a

GAO

United States Government Accountability Office

Report to Congressional Requesters

April 2005 INFORMATION 

TECHNOLOGY

OMB Can Make More 

Effective Use of Its 

Investment Reviews

GAO-05-276
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

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Highlights of GAO-05-276, a report to

congressional requesters 

April 2005

INFORMATION TECHNOLOGY 

OMB Can Make More Effective Use of Its 

Investment Reviews 

For the fiscal year 2005 budget, OMB developed processes and criteria for 

including IT investments on its Management Watch List. In doing so, it 

identified opportunities to strengthen investments and promote 

improvements in IT management. However, it did not develop a single, 

aggregate list identifying the projects and their weaknesses. Instead, OMB 

officials told GAO that to identify IT projects with weaknesses, individual 

OMB analysts used scoring criteria that the office established for evaluating 

the justifications for funding that federal agencies submit for major projects. 

These analysts, each of whom is typically responsible for several federal 

agencies, were then responsible for maintaining information on these 

projects. To derive the total number of projects on the list that OMB 

reported for fiscal year 2005, OMB polled its individual analysts and 

compiled the result. However, OMB officials told GAO that they did not 

compile a list that identified the specific projects and their identified 

weaknesses. The officials added that they did not construct a single list 

because they did not see such an activity as necessary. Thus, OMB has not 

fully exploited the opportunity to use the list as a tool for analyzing IT 

investments on a governmentwide basis. 

OMB had not developed a structured, consistent process for deciding how to 

follow up on corrective actions that its individual analysts asked agencies to 

take to address weaknesses associated with projects on its Management 

Watch List. According to OMB officials, decisions on follow-up and 

monitoring of progress were typically made by the staff with responsibility 

for reviewing individual agency budget submissions, depending on the staff’s 

insights into agency operations and objectives. Because it did not 

consistently require or monitor follow-up activities, OMB did not know 

whether the project risks that it identified through its Management Watch 

List were being managed effectively, potentially leaving resources at risk of 

being committed to poorly planned and managed projects. In addition, 

because it did not consistently monitor the follow-up performed on projects 

on the Management Watch List, OMB could not readily tell GAO which of the 

621 projects received follow-up attention. Thus, OMB was not using its 

Management Watch List as a tool in setting priorities for improving IT 

investments on a governmentwide basis and focusing attention where it was 

most needed. 

For the President’s Budget for 

Fiscal Year 2005, the Office of 

Management and Budget (OMB) 

stated that of the nearly 1,200 

major information technology 

(IT) projects in the budget, it had 

placed approximately half—621 

projects, representing about $22 

billion—on a Management Watch 

List, composed of mission-critical 

projects with identified 

weaknesses. GAO was asked to 

describe and assess OMB’s 

processes for (1) placing projects 

on its Management Watch List and 

(2) following up on corrective 

actions established for projects on 

the list. 

What GAO Recommends

To enable OMB to take advantage 

of potential benefits of using its 

Management Watch List as a tool 

for analyzing, setting priorities, and 

following up on IT projects, GAO is 

making recommendations to OMB 

aimed at more effective 

development and use of its 

Management Watch List. 

In commenting on a draft of this 

report, OMB did not agree that an 

aggregated list, as recommended 

by GAO, is necessary for adequate 

oversight and management, 

because it uses other information 

and processes for this purpose. 

However, GAO continues to believe 

that an aggregated list would 

contribute to OMB’s ability to 

analyze IT investments 

governmentwide and track 

progress in addressing deficiencies. 
Page i GAO-05-276 OMB Investment Reviews

Contents

Letter 1

Results in Brief 2

Background 3

Objectives, Scope, and Methodology 6

OMB Established Processes and Criteria for Identifying Weak 

Projects, but It Did Not Use an Aggregate List to Perform Its 

Analysis or Oversight 7

OMB’s Follow-up on Projects Was Inconsistent, and Follow-up 

Activities Were Not Tracked Centrally 9

Conclusions 11

Recommendations for Executive Action 12

Agency Comments and Our Evaluation 12

Appendix

Appendix I: Comments from the Office of Management and Budget 15

Abbreviations

IT information technology

OIRA Office of Information and Regulatory Affairs

OMB Office of Management and Budget

RMO Resource Management Office

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Page 1 GAO-05-276 OMB Investment Reviews

United States Government Accountability Office

Washington, D.C. 20548

A

April 15, 2005 Letr

The Honorable Tom Davis

Chairman, Committee on Government Reform

House of Representatives

The Honorable Adam H. Putnam

House of Representatives

The President’s Budget for Fiscal Year 2005 identified approximately 

$60 billion for information technology (IT) projects. In that budget, the 

Office of Management and Budget (OMB) stated that, of approximately 

1,200 major IT projects, about half—621 projects, representing about

$22 billion—were on a ‘‘Management Watch List.’’ This information was 

reiterated in testimony in March 2004,1

 during which OMB officials stated 

that the list consisted of mission-critical projects that needed to improve 

performance measures, project management, and IT security. OMB 

identified weaknesses in these three areas, among others, in its analysis of 

the business cases that agencies submitted to justify project funding. The 

officials added that the fiscal year 2005 budget process required agencies to 

successfully correct project weaknesses and business case deficiencies; 

otherwise, OMB would limit agencies’ spending on new starts and other 

developmental activities. 

This report responds to your request that we describe and assess OMB’s 

processes for (1) placing projects on its Management Watch List and 

(2) following up on corrective actions established for projects on the list. 

To accomplish these objectives, we reviewed and analyzed OMB’s policy 

and budget guidance for fiscal year 2005 and interviewed OMB officials 

(further details on our objectives, scope, and methodology are provided 

following the background section).

1

On March 3, 2004, OMB’s Deputy Director for Management and its Administrator for 

Electronic Government and Information Technology testified at a hearing conducted by the 

Subcommittee on Technology, Information Policy, Intergovernmental Relations and the 

Census, Committee on Government Reform, House of Representatives. The hearing topic 

was “Federal Information Technology Investment Management, Strategic Planning, and 

Performance Measurement: $60 Billion Reasons Why.”
Page 2 GAO-05-276 OMB Investment Reviews

Results in Brief For the fiscal year 2005 budget, OMB developed processes and criteria for 

including IT projects (investments) on its Management Watch List. In doing 

so, it identified opportunities to strengthen investments and promote 

improvements in IT management. However, OMB did not develop a single, 

aggregate list identifying the projects and their weaknesses. Instead, OMB 

officials told us that individual OMB analysts used scoring criteria 

established in the office’s Circular A-11 for evaluating the justifications for 

funding (known as exhibit 300s) that are submitted by federal agencies. 

OMB delegated individual analysts on its staff, each of whom is typically 

assigned responsibility for several federal agencies, with maintaining, for 

their respective agencies, information for the IT projects included on the 

list. To derive the 621 total of projects on the list that OMB reported for 

fiscal year 2005, OMB polled its individual analysts and compiled the 

numbers. OMB officials told us that they did not construct a single list of 

projects meeting their watch list criteria because they did not see such an 

activity as necessary for performing OMB’s predominant mission: to assist 

in overseeing the preparation of the federal budget and to supervise agency 

budget administration. Thus, OMB did not exploit the opportunity to use 

the list as a tool for analyzing IT investments on a governmentwide basis, 

limiting its ability to identify and report on the full set of IT investments 

requiring corrective actions.

OMB did not develop a structured, consistent process for deciding how to 

follow up on corrective actions that it asked agencies to take to address 

weaknesses associated with projects on the Management Watch List. 

According to OMB officials, decisions on follow-up and monitoring of 

specific projects were typically made by the OMB staff with responsibility 

for reviewing individual agency budget submissions, depending on the 

staff’s insights into agency operations and objectives. Because it did not 

consistently monitor the follow-up performed, OMB could not tell us which 

of the 621 projects received follow-up attention, and it did not know 

whether the specific project risks that it identified through its Management 

Watch List were being managed effectively. This approach could leave 

resources at risk of being committed to poorly planned and managed 

projects. Thus, OMB was not using its Management Watch List as a tool for 

improving IT investments on a governmentwide basis and focusing 

attention where it was most needed. 

To enable OMB to take advantage of the potential benefits of using the 

Management Watch List as a tool for analyzing and following up on IT 

investments, we are recommending that OMB develop a centralized 
Page 3 GAO-05-276 OMB Investment Reviews

capability for creating and monitoring its Management Watch List, 

including developing and using criteria for prioritizing the IT projects on 

the list and appropriate follow-up activities, and that it use the prioritized 

list for reporting to the Congress as part of its statutory reporting 

responsibilities. 

In commenting on a draft of this report, OMB’s Administrator of the Office 

of E-Government and Information Technology expressed appreciation for 

our review of OMB’s use of its Management Watch List. However, the 

Administrator disagreed with our assessment that an aggregated 

governmentwide list is necessary to perform adequate oversight and 

management, and that OMB does not know whether risks are being 

addressed. According to the Administrator, OMB has more than adequate 

knowledge of agency project planning and uses others means to assess 

project performance. Nonetheless, based on OMB’s inability to easily 

report which of the 621 investments on the Management Watch List 

remained deficient or how much of the $22 billion cited in the President’s 

Budget remained at risk, we continue to believe that an aggregate list 

would facilitate OMB’s ability to track progress.

Background According to OMB, its predominant mission is to assist the President in 

overseeing the preparation of the federal budget and to supervise budget 

administration in executive branch agencies. In helping to formulate the 

President’s spending plans, OMB is responsible for evaluating the 

effectiveness of agency programs, policies, and procedures; assessing 

competing funding demands among agencies; and setting funding 

priorities. OMB also is to ensure that agency reports, rules, testimony, and 

proposed legislation are consistent with the President’s budget and with 

administration policies.

In addition, OMB is responsible for overseeing and coordinating the 

administration’s procurement, financial management, information, and 

regulatory policies. In each of these areas, OMB’s role is to help improve 

administrative management, to develop better performance measures and 

coordinating mechanisms, and to reduce unnecessary burden on the 

public.

To drive improvement in the implementation and management of IT 

projects, the Congress enacted the Clinger-Cohen Act in 1996 to further 

expand the responsibilities of OMB and the agencies under the Paperwork
Page 4 GAO-05-276 OMB Investment Reviews

Reduction Act.2

 The act requires that agencies engage in capital planning 

and performance- and results-based management. OMB is required by the 

Clinger-Cohen Act to establish processes to analyze, track, and evaluate the 

risks and results of major capital investments in information systems made 

by executive agencies. OMB is also required to report to the Congress on 

the net program performance benefits achieved as a result of major capital 

investments in information systems that are made by executive agencies.3

In response to the Clinger-Cohen Act and other statutes, OMB developed 

section 300 of Circular A-11. This section provides policy for planning, 

budgeting, acquisition, and management of federal capital assets and 

instructs agencies on budget justification and reporting requirements for 

major IT investments.4

 Section 300 defines the budget exhibit 300, also 

called the Capital Asset Plan and Business Case, as a document that 

agencies submit to OMB to justify resource requests for major IT 

investments. The exhibit 300 consists of two parts: the first is required of all 

assets; the second applies only to information technology. Among other 

things, the exhibit 300 requires agencies to provide information 

summarizing spending and funding plans; performance goals and 

measures; project management plans, goals, and progress; and security 

plans and progress. This reporting mechanism, as part of the budget 

formulation and review process, is intended to enable an agency to 

demonstrate to its own management, as well as OMB, that it has employed 

the disciplines of good project management, developed a strong business 

case for the investment, and met other Administration priorities in defining 

the cost, schedule, and performance goals proposed for the investment. 

The types of information included in the exhibit 300, among other things, 

are to help OMB and the agencies identify and correct poorly planned or 

performing investments (i.e., investments that are behind schedule, over 

budget, or not delivering expected results) and real or potential systemic 

weaknesses in federal information resource management (e.g., project 

manager qualifications).

2

44 U.S.C. § 3504(a)(1)(B)(vi) (OMB); 44 U.S.C. § 3506(h)(5) (agencies).

3

These requirements are specifically described in the Clinger-Cohen Act, 40 U.S.C. § 

11302(c).

4

OMB Circular A-11 defines a major IT investment as an investment that requires special 

management attention because of its importance to an agency’s mission or because it is an 

integral part of the agency’s enterprise architecture, has significant program or policy 

implications, has high executive visibility, or is defined as major by the agency’s capital 

planning and investment control process.
Page 5 GAO-05-276 OMB Investment Reviews

According to OMB’s description of its processes, agencies’ exhibit 300 

business cases are reviewed by OMB analysts from its four statutory 

offices—Offices of E-Government and Information Technology (e-Gov), 

Information and Regulatory Affairs (OIRA), Federal Financial 

Management, and Federal Procurement Policy—and its Resource 

Management Offices (RMO). In addition to other responsibilities under 

various statutes, e-Gov and OIRA develop and oversee the implementation 

of governmentwide policies in the areas of IT, information policy, privacy, 

and statistical policy. OIRA and e-Gov analysts also carry out economic and 

related analyses, including reviewing exhibit 300s. Each of about 12 

analysts is responsible for overseeing IT projects for a specific agency or 

(more commonly) several agencies. 

OMB’s RMOs are staffed with program examiners, whose responsibility is 

to develop and support the President’s Budget and Management Agenda. 

RMOs work as liaisons between federal agencies and the presidency. In 

formulating the budget, they evaluate agency requests for funding and 

evaluate agency management and financial practices. RMOs also evaluate 

and make recommendations to the President when agencies seek new 

legislation or the issuance of Presidential executive orders that would help 

agencies to fulfill their organizational objectives.

According to OMB officials, the OIRA and e-Gov analysts, along with RMO 

program examiners, evaluate agency exhibit 300 business cases as part of 

the development of the President’s Budget. The results of this review are 

provided to agencies through what is called the “passback” process. That 

is, OMB passes the requests back to agencies with its evaluation, which 

identifies any areas requiring remediation. 

The final step in the budget process, occurring after the Congress has 

appropriated funds, is apportionment, through which OMB formally 

controls agency spending. According to the Antideficiency Act, before the 

agency may spend its funding resources, appropriations must be 

apportioned by periods within the fiscal year (typically by quarters) or 

among the projects to be undertaken.5

 Although apportionment is a 

procedure required to allow agencies to access their appropriated funds, 

OMB can also use apportionment to impose conditions on agency 

spending, such as changes in agency practices; it is one of several 

5

31 U.S.C. § 1512.
Page 6 GAO-05-276 OMB Investment Reviews

mechanisms that the Clinger-Cohen Act authorizes OMB to use to enforce

an agency head’s accountability for the agency’s IT investments.6

The President’s Budget for Fiscal Year 2005 included about 1,200 IT 

projects, totaling about $60 billion. Of this total number of projects, OMB 

reported in the budget that slightly over half—621 projects, representing 

about $22 billion—were on a Management Watch List. According to OMB’s 

March 2004 testimony, this list consists of mission-critical projects that 

needed to improve performance measures, project management, IT 

security, or overall justification. OMB officials described this assessment as 

based on evaluations of exhibit 300s submitted to justify inclusion in the 

budget. According to OMB’s testimony, the fiscal year 2005 budget required 

agencies to successfully correct identified project weaknesses and 

business case deficiencies; otherwise, they risked OMB placing limits on 

their spending. OMB officials testified in March 2004 that they would 

enforce these corrective actions through the apportionment process.

OMB continued its use of a Management Watch List in the recently released 

President’s Budget for Fiscal Year 2006. The President’s Budget for Fiscal 

Year 2006 includes 1,087 IT projects, totaling about $65 billion. Of this total 

number of projects, OMB reported in the budget that 342 projects, 

representing about $15 billion, are on the fiscal year 2006 Management 

Watch List.

Objectives, Scope, and 

Methodology

Our objectives were to describe and assess OMB’s processes for (1) placing 

projects on its Management Watch List and (2) following up on corrective 

actions established for projects on the list. 

To examine OMB’s processes for developing the list, we requested a copy 

of the Management Watch List; we reviewed related OMB policy guidance, 

including its Circular A-11 and Capital Programming Guide, as well as the 

Analytical Perspectives for the President’s Budget submissions for fiscal 

years 2005 and 2006; and we interviewed OMB analysts and their managers, 

including the Deputy Administrator of OIRA and the Chief of the 

Information Technology and Policy Branch, to identify the processes and 

criteria they have in place to determine which IT projects to include on the 

Management Watch List. 

6

40 U.S.C. § 11303(b)(5)(B).
Page 7 GAO-05-276 OMB Investment Reviews

To examine OMB’s follow-up procedures on corrective actions established 

for IT projects on the list, we reviewed related policy guidance, including 

section 300 of Circular A-11 and OMB’s Capital Programming Guide. We 

analyzed OMB’s apportionment documentation, specifically the Standard 

Form 132 (Apportionment and Reapportionment Schedule), which 

documented special apportionments that specified conditions that had to 

be met before the agencies could receive funds. In addition, we interviewed 

OMB officials and analysts and reviewed testimony and laws affecting the 

management of IT investments, such as the Clinger-Cohen Act. 

We conducted our work at OMB headquarters in Washington, D.C., from 

August 2004 through March 2005, in accordance with generally accepted 

government auditing standards.

OMB Established 

Processes and Criteria 

for Identifying Weak 

Projects, but It Did Not 

Use an Aggregate List 

to Perform Its Analysis 

or Oversight

According to OMB officials, including the Deputy Administrator of OIRA 

and the Chief of the Information Technology and Policy Branch, OMB staff 

identified projects for the Management Watch List through their evaluation 

of the exhibit 300s that agencies submit for major IT projects as part of the 

budget development process. This evaluation is carried out as part of 

OMB’s responsibility for helping to ensure that investments of public 

resources are justified and that public resources are wisely invested. 

The OMB officials added that their analysts evaluate agency exhibit 300s by 

assigning scores to each exhibit 300 based on guidance presented in OMB 

Circular A-11.7

 According to this circular, the purpose of the scoring is to 

ensure that agency planning and management of capital assets are 

consistent with OMB policy and guidance. 

As described in Circular A-11, the scoring of a business case consists of 

individual scoring for 10 categories, as well as a total composite score of all 

the categories. The 10 categories are 

• acquisition strategy, 

• project (investment) management, 

• enterprise architecture, 

7

These scoring criteria are presented in Office of Management and Budget Circular A-11, 

Part 7, Planning, Budgeting, Acquisition, and Management of Capital Assets (July 2004).
Page 8 GAO-05-276 OMB Investment Reviews

• alternatives analysis, 

• risk management, 

• performance goals, 

• security and privacy, 

• performance-based management system (including the earned value 

management system8

), 

• life-cycle costs formulation, and 

• support of the President’s Management Agenda.

According to Circular A-11, scores range from 1 to 5, with 5 indicating 

investments whose business cases provided the best justification and 1 the 

least. For investments with average scores of 3 or below, OMB may ask 

agencies for remediation plans to address weaknesses in their business 

cases.

OMB officials said that, for fiscal year 2005, an IT project was placed on the 

Management Watch List if its exhibit 300 business case received a total 

composite score of 3 or less, or if it received a score of 3 or less in the areas 

of performance goals, performance-based management systems, or 

security and privacy, even if its overall score was a 4 or 5. OMB reported 

that agencies with weaknesses in these three areas were to submit 

remediation plans addressing the weaknesses.

According to OMB management, individual analysts were responsible for 

evaluating projects and determining which projects met the criteria to be 

on the Management Watch List for their assigned agencies. To derive the 

total number of projects on the list that were reported for fiscal year 2005, 

OMB polled the individual analysts and compiled the numbers.

8

Earned value management is a project management tool that integrates the investment 

scope of work with schedule and cost elements for investment planning and control. This 

method compares the value of work accomplished during a given period with that of the 

work expected in the period. Differences in expectations are measured in both cost and 

schedule variances.
Page 9 GAO-05-276 OMB Investment Reviews

OMB officials said that they did not aggregate these projects into a single 

list describing projects and their weaknesses. According to these officials, 

they did not construct a single list of projects meeting their watch list 

criteria because they did not see such an activity as necessary in 

performing OMB’s predominant mission: to assist in overseeing the 

preparation of the federal budget and to supervise agency budget 

administration. Further, OMB officials stated that the limited number of 

analysts involved enabled them to explore governmentwide issues using ad 

hoc queries and to develop approaches to address systemic problems 

without the use of an aggregate list. They pointed at successes in improving 

IT management, such as better compliance with security requirements, as 

examples of the effectiveness of their current approach. 

Nevertheless, OMB has not fully exploited the opportunity to use its 

Management Watch List as a tool for analyzing IT investments on a 

governmentwide basis. According to the Clinger-Cohen Act, OMB is 

required to establish processes to analyze, track, and evaluate the risks and 

results of major IT capital investments by executive agencies, which 

aggregation of the Management Watch List would facilitate. Without 

aggregation, the list’s visibility was limited at more senior levels of OMB, 

constraining its ability to conduct analysis of IT investments on a 

governmentwide basis and limiting its ability to identify and report on the 

full set of IT investments requiring corrective actions. 

OMB’s Follow-up on 

Projects Was 

Inconsistent, and 

Follow-up Activities 

Were Not Tracked 

Centrally

OMB did not develop a structured, consistent process or criteria for 

deciding how to follow up on corrective actions that it asked agencies to 

take to address weaknesses associated with projects on the Management 

Watch List. Instead, OMB officials, including the Deputy Administrator of 

OIRA and the Chief of the Information Technology and Policy Branch, said 

that the decision on whether and how to follow up on a specific project 

was typically made jointly between the OIRA analyst and the RMO program 

examiner who had responsibility for the individual agency, and that followup on specific projects was driven by a number of factors, only one of 

which was inclusion on the Management Watch List. 

These officials also said that the decision for follow-up was generally 

driven by OMB’s predominant mission to assist in budget preparation and 

to supervise budget administration, rather than strictly by the perceived 

risk of individual projects. According to these officials, those Management 

Watch List projects that did receive specific follow-up attention received 

feedback through the passback process, through targeted evaluation of 
Page 10 GAO-05-276 OMB Investment Reviews

remediation plans designed to address weaknesses, and through the 

apportioning of funds so that the use of budgeted dollars was conditional 

on appropriate remediation plans being in place.9

 These officials also said 

that follow-up of some Management Watch List projects was done through 

quarterly e-Gov Scorecards.10

OMB officials also stated that those Management Watch List projects that 

did receive follow-up attention were not tracked centrally, but only by the 

individual OMB analysts with responsibility for the specific agencies. For 

example, if an agency corrected a deficiency or weakness in a specific area 

of the exhibit 300 for a Management Watch List project, that change was 

not recorded centrally. Accordingly, OMB could not readily tell us which of 

the 621 watch list projects for fiscal year 2005 were followed up on, nor 

could it use the list to describe the relationship between its follow-up 

activities and the changes in the numbers of projects on the watch list 

between fiscal year 2005 (621 projects) and fiscal year 2006 (342). Further, 

because OMB did not trace follow-up centrally, senior management could 

not report which projects received follow-up attention and which did not.

OMB does not have specific criteria for prioritizing follow-up on 

Management Watch List projects. Without specific criteria, OMB staff may 

be agreeing to commit resources to follow up on projects that did not 

represent OMB’s top priorities from a governmentwide perspective. For 

example, inconsistent attention to OMB priorities, such as earned value 

management, could undermine the objectives that OMB set in these areas. 

In addition, major projects with significant management deficiencies may 

have continued to absorb critical agency resources.

In order for OMB management to have assurance that IT program 

deficiencies are addressed, it is critical that corrective actions associated 

with Management Watch List projects be monitored. Follow-up activities 

are instrumental in ensuring that agencies address and resolve weaknesses 

found in exhibit 300s, which may indicate underlying weaknesses in project 

9

The authority for apportioning funds is specifically described in the Clinger-Cohen Act, 40 

U.S.C. § 11303(b)(5)(B)(ii).

10The quarterly e-Gov Scorecards are reports that use a red/yellow/green scoring system to 

illustrate the results of OMB’s evaluation of the agencies’ implementation of e-government 

criteria in the President’s Management Agenda. The scores are determined in quarterly 

reviews, where OMB evaluates agency progress toward agreed-upon goals along several 

dimensions, and they provide input to the quarterly reporting on the President’s 

Management Agenda.
Page 11 GAO-05-276 OMB Investment Reviews

planning or management. Tracking these follow-up activities is essential to 

enabling OMB to determine progress on both specific projects and 

governmentwide trends. In addition, tracking is necessary for OMB to fully 

execute its responsibilities under the Clinger-Cohen Act, which requires 

OMB to establish processes to analyze, track, and evaluate the risks and 

results of major capital investments made by executive agencies for 

information systems. Without tracking specific follow-up activities, OMB 

could not know whether the risks that it identified through its Management 

Watch List were being managed effectively; if they were not, funds were 

potentially being spent on poorly planned and managed projects.

Conclusions By scoring agency IT budget submissions and identifying weaknesses that 

may indicate investments at risk, OMB is identifying opportunities to 

strengthen investments. This scoring addresses many critical IT 

management areas and promotes the improvement of IT investments. 

However, OMB has not developed a single, aggregate list identifying the 

projects and their weaknesses, nor has it developed a structured, 

consistent process for deciding how to follow up on corrective actions. 

Aggregating the results at a governmentwide level would help OMB take 

full advantage of the effort that it puts into reviewing business cases for 

hundreds of IT projects. A governmentwide perspective could enable OMB 

to use its scoring process more effectively to identify management issues 

that transcend individual agencies, to prioritize follow-up actions, and to 

ensure that high-priority deficiencies are addressed. 

OMB’s follow-up on poorly planned and managed IT projects has been 

largely driven by its focus on the imperatives of the overall budget process. 

Although this approach is consistent with OMB’s predominant mission, it 

does not fully exploit the insights developed through the scoring process, 

and it may leave unattended weak projects consuming significant budget 

dollars. The Management Watch List described in the President’s Budget 

for Fiscal Year 2005 contained projects representing over $20 billion in 

budgetary resources that could have remained at risk because of 

inadequate planning and project management. Because of the absence of a 

consistent and integrated approach to follow-up and tracking, OMB was 

unable to use the Management Watch List to ascertain whether progress 

was made in addressing governmentwide and project-specific weaknesses 

and where resources should be applied to encourage additional progress. 

Thus, there is an increased risk that remedial actions were incomplete and 

that billions of dollars were invested in IT projects with planning and 

management deficiencies. In addition, OMB’s ability to report to the 
Page 12 GAO-05-276 OMB Investment Reviews

Congress on progress made in addressing critical issues and areas needing 

continued attention is limited by the absence of a consolidated list and 

coordinated follow-up activities. 

Recommendations for 

Executive Action

In order for OMB to take advantage of the potential benefits of using the 

Management Watch List as a tool for analyzing and following up on IT 

investments on a governmentwide basis, we are recommending that the 

Director of OMB take the following four actions:

• Develop a central list of projects and their deficiencies.

• Use the list as the basis for selecting projects for follow-up and for 

tracking follow-up activities; 

• to guide follow-up, develop specific criteria for prioritizing the IT 

projects included on the list, taking into consideration such factors 

as the relative potential financial and program benefits of these IT 

projects, as well as potential risks. 

• Analyze the prioritized list to develop governmentwide and agency 

assessments of the progress and risks of IT investments, identifying 

opportunities for continued improvement.

• Report to the Congress on progress made in addressing risks of major IT 

investments and management areas needing attention.

Agency Comments and 

Our Evaluation

In written comments on a draft of this report, OMB’s Administrator of the 

Office of E-Government and Information Technology expressed 

appreciation for our review of OMB’s use of its Management Watch List. 

She noted that the report was narrowly focused on the Management Watch 

List and the use of exhibit 300s in that context. She added that the report 

did not address the more broad budget and policy oversight responsibilities 

that OMB carries out or the other strategic tools available to OMB as it 

executes those responsibilities. We agree that our review described and 

assessed OMB’s processes for (1) placing the 621 projects representing 

about $22 billion on its Management Watch List and (2) following up on 

corrective actions established for projects on the list. 
Page 13 GAO-05-276 OMB Investment Reviews

The Administrator commented that OMB’s oversight activities include the 

quarterly President’s Management Agenda Scorecard assessment. We 

acknowledge these activities in the report in the context of the e-Gov 

scorecard, which measures the results of OMB’s evaluation of the agencies’ 

implementation of e-government criteria in the President’s Management 

Agenda. We also agree with the Administrator that OMB is not the sole 

audience of an exhibit 300. As we state in the report, an exhibit 300 

justification is intended to enable an agency to demonstrate to its own 

management, as well as to OMB, that it has employed the disciplines of 

good project management, developed a strong business case for the 

investment, and met other Administration priorities in defining the cost, 

schedule, and performance goals proposed for the investment.

The Administrator disagreed with our finding that OMB did not have 

specific criteria for prioritizing follow-up on exhibit 300s that have been 

included on the Management Watch List. She explained that OMB 

establishes priorities on a case-by-case basis within the larger context of 

OMB’s overall review of agency program and budget performance. 

However, our review showed that OMB did not develop a structured, 

consistent process or criteria for deciding how it should follow up on 

corrective actions that it asked agencies to take to address the weaknesses 

of the projects on the Management Watch List. Accordingly, we continue to 

believe that OMB should specifically consider those factors that it had 

already determined were critical enough that they caused an investment to 

be included in the Management Watch List. Without consistent attention to 

those IT management areas already deemed as being of the highest priority 

by OMB, the office risks focusing on areas of lesser importance. 

We agree with the Administrator’s separate point that agencies have the 

responsibility for ensuring that investments on the Management Watch List 

are successfully brought up to an acceptable level. The follow-up that we 

describe in our report consists of those activities that would allow OMB to 

ascertain that the deficient investments have, in fact, been successfully 

strengthened. We note in the report that the quarterly President’s 

Management Agenda Scorecard plays a role in this activity (in the report, 

we refer to the e-Gov Scorecard, which contributes to the Management 

Agenda Scorecard). 

Finally, the Administrator disagrees with our assessment that an 

aggregated governmentwide list is necessary to perform adequate oversight 

and management, and that OMB does not know whether risks are being 

addressed. However, our review indicated that OMB was unable to easily 
Page 14 GAO-05-276 OMB Investment Reviews

determine which of the 621 investments on the Management Watch List 

remained deficient or how much of the $22 billion cited in the President’s 

Budget remained at risk. In our assessment we observed that OMB had 

expended considerable resources in the scoring of all exhibit 300s and the 

identification of investments requiring corrective action, but that it never 

committed the additional resources that would be required to aggregate the 

partial management watch lists held by each individual analyst. Because no 

complete Management Watch List was formed, OMB lost the opportunity to 

analyze the full set of deficient investments as a single set of data. This 

undermined its ability to assess governmentwide trends and issues. In 

addition, the lack of a complete Management Watch List necessarily 

inhibited OMB’s ability to track progress overall and to represent the full 

set of investments requiring corrective action. We continue to believe that 

these activities could be facilitated by an aggregate Management Watch 

List.

As agreed with your offices, unless you publicly announce its contents 

earlier, we plan no further distribution of this report until 30 days from the 

report date. At that time, we will send copies to other interested 

congressional committees and to the Director of the Office of Management 

and Budget. We also will make copies available to others upon request. In 

addition, the report will be available at no charge on the GAO Web site at

www.gao.gov.

Should you or your offices have questions on matters discussed in this 

report, please contact me at (202) 512-9286, or Lester P. Diamond, Assistant 

Director, at (202) 512-7957. We can also be reached by e-mail at 

pownerd@gao.gov, or diamondl@gao.gov, respectively. Key contributors to 

this report were William G. Barrick, Barbara Collier, Sandra Kerr, and Mary 

Beth McClanahan.

David A. Powner

Director, IT Management Issues
Page 15 GAO-05-276 OMB Investment Reviews

Appendix I

Comments from the Office of Management Apendxies

and Budget ApendxiI
Appendix I

Comments from the Office of Management 

and Budget

(310472) Page 16 GAO-05-276 OMB Investment Reviews
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