GAO

United States General Accounting Office

A

Testimony

Before the Subcommittee on Government Efficiency and 

Financial Management, Committee on Government 

Reform, House of Representatives

For Release on Delivery 

Expected at 2 p.m. EST

Tuesday, April 1, 2003

PERFORMANCE 

BUDGETING

Current Developments and 

Future Prospects

Statement of Paul L. Posner, Managing Director 

Federal Budget Analysis, Strategic Issues

GAO-03-595T
Performance management is critical to delivering program results 

and ensuring accountability, but it is not without risks. 

Building on agencies’ hard-won achievements in developing plans and 

measures, the government faces the challenge of promoting the use of that 

information in budget decision making, program improvement, and agency 

management. More explicit use of performance information in decision 

making promises significant rewards, but it will not be easy. Decision 

makers need a road map that defines what successful performance 

budgeting would look like, and identifies key elements and potential pitfalls. 

Credible performance information and measures are critical for 

building support for performance budgeting. For performance data to 

more fully inform resource allocation decisions, decision makers must feel 

comfortable with the appropriateness and accuracy of the outcome 

information and measures presented—that is, that they are comprehensive 

and valid indicators of a program’s outcomes. Decision makers likely will 

not use performance information that they do not perceive to be credible, 

reliable, and reflective of a consensus about performance goals among a 

community of interested parties. The quality and credibility of outcomebased performance information and the ability of federal agencies to 

evaluate and demonstrate their programs’ effectiveness are key to the 

success of performance budgeting. 

Successful performance budgeting is predicated on aligning 

performance goals with key management activities. The closer the 

linkage between an agency’s performance goals, its budget presentation, and 

its net cost statement, the greater the reinforcement of performance 

management throughout the agency and the greater the reliability of 

budgetary and financial data associated with performance plans. Clearer and 

closer association between expected performance and budgetary requests 

can more explicitly inform budget discussions and shift the focus from 

inputs to expected results. 

The test of performance budgeting will be its potential to reshape 

the kinds of questions and trade-offs that are considered throughout 

the budget process. The real payoff will come in strengthening the budget 

process itself. The focus on outcomes potentially can broaden the debate 

and elevate budget trade-offs from individual programs to a discussion of 

how programs work together to achieve national goals. It is critical to 

understand how programs fit within a broader portfolio of tools and 

strategies for program delivery. Shifting perspectives from incremental 

budgeting to consideration of all resources available to a program, that is, 

base funding as well as new funds, potentially can lead to a reexamination of 

existing programs, policies, and activities. Prudent stewardship of our 

nation’s resources is essential not only to meeting today’s priorities, but also 

for delivering on future commitments and needs. 

Since the Government 

Performance and Results Act 

(GPRA) was enacted in 1993, 

federal agencies increasingly have 

been expected to link strategic 

plans and budget structures with 

program results. The current 

administration has taken several 

steps to strengthen and further the 

performance-resource linkage by 

making budget and performance 

integration one of its five 

management initiatives included in 

the President’s Management 

Agenda. 

GAO has reported and testified 

numerous times on agencies’ 

progress in making clearer 

connections between resources 

and results and how this 

information can inform budget 

deliberations. The administration’s 

use of the Program Assessment 

Rating Tool (PART) for the fiscal 

year 2004 President’s budget and 

further efforts in fiscal year 2005 to 

make these connections more 

explicit, have prompted our 

examination of what can and 

cannot be expected from 

performance budgeting. 

www.gao.gov/cgi-bin/getrpt?GAO-03-595T.

To view the full testimony, click on the link 

above. For more information, contact Paul 

Posner at (202) 512-9573 or 

posnerp@gao.gov. 

Highlights of GAO-03-595T report to the 

Subcommittee on Government Efficiency 

and Financial Management, Committee on 

Government Reform, House of 

Representatives 

April 1, 2003

PERFORMANCE BUDGETING 

Current Developments and Future 

Prospects 
Page 1 GAO-03-595T 

Mr. Chairman and Members of the Subcommittee:

I am pleased to be here today to discuss efforts to further integrate budget 

and performance information—what many have referred to as 

“performance budgeting.” Since the Government Performance and Results 

Act (GPRA) was enacted in 1993, federal agencies have been increasingly 

expected to focus on achieving results and to demonstrate, in performance 

plans and reports, how their activities help achieve agency goals. The 

current administration has taken several steps to strengthen and further 

performance-resource linkages for which GPRA laid the groundwork. For 

example, the Office of Management and Budget’s (OMB) Program 

Assessment Rating Tool (PART), has been designed to use performance 

information more explicitly in the federal budget formulation process by 

summarizing performance and evaluation information. The administration 

applied this new tool to about 20 percent of the programs in the fiscal year 

2004 President’s budget request. Most recently, OMB required agencies to 

submit a performance-based budget for fiscal year 2005 and later years. 

Given this effort to change the presentation of the President’s budget 

request to explicitly connect agencies’ budget and planning structures, it is 

crucial to understand what can and cannot be expected from performance 

budgeting, and what opportunities and challenges lay ahead.

In my testimony today I make several points:

• Performance management is critical to delivering program results and 

ensuring accountability, but it is not without risks.

• In a sense decision makers need a strategic plan for performance 

budgeting—a road map to define what performance budgeting would 

look like.

• The presence of credible performance information and measures is a 

critical underpinning for building support for performance budgeting.

• Successful performance budgeting is predicated on aligning 

performance goals with key management activities. 

• Ultimately, the test of performance budgeting will be its potential to 

reshape the kinds of questions and trade-offs that are considered 

throughout the budget process.
Page 2 GAO-03-595T 

This testimony draws upon our wide-ranging ongoing and completed work 

on federal budget and performance integration; the President’s Budget of 

the U.S. Government, Fiscal Year 2004; and performance management 

initiatives. We conducted our work in accordance with generally accepted 

government auditing standards.

Current Performance 

Budgeting Initiatives 

Are Grounded in Past 

Efforts

An Historical Perspective In the 1990s, Congress and the executive branch laid out a statutory and 

management framework that provides the foundation for strengthening 

government performance and accountability, with GPRA as its centerpiece. 

GPRA is a continuation of more than 50 years of efforts to link resources 

with results. These management reforms of the past—the Budget and 

Accounting Procedures Act of 1950, Planning-Programming-BudgetingSystem, Management by Objectives, and Zero-Base-Budgeting—failed 

partly because they did not prove to be relevant to budget decision makers 

in the executive branch or Congress.1

GPRA melds the best features, and avoids the worst, of its predecessors. 

Unlike most of its predecessors, GPRA is grounded in statute, giving 

Congress an oversight stake in the success of this initiative. Moreover, 

unlike these other initiatives, GPRA explicitly sought to promote a 

connection between performance plans and budgets. The expectation was 

that agency goals and measures would be taken more seriously if they were 

perceived to be used and useful in the resource allocation process. GPRA 

has now entered its 10th year, has survived two successive administrations, 

and has periodically formed the basis for congressional oversight.

1

 U.S. General Accounting Office, Performance Budgeting: Past Initiatives Offer Insights 

for GPRA Implementation, GAO/AIMD-97-46 (Washington, D.C.: Mar. 27, 1997).
Page 3 GAO-03-595T 

Recent Initiatives The current administration has implemented several efforts to more 

completely integrate information about cost and performance during its 

annual budget review process. The President’s Management Agenda 

(PMA), by focusing on 14 targeted areas—5 mutually reinforcing 

governmentwide goals and 9 program initiatives—seeks to improve the 

management and performance of the federal government. Budget and 

performance integration is one of the administration's five priorities in the 

PMA, while PART is the central element in the performance budgeting 

piece of the PMA. 

To track both agencies’ progress towards and current status in achieving 

each of the five PMA initiatives, OMB implemented an Executive Branch 

Management scorecard. We have found that the value of the scorecard, 

with its red, yellow, and green “stoplight” grading system, is not, in fact, the 

scoring, but the degree to which scores lead to a sustained focus and 

demonstrable improvements. The Scorecard criteria for the budget and 

performance integration initiative include elements such as the integration 

of budget and planning staff, an integrated performance plan and budget 

grounded in outcome goals and aligned with the staff and resources 

necessary to achieve program targets, and whether the agency can 

document program effectiveness. While the scorecard focuses on the 

capacity of agency management to develop an infrastructure for 

performance budgeting, OMB’s PART is meant to more explicitly infuse 

performance information into the budget formulation process at a level at 

which funding decisions are made.

PART was applied during the fiscal year 2004 budget cycle to 234 

“programs.”2

 OMB rated programs as “effective,” “moderately effective,” 

“adequate,” or “ineffective” based on program design, strategic planning, 

management, and results. If OMB deemed a program’s performance 

information and/or performance measures insufficient or inadequate, a 

fifth rating of “results not demonstrated” was given. According to OMB, the 

assessments were a factor in funding decisions for the President’s fiscal 

year 2004 budget request. In an unprecedented move, OMB has made the 

assessment tool, rating results, and supporting materials available on its 

Web site. 

2

 There is no consistent definition for the term program. For purposes of PART, the unit of 

analysis (program) should have a discrete level of funding clearly associated with it.
Page 4 GAO-03-595T 

OMB has said that it will apply PART to another 20 percent of programs and 

reassess the fiscal year 2004 programs in developing the President’s fiscal 

year 2005 budget request. Moreover, it has announced its intention to use 

agencies’ updated strategic plans, which were due in March 2003, as 

templates for future budget requests. 

Performance 

Budgeting Holds Great 

Promise and Great 

Challenges

During GPRA’s first 10 years, the federal government has managed, for the 

first time, to generate a systematic, governmentwide effort to develop 

strategic and performance plans covering the essential functions of 

government. While clearly a work in progress, the formulation of 

performance goals and indicators has laid the foundation for a more 

fundamental transformation in how the government does business.

As we begin this next decade of performance management at the federal 

level, we may have reached a crossroad. Building on agencies’ hard-won 

achievements in developing plans and measures, the government now 

faces the challenge of promoting the use of that information in budget 

decision making, program improvement, and agency management. 

Promoting a more explicit use of performance information in decision 

making promises significant rewards, but it will not be easy, and in fact, is 

fraught with risks. Decision makers need a road map that defines what 

successful performance budgeting would look like, and that identifies the 

key elements and potential pitfalls on the critical path to success. In a 

sense, what is needed is a strategic plan for performance budgeting.

In the remainder of this testimony I will discuss some of these key elements 

and risks, including a definition and expectations for performance 

budgeting itself; the underpinnings of credible performance information 

and measures; addressing the needs of various potential users; the 

alignment of performance planning with budget and financial management 

structures; elevating budget trade-offs; and the continuing role of 

congressional oversight. 

What Is Performance 

Budgeting, and What Might 

Be Expected from It? 

Performance-based budgeting can help enhance the government’s capacity 

to assess competing claims in the budget by arming budgetary decision 

makers with better information on the results of both individual programs 

as well as entire portfolios of tools and programs addressing common 

performance outcomes. Although not the answer to vexing resource trade-
Page 5 GAO-03-595T 

offs involving political choice, performance information could help 

policymakers address a number of questions, such as whether programs 

are contributing to their stated goals, well-coordinated with related 

initiatives at the federal level or elsewhere, and targeted to those most in 

need of services or benefits. It can also provide information on what 

outcomes are being achieved, whether resource investments have benefits 

that exceed their costs, and whether program managers have the requisite 

capacities to achieve promised results.

Although performance budgeting can reasonably be expected to change the 

nature of resource debates, it is equally important to understand what it 

cannot do. Previous management reforms have been doomed by inflated 

and unrealistic expectations, so it is useful to be clear about current goals.

Performance budgeting cannot replace the budget process as it currently 

exists, but it can help shift the focus of budgetary debates and oversight 

activities by changing the agenda of questions asked in these processes. 

Budgeting is essentially the allocation of resources; it inherently involves 

setting priorities. In its broadest sense, the budget debate is the place 

where competing claims and claimants come together to decide how much 

of the government’s scarce resources will be allocated across many 

compelling national purposes. Performance information can make a 

valuable contribution to this debate, but it is only one factor and it cannot 

substitute for difficult political choices. There will always be a debate 

about the appropriate role for the federal government and the need for 

various federal programs and policies—and performance information 

cannot settle that debate. It can, however, help move the debate to a more 

informed plane, one in which the focus is on competing claims and 

priorities. In fact, it raises the stakes by shifting the focus to what really 

matters—lives saved, children fed, successful transitions to selfsufficiency, and individuals lifted out of poverty.

Under performance budgeting, people should not expect that good results 

will always be rewarded through the budget process while poor results will 

always have negative funding implications. Viewing performance budgeting 

as a mechanistic arrangement—a specific level of performance in exchange 

for a certain amount of funding—or in punitive terms—produce results or 

risk funding reductions—is not useful. Such mechanistic relationships 

cannot be sustained. Rather than increase accountability, these approaches 

might instead devalue the process by favoring managers who meet 

expectations by aiming low. The determination of priorities is a function of 

competing values and interests that may be informed by performance 
Page 6 GAO-03-595T 

information but also reflects such factors as equity, unmet needs, and the 

appropriate role of the federal government in addressing these needs. 

OMB’s PART initiative illustrated that improving program design and 

management may be a necessary investment in some cases. For example, 

the Department of Energy’s Environmental Management (Cleanup) 

program was rated “ineffective” under PART. The administration 

recommended additional funds for the program compared to fiscal year 

2002 funding and reported that the Department will continue to work with 

federal and state regulators to develop revised cleanup plans. The 

Department of State’s Refugee Admissions to the U.S. program was rated 

“adequate” under PART; in addition to recommending increased funding, 

the administration will review the relationship between this program and 

the Office of Refugee Resettlement at the Department of Health and Human 

Services. For its part, State will continue its ongoing efforts to improve 

strategic planning to ensure that goals are measurable and mission-related.

Ultimately, performance budgeting seeks to increase decision makers’ 

understanding of the links between requested resources and expected 

performance outcomes. Such integration is critical to sustain and 

institutionalize performance management reforms. As the major annual 

process in the federal government where programs and activities come up 

for regular review and reexamination, the budget process itself benefits as 

well if the result of integration is better, more reliable performance 

information. 

Credible Performance 

Information and Agencies’ 

Capacity to Produce It Is 

Critical

For performance data to more fully inform resource allocations, decision 

makers must feel comfortable with the appropriateness and accuracy of 

the outcome information and measures presented—that is, they are 

comprehensive and valid indicators of a program’s outcomes. Decision 

makers likely will not use performance information that they do not 

perceive to be credible, reliable, and reflective of a consensus about 

performance goals among a community of interested parties. Moreover, 

decisions might be guided by misleading or incomplete information, which 

ultimately could further discourage the use of this information in resource 

allocation decisions.
Page 7 GAO-03-595T 

Accordingly, the quality and credibility of outcome-based performance 

information and the ability of federal agencies to produce such evaluations 

of their programs’ effectiveness are key to the success of performancebased budgeting. However, in the fiscal year 2004 President’s budget 

request, OMB rated 50 percent of PART programs as “results not 

demonstrated” because they found that the programs did not have 

adequate performance goals and/or data to gauge program performance 

were not available. Likewise, GAO’s work has noted limitations in the 

quality of agency performance and evaluation information and in agency 

capacity to produce rigorous evaluations of program effectiveness. We 

have previously reported that agencies have had difficulty assessing many 

program outcomes that are not quickly achieved or readily observed and 

contributions to outcomes that are only partly influenced by federal funds. 3

Furthermore, our work has shown that few agencies deployed the rigorous 

research methods required to attribute changes in underlying outcomes to 

program activities.4

Data Quality If budget decisions are to be based in part on performance data, the 

integrity, credibility, and quality of these data and related analyses become 

more important. Developing and reporting on credible information on 

outcomes achieved through federal programs remains a work in progress. 

For example, we previously reported5

 that only five of the 24 Chief 

Financial Officers (CFO) Act agencies’ fiscal year 2000 performance 

reports included assessments of the completeness and reliability of their 

performance data in their transmittal letters. Further, although concerns 

about the quality of performance data were identified by the inspectors 

general as either major management challenges or included in the 

discussion of other challenges for 11 of the 24 agencies, none of the 

agencies identified any material inadequacies with their performance data 

in their performance reports.

3

 U.S. General Accounting Office, Performance Budgeting: Opportunities and Challenges, 

GAO-02-1106T (Washington, D.C.: Sept. 19, 2002).

4 U.S. General Accounting Office, Program Evaluation: Agencies Challenged by New 

Demand for Information on Program Results, GAO/GGD-98-53 (Washington, D.C.: Apr. 24, 

1998).

5

 U.S. General Accounting Office, Performance Reporting: Few Agencies Reported on the 

Completeness and Reliability of Performance Data, GAO-02-372 (Washington, D.C.: 

Apr. 26, 2002).
Page 8 GAO-03-595T 

Moreover, reliable cost information is also important. Unfortunately, as we 

recently reported,6

 most agencies’ financial management systems are not 

yet able to routinely produce information on the full cost of programs and 

projects as required by the Federal Financial Management Improvement 

Act of 1996 (FFMIA).7

The ultimate objective of FFMIA is to ensure that agency financial 

management systems routinely provide reliable, useful, and timely financial 

information, not just at year-end or for financial statements, so that 

government leaders will be better positioned to invest resources, reduce 

costs, oversee programs, and hold agency managers accountable for the 

way they run programs. To achieve the financial management 

improvements envisioned by the CFO Act, FFMIA, and more recently, the 

PMA, agencies need to modernize their financial management systems to 

generate reliable, useful, and timely financial information throughout the 

year and at year-end. Meeting the requirements of FFMIA presents longstanding, significant challenges that will be attained only through time, 

investment, and sustained emphasis on correcting deficiencies in federal 

financial management systems.

Evaluation Capacity In the past, we have also noted limitations in agency capacity to produce 

high-quality evaluations of program effectiveness.8

 Through GPRA 

reporting, agencies have increased the information available on program 

results. However, some program outcomes are not quickly achieved or 

readily observed, so agencies have drawn on systematic evaluation studies 

to supplement their performance data collection and better understand the 

reasons behind program performance. However, in survey based on 1995 

data covering 23 departments and independent agencies, we found that 

agencies were devoting variable but relatively small amounts of resources 

to evaluating program results. Many program evaluation offices were small, 

had other responsibilities, and produced only a few effectiveness studies 

annually. Moreover, systematic program evaluations—and units 

responsible for producing them—had been concentrated in only a few 

agencies. Although many federal programs attempt to influence complex 

systems or events outside the immediate control of government, we have 

6

 U.S. General Accounting Office, Financial Management: FFMIA Implementation 

Necessary to Achieve Accountability, GAO-03-31 (Washington, D.C.: Oct. 1, 2002).

7

 P. L. 104-208, Div. A, Title I, sec. 101(f) [Title VIII], 110 Stat. 3009-389 (1996).

8 GAO/GGD-98-53. 
Page 9 GAO-03-595T 

expressed continued concern that many agencies lack the capacity to 

undertake the program evaluations that are often needed to assess a 

federal program’s contributions to results where other influences may be at 

work. In addition to information on the outcomes, impact evaluations using 

scientific research methods are needed to isolate a particular program’s 

contribution to those outcomes. Yet in our survey, we found that the most 

commonly reported study design was judgmental assessment of program 

effects. These judgmental assessments, one-time surveys, and simple 

before-and-after studies accounted for 40 percent of the research methods 

used in agencies’ evaluation studies conducted during the period we 

studied.

There are inherent challenges affecting agencies’ capacity to conduct 

evaluations of program effectiveness. For example, many agency programs 

are designed to be one part of a broader effort, working alongside other 

federal, state, local, nonprofit, and private initiatives to promote particular 

outcomes. Although information on the outcomes associated with a 

particular program may be collected, it is often difficult to isolate a 

particular program’s contribution to those outcomes. Additionally, where 

federal program responsibility has devolved to the states, federal agencies’ 

ability to influence program outcomes diminishes, while at the same time, 

their dependence on states and others for data with which to evaluate 

programs grows. 

In past reports, we have identified several promising ways agencies can 

potentially maximize their evaluation capacity. For example, careful 

targeting of federal evaluation resources on key policy or performance 

questions and leveraging federal and nonfederal resources show promise 

for addressing key questions about program results. Other ways agencies 

might leverage their current evaluation resources include adapting existing 

information systems to yield data on program results, drawing on the 

findings of a wide array of evaluations and audits, making multiple use of 

an evaluation’s findings, mining existing databases, and collaborating with 

state and local program partners to develop mutually useful performance 

data.
Page 10 GAO-03-595T 

Our work has also shown that advance coordination of evaluation activities 

conducted by program partners is necessary to help ensure that the results 

of diverse evaluation activities can be synthesized at the national level.9

Improvements in the quality of performance data and the capacity of 

federal agencies to perform program evaluations will require sustained 

commitment and investment of resources, but over the longer term, failing 

to discover and correct performance problems can be much more costly. 

More importantly budgetary investments need to be viewed as part of a 

broader initiative to improve the accountability and management capacity 

of federal agencies and programs.

Credible Performance 

Information Must Be 

Available to and Used by 

Actors with Different Needs

Improving the supply of performance information is in and of itself 

insufficient to sustain performance management and achieve real 

improvements in management and program results. Rather, it needs to be 

accompanied by a demand for that information by decision makers and 

managers alike. The history of performance budgeting has shown that the 

supply of information will wither if it is perceived to have failed to affect 

decision making. Accordingly, PART may complement GPRA’s focus on 

increasing the supply of credible performance information by promoting 

the demand for this information in the budget decision making process. 

9

 In a report to be issued in May 2003, we discuss the experiences of five diverse agencies 

that have demonstrated evaluation capacity. The report also identifies useful capacitybuilding strategies that other agencies might adopt.
Page 11 GAO-03-595T 

Successful use of performance information in budgeting should not be 

defined only by the impact on funding levels in presidential budget requests 

and the congressional budget process. Rather, resource allocation 

decisions are made at various other stages in the budget process, such as 

agency internal budget formulation and execution and in the congressional 

oversight and reauthorization process.10 If agency program managers 

perceive that program performance and evaluation data will be used to 

make resource decisions throughout the resource allocation process and 

can help them make better use of these resources, agencies may make 

greater investments in improving their capacity to produce and procure 

quality information. For example, in our work at the Administration on 

Children and Families, we describe three general ways in which resource 

allocation decisions at the programmatic level are influenced by 

performance: (1) training and technical assistance money is often allocated 

based on needs and grantee performance, (2) partnerships and 

collaboration help the agency work with grantees towards common goals 

and further the administration’s agenda, and (3) organizing and allocating 

staff around agency goals allow employees to link their day-to-day 

activities to longer-term results and outcomes.11 It is important to note that 

these and other examples from our work at the Veterans Health 

Administration and the Nuclear Regulatory Commission affect 

postappropriations resource decisions, that is, the stage where programs 

are being implemented during what is generally referred to as budget 

execution.12

10 Philip G. Joyce and Susan Seig, Using Performance Information for Budgeting: 

Clarifying the Framework and Investigating Recent State Experience (Washington, D.C.: 

American Society for Public Administration, 2000).

11 U.S. General Accounting Office, Managing for Results: Efforts to Strengthen the Link 

Between Resources and Results at the Administration for Children and Families, GAO03-09 (Washington, D.C.: Dec. 10, 2002).

12 U.S. General Accounting Office, Managing for Results: Efforts to Strengthen the Link 

Between Resources and Results at the Veterans Health Administration, GAO-03-10

(Washington, D.C.: Dec. 10, 2002), and Managing for Results: Efforts to Strengthen the Link 

Between Resources and Results at the Nuclear Regulator Commission, GAO-03-258

(Washington, D.C.: Dec. 10, 2002).
Page 12 GAO-03-595T 

Structural Alignment Sustaining a focus on performance budgeting in the federal government is 

predicated upon aligning performance goals with all key management 

activities—budgeting, financial management, human capital management, 

capital acquisition, and information technology management. The closer 

the linkage between an agency’s performance goals, its budget 

presentation, and its net cost statement, the greater the reinforcement of 

performance management throughout the agency and the greater the 

reliability of budgetary and financial data associated with performance 

plans. Clearer and closer association between expected performance and 

budgetary requests can more explicitly inform budget discussions and 

focus them—both in Congress and in agencies—on expected results, rather 

than on inputs or transactions solely.13

Throughout government, as figure 1 shows, there exists a general lack of 

integration among budget, performance, and financial reporting 

structures.14 Moreover, these structures can vary considerably across the 

departments and agencies of the federal government. For example, the 

current budget account structure was not created as a single integrated 

framework, but developed over time to reflect the many roles it has been 

asked to play and to address the diverse needs of its many users. It reflects 

a variety of different orientations which for the most part do not reflect 

agency performance goals or objectives. Agency budget accounts, for 

instance, can be organized by items of expense, organizational unit, 

program, or a combination of these categories. 

13 For further information see U.S. General Accounting Office, Managing for Results: 

Results-Oriented Budget Practices in Federal Agencies, GAO-01-1084SP (Washington, D.C.: 

August 2001).

14 U.S. General Accounting Office, Managing for Results: Agency Progress in Linking 

Performance Plans with Budgets and Financial Statements, GAO-02-236 (Washington, 

D.C.: Jan. 4, 2002).
Page 13 GAO-03-595T 

Figure 1: GPRA Performance Planning, Budget, and Net Cost Model

The general lack of integration between these structures can hamper the 

ability of agencies to establish and demonstrate the linkage between 

budget decisions and performance goals. While special analyses can help 

illustrate these linkages, such efforts are often burdensome and awkward. 

A systematic capacity to crosswalk among these disparate structures can 

help encourage a more seamless integration of resources with results. 

Better matching of full costs associated with performance goals helps 

increase decision makers’ understanding of the links between requested 

resources and expected performance outcomes. This will eventually 

require linkages between performance planning and budget structures (to 

highlight how requested resources would contribute to agency goals) as 

well as linkages between performance plans and financial reporting 

structures (to highlight the costs of achieving agency goals). Ultimately, 

over the longer term, this integration may require changing the structures 

themselves to harmonize their orientations. 

Source: GAO.

Budget

Budget

Account

Strategic

Objective

Responsibility

Segment

Program

Activity

Performance

Goal

Segment

Output

Performance Planning Statement of Net Cost

Budget Performance Planning Statement of Net Cost

Agency General Agency Goal
Page 14 GAO-03-595T 

Our work indicates that progress has been made. Agencies are developing 

approaches to better link performance plans with budget presentations and 

financial reporting. They have made progress in both in establishing 

linkages between performance plans and budget requests and in translating 

those linkages into budgetary terms by clearly allocating funding from the 

budget’s program activities to performance goals.15

For example, table 1 and figure 2 show the approaches used by the 

Department of Housing and Urban Development (HUD) in its last three 

performance plans. In table 1, for fiscal years 2000 and 2001, HUD used 

summary charts to array its requested resources by general goal but 

progressed from portraying this linkage with an “x” in fiscal year 2000 to 

using funding estimates derived from its budget request in fiscal year 2001. 

Figure 2 shows the fiscal year 2002 plan in which HUD removed the 

summary charts and instead directly portrayed the linkages in the body of 

the plan. 

15 GAO-02-236.
Page 15 GAO-03-595T 

Table 1: Change in HUD’s Presentation of Performance Plan-Budget Linkages, Fiscal Years 2000 and 2001

Source: HUD.

Note: Dollars in millions. GAO analysis of HUD data.

Fiscal Year 2000 performance plan 

General goals

Selected examples 

of accounts or 

program activities

Budget 

request 

Increase 

availability of 

decent, safe, and 

affordable housing 

in American 

communities

Ensure equal 

opportunity in 

housing for all 

Americans

Promote selfsufficiency and 

asset development 

of families and 

individuals

Improve 

community 

quality of life 

and economic 

vitality

Restore the 

public trust 

in HUD

Public Housing 

Capital Fund $2,555 X X X

Community 

Development Block 

Grants $4,775 X X X X

FHA: GI/SRI $208 X X X

Fiscal Year 2001 performance plan 

General goals

Selected examples 

of accounts or 

program activities

Budget 

request

Increase 

availability of 

decent, safe, and 

affordable housing 

in American 

communities

Ensure equal 

opportunity in 

housing for all 

Americans

Promote selfsufficiency and 

asset development 

of families and 

individuals

Improve 

community 

quality of life 

and economic 

vitality

Ensure the 

public trust 

in HUD

Public Housing 

Capital Fund $2,955 $2,069 $443 $148 $295 --

Community 

Development Block 

Grants $4,900 $1,470 $490 $980 $1,960 --

FHA: GI/SRI $456 $456 -- -- -- --
Page 16 GAO-03-595T 

Figure 2: HUD’s Presentation of Performance Plan-Budget Linkages, Fiscal Year 

2002

a HOME includes housing counseling staff in the Office of Housing.

b Housing Certificate Fund BA numbers represent program levels instead of net budget authority (BA 

figures for this account are significantly affected by rescissions and advanced appropriations). Staff 

includes Office of Housing staff working with project-based Section 8.

c

 Fiscal year 2001 BA total does not include supplemental appropriations.

d Includes programs that do not receive a discretionary appropriation.

e Other staff includes the Real Estate Assessment Center and the Office of Multifamily Housing 

Assistance Restructuring.

Source: HUD’s fiscal year 2002 performance plan.
Page 17 GAO-03-595T 

We have also seen progress in agencies’ initial efforts to link annual 

performance reporting with annual audited financial statements.16 For 

example, for fiscal year 2000, 13 of the 24 agencies covered by the CFO Act, 

compared to 10 in fiscal year 1999, reported net costs in their audited 

annual financial statements using a structure that was based on their 

performance planning structure.

Better understanding the full costs associated with program outcomes is 

another important but underdeveloped element of performance budgeting. 

This entails a broader effort to more fully measure the indirect and accrued 

costs of federal programs. The administration has proposed that agencies 

be charged for the government’s full share of the accruing costs of all 

pension and retiree health benefits for their employees as those benefits 

are earned. Such a proposal could help better reflect the full costs accrued 

in a given year by federal programs. 

Recognizing long-term costs is also important to understanding the future 

sustainability and flexibility of the government’s fiscal position. For 

activities such as environmental cleanup costs, the government’s 

commitment occurs years before the cash consequences are reflected in 

the budget. These costs should be considered at the time resource 

commitments are made. Building on past work,17 we are currently 

exploring these issues in greater detail.

More broadly, timely, accurate, and useful financial information is essential 

for managing the government’s operations more efficiently, effectively, and 

economically; meeting the goals of financial reform legislation (such as the 

CFO Act); supporting results-oriented management approaches; and 

ensuring ongoing accountability. We have continued to point out that the 

federal government is a long way from successfully implementing the 

statutory reforms of the 1990s. Widespread financial management system 

weaknesses, poor recordkeeping and documentation, weak internal 

controls, and a lack of information have prevented the government from 

having the cost information needed to effectively and efficiently manage 

operations or accurately report a large portion of its assets, liabilities, and 

costs. 

16 GAO-02-236.

17 U.S. General Accounting Office, Fiscal Exposures: Improving the Budgetary Focus on 

Long-Term Costs and Uncertainties, GAO-03-213 (Washington, D.C.: Jan. 24, 2003).
Page 18 GAO-03-595T 

Performance Budgeting Can 

Broaden the Debate on 

Budget Trade-offs

Looking forward, it is appropriate to ask why all of this effort is 

worthwhile. Certainly making clear connections between resources, costs, 

and performance for programs is valuable. Improving evaluation capacity 

has the potential to create the demand to support further improvements. 

However, the real payoff will come in strengthening the budget process 

itself. 

Expanding and Elevating Budget 

Deliberations beyond Individual 

Programs

The integration of budgeting and performance can strengthen budgeting in 

several ways. First, the focus on outcomes can broaden the debate and 

elevate budget trade-offs from individual programs to a discussion of how 

programs work together to achieve national goals. Although the evaluation 

of programs in isolation may be revealing, it is often critical to understand 

how each program fits with a broader portfolio of tools and strategies—

such as regulations, direct loans, and tax expenditures—to accomplish 

federal goals. For example, in fiscal year 2000, the federal health care and 

Medicare budget functions included $319 billion in entitlement outlays, $91 

billion in tax expenditures, $37 billion in discretionary budget authority, 

and $5 million in loan guarantees. (See fig. 3.)

Figure 3: Relative Reliance on Policy Tools in the Health Care Budget Functions, 

Fiscal Year 2000 ($447 Billion In Total Spending)

Note: Includes both the health and medicare budget functions. Loan guarantees account for about $5 

million, or about 0.001 percent of the approximately $447 billion in total federal health care resources.

Achieving federal/national policy goals often depends on the federal 

government’s partners—including other levels of government, private 

20%

8%

72%

Source: Budget of the United States Government, FY 2001, Office of Management and Budget.

Tax expenditures

Discretionary BA

Mandatory outlays
Page 19 GAO-03-595T 

employers, nonprofits, and other nongovernmental actors. The choice and 

design of these tools are critical in determining whether and how these 

actors will address federal objectives. GPRA required the President to 

prepare and submit to Congress a governmentwide performance plan to 

highlight broader, crosscutting missions, such as those discussed above. 

Unfortunately, this was not done in fiscal years 2003 and 2004; we hope that 

the President’s fiscal year 2005 budget does include such a plan.

Examining the Base in Budget 

Deliberations

Second, a focus on performance can help us shift our view from 

incremental changes to an evaluation of the base itself. Making government 

adapt to meet the challenges of the future is broader than strengthening 

performance-informed resource decisions. Fiscal pressures created by the 

retirement of the baby boom generation and rising health care costs 

threaten to overwhelm the nation’s fiscal future. Difficult as it may seem to 

deal with the long-term challenges presented by known demographic 

trends, policymakers must not only address the major entitlement 

programs but also reexamine other budgetary priorities in light of the 

changing needs of this nation in the 21st century. Reclaiming our fiscal 

flexibility will require the reexamination of existing programs, policies, and 

activities. It is all too easy to accept “the base” as given and to subject only 

new proposals to scrutiny and analysis. 

As we have discussed previously,18 many federal programs, policies, and 

activities—their goals, their structures, and their processes—were 

designed decades ago to respond to earlier challenges. In previous 

testimony,19 we noted that the norm should be to reconsider the relevance 

or “fit” of any federal program, policy, or activity in today’s world and for 

the future. Such a review might ferret out programs that have proven to be 

outdated or persistently ineffective, or alternatively could prompt 

appropriate updating and modernizing activities through such actions as 

improving program targeting and efficiency, consolidation, or 

reengineering of processes and operations. This includes looking at a 

program’s relationship to other programs.

18 U.S. General Accounting Office, Budget Issues: Effective Oversight and Budget 

Discipline Are Essential—Even in a Time of Surplus, GAO/T-AIMD-00-73 (Washington, 

D.C.: Feb. 1, 2000), and Budget Issues: Long-Term Fiscal Challenges, GAO-02-467T

(Washington, D.C.: Feb. 27, 2002).

19 U.S. General Accounting Office, Homeland Security: Challenges and Strategies in 

Addressing Short- and Long-Term National Needs, GAO-02-160T (Washington, D.C.: Nov. 7, 

2001), GAO/T-AIMD-00-73, and GAO-02-467T.
Page 20 GAO-03-595T 

The Role of Congressional 

Oversight

Finally, and most critically, Congress must be involved in this debate and 

the resulting decisions and follow-up oversight activities. Congressional 

buy-in is critical to sustain any major management initiative, but 50 years of 

past efforts to link resources with results have shown that any successful 

effort must involve Congress as a partner given Congress’ central role in 

setting national priorities and allocating the resources to achieve them. In 

fact, the administration acknowledged that performance and 

accountability are shared responsibilities that must involve Congress. It 

will only be through the continued attention of Congress, the 

administration, and federal agencies that progress can be sustained and, 

more important, accelerated. Congress has, in effect, served as the 

institutional champion for many previous performance management 

initiatives, such as GPRA and the CFO Act, by providing a consistent focus 

for oversight and reinforcement of important policies.

More generally, effective congressional oversight can help improve federal 

performance by examining the program structures agencies use to deliver 

products and services to ensure that the best, most cost-effective mix of 

strategies is in place to meet agency and national goals. As part of this 

oversight, Congress should consider the associated management and 

policy implications of crosscutting programs.

Given this environment, Congress should also consider the need for 

processes that allow it to more systematically focus its oversight on 

programs with the most serious and systemic weaknesses and risks. At 

present, Congress has no direct vehicle to provide its perspective on 

governmentwide performance issues. Congress has no established 

mechanism to articulate performance goals for the broad missions of 

government, to assess alternative strategies that offer the most promise for 

achieving these goals, or to define an oversight agenda targeted at the most 

pressing crosscutting performance and management issues. Congress 

might consider whether a more structured oversight approach is needed to 

permit a coordinated congressional perspective on governmentwide 

performance matters. Such a process might also facilitate congressional 

input into the OMB PART initiative. For example, although the selection of 

programs and areas for review is ultimately the President’s decision, such 

choices might be informed and shaped by congressional views and 

perspectives on performance issues.
Page 21 GAO-03-595T 

Concluding 

Observations

How would “success” in performance budgeting be defined? Simply 

increasing the supply of performance information is not enough. If the 

information is not used—that is, if there is insufficient demand—the quality 

of the information will deteriorate and the process either will become rote 

or will wither away. However, for the reasons noted, the success of 

performance budgeting cannot be measured merely by the number of 

programs “killed” or a measurement of funding changes against 

performance “grades.” Rather, success must be measured in terms of the 

quality of the discussion, the transparency of the information, the 

meaningfulness of that information to key stakeholders, and how it is used 

in the decision-making process. If members of Congress and the executive 

branch have better information about the link between resources and 

results, they can make the trade-offs and choices cognizant of the many 

and often competing claims at the federal level.

A comprehensive understanding of the needs of all participants in the 

budget process, including what measures and performance information are 

required at different stages of the budget cycle, is critical. Making 

performance budgeting a reality throughout the federal government will be 

facilitated by efforts to improve the structural alignment of performance 

planning goals with budget and cost accounting structures and 

presentations. However, developing credible performance measures and 

data on program results will be absolutely critical in determining whether 

the performance perspective becomes a compelling framework that 

decsion makers will use in allocating resources. 

Performance budgeting is difficult work. It requires taking a hard look at 

existing programs and carefully reconsidering the goals those programs 

were intended to address—and whether those goals are still valid. It 

involves analyzing the effectiveness of programs and seeking out the 

reasons for success or failure. It involves navigating through the maze of 

federal programs and activities, in which multiple agencies may operate 

many different programs, to address often common or complementary 

objectives. However, the task of revising and reforming current programs 

and activities that may no longer be needed or that do not perform well is 

fraught with difficulties and leads to real “winners” and “losers.” 

Notwithstanding demonstrated weaknesses in program design and 

shortfalls in program results, there often seems to be little “low hanging 

fruit” in the federal budget. In fact, some argue that because some 

programs are already “in the base” in budgetary terms, they have a 

significant advantage over new initiatives and new demands.
Page 22 GAO-03-595T 

This is an opportune time for the executive branch and Congress to 

carefully consider how agencies and committees can best take advantage 

of and leverage the new information and perspectives coming from the 

reform agenda under way in the executive branch. Prudent stewardship of 

our nation’s resources—whether in time of deficit or surplus—is essential 

not only to meet today’s needs but also for us to deliver our promises and 

address future needs.

This concludes my prepared statement. I would be pleased to answer any 

questions you or the other members of the subcommittee may have at this 

time.

Contacts and 

Acknowledgement

For further contacts regarding this testimony, please contact Paul Posner at 

(202) 512-9573 or at posnerp@gao.gov or Denise Fantone, Assistant 

Director, at (202) 512-4997 or at fantoned@gao.gov. Individuals making key 

contributions to this testimony included Jacqueline M. Nowicki, 

Kristeen G. McLain, and Elizabeth McClarin.

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