# Presentation: 261104

## Dept. of Commerce – 6th Annual Finance Conference

The Budget Formulation & Execution Line of Business 

Andy Schoenbach
Office of Management and Budget (OMB)
Chief, Budget Systems Branch, & LoB Policy Lead

**The Budget Formulation & Execution Line of Business**** **
**Andy Schoenbach**
**Office of Management and Budget (OMB)**
**Chief, Budget Systems Branch, & LoB Policy Lead**

**May 30, 2007**

**Reviewing the BFE LoB – the Nature of        Federal Budgeting**
**Facilitating Government-wide Collaboration &     Data Collection **
**Budget Execution, and Integration with Financial Management **
**Next Steps**

**Agenda**

## Budget Formulation, Budget Execution, & Financial Management – per the Constitution (1787)

**“****No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law;”**
**              ****(Budget Formulation and Execution) **
**“****and a regular Statement and Account of the Receipts and Expenditures of all public Money shall be published from time to time.” **
**                        ****(Financial Management) **
- 	(Article I, Section 9)

## Nature of Federal Budgeting

- Budgeting is the process by which limited Federal resources are allocated among competing demands.
- It is a policy-driven process - inherently dynamic and fast-paced in response to political, economic, global, and (as Hurricane Katrina demonstrated) environmental events.
- Key participants are the President, Congressional leaders, over two dozen House and Senate Budget & Appropriations committees, OMB, CBO, and senior agency officials.
- Each of these key participants has the power to demand information in their own formats in their own time frames.

**“****No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law” **

## Federal Budgeting is Dynamic

- Illustrative examples (nostalgia for US Budgeteers):
- August 1985 Gramm-Rudman-Hollings Act established deficit targets and sequestration requirements.
- Fall 1987 Bipartisan Budget Agreement following the “Black Monday” Stock Market crash.
- Oct. 1990 Budget Enforcement Act - new rules for constructing baselines; *PAYGO* for receipts & entitlements.
- Winter 1994 *Republican Revolution *and the government-wide shutdown.  The current 2006 *Democratic* *Revolution*.
- Oct. 2001 decision to show Federal retirement costs on an accrual basis.
- Major disasters such as 9/11 and Hurricane Katrina.
- Presidential Transitions (every one is unique).

## Budget Formulation and Execution LoBAs Is State - Impetus for Change

- Most agencies do not have integrated automated systems to support their budgeting activities – they depend on basic desktop office software to prepare and justify multi-billion dollar budgets.
- Hundreds of budget exercises are conducted annually without the benefit of electronic collaborative technologies.
- Agency budget personnel spend too much time entering and reconciling data and merging numbers into their submissions, and publications.
- Only one agency currently submits data to MAX electronically.
- Agencies pursuing automated systems have done so unilaterally with little coordination (until the BFE LoB).

**Agency Analysis - Findings**
- Primary agency tools for budgeting are Excel and Word
- A few agencies have integrated Excel & Word with databases
- A few agencies have successfully implemented elements of budget systems that contribute significantly to their productivity
- There have also been quite a few unsuccessful attempts at implementing systems – some fairly expensive
- BF&E modules from FM vendors have not worked

## Business Analysis Findings

**Nine major business processes** were identified as _common to all agencies_.
- Within these nine major processes, **59 business activities** were identified with a _high degree of commonality_.
- _However, at the next level of business specificity, there were_ _significant process and workflow variances_ - reflecting **inherent agency diversity characteristics**.
- Also, the dynamic nature of budgeting necessitates that systems be **flexible** enough to readily accommodate changes to business processes.

-                 **Agency Diversity Characteristics**
- Budget size
- Political sensitivity
- Mission complexity
- Funding type (mandatory vs. discretionary, credit, revolving)
- Activity type (operational, services, regulatory, capital investment, grant-making, commercial-like, military)
- Organizational complexity (centralized, federated, field, international)
- Budgeting sequence (top-down vs. bottom-up)
- Different (and multiple) Congressional constituencies

**Nine Business Processes**
- Pre-budget formulation
- Strategic business assessments
- Dept / agency budgeting
- Dept / agency submission to OMB
- OMB internal decision making
- Preparation and publication of the President’s Budget and Mid-Session Review
- Congressional submission and negotiation
- Tracking congressional action
- Budget execution

## LoB Common Solutions Framework

**Focus on Functional Capabilities**
- The diversity and dynamic nature of budgeting business processes **precludes traditional business process engineering approaches**.
- These difficulties can be effectively bridged by focusing on solutions that **enhance** ***core functional capabilities ***of budgeting***.***
- The same *core functional capabilities* often apply to **multiple business activities**.
- Therefore, an architecture based on *core functional capabilities* will have **broad applicability** in transforming budgeting activities.

**Core Functional Capabilities**
- Numbers manipulation (spreadsheets, reporting)
- Word processing and document publishing
- Database/data warehouse
- Tracking
- Collaboration (meetings, documents)
- Data collection (numbers & text)
- Information sharing
- Analysis and modeling

## Vision: The Budget of the Future

- The MAX A-11 data collection application as we know it would disappear - it would be replaced by agencies using their own automated systems to formulate their budgets and pass the data to OMB electronically.
- Budget numbers and supporting text would move seamlessly from stage to stage of the budget process.
- Budget exercises – even fast-turnaround ad hoc exercises – would be performed using nation-wide web-based applications.
- Collaboration between agencies & OMB, within agencies, and with the Hill – would be facilitated by easy-to-use secure capabilities.

## The BFE LoB Approach

- Improve Federal budgeting **without compromising** essential budgeting functions.
- Based on a ***value proposition*** - agencies voluntarily participate in the LoB and pay a flat funding (or in-kind) contribution to gain the benefits and government-wide services the LoB provides.
- Agencies **optionally** implement LoB sponsored tools and services that they either procure and deploy themselves or obtain via fee-for-service.
- Governed by the **contributing agencies** under the auspices of the Budget Officers Advisory Council (BOAC) and the Small Agency Council.

## LoB Transformation Strategies

**Governance processes** that:
- Maintain a **year-round **PMO staff to advance budgeting interests
- Set **standards** for data, data exchange, and modularization
- Extend the **architecture** to further understand business processes
**Provide centralized** **services** (and service components) where functions are mandated or conducive to standardization.
**Help agencies be Smart Consumers:  **
**Share** information** **on what has and hasn’t worked (best and worst practices)
- Arrange for **shared service providers** for functions multiple agencies are acquiring
**Consolidate acquisitions** (e.g. Smart Buys)
**Leverage **new custom development in a reusable way as Government-Off-the-Shelf (GOTS) and Open Source.
**Encourage Collaboration - **establish a community of practice

## Budget Formulation & Execution LoB

**Capabilities as **
**Common Solutions**

## Capabilities as Common Solutions

**Program Management (Coordination, Standards, Architecture) **

**Agency Budgeting Tools **

**Analytical Tools**

**Budget Performance Integration**

**Collaboration**

**Data Collection & Tracking**

**Document Production**

**Knowledge Management**

**Human Capital (the Federal Budgeting Profession)**

**Budget Formulation & Execution Line of Business (BFE LoB)**

**Budget Formulation & Execution Line of Business (BFE LoB)**

**(New) Budget Execution (including Touch-Points with the FM LoB)**

**Facilitating Government-wide**
**Collaboration & Data Collection**
**The Budget Community and **
**the Earmarks Exercise**
- _[https://max.omb.gov/community](https://max.omb.gov/community)_

**Budget Formulation & Execution LoB**

## Collaboration: The Budget Community Today 3,900 Government Users (and growing)

**Collaboration: The Budget Community Today ****3,900 Government Users (and growing)**

## Collaboration: The Budget Line of Business

**Collaboration: The Budget Line of Business**

## Collaboration: CGAC (also Funds Control)

**Collaboration: CGAC (also Funds Control)**

## Collaboration: Transparency Act

**Collaboration: Transparency Act**

## The Earmarks Data Collection Exercise

- Used new BFE LoB and MAX capabilities to compile detailed information on over 19,000 earmarks in just six weeks:
- Budget Community website for proactive communication and collaboration.
- Posted draft documents and used threaded-comments, Q’s & A’s, and FAQs to share information quickly.
- Partweb / ITweb-like interface for data collection.
- On-line meeting capability to facilitate broad agency participation in defining exercise requirements (despite ice-storms).

## The Earmarks Exercise – Proactive Communication

**The Earmarks Exercise – Proactive Communication**

## Collaboration: Agencies

**Collaboration: Agencies**

## Vision - The Budget Community

**Vision - The Budget Community**
** ****Part of an Integrated Federal Community**

## Vision – The Financial Community 

**Vision – The Financial Community **
**Part of an Integrated Federal Community**

**Budget Execution**
** ****and**
**Integration with Financial Management **

**Budget Formulation & Execution LoB**

- Policy Making: Resource Allocation
- ________________________________________
- Post-decisional: Accounting, Control, Reporting

**Budget Formulation, Execution, and **
**Financial Management - ****A Complete Cycle**

**Policy Making**

**Post-decisional**

**Policy Making**

**Post-decisional**

## Budget Formulation, Execution, and Financial Management - Components 

**Policy Making ******** Decisional**
_**_________________________________________________________________________________________________________________________________________**_
**_______________________________________________________________________________**
**Post-decisional ******** After-action**
_**_________________________________________________________________________________________________________________________________________**_
_**Financial Management**_

**   **_**Budget Execution**_
- Apportionments*
- Allotments, Suballot., & Allowances*
- Commitments*
- Obligations*
- Reprogramming*

**   **_**Budget Formulation**_
- Agency Budget Requests
- President’s Budget Request
- Legislative Action (Appropriations)

- Funds Control*
- Collections & Receivables
- Reporting

- Accounting*
- Payments
- Asset and Liability Mgmt

- Cost Accounting Performance Measurement

- * Key BFE LoB and FM LoB *touch points*

## Budget Execution, & Integration with Financial Management

- New Budget Execution Workgroup is exploring a broad scope of activity:
- Define tools that facilitate decision-making for Budget Execution (e.g. apportionments, allotments, etc.)
- Identify key intersections (*Touch-points*) between Budgeting and Financial Management, and *Tie-points *between budget and financial reports.
- Explore potential to streamline apportionments process
- Define data & data exchange standards to be incorporated in core Financial Management systems.
- Partnership between the BFE LoB, Treasury FMS, and OMB BRD and OMB OFFM.
- Currently 27 agency representatives (and growing), including several FMLoB FSIO Transformation Team members.

**Wrap-up, Next Steps**

- Consider how the Department and its components can benefit from LoB solutions and activities.
- Sign up to participate in the Touch-points study to better understand the interrelationship between budget and finance.
- Be a **smart consumer** of budgeting tools:
- Use the new BFE decision matrix and participate in the workgroup.  Look at the Treasury BFEM tool.
- Reconsider any procurements of BFE modules that are part of FM systems – they have generally not worked.
- If you have a system, form a consortium for development, modernization, and enhancement.  Consider making it available for other agencies as an LoB “*productized*” system.
- Contact the Budget LoB at BudgetLoB@Ed.gov

**Next Steps**

- Questions?

**Additional Materials**
**Sponsor:**  Beth Robinson, Assistant Director for Budget, OMB
**Policy Lead:** Andy Schoenbach, Chief, Budget Systems Branch, OMB
**Managing Partner:**  Tom Skelly, Director of Budget Service, Education
**Program Management Office Lead:**  Sandi McCabe, Education
**   **
**        ****Contact the Budget LoB at** _[BudgetLoB@Ed.gov](mailto:BudgetLoB@Ed.gov)_
**Go to the Budget Community at**** **_[https://max.omb.gov/community](https://max.omb.gov/community)_

**Budget Formulation & Execution LoB**

## Agency Budgeting Tools

| Proposed Solutions | Where We Are Today |
| --- | --- |
| 
Facilitate agency use of Budgeting Tools; ‘productize existing tools for use by other agencies – either as a fee-for-service, or agency installed basis
Decision matrix for evaluating budget systems; assess current systems 
Enable electronic data transfer to MAX A-11; develop business rule service for agencies to validate data 
Maturity model for agency use in assessing their automation levels | 
First LoB “productized” system available from Treasury (BFEM) as a turn-key fee for service for $55k/year/component.  Several agencies will use or pilot for 2009 Budget cycle. 
Decision matrix in final stages of development 
MAX A-11 workgroup started to discuss transfers and validation
 |

## Analytical Tools

| Proposed Solutions | Where We Are Today |
| --- | --- |
| 
Tools for data analysis, reporting, modeling, and scenario building | 
Treasury’s BFEM system provides some functionality  |

## Budget Execution (New)

| Proposed Solutions | Where We Are Today |
| --- | --- |
| Define tools that facilitate decision-making for apportionments, allotments, etc.
Identify key intersections (Touch-points) between Budgeting and Financial Mgmt.
Identify Tie-points between budget and financial reports
Improvements to and automated feeds from OMB’s Apportionment system.
Define data & data exchange standards to be incorporated in FM systems. | Workgroup formed to explore proposed solutions
Partnership between the BFE LoB,  Treasury FMS, and OMB Budget Review.  Several FM LoB FSIO Transformation Team members participating.
Touch-points study underway.  Interviews conducted with six agencies to date.  Looking for additional volunteers. |

## Budget Performance Integration

| Proposed Solutions | Where We Are Today |
| --- | --- |
| 
Tools, services, and best practices to improve program performance measurement and aligning outputs with budgets and actual costs
 | 
Coordination with BPI Council
 |

## Collaboration

| Proposed Solutions | Where We Are Today |
| --- | --- |
| 
Tools and services to improve information sharing, communication and collaboration across government:
Government-wide collaboration site
Secure online meetings
Collaborative authoring of documents and spreadsheets
Guidelines for data ownership in all shared spaces | 
Community page available at: https://max.omb.gov/community
Any government user can easily register (3,900 users so far)
Used for several collaborations including Earmarks, CGAC, Funds Control, Transparency Act, others
Agencies starting to pilot using the site for their own collaborations
Workgroup ready to pilot options for secure online meetings |

## Data Collection & Tracking

| Proposed Solutions | Where We Are Today |
| --- | --- |
| 
Tools for inter- and intra-agency and central budget data collection exercises (numbers and text)
Government-wide web-based platform
Review and optimize recurring budget exercises
Include basic document management for locating past exercises | 
Piloted a quick-turnaround data collection approach with the Earmarks project
Performing after-action review - assessing requirements and options
Analyzing recurring BDRs and BPMs |

## Document Production

| Proposed Solutions | Where We Are Today |
| --- | --- |
| 
Tools and services that produce documents
Include the capability to incorporate numbers from budget systems or spreadsheets  | 
Document production module within the Treasury system  |

## Knowledge Management

| Proposed Solutions | Where We Are Today |
| --- | --- |
| 
Tools and service to capture, organize, store, and share knowledge and experiences  | 
“Community Page” serves as a place to share knowledge
Additional efforts to begin in the future 

 |

## Human Capital (the Federal Budgeting Profession)

| Proposed Solutions | Where We Are Today |
| --- | --- |
| Create a Community of Practice for the Federal budgeting profession

Identify best practices for training & education

Recommend training curriculum for different career stages; maintain library with training schedules and position descriptions 

Identify career path options and opportunities in Federal budgeting

Explore professional certification program

Find ways to attract new professionals

Conduct skills assessment and gap analysis for Federal budgeting work force  | Community page available at https://max.omb.gov/community

Workgroup starting to explore proposed solutions

Gathering training curriculums from agencies and posting to Community page  |

## Governance(Coordination, Standards, Architecture)

**FY 07**

**FY 08**

**FY 09**

**FY 10**

_**Establish the PMO**_
** **Plans & acquisition
-  Product management
-  Coordination & liaison
-  Resource management

_**PMO Operations**_

**Governance**

**Standards**

_**Data Standards**_
-  Govt-wide BFE data
-  Sys to Sys exchange
-  Budget & capital plans
-  Business best practices

_**Data Standards**_
-  BFE and Financial Mgmt
-  Schema: DB,  XML
-  Refine previous stds

_**Standards O&M**_

_**Continue Architecture **_
-  Service module standards
-  Federated architecture
-  Extend agency surveys

**Architecture**

_**Refine Architecture**_

**PMO**

_**Service Module Standards **_
_**(by Arch & Data Standards)**_
- Develop Service Module Standards for GOTS/COTS

**Service Module Standards**

_**Continue Service Module Process **_
_**(by PMO)**_

_**Service Module Standards (by PMO)**_
-  Implement process

**Governance****(Coordination, Standards, Architecture)**

## Governance(Coordination, Standards, Architecture)

| Proposed Solutions | Where We Are Today |
| --- | --- |
| Managing Partner – year-round organization; manages projects, acquisitions, services, and planning in accordance with LoB goals and objectives
Architecture – develop guidelines for Federal budgeting/LoB architecture; encourage modular tools
Data Standards – establish architecture, data and data exchange standards, as well as standards and processes for exchanging data with financial management systems
Service Module Standards – encourage reusability & sharing of agency software investments through standards for module interoperability & procedures for certification   | Concept of Operations, Common Solutions and Conceptual Target Architecture (published June 2006); Exhibit 300/Business Case (submitted September 2006)
Department of Education established PMO (September 2006) – coordinates all LoB activities, executed MOUs, collected MOU funds, produced first BFE LoB newsletter, BudgetSolutions
Architecture, Data & Service Module Standards – PMO will begin work on architecture and standards; will provide guidelines on integrating into applications
PMO contact at budgetlob@ed.gov |

- Budget Formulation and Execution LoB
- Vision, Goals, & Objectives

## 	Budget Formulation & Execution LoB

**Vision**
***Modern, interoperable, flexible, cost effective, and optimized solutions supporting all phases of the formulation and execution of the Federal Budget and linking budget formulation, execution, planning, performance, and financial information.***

**Notes:**
Task force inputs:
Voluntary consensus and open standards
Authoritative data sources
Full participation from all agencies
Communications to stakeholders and customers
Access to info and interoperability (note distinction to data)
Explicitly include web services
Improved program performance
Improved decision support
Coordinated data acquisition and accessibility
Prioritized and informed investment decisions
Redundancy reduction
National data acquisition process/policy

## Budget Formulation & Execution LoB

**Goals**
**Improve the efficiency and effectiveness of agency and central processes for formulating and executing the Federal Budget**
**Improve the integration and standardized exchange of budget formulation, execution, planning, performance measurement, and financial management information and activities across government**
**Improve capabilities for analyzing budget, execution, planning, performance, and financial information in support of decision making**
**Enhance capabilities for aligning programs and their outputs and outcomes with budget levels and actual costs to institutionalize budget and performance Integration**
**Enhance the effectiveness of the Federal budgeting workforce **

**Notes:**
Task force inputs:
Coherent process to national data acquisition
Common business process standardization
Improve consistency of geospatial data
Improve the efficiency of geospatial data creation process
Improve decision making that uses geospatial data
Integrate easily with other government and private sector processes 
Improve accessibility and interoperability of geospatial data 
Allow new relationships and inferences to be derived from geospatial data

## 	 Budget Formulation & Execution LoB

**Objectives**
*The tactical targets that lead to achieving the goals*
- Develop a target architecture, concept of operations, and range of common solutions that are flexible enough to accommodate the diverse and dynamic requirements of agency and central budget processes
- Achieve operational efficiencies and cost savings via the consolidation and dissemination of standardized budgeting solutions and processes where possible
- Develop a maturity model that assesses the sophistication of each individual agency’s automated budgeting processes and defines transition paths to appropriate common solutions for agencies at different maturity levels
- Establish a government-wide capability for electronic collaboration on budgeting-related exercises and activities by organizations in the Federal budgeting community

- Goal 1 - **Improve the efficiency and effectiveness of agency & central processes for formulating and executing the Federal Budget**

## 	 Budget Formulation & Execution LoB

**Objectives**
*The tactical targets that lead to achieving the goals*
- Ensure that the LoB target architecture, concept of operations, and range of common solutions facilitates automated exchange of data using standards and technologies for electronic information exchange
- Improve the collaboration between budgeting, planning, and financial management organizations
- Review and reconcile terms and usage between budgeting and financial management information

- Goal 2 - **Improve the integration and standardized exchange of budget formulation, execution, planning, performance measurement, and financial management information and activities across government**

## Budget Formulation & Execution LoB

**Objectives**
*The tactical targets that lead to achieving the goals*
- Ensure that the LoB target architecture, concept of operations, and range of common solutions includes diverse innovative tools and approaches for enhancing agency and central budget abilities to readily and flexibly extract, manipulate, and model budget, execution, performance, and financial data
- Ensure that the clearinghouse/repository for Federal budgeting and execution activities facilitates and promotes agencies adopting best practices and common solutions for analyzing data and supporting decision making

- Goal 3 - **Improve capabilities for analyzing budget, execution, planning, performance, and financial information in support of decision making**

## 	 Budget Formulation & Execution LoB

**Objectives**
*The tactical targets that lead to achieving the goals*
- Establish guidance and best practices relating to the alignment of program budget requirements, strategic goals, actual costs, and performance outcomes
- Ensure that the LoB target architecture, concept of operations, and range of common solutions includes innovative approaches that facilitate integration of planning and performance in all phases of the budget formulation and execution process
- Establish the standardized processes and data definitions necessary to readily align budget, planning, and performance  information

- Goal 4 - **Enhance capabilities for aligning programs and their outputs and outcomes with budget levels and actual costs to** **Institutionalize budget and performance integration**

## 	 Budget Formulation & Execution LoB

**Objectives**
*The tactical targets that lead to achieving the goals*
- Create a Federal Budgeting Community of Practice:
- Establish a government-wide capability for knowledge sharing among agencies and central budget organizations, including a clearinghouse/repository for Federal budgeting activities of interest (e.g., guidance, best practices, lessons learned, etc)
- Develop and disseminate best practices for human capital management for Federal Budget offices
- Conduct a skills assessment and gap analysis for Federal budgeting – develop and disseminate best practices for training and education
- Conduct conferences, training, and other approaches that facilitate professional development of the Federal budgeting workforce.

- Goal 5 - **Enhance the effectiveness of the Federal budgeting workforce**