United States General Accounting Office

GAO Testimony

Before the Subcommittee on Risk Management and

Specialty Crops, Committee on Agriculture

House of Representatives

For Release on Delivery

Expected at

3:00 p.m., EDT

on Wednesday

October 22, 1997

RESULTS ACT

Observations on CFTC’s

Strategic Plan

Statement of Richard J. Hillman, Acting Associate Director

Financial Institutions and Markets Issues

General Government Division

GAO/T-GGD-98-17

Summary 

Results Act: Observations on CFTC’s

Strategic Plan

Under the Government Performance and Results Act of 1993 (GPRA or

Results Act), executive agencies were to complete—not later than

September 30, 1997—strategic plans in which they define their missions,

establish results-oriented goals, and identify strategies they will use to

achieve those goals for the period of 1997 through 2002. The House

Subcommittee on Risk Management and Specialty Crops, House

Committee on Agriculture, asked GAO to assess the strategic plan of the

Commodity Futures Trading Commission (CFTC) for compliance with the

Results Act.

On the basis of its review, GAO found that CFTC’s strategic plan contained

all of the major components required by the Results Act. However, as

discussed below, GAO identified several areas in which CFTC could improve

its plan.

• The plan defines goals and objectives that supported CFTC’s mission, but

most of these could benefit by being restated in a way that would facilitate

future assessment.

• The plan identifies activities for achieving CFTC’s goals and objectives, but

it could be more informative by including the resources needed for the

activities, schedules for completing key actions, and ways for assigning

accountability to managers and staff.

• The plan’s discussion of the relationship between goals in the annual and

strategic plans could be strengthened by including more results-oriented

performance measures that could be used to reflect progress made toward

achieving its goals.

• The plan identifies some key external factors that could affect the agency’s

ability to achieve its goals, but the plan could be improved by describing

how such factors are linked to particular goals and how a particular goal

can be affected by a specific factor.

• The plan indicates that CFTC will use its existing processes to evaluate its

programs, but the plan could be expanded to include information on the

timing and scope of future evaluations.

• The draft plan was made available to stakeholders late in the process. As a

result, the plan reflects limited consultation with stakeholders during plan

development. Also, the plan does not discuss how CFTC will incorporate

stakeholders’ views in the development of future plans.

GAO recognizes that developing performance measures and measuring

program impacts present challenges to CFTC and other regulatory agencies

in addressing the requirements of the Results Act. However, it is important

that CFTC and other regulatory agencies continue their efforts toward that

Page 1 GAO/T-GGD-98-17
Summary 

Results Act: Observations on CFTC’s

Strategic Plan

end. Any new methods or research approaches developed by one agency

could also be useful to others.

GAO also recognizes that CFTC’s strategic plan is a dynamic document that

the agency intends to refine. Improving management in the federal sector

will not be easy, but the Results Act can assist in accomplishing this goal.

Page 2 GAO/T-GGD-98-17
Statement 

Results Act: Observations on CFTC’s

Strategic Plan

Mr. Chairman and Members of the Subcommittee:

I am pleased to be here today to assist the Subcommittee in its review of

the Commodity Futures Trading Commission’s (CFTC) strategic plan.

Hearings such as this one are an important part of assuring that the intent

of the Government Performance and Results Act of 1993 (GPRA or Results

Act) is met, and we commend you, Mr. Chairman, for holding this hearing.

The consultative process provides an important opportunity for Congress

and the executive branch to collectively ensure that agency missions are

focused, goals are results-oriented, and strategies and funding

expectations are appropriate. As you know, the Results Act required

executive agencies to complete their initial strategic plans by

September 30, 1997, and CFTC met this requirement.

My testimony today discusses our review of CFTC’s strategic plan. We

specifically determined whether the plan contained each of the six

components required by the Results Act and assessed each component’s

strengths and weaknesses. We also reviewed the extent to which CFTC

consulted with stakeholders, including the other federal financial market

regulators. Finally, we identified challenges that CFTC faces in addressing

the requirements of the Results Act.

CFTC’s strategic plan reflects a concerted effort by the agency to address

the requirements of the Results Act. Although the plan could be

strengthened in some areas, it compares favorably with the plans of other

federal financial regulators that we have reviewed.1

 On the basis of our

review, we found that CFTC’s plan contained all of the components required

by the Results Act but that some of the components could be

strengthened. We also found that the plan could be improved by additional

stakeholder input, including interagency coordination. Finally, due to the

complex set of factors that determine regulatory outcomes, measuring

program impacts presents challenges to CFTC in addressing the

requirements of the Results Act, as it does for regulatory agencies in

general. However, the use of program evaluations to derive

results-oriented goals and to measure the extent those goals are achieved

is one key to the success of the process. Notwithstanding the need for

improvements, we recognize that CFTC’s strategic plan is a dynamic

document that the agency intends to refine.

1

See The Results Act: Observations on Draft Strategic Plans of Five Financial Regulatory Agencies

(GAO/T-GGD-97-164, July 29, 1997).

Page 3 GAO/T-GGD-98-17
Statement 

Results Act: Observations on CFTC’s

Strategic Plan

My comments apply to the strategic plan that CFTC formally submitted to

Congress and the Office of Management and Budget (OMB) in

September 1997. In general, our assessment of CFTC’s plan was based on

knowledge of the agency’s operations and programs; past and ongoing

reviews of CFTC; results of work on other agencies’ strategic plans and the

Results Act; discussions with CFTC, OMB, and Subcommittee staff; and other

information available at the time of our assessment. The criteria we used

to determine whether CFTC’s plan complied with the requirements of the

Results Act were the Results Act itself and OMB guidance on preparing

strategic plans (OMB Circular A-11, Part 2). To assess CFTC’s consultation

with stakeholders and to identify challenges in implementing the Results

Act, we relied on the results of our previous work and/or discussions with

CFTC and OMB officials.

Background CFTC is an independent agency that administers the Commodity Exchange

Act, as amended,2

 and was created by Congress in 1974. The principal

purposes of the act are to protect the public interest in the proper

functioning of the market’s price discovery and risk-shifting functions. In

administering the act, CFTC is responsible for fostering the economic utility

of the futures market by encouraging its efficiency, monitoring its

integrity, and protecting market participants from abusive trade practices

and fraud.

As its title indicates, the Results Act focuses on results. The Act seeks to

shift the focus of federal management and decisionmaking from a

preoccupation with the number of tasks completed or services provided to

a more direct consideration of the results of programs—that is, the real

differences those tasks or services make in citizens’ lives. In crafting the

Act, Congress recognized that congressional and executive branch

decisionmaking had been severely handicapped in many agencies by the

absence of the basic underpinnings of well-managed organizations. These

agencies lacked clear missions; results-oriented performance goals;

well-conceived agency strategies to meet those goals; and accurate,

reliable, and timely program performance and cost information to measure

progress in achieving program results. In recent years, Congress has

established a statutory framework for addressing these long-standing

challenges and for helping it and the executive branch make the difficult

2

7 U.S.C. 1 et seq.

Page 4 GAO/T-GGD-98-17
Statement 

Results Act: Observations on CFTC’s

Strategic Plan

trade-offs that are necessary for effective policymaking.3 Improving

management in the federal sector will not be easy, but the Results Act can

assist in accomplishing this task.

The Results Act requires executive agencies to prepare multiyear strategic

plans, annual performance plans, and annual performance reports. First,

the Act requires agencies to develop a strategic plan covering the period of

1997 through 2002. As indicated in the Results Act and OMB guidance, each

plan is to include six major components: (1) a comprehensive statement of

the agency’s mission, (2) the agency’s long-term goals and objectives for

all major functions and operations, (3) a description of the approaches (or

strategies) for achieving the goals and the various resources needed, (4) an

identification of key factors, external to the agency and beyond its control,

that could significantly affect its achievement of the strategic goals, (5) a

description of the relationship between the long-term strategic goals and

annual performance goals, and (6) a description of how program

evaluations were used to establish or revise strategic goals and a schedule

for future evaluations. In developing their strategic plans, agencies are to

consult with Congress and solicit the views of stakeholders.

Second, the Results Act requires executive agencies to develop annual

performance plans covering each program activity set forth in their

budgets. The first annual performance plans, covering fiscal year 1999, are

to be provided to Congress after the President’s budget is submitted to

Congress in early 1998. An annual performance plan is to contain the

agency’s annual goals, measures to gauge performance toward meeting its

goals, and resources needed to meet its goals.

And third, the Results Act requires executive agencies to prepare annual

reports on program performance for the previous fiscal year. The

performance reports are to be issued by March 31 each year, with the first

(for fiscal year 1999) to be issued by March 31, 2000. In each report, the

agency is to compare its performance against its goals, summarize the

findings of program evaluations completed during the year, and describe

the actions needed to address any unmet goals.

3

This framework includes as its essential elements the Chief Financial Officers (CFO) Act; information

technology reform legislation, including the Paperwork Reduction Act of 1995 and the Clinger-Cohen

Act; and the Results Act. The CFO Act was expanded and amended by the Government Management

Reform Act.

Page 5 GAO/T-GGD-98-17
Statement 

Results Act: Observations on CFTC’s

Strategic Plan

CFTC’s Strategic Plan

Contains All Six

Required

Components, but

Some Components

Could Be

Strengthened

Based on our review, we found that CFTC’s strategic plan contains all of the

six major components required by the Results Act. The plan defines the

agency’s mission, establishes goals, lists activities to be performed to

achieve the goals, identifies key factors affecting the achievement of the

goals, discusses the relation between the goals of the strategic and annual

performance plans, and addresses methods for evaluating the agency’s

programs. However, we identified several areas in which CFTC could

improve the plan as it is revised and updated.

Mission Statement Consistent with the OMB guidance, the strategic plan contains a brief

mission statement that broadly defines CFTC’s basic purposes: to protect

market users and the public from abusive practices and to foster open,

competitive, and financially sound futures and option markets. In addition,

the accompanying background of the mission statement defines the

agency’s core responsibilities and discusses the agency’s enabling

legislation.

General Goals and

Objectives

Consistent with the OMB guidance, the strategic plan describes CFTC’s goals

and general objectives, providing staff with direction for fulfilling the

agency’s mission. The agency’s three goals are to (1) protect the economic

functions of the commodity futures and options markets, (2) protect

market users and the public, and (3) foster open, competitive, and

financially sound markets. The plan further defines each goal in terms of a

number of outcome objectives. For example, under goal two, the plan

includes the outcome objectives of promoting compliance with and

deterring violations of federal commodities laws as well as requiring

commodities professionals to meet high standards.

The OMB guidance notes that a strategic plan’s general goals and objectives

should be stated in a manner that allows for future assessment of whether

the goals and objectives are being achieved. Although the general goals

and outcome objectives support the agency’s mission, most could benefit

by being restated in a way that facilitates future assessment of whether

they have been achieved. Examples of objectives that could be restated

include overseeing markets used for price discovery and risk shifting as

well as promoting markets free of trade practice abuse.

Page 6 GAO/T-GGD-98-17
Statement 

Results Act: Observations on CFTC’s

Strategic Plan

Description of How the

General Goals and

Objectives Will Be

Achieved

Consistent with the OMB guidance, the strategic plan lists key activities that

staff are to perform to accomplish the outcome objectives and, in turn,

general goals. For example, an outcome objective of goal three is to

facilitate the continued development of an effective, flexible regulatory

environment. The specific activities to be performed for this objective

include providing regulatory relief, as appropriate, to foster the

development of innovative transactions and participating in the

President’s Working Group on Financial Markets4

 to coordinate efforts

among U.S. financial regulators.

The plan also discusses actions for communicating accountability to CFTC

managers and staff. These actions include instituting a performance

management system to create a more effective communication tool for

mangers and staff and using the annual performance plan to better

communicate specific goals and performance levels to staff.

The OMB guidance notes that a strategic plan should briefly describe the

resources needed to achieve its goals and objectives, for example, in terms

of operational processes, staff skills, and technologies, as well as human,

capital, and other resources. The guidance further notes that a plan should

include schedules for initiating and completing significant actions as well

as outline the process for communicating goals and objectives throughout

the agency and for assigning accountability to managers and staff for

achieving objectives.

Although CFTC’s plan lists specific activities to be performed to achieve its

goals and objectives, it could be made more informative by discussing the

resources needed to perform the activities and by providing schedules for

initiating and completing significant actions. Similarly, the plan’s

discussion of communicating accountability could be expanded to address

how CFTC will assign accountability to managers and staff for achieving

objectives.

Relationship Between

Goals in the Annual

Performance and Strategic

Plans

Consistent with the OMB guidance, the strategic plan discusses the annual

plan activities in relationship to each of the strategic plan’s goals. Many of

the identified annual plan activities reflect CFTC’s ongoing regulatory

responsibility to protect market participants and oversee the markets. The

strategic plan also includes a discussion on measuring the activities to be

4

The President’s Working Group on Financial Markets was created following the October 1987 stock

market crash to address issues concerning the competitiveness, integrity, and efficiency of the

financial markets. The Secretary of the Treasury chairs the group, and other members include the

chairs of CFTC, the Federal Reserve System, and the Securities and Exchange Commission.

Page 7 GAO/T-GGD-98-17
Statement 

Results Act: Observations on CFTC’s

Strategic Plan

performed to accomplish each goal. Finally, the strategic plan mentions

that the annual plan establishes indicators and targets with the goal of

ensuring that day-to-day activities are appropriately defined and measured.

According to the OMB guidance, a strategic plan should briefly outline the

type, nature, and scope of the annual performance goals and the relevance

and use of these goals in helping determine whether the strategic plan’s

goals and objectives are being achieved. The linkage between the two

plans is important because a strategic plan’s goals and objectives establish

the framework for developing the annual performance plan. Moreover,

annual performance goals indicate the planned progress in that particular

year toward achieving the strategic plan’s goals and objectives.

While CFTC’s strategic plan discusses performance measures, it does not

include performance goals that could be used to indicate the planned

progress made each year toward achieving the general goals and

objectives. Moreover, its measures focus on activities that are generally

not stated in a manner that allows for future assessments and that may not

always measure the intended outcomes. Examples of such measures

include “potential violators deterred,” “informed market users,” and “high

level of compliance fostered.” CFTC could strengthen its plan by discussing

performance goals and developing more results-oriented performance

measures against which actual performance can be compared. As

discussed below, regulatory agencies, such as CFTC, face barriers in

developing such measures.

Key External Factors

Affecting Achievement of

General Goals and

Objectives

Consistent with the OMB guidance, the strategic plan discusses some

external challenges that could alter CFTC’s ability to meet its goals and

objectives, and it also discusses the strategies for meeting such challenges.

The external challenges include the growing use of over-the-counter

derivatives; structural changes in the financial services industry, including

the convergence of the securities, futures, insurance, and banking

industries; and globalization of financial markets. Strategies to address

such challenges include fostering strong relationships with foreign

authorities and responding to structural changes to ensure a level playing

field as the futures, insurance, securities, and banking industries become

more integrated.

The plan also discusses four internal, or management, challenges that

could alter CFTC’s ability to meet its goals and objectives, and it discusses

strategies for meeting such challenges. Internal challenges include

Page 8 GAO/T-GGD-98-17
Statement 

Results Act: Observations on CFTC’s

Strategic Plan

diminishing resources, recruiting and retaining qualified staff, and

remaining abreast of technology. Strategies to address such challenges

include reviewing resource requirements for operations and programs to

ensure sound fiscal management, setting standards for staff recruitment,

and implementing the agency’s data processing plan.

According to OMB guidance, a strategic plan should not only discuss key

external factors but also indicate their link to particular goals and describe

how the factors could affect the achievement of the goals. While the plan

discusses external factors and strategies for addressing them, the link

between particular factors and goals is not clear. CFTC could strengthen its

plan by describing how the external factors are linked with particular

goals and how a particular goal could be affected by the external factors.

Also, the plan might benefit from a discussion of external factors that

represent significant challenges for the financial industry, such as those

relating to the “year 2000” computer dating problem5

 and those relating to

proposals for revising the Commodity Exchange Act that could affect

CFTC’s jurisdiction and that of other federal financial market regulators.6

Program Evaluations and

Strategic Plans

The strategic plan specifies that CFTC will use methods and processes that

are already in place to evaluate how well it is implementing its strategic

and annual performance plans for the first 3 years. According to the plan,

these processes are to provide information on, among other things,

program accomplishments, staff activities, and CFTC’s financial condition

and resource usage. However, the plan also explains that the reporting

process related to program accomplishments will be evaluated to

determine how it may be used for reporting on program progress toward

meeting the goals, outcome objectives, and activities in the strategic plan

as well for setting overall priorities and allocating resources consistent

with those priorities. Similarly, reviews and evaluations are described for

the systems related to staff activities and resource usage. As such, we note

that CFTC’s evaluations are to be of its existing measurement and

monitoring systems and that CFTC does not appear to be planning any

evaluations of the manner and extent to which its programs achieve their

objectives.

5

The year 2000 computer dating problem relates to the need for computer systems to be changed to

accommodate dates beyond the year 1999.

6

See The Commodity Exchange Act: Legal and Regulatory Issues Remain (GAO-GGD-97-50, April 7,

1997).

Page 9 GAO/T-GGD-98-17
Statement 

Results Act: Observations on CFTC’s

Strategic Plan

The OMB guidance notes that a strategic plan should briefly describe

program evaluations used to prepare the plan and provide a schedule for

future evaluations outlining the methodology, scope, and issues to be

addressed. CFTC’s plan does not mention whether any evaluations were

used to prepare the plan; however, CFTC officials told us that no

evaluations were used. As CFTC revises and updates its plan, the plan could

be made more useful by including the results of program evaluations used

to prepare the plan. It could also be made more informative by discussing

the timing and scope of future program evaluations as well as the

particular issues to be addressed.

CFTC’s Strategic Plan

Reflects Limited

Consultation

In developing their strategic plans, agencies are to consult with Congress

and solicit the views of stakeholders—those potentially affected by or

interested in the plan. Agencies have discretion in determining how this

consultation is conducted. The OMB guidance notes that some general

goals and objectives will relate to cross-agency functions, programs, or

activities. In such cases, it instructs agencies to ensure that appropriate

and timely consultation occurs with other agencies during the

development of strategic plans with cross-cutting goals and objectives.

CFTC’s strategic plan identifies numerous stakeholders, stating that they

are valuable resources that must be tapped to provide critical feedback on

the agency’s goals and priorities. The stakeholders identified in the plan

include futures exchanges, the National Futures Association, market

users, and other federal departments and agencies. The plan also discusses

CFTC’s working relationships with other organizations and jurisdictions.

For example, it notes that CFTC staff work through various

intergovernmental partnerships to consult on issues of importance to CFTC

and other federal financial regulators, including federal securities and

bank regulators.

The draft plan was made available to stakeholders late in the process. As a

result, the plan reflects limited consultation with stakeholders during plan

development. Also, the plan does not discuss how CFTC will incorporate

stakeholders’ views in the development of future plans. CFTC published its

draft strategic plan in the Federal Register on September 16, 1997, to

solicit comments.7

 The comment period ended on October 16, 1997. In

addition, CFTC made the draft plan available on its internet home page and

provided copies of the draft plan to present and former members of its

advisory committees. Furthermore, every former CFTC commissioner and

7

62 Fed. Reg. 48613.

Page 10 GAO/T-GGD-98-17
Statement 

Results Act: Observations on CFTC’s

Strategic Plan

chairperson was contacted and asked to provide feedback on the draft

plan, and CFTC officials told us that the draft plan had been provided to the

other federal financial market regulators for comment. Nonetheless, CFTC

officials told us that there were only two parties outside of Congress, OMB,

and at your request, the GAO that had provided the agency feedback on the

plan, as of October 16, 1997.

CFTC officials told us that they plan to use the same approach in developing

future plans as they did in developing the current plan. CFTC’s lack of

success with this approach suggests that the agency should consider

alternative approaches.

CFTC Faces

Challenges in

Implementing the

Results Act

In enacting the Results Act, Congress realized that the transition to

results-oriented management would not be easy. Moving to a results

orientation could be especially difficult for CFTC and other regulatory

agencies. We analyzed a set of barriers facing certain regulatory agencies

in their efforts to implement the Results Act in a June 1997 report.8

 These

barriers included the following: (1) problems collecting performance data,

(2) complexity of interactions and lack of federal control over outcomes,

and (3) results realized only over long time frames. To some extent, each

of these barriers is applicable to CFTC.

As implementation of the Results Act proceeds, CFTC, like other regulatory

agencies, is likely to continue encountering barriers to establishing

results-oriented goals and measures and, as a result, in evaluating program

impact. Although developing performance measures and evaluating

program impact are difficult, it is important that CFTC and other regulatory

agencies continue their effort toward that end. Any new methods or

research approaches developed by one agency could also be useful to

others.

In summary, it is important to recognize that while CFTC’s strategic plan

can be further improved, the Results Act anticipated that the process of

developing an effective strategic plan could take several planning cycles.

Nonetheless, we are pleased that CFTC’s strategic plan reflects

improvements based on the suggestions that we made during informal

meetings with agency officials as well as suggestions that the agency

received from congressional committees and OMB. We look forward to

8

Managing for Results: Regulatory Agencies Identified Significant Barriers to Focusing on Results

(GAO/GGD-97-83, June 14, 1997).

Page 11 GAO/T-GGD-98-17
Statement 

Results Act: Observations on CFTC’s

Strategic Plan

continuing to work with the Congress and CFTC to ensure that the

requirements of the Results Act are met.

Mr. Chairman, this concludes my prepared statement. I will be pleased to

respond to any questions that you or Members of the Subcommittee may

have.

(233544) Page 12 GAO/T-GGD-98-17
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