorable Todd R. Platts:
Chairman:
The Honorable Edolphus Towns:
Ranking Minority Member:
Subcommittee on Government Management, Finance, and Accountability:
Committee on Government Reform:
House of Representatives:
In August 2001, the Bush administration launched the President's
Management Agenda (PMA) with the stated purpose of focusing attention
on ensuring that the resources entrusted to the federal government are
well managed and wisely used. The PMA targets five management
initiatives--strategic management of human capital, competitive
sourcing, improved financial performance, expanded electronic
government, and budget and performance integration. The Office of
Management and Budget (OMB) developed criteria to measure success and a
PMA scorecard to track agency progress for each of the five
initiatives. The scorecard employs a traffic light grading system to
indicate both the agencies' current status in achieving the PMA goals
and the periodic progress made by agencies for each of the five
initiatives --"green" indicates success, "yellow" indicates mixed
results, and "red" indicates unsatisfactory results. While the PMA is
primarily intended to be an internal management tool to drive
improvements for these five management initiatives, the resulting
scores are publicly disseminated on OMB's Web site, in the annual
Financial Report of the United States Government, and the annual Budget
of the United States Government.
The goals of the Improved Financial Performance Initiative (the focus
of this report) are consistent with the goals envisioned in the Chief
Financial Officers (CFO) Act, which, among other things, are to improve
agencies' financial management and provide for the production of
complete, reliable, timely, and consistent financial information for
use by the executive branch and Congress in the financing, management,
and evaluation of federal programs. As of September 30, 2006, 8 of 26
agencies scored by OMB had a green current status score in the area of
Improved Financial Performance and 24 of 26 agencies had green progress
scores. To better understand the process and criteria by which OMB
assesses agencies in the area of Improved Financial Performance, you
requested that we (1) study and evaluate OMB's process and criteria for
awarding a green designation for current status and progress and (2)
provide examples of how agency managers use financial data to better
manage their agencies on a day-to-day basis for those agencies that had
achieved a green current status score for the Improved Financial
Performance Initiative, as of September 30, 2004. At that time, six
agencies had green current status scores: the Departments of Education
(Education), Energy (DOE),[Footnote 1] and Labor (Labor); the
Environmental Protection Agency (EPA); the National Science Foundation
(NSF); and the Social Security Administration (SSA).
To address the first objective and obtain an understanding of the
scoring process, we interviewed OMB and agency officials and reviewed
relevant literature, including documents available on OMB's Web site
and agency performance and accountability reports (PAR), which include
audited financial statements. We reviewed OMB's published scorecard
criteria and the reference guide OMB prepared to help agencies
understand the green criteria and prepare for discussions and
demonstrations with OMB on how the agencies were meeting the scoring
criteria. Also, we independently assessed whether agencies had met the
seven yellow current status scoring criteria. Initially, OMB would not
provide us access to the key documents used in the scoring process
because it considered these documents to be deliberative and
predecisonal. These documents, which are described in the background
section of this report, included the agency quarterly scorecards, Proud
to Be documents, and Green Plans. After OMB received a draft of our
report for comment describing this initial scope limitation, OMB
granted us access to review these documents on its premises but still
would not provide us access to its written comments on agency plans or
other communications, such as emails, relating to the scoring
determinations. This particular restriction did not significantly limit
our ability to fulfill the objectives of this review.
To address the second objective, we reviewed agency documents,
including agency PARs. We interviewed agency officials and attended
briefings by personnel of the six agencies in our review, at which
officials demonstrated examples of how financial information was used
to make decisions about their programs. However, we did not determine
how widespread the use of these examples was throughout the agencies.
We also did not verify that the use of the information ultimately
resulted in better decisions or better-managed programs. We did not
obtain information from the agencies that obtained a green current
status score for Improved Financial Performance subsequent to September
30, 2004, including the Department of Commerce, the Department of
State, the General Services Administration, and the Smithsonian
Institution.
We performed our work in accordance with generally accepted government
auditing standards. We conducted our initial work from April 2005
through March 2006. We updated our work from July 2006 through November
2006 after OMB provided us access to the agency quarterly scorecards,
Green Plans, and Proud to Be documents.
Results in Brief:
Overall, OMB has established reasonable scoring criteria and helpful
guidance describing what agencies must do to achieve "green scores" for
the Improved Financial Performance Initiative. OMB has also designed
and implemented a quarterly scoring process to assess whether agencies
have met these criteria and are making progress in expanding the
routine use of financial data in management decision making in key
areas of operations. OMB's established scoring criteria address the
fundamental aspects of sound financial management and require clean
audit opinions, sound internal controls, compliance with applicable
laws and regulations, and financial systems that are compliant with
federal standards. Seven of the nine current status scoring criteria
(i.e., the yellow or compliance criteria) relate to these aspects and
are objective and verifiable using publicly available information. The
remaining two green or results criteria are more subjective and require
OMB's staff to make judgments about whether the criteria have been
satisfied. These two criteria require agencies to (1) demonstrate that
they currently produce accurate and timely financial information that
is used by management to inform decision making and drive results in
key areas of operations and (2) have a plan (referred to as a Green
Plan) to continuously expand the routine use of financial data in
decision making in additional areas of operations. We found OMB's staff
were actively engaged in this scoring process and met regularly with
agency officials to discuss progress in meeting the scoring criteria
and to provide input into agencies' data expansion efforts.
While OMB's scoring process is reasonable and useful as an internal
management tool, we did note some opportunities for OMB to enhance the
process. Specifically, the factors supporting OMB's key decisions and
judgments relating to the more subjective green criteria were not fully
documented. Some of the factors were discussed in the documentation OMB
made available for our review, but OMB officials had to provide us with
additional verbal explanations in order for us to better understand the
rationale for awarding the green scores. Further, the Green Plans and
updates to these plans, which are key documents used in the scoring
process, lacked evidence of OMB's review and approval. Also, there was
no formalized process to track the receipt of Green Plans or subsequent
updates. Consequently, it was difficult to readily identify the most
current plan on file. To help ensure consistency and continuity in the
scoring process over time and as the staff involved change, it would be
advantageous to OMB to more systematically document these and other
factors that are critical to these decisions.
Agency managers we contacted generally supported the Improved Financial
Performance Initiative because it has helped to focus top management's
attention on the financial management challenges confronting the
agencies. Managers and staff at each of the six agencies we visited
provided examples of how they were currently using financial as well as
performance data to make management decisions related to controlling
costs, budgeting, allocating resources, and managing contracts and
grants. These activities, if performed routinely, provide management
with valuable, decision-enhancing information. For example, Education's
office of Federal Student Aid (FSA) developed an activity- based cost
accounting system to better analyze and manage its costs. As a result,
FSA reported to us that it had reduced the unit cost for loan
consolidations from $115 per unit to $66 per unit over an 18-month
period. Agency officials told us that some of the examples or
activities demonstrated to us were also previously demonstrated to OMB
to show that the agency was using financial data to help inform
management decision making. However, because of the documentation
issues discussed above, we were not able to determine specifically
which example or examples formed the basis for OMB's green decisions.
To help strengthen OMB's scoring process for the Improved Financial
Performance Initiative, we recommend that the Director of OMB direct
the Office of Federal Financial Management to establish a process to
more systematically document:
* the basis for all key decisions and judgments made in determining
agency green scores and:
* the receipt and review and approval of Green Plans, including updates
used in the scoring process.
We provided a draft of this report for comment to the Director of OMB.
We also provided applicable sections of the draft report to officials
of Education, DOE, Labor, EPA, NSF, and SSA. In comments on a draft of
this report, OMB stated that it generally concurs with these
recommendations and outlined steps it is taking in response to our
recommendations.
Background:
In August 2001, the President launched a Management Reform Agenda to
"address the most apparent deficiencies for which the opportunity to
improve performance is the greatest." OMB, in conjunction with the
President's Management Council, developed standards for success in each
of five governmentwide initiatives. The five governmentwide initiatives
include strategic management of human capital, competitive sourcing,
improved financial performance, expanded electronic government, and
budget and performance integration.
OMB utilizes an Executive Branch Management Scorecard to track results
toward achieving the goals of the PMA. The scorecard, issued quarterly,
employs a traffic light grading system. Scores for each of the five
initiatives are given for both "current status" and "progress." Initial
scores were developed in 2001 for 26 executive agencies, including 23
of the 24 CFO Act agencies, the U.S. Army Corps of Engineers, the
Smithsonian Institution, and OMB itself.[Footnote 2] The first current
status scorecard was issued by OMB on September 30, 2001, while
progress scores were first issued on June 30, 2002. See appendix I for
the September 30, 2006, OMB scorecard.
There are separate current status criteria for each of the five
governmentwide initiatives. Scores for "current status" are based on
the scorecard standards for success developed by OMB with input from
the President's Management Council[Footnote 3] and experts throughout
government and academe. According to OMB, these standards have been
refined based on continued experience implementing the PMA. For all
five governmentwide initiatives, OMB assesses an agency's "progress" on
a case-by-case basis against the deliverables and time lines
established for each initiative. The green, yellow, and red score
criteria range from successfully implementing plans to plans being in
serious jeopardy of failure absent significant management intervention.
This report, as requested, focuses on the Improved Financial
Performance Initiative, which OMB has described as a management tool.
Under this initiative, agencies are expected to implement integrated
financial and performance systems that routinely produce information
that is timely, useful, and reliable to facilitate better performance
measurement and decision making. This should help achieve the goals
that Congress established in the CFO Act, including:
* provide for improvement, in each agency of the federal government, of
systems of accounting, financial management, and internal controls to
ensure the issuance of reliable financial information and to deter
fraud, waste, and abuse of government resources and:
* provide for the production of complete, reliable, timely, and
consistent financial information for use by the executive branch of the
government and Congress in the financing, management, and evaluation of
federal programs.
Agency quarterly scorecards; corrective action plans; Green Plans,
including updates; annual Proud to Be documents; and the annual PAR
plus some additional documentation are used by OMB in the scoring
process for the Improved Financial Performance Initiative. The
following summarizes the content of these documents and describes how
they relate to one another.
The agency quarterly scorecards have three columns and are prepared
using a standardized template. The first column shows the current
status color score and a checklist that shows whether an agency has met
each of the green and yellow criteria. The second column shows the
progress color score and some of the factors for the score, including
actions taken and actions planned to expand the use of financial data
in day-to-day operations. The third column provides space for general
comments, including comments on the status of efforts to prepare or
update the agency Green Plans, matters relating to individual
initiatives, and in some cases explanations for changes to agency's
scores.
An agency is required to file a corrective action plan when it has a
material weakness or has received a current status red score.
Corrective action plans state how an agency plans to correct its
financial management deficiencies. Filing the corrective action plan
may enable an agency to obtain a green score for progress.[Footnote 4]
The Green Plan is a living document that an agency will periodically
update and expand. It acts as the agreement between OMB and the agency
on the agency's near-and long-term areas of focus and what key actions
and goals will be tracked on the quarterly agency scorecard. Green
Plans must be approved by OMB. Beginning in fiscal year 2005, for
current status, if an agency has a yellow score, and therefore is
working toward a green score, or had a green score, it is required to
provide OMB a Green Plan.
Agencies submit the Proud to Be document to OMB in June following a
standardized template. It documents the goals an agency would be proud
to achieve during the next 12 months. There is a section for each PMA
initiative (all five management areas), which gives the status for the
Standards for Success (scoring criteria) and lists key milestones. For
the Improved Financial Management sections the following information is
included: (1) checklists for green and yellow standards, (2) key
milestones for the last quarter of the current fiscal year and the
first three quarters of the next fiscal year and also ongoing items,
and (3) key results that the agency would be proud to achieve. These
milestones cover initiatives included in the agency Green Plans.
The PAR is completed each November and, among other things, contains an
agency's annual financial statements and the related independent
auditor's report on those statements. It also includes the auditors
report on internal controls and compliance with laws and regulations.
The PAR is the principle support for whether the yellow criteria have
been met.
According to an OMB official, the specific documentation maintained by
OMB to support the Improved Financial Performance scores varies by
agency and can include but is not limited to the following:
* agency quarterly scorecard;
* the Green Plan (beginning first quarter fiscal year 2005);
* Proud to Be document;
* PAR (also includes the major management challenges used by OMB to see
if agency plans are dealing with these challenges);
* corrective action plans (submitted by an agency if there is a
material weaknesses in its financial performance);
* reports on Anti-Deficiency Act violations;[Footnote 5]
* written OMB questions and the agency's responses; and:
* briefing documentation, including slides and system screen prints.
OMB Has a Reasonably Designed Scorecard Process, but Documentation of
the Process Could Be Enhanced:
OMB has developed reasonable scoring criteria and helpful guidance
describing what agencies must do to achieve "green scores" for the
Improved Financial Performance Initiative. OMB has also designed and
implemented a quarterly scoring process to assess whether agencies have
met these criteria and are making progress in expanding the routine use
of financial data in management decision making in key areas of
operations. Implementation of OMB's scoring process has clearly been a
catalyst to improve financial management and to encourage agency
managers to use financial data to enhance decision making as envisioned
under the CFO Act. While OMB's scoring process is reasonable and useful
as an internal management tool, based on the six agencies we reviewed,
we noted some opportunities for OMB to enhance its documentation of the
scoring process.
OMB Has Reasonable Scoring Criteria and Helpful Guidance for Developing
Green Plans:
OMB has developed reasonable scoring criteria for the Improved
Financial Performance Initiative. Separate criteria exist for the
current status and progress scores. There are seven yellow (or
compliance) criteria and two additional green (or results) criteria
that must be satisfied to receive a green current status score. The
seven yellow criteria address the fundamental aspects of sound
financial management and require clean audit opinions, sound internal
controls, compliance with laws and regulations, and financial systems
that comply with federal standards. Most of the yellow criteria are
assessed annually and are verifiable using the agencies' annual PARs.
OMB considers meeting the yellow criteria as a proxy for having timely,
reliable financial information. The two additional green criteria are
more subjective and require OMB to make judgments about whether the
agencies have met the criteria. These green criteria require agencies
to (1) demonstrate that they currently produce accurate and timely
financial information that is used by management to inform decision
making and drive results in key areas of operations and (2) have plans
(i.e., the Green Plans) to expand the routine use of financial
information in decision-making in additional areas of operations.
According to an OMB official, the progress scores depend on agencies'
success in implementing the Green Plan initiatives or corrective
actions needed to address identified financial management weaknesses
(when an agency has not achieved a green current status score) within
established milestones. Based on OMB's criteria, if an agency is
successfully implementing its plans within expected time frames, the
agency will receive a green progress score. Conversely, if an agency's
plans are not likely to achieve the objectives or if there are
significant slippages in meeting the milestones, the agency would
receive a yellow or possibly even a red progress score.
Current status and progress criteria in effect as of the December 31,
2005, scorecard, when the last change was made to the scoring criteria,
are as shown in figure 1.
Figure 1: Improved Financial Performance Initiative Scorecard Criteria:
[See PDF for image]
Source: OMB.
[A] Although OMB guidance calls for auditors to provide negative
assurance when reporting on an agency system's FFMIA compliance, as
stated in GAO, Financial Management: Improvements Under Way but Serious
Financial Systems Problems Persist, GAO-06-970 (Washington, D.C.: Sept.
26, 2006), we believe that a statement of positive assurance is a
statutory requirement under FFMIA. In addition, negative assurance may
provide the false impression that the agencies' systems substantially
comply with the requirements of FFMIA. FFMIA is set forth at 31 U.S.C.
§ 3512 note.
[End of figure]
The Improved Financial Performance Initiative current status criteria
have evolved over the years, while the progress criteria have remained
substantially the same. The following are key changes that OMB has made
to the current status criteria:
* As of September 30, 2004, the yellow criteria were amended to require
an unqualified opinion on the agency's financial statements. For fiscal
years 2001 through 2003, the yellow criteria required only an opinion
on the financial statements.[Footnote 6]
* For the first quarter of fiscal year 2006, the yellow criteria for
internal control weaknesses and the Federal Managers' Financial
Integrity Act[Footnote 7] were changed from "no material weaknesses" to
"no repeat material weaknesses." According to an OMB official, the
criteria were revised to incorporate the December 21, 2004, revision to
OMB Circular No. A-123, Management's Responsibility for Internal
Control, effective in fiscal year 2006. This official added that
agencies can report material weaknesses pursuant to OMB Circular No. A-
123 without fear of their green current status score for Improved
Financial Performance being negatively affected.
* For the first quarter of fiscal year 2006, the words "and timely"
were added to the second green criterion, which now reads "currently
produces accurate and timely financial information."
A summary of the initial and September 30, 2006, quarterly current
status and progress scores for the Improved Financial Performance
Initiative for the 26 government agencies scored by OMB is shown in
figure 2.
Figure 2: Current Status Scores and Progress Scores for Improved
Financial Performance Initiative:
[See PDF for image]
Source: OMB scorecards.
[End of figure]
Table 1 shows when the six agencies we reviewed first received a green
score for current status and progress for the Improved Financial
Performance Initiative.
Table 1: Dates When Agencies Received Their Current Status and Progress
Green Scores:
Agency: National Science Foundation;
Current status--date agency received first green score: 9/30/2001;
Progress--date agency received first green score: 6/30/2002.
Agency: Environmental Protection Agency;
Current status--date agency received first green score: 6/30/2003;
Progress--date agency received first green score: 9/30/2002.
Agency: Social Security Administration;
Current status--date agency received first green score: 6/30/2003;
Progress--date agency received first green score: 6/30/2002.
Agency: Department of Education;
Current status--date agency received first green score: 12/31/2003;
Progress--date agency received first green score: 12/31/2002.
Agency: Department of Energy;
Current status--date agency received first green score: 6/30/2004;
Progress--date agency received first green score: 6/30/2002.
Agency: Department of Labor;
Current status--date agency received first green score: 9/30/2004;
Progress--date agency received first green score: 6/30/2002.
Source: OMB scorecards.
[End of table]
Since receiving its Improved Financial Performance Initiative green
scores for current status and progress, each agency included in our
review, except for DOE and Labor, has maintained its quarterly green
scores through September 30, 2006. DOE received a red current status
score for the Improved Financial Performance Initiative as of December
31, 2005. DOE received the red score because the agency received a
disclaimer of opinion from its auditor on its fiscal year 2005
consolidated financial statements, meaning that the auditor was unable
to express an opinion, and was not in compliance with FFMIA. DOE
implemented a new financial accounting system in April 2005 and adopted
a new chart of accounts. Because of various issues with the system, DOE
was unable to provide accurate financial data and could not always
provide supporting documents required for the audit. This limited the
scope of the auditor's work. DOE continued to receive a red current
status score through September 30, 2006.
DOE received a yellow progress score for the Improved Financial
Performance Initiative as of March 31, 2005. This score returned to
green as of June 30, 2006. Additionally, Labor's progress score slipped
from green to yellow as of March 31, 2006, but rebounded the next
quarter. For both agencies, the quarterly agency scorecards provided
explanations for the change in these progress scores.
In July 2005, OMB issued a reference guide, entitled Achieving Green in
Financial Performance, to help agencies understand the green current
status criteria and what is required to prepare an acceptable Green
Plan to satisfy these criteria. Agency officials told us that the
guidance was helpful to them. Specifically the guidance provides the
following information. First, it explains what is required to meet the
green current status criteria for (1) producing accurate timely
financial information used by management to inform decision making and
drive results in key areas of operations and (2) implementing a plan to
continuously expand the scope of its routine data used to inform
management decision making in additional crucial areas of operations.
Second, it lists three primary areas of information and related
detailed components of these areas for each initiative in the agencies'
Green Plans that must be approved by OMB to satisfy the green criteria.
These areas are:
* financial (or business) goals that are critical to management,
* how data are used strategically to achieve the goals, and:
* how success is measured (e.g., reduce cost, increase efficiency) to
provide evidence that the desired goal is being achieved.
Third, the guidance gives agencies some general assistance concerning
discussions with OMB, including demonstrations and describing how the
criteria are being met. Finally, the guidance provides examples of
initiatives accepted by OMB under the green criteria. According to an
OMB official, the guidance is currently being revised and will include
additional examples of initiatives accepted by OMB in determining green
scores.
The useful guidance provided to agencies for implementing the Improved
Financial Performance Initiative, combined with the specific criteria
established by OMB, result in a reasonably designed scorecard process
for this PMA initiative.
Enhanced Documentation Would Benefit the Overall Scoring Process:
While OMB's scoring process is reasonably designed and useful as a
management tool, we noted some opportunities for OMB to enhance its
documentation of the process for determining green scores and to help
ensure consistency and continuity of the process over time and as the
staff involved changes. Specifically,
* key factors supporting OMB's green designations were not fully
documented;
* there was little evidence that the Green Plans and updates to these
plans, which are key documents used in the scoring process, had been
reviewed and approved by OMB; and:
* there was no formalized process to track the receipt of Green Plans
or subsequent updates.
As discussed earlier, to obtain and maintain a green current status
score, an agency must satisfy OMB's seven yellow criteria plus two
additional green criteria. We were able to independently assess whether
the six agencies in our review had met OMB's generally objective yellow
criteria as of September 30, 2004, and December 31, 2005. This was done
using publicly available agency PARs that included agency audit reports
and information from OMB on when they received agency interim financial
reports. However, for the other green current status criteria as well
as the progress score criteria, which are more subjective, we could not
tell from the documentation made available to us by OMB the basis for
their overall agency assessments or key decisions or judgments made
during the scorecard process. For example we could not determine which
initiatives were used by OMB to satisfy the green score criteria for
agencies in our review. OMB officials discussed with us factors they
considered in determining if agencies satisfied the green current
status criteria, and these explanations seemed reasonable. We found
that OMB staff have been actively engaged in the scoring process and
meet regularly with the agencies to discuss the agencies' progress in
meeting the scoring criteria and to provide input into agencies' data
expansion efforts. According to an OMB official, OMB uses emails to
provide agencies written comments on agency Green Plans in addition to
comments provided during meetings with agencies, but these
communications were not made available to GAO for review. However, this
OMB official also stated, they do not document specifically how an
agency satisfied the green current status or progress criteria
including what key activities or initiatives for using financial data
for decision-making purposes were involved.
In addition, we could not discern how OMB evaluates and determines the
sufficiency of individual initiatives or activities, in relation to key
operations of the agency as a whole, when awarding a green current
status score. OMB's green current status criteria include implementing
the Green Plan to continuously expand the scope of an agency's routine
data use to inform management decision making. According to OMB's Green
Plan guidance, this requires agencies to provide evidence that
information is actively being used to help them achieve results in key
areas of operations. An OMB official stated that OMB personnel have
reviewed agency Green Plans and are satisfied that the plans meet the
criteria for covering certain levels of operations. However, the levels
of operations that were required to satisfy the criteria were not
defined. In addition, the official stated that there is no written
documentation or explanation of how an agency has covered a certain
level of operations and therefore was justified in receiving a green
current status score. Documenting these types of key assessments would
help ensure consistency and continuity in OMB's process for awarding
the green scores. This documentation would be particularly important
when changes are made in OMB staff involved in the scoring process.
During our review, we also found that OMB could not readily identify
the most current Green Plans or updates to the Green Plans for the six
agencies in our review. For example, we were given access to a Green
Plan for each of the six agencies and were told by an OMB official that
they were the current plans. We later saw more recent Green Plans for
two of the six agencies. We were subsequently given access to updates
to Green Plans for three of these agencies. However, it was unclear
whether these were the current updates or if there were any other
updates, and two Green Plans were marked "DRAFT." Further, the plans
that were provided to us by OMB lacked evidence of any review or
approval by OMB.
An OMB official acknowledged that OMB had no systematic way of tracking
Green Plans, including identifying what is the current agency Green
Plan. This official added that the only way OMB personnel have for
tracking Green Plans or updates to Green Plans is their written
analysis of Green Plans or updates that are provided to agencies but
were not available to us. A systematic method for tracking Green Plans
and documenting the review of the plans would help ensure that OMB
personnel can readily identify the most current Green Plan on file and
whether the plan has been approved by OMB.
Agency-Provided Examples Describing the Use of Financial Data to Manage
Programs:
Officials in the six government agencies we contacted generally
supported the scorecard process saying it helped to focus top-level
management attention on financial management issues. Managers and staff
at each of the six agencies we visited provided examples of how their
respective offices were using financial as well as performance data to
make management decisions involving controlling costs, preparing
budgets, allocating resources, and managing contracts and grants. They
also demonstrated some of the system capabilities that facilitated
using financial data in the management decision-making process,
including some of the automated mechanisms used to disseminate data to
staff and managers in a timely manner. These officials said that many
of the examples provided to us were also provided to OMB for the
quarterly scoring process. However, because of previously discussed
documentation limitations, we were not able to determine specifically
which example or examples formed the basis for OMB's green decisions.
The following are highlights of some of the examples provided to us by
the six agencies.
* EPA officials in the Office of the Chief Financial Officer (OCFO)
demonstrated to us the Web-based OCFO Reporting and Business
Intelligence Tool (ORBIT), which according to EPA officials, integrates
financial, administrative, and program performance information to
assist agency managers in making decisions about their programs and
operations. One of ORBIT's features is a Management Dashboard, which
provides users with a quick view of EPA's financial and budgetary
status and presents information in a series of charts and graphs called
analytics to alert managers to situations out of normal ranges. For
example, the appropriation utilization alerts analytics alerts a user
with a red light if more than 50 percent of an annual appropriation has
been obligated early in a fiscal year.
* NSF officials told us that data in grantee financial reports,
submitted to NSF through FastLane, a real-time Web-based system, showed
that approximately 10 percent of NSF's grantees reported a cash balance
at the end of each reporting quarter. This means that grantees had
either up to a 10-day cash reserve, which NSF permits, or in some cases
over the 10-day reserve which NSF considers to be excess cash. NSF
officials added that monitoring procedures, which they implemented
during fiscal year 2005, produced a recovery of over $3.2 million in
excess cash held by grantees and a 33 percent decrease in the number of
grantees reporting cash on hand.
* A DOE Office of Environmental Management official described to us how
its Web-based Budget Automation, Justification, and Administration
(BAJA) tool automatically generates and facilitates changes to its
annual Congressional Budget Submission. Using BAJA, the effects of data
changes automatically flow throughout the document, making the process
much quicker and more reliable than the old manual process.
* An SSA official described to us how he used workload information from
SSA's Unified Measurement System and other financial information, such
as real-time budget allocation and expenditure data, to reallocate
workloads (i.e., claims to be processed) among two different field
offices to better match the available staff resources. He told us that
in past years, SSA managers did not have the allocation tools that are
currently available. The availability of current budget allocation and
spending data enabled him to consider the estimated costs of moving
staff versus moving the work.
* Officials from Labor's Employee Benefits Security Administration
(EBSA) told us how they use obligation data from DOLAR$ (Labor's core
accounting system) and unit cost data from CAM (Labor's cost accounting
system)[Footnote 8] to allocate funding resources and otherwise manage
their business in situations where EBSA is uncertain about the amount
of funding it will have for a year when the amount of its annual
appropriation is not known until later in the fiscal year. Using the
DOLAR$ and CAM data for equivalent prior periods and adjusting for
mandatory cost increases (e.g., payroll and rent), EBSA managers told
us that they (1) determine the amount of program costs that EBSA can
afford to finance within the constraints of that funding level; (2)
assess whether special or extraordinary measures, like a hiring freeze,
furloughs, or reducing or eliminating certain commitments, are needed
to remain within that funding level; and (3) then target resources to
achieve the program's objectives.
* Officials from Education's FSA office told us they developed an
activity-based cost accounting system to better manage FSA's costs.
According to the FSA officials, they used unit cost information
developed from the cost system as a tool to renegotiate and consolidate
several contracts relating to the administration of FSA's direct loan
program and reduced FSA's unit cost for loan consolidations from $115
per unit to $66 per unit, over a period of 18 months.
* Labor's Employment and Training Administration (ETA) officials
described to us how they used financial information to help manage
construction contracts for the $1.4 billion Job Corps program. ETA
officials showed us an example of a report that contains contractor
information, such as company name, contact person, narrative of the
scope of work, and planned and actual schedule dates, along with
financial information such as budget, authorized spending, and contract
modification amounts. ETA officials said they use this report to track
costs and schedule data in order to make decisions related to the
contracts during monthly meetings between the contractor and Job Corps
management.
* EPA officials in the Office of Superfund Remediation and Technology
Innovation (OSRTI) demonstrated to us the Web-based system called
Superfund eFacts, which extracts information from a database containing
general program information on Superfund sites across the nation and
also contains financial information from EPA's Integrated Financial
Management System. OSRTI staff showed us eFact's ability to drill down
to detailed financial information, such as obligation amounts related
to a site, by clicking on charts and spreadsheets from a listing of
Superfund sites. EPA officials told us the information in the charts is
updated nightly and that prior to the implementation of eFacts,
managers could only get hard copy reports on an ad hoc basis from a
contractor and that the program and financial information in eFacts
allows for information to get to managers much faster than in the past,
saving time and money.
Conclusions:
The PMA has generally been viewed positively by agencies because of the
attention it has brought to long-standing management deficiencies,
including financial management. OMB has established reasonable scoring
criteria and helpful guidance for the Improved Financial Performance
Initiative and designed a reasonable scoring process to assess whether
agencies have met these criteria and are making progress in expanding
the routine use of financial data in management decision making in key
areas of operations. The scorecard process has clearly been a catalyst
to improve financial management and to encourage agency managers to use
financial data to enhance decision making as envisioned under the CFO
Act. Better documenting the key decisions would strengthen what is
already a useful internal management tool by helping ensure consistency
and continuity in the process and would enhance the value of the
process to external users.
Recommendations for Executive Action:
To help ensure consistency and continuity in the Improved Financial
Performance Initiative scoring process over time and as the staff
changes, we recommend that the Director of OMB direct the Office of
Federal Financial Management to take the following two actions:
* establish a process to more systematically document the basis for all
key decisions and judgments made in determining agency green scores,
and:
* establish a process to document the receipt and review and approval
of Green Plans, including updates used in the scoring process.
Agency Comments and Our Evaluation:
In written comments on a draft of this report, OMB's Controller stated
she generally concurs with our recommendations and outlined steps OMB
is taking in response to these recommendations. We also discussed
technical comments with OMB officials, which we have incorporated in
the final report as appropriate. OMB's written comments are reproduced
in appendix II.
We are sending copies of this report to the Director of the Office of
Management and Budget; the Secretaries of Education, Energy, and Labor;
the Administrator, Environmental Protection Agency; the Director,
National Science Foundation; the Commissioner of Social Security; and
other interested parties. Copies will be made available to others upon
request. In addition, this report will be available at no charge on the
GAO Web site at [Hyperlink, http://www.gao.gov].
If you or your staffs have any questions about this report, please
contact me at (206) 287-4809 or calboml@gao.gov. Contact points for our
Offices of Congressional Relations and Public Affairs may be found on
the last page of this report. Major contributors to this report are
acknowledged in appendix III.
Signed by:
Linda Calbom:
Director, Financial Management and Assurance, and Western Regional
Director:
[End of section]
Appendix I: September 30, 2006, Executive Branch Management Scorecard:
[See PDF for Scorecard]
[End of section]
Appendix II: Comments from the Office of Management and Budget:
The Controller:
Executive Office Of The President:
Office Of Management And Budget:
Washington, D.C. 20503:
NOV 14 2006:
Ms. Linda Calbom:
Director:
Financial Management and Assurance and Western Region:
Government Accountability Office:
Washington, DC 20548:
Dear Ms. Calbom:
Thank you for the opportunity to comment on the Government
Accountability Office's (GAO) draft report entitled "Review of OMB's
Improved Financial Performance Scorecard Process," GAO-07-95.
The Office of Management and Budget (OMB) agrees with GAO's assessment
that the Improved Financial Performance initiative under President's
Management Agenda (PMA) has been a catalyst for improving financial
management in the Federal Government. The initiative has focused top
agency management on financial management issues and has been a driver
of many of the financial management achievements over the past several
years including accelerating financial reporting and reducing the
number of material weaknesses reported government-wide. The Improved
Financial Performance initiative has also called more attention to the
critical role that the Chief Financial Officers have in providing
accurate and timely financial information to program managers to
enhance decision making.
OMB generally concurs with your recommendations that key decisions and
important steps in the scoring process could be more systematically
documented. We are already taking steps to improve this process
including:
* Developing a tracking system for agency green plans and supporting
materials, and,
* Preparing summaries of all "approved" Green Plan initiatives, which
clarify both what initiatives have been approved as well as how each
initiative meets the Green Plan criteria.
Finally, personnel from the agencies have been actively engaged in the
PMA process and the overall improvement of financial management
practices government-wide. GAO's recognition of their efforts is
appreciated.
Again, we want to thank GAO for the opportunity to comment on this
draft report. We look forward to our continuing work in improving
financial performance.
Sincerely,
Signed by:
Linda Combs:
Controller:
[End of section]
Appendix III: GAO Contact and Staff Acknowledgments:
GAO Contact:
Linda Calbom, (206) 287-4809 or calboml@gao.gov:
Acknowledgments:
Staff members who made key contributions to this report include Phil
McIntyre, Assistant Director; Donald Campbell; Richard Cambosos; Lisa
Cyre; Abe Dymond; and Diane Morris.
FOOTNOTES
[1] DOE's current status score was downgraded to red in December 2005
because it received a disclaimer of opinion on its fiscal year 2005
consolidated financial statements and was not in compliance with the
Federal Financial Management Improvement Act (FFMIA). DOE's current
status score remained red as of September 30, 2006.
[2] The Department of Homeland Security was added to the scorecard
after it was established on January 24, 2003, and the Federal Emergency
Management Agency was deleted from the scorecard after becoming a part
of the Department of Homeland Security effective March 1, 2003.
[3] The President's Management Council advises and assists the
President in ensuring that government reform is implemented throughout
the executive branch. The Council's functions include improving overall
executive branch management; coordinating management-related efforts to
improve government; ensuring the adoption of new management practices
in agencies; and identifying examples of, and providing mechanisms for,
interagency exchange of information about best management practices.
[4] See Implementation Guide for OMB Circular A-123, Management's
Responsibility for Internal Control, Appendix A, Internal Control over
Financial Reporting, 41-45 (July 2005), for detailed guidance regarding
corrective action plans.
[5] The Anti-Deficiency Act generally prohibits agencies from making
obligations and expenditures in excess of the appropriations or
apportionments of appropriations made to them. 31 U.S.C. §§ 1341, 1342,
1349-51, 1511-1519.
[6] For example, a qualified opinion would have been acceptable under
the previous criteria but not under the current criteria. A qualified
opinion relates to a nonpervasive departure from generally accepted
accounting principles or a nonpervasive scope limitation.
[7] 31 U.S.C. § 3512 (c), (d).
[8] For more information on CAM, see GAO, Managerial Cost Accounting
Practices: Leadership and Internal Controls Are Key to Successful
Implementation, GAO-05-1013R (Washington, D.C.: Sept. 2, 2005).
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