STATEMENT OF THE HONORABLE MARK W. EVERSON,
CONTROLLER, OFFICE OF FEDERAL FINANCIAL MANAGEMENT
OFFICE OF MANAGEMENT AND BUDGET
BEFORE THE
SUBCOMMITTEE ON GOVERNMENT EFFICIENCY, FINANCIAL
MANAGEMENT AND INTERGOVERNMENTAL RELATIONS
February 15, 2002
Mr. Chairman and Members of the Subcommittee:
Thank you for the opportunity to appear before the subcommittee to
discuss the Administration’s efforts to improve the management and
performance of the federal government. I would like to discuss two
important components of this effort. One is the President’s Management
Agenda and the Administration’s use of an Executive Branch Management
Scorecard to track improvements in the five government-wide problem areas
targeted by the President. The other is the manner in which the President’s
Budget for 2003 seeks to foster accountability in government -- taking a
first step toward performance-based budgeting. In addition, I would like to
briefly discuss a specific initiative to improve financial transparency -- a
modest but important step to more closely align the federal government’s
budgeting process with its financial accounting and reporting.
The President’s Management Agenda and Scorecard
Since the beginning of his Administration, the President has called
for better management of the federal government. Beginning with his Budget
Blueprint in February 2001, continuing in the FY 2002 Budget and in his
Management Reform Agenda released in August 2001, the President has
repeatedly spelled out a clear agenda for government reform.
Rather than pursue an endless and disconnected array of initiatives,
the Administration has elected to identify the government’s most glaring
problems -- and solve them. The President has ordered the pursuit of five
government-wide initiatives that together will help government achieve
better results.
The first initiative, Strategic Management of Human Capital, aims to
attract talented and imaginative people to the federal government in order
to improve the service provided to our citizens. A second, Competitive
Sourcing, exposes parts of government to competition so that they may better
focus on what customers want while controlling costs. A third project,
Improving Financial Performance, improves how government manages its money --
reducing, for instance, the billions in erroneous payments the government
makes every year. A fourth project, Expanded E-Government, harnesses the
power of the Internet to make government more productive. The fifth,
Budget and Performance Integration, begins the process of linking resource
decisions with results -- the underlying information needed to hold
government accountable.
Good intentions and good beginnings are not the measure of success.
What matters in the end is completion: performance and results. In order to
ensure accountability for performance and results, the Administration is
using an Executive Branch Management Scorecard. The scorecard tracks how
well departments and agencies are executing the President’s management
initiatives, and where they stand at a given point in time against overall
standards for success.
The scorecard employs a simple "traffic light" grading system common
today in well-run businesses: green for success, yellow for mixed results,
and red for unsatisfactory. Scores are based on five standards for success
defined by the President’s Management Council and discussed with experts in
government and academe, including individual fellows from the National
Academy of Public Administration.
The standards for financial management, for example, were reviewed by
the Secretary of the Treasury, the Comptroller General, and the Director of
the Office of Management and Budget (OMB). Under each of the five sets of
standards, an agency is "green" if it meets all of the standards for success,
"yellow" if it has achieved some but not all of the criteria, and "red" if
it has even one of any number of serious flaws. For example, in financial
management, an agency is "red" if its books are in such poor condition that
auditors cannot express an opinion on the agency’s financial statements.
A 2001 baseline evaluation of departments and agencies against the
standards for success shows a lot of poor scores with 85% red and only one
green, in financial management at the National Science Foundation. This was
to be expected since, as the President indicated when selecting the
Management Agenda items, the areas are "targeted to address the most
apparent deficiencies where the opportunity to improve performance is the
greatest."
Performance-based Budgeting
The President’s Budget for 2003 takes the first step toward reporting
to taxpayers on the relative effectiveness of the thousands of programs on
which their money is spent. It commences the overdue process of seriously
linking program performance to future spending levels. It asks not merely
"How much?"; it endeavors to explain "How well?"
These changes have been called for by good government advocates for
decades. A 1949 commission headed by the 31st President, Herbert Hoover,
first introduced the term "performance-based budgeting." Subsequent
Presidents launched efforts to get better results from government. During
the 1990s, the Congress passed several statutes aimed at enhancing
government’s attention to performance. As you know, the Government
Performance and Results Act (GPRA) in 1993 directed the executive branch to
undertake the measurement of effectiveness and to reflect the answers in
budget choices. As Senator John Glenn said several years later, "The
ultimate goal of GPRA is to use program performance information to guide
resource allocation decisions."
In an initial and admittedly exploratory way, the FY 2003 Budget
responds to these longstanding demands, proposing to reinforce provably
strong programs, and to redirect funds in many cases from programs that
demonstrably fail, or cannot offer evidence of success. Eager to make
government work better, the Administration used all of the performance
information it could gather in making decisions for this Budget. We seek to
change the burden of proof, asking agencies and advocates to supply evidence
of program effectiveness instead of assuming effectiveness in the absence of
evidence to the contrary. OMB staff and agencies collected evaluations,
studies and performance documentation of all sorts from a variety of sources
to assess which programs were effectively improving desired outcomes.
Over time, the results of this performance-oriented process of policy
development and budget allocation will include:
funding effective programs, which have demonstrated benefits greater than cost;
shifting resources toward more effective programs from less effective ones that have similar purposes;
setting program targets and strategies based on understanding performance and cost relationships;
adding incentives to enhance program effectiveness; and
improving efficiency in programs and support services.
The information on which program ratings are based is far from
perfect, and some conclusions may ultimately prove erroneous. The
Administration invites a spirited discussion and welcomes additional data,
as well as suggestions about how to measure performance better throughout
the federal government.
Financial transparency
In closing, I would like to highlight a specific step which will
improve financial transparency. It is our belief that budget accounts should
show the total resources required to achieve program results. Currently this
is not always the case.
Our proposal would assign employee costs, including those relating to
retirement, as direct charges to programs. For example, pensions for new
employees and for military employees were reformed in the mid-1980s, with
employers paying their share of the accruing costs. Yet, costs for employees
hired earlier under the Civil Service Retirement System have been only partly
charged to programs.
This accounting change would be an important step in closing the gap
between current budgetary cost and uniform full operating cost so that cost
and results can be compared to each other and across government. Importantly,
this change will not affect the "bottom line" of the budget as a whole, or
the basic budgetary concepts of budget authority, obligations, and outlays.
The need for financial transparency has been cited by both the American
Institute of Certified Public Accountants (AICPA), and the Association of
Government Accountants (AGA). In addition, the Joint Financial Management
Improvement Program (JFMIP), whose principals include the Comptroller General,
the Secretary of the Treasury, the Director of the Office of Personnel Management,
and the Director of OMB, has said, including the full costs of employees "in
data used for budgetary decision-making would enhance both the planning process
and the evaluation of the costs of operations. It would also provide for
enhanced consistency and transparency relating to presentation of this
information and greater accountability for results."
* * *
The steps the Administration is taking to improve government
management including those in budget and performance integration and
financial transparency are exciting and long overdue. I look forward to
working with the committee and I’ll take any questions you may have on these
matters.
